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SALES ARM, INC. v. AUTOMOBILE CLUB OF SOUTHERN CAL

October 22, 1975

SALES ARM, INC., Plaintiff,
v.
AUTOMOBILE CLUB OF SOUTHERN CALIFORNIA, a Foreign Corporation, et al., Defendants



The opinion of the court was delivered by: POLLACK

POLLACK, District Judge.

 The defendant, Automobile Club of Southern California, was served with a copy of the summons and complaint herein in Los Angeles, California, and moves to dismiss this suit for absence of personal jurisdiction over it by this Court pursuant to Rule 12(b)(2), (3), Fed.R.Civ.P., or in the alternative, for an order pursuant to 28 U.S.C. § 1404(a) transferring this action to the United States District Court for the Central District of California upon the grounds that the convenience of the parties and witnesses and the interests of justice would be served by such transfer.

 On the return date of the said defendant's motion the Court directed that consideration thereof be held in abeyance pending receipt of an evidentiary record to be established by the parties by deposition and discovery on the issues, only, of personal jurisdiction and convenience of forum. Such an evidentiary record has been developed and has been submitted hereon.

 The plaintiff is a national marketing organization incorporated in New York and is qualified to do and has been and is doing business in California at its western offices in Los Angeles, California where it had and has staff to handle its business. It sues for compensation said to be due it on advertising contacts solicited for the magazine, Westways, which the Club publishes and distributes to its members. The business connections of plaintiff with the Club were terminated in 1974. A second count in the complaint asserts an alleged conspiracy of the defendants to interfere with plaintiff's former contractual relationship with the Club.

 The Club is a non-profit California membership corporation located in Los Angeles, California. Its principal activity is providing motoring related services to its nearly 400,000 members, nearly all of whom are required to be or become residents of Southern California. The nature of the Club's activities is of prime significance here. It does not conduct business in the usual commercial sense. It services the California auto disability needs of its California subscribers who require road and map service for their cars when breakdown or service needs occur. It has no "business" to transact in New York in any commercial sense.

 The Club's co-defendants on the second count are a successor to the plaintiff, McClintock Associates, Inc., a California corporation, which is in the business of soliciting advertising and Mr. Robert Taller, an employee of McClintock and former employee of the plaintiff's California office and a resident of Los Angeles, California. Neither of these co-defendants is amenable to services of process in New York; long-arm service attempted on McClintock was vacated heretofore.

 Plaintiff conceded in open Court and the evidence submitted establishes beyond peradventure of doubt that the Club has not "transacted business" within the contemplation of N.Y. CPLR § 302(a)(1) in New York. See Haar v. Armendaris Corp., 31 N.Y.2d 1040, 342 N.Y.S.2d 70, 294 N.E.2d 855 (1973). The plaintiff's principal remaining contention to sustain its claim that this Court has personal jurisdiction over the Club is that the Club is "doing business"

 (i. e., has and is engaged in a continuous course of dealings) in New York. This contention in turn is largely posited on the notion that plaintiff was an agent, in the employee sense, of the Club in New York. There is no factual basis for this contention. Indeed, the agreement of the parties stated explicitly:

 
Nothing in this agreement shall be construed to create a joint venture between the parties hereto. Representative [plaintiff] is not an employee of Westways, the Automobile Club of Southern California or the Inter-Insurance Exchange of the Automobile Club of Southern California, and shall enjoy the status of an independent contractor subject to his own management and control.

 The plaintiff was an independent contractor, not an employee of the Club or its agent. The plaintiff was paid by a commission, employed and managed its own salesmen, including a sales manager, maintained its own offices in California and paid all its own expenses.

 Plaintiff by contract was obligated to maintain an office in Los Angeles. The traffic division function of its marketing work, a key in the relationship, was staffed and handled and supervised in Los Angeles by the plaintiff. This function embraced the processing of all advertising contracts and insertion orders; monthly invoicing to the auto club; maintenance of advertising promotional lists; and reporting to plaintiff's California office manager.

 The voluminous evidentiary record now before the Court makes very clear that the Club was and is not engaged in "doing business" in New York either directly or indirectly through any agent or employee. Delagi v. Volkswagenwerk AG of Wolfsburg, 29 N.Y.2d 426, 328 N.Y.S.2d 653, 278 N.E.2d 895 (1972); Miller v. Surf Properties, 4 N.Y.2d 475, 176 N.Y.S.2d 318, 151 N.E.2d 874 (1958). The Club is not qualified to do business here; it has no office or property owned, leased or occupied or possessed in New York; its only offices are in California. See Bryant v. Finnish National Airline, 15 N.Y.2d 426, 260 N.Y.S.2d 625, 208 N.E.2d 439 (1965). The Club does not pay income or property taxes to the State of New York. It does not have or retain employees or agents for any purpose in New York. It owns no interest in and is not in privity of contract with any New York auto club. The Club exists to provide services to Californians and does not solicit or offer membership to nonresidents. All advertising insertion orders and contracts solicited by the plaintiff in New York or outside of California were subject to acceptance by the Club in California, not New York, and there has been no change in this procedure with the advent of the relationship of the Club with McClintock.

 Looking at the totality of the Club's activities within the forum as eked out by the plaintiff's papers, no purposeful acts were or are performed in New York by the Club. Its contacts here are and always were negligible and no injury to the plaintiff occurred in New York. Considering the character of the Club, its Southern California membership, its dominant purpose and functions, this is hardly surprising. The Club is not subject to service under New York's "doing business" statute. CPLR § 301.

 In addition, with respect to the conspiracy count of the complaint, the claim of personal jurisdiction under N.Y. CPLR § 302(a)(3) must fail because there has been no injury suffered in New York to bring the case into New York under the statute. The place of injury, for the purposes of § 302(a)(3), is where the business is lost, i. e., where the customers are located, rather than where the injured company is domiciled. American Eutectic Welding Alloys Sales Co. v. Dytron Alloys Corp., 439 F.2d ...


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