Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_04-cv-00482/USCOURTS-caed-2_04-cv-00482-9/pdf.json

Nature of Suit Code: 820
Nature of Suit: Copyright
Cause of Action: 17:101 Copyright Infringement

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1

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

OPTHALMIC IMAGING SYSTEMS,

a California corporation,

NO. CIV. S-04-482 LKK/DAD

Plaintiff,

v. O R D E R

MARK FUKUHARA, an individual;

DOUGLAS BURLAND, an individual;

MICHAEL GERKOVICH, an individual;

STEVEN LEACH, an individual;

EDMUND PETERSON, an individual;

DAN SALOMON, an individual; JOE

SILVA, an individual; DALE BRODSKY,

an individual; EYEPICTURES, INC., a

Missouri corporation; JUSTICE

OPTHALMICS, INC., a Tennessee

corporation; ZETA DEVELOPMENT LABS,

INC., a Tennessee corporation; and

JOHNNY JUSTICE, JR., an individual,

Defendants.

 /

In the underlying action, plaintiff, Ophthalmic Imaging

Systems ("OIS"), filed an action against a group of its former

employees and their current business affiliates, alleging

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copyright infringement, false advertising, violation of the

Computer Fraud and Abuse Act, breach of contract,

misappropriation of trade secrets, and interference with

contracts. Pending before the court is plaintiff’s motion to

dismiss all claims against defendant Zeta Development Labs, Inc.

(“Zeta”) under Fed. R. Civ. P. 41. Defendant Zeta joins OIS’

motion to dismiss claims against it. Defendants Eyepictures,

Inc. and Dale Brodsky oppose this motion. 

I.

BACKGROUND

The court has repeatedly addressed the relevant

allegations. Nonetheless, they must be briefly adverted to here

for the purpose of resolving the instant motion.

OIS, a corporation with its principal headquarters and

place of business in Sacramento, California, manufactures

digital ophthalmic imaging systems specially designed to

photograph the human eye. OIS asserts that a crucial source of

its value and profitability lies in its trade secrets, which

consist primarily of customer lists, manufacturing and design

“know how,” vendor information, and servicing “know how.” In

order to preserve the confidentiality of its trade secrets, OIS

requires all employees to sign confidentiality agreements which

prohibit OIS employees from disclosing OIS’ trade secrets.

In January 2002, defendant Mark Fukuhara, then the Vice

President of Operations of OIS, was terminated and left OIS. 

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3

Over the next year, several more employees, including Michael

Gerkovich, left OIS to join Fukuhara in a new business. By late

spring of 2002, OIS allegedly learned from certain of its

customers that these former employees ("defendant employees")

had formed a new business called Imaging Service Group, and that

their business, at least in part, was providing service for

customers of OIS’ imaging systems. The business was owned

principally by defendants Dale Brodsky, Gerkovich, and another

shareholder. OIS claims that Gerkovich solicited business from

its customers who were seeking service for their OIS imaging

systems, and directed these customers to defendant's new

business enterprise.

 At some point some part of defendant employees' business

had been acquired by entities under the control of defendant

Johnny Justice, Jr. ("Justice"), a resident of the state of

Tennessee and one of the most prominent ophthalmic imaging

specialists in the United States. Justice is the 100%

shareholder of defendant Zeta Development Labs, Inc. ("Zeta"), a

Tennessee Corporation. Zeta also does business under the

Justice Diagnostic Imaging, Inc. name. OIS alleges that

Justice, and another company he owns, Justice Ophthalmics, Inc.

(JOI) were placed on notice of OIS’ belief that the defendant

employees were misappropriating OIS’ trade secrets and

confidential information in 2003. 

On December 10, 2004, the court granted defendants’ motion

to dismiss for lack of personal jurisdiction as to defendant

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1 Johnny Justice states that he was told by Gerkovich that

several former OIS employees conducted a “Saturday morning raid”

at OIS sometime in 2002 after they had left employment at OIS.

These former employees allegedly took various OIS parts, possibly

sync boxes, digital cameras, and other equipment related to imaging

systems. Justice Decl. at 1-2. 

2 A dismissal under Rule 41(a)(2) normally is without

prejudice, as explicitly stated in that rule.

3 Federal Rule of Civil Procedure 41(a)(2) provides:

Except as provided in paragraph (1) of this subdivision

of this rule, 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. If a counterclaim has been pleaded by a

defendant prior to the service upon the defendant of the

plaintiff's motion to dismiss, the action shall not be

dismissed against the defendant's objection unless the

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Johnny Justice and Justice Ophthalmic Inc. 

On October 10, 2005, defendant Zeta announced that it had

entered into a settlement with the plaintiff. See Exs. A and B

to Opp’n. Zeta is currently cooperating with plaintiff and has

taken a position that is adverse to the remaining defendants.1

II.

VOLUNTARY DISMISSAL STANDARDS

OIS moves to voluntarily dismiss all its claims against

Zeta pursuant to Fed. R. Civ. P. 41(a)(2).2 Mot. at 2. The

Rule provides district courts broad discretion to determine the

appropriate terms and conditions for dismissal. Id. at 975. 

Nonetheless, a district court should grant a motion for

voluntary dismissal under Rule 41(a)(2) unless a defendant can

show that it will suffer some “plain legal prejudice” as a

result of the dismissal.3 Smith v. Lenches, 263 F.3d 972, 975

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counterclaim can remain pending for independent

adjudication by the court. Unless otherwise specified in

the order, a dismissal under this paragraph is without

prejudice.

5

(9th Cir. 2001)(citing Waller v. Fin. Corp. of Am., 828 F.2d

579, 583 (9th Cir. 1987)); see also Hamilton v. Firestone Tire &

Rubber Co., 679 F.2d 143, 145-46 (9th Cir. 1982). Legal

prejudice means “prejudice to some legal interest, some legal

claim, some legal argument.” Westlands Water Dist. v. United

States, 100 F.3d 94, 97 (9th Cir. 1996). Legal prejudice is

shown where actual legal rights are threatened or where the

opposing party demonstrates that it will suffer an unreasonable

or extreme burdens. Id. “ Uncertainty because a dispute remains

unresolved” or because “the threat of future litigation . . .

causes uncertainty” does not result in plain legal prejudice.

Id. at 96-97. Moreover, plain legal prejudice does not result

merely because a defendant will be inconvenienced or where a

plaintiff would gain a tactical advantage by that dismissal. 

Hamilton, 679 F.2d at 145.

The Ninth Circuit has also explained that a district court

“properly identified legal prejudice when dismissal rendered the

remaining parties unable to conduct sufficient discovery to

untangle complex fraud claims and adequately defend themselves

against charges of fraud.” Id. at 98 (citing Hyde & Drath, 24

F.3d 1162, 1169 (9th Cir. 1994)).

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III.

ANALYSIS

Plaintiff seeks to dismiss all claims against Zeta, one

defendant among many, in this case involving alleged

misappropriation of trade secrets. Two defendants, Dale Brodsky

(“Brodsky”) and Eyepictures, Inc. (“Eyepictures”) oppose this

motion. Defendants offer three arguments why they will suffer

“plain legal prejudice” if this court dismisses Zeta from this

suit. These arguments are unpersuasive.

A. VIOLATION OF FIRST RIGHT OF REFUSAL 

Eyepictures claims that the settlement between OIS and Zeta

may potentially violate their right of first refusal under a May

2003 asset purchase agreement between Eyepictures and Zeta. As

part of the settlement agreement, Zeta is transferring all of

its documents, equipment, and evidence concerning imaging

systems to OIS. Ex. B to Defs.’ Opp’n. Defendants assert that

it “appears” that the settlement has violated their Right of

Refusal, but they cannot know for sure because “plaintiff’s

counsel has refused to allow either Mr. Brodsky or any other

employee of Eyepictures, Inc. to examine the items transferred

to the plaintiff.” Opp’n at 4. 

It is, to say the least, unclear to this court that a

transfer of property which does not involve a sale but is 

pursuant to settlement of a lawsuit, would be a violation of a

precedent right of first refusal. In any event, the remaining

defendants have not briefed, much less demonstrated that

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contention, apparently believing the proposition is selfevident. 

Moreover, from all that appears, any potential claims

related to a possible breach of right of first refusal would be

a suit for the breach of contract unrelated to plaintiff’s claim

in the instant suit. Put somewhat differently, from the showing

made by the parties, Eyepictures’ complaint relates to the “the

threat of future litigation,” which the Ninth Circuit has

explicitly held is “insufficient to establish plain legal

prejudice.” Westlands, 100 F.3d at 97 (citations omitted).

B. NO OPPORTUNITY TO INTERVIEW DALE BRODSKY OR JOHNNY JUSTICE

Both Brodsky and Eyepictures contend that because Zeta and

Johnny Justice have provided plaintiff with information

supportive of plaintiff’s claim and adverse to their defense.

They contend that if the dismissal is permitted, “[n]either

Eyepictures, Inc. nor Dale Brodsky will have an opportunity to

cross-examine Mr. Justice.” Opp’n at 3. Defendants’ argument

fails to demonstrate that they would suffer “plain legal

prejudice” as contemplated by the Ninth Circuit. 

Nothing before the court suggests that defendants cannot

depose Justice. Moreover, since the declaration is hearsay, to

prove its contents Justice must be called as a witness. In such

an event, the defendants will have a full opportunity to cross

examine him. While deposing a non-party may be somewhat more

inconvenient than deposing a party, mere inconvenience does not

amount to “plain legal prejudice.” See Smith v. Lenches, 263

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F.3d 972, 976 (9th Cir. 2001). 

C. OFFSET DEFENSE

Finally, defendants argue that “[t]o the extent that any

monetary consideration was paid [in the settlement between Zeta

and OIS] . . . defendants would be entitled to an off-set in

this amount.” Opp’n at 3. They suggest that the defendants are

allegedly joint tortfeasors who would be “jointly and severally

liable to the plaintiffs for their claimed damages and

attorney’s fees.” Id. They argue that they cannot tender this

affirmative defense because there were no facts available to

support this defense when their answer was due in 2004. 

Plaintiff maintains that defendants are not prejudiced

because at any point they could allege the defense of offset and

can amend their answer after further discovery. Repl. at 3. 

Plaintiff also argues that dismissal of Zeta will not prejudice

defendants in terms of discovery should defendants seek to

conduct discovery on the issue of offset. Plaintiff points out

that defendants could subpoena the settlement agreement and

documents to be produced at trial and can cross-examine OIS

witnesses. Plaintiff’s points are well-taken. 

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 The decision to grant a voluntary dismissal is in the

discretion of the district court. Hamilton v. Firestone Tire &

Rubber Co., 679 F.2d 143, 145 (9th Cir. 1982). The court

concludes that because the defendants opposing dismissal have

failed to demonstrate “plain legal prejudice” will result,

plaintiff’s motion to dismiss claims against Zeta corporation is

GRANTED.

IT IS SO ORDERED. 

DATED: December 15, 2005.

/s/Lawrence K. Karlton 

LAWRENCE K. KARLTON

SENIOR JUDGE

UNITED STATES DISTRICT COURT

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