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August 21, 1991


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


This is an action asserting numerous claims arising from defendants' activities in connection with the operation and management of plaintiff Qantel Corporation. Defendants have now moved: 1) to dismiss the amended complaint,*fn1 pursuant to Fed. R.Civ.P. 12(b)(2), for lack of personal jurisdiction over defendants Christl Niemuller and Goodwood Management Services, Inc.; 2) to dismiss those claims alleging harm to Qantel Canada, Inc. for lack of standing; 3) to dismiss plaintiff's Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1961, et seq., ("RICO") claim, pursuant to Fed.R.Civ.P. 9(b), for failure to plead the predicate acts of wire fraud with particularity, and pursuant to Fed.R.Civ.P. 12(b)(6), for failure to state a claim upon which relief can be granted; and 4) to dismiss plaintiff's conspiracy to defraud claim, pursuant to Fed.R.Civ.P. 9(b), for failure to plead fraud with particularity. For the reasons set forth below, defendants' motion is granted in part, and denied in part.


Plaintiff Qantel Corporation ("Qantel") is a New York corporation with its principal place of business in California. Qantel is a holding company engaged in the design, development, manufacture and marketing of computer equipment through its whollyowned subsidiaries MDS Capital Corporation ("MDS Capital") and Qantel Business Systems, Inc. ("Qantel Business"). MDS Capital, in turn, owns Qantel Canada, Inc. ("Qantel Canada"). Defendants Karl H. Niemuller ("Karl") and Christl Niemuller ("Christl") (collectively "the Niemullers") are residents of Canada, and are married to each other. Defendant Goodwood Management Services, Inc. ("Goodwood") is Canadian corporation with it principal place of business in Ontario, Canada. Goodwood is jointly owned by the Niemullers, and Christl is its President and sole director.

Prior to March 1, 1983, the Niemullers owned C.T.S. Computer Systems, Inc. ("CTS"), a Canadian corporation licensed as a distributor of computer systems manufactured by Qantel Business. The Niemullers also owned Goodwood, which purchased computer equipment for lease to other businesses. On March 1, 1983, Qantel purchased CTS from the Niemullers, and CTS was renamed "Qantel Canada, Inc." In connection with the sale, Karl was hired as President and a director of Qantel Canada, positions in which he remained though December 7, 1990. Karl subsequently also served as Qantel's Vice President of Corporate Marketing from October 30, 1985 through January 8, 1986, as Qantel's Executive Vice President from January 8, 1986 through January 2, 1990, as Qantel's Chief Operating Officer from March 20, 1986 through December 7, 1990, and as Qantel's President and Chief Executive Officer from January 2, 1990 until his resignation on December 7, 1990. Karl was also a member of Qantel's Board of Directors from September 17, 1987 through December 13, 1990.

The amended complaint in this action alleges that the defendants — and, in particular, Karl — engaged in certain misleading and fraudulent conduct in connection with the business activities of Qantel and Qantel Canada. Specifically, Qantel avers that the defendants conspired to have Karl, as President of Qantel Canada, use his position to direct subordinate Qantel Canada employees to accept improperly over a five-year period the assignment from Goodwood of numerous equipment leases that had been entered into by Goodwood (the "Goodwood Leases"). The amended complaint alleges that the Goodwood Leases were assigned to, and accepted by, Qantel Canada, without recourse, for amounts in excess of their fair value, and despite the Niemullers' knowledge of "facts indicating" that collection of future lease payments on some or all of the Goodwood Leases would be difficult or impossible. The amended complaint further alleges that Karl breached his fiduciary duties as a senior officer and director of Qantel by concealing and affirmatively misrepresenting his interest in the company—Goodwood—from which Qantel Canada purchased the Goodwood Leases.

In addition, Qantel seeks redress for Karl's alleged use of his positions as a senior officer and director of Qantel, and as President of Qantel Canada, to obtain improperly payment of certain personal expenses by Qantel Canada. The amended complaint alleges that Karl sought and obtained reimbursement from Qantel Canada of $10,000 in personal income taxes and almost $36,000 in closing costs incurred in the sale of the Niemullers' home, by submitting false expense reports to Qantel Canada identifying those expenses as "business expenses." The amended complaint also alleges that Karl obtained reimbursement from Qantel Canada for approximately $85,000 in other, unidentified, personal expenses by similarly submitting false expense reports.

Qantel also claims that Karl abused his positions of trust by directing the Qantel Canada payroll department to add two hundred hours to his Qantel vacation accrual balance. Karl thereafter allegedly directed his subordinates at Qantel Canada to mail the falsified records to Qantel's Chief Financial Officer, seeking and obtaining $24,000 from Qantel for the "unused accrued vacation time."

Finally, the amended complaint avers that by virtue of Karl's alleged concealment of his involvement, with Christl, in Goodwood and the Goodwood Lease transactions, and his concealment of the other above-described actions in breach of Karl's fiduciary duties to Qantel and Qantel Canada, Qantel was fraudulently induced to enter into certain agreements with Karl in the belief that he was a loyal, honest and faithful employee. In particular, Qantel entered into an employment agreement dated January 2, 1990, whereby Qantel agreed to employ Karl as its President and Chief Executive Officer at a salary of $250,000, and an agreement, dated August 2, 1989, entitling Karl to the payment by Qantel of $375,000 upon his resignation. The amounts of $250,000 and $375,000 have been paid to Karl by Qantel pursuant to these agreements.

Qantel seeks recovery against Karl alone for breach of fiduciary duty, fraud, negligent misrepresentation, rescission, manipulation of a corporation, breach of contract, and violation of RICO. In addition, the amended complaint contains claims of conspiracy to defraud as against all defendants, tortious interference with business relations as against Christl and Goodwood, and monies had and received as against Karl and Goodwood.


I. Personal Jurisdiction Over Christl and Goodwood

The first branch of defendants' motion seeks dismissal of the amended complaint as against Christl and Goodwood on the ground that this Court lacks personal jurisdiction over those defendants. It is undisputed that Christl is a Canadian citizen and Goodwood a Canadian corporation, and that neither Christl nor Goodwood performed any act within New York that could give rise to this Court's jurisdiction over either one of them. Indeed, the amended complaint contains only two references to acts involving New York: a Qantel Board of Directors meeting in 1987, and Karl's mailing of responses to a questionnaire to Qantel's attorneys in New York in which he allegedly failed to disclose his interest in Goodwood.

In this action, where the claims against Christl and Goodwood are state law claims, personal jurisdiction over them

  is determined by reference to the law of the jurisdiction in
  which the court sits. The burden of establishing jurisdiction
  over a defendant, by a preponderance of the evidence, is upon
  the plaintiff. Until an evidentiary hearing is held, however,
  the plaintiff need make only a prima facie showing that
  jurisdiction exists, and this remains true not withstanding a
  controverting presentation by the moving party. 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
  doubt exist, they are resolved in the plaintiff's favor.

Hoffritz For Cutlery, Inc. v. Amajac, Ltd., 763 F.2d 55, 57 (2d Cir. 1985) (citations omitted).*fn2 Section 302 of the New York Civil Practice Law and Rules ("CPLR") embodies New York's personal jurisdiction "longarm" rules.

Qantel argues that this Court has jurisdiction over Christl and Goodwood pursuant to CPLR § 302(a)(2), which provides in relevant part that "[a]s to a cause of action arising from any of the acts enumerated in this section, a court may exercise personal jurisdiction over any non-domiciliary . . . who in person or through an agent . . . commits a tortious act within the state." It has been held that under this provision "the acts of a co-conspirator within the state may be attributed to an out-of-state defendant for the purpose of obtaining personal jurisdiction over that defendant, on the theory that the co-conspirator is carrying out activities in New York pursuant to the conspiracy." Grosser v. Commodity Exchange, Inc., 639 F. Supp. 1293, 1308 (S.D.N.Y. 1986) (citation omitted), aff'd without op., 859 F.2d 148 (2d Cir. 1988). To allege a conspiracy, facts must be alleged showing an agreement to enter into the conspiracy, the non-domiciliary's participation in the conspiracy and acts in furtherance thereof, and a connection between the non-domiciliary and the allegedly tortious acts committed in New York. See Grosser, supra, 639 F. Supp. at 1308-09; Soltex Polymer Corp. v. Fortex Industries, Inc., 590 F. Supp. 1453, 1463 ...

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