Dynal for such expenses. See, e.g., Fed. R. Civ. P. 26(b)(2), (c); Local Civil Rule 15.
This case is thus different from H.L. Hayden Co. v. Siemens Medical Systems, Inc., 112 F.R.D. 417 (S.D.N.Y. 1986), cited by the defendants, in which the court denied an application to amend the complaint to add an additional party on the basis of undue delay. One of the most important factors in that court's calculus was the degree to which the proposed amendment "would delay the final disposition of the action." Id. at 419. There, because discovery was completed and dispositive motions from all of the parties were already sub judice, the court estimated that joinder of an additional defendant would put off the final disposition of that matter for at least an additional six months. Id. at 420. That is not the situation here.
Moreover, weighed against the concerns raised by Dynal is the court's not insubstantial interest in adjudicating the entire dispute in one action. As the court in Hayden recognized, an important factor for the court to consider when deciding a motion for leave to amend is whether denying leave is likely to lead to the initiation of a second action which encompasses substantially the same factual and legal questions as the initial proceeding. Id. at 421. Here, since Saxholm has indicated its intention to initiate a second action if leave to amend be denied, and since such an action would involve most of the exact same facts, circumstances, and questions of law as this action, denying leave to amend would simply multiply proceedings in this court with no apparent benefit to the parties.
Given the absence of any appreciable delay or any other hardship which cannot be alleviated by appropriate discovery orders, the defendants have not demonstrated sufficient prejudice to justify denial of the plaintiffs' motion.
Dynal also argues that, because the proposed claims fail as a matter of law, it would be futile to permit the amendment. Although leave to amend should not be granted in such circumstances, Foman, 371 U.S. at 182, a proposed claim is futile only if it is clearly frivolous or legally insufficient on its face. Sterling, 154 F.R.D. at 589. If the proposed claim sets forth facts and circumstances which may entitle the plaintiff to relief, then futility is not a proper basis on which to deny the amendment. Allstate Ins. v. Administratia Asigurarilor De Stat, 875 F. Supp. 1022, 1029 (S.D.N.Y. 1995); see also, Mathon v. Marine Midland Bank, N.A., 875 F. Supp. 986, 1003 (E.D.N.Y. 1995) (leave to replead granted where court could not say that under no circumstances would proposed claims provide a basis for relief).
Dynal's argument that the proposed claims against Dyno are futile rests on their assertion that the court lacks personal jurisdiction over Dyno. Dynal contends that Dyno's contacts with New York are insufficient, both under constitutional due process principles and under New York's "long arm" statute, to permit the court to exercise jurisdiction over it.
1. Due Process
The Due Process Clause of the United States Constitution circumscribes the reach of the court's in personam jurisdiction. International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S. Ct. 154, 158, 90 L. Ed. 95 (1945). Due process requires that a defendant have purposeful "minimum contacts" with the forum state before jurisdiction attaches. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474, 105 S. Ct. 2174, 2183, 85 L. Ed. 2d 528 (1985). These contacts need not include the physical presence of the defendant in the forum state, but may arise where the defendant, outside of the forum state, takes some action which is purposefully directed at that state. Asahi Metal Industry Co. v. Superior Court, 480 U.S. 102, 114, 107 S. Ct. 1026, 1034, 94 L. Ed. 2d 92 (1987). This includes placing manufactured goods in the "stream of commerce" where the defendants have good reason to know the likely destination of the product. Id; World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S. Ct. 559, 567, 62 L. Ed. 2d 490 (1980). The precise parameters of the "stream of commerce" theory are still a topic of much discussion among the federal circuit courts of appeal. See, e.g., Vermeulen v. Renault, U.S.A., Inc., 985 F.2d 1534, 1544-48 & n.17 (11th Cir. 1993) (collecting cases). The courts appear to agree, however, that where a manufacturer places a product into the forum state via an established distribution chain, specific jurisdiction, such as is alleged here, is proper. Beverly Hills Fan Co. v. Royal Sovereign Corp., 21 F.3d 1558, 1565-68 (Fed Cir. 1994), (citing Burger King, 471 U.S. at 472-73, 105 S. Ct. at 2182; Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 774-75, 104 S. Ct. 1473, 1478-79, 79 L. Ed. 2d 790 (1984)).
In this case, Saxholm contends that Dyno created Dynal AS specifically to market and sell its Dynospheres. Dynal AS, as an exclusive distributor, markets Dyno's biomagnetic materials throughout the world through a number of wholly-owned subsidiaries, including Dynal, Inc. Dyno's substantial ownership interest in Dynal AS coupled with the presence of a shared director and officer, Hakon Haugen, lend substantial credibility to Saxholm's argument that Dyno was or should have been well aware that the eventual destination of their products included the United States and specifically the State of New York.
Saxholm has also submitted documentary evidence that Dyno Particles has had direct contact with two companies located in the United States, at least one of which is in New York. Specifically, in a letter from Dynal AS to an entity listed as "Fisher Scientific," in Orangeburg, New York, Dynal AS advises Fisher that its request for information concerning Dynospheres had been forwarded to Dyno Particles, in Lillestrom, Norway. Dynal AS further asserted that Dyno Particles would contact Fisher directly at some time in the future. A second letter, from a corporation located in Maryland, which is addressed to Hakon Haugen at Dyno Particles, appears to be a proposed distribution agreement between Dyno and the Maryland corporation. These communications tend to establish that Dyno Particles had purposeful contacts with entities in the United States for the purpose of distributing its products here.
In view of the allegations and evidence that Dyno Particles has placed its products into a stream of commerce through an established distribution channel that it owns in substantial part, and has had other purposeful contacts with the United States and the forum state, the situation here appears quite similar to that presented in Beverly Hills, supra. The court therefore cannot at this stage of the proceedings hold that jurisdiction over Dyno will necessarily be defeated for lack of sufficient contacts with the forum under constitutional principles of due process.
2. New York's Long Arm Statute
Federal courts deciding federal question cases must look not only to the due process clause, but also to relevant state law when determining whether personal jurisdiction over a non-domiciliary is proper. United States v. First Nat'l City Bank, 379 U.S. 378, 381, 85 S. Ct. 528, 530, 13 L. Ed. 2d 365 (1965); Hubbell v. Pass & Seymour Inc., 883 F. Supp. 955, 961 (S.D.N.Y. 1995); Beverly Hills, 21 F.3d at 1569; see also Fed. R. Civ. P. 4(e)-(f). As New York's statute does not extend to the limits of due process, see Interface Biomedical Laboratories v. Axiom Medical, 600 F. Supp. 731, 735 n.3 (E.D.N.Y. 1985), a separate analysis is necessary. Saxholm urges that sections 302(a)(2) and 302(a)(3) of New York's Civil Practice Law and Rules ("CPLR") each provide a jurisdictional basis for this action in New York. Those sections are examined below.
Section 302(a)(2) provides for personal jurisdiction over a non-domiciliary who commits a tort within the State if the claim for relief arises out of that act. Saxholm argues that Dyno's sales to Dynal, which occurred in Norway, contributed to or induced acts of direct infringement committed by Dynal in New York. The question whether an out-of-state act that contributes to or induces patent infringement within the state may be considered a "tort within the state" for purpose of 302(a)(2) is one which appears not to have been addressed in any published opinion. In the parallel field of trademark law, however, out-of-state acts that contribute to or induce trademark infringement in New York have been held sufficient to exercise jurisdiction over the out-of-state actor under section 302(a)(2). See, e.g., G.H. Bass & Co. v. Wakefern Food Corp., 1991 U.S. Dist. LEXIS 18344, 21 U.S.P.Q.2D (BNA) 1862, 1864-65 (S.D.N.Y. 1991). And similarly worded long arm statutes from other jurisdictions have been interpreted to permit courts to exercise jurisdiction over non-domiciliaries charged with contributory patent infringement. See, e.g., Honeywell, Inc. v. Metz Apparatewerke, 509 F.2d 1137, 1144 (7th Cir. 1975) (applying Illinois law); Kearns v. Wood Motors, Inc., 204 U.S.P.Q. 485, 488-90 (E.D.Mich. 1978) (Michigan law); Gor-Vue Corp. v. Hornell Elektrooptik AB, 634 F. Supp. 535, 537-38 (N.D. Ohio 1986) (Ohio law). In view of these holdings and the absence of contrary authority, section 302(a)(2) is likely to be interpreted broadly enough to provide for jurisdiction over Dyno in New York on the facts alleged in this case.
Section 302(a)(3) potentially provides an additional basis for jurisdiction in New York. In relevant part, that section states that jurisdiction is proper where a defendant,
commits a tortious act without the state causing injury to person or property within the state [and]