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IMPEX METALS CORP. v. OREMET CHEM. CORP.

October 28, 1971

IMPEX METALS CORP., Plaintiff,
v.
OREMET CHEMICAL CORPORATION, Defendant


Croake, District Judge.


The opinion of the court was delivered by: CROAKE

MEMORANDUM

CROAKE, District Judge.

 This is an action brought by the seller of aluminum rods against the buyer, on three causes of action: one on a contract of sale, one on a theory of goods sold and delivered, and one on a sight draft in connection therewith. The amount in dispute is alleged to be $29,360.52.

 The action was originally brought in the New York State Supreme Court, New York County; defendant, a New Jersey corporation with no New York office, at least at the time of the execution of the contract in suit, removed it to this Court under the provisions of 28 U.S.C. §§ 1441 and 1446, and has now moved for dismissal for lack of personal jurisdiction, pursuant to 28 U.S.C. §§ 1447 and 1448, and Rule 12(b), Fed. R. Civ. P. The complaint has not as yet been answered, nor has any discovery taken place; any statement of facts in this opinion is therefore to be considered tentative, based as it is merely upon the factual averments in the petition for removal and in the affidavit in opposition to this motion.

 The first cause of action is based upon a contract, allegedly entered into in October of 1969, after certain negotiations between officers of the parties had taken place at plaintiff's New York offices. The extent or scope of the negotiations is not apparent on this record. The nature of the contract is similarly unclear; it may have been an oral contract, later confirmed in writing for Statute of Frauds purposes, or it may have been arrived at by written acceptance of an oral offer.

 This uncertainty in turn precludes determination of the actual site of execution of the contract. If it was oral, then the meeting of the minds may well have taken place in plaintiff's office in New York, where negotiations were carried out. But if the most that occurred in these negotiations was an offer by plaintiff, later accepted by letter from New Jersey, then the contract may be found to have been executed in New Jersey. See A. Millner Co. v. Noudar, Lda., 24 App. Div. 2d 326, 266 N.Y.S. 2d 289, 293 (1st Dept. 1966) ("Millner").

 The second cause of action is for goods sold and delivered; specifically, certain rods which plaintiff was to cause to be manufactured in Yugoslavia and shipped to California for acceptance there by defendant. No performance in New York by either party was anticipated or effected.

 The third cause of action is based upon a commercial draft, drawn on defendant's New York bank. However, inasmuch as no negotiation, assignment, or other transfer of the draft has taken place, all personal and real defenses available against the other two causes of action based upon the underlying agreement are available here as well. N.Y.U.C.C. § 3-306 (McKinney's 1964).

 In situations such as the present, where an action has been removed from the state to the federal district court, the district court's jurisdiction over the person of the defendant necessarily depends upon the sufficiency of the original service of process. If the original service was defective for any reason, including lack of subject matter jurisdiction in the state court, the action must be dismissed in the district court. This is the case notwithstanding the fact that, subsequent to the dismissal, original service would be upheld under the diversity jurisdiction of the district court, should the defendant be found within the jurisdiction. 28 U.S.C. § 1448, Wilson v. Kansas City Southern Ry., 101 F. Supp. 56, 59-60 (W.D. Mo. 1951), and cases therein cited.

 The present motion to dismiss therefore raises the issue of whether the state court from which this action was removed possessed jurisdiction sufficient to authorize the service of process on defendant in New Jersey. The relevant statute is New York's "long arm" statute, N.Y.C.P.L.R. § 302 (McKinney's 1963), which provides in relevant part as follows:

 
§ 302. Personal jurisdiction by acts of nondomiciliaries
 
(a) Acts which are the basis of jurisdiction. 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:
 
1. transacts any business within the state; * * *.

 The initial question presented is whether this defendant has transacted any business within New York State. If such is proven to be the case, the next question would be whether the causes of action ...


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