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November 9, 2001


The opinion of the court was delivered by: Honorable Norman A. Mordue, United States District Judge.



Plaintiff, a New York corporation, brings this diversity action, filed December 28, 2000, to recover from defendant, a Swiss corporation, $115,800.32, plus interest and costs. Defendant moves to dismiss the action on grounds of lack of subject matter jurisdiction, lack of personal jurisdiction and failure to state a cause of action. Fed.R.Civ.P. 12(b)(1), (2) and (6). Defendant also moves to disqualify plaintiff's counsel, Richard D. Malmed, Esq. For reasons stated below, the Court denies dismissal and grants disqualification of counsel.*fn1


For more than twenty years prior to March 4, 1996, plaintiff was the exclusive United States distributor of defendant's medical products, which defendant shipped from Switzerland to plaintiff in New York. Plaintiff states that at some point, without plaintiff's consent, defendant began adding 10.5% annual interest to its invoices to plaintiff. Plaintiff avers that as of March 4, 1996, it owed defendant $476,968. According to defendant, the amount owed was $530,000.

On March 4, 1996, plaintiff, defendant and Lukens Medical Corporation ("Lukens"), a New Mexico corporation,*fn2 entered into an agreement (the "Guest agreement")*fn3 whereby defendant agreed to terminate its exclusive distributorship arrangement with plaintiff and enter into an exclusive distributorship agreement with Lukens. Lukens agreed to assume plaintiff's debt to defendant in the sum of $250,000 and to pay this amount directly to defendant, in partial discharge of that debt. Lukens further agreed to pay directly to defendant for eight years the sum of $7,500 per month out of payments, known as "post-closing payments" otherwise payable to plaintiff under a separate related agreement, described below, between plaintiff and Lukens. The Guest agreement provided that "the amount of each monthly Post-Closing payment in excess of . . . $7,500, if any, shall be paid to [plaintiff] . . . ." Correspondingly, plaintiff assigned to defendant plaintiff's right to receive $7,500 per month from the post-closing payments.

On March 5, 1996, plaintiff and Lukens entered into a related contract (the "Lukens/Ulster agreement") whereby plaintiff sold to Lukens some of plaintiff's assets, including its right to distribute defendant's products. Lukens agreed to make payments, called "post-closing payments," to plaintiff and Peter F. Lordi, Jr., plaintiff's president. It appears that the amount of the payments was based on the amount of income from the product lines Lukens purchased from plaintiff.*fn4
The complaint claims that defendant received payments from Lukens under the Guest agreement until plaintiff's total debt to defendant was repaid, after which defendant continued to collect monies from Lukens by wrongfully demanding that Lukens pay accrued interest at the rate of 10.5% as well as an amount reflecting the currency differential between Swiss francs and American dollars. According to the complaint, "[p]laintiff never agreed to the payment of interest on the unpaid balance, and never agreed to pay for any adjustment for currency differentials between the Swiss franc and the American dollar on the existing debt." Plaintiff claims that by this means defendant wrongfully collected from Lukens $90,115.32 in accrued interest and $25,685 in currency adjustments, for a total of $115,800.32. It appears to be plaintiff's position that Lukens should instead have paid these sums to plaintiff under the Lukens/Ulster agreement.


I. Subject matter jurisdiction

Plaintiff asserts that this court has diversity jurisdiction under 28 U.S.C. § 1332(a)(2), which provides for district court jurisdiction in cases where the parties are diverse and "the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs[.]" Defendant, asserting that plaintiff's claims do not attain the monetary minimum, moves to dismiss for lack of subject matter jurisdiction under Fed.R.Civ.P. 12(b)(1).

"The general federal rule has long been to decide what the amount in controversy is from the complaint itself, unless it appears or is in some way shown that the amount stated in the complaint is not claimed in good faith." Horton v. Liberty Mut. Ins. Co., 367 U.S. 348, 353 (1961). In addressing the question of good faith, courts have held that dismissal is justified only where it appears to a legal certainty that the claim is really for less than the jurisdictional amount. See id.; St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 288-89 (1938). Thus, "if, from the face of the pleadings, it is apparent, to a legal certainty, that the plaintiff cannot recover the amount claimed or if, from the proofs, the court is satisfied to a like certainty that the plaintiff never was entitled to recover that amount," the suit will be dismissed. St. Paul, 303 U.S. at 289; accord Tongkook America, Inc. v. Shipton Sportswear Co., 14 F.3d 781, 784 (2d Cir. 1994). That a plaintiff might not ultimately recover the minimum jurisdictional amount or that a valid defense to the claim may exist, does not show plaintiff's bad faith or destroy jurisdiction. See St. Paul, 303 U.S. at 289.
Here, the alleged jurisdictional defect does not appear on the face of the complaint, which sets forth a claim for money damages and a basis for calculating those damages in the amount of $115,800.32. At this point there is no ground for a finding that this amount is not sought in good faith, nor does it appear to a legal certainty that plaintiff's claim is really for less than the jurisdictional amount. Dismissal on this ground is denied.

II. Failure to state a claim

In addressing a motion to dismiss the complaint for failure to state a claim under Fed. R. Civ. P. 12(b)(6), the Court accepts as true all material facts alleged in the complaint and draws all reasonable inferences in plaintiff's favor. See McEvoy v. Spencer, 124 F.3d 92, 95 (2d Cir. 1997). Dismissal is proper only where it appears beyond doubt that plaintiff can prove no set of facts in support of its claims which would entitle it to relief. See Valmonte v. Bane, 18 F.3d 992, 998 (2d Cir. 1994).
The Court reads plaintiff's complaint as alleging that defendant received from Lukens money belonging to plaintiff and that in equity and good conscience defendant should be compelled to return it. If plaintiff is able to prove this claim at trial, plaintiff may be entitled to recover the amounts wrongfully received by defendant. See generally Matter of Estate of Witbeck, 666 N.Y.S.2d 315, 317 (3d Dep't 1997). The effect, if any, of the settlement agreement in plaintiff's Ulster County action against Lukens (see n. 4, supra) cannot be determined at this point. Nor does the record establish whether, under the terms of that settlement agreement, a recovery herein by plaintiff would amount to a double recovery. Accepting as true all material facts alleged in plaintiff's complaint and drawing all reasonable inferences in its favor, the Court concludes that defendant has not demonstrated its entitlement to dismissal under Fed.R.Civ.P. 12(b)(6). Dismissal on this ground is denied.

III. Personal jurisdiction

Defendant argues that the Court lacks personal jurisdiction over defendant. Fed. R. Civ. P. 12(b)(2). Since there has been no discovery and no evidentiary hearing on jurisdiction, plaintiff need make only a prima facie showing that jurisdiction is proper. See Ball v. Metallurgie Hoboken-Overpelt, S.A., 902 F.2d 194, 196-97 (2d Cir. 1990).
New York law governs the issue of personal jurisdiction in this diversity action. See CutCo Indus., Inc. v. Naughton, 806 F.2d 361, 365 (2d Cir. 1986). Plaintiff relies on New York's long-arm statute,*fn5 which permits a court to exercise personal jurisdiction over any non-domiciliary who in person or through an agent "transacts any business within the state or contracts anywhere to supply goods or services in the state[.]" N.Y.C.P.L.R. 302(a)(1). Such jurisdiction extends only to a "cause of action arising from any of the acts enumerated" in section 302, that is, there ...

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