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BANKERS TRUST CO. v. NORDHEIMER

September 21, 1990

BANKERS TRUST COMPANY, PLAINTIFF,
v.
GARY H. NORDHEIMER, SCOTT A. NORDHEIMER, EDMUND A. ABRAMSON AND RALPH WEISER, DEFENDANTS.



The opinion of the court was delivered by: Edelstein, District Judge:

  OPINION & ORDER

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.

I. BACKGROUND

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.

The second type of financing was a line of credit established by Bankers Trust for SHC, from which each defendant was personally authorized to draw. SHC drew on this line of credit by submitting a letter to Bankers Trust in New York explaining the planned use for the money it intended to borrow. If the request was approved, Bankers Trust transferred money to SHC's checking account at Bankers Trust in New York. In return, SHC would execute a promissory note for the amount drawn and deliver it to a Bankers Trust's office in either White Plains, New York or New York City.

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.

II. DISCUSSION

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 . . . [1] transacts any business within the state or [2] 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).

A. Transacted Business

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 ...


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