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Lincoln Diagnostics, Inc. v. Panatrex

September 16, 2009

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

A bench trial was held in this case on March 23 and 24, 2009. On May 8, 2009, Plaintiff, Lincoln Diagnostics, Inc., filed its Proposed Findings of Fact and Conclusions of Law (#136). On June 5, 2009, Defendant, Panatrex, Inc., filed its Proposed Findings of Fact and Conclusions of Law (#137). On June 19, 2009, Plaintiff filed its Reply to Defendant's Proposed Findings of Fact and Conclusions of Law (#139). The parties have also filed motions related to the bench trial. This court has carefully considered the arguments of the parties and the documents filed by the parties. Following this court's careful and thorough consideration, this court concludes that Plaintiff is entitled to an injunction and attorney's fees under the Lanham Act. Accordingly, Plaintiff's Motion for Attorney's Fees (#114) is GRANTED. This court concludes, however, that an award of damages would not be appropriate in this case. This court further concludes that any relief under the Illinois Deceptive Trade Practices Act would be redundant to the relief already granted and that Plaintiff cannot recover under the Illinois Consumer Fraud and Deceptive Business Practices Act. As far as the motions filed following the bench trial, this court rules as follows: (1) Plaintiff's Motion to Cite Authority (#138) is GRANTED; (2) Defendant's Motion to Correct Typographical Error (#140) is GRANTED; (3) Plaintiff's Motion for Leave to File Reply (#143) is GRANTED; (4) Plaintiff's Motion to Correct False Statement (#144) is GRANTED; (5) Defendant's Motion to Correct Typographical Error (#150) is GRANTED; and (6) Plaintiff's Motion to Strike (#149) is DENIED as moot. This case is terminated.

BACKGROUND

On April 18, 2007, Plaintiff filed its Complaint (#1) against Defendant. Plaintiff is an Illinois corporation and Defendant is a California corporation. Both Plaintiff and Defendant manufacture disposable skin testing devices that are used in the diagnosis of allergies. Dr. Ray Ling Hsiao is president of Defendant and resides in Taiwan. Defendant is owned by Dr. Hsiao and other members of his family. In its Complaint, Plaintiff alleged that Defendant made false and misleading marketing statements in printed advertisements, including in The Journal of Allergy and Clinical Immunology (Journal), and on its website. Plaintiff sought relief under the Lanham Act, the Illinois Uniform Deceptive Practices Act and the Illinois Consumer Fraud and Deceptive Practices Act.*fn1 A Discovery Order (#17) was entered on June 27, 2007. During discovery, Plaintiff served Defendant with Requests for Admission of Facts. Defendant did not respond to the Requests for Admission of Facts in a timely manner.*fn2

On May 29, 2008, this court entered an Opinion (#52) in this case. This court found that Defendant's failure to respond in a timely manner to Plaintiff's Requests for Admission of Facts resulted in the admission of all the facts included in the requests, including important facts regarding personal jurisdiction. By failing to respond to Plaintiff's Requests for Admission of Facts, Defendant admitted that: (a) it regularly and systematically sold the Panatrex Products to one or more customers in the State of Illinois; (b) it 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; (c) it knew that its printed advertisements would be transported into the State of Illinois for use and would be read by citizens of the State of Illinois; (d) it received funds and monies from citizens of the State of Illinois from the sale of Panatrex Products on a regular and systematic basis; (e) it has regularly and systematically marketed and advertised for sale the Panatrex Products within the State of Illinois; (f) it has regularly and systematically obtained the benefits and protections of the laws of the State of Illinois; (g) the Journal is transported into the State of Illinois on a regular basis for sale and distribution to subscribers thereof; (h) it sold and caused the delivery of products manufactured by Defendant into the State of Illinois on a regular and systematic basis during calendar years 2005, 2006, and 2007; and (i) Defendant caused the publication of advertisements for Defendant's products to be made with the intent of such advertisements to be received by persons within the State of Illinois during calendar years 2005, 2006, and 2007.*fn3

This court therefore concluded that it has personal jurisdiction over Defendant based upon the "effects doctrine" and also concluded that Defendant had sufficient minimum contacts with the state of Illinois so that this court could constitutionally exercise personal jurisdiction over Defendant. Accordingly, this court denied Defendant's Motion to Dismiss.

In its Opinion (#52), this court also granted Plaintiff's Motion for Partial Summary Judgment. This court noted that, based upon the lengthy statement of Undisputed Facts set out in the Motion, Plaintiff argued that the facts showed that Defendant sought to market its products by "combining" two separate and distinct products and advertising the two products by way of claims that could not be true for both and which were literally false as to either. Plaintiff also argued that Defendant claimed in its advertisements to possess the approval of the Food and Drug Administration (FDA) although Defendant possesses no such approval. This court concluded that Defendant was deemed to have admitted the facts included in Plaintiff's Statement of Undisputed Facts because it did not respond to Plaintiff's Requests for Admission of Facts in a timely manner and also did not specifically respond to or dispute the facts in its two-page Response to Motion for Partial Summary Judgment. This court further concluded that, based upon the undisputed facts set forth by Plaintiff, Plaintiff had shown that it was entitled to judgment as to liability on its claims against Defendant. This court stated that, based upon the undisputed facts, Plaintiff had shown that Defendant violated the Lanham Act because it had, in connection with the Panatrex Products, used in commerce false and misleading descriptions of fact or false and misleading representations of fact, which: (1) in commercial advertising or promotion, misrepresented the nature, characteristics or qualities of the Panatrex Products; or (2) were likely to cause confusion or mistake, or to deceive, as to the approval by the FDA of the Panatrex Products. This court noted that, although Plaintiff had the burden of showing that Defendant's advertisements contained a false statement, this was proven conclusively by Defendant's admissions. This court stated:

This court finds that Defendant has admitted making numerous and repeated statements about the Panatrex Products which were false when made, and known by Defendant to have been false when made, all in an effort to increase the sales of the Panatrex Products in interstate commerce. This court further finds that Defendant's admission that it included false statements in its advertisements and marketing is evidence that Defendant believed that such statements would convince (or, in reality, confuse) customers to purchase the Panatrex Products. Therefore, Plaintiff has established that Defendant violated section 43(a) of the Lanham Act [15 U.S.C. § 1125(a)] and Plaintiff is entitled to summary judgment as to liability on this claim.

This court also concluded, based upon the undisputed facts, that Plaintiff had shown that Defendant violated the Illinois Uniform Deceptive Trade Practices Act and the Illinois Consumer Fraud and Deceptive Business Practices Act. This court stated that the case remained scheduled for a bench trial solely on the issue of the proper and appropriate remedy to be awarded to Plaintiff.

This court also granted Plaintiff's Motion to Compel. In its Motion, Plaintiff pointed out Defendant's almost complete failure to comply with discovery requests in this case. This court concluded that Plaintiff had shown that Defendant failed to comply with discovery requests so that sanctions under Rule 37 of the Federal Rules of Civil Procedure were warranted. This court stated that Defendant was "hereby ordered to respond fully and completely to the Interrogatories and Requests for Products served on it, in compliance with the Federal Rules of Civil Procedure, within 30 days of the date of this Opinion." This court also stated that "Defendant is also ordered to produce for deposition corporate representatives who can provide information regarding Defendant's sales and other matters related to recovery and damages within 30 days of the date of this Opinion." In addition, this court stated that Plaintiff was entitled to recover the attorney's fees and costs it incurred as a result of Defendant's failure to respond to written discovery in a proper and timely manner.*fn4

In its Opinion (#52), this court also granted the Motion of Defendant's attorney, Michael A. Berns, to withdraw as counsel in the case. This court noted that there was no dispute that there were irreconcilable differences between Defendant and its counsel. This court advised Defendant that it would need to obtain new counsel to represent it because a corporation must be represented by an attorney.

Subsequently, Defendant obtained new counsel, Paul E. Adami, to represent it in this case. Defendant's new counsel filed a Motion for Reconsideration of Grant of Partial Summary Judgment. On July 21, 2008, this court entered an Opinion (#66) which denied the motion. This court stated that Defendant had not provided this court with any basis for finding that the failure of Defendant and its attorney to comply with the clear deadlines set by the court was excusable. This court noted that "inattentiveness" is not "excusable" and that Defendant "must be held accountable for the acts and omissions of [its] attorney[]." This court therefore concluded that it was well within its authority to grant Plaintiff's Motion for Partial Summary Judgment based upon Defendant's failure to timely respond to Plaintiff's Requests for Admission of Facts and Defendant's failure to contest the Undisputed Material Facts included in Plaintiff's Motion.

Suffice it to say that this litigation did not go smoothly even with liability established and new counsel representing Defendant. As the case proceeded, the following orders were entered:

On July 31, 2008, Magistrate Judge David G. Bernthal denied Defendant's Motion for Protective Order requesting that Dr. Hsiao's deposition be taken by telephone or in Taiwan.

On August 5, 2008, this court denied Defendant's Second Motion for Protective Order requesting that Plaintiff be prohibited from obtaining certain information sought in discovery. This court ordered Defendant to provide the information and further ordered Dr. Hsiao to appear at the courthouse for a deposition on August 25, 2008.

On September 10, 2008, this court entered an Opinion (#91) which noted that, although Dr. Hsiao had been informed throughout the course of the litigation that he could not represent Defendant (a corporation) and could not file anything in this case or communicate directly with the court, he had persisted in attempting to file documents and in faxing documents directly to the court. This court therefore ordered that certain documents faxed by Dr. Hsiao to the clerk's office were STRICKEN.

On September 16, 2008, this court entered an Opinion (#93) which granted Plaintiff's request for the reasonable expenses, including attorney's fees, it incurred in responding to Defendant's Motion for Protective Order and Second Motion for Protective Order. This court concluded that Defendant had exhibited a "pervasive course of conduct . . . that can only be described as calculated to frustrate legitimate discovery" and that the Motions for Protective Order were not "substantially justified." This court also granted Plaintiff's Motion for Directions and ruled that Defendant lacked any viable claim of privilege in an e-mail book (which included communications between Dr. Hsiao and Defendant's former counsel) intentionally sent to Plaintiff's counsel by Dr. Hsiao. This court stated that Plaintiff did not need to return or safeguard the documents included in the e-mail book.

On October 3, 2009, this court entered an Order (#97) and ordered Defendant to pay Plaintiff $2,456.25 for the attorney's fees Plaintiff incurred in responding to Defendant's two motions for protective order.

On February 18, 2009, this court entered an Opinion (#118) and noted that this case has had a lengthy and tortured history in this court and that the record showed that Defendant, through its president, Dr. Ray L. Hsiao, had made every effort to avoid providing information to Plaintiff. This court then, following a careful analysis of the history of the case and the issues raised, granted Plaintiff's Motions for Sanctions (#68, #73) and ordered Defendant to pay Plaintiff all of the attorney's fees and costs it had incurred as a result of Defendant's failure to comply with this court's Opinion (#52) ordering compliance with discovery requests. This court also stated that, at the bench trial on damages scheduled for March 23, 2009, Defendant would not be allowed to present any evidence relevant to the issue of liability and would not be allowed to present any evidence on damages which was not fully disclosed to Plaintiff in discovery. This court also granted Plaintiff's Motion to Bar Contradictions to Deposition and for Sanctions (#104). This court noted that, at the deposition taken on August 25, 2008, there were numerous questions that Dr. Hsaio was unable to answer and that Dr. Hsiao subsequently signed an errata sheet, dated October 7, 2008, which set out several pages of changes to the deposition transcript. This court found that Dr. Hsiao was inadequately prepared for the Rule 30(b)(6) deposition and, therefore, attempted to change his deposition answers by way of the errata sheet. This court agreed with Plaintiff that sanctions should be imposed on Defendant for designating a corporate representative for deposition who was not prepared for the deposition and was unable to offer useful information on many subjects during the deposition. This court stated that the appropriate sanction was to bar Dr. Hsiao from contradicting or changing the answers given at the deposition. This court also concluded that Plaintiff was entitled to the expenses and attorney's fees it incurred in bringing its motion regarding the deposition.

On March 11, 2009, this court entered an Opinion (#122) which ruled on Plaintiff's Motion in Limine. This court declined to enter an order completely prohibiting Defendant from presenting any evidence at the upcoming bench trial. This court did conclude, however, that Plaintiff had shown that it was entitled to an order further limiting the evidence Defendant could present at trial in addition to the limitations already imposed by this court. This court ordered that any documents relevant to the issue of damages ...


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