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March 28, 1969

BLUMENTHAL BROS. CHOCOLATE CO., Defendant and Third-Party Plaintiff, v. H. C. CHRISTIANS CO. and Grover Farms, Inc., Third-Party Defendants

Mansfield, District Judge.

The opinion of the court was delivered by: MANSFIELD

MANSFIELD, District Judge.

This is a motion to dismiss a third-party complaint filed with the leave of the Court in this diversity suit for damages allegedly resulting from a shipment of chocolate by defendant Blumenthal Bros. Chocolate Company ("Blumenthal") from its plant in Philadelphia, Pennsylvania, to plaintiff, The Chunky Corporation's ("Chunky") candy factory in Brooklyn, New York. Chunky claims that as a result of an alleged impurity in the chocolate in the form of bacteria known as salmonellae, it was compelled to destroy a large amount of candy manufactured by it from the chocolate, it suffered substantial impairment of good will, and it will be compelled to undertake the defense of lawsuits by purchasers of its candy and may have to pay judgments in those suits. Chunky charges Blumenthal with breaches of express and implied warranty and negligence.

 Blumenthal has denied the material allegations of the complaint and by way of its third-party complaint, asserts that if it is held liable on Chunky's claim the third-party defendants, H. C. Christians Company ("Christians") and Grover Farms, Inc. ("Grover") should be jointly and severally held liable over to it. Christians, a wholesaler, is a Wisconsin corporation with its principal place of business in Chicago, Illinois, where it was served with process; Grover is a Maryland corporation engaged in the dairy business, with its headquarters in Baltimore, where it was served. As wholesaler Christians entered into a contract with Blumenthal under which Christians agreed to supply Blumenthal with non-fat dry milk for use in the production of chocolate. The milk was produced by Grover, and delivery was made by Grover from its dairy in Pennsylvania to the Blumenthal plant, apparently pursuant to a contract between Grover and Christians. Christians did not participate in the actual production or delivery of the milk.

 Blumenthal's third-party claim is that if there were salmonellae in the chocolate it delivered to Chunky, the bacteria were introduced into Blumenthal's plant through the milk delivered by Grover pursuant to Christians' contract with Blumenthal.

 Both third-party defendants move to dismiss the third-party complaint on the ground that the Court lacks personal jurisdiction over them, or, in the alternative, that the third-party complaint fails to state a claim on which relief can be granted. We conclude that the third-party complaint must be dismissed for the reason that personal jurisdiction over the third parties is lacking.


 This being a diversity suit, the existence of personal jurisdiction over these parties is governed by New York law. Liquid Carriers Corp. v. American Marine Corp., 375 F.2d 951 (2d Cir. 1967). Blumenthal first contends that personal jurisdiction over Christians exists under New York CPLR § 301, asserting that Christians' activities constitute doing business within the State of New York. An affidavit submitted by Christians' treasurer indicates that it does have New York customers, and that in the fiscal year ending January 31, 1967 almost 4% of its sales were to these customers for use or consumption in New York. This affidavit, which is uncontroverted by Blumenthal, also states that Christians has no physical facilities, telephone listings, mailing addresses, or bank accounts in New York. It has no employees who reside in New York. Thus its activities amount to less contact with the state than was shown in those cases that have taken the most expansive view of the concept of doing business for the purpose of establishing personal jurisdiction under CPLR § 301. Bryant v. Finnish National Airlines, 15 N.Y.2d 426, 260 N.Y.S.2d 625, 208 N.E.2d 439 (1965) (maintenance of office with seven employees in New York); Frummer v. Hilton Hotels Int'l, 19 N.Y.2d 533, 281 N.Y.S.2d 41, 227 N.E.2d 851 (1967), cert. denied, 389 U.S. 923, 88 S. Ct. 241, 19 L. Ed. 2d 266 (1968) (maintenance of permanent office by affiliated agent which accepted and confirmed reservations). In both Frummer and Bryant the foreign corporate defendants were represented on a permanent and continuous basis by personnel actively engaged in the solicitation of business for defendants from permanently maintained offices. No such continuous activity on the part of Christians in this state has been shown, and, therefore, there can be no basis for the exercise of this Court's personal jurisdiction pursuant to CPLR § 301.

 Blumenthal next urges that personal jurisdiction exists by virtue of the "single act" long arm statute, New York CPLR § 302. Since the third-party cause of action clearly did not arise from the transaction of any business by Christians in this state [§ 302(a)(1)], or from a tortious act committed by Christians within the state [§ 302(a)(2)], the only arguable basis for personal jurisdiction is § 302(a)(3), which provides in pertinent part:

"(a) As to a cause of action arising from any of the acts enumerated in this section, a court may exercise personal jurisdiction over any nondomiciliary, or his executor or administrator, who in person or through an agent * * *.
* * *
"3. commits a tortious act without the state causing injury to person or property within the state, * * * if he
(i) regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in the state, or
(ii) expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce * * *."

 The threshold question under this subsection is whether Christians "in person or through an agent" is alleged to have committed a tortious act without the state causing injury to a person or property within the state. Both Christians and Grover argue that whatever tortious act is alleged, there is in the third-party complaint no allegation of injury to a person or property within New York State. The injury to Blumenthal, it is submitted, is a financial loss which accrues in Blumenthal's home state of Pennsylvania. This contention must be rejected. The primary action alleges injury to persons and property within New York State, and it is this injury which forms the actual basis of the third-party complaint. It is conceptualistic at best to state that a Pennsylvania corporation paying a judgment resulting from liability which accrued in New York is "injured" only in Pennsylvania. The only authority cited by third-party defendants for this proposition is Spectacular Promotions Inc. v. Radio Station WING, 272 F. Supp. 734 (S.D.N.Y.1967), which actually comes closer to supporting Blumenthal's position. That case merely held that a New ...

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