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MATERIAL SUPPLY INT'L v. SUNMATCH INDUSTRIAL
June 29, 1999
MATERIAL SUPPLY INT'L, INC., PLAINTIFF,
SUNMATCH INDUSTRIAL CO., LTD., ET AL., DEFENDANTS. SUNMATCH INDUSTRIAL CO., LTD., COUNTERCLAIMANT, V. MATERIAL SUPPLY INT'L, INC., JEWETT-CAMERON LUMBER CORP. AND MSI-PRO CO., INC., COUNTERCLAIM DEFENDANTS.
The opinion of the court was delivered by: Urbina, District Judge.
Denying Without Prejudice Motion to Dismiss Sunmatch's Amended
Counterclaims Against Jewett-Cameron and MSI-Pro; Granting
Sunmatch Discovery on Alter-Ego Issue; Granting Material Supply
International's Motion for First-Use and Expert Discovery
These matters come before the court upon a motion to dismiss
the counterclaims asserted by defendant Sunmatch Industrial
Company, Limited ("Sunmatch") against MSI-Pro Company,
Incorporated ("MSI-Pro") and Jewett-Cameron Lumber Corporation
("Jewett"). Sunmatch has not alleged that MSI-Pro or Jewett
wronged Sunmatch or had any contacts with the District of
Columbia ("District"). Rather, Sunmatch seeks to impute the
jurisdictional contacts of the plaintiff, Material Supply
International, Inc. ("MSI") to MSI-Pro and Jewett on the ground
that they were MSI's successor and alter-ego, respectively.
Because MSI-Pro and Jewett deny that these entities were the
alter egos of MSI, they contend that MSI's jurisdictional
contacts should not be imputed to them. Accordingly, MSI-Pro and
Jewett ask the court to dismiss the counterclaims for lack of
personal jurisdiction and for failure to state a claim.
After reviewing Sunmatch's amended counterclaims, the
submissions of the parties and the relevant law, the court
concludes that the motion to dismiss will be denied without
prejudice. For the reasons which follow, Sunmatch shall be
afforded discovery bearing on its contention that MSI-Pro and
Jewett are the alter egos of MSI. Following discovery, MSI-Pro
and Jewett shall file dispositive motions in accordance with the
timetable set forth in the attached order.
A. The Contract and Trademark Disputes between MSI and
Defendant Sunmatch is a company based in Taipei, Taiwan, that
manufactures pneumatic tools under the trademark "Suntech."*fn1
The plaintiff, MSI, is an Oregon corporation with its principal
place of business in Portland which entered into an exclusive
licensing agreement with Sunmatch to sell Suntech tools in the
United States. The agreement, effective from December 1985
through November 1990, stated that Sunmatch would supply MSI with
"Suntech" tools for sale in all of North America and Hawaii. Am.
Counterclaim ¶ 93. After marketing and selling Sunmatch's Suntech
tools in the U.S. for several years, MSI filed for and obtained
registration of the Suntech trademark in October 1991, without
Sunmatch's consent or knowledge. Id. ¶ 94. Upon discovering
this, Sunmatch filed a petition with the Trademark Trial and
Appeals Board ("TTAB") to cancel MSI's registration. In March
1994, the TTAB granted summary judgment to Sunmatch and issued
Cancellation No. 20,482.
By amended complaint filed in June 1994, MSI sought review of
the TTAB's decision and asserted additional causes of action
against Sunmatch.*fn2 Sunmatch answered and asserted
counterclaims against MSI in September 1994.
B. First Trial on Contract and Trademark Claims between MSI
The claims between MSI and Sunmatch were tried in February
1996. The court affirmed the TTAB and concluded that Sunmatch was
the owner of the Suntech trademark, primarily because it found
that Sunmatch was the first to use that name. The court therefore
dismissed MSI's claims for trademark infringement, common-law
unfair competition, injunctive relief and fraud on the Patent and
Trademark Office ("PTO"), pursuant to Fed. R.Civ.P. 50(a).
The court presented its conclusion that Sunmatch was the owner
of the trademark to the jury and instructed it to deliberate on
the remainder of the claims. The jury upheld MSI's claim against
Sunmatch for breach of fiduciary duty, for which it awarded MSI
$50,000 in compensatory and $100,000 in punitive damages, but it
rejected MSI's claims for fraud and breach of contract. The jury
upheld Sunmatch's counterclaims for trademark infringement, fraud
on the PTO and breach of contract, for which it awarded Sunmatch
$908,500. The jury rejected Sunmatch's counterclaims for unfair
competition under federal and state law.
This court entered judgment pursuant to these verdicts in March
1996. After considering post-judgment motions, the court issued
an opinion and order in May 1997.
C. Appeal from First MSI-Sunmatch Trial
Both MSI and Sunmatch appealed. In July 1998, the Court of
Appeals affirmed in part, reversed in part and remanded. MSI v.
Sunmatch, 146 F.3d 983 (D.C.Cir. 1998). Specifically, the Court
affirmed the jury's award of $150,000 to MSI on its
claim that Sunmatch breached its fiduciary duty. The Court also
affirmed the jury's verdict in favor of Sunmatch on MSI's claims
for breach of contract, fraud on the TTAB and fraud on MSI. See
MSI, 146 F.3d at 994. Conversely, the Court held that this court
violated MSI's Seventh Amendment right to a jury trial by
deciding who owned the trademark before submitting the other
claims to the jury. See id. Accordingly, the Court remanded for
a new jury trial "of all causes of action that entail the
question which party owned the Suntech trademark", namely (1)
MSI's challenge to the TTAB decision awarding the trademark to
Sunmatch; (2) Sunmatch's claims for breach of contract and fraud
on the PTO; and (3) MSI and Sunmatch's claims for trademark
infringement and unfair competition under federal and state law.
Id. at 989. As a result, Sunmatch lost the $908,500 verdict it
had won on its claims that MSI committed trademark infringement,
fraud on the PTO and breach of contract. Sunmatch gained,
however, the opportunity to re-try its unfair-competition claims.
Only MSI's $150,000 judgment for breach of fiduciary duty remains
D. The Joinder of Counterclaim Defendants MSI-Pro and
On April 1, 1996, approximately one month after the conclusion
of the first trial, plaintiff MSI's parent company, Jewett,
incorporated MSI-Pro, Inc., an Oregon corporation importing,
distributing and retailing industrial tools. Mot. to Dis., Ex. 1;
Mot. to Join MSI-Pro and Jewett filed Sept. 8, 1997 ("Mot. to
Join"). On August 9, 1996, MSI merged its operations into MSI-Pro
and became an inactive corporation. Mot. to Join, Ex. 2. Sunmatch
alleges that MSI transferred all its assets to MSI-Pro, but none
of its submissions say so in so many words.
In September 1997, Sunmatch filed a motion to join MSI-Pro and
Jewett as counterclaim defendants pursuant to Fed. R.Civ.P.
25(c). This court granted the motion in December 1998.
E. Sunmatch's Counterclaims against MSI-Pro and Jewett
On January 4, 1999, Sunmatch filed an amended counterclaim
against MSI-Pro and Jewett. Sunmatch alleged that MSI-Pro and
Jewett are jointly and severally liable for MSI's wrongful acts.
On February 19, 1999, MSI-Pro and Jewett filed a joint motion to
dismiss Sunmatch's counterclaims. They contend that because they
are not MSI's alter-egos, the court lacks personal jurisdiction
and must dismiss the counterclaims against them.
Although "[f]indings of fact and conclusions of law are
unnecessary on decisions of motions under Rule 12," Fed.R.Civ.P.
52(a); Summers v. DOJ, 140 F.3d 1077, 1079-80 (D.C.Cir. ...