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LOUDON PLASTICS, INC. v. BRENNER TOOL & DIE

November 9, 1999

LOUDON PLASTICS, INC., PLAINTIFF,
v.
BRENNER TOOL & DIE, INC., DEFENDANT.



The opinion of the court was delivered by: Kahn, District Judge.

  MEMORANDUM — DECISION AND ORDER

Presently before the Court are Defendant's motions to (i) dismiss the complaint for lack of personal jurisdiction, (ii) dismiss the complaint for improper venue, (iii) transfer the case to the Eastern District of Pennsylvania, (iv) dismiss Plaintiff's second claim for failure to state a claim, and (v) dismiss Plaintiff's third claim for failure to state a claim. For the reasons set forth below, the Court denies motions (i) through (iii), and grants (iv) and (v).

I. BACKGROUND

Plaintiff is a New York corporation engaged in the manufacture, design, and distribution of swimming pools and accessories. Defendant is a Pennsylvania corporation that manufactures custom tool and dies for industrial applications and also performs contract custom machining.

In November 1995, Plaintiff solicited bids from various machine shops and tool and die makers for two molds for an above-ground pool ladder. Defendant submitted the winning bid of $306,000 with a delivery date of twenty-eight weeks. After work commenced, Defendant discovered that the specifications and drawings were inaccurate and the parties extended the delivery date to September 22, 1997, then later to November 21, 1997. On or about November 4, 1997, Defendant advised Plaintiff that delivery could not be made until January 20, 1998, and Plaintiff requested that Defendant release the partially unfinished molds and Defendant's specifications and drawings to a tool and die maker located in Ohio, who completed the job for $348,000.

Plaintiff now asserts three causes of action: (1) breach of contract; (2) negligent performance of contractual obligations; and (3) breach of the implied duty of good faith and fair dealing.*fn1

II. ANALYSIS

A. Motion to Dismiss for Lack of Personal Jurisdiction

Defendant moves to dismiss the complaint for lack of personal jurisdiction pursuant to Fed.R.Civ.P. 12(b)(2). The due process clause of the Fourteenth Amendment permits a state to exercise personal jurisdiction over a non-resident defendant with whom it has "certain minimum contacts . . . such that the maintenance of the suit does not offend `traditional notions of fair play and substantial justice.'" International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945). In determining whether minimum contacts exist, the court considers "the relationship among the defendant, the forum, and the litigation." Shaffer v. Heitner, 433 U.S. 186, 204, 97 S.Ct. 2569, 53 L.Ed.2d 683 (1977). To establish the minimum contacts necessary to justify "`specific' jurisdiction, the [plaintiff] first must show that [his] claim arises out of or relates to [defendant's] contacts with [the forum state]." Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984). A plaintiff must also show that defendant "purposefully availed" itself of the privilege of doing business in the forum state and that the defendant could foresee being "haled into court" there. See World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980); Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985). If a plaintiff satisfies these requirements, the court also considers whether the assertion of jurisdiction "comports with `traditional notions of fair play and substantial justice' — that is, whether it is reasonable under the circumstances of a particular case." International Shoe, 326 U.S. at 316, 66 S.Ct. 154.

Applying these standards in the case sub judice, we conclude that Defendant had sufficient minimum contacts with New York to support the exercise of jurisdiction and that the assertion of jurisdiction is reasonable under the circumstances. The March 12, 1997 contract was expressly conditioned on the terms set forth on the reverse side, which included a forum selection clause stating: "Any action brought hereunder may be brought or transferred to the County of Albany." What both parties neglected to raise in their submissions is that the clause is permissive, not mandatory. A forum selection clause may be either permissive or exclusive. An exclusive or mandatory forum selection clause revokes jurisdiction from all forums except those specifically identified in the clause, and must be enforced. See John Boutari & Son, Wines and Spirits, S.A. v. Attiki Importers and Distribs., 22 F.3d 51, 53 (2d Cir. 1994). An exclusive clause is created by the addition of any language clearly narrowing jurisdiction and venue exclusively to the identified forum. See Docksider, Ltd. v. Sea Technology, Ltd., 875 F.2d 762, 764 (9th Cir. 1989) (requiring "some further language indicating the parties' intent to make jurisdiction exclusive"). In confronting a similar clause, the Second Circuit held that although owed some deference, such a clause is subject to standard forum non conveniens analysis. See Blanco v. Banco Industrial de Venezuela, S.A., 997 F.2d 974, 979-80 (2d Cir. 1993). Defendant's contention in its reply brief that the clause was never part of the contract because the print was illegible and small is meritless. Defendant freely entered into the contract and had ample opportunity to scrutinize it. Moreover, the parties here had previously entered into 13 separate agreements, and Defendant is a sophisticated business entity. This Court, however, cannot rely upon the clause alone to obtain personal jurisdiction over Defendant.

Plaintiff's reliance the accessibility of Defendant's Internet web site to New Yorkers as constituting sufficient minimum contacts under N.Y.C.P.L.R. 301 and/or 302 is misplaced. Defendant's web site is simply a non-interactive advertisement. In cases involving such "passive" web sites, courts in this circuit and others have consistently held that jurisdiction does not exist absent other contacts with the forum. For example, in Bensusan Restaurant Corp. v. King, 126 F.3d 25 (2d Cir. 1997), the operator of a well-known New York jazz club called "The Blue Note" sued the operator of a Missouri jazz club of the same name for trademark infringement. To promote his club, the defendant operated an Internet web site which contained general information about his club, a calendar of events, and ticketing information, including the names and addresses of ticket outlets in Missouri and a telephone number for charge-by-phone orders. The district court refused to exercise jurisdiction over the defendant under N YC.P.L.R. 302(a)(2) or (a)(3), reasoning that the maintenance of a web site alone, without more, did not rise to the level of purposeful availment of New York's laws. In finding that the exercise of jurisdiction would violate due process, the district court reasoned that the defendant had done nothing to purposefully avail himself of the benefits of New York. Plaintiff's claim of jurisdiction under C.P.L.R. 301 related to the Internet site likewise must fail. See Hoffritz for Cutlery, Inc. v. Amajac, Ltd., 763 F.2d 55, 58 (2d Cir. 1985) ("The showing necessary for finding that defendant `transacted business' and is suable on a cause of action arising from that transaction is considerably less than that needed to establish defendant's `doing business,' which renders the defendant subject to suit on even an unrelated cause of action.'"). Defendant, like numerous others, simply created a Web site and permitted anyone who could find it to access it.

  Nevertheless, Defendant's other contacts with New York create
sufficient minimum contacts justifying the extension of personal
jurisdiction. Under C.P.L.R. 302, a nondomiciliary defendant is
subject to the jurisdiction of New York State courts if the
defendant engaged in some purposeful activity within the State
and there is a substantial relationship between the activity and
the cause of action sued upon. See Amodeo v. Star Mfg. Co.,
88 A.D.2d 1081, 452 N.Y.S.2d 724 (3d Dep't 1982). The statute sets
forth various grounds for long-arm jurisdiction. For instance,
under C.P.L.R. 302(a)(1), an out-of-state defendant may be sued
in New York if it "transacts any business within the state or
contracts anywhere to supply goods or services in the state." It
is well-settled that while telephone and mail contacts generally
do not constitute "transacting business" under New York's
long-arm statute, see Fiedler v. First City National Bank,
807 F.2d 315, 317 (2d Cir. 1986), in certain circumstances
jurisdiction may be predicated on a transaction conducted by
means of telephone calls, faxes, and the acts of an in-state
agent; physical presence in the state is not required. See
Parke-Bernet Galleries, Inc. v. Franklyn, 26 N.Y.2d 13,
308 N.Y.S.2d 337, 256 N.E.2d 506 (N.Y. 1970); Camel Invs. Ltd. v.
Transocean Capital [Bermuda] Ltd., 195 A.D.2d 533, 600 N.Y.S.2d 471
 (2d Dep't 1993). The key inquiry is whether Defendant
purposefully availed itself of the benefits of New York's laws,
and courts must look to the substance of the communications.

In Parke-Bernet, 26 N.Y.2d at 17, 308 N.Y.S.2d 337, 256 N.E.2d 506, the defendant Franklyn, a resident of California, made one phone call in which he received and transmitted bids in an art auction being held in New York City. In sustaining jurisdiction, the New York Court of Appeals noted that the circumstances fell between "the situation where a defendant was physically present at the time the contract was made — the clearest sort of case in which our courts would have 302 jurisdiction — and the situation where a defendant merely telephones a single order from outside the State — a case in which our courts would not have such jurisdiction." Id. (citations omitted). Although he never entered the state, personal jurisdiction was appropriate over Franklyn because he "projected himself into the auction room in order to compete with the other prospective purchasers who were there." See id., 26 N Y2d at 18, 308 N.Y.S.2d 337, 256 N.E.2d 506. Similarly, in CT Chemical (USA), Inc. v. Horizons Int'l, 106 F.R.D. 518, 519-20 (S.D.N.Y. 1985) (Sweet, J.), the defendant negotiated two contracts over the telephone and through the mail. The court, relying primarily on the reasoning in Parke-Bernet, found defendant's telephone and mail contacts sufficient to confer jurisdiction under C.P.L.R. 302(a)(1). See id. at 521-22.

Here, Defendant admits to having engaged in numerous telephone conversations with Plaintiff's representative in New York, as well as a visit by one of its principals to New York, on matters related to this transaction. The negotiation of the contract underlying this dispute took place in large measure by phone. Significantly, Plaintiff's purchase orders were mailed and faxed from this state, and the product ordered was to be delivered here. This contract was therefore negotiated and offers exchanged in New York. Furthermore, Defendant purposefully engages in business activity with New York customers and services ...


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