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NICHOLS v. SURGITOOL

August 30, 1976

Arlene NICHOLS and Vance Nichols, Plaintiffs,
v.
SURGITOOL, INC., Defendant



The opinion of the court was delivered by: ELFVIN

MEMORANDUM and ORDER

 ELFVIN, District Judge.

 This action is now before the Court on defendant's motion to dismiss on the ground that the State of New York lacks personal jurisdiction over the defendant, or in the alternative, that service of process upon the defendant was not made in compliance with Rule 4(d)(3) or Rule 4(d)(7) of the Federal Rules of Civil Procedure.

 Defendant, a Pennsylvania corporation, alleges that this Court lacks in personam jurisdiction because the defendant was not doing business in New York and thus was not present in the State. In addition, defendant claims that service was made upon someone other than an officer, managing or general agent of the corporation, or in lieu thereof, was not made in the manner prescribed by the law of the State of New York.

 Plaintiffs submit that New York has long-arm jurisdiction pursuant to Sections 302(a)(1) and 302(a)(3) of New York's Civil Practice Law and Rules. Plaintiffs assert that service upon defendant corporation satisfied the minimum requirements to effectuate valid service because actual notice of the impending lawsuit was received by defendant.

 It has been held that in a diversity action the amenability of a foreign corporation to suit in a federal court is determined in accordance with the law of the state where the court resides. Arrowsmith v. United Press International, 320 F.2d 219, 223 (2d Cir. 1963). Section 302(a)(1) of New York's Civil Practice Law and Rules provides that a court may exercise personal jurisdiction over any nondomiciliary who in person or through an agent transacts any business within the state. For jurisdiction to lie under this provision, the defendant must have engaged in purposeful activity within the state. Longines-Wittnauer Watch Co. v. Barnes and Reinecke, Inc., 15 N.Y.2d 443, 261 N.Y.S.2d 8, 209 N.E.2d 68 (1965). In that case the activities within New York consisted of substantial preliminary negotiations, the execution of a supplementary contract, the shipment of two specially designed machines, and the supervision of the installation and testing of the machinery by defendant's employees. In another case, the court held that the solicitation and negotiation of a contract by a high-level officer of the corporate defendant who made three separate trips to New York over a period of two months was sufficiently extensive and purposeful to constitute the transaction of business. Liquid Carriers Corp. v. American Marine Corp., 375 F.2d 951 (2d Cir. 1967). See also, Harry Winston, Inc. v. Waldfogel, 292 F. Supp. 473 (S.D.N.Y.1968).

 On the other hand, it is well established that Section 302(a)(1) does not encompass within its jurisdictional reach a nondomiciliary who was never physically present in New York, but who merely solicited business by means of out-of-state mailings and thereafter shipped goods into the state. Kramer v. Vogl, 17 N.Y.2d 27, 267 N.Y.S.2d 900, 215 N.E.2d 159 (1966). A corporate defendant is deemed to have transacted business, however, when the shipment of goods results from solicitation within the state by a sales representative or agent. Singer v. Walker, 15 N.Y.2d 443, 261 N.Y.S.2d 8, 209 N.E.2d 68 (1965).

 I am cognizant of the fact that the "transacts any business" basis for longarm jurisdiction requires less contacts than the permanence and continuity requirements of the doing business test. Simonson v. International Bank, 14 N.Y.2d 281, 251 N.Y.S.2d 433, 200 N.E.2d 427 (1964). Notwithstanding this greater flexibility, I hold that defendant corporation did not transact business in New York within the meaning of CPLR § 302(a)(1). Defendant did not have an office or a telephone listing in the state, its employees or officers or agents did not enter the state and the defendant did not engage in the solicitation of business through any advertising medium or through dealers or representatives within New York. The defendant's advertisement in nationally distributed professional and trade journals, literature sent by defendant in response to inquiries and the display of its products at numerous conferences did not constitute the transaction of business within New York. The defendant did not make any in-state visit during which business was carried out.

 Personal jurisdiction may also be independently obtained, however, under CPLR § 302(a)(3), which provides that a court may exercise in personam jurisdiction over a nondomiciliary who commits a tortious act outside New York which causes injury within the state, if he

 
"(i) regularly does or solicits business, or engages in other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in the state, or
 
"(ii) expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce."

 It should be noted at this point that the terminology "does * * * business" contained in this section of the long-arm statute is less stringent quantitatively than the doing business test of CPLR § 301. Chunky Corporation v. Blumenthal Bros. Chocolate Co., 299 F. Supp. 110, 115 (S.D.N.Y.1969). Moreover, the mere solicitation of business on a regular basis subjects a defendant to in personam jurisdiction for a tortious injury in the state. See, McLaughlin, Practice Commentaries, CPLR § 302 (McKinney's 1972) at 88-89.

 This Court has personal jurisdiction over the defendant corporation under CPLR § 302(a)(3)(i). The defendant's answers to plaintiff's interrogatories concerning its doing business reveal that it regularly did and solicited business in New York. Between April 1, 1963 and June 22, 1970, the defendant sold 1,088 surgical devices to purchasers in New York State with a dollar value of $259,935.70. The defendant advertised in professional and trade journals and mailed descriptive literature and clinical reprints to physicians and hospitals in New York in response to inquiries. Its products were displayed in various places throughout the country, including New York City. These promotional efforts were designed to achieve wide distribution of information calculated to promote the sales of its products on an interstate basis. In addition, defendant derived substantial revenue from the use of its products in the state. The determination of what constitutes substantial revenue requires a comparison of defendant's total gross sales revenue with the gross sales revenue attributed to New York sales. See Chunky Corporation v. Blumenthal Bros. Chocolate Co., supra, at 115. Therein it was held that revenue derived from sales to purchasers in New York amounting to 4% of total gross revenue was insufficient to amount to substantial revenue. The practice commentary accompanying the section suggests that, if a defendant derived 10% of its sales revenue from New York, it would be subject to personal jurisdiction pursuant to this section. See, McLaughlin, Practice Commentaries, CPLR § 302 (McKinney's 1972). In the instant case, defendant has derived over 7% of its gross sales revenue from sales to purchasers in New York. This is held by me to satisfy the substantial revenue requirement of CPLR § 302(a)(3)(i) because the aggregate dollar volume was not insignificant.

 Even if personal jurisdiction could not be obtained pursuant to CPLR § 302(a)(3)(i), the same is properly predicated upon CPLR § 302(a)(3)(ii). The defendant corporation engaged in a course of conduct in which it expected or should have reasonably expected any tortious act by it to have consequences in the state. The test concerning this determination is objective, rather than subjective. The statutory requirement of foreseeability relates to forum consequences generally and does not require the defendant to foresee the specific New York consequences of its alleged tortious conduct. Allen v. Auto Specialties Mfg. Co., 45 A.D.2d 331, 357 N.Y.S.2d 547, 550 (3rd Dept. 1974); see also, Markham v. Gray, 393 F. Supp. 163 (W.D.N.Y.1975). Defendant's wide dissemination of information ...


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