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ULSTER SCIENTIFIC v. GUEST ELCHROM SCIENTIFIC
November 9, 2001
ULSTER SCIENTIFIC, INC., PLAINTIFF,
GUEST ELCHROM SCIENTIFIC AG, DEFENDANT.
The opinion of the court was delivered by: Honorable Norman A. Mordue, United States District Judge.
MEMORANDUM-DECISION AND ORDER
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
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
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
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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