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MARKETING SHOWCASE v. ALBERTO-CULVER CO.

January 24, 1978

MARKETING SHOWCASE, INC., Plaintiff,
v.
ALBERTO-CULVER COMPANY, Defendant



The opinion of the court was delivered by: TENNEY

MEMORANDUM

 TENNEY, J.

 Three motions are pending before the Court in this breach-of-contract action. Plaintiff, a New York corporation, began the suit on March 21, 1977 in Supreme Court, New York County, where it thereafter obtained an ex parte order of attachment to issue against certain New York debts owed to the defendant, a Delaware corporation with its principal office in Illinois. Plaintiff assumed by this device that it had begun the process of acquiring quasi-in-rem jurisdiction over defendant. By the terms of N.Y.C.P.L.R. § 6213 (McKinney Supp. 1976-77), plaintiff was required to perfect this jurisdiction by serving defendant within 60 days of the issuance of the order of attachment. Service was effected on April 28, 1977 in conformity with N.Y.C.P.L.R. §§ 311, 313, 314 (McKinney 1972 & McKinney Supp. 1976-77), which, read together, endorse the procedure which plaintiff employed, i.e., delivery of the summons and complaint by a Deputy Sheriff of Cook County, Illinois.

 In the interim, however, defendant had removed the suit to this Court pursuant to 28 U.S.C. § 1441(b), and in June 1977, moved pursuant to Rules 4(c) and 12(b)(5) of the Federal Rules of Civil Procedure ("Rules") to dismiss for insufficiency of service. Defendant postulated in that motion that once the case had been removed from state to federal court plaintiff was required to employ federal and not state procedure in order to perfect quasi-in-rem jurisdiction, and that service of the summons and complaint by other than "a United States marshal . . . his deputy, or . . . some person specially appointed by the court for that purpose," Rule 4(c), was therefore a nullity. Plaintiff contested this theory and, additionally, cross-moved pursuant to Rule 37(a) for an order compelling discovery.

 Legal history intervened in these proceedings with the decision of the Supreme Court in Shaffer v. Heitner, 433 U.S. 186, 97 S. Ct. 2569, 53 L. Ed. 2d 683, 45 U.S.L.W. 4849 (1977), a decision which radically altered the scope of quasi-in-rem jurisdiction. Defendant therefore seized on the Shaffer ruling to move for dismissal of the complaint pursuant to Rule 12(b)(2), alleging that the teachings of Shaffer had altogether obliterated plaintiff's jurisdictional base. Plaintiff responded by asserting that it had in personam jurisdiction over defendant both under the classical tests for "doing business" in New York and under the New York "long-arm statute," N.Y.C.P.L.R. §§ 301, 302(a)(1) (McKinney 1972). It is in this somewhat tortured procedural posture that the case now stands.

 Because a decision against plaintiff based on Shaffer would be dispositive of all the issues at bar, the Court will deal first with defendant's latest motion to dismiss, that which asserts lack of jurisdiction over the person of the defendant. Although all the ramifications of Shaffer are yet to be settled, what is clear from that decision is that the Supreme Court has scuttled the jurisdictional base upon which this plaintiff initially began suit. The Court has announced that in "cases where the property which now serves as the basis for state court jurisdiction is completely unrelated to the plaintiff's cause of action . . ., [without] the existence of other ties among the defendant, the State, and the litigation, the presence of the property alone would not support the State's jurisdiction." 45 U.S.L.W. at 4855. There is no allegation here, nor can there be, that the property attached by plaintiff is in any way related to the dispute between the parties.

 Moreover, the Supreme Court in Shaffer went on to hold that henceforth "all assertions of state court jurisdiction must be evaluated according to the standards set forth in International Shoe and its progeny." Id. at 4856. The teaching of International Shoe is by now quite familiar: a defendant not within the territory of the forum cannot be subjected to the in personam jurisdiction of the forum unless he has "certain minimum contacts with [the forum] such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.' Milliken v. Meyer, 311 U.S. 457, 463, 85 L. Ed. 278, 61 S. Ct. 339 (1940)." International Shoe Co. v. Washington, 326 U.S. 310, 316, 90 L. Ed. 95, 66 S. Ct. 154 (1945).

 The Shaffer Court did not merely announce a new principle of jurisdiction, however. Despite the fact that the property attached in that case was found to be neither the subject of the litigation nor related to the underlying cause of action, the Court went on to apply the International Shoe standard by measuring the contacts of the defendant with the forum. *fn1" That the Shaffer Court went on to an examination of "contacts" militates for a finding that the action at bar, although commenced quasi in rem, will survive if investigation reveals that "fair play and substantial justice" permitted suit in this forum. Putting aside all problems of service, as did the Supreme Court, and relying for the moment on defendant's actual receipt of process, this Court must now determine, in effect, whether it is proper to assert in personam jurisdiction over this defendant. To that end and because this action is brought here on grounds of diversity of citizenship, the Court must look to the law of the state in which it sits to determine whether such jurisdiction exists. Arrowsmith v. United Press Int'l, 320 F.2d 219 (2d Cir. 1963) (en banc).

 Plaintiff alleged in its original complaint that defendant is subject to New York jurisdiction under N.Y.C.P.L.R. §§ 301 and 302(a)(1). The first section brings a foreign corporate defendant within the power of the court for any cause of action if the traditional test for "presence," i.e., "doing business," is met. Aquascutum of London, Inc. v. S.S. American Champion, 426 F.2d 205 (2d Cir. 1970). The second, a subsection of New York's "long-arm" statute, grants jurisdiction based on defendant's transaction of business within the state. "Transacting" business requires far fewer contacts with New York than does "doing" business, Potter's Photographic Applications Co. v. Ealing Corp., 292 F. Supp. 92 (E.D.N.Y. 1968), but that liberality, sanctioned in International Shoe, is offset by the corresponding demand that the cause of action arise from the very transaction or transactions which are relied upon to provide the contact with the forum. Longines-Wittnauer Watch Co. v. Barnes & Reinecke, Inc., 15 N.Y.2d 443, 261 N.Y.S.2d 8, 209 N.E.2d 68, cert. denied, 382 U.S. 905, 86 S. Ct. 241, 15 L. Ed. 2d 158 (1965).

 Plaintiff alleges that the contract being sued on was "a contract between the parties within the State of New York," Complaint para. 3, and that the breach of this New York transaction falls within the ambit of section 302(a)(1). The contract covered the production and placement of advertising materials for insertion in newspapers nationwide. For purposes of this motion the Court will presume that certain creative and mechanical work was to be performed by plaintiff in New York. However, the only other New York contact with this contract was plaintiff's signature thereto in this state: plaintiff's representative went to Illinois to initiate the transaction, negotiations were conducted in Illinois or by telephone, and defendant signed the contract in Illinois. Affidavit of David E. Gordon, sworn to November 11, 1977, para. 6. Plainly, all of the New York activities attendant on the consummation of the obligation and perhaps on its later-aborted performance were plaintiff's. However, an exercise of jurisdiction under N.Y.C.P.L.R. § 302(a)(1) turns on an assessment of the purposeful activities of the defendant within New York in relation to the transaction. Galgay v. Bulletin Co., Inc., 504 F.2d 1062 (2d Cir. 1974); Longines, supra. Plaintiff has shown no New York activity on the part of defendant vis-a-vis this contract, and consequently this jurisdictional assertion must fail.

 Plaintiff next contends that defendant is "doing business" in New York so as to render it amenable to suit here on any cause of action. On the contrary, defendant maintains that its activities in the state amount to no more than the "mere solicitation" of business and New York courts have repeatedly held this, without more, insufficient to afford a jurisdictional predicate under § 301. See, e.g., Frummer v. Hilton Hotels Int'l, Inc., 19 N.Y.2d 533, 281 N.Y.S.2d 41, 227 N.E.2d 851 (1967). This is true no matter how substantial the volume of sales solicited in New York. Baird v. Day & Zimmerman, Inc., 390 F. Supp. 883 (S.D.N.Y. 1974), aff'd, 510 F.2d 968 (2d Cir. 1975); Delagi v. Volkswagenwerk AG, 29 N.Y.2d 426, 328 N.Y.S.2d 653, 278 N.E.2d 895 (1972).

 Although the plaintiff has the burden of demonstrating jurisdiction where it is challenged, McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 80 L. Ed. 1135, 56 S. Ct. 780 (1936), the Court may rely on affidavits to establish jurisdictional facts. Ghazoul v. International Management Services, Inc., 398 F. Supp. 307 (S.D.N.Y. 1975). Moreover, the showing need only be of "'threshold' jurisdiction sufficient to demonstrate the fairness of allowing the suit to continue. The parties are not bound by the court's jurisdictional findings of fact when the case comes to trial on the merits." Id. at 309. The plaintiff has submitted nothing whatever to the Court to support its allegation that defendant is doing business here. However, from defendant the Court has learned that a sales manager of one of its divisions lives and carries on corporate activities here and that it has eleven salesmen residing and working here although there is no office maintained in New York. Gordon Affidavit paras. 5(B)-(D). There is authority in New York holding that the regular maintenance of a sales organization of six representatives within the state is sufficient to comport with "fair play and substantial justice" and to determine at the outset that the court has in personam jurisdiction. In Benware v. Acme Chemical Co., 284 App. Div. 760, 761, 135 N.Y.S.2d 207, 208-9 (3d Dep't 1954), the court stated:

 
The setting up and maintenance of a permanent sales organization working in New York with its component members in full-time employment by the corporation would surely be regarded in any enlightened view as bringing the corporate entity into New York. Since sales are a main part of its corporate function, such extensive and persistent corporate activity ought to be treated as carrying out in New York a corporate function on a scale sufficient to be seen, felt, ...

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