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Kitaru Innovations Inc. v. Chandaria

March 24, 2010

KITARU INNOVATIONS INC., PLAINTIFF,
v.
ASHOK CHANDARIA AND SACHEN AND ORDER CHANDARIA, DEFENDANTS.



The opinion of the court was delivered by: Paul G. Gardephe, U.S.D.J.

ECF CASE

MEMORANDUM OPINION

Plaintiff Kitaru Innovations Inc. ("Kitaru") brings this action against Ashok and Sachen Chandaria for claims arising out of a dispute over ownership rights to United States Patent No. 6,874,554. Plaintiff seeks a declaratory judgment that it has not infringed on the patent in question, a judgment setting aside what it claims was a fraudulent transfer of rights under the patent from Ashok to Sachen Chandaria, money damages for tortious interference, and a permanent injunction preventing Defendants from contacting any of Kitaru's customers or licensees with respect to claims of patent infringement.

Defendants have moved to dismiss or, in the alternative, to stay this action pending the outcome of a related action in Canada. For the reasons stated below, the motion to dismiss will be GRANTED on grounds of forum non conveniens.

BACKGROUND

Kitaru is a Barbados corporation with its principal place of business in Saint James, Barbados. (Cmplt. ¶ 1) Ashok and Sachen Chandaria are citizens of the United Kingdom who reside in Kenya. (Cmplt. ¶¶ 2-3)

The Complaint alleges that on February 28, 2006, Ashok Chandaria assigned all of his rights and interest in United States Patent No. 6,874,554 (the "'554 Patent") to Kitaru. (Cmplt. ¶ 7) The assigning document was recorded with the United States Patent Office on May 16, 2006. (Id.) The Complaint further alleges, however, that Ashok Chandaria executed a second assignment of the '554 Patent on January 15, 2008, purporting to transfer all of his rights and interest in this same patent to Sachen Chandaria, his son. (Cmplt. ¶¶ 7, 8) This document was recorded by the United States Patent Office on February 6, 2008. (Cmplt. ¶ 7)

Kitaru alleges that in late 2008, LePage's 2000, Inc., one of Kitaru's principal customers and patent licensees, and LePage's principalshareholder, the Conros Corporation, received several letters from a Toronto law firm on behalf of Ashok Chandaria and his family. (Cmplt. ¶ 8) The letters claimed that LePage's was unlawfully using patents owned by Ashok Chandaria and his family. (Id.) The law firm refused, however, to identify the patents in question. (Id.) Kitaru alleges that an investigation into the letters' allegations revealed the January 2008 assignment of the '554 Patent to Sachen Chandaria. (Id.)

Kitaru then filed this suit seeking (1) a declaratory judgment that it has not infringed on Ashok Chandaria's rights to the '554 Patent (Cmplt. ¶¶ 10-13); a declaratory judgment setting aside the allegedly fraudulent transfer of rights to the '554 Patent to Sachen Chandaria (Cmplt. ¶¶ 14-16); and (3) an injunction barring the Defendants from contacting any of Kitaru's customers or licensees with respect to any claim of patent infringement (Cmplt. ¶¶ 25-27). Kitaru also seeks damages for alleged tortious interference. (Cmplt. ¶¶ 17-22)

DISCUSSION

Defendants argue that this action should be dismissed or stayed in light of a closely related action filed by Ashok Chandaria in the Superior Court of Justice for Ontario, Canada (the "Canadian Action"). Defendants contend that a dismissal or stay is appropriate under the abstention doctrine and on grounds of forum non conveniens.

The Canadian Action was filed on March 4, 2009. (Sobel Decl., Ex. 1 at 2) On July 24, 2009, Ashok Chandaria filed an Amended Statement of Claim, adding claims related to the '554 Patent.*fn1 (Sobel Decl., Ex. 1 at ¶¶ 36-42)

The Amended Statement of Claim in the Canadian Action names forty parties as defendants and outlines a complex family dispute in which the claims set forth in the instant action are merely one part. According to the Amended Statement of Claim, all of the companies involved in the action at bar -- Kitaru, LePage's and the Conros Corporation -- are owned by the Chandaria family and are controlled by, among others, Kapoor and Navin Chandaria, Ashok Chandaria's brothers. (Sobel Decl., Ex. 1 at ¶¶ 4, 8) Kitaru,*fn2 LePage's, a number of Conros entities, and Kapoor and Navin Chandaria are all named as defendants in the Canadian Action. (Sobel Decl., Ex. 1 at 1)

The Amended Statement of Claim alleges that in early 2007 the Chandaria brothers agreed that Ashok Chandaria's proportionate share of the family's North American businesses would be paid out to him. (Id. at ¶ 25) As part of this agreement, Ashok Chandaria agreed to transfer ownership of several patents, including the '554 Patent, to Kitaru in exchange for receiving his share of the family business and financial holdings. (Id. at ¶¶ 36-37, Schedule A at 1) Ashok Chandaria alleges, however, that he was never paid his share. (Id. at ¶ 38) As a result, Ashok Chandaria seeks to void the assignment of the patents, including the '554 Patent, for failure of consideration and fraudulent misrepresentation. (Id. at ¶¶ 40-42)

In considering Defendants' motion to dismiss on abstention or forum non conveniens grounds, this Court may consider affidavits, affirmations and exhibits submitted in connection with the motion. See Goldberg v. UBS AG, 660 F. Supp. 2d 410, 419 (S.D.N.Y. 2009) (citing cases stating that courts may consider complaint, affirmations, affidavits, and exhibits in deciding a motion to dismiss on forum non conveniens grounds); Kingsway Fin. Servs. v. Pricewaterhouse-Coopers, LLP, 420 F. Supp. 2d 228, 233 (S.D.N.Y. 2005) (citing cases stating that courts may consider affidavits and other evidence in considering a motion to dismiss on abstention grounds).

I. ABSTENTION IS NOT APPROPRIATE

Federal courts have a "virtually unflagging obligation... to exercise the jurisdiction given them," Colo. River Water Conservation Dist. v. United States, 424 U.S. 800, 817 (1976), and the existence of a parallel foreign proceeding does not negate that obligation. Royal & Sun Alliance Ins. Co. of Can. v. Century Int'l Arms, Inc., 466 F.3d 88, 92 (2d Cir. 2006). The Second Circuit has stated that "[g]enerally, concurrent jurisdiction in United States courts and the courts of a foreign sovereign does not result in conflict. Rather, '[p]arallel proceedings in the same in personam claim should ordinarily be allowed to proceed simultaneously, at least until a ...


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