ROLLS-ROYCE MOTORS, INC. v. CHARLES SCHMITT & CO. No. 85 Civ. 5078 (PKL).
657 F.Supp. 1040 (1987)
ROLLS-ROYCE MOTORS, INC., Plaintiff, v. CHARLES SCHMITT & CO. and Charles D. Schmitt, Defendants.
United States District Court, S.D. New York.
April 3, 1987.
Jacob, Medinger & Finnegan, New York City, for defendants.
LEISURE, District Judge:
Plaintiff Rolls-Royce Motors Inc. ("Rolls-Royce"), a Delaware corporation with its headquarters in New Jersey, has brought this action against Charles Schmitt & Co. ("Schmitt Co."), a Missouri corporation, and Charles D. Schmitt ("Schmitt"), a resident of Missouri and president and principal stockholder of Schmitt Co. Schmitt Co., by virtue of a 1984 agreement ("Dealer Agreement") with plaintiff, has been a dealer of new automobiles imported by plaintiff. The contract, which was not executed in New York, provides that Schmitt Co. will "develop the retail sale" of plaintiff's product in St. Louis, Missouri, but does not prevent the defendant from dealing in Rolls-Royce automobiles elsewhere. The Dealer Agreement expressly states that it shall be deemed a New York contract, and shall be interpreted according to New York law.
While Schmitt Co. has been a successful dealer of plaintiff's product, there apparently has been conflict between the parties over the nature of Schmitt Co.'s advertising, alleged misrepresentations by defendants concerning the Rolls-Royce product, alleged false utterances concerning plaintiff's employees, and other alleged breaches of the Dealership Agreement. Despite several meetings between Schmitt and a executive of plaintiff in New York City, these differences were not resolved. Instead, on June 14, 1985, plaintiff terminated Schmitt Co.'s status as a dealer pursuant to a contractual provision providing for such action in the event of an uncured, material breach of the Dealership Agreement by the dealer.
Plaintiff instituted this action seeking: 1) a declaratory judgment that termination of the Dealership Agreement was lawful, to be granted pursuant to the Declaratory Judgment Act, 28 U.S.C. §§ 2201 and 2202; 2) damages for breach of contract; 3) equitable relief in the form of an injunction preventing defendants from uttering statements or engaging in conduct that might
Plaintiff alleges that Schmitt Co. breached the Dealership Agreement by impugning the reputation of the Rolls-Royce organization, fellow dealers, and the Rolls-Royce product; by altering automobiles in violation of federal regulations; by altering automobiles and thereby invalidating plaintiff's warranty; by failing to adhere to record-keeping requirements mandated by the Dealership Agreement; by engaging in deceptive advertising; and by conducting its business affairs in a "notorious and outrageous" manner so that plaintiff has been exposed to "ridicule" by virtue of its association with defendants. Plaintiff alleges further that on at least one occasion, while Schmitt was in New York, he uttered disparaging statements over the telephone to plaintiff's employee in Illinois concerning plaintiff and the plaintiff's New York dealer. Schmitt is alleged to have acted similarly, on other occasions, while in St. Louis, Missouri.
The case is now before the Court upon defendants' motion seeking the dismissal of plaintiff's amended complaint due to lack of personal jurisdiction, improper venue, insufficiency of process, and insufficiency of service of process, pursuant to Fed.R. Civ.P. 12(b)(2)-(5). Alternatively, defendants have moved requesting the transfer of this action to the District Court for the Eastern District of Missouri.
In deciding whether to dismiss plaintiff's complaint, this Court is guided by the following principles of jurisdictional analysis. Plaintiff's pleadings are to be construed in the light most favorable to it, see Hoffritz for Cutlery, Inc. v. Amajac, Ltd.,
A. Jurisdiction over the Corporate Defendant
Subject matter jurisdiction over the claims against Schmitt Co. is based on diversity of citizenship, 28 U.S.C. § 1332.
1. The Corporate Defendant is not "Doing Business" Pursuant to CPLR § 301
CPLR § 301 states that "[a] court may exercise such jurisdiction over persons, property, or status as might have been exercised heretofore." With respect to a foreign corporation, § 301 preserves the case law existing prior to its enactment, which provided that a corporation is "doing business" and is therefore "present" in New York and subject to personal jurisdiction with respect to any cause of action, related or unrelated to the New York contacts, if it does business in New York "not occasionally or casually, but with a fair measure of permanence and continuity." Tauza v. Susquehanna Coal Co., 220 N.Y. 259, 267, 115 N.E. 915, 917 (1917); accord Laufer v. Ostrow,
As a threshold matter, the Court notes that Schmitt Co. is not incorporated or licensed to do business in New York. "The New York courts, [however,] in applying the pragmatic test for section 301 jurisdiction, have focused upon [additional] factors including: the existence of an office in New York; the solicitation of business in the state; the presence of bank accounts and other property in the state; and the presence of employees of the foreign defendant in the state." Hoffritz, supra, 763 F.2d at 58 (citations omitted) (emphasis added). New York courts also look at whether defendant lists a telephone number in the state. When considering this criteria, the facts presented by plaintiff fail to establish that Schmitt Co.'s presence in New York is sufficiently continuous and substantial to warrant the exercise of jurisdiction pursuant to § 301.
As previously noted, Schmitt Co. is not licensed to conduct business in the state. Schmitt Co. does not: (1) maintain a local office or bank account in New York
Plaintiff, unable to rely on these classic factors of § 301 jurisdiction, argues that Schmitt Co. is "doing business" in New York because Schmitt Co. has allegedly solicited business in this state. Plaintiff concedes, as it must, that the long-standing New York rule is that solicitation alone, no
In Aquascutum of London, Inc. v. S.S. American Champion,
Id. at 211 (emphasis added) (citing Jensen v. United Air Lines Transport Corp., 255 App.Div. 611, 8 N.Y.S.2d 374 (1st Dep't 1938), aff'd mem., 281 N.Y. 598, 22 N.E.2d 167 (1939); Elish v. St. Louis S.W. Ry.,
Id. at 212 (citations omitted).
Plaintiff argues that Schmitt Co.'s activities satisfy the "solicitation plus" rule because:
P. Memo. at 26. Careful examination of these seven allegations reveals that none is sufficient to satisfy the threshold level of solicitation. The seven factors also fail collectively to amount to Schmitt Co. "doing business" in New York.
Although plaintiff discusses all seven factors, it relies primarily on factors (1) and (3), Schmitt Co.'s purchases of substantial quantities of used luxury automobiles in New York and its president's frequent visits to New York for the purpose of making those purchases. See P. Memo at 6-8. It is undisputed that Schmitt has been visiting New York at least once a month for several years primarily to buy used cars, including Rolls-Royce cars. Since 1980, Schmitt Co. has purchased well over 100 new or used Rolls-Royce cars in New York. Id. at 9. Plaintiff also claims that in the first seven months of 1985, Schmitt spent "at least 50 days in New York" and spent some $55,000 in New York for food, lodging, and other items. Id. at 6-7.
The weakness of plaintiff's position — its reliance on Schmitt Co.'s purchasing activities—is revealed by the distinction made in the case law between purchases of goods and services in New York and the sale of goods and services in New York. In Helicopteros Nacionales de Columbia v. Hall,
Even prior to Helicopteros, the law in New York was clear that purchases in New York by a foreign defendant corporation of a major share of the merchandise to be sold at its place of business outside the state, even if systematic and made upon visits occurring at regular intervals, do not warrant a finding that the defendant was present within the jurisdiction of New York. Greenberg v. Lamson Bros., 273 A.D. 57, 75 N.Y.S.2d 233, 236 (1st Dep't 1947); Rosenberg Bros. & Co. v. Curtis Brown Co.,
Plaintiff — presumably aware of the inadequacy of its allegations of mere purchasing activities on the part of Schmitt Co., for the purposes of demonstrating that the corporate defendant was soliciting business in this state — tries to bolster Schmitt Co.'s sales activities in New York by indiscriminately merging them with Schmitt Co.'s purchasing activities. Nevertheless, close study reveals that Schmitt Co.'s sales activities in this District are de minimis and do not amount to the solicitation of business in New York.
Plaintiff claims that Schmitt Co. has sold twelve Rolls-Royce cars in New York since November 1984. This assertion is based on plaintiff's misinterpretation of defendants' answers to interrogatories. In an attempt to support its jurisdictional argument, plaintiff has converted, in broad gauge fashion, sales to customers with New York addresses into sales in New York. Of the twelve alleged sales in New York, seven automobiles were sold to purchasers with New York addresses who traveled to St. Louis, Missouri in order to make their purchases. Two of the remaining five cars were sold to New York purchasers by telephone between St. Louis and New York; the purchasers never saw the cars and the transactions were concluded by mail or wire with the shipments of the cars to New York. The remaining three cars were also sold via telephone, mail or wire; furthermore, these cars were delivered to a state other than New York. Therefore, these sales can hardly be characterized as sales in New York.
Plaintiff also suggests that Schmitt Co. has sold an equal number of automobiles, other than Rolls-Royces, in New York. Schmitt Co. concedes that it sold eight automobiles to purchasers with New York addresses. Of these sales, however, four were to purchasers who came to St. Louis to buy their cars; one was a sale to a New York car dealer, executed via telephone and mail, with the car shipped from Connecticut to New York; one was inspected by the purchaser and delivered to California, again executed by way of mail and telephone communications; one was an agreed repurchase by a New York dealer of a car, which had proven defective, previously purchased by Schmitt Co.; and the final sale involved Schmitt Co.'s purchase of an automobile from a New York dealer and a resale the same day to another New York dealer. The Court holds that only the last
Plaintiff also tries to make much of Schmitt Co's advertising in the New York Times and the Wall Street Journal. From January 1980 through August 1985, Schmitt Co. advertised virtually every Sunday in the New York Times and at least once a week in the Wall Street Journal. Almost all of the advertisements bear the legend "Authorized Rolls-Royce Dealer" and offer to sell and purchase new and used Rolls-Royce, Bentley and other cars. P. Memo at 9. Plaintiff claims that the cost of these advertisements to Schmitt Co. amounted to a little less than $3 million dollars. Id.
Defendants contend that these advertisements are insufficient, even when conjoined with the other alleged factors, to establish that Schmitt Co. is soliciting or "doing business" in New York. Defendants correctly point out that "[i]t is common knowledge that the Wall Street Journal is distributed nationally and that the New York Times, although to some extent a New York City newspaper also has national distribution." D. Reply Memo. at 5. Furthermore, Schmitt Co.'s "advertisements in the Wall Street Journal and New York Times are prepared in St. Louis, Missouri and sent by a telephone copying device to the newspapers in New York." Id. Thus, the source of Schmitt Co.'s advertising campaign is St. Louis; it is directed at a national audience and only the publications themselves are based in New York. Schmitt Co. also notes that a significant portion of its advertising is directed towards promoting its purchasing activities in New York. Accordingly, it would be incorrect to conclude that Schmitt Co. is expending substantial resources on advertising directed towards soliciting sales in New York. Thus, the Court holds that this advertising does not constitute substantial solicitation for the purposes of § 301. See Baird v. Day & Zimmerman, Inc.,
Plaintiff's fourth claim is that Schmitt Co. has maintained representatives in New York, namely Jack Wolf and Herbert Shane, in order to solicit business. Plaintiff alleges that within the last year, Wolf has arranged the sale to Schmitt Co. of 10 to 12 luxury cars and has handled numerous inquiries that failed to conclude in sales. Plaintiff also claims that Wolf and Shane have performed many other activities to assist Schmitt Co. in doing business in New York:
P. Memo. at 27. Plaintiff also alleges that Schmitt Co. has arranged for "dealer prep" of new cars sold to take place at George Haug Co., an authorized Rolls-Royce New York service facility. Furthermore, Schmitt Co. is alleged to have advertised in the New York Times that it has a "New York representative", namely either Wolf or Shane. In addition, Wolf has purportedly stressed to a telephone caller that he was Schmitt Co.'s "exclusive representative" in New York.
As with plaintiff's previous claims, the allegations concerning Wolf and Shane, although imposing at first glance, fail to withstand closer scrutiny. Even a cursory
Deposition of Jack Wolf, October 22, 1985 ("Wolf Dep."), 15-16 (emphasis added). Wolf also remarked that:
Id. at 16 (emphasis added).
Further evidence which contradicts plaintiff's contention that Wolf was an agent or representative of Schmitt Co. is Wolf's testimony that he sold used cars to approximately a hundred car dealers, other than Schmitt Co. Wolf even stated that he "contacted competition of Charles Schmitt, [including authorized Rolls-Royce dealers] like Carriage or what's-his-name — you know, Rallye Motors...." Id. Wolf would often contact these dealers competing with Schmitt Co., before he called Schmitt Co. regarding the possible purchase of a used automobile.
Plaintiff's claims regarding Shane are similarly unsupportable. Shane testified that he has dealt with some 30 dealers other than Schmitt Co. over the past few years. Deposition of Herbert Shane, October 22, 1985 ("Shane Dep."), 4. Shane further testified that his "relationship" with Schmitt terminated because he "had called [Schmitt] so often, and no cars were bought...." Id. at 17.
The Court notes that Schmitt Co. lacked the power to control the details of Shane's or Wolf's daily operations. See, e.g., Delagi, supra, 29 N.Y.2d at 432, 278 N.E.2d at 897, 328 N.Y.S.2d at 657; PPS v. Jewelry Sales Representatives, Inc.,
Moreover, it is clear to the Court that whatever activities Wolf and Shane allegedly engaged in on behalf of Schmitt Co. were restricted almost exclusively to the purchasing of used automobiles in New York. Wolf testified that the only fees he received from Schmitt were for cars that Wolf sold to Schmitt. Also Wolf also stated that he did not know what Schmitt's or Schmitt Co.'s inventory was nor did he ever negotiate a sale for Schmitt or Schmitt Co. Wolf Dep. at 105. Moreover, Shane stated that he primarily attempted to sell used luxury automobiles to Schmitt Co. See generally Shane Dep. Not only does it appear that Shane's relationship with Schmitt Co. involved merely Schmitt Co.'s purchasing activities, but it also appears that it was not a very fruitful relationship. Shane testified that "I called [Schmitt] in the past, tried to sell him cars. I wasn't too successful." Id. at 3. Responding to the question why he was not successful, Shane stated "I don't know. I have got better buyers.... I don't recall whether I
Plaintiff also tries to demonstrate that Schmitt Co. held out Wolf and Shane as its representatives in New York and therefore was soliciting business in New York. This claim is primarily grounded upon the advertisements published in the New York Times and the Wall Street Journal, which sometimes stated that Wolf or Shane were representatives of Schmitt Co. However, examination of these advertisements reveal that all but one pertain to purchases by Schmitt Co. of used luxury automobiles.
Plaintiff's sixth contention is that this Court has § 301 jurisdiction over Schmitt Co. because Schmitt Co. has held itself out as having a New York "location" or office. The Court has already disposed of plaintiff's allegations in this regard concerning Wolf and Shane. Plaintiff, however, also relies on Schmitt Co.'s stationary. It is undisputed that since 1971 the words New York and London have been placed in the upper right hand corner of Schmitt Co.'s stationary. Plaintiff's Exhibit 8. The stationary, however, fails to include a specific office address or telephone number in New York. See Manchester Modes v. Lilli Ann Corp.,
The cases cited by plaintiff in support of its contention that Schmitt Co. is "doing business" in New York under the "solicitation-plus" doctrine are inapposite and in fact demonstrate the precariousness of plaintiff's position. For example, Aquascutum—where the Second Circuit affirmed the dismissal of a complaint for lack of personal jurisdiction — involved a London-based English corporation offering different types of freight service to New York. In Katz Agency v. Evening News Ass'n,
For the reasons set forth above, the Court finds that plaintiff has failed to establish the threshold element of solicitation of business in New York. Moreover, even assuming plaintiff had satisfied this preliminary element, its alleged "plus" elements fail to support a finding by this Court that Schmitt Co. is "doing business" in New York. Thus, this Court does not have § 301 jurisdiction over Schmitt Co.
2. The Corporate Defendant is Transacting Business in New York Pursuant to CPLR § 302(a)(1)
Section 302(a) of the CPLR provides in pertinent part:
"Thus, in order for personal jurisdiction over [Schmitt Co.] to lie in New York, [Schmitt Co.] must have transacted business in this state and the cause of action must arise out of such transaction." Penthouse Films International, Ltd. v. Russell Films, Ltd., No. 86-503 (S.D.N.Y. Sept. 2, 1986) (Motley, C.J.) [Available on WESTLAW, DCT database] (available Mar. 4, 1987 on LEXIS, genfed library, Dist file). See also Gelfand v. Tanner Motor Tours, Inc.,
The seminal New York case interpreting CPLR § 302 is Longines-Wittenauer Watch Co. v. Barnes & Reinecke, Inc.,
Id. at 457, 209 N.E.2d at 75-76, 261 N.Y. S.2d at 19. The New York Court of Appeals sustained jurisdiction on these facts. In doing so, the court refused to determine whether any of the foregoing contacts would, in and of themselves, meet the transacting business test. Id. at 458, 209 N.E.2d at 76, 261 N.Y.S.2d at 19.
The test developed in Longines is hardly a precise one; the court must look at the aggregation of defendant's activities, coupled with the selective weighing of the various actions. See 1 J. Weinstein, H. Korn & A. Miller, New York Civil Practice
The aforementioned criteria cannot be imposed mechanically. Each analysis under CPLR § 302 is sui generis. The only certainty regarding the jurisdictional standard applicable under CPLR § 302 is that the "showing necessary for a finding that defendant `transacted business' and is suable on a cause of action arising from that transaction is considerably less than that needed to establish defendant's `doing business' ...." Hoffritz, supra, 763 F.2d at 58.
The Second Circuit has stated that in a breach of contract action, "[t]he proper inquiry ... is `whether looking at the "totality of the defendant's activities within the forum", purposeful acts have been performed in New York by the foreign corporation in relation to the contract, "albeit preliminary or subsequent to its execution."'" Sterling National Bank & Trust Co. v. Fidelity Mortgage Investors,
In the instant action Schmitt Co. has had meetings at Schmitt's request with plaintiff's executives regarding performance under the Dealer Agreement. These include a February 5, 1985 meeting at the 21 Club between Schwartz and Schmitt concerning advertising and allocation of cars; a February 28, 1985 meeting at the St. Regis Hotel, when Schwartz and Schmitt discussed allocation of cars; and a June 18, 1985 meeting at which plaintiff requested that Schmitt Co. furnish assurances that it would not violate the Dealer Agreement. Affidavit of Robert Schwartz, sworn to on November 7, 1985, ¶ 5(c).
While physical presence is not a "talisman which will convert all affairs of business into a New York transaction," it is one of the most concrete manifestations of a non-domiciliary's purposeful activity in New York. N.Y.Civ.Prac.L. & R. § 302(a)(1) practice commentaries C302:9-10 (McKinney 1972). Contrary to defendant's suggestion, the fact that the meeting could have taken place elsewhere, see D. Reply Memo. at 10, is jurisdictionally irrelevant. See Penthouse Films, supra. What is relevant is that Schmitt, already in New York on a business trip, agreed to participate, and did participate, in three meetings concerning Schmitt Co.'s contractual relations with plaintiff.
In George Reiner & Co. v. Schwartz,
In a more recent case, Penthouse Films, supra, Judge Motley held that a series of meetings in New York between film director Ken Russell and Robert Guccione, president of plaintiff corporation, constituted transacting business in New York. As in the instant action, the meetings in Penthouse Films occurred subsequent to the execution of the contract between the parties. Moreover, as in this case, defendant in Penthouse Films argued that the business discussed at these meetings could have been discussed in any location, or in fact could have performed on the phone or through correspondence. Judge Motley held that neither of these two factors affected the decision regarding whether business had been transacted by defendant in New York.
In addition to the meetings in New York between Schmitt Co.'s president and plaintiff's executives, plaintiff specifically alleges
Dealer Agreement ¶ 5. It is evident that such a report would include cars bought and sold on the New York market.
In construing CPLR § 302(a)(1), the New York Court of Appeals has said the New York transaction must "bear a substantial relationship to the transaction out of which the instant cause of action arose." McGowan v. Smith,
Under this standard it is clear that plaintiff's action arises from Schmitt Co.'s transaction of business in New York. These were direct meetings between plaintiff's executives and Schmitt Co.'s president for the purpose of discussing matters central to the litigation, most notably, defendant's alleged lack of performance under the Dealership Agreement. This, of course, is the issue, without which, there would be no lawsuit. See Schwartz Aff. at ¶ 5. Cf. New World Capital Corp., supra, 612 F.Supp. at 173 (post-contract visit would sustain jurisdiction if related to plaintiff's cause of action).
In addition to meetings in New York, courts may look to other factors such as advertising activities, Murray v. Plessey, Inc.,
In sum, the Court finds that the corporate defendant's meetings with plaintiff in the forum, its additional physical presence in the forum, and its other activities in New York are sufficient to subject Schmitt Co. to personal jurisdiction in New York under CPLR § 302(a)(1).
3. The Corporate Defendant has not Committed an In-State Tort Pursuant to CPLR § 302(a)(2)
CPLR Section 302(a)(2) provides for personal jurisdiction over a defendant when a defendant "commits a tortious act within the state" of New York. See Business Trends Analysts v. The Freedonia Group Inc.,
In Feathers v. McLucas,
Plaintiff's argument that it has established jurisdiction over the corporate defendant under CPLR § 302(a)(2) is fourfold: (1) Schmitt has allegedly made false statements concerning plaintiff's New York Dealer; (2) Schmitt purportedly disparaged plaintiff's New York dealer; (3) Schmitt allegedly made certain misrepresentations concerning features of plaintiff's cars in the New York newspapers; and (4) Schmitt Co. purportedly injured plaintiff's reputation under the New York anti-dilution statute.
With respect to plaintiff's claim of making false statements regarding plaintiff's New York dealer, the Court has carefully examined the affidavits provided by plaintiff and must conclude that they form an inadequate basis upon which to maintain jurisdiction over Schmitt Co. pursuant to § 302(a)(2). In his affidavit, sworn to on November 5, 1985, David Carmichael recounts a phone call made by Schmitt in New York to Carmichael. Id. at ¶ 3(d). According to Carmichael, Schmitt demanded to know why plaintiff's New York dealer was receiving cars and Schmitt Co. was not; Schmitt then allegedly threatened an employee of plaintiff and slandered plaintiff's cars and additional employees. In his affidavit, sworn to on November 7, 1985, W. Michael Garner, Esq. merely states that plaintiff "may call ... witnesses to a June 1985, incident in the Bronx in which Schmitt is said to have threatened the life of a New York Rolls-Royce dealer ... and may ... call [another witness] with respect to a 1985 incident in which ... Schmitt reportedly caused a disturbance by parking a Rolls-Royce ... in front of the St. Regis Hotel [in New York]."
The contention that Schmitt Co. disparaged the New York dealer while acting in New York is no more effective. Plaintiff cites no evidence before the Court in support of this argument other than Schwartz's vague allegation that Schmitt disparaged the New York dealer "in the vilest terms." Schwartz Aff. at ¶ 7. And even this statement pertains to a phone conversation between Schmitt and Schwartz which took place when Schmitt was in St. Louis. Id. "Additionally, if the claimed misrepresentation or disparagement of the New York dealer is said to be fraudulent, it must be pleaded specifically under Rule 9(b), Federal Rules of Civil Procedure, which it is not. And if, on the other hand, it is claimed to be defamatory, it is specifically excluded as a basis for long arm jurisdiction under CPLR 301(a)(2)...." D. Reply Memo. at 34.
With respect to plaintiff's argument that Schmitt Co. has made misrepresentations concerning features of Rolls-Royce cars, the gravamen of plaintiff's claim seems to be breach of the Dealership Agreement. Of course, breach of contract, without more, is not tortious. See Amigo Foods Corp. v. Marine Midland Bank-New York,
Plaintiff's last argument in support of this Court's jurisdiction over Schmitt Co. pursuant to § 302(a)(2) is that the corporate defendant has injured plaintiff's reputation in New York under New York's anti-dilution statute, N.Y.Gen. Bus.Law § 368-d. The statute is "designed to protect the distinctiveness of an owner's trademark from being undercut by another's similar use." Dreyfus Fund v. Royal Bank of Canada,
4. The Corporate Defendant has not Committed Tortious Acts Pursuant to CPLR § 302(a)(3)
In relevant part, CPLR § 302(a)(3) grants courts in New York personal jurisdiction as follows:
It is clear that Schmitt Co. has transacted business in New York. Nevertheless, there are two deficiencies in plaintiff's claim that jurisdiction is proper over plaintiff's tort claims pursuant to § 302(a)(3). First, it is not obvious to the Court that plaintiff has suffered any injury in New York. Second, it is unclear whether defendant has committed an out-of-state tort within the ambit of this provision.
It is well settled that a "commercial tort may be a `tortious act' within the meaning of [§] 302(a)(3)." Cantor v. Life Alert, Inc.,
Plaintiff contends that Schmitt Co. has committed tortious acts outside of New York causing plaintiff injury within New York. Plaintiff states that:
D. Memo. at 35 (citations omitted).
In Aaacon Auto Transport v. Barnes,
With respect to plaintiff's claims that Schmitt Co. engaged in tortious conduct outside of New York which affected plaintiff, many of the issues discussed previously with reference to § 302(a)(2) jurisdiction are again relevant. The Court declines to review these earlier points in detail. However, the Court notes that § 302(a)(3), like § 302(a)(2), specifically excludes jurisdiction over defamation actions. In the instant action, what plaintiff seeks to characterize as harassment, is actually a reference to allegedly slanderous statements made by Schmitt. Furthermore, plaintiff's tort claim stems from its breach of contract claim and is not tortious in nature.
B. Jurisdiction Exists Over the Individual Defendant Pursuant to RICO
Plaintiff has alleged violations by defendant Schmitt of RICO, 18 U.S.C. § 1961 et seq. Subject matter jurisdiction as to Schmitt is thus properly based on a federal question, 28 U.S.C. § 1331. See generally West 14th Street Commercial Corp. v. 5 West 14th Owners Corp.,
"RICO contains specific provisions authorizing nationwide service of process." Soltex Polymer Corp. v. Fortex Industries,
Plaintiff's additional claims against defendant Schmitt are subject to this Court's jurisdiction pursuant to the doctrine of "pendent jurisdiction." Where a federal statute authorizes nationwide service of process, and the federal and state claims derive from a "common nucleus of operative fact," Gibbs v. United Mine Workers,
In the instant case, Schmitt and Schmitt Co.'s allegedly false statements concerning plaintiff's product, which were contained in its advertising, form the basis for the RICO claim. Obviously, they are also integral to plaintiff's non-RICO claims for breach of contract. Pendent jurisdiction allows this Court to hear all related claims,
C. Venue is Proper Pursuant to 28 U.S.C. § 1391
While personal jurisdiction over defendant Schmitt Co. was determined according to state law, venue is a question of federal law. Leroy v. Great Western United Corp.,
Schmitt Co. is a corporation; thus determination of venue under § 1391(b) begins with § 1391(c), which states:
"The precise quantum of activity needed to satisfy the `doing business' requirement of § 1391(c) is unclear." Oral-B Laboratories,
Since Schmitt Co. does not "reside", for the purposes of § 1391, in this district, venue may be found here under the general statute only if the "claim arose" in this district. "Determining where a claim arises for the purpose of 28 U.S.C. § 1391(b) frequently proves to be a vexing and uncertain process." Jaffe v. Boyles,
"The determination of where a claim arises is a federal question to be answered by federal law." Id. (citation omitted). Some courts have suggested that the statute envisions every claim arising in only one district. But see Discussion in J. Moore Federal Practice ¶ 0.142 [5.-2], p. 1431 (1974). However, in Leroy, supra, the Supreme Court declined to decide whether § 1391(b) "adopts the occasionally fictive assumption that a claim may arise in only one district." 443 U.S. at 184-85, 99 S.Ct. at 2716-17. The Court noted, however, that Congress did not intend to give plaintiffs "unfettered choice" among several districts and provided factors for determining where venue is proper when it is unclear whether the claim arose in only one particular district. Id. The Court stated that:
Id. at 185, 99 S.Ct. at 2717 (citation and footnote omitted) (emphasis in original).
"The federal courts have developed different standards for determining where a claim arose for purposes of venue; the most widely accepted is the `weight of the contacts' test...." Lieb v. American Pac. Intern., Inc.,
In this action, plaintiff's claims, inter alia, seek declaratory relief and damages for Schmitt Co.'s alleged breach of the Dealer Agreement. Defendants argue that plaintiff's claims against Schmitt Co. arose in either Missouri or New Jersey rather than in New York because the contract in question was signed by Schmitt Co.'s president in St. Louis, Missouri, and mailed by him for signature to plaintiff in Lyndhurst, New Jersey. Moreover, defendants note that neither plaintiff nor the corporate defendant are New York corporations. Finally defendants contend that the contract calls for maintenance of a dealer place of business in St. Louis only and that Schmitt Co. primarily performed this contract in Missouri. On the other hand, plaintiff points out that Schmitt Co.'s president's refusal to assure plaintiff, during a meeting in New York held on June 18, 1985, that Schmitt Co. would not breach further the Dealer Agreement directly precipitated this action. Plaintiff also argues that the Dealer Agreement states that it "shall at all times be deemed a New York
"Clearly, this is not a case in which the contacts between the claim and this district are insignificant or miniscule. Rather, the actions taken by [Schmitt Co.] here go to the heart of [plaintiff's] claim concerning the [breach], and accordingly the Court finds venue to be proper [with respect to the claims] in this district." Moyglare Stud Farm, supra, 562 F.Supp. at 292. The Court especially relies on the fact that Schmitt Co. negotiated with plaintiff that the Dealer Agreement is a New York contract and that New York law should govern the Agreement. Under the principles of Leroy, supra, 434 U.S. at 186, the fact that New York law is to be applied weighs heavily in favor of finding venue in this district. In Leroy, the Supreme Court emphasized that "federal judges sitting in Idaho are better qualified to construe Idaho law, and to assess the character of Idaho's probable enforcement of that law" and therefore, venue lies more properly in Idaho. Id.; see also Moyglare Stud Farm, supra, 562 F.Supp. at 292 ("choice of law clause deserves significant weight in determining where a claim arose"). Accordingly, for all the aforementioned reasons the Court finds venue with respect to claims against Schmitt Co. to be proper in this district pursuant to § 1391(b).
D. Venue Is Proper as to the Individual Defendant Pursuant to 18 U.S.C. § 1965(a)
Defendant Schmitt also moves to dismiss plaintiff's RICO claim as to him on the grounds of improper venue. Plaintiff contends that venue is proper under RICO's venue provision. 18 U.S.C. § 1965(a).
The RICO statute's venue provision can be read as supplementing the general venue statute. See Van Schaick v. Church of Scientology, Inc.,
There is no allegation that Schmitt, the individual defendant, resides in the Southern District of New York. In this case, however, there are enough facts from which Schmitt can be said to be transacting business in the Southern District. The term transaction of business means regularly conducting business of a substantial and continuous character within that district. Hodgdon v. Needham-Skyles Oil Co.,
In Bulk Oil (USA) Inc. v. Sun Oil Trading Co.,
In Soltex, supra, Judge McLaughlin reached the opposite conclusion. 590 F. Supp. at 1453; he held that the fiduciary shield doctrine does not circumscribe the breadth of a federal court's jurisdiction in a RICO case. Judge McLaughlin posed the question as a choice between interpreting the doctrine as "merely a judicial construction of the New York long-arm statute" or "a constitutional principle of due process" which "must be respected even in a purely federal case." Id. at 1458. Following the Second Circuit's statement in Marine Midland, supra, that "[t]he fiduciary shield doctrine is not a constitutional principle, but is rather a doctrine based on judicial inference as to the intended scope of the [New York] long-arm statute ...", 664 F.2d 902 (citation omitted), Judge McLaughlin held that the "fiduciary shield doctrine is inapplicable in a RICO case where plaintiff does not resort to New York's long-arm statute to establish a jurisdictional predicate [against the individual defendant]." Soltex, supra, 590 F.Supp. at 1458.
Judge McLaughlin's view is entirely consistent with recent decisions of the Supreme Court, which held that the fiduciary shield doctrine is not grounded in the due process clauses of the first and fourteenth amendments. Calder v. Jones,
E. Transfer Under § 1404(a) Is Denied
Defendants, alternatively, have moved seeking transfer of this action to the District Court for the Eastern District of Missouri pursuant to 28 U.S.C. § 1404(a). Section 1404(a) provides: "For
In deciding a motion to transfer pursuant to 28 U.S.C. § 1404(a), the essential inquiry, as was true under its common-law predecessor of forum non conveniens, see Manu International, S.A. v. Avon Products,
The party seeking the transfer bears the burden of making a clear cut showing that the transfer is warranted. See Factors Etc., Inc. v. Pro Arts, Inc.,
As a threshold matter, the Court must consider the fact that two months after plaintiff brought this action, defendants filed an action in the District Court for the Eastern District of Missouri. In that action, which is still pending, defendants seek relief for plaintiff's alleged antitrust violations.
The rule in this Circuit is, absent special circumstances, the first filed suit should have priority.
For the aforementioned reasons, the Court declines to view the filing of this lawsuit as an act of forum shopping by plaintiff, that would (according to defendants) obviate the need for them to sustain their burden of demonstrating that this district is a seriously inconvenient forum for the litigation. D. Reply Memo. at 44. Defendants may not escape their burden under § 1404(a) merely by alleging that plaintiff's forum selection was intended only to harass defendants.
Defendants have failed to make the requisite showing under § 1404(a). While it may be somewhat inconvenient for defendants to bring witnesses to New York, it would be just as inconvenient for plaintiff to bring its witnesses to Missouri. Defendants have failed to specify who will be called to testify in the transferee district, or as to what they might testify to. Moreover, there is a total absence of other factors which ordinarily indicate that transfer is warranted. For example, defendants have not demonstrated that this case requires the introduction of voluminous documents or special evidence not otherwise accessible in New York. Moreover, in denying defendants' motion to transfer, the Court relies on the parties' choice of law governing the contract. See Y
As to the convenience of the parties, in light of Schmitt's monthly trips here and his apparent familiarity with this State, see P. Memo. at 45-46, defendants can hardly argue that New York is a seriously inconvenient forum in which to litigate this action. Defendants also cannot plead persuasively financial or other inconvenience.
This Court has personal jurisdiction over plaintiff's breach of contract claims against the corporate defendant pursuant to CPLR § 302(a)(1). The Court, however, does not have jurisdiction over plaintiff's tort claims against the corporate defendant, thus they are dismissed. Jurisdiction over the individual defendant is conferred upon the
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