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LUMBERMENS MUT. CAS. CO. v. BORDEN CO.

January 31, 1967

LUMBERMENS MUTUAL CASUALTY COMPANY, Plaintiff,
v.
The BORDEN COMPANY, Inc., Blackstone Mutual Insurance Company, Affiliated F.M. Insurance Company, United Engineers and Contractors, Inc., the Wickes Corporation, Vulcan-Cincinnati Corporation, Catalysts and Chemicals, Inc., and Monochem, Inc., Defendants


Tenney, District Judge.


The opinion of the court was delivered by: TENNEY

MEMORANDUM

TENNEY, District Judge.

 Defendant Catalysts and Chemicals, Inc. (hereinafter referred to as "Catalysts") moves for an order pursuant to Rule 12(b) of the Federal Rules of Civil Procedure dismissing plaintiff's action against it on the grounds that the Court lacks jurisdiction over the subject matter and over the person of defendant Catalysts and that venue is improper.

 In its complaint, plaintiff seeks a declaratory judgment that it is not liable to the Borden Company (hereinafter referred to as "Borden") with respect to certain accidents which Borden claims were covered by two policies of insurance issued by plaintiff. These accidents occurred at a Borden chemical plant located at Geismar, Louisiana. To the extent that plaintiff may be held liable to Borden, it seeks declaratory judgments against the other named defendants, including Catalysts, whom it claims were responsible for the various accidents.

 Plaintiff seeks to sustain jurisdiction over the person of Catalysts on the grounds that said defendant is doing business in New York within the meaning of N.Y. CPLR § 301 or is transacting business in New York within the meaning of CPLR § 302. After careful consideration, the Court is of the opinion that jurisdiction over Catalysts cannot be upheld under either of these sections and, hence, plaintiff's action as against Catalysts must be dismissed. This makes consideration of Catalysts' other motions unnecessary.

 CATALYSTS IS NOT DOING BUSINESS IN NEW YORK.

 Catalysts contends that the Court lacks jurisdiction over it since Catalysts is not doing business in New York within the meaning of § 301 of the CPLR. This section provides that a Court may exercise such jurisdiction over persons, property or status as might have been exercised heretofore. Although the power New York possesses to subject a foreign corporation to personal jurisdiction because it "does business" in New York is not conferred by any statute, (see McLaughlin, Practice Commentary, McKinney's CPLR § 301) it is clear that this is the test that must be satisfied in order to comply with the jurisdictional requirements of CPLR § 301.

 The long-standing criterion for determining whether a foreign corporation is doing business within this state was set out in Tauza v. Susquehanna Coal Co., 220 N.Y. 259, 267, 115 N.E. 915, 917 (1917), wherein it was stated that such corporation must do business "not occasionally or casually, but with a fair measure of permanence and continuity." More recently, the New York Court of Appeals spoke of the test in terms of a continuous and systematic course of business. Simonson v. International Bank, 14 N.Y.2d 281, 251 N.Y.S.2d 433, 200 N.E.2d 427 (1964). And in Elish v. St. Louis Southwestern Ry. Co., 305 N.Y. 267, 112 N.E.2d 842 (1953), it was stated that the mere solicitation of business by a foreign corporation within this state is insufficient. See Miller v. Surf Properties, Inc., 4 N.Y.2d 475, 176 N.Y.S.2d 318, 151 N.E.2d 874 (1958).

 An examination of Catalysts' activities in this state fails to disclose sufficient contacts to sustain a finding that Catalysts is doing business here. Dr. Reitmeier, the president of Catalysts, has stated the following uncontroverted facts in his affidavit: Catalysts is a Delaware corporation whose principal and only place of business is in Louisville, Kentucky; Catalysts has no registered agent in New York, no office or place of business in New York, no telephone number in New York, no bank account in New York, no officers or employees working regularly or residing in New York. Furthermore, Catalysts owns no stock in any company located in New York, and no shareholders' or directors' meetings are held in New York. All sales are f.o.b. Louisville, Kentucky; no Catalysts products are warehoused in New York, and no Catalysts products have been shipped into New York since 1962.

 To support jurisdiction under CPLR § 301, plaintiff points to several activities by Catalysts in New York. In the first place, plaintiff points to a statement in Dr. Reitmeier's affidavit wherein it is admitted that Catalysts' representatives occasionally travel to New York to confer with its engineering company customers. In 1963, eleven visits were made to Catalysts' New York customers. In 1964, up until the date Catalysts was served in this action, six such visits were made. These calls were made either in response to inquiries concerning Catalysts' products or on occasions when Catalysts was of the opinion that the customer had obtained or might obtain a contract for a plant in which a catalyst would be required. Furthermore, Reitmeier's deposition admits that these representatives were almost always supplying technical information to its prospective customers. Plaintiff argues that since it has been admitted that most of Catalysts' representatives were graduate engineers, they were doing more than merely soliciting business in New York, and were performing a technical service function.

 It is clear that the representatives Catalysts sent to New York were essentially sales representatives. The fact that they may have performed a technical service function was incidental to their main job as salesmen. The technical nature of Catalysts' product made it imperative that the salesmen be highly trained in order to explain the intricacies of the product and answer inquiries concerning its use.

 The fact that New York cases have held that mere solicitation is not sufficient to subject a foreign corporation to jurisdiction under § 301 (Elish v. St. Louis Southwestern Ry. Co., supra), does not necessarily mean that merely any type activity carried on in addition to solicitation is sufficient. Furthermore the Court doubts that the type of activity engaged in by Catalysts meets the standards set forth in Tauza v. Susquehanna Coal Co., supra. The sporadic trips made into New York by Catalysts' representatives and the nature of their activities here certainly cannot be held to be the type of regular, systematic and continuous activity necessary to sustain jurisdiction under CPLR § 301. See, e.g., Greenberg v. R.S.P. Realty Corp., 22 App.Div.2d 690, 253 N.Y.S.2d 344 (2d Dep't 1964); Irgang v. Pelton & Crane Co., 42 Misc.2d 70, 247 N.Y.S.2d 743 (S. Ct.1964).

 Two other arguments made by plaintiff require little discussion. Lawrence Pricher, a director of Catalysts, resides in New York and is an officer of the New Jersey Zinc Company which owns 16 per cent of Catalysts stock. From these facts, plaintiff asks the Court to find that Pricher's activities in New York on behalf of Catalysts, together with Catalysts' other activities in this state, constitute "doing business" within the meaning of CPLR § 301.

 However, if a foreign corporation is not doing business in New York, the mere fact that an officer resides in the state does not bring the corporation within the jurisdiction of New York. Joseph Walker & Sons v. Lehigh Coal & Nav. Co., 8 Misc.2d 1005, 167 N.Y.S.2d 632 (Sup.Ct.1957); see Hulick v. Petroleum Corp., 198 App.Div. 359, 190 N.Y.S. 377 (1st Dep't 1921). In addition, there is no support for plaintiff's assertion that Pricher performs a directorial function for Catalysts in New York. Finally, as Pricher's deposition shows, New Jersey Zinc is a ...


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