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RATES TECHONOLOGY, INC. v. DIORIO

January 30, 1986

RATES TECHONOLOGY, INC., a Delaware corporation, Individually and on behalf of ADVANCED TELECOMUNICATIONS AND MANUFACTURING CORP., a Delaware corporation in formation, Plaintiff,
v.
PETER A. DIORIO and UNIVERSAL PAYPHONE CORPORATION, a New Mexico Corporation, Defendants.



The opinion of the court was delivered by: MCLAUGHLIN

McLAUGHLIN, District Judge

This is an action for breach of contract, fraud and breach of fiduciary duty arising out of the parties' ill-fated attempt at a joint venture. Defendants move to dismiss the action for lack of personal jurisdiction. Fed. R. Civ. P. 12(b)(2).

Facts

 Plaintiff is a Delaware corporation with its principal place of business in New York. Defendant Universal Payphone Corporation ("Universal") is a New Mexico corporation having its principal place of business in New Mexico. Defendant DiOrio, a New Mexico resident, is the president of Universal.

 On November 2, 1984, certain of Rates' officers met with DiOrio and Lee G. Lovett, a co-owner of Universal, in New York for three to four hours. The parties differ in their characterization of this meeting.

 Defendant contends that the meeting was in the nature of a sales presentation by Rates, designed to "show-off" the attractive features of its pay telephone system. Plaintiff, on the other hand, argues that the parties planned the basic structure of the deal at this meeting and that their subsequent negotiations merely involved working out the details of the contractual relationship.

 In any event, on January 22, 1985, following further negotiations (which occurred over the telephone or at meetings outside of New York), the parties entered into a contract setting forth the terms of their agreement. The contract was signed by plaintiff's representative in New York and by defendant D'Orio in Washington, D.C.

 The contract called for the formation of a separate company, Advanced Telecommunications & Manufacturing Corporation ("AT&M"), which would "hold" certain patented telephone technology (to be supplied by Rates) and enter into manufacturing and marketing contracts (to be negotiated by DiOrio and Lovett). The agreement contemplated selling pay telephones throughout the country, including New York.

 Shortly after the contract was executed, defendants paid the first installment of development costs due to Rates under the agreement. In turn, Rates issued a patent license to AT&M. The joint venture was underway.

 On February 11, 1985, Lovett, acting on behalf of AT&M, entered into a manufacturing contract with Seiscor Technologies, Inc. ("Seiscor"). On February 24, 1985, however, Lovett cancelled this contract. Thereafter, DiOrio, acting on behalf of Universal (not the joint venture), entered into a similar contract with Seiscor.

 Defendants have taken no further action with respect to the joint venture.

 Accordingly, Rates commenced this action alleging that defendants (a) breached the contract, (b) breached their fiduciary duty by converting to their own use a business opportunity that belonged to the joint venture, and (c) fraudulently induced Rates to enter the contract.

 Discussion

 The question before this Court is whether long-arm jurisdiction can be asserted over the defendants under C.P.L.R. ยง 302. See Arrowsmith v. United Press International, 320 F.2d 219, 223 (2d Cir. 1963). The issue of personal jurisdiction must be determined separately for each cause of action asserted in the complaint. Interface ...


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