York that `substantially advance' or are `essential' to one's
formation of a business agreement, such activity will
constitute a legally sufficient basis for jurisdiction under
§ 302(a)(1)." Current Textiles Corp. v. AVA Industries, Inc.,
624 F. Supp. 819, 820 (S.D.N.Y. 1985), citing Lehigh Valley
Industries, Inc. v. Birenbaum, 527 F.2d 87, 91 (2d Cir. 1975).
Milgrim and the defendants set forth vastly different
versions of the events leading to the formation of their
contractual relationships. Construing the pleadings and
affidavits in favor of Milgrim, this Court finds each of the
corporate defendants did transact sufficient business with
plaintiff in New York to support the Court's exercise of
personal jurisdiction over them at this stage of the
Milgrim alleges that its relationship with Shephard began at
a meeting between Lacey and Milgrim partner Mantle which took
place in New York City on February 13, 1989. Milgrim asserts
that it was at this New York meeting that it agreed to provide
and Lacey agreed to cause Shephard to pay for Milgrim's
services.*fn2 Affidavit of Raymond A. Mantle, sworn to on June
28, 1991 ("Mantle Aff."), at ¶ 5. That same day, Milgrim sent a
letter confirming its representation of Shephard to Shephard's
Canadian counsel. Mantle Aff. Exh. 1. Because Milgrim alleges
that negotiations which took place in New York substantially
advanced and were essential to the formation of its agreement
with Shephard, there is personal jurisdiction over Shephard
pursuant to § 302(a)(1).
Milgrim claims that at the same New York meeting with Lacey
on February 13, 1989 in which Mantle agreed to represent
Shephard, Mantle also agreed to represent Arimathaea. Mantle
Aff. ¶ 4. For the reasons discussed with regard to Shephard,
supra, this Court has jurisdiction over Arimathaea.
Milgrim claims that it first began work related to Nycal in
January 1990 when Lacey telephoned Mantle at Milgrim's New York
office and asked for Milgrim's tax advice regarding a pending
personal acquisition of Nycal by Lacey. Mantle Aff. ¶ 8. On
February 23, 1990, Lacey met with Milgrim attorneys at
Milgrim's New York office, and this tax advice was
communicated. Mantle Aff. ¶ 9. On April 5, 1990, another
meeting was held at Milgrim's New York office and attended by
Mantle and Lacey, who by then was Nycal's Chief Executive
Officer. At this second meeting, Lacey and Mantle negotiated
the terms upon which Milgrim would serve as Nycal's general
counsel and discussed the method of billing Milgrim's fees.
Mantle Aff. ¶ 10. After this meeting, Mantle sent a letter
dated April 19, 1990 to Lacey confirming the agreement to
represent Nycal. Mantle Aff. ¶ 12, Exh. 2.
Accordingly, this Court has jurisdiction over Nycal.
For the reasons set forth in section II of this opinion, this
Court finds it unnecessary to resolve the question of whether
there is personal jurisdiction over Lacey.
II. MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM
The defendants move pursuant to Fed.R.Civ.P. 12(b)(6) to
dismiss Milgrim's fraud claim for failure to state a claim upon
which relief may be granted. This Court has excluded all
matters outside the pleadings and so does not convert this
motion to one for summary judgement. Kopec v.
Coughlin, 922 F.2d 152, 154-155 (2d Cir. 1991).
Federal Rule of Civil Procedure 9(b) requires that:
In all averments of fraud or mistake, the
circumstances constituting fraud or mistake shall
be stated with particularity. Malice, intent,
knowledge, and other condition of mind of a person
may be averred generally.
Fed.R.Civ.Pro. 9(b). It is a generally accepted principle that
allegations of fraud may not be based on information and
belief,*fn3 and these allegations generally must specify the
time, place, speaker, and content of the alleged
misrepresentations. Di Vittorio v. Equidyne Extractive
Industries, Inc., 822 F.2d 1242, 1247 (2d Cir. 1987).
Turning now to Milgrim's complaint, this Court notes that
Milgrim's allegation of fraud is based "Upon information and
belief." Complaint, ¶ 16. Milgrim does identify the content and
source of the fraudulent statement as Lacey's promise to cause
the defendants to pay Milgrim's fees and alleges that Lacey
knew he did not intend to do so. Milgrim fails to identify the
time or place of the alleged fraudulent, statement.
Furthermore, Milgrim fails to state a factual basis for its
claim that Lacey knew his promise of payment was fraudulent as
is required by Rule 9(b). Luce v. Edelstein, supra note 3 at
54. If a pleading such a Milgrim's is sufficient to comply with
Rule 9(b), all breach of contract claims would include such an
allegation in order to assert a claim of fraud against an
individual defendant. Milgrim's failure to include such factual
support is fatal, and the defendants' motion to dismiss the
fraud claims for failure to state a claim is granted.
III. MOTION TO DISMISS FOR LACK OF SUBJECT MATTER JURISDICTION
Defendant Shephard has moved pursuant to Fed.R.Civ.P.
12(b)(1) to dismiss all claims against it for lack of subject
matter jurisdiction, arguing that the amount in controversy
does not exceed $50,000. 28 U.S.C. § 1332 (1991).
Milgrim's complaint alleges that, "Defendant Shephard owes
plaintiff $48,422.18 for legal services rendered to, and
disbursements and charges incurred for Shephard from February
1989 through November 1990." Complaint, ¶ 10. In addition,
Milgrim alleges that Shephard owes it the costs of defending
and indemnification for the suits filed by the McBride firm.
Complaint, ¶ 11-12. The defendants argue that Milgrim's
liability in the McBride suit is a mere "contingency" which is
"too speculative to be considered in the amount in controversy
for purposes of 28 U.S.C. § 1332." Def.Rep.Mem. at 9.
Therefore, defendants urge that only $48,422.18 is in
controversy, and there is no diversity jurisdiction with regard
It is well established that the amount in controversy for
purposes of diversity jurisdiction should be determined from
the face of the complaint itself, unless it appears or can be
shown that the amount stated in the complaint is not claimed in
good faith. Horton v. Liberty Mutual Ins. Co., 367 U.S. 348,
353, 81 S.Ct. 1570, 1573, 6 L.Ed.2d 890 (1961). In order to
show that the amount claimed by the plaintiff was not made in
good faith, it must appear to a "legal certainty" that the
claim is really for less than the jurisdictional amount in
controversy. Id. As the Second Circuit has summarized:
The jurisdictional determination is to be made on
the basis of the plaintiff's allegations, not on a
decision on the merits. Moreover, even where those
allegations leave grave doubt about the likelihood
of a recovery of the requisite amount, dismissal
is not warranted. (citations omitted) Rather, it
must appear to a legal certainty that the
plaintiff can not recover sufficient damages to
jurisdiction. Zacharia v. Harbor Island Spa, Inc.,
684 F.2d 199, 202 (2d Cir. 1982).
Milgrim has alleged that Shephard owes it $48,422.18 plus the
costs of defending and indemnification for the McBride suit for
$36,084.36. The difference between $50,000 and Milgrim's
definitive allegation of $48,422.18 is $1,577.82. Therefore,
under the teaching of Zacharia, supra, to defeat jurisdiction,
it must appear to a legal certainty that Milgrim's costs of
defending the McBride suit and its possible ultimate liability
for damages, both of which arise from actions taken on behalf
of Shephard, could not exceed $1,577.82. This strict standard
has not been met here,