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May 20, 1980

BURTON SELMAN, on behalf of himself and others similarly situated, Plaintiff, against HARVARD MEDICAL SCHOOL, et al., Defendants.

The opinion of the court was delivered by: DUFFY

Plaintiff, Burton Selman, was a medical student at Universidad Autonama of Guadalajara, Mexico (hereinafter referred to as "UAG") whose transfer applications to numerous medical schools in the United States were rejected. The instant action was instituted in February, 1979, against several United States medical schools, *fn1" individual employees of those schools, and the Association of American Medical Colleges (hereinafter referred to as "AAMC"). Selman brought suit on behalf of himself as well as all similarly situated qualified applicants from foreign medical schools who applied for admission to defendant medical schools under the "Federal Transfer Program" and were rejected.

Defendants have jointly moved to dismiss the complaint on four grounds. First, defendants contend that subject matter jurisdiction is lacking as to all defendants. Second, it is alleged that personal jurisdiction is lacking as to several of the individual defendants who are California residents. *fn2" Third, defendants argue that plaintiff has failed to state a claim upon which relief can be granted and to aver the circumstances constituting fraud with the degree of particularity required under Fed.R.Civ.P. 9(b). Finally, defendants charge that plaintiff's failure to join the Commissioner of Internal Revenue as an indispensable party at least as to the sixth cause of action requires its dismissal. In addition to the above motion in which AAMC has joined, AAMC has separately moved to dismiss for lack of in personam jurisdiction and failure to state a claim.

 Plaintiff has cross-moved for an order certifying the action as a class action pursuant to Fed.R.Civ.P. 23(c)(1).

 In his complaint, plaintiff lists seven causes of action all arising from similar allegedly illegal and unconstitutional admissions criteria used by defendant medical schools. The first cause of action appears to sound in contract. It is alleged that defendant medical schools failed to use the criteria for admission of transfer students set forth in various brochures sent to applicants. Rather, plaintiff maintains that unequal and arbitrary standards were used including, inter alia, preference given to those applicants who had "personal contacts" with members of the Admission Committees. Plaintiff argues that he and members of the class relied to their detriment on criteria published in these brochures.

 Next, plaintiff argues in tort. He charges the defendants with intentional misrepresentation and intent to deceive and defraud.

 Plaintiff's third cause of action is based on the Foreign Medical School Transfer Program. Health Professions Educational Assistance Act Pub.L.No. 94-484, 90 Stat. 2243, 2296 (1976). It is interesting to note that this program which originally provided for a "Match List" matching qualified foreign medical school applicants with participating United States schools was repealed before it went into effect. Public Health Service Act Amendments Pub.L.No. 95-215, 91 Stat. 1503 (1977).

 In its place, there is now a "capitation grant" program providing for annual grants to schools of medicine which comply with various requirements. 42 U.S.C. §§ 292 et seq. One such prerequisite to participation in the program is the assurance by participating medical schools that they will increase enrollment of full time third-year students. 42 U.S.C. § 295f-1(b) (Supp.1978). This provision would presumably encourage participating medical schools to accept transfer students from foreign schools.

 It is contended that the above capitation program creates a federal statutory right to fair consideration, the violation of which may properly be redressed under 42 U.S.C. § 1983. Plaintiff maintains that the arbitrary admissions criteria used by defendant medical schools violate this statutory right as well as the due process clauses of the Fifth and Fourteenth Amendments.

 Next, plaintiff alleges a conspiracy on the part of defendants to adopt discriminatory admissions policies in violation of 42 U.S.C. § 1985. Alleged overt acts in connection with this conspiracy include, inter alia, dissemination of misleading information and waiver of some requirements for certain applicants. In addition, plaintiff points to several personal gripes; e.g.: failure to consider plaintiff's timely change of address letters.

 In a related cause of action, plaintiff charges defendants with unlawful combinations, contracts, and agreements in restraint of trade under the Sherman Act, 15 U.S.C. §§ 1 et seq. As part of these supposed unlawful combinations, defendants allegedly engaged in a successful "boycott" to change the "Match List" program thereby enabling them to consider applicants on the basis of their own arbitrary criteria. It is contended that defendants' unlawful activities prevent and prohibit free competition by preventing plaintiffs and members of the class the opportunity to become doctors. Consequently, the quality of health services available to the public is allegedly severely restricted.

 In his sixth cause of action, plaintiff argues that defendants' tax exempt status as charitable organizations under the Internal Revenue Code, 26 U.S.C. § 501(c)(3), should be revoked. To further this contention, he argues that the named "medical schools are not operating for the benefit of members of the community generally, but for the benefit of a select class of persons." Complaint P 73.

 Finally, without specifying the statutes or constitutional provisions to which he is referring, Selman argues that defendants activities violate individual states' requirements of fairness in considering applicants for admission.

 I. Association of American Medical Colleges

 A. Failure to State a Claim

 AAMC's first argument in its motion to dismiss is that it is merely named in the caption of plaintiff's complaint. Nowhere in any of the substantive paragraphs of the complaint, it alleges, is there any reference to AAMC. Contrary to this assertion, however, in the fourth cause of action, plaintiff does state that "all defendants further conspired to conceal said discrimination." Complaint P 57.

 "Notice pleading" provided for by the Federal Rules requires that complaints be liberally construed. International Controls Corp. v. Vesco, 490 F.2d 1334, 1351 (2d Cir.), cert. denied, 417 U.S. 932, 94 S. Ct. 2644, 41 L. Ed. 2d 236 (1974). Here, the complaint was sufficient to give notice to AAMC that, at least, it was being included in the conspiracy charge.

 Although there is a paucity of reference to defendant AAMC in the substantive portion of the complaint, I reluctantly must conclude that this alone is not sufficient reason to dismiss the complaint against AAMC. My conclusion on this matter takes into account the ease with which the complaint could be amended under Fed.R.Civ.P. 15(a). See International Controls Corp. v. Vesco, supra, at 1351.

 B. In Personam Jurisdiction

 The AAMC is a non-profit, Illinois corporation whose only offices are located in Washington, D.C. It has 125 member medical schools, twelve of which are located in New York State.

 The stated purpose of AAMC is "the advancement of medical education." To this end, AAMC, publishes journals, conducts research, and holds meetings and forums. Affidavit of John F. Sherman, Vice-President of AAMC, P 4 (May 5, 1979) (hereinafter referred to as "Sherman Aff."). Together with the American Medical Association, AAMC sponsors the Liaison Committee on Medical Education which accredits medical schools in the United States and Canada.

 In addition, AAMC is involved in two programs related to medical school admissions. First, it developed the new Medical College Admissions Test (hereinafter referred to as "MCAT") which is administered to those seeking admission to United States medical schools. The test is administered throughout the United States including several New York locations. This test is administered, however, by the American College Testing Program, Inc. (hereinafter referred to as "ACTP"), an Iowa corporation. AAMC indicates that the ACTP is an independent contractor over whom AAMC exercises no discretion or control.

 AAMC also sponsors the "Coordinated Transfer Application System," (hereinafter referred to as "COTRANS") and the "American Medical College Application Service" (hereinafter referred to as "AMCAS"). These programs provide a centralized application processing service for applicants to participating schools. Applicants submit the applications to AAMC in Washington, D.C. They are then forwarded to various designated medical schools.

 AAMC owns no property, has no office, bank account, or telephone listing in New York. It is not qualified to do business in New York State and has not designated an agent for service of process there. Sherman Aff. P 7.

 Pursuant to Fed.R.Civ.P. 4(e), service upon a party not an inhabitant or found within the state may be made under the state law of the state in which the District Court is sitting. Thus, AAMC's motion to dismiss for lack of in personam jurisdiction must be tested against N.Y.Civ.Prac.Law §§ 301 and 302. (McKinney Supp.1980).

 At the outset, it should be noted that once jurisdiction is challenged in an appropriate manner, plaintiff shoulders the burden of proof on the issue of personal jurisdiction. McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 189, 56 S. Ct. 780, 785, 80 L. Ed. 1135 (1936). Even during the preliminary stages of litigation, plaintiff must at least establish a prima facie case of transactions sufficiently related to the forum so as to make in personam jurisdiction proper. United States v. Montreal Trust Co., 358 F.2d 239 (2d Cir.), cert. denied, 384 U.S. 919, 86 S. Ct. 1366, 16 L. Ed. 2d 440 (1966).

 The Second Circuit has consistently held that "(i)t is basic that the burden of proving jurisdiction is upon the party who asserts it and that he must show by the complaint and supporting affidavits the essential requirements of the jurisdictional statute . . . ." Lehigh Valley Industries, Inc. v. Birenbaum, 527 F.2d 87, 92 (2d Cir. 1975) (citations omitted).

 Plaintiff has failed to show that in personam jurisdiction obtains under N.Y.Civ.Prac.Law § 301. *fn3" Under this subdivision, jurisdiction over a foreign corporation is proper if it is "doing business" within the state. This test has been interpreted by the New York Court of Appeals to require "doing business systematically and regularly with a fair measure of permanence and continuity." Tauza v. Susquehanna Coal Co., 220 N.Y. 259, 267, 115 N.E. 915, 917 (1917).

 It is clear that AAMC is not directly doing business in New York State. It has no office, employees, telephone listing, or bank accounts and does not carry on regular activities in New York. It might be argued that the administration of AAMC's MCAT in the state on a regular basis is sufficient presence. It is well settled, however, that the mere shipment to or use of defendants' goods in a foreign state is not a sufficient basis for in personam jurisdiction over a foreign corporation. Kramer v. Vogl, *fn4" 17 N.Y.2d 27, 215 N.E.2d 159, 267 N.Y.S.2d 900 (1966). Similarly, the mere mailing of applications to New York medical schools on behalf of applicants is not sufficient "systematic and regular" business to satisfy the "doing business" test.

 There is a question, however, as to whether or not AAMC is indirectly present in the state by way of an agent, representative, or related corporation. AAMC argues that ACTP which administers the MCAT at various locations in New York is an independent contractor over whom AAMC exercises no discretion or control. In fact, AAMC avers that ACTP "is an independent non-profit testing organization incorporated in and having its offices and principal place of business in the State of Iowa." Sherman Aff. P 8.

 Plaintiff, on the other hand, contends that ACTP is a testing subsidiary of AAMC which is its agent in New York State for jurisdictional purposes. Yet, plaintiff has put forward no evidence of common ownership or control. There is also no suggestion of the existence of an agency agreement.

 Where such evidence is lacking and "there exist truly separate corporate entities, a valid (inference) of agency cannot be sustained." Delagi v. Volkswagenwerk AG of Wolfsburg Germany, 29 N.Y.2d 426, 431, 278 N.E.2d 895, 897, 328 N.Y.S.2d 653, 656 (1972). Moreover, in order to be an agent for purposes of New York personal jurisdiction "the alleged agent must have acted in this state for the benefit of and with the knowledge and consent of the non-resident and the non-resident must exercise some element of control over the agent." Louis Marx & Co. v. Fuji Seiko Co. Ltd., 453 F. Supp. 385, 390 (S.D.N.Y.1978) (footnote omitted).

 Absent an agency agreement, common ownership or common control, I cannot conclude that ACTP's activities in New York State are those of an agent for purposes of jurisdiction. Consequently, I find that AAMC is not "doing business" in New York and cannot be subject to in personam jurisdiction under N.Y.Civ.Prac.Law § 301.

 Similarly, jurisdiction over AAMC cannot be founded on the New York long-arm statute, N.Y.Civ.Prac.Law § 302. *fn5" AAMC's activities do not fit into any of the three basic subdivisions of § 302.

 Subdivision (a)(1) requires a cause of action arising from a non-domiciliary who "transacts any business within the state or contracts anywhere to supply goods or services in the state". N.Y.Civ.Prac.Law § 302(a)(1) (McKinney Supp. 1980). There is no clear test to determine whether or not such transaction has occurred. Rather, the courts have applied a "totality of the circumstances" test in making § 302(a)(1) determinations. Sterling National Bank and Trust Co. of New York v. Fidelity Mortgage Investors, 510 F.2d 870 (2d Cir. 1975).

 Several factors have been considered by the courts in applying the "totality of circumstances" test, none of which are present in the instant case. There is no evidence of any contract or contract negotiations in New York concerning the administration of the MCAT or any other AAMC matter. Longines-Wittnauer Watch Co. v. Barnes & Reinecke, 15 N.Y.2d 443, 209 N.E.2d 68, 261 N.Y.S.2d 8 (1965). Nor is there any indication that AAMC officers were present in New York in an official capacity which relates to the plaintiff's alleged cause of action. Reiner & Co., Inc. v. Schwartz, 41 N.Y.2d 648, 363 N.E.2d 551, 394 N.Y.S.2d 844 (1977); Hi Fashion Wigs, Inc. v. Hammond Advertising, Inc., 32 N.Y.2d 583, 300 N.E.2d 421, 347 N.Y.S.2d 47 (1973).

 At best, AAMC has had contacts with New York by mailing applications to the state and having its MCAT administered in New York. Mere solicitation, advertising, or telephone calls to New York do not satisfy the "transaction of business" test. Glassman v. Hyder, 23 N.Y.2d 354, 244 N.E.2d 259, 296 N.Y.S.2d 783 (1968). A fortiori, in the instant case where the mailing of applications, or "solicitations" to New York are on behalf of others, AAMC cannot be deemed to have transacted business in New York. Likewise, the mere administration of the MCAT developed by AAMC by an independent testing corporation in New York is not the "transaction of business" as that term is used in § 302(a)(1). Nor can the administration of the MCAT by ACTP in New York be considered a contract by AAMC to provide "goods or services in the state." AAMC merely developed the MCAT, a test which is administered nationwide by an independent contractor. It did not contract to supply services in New York State.

 Even assuming that AAMC's limited contacts with New York are sufficient to constitute "transaction of business," or "contracting to supply goods or services in the state," it is clear that plaintiff's alleged cause of action does not arise from these contacts as required by § 302(a). Certainly, plaintiff does not contend that the mere mailing of a few of his applications to schools or the mere administration of the MCAT in New York State are acts which give rise to his complaint of discriminatory admissions policies.

 Similarly, in personam jurisdiction over AAMC in this case cannot be premised on subdivision (a)(2). That subdivision requires that the defendant commit a tortious act in New York and that the act cause injury in New York.

 Section 302(a)(2) has been interpreted to require "that the defendant be physically present in New York when committing the tort" Lynn v. Cohen, 359 F. Supp. 565, 568 (S.D.N.Y.1973). There is no indication in the instant case that AAMC committed any tortious acts within the state.

 Nor is there any indication that plaintiff was injured here. Although plaintiff claims to be a New York resident, the alleged injury took place while he was applying for transfer to a United States medical school from Guadalajara, Mexico. *fn6"

 Likewise, jurisdiction cannot be founded on § 302(a)(3). The threshold test under this section requires a tortious act committed without the state and an injury to the plaintiff within the state. In addition, it must be shown that the defendant regularly solicits business in or derives substantial revenue from New York, § 302(a)(3)(i), or that the consequences of defendant's activities in New York were foreseeable and that defendant derives substantial revenue from interstate or international commerce, § 302(a)(3)(ii).

 I need not go beyond the threshold question here for, as noted above, there is no indication that the alleged injury, if in fact it was caused by any activities of AAMC, took place in New York. Thus, the ...

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