Vaughan Company v. Global Bio-Fuels Technology, LLC et al

Filing 186

MEMORANDUM-DECISION and ORDER: that Plaintiff's motion for leave to voluntarily dismiss Counts 1 through 4 of the Complaint without prejudice (ECF No. 120 ) is Denied; Defendants' motion for partial summary judgment (ECF No. 129 ) is Gran ted in part and Denied in part; Defendants are Granted judgment as a matter of law concerning Counts 1 through 4 of the Complaint and such Counts are Dismissed with Prejudice; Defendants are Granted judgment as a matter of law concerning its Second C ounterclaim seeking a declaration of noninfringement; Defendants' request for sanctions and for dismissal for lack of personal jurisdiction is Denied. All other relief requested pursuant to defendants' March 24, 2015 partial motion for sum mary judgment is Denied; The remaining counts contained in plaintiff's complaint (Counts 5 through 9) and defendants' counterclaims (Counterclaims 1, 3,4, and 5) are Dismissed without prejudice; The Clerk serve a copy of this Decision and Order upon defendants in accordance with the Local Rules and The Clerk is directed to enter judgment accordingly and close this case. Signed by Judge David N. Hurd on 09/22/2016. (hmr)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF NEW YORK
-------------------------------VAUGHAN COMPANY,
Plaintiff,
-v-

1:12-CV-01292
(DNH/DJS)

GLOBAL BIO-FUELS TECHNOLOGY, LLC
and RICHARD BEHNKE,
Defendants.
-------------------------------APPEARANCES:

OF COUNSEL:

BARCLAY DAMON LLP
Attorneys for Plaintiff
One Park Place
300 South State Street
Syracuse, NY 13202-2078

JOHN D. COOK, ESQ.

BISHOP DIEHL & LEE, LTD.
Attorneys for Plaintiff
1475 East Woodfield Road, Suite 800
Schaumburg, IL 60173

NEIL A. BENCHELL, ESQ.
EDWARD L. BISHOP, ESQ.
NICHOLAS S. LEE, ESQ.

HARRIS, BEACH LAW FIRM1
Attorneys for Defendants
Technology, LLC
333 West Washington Street - Suite 200
Syracuse, NY 13202

JAMES R. MULDOON, ESQ.
STEVEN P. NONKES, ESQ.
TED H. WILLIAMS, ESQ.

RICHARD BEHNKE
Pro Se
8014 Olson Memorial Highway
Suite 426
Golden Valley, MN 55427
DAVID N. HURD
United States District Judge

1

The Harris Beach Law Firm has subsequently been permitted to withdraw as counsel to the
defendants. See ECF No. 156.

MEMORANDUM-DECISION and ORDER
I. INTRODUCTION
On August 16, 2012, plaintiff Vaughan Company (“plaintiff” or “Vaughan”), brought this
action against defendants Richard Behnke (“Behnke”) and Global Bio-Fuels Technology, LLC
(“Global Bio-Fuels”). In its complaint, plaintiff asserts nine causes of action - four patent
infringement claims brought pursuant to 35 U.S.C. § 271 (“Counts 1 - 4") and state law claims
for misappropriation of trade secrets (“Count 5"), unfair competition (“Count 6"), tortious
interference with business relationships (“Count 7"), conversion (“Count 8") and breach of
fiduciary duty (“Count 9"). Presently under consideration are: (i) plaintiff’s motion for leave to
voluntarily dismiss Counts 1 - 4 of the complaint pursuant to Federal Rule of Civil Procedure
41(a)(2) (ECF No. 120) and (ii) defendants’ cross motion for partial summary judgment pursuant
to Federal Rule of Civil Procedure 56 (ECF No. 129). Both motions are fully briefed. See ECF
Nos. 129, 135, 141.
II. FACTUAL BACKGROUND
Vaughan, a Washington corporation with its principal place of business in Washington
state, designs and manufactures specialized pumps used in municipal wasterwater treatment
facilities. Behnke, a Minnesota resident, began working as a Regional Sales Manager for
Vaughan in January 2000. Behnke eventually became Vaughan’s Director of Mixing Technology.
These positions required him to make sales presentations regarding Vaughan’s ROTAMIX®
product and afforded him access to a wide range of internal corporate information, including
project proposals, product designs and customer lists. On June 24, 2010, while still employed
by Vaughan, Behnke formed Global, a Minnesota company specializing in the design and
manufacture of pump mixing systems similar to those of Vaughan. The complaint alleges that
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while conducting business for Vaughan, Behnke solicited and sold Global products to Vaughan
customers. Behnke resigned from Vaughan on November 10, 2011, and remains the owner and
president of Global. Since his resignation, Behnke has refused to return his Vaughan laptop,
which contains confidential company information. The Complaint alleges that Behnke has used
this information to underbid Vaughan on mixing system projects.
Counts 1 through 4 of the Complaint contend that defendants infringed upon four of
Vaughan’s patents by submitting a bid or proposal for a digester mixing systems project in
Rensselaer County, New York in August 2012 (the “Rensselaer Project”). Defendants have
asserted throughout this litigation that they merely offered to sell a Chop-X pump, which does
not infringe upon plaintiff’s patents.
On October 5, 2012, defendants moved to dismiss the complaint for failure to state a
claim and lack of personal jurisdiction against defendant Behnke. In a November 15, 2012
Memorandum-Decision & Order, this Court denied defendants’ motion and found that it was
premature to conclude that the defendants did not offer to sell equipment subject to plaintiff’s
patents. See ECF No. 22. Thereafter, defendants sought judgment on the pleadings with
regards to Counts 1 through 4. On October 23, 2013, the Court denied defendants’ motion. See
ECF No. 62. In such opinion, the Court again noted that it was unclear whether defendant’s bid
contemplated any alterations to the Chop-X pump or otherwise included components for which
Vaughan holds patents and therefore found that plaintiff was entitled to discovery to determine
if defendants’ Rensselear bid did in fact infringe upon plaintiff’s patents. On October 29, 2013,
defendants filed their Second Amended Answer and Counterclaims, seeking a declaration of

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invalidity of Vaughan’s patents, a declaration of non-infringement, defamation and tortious
interference and equitable assignment of copyright registration. See ECF No. 63.
The parties have conducted discovery in the form of requests for production, requests
for admission and interrogatories. Vaughan has taken at least five depositions, including those
of defendant Behnke and third party deponent, Marc Gerbsch, who received defendants’
proposal regarding the Rensselaer Project. In February 2015, after completion of the depositions
and review of the exchanged discovery, Vaughan decided that it would not pursue Counts 1
through 4, its patent infringement claims.
III. DISCUSSION
(a) Plaintiff’s Motion for Voluntary Dismissal Without Prejudice is Denied.
Vaughan seeks leave from the Court to voluntarily dismiss Counts 1 through 4 of the
complaint without prejudice.
Federal Rule of Civil Procedure 41(a)(2) provides that “an action shall not be dismissed
at the plaintiff's instance save upon order of the court and upon such terms and conditions as the
court deems proper.” FED. R. CIV. P. 41(a)(2). The decision whether to grant a motion for
voluntary dismissal is in the sound discretion of the district court.

See D'Alto v. Dahon

California, Inc., 100 F.3d 281, 283 (2d Cir. 1996). The Second Circuit has recognized that “[t]wo
lines of authority have developed with respect to the circumstances under which a dismissal
without prejudice might be improper.” Kwan v. Schlein, 634 F.3d 224, 230 (2d Cir. 2011). The
first “indicates that such a dismissal would be improper ‘if the defendant would suffer some plain
legal prejudice other than the mere prospect of a second lawsuit.’” Id. at 230 (quoting Camilli v.
Grimes, 436 F.3d 120, 123 (2d Cir. 2006). The second lien of authority “indicates that the test
for dismissal without prejudice involves consideration of various factors known as the Zagano
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factors.” Id. (citing Zagano v. Fordham University, 900 F.2d 12, 14 (2d Cir. 1990)). These
Zagano factors include: (1) plaintiff's diligence in bringing the motion, (2) any “undue
vexatiousness” on plaintiff's part, (3) the extent to which the suit has progressed, including
defendant's efforts and expense in preparation for trial; (4) duplicative expense of any relitigation;
and (5) the adequacy of plaintiff's explanation for the need to dismiss. See Zagano, 900 F.2d
at 14.

“These factors are not necessarily exhaustive and no one of them, singly or in

combination with another, is dispositive.” Kwan, 634 F.3d at 230.
Consideration of the Zagano factors weighs in favor of dismissal of the patent
infringement with prejudice. While Vaughan was diligent in bringing its motion and there appears
to be no undue vexatiousness on its part, plaintiff seeks to dismiss its patent infringement claims
over two and a half years after this action began, in which time the defendants expended
significant time, effort and resources to defend against plaintiff’s patent infringement claims.
Defendants have opposed plaintiff’s patent infringement claims in moving to dismiss them,
preparing noninfringement contentions and claims construction briefing, preparing invalidity
contentions against the four patents and engaging in discovery, including responding to plaintiff’s
264 document demands, 17 interrogatories and 163 requests for admissions. See ECF Nos. 2921, 29-22 and 29-23. “Where cases have barely been litigated, there is correspondingly little
concern about the expense of relitigation for defendants.” Krulls v. CIRG, LLC, 2011 WL
2470471, at *2 (N.D.N.Y. June 20, 2011) (D.J. Kahn). The extent to which this case has
progressed and the discovery that has taken place favor dismissal with prejudice.
Further, Vaughan’s explanation for the need to dismiss is inadequate. Plaintiff asserts
that its request to dismiss its patent infringment claims results from its desire to move towards

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a quick resolution of the remaining causes of action. See ECF No. 120 at 11. However, the
Court sees the matter differently. The Court previously permitted plaintiff discovery to investigate
its patent infringement claims. After having had extensive discovery, plaintiff now admits that it
“does not have sufficient evidence at this time to proceed on its Patent Infringement Counts.”
See ECF No. 120 at 8. A party should not be permitted to avoid the prospect of an adverse
decision on a dispositive motion by dismissing a claim without prejudice. Zagano, 900 F.2d at
14, Manti Transp., Inc. v. Assoc. Commercial Corp., 2002 U.S. Dist. LEXIS 3738, at *14-15
(E.D.N.Y. Mar. 8, 2012). It is quite clear that plaintiff’s motive in bringing this motion is to avoid
an adverse decision that will forever bind it.
Given the significant expenses incurred by defendants at this advanced stage of
litigation and the lack of evidence supporting plaintiff’s patent infringement claims, defendants
would be sufficiently prejudiced if the Court were to dismiss the patent infringement claims
without prejudice. Therefore, based upon consideration of the Zagano factors, plaintiff’s motion
for leave to withdraw Counts 1 through 4 will be denied.
(b) The Defendants’ Motion for Partial Summary Judgment is Granted.
Defendants have moved for partial summary judgment concerning noninfringment.
Summary judgment is appropriate where, construing the evidence in the light most favorable to
the non-moving party, “there is no genuine issue as to any material fact and that the moving
party is entitled to a judgment as a matter of law”. FED. R. CIV. PRO. 56(c); Richardson v. Selky,
5 F.3d 616, 621 (2d Cir. 1993). The party moving for summary judgment has the burden to
establish “that no genuine issue of material fact exists and that the undisputed facts establish her
right to judgment as a matter of law.” Bowen v. National R.R. Passenger Corp., 363 F. Supp.
2d 370, 373 (N.D.N.Y. 2005).
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“[T]he mere existence of some alleged factual dispute between the parties will not
defeat an otherwise properly supported motion for summary judgment; the requirement is that
there be no genuine issue of material fact.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986). A party opposing summary judgment “may not rest upon the mere allegations or denials
of [their] pleading, but must set forth specific facts showing that there is a genuine issue for trial.”
Id. (quoting First Nat’l Bank of Ariz. v. Cities Svcs.Co., 391 U.S. 253, 288 (1968)). Those specific
facts must be supported by “citing to particular parts of materials in the record.” FED. R. CIV.
PRO. 56(c)(1)(A). “[I]f the evidence is merely colorable, or is not significantly probative, summary
judgment may be granted.” Anderson, 477 U.S. at 249-50.
To prove patent infringement, a patentee must demonstrate that an accused device
contains an element corresponding to each and every limitation of an asserted claim. See
Laitram Corp. v. Rexnord Inc., 939 F.2d 1533, 1535 (Fed. Cir. 1991). “The patentee bears the
burden of proving infringement by a preponderance of the evidence.” SRI Intern. v. Matsushita
Elec. Corp. of America, 775 F.2d 1107, 1123 (Fed. Cir. 1985). However, when a defendant
moves for summary judgment on a counterclaim of non-infringement against the patentee, the
defendant bears an initial burden. See Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). A
defendant can meet this burden merely by “‘showing’ - that is, pointing out to the district court that there is an absence of evidence to support the nonmoving party’s case.” Exigent Tech. Inc.,
442 F.3d 1301, 1308 (Fed. Cir. 2006) (quoting Celotex, 477 U.S. at 325).
Vaughan raises no issue of fact contradicting that what defendants offered to sell in
connection with the Rensselaer Project was a Hayward Gordon Chop-X pump and has made no
contention that such pump, or any alleged modification of such pump, infringes upon its patents.

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Accordingly, plaintiff has failed to raise a genuine issue of material fact with regards to Counts
1 through 4 of the complaint or defendants’ non-infringement counterclaim. As a result,
defendant’s motion for partial summary judgment will be granted dismissing Counts 1 through
4 of the complaint and granting judgment concerning its second counterclaim.
(c) Request for Attorneys’ Fees and Costs.
Defendants have moved for attorneys’ fees pursuant to 35 U.S.C. § 285, which
provides that the Court “in exceptional cases may award reasonable attorney fees to the
prevailing party”. An exceptional case exists under § 285 where the position of the sanctioned
party is: (1) objectively unreasonable, and (2) asserted in subjective bad faith. See Highmark,
Inc. v. Allcare Health Management Systems, Inc., 701 F.3d 1351, 1353 (Fed. Cir. 2012). The
Court finds insufficient evidence that Vaughan’s conduct constituted an “exceptional case”
pursuant to § 285 and therefore denies an award of attorneys’ fees.
Vaughan seeks the imposition of costs and fees pursuant to 28 U.S.C. §1927, which
provides that “any attorney . . . who so multiplies the proceedings in any case unreasonably and
vexatiously may be required by the court to satisfy personally excess costs, expenses, and
attorney's fees reasonably incurred because of such conduct”. The Second Circuit has explained
that the imposition of Section 1927 sanctions is “highly unusual and requires a clear showing of
bad faith” by an attorney. West Virginia v. Chas. Pfizer & Co., Inc., 440 F.2d 1079, 1092 (2d Cir.
1971). The Court also finds insufficient evidence to warrant to imposition of costs and fees
pursuant to Section 1927. Accordingly, plaintiff’s request will be denied.
(d) The Court Retains Personal Jurisdiction Over the Defendants.
Defendants assert that with the withdrawal or dismissal of the patent infringement
claims, the Court should decline to exercise personal jurisdiction over the defendants with
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respect to the remaining claims. Defendants argue that the Court’s prior decision to exercise
personal jurisdiction over defendants was entirely predicated upon defendants’ involvement with
the Rensselaer Project.
To determine whether personal jurisdiction exists over a non-domiciliary, a federal
district court must apply the forum state's long-arm statute. Chloe v. Queen Bee of Beverly Hills,
LLC, 616 F.3d 158, 163 (2d Cir. 2010). If the long-arm statute permits personal jurisdiction, the
court must then determine whether the exercise of such jurisdiction comports with traditional
notions of due process. Id. at 164. This due process analysis incorporates two inquiries: (1)
whether the defendant had "sufficient contacts with the forum state to justify the court's exercise
of personal jurisdiction"; and (2) whether it is reasonable to exercise jurisdiction in light of the
particular circumstances of the case. Id. When considering the reasonableness aspect, a court
may evaluate the burden on the defendants, the interests of the forum state, the plaintiff's
interest in obtaining relief, interstate judicial economy, and the shared interest of "furthering
fundamental substantive social policies." Id.
New York's long-arm statute permits the exercise of personal jurisdiction over any nondomiciliary "who in person or through an agent . . . transacts any business within the state or
contracts anywhere to supply goods or services in the state." N.Y. C.P.L.R. § 302(a)(1). Even
though Vaughan’s patent infringement claims have been dismissed, there is no doubt that
defendants have transacted business in New York by submitting a bid for the Rensselaer Project.
Therefore, New York's long-arm statute provides for personal jurisdiction over Behnke.
Moreover, exercising personal jurisdiction over Behnke does not violate traditional
standards of due process. Behnke availed himself of the benefits and protections of New York

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law when he purposefully submitted a bid for the Rensselaer Project on behalf of Global. Thus,
he had sufficient minimum contacts with New York to justify personal jurisdiction, even in the
absence of a continuing business relationship with the state. See Chloe, 616 F.3d at 170.
Accordingly, defendant’s request that the Court decline to continue to exercise personal
jurisdiction over defendants will be denied.
(e) Jurisdiction of Remaining Law Claims.
Although the Court retains personal jurisdiction over defendants, it will decline to
exercise supplemental jurisdiction over plaintiff’s remaining state law claims.
A district court's exercise of supplemental jurisdiction is governed by 28 U.S.C. §
1367(a), which provides that “in any civil action of which the district courts have original
jurisdiction, the district courts shall have supplemental jurisdiction over all other claims that are
so related to claims in the action within such original jurisdiction that they form part of the same
case or controversy ....” 28 U.S.C. § 1367(a). Subsection (c) provides that a district court “may”
decline to exercise supplemental jurisdiction over a claim if the court has dismissed all claims
over which it had original jurisdiction. 28 U.S.C. § 1367(c)(3). “[I]n the usual case in which all
federal-law claims are eliminated before trial, the balance of factors to be considered under the
pendent jurisdiction doctrine—judicial economy, convenience, fairness, and comity—will point
toward declining to exercise jurisdiction over the remaining state-law claims.” Valencia ex rel.
Franco v. Lee, 316 F.3d 299, 305 (2d Cir. 2003) (quoting Carnegie–Mellon University v. Cohill,
484 U.S. 343, 349–50 (1988)). Here, all of plaintiff's patent infringement claims have been
dismissed. Accordingly, judicial economy, fairness, convenience and comity will be served best
by declining to exercise supplemental jurisdiction over plaintiff's remaining state law claims. As

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a result, plaintiff’s remaining causes of action, Counts 5 through 9, will be dismissed without
prejudice.
Similarly, defendants’ remaining counterclaims will be dismissed without prejudice.
Defendants’ third and fourth counterclaim allege state law causes of action which the Court will
decline to exercise supplemental jurisdiction over. Defendant’s first counterclaim seeks a
declaration of invalidity concerning plaintiff’s patents. However, it is not the role of federal courts
to directly supervise the functions of the patent office by rendering advisory opinions as to the
correctness of patent awards. See Checkpoint Systems, Inc. v. United States Int’l Trade Comm.,
54 F.3d 756, 761 (Fed. Cir. 1995). “In the absence of a patentee's accusation that a party is
infringing or will infringe upon his patent, there does not exist a sufficient case or controversy for
a party to seek district court review of the patent office's decision to issue a patent.” Bioxy, Inc.
v. Birko Corp., 935 F. Supp. 737, 741 (E.D.N.C. 1996). The dismissal of plaintiff’s patent
infringement claims terminates the dispute, as no other activity by the defendants, current or
contemplated, is suspected by the plaintiff of infringement.

Therefore, defendant’s first

counterclaim will be dismissed without prejudice for lack of subject matter jurisdiction.
Additionally, defendants’ fifth counterclaim seeks the equitable assignment of
copyrights presently owned by Vaughan. However, given defendants lack of prosecution of their
claims and failure to comply with the orders of Magistrate Judge Daniel Stewart, the Court will
dismissal defendants’ counterclaim pursuant to Federal Rule of Civil Procedure 41(b).
Rule 41(b) provides that a party’s failure to prosecute or to comply with any order of
the court may lead to the dismissal of any claim against the other party. See FED. R. CIV. P.
41(b). Such dismissals equally “apply to the dismissal of any counterclaim, cross-claim, or third-

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party claim” and can be entertained by the Court sua sponte. See FED. R. CIV. P. 41(c); LeSane
v. Hall’s Sec. Analyst, Inc., 239 F.3d 206, 209 (2d Cir. 2001); Spencer v. Doe, 139 F.3d 107, 112
(2d Cir. 1998). Courts should consider: (1) the duration of the delay, (2) whether the party had
received notice that delays could result in dismissal, (3) whether the other party is likely to be
prejudiced by further delay, (4) whether the district court has balanced the need to alleviate
calendar congestion against the party's right to be heard, and (5) whether there are lesser
sanctions. See Faison v. Russi, 189 F.3d 460, 461 (2d Cir. 1999). “Generally, no one factor is
dispositive.” Nita v. Connecticut Dept. of Environmental Protection, 16 F.3d 482, 485 (2d Cir.
1994). Unless the court specifies otherwise, Rule 41(b) provides that dismissal “operates as an
adjudication on the merits.” Austin v. Lynch, 2011 WL 5924378, at *1 (S.D.N.Y. 2011).
Since the defendants’ counsel withdrew on September 2, 2015, defendant Global BioFuels has failed to obtain new counsel despite being repeatedly notified that counsel was
required. See ECF No. 157, 161, 167. While defendant Behnke participated in a telephonic
conference with Magistrate Judge Stewart on January 25, 2016, he failed to appear at a
mandatory settlement conference on April 26, 2016 or to provide the Court with a summary of
his positions and a realistic settlement demand, as required in Judge Stewart’s March 29, 2016
Order. See ECF No. 173. After plaintiff moved for sanctions based upon such nonappearance,
defendants again failed to appear and oppose such motion. Similarly, pursuant to a May 20,
2016 Order of Magistrate Judge Stewart, defendants were directed to provide a copy of a laptop
and assist plaintiff in accessing certain email accounts. See ECF No. 174. According to plaintiff,
such order has been disregarded by defendants. See ECF No. 185. Most recently, defendants
failed to appear at a June 29, 2016 status conference before Magistrate Judge Stewart.
Given defendants repeated failure to comply with the Court’s orders and failure to
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prosecute his counterclaims, dismissal of his remaining counterclaims without prejudice is
appropriate.
IV. CONCLUSION
In sum, the Court holds that Vaughan has failed to demonstrate that it is appropriate
to dismiss its patent infringement claims without prejudice. As a result, it motion for leave to
dismiss will be denied. Defendants have sufficiently demonstrated entitlement to judgment as
a matter of law concerning Counts 1 through 4 of the complaint and its second counterclaim
seeking a declaration of noninfringment.

All other relief requested in the parties’ pending

motions will be denied. The Court will decline to exercise supplemental jurisdiction over plaintiff’s
remaining state law claims and dismisses defendant’s remaining couterclaims without prejudice.
Accordingly, it is a ORDERED that:
(1) Plaintiff’s motion for leave to voluntarily dismiss Counts 1 through 4 of the Complaint
without prejudice (ECF No. 120) is DENIED;
(2) Defendants’ motion for partial summary judgment (ECF No. 129) is GRANTED in
part and DENIED in part;
(3) Defendants are GRANTED judgment as a matter of law concerning Counts 1
through 4 of the Complaint and such Counts are DISMISSED WITH PREJUDICE;
(4) Defendants are GRANTED judgment as a matter of law concerning its Second
Counterclaim seeking a declaration of noninfringement;

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(5) Defendants’ request for sanctions and for dismissal for lack of personal jurisdiction
is DENIED. All other relief requested pursuant to defendants’ March 24, 2015 partial motion for
summary judgment is DENIED;
(6) The remaining counts contained in plaintiff’s complaint (Counts 5 through 9) and
defendants’ counterclaims (Counterclaims 1, 3, 4 and 5) are DISMISSED without prejudice; and
(7) The Clerk serve a copy of this Decision and Order upon defendants in accordance
with the Local Rules.
The Clerk is directed to enter judgment accordingly and close this case.
IT IS SO ORDERED.

Dated: September 22, 2016
Utica, New York.

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