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J.L.B. EQUITIES, INC. v. OCWEN FINANCIAL CORP.

March 2, 2001

J.L.B. EQUITIES, INC., PLAINTIFF,
V.
OCWEN FINANCIAL CORPORATION, DEFENDANT.



The opinion of the court was delivered by: Barrington D. Parker, Jr., District Judge.

  MEMORANDUM DECISION AND ORDER

Plaintiff J.L.B. Equities, Inc., a Delaware corporation located in Elmsford, New York ("JLB"), commenced this diversity action in September 1999 against Ocwen Financial Corporation ("Ocwen") alleging breach of contract. Ocwen moves to dismiss the Complaint on the grounds that (i) this Court lacks personal jurisdiction over the defendant, and (ii) venue is not proper in this District. See Fed.R.Civ.P. 12(b)(2) & (3). For the following reasons, the defendant's motion is granted.

BACKGROUND

Ocwen is a publicly traded holding company located in Florida with assets totaling almost $3.3 billion. It owns a number of subsidiaries engaged in financial services. Its primary function is cash management, deciding where to invest the available cash of its subsidiaries. According to the plaintiff, Ocwen maintains a custodial account-which has held over $2 billion worth of securities and generated nearly $25 million in interest income from 1997 to 1999 — with the Bank of New York, which is located in New York. Moreover, JLB contends that one of Ocwen's banking subsidiaries, Ocwen Federal Bank (the "Bank" or the "Ocwen Bank"), owns and sells real property in New York, services New York mortgages and solicits brokered deposits in New York. The Court assumes, for purposes of this motion, that the Ocwen Bank is subject to the general jurisdiction of the New York courts.

According to the Complaint, JLB arranged a relationship between City Mortgage Company, a United Kingdom company located in London, England ("City Mortgage"), and Greenwich International, Ltd., a Bermuda corporation located in London, England ("Greenwich"), whereby City Mortgage sold mortgages originated in the U.K. to Greenwich, which would then securitize the mortgages. In May 1995, City Mortgage entered into a contract agreeing to pay JLB a commission based upon the value of the mortgages which were originated by City Mortgage and securitized by Greenwich (the "Fee Agreement").

In April 1998, City Mortgage's parent company, Cityscape Financial Corporation ("Cityscape"), sold substantially all of City Mortgage's assets to Ocwen pursuant to a sale agreement (the "Asset Sale Agreement"). According to the plaintiff, Ocwen agreed to assume most of City Mortgage's outstanding contracts on that date, including the Fee Agreement. The Complaint alleges that in June and November 1998, Greenwich securitized mortgages worth over £ 340 million on behalf of Ocwen, a substantial portion of which included loans originated by City Mortgage. According to the plaintiff, these securitizations triggered Ocwen's obligation to make payments to JLB under the Fee Agreement. To date, since Ocwen has not made any payments to JLB, JLB filed this action.

In early 2000, Ocwen moved to dismiss the Complaint on the grounds that this Court lacked personal jurisdiction and that venue was not proper in this District. Fed.R.Civ.P. 12(b)(2) & (3). By Order on May 24, 2000, this Court found that the defendant's motion was premature and ordered the parties to conduct discovery on the issue of jurisdiction. Currently before the Court is defendant's reinstated motion — discovery having been completed-seeking dismissal of the Complaint on the grounds previously stated.

DISCUSSION

In a diversity action, personal jurisdiction is governed by the law of the forum state. See United States v. First Nat'l City Bank, 379 U.S. 378, 381-82, 85 S.Ct. 528, 13 L.Ed.2d 365 (1965); Arrowsmith v. United Press Int'l, 320 F.2d 219, 223 (2d Cir. 1963) (en banc). In responding to a Rule 12(b)(2) motion, the plaintiff "bears the burden of proving by a preponderance of the evidence that personal jurisdiction exists." Landoil Resources Corp. v. Alexander & Alexander Services, Inc., 918 F.2d 1039, 1043 (2d Cir. 1990). Because the Court has not held a hearing on the issue, the plaintiff need only make a prima facie showing of jurisdiction. Moreover, "all pleadings and affidavits must be construed in the light most favorable to [the plaintiff] and all doubts must be resolved in the [plaintiff's] favor." Id.; Hoffritz For Cutlery, Inc. v. Amajac, Ltd., 763 F.2d 55, 57 (2d Cir. 1985). Where, as here, however, the parties have engaged in extensive discovery concerning the defendant's contacts with the state, JLB's prima facie showing must include an averment of facts that, if credited by the trier of fact, would suffice to establish personal jurisdiction over Ocwen. Bank Brussels Lambert v. Fiddler Gonzalez & Rodriguez, 171 F.3d 779, 784 (2d Cir. 1999).

The Court must follow a two-step procedure to determine whether personal jurisdiction exists. First, the Court must decide whether a statutory basis for personal jurisdiction exists under the New York Civil Practice Law and Rules (the "C.P.L.R."). Second, if a statutory basis does exist, the Court must conduct a constitutional inquiry to determine whether the exercise of personal jurisdiction is consistent with the requirements of due process. See International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945). Because the Court finds there is no statutory basis to exercise personal jurisdiction over Ocwen, it does not reach the constitutional due process issue.

I. C.P.L.R. § 301

Section 301, as construed by the New York courts, permits the general exercise of personal jurisdiction over a foreign corporation if it is "engaged in such a continuous and systematic course of doing business here as to warrant a finding of its presence in this jurisdiction." McGowan v. Smith, 52 N.Y.2d 268, 272, 419 N.E.2d 321, 437 N.Y.S.2d 643 (1981) (internal quotations omitted). Accordingly, "New York law requires that the defendant be present in New York "not occasionally or casually, but with a fair measure of permanence and continuity.'" Landoil, 918 F.2d at 1043 (quoting Tauza v. Susquehanna Coal Co., 220 N.Y. 259, 267, 115 N.E. 915 (1917)).

The test has been described as simple and pragmatic, but necessarily fact sensitive. See Bryant v. Finnish Nat'l Airline, 15 N.Y.2d 426, 432, 208 N.E.2d 439, 260 N.Y.S.2d 625 (1965); Landoil, 918 F.2d at 1043. In (determining jurisdiction, New York courts have generally focused on the following factors: "The existence of an office in New York; the solicitation of business in New York; the presence of bank accounts or other property in New York; and the presence of employees or agents in New York." Id.

JLB does not dispute the defendant's contention that Ocwen maintains no New York office, has no personnel in New York and does not solicit business directly in New York. Rather, JLB asserts that Ocwen is "doing business" in the state in two ways: (1) by buying and selling securities through its custodial account with the Bank of New ...


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