Plaintiffs Hoffritz for Cutlery, Inc. and Edwin Jay, Inc. appeal from an order of the United States District Court for the Southern District of New York (Edelstein, Judge) which dismissed their complaint on the ground that the court lacked personal jurisdiction over the defendants under applicable New York law.
This appeal requires us to decide whether the courts of the State of New York would find jurisdiction over non-resident defendants under its longarm statute, N.Y. CPLR section 302(a), or on a theory of defendants' "presence" under CPLR section 301. The district court held that they would not, and dismissed the complaint. Plaintiffs appeal from that order; for the reasons set forth below, we reverse, and remand the action to the district court.
The appeal before us arises from an alleged breach of a franchise agreement entered into by the parties on August 29, 1970. The plaintiffs are New York corporations: Hoffritz for Cutlery, Inc., which operates a chain of cutlery and gift stores and owns the Hoffritz name, and Edwin Jay, Inc., which is the exclusive wholesale supplier of Hoffritz brand merchandise. The stock in both these corporations is held by the same shareholder; plaintiffs corporations is held by the same shareholder; plaintiffs are hereinafter referred to as "Hoffritz." The defendants are Amajac, Ltd. ("Amajac"), a Georgia corporation, and Jack E. Ayers, president and sole shareholder of Amajac, a Georgia resident and domiciliary.
In its complaint, Hoffritz alleged three breaches of the franchise agreement, a11 connected with Amajac's Atlanta store lease: (1) that Ayers was named as lessee, rather than Amajac; (2) that the lease was not made assignable to Hoffritz; and (3) that Hoffritz was not provided a copy of the lease. Hoffritz sought an injunction requiring the return of all materials bearing the Hoffritz name, and liquidated and consequential damages for breach of contract. By order dated July 18, 1984, the district court herein, without holding an evidentiary hearing, granted defendants' motion to dismiss the complaint pursuant to Fed. R. Civ. P. 12(b) (2), for lack of personal jurisdiction. The district judge applied New York law, and concluded that neither of the jurisdictional bases alleged by plaintiffs would suffice to sustain jurisdiction in a New York court.
The following facts are either uncontested or appear from the plaintiffs' papers in opposition to defendants' motion to dismiss; because the dismissal took place without a hearing, this Court will accept them as true for purposes of this appeal. See Beacon Enterprises, Inc. v. Menzies, 715 F.2d 757, 768 (2d Cir. 1983); Marine Midland Bank, N.A. v. Miller, 664 F.2d 899, 904 (2d Cir. 1981); American Eutectic Welding Alloys Sales Co. v. Dytron Alloys Corp., 439 F.2d 428, 430 (2d Cir. 1971). Amajac does not maintain an office in New York, nor is it licensed to do business there; it has no officers, directors or employees in New York; it has no New York telephone listing or mailing address; it has no New York subsidiaries, divisions or affiliates; finally, it owns no property in New York. On the other hand, the initial discussions pertaining to the franchise agreement were held in New York. At these meetings, which were attended by Ayers on behalf of Amajac, the parties discussed projected sales, store design, inventory cost, and the terms of the proposed agreement. Subsequent negotiations took place in Atlanta, Georgia and Detroit, Michigan. The final franchise agreement was signed by Amajac in Georgia, and was sent to plaintiffs in New York, where they signed it. One term of this agreement authorized plaintiffs at their option to resolve disputes by arbitration, and provided further that such arbitration would be held in New York.
During the life of the agreement, Ayers corresponded extensively with Hoffritz concerning the business relations between them. He also visited New York some fifty-four times; during each of these visits, he met with Hoffritz representatives to discuss his franchised business. At these meetings, virtually the entire range of the business was discussed, including promotions, signs, traffic flow, display matters, prices, types of items carried or sought to be carried, breakage on shipments, outstanding balances and interest due, returns, and so on.
The district court held that these facts were insufficient to sustain jurisdiction over either Amajac or Ayers in a New York court. On appeal, plaintiffs urge that jurisdiction may properly be found under CPLR § 301, because Ayers individually is 'doing business' in New York with sufficient continuity and permanence to justify his being haled before a New York court. Additionally, they claim that jurisdiction is proper under the New York longarm statute, CPLR § 302(a)(l). We turn now to these contentions.
There are several oft-encountered benchmarks in the law of personal jurisdiction. First, personal jurisdiction over a defendant in a diversity action is determined by reference to the law of the jurisdiction in which the court sits, United States v. First National City Bank, 379 U.S. 378, 381-82, 13 L. Ed. 2d 365, 85 S. Ct. 528 (1965); Arrowsmith v. United Press International, 320 F.2d 219, 223 (2d Cir. 1963) (en banc). The burden of establishing jurisdiction over a defendant, by a preponderance of the evidence, is upon the plaintiff. Marine Midland Bank, N.A. v. Miller, 664 F.2d at 899. Until an evidentiary hearing is held, however, the plaintiff need make only a prima facie showing that jurisdiction exists, Beacon Enterprises, Inc., 715 F.2d at 768, and this remains true notwithstanding a controverting presentation by the moving party. Marine Midland Bank, N.A., 664 F.2d at 904; see American Eutectic, 439 F.2d at 430. In the absence of an evidentiary hearing on the jurisdictional allegations, or a trial on the merits, all pleadings and affidavits are construed in the light most favorable to plaintiff, and where doubts exist, they are resolved in the plaintiff's favor. E.g., Beacon Enterprises, Inc., 715 F.2d at 768; Marine Midland Bank, N.A., 664 F.2d at 904; Cranston Print Works Co. v. Brockmann International A.G., 521 F. Supp. 609, 613 (S.D.N.Y. 1981); Freeman v. Gordon & Breach, Science Publishers, Inc., 398 F. Supp. 519, 520 (S.D.N.Y. 1975). Bearing these points in mind, we address first plaintiffs' contention that CPLR section 301 provides jurisdiction over Ayers.
Section 301 provides that "[a] court may exercise such jurisdiction over persons, property, or status as might have been exercised heretofore." In the case of a foreign corporation, section 301 keeps alive the case law existing prior to its enactment, which provided that a corporation is "doing business" and is therefore "present" in New York and subject to personal jurisdiction with respect to any cause of action, related or unrelated to the New York contacts, if it does business in New York "not occasionally or casually, but with a fair measure of permanence and continuity." Tauza v. Susquehanna Coal Co., 220 N.Y. 259, 267, 115 N.E. 915, 917 (1917); accord Laufer v. Ostrow, 55 N.Y.2d 305, 449 N.Y.S.2d 456, 434 N.E.2d 692 (1982). A non-domiciliary may be served outside New York, and sued upon any cause of action, if it engages in a continuous and systematic course of doing business in New York. Frummer v. Hilton Hotels International, Inc., 19 N.Y.2d 533, 536, 281 N.Y.S.2d 41, 43, 227 N.E.2d 851, 853, cert. denied, 389 U.S. 923, 19 L. Ed. 2d 266, 88 S. Ct. 241 (1967); see Liquid Carriers Corp. v. American Marine Corp., 375 F.2d 951, 953 (2d Cir. 1967). Whether a corporation may be deemed to be present by virtue of its doing business in the jurisdiction depends upon the application of a "simple and pragmatic" test. Bryant v. Finnish National Airline, 15 N.Y.2d 426, 432, 260 N.Y.S.2d 625, 628-29, 208 N.E.2d 439, 441 (1965). We are not persuaded that this test is met upon the present record.
We note that Hoffritz's argument in the district court was that both Amajac, and Ayers individually, were doing business in New York. On appeal, however, Hoffritz argues only that Ayers, individually, was doing business in New York. In this connection, we are unaware of any decision of the New York State Court of Appeals addressing the question whether an individual, as opposed to a corporation, may properly be the subject of "doing business" jurisdiction. The Appellate Division cases on the issue are divided. Compare in In re Nilsa B. v. Clyde H., 84 A.D.2d 295, 445 N.Y.S.2d 579 (2d Dep't 1981) with ABKCO Industries, Inc. v. Lennon, 52 A.D.2d 435, 384 N.Y.S.2d 781 (1st Dep't 1976). We find it unnecessary, however, to resolve this issue because, even accepting the possibility that section 301 "doing business" jurisdiction may properly exist over an individual, we agree with district judge that there has been an insufficient showing to make out even a prima facie case for such jurisdiction here. The New York courts, in applying the pragmatic test for section 301 jurisdiction, have focused upon factors including: the existence of an office in New York; the solicitation of business in the state; the presence of bank accounts and other property in the state; and the presence of employees of the foreign defendant in the state. See, e.g., Frummer, 19 N.Y.2d at 537, 281 N.Y.S.2d at 44, 227 N.E.2d at 853; Bryant, 15 N.Y.2d at 430-31, 260 N.Y.S.2d at 627-28, 208 N.E.2d at 441-42; see also Liquid Carriers, 375 F.2d at 953. None of these elements are present in this case.*fn1 Accordingly, we hold that a showing of jurisdiction under section 301 has not been made.
That a defendant is not "doing business" in New York, however, does not require us to hold that it is not subject to suit in New York. If the defendant has "transacted business" in New York, it is suable on any cause of action that arises out of the transaction. CPLR § 302(a)(1). The showing necessary for a finding that defendant "transacted business" and is suable on a cause of action arising from that transaction is considerably less than that needed to establish defendant's "doing business," which renders the defendant subject to suit on even an unrelated cause of action. Beacon Enterprises, Inc., 715 F.2d at 763; Fontanetta v. American Board of Internal Medicine, 421 F.2d 355, 357 (2d Cir. 1970); George Reiner & Co. v. Schwartz, 41 N.Y.2d 648, 653-54, 394 N.Y.S.2d 844, 847-48, 363 N.E.2d 551, 554-55 (1977). This ...