Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.


April 13, 2000


The opinion of the court was delivered by: Scheindlin, District Judge.


I. Introduction

Aerotel, Ltd. is a corporation organized under the laws of Israel with its principal place of business in Israel. See Amended Complaint ("Am.Cmpl."), attached as Exhibit G to the Declaration of John Fuisz, defendants' attorney, in Support of Defendant Sprint Corporation's Motion to Dismiss and/or Transfer and for a Protective Order Staying Discovery ("Fuisz Decl."), ¶ 3. Aerotel, Ltd. is the assignee of U.S. Patent No. 4,706,275 (the "`275 Patent") which protects an invention for making prepaid telephone calls. Id. ¶ 9. Aerotel U.S.A., Inc. is a wholly owned subsidiary of Aerotel, Ltd. and is its exclusive U.S. licensing representative. Id. ¶ 4. Sprint Corporation is a corporation organized under the laws of Kansas with its principal place of business in Kansas. Id. ¶ 5. Sprint Communications Company L.P. ("Sprint Communications") and Sprint Spectrum L.P. ("Sprint Spectrum") are limited partnerships wholly owned by Sprint Corporation. Id. ¶¶ 6-7, 14. Tandy Corporation is a Delaware corporation which has a place of business in New York. Id. ¶ 8.

Aerotel, Ltd. and Aerotel, U.S.A., Inc. (collectively "Aerotel") sued defendant Sprint Corporation in the Southern District of New York for its alleged infringement of the '275 Patent by filing a Complaint on November 5, 1999. See Original Complaint ("Cmpl."), attached as Exhibit A to the Fuisz Declaration. Aerotel mailed the Original Complaint to Office of the President, Sprint Corporation, 380 Madison Avenue, New York, New York 10022. According to Sprint Corporation, it does not own or lease any property at that address. See Declaration of Michael Hyde, Assistant Secretary of Sprint Corporation, in Support of Defendant Sprint Corporation's Motion to Dismiss and/or Transfer Plaintiff Aerotel's Complaint for Lack of Personal Jurisdiction ("Hyde Decl."), sworn to on December 8, 1999, ¶ 5. On December 8, 1999, Sprint Corporation filed a declaratory judgment action against Aerotel, Ltd. in the United States District Court for the District of Kansas. See Fuisz Decl. Ex. C. Aerotel, Ltd. was served with the declaratory judgment complaint on December 10, 1999. Plaintiffs then filed and served an Amended Complaint on December 15, 1999 naming Sprint Corporation as well as Sprint Communications, Sprint Spectrum and Tandy Corporation as defendants. See Am. Cmpl. ¶¶ 5-8.

Defendant Sprint Corporation now moves, inter alia, under Federal Rules of Civil Procedure 12(b)(2) and 12(b)(3) for dismissal of the complaint for lack of personal jurisdiction and for improper venue. Sprint Corporation alternatively moves under 28 U.S.C. § 1404(a) to have this action transferred to the District of Kansas where it will be joined with the declaratory judgment action, Sprint Corporation, et al., v. Aerotel, Ltd. 99 Civ. 2547 (JWL).*fn1 Sprint Communications, Sprint Spectrum and Tandy Corporation join in Sprint Corporation's motion to dismiss and also move for a transfer of venue pursuant to 28 U.S.C. § 1404(a). For the following reasons, Sprint Corporation's motion to dismiss is denied and its motion to transfer venue is denied. The remaining motions to dismiss and transfer venue are denied.

II. Discussion

A. Personal Jurisdiction — Sprint Corporation

The burden of proof to establish personal jurisdiction is on Aerotel, see Kernan v. Kurz-Hastings, Inc., 175 F.3d 236, 240 (2d Cir. 1999) (citation omitted), and the required standard of proof is by a preponderance of the evidence. See First Nationwide Bank v. Gelt Funding Corp., 27 F.3d 763, 771 (2d Cir. 1994). Although in patent cases the court applies the uniform body of Federal Circuit law, see Beverly Hills Fan Co. v. Royal Sovereign Corp., 21 F.3d 1558, 1564-65 (Fed. Cir. 1994), the court will apply the relevant state long-arm statute when determining whether it has personal jurisdiction over a defendant. See Graphic Controls Corp. v. Utah Med. Prods., Inc., 149 F.3d 1382, 1386 n. 2 (Fed. Cir. 1998). Accordingly, New York law will determine whether this Court has jurisdiction over Sprint Corporation. As explained by the Federal Circuit:

Determining whether jurisdiction exists over an out-of-state defendant involves two inquiries: whether a forum state's long-arm statute permits the assertion of jurisdiction and whether assertion of personal jurisdiction violates federal due process. With regard to the federal constitutional due process analysis of the defendant's contacts with the forum state in patent cases, we do not defer to the interpretations of other federal and state courts. However, in interpreting the meaning of state long-arm statutes, we elect to defer to the interpretations of the relevant state and federal courts, including their determinations regarding whether or not such statutes are intended to reach to the limit of federal due process.

Graphic Controls, 149 F.3d at 1385 (citations and footnote omitted).

"Under New York law there are two ways in which a court may exercise personal jurisdiction over a non-domiciliary corporation: (1) If the corporation `does business' in New York, jurisdiction may be exercised pursuant to N.Y. CPLR § 301.(2) Even if the corporation does not `do business' in New York, jurisdiction may be exercised if the corporation falls under New York's long-arm statute (N.Y. CPLR § 302)." King v. Best Western Country Inn, 138 F.R.D. 39, 41 (S.D.N.Y. 1991). Under the "doing business test", a foreign corporation is amenable to suit in New York if it is "`engaged in such a continuous and systematic course of "doing business" here as to warrant a finding of its "presence" in this jurisdiction.'" Frummer v. Hilton Hotels Int'l, Inc., 19 N.Y.2d 533, 536, 281 N.Y.S.2d 41, 227 N.E.2d 851 (1967) (quoting Simonson v. International Bank, 14 N.Y.2d 281, 285, 251 N.Y.S.2d 433, 200 N.E.2d 427 (1964)). Alternatively, although a corporation may not be doing business so as to subject it to general jurisdiction, it may be subject to specific jurisdiction. Section 302(a)(1) provides for jurisdiction where the defendant "transacts any business within the state or contracts anywhere to supply goods or services in the state" and the cause of action arises from such acts. N.Y. CPLR § 302(a)(1) (McKinney 1990).

For a court to assert jurisdiction over a defendant under section 302(a)(1), the plaintiff must meet the following two prong test: (1) the defendant's business activities in New York must be activities by which the defendant projects itself into New York in such a way as to purposefully avail itself of the benefits and protections of New York laws and (2) the plaintiffs cause of action must arise out of that business activity within the state.

Graphic Controls, 149 F.3d at 1386.

Sprint Corporation is a holding company that does not transact telecommunications services, including pre-paid calling services, in New York. See Hyde Decl. ¶¶ 3-4. Moreover, it does not have any employees authorized to act on its behalf in New York. Id. ¶ 5. Sprint Corporation is not licensed to do business in New York and has never purposefully availed itself of the privilege of doing business in New York. Id. ¶¶ 4-5.

In its Amended Complaint, Aerotel has alleged that "Sprint Communications and Sprint Spectrum are wholly owned by Sprint Corporation, and Sprint Corporation exercises control over Sprint Communications and Sprint Spectrum and their operations, including the alleged infringing activities of Sprint Communications and Sprint Spectrum."*fn2 Am. Cmpl. ¶ 14 (emphasis added). Aerotel advances its argument that Sprint Corporation is present in New York by reason of its management and control of Sprint Communications and Sprint Spectrum in a number of ways. First, Aerotel points to the common management Sprint Corporation shares with its subsidiaries. Aerotel cites the 1998 Form 10-K filed by Sprint Spectrum which discloses that at least four of its sixteen officers and board members are shared in common with Sprint Corporation.*fn3 Compare Sprint Corporation's 1999 Form 10-K, attached as Exhibit 1 to the Declaration of Joshua S. Broitman, plaintiffs' attorney, in Opposition to Sprint Corporation's Motion to Dismiss the Complaint or Transfer, sworn to January 13, 2000 ("Broitman Decl."), at 17/83 with id. at 16/307. Aerotel also cites the 1999 Form 10-K of Sprint Corporation in further support of a finding of common management. See id., Ex. 1 at 16/307. Presumably, the two officers of Sprint Corporation holding the title "President — Long Distance Division" and "President — Sprint PCS" also overlap with the businesses of Sprint Communications and Sprint Spectrum. Aerotel also cites portions of the deposition testimony of Michael Hyde submitted in an unrelated case, Berrios v. Sprint Corp. and Sprint Communications Co. L.P., 1997 WL 777945, 1997 U.S.Dist. LEXIS 19259 (E.D.N.Y. 1997).*fn4 During that deposition, Mr. Hyde stated that ten to twelve of the senior executives of Sprint Corporation hold comparable positions at Sprint Communications. He also stated that Sprint Communications has no other senior executive management other than those ten to twelve people. As Mr. Hyde is the Assistant Secretary of Sprint Corporation, these statements are admissions of Sprint Corporation and may be considered pursuant to Federal Rule of Evidence 801(d)(2). Aerotel's evidence thus shows considerable overlap in the management of Sprint Corporation and Sprint Communications and, to a lesser extent, Sprint Spectrum.

Second, Aerotel alleges that Sprint Corporation exercises operational and financial control over its subsidiaries. In support of this statement, Aerotel cites Sprint Corporation's 1999 Form 10-K. See Broitman Decl., Ex. 1. That document states that the shareholders of Sprint Corporation approved the formation of the FON Group and FON stock and the PCS Group and PCS stock. Id. at 3/307. The value of the PCS stock is intended to reflect the performance of Sprint's domestic wireless personal communications services operations and the value of the FON stock is intended to reflect the performance of all of Sprint's other operations. Id. A discussion of conflicts of interest between FON and PCS ensues and an example is offered where the Sprint Board may "make operational and financial decisions with respect to one Group that could be considered to be detrimental to the other Group." Id. at 4/307. This discussion only tangentially supports the proposition that Sprint Corporation exercises operational and financial control over all of the entities engaged in its global communications business.

Finally, Aerotel notes that Sprint Corporation presents its telecommunications services along with those of its subsidiaries to the marketplace under the common trade name "Sprint" without regard to its complex corporate structure. Aerotel points to a 1998 Sprint web page which does, in fact, talk generically about Sprint as a collective entity. See Broitman Decl. Ex. 4 at 3 ("Sprint is a global communications company . . . Sprint built and operates the United States' only nationwide all-digital, fiber optic network . . . Sprint has $15 billion in annual revenues."). These statements, intended to be read by the consuming public, cannot create a single entity structure given the sophistication and complexity of today's corporate world. In addition, the copyright at the bottom of the web page is in the name of Sprint Communications Company, L.P. providing further proof of the independence of that company from Sprint Corporation. Thus, only Aerotel's first argument — that Sprint Corporation is present in New York because of its overlapping management with Sprint Communications and Sprint Spectrum — is persuasive but needs to be more fully developed.

In patent cases, it is fundamental that "`the corporate entity should be recognized and upheld, unless specific, unusual circumstances call for an exception.'" Manville Sales Corp. v. Paramount Sys., Inc., 917 F.2d 544, 552 (Fed. Cir. 1990) (quoting Zubik v. Zubik, 384 F.2d 267, 273 (3d Cir. 1967)). "Courts are reluctant to disregard the separate existence of related corporations . . . and have consistently given substantial weight to the `presumption of separateness.'" Kashfi v. Phibro-Salomon, Inc., 628 F. Supp. 727, 732 (S.D.N.Y. 1986). However, "where a corporate subsidiary is essentially a `separately incorporated department or instrumentality' of a foreign corporation, the activities of the subsidiaries will be attributed to the foreign parent for purposes of determining the parent's amenability to personal jurisdiction in New York."*fn5 Canterbury Belts Ltd. v. Lane Walker Rudkin, Ltd., 869 F.2d 34, 40 (2d Cir. 1989) (citations omitted). As explained by the Second Circuit,

In determining whether the subsidiary is a "mere department" of the parent — the other New York jurisdictional basis — the court must consider four factors, which in Beech Aircraft we summarized as follows: first, "common ownership" — which is "essential" -; second, "financial dependency of the subsidiary on the parent corporation;" third, "the degree to which the parent corporation interferes in the selection and assignment of the subsidiary's executive personnel and fails to observe corporate ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.