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TRAFALGAR CAPITAL CORP. v. OIL PRODUCERS EQUIP. CO

January 19, 1983

TRAFALGAR CAPITAL CORPORATION, Plaintiff,
v.
OIL PRODUCERS EQUIPMENT CORP., CHARLES C. WILLIAMS, JR., REX G. WALLACE and TENNESSEE CAPITAL CORPORATION, Defendants



The opinion of the court was delivered by: WEINFELD

EDWARD WEINFELD, D.J.

 Plaintiff, Trafalgar Capital Corporation ("Trafalgar"), brings this diversity action against Oil Producers Equipment Corporation ("Oil Producers"); Rex G. Wallace and Charles C. Williams, Jr., respectively, President and Vice President of Oil Producers, in their individual capacities; and Tennessee Capital Corporation ("Tennessee Capital"). Trafalgar is a New York financial consulting service. Oil Producers, a manufacturer of oil well drilling and mining equipment, is a Texas corporation with its principal place of business in Longview, Texas. Wallace and Williams live and work in Longview. Tennessee Capital is a regional brokerage and investment banking firm organized under the laws of the State of Tennessee with its principal place of business in Memphis.

 The complaint contains four counts. The first alleges a breach by Oil Producers of a financial consulting contract between it and plaintiff ("the contract"). The second charges Wallace and Williams with tortious interference with the contract. Count three raises a claim of fraud against Oil Producers, Wallace and Williams with respect to the contract. Finally, count four alleges that Tennessee Capital induced the other defendants to breach the contract and instead, to enter into an underwriting agreement with it. Plaintiff seeks recovery of $15,000, and 10% of Oil Producers' outstanding common stock as provided for under the contract. Each defendant moves, pursuant to Rule 12(b)(2) of the Federal Rules of Civil Procedure to dismiss the complaint for lack of personal jurisdiction, or in the alternative, to transfer this action to the United States District Court for the Eastern District of Texas under 28 U.S.C., section 1404(a).

 Oil Producers and Trafalgar first had contact with one another in the summer of 1980, when Curtis Payne, who allegedly represented that he was an agent of Trafalgar, approached Williams. Payne stated that Trafalgar could provide financial consulting services to Oil Producers with respect to equity funding through a public offering of common stock. Over a three month period numerous discussions ensued among Wallace, Williams and Payne, all of which occurred in Texas. These discussions also included telephone conversations from Texas with Trafalgar representatives in New York relating to a contemplated agreement between Trafalgar and Oil Producers.

 On November 6, 1980, Williams and Wallace, accompanied by Payne, travelled to New York and met with Neal Bruckman, Trafalgar's president, and another Trafalgar employee to conclude an agreement based on their prior negotiations. There is a dispute as to how long the meetings lasted. Defendants claim the meetings lasted less than an hour; plaintiff claims the parties met for two hours in Trafalgar's offices, and for four hours in a New York restaurant. Both agree that after the meetings adjourned, Wallace and Williams returned to their hotel in Newark, New Jersey, where they and Payne were staying preparatory to their return to Texas. Whatever the fact as to how long the discussions lasted, the parties negotiated not only the terms of a financial consulting contract to be entered into between Trafalgar and Oil Producers, but also discussed the terms of a public offering of Oil Producers securities with respect to which Trafalgar was to act as Oil Producers' consultant. A draft letter agreement for Trafalgar's services, based upon the New York discussions, was brought to Wallace and Williams at their hotel in Newark. After "minor handwritten modifications," *fn1" the contract was executed, and Williams and Wallace returned to Texas the next morning.

 Thereafter, Trafalgar drafted proposed underwriting documents of the public offering in New York. Upon completion, copies were mailed to Oil Producers' accountant and counsel in Texas, who after review returned them to Trafalgar with suggested changes. This procedure was repeated several times, as further drafts were revised and reviewed. In February, 1981, once the underwriting documents were acceptable, Wallace and Williams returned to New York to discuss the contemplated public offering with potential underwriters. Discussions ensued, but none bore fruit. Thereafter, Williams and Wallace made no other trips to New York in connection with this matter.

 Trafalgar also contacted non-New York underwriters, one of which was Tennessee Capital. Indeed, upon leaving New York after their second visit, Wallace, Williams and Bruckman travelled to Memphis to discuss matters with Tennessee Capital representatives. The result of the meeting is disputed. Plaintiff claims that Tennessee Capital agreed to underwrite the offering; Tennessee Capital states that no agreement was reached, and that it then had no interest in raising capital for Oil Producers in accordance with the plans suggested by Trafalgar.

 In March, 1981, Oil Producers terminated its agreement with Trafalgar. Thereafter, following negotiations in Texas and Tennessee between Oil Producers and Tennessee Capital, they entered into an agreement. A public offering of Oil Producers' common stock, underwritten by Tennessee Capital, was made in January, 1982.

 All defendants assert that they are non-residents, have never transacted business in New York and have no representative, office or property in New York; that the agreement sued upon was negotiated primarily in Texas and was executed on behalf of Oil Producers in Newark, New Jersey. The individual defendants, in addition, claim that their attendance in New York, when the contract with the plaintiff was further negotiated and its terms finalized, was solely as officers of Oil Producers.

 THE MOTION TO DISMISS FOR LACK OF PERSONAL JURISDICTION

 "The amenability of a foreign [party] to suit in a federal court in a diversity action is determined in accordance with the law of the state where the court sits." *fn2" Thus, New York's long arm statute *fn3" is determinative of the jurisdictional claims here at issue, the resolution of which requires the court to examine the "totality of the defendants activities within the forum," *fn4" and consider whether the defendants have "engaged in some purposeful activity in [the] State in connection with the matter in suit." *fn5" Furthermore, the burden of establishing jurisdiction rests upon the party asserting it. *fn6" With these benchmarks in mind, the Court turns to the issues in this case.

 (a) Oil Producers

 Plaintiff contends that Oil Producers has sufficient contacts with New York because it has "transact[ed] business within the state." *fn7" Plaintiff relies on the two occasions Oil Producers was present in New York through its officers at which time plaintiff claims that the contract was substantially negotiated and drafted, and acts taken in furtherance of the performance of the contract occurred. Defendants argue otherwise, stating that the New York meetings were "inconsequential . . . [because] the contract was primarily negotiated and ultimately executed outside of New York." *fn8" There is no dispute, however, that Oil Producers, through its officers Wallace and Williams, was present in New York on one occasion to further negotiate and consummate the contract, and on another to effect a public offering of its securities with respect to which plaintiff was to act as the consultant under the contract. While the defendants minimize the significance of the first New York meetings, the fact is that they resulted in a draft agreement where previously there had only been discussions. At those meetings, the parties concluded the substance of the agreement that forms the hard core of this litigation. *fn9" That the discussions immediately preceding the drafting, the drafting itself, and the substance of the finalized agreement were concluded in New York is significant for jurisdictional purposes. The circumstance that Williams and Wallace signed the contract in Newark at a hotel where they were staying for their travel convenience does not detract from the force of their activities in New York in negotiating and concluding the final terms of the contract. Aside from what the defendants themselves describe as "minor handwritten modifications" to the draft, the fact is that it became the final agreement between the parties. This alone would appear sufficient to establish New York jurisdiction, but there is more. After approval by its attorneys and accountants of the underwriting documents which had been prepared by plaintiff, Oil Producers, through its officers, returned to New York a second time where, through introductions effected by plaintiff, they engaged in discussions ...


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