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Lincoln Diagnostics, Inc. v. Panatrex

May 29, 2008

LINCOLN DIAGNOSTICS, INC., AN ILLINOIS CORPORATION, PLAINTIFF,
v.
PANATREX, INC., A CALIFORNIA CORPORATION, DEFENDANT.



The opinion of the court was delivered by: Michael P. McCUSKEY Chief U.S. District Judge

OPINION

On April 3, 2008, United States Magistrate Judge David G. Bernthal filed a Report and Recommendation (#49) in this case. On April 15, 2008, Plaintiff, Lincoln Diagnostics, Inc., filed its Objections to Report and Recommendation (#50). On April 25, 2008, Defendant, Panatrex, Inc., filed its Response to Plaintiff's Objections (#51). This court has conducted a careful and thorough de novo review of the Magistrate Judge's reasoning, Plaintiff's Objections, and Defendant's Response. Following this review, this court disagrees with the Magistrate Judge's conclusion that this court lacks personal jurisdiction over Defendant. This court therefore concludes that Defendant's Motion to Dismiss (#19) must be DENIED. Because this court has concluded that it has personal jurisdiction over Defendant in this case, this court also rules as follows regarding the remaining pending motions in this case which have been fully briefed: (1) Plaintiff's Motion for Partial Summary Judgment (#29) is GRANTED; (2) Plaintiff's Motion to Strike (#37) is DENIED; (3) Plaintiff's Motion to Compel and Request for Sanctions (#39) is GRANTED; (4) Defendant's counsel's Motion to Withdraw as Counsel of Record (#41) is GRANTED; (5) Defendant's Motion for Extension of Time (#43) is MOOT; and (6) Plaintiff's Motion to Strike (#46) is GRANTED.

BACKGROUND

On April 18, 2007, Plaintiff filed its three-count Complaint (#1) against Defendant in this court.*fn1 Plaintiff alleged that it is an Illinois corporation with its principal place of business in Macon County, Illinois. Plaintiff alleged that it is a leader in the design and manufacture of skin test applicators for administering allergenic extracts. Plaintiff alleged that it manufactures and sells a distinctively packaged line of disposable skin test applicators under the names "Multi-Test(r)" and "Multi-Test(r)II." Plaintiff alleged that Defendant is a California corporation with its principal place of business in Placentia, California. Plaintiff alleged that Defendant has marketed for sale, sold and delivered, in interstate commerce, a line of disposable skin test applicators used to apply allergenic extracts for epicutaneous skin testing under the names of "Quick-Test(r)" and "Sharp-Test(r)" and sometimes markets these two products together using the name "Quanti-Test(r)" (collectively the "Panatrex Products"). Plaintiff alleged that Defendant commenced marketing and advertising the Panatrex Products through printed advertisements and that one of the advertisements appeared in the February 2007 issue of The Journal of Allergy and Clinical Immunology (the "Journal"), a respected journal among allergy clinicians. Plaintiff also alleged that Defendant commenced marketing and advertising the Panatrex Products through its website available to persons using the Internet at www.Panatrex.com. Plaintiff alleged that Defendant's printed and website advertisements are misleading and likely to cause confusion in the relevant market of purchasers and users of skin test applicators for human allergen tests. Plaintiff attached a copy of Defendant's advertisement in the Journal as Exhibit 1.

In Count I, Plaintiff alleged that, in marketing the Panatrex Products using advertisements which are misleading and likely to cause confusion, Defendant violated § 43(a) of the Lanham Act (15 U.S.C. § 1125(a)), causing substantial and irreparable injury to Plaintiff and from which Defendant has received economic benefits and profits. In Count II, Plaintiff alleged that Defendant engaged in deceptive trade practices in violation of the Illinois Uniform Deceptive Trade Practices Act (815 Ill. Comp. Stat. 510/1 et seq. (West 2006)), causing Plaintiff substantial and irreparable injury. In Count III, Plaintiff alleged that Defendant engaged in acts of unfair methods of competition and unfair or deceptive acts or practices in violation of the Illinois Consumer Fraud and Deceptive Business Practices Act (815 Ill. Comp. Stat. 505/1 et seq. (West 2006)), causing Plaintiff substantial and irreparable injury as well as economic losses. Plaintiff sought injunctive relief as well as damages and recovery of its reasonable attorney's fees and costs.

On May 14, 2007, Defendant filed an Answer and Affirmative Defenses (#5). A Rule 16 conference was held on June 15, 2007, before Judge Bernthal. On June 27, 2007, a Discovery Order (#17) was entered. The case was scheduled for a final pretrial conference on August 8, 2008, at 11:00 a.m. and a bench trial on August 25, 2008, at 9:00 a.m. The Discovery Order further stated that all fact discovery, including depositions of non-expert witnesses, was to be completed by December 31, 2007. All discovery, including the depositions of experts, was to be completed by April 15, 2008. The Discovery Order stated that "[a]ll responses, answers, and objections to written interrogatories (pursuant to Fed. R. Civ. P. 33), requests for production (pursuant to Fed. R. Civ. P. 34) and requests for admission (pursuant to Fed. R. Civ. P. 36) shall be deemed timely if served within forty-five (45) days after service of the underlying interrogatories, requests for production and/or requests for admission upon the party responding, answering, or objecting to the same."*fn2

On July 12, 2007, Judge Bernthal entered an Order (#18) which granted in part and denied in part Plaintiff's Motion to Strike Defendant's Affirmative Defenses. In the Order, Judge Bernthal stated:

The Court notes that a number of the defenses would be more appropriately raised in the form of a motion to dismiss. These include the first defense (failure to state a claim), tenth defense (improper venue), twelfth defense (lack of standing), and thirteenth defense (lack of personal jurisdiction). As a practical matter, the Court cannot address the merits of those defenses unless they are raised in a motion to dismiss. Accordingly, the Court encourages Defendant to file a motion to dismiss addressing the aforementioned defenses, or to withdraw them as soon as feasible if Defendant determines that they lack merit.

Almost five months later, on December 4, 2007, Defendant filed a Motion to Dismiss (#19). Defendant argued that it was not subject to this court's jurisdiction, that venue was improper and that the Complaint failed to state a claim upon which relief may be granted. In support of its Motion to Dismiss, Defendant filed the unsworn declaration of Chin Chao Chiu. Defendant also filed a Memorandum in Support (#2), which included brief, rather undeveloped arguments in support of the issues raised by Defendant. On December 5, 2007, Defendant filed a Motion for Protective Order to Stay Discovery (#21) arguing that discovery should be stayed pending a ruling on the Motion to Dismiss.

On December 19, 2007, Plaintiff filed three separate responses to Defendant's Motion to Dismiss (#24, #25, #26). Plaintiff attached the sworn Declaration of Gary L. Hein, Jr., in support of its Memorandum in Opposition to Motion to Dismiss (#26) regarding lack of personal jurisdiction and improper venue. In his Declaration, Hein stated that Plaintiff had received copies of the Journal, which included Defendant's advertisements, in Illinois and that Plaintiff had accessed Defendant's website from Illinois. Hein further stated that Plaintiff had received multiple items of correspondence directed to its office in Illinois from Defendant regarding the presently pending litigation, and had received telephone communication from Defendant in Illinois. Hein also stated that, from 1999*fn3 through 2003, Plaintiff had a customer by the name of Cynthia Yango, M.D., whose offices are located in Illinois and who purchased approximately $11,700 annually in products. Hein stated that Dr. Yango has purchased products from Defendant following calendar year 2003. Plaintiff argued that this court could properly exercise personal jurisdiction over Defendant because:

(1) Defendant violated the Lanham Act within the Central District of Illinois; (2) Defendant transacts and does business in Illinois; (3) Defendant's wrongful acts occurred throughout the United States, including within the Central District of Illinois, and damages caused by these wrongful acts occurred within the Central District of Illinois; and (4) Defendant has relied upon and accepted the protections and benefits of the laws of the State of Illinois in Defendant's conduct of business within Illinois. Plaintiff noted that it had requested documents and records regarding Defendant's sales in Illinois but that, to date, Defendant had not produced any such requested information or documents.

Plaintiff also filed a Motion to Strike Declaration of Chin Chao Chiu (#22). Plaintiff stated that, in attempting to schedule depositions in this case, Defendant's counsel informed Plaintiff that "Chin Chao Chiu lacked information relevant to the above-referenced litigation and further lacked involvement with the operations of Panatrex." Plaintiff also pointed out that the Declaration was not made under oath.

On December 28, 2007, Defendant filed the Declaration of Ray Ling Hsiao, M.D., in support of Defendant's Motion to Dismiss (#27). Hsiao's six-page Declaration was made under penalty of perjury. Hsiao stated that he is a Taiwan citizen living in Taipei, Taiwan, and is the president of three companies, including Defendant. One of the statements included in the lengthy Declaration was that Defendant was not the owner of the website referenced in Plaintiff's Complaint, and that Defendant "never paid for this web site, and never operated the web site."

On January 10, 2008, Judge Bernthal granted the Motion to Strike Declaration of Chin Chao Chiu, noting that it was not made under oath and could not be considered by the court. Also on January 10, 2008, Judge Bernthal, by text order, denied Defendant's Motion for Protective Order to Stay Discovery.

On January 21, 2008, Plaintiff filed a Motion for Partial Summary Judgment on the Issue of Liability (#29). Plaintiff stated that, on November 5, 2007, Plaintiff served Defendant with Interrogatories, Requests for Production and Requests for Admission of Facts. Based upon the Discovery Order, which allowed the parties 45 days to respond to written discovery, Defendant's responses were due on December 20, 2007. Plaintiff stated that Defendant had never responded to Plaintiff's Requests for Admission of Facts, and the time for responding had passed. Plaintiff stated that Defendant's failure to respond to the Requests within the applicable time period constituted admissions of the Requests pursuant to Rule 36 of the Federal Rules of Civil Procedure.

Based upon Defendant's admissions, Plaintiff set out a statement of numerous Undisputed Material Facts. This statement included the undisputed fact that Defendant "regularly and systematically sold the Panatrex Products to one or more customers in the State of Illinois." The statement also included the undisputed facts that Defendant "engaged in the marketing of the Panatrex Products by various means, including the use of published advertisements in publications, including journals read by allergy clinicians, which journals are regularly and customarily transported into the State of Illinois for readers who are citizens of the State of Illinois" and that, "[i]n placing its printed advertisements in publications regularly and customarily sold or transported into the State of Illinois, [Defendant] knew that its printed advertisements . . . would be transported into the State of Illinois for use and to be read by citizens of the State of Illinois." The statement included the undisputed fact that Defendant "has regularly and systematically marketed and advertised for sale the Panatrex Products within the State of Illinois" and that, for a period of not less than five years, Defendant "has regularly and systematically obtained the benefits and protections of the laws of the State of Illinois." The statement further included Defendant's admission that Defendant's claims regarding the Panatrex Products in printed advertisements and on the website owned, operated or controlled by one of Defendant's employees, agents, officers or directors, were false or misleading and were known to be false by Defendant when made.

Based upon the lengthy statement of Undisputed Material Facts set out in its Motion, Plaintiff argued Defendant sought to market its products by "combining" two separate and distinct products and advertising the two products by way of claims that cannot be true for both and which are literally false as to either. Plaintiff further argued that Defendant claimed to possess the approval of the FDA though Defendant possesses no such approval. Plaintiff therefore argued that it was entitled to summary judgment on the issue of liability as to its claims under § 43(a) of the Lanham Act, the Illinois Uniform Deceptive Trade Practices Act, and the Illinois Consumer Fraud and Deceptive Business Practices Act.

Also on January 21, 2008, Plaintiff filed a Motion to Strike Declaration of Ray Ling Hsaio (#28). Plaintiff noted that the Declaration, which stated that it was filed in support of Defendant's Motion to Dismiss, did not provide any explanation regarding which portions of the Motion to Dismiss were supported by the lengthy Declaration. Plaintiff further noted that the Declaration was not filed until nine days after Plaintiff filed its Responses to the Motion to Dismiss. Plaintiff argued that Defendant had not "asserted or established any reason for its untimely tender of the Hsiao Declaration or any reason for its prior unavailability." Plaintiff also again noted that Defendant had not responded to its Requests for Admission of Facts, arguing that Defendant's failure to file any timely response, objection or denial to the Requests for Admission of Facts rendered all of the statements therein admitted. Plaintiff argued that Hsiao's Declaration was nothing more than Defendant's "efforts to assert improperly opposition to matters which should be deemed admitted by [Defendant]."

On January 28, 2008, Defendant filed a Second Declaration of Ray Ling Hsiao, M.D., to Support the Motion to Dismiss (#30). On January 29, 2008, Plaintiff filed a Memorandum in Response and Opposition to Second Declaration of Ray Ling Hsiao, M.D. (#31), which was docketed as a Motion to Strike. Plaintiff noted that, as with Hsiao's first Declaration, Plaintiff and the court were required to speculate as to the manner in which the second Declaration was intended to support any relief sought by Defendant in its Motion to Dismiss. Plaintiff argued that there were numerous problems with the untimely and questionable statements included in the second Declaration, and again pointed out that Defendant could not properly dispute facts which had been admitted by Defendant.

On February 7, 2008, Defendant filed a Response to Motion to Strike Declaration of Ray Ling Hsiao (#32). Defendant stated that the Declaration was filed to provide information on Defendant's activities within the district. Defendant further stated that the Declaration supported Defendant's contention that this court does not have personal jurisdiction over Defendant and that venue is not proper in this district. Defendant stated that "[d]istance and language barriers have contributed to delays in filings and responses."

On February 14, 2008, Defendant filed a two-page Response to Motion for Partial Summary Judgment (#33). Defendant stated that it had submitted a response to Plaintiff's Requests for Admission of Facts.*fn4 Defendant did not dispute that the response was untimely. Defendant did not specifically respond to any of the Undisputed Material Facts listed by Plaintiff in its Motion. Instead, Defendant denied a few of the facts, including stating that Defendant "has denied making all of the alleged statements from panatrex.com." Defendant argued that there were material issues of fact so that partial summary judgment on liability was inappropriate. Defendant also stated that, in the alternative, it "would move pursuant to Rule 36(b) to withdraw any facts admitted inadvertently by their failure to respond to the discovery matters on a timely basis." The only explanation Defendant gave for failing to timely respond to discovery requests was that it had filed a motion seeking to delay discovery until after a ruling on the Motion to Dismiss. Defendant stated that "[w]hen the motion for protective order was denied, the discovery materials were not filed in time."

On February 21, 2008, Judge Bernthal entered two Orders (#34, #35) which denied Plaintiff's Motions to Strike the Declarations of Ray Ling Hsiao. Judge Bernthal stated that he would consider the Declarations only for purposes of determining the existence of personal jurisdiction. Judge Bernthal did not address the effect of Defendant's failure to timely respond to Plaintiff's Requests for Admission of Facts.

On February 22, 2008, Plaintiff filed a Reply to Defendant's Response to Motion for Summary Judgment (#36). Plaintiff stated that it did not receive a response to the Requests for Admission of Facts served on Defendant until February 7, 2008. Plaintiff then noted that Defendant's Response to the Motion for Partial Summary Judgment did not comply with Rule 7.1(D) of the Local Rules of the Central District of Illinois. Plaintiff argued that Defendant's failure to file a Response in compliance with this court's Rules should result in the entry of summary judgment in Plaintiff's favor. Plaintiff also filed a Motion to Strike Defendant's Response (#37) and Memorandum in Support (#38) based upon Defendant's complete failure to comply with Rule 7.1(D).

In addition, Plaintiff filed a Memorandum of Law in Opposition to Defendant's Motion to Withdraw Admissions to Requests for Admission of Facts (#40). Plaintiff responded to Defendant's one-sentence request, included in its Response, that it be allowed to withdraw its admissions of facts. Plaintiff noted that Defendant offered no reason or excuse for the delay in responding to the Requests for Admission of Facts. Plaintiff also pointed out that, although Defendant is now attempting to deny ownership or control of the Panatrex website, it had earlier acknowledged such control in letters sent to Plaintiff. Plaintiff attached the sworn Declaration of Gary L. Hein, Jr. Hein stated that, prior to the commencement of this litigation, he participated in conversations with Defendant and also received correspondence from Defendant in March 2007 and May 2007. Plaintiff attached a copy of a letter dated March 23, 2007, from Ray L. Hsiao to Hein and a copy of a letter dated May 7, 2007, to Hein from Chin Chao Hsiao, who identified herself as the wife of Ray L. Hsiao. Both letters discussed the representations included on the Panatrex website and discussed correcting or revising the website.

Plaintiff also filed, on February 26, 2008, a Motion to Compel and Request for Sanctions (#39). In this Motion, Plaintiff stated that, in addition to serving written discovery on Defendant on November 5, 2007, it also attempted to schedule the depositions of Dr. Hsiao and his wife, as well as corporate representatives with knowledge regarding specific matters relevant to the case, in December 2007. The deposition notices specifically requested testimony regarding issues relevant to Defendant's sales and business activities in the States of Illinois. In response to the scheduled depositions, Defendant filed its Motion for Protective Order to Stay Discovery and informed Plaintiff that Defendant would not make these persons available for depositions. Plaintiff stated that Defendant provided a Response to Interrogatories on February 14, 2008, which was not answered under oath, was not signed by the person making the answers, contained incomplete answers, contained false answers, and interposed untimely objections. Plaintiff stated that, as of the date of the Motion to Compel, Defendant had not filed any response to Plaintiff's Requests for Production. Plaintiff stated that it had attempted to confer with Defendant's counsel regarding the problems with discovery.

Plaintiff attached a copy of the Interrogatories, Requests for Production and Notices of Depositions it served on Defendant, as well as a copy of Defendant's purported Response to Interrogatories. In response to Plaintiff's interrogatory asking Defendant to "[i]dentify all sales and/or business communications directed by Panatrex into the State of Illinois" for the calendar years 2003 through 2007, Defendant responded that "it does not maintain records for sales just into the State of Illinois, or any other individual state." Plaintiff sought an Order compelling Defendant to respond fully and completely to the Interrogatories and Requests for Production served on it and compelling Defendant to produce corporate representatives for deposition. Plaintiff also sought payment from Defendant of the attorney's fees and costs it had incurred as a result of Defendant's failure to respond to written discovery in a proper and timely manner.

On March 12, 2008, Defendant's counsel filed a Motion to Withdraw as Counsel of Record (#41). Defendant's counsel stated that "Defendant and counsel have irreconcilable differences over issues out of this litigation as well as over management and direction of this litigation." Defendant's counsel stated that he was unable to represent Defendant and moved to withdraw as counsel. Also on March 12, 2008, Defendant filed a Motion for Extension of Time (#43). Defendant stated that it needed additional time to find an attorney and respond to Plaintiff's Motion to Compel. Defendant stated that a "proper response should be provided by the counsel representing the Defendant in further proceedings." Defendant also sought additional time to respond to Plaintiff's Motion to Strike. Defendant stated that "the withdrawing attorney has not been working with the Defendant to file a response" and that "the incoming attorney should have an opportunity to respond."

On March 12, 2008, Plaintiff filed a Response to Motion to Withdraw as Counsel of Record (#42) stating that it had no objection to the Motion to Withdraw. However, Plaintiff stated that, in prior litigation between the parties, "Dr. Hsiao tendered documents and pleadings on behalf of Panatrex to the District Court without the aid, assistance or representation of legal counsel." Plaintiff suggested that Defendant should be advised that efforts by Dr. Hsiao to provide legal representation to Defendant would not be countenanced by the district court. Plaintiff also stated that it did object to further delays in the filing of responsive pleading due from Defendant regarding the numerous motions still pending in this case. Plaintiff also filed a Response to Motion to Extend Time (#44). Plaintiff expressed its frustration with Defendant's further request "to extend time for activities which should have been concluded long ago."

On March 14, 2008, Defendant filed a Response to Plaintiff's Motion to Compel and Request for Sanctions (#45). This Response was signed by Ray Ling Hsiao, M.D., on behalf of Defendant. The Response was rambling and included some incoherent and obviously contradictory statements. For example, the Response stated that "Defendant is not the owner of the said web site" and "Defendant does not operate the said web site." However, the Response also stated that "Defendant did not refuse to change the content of the said advertisement." Defendant's counsel attached a "Disclaimer of Filing" to the Response. The disclaimer stated that Defendant prepared the response to the Motion to Compel. Defendant's counsel stated that he did not prepare the response, but had been asked to file the response. Defendant's counsel stated that Defendant was in the process of finding an attorney to represent it in this matter and wanted to get the response filed. Defendant's counsel stated that "[i]n the interest of best representing the client and making full disclosure to the court, I submit their response at their direction."

On March 14, 2008, Judge Bernthal entered a text order directing the clerk to send a copy of Defendant's counsel's Motion to Withdraw as Counsel of Record to Defendant, c/o its president, Ray Ling Hsiao, in Placentia, California. Judge Bernthal stated that, if Defendant wished to object to the motion, it must file its objections in writing within 14 days. A later text order extended the time for objections to 21 days. Judge Bernthal, later on March 14, 2008, entered another text order in this case. He stated that the court had received a letter from Ray Ling Hsiao which included a document entitled the Third Declaration of Ray Ling Hsiao, M.D. to Support the Motion to Dismiss. Judge Bernthal directed the clerk to return the correspondence and document to the sender "who is not authorized to make filings on behalf of the Defendant corporation." Judge Bernthal noted that the only exception was that a corporate officer could respond to the pending motion by counsel for leave to withdraw.

Also on March 14, 2008, Plaintiff filed a Motion to Strike Defendant's Response to the Motion to Compel (#46). Plaintiff stated that Defendant's Response appeared "to be more of an effort by [Defendant] to present factual information to the District Court without any requirements that such factual information be evidentiary in nature or relevant to any matter related to the Motion to Compel." Plaintiff further stated that, although it certainly understood Defendant's counsel's reluctance to sign Defendant's response, "the rules applicable to litigants appearing before the District Court do not permit a party to appear by a non-attorney and have such documents filed by an attorney." Plaintiff also pointed out that the response is "unintelligible."

On March 27, 2008, Defendant's attorney filed a Response to Plaintiff's Motion to Strike (#47) and also filed a Disclaimer of Filing, which included language identical to the earlier Disclaimer. Defendant's Response was obviously prepared by Dr. Hsiao and consisted almost entirely of completely unsupported factual statements and argument that Plaintiff's Complaint lacks merit. On March 31, 2008, Defendant filed a Response to Motion to Withdraw as Counsel of Record (#48). Defendant stated that it objected to the Motion but also acknowledged that there were irreconcilable differences between Defendant and its counsel. ...


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