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PLASTISTARCH INTL. CORP. v. PLASTISTARCH CORP.

February 26, 1980

PLASTISTARCH INTERNATIONAL CORPORATION, Plaintiff,
v.
PLASTISTARCH CORPORATION LIMITED, and CELLCOR CORPORATION OF CANADA, LIMITED, Defendants.



The opinion of the court was delivered by: POLLACK

MEMORANDUM

Defendants seek an order dismissing the Amended Complaint under Fed.R.Civ.P. 12(b)(1) for lack of subject matter jurisdiction, 12(b)(2) for lack of personal jurisdiction, 12(b)(3) for improper venue, 12(b)(7) for failure to join an indispensable party under Rule 19, and 17 for failure to prosecute the action in the name of the real party in interest. The parties have submitted their respective statements of fact in accordance with Local Rule 9(g). Since matters outside the pleadings have been considered by the Court affidavits, exhibits, statement and the response thereto under Local Rule 9(g) the motion will be considered as one for summary judgment under Fed.R.Civ.P. 56. For the reasons set out below, the motions to dismiss the amended complaint for lack of personal jurisdiction and for improper venue will be granted.

 This action is based on diversity of citizenship. The amended complaint seeks a declaratory judgment (i), that a certain July 1973 agreement between defendants and a corporation not a party to this suit was a valid agreement; (ii), decreeing the scope of technology to be transferred under said agreement; (iii), ordering the defendants to perform the said agreement, including the assignment to plaintiff of the rights to use the technology referred to; and (iv), decreeing damages in favor of plaintiff.

 Plaintiff, Plastistarch International Corporation (referred to in the papers as PLSI, but for clarity also referred to herein as "Delaware") is a company organized under the laws of the State of Delaware and according to the amended complaint, with offices in New York City. Defendants Plastistarch Corporation Limited (referred to in the papers as PLS) and Cellcor Corporation of Canada, Limited, are corporations organized under the laws of Canada with their principal offices in St. Laurent, and Montreal, Quebec, Canada, respectively. (For convenience the defendants will be singly or collectively referred to as "Canadian" hereafter.) Neither defendant transacts business in New York, nor are they authorized to do so and neither has an office in New York.

 Although the dispositive legal issues in this case are relatively straightforward, the underlying facts are somewhat labyrinthine. In 1973, a Mr. John F. Hughes, a Canadian, was experimenting with the manufacture of starch based materials to be used as substitutes for certain products containing petroleum derivatives. Along with others, he organized the defendant corporations (Canadian) to develop, produce, and market the products.

 According to Hughes' uncontradicted affidavit, in the later part of June 1973, he was invited by Mr. Roger Shashoua, then-president of a corporation with principal offices in New York, viz., Patents International Overseas Corporation (PIO in the papers), to attend a meeting of the managers of that corporation and its parent corporation, Patents International Affiliates Ltd. (PIA in the papers). The meeting was held on or about July 2, 1973, in New York City. There is no indication in the record that Hughes had done anything to initiate the invitation or meeting in New York. Hughes affirms, again without contradiction, that the purpose of the meeting was for him to meet PIO and PIA personnel and to become familiar with their worldwide marketing capabilities for new products.

 At the meeting, which lasted approximately two hours, there was a discussion of PIO's marketing potential and of the economic potential of Hughes' products for which patent applications had been filed. Mr. Shashoua broached the suggestion that Canadian enter into a contract with PIO for the worldwide marketing of the patented products. Hughes responded that the only marketing rights that would be considered would have to be exclusive of the United States and Canada. At the conclusion of that meeting, as Hughes was leaving to return to Montreal, he was handed an initial draft of a proposed contract between PIO and Canadian for the marketing of the products. Hughes had not seen the draft before. Hughes stated that he could not respond thereto until he had returned to Montreal and reviewed the draft with officers of Canadian, one of whom was a Canadian attorney.

 Back in Canada, the draft was given to Roy Flaherty and H. Digby Clarke, the two officers of the Canadian defendants, for their review. On July 7, 1973, Hughes and Flaherty met at the Montreal office of the parent of PIO namely PIA to negotiate the terms of a contract with Mr. Vito Altavilla, who was representing PIO and PIA in regard to the matter. At that meeting, some minor changes were made in the draft of the proposed contract and, as amended, an agreement was prepared and executed in PIA's office at Sherbrooke Street, Montreal, Canada. That is the July 7, 1973 agreement on which Delaware now seeks a declaratory judgment.

 The July 7, 1973 agreement recited that Canadian had certain technology and know-how for the conversion of starch which was patented and for which patent applications had been filed; the products were denominated as Cytores under a Canadian Trade Mark. The agreement called for the formation of a joint-venture company to be called PLASTISTARCH INTERNATIONAL CORPORATION (Delaware herein) which would own the worldwide rights to Cytores, with the exclusion of Canada and the United States, to commercialize the product by means which would satisfactorily protect the technology. PIO agreed to form Delaware and make available to it the services of PIO's international network of offices and marketing know-how.

 Canadian in turn agreed: to assign the said rights to Delaware, the assignment to cover all patents and applications therefor; to assign and make available to Delaware all the technical know-how etc. concerning Cytores; to supply converter equipment if ordered by Delaware; and to train representatives of Delaware.

 Delaware was incorporated on August 7, 1973. PIO contributed $ 25,000 to Delaware's capital for 52% of its common stock, and Canadian received 48% of the common capital stock for the assignments to be made. Thereafter during 1973, PIO undertook a limited marketing program for the products, consisting of some press releases and their exhibition at a trade show in Japan. After December 1973 the marketing program was terminated. PIO then withdrew for its own account all of the remaining capital of Delaware. It is uncontradicted that the 1975 Annual Report to Shareholders issued by PIA (PIO's parent) announced that:

 
As a result of economic conditions during (the year ended October 31, 1974, PIA) began concentrating primarily on exhibits, and discontinued licensing of new products and various joint venture arrangements. In accordance with this policy, during 1974, it discontinued the operations of . . . Plastistarch International Corporation (Delaware herein)

 It is further documented and uncontradicted that in March of 1976, plaintiff Delaware's corporate charter was revoked by the State of Delaware for failure to pay its franchise taxes.

 During the intervening time, in February 1975, the defendant, Canadian, licensed the Canadian and United States rights to the same patented technology to Boyd Scott & McDonald (BSM hereafter), a Canadian corporation with its principal place of business in Montreal. Under this 1975 agreement, BSM was obligated to use its best ...


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