The opinion of the court was delivered by: CONNER
This is an action alleging breach of contract and conspiracy to defraud. Defendants Brockmann International A.G. ("BIAG"), Brockmann Incorporated ("Brockmann Inc."), Juergen H. Brockmann ("Brockmann") and Uwe H. Flato ("Flato") have moved to dismiss the amended complaint for lack of jurisdiction over the person, Rule 12(b)(2), F.R.Civ.P., for insufficiency of service of process, Rule 12(b)(5), F.R.Civ.P., and, as to the sixth claim in the amended complaint, for failure to state a claim upon which relief can be granted, Rule 12(b)(6), F.R.Civ.P.
According to the amended complaint, plaintiff Cranston Print Works Company ("Cranston") is a Rhode Island corporation qualified to do business in New York, and in fact doing business in New York through two New York divisions, VIP Division ("VIP") and Cranston Print Works U.S.A. Division ("Cranston-USA").
BIAG is a Liechtenstein corporation with its principal place of business in that country and an office in North Carolina. Brockmann Inc. is a North Carolina corporation with its principal place of business in that state. Brockmann is a non-citizen of the United States and is the president and principal shareholder of both BIAG and Brockmann Inc. Flato and Rhodes are alleged to be North Carolina citizens employed by both BIAG and Brockmann Inc.
The amended complaint alleges that, in October 1980 in New York City, Cranston, through VIP, entered into a contract with BIAG whereby BIAG agreed to purchase from Cranston 57,2821/4 yards of fabric. Pursuant to the contract, BIAG opened an irrevocable letter of credit at a North Carolina bank in favor of Cranston-USA. Payments under the letter of credit were to be made sixty days after shipment. A subsequent contract between Cranston and BIAG in November 1980, regarding 23,238 yards of fabric, contained the same terms as the October agreement, and BIAG opened a second irrevocable letter of credit at the North Carolina bank in favor of Cranston-USA pursuant thereto.
Counts One through Five of the amended complaint, apparently directed at BIAG,
recite the completion of five partial shipments of fabric from Cranston to BIAG pursuant to the October and November 1980 agreement and BIAG's instructions to the North Carolina bank not to pay under the letters of credit despite the passage of sixty days following each of the shipments, and seek damages for breach of the October and November 1980 contracts in the amounts due for the five shipments.
Count Six of the amended complaint, which did not appear in the original complaint, alleges a conspiracy on the part of defendants to defraud Cranston. Although the two contracts prohibited or limited partial shipments, defendants are alleged to have made certain representations to Cranston in New York, which induced Cranston to agree to deliver partial shipments to BIAG. BIAG agreed to instruct the North Carolina bank to amend the letters of credit to allow for payment to Cranston for partial shipments. Cranston seeks damages under Count Six in the amount of $ 251,587.97, the total amount claimed to be due in Counts One through Five for completed partial shipments.
BIAG has moved to dismiss the contract claims Counts One through Five of the amended complaint on the ground that personal jurisdiction over it is lacking. BIAG points out that none of the defendants is a New York citizen or resident; that none of them is registered to do, or does, business in New York; and that none of them maintains any office, warehouse, bank account, telephone listing, mailing address, employees, agents or sales representatives in New York. Thus, BIAG persuasively argues, the only conceivable basis for personal jurisdiction over it on the contract claims is N.Y.C.P.L.R. § 302(a)(1), which provides for personal jurisdiction over nondomiciliaries who "transact any business within the state ...."
In order for Cranston to assert personal jurisdiction over BIAG pursuant to Section 302(a)(1), BIAG must not only have transacted business in New York, but the cause of action must arise out of the business transacted in New York. E.g., Chertok v. Ethyl Corp. of Canada, 341 F. Supp. 1251, 1254 (S.D.N.Y.1972). In this regard BIAG points out that the contracts called for no business to be transacted by it in New York. The fabric was apparently to be shipped from Cranston's mill in Massachusetts to Europe. Payment was to be made by letters of credit issued by and presented to the North Carolina bank.
Accordingly, personal jurisdiction hinges upon Cranston's allegation in the amended complaint that Cranston and BIAG entered into the first of the two contracts in New York City on October 17, 1980.
BIAG, by Brockmann, denies that the October 17 contract was entered into in New York. According to Brockmann, the October 17 contract consisted of a Telex message sent by Brockmann from North Carolina to New York, confirming two orders placed over the telephone that day from North Carolina to New York.
In response, Cranston has sought to detail the history of the two contracts by the affidavits of several of its employees, which in sum set forth the following chronology of events in 1980 and 1981:
September 24, 1980 Telephone call from Brockmann to Cranston-
USA (in New York) inquiring as to fabrics,
prices and shipping.
September 24 Telephone call from Rhodes to Cranston-
USA with more specific inquiries concerning
Unspecified Telephone call from Rhodes to Cranston-USA
requesting a meeting in New York.
October 8 Meeting in New York attended by Brockmann
at which specific contractual terms were
discussed in detail.
October 17 Telex from Brockmann to Cranston in New
York confirming purchase orders on terms
substantially the same as those agreed to at
the October 8 meeting.
October 22 Telex from Brockmann to Cranston in New
York confirming establishment of first
letter of credit at North Carolina bank.
October 28 Telephone call from Rhodes to Crantex, a
New York division of Cranston, requesting a
meeting in New York to see additional
October 29 Meeting in New York attended by Brockmann
and Rhodes at which amendment of the letter
of credit to allow Cranston more time for
shipment and more room for error regarding
quantity, leading to subsequent amendments
of the letter of credit.
November 1 Rhodes picked up Cranston fabric samples at
Kennedy Airport in New York, apparently
while en route from Europe to North Carolina.
November 6 Telex from Brockmann to Cranston in New York
confirming second contract on substantially
same terms as first contract.
November 10 Telephone call from Rhodes to Cranston in
New York requesting shipment of sample
fabrics to BIAG, and Telex from Rhodes
November 11 Telephone conversation between Brockmann
and Cranston regarding assurances that
Cranston fabrics would not be resold as piece
Unspecified Telephone call from ...