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WAFIOS MACHINERY CORPORATION v. NUCOIL INDUSTRIES CO.

July 21, 2004.

WAFIOS MACHINERY CORPORATION; and WAFIOS AG, Plaintiffs,
v.
NUCOIL INDUSTRIES CO., LTD.; NUCOIL INDUSTRIES, INC.; and OTHER UN-NAMED PARTIES, Defendants.



The opinion of the court was delivered by: ROBERT SWEET, Senior District Judge

OPINION

Defendant Nucoil Industries, Inc. ("Nucoil USA") has moved to dismiss the complaint filed against it by plaintiffs Wafios Machinery Corporation and Wafios AG (collectively, "Wafios") pursuant to Fed.R.Civ.P. 12(b)(2) and (3). Defendant Nucoil Industries Co. Ltd. ("Nucoil Taiwan" has moved separately to dismiss the claims against it pursuant to Rule 12(b)(2), (3) and (5). For the reasons stated below, both motions are denied with leave to renew following limited jurisdictional discovery.

  Prior Proceedings

  Wafios filed the complaint in this action on December 11, 2003, alleging patent infringement by both Nucoil USA and Nucoil Taiwan. An answer was filed by Nucoil USA on March 31, 2004, and an amended answer including counterclaims was filed on April 5, 2004. Nucoil USA's motion was filed on April 1, 2004. Following the exchange of briefs, oral argument was heard on the motion on April 21, 2004, at which time the motion was deemed fully submitted.

  Nucoil Taiwan's motion was filed on April 22, 2004. Following the exchange of briefs, oral argument was heard on the motion on May 19, 2004, at which time the motion was deemed fully submitted. Discussion

  Both Nucoil USA and Nucoil Taiwan argue that personal jurisdiction is lacking and that venue is improper, and the complaint should accordingly be dismissed. Nucoil Taiwan also argues that service of process on it in Taiwan was improper.

  Nucoil USA Has Not Waived Its Jurisdictional Defenses

  Wafios argues that Nucoil USA's counterclaims for defamation, tortious interference with prospective economic advantage and violation of the Connecticut Unfair Trade Practices Act, Conn. Gen. Stat. § 42-110b ("CUTPA") are permissive, and therefore that Nucoil USA has waived the defenses of lack of personal jurisdiction and improper venue.*fn1

  Although Nucoil USA has not contested the issue, the premise of Wafios's argument is incorrect. Although the Second Circuit has not ruled on the question of whether the assertion of a counterclaim, whether permissive or compulsory, waives the defense of personal jurisdiction, and has observed that "federal law on this issue appears to be in disarray," Cargill, Inc. v. Sabine Trading & Shipping Co., 756 F.2d 224, 229 (2d Cir. 1985); see also PDK Labs, Inc. v. Friedlander, 103 F.3d 1105, 1111 n. 4 (2d Cir. 1997); Matter of Arbitration between InterCarbon Bermuda, Ltd. and Caltex Trading and Transport Corp., 146 F.R.D. 64, 69-70 (S.D.N.Y. 1993) (collecting caselaw demonstrating opposing views on the issue), a finding of waiver would "exalt form over substance in a way that the adoption of the Federal Rules of Civil Procedure rendered obsolete." Local Union No. 38, Sheet Metal Workers' Int'l Ass'n, AFL-CIO v. A & M Heating, Air Conditioning, Ventilation & Sheet Metal, Inc., 314 F. Supp.2d 332, 352 (S.D.N.Y. 2004).

  The rationale for finding that a permissive counterclaim waives the defenses of lack of personal jurisdiction is that the defendant has affirmatively sought the aid of the court. See Beaunit Mills, Inc. v. Industrias Renidas F. Matarazzo, 23 F.R.D. 654, 656-57 (S.D.N.Y. 1959). However, when both jurisdictional defenses and counterclaims are included in a single responsive pleading, it is appropriate to treat the counterclaim "as conditional: its assertion being hypothecated upon an adverse ruling on Defendant's jurisdictional defenses." Queen Noor, Inc. v. McGinn, 578 F.Supp. 218, 220 (S.D.Tex.1984) (citing Lomanco, Inc. v. Missouri Pacific Railroad Company, 566 F.Supp. 846 (E.D.Ark.1983) and In Re Arthur Treacher's Franchisee Litigation, 92 F.R.D. 398 (E.D.Pa.1981)). Such an approach best serves both the language of Rule 12(b) and the policy behind it, as articulated by the Third Circuit over thirty years ago:
Rule 12(b) provides a defendant with the option of raising jurisdictional defenses by motion or by answer. If we were to take the position that a defendant, by raising his jurisdictional defenses in the same pleading in which he asserted a counterclaim, waived his jurisdictional defenses, we would in effect be engrafting a judicial exception to Rule 12(b). We would be requiring a defendant to raise his jurisdictional defenses by motion when he intends to file a counterclaim in his responsive pleading. This requirement would be contrary to the option provided to the defendant in Rule 12(b).
Furthermore, the policy behind Rule 12(b) militates against our finding a waiver where a defendant files a counterclaim in the same pleading in which he asserts jurisdictional defenses. The purpose behind Rule 12(b) is to avoid the delay occasioned by successive motions and pleadings and to reverse the prior practice of asserting jurisdictional defenses by `special appearance.'
Neifeld v. Steinberg, 438 F.2d 423, 428-29 (3d Cir. 1971) (citing 5 C. Wright and A. Miller, Federal Practice and Procedure: Civil § 1362, at 647-48 (1969)). Since the Neifeld decision, at least three other Circuits have also held that the filing of a counter-claim, whether permissive or compulsory, does not operate as a waiver of an objection either to personal jurisdiction or to venue, "whether the objection is raised by motion or answer, provided that the objection is not otherwise waived in the course of the litigation." Bayou Steel Corp. v. M/V Amstelvoorn, 809 F.2d 1147, 1149 (5th Cir. 1987); see also Chase v. Pan-Pacific Broadcasting, Inc., 750 F.2d 131, 132 (D.C. Cir. 1984) (Ginsburg, J.); Gates Learjet Corp. v. Jensen, 743 F.2d 1325, 1330 n. 1 (9th Cir. 1984); and generally Wright & Miller, supra, § 1397 (1990) (stating view that the "trend in more recent cases is to hold that no Rule 12(b) defense is waived by the assertion of a counterclaim, whether permissive or compulsory"). Accordingly, Nucoil USA has not waived its right to assert its jurisdictional defenses, and it is not necessary to decide whether its counterclaims are permissive or compulsory.

  Personal Jurisdiction Over Nucoil USA

  Nucoil USA argues that Wafios' complaint should be dismissed for lack of personal jurisdiction pursuant to Rule 12(b)(2), arguing that Wafios has not shown that Nucoil USA has sufficient contacts to the forum to subject it to jurisdiction. Wafios conversely argues that specific jurisdiction may be exercised over Nucoil USA because of its internet website through which potential customers may request sales literature.

  Plaintiffs bear the burden of establishing that the court has jurisdiction over a defendant when served with Rule 12(b)(2) motion to dismiss. DiStefano v. Carozzi North American Inc., 286 F.3d 81, 84 (2d Cir. 2001); Robinson v. Overseas Military Sales Corp., 21 F.3d 502, 507 (2d Cir. 1994). Because an evidentiary hearing has not been held, the plaintiffs need only make a prima facie showing of jurisdiction through the complaint's allegations and affidavits in order to defeat the motion to dismiss. CutCo Indus., Inc. v. Naughton, 806 F.2d 361, 363 (2d Cir. 1986); Network Interprises, Inc. v. APBA Offshore Prods., Inc., 01 Civ. 11765, 2002 WL 31050846, at *8 (S.D.N.Y. Sept. 12, 2002). The facts must be construed in the light most favorable to plaintiffs. Cooper, Robertson & Partners L.L.P. v. Vail, 143 F. Supp.2d 367, 370 (S.D.N.Y. 2001) (citing Hoffritz for Cutlery Inc. v. Amajac, Ltd., 763 F.2d 55, 57 (2d Cir. 1985)). In assessing whether personal jurisdiction is authorized, the court must look first to the long-arm statute of the forum state. Bensusan Rest. Corp. v. King, 126 F.3d 25, 27 (2d Cir. 1997). If the exercise of jurisdiction is appropriate under that statute, the court must decide whether such exercise comports with the requisites of due process. Id. In patent infringement cases, "when analyzing personal jurisdiction for the purposes of compliance with federal due process, Federal Circuit law, rather than regional circuit law, applies." 3D Systems, Inc. v. Aarotech Laboratories, Inc., 160 F.3d 1373, 1377 (Fed. Cir. 1998).

  New York's long-arm statute allows for personal jurisdiction over a non-domiciliary when that person or his or her agent:
(2) commits a tortious act within the state . . .; or (3) commits a tortious act without the state causing injury to person or property within the state . . ., if he [or she] (i) regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in the state, or (ii) expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce . . .
N.Y.C.P.L.R. § 302(a)(2)-(3) (McKinney 2001). The tortious act alleged by Wafios is the violation of 35 U.S.C. ...

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