The opinion of the court was delivered by: WEXLER
John Kosta commenced this diversity suit against the St. George's University School of Medicine ("St. George's" or the "Medical School"), and Charles R. Modica, St. George's Chancellor and the Chairman of its Board of Trustees, for acts in violation of New York's common law concerning non-academic suspensions. Kosta seeks compensatory and punitive damages, attorneys fees, and reinstatement as a student at St. George's. Modica and St. George's have moved jointly to dismiss the Complaint for lack of personal jurisdiction, insufficiency of service of process, and failure to state a claim. Rule 12(b)(2),(5),(6), Fed. R. Civ. P.
Kosta, a resident of New Jersey, alleges that in early 1984, as a second year medical student at St. George's, (which was then conducting classes in Barbados, West Indies), he informed a St. George's dean that he had observed a number of other students cheating on tests. These charges were rejected by the Medical School, but the complaint alleges that the students conspired to harass Kosta and disrupt his life in retaliation for the accusation. Kosta complained to the Medical School, but no action was taken. Shortly thereafter, in February, 1984, at the suggestion of St. George's Dean of Students, Kosta took a leave of absence and returned to New Jersey. Kosta subsequently met defendant Charles Modica at the offices of the Foreign Medical School Services Corporation in Bay Shore, New York, when Modica was visiting the United States on business and apparently, they discussed the circumstances of Kosta's conduct at St. George's. Modica subsequently informed Kosta that a hearing would be held in Barbados to inquire into the behavior of Kosta and the other students. Kosta did not appear at the hearing and did not present any evidence or witnesses on his behalf, despite having been notified of an opportunity to do so.
Kosta alleges that after he first learned of the hearing, he requested that it be adjourned until after the spring semester and moved to Bay Shore, New York, and that these requests were granted. Kosta also alleges, however, that on April 2, Modica's office called him at home in New Jersey to inform him that the hearing would be held in Barbados four days hence, on April 6. Kosta claims that he reminded the caller of his earlier understanding and again requested a continuance and a change of venue to Bay Shore but that these requests were denied. Kosta admits that he did not attend the hearing.
Approximately two months later, Kosta received a letter from Modica placing Kosta on a "Medical Leave of Absence." Under its terms, Kosta would be able to re-matriculate at St. George's only if he sought psychiatric help and was approved by a panel of three psychiatrists. Kosta twice wrote Modica to request a reconsideration or appeal of the decision, but there was no reply. Kosta travelled to Barbados later that year in an attempt to register for the fall, 1984 term, but the Medical School would not allow Kosta to do so. Kosta obtained counsel and this lawsuit ensued.
Defendants contend that the Complaint should be dismissed because they are not subject to personal jurisdiction in New York. The following facts are relevant to the jurisdictional issue.
St. George's was established in 1976 in the West Indies largely through the energies of R. Modica, an attorney. The Medical School is an entity organized under the laws of Grenada and its stock, which is controlled by four shareholders, has been placed into an educational trust controlled by nine trustees. For a period in the fall of 1983, events compelled St. George's to cease operations in Grenada and evacuate its students to other locations. During that time, St. George's conducted classes on the campus of Long Island University ("LIU") in Brooklyn, New York, and arranged with LIU to house students in LIU's dormitories. None of events giving rise to the instant suit occurred at the LIU campus. St. George's has twice applied to the New York State Commissioner of Education to obtain clinical clerkships in New York. According to its own newsletter, St. George's attracts 508 students from the United States, with the majority coming from New York. St. George's solicits students with advertisements in the Sunday edition of the New York Times.
Kosta contends that St. George's is subject to jurisdiction in New York because of the relationship between St. George's and the Foreign Medical School Services Corporation (FMSSC), a New York corporation with offices in Bay Shore, Long Island. FMSSC, a profit-making corporation, is owned wholly by a Nevada corporation, the Institute for Medical Education. Two of the Nevada corporations's shareholders, including Modica, are also shareholders or trustees of St. George's. Modica is an officer of FMSSC and St. George's Chancellor and Chairman of the Board of Trustees. Under a contract with St. George's, FMSSC provides a number of services for St. George's and FMSSC retains between thirty-four and forty-two employees at its Bay Shore, Long Island office for that purpose.
It is clear, however, that FMSSC is more than a mail drop or telex center for St. George's. St. George's letterhead identifies FMSSC as its sole North American correspondent and FMSSC's letterhead identifies it as the North American correspondent for St. George's. All student financial affairs, including statements and tuition payments, are handled through the FMSSC. Checks payable to St. George's are endorsed over to FMSSC for deposit in FMSSC's New York bank and ultimate transfer to St. George's account in a Canadian bank. Students seeking admission to St. George's are often directed to appear at FMSSC's Bay Shore office for interviews. St. George's admissions director and assistant director both maintain offices in Bay Shore at FMSSC. Nearly all of St. George's administrative matters are handled by FMSSC in Bay Shore. Apparently, the only non-academic or non-educational affairs performed by St. George's are those directly related to the functioning of school facilities in the West Indies. Furthermore, it does not appear that FMSSC provides services to any other organization or medical school except St. George's. In addition, St. George's personnel, including Modica, often visit FMSSC's offices and conduct business there.
Initially, the Court decides that the exercise of jurisdiction over St. George's will not violate the Due Process Clause of the Constitution. Burger King v. Rudzewicz, 471 U.S. 462, 105 S. Ct. 2174, 85 L. Ed. 2d 528 (1985); McGee v. International Life Insurance Co., 355 U.S. 220, 78 S. Ct. 199, 2 L. Ed. 2d 223 (1957); International Shoe Co. v. Washington, 326 U.S. 310, 66 S. Ct. 154, 90 L. Ed. 95 (1945); But cf. Worldwide Volkswagen v. Woodson, 444 U.S. 286, 100 S. Ct. 559, 62 L. Ed. 2d 490 (1980). Moreover, as a New York corporation, FMSSC is subject to jurisdiction in New York. N.Y. Civ. Prac. L. § 301. The issue then becomes whether St. George's, admittedly a foreign, non-resident corporation, is doing business in New York, and subjection under New York law, by virtue of either its own activities or its relationship with the FMSSC.
Under the facts in this case, it is clear that FMSSC, through its contract with St. George's, is an agent for St. George's in New York. FMSSC handles nearly every element of St. George's administrative affairs with respect to the North American students, which comprise approximately seventy percent of St. George's student body. These affairs include admissions, student financial affairs, and recordkeeping. FMSSC's Bay Shore office also serves as a base of operations for visiting St. George's staff. Most significant perhaps is that Modica is an owner and officer of both entities. New York courts have held that an important element in establishing jurisdiction is the degree of common ownership between the New York and the foreign corporation. Frummer v. Hilton Hotels International, Inc., 19 N.Y.2d 533, 281 N.Y.S.2d 41, 227 N.E.2d 851, cert. denied, 389 U.S. 923, 88 S. Ct. 241, 19 L. Ed. 2d 266 (1967); Taca International Airlines, S.A. v. Rolls-Royce of England, Ltd., 15 N.Y.2d 533, 281 N.Y.S.2d 129 (1965); Tauza v. Susquehanna Coal Co., 220 N.Y. 259, 115 N.E. 915 (1917). St. George's is also subject to jurisdiction under § 301 for its own acts, without reference to its relationship to FMSSC. Specifically, St. George's arrangement with LIU for teaching and dormitory facilities in late 1983 indicates that St. George's was "doing ...