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CANADIAN IMPERIAL BANK OF COMMERCE v. SAXONY CARPE

October 13, 1995

CANADIAN IMPERIAL BANK OF COMMERCE, Plaintiff, against SAXONY CARPET COMPANY, INC., Defendant.

DEBORAH A. BATTS, U.S.D.J.


The opinion of the court was delivered by: BATTS

DEBORAH A. BATTS, U.S.D.J.

 Defendants move, pursuant to Rule 12(b)(1) and 12(b)(2) of the Federal Rules of Civil Procedure, to dismiss Plaintiff's Complaint. Plaintiffs move, pursuant to Rule 56 of the Federal Rules of Civil Procedure, for summary judgment. For the following reasons, Defendant's motion to dismiss is denied, and Plaintiff's motion for summary judgment is granted.

 I. BACKGROUND

 In 1986, Defendant Saxony Carpet Company, Inc. ("Saxony") and Elite Carpets Ltd. ("Elite") began a business relationship that lasted until 1988, when Elite ceased operation of its business. (Pl.'s Local Rule 3(g) Statement [hereinafter Pl. 3(g)] P 12; Def.'s Local Rule 3(g) Statement [hereinafter Def. 3(g)) P 9.) Saxony is in the business of selling custom-made designer carpeting. (Def. 3(g) P 3.) Elite was in the business of manufacturing custom-made carpeting. Elite manufactured carpets in Canada for Saxony's business in New York. (Def. 3(g) PP 4, 9.)

 Plaintiff Canadian Imperial Bank of Commerce ("CIBC") instituted this action in this Court to enforce a default judgment ("Canadian judgment") it had obtained against Defendant in the Superior Court of the District of Montreal, Province of Quebec, Canada, on May 17, 1991 for $ 72,149.16. (Pl. 3(g) P 7; Def. 3(g) P 17.) The dispute in the Montreal court involved an alleged account receivable based on certain contracts between Elite and Saxony for the manufacture and sale of custom-made carpeting. (Pl. 3(g) P 10; Def. 3(g) P 8.) As a lender for Elite, CIBC took as security for its loan a general assignment of Elite's receivables. (Pl. 3(g) P 10; Def. 3(g) P 4.)

 According to Defendant Saxony, Elite approached Saxony in 1986 for the purpose of soliciting business from Saxony. The initial contact between the two companies involved meetings and negotiations, most of which were held in New York, between the principals of Saxony and Elite. (Def. 3(g) PP 11, 12.) The negotiations resulted in agreements whereby Elite would manufacture carpet for Saxony based upon designs commissioned by Saxony. (Def. 3(g) P 9.)

 According to the Plaintiff, Elite would receive orders from Saxony in the form of written purchase orders. Elite would accept the order by means of a writing sent from its offices in Quebec. Elite would then manufacture the carpet ordered by Saxony at Elite's plant in St. Terese, Quebec, and ship the carpet to New York. (Pl. 3(g) P 16, 17.)

 The record indicates that the initial stage of developing the business relationship took place at Saxony's offices in New York. (Def. 3(g) P 11.) In July 1987, two of Saxony's principal executives (Mr. Alan Meiselman and his wife, Penny Meiselman, President and Secretary-Treasurer of Saxony, respectively) visited Elite's facilities in Canada for two days. (Pl. 3(g) P 13.) Saxony characterizes the visit as "social in nature and made upon the request and invitation of Elite Carpet." (Def.'s Mem. in Opp'n at 15.) According to Plaintiff, Saxony made the visit for the purpose of inspecting Elite's mills, and that business between Elite and Saxony increased thereafter, from a level of $ 30-40,000 per annum to $ 100,000 per annum. (Pl. 3(g) PP 14, 15.)

 In May 1991, Saxony was notified of the action brought by CIBC in the Superior Court of the District of Montreal, in the City of Montreal, Province of Quebec, Canada. Notice was given through personal service of process in New York City on Alan Meiselman. (Pl. 3(g) P 4.) Saxony's counsel replied with a letter dated May 23, 1991, asserting that Saxony was not subject to personal or subject matter jurisdiction in the Montreal action. Other than this letter, Saxony took no action in response to the Canadian suit, and did not retain Canadian counsel to represent its interests in the matter. (Pl. 3(g) P 6.)

 On the basis of diversity of citizenship, CIBC now seeks enforcement of the Canadian judgment in this Court. Plaintiff CIBC argues that New York law and the principles of comity require the enforcement of foreign money judgments with the exception of very limited circumstances involving personal or subject matter jurisdiction, forum non conveniens, or contravention of New York's public policies. As Plaintiff claims that these defects do not exist in this matter, Plaintiff moves for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure.

 Defendant Saxony argues that the judgment obtained in the Canadian court on default did not allow Saxony to defend the matter on its merits, and that the Canadian court lacked both personal and subject matter jurisdiction "by reason of the fact that all of the transactions between the parties occurred in the City and State of New York." (Def.'s Mem. at 3-4.) As noted before, Saxony characterizes the visit by Alan and Penny Meiselman as primarily social in nature. Furthermore, Saxony claims that the alleged account receivable is based on carpeting that was manufactured and delivered by Elite to Saxony in 1987 and 1988, and that the carpet in question was defective and of unmerchantable quality. Saxony also claims that Elite had acknowledged the carpeting was defective, but before a settlement could be reached by the parties resolving the matter, Elite went out of business. Defendant therefore moves to dismiss the action pursuant to Rules 12 (b)(1) and (2) of the Federal Rules of Civil Procedure. In the alternative, Defendant, as both a second affirmative defense and as a counter-claim, claims damages suffered as a result of the defective carpeting.

 II. DISCUSSION

 A. Motion to Dismiss under ...


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