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ARROW TRADING CO. v. SANYEI CORP.

June 8, 1983

ARROW TRADING CO., INC., Plaintiff,
v.
SANYEI CORPORATION (HONG KONG), LTD., Defendant.



The opinion of the court was delivered by: MOTLEY

FINDINGS OF FACT AND CONCLUSIONS OF LAW

MOTLEY, Chief Judge.

 This action is before the court upon defendant's motion to dismiss for lack of personal jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(2). Plaintiff contends that this court has personal jurisdiction over defendant pursuant to Federal Rule of Appellate Procedure 4(a)(1) and New York Civil Practice Law sections 301 and 302(a)(1). An evidentiary hearing was held on December 13, 1982 through December 15, 1982. The following are the court's findings of fact and conclusions of law.

 Findings of Fact

 Arrow Trading Company, Inc. (Arrow), is a New York corporation with its principal place of business in the City of New York. It is engaged in the business of importing and marketing general merchandise. Defendant Sanyei Corporaiton (Hong Kong), Ltd. is a trading company incorporated in Hong Kong with its only offices in Hong Kong. Defendant is a partially-owned subsidiary of Sanyei Corporation, a Japanese trading corporation which is not a party to this action. Sanyei Corporation is also the parent corporation of Sanyei New York, a wholly-owned subsidiary with offices in the City of New York.

 Early in 1978, Benjamin Dweck, the president of Arrow, visited defendant's offices in Hong Kong and dropped off a flashlight, requesting that defendant locate a manufacturer to replicate the flashlight. Thereafter, the parties entered into negotiations by mail and telex. Among the details negotiated were Arrow's requirement that it be granted exclusive rights to the mold used to manufacture the flashlights, and that the cost of the mold be absorbed by the manufacturer. On May 24, 1978, Arrow sent S.H.K. a purchase order for 100,000 of the flashlights, subject to approval of a sample to be forwarded by S.H.K. S.H.K. guaranteed delivery but not quality. On May 25, 1978, Arrow instructed S.H.K. to proceed with production if S.H.K. had selected a manufacturer that it trusted.

 On June 7, 1978, S.H.K. confirmed receipt of Arrow's purchase order via a "Confirmation Note" which stated, inter alia, "we confirm having booked the following order for your account as per the particulars and terms stated below . . . mold charges and cost will be assumed and paid by the maker."

 Arrow subsequently ordered an additional 150,000 flashlights by telex. It thereafter opened two irrevocable letters of credit dated June 14, 1978 and December 21, 1978, in the amounts of $80,000 and $142,000 respectively.Each letter of credit called for documentation which included a "Special Customs Invoice showing a complete breakdown of cost including ex-factory costs."

 Upon receipt of the initial shipment, Arrow was dissatisfied with the quality of the flashlights. Consequently, in February of 1979, Arrow's vice president and one of Arrow's customers, both in Hong Kong on business, visited the S.H.K. offices regarding the defects in the flashlights. Defendant's division head for the product took them to the factory where they discussed with the maker the corrective measures to be taken. Thereafter, telexes were exchanged regarding the matter. An officer of defendant's sister corporation, Sanyei New York, was sent to inspect the defective flashlights stored in plaintiff's New York warehouse. The representative of Sanyei New York relayed the information he received to defendant in Hong Kong. In May of 1979, Arrow's vice president again visited defendant in Hong Kong. The following month defendant's vice president visited New York and inspected the flashlights. Ultimately, in January of 1980, Arrow and defendant met again with the manufacturer in Hong Kong and reached a tentative solution.Defendant then telexed Arrow that Arrow's buyer had settled the claim. On March 17, 1980, Arrow's attorneys sent a letter of claim to defendant. Defendant responded that Arrow's claim should properly be directed to the manufacturer but that a "complete understanding and settlement has already been reached amongst Arrow Trading, Hong Kong Sanyei and the manufacturer. . . ." In April of 1980, Arrow and its attorney met with defendant's vice president and an attorney at the offices of Sanyei New York. No settlement was reached. The instant action was filed in March of 1981.

 Conclusions of Law

 In this diversity action, the issue of personal jurisdiction must be determined in accordance with New York state law. Arrowsmith v. UPI, 320 F.2d 219 (2d Cir. 1963). Plaintiff asserts that jurisdiction herein is proper pursuant to New York's traditional "doing business" test, see Civ. Prac.L. § 301 (McKinney 1972), and pursuant to the New York long-arm statute, Civ.Prac.L. § 302(a)(1) (McKinney Supp. 1982).

 I.

 Under New York's traditional "doing business" test, the courts of New York are authorized to exercise jurisdiction over a foreign corporation only upon a finding that the corporation is "engaged in such a continuous and systematic course of "doing business" here as to warrant a finding of its "presence" in this jurisdicition." McGowan v. Smith, 52 N.Y.2d 268, 272, 419 N.E.2d 321, 323, 437 N.Y.S.2d 643, 645 (1981) quoting Simonson v. International Bank, 14 N.Y.2d 281, 285, 200 N.E.2d 427, 429, 251 N.Y.S.2d 433, 436 (1964).

 The test, though not "precise" . ., is a "simple pragmatic one" . . . is the aggregate of the corporation's activities in the State such that it may be said to be "present" in the State "not occasionally or casually, but with a fair measure of permanence and continuity" . . . and is the quality and nature of the corporation's contacts with the State ...


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