The opinion of the court was delivered by: ARTHUR D. SPATT
In this diversity case, the defendants Signal Technology Corp. ("Signal") and Ditric Optics, Inc. ("Ditric") move pursuant to Fed. R. Civ. P. 12(c) for a judgment on the pleadings (1) dismissing the complaint as against the defendant Signal, and (2) dismissing the tenth cause of action in the complaint as against the defendant Ditric. The basis of the underlying controversy is the alleged breach by Ditric of a ten-year commercial lease between Sunrise and Ditric.
The plaintiff Sunrise Industrial Joint Venture ("Sunrise") is a New York general partnership. The defendant Ditric is a corporation organized under the laws of Massachusetts. Signal is a corporation organized under the laws of Delaware, with offices in Massachusetts. Until the time it ceased doing business, Ditric was a wholly owned subsidiary of Signal.
On March 15, 1988 Sunrise, as landlord, and Ditric, as tenant, entered into a ten-year commercial lease of a 17,000 square foot building located at 91-4 Colin Drive, Holbrook, New York. Commencement of the lease began on June 1, 1988 and expired on September 30, 1998. Under the terms of the lease, Ditric's use of the premises was limited to the manufacture, warehousing and distribution of optical equipment and offices incident to these activities. Rent for the premises was fixed at $ 93,621 a year for the first five years, and $ 110,643 a year for the remaining five years. The rent was payable in monthly installments at the beginning of the month, the first payment commencing on October 1, 1988.
Sunrise alleges that Ditric was current with rent payments through May 30, 1993, namely, for the first five years of the lease term, but that after that date it failed to pay any more rent. According to the plaintiff, Ditric was notified on July 12, 1993 of its default in accordance with the terms of the lease, and has failed to cure the default.
As a result of the alleged default and sale of Ditric's assets, the plaintiff commenced the present lawsuit. The complaint alleges eleven causes of action against Ditric, of which the last six are also alleged against Signal. The first five causes of action are for various monetary damages allegedly provided to Sunrise by the lease terms in the event of a default by Ditric, including the amount of rent owed, the full amount of the fixed rent, the cost of reletting the premises, costs and attorneys' fees, and interest calculated at 15% annually.
The sixth through ninth causes of action allege claims for fraudulent conveyance under New York Debtor-Creditor Law §§ 272-276a. The tenth cause of action states a claim for failure to comply with the bulk transfer provisions of Article 6 of the New York Uniform Commercial Code ("NYUCC"). Finally, the eleventh cause of action alleges that because Signal did not pay adequate consideration for the proceeds of the Ditric asset sale, Signal holds the proceeds of the sale and any other assets it received in constructive trust for Sunrise. The plaintiff seeks compensatory and punitive damages, costs and reasonable attorneys fees, reconveyance of Ditric's assets to Sunrise, and an accounting of the assets by Signal. A copy of the lease and other correspondence between the parties is attached to the complaint.
The defendants move pursuant to Rule 12(c) for a judgment on the pleadings dismissing the complaint as against Signal, and dismissing the tenth cause of action against Ditric.
In order to clarify the allegations in the complaint, the defendants have submitted the affidavit of James J. Hickey, vice-president and treasurer of Signal. According to Hickey, Ditric sold its assets in April 1991 in two transactions. First, on April 16, 1991 it sold a substantial portion of its assets to Fairway Data Systems ("Fairway"), a California company, pursuant to an asset purchase agreement between the two companies. As part of this transaction Ditric assigned its lease with Sunrise to Fairway, and Fairway assumed Ditric's obligations under the lease. Second, on April 29, 1991 Ditric sold the remainder of its assets to the Carion Corporation ("Carion"), a Massachusetts corporation. This latter sale was pursuant to an asset purchase agreement between Ditric, Signal and Carion. Shortly after this transaction, Ditric's name was changed to ST Optics, Inc. Hickey further states that on January 2, 1992, ST Optics transferred the proceeds of these two sales in the form of a one-time dividend to Signal, its sole shareholder, in the amount of $ 1,041,048.
The defendants contend that the transactions involving the sale of Ditric's assets occurred some 27 months before the alleged default under the lease, and that the subsequent conveyance of the sale proceeds to Signal occurred some 18 months before the alleged default. Thus, the defendants argue that at the time of these transactions Sunrise could not have been a creditor of Ditric because all the rent payments were current, and therefore the sale of Ditric's assets and subsequent conveyance of the sale proceeds to Signal could not have defrauded Sunrise as a creditor nor have been in violation of the Bulk Transfers provisions of the NYUCC. As a result, the defendants contend the complaint must be dismissed as against Signal, and the cause of action under the NYUCC Bulk Transfers statute must also be dismissed against Ditric.
On the other hand, the plaintiff contends that the definition of "creditor" under the New York Debtor-Creditor Law and the NYUCC Bulk Transfers statute includes persons who hold unmatured and contingent claims. According to Sunrise, at the time of the transactions at issue it held an unmatured and contingent claim against Ditric for the rent in the event of default, and therefore was a "creditor" within the meaning of the relevant statutes for the purposes of bringing the present action.
Sunrise also contends that the Court has personal jurisdiction over Signal because Signal generally does business in New York, and has conducted business in New York through it affiliate Ditric. Moreover, Sunrise contends that Signal is subject to New York's long-arm jurisdiction, because it has sufficient minimal contacts in the state with respect to the lease at issue. In support of its contentions favoring personal jurisdiction over Signal, Sunrise sites the following activities by Signal in New York: (1) Signal negotiated the lease at issue on behalf of Ditric; (2) when Signal wanted Ditric to be released from its lease obligations at the end of the first five year term, it sent two Signal officers, one of them being the Chief Financial Officer, to meet with Sunrise's managing agent in order to negotiate the release from the lease; (3) subsequent to the negotiations, Signal sent correspondence to Sunrise offering the terms of release from the lease; (4) contrary to Signal's assertion that it never transacted business in New York, Sunrise sites to a press release issued by Signal which states that Signal had acquired a major company located on Long Island; and (5) Signal and Ditric have interlocking directors and are virtually indistinguishable as companies.
Judgment on the Pleadings
Judgment on the pleadings is appropriate where material facts are undisputed and a judgment on the merits is possible merely by considering the contents of the pleadings. Sellers v. M.C. Floor Crafters, Inc., 842 F.2d 639, 642 (2d Cir. 1988). In considering a motion for judgment on the pleadings, the court must accept as true all of the non-movant's well pleaded factual allegations, and draw all reasonable inferences therefrom in favor of the non-movant. Davidson v. Flynn, 32 F.3d 27, 29 (2d Cir. 1994); DeSantis v. United States, 783 F. Supp. 165, 168 (S.D.N.Y. 1992). Unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his or her claim which would entitle the plaintiff to relief, the court can not grant a defendant's motion for judgment on the pleadings. Sheppard v. Beerman, 18 F.3d 147, 150 (2d Cir.) (when deciding a Rule 12(c) motion, the court applies the same standard as that applicable to a 12(b)(6) motion), cert. denied, 130 L. Ed. 2d 28, 115 S. Ct. 73 (1994); George C. Frey Ready-Mixed Concrete, Inc. v. Pine Hill Concrete Mix Corp., 554 F.2d 551, 553 (2d Cir. 1977).
In its discretion and upon notice to the parties, a court may consider materials outside the pleadings. If it does so and notice is given to the parties, the motion for judgment on the pleadings is treated as one for summary judgment. Gagliardi v. Village of Pawling, 18 F.3d 188, 191 (2d Cir. 1994); Sellers, 842 F.2d at 642.
1. Personal Jurisdiction Over Signal.
Where a Court is asked to rule on a combination of Rule 12 defenses, it will pass on the jurisdictional issues before considering whether a claim is stated in the complaint. Arrowsmith v. United Press Int'l, 320 F.2d 219, 221 (2d Cir. 1963) (in banc); Penguin v. Janklow, 98 F.R.D. 763 (S.D.N.Y. 1983). If the Court relies on the pleading and affidavits alone when considering a motion to dismiss for lack of jurisdiction, as it does here, the plaintiff need only make a prima facie showing of jurisdiction in order to defeat the motion. In that event, the pleading and affidavits are construed in the light most favorable to the plaintiff, and all doubts are resolved in his or her favor. Robinson v. Overseas Military Sales Corp., 21 F.3d 502, 507 (2d Cir. 1994); CutCo Indus., Inc. v. Naughton, 806 F.2d 361, 365 (2d Cir. 1986); En Vogue v. UK Optical Ltd., 843 F. Supp. 838, 842 (E.D.N.Y. 1994). If the jurisdictional issue requires an evidentiary hearing, then the plaintiff must establish jurisdiction by a preponderance of evidence. Robinson, 21 F.3d at 507 n.3; Cut Co., 806 F.2d at 365.
To determine whether a Court has personal jurisdiction over a defendant, it is necessary to examine the relevant statutes of the forum state. Hoffritz for Cutlery, Inc. v. Amajac, Ltd., 763 F.2d 55, 57 (2d Cir. 1985). Under New York law, the Court must follow a two-step procedure in order to determine whether there is personal jurisdiction over a defendant: (1) the Court must determine whether New York Civil Practice Law and Rule ("CPLR") sections 301 or 302 provide a basis for personal jurisdiction, and (2) if they do, the Court must then conduct a constitutional inquiry to determine whether the exercise of personal jurisdiction over the defendant would offend due process pursuant to ...