United States District Court, Southern District of New York
December 14, 1999
RIDLEY M. WHITAKER, PLAINTIFF,
FRESNO TELSAT, INC.; JAMES A. SIMON; AMERICAN TELECASTING, INC.; JAS PARTNERS, LTD.; ROSENTHAL, JUDELL & UCHIMA, AND JOHN DOE NOS. 1-10 (WHICH ARE INDIVIDUAL AND ENTITIES WHOSE IDENTITIES AT THIS TIME ARE UNKNOWN), DEFENDANTS.
The opinion of the court was delivered by: Scheindlin, District Judge.
OPINION & ORDER
Defendant American Telecasting, Inc. ("ATI") moves, pursuant to
Federal Rule of Civil Procedure 12(b)(2), to dismiss plaintiff's
Amended Complaint which seeks payment of legal fees. Because this
Court lacks personal jurisdiction over ATI, the motion is
The plaintiff in this action, Ridley M. Whitaker, is an
attorney licensed to practice in the State of New York. The
Amended Complaint alleges that plaintiff was injured as a result
of a conspiracy among the defendants,*fn1 including ATI, to
plaintiff of fees allegedly due under a retainer agreement
between plaintiff and defendant Fresno Telsat, Inc. ("FTI").*fn2
Amended Complaint ¶ 35. Pursuant to that agreement, plaintiff was
to receive fees for legal services performed in connection with
his representation of FTI from 1994 to 1998. Id. Such services
included representation in a trial brought by FTI against ATI and
other defendants venued in the State of California.*fn3 Id. ¶
17. FTI retained Whitaker in New York City, id., and the
retainer agreement between FTI and Whitaker was negotiated and
drafted in New York. See Opp. Mem. at 12.
ATI is a Delaware corporation whose main offices are located in
Colorado. Affidavit of David K. Sentman, ATI's Senior Vice
President and Chief Financial Officer, in Support of Motion to
Dismiss, sworn to July 29, 1999 ("Sentman Aff."). ATI is not
incorporated, licensed or qualified to do business in New York.
Id. ¶ 4. ATI has no office, agents, employees, property, bank
accounts or telephone listings in New York. Id. ATI has not
appointed an agent for service of process in New York. Id. ATI
does not market or sell any of its products in New York. Id.
Nor does it otherwise transact any business in New York. Id.
Finally, ATI has done nothing to avail itself of the laws of the
State of New York with respect to this lawsuit. Id.
A. Legal Standard
In general, "the amenability of a foreign corporation to suit
in a federal court in a diversity action is determined in
accordance with the law of the state where the court sits, with
`federal law' entering the picture only for the purpose of
deciding whether a state's assertion of jurisdiction contravenes
a constitutional guarantee." Arrowsmith v. United Press Int'l,
320 F.2d 219, 223 (2d Cir. 1963) (en banc).
District courts resolving issues of personal
jurisdiction must therefore engage in a two-part
analysis. First, they must determine whether there is
jurisdiction over the defendant under the relevant
forum state's laws — which, in this case, are the
various subsections of New York's C.P.L.R. § 302(a) .
. . Second, they must determine whether an exercise
of jurisdiction under these laws is consistent with
federal due process requirements.
Bank Brussels Lambert v. Fiddler Gonzalez & Rodriguez,
171 F.3d 779
, 784 (2d Cir. 1999) (citing Metropolitan Life Ins. Co. v.
Robertson-Ceco Corp., 84 F.3d 560, 567 (2d Cir. 1996)).
The plaintiff bears the burden of establishing that the court
has jurisdiction over the defendant when a Rule 12(b)(2) motion
to dismiss is made. See Robinson
v. Overseas Military Sales Corp., 21 F.3d 502, 507 (2d Cir.
1994). However, "`prior to discovery, a plaintiff challenged by a
jurisdiction testing motion may defeat the motion by pleading in
good faith, . . ., legally sufficient allegations 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. 1990)). Thus,
a plaintiff "need make only a prima facie showing of jurisdiction
through [his] own affidavits and supporting materials." Marine
Midland Bank, N.A. v. Miller, 664 F.2d 899, 904 (2d Cir. 1981).
Furthermore, "where the issue is addressed on affidavits, all
allegations are construed in the light most favorable to the
plaintiff and doubts are resolved in the plaintiff's favor."
A.I. Trade Fin., Inc. v. Petra Bank, 989 F.2d 76, 79-80 (2d
B. New York's C.P.L.R. § 302(a)
New York's long-arm statute is codified in section 302 of its
Civil Practice Law and Rules and provides for jurisdiction over
any non-domiciliary who:
1. transacts any business within the state or
contracts anywhere to supply goods or services in the
2. commits a tortious act within the state, . . .; or
3. commits a tortious act without the state causing
injury to person or property within the state, . . .,
(i) regularly does or solicits business, or engages
in any other persistent course of conduct, or
derives substantial revenue from goods used or
consumed or services rendered, in the state, or
(ii) expects or should reasonably expect the act to
have consequences in the state and derives
substantial revenue from interstate or
N YC.P.L.R. § 302 (McKinney 1990). Each of these subsections
will be analyzed in turn.
1. C.P.L.R. § 302(a)(1)
During the months of June and July 1998, Martin S. Fletcher, an
attorney, made numerous telephone calls to Whitaker in New York
for the purpose of obtaining his consent to the sale of FTI's
partnership interest. Opp. Mem. at 9. Plaintiff contends that as
a result of these calls, ATI sought the benefit and protections
of New York's laws or attempted to engage in business in New
York. Plaintiff is wrong for two reasons.
First, Mr. Fletcher is legal counsel to FTI, not ATI. Affidavit
of Martin T. Fletcher, Sr., sworn to September 30, 1999
("Fletcher Aff."), ¶ 2. In his affidavit, Martin states: "At no
time have I ever represented ATI in any matter. At no time did I
act or undertake to act as attorney for or agent of ATI in any
matter." Id. ¶ 5. More specifically, with regard to the
communications he made to Whitaker, Martin states that all such
communications were made by him as legal counsel for FTI. Id. ¶
6. Given these representations, any actions taken by Fletcher
cannot be imputed to ATI because Fletcher was working in his sole
capacity as FTI's attorney.
Even assuming Fletcher's communications could be attributed to
ATI, however, there still would be no jurisdiction under C.P.L.R.
§ 302(a)(1). Jurisdiction can rarely be based solely on
defendant's telephone calls into New York. See Carlson v.
Cuevas, 932 F. Supp. 76, 78 (S.D.N.Y. 1996) (citing Beacon
Enters., Inc. v. Menzies, 715 F.2d 757, 766 (2d Cir. 1983)).
Only "[i]f the purpose of the calls is for the defendant to
actively participate in business in New York, [can] they alone .
. . support a finding of New York long arm jurisdiction under
C.P.L.R. § 302(a)(1)." Carlson, 932 F. Supp. at 78. This is
certainly not the case here. "New York courts have held that
conducting contractual negotiations by phone, fax or mail with a
party in New York does not constitute the transaction of business
within the state." Worldwide Futgol Assocs., Inc. v.
Event Entertainment, Inc., 983 F. Supp. 173, 177 (E.D.N Y
1997). Accordingly, Fletcher's telephone calls to Whitaker
requesting his consent to the sale of FTI's partnership interest,
even if made on behalf of ATI, do not constitute transacting
business within New York and, therefore, cannot sustain
jurisdiction under C.P.L.R. § 302(a)(1).
2. C.P.L.R. § 302(a)(2)
Plaintiff cannot establish jurisdiction over ATI pursuant to
this subsection because the Second Circuit has ruled that a
defendant's physical presence in New York is required under §
302(a)(2). See Bensusan Restaurant Corp. v. King, 126 F.3d 25
(2d Cir. 1997). Plaintiff nowhere alleges that ATI ever sent an
officer, employee or agent into New York, and therefore
jurisdiction cannot be predicated upon § 302(a)(2).
3. C.P.L.R. § 302(a)(3)(ii)
To establish jurisdiction under C.P.L.R. § 302(a)(3)(ii),
Whitaker must show: (1) ATI's commission of a tort outside New
York; (2) injury to Whitaker in New York; (3) that ATI should
have reasonably foreseen New York consequences; and (4) that ATI
derives substantial revenue from interstate commerce. See Popper
v. Podhragy, 48 F. Supp.2d 268, 273 (S.D.N.Y. 1998). The first
requirement has been met as plaintiff has alleged that FTI and
ATI conspired and falsely consummated a settlement in order to
deprive him of his fee. Amended Complaint ¶¶ 100-01. The fourth
requirement has also been met as plaintiff alleges that ATI has
derived revenue in excess of 10 million dollars from interstate
commerce. Id. ¶ 15.
Arguably, the third requirement has also been met. In National
Westminster Bank PLC v. Retirement Care Assocs., Inc., 98 Civ.
6023, 1999 WL 239677 (S.D.N.Y. Apr. 23, 1999), the plaintiff
("NatWest") alleged that the defendants ("RCA" and "Sun")
breached an engagement agreement in which RCA hired NatWest to
act as a financial advisor for a proposed merger between RCA and
Sun. Id. at *1. The engagement agreement was drafted in New
York by NatWest but was executed by RCA in Atlanta. Id. After
the merger was consummated, RCA failed to pay NatWest. Id. at
*2. Plaintiff asserted personal jurisdiction over RCA and Sun
under C.P.L.R. § 302(a)(3)(ii) which defendants contested,
arguing that the loss suffered by Natwest in New York "resulted
solely by virtue of plaintiffs residence there." Id. at *3. The
court disagreed, however, stating that
[i]n this case, there is no other injury than the
financial injury to NatWest in New York. By allegedly
interfering with the engagement agreement between RCA
and NatWest, Sun knew that its actions were directed
at avoiding a financial obligation to a New York
entity under a contract that was partially
negotiated and executed in New York and should have
expected that its actions would cause financial loss
in New York. The financial injury suffered by NatWest
in New York is, therefore, directly the result of
Sun's alleged actions and personal jurisdiction over
Sun is proper under CPLR 302(a)(3)(ii).
Id. (emphasis added, citations omitted).
The court in Retirement Care Associates, as well as plaintiff
here, cite Levisohn, Lerner, Berger & Langsam v. Medical Taping
Sys., Inc., 10 F. Supp.2d 334 (S.D.N.Y. 1998), as support for
their assertion of jurisdiction. In Levisohn, the plaintiff, a
New York law firm, sued to recover legal fees owed by defendant
("MTS"). Plaintiff alleged that MTS breached a retainer agreement
and fraudulently conveyed its assets to the eight individual
defendants. 10 F. Supp.2d at 337. The court found jurisdiction
over the individuals under § 302(a)(3)(ii) and offered the
Accepting [plaintiff's] allegations as true, the
individual defendants' tortious conduct was intended
to avoid an obligation to a New York entity under a
negotiated and partially executed in New York. The
tortious conduct was therefore designed to injure
[plaintiff] in New York, In addition, and for this
reason, the individual defendants expected, or at
least reasonably should have expected, their acts to
have consequences in New York.
Id. at 343.
Plaintiff makes no allegation that ATI knew that the retainer
agreement between Whitaker and FTI was negotiated and drafted in
New York. Presumably, however, ATI knew that Whitaker was a New
York attorney and that withholding his legal fees would have
consequences in New York. Thus, a strong argument can be made
that ATI should have reasonably foreseen consequences in New York
thereby satisfying the third requirement. I need not decide this
issue, however, because plaintiff has failed to allege the second
required element, namely an injury in New York.*fn4
Plaintiff cites Bank Brussels and Mega Tech Int'l Corp. v.
Al-Saghyir Establishment, 96 Civ. 8711, 1999 WL 269896 (S.D.N Y
May 3, 1999), for the proposition that he was injured in New
York. In Bank Brussels, the plaintiff, a bank, sued a Puerto
Rican law firm for fraud and breach of fiduciary duty for failing
to disclose certain negative information in an opinion letter
which was a prerequisite to a loan made by the bank to a third
party. 171 F.3d at 782. None of the law firm's partners or agents
entered New York in connection with its services but the bank
disbursed the money from an account in New York. Id. at 782-83.
The court, in finding jurisdiction under C.P.L.R. § 302(a)(3),
[C]ourts determining whether there is injury in New
York sufficient to warrant § 302(a)(3) jurisdiction
must generally apply a situs-of-injury test, which
asks them to locate the "original event which caused
the injury." This "original event" is, however,
generally distinguished not only from the initial
tort but from the final economic injury and the felt
consequences of the tort.
Id. at 791 (citation omitted). The Bank Brussels court found
that the injury occurred in New York because, under the
situs-of-injury test, the "original event" that caused the
economic harm to the bank was the disbursement of funds and that
disbursement took place in New York. Id. at 792.
Similarly, jurisdiction was found in Mega Tech where
plaintiff, a New Jersey corporation, sued two Saudi Arabian
corporations ("NKF" and "ASE") for failure to forward funds due
under a construction contract. 1999 WL 269896, at *2-3. With
regard to foreseeability, the court explained that "ASE's alleged
actions committed outside New York with immediately foreseeable
adverse business consequences to Mega Tech inside New York are
precisely within the class of harms covered by § 302(a)(3)."
Id. at *9. Recognizing that foreseeability alone is not enough
to confer jurisdiction, the court went on to find injury in New
York, as follows:
The first effect of ASE's conduct was also located in
New York because Mega Tech had invested large sums of
money in the State to plan the main hospital project
and because Mega Tech lost prospective opportunities
in New York. The "original event," just as in Bank
Brussels, was a New York corporation's contribution
of money to a project that ultimately caused the
corporation to sustain significant financial losses
due to tortious conduct that occurred outside the
Id. at *10.
Plaintiff's reliance on Bank Brussels and Mega Tech is
His argument — that the "first effect of ATI's conduct was
located in New York because the bills for services which FTI has
refused to pay because of the fraudulent scheme conceived by ATI
were to be paid in New York and to date remain unpaid," Opp. Mem.
at 10 — is unavailing. If the conspiracy to defraud is the tort,
the first or "original event" is either the structuring of the
partnership sale to avoid payment or the actual withholding of
payment to Whitaker, both of which occurred outside New York. To
confer jurisdiction according to where payment should be made
would be to base jurisdiction solely upon the fact that plaintiff
resides in New York. However, such a holding would directly
contravene Mareno v. Rowe, 910 F.2d 1043 (2d Cir. 1990) in
which the Second Circuit stated that an injury "does not occur
within the state simply because the plaintiff is a
resident."*fn5 910 F.2d at 1046.
Even assuming that plaintiff's alleged injury did in fact occur
in New York, the exercise of jurisdiction would offend due
process. As explained by the Second Circuit:
The due process requirement for personal
jurisdiction, enunciated by the Supreme Court in the
seminal case of International Shoe Company v.
Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95
(1945), protects a person without meaningful ties to
the forum state from being subjected to binding
judgments within its jurisdiction. . . .
The due process test for personal jurisdiction has
two related components; the "minimum contacts"
inquiry and the "reasonableness" inquiry. The court
must first determine whether the defendant has
sufficient contacts with the forum state to justify
the court's exercise of personal jurisdiction. . . .
The second stage of the due process inquiry asks
whether the assertion of personal jurisdiction
comports with "traditional notions of fair play and
substantial justice" — that is, whether it is
reasonable under the circumstances of the particular
case. The Supreme Court has held that the court must
evaluate the following factors as part of this
"reasonableness" analysis: (1) the burden that the
exercise of jurisdiction will impose on the
defendant; (2) the interests of the forum state in
adjudicating the case; (3) the plaintiff's interest
in obtaining convenient and effective relief; (4) the
interstate judicial system's interest in obtaining
the most efficient resolution of the controversy; and
(5) the shared interest of the states in furthering
substantive social policies. . . .
Thus, in assessing whether it may exercise
jurisdiction over a particular defendant, a court
must weigh the relative strengths and weaknesses of
each requirement — that is, depending upon the
strength of the defendant's contacts with the forum
state, the reasonableness component of the
constitutional test may have a greater or lesser
effect on the outcome of the due process inquiry.
Metropolitan Life, 84 F.3d at 567-68 (citations omitted).
Here, the reasonableness prong is arguably satisfied after
applying the above five factors. Factor one cuts against
jurisdiction as ATI will surely be burdened in defending an
action in the Southern District of New York.*fn6 Factor two
favors jurisdiction as New York presumably has a strong interest
in ensuring that its residents are paid for the services they
render to nonresidents. Factor three similarly favors
jurisdiction as plaintiff has a strong interest in recovering his
fees through a single litigation. Factor four also cuts in
favor of jurisdiction as forcing plaintiff to split his case
between the Southern District of New York and a Colorado court is
not the most efficient way of resolving a single dispute. The
fifth factor is neutral as this Court is unaware of any social
policies implicated by plaintiff's cause of action.
The problem, however, is not the reasonableness prong, it is
the minimum contacts requirement. ATI has no contacts with the
state of New York, much less minimum contacts that would justify
haling it into court here. No matter how eminently reasonable it
may be to assert jurisdiction, the complete absence of minimum
contacts precludes this Court from exercising jurisdiction. See
Ticketmaster — New York, Inc. v. Alioto, 26 F.3d 201, 210 (1st
Cir. 1994) ("We think . . . that the reasonableness prong of the
due process inquiry evokes a sliding scale: the weaker the
plaintiff's showing [on minimum contacts], the less a defendant
need show in terms of unreasonableness to defeat jurisdiction.
The reverse is equally true: an especially strong showing of
reasonableness may serve to fortify a borderline showing of
[minimum contacts]."). This is not a case of a "borderline
showing" of minimum contacts, there simply are no contacts.
Because the sliding scale tilts completely to one side, personal
jurisdiction over ATI cannot be maintained. See Donatelli v.
National Hockey League, 893 F.2d 459, 465 (1st Cir. 1990) (If
the defendant's contacts with the forum "do not exist in
sufficient abundance, that is, if the constitutionally necessary
first-tier minimum is lacking, the inquiry ends.").
C. The Sprint Merger
On September 23, 1999, ATI became a wholly-owned subsidiary of
the Sprint Corporation ("Sprint"). See Sur-Reply Memorandum of
Law in Support of Motion to Dismiss the Amended Complaint at 3.
Whitaker requests that he be permitted to engage in discovery
concerning the relationship between ATI and Sprint for purposes
of "301 jurisdiction."*fn7 See Supplemental Memorandum of Law
of Mr. Whitaker in Opposition to Motion to Dismiss at 12. This
request is denied. The relevant time frame for a jurisdictional
inquiry under C.P.L.R. § 301 is at the time of the filing of the
summons and complaint. See Andros Compania Maritima S.A. v.
Intertanker Ltd., 714 F. Supp. 669, 675 (S.D.N.Y. 1989)
(citations omitted). The fact that ATI may have subsequently
become part of a corporation that is doing business within New
York is irrelevant to the present jurisdictional analysis.
Accordingly, Plaintiff is not permitted to conduct discovery on
For the reasons stated above, this Court has no personal
jurisdiction over ATI which is hereby dismissed from this
lawsuit. A conference is scheduled for December 15, 1999 at 3:30
p.m. to discuss the status of this case.