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SCHOMANN INTERN. CORP. v. N. WIRELESS

January 26, 1999

SCHOMANN INTERNATIONAL CORPORATION, PLAINTIFF,
v.
NORTHERN WIRELESS, LTD. AND CURT KOCH, DEFENDANTS.



The opinion of the court was delivered by: McAVOY, Chief Judge.

MEMORANDUM-DECISION & ORDER

The present action arises out of a Complaint filed on August 13, 1998 by Schomann International Corporation ("Schomann" or "Plaintiff") against Northern Wireless, Ltd. ("Northern") and Curt Koch ("Koch") (collectively the "Defendants"), alleging breach of contract relating to the purchase of equipment and construction and installation of cellular telecommunications systems in the Republic of Georgia, formerly part of the U.S.S.R. Defendants move to dismiss for lack of personal jurisdiction and improper venue, pursuant to FED.R.CIV.P. 12(b)(2) and (3) or in the alternative, for a change of venue for the convenience of the parties, pursuant to 28 U.S.C. § 1404(a). This Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1332.

I. BACKGROUND

In considering a motion to dismiss, the Court accepts as true the factual allegations in the Complaint. See Dwyer v. Regan, 777 F.2d 825, 828-29 (2d Cir. 1985). Those allegations follow.

On or about December 18, 1997, Plaintiff, a New York corporation with its principal place of business in Skaneateles, New York, entered into a Consulting Services Agreement (the "Agreement") with Koch, the principal and sole shareholder of Northern, an Iowa corporation with its principal place of business in Hudson, Iowa, requiring Defendants to act as Plaintiff's engineering consultant with respect to its acquisition and installation of a cellular telecommunications system in the Republic of Georgia. Koch, a telecommunications engineer, contracted to perform the services provided in the Agreement. These services included, inter alia, selection of the cell site locations; acquisition of all equipment; provision of all facilities, tools, and personnel necessary to test and ship the equipment; and installation of the equipment at the selected cell site locations. The Agreement detailed specific work and delivery requirements and required Northern to complete the installation work in an "expeditious and workmanlike manner."

Schomann alleges that Defendants breached the Agreement by, inter alia, suspending work on the project without proper authorization, failing to provide written progress reports and misrepresenting the status of the project, failing to provide sufficient personnel, delaying completion of the project, and failing to notify Plaintiff of such delays and take appropriate remedial steps to comply with the delivery and installation schedules provided in the Agreement.

Plaintiff seeks to hold Northern liable in its corporate capacity, and against Koch, individually, as the sole shareholder and "alter-ego" of Northern, and seeks monetary damages for overpayments to Northern and lost revenues resulting from Schomann's inability to solicit customers by the date of completion set forth in the Agreement.

II. DISCUSSION

A. Personal Jurisdiction

Defendants first move under FED.R.CIV.P. 12(b)(2) to dismiss the Complaint against them for lack of personal jurisdiction.

Where subject matter jurisdiction is predicated upon diversity of the parties, the law of the forum state applies in determining whether a plaintiff has personal jurisdiction over a defendant. See Agency Rent A Car Sys., Inc. v. Grand Rent A Car Corp., 98 F.3d 25, 29 (2d Cir. 1996); CutCo Indus. Inc. v. Naughton, 806 F.2d 361, 365 (2d Cir. 1986). A plaintiff bears the ultimate burden of establishing jurisdiction over a defendant by a preponderance of the evidence. See CutCo Indus., 806 F.2d at 365. Where, however, personal jurisdiction is challenged prior to discovery, a plaintiff may defeat the motion "`by pleading in good faith, see FED.R.CIV.P. 11, legally sufficient allegations of jurisdiction,' i.e., by making a `prima facie showing' of jurisdiction." Jazini v. Nissan Motor Co., Ltd., 148 F.3d 181, 184 (2d Cir. 1998) (quoting Ball v. Metallurgie Hoboken-Overpelt, S.A., 902 F.2d 194, 197 (2d Cir.), cert. denied, 498 U.S. 854, 111 S.Ct. 150, 112 L.Ed.2d 116 (1990)). In deciding such a motion, all pleadings and affidavits must be construed in the light most favorable to the plaintiff. See PDK Labs, Inc. v. Friedlander, 103 F.3d 1105, 1108 (2d Cir. 1997); Hoffritz for Cutlery, Inc. v. Amajac, Ltd., 763 F.2d 55, 57 (2d Cir. 1985).

Schomann contends that jurisdiction over Northern exists under New York's long-arm statute, N.Y.C.P.L.R. § 302(a)(1), which provides, in pertinent part:

  (a) As to a cause of action arising from any of
  the acts enumerated in this section, a court may
  exercise personal jurisdiction over any
  non-domiciliary, or his executor or administrator,
  who in person or through an agent:
  1. transacts any business within the state or
  contracts anywhere to supply goods or services in
  the state. . . .

N YC.P.L.R. § 302(a)(1) (McKinney Supp. 1999).

For a court to exercise jurisdiction under this provision, two conditions must be met — the non-domiciliary must "transact business" within the forum state and the claim must also "arise from" the transaction of business within the state. See Agency Rent A Car Sys., Inc., 98 F.3d at 29; CutCo Indus., 806 F.2d at 365 (citing McGowan v. Smith, 52 N.Y.2d 268, 272, 437 N.Y.S.2d 643, 419 N.E.2d 321 (1981) (requiring an "articulable nexus between the business transacted and the cause of action sued upon")). To "transact business" under CPLR § 302(a)(1), a non-domiciliary must "purposefully avail [himself] of the privilege of conducting activities within [New York], thus invoking the benefits and protections of its laws." CutCo Indus., 806 F.2d at 365 (quoting McKee Elec. Co. v. Rauland-Borg Corp., 20 N.Y.2d 377, 382, 283 N.Y.S.2d 34, 229 N.E.2d 604 (1967)). The "arises from" prong is satisfied if there exists a substantial relationship between the defendant's activities in the forum state and the transaction out of which the cause of action arose. See Vardinoyannis v. Encyclopedia Britannica, Inc., 1990 WL 124338, at *4 (S.D.N.Y. August 20, 1990). These standards ensure that jurisdiction comports with due process requirements such that the defendant can "reasonably `anticipate being haled into court' in that forum." See National Tel. Director Consultants, Inc. v. Bellsouth Adver. & Publishing Corp., 25 F. Supp.2d 192, 196 (S.D.N Y 1998) (quoting World-Wide Volkswagen v. Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980)).

In determining whether an out-of-state defendant "transacts business" in New York, the Second Circuit has adopted an approach that considers a variety of factors, including: (1) whether the defendant has an on-going contractual relationship with a New York corporation; (2) whether the contract was negotiated or executed in New York and whether, after executing a contract with a New York business, the defendant has visited New York for the purpose of meeting with parties to the contract regarding the relationship; (3) what the choice-of-law clause is in any such contract; and (4) whether the contract requires notices and payments to be sent into the forum state or requires supervision by the corporation in the forum state. See Agency Rent A Car Sys., Inc., 98 F.3d at 29; National Tel. Director Consultants, Inc., 25 F. Supp.2d at 195; Lacey v. Zartman, 1998 WL 312354, at *6 (N.D.N.Y. June 8, 1998). Although these factors provide some guidance, courts examine the totality of the defendant's contacts within the forum state in determining whether personal jurisdiction over a defendant exists. See Agency Rent A Car Sys., Inc., 98 F.3d at 29; CutCo Indus., 806 F.2d at 365; George Reiner & Co., Inc. v. Schwartz, 41 N.Y.2d 648, 394 N.Y.S.2d 844, 363 N.E.2d 551 (1977); Glassman v. Hyder, 23 N.Y.2d 354, 362, 296 N.Y.S.2d 783, 244 N.E.2d 259 (1968). In certain instances, however, a single transaction may satisfy the statutory transaction of business requirement. See Ingraham v. Carroll, 90 N.Y.2d 592, 597, 665 N YS.2d 10, 687 N.E.2d 1293 (1997) (noting that a "`one shot' single business transaction" is sufficient to meet ...


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