United States District Court, S.D. New York
February 1, 2005.
MK SYSTEMS, INC., Plaintiff,
DAVID SCHMIDT, LIFEWAVE PRODUCTS, LLC, Defendants.
The opinion of the court was delivered by: ROBERT SWEET, Senior District Judge
On October 14, 2004, MK Systems, Inc. ("MK") filed the original
complaint in this action, asserting three claims against defendants David
Schmidt ("Schmidt") and LifeWave Products, L.L.C. ("LifeWave")
(collectively, the "Defendants"): (i) a claim for fraud in the inducement
asserted against both Defendants; (ii) a claim for breach of contract
asserted against LifeWave; and (iii) a claim asserted against both
Defendants for alleged violations of "the laws of the Food and Drug
Administration" (Compl. at ¶ 63) for which MK is seeking a permanent
injunction to prevent Defendants from manufacturing or commercially
distributing certain products unless and until the products are "fully
compliant with FDA law." (Compl. at ¶ 68).
According to the complaint, which was verified by Mark Klein, the
"President of the corporate plaintiff in the above-captioned action"
(Compl. at 15), MK is a corporation incorporated under the laws of the
State of New York, having its principal place of business at 500 Fifth
Avenue in the City, County and State of New York. (See Compl. at ¶ 1.)
LifeWave is alleged to be a limited liability company existing under and
by virtue of the laws of the State of Georgia, with its principal place
of business in Suwanee, Georgia. (See Compl. at ¶ 3.) Schmidt is alleged
to be a "member" of LifeWave, whose offices are alleged to be in
Suwanee, Georgia. (Compl. at ¶ 4.) Jurisdiction is alleged under both
28 U.S.C. § 1331 and 28 U.S.C. § 1332.
On December 22, 2004, Schmidt moved to dismiss the complaint pursuant
to Rule 12(b), Fed.R.Civ.P., on the grounds that MK lacks capacity to
bring the suit and that no private right of action exists under the
Federal Food, Drug, and Cosmetic Act, 21 U.S.C. § 301, et seq. (the
"FDCA"), or, in the alternative, to transfer the action to the United
States District Court in the Northern District of Georgia pursuant to
28 U.S.C. § 1404(a). On January 11, 2005, LifeWave moved to dismiss MK's
complaint, adopting the arguments of Schmidt.
One day earlier, by order to show cause dated January 10, 2005, MK
moved to stay all proceedings and enjoin LifeWave from prosecuting an
action entitled LifeWave Products, LLC v. Kline, et al., Case No. 04
Civ. 3710, currently pending in the United States District Court for the
Northern District of Georgia, Atlanta Division (the "Georgia action").
The Georgia action was commenced on December 21, 2004, and MK argued that
the Georgia action should be stayed pursuant to the so-called first-filed
On January 14, 2005, Active-8, Inc., d/b/a MK Lifepatch Systems, Inc.
("Active-8") filed a document in this matter styled a first amended
complaint. According to the purported amended complaint, Active-8 is
alleged to be a corporation incorporated under the laws of the State of
Nevada, having its principal place of business at 500 Fifth Avenue, in
the City, County and State of New York. Active-8, it is alleged, "was
formally [sic] known as MK
Systems, Inc." and is allegedly "registered to do business in the states
of New York and New Jersey." (Active-8 Am. Compl. at ¶ 1.) Apart from
the addition of two new paragraphs and the absence of verification, the
purported first amended complaint and the original complaint are
substantially the same.
A hearing was held on the motion to enjoin the Georgia action on
January 19, 2005, and the motions to dismiss and transfer the action were
heard on January 26, 2005. On January 25, 2005, Defendants filed a motion
to dismiss Active-8's amended complaint on the ground that Active-8 was
not a party to the action or, in the alternative, to transfer the action
For the reasons set forth below, Defendants' motions to dismiss the
original complaint are granted, and this action is dismissed in its
entirety without prejudice subject to the condition specified below.
A. The Purported Amendment By Active-8 Was Improper And The Original
Complaint Remains The Operative Complaint
Pursuant to Rule 15(a), Fed.R.Civ.P., "[a] party may amend the party's
pleading once as a matter of course at any time before a responsive
pleading is served . . ." Fed.R.Civ.P.
15(a). As a motion to dismiss is not itself a pleading, see Fed.R.Civ.P.
7(a), where a plaintiff amends its complaint after a defendant has moved
to dismiss the complaint but before the motion has been decided, the
motion to dismiss is rendered moot. See, e.g., United Magazine Co. v.
Murdoch Magazines Distrib., Inc., 146 F. Supp. 2d 385, 416 (S.D.N.Y.
In this case, however, MK did not amend its complaint. Instead, the
purported first amended complaint was filed by Active-8, a corporation
which, unlike MK, is alleged to be incorporated under the laws of the
State of Nevada and registered to do business in the States of New York
and New Jersey.
Rule 15(a) provides that a party "may amend the party's pleading. . .
." Fed.R.Civ.P. 15(a) (emphasis supplied). Active-8 could not amend the
original complaint as of right as it is not "the party" which filed the
original complaint but an entity bearing a different name and, according
to the purported amended complaint, allegedly incorporated in a different
state. The allegation that Active-8 was, at some unspecified time in the
past, "formally known as MK Systems, Inc." (Active-8 Am. Compl. at ¶ 1),
is a suggestive coincidence of name but provides no basis to conclude
that Active-8, the alleged Nevada corporation, is one and the same entity
as MK, the alleged New York corporation which filed the complaint in this
If either MK or Active-8 wished to substitute Active-8 as plaintiff in
place of MK as the real party in interest under Rule 17(a), Fed.R.Civ.P.,
the proper means for doing so would have been to seek leave of the
Court. See generally Advanced Magnetics, Inc. v. Bayfront Partners,
Inc., 106 F. 3d 11, 20 (2d Cir. 1997) ("A Rule 17(a) substitution of
plaintiffs should be liberally allowed when the change is merely formal
and in no way alters the original complaint's factual allegations as to
the events or the participants."). Absent such leave, the purported
amendment by Active-8 of MK's complaint is improper.
Accordingly, since the purported first amended complaint was filed by a
non-party entity not entitled to file an amended complaint as of right
nor granted leave to substitute for MK, the so-called first amended
complaint is a nullity, and the operative complaint remains the original
complaint filed by MK. As a consequence, Defendants' unopposed motions to
dismiss the complaint have not been rendered moot and may be considered
by the Court.
B. Defendants' Motions To Dismiss The Complaint Are Granted
In their motions brought pursuant to Rule 12(b), Fed.R. Civ. P.,
Defendants have asserted that MK lacks the capacity to sue under Rule
17(b), Fed.R.Civ.P. In support of this argument, Defendants have
submitted a declaration of counsel attesting to the absence of any record
of a corporation named "MK Systems, Inc." in
the online database for the New York State Department of State Division
Although the defense of lack of capacity is not expressly mentioned in
Rule 12(b), Fed.R.Civ.P., it is accepted practice in this circuit that
arguments concerning a plaintiff's lack of capacity may be treated as
arising under Rule 12(b)(6) where the defect in capacity appears on the
face of the complaint. See Klebanow v. New York Produce Exch.,
344 F.2d 294, 296 n. 1 (2d Cir. 1965) (Friendly, J.); Machne Menachem,
Inc. v. Hershkop, No. 97 Civ. 2550 (ILG), 2001 WL 984943, at *3
(E.D.N.Y. July 24, 2001); Weiner v. Winters, 50 F.R.D. 306, 307-08
(S.D.N.Y. 1970). Where, as here, the Court must consider matters outside
the pleadings, such as affidavits, the motion shall be treated under Rule
56(b), Fed.R.Civ.P. See Klebanow, 344 F.2d at 296 n. 1; Machne Menachem,
2001 WL 984943, at *3; Weiner, 50 F.R.D. at 308.
The capacity of a corporation to sue or be sued is determined by the
law under which it was organized. See Fed.R.Civ.P. 17(b). Although MK is
alleged to be incorporated in New York, Defendants have challenged this
allegation, and MK has offered no evidence to suggest that Defendants are
incorrect. To the contrary, in connection with the reply papers on MK's
motion to enjoin the Georgia action counsel for MK and Active-8 have
submitted documentation evidencing the incorporation of an entity by the
name of "MK Systems, Inc." in Nevada and a New Jersey
certificate of authority of MK Systems, Inc. d/b/a/ MK Life Patch
Systems, Inc. In addition, counsel for MK and Active-8 has affirmed that
Active-8 was originally incorporated in Nevada as "MK Systems, Inc.," and
that "plaintiff's principal and president? amended its name to `Active-8
Inc.'" (Reply Affirmation of Eric Vaughn-Flam, dated Jan. 18, 2005
("Vaughn-Flam Reply Aff."), at ¶ 8.) There is no indication from
counsel's affirmation or from the documentary evidence submitted in
support whether the amendment in question was ever formally accomplished
under Nevada law.*fn1 Counsel further affirms that, "[p]rior to the
commencement of the current action, the undersigned filed an application
with the Secretary of State for a license for plaintiff pursuant to the
New York B.C.L." (Vaughn-Flam Reply Aff., at ¶ 8.)
Based upon the foregoing, it appears that MK was, at some point in the
past, and may continue to be a foreign corporation organized under the
laws of the State of Nevada.
As stated earlier, under Rule 17(b), Fed.R.Civ.P., MK's capacity to sue
is determined by the law under which it was organized. It need not be
determined whether MK properly possessed capacity to sue under the laws
of the State of Nevada at the time
this action was commenced, however, since, even assuming MK possesses
such capacity, the application of Rule 17(b) where diversity jurisdiction
is alleged "is nevertheless subject to the forum state's `door-closing'
provisions." Remsen Partners, Ltd. v. Southern Management Corp., No. 01
Civ. 4427 (RCC), 2004 WL 2210254, at *2 (S.D.N.Y. Sept. 30, 2004) (citing
Woods v. Interstate Realty Co., 337 U.S. 535, 538 (1949); Angel v.
Bullington, 330 U.S. 183, 191-92 (1947)); see also Regal Custom
Clothiers, Ltd. v. Mohan's Custom Tailors, Inc., No. 96 Civ. 6320 (SS),
1997 WL 370595, at *3 (S.D.N.Y. July 1, 1997) (observing that New York's
"door-closing statute" "closes federal doors, where the federal court's
jurisdiction is based on diversity") (citations omitted). The application
of New York's "door-closing statute," see N.Y. Bus. Corp. Law § 1312(a),
is dispositive here with regard to MK's state law claims.
Pursuant to New York's door-closing statute, out-of-state corporations
doing business in New York without authorization are precluded from
maintaining any legal action in the state:
A foreign corporation doing business in this state
without authority shall not maintain any action or
special proceeding in this state unless and until such
corporation has been authorized to do business in this
state and it has paid to the state all fees and taxes
imposed under the tax law or any related statute . .
. as well as penalties and interest charges related
thereto, accrued against the corporation.
N.Y. Bus. Corp. Law § 1312(a) (emphasis supplied). Where jurisdiction
rests on diversity, N.Y. Bus. Corp. Law § 1312 "precludes the
maintaining of an action by an unauthorized foreign corporation not only
in the state courts of New York but also in the federal courts located in
that state." Netherlands Shipmortgage Corp., Ltd. v. Madias, 717 F.2d 731
735 (2d Cir. 1983).
Although MK has alleged that its principal place of business is in New
York, which allegation may be treated as an admission that MK is doing
business in New York, see, e.g., British Fish Development, Inc. v.
Wheeler's Restaurants PLC, No. 89 Civ. 4616 (CSH), 1990 WL 55725, at *2
(S.D.N.Y. Apr. 24, 1990), amended by 1990 WL 71467 (S.D.N.Y. May 23,
1990), there is no evidence demonstrating that MK is authorized to do
business in the State of New York; indeed, even crediting the suggestion
that MK and Active-8 are one and the same entity, counsel has affirmed
only that an application for authorization for the MK/Active-8 entity was
filed prior to the commencement of the current action, not that any such
authorization exists. As a foreign corporation lacks capacity to maintain
any action in New York "unless and until" it has been authorized to do
business in the State of New York, N.Y. Bus. Corp. Law § 1312(a), and
MK, by its counsel, has acknowledged that it did not have any such
authorization at the time the suit was brought, MK lacked capacity to
bring this action*fn2 insofar as the action is premised on diversity
The Second Circuit has ruled that "an appropriate remedy for a section
1312 violation is a conditional dismissal or stay of the action pending
cure of the violation." S & K Sales Co. v. Nike, Inc., 816 F.2d 843, 853
(2d Cir. 1987); accord A.I. Trade Fin., Inc. v. Petra Bank, 989 F.2d 76,
84 (2d Cir. 1993). Accordingly, the dismissal of MK's state-law claims as
to which this Court's diversity jurisdiction has been invoked shall be
without prejudice and conditional upon MK failing to serve and file,
within twenty (20) days of the date of entry of this opinion and order,
proof that it has obtained authority to do business in New York.
MK's complaint may not be dismissed in its entirety on the basis of New
York's door-closing statute, however. MK has alleged federal question
jurisdiction in addition to diversity jurisdiction, and it would seem
anomalous, at the very least, to apply subsection 1312(a) a rule
limiting access to the New York State courts where a plaintiff is
alleging a federal claim. Thus, to the extent that MK has alleged federal
question jurisdiction as an alternate basis for jurisdiction in
connection with the third claim of the complaint, which is premised on
purported violations of the FDCA and regulations promulgated thereunder,
MK's capacity to sue depends solely on the application of Nevada law,
pursuant to Rule 17 (b), Fed.R. Civ. P., and not on the application of
N.Y. Bus. Corp. Law § 1312(a). Once again, it need not be determined
whether MK enjoys capacity under Nevada law, as, even
assuming such capacity, this Court lacks federal question jurisdiction
over the sole remaining claim of the complaint.*fn3
There are two ways in which a case may present a federal question under
28 U.S.C. § 1331. First, federal question jurisdiction exists if "federal
law creates the cause of action." West 14th Street Commercial Corp. v. 5
West 14th Owners Corp., 815 F.2d 188, 192 (2d Cir. 1987). "If state law
creates the cause of action, the second test asks whether that cause of
action poses a substantial federal question." Id.; see also Merrell Dow
Pharms. Inc. v. Thompson, 478 U.S. 804, 808 (1986) (Although "the vast
majority of cases brought under the general federal-question jurisdiction
of the federal courts are those in which federal law creates the cause of
action . . . a case may arise under federal law where the vindication of
a right under state law necessarily turn[s] on some construction of
federal law.") (quotation marks and citations omitted).
"[C]ase law is clear on the point that no private right of action
exists under the FDC Act." Eon Labs Mfg. Inc. v. Watson Pharm., Inc.,
164 F. Supp. 2d 350, 361 n. 14 (S.D.N.Y. 2001) (citing
Braintree Labs., Inc. v. Nephro-Tech, Inc., 58 F. Supp. 2d 1293, 1295
n. 1 (D. Kan. 1999) (discussing dismissal of two counts which
"essentially alleged misbranding in violation of the Federal Drug and
Cosmetic Act (FDCA), 21 U.S.C. §§ 301-395, a statute under which no
private right of action exists")); see also PDK Labs, Inc. v.
Friedlander, 103 F.3d 1105, 1113 (2d Cir. 1997) (observing that "no . .
. private right of action exists" under the FDCA); Bernhardt v. Pfizer,
Inc., Nos. 00 Civ. 4042 (LMM) & 00 Civ. 4379 (LMM), 2000 WL 1738645, at
*2 (S.D.N.Y. Nov. 22, 2000) (observing that there is "no private right of
action to enforce the provisions of the FDCA"). Nor does any private
cause of action arise under the implementing regulations of the FDCA.
See 21 U.S.C. § 337; see also Cushing v. Moore, 970 F.2d 1103, 1106 (2d
Cir. 1992); Martinez Caraballo v. Intermedics, Inc., 886 F. Supp. 974,
979 (D.P.R. 1995) (collecting cases); Auto-Tron v. Allen Group, Inc.,
No. 90 Civ. 2900, 1990 WL 153958, at *3 (D.N.J. Oct. 20, 1990).
Although a private cause of action for per se negligence may arise
under New York State law upon violation of the FDCA, see Sita v. Danek
Med., Inc., 43 F. Supp. 2d 245, 262 (E.D.N.Y. 1999) (collecting
cases), the mere invocation of the FDCA in relation to a state law claim
is insufficient to establish federal question jurisdiction. As the U.S.
Supreme Court has explained,
[T]he congressional determination that there should
be no federal remedy for the violation of [the
Federal Food, Drug, and Cosmetic Act] is tantamount
to a congressional conclusion that the presence of a
claimed violation of
the statute as an element of a state cause of action
is insufficiently `substantial' to confer
Merrell Dow Pharms., 478 U.S. at 814 (footnote omitted). Accordingly, no
federal question jurisdiction exists, and the third claim of the
complaint is dismissed for want of jurisdiction.*fn4
Because, for the reasons set forth above, MK lacked capacity to bring
those claims over which this Court's diversity jurisdiction was alleged
at the time this action was commenced and because the sole claim over
which federal question jurisdiction was alleged provides no basis for
such jurisdiction, Defendants' motion to dismiss the complaint is
granted. The complaint is dismissed in its entirety and without prejudice
conditional upon MK failing to serve and file, within twenty (20) days of
the date of entry of this opinion and order, proof that it has obtained
authority to do business in New York.
It is so ordered.