MINNEAPOLIS PERSONAL INJURY ATTORNEY  
attorney Michael E. Douglas Attorney at Law
  Personal Injury Attorney
  St. Paul Workers Compensation Lawyer work comp attorney
 > About Me
   :: My Commitment
   :: Our Community
   
 > Legal Practice Areas
  twin cities comsumer lawPersonal Injury
   :: Traffic Accidents
   :: Medical Malpractice
   :: Social Security Disability
   :: Premises Liability
   :: Wrongful Death
   :: Dog Bite
   :: Back/Spinal/Neck Injuries
   :: Whiplash
   :: Defective Medical Devices
   :: Defective Drugs
  Minnesota Personal InjuryWorkers Compensation
  St. Paul personal injuryConsumer Law
   :: Debt Collection
   :: Repossessions
   :: Foreclosures
   :: Loan, Credit, Banking
   :: Arbitration Agreements
   :: Deception and Fraud
   :: Auto Fraud / Lemon Law
   :: Warranties
   :: Predatory Lending
   
 > Contact Us
   :: Contact Us
 

Law Offices of Michael E. Douglas
P.O. Box 251551
Woodbury, Minnesota 55125-6551
   

 Saint Paul Lawyer
 
 mdouglas@injurylawtwincities.com

 

The Crystal Import Corp. v. AVID Identification Systems, Inc.: US District Court : CIVIL PROCEDURE - claims were barred by res judicata

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
The Crystal Import Corporation, an Alabama
corporation, and Datamars SA, a Swiss
corporation,
Plaintiffs,
Civ. No. 08-2514 (RHK/JJG)
MEMORANDUM OPINION
AND ORDER
v.
AVID Identification Systems, Inc.,
a California corporation,
Defendant.
Thomas F. Pursell, Mark R. Privratsky, Lindquist & Vennum PLLP, Minneapolis,
Minnesota, Amy Crafts, Gina Lombardo, Steven M. Bauer, Proskauer Rose LLP, Boston,
Massachusetts, for Plaintiffs.
John W. Thornburgh, Juanita R. Brooks, Michael A. Amon, Roger A. Denning, Fish &
Richardson PC, San Diego, California, Thomas S. McClenahan, Joshua H. Bleet, Fish &
Richardson PC, Minneapolis, Minnesota, for Defendant.
INTRODUCTION
This action arises out of the antitrust claims of The Crystal Import Corporation
and Datamars SA.1 Crystal alleges that Defendant, AVID Identification Systems,
Incorporated (AVID), attempted to enforce a patent obtained through its intentional,
fraudulent, and material misrepresentations made to the U.S. Patent and Trademark
Office (PTO) in violation of the Sherman Act, 15 U.S.C. 2. AVID now moves to
1 Hereinafter referred to jointly as Crystal.
2
dismiss the instant action on the ground of res judicata. For the reasons set forth below,
the Court will grant the Motion.
BACKGROUND
The following facts are not in dispute. Crystal and AVID are competitors in the
companion animal radio frequency identification (RFID) market. RFID chips and
readers are used to identify and assist in the recovery of lost companion animals. AVID
manufactures RFID products that utilize a different radio frequency than the products
manufactured by Crystal, which are produced based on the ISO-compliant standard more
commonly used in Europe. Since 2004, Crystal and AVID have engaged in a protracted
legal battle involving three separate lawsuits. In order to understand the merits of the
instant Motion, the procedural history of these lawsuits is outlined below.
In May 2004, AVID filed a patent-infringement lawsuit against Crystal and four
other defendants in the United States District Court for the Eastern District of Texas (the
Texas Action). In May 2006, AVID obtained a favorable jury verdict on its
infringement claims. However, in September 2007, the district court ruled that AVID
obtained one of the three patents-in-suit through inequitable conduct by intentionally
withholding material information from the PTO and invalidated that patent.
In December 2004, prior to the jury verdict in the Texas Action, Crystal filed suit
against AVID and Digital Angel Corporation (Digital Angel) alleging several antitrust
violations (the First Antitrust Action). The case was filed in the United States District
Court for the Northern District of Alabama and later transferred to this district. In this
lawsuit, which is ongoing, Crystal claims that AVID engaged in several illegal business
3
practices intended to exclude Crystal from the RFID market.2 Such alleged business
practices include, but are not limited to, AVIDs encryption of its RFID chips, AVIDs
publication of false and misleading statements, and AVIDs agreement with Digital
Angel to cross-license its technology in exchange for Digital Angels promise not to sell
ISO-compliant standard RFID products of the type Crystal manufactures. Crystal claims
such actions are tortious and violative of the Sherman Act, the Clayton Act, and the
Lanham Act.
In October 2006, AVID and Digital Angel moved to stay the First Antitrust Action
pending resolution of the Texas Action and an additional patent-infringement lawsuit
between Digital Angel and Crystal. AVID and Digital Angel argued that a stay in the
First Antitrust Action was necessary because Crystals antitrust claims were based in
substantial part on the resolution of the patent-infringement lawsuits. Magistrate Judge
Susan Richard Nelson recommended the denial of the Motion to Stay, finding that the
antitrust claims were separate and distinct from the patent-infringement claims. This
recommendation was conditioned on Crystals deletion of all patent references in its First
Amended Complaint. Crystal complied with this condition, voluntarily filing a Second
Amended Complaint in January 2007. Magistrate Judge Nelsons recommendation was
not objected to and was thereafter adopted by District Judge David S. Doty.
After the inequitable-conduct finding in the Texas Action, Crystal moved to
amend its Second Amended Complaint in the First Antitrust Action to add a Walker
2 Crystals claims against Digital Angel were dismissed with prejudice after a settlement was reached.
4
Process claim3 pursuant to Section 2 of the Sherman Act, alleging that AVID wrongfully
attempted to enforce a patent obtained through its intentional, fraudulent, and material
misrepresentations to the PTO. This Motion to Amend was filed in December 2007, six
months after the established date in the scheduling order for filing motions to amend the
pleadings. Despite the missed deadline, Magistrate Judge Nelson granted the Motion.
AVID filed a timely objection to the Order granting the Motion to Amend. Judge
Doty sustained AVIDs objection, denying Crystals Motion to Amend. The Court noted
that Crystal was aware of the factual basis supporting the Walker Process claim prior to
the scheduling order deadline, as Crystal asserted inequitable conduct through fraud on
the PTO as an affirmative defense and as a counterclaim in the Texas Action. Judge
Doty stated that while inequitable conduct is not coterminous with Walker Process fraud
. . . the conduct establishing each arises out of AVIDs procurement of the disputed
patents. Thus, Crystal Import knew about the alleged conduct giving rise to a Walker
Process claim at the latest in November 2005. (Doc. No. 201 at 5.) Thus, the Court
held that Crystal was not diligent in its adherence to the scheduling order and therefore
could not show good cause to amend.
In June 2008, Crystal filed the present action (the Second Antitrust Action),
reasserting the Walker Process claim that was the subject of the denied Motion to Amend
3 Walker Process Equip., Inc. v. Food Mach. & Chem. Corp., 382 U.S. 172 (1965). In this case,
the Supreme Court held that the enforcement of a patent procured by fraud on the Patent Office
may be violative of 2 of the Sherman Act provided the other elements necessary to a 2 case
are present. Id. at 174.
5
in the First Antitrust Action. AVID alleges that the Second Antitrust Action is barred by
res judicata and moves to dismiss.
STANDARD OF DECISION
The recent Supreme Court case of Bell Atlantic Corp. v. Twombly, __ U.S. __,
127 S. Ct. 1955 (2007), sets forth the standard to be applied when evaluating a motion to
dismiss under Rule 12(b)(6). To avoid dismissal, a complaint must include enough facts
to state a claim to relief that is plausible on its face. Id. at 1974. Stated differently, a
plaintiff must plead sufficient facts to provide the grounds of his entitle[ment] to
relief, [which] requires more than labels and conclusions, and [for which] a formulaic
recitation of the elements of a cause of action will not do. Id. at 1964-65 (citation
omitted). Thus, a complaint cannot simply le[ave] open the possibility that a plaintiff
might later establish some set of undisclosed facts to support recovery. Id. at 1968
(citation omitted). Rather, the facts set forth in the complaint must be sufficient to
nudge[] the[] claims across the line from conceivable to plausible. Id. at 1974.
When reviewing a motion to dismiss, the complaint must be liberally construed,
assuming the facts alleged therein as true and drawing all reasonable inferences from
those facts in the plaintiffs favor. Id. at 1964-65. A complaint should not be dismissed
simply because a court is doubtful that the plaintiff will be able to prove all of the factual
allegations contained therein. Id. Accordingly, a well-pleaded complaint can survive a
motion to dismiss even if it appears that a recovery is very remote and unlikely. Id. at
1965 (citation omitted).
6
ANALYSIS
AVID asserts that the denial of Crystals Motion to Amend in the First Antitrust
Action is res judicata as to the instant action. Under the doctrine of res judicata, a
judgment on the merits in a prior suit bars a second suit involving the same parties or
their privies based on the same cause of action. Lane v. Peterson, 899 F.2d 737, 741
(8th Cir. 1990) (quoting Parklane Hosiery Co. v. Shore, 439 U.S. 322, 326 n.5 (1979)).
Thus, the relitigation of a claim is barred by res judicata if three requirements are met:
(1) the prior judgment was rendered by a court of competent jurisdiction; (2) the prior
judgment was a final judgment on the merits; and (3) the same cause of action and the
same parties or their privies were involved in both cases. Lane, 899 F.2d at 742
(citation omitted). Only the second and third requirements are at issue in this case.
I. The denial of leave to amend was a final judgment on the merits.
Crystal contends that the denial of its Motion to Amend in the First Antitrust
Action was not a final judgment on the merits. (Mem. in Oppn at 8-13.) The Court
disagrees.
It is well established that [t]he denial of a motion to amend a complaint in one
action is a final judgment on the merits barring the same complaint in a later action.
Profl Mgmt. Assocs., Inc. v. KPMG LLP, 345 F.3d 1030, 1032 (8th Cir. 2003) (citation
omitted). Such a denial constitutes res judicata on the merits of the claims which were
the subject of the proposed amended pleading . . . even when denial of leave to amend is
based on reasons other than the merits, such as timeliness. Id. (internal quotations and
citation omitted). Crystal moved to amend its Second Amended Complaint in the First
7
Antitrust Action to add a Walker Process claim and Judge Doty denied that Motion.
Thus, the denial of the Motion to Amend in the First Antitrust Action was a final
judgment and on the merits.4
II. The First and Second Antitrust Actions are the same cause of action.
Crystal further asserts that the instant action is not barred by res judicata because
the Walker Process claim is a separate cause of action from the First Antitrust Action.
(Mem. in Oppn at 13-16.)5 The Court disagrees.
The exact boundaries of a cause of action cannot be stated with mathematical
precision. Poe v. John Deere Co., 695 F.2d 1103, 1106 (8th Cir. 1982). Nevertheless,
the Eighth Circuit has stated that two causes of action are the same for res judicata
purposes if the second claim arises out of the same nucleus of operative facts as the
prior claim. Lane, 899 F.2d at 742 (citations omitted). In determining whether two
lawsuits arise out of the same nucleus of operative facts, the Eighth Circuit analyzes
whether the facts underlying each lawsuit concern the same transaction, or series of
connected transactions. Poe, 695 F.2d at 1106 (quoting Restatement (Second) of
4 Crystal attempts to distinguish Professional Management from the present action. (Mem. in
Oppn at 10-11.) It argues that in Professional Management, the denial of plaintiffs motion to
amend followed the dismissal of the earlier action, which was a final judgment on the merits. In
contrast, a final judgment on the merits has yet to be rendered in the First Antitrust Action. (Id.)
However, this point of distinction is irrelevant, as Professional Management is unambiguous in
its holding that the denial of a motion to amend is a final judgment on the merits. 345 F.3d at
1032. In addition, during oral argument, Crystal argued that the Court should rely on Kulinski v.
Medtronic Bio-Medicus, Inc., to find that the denial of a motion to amend is not a final judgment
on the merits. 112 F.3d 368, 373 (8th Cir. 1997). However, Kulinski does not help Crystal
because the denial of the motion to amend in that decision was rendered by a court lacking
subject-matter jurisdiction. Id. at 370. Implicitly therefore, all decisions of the court were then
invalidated.
5 Crystal does not dispute that the parties involved in the First Antitrust Action and the Second
Antitrust Action are the same.
8
Judgments 24(1) (1982)). What comprises a transaction, or series of connected
transactions, is determined pragmatically, giving weight to such considerations as
whether the facts are related in time, space, origin, or motivation, whether they form a
convenient trial unit, and whether their treatment as a unit conforms to the parties
expectations or business understanding or usage. Id. (quoting Restatement (Second) of
Judgments 24(2) (1982)).
In this case, it is clear that the First and Second Antitrust Actions involve the same
cause of action for res judicata purposes. The claims in each arise out of the same
nucleus of operative facts - namely, AVIDs alleged anticompetitive behavior done with
the purpose of excluding Crystal from the RFID market. The Walker Process claim is
just one segment of a series of connected transactions stemming from AVIDs alleged
campaign to maintain monopoly power in the RFID market.
Crystal argues that the First and Second Antitrust Actions are not the same cause
of action because not only are there different factual scenarios that lead to antitrust
liability, [but] both complaints allege different anticompetitive conduct. (Mem. in
Oppn at 15.) However, res judicata contemplates that there may be some variance in
the proof required for claims that are nonetheless the same claim. Lane, 899 F.2d at 743
(internal quotations omitted). Therefore, while the Walker Process claim centers upon a
different segment of AVIDs alleged anticompetitive conduct, the fact that additional
evidence would be required to establish Walker Process liability is not dispositive on the
issue of res judicata.
9
In this case, both antitrust actions are related in time, space, origin, [and]
motivation. Poe, 695 F.2d at 1106 (quoting Restatement (Second) of Judgments
24(2) (1982)). The claims in the First and Second Antitrust Actions share the same
factual predicate; both require the establishment of the relevant RFID product market in
the United States, AVIDs wrongful intent to monopolize and exclude, AVIDs dominant
market position, and Crystals damages demonstrated through evidence of diminished
ability to compete in the RFID market. Moreover, the First and Second Antitrust actions
involve the same relevant time period.
Not only are the First and Second Antitrust Actions related in time, space, origin
[and] motivation, but they would form a convenient trial unit and such unification
would conform to the parties expectations or business understanding or usage. Id.
(quoting Restatement (Second) of Judgments 24(2) (1982)). Crystal has already
acknowledged this by attempting to add the Walker Process claim in the First Antitrust
Action. As noted above, the First and Second Antitrust Actions require proof of many of
the same facts, and each seeks to address the same wrong: AVIDs alleged
anticompetitive behavior done with the intent to exclude Crystal from the RFID market
and maintain monopoly power.
That the Second Antitrust Action involves a different legal claim than the First
Antitrust Action is inapposite for two reasons. First, Crystal moved to amend its Second
Amended Complaint in the First Antitrust Action to include a Walker Process claim and
Judge Doty denied the Motion; as discussed above, Judge Dotys ruling is a judgment on
the merits as to Crystals Walker Process claim. See Profl Mgmt., 345 F.3d at 1032.
10
Second, even if Crystal had not attempted to amend its Second Amended Complaint in
the First Antitrust Action, the Eighth Circuit adheres to the principle that res judicata
bars all claims that could have been advanced in support of a previously adjudicated
cause of action. Mills v. Des Arc Convalescent Home, 872 F.2d 823, 826-27 (8th Cir.
1989) (citation omitted). Accordingly, for purposes of res judicata, the Court determines
that the Second Antitrust Action alleges the same claim for relief as that alleged in the
First Antitrust Action.
III. The Walker Process claim was ripe prior to the finding of inequitable
conduct in the Texas Action.
Crystal finally argues that res judicata does not apply in this case because the
Walker Process claim did not ripen until after the finding of inequitable conduct in the
Texas Action. (Mem. in Oppn at 16-18.) The Court disagrees.
Crystal is correct that the doctrine of res judicata does not apply to claims that did
not exist when the first suit was filed. Lundquist, 238 F.3d at 977. In making this
argument in the present action, Crystal relies on Lawlor v. National Screen Service Corp.,
which holds that a prior suit cannot be given the effect of extinguishing claims which
did not even then exist and which could not possibly have been sued upon in the previous
case. 349 U.S. 322, 328 (1955). However, Crystal has not established that the Walker
Process claim did not exist prior to the finding of inequitable conduct in the Texas
Action. Indeed, the factual predicate behind the Walker Process claim (AVIDs
intentional fraud on the PTO to obtain a patent) was asserted by Crystal both as a
counterclaim and as an affirmative defense in the Texas Action, which eventually led to
11
the finding of inequitable conduct. Unlike in Lawlor, [Crystal] fails to allege additional
facts not in existence at the time [the First Antitrust Action] was filed. Banks v. Intl
Union Elec., Elec., Tech., Salaried & Mach. Workers, 390 F.3d 1049, 1053 (8th Cir.
2005). As the conduct establishing the Walker Process claim was known to Crystal when
the First Antitrust Action was filed, such a claim was ripe and actionable at that time.
Because the Walker Process claim for relief stems from the same nucleus of
operative facts as the First Antitrust Action, Crystal lost the ability to pursue the claim
when it was not included in the First Antitrust Action in a timely manner. The doctrine
of res judicata has the salutary effects of protecting adversaries from the expense and
vexation of multiple lawsuits, conserving the limited time of judges, and fostering
reliance on decisions of courts. Poe, 695 F.2d at 1107-08. Thus, Crystal cannot now
assert its Walker Process claim in a separate action to avoid the consequences of its
dilatoriness. Because all the requirements of res judicata are met, the doctrine bars the
instant action and Crystals Complaint will be dismissed.
CONCLUSION
Based on the foregoing, and all the files, records, and proceedings herein, IT IS
ORDERED that Defendants Motion to Dismiss (Doc. No. 26) is GRANTED and
Plaintiffs Complaint (Doc. No. 1) is DISMISSED WITH PREJUDICE.
LET JUDGMENT BE ENTERED ACCORDINGLY.
Date: October 20, 2008
s/Richard H. Kyle
RICHARD H. KYLE
United States District Judge
 

 
 
 

  What day were you injured?

  / /


  What caused your injuries?
Traffic/Bicycle Accident
Work-Related Injury
Wrongful Death
Dog Bite
Slip and Fall
Other:


  How have your injuries affected

  your life?

 


  What kinds of medical care
  professionals have you seen?

 


  What has your treatment cost?

 

  Is Insurance Involved?
My insurance may cover
        this.

Someone else's insurance
        may cover this.

I already filed a claim.
I rejected a settlement
        offer.

I accepted a settlement
        offer.

  Were there any witnesses?
Bystanders Witnessed This.
Police Responded and Filed
        a Police Report

Police Responded but Did
        Not File a Police Report


 

 

          By visiting this page or clicking the
  "submit" button above, you agree
  that you have read and accept this   "disclaimer".
 
Copyright © Michael E. Douglas, Attorney at Law, Saint Paul MN. All Rights Reserved.
Minnesota Law Firm representing Personal Injury, Car / Auto Accident, Workers Compensation, Medical Malpractice, Social Security Disability claims.
Dedicated to Injured Workers, Victims of Negligence, Car Accidents, Victims of Fraud, and those in need of legal assistance.