The opinion of the court was delivered by: EUGENE H. NICKERSON
NICKERSON, District Judge:
Plaintiff, a New York corporation that produces and markets a vision training device, brought this action against defendant Kolinor Optical Enterprises & Consultants, S.R.L. ("Kolinor"), its former licensee, alleging that Kolinor was attempting to manufacture and market a competing vision device using plaintiff's technical secrets, in violation of a distribution contract between plaintiff and Kolinor. Kolinor is an Italian company with headquarters in Florence, Italy.
Plaintiff filed an amended complaint, alleging that defendants have violated the Racketeer Influenced and Corrupt Organizations ("RICO") Act, 18 U.S.C. §§ 1961-68, and state law. That complaint was dismissed for failing adequately to allege an enterprise. Plaintiffs then filed a second amended complaint on October 28, 1991.
The court assumes familiarity with its previous orders dated May 3 and June 19, 1990 (enjoining Kolinor and those in concert from, among other things, manufacturing a competing vision trainer); June 26, 1991 (dismissing the amended complaint); June 8, 1992 (restraining defendants Ramon Codina ("Codina") and Maria Codina from removing or encumbering assets in the United States); and March 24, 1993, 817 F. Supp. 326 (E.D.N.Y. 1993) (exercising personal jurisdiction over defendant Dov Gottesman ("Gottesman") and denying personal jurisdiction over defendant Noam Gottesman).
The court addresses now separate motions by defendant Christopher Kuehn, Esq. and the Codinas. Kuehn moved to dismiss the complaint, and the court notified the parties of its intent to treat the motion as one for summary judgment.
The alleged role of the various parties and the background facts of this dispute have been described in detail in the court's previous opinion. 817 F. Supp. at 328-30. The papers show, in summary, the following scheme to defraud and acts by Kuehn and the Codinas.
Plaintiff manufactures and holds patents in the United States, Canada, and the United Kingdom for a vision training device that, using the principles of biofeedback, allows a patient to improve visual focusing ability.
Its principal, Dr. Joseph N. Trachtman, entered into a distribution agreement in 1987 with defendant George Jordan, granting his company, Kolinor, exclusive rights to distribute the device in the European Economic Community, Israel, and North Africa. Kolinor entered into a sub-distribution agreement with, among others, Codina, granting him the exclusive right to distribute plaintiff's vision trainer in Spain and Portugal. Each of those agreements expired at the end of 1989.
The papers, construed most favorably to plaintiff, show that beginning in late 1989, Jordan and others engaged in a scheme to manufacture and market a competing vision device using plaintiff's technical secrets, to conceal that scheme from plaintiff through a series of deceptive wire and mail communications, and to conceal that scheme from this court in the course of a preliminary injunction hearing.
Kuehn first met Jordan in early 1989, when Kuehn was an associate attorney at the New York law firm of Cutner & Rathkopf. In May 1989, Kuehn left that firm and established his own practice in New York. His sole client was Kolinor.
During the following months, he negotiated with plaintiff regarding a plan whereby plaintiff would license Kolinor to manufacture the vision trainer. These negotiations failed.
During that same summer, Kuehn also advised Kolinor regarding its plan to distribute optical equipment in the United States manufactured by an Italian company named Sbizza. Kuehn referred Jordan to defendant Patrick G. McGarry, whose company, defendant Worldwide Regulation Services, Ltd., specialized in international regulatory matters.
By October 1989 Kolinor decided to develop its own vision training device rather than renew its distribution contract with plaintiff. Jordan told Kuehn that he would seek to obtain financing from Gottesman, an investor living in Switzerland who had provided Kolinor with start-up financing.
Kuehn spoke by telephone with Jordan and Gottesman in October, advising them that Kolinor's contract with plaintiff contained confidentiality and non-competition clauses and that plaintiff enjoyed certain patent protections. Soon thereafter, with Kuehn's assistance, Kolinor retained patent counsel in the United States to obtain and analyze plaintiff's patents.
On November 29th, at McGarry's suggestion, Jordan and Kuehn travelled to Chicago for the purpose of examining "optical exhibitors" they expected to see at a medical exhibit. This visit was presumably related to the Sbizza project, but it evidently gave Jordan and Kuehn an opportunity to discuss Jordan's plan to manufacture a competing vision trainer.
In a facsimile transmission dated December 3rd, Kuehn informed McGarry that Jordan was developing a vision trainer to compete with plaintiff's trainer, and he asked McGarry to advise Jordan how to avoid infringing plaintiff's patents.
The letter also examined the legal risks of Jordan's scheme. It stated:
6. The vision training device which is being developed will use some of the technology and method which was used in the Biofeedtrac AVT. At this time, it is not clear whether this technology and method is the property (through patents) of Biofeedtrac or simply the application of other, previously known technology. . . .
11. The reaction of the Trachtmans upon learning of the new vision training device can only be guessed at and the procedure and outcome of any litigation they might commence can only be the subject of speculation. . . .
a. In order to evaluate their options, the Trachtmans would first have to purchase one of the new vision training devices which will not be easy to do, since this is a very controlled market. . . .
d. The Trachtmans could also attempt to invalidate international or European patents protecting the new vision training device. . . . In order to evaluate the chances of such proceedings, the final development of the vision training device must be awaited.
e. Lastly, there is also the possibility that the Trachtmans could bring an action against Dr. Jordan personally. Such an action could be based on fraud, and they could claim that Dr. Jordan fraudulently induced them into delivering their technical know-how to them, in order to use the knowledge for his own benefit. Such a suit could be brought in the United States, even though it does not appear that a United States court would have personal jurisdiction over Dr. Jordan. In any event, such a proceeding, while potentially annoying for Dr. Jordan personally, should not affect the operations of the new entity.
Kuehn apparently did not consider whether an action based on fraud might "annoy" anyone within this court's jurisdiction.
In January 1990 Jordan, McGarry, Kuehn, and three of McGarry's employees met in Bohemia, New York, to discuss the Sbizza project and perhaps, the vision trainer project. Kuehn says that during this meeting Jordan asked McGarry to conduct a clinical testing program of plaintiff's vision trainer.
In February McGarry informed Kuehn that McGarry and Jordan had agreed jointly to develop the competing vision trainer that would be named the "Enlightener." At McGarry and Jordan's request, Kuehn (1) arranged to incorporate two Delaware corporations, defendants WRS Vision, Inc. and WRS Manufacture, Inc. (the "WRS Companies"), naming himself as sole initial director; (2) drafted bylaws, organizational minutes, shareholder agreements, and corporate resolutions authorizing the companies to open bank accounts; (3) drafted an organizational and skeletal business plan; (4) agreed to act as corporate secretary for the two entities; and (5) agreed to act as counsel for the WRS Companies, provided that Jordan did not believe such representation would create a conflict of interest.
Throughout this period, technicians working with Jordan in Italy had disassembled plaintiff's vision trainer. The papers raise an inference that Kuehn knew that the device under development would infringe plaintiff's patents and was constructed using plaintiff's technical secrets.
Plaintiff brought this action in April 1990, and the court conducted a preliminary injunction hearing on May 3, 1990.
There is an issue of fact as to whether Kuehn advised defendant Richard C. Lanzillotto to commit perjury at the hearing. When asked in a deposition after the hearing why he had untruthfully denied knowing of a joint venture to build a competing vision trainer, Lanzillotto said he did not know of the venture first hand and that Kuehn had told him before the hearing that he did not have to testify regarding hearsay. Kuehn's explanations of what he told Lanzillotto has shifted during the past several years.
Immediately after the May 3rd hearing, Kuehn resigned from his representation of the WRS Companies. Kolinor and Jordan stopped communicating with Kuehn, and, according to Kuehn, refused to pay him for services rendered since January 1990.
Kuehn says that he has no involvement since the May 3rd hearing with any of the persons in Italy who are now manufacturing and distributing a vision training device -- named the "V.T. System" -- that, plaintiff says, was designed using plaintiff's secrets. Plaintiff offers no evidence that Kuehn's participation with the co-conspirators continued after May 1990.
In summary, the papers, construed in the light most favorable to plaintiff, show that Kuehn knew that Jordan, McGarry, and others were engaged in a fraudulent scheme to manufacture a vision training device in violation plaintiff's contractual and, perhaps, patent rights. Kuehn advised Jordan how to avoid detection and to minimize the legal risks of such a scheme, negotiated with plaintiff during this period to prevent it from discovering the scheme, ...