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NATIONAL SPINNING CO. v. TALENT NETWORK

December 31, 1979

NATIONAL SPINNING CO., INC. Plaintiff, against TALENT NETWORK, INC., Defendant.


The opinion of the court was delivered by: MACMAHON

Defendant moves, pursuant to Rule 12(b)(2), Fed.R.Civ.P., to dismiss the complaint for lack of personal jurisdiction.

Defendant, Talent Network, Inc. ("TNI"), is an Illinois corporation with no offices, telephone listings or employees in New York. It is neither registered to do business, nor does it do business in this state.

 Plaintiff, National Spinning Co., Inc. ("National"), is a New York corporation which seeks to recover a $ 15,000 advance royalty payment and additional damages arising from the alleged breach by TNI of a licensing agreement entered into by the parties in April 1978. Under this agreement, National was to acquire from TNI the right to use various works of art by the late artist Pablo Picasso in "wall hanging" kits which it planned to manufacture and distribute commercially.

 The parties began their discussions of a proposed licensing arrangement in the spring of 1977 when National approached TNI about the idea at a trade fair held in Chicago. Negotiations continued for approximately one year and involved two visits by a representative of National to TNI's office in Illinois, as well as numerous telephone calls.

 The parties reached agreement on the substantive commercial terms of a licensing arrangement in late August 1977, when National's president wrote TNI a letter confirming the parties' understanding of the proposed terms "subject to the mutually satisfactory negotiation of a final contract." It is undisputed that agreement on all of the terms set forth in the letter, including the product to be licensed, royalty rate, terms of payment and duration of the license, was reached outside New York State.

 The above terms were incorporated into a draft of TNI's standard licensing agreement by Milton Kayle, Esq., who sent the proposed draft to plaintiff's headquarters in New York City on February 17, 1978. Counsel for plaintiff, Arnold Schlanger, Esq., subsequently requested a meeting with Mr. Kayle to discuss a number of proposed changes.

 Messrs. Kayle and Schlanger met for four hours in New York City on April 10, 1978. In negotiating the final terms of the license agreement, they made a number of changes in the proposed draft; all its substantive commercial terms, however, remained unaltered from the parties' original understanding. Defendant later signed the final document in Illinois, and the alleged breach apparently occurred in that state as well. Plaintiff here relies solely on the New York City meeting to establish jurisdiction In personam over defendant.

 In determining personal jurisdiction in a diversity action, we apply the law of the forum state. Arrowsmith v. United Press Int'l, 320 F.2d 219, 223 (2d Cir. 1963) (en banc). Plaintiff predicates jurisdiction on New York's long-arm statute, CPLR § 302(a), which provides in pertinent part:

 
"As to a(ny) cause of action arising from any of the acts enumerated in this section, a court may exercise personal jurisdiction over any nondomiciliary, or his executor or administrator, who in person or through an agent:
 
1. transacts any business within the state . . . ."

 The New York statute thus requires not only that the defendant "transact business" within this state, but also that plaintiff's cause of action arise out of such transaction.

 There is no dispute that plaintiff's cause of action arose from the contract which was the subject matter of the April 10 meeting. Thus, the sole question for decision is whether a single four-hour meeting in New York City between the parties' attorneys to negotiate the final terms of a contract constitutes a "transaction of business" within this state for the purposes of CPLR § 302(a).

 Before considering whether defendant's activities are sufficient to satisfy New York's long-arm statute, we note that it is not our task to decide whether a state could, if it wished, exercise personal jurisdiction under these circumstances within the constitutional confines of International Shoe Co. v. Washington, 326 U.S. 310, 66 S. Ct. 154, 90 L. Ed. 95 (1945), and Hanson v. Denckla, 357 U.S. 235, 78 S. Ct. 1228, 2 L. Ed. 2d 1283 (1958). "The question . . . to be first decided is not what jurisdiction New York is allowed under the Federal Constitution, but what jurisdiction it has legislated unto itself within its permissive area by enacting CPLR § 302(a)." Old Westbury Golf & Country Club, Inc. v. Mitchell, 44 Misc.2d 687, 254 N.Y.S.2d 679, 681 (Sup.Ct. Nassau Co. 1964).

 The starting point in our analysis is the opinion of the New York Court of Appeals in Longines-Wittnauer v. Barnes & Reinecke, 15 N.Y.2d 443, 261 N.Y.S.2d 8, 209 N.E.2d 68 (1965). There, the court sustained jurisdiction over a foreign defendant on the totality of its purposeful activity in New York, including "substantial preliminary negotiations through high-level personnel during a period of some two months," the actual execution of a supplementary contract and shipment of two machines into this state which were installed and tested by defendant's ...


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