St. Clair Intellectual Property Consultants Inc. v. Samsung Electronics Co. Ltd. et al

Filing 22

MEMORANDUM OPINION re 9 motion to dismiss. Signed by Judge Leonard P. Stark on 3/29/13. (ntl)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
ST. CLAIR INTELLECTUAL
PROPERTY CONSULTANTS, INC.,
Plaintiff,
v.
Civil Action No. 12-69-LPS
SAMSUNG ELECTRONICS CO. LTD.,
SAMSUNG ELECTRONICS AMERICA,
INC. AND SAMSUNG
TELECOMMUNICATIONS AMERICA,
LLC,
Defendants.

Richard D. Kirk, Stephen B. Brauerman, BAYARD, P.A., Wilmington, DE.
R. Terrance Rader, Charles W. Bradley, Glenn E. Forbis, RADER, FISHMAN & GRAUER
PLLC, Bloomfield Hills, MI.
Attorneys for Plaintiff.
Adam W. Poff, Monte Squire, YOUNG CONAWAY STARGATT & TAYLOR, LLP,
Wilmington, DE.
Roderick R. McKelvie, Kevin B. Collins, Brian G. Bieluch, Jonathan Herczeg, COVINGTON &
BURLING LLP, Washington, DC.
Attorneys for Defendants.

MEMORANDUM OPINION

March 29, 2013
Wilmington, Delaware

t~~-~

STARK, U.S. District Judge:

Pending before the Court is Defendants' Motion to Dismiss. (D.I. 9) For the reasons set
forth below, the Court will deny Defendants' motion.

I.

BACKGROUND
On December 30, 2011, St. Clair Intellectual Property Consultants, Inc. ("St. Clair" or

"Plaintiff') filed a complaint against Samsung Electronics USA, Inc. ("SE USA"). See St. Clair
Intellectual Property Consultants, Inc. v. Samsung Electronics USA, Inc., No. 11-1306 (D. Del.

Dec. 30, 2011) [hereinafter Samsung 1]. In Samsung 1, St. Clair alleged that SE USA willfully
infringed six of St. Clair's patents: U.S. Patent Nos. 5,710,929; 5,758,175; 5,892,959; 6,079,025;
5,630,163; and 5,822,610, by selling and distributing smartphones, tablets, and netbooks that use
the Android operating system. On January 20, 2012, St. Clair voluntarily dismissed Samsung I
pursuant to Federal Rule of Civil Procedure 41(a)(1)(A)(i). See Notice of Dismissal, No.
11-1306 (D. Del. Jan. 20, 2012).
That same day, St. Clair filed a complaint against Samsung Electronics America, Inc.
("SEA") and Samsung Telecommunications America, LLC ("STA"). See St. Clair Intellectual
Property Consultants, Inc. v. Samsung Electronics America, Inc., No. 12-58 (D. Del. Jan. 20,

2012) [hereinafter Samsung 11]. St. Clair alleged that SEA and STA willfully infringed the same
patents identified in Samsung I, by selling and distributing the same smartphones, tablets, and
netbooks that use the Android operating system. On January 23, 2012, St. Clair dismissed
Samsung //pursuant to Rule 41(a)(1)(A)(i). See Notice ofDismissal, No. 12-58 (D. Del. Jan. 23,

2012).
That same day, St. Clair filed the present suit against Samsung Electronics Co. Ltd.
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("SEC"), SEA, and STA (collectively, "Samsung" or "Defendants"). (D.I. 1) Like Samsung I
and Samsung II, St. Clair alleges Defendants willfully infringe the same six patents previously
asserted by selling and distributing the same smartphones, tablets, and netbooks.
On May 2, 2012, Defendants moved to dismiss the case pursuant to Federal Rules of
Civil Procedure 12(b)(6) and 41(a)(1)(B). (D.I. 9)

II.

LEGALSTANDARDS
A.

Motion to Dismiss under Rule 12(b)(6)

The sufficiency of pleadings for non-fraud cases is governed by Rule 8 of the Federal
Rules of Civil Procedure, which requires "a short and plain statement of the claim showing that
the pleader is entitled to relief." When presented with a Rule 12(b)( 6) motion to dismiss for
failure to state a claim, courts conduct a two-part analysis. See Fowler v. UPMC Shadyside, 578
F .3d 203, 210 (3d Cir. 2009). First, courts separate the factual and legal elements of a claim,
accepting "all of the complaint's well-pleaded facts as true, but may disregard any legal
conclusions." !d. at 210-11. This first step requires courts to draw all reasonable inferences in
favor of the non-moving party. See Maio v. Aetna, Inc., 221 F.3d 472, 500 (3d Cir. 2000).
However, the Court is not obligated to accept as true "bald assertions," Morse v. Lower Merion

Sch. Dist., 132 F.3d 902,906 (3d Cir. 1997), "unsupported conclusions and unwarranted
inferences," Schuylkill Energy Res., Inc. v. Pa. Power & Light Co., 113 F.3d 405, 417 (3d Cir.
1997), or allegations that are "self-evidently false," Nami v. Fauver, 82 F.3d 63, 69 (3d Cir.
1996).
Second, courts determine "whether the facts alleged in the complaint are sufficient to
show that the plaintiff has a 'plausible claim for relief.'" Fowler, 578 F.3d at 211 (quoting
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Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009)). A claim is facially plausible "when the plaintiff
pleads factual content that allows the court to draw the reasonable inference that the defendant is
liable for the misconduct alleged." Iqbal, 556 U.S. at 678. This is a context-specific
determination, requiring the court "to draw on its judicial experience and common sense." !d. at
679. At bottom, "[t]he complaint must state enough facts to raise a reasonable expectation that
discovery will reveal evidence of [each] necessary element" of a claim. Wilkerson v. New Media
Tech. Charter Sch. Inc., 522 F.3d 315, 321 (3d Cir. 2008) (internal quotation marks omitted).
"[W]hen the allegations in a complaint, however true, could not raise a claim of
entitlement to relief, this basic deficiency should ... be exposed at the point of minimum
expenditure of time and money by the parties and the court." Bell Atl. Corp. v. Twombly, 550
U.S. 544, 558 (2007) (internal quotation marks omitted). Finally, although a non-fraud claim
need not be pled with particularity or specificity, that claim must "give the defendant fair notice
of what the ... claim is and the grounds upon which it rests." !d. at 555.

B.

Rule 4l(a)(l)

Federal Rule of Civil Procedure 41(a)(1) permits a plaintiff to voluntarily dismiss an
action, without prejudice, so long as the plaintiff has not previously dismissed another action
"based on or including the same claim." If the plaintiff files a second notice of dismissal
pursuant to Rule 41(a)(1), the Court must dismiss an action based on or including the same claim
with prejudice. See Fed. R. Civ. P. 41(a)(1)(B); Cooter & Gell v. Hartmarx Corp., 496 U.S. 384,
394 (1990). This "two dismissal rule" means that a second voluntary dismissal serves as an
"adjudication upon the merits" and the doctrine of res judicata applies. See Manning v. South
Carolina Dept. ofHighway & Public Transp., 914 F.2d 44,47 (4th Cir. 1990). The two
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dismissal rule is designed to limit a plaintiffs ability to dismiss an action and encourage
plaintiffs to diligently prepare their papers, to curb potential abuses of the judicial system. See
Cooter, 496 U.S. at 397-98.

III.

DISCUSSION
A.

Applicability of Rule 4l(a)(l)

The parties do not appear to contest the applicability of the Rule 41(a)(l) dismissal of
Samsung II. The central issue between the parties is whether Samsung I is also a voluntary

dismissal against the current Defendants. Defendants claim that SE USA is a Samsung entity
with sufficient relations to the present Defendants such that Rule 41(a)(l)(B) requires this Court
to dismiss the case based on Samsung I and Samsung II. Plaintiff claims that because SE USA
was void at the commencement ofSamsung I and because SE USA has no relationship with
Defendants, the Samsung I dismissal does not count as a Rule 41(a)(l) dismissal against
Defendants.

1.

Status of SE USA

Plaintiff argues that the two dismissal rule is inapplicable because Samsung I was a
suit against SE USA, a defunct corporation which could not sue or be sued. Plaintiff argues that
because SE USA failed to pay its franchise tax obligation, it became defunct by 2006. (D.I. 14 at
7-8) Under 8 Del. Code§ 278, Plaintiff argues that SE USA could not be sued after the threeyear statutory dissolution period. (!d. at 8) Therefore, Plaintiff contends that Defendants failed
to establish that any claim could exist against SE USA.
Defendants argue that the status of SE USA is irrelevant. Specifically, Defendants cite to
Federal Rule of Civil Procedure 3, which states that "[a] civil action is commenced by filing a

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complaint with the court." Thus, in Defendants' view, Plaintiff commenced an action that was
thereafter voluntarily dismissed under Rule 4l(a)(1), whether or not SE USA was void. (D.I. 16
at 4)
On this issue, the Court agrees with Defendants. Plaintiff commenced Samsung I when it
filed its complaint on December 30, 2011. Defendants persuasively analogize this case to Lake
at Las Vegas Investors Grp., Inc. v. Pacific Malibu Dev. Corp., 933 F.2d 724, 726 (9th Cir.
1991), in which the plaintiffs argued that they did not fall within Rule 41(a)(1) because their
prior suit was against a foreign corporation not registered in the state. Under Nevada law, an
unregistered foreign corporation cannot commence, maintain, or defend an action. The Ninth
Circuit rejected plaintiffs' argument, stating that lack of capacity is an affirmative defense, and,
underNevada Rule of Civil Procedure 3, an action is commenced upon filing of the complaint.
See id. Likewise, here, Federal Rule of Civil Procedure 3 states that an action commences upon
the filing of the complaint. Thus, the status of SE USA is irrelevant to the application of Rule
41(a)(l). Plaintiff filed and voluntarily dismissed a claim against SE USA in Samsung I and,
therefore, Samsung I falls within Rule 41 (a)(1 ).

2.

Sufficiency of Relationship Between SE USA and Defendants

The two dismissal rule bars Plaintiffs suit ifthe Court finds that Plaintiff previously
dismissed actions based on or including the same claims. See Fed. R. Civ. P. 41(a)(1)(B). Both
sides agree that while the text of Rule 41(a)(l)(B) does not expressly require "privity," some
degree of relationship is required to dismiss a party under the two dismissal rule. (D .I. 14 at 11;
D.I. 16 at 7; see also 5 James Wm. Moore et al., Moore's Fed. Practice§ 41.04 (2d ed. 1996)
(stating that two dismissal rule is not applicable "unless the defendants are the same or

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substantially the same or in privity in both actions, although the rule does not expressly so
provide"))
Several courts have held that the two dismissal rule applies if the defendants are the same,
substantially the same, or in privity with each other. See, e.g., Am. Cyanamid Co. v. Capuano,
381 F.3d 6, 17 (1st Cir. 2004) (concluding that two dismissal rule is inapplicable where there is
no privity); Catbridge Machinery, LLC v. Cytec Engineered Materials, 2012 WL 2958244, at *3
(D.N.J. July 18, 2012) (stating that two dismissal rule applies when defendants are same or in
privity); Ogden Allied Sec. Servs., Inc. v. Draper & Kramer, 137 F.R.D. 259, 261 (N.D. Ill. 1991)
(adopting view that defendants must be same, substantially same, or in privity for two dismissal
rule to apply). Other courts focus on whether the defendants are sufficiently interrelated so that
they share the same legal rights. See, e.g., Lake at Las Vegas Investors Grp., 933 F.2d at 726
(rejecting strict privity and holding that some relationship between dismissed party and party
seeking to apply two dismissal rule is required); Manning v. S.C. Dep 't of Highway & Public

Transp., 914 F.2d 44, 48 (4th Cir. 1990) (stating that privity within meaning of res judicata
focuses on parties' legal right and relationship to subject matter oflitigation); Murray v. Sevier,
145 F.R.D. 563, 567 (D. Kan. 1993) (stating that defendants did not share same legal rights, so
two dismissal rule was inapplicable even where plaintiff had identical interests in each case).
Defendants argue that Plaintiffhas asserted, for the third time, the same claim of willful
infringement based on the same St. Clair patents and the same Samsung products. (D.I. 16 at 8)
Further, Defendants contend that the public record shows that there is a relationship between SE
USA and Samsung. (!d.) The public record shows that SE USA's incorporator shares the same
address as Samsung's regional headquarters for its North American operations, at which SEA is

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based. Additionally, the public record shows that SE USA's incorporator served as general
counsel of SEA.
Plaintiff argues that Defendants' evidence is weak, and Defendants have produced no
evidence to establish that SE USA had anything to do with the accused Android products. (D.I.
18 at 7) Plaintiff points out that SE USA has been defunct since 2006 and, therefore, could not
have made, sold, or used Android-based products, as they were not introduced until at least 2008.
(D.I. 14 at 2 n.2 & 10 n.9) Thus, Plaintiff asserts that Defendants cannot show that SE USA has
any relevant relationship with the present Defendants and could not have had the same legal
interests in the Android products, because the products did not exist at the time SE USA was in
existence. (Id. at 4)
The Court concludes that, at this stage, Defendants fail to meet their burden of
establishing by a preponderance of evidence that a sufficient relationship exists between
Defendants and SE USA. See Sysco Corp. v. Chi-Chi's, Inc., 338 B.R. 618,622 (Bankr. D. Del.
2006) (stating that party invoking two dismissal rule bears burden of proving its applicability).
Though Defendants present some evidence of a connection between SE USA and Defendants, it
is only through a single person, SE USA's incorporator, and establishes no more than a tenuous
relationship. This falls short of showing that SE USA and Defendants are the same, substantially
the same, or in privity. Moreover, Defendants do not allege any facts to show that SE USA had
the same, similar, or any legal interest in the subject matter of the three litigations, i.e., the
Android operating system.
While Defendants are correct that application of the two dismissal rule is not
discretionary, it is also true that the rule has been strictly construed. See Manze v. State Farm

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Ins. Co., 817 F.2d 1062, 1066 (3d Cir. 1987); see also Sutton Place Dev. Co. v. Abacus Mortg.
Inv. Co., 826 F.2d 637,640 (7th Cir.1987) (stating that court "should be especially careful not to
extend the scope of such a narrow exception when the purpose for the exception would not be
served"); Polaron Prods., Inc. v. Lybrand Ross Bros. & Montgomery, 534 F.2d 1012, 1017 (2d
Cir. 1976) (suggesting that "[w]here the purpose behind the 'two dismissal' exception would not
appear to be served by its literal application, and where that application's effect would be to close
the courthouse doors to an otherwise proper litigant, a court should be most careful not to
construe or apply the exception too broadly"); Murray v. Sevier, 145 F.R.D. 563, 567 (D. Kan.
1993) (holding that two dismissal rule is inapplicable where it is not clear that defendants have
same legal right). As the two dismissal rule serves as an adjudication on the merits and a bar
against bringing suit, the Court must strictly construe it. See generally Surowitz v. Hilton Hotels
Corp., 383 U.S. 363,373 (1966) ("The basic purpose ofthe Federal Rules is to administer justice
through fair trials, not through summary dismissals as necessary as they may be on occasion.").
Here, the Court concludes that the two dismissal rule is inapplicable against Plaintiff
because Defendants have failed to present evidence sufficient to show a close relationship
between Defendants and SE USA, or any evidence ofSE USA's legal interest in the subject
matter ofthe litigation. Accordingly, the Court will deny Defendants' motion.'

'Given this disposition, the Court does not address Plaintiffs request to modify the prior
dismissals pursuant to Federal Rule of Civil Procedure 60(b), or Plaintiffs request to convert
Defendants' motion to dismiss under Rule 12(b)(6) into a motion for summary judgment under
Rule 56.
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IV.

CONCLUSION

For the foregoing reasons, the Court will deny Defendants' Motion to Dismiss. (D.I. 9)
An appropriate Order follows.

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