The opinion of the court was delivered by: NEAHER
Plaintiff, a professional basketball player, commenced this action to rescind his contract with the defendant basketball club (hereinafter "Squires") and to recover claimed damages of $308,800 by reason of alleged concealment and false representations which induced him to enter the contract. Jurisdiction is grounded on diversity of citizenship, 28 U.S.C. § 1332(a), plaintiff alleging New York citizenship and residence and Squires conceding it is a limited partnership having its principal office in Norfolk, Virginia where the sole general partner, a District of Columbia corporation, also resides and is licensed to do business.
Squires has moved before answer to dismiss the complaint for lack of jurisdiction over the subject matter and over its person and for insufficient service of process. Rule 12(b)(1), (2) and (5), F.R.Civ.P. Alternatively, it seeks to have the action transferred under 28 U.S.C. § 1404(a) to the United States District Court for the Eastern District of Virginia, Norfolk Division.
Squires' motion under Rule 12(b)(1) and (5) must fail. Its contention that the court lacks jurisdiction over the subject matter rests solely upon plaintiff's omission to allege in the complaint, as filed, the diverse citizenship of the Squires partnership as distinguished from its principal place of business in Virginia. For purposes of diversity jurisdiction the citizenship of the general partners is controlling. See Woodward v. D. H. Overmyer Co., 428 F.2d 880, 883 (2 Cir.), cert. den. 400 U.S. 993, 91 S. Ct. 460, 27 L. Ed. 2d 441 (1971). The fact of such diverse citizenship having been documented by plaintiff and conceded by defendant, n. 1 supra, an amendment of the complaint was allowed so as to reflect it. Rule 15(a), F.R.Civ.P.
The claim of insufficiency of service of process also lacks merit. Concededly a copy of the summons and complaint was forwarded by the United States Marshal for this district to the Marshal for the Eastern District of Virginia. The latter's deputy delivered it to Al Bianchi, general manager of The Virginia Squires Basketball Club, Inc., the District of Columbia corporation which is the sole general partner of Squires. That service was effected at the general partner's office in Norfolk, Virginia, where the Squires business office is also located, n. 1 supra, and it is not denied that Mr. Bianchi was authorized to accept it.
The service was accomplished in conformity with New York CPLR §§ 310, 311(1) and 313
as authorized by Rule 4(e) and (f), F.R.Civ.P., and is sufficient in all respects.
The procedural sufficiency of service of process upon Squires having been upheld, the remaining -- and critical -- jurisdictional question is whether Squires is "subject to the jurisdiction of the courts of the state under section 301 or 302", N.Y. CPLR § 313, as plaintiff contends. On that question "it is the plaintiff who shoulders the burden of proof, by a preponderance of the evidence." Leasco Data Processing Equipment Corp. v. Maxwell, 319 F. Supp. 1256, 1260 (S.D.N.Y.1970). And "[as] this is a diversity case the question must be resolved under New York law [citation omitted]." Beja v. Jahangiri, 453 F.2d 959, 960 (2 Cir. 1972).
Under N.Y. CPLR § 301,
as applied by the courts of New York, a nonresident "doing business" in New York may be sued here even though the plaintiff's cause of action does not arise out of acts done in New York. Beja v. Jahangiri, supra at 961, citing New York cases. "[There] is no precise test of the nature or extent of the business that must be done" to subject a non-resident to such jurisdiction. Tauza v. Susquehanna Coal Co., 220 N.Y. 259, 268, 115 N.E. 915, 918 (1917). "The test for 'doing business' is and should be a simple pragmatic one." Bryant v. Finnish National Airline, 15 N.Y.2d 426, 432, 260 N.Y.S.2d 625, 629, 208 N.E.2d 439, 441 (1965). "Each case necessarily depends on its own facts [citation omitted]." Taca International Airlines v. Rolls-Royce of England, 21 A.D.2d 73, 74, 248 N.Y.S.2d 273, 275 (1st Dept. 1964), affd. 15 N.Y.2d 97, 256 N.Y.S.2d 129, 204 N.E.2d 329 (1965).
The following undisputed facts appear from the pleadings, affidavits and concessions of the parties concerning the unique business activities of defendant. Squires is engaged in the business of conducting and participating in professional basketball games for profit. Although Squires' domicile, base of operations and "home" games are localized in Norfolk, Virginia, its business is multistate and interstate in nature, as part of the operations of a national league of such clubs.
Squires is one of the member clubs of the American Basketball Association (ABA), which was formed "[to] operate a league of professional basketball clubs and to promote the interests of professional basketball and the interests of each member club" and "[to] do everything and anything . . . necessary . . . for the purposes above stated or any of them."
ABA was organized under the corporation law of Delaware but its principal office is and has been located in New York City where it is listed in the telephone directory, carries on its operations and acts "as the designated AGENT for the member clubs," supra n. 5.
ABA, under its by-laws, does not itself operate for profit, supra n. 5, but it is clearly the framework -- akin to a joint venture -- through which Squires and the other member clubs carry on an integrated business operation for mutual profit. The ABA bylaws constitute a contract by and between the member clubs pursuant to which each club holds its franchise and conducts and participates in ABA basketball games in New York and other franchise areas. There is no question that ABA is jointly managed by the member clubs, although the day-to-day direction of its operations is vested in a Commissioner who is granted broad powers to regulate, supervise and enforce the obligations of the member clubs to one another.
A review of ABA's comprehensive by-laws permits of no doubt that the playing of basketball games in New York is not only in furtherance of Squires' own business purposes but is essential to the fulfillment of the business purposes and objects of the ABA joint enterprise of which Squires is an integral part. Squires plays a number of games here with the New York Nets club of the ABA because it is contractually bound to do so. The playing dates and number of games are fixed months in advance by the ABA Commissioner who prepares the schedule of games each member club is obliged to play.
That the Squires play only 6 to 8 games in New York out of a season schedule of 84 games cannot obscure the vital importance of the New York portion of the schedule to the Squires' continuance in business. The entire basketball season lasts only six months -- October through March -- except for play-off games; and the average number of playing days is about three a week. Thus during a season the Squires play in New York on the average of at least once a month, not casually or fortuitously, but on a regular and continuing basis pursuant to a well-organized business plan.
The Squires argue, however, that they derive no revenue from their games here since "all gate receipts go . . . to the New York Nets."
Even if altogether true, this would not alter the business character of the Squires' activities in New York. The distribution of game receipts is a matter of contract between all member clubs subject to change at each annual meeting.
And the end result currently is that when the Nets (or other clubs) play the Squires in Virginia all the gate receipts go to the Squires. Moreover, this policy does not hold for play-off games which the Squires and Nets played in New York last season as leaders of their respective ABA divisions. Under the by-laws the net receipts of such games are equally divided between the participating clubs after deducting expenses.
In addition, since play-off and championship games inevitably generate radio and television income, the ABA by-laws ...