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GOGGI CORP. v. OUTBOARD MARINE CORP.

June 21, 1976

Goggi Corp. and Goggi International, Ltd. Plaintiffs
v.
Outboard Marine Corp., Ryan Equipment Co., Chrysler Corp., Chrysler Outboard Corp., Marine Dealers Association, Inc. of Central New York, and Boating Industry Association


Duffy, D.J.


The opinion of the court was delivered by: DUFFY

DUFFY, D.J.:

A variety of motions addressed to jurisdiction, venue and the pleadings have been raised by several of the parties in this case. This opinion will dispose of the several motions.

 The defendant Boating Industry Association ("BIA") moves to sever or dismiss plaintiffs' action against it on grounds of improper venue and/or lack of personal jurisdiction. The plaintiffs Goggi Corp. and Goggi International, Ltd. ("Goggi") are New York corporations engaged in manufacturing and selling devices which, when attached to outboard motors manufactured by defendants Chrysler Corp. and Outboard Marine Corp. ("OMC") allegedly collect and recirculate unburned fuel which would otherwise be discharged by the motors into the water. BIA, a partnership, is a trade association made up of member trade associations which are involved in the boating industry. The offices of BIA and its member associations are all located in Chicago, Ill.

 The plaintiffs have sued alleging anti-trust law violations, trade disparagement, prima facie tort, libel and slander. The defendants include various boat and boating equipment manufacturers and dealers. The bases of plaintiffs' anti-trust claim against BIA, according to the complaint are: (1) BIA's allegedly unjustified refusal, under the control of Chrysler and OMC, to certify BIA's products pursuant to its accessory equipment certification program thus precluding the sale of plaintiffs' products by Chrysler and OMC dealers who may only deal in certified accessory products; (2) BIA's alleged notification of dealers and the public that Chrysler and OMC will not honor warranties for their outboard motors if devices of the type manufactured by plaintiffs are installed; and (3) BIA's disparagement and misrepresentation of plaintiffs' products.

 That portion of defendant BIA's motion which is addressed to in personam jurisdiction charges that "long arm" service of process, as was utilized by plaintiffs, was inappropriate in this case. According to BIA neither New York CPLR § 302(a)(2) nor § 302(a)(3)(ii), the sections relied on by plaintiffs, are available. Under § 302(a)(2) the tortious act sued upon must have been committed within New York; whereas under § 302(a)(3)(ii) the tortious act may have been committed outside New York if the defendant expects or should reasonably expect the act to have consequences in New York and the defendant derives substantial revenue from interstate or international commerce. It is plaintiffs' position that "long arm" service was proper under both of these sections.

 Plaintiffs claim that many tortious acts were committed by BIA in New York citing one conversation which occurred in 1970 in New York during which BIA representatives at a press reception allegedly described "anti-drain devices" as "obsolete." Defendant counters that this was a private communication to an employee of OMC and a member of the State General Assembly which caused no injury or damage to plaintiffs. However this is a question of fact which can only be resolved at trial. Moreover, BIA's own affidavit and memorandum of law state that BIA personnel have made occasional trips to New York during which BIA's positions on pending legislation and governmental regulations apparently were discussed.

 The defendant claims that any such statements were within the first amendment's protection since they were lobbying activities. See United Mine Workers of America v. Pennington, 381 U.S. 657, 85 S. Ct. 1585, 14 L. Ed. 2d 626 (1965); Eastern R.R. Presidents Conference v. Noerr Motor Freight, 365 U.S. 127, 5 L. Ed. 2d 464, 81 S. Ct. 523 (1961). Nevertheless, the relationship of these statements to pending legislation or governmental action is an issue of fact for trial as is the plaintiffs' allegation that statements which are claimed to have been lobbying efforts were "mere sham" within Noerr; California Motor Transport Co. v. Trucking Unlimited, 404 U.S. 508, 30 L. Ed. 2d 642, 92 S. Ct. 609 (1972); and Otter Tail Power Co. v. U.S., 410 U.S. 366, 35 L. Ed. 2d 359, 93 S. Ct. 1022 (1973).

 The other allegedly tortious activities of BIA including communications to dealers, members of the press, and the public as well as BIA's certification practices apparently originated outside New York. However, many of these statements were made to people located in New York; certain of the communications were admittedly lobbying efforts directed toward New York legislation; the plaintiffs, who were the targets of the alleged conspiracy, are New York corporations; and the co-defendants Chrysler and OMC have franchised dealers in New York. All of these factors justify a conclusion that BIA could reasonably have foreseen consequences of its actions in New York.

 Finally, under N. Y. CPLR § 302(a)(3)(ii), the defendant must "derives substantial revenue from interstate or international commerce." This requirement is satisfied by BIA's concession that in 1974, allegedly a high income year, its non-Illinois revenue was approximately $140,000. Defendant contends that this does not constitute "substantial" revenue.

 In support of this argument defendant cites Path Instruments Int'l Corp. v. Asahi Optical Co., 312 F. Supp. 805 (S.D.N.Y. 1970) wherein the district court indicated that while the defendant's $85,000 sales revenue over a 10 month period would not seem to be "substantial" "in absolute terms" (312 F. Supp. at 809), its status as a subsidiary which functioned as United States distributor for a larger Canadian corporation and the interstate nature of its business overcame any doubts as to the "substantial revenue" requirement of § 302(a)(3)(ii). Defendant likens itself to the defendant in Path Instruments inasmuch as its interstate revenues do not, it is contended, greatly exceed those of the defendant in that case. In fact, projecting the Path Instruments defendant's income for a full year it would have been approximately $38,000 less than the $140,000 figure with which we are dealing in the case at hand. Moreover, BIA's relationship with the nationwide industry which it represents coupled with the fact that its nationwide certification program, which is challenged in the instant action, is the source of its interstate income are factors similar to those in Path Instruments which overcome any doubt as to the fulfillment of the "substantial revenue" requirement in this case. *fn1"

 Turning to that portion of defendant's motion which is addressed to venue, I find that venue in this case is properly laid in this district. The parties are in apparent agreement that if venue is proper in this case it must be under 28 U.S.C. § 1391(b). *fn2" See Albert Levine Assoc. v. Bertoni & Cotti, 314 F. Supp. 169 (S.D.N.Y. 1970). Plaintiffs claim that under 28 U.S.C. § 1391(b) venue is proper here since this is the district "in which the claim arose."

 It is the plaintiffs' position that BIA's statements to the press, dealers and the public which were either made in or circulated in this district justify venue here. Furthermore, plaintiffs claim that since defendant's certification procedure forecloses plaintiffs' entry into the New York outboard motor accessory market, that portion of its claim arose in this district. See Albert Levine Assoc. v. Bertoni & Cotti, 314 F. Supp. 169 (S.D.N.Y 1970); Iranian Shipping Lines v. Moraites, 377 F. Supp. 644 (S.D.N.Y. 1974).

 Defendant counters that all of its challenged statements are protected under the first amendment and the Noerr and Pennington cases cited above. However, the question as to whether or not these were protected statements is, as noted above, not presently at issue, especially since this motion is addressed to venue and not to any claimed failure to state a cause of action.

 Defendant next argues that the certification procedures and statements to the press originated in Illinois. Admitting that communications to the press were sent into New York, allegedly as lobbying efforts to influence the outcome of pending New York legislation, defendant claims that such statements "had no particular nexus with the Southern District of New York." Clearly, as found in connection with the ...


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