The opinion of the court was delivered by: Edelstein, District Judge:
Defendants Edmund Abramson and Ralph Weiser and defendants
Gary and Scott Nordheimer have moved pursuant to Federal Rule
of Civil Procedure 12(b)(2) to dismiss this action on the
ground that the Court lacks in personam jurisdiction. The
action against the Nordheimers has been automatically stayed
because involuntary bankruptcy proceedings have been filed
against them. For the following reasons, defendants Abramson
and Weiser's motion is denied.
Bankers Trust has brought this action seeking to recover
payment of a loan made to defendants. Defendants have moved to
dismiss for lack of personal jurisdiction alleging that they
do not have sufficient contacts with New York to warrant the
exercise of jurisdiction in this action. The underlying facts
concerning this motion are uncontested.
Defendants Abramson and Weiser are domiciliaries of Florida.
In August 1985, the four defendants contacted Bankers Trust
Company's office in White Plains, New York and asked Bankers
Trust to provide financing for the planned purchase and
renovation of the Sutton Place Hotel in New York City.
Defendants sought this financing through two entities they
formed expressly to pursue the Sutton Place Hotel venture:
Sutton Hotel Corporation ("SHC") and Sutton Hotel Association
("SHA"). Each of the four defendants is a director and owns,
either directly or indirectly, a 25% interest in SHC, a
Delaware Corporation. SHC owns 24.5% of SHA, a New York
limited partnership, and is SHA's general partner. Defendants
Abramson and Weiser, as directors of SHC, voted along with the
Nordheimers for a corporate resolution authorizing SHC to
borrow money from Bankers Trust in New York.
Bankers Trust agreed to provide SHC with financing for the
venture on the basis of each individual defendant's financial
status. Accordingly, Bankers Trust required that each
defendant personally guarantee payment of any loans made to
SHC. Each defendant signed an unlimited guaranty of payment to
the Bank for all liabilities incurred by SHC. Each guarantee
expressly stated that it was to be governed by the law of the
State of New York.
On the basis of these personal guarantees, Bankers Trust
agreed to provide two types of financing. First, Bankers Trust
gave a four million dollar letter of credit to Perpetual
American Bank to secure repayment of a loan it had made in
connection with the Sutton Place Hotel venture. The form of
the letter of credit was changed on several occasions at
defendants' request. In each case, SHC or SHA submitted an
application to Bankers Trust in New York. To draw on the
letter of credit, Perpetual is required to give written notice
to Bankers Trust in New York that required loan payments have
not been met.
Over time, SHA defaulted on its obligations to Perpetual.
Before Perpetual could draw on the letter of credit,
defendants Abramson and Weiser objected to the drawing on two
grounds: first, the Perpetual loan was made to SHA, but the
Bankers Trust Letter of Credit guaranteed SHC; second, SHA was
created without Abramson and Weiser's consent and its creation
reduced their interest in the Sutton Place Hotel venture.
As a result of the failure to make required payments, the
parties met in Washington D.C. where they negotiated an
"Amended and Restated Agreement" which defendants executed in
Florida. As part of this agreement, each defendant
acknowledged and reaffirmed the guaranty previously executed
by him. The Amended and Restated Agreement sets out a schedule
for defendants to pay off obligations that arose under the
defendant's initial guaranty agreements.
Personal jurisdiction in a diversity action is determined by
the law of the forum in which the federal court sits.
Hoffritz for Cutlery, Inc. v. Amajac, Ltd., 763 F.2d 55, 57 (2d
Cir. 1985). Section 302(a)(1) of the New York Civil Practice
Law and Rules (McKinney's 1972 & Supp. 1989) ("CPLR 302(a)(1)")
provides that "a court may exercise personal jurisdiction over
any nondomiciliary . . . who in person or through an agent . .
.  transacts any business within the state or  contracts
anywhere to supply goods or services in the state. . . ." In
the instant action, personal jurisdiction is proper because
defendants have both transacted business in New York and
supplied goods and services to New York under CPLR 302(a)(1).
The standard for determining whether a defendant has
transacted business under CPLR 302(a)(1) is whether the
totality of circumstances establish that the defendant
purposefully availed himself of the privilege of conducting
activities in New York. First City Federal Savings Bank v.
Dennis, 680 F. Supp. 579, 583 (S.D.N.Y. 1988). The plaintiff's
cause of action must arise from the acts that form the basis of
the allegation that the defendant is transacting business in
New York. Id. When a defendant is sued upon a loan made payable
in New York and the loan is subsequently the sole basis of an
agreement executed outside the state, the subsequent agreement
does not rob the New York State courts of jurisdiction. Lewis
and Eugenia Van Wezel Foundation v. Guerdon ...