Court Opinion

ID: 2900105
Source: CourtListenerOpinion
Date Created: 2015-09-09 15:04:43.45485+00
Date Added: 2024-06-11T15:18:38.204666
License: Public Domain

DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA
                            FOURTH DISTRICT

                          JACK ARONOWITZ,
                              Appellant,

                                    v.

  HOME DIAGNOSTICS, INC., a Florida corporation, and TECHNICAL
              CHEMICALS & PRODUCTS, INC.,
                          Appellees.

                             No. 4D12-3862

                          [ September 9, 2015 ]

   Appeal from the Circuit Court for the Seventeenth Judicial Circuit,
Broward County; John B. Bowman, Judge; L.T. Case No. 96-016225.

   Bernardo Burstein and Robert A. Bouvatte, Jr. of Burstein &
Associates, P.A., Miami, for appellant.

  M. Glenn Curran, III of the Curran Law Group, Fort Lauderdale, for
Appellee Home Diagnostics, Inc.

TAYLOR, J.

    Jack Aronowitz appeals the final summary judgment entered in favor
of Home Diagnostics, Inc. (HDI) in this case involving claims of breach of
license agreements for HDI’s use of certain patented technology. The trial
court found that Aronowitz’s breach of contract claims were barred by res
judicata and precluded by collateral estoppel as a result of litigation
between the parties in federal court. For the reasons stated below, we
reverse the final judgment and remand for further proceedings.

    The litigation between these parties began over twenty-one years ago.
Aronowitz is the owner of three patents for blood glucose and cholesterol
testing products: patent 4,774,192 (’192 patent), patent 4,877,580 (’580
patent), and patent 4,790,979 (’979 patent). In 1988, Aronowitz entered
into an agreement in which Technical Chemicals & Products, Inc., would
manufacture the products, using the patented technology, and HDI would
have a worldwide exclusive license to market, sell, and distribute the
products. In 1990, the parties agreed that HDI would have an exclusive
license to manufacture and distribute the glucose and cholesterol testing
products. Pursuant to these agreements, HDI was required to pay
Aronowitz royalties.

   In 1993, Aronowitz filed suit in federal court alleging that HDI infringed
on his patent rights. He claimed that HDI failed to meet its royalty
obligations under the 1988 and 1990 agreements. Aronowitz demanded
that HDI cease and desist from the unauthorized use of his patents.
Among other things, he requested a preliminary and permanent injunction
restraining HDI from infringing on his patents and sought compensatory
damages in the form of a royalty for each diagnostic test strip
manufactured from the date of the breach.

   The district court entered a judgment in favor of HDI. Issues related to
the ’979 patent were disposed of during trial due to lack of evidence. The
court found that HDI’s products did not infringe on the ’192 patent, and
that although some of HDI’s products did utilize the ’580 patent, HDI did
not infringe on the ’192 patent because it had a valid license. The court
also found that the contingencies giving rise to the obligation to pay
royalties never occurred and “the evidence was insufficient to establish
that [HDI] was in material breach as required for [Aronowitz] to terminate
the license.”

    On appeal, the federal circuit court vacated the district court’s findings
related to the agreements. See Technical Chems. & Prods., Inc. v. Home
Diagnostics, Inc., 152 F.3d 947, 1998 WL 163650 (Fed. Cir. 1998). The
court also vacated the district court’s findings with respect to the
infringement of the ’192 patent, ruling that the district court used the
incorrect infringement analysis. Id. at *11. However, the court found that
at least one of HDI’s products utilized the technology of the ’580 patent.
Id. at *13.

   The federal circuit court instructed the district court, on remand, to
determine if the use of the ’580 patent was covered by the 1988 and 1990
agreements. Id. at *12. The circuit court also instructed the district court
to determine whether, under the proper infringement analysis, HDI’s
products infringed on the ’192 patent. Id. The district court also had to
address whether royalties were due under the agreements and whether
HDI breached the agreements by failing to pay royalties. Id. at *11-12. If
HDI breached the agreements, the court would have to determine the
proper remedy. Id.

   While the federal case was on appeal, Aronowitz filed a breach of
contract claim in Broward County circuit court, alleging that HDI failed to
pay royalties pursuant to the agreements. On HDI’s motion, the trial court

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abated the state case until the federal case was resolved.

   In 2000, the district court issued an Amended Findings of Fact and
Conclusions of Law. After conducting the correct infringement analysis,
the district court again found that HDI’s product did not utilize the ’192
patent. The judge who made those findings retired without addressing the
’580 patent and breach of agreement issues. After two orders to show
cause why the case should not be dismissed, a magistrate administratively
closed the case until the parties reconstructed the incomplete record.

   In 2010, the district court denied Aronowitz’s Motion to Reopen the
Case and entered a final judgment. The court found that the case had
suffered an extraordinary delay. Aronowitz failed to provide evidence that
he made any reasonable efforts to prosecute his claim after the case was
administratively closed.    The court concluded that Aronowitz had
abandoned the remaining issue: whether the ’580 patent was covered by
HDI licensing agreements and whether HDI breached the agreements.
This order was affirmed on appeal.

   In 2011, on Aronowitz’s motion, the Broward County circuit court
reactivated the breach of contract case. HDI filed a motion for summary
judgment, arguing that the breach of contract claim was barred by res
judicata and precluded by collateral estoppel. The trial court found that
the breach of contract issues raised in the state action were barred by
collateral estoppel and res judicata because they were actually litigated
between the parties in the federal proceedings.

   On appeal, Aronowitz argues that his breach of contract action was not
barred by res judicata because there was not a final judgment on the
merits rendered by a court of competent jurisdiction on the same cause of
action. He also argues that these issues were not litigated in the federal
case and, thus, were not precluded by collateral estoppel.

   The standard of review for an order granting summary judgment is de
novo. Jaffer v. Chase Home Fin., LLC, 155 So. 3d 1199, 1201 (Fla. 4th
DCA 2015). Summary judgment should be entered only when there is no
genuine issue of any material fact. Id. The movant has the burden of
proving the nonexistence of any genuine issue of material fact. Branch
Banking & Trust Co. v. ARK Dev./Oceanview, LLC, 150 So. 3d 817, 819
(Fla. 4th DCA 2014) (citation omitted).

   A trial court’s ruling concerning the application of res judicata and
collateral estoppel is also reviewed de novo. W & W Lumber of Palm Beach,
Inc. v. Town & Country Builders, Inc., 35 So. 3d 79, 82 (Fla. 4th DCA 2010).

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HDI asserted the affirmative defense of res judicata and collateral estoppel
based on a federal judgment. When res judicata is asserted based on a
prior federal judgment, Florida courts apply federal claim preclusion
principles. Anderson v. Vanguard Car Rental USA Inc., 60 So. 3d 570, 572
(Fla. 4th DCA 2011). Similarly, when the party asserts collateral estoppel,
the state court should apply federal issue preclusion principles. Gawker
Media, LLC v. Bollea, 129 So. 3d 1196, 1203 (Fla. 2d DCA 2014).

    “Federal courts apply res judicata when (1) there has been a final
judgment on the merits, (2) rendered by a court of competent jurisdiction,
(3) in a case with identical parties, (4) on the same cause of action.”
Anderson, 60 So. 3d at 572 (quoting Andujar v. Nat’l Prop. & Cas.
Underwriters, 659 So. 2d 1214, 1216 (Fla. 4th DCA 1995) and citing Hart
v. Yamaha–Parts Distribs., Inc., 787 F.2d 1468 (11th Cir. 1986)). “The
general test when deciding whether the cause of action is the same is
whether the facts or evidence necessary to maintain the suit are the same
in both actions.” U.S. Project Mgmt., Inc. v. Parc Royale E. Dev., Inc., 861
So. 2d 74, 76 (Fla. 4th DCA 2003) (citations and internal quotation marks
omitted). Res judicata also bars “‘every other matter which the parties
might have litigated and had determined, within the issues as [framed] by
the pleadings or as incident to or essentially connected with the subject
matter’ of the first litigation.” Zikofsky v. Mktg. 10, Inc., 904 So. 2d 520,
523 (Fla. 4th DCA 2005) (quoting Hay v. Salisbury, 109 So. 617, 621
(1926) and Tyson v. Viacom, Inc., 890 So. 2d 1205, 1214 (Fla. 4th DCA
2005) (Gross, J., concurring)) (quotation marks omitted).

    If the two causes of action fail to satisfy the identity test of res judicata,
but the identity of parties and issues are present, collateral estoppel may
be utilized. Selim v. Pan Am. Airways Corp., 889 So. 2d 149, 153 (Fla. 4th
DCA 2004). “To claim the benefit of collateral estoppel the party relying
on the doctrine must show that: (1) the issue at stake is identical to the
one involved in the prior proceeding; (2) the issue was actually litigated in
the prior proceeding; (3) the determination of the issue in the prior
litigation must have been ‘a critical and necessary part’ of the judgment in
the first action, and (4) the party against whom collateral estoppel is
asserted must have had a full and fair opportunity to litigate the issue in
the prior proceeding.” Gawker Media, LLC, 129 So. 3d at 1203 (quoting
Pleming v. Universal-Rundle Corp., 142 F.3d 1354, 1359 (11th Cir. 1998)).
Collateral estoppel applies to specific issues “that were actually litigated
and decided in the former suit.” Zikofsky, 904 So. 2d at 525.

   Here, the federal court was a court of competent jurisdiction because
Aronowitz asserted a cause of action under federal patent law—patent
infringement. Then he invoked the pendent jurisdiction of the court over

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the breach of contract claim by litigating the claim with the approval of the
federal court. See Anderson, 60 So. 3d at 572 (“Under the doctrine of
pendent jurisdiction, a plaintiff may assert related state law claims along
with federal claims in federal court and thereby give that court discretion
to exercise jurisdiction over state law claims as to which it otherwise
lacked jurisdiction.”).

    Citing Tyson, Aronowitz argues that there is no identity of the cause of
action. 890 So. 2d at 1211. In Tyson, we explained that identity of the
cause of action is a question of “whether the facts or evidence necessary
to maintain the suit are the same in both actions.” Id. at 1209 (quoting
Albrecht v. State, 444 So. 2d 8, 12 (Fla. 1984), superseded by statute on
other grounds). There, we held that the adjudication of a whistleblower
claim did not bar a subsequent action for breach of employment contract
and fraud in the inducement because the facts necessary to prove the
claims were not identical. Id. at 1209. Unlike the plaintiff in Tyson,
however, Aronowitz actually litigated all the matters pertaining to the
breach of contract action claim by consent. See Dawley v. NF Energy
Saving Corp. of Am., 374 Fed. Appx. 921, 923 (11th Cir. 2010) (“Federal
Rule of Civil Procedure 15(b)(2) provides that where issues are tried by
express or implied consent of the parties, those issues will be treated as
having been raised in the pleadings.”). In the original judgment, the
district court stated “Plaintiffs have argued that Defendant’s failure to pay
royalties constituted a material breach which led to the termination of the
license.” The district court concluded that the evidence was insufficient
to establish that HDI was in material breach as required for Aronowitz to
terminate the license. On appeal, the federal circuit court opinion stated
that “TCPI and Aronowitz argue that HDI breached the agreements by
failing to pay the per strip royalties . . . .” Technical Chems. & Prods., Inc.,
1998 WL 163650, at *11.

   Although the parties litigated the breach of contract claim and the
district court initially adjudicated the merits of the breach of contract
claim, the federal circuit court vacated all of the district court’s findings
regarding breach of agreements. See Technical Chems. & Prods., Inc., 1998
WL 163650, at *12. Since the federal circuit court vacated the district
court’s findings, those findings cannot bar subsequent litigation on the
same claim. See Ciffo v. Pub. Storage Mgmt., Inc., 622 So. 2d 1053, 1054
(Fla. 4th DCA 1993) (“A judgment which has been reversed on appeal
cannot be the basis of invoking the doctrine of res judicata.”).

   On remand, the district court did not make any final determinations on
the breach of contract issues. The district court found that HDI’s products
did not infringe on the ’192 patent. Since HDI did not utilize that ’192

                                       5
patent technology, no royalties were due, and the court did not reach any
breach of contract issues related to that patent. In the final judgment, the
district court acknowledged that the issues of whether the ’580 patent was
covered by the agreements and whether HDI breached those agreements
were not addressed. The district court did not reopen the case, because it
concluded that after four years of inactivity Aronowitz had abandoned the
remaining issues. Aronowitz failed to prosecute and did not provide any
viable excuse for the significant delay in the case. By denying Aronowitz’s
motion to reopen the case, the district court declined to rule on the merits
of the breach of contract claims. Since the judgment was rendered on
grounds that do not involve the merits of the breach of contract claims,
the judgment cannot be used as the basis for the operation of the doctrine
of res judicata. See State St. Bank & Trust Co. v. Badra, 765 So. 2d 251,
254 (Fla. 4th DCA 2000) (“A judgment rendered on any grounds which do
not involve the merits of the action may not be used as the basis for the
operation of the doctrine of res judicata.”).

   Similarly, the collateral estoppel doctrine does not preclude Aronowitz
from raising the breach of contract issues in state court. Because the
breach of contract issues were never decided in the federal action,
Aronowitz is not precluded from raising these issues in a state action.

    In sum, we find that Aronowitz’s breach of contract claims were not
barred by the doctrine of res judicata or precluded by collateral estoppel,
because the federal judgment was not a final adjudication on the merits of
those claims. We therefore reverse the summary judgment and remand
for further proceedings.

   Reversed and Remanded.

MAY, and KLINGENSMITH, JJ., concur.

                           *          *        *

   Not final until disposition of timely filed motion for rehearing.

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