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PACKER v. TDI SYS.

March 31, 1997

WILLIAM B. PACKER, SR. and SEAVIEW INVESTORS, L.P., Plaintiffs, against TDI SYSTEMS, INC. and THOMAS F. DESORMEAUX, Defendants.


The opinion of the court was delivered by: LEISURE

 LEISURE, District Judge :

 Plaintiffs brought this contract action seeking declaratory and compensatory relief in connection with a number of contracts allegedly made between plaintiffs and defendants for the purchase of certain equipment, technology, and intellectual property rights to a proprietary technology developed and patented by plaintiff corporation. Individual defendant Thomas F. DesOrmeaux moves for dismissal for lack of personal jurisdiction, pursuant to Rule 12(b)(2) of the Federal Rules of Civil Procedure. For the reasons stated below, the motion is denied.

 BACKGROUND

 The Purchase and Contribution Agreement, signed in Houston on September 2, 1992, contains a choice of law provision designating New York law as controlling any dispute arising from the agreements, and specifies that the closing of the transaction would take place in the New York City offices of plaintiffs' counsel. On November 18, 1992, DesOrmeaux attended the closing and signed a number of agreements and exhibits on behalf of TDI. *fn1" A number of the documents signed during the meeting contain a forum selection clause stating that the parties agree to the exclusive jurisdiction of the New York state courts and this Court for all disputes arising out of the agreements, and stating specifically that the clause was expressly negotiated. *fn2" Several of the documents also contain New York choice of law provisions, and direct that copies of service of notices be mailed to counsel in New York. In relation to the transaction, STS delivered a promissory note (the "Note") in the principal sum of $ 500,000, half of the purchase price, and the parties entered a security agreement giving TDI a first lien with respect to certain of the assets related to the Technology. The Note, signed by Packer on behalf of STS, contains a forum selection clause and a choice of law clause designating New York courts and New York law.

 Subsequently, STS experienced financial difficulties. In order to obtain additional financing from a lender (collectively with its successor-in-interest, the "Lender"), STS needed TDI to subordinate its indebtedness and security interest to the security agreement to be entered with the Lender. On May 26, 1993, and again on August 25, 1993, STS, TDI, and the Lender entered agreements providing for the subordination and standstill of STS's obligations to TDI under the Note. In July of 1994, STS, Packer, TDI, and DesOrmeaux entered a letter agreement (the "Letter Agreement") whereby Packer guaranteed either to pay the amount due or to buy the Note in the event that the maker, STS, failed to pay under the Note. In exchange, TDI and DesOrmeaux agreed to allow STS to go forward with its financing transaction with the Lender and to terminate TDI's lien under the security agreement signed November 18, 1992. *fn3" Packer and DesOrmeaux each signed the Letter Agreement both individually and on behalf of, respectively, STS and TDI. The Letter Agreement states that "we refer to the promissory note (the "Note") in the principal amount of $ 500,000 dated November 18, 1992." Packer Aff. Ex. 6 at 1.

 Contemporaneously with the execution of the Letter Agreement, STS, TDI, and the Lender executed an agreement (the "Subordination Agreement") confirming the August 25, 1993 agreement to subordinate TDI's security interests under the original security agreement to those of the Lender. See Packer Aff. Exs. 12, 13. The Subordination Agreement contains a New York choice of law clause and a nonexclusive New York forum selection clause.

 Plaintiffs' first four causes of action seek declaratory judgments that Packer is not obligated under the Letter Agreement, alleging that certain conditions stated in the Letter Agreement relating to STS's solvency had not been fulfilled; that the Letter Agreement is unenforceable by reason of duress; or that defendants' breaches of contract and of their duty of good faith and fair dealing with respect to the Letter Agreement and other agreements entered into in the overall transaction excuse Packer from performance. As a fifth cause of action, plaintiffs allege that defendants breached the agreement that TDI would subordinate its security interests in the Technology. Finally, plaintiffs allege that TDI's commencement of suit in Texas state court breached forum selection clauses contained in the Note and other documents. Defendant DesOrmeaux moves, pursuant to Rule 12(b)(2), to dismiss this action as it relates to him for lack of personal jurisdiction.

 DISCUSSION

 A plaintiff facing a Rule 12(b)(2) motion bears the burden of showing that personal jurisdiction over the defendant is properly exercised. Where no discovery and no evidentiary hearing as to jurisdictional matters has been conducted, the plaintiff "need only allege facts constituting a prima facie showing of personal jurisdiction," and the pleadings and affidavits must be construed in the nonmoving party's favor. PDK Labs, Inc. v. Friedlander, 103 F.3d 1105, 1108 (2d Cir. 1997) (citing Ball v. Metallurgie Hoboken-Overpelt, S.A., 902 F.2d 194, 197 (2d Cir. 1990); CutCo Indus., Inc. v. Naughton, 806 F.2d 361, 364-65 (2d Cir. 1986)); accord Metropolitan Life Ins. Co. v. Robertson-Ceco Corp., 84 F.3d 560, 566-67 (2d Cir.), cert. denied, 136 L. Ed. 2d 398, 117 S. Ct. 508 (1996).

 Generally, it is well-settled that a party may agree by contract to submit to jurisdiction in a given forum and that such a forum selection clause, when it is part of the contract that forms the basis of the action, will be enforced, obviating the need for a separate analysis of the propriety of exercising personal jurisdiction. See, e.g., Jones v. Weibrecht, 901 F.2d 17, 18 (2d Cir. 1990). However, where no forum selection clause exists to govern the dispute, the court must examine the constitutional and statutory requirements for the exercise of personal jurisdiction. Due process considerations with respect to the exercise of personal jurisdiction include a nonresident defendant's "liberty interest in not being subject to the binding judgments of a forum with which he has established no meaningful 'contacts, ties, or relations.'" Burger King Corp. v. Rudzewicz, 471 U.S. 462, 471-72, 85 L. Ed. 2d 528, 105 S. Ct. 2174 (1985) (quoting International Shoe v. Washington, 326 U.S. 310, 319, 90 L. Ed. 95, 66 S. Ct. 154 (1945)). Such constitutional limits are satisfied if a nonresident defendant has sufficient "minimum contacts" with the forum state such that exercise of jurisdiction comports with "traditional notions of fair play and substantial justice." International Shoe, 326 U.S. at 316 (quoting Milliken v. Meyer, 311 U.S. 457, 463, 85 L. Ed. 278, 61 S. Ct. 339 (1940)) (internal quotation marks omitted).

 The two varieties of personal jurisdiction are "general jurisdiction" and "specific jurisdiction." See Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 nn.8-9, 80 L. Ed. 2d 404, 104 S. Ct. 1868 (1984). General and specific personal jurisdiction differ in the level of "minimum contacts" required to satisfy the International Shoe test. General jurisdiction requires "continuous and systematic" contacts with the forum state. *fn4" Id. at 415 (quoting Perkins v. Benguet Consol. Mining, 342 U.S. 437, 438, 96 L. Ed. 485, 72 S. Ct. 413 (1952)) (internal quotation marks omitted). In contrast, the level of contact necessary to support specific jurisdiction is satisfied "when a controversy is related to or 'arises out of' a defendant's contacts with the forum." Id. 466 U.S. at 414 (quoting Shaffer v. Heitner, 433 U.S. 186, 204, 53 L. Ed. 2d 683, 97 S. Ct. 2569 (1977)).

 In addition to the constitutional considerations, state statutory requirements for specific personal jurisdiction must also be satisfied. Under New York's "long-arm" statute, a court can exercise specific personal jurisdiction "over any non-domiciliary ... who in person or through an agent ... transacts any business within the state." N.Y. C.P.L.R. 302(a)(1) (McKinney 1990). New York's statute is a "single act statute," empowering a court to exercise specific jurisdiction over a nondomiciliary on the basis of one transaction in the forum so long as the defendant's activities in New York "were purposeful and there is a substantial relationship between the transaction and the claim asserted." Kreutter v. McFadden Oil Corp., 71 N.Y.2d 460, 467, 527 N.Y.S.2d 195, 198-99, 522 N.E.2d 40, 43 (1988); see also Hanson v. Denckla, 357 U.S. 235, 253, 2 L. Ed. 2d 1283, 78 S. Ct. 1228 (1958) ("It is essential in each case that there be some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.").

 In evaluating a defendant's purposeful availment of the forum, a court looks to the totality of the circumstances and may not ground jurisdiction upon "random," "fortuitous," or "attenuated" contacts. CutCo Indus., 806 F.2d at 365; accord Burger King, 471 U.S. at 475. The New York Court of Appeals has noted that a defendant's physical presence at the time of the negotiation, making, and/or execution of a contract justifies a finding of purposeful availment. See George Reiner & Co. v. Schwartz, 41 N.Y.2d 648, 653, 394 N.Y.S.2d 844, 847, 363 N.E.2d 551, 554 (1977) (finding jurisdiction on the basis that defendant "was physically present in New York at the time the contract ... was negotiated and made and the contract ... was the transaction out of which the cause of action arose"); Hi Fashion Wigs v. Hammond Adver., 32 N.Y.2d 583, 586, 347 N.Y.S.2d 47, 50, 300 N.E.2d 421, 423 (1973) (holding that a third-party defendant's voluntary presence in the forum in order to deliver a guarantee was "so essential ... to its validity and existence as a contract" that the defendant could be deemed to have purposefully availed himself of the forum); ...


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