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3H ENTERPRISES, INC. v. DWYRE
December 12, 2001
3H ENTERPRISES, INC. AND STEVEN HOCHMAN, PLAINTIFFS,
JOHN STEVEN DWYRE, TERESA SANTELLANES, AND MAURO SANTELLANES, DEFENDANTS.
The opinion of the court was delivered by: Mcavoy, District Judge
This is one of many lawsuits rising out of the parties' business
dealings in Texas. 3H Enterprises (3H) and Steven Hochman (Hochman),
plaintiffs in this action, allege an abuse of process by Teresa
Santellanes and Mauro Santellanes (collectively "the Santellanes") and
their attorney in Texas John Steven Dwyre (Dwyre). Before this Court are
Defendants' motions to dismiss for lack of subject matter jurisdiction,
lack of personal jurisdiction, failure to state a claim, and res
judicata. Additionally, Defendants move for sanctions against Plaintiff
Hochman and his attorney.
"This motion was originally filed by the Defendants pro se.*fn1
Plaintiffs responded to that motion. While a decision was pending, the
Santellanes Defendants obtained New York counsel, who requested
permission to file supplemental motion papers. Permission was granted, and
Plaintiffs have responded to the Santellanes' motion papers as well.
Thus, the Court makes the following decision based upon all of the
The Santellanes are residents of Texas. Dwyre was their attorney in the
prior New York and Texas actions. 3H is a business incorporated in
Delaware County, New York, that was, prior to the Texas lawsuit, doing
business in Texas. Hochman is the sole shareholder, director and officer
of 3H. Compl. ¶ 2. 3H is in the business of buying and selling
mortgages. Hochman Aff. ¶ 2. Sometime in 2000, the Santellanes
contracted to sell a mortgage to 3H. Compl. ¶ 3. The Santellanes did
not complete the transaction. 3H alleges that it was the Santellanes who
breached the contract without cause. Compl. ¶ 4. All of 3H's
contracts contained forum selection clauses and liquidated damages
clauses. Following the Santellanes refusal to go through with the
contract, 3H brought suit in Delaware County, New York, the place listed
in the forum selection clause. That action was dismissed on the basis of
forum non conveniens. Compl. ¶ 6. 3H filed a notice of appeal, but
that appeal remained unperfected. Compl. ¶ 7. Following the dismissal
of the New York lawsuit, the Santellanes, with Dwyre as their attorney,
brought suit in a Texas court alleging that 3H was engaged in a
fraudulent scheme. That action sought damages and injunctive relief.
Compl. ¶ 8. 3H contested jurisdiction in the matter and lost. Texas
Judgment, p. 1-2. 3H then answered in the action through its Texas
attorneys. Texas Judgment, p. 1. Following the answer, 3H discharged its
counsel and did not proceed further in the action. Hochman Aff. ¶ 2.
Hochman states in his affidavit that "I then decided, on May 22, to cut
our losses and discharge Texas counsel and deal somehow with whatever
legitimate consequences might follow." Hochman Aff. ¶ 6.
It now appears that after having a similar judgment rendered in
Florida, 3H ceased doing business entirely. Neither of these judgments
has been paid by 3H. Mendelson Aff. ¶ 2; Dwyre Aff. ¶ 12.
Plaintiff Hochman contends that he stopped doing business in other states
for business reasons, but stopped doing business in Texas solely because
of the injunction issued against him. Hochman Second Aff. ¶¶ 3-5.
During the Texas litigation, while 3H was still actually defending the
action,*fn2 Dwyre served a notice to take the deposition of Hochman in
New York. Hochman moved to quash the notice, but his motion was denied.
The Court issued an order allowing Hochman the choice of appearing for
deposition in Texas on a specific date or arranging for a deposition in
New York with the costs to be paid by him.
Hochman failed to appear on the specified date, or to arrange for a New
York deposition after being ordered by the Texas court to do so.
Def.Mem.L., Ex. "3," Texas order. Thereafter Dwyre moved for contempt and
various discovery sanctions, including the striking of defendant's answer
and judgment as a matter of law. In that motion, Dwyre states, "[d]eath
penalty sanctions are warranted. This Defendant has failed to comply with
an important order of this Court and is not cooperating with discovery."
Id. An order resulted from this motion which states that "[d]efendant,
Steve Hochman is commanded to appear and show cause why he should not be
held in contempt of court for not appearing as ordered at his deposition
on June 11, 2001." Id. at Order. Plaintiff Hochman contends that this was
"an ex parte order commanding Hochman to appear in Texas for deposition
on August 2, 2001, or face the `death penalty'." Compl. ¶ 11. Hochman
never appeared before the Court to show cause why he should not be held
in contempt. Following the failure of Plaintiff Hochman to appear for the
third time, the Court entered a default judgment.
Plaintiffs now bring this action alleging that Dwyre and the
Santellanes were motivated by malice against him, and thus abused process
against him. He alleges that the default judgment in Texas effectively
precludes him from doing business in Texas, and he asks this Court to
award him damages for his emotional distress and his loss of business as
a result of the Texas judgment.
Defendants move to dismiss the complaint for lack of jurisdiction,
failure to state a claim upon which relief can be granted, and res
judicata. Defendants also move for sanctions against Plaintiffs and their
attorney. For the reasons that follow, Defendants motion to dismiss is
Defendants contend that there is no personal jurisdiction over them
because they lack the minimum contacts with New York.
On a motion to dismiss for lack of personal jurisdiction, the Plaintiff
bears the burden of demonstrating the Court has jurisdiction. Kernan v.
Kurz-Hastings, Inc., 175 F.3d 236, 240 (2d Cir. 1999). Where the motion
to dismiss is made prior to discovery, the plaintiff can defeat the
motion with "legally sufficient allegations
of jurisdiction." Photoactive Productions, Inc. v. AL-OR International
Ltd., 99 F. Supp.2d 281, 285 (E.D.N.Y. 2000) (citations omitted). Thus,
the Plaintiff must make a "prima facie showing of jurisdiction."
Photoactive Productions, 99 F. Supp.2d at 285 (citations omitted). In
this diversity action, jurisdiction is determined by the law of the state
in which the federal court sits. Mario Valente Collezioni, Ltd. v.
Confezioni Semeraro Paolo, S.R.L., 264 F.3d 32, 35 (2d Cir. 2001);
Bensusan Restaurant Corp. v. King, 126 F.3d 25, 27 (2d Cir. 1997). Thus,
New York law determines whether jurisdiction exists.
1. New York Long Arm Jurisdiction
Plaintiffs seek to premise jurisdiction on New York's long-arm
provision, C.P.L.R. 302(a). C.P.L.R. 302(a) does not requite the same
level of contacts with New York as are required for jurisdiction under
C.P.L.R. 301. However, in order to exert jurisdiction under C.P.L.R.
302, the cause of action must arise out of the established contacts.
National Telephone Directory Consultants, Inc. v. Bellsouth Advertising
& Publishing Corp., 25 F. Supp.2d 192 (S.D.N.Y. 1998) (citations
omitted). Purposeful availment is the cornerstone of long-arm
jurisdiction in New York. See Courtroom Television Network v. Focus
Media, Inc., 264 A.D.2d 351, 695 N.Y.S.2d 17, 18 (1st Dep't 1999)
(citations omitted), Thus, jurisdiction is appropriate where the party
has projected itself into New York, and where it has put itself in the
position to receive the benefits of New York law and commerce. National
Telephone Directory, 25 F. Supp.2d at 196.
Further, when long arm jurisdiction is at issue, the Court must also
ensure that the exercise of jurisdiction does not implicate
constitutional concerns and will not offend "traditional notions of fair
play and substantial justice." People v. Concert Connection, Ltd.,
211 A.D.2d 310, 314, 629 N.Y.S.2d 254 (2nd Dep't 1995) (quoting
International Shoe v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90
L.Ed. 95 (1945)). Thus, certain "minimum contacts" must exist in order to
confer jurisdiction on the Court. Mario Valente Collezioni, Ltd., 264
F.3d at 35 (federal law of minimum contacts determines whether exercise
of jurisdiction is constitutional).
Plaintiffs makes a number of arguments regarding jurisdiction. The
Court will address each in turn.
Plaintiffs first seek to premise jurisdiction on C.P.L.R. 302(a)(2).
That statute provides jurisdiction over a person who commits a tortious
act within New York. In relying on this provision, Plaintiffs contend
that because Defendant Dwyre issued process in New York, he committed a
tortious act within the state. See Pl.Mem.L. 14. What Plaintiffs seem to
ignore here is that the issuing of process is not the tortious act
complained of. Abuse of process does not concern the issuance of
process, but rather "`the improper use of process after it is regularly
issued.'" Labensky v. County of Nassau, 6 F. Supp.2d 161, 177 (E.D.N.Y.
1998) (quoting Cook v. Sheldon, 41 F.3d 73, 80 (2d Cir. 1994)). It is