The opinion of the court was delivered by: KNAPP
Defendant -- a resident of Greece -- has moved to dismiss the complaint in this action by Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") to recover the debit balance in defendant's commodities account with Merrill Lynch on the ground that the Court lacks personal jurisdiction over him. Merrill Lynch has cross-moved to stay the action and compel arbitration of the dispute before the New York Stock Exchange, pursuant to the last paragraph of the parties' Commodity Account Agreement and Sections 3 and 4 of the Federal Arbitration Act, 9 U.S.C. §§ 3 and 4. Because of our disposition of defendant's motion to dismiss, we need not reach the merits of plaintiff's cross-motion.
The issue raised by defendant's motion to dismiss is whether, under New York's "long arm" statute -- CPLR § 302(a)(1) -- defendant can be said to have, by virtue of his having placed numerous buy and sell orders for certain commodities futures contracts through Merrill Lynch's London and New York offices, "transacted business" within the state of New York. Unlike most cases arising under the "transaction of business" provision of § 302 wherein a third party plaintiff seeks to establish personal jurisdiction over a foreign defendant by virtue of the activities in New York of the defendant's agent, the instant case involves a situation where the agent itself is suing a foreign principal, seeking to attribute its own unilateral activities within New York - albeit at the direction of the foreign principal - to the defendant for jurisdictional purposes.
The complaint -- originally filed in New York Supreme Court and later removed to this Court by reason of diversity of citizenship -- alleges that defendant opened a commodities futures trading account in October, 1974 with plaintiff's London affiliate. Thereafter, as a result of trading in said account, a debit balance of $1.2 million was incurred, which plaintiff Merrill Lynch now seeks to recover. Since defendant admittedly was never physically present in New York in connection with the transactions which gave rise to this lawsuit, the only possible jurisdictional nexus between defendant and New York are the activities engaged in by plaintiff -- his agent
-- at his specific request. More specifically, it is plaintiff's contention that defendant can be deemed to have "transacted business" within New York by virtue of his having instructed plaintiff -- and plaintiff having carried out those instructions -- to buy and sell New York Sugar 11 Contracts, which transactions can be conducted nowhere in the world except on the New York Coffee and Sugar Exchange.
Ordinarily, New York courts have been extremely reluctant to permit an agent to bootstrap himself into jurisdiction over a non-domiciliary principal by means of the agent's own unilateral activities in New York. Haar v. Armendaris Corp. (1st Dept., 1972) 40 A.D.2d 769, 337 N.Y.S.2d 285, rev'd, 31 N.Y.2d 1040, 342 N.Y.S.2d 70, 294 N.E.2d 855; Parke-Bernet Galleries, Inc. v. Franklyn (1970) 26 N.Y.2d 13, 19 (n.2), 308 N.Y.S.2d 337, 256 N.E.2d 506 (1973), Traub v. Robertson-American Corp., 368 N.Y.S.2d 958 (Sup. Ct., Nassau Co., 1975) May 30, 1975 N.Y.L.J. p. 21, Hertz, Newmark & Warner v. Fischman (Civ. Ct., New York City, 1967) 53 M.2d 418. This is because due process requires that the non-domiciliary defendant himself have had some meaningful contact with the forum state. It is essential that, before personal jurisdiction may be obtained in such circumstances, the defendant "purposefully avail itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws". Hanson v. Denckla (1958) 357 U.S. 235, 253, 2 L. Ed. 2d 1283, 78 S. Ct. 1228. New York has been extremely reluctant to find such "purposeful" availment where the defendant is claimed to have acted within the state only through the agency of the plaintiff suing him.
For example, in Haar v. Armendaris Corp., supra, a New York attorney sought to recover compensation for having negotiated a business deal in New York from the Delaware corporation which had specifically retained him for that very purpose. The Appellate Division sustained jurisdiction over the Delaware defendant on the ground that it had transacted business in New York through the plaintiff-attorney. As that court observed (at 769):
"Clearly, the negotiations were by plaintiff and his associate as the agents for and in behalf of the defendant under the express provisions of the retainer. Defendant, therefore, through plaintiff and his associate as its agents, transacted business within this state within the meaning of CPLR § 302(a)(1)."
The lone dissenting Justice, although recognizing that plaintiff was a true agent, nonetheless felt constrained by footnote 2 in Parke-Bernet Galleries, Inc. v. Franklyn (1970) 26 N.Y.2d 13, 19, 308 N.Y.S.2d 337, 341, 256 N.E.2d 506 to conclude that in an action by an agent against his foreign principal, the acts of the agent can never be attributed to the foreign defendant for jurisdictional purposes. Thus, the dissenting Justice observed (337 N.Y.S.2d at 287-8):
"This is not an action between defendant and a third party, but rather between plaintiff as agent for defendant and defendant-principal. In the former situation I would not hesitate to find jurisdiction, but I conclude differently under the facts of this case.
This precise issue was the subject of a footnote in Parke-Bernet Galleries, Inc. v. Franklyn, 26 N.Y.2d 13, at p. 19, 308 N.Y.S.2d 337, at p. 341, 256 N.E.2d 506, at p. 509 which reads as follows:
'2. The present case differs materially from others, relied upon by the defendant, in which we have denied jurisdiction. (See Glassman v. Hyder, 23 N.Y.2d 354, 296 N.Y.S.2d 783, 244 N.E.2d 259; Standard Wine & Liq. Co. v. Bombay Spirits Co., 20 N.Y.2d 13, 281 N.Y.S.2d 299, 228 N.E.2d 367; McKee Elec. Co. v. Rauland-Borg Corp., 20 N.Y.2d 377, 283 N.Y.S.2d 34, 229 N.E.2d 604, supra; Kramer v. Vogl, 17 N.Y.2d 27, 267 N.Y.S.2d 900, 215 N.E.2d 159.) It is sufficient to point out that in each of those cases, all of which involved agents who were suing their principals, the plaintiff was relying on his own activities within the State, and not those of the defendant, as the basis for jurisdiction. In other words, in no one of these cases had the defendant himself engaged in purposeful activity within the State nor had the cause of action arisen out of transactions with third parties conducted through an agent.'"
The Court of Appeals unanimously reversed the finding of jurisdiction "on the dissenting opinion of the Appellate Division". 31 N.Y.2d 1040, 342 N.Y.S.2d 70, 294 N.E.2d 855.
It seems to us that Haar is dispositive of this motion. This can be illustrated by comparison of the facts in Haar and those at bar on the one hand, with those, on the other hand, in Parke-Bernet, ...