the closing would occur in St Louis, Missouri.
Fourth, according to Sale, at defendants' insistence a forum selection clause that would have made them subject to the exclusive jurisdiction of any state or federal court in New York was removed from the final Agreement. Defendants contend, and BSC does not refute, that the initial draft of the Agreement contained such a forum selection clause, and that defendants requested that the clause, be omitted from the final Agreement. (Sale Aff. at P 5).
As with all contracts, the intent of the parties controls. It is evident from the negotiations between the panties that defendants took clear and unequivocal steps to avoid activities that would subject them to jurisdiction in New York. Those acts are important and should be given weight in determining whether defendants are subject to being sued in New York.
Fifth, none of the payments owed under any of the agreements were required to be made in New York. Cf. Cutco Indus., 806 F.2d at 368 (stating that notices and payments sent to the forum state are relevant for jurisdictional purposes because they subject senders to the supervision of the company in the forum state); Cooperstein, 124 A.D.2d 632, 507 N.Y.S.2d 893 (relying on fact that defendant did not send lend proceeds to New York in finding no jurisdiction). In fact, all payments due under the various agreements were owed by BSC to defendants outside of New York.
In contrast, only two factors support BSC's contention that defendants transacted business in New York: (1) the New York choice-of-law clauses in the various agreements; and (2) BSC's presence in New York. However, in light of the contrary evidence neither is sufficient to sustain even prima facie jurisdiction over defendants. A choice-of-law clause, although relevant in determining whether a non-domiciliary 'transacted business' under § 302(a)(1), by itself is insufficient to confer jurisdiction over a non-domiciliary defendant. Cutco Indus., 806 F.2d at 366-67. See also Peter Lisec Glastechnische Industrie GmbH v. Lenhardt Maschinenbau GmbH, 173 A.D.2d 70, 577 N.Y.S.2d 803 (1st Dep't 1991). Similarly, "the focus of a CPLR § 302 inquiry is on what defendant . . . did in New York in connection with the cause of action," not what plaintiff did there. PaineWebber, Inc., 748 F. Supp. at 119. A plaintiff may not rely solely upon his own activity in New York for purposes of § 302(a)(1) jurisdiction. Laufer v. Ostrow, 55 N.Y.2d 305, 312, 449 N.Y.S.2d 456, 434 N.E.2d 692 (1982).
Defendants did not purposefully avail themselves of the privilege of conducting business in New York, nor did they purposefully project themselves into the state. Cf. Eugene Iovine, Inc. v. Rudox Engine & Equipment Co., 786 F. Supp. 236, 238-39 (S.D.N.Y. 1992) ("Rudox's allegation that Horlick 'reached out' beyond Massachusetts to negotiate a contract with Rudox is not relevant to a § 302(a)(1) claim."). Indeed, a review of the totality of defendants' contacts with New York clearly reveals that defendants intentionally avoided conducting business in New York. Accordingly, I find that plaintiff has failed to establish prima facie jurisdiction over any of the defendants under the "transacts business" clause of CPLR § 302(a)(1).
B. Contracts Anywhere to Supply Goods or Services
In a recent opinion, A.I. Trade Finance, Inc. v. Petra Bank, 989 F.2d 76 (2d Cir. 1993), the Second Circuit held that a financial guaranty payable in New York is a contract to perform services within the meaning of CPLR § 302(a)(1).
Id. at 81. Relying on A.I. Trade, BSC contends that this court should exercise personal jurisdiction over all three defendants because the indemnity agreements signed by defendants, like the financial guaranty in A.I. Trade, are contracts to supply services in New York within the meaning of CPLR § 302(a)(1). I disagree.
The guaranty at issue in A.I. Trade and indemnity agreements of the sort at issue here are fundamentally different contracts. Under an indemnity contract the liability assumed is primary, not secondary like the liability assumed under a contract of guaranty. Assets Realization Co. v. Roth, 226 N.Y. 370, 123 N.E. 743 (1919); N.Y.Jur.2d, Contribution, Indemnity, and Subrogation, § 8 (1992). The distinction is critical for purposes of our analysis because as the court in A.I. Trade noted:
Courts applying 302(a)(1) to the underlying original obligation to pay money and courts applying 302(a)(1) to a guaranty have treated them differently. Some courts have held that a primary obligor's agreement to designate New York as a place of payment of its debt does not transform the debt into a contract to perform services in New York for jurisdictional purposes.
A.I. Trade, 989 F.2d at 81 (citing cases). Consequently, because defendants are primary obligors rather than secondary guarantors, A.I. Trade does not control the jurisdictional analysis in this action.
For jurisdictional purposes, an indemnity agreement, as a primary obligation, is akin to a promissory note, and "it is well-settled that 'the mere designation of New York as the site for payment on a promissory note is insufficient to confer jurisdiction over a nonresident defendant."' First Federal Savings Bank v. Dennis, 680 F. Supp. 579, 584 (S.D.N.Y. 1988) (quoting Plaza Realty Investors, 484 F. Supp. at 346). See also American Recreation Group, Inc. v. Woznicki, 87 A.D.2d 600, 448 N.Y.S.2d 51 (2d Dep't 1982) (holding that agreement to pay promissory note in New York did not confer jurisdiction over defendant). Moreover, the indemnity agreements at issue here do not even require that payments be made in New York. Thus, no defendant is obligated to make any payments, or perform any other obligation, in New York. Accordingly, I find that plaintiff has failed to establish prima facie jurisdiction over any of the defendants under the "contracts anywhere" clause of CPLR § 302(a)(1).
Therefore, the fact that defendants agreed to indemnify BSC, standing alone, is insufficient to establish jurisdiction over defendants. See Acres Int'l Corp. v. Moore Business Forms, Inc., 1988 WL 129367, *3 (W.D.N.Y. 1988) (Elfvin, J.); Media Corp. of America v. Motif Manufacturing Co., Inc., 524 F. Supp. 86, 87 (S.D.N.Y. 1981). To confer jurisdiction over defendants BSC must offer proof that defendants engaged in additional activities in or relating to New York. See First Federal Savings Bank, 680 F. Supp. at 584.
However, as the discussion above reveals, BSC has offered no convincing evidence to support the conclusion that defendants availed themselves of the privilege of conducting activities in New York. The mere existence of the indemnity agreements does not change that fact.
Furthermore, indemnity agreements are quite standard in contracts of this type. It would be anomalous if insertion of such a clause in an agreement could by itself force the non-resident to submit to jurisdiction in New York. "The fulfillment of a duty to defend is not the kind of performance that makes one personally amenable to New York jurisdiction. See Acres Int'l Corp., 1988 WL 129367, *3; Media Corp., 524 F. Supp. at 87.
Accordingly, I find that plaintiff has failed to establish prima facie jurisdiction over any of the defendants under the "contracts anywhere" clause of CPLR § 302(a)(1).
III. N.Y.Civ.Prac.L & R. § 302(a)(3)
BSC also contends that this Court may exercise jurisdiction over defendants pursuant to CPLR § 302(a)(3). That section permits New York courts to exercise personal jurisdiction over a non-domiciliary, who in person or through an agent "commits a tortious act without the state causing injury to person or property within the state" if he, inter alia, "(ii) expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce. . ." N.Y.Civ.Prac.L. & R. 302(a)(3)(ii). The tortious act allegedly committed by defendants here is fraud, namely, making false representations and failing to disclose material information regarding critical aspects of the sale and manufacture of BARC airguns.
The parties do not dispute that the alleged tort occurred outside New York. Accordingly, the issue left to be resolved is whether BSC has made a prima facie showing that the remaining elements of § 302(a)(3)(ii) have been satisfied. BSC contends that the financial loss they suffered as a result of defendants tortious acts (the $ 4,000,000 paid under the Purchase Agreement) caused injury to them in New York, and that defendants should have foreseen the New York consequences of their actions because they knew that BSC was located in New York. I disagree.
"New York courts uniformly hold that the situs of a nonphysical, commercial injury is 'where the critical events associated with the dispute took place.'" United Bank of Kuwait, P.L.C. v. James M. Bridges, Ltd., 766 F. Supp. 113, 116 (S.D.N.Y. 1991) (quoting Am. Eutectic Welding Alloys Sales Co. v. Dytron Alloy Corp., 439 F.2d 428, 433 (2d Cir. 1971)). An injury "does not occur within the state simply because the plaintiff is a resident. 'The situs of the injury is the location of the original event which caused the injury, not the location where the resultant damages are subsequently felt by the plaintiff.'" Mareno v. Rowe, 910 F.2d 1043, 1046 (2d Cir. 1990) (quoting Carte v. Parkoff, 152 A.D.2d 615, 616, 543 N.Y.S.2d 718 (2d Dep't 1989)), cert. denied, 498 U.S. 1028 (1991). Thus, "the occurrence of financial consequences in New York due to the fortuitous location of the plaintiffs in New York is not a sufficient basis for jurisdiction under § 302(a)(3)." Pocahontas Supreme Coal Co., Inc. v. Nat'l Mines Corp., 90 F.R.D. 67, 73 (S.D.N.Y. 1981); see also Fantis Foods, Inc. v. Standard Importing Co., 49 N.Y.2d 317, 326, 425 N.Y.S.2d 783, 402 N.E.2d 122 (1980).
If the rule were otherwise, any financial loss by a New York corporation could subject a non-domiciliary to jurisdiction in New York. Such a rule obviously places too much emphasis on the activities of and affects on the New York plaintiff rather than the actions of the non-domiciliary defendant.
In this case, the alleged misrepresentations and omissions were made outside New York, in New Orleans where the parties signed the Purchase Agreement and/or in St. Louis where the closing was held. BSC, through its representatives, was present at both locations where defendants committed the alleged fraud, and it signed the relevant agreements and closed the sale in reliance on the false representations and omissions outside of New York. Thus, New Orleans and/or St. Louis, not New York, constitute the original location of the event which caused the injury. Any financial consequences suffered by BSC in New York is due solely to the fortuitous location of BSC in that state.
BSC attempts to avoid the outcome of the application of these well-settled jurisdictional principles by equating this case with Hargrave v. Oki Nursery, Inc., 636 F.2d 897 (2d Cir. 1980).
This case, though, is distinguishable from Hargrave. In Hargrave, the court expressly relied on three factors in arriving at its conclusion that plaintiffs suffered injury in New York: First, the injury was immediately felt in New York because plaintiffs were domiciled there; second, plaintiffs were in New York when they received the misrepresentations; and third, the diseased vines were to be shipped to New York. See Id., at 900. The court also noted that New York was the only state in which plaintiffs had property that could be injured. Id.
In contrast, in this case, BSC was in New Orleans and/or St. Louis when it received and relied on the misrepresentations and all of the property purchased by BSC is located outside of New York. Thus, the only similarity between Hargrave and this case is that plaintiffs in both cases were domiciled in New York. However, as the case law makes clear, merely being domiciled in New York is an insufficient basis upon which to sustain § 302(a)(3) jurisdiction. See Mareno, 910 F.2d at 1046. Accordingly, I find that BSC has failed to establish prima facie jurisdiction over any of the defendants pursuant to CPLR § 302(a)(3).
For the reasons set forth above, defendants' motion to dismiss this action for lack of personal jurisdiction is granted, and the complaint is dismissed.
IT IS SO ORDERED.
DAVID G. LARIMER
UNITED STATES DISTRICT JUDGE
Dated: Rochester, New York
July 20, 1993.