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UNITED FEATURE SYNDICATE v. MILLER FEATURES SYND.

March 11, 2002

UNITED FEATURE SYNDICATE, INC., AND NEWSPAPER ENTERPRISE ASSOCIATION, INC., PLAINTIFFS,
V.
MILLER FEATURES SYNDICATE, INC., RICHARD VROOM, AND AGNES VROOM, DEFENDANTS.



The opinion of the court was delivered by: Lynch, District Judge.

    OPINION AND ORDER

BACKGROUND

For purposes of this motion to dismiss, the facts must be taken as pleaded by the plaintiffs. United Media — which is comprised of UFS, a New York corporation with principal place of business in New York, and NEA, a Delaware corporation with principal place of business in New York — is in the business of syndicating newspaper features, including a number of popular comic strips for which it holds registered U.S. copyrights. (Amend. Compl. ¶¶ 1-2, 9.) For approximately 100 years, United Media has licensed the rights to publish its features to Canadian newspapers, either directly or through agents that market United Media's features on its behalf. Miller Features, an Ontario corporation with its principal place of business in Toronto, is one such marketing agent. (Amend.Compl. ¶¶ 3, 10-11.) Miller Features was founded and operated by the Vrooms, both of whom are citizens of Canada and residents of Toronto. (Amend.Compl. ¶¶ 4-5.) The Canadian company initially agreed, orally, to serve as United Media's agent at some point in 1996; the parties later memorialized the terms of that oral agreement in a written Agency Agreement, dated July 8, 1998 (the "Written Agency Agreement"), that formally appointed Miller Features to serve as United Media's agent. Under the terms of the Written Agency Agreement, Miller Features agreed to promote United Media's features in Canada; to service the agreements between United Media and its Canadian clients by "collecting, disbursing, and accounting for payments made by Clients for the benefit of [United Media] . . . and assuring that all Clients make such payments in a timely fashion", and to negotiate future agreements with prospective Canadian clients. (Amend. Compl. ¶¶ 12-13.)

The agreement obligated Miller Features to use all reasonable efforts to collect amounts owed to United Media by Canadian clients within 60 days after the end of the calendar month in which those amounts were due and to provide United Media with a monthly accounting of all amounts invoiced from United Media's Canadian clients and payable to United Media for that particular month. In consideration for providing these and other services as United Media's agent, Miller Features was paid a percentage-based commission on all amounts paid to United Media by its Canadian clients. The net amounts owed to United Media after deduction of these commissions were to be paid when the monthly accounting report was submitted. (Amend.Compl. ¶¶ 14-17.) United Media had the right to terminate the agreement by written notice in the event of any breach, and the effect of that termination was to render all amounts owed to United Media immediately due and payable. (Amend.Compl. ¶ 18.) Choice of law and forum selection provisions in the agreement provide that New York law governs and that the federal and state courts within this District are the exclusive fora for dispute resolution. (Amend. Compl Exh. B. ¶ 10.)

In addition to negotiating the agency agreements in New York, the Vrooms had numerous and repeated contacts with New York in connection with the agency relationship between United Media and Miller Features, attending numerous quarterly sales meetings at United Media's New York offices, communicating regularly with United Media by telephone and mail, and transmitting monthly accounting reports and funds collected from United Media's Canadian clients. (Decl. of Lisa Marie Wilson, July 16, 2001, at ¶¶ 5-14 & Exh. 12, 4-7, 9. ("Wilson Decl.")) While the Written Agency Agreement expired by its terms on December 31, 1999, Miller Features continued to perform its services as United Media's agent in accordance with the expired agreement's terms throughout the year 2000. (Amend.Compl. ¶ 20.) In November 2000, however, United Media became aware that Miller Features had fallen into arrears in its payments to United Media. The parties spent a few months attempting to negotiate a mutually acceptable repayment plan; as part of those negotiations, the Vrooms came to New York for a meeting with United Media in January 2001. (Amend.Compl. ¶ 22.) When these negotiations failed to resolve matters, United Media gave formal notice, in a letter sent to Miller Features on February 13, 2001, that it was terminating the Agency Agreement and advised Miller Features that United Media was owed approximately $248,043. (Amend. Compl. ¶ 23.) United Media requested immediate access, as provided for in Section 4(f) of the Agency Agreement, to all information pertaining to its Canadian client relationships — including the contact information for each client, a list of the specific features to which each client subscribed, and the rate and delivery fees for each feature. Since much of this information had been collected and maintained exclusively by Miller Features, United Media was unable to service its clients effectively upon termination of the agreement — indeed, in some instances, United Media was not even able to identify its Canadian clients. While United Media followed up its initial request in subsequent letters and telephone calls, the Defendants did not provide any of these records to United Media upon its request and, apparently, still have not done so. (Amend. Compl. ¶¶ 23-27.)

United Media also instructed Miller Features permanently to cease all of its dealings with United Media's Canadian clients, in accordance with Section 9(a) of the Agency Agreement. However, Agnes Vroom continued to contact United Media's Canadian clients after February 13, 2001, and instructed them to continue paying Miller Features for United Media's features. These communications apparently continued throughout March 2001 in spite of United Media's repeated requests for Miller Features and the Vrooms to cease, resulting in some confusion on the part of some of United Media's Canadian clients. (Amend.Compl. ¶¶ 23, 28-36.) Miller Features also continued to represent that it was serving as United Media's agent on its internet web site until April 2001, when the web site was shut down altogether. (Amend.Compl. ¶¶ 37-39.)

Miller Features filed for bankruptcy in Canada on March 13, 2001. (Amend. Compl. ¶ 10.) United Media initiated this action and moved for a preliminary injunction against Miller Features and the Vrooms on March 30, 2001, and filed an Amended Complaint on April 16, 2001. Pending a hearing on United Media's motion for the preliminary injunction, the Court restrained the defendants from contacting United Media's Canadian clients or engaging in certain conduct suggesting that Miller Features continued to be an agent of United Media or had any right to market United Media features. The Court vacated that restraining order following a hearing held on May 22, 2001, and shortly thereafter United Media voluntarily discontinued the action against Miller Features. United Media did not discontinue the action against the Vrooms or file another amended complaint.

Counts Two, Five, Six, Seven, and Nine of the Amended Complaint — which respectively allege breach of fiduciary duty, unjust enrichment, conversion, fraudulent conveyance, and federal copyright infringement — were originally asserted against all three defendants, and so remain pending against the Vrooms. (Amend. Compl. ¶¶ 43-47, 60-68, 74-78.) While Counts One, Three, and Four — which respectively allege breach of contract, entitlement to an accounting, and entitlement to the imposition of a constructive trust — are nominally asserted against Miller Features alone, United Media asserts in Count Eight that it should be permitted to lift the corporate veil and hold the Vrooms, as officers or shareholders of Miller Features, liable in their individual capacities for any wrongdoing by the corporation. (Amend. Compl. ¶¶ 48-59, 69-73.) Counts One, Three, and Four therefore remain before the Court, through the veil-piercing claim asserted in Count Eight, as claims asserted directly against the Vrooms.

DISCUSSION

Pursuant to Fed.R.Civ.P. 12(b), the Vrooms now move to dismiss this action on a variety of procedural grounds — lack of personal jurisdiction, forum non conveniens, international comity — and for failure to state a claim upon which relief may be granted.

I. Personal Jurisdiction

In order to defeat the Vrooms' jurisdiction-testing motion at this stage of the litigation, United Media need only make a prima facie showing of jurisdiction based on the factual allegations in its complaint and supporting affidavits. Ball v. Metallurgie Hoboken-Overpelt, S.A., 902 F.2d 194, 197 (2d Cir. 1990); Kronisch v. United States, 150 F.3d 112, 130-31 (2d Cir. 1998). Personal jurisdiction over a non-resident defendant typically is governed by the law of the state in which a federal court sits. Bensusan Restaurant Corp. v. King, 126 F.3d 25, 27 (2d Cir. 1997).

United Media maintains that the Court properly may exercise personal jurisdiction over the Vrooms, both of whom are citizens and domiciliaries of Ontario, under Rule 302(a)(1) of the New York Civil Practice Law and Rules, which confers longarm jurisdiction over a non-domiciliary defendant if two conditions are satisfied. First, the non-domiciliary defendant must "transact[] . . . business within the state," either in person or through an agent. C.P.L.R. 302(a)(1). "[P]roof of one transaction in New York is sufficient to invoke jurisdiction, even though the defendant never enters New York." Kreutter v. McFadden Oil Corp., 71 N.Y.2d 460, 467, 527 N.Y.S.2d 195, 522 N.E.2d 40 (1988). A non-domiciliary defendant "transacts business" under C.P.L.R. 302(a)(1) when it "purposefully avails itself of the privilege of conducting activities within [New York], thus invoking the benefits and protections of its laws." McKee Elec. Co. v. Rauland-Borg Corp., 20 N.Y.2d 377, 382, 283 N.Y.S.2d 34, 229 N.E.2d 604 (1967). Whether the defendant "transacts business" in New York is determined with reference to a variety of factors, including:

(i) whether the defendant has an ongoing contractual relationship with a New York corporation, (ii) whether the contract was negotiated or executed in New York, and whether, after executing a contract with a New York business, the defendant has visited New York for the purpose of meeting with parties to the contract regarding the relationship, (iii) what the choice-of-law clause is in any such contract, and (iv) whether the contract requires [the defendant] to send notices and payments into the forum state or subjects them to supervision by the corporation in the forum state.

Agency Rent A Car Sys., Inc. v. Grand Rent A Car Corp., 98 F.3d 25, 29 (2d Cir. 1996) (citations omitted); see also Cut-Co Industries, Inc. v. Naughton, 806 F.2d 361, 368 (2d Cir. 1986) (considering, as relevant contacts for jurisdictional purposes, defendant's "extensive communication" by telephone with plaintiffs New York office and his forwarding of royalties, fees, and financial information to that office). No one factor is dispositive; other factors may be considered, and the "ultimate determination is based on the totality of the circumstances." Agency Rent A Car Sys., 98 F.3d at 29.

Second, the claim against the non-domiciliary must arise from that business activity. C.P.L.R. 302(a)(1). The parties quibble over the precise language that describes this standard, with the Vrooms asserting that United Media must demonstrate a "substantial nexus" between the transaction of business and the cause of action and United Media maintaining that this nexus need only be "articulable." Each side can find support for its chosen phrase in New York case law; indeed, the New York Court of Appeals appears to use the terms interchangeably. Compare McGowan v. Smith, 52 N.Y.2d 268, 272, 437 N.Y.S.2d 643, 419 N.E.2d 321 (1981) (stating that C.P.L.R. 302(a)(1) requires "some articulable nexus between the business transacted and the cause of action sued upon"), with id. (series of visits to New York cannot form predicate for exercise of personal jurisdiction because "they have not been shown to bear a substantial relationship to the transaction out of which the instant cause of action arose"). Here, the factual allegations in the Amended Complaint clearly reveal a sufficient nexus — be it labeled "articulable" or "substantial" — between business transacted in New York by the Vrooms and the claims asserted by United Media to justify the exercise of long-arm jurisdiction over the Vrooms. Between 1995 and 2001, the Vrooms had extensive contact with New York in connection with the negotiation and performance of the agency agreements between Miller Features and United Media. Both the initial oral agreement and subsequent Written Agency Agreement were negotiated by Richard Vroom in New York on Miller Features' behalf, and those negotiations by themselves might constitute sufficient contacts to justify the exercise of personal jurisdiction. See, e.g., Cross & Cross Properties Ltd. v. Everett Allied Co., 664 F. Supp. 713, 716 (S.D.N.Y. 1987) (factual allegations that defendant was "physically present in New York for negotiation of and agreement in principle to the contracts out of which the cause of action arose . . . present very nearly the `clearest sort of case' for longarm jurisdiction under New York law" (citation omitted)).

But the Vrooms' contacts with New York in connection with the agency relationship between Miller Features and United Media extend well beyond mere negotiation of those agreements. As part of that ongoing contractual relationship, the Vrooms regularly communicated with United Media in New York by telephone, facsimile, and regular mail. At the end of almost every month, they sent accounting reports and hundreds of thousands of dollars to United Media in New York. The Vrooms also made periodic visits to New York to attend quarterly sales meetings at United Media's offices; indeed, the Written Agency Agreement explicitly contemplates the attendance of Miller Features representatives at those New York sales meetings by providing for the reimbursement of expenses incurred by Miller Features when attending those meetings. Wilson Decl. ¶ 10 & n. 2.

These purposeful, periodic contacts with New York — taking many different forms over a period of years — clearly constitute "transact[ion of] business" in New York within the meaning of C.P.L.R. 302(a)(1). While Richard Vroom protests that his contacts with New York took place solely in his capacity as an officer of Miller Features, C.P.L.R. 302(a)(1) does not "accord any special treatment to fiduciaries acting on behalf of a corporation or . . . insulate them from long-arm jurisdiction for acts performed in a corporate capacity." Kreutter, 71 N.Y.2d at 470, 527 N.Y.S.2d 195, 522 N.E.2d 40. Nor do the Vrooms fare any better by arguing that none of the acts supporting United Media's various tort claims took place in New York. While it is true that the conditions for long-arm jurisdiction must be satisfied for each cause of action asserted, e.g., Anderson v. Indiana Black Expo, Inc., 81 F. Supp.2d 494, 501 (S.D.N.Y. 2000), United Media is not precluded from asserting its various tort claims simply by virtue of the fact that the Vrooms' various contacts with New York revolve around a contractual relationship. "The requirement [under C.P.L.R. 301(a)(2)] that the claim arise under the contract . . . does not mean that the cause of action must be for breach of contract." GB Marketing USA Inc. v. Gerolsteiner Brunnen GmbH & Co., 782 F. Supp. 763, 768 (S.D.N.Y. 1991). Claims sounding in tort may properly "arise from" the transaction of business in New York, even when the acts underlying the cause of action took place outside of New York, as long as they are sufficiently related to that transaction of business. See Stewart v. Adidas A.G., No. 96 Civ. 6670(DLC), 1997 WL 218431, *5 (S.D.N.Y. Apr. 30, 1997); Mayer v. Josiah Wedgwood & Sons, Ltd., 601 F. Supp. 1523, 1531 n. 9 (S.D.N.Y. 1985). And since all of United Media's claims concern the Vrooms' conduct towards United Media and its Canadian clients, the Vrooms' transaction of business in New York is sufficiently related to the claims asserted to justify the exercise of personal jurisdiction.

II. Forum Non Conveniens

The Vrooms also maintain that the action should be dismissed on the ground of forum non conveniens, arguing that since most of the relevant documents and witnesses are in Canada, and none of the alleged acts of wrongdoing took place in New York, United Media's claims should instead be presented to a Canadian court, be it the Toronto bankruptcy court before which the Miller Features bankruptcy proceeding is pending or some other Canadian forum.

When reviewing a motion to dismiss for forum non conveniens, we must "begin with the assumption that the plaintiff's choice of forum will stand." Iragorri v. United Techs. Corp., 274 F.3d 65, 71 (2d Cir. 2001) (en bane), see Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508, 67 S.Ct. 839, 91 L.Ed. 1055 (1947) ("[U]nless the balance [of conveniences] is strongly in favor of the defendant, the plaintiffs choice of forum should rarely be disturbed."). Even greater deference is afforded to the plaintiffs choice when, as in this case, the plaintiff has sued in its home forum. Iragorri, 274 F.3d at 71; see Piper Aircraft Co. v. Reyno, 454 U.S. 235, 255-56, 102 S.Ct. 252, 70 L.Ed.2d 419 (1981) ("When the home forum has been chosen, it is reasonable to assume that this choice is convenient."); Koster v.(Am.) Lumbermens Mut. Cas. Co., 330 U.S. 518, 524, 67 S.Ct. 828, 91 L.Ed. 1067 (1947) ("In any balance of conveniences, a real showing of convenience by a plaintiff who has sued in his home forum will normally outweigh the inconvenience the defendant may have shown."). The existence of a forum selection clause also counsels strongly against dismissal of an action based on forum non conveniens. Firemen's Ins. Co. of Newark, New Jersey v. Keating, 753 F. Supp. 1137, 1145 (S.D.N.Y. 1990).

Given these strong presumptions in favor of United Media's choice of its home forum, the Vrooms labor under a particularly heavy burden when arguing for dismissal based on forum non conveniens. Since United Media readily concedes that an adequate, alternative forum is available in Canada, Pl. Brief in Opp. at 16, we proceed to evaluate the Vrooms' argument for dismissal under the familiar framework of private and public interest factors set forth in Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508-09, 67 S.Ct. 839, 91 L.Ed. 1055 (1947). Private interest factors include: (1) the relative ease of access to sources of proof; (2) the availability of compulsory process for attendance of unwilling witnesses; (3) the cost of obtaining attendance of willing witnesses; (4) issues concerning the enforceability of a judgment; and (5) all other practical problems that make trial of a case easy, expeditious, and inexpensive — or the opposite. Murray v. British Broadcasting Corp., 81 F.3d 287, 294 (2d Cir. 1996). Public interest factors include: (1) the administrative difficulties flowing from court congestion; (2) the local interest in having controversies decided at home; (3) the interest in having a trial in a forum that is familiar with the law governing the action; (4) the avoidance of unnecessary problems in conflict of laws or in the application of foreign law; and (5) the unfairness of burdening citizens in an unrelated forum with jury duty.

Id. at 293. In light of the various presumptions weighing in United Media's favor, dismissal based on forum non conveniens is justified only if the balance of these public and private interest factors weighs heavily in favor of the Vrooms' alternative forum. See Koster, 330 U.S. at 524, 67 S.Ct. 828 (in order to disturb plaintiffs choice of its home forum, defendant must make "clear showing of facts which either (1) establish such oppressiveness and vexation to a defendant as to be out of all proportion to plaintiffs convenience, which may be shown to be slight or nonexistent, or (2) make trial in the chosen forum inappropriate because of considerations affecting the court's own administrative and legal problems"); Leasco Data Processing Equipment Corp. v. Maxwell, 468 F.2d 1326, 1344 (2d Cir. 1972) (Friendly, J.) ("[C]ourts should require positive evidence of unusually extreme circumstances, and should be thoroughly convinced that material injustice is manifest before exercising any such discretion to deny a citizen access to the courts of this country.").

Here, the Vrooms fall well short of establishing that United Media's choice of this forum will cause "such oppressiveness and vexation . . . as to be out of all proportion to [United Media's] convenience." Id. The private interest factors are more or less neutral. The Vrooms assert that all of the relevant documents and witnesses, including Miller Features' clients and several of its employees, are located in Canada, and that these Canadian witnesses "would be prevented by the expense and travel from testifying at the trial." Vroom Reply Aff. ¶ 3. However, the burdens asserted by the Vrooms of litigating in New York, rather than Toronto, are not exceptional.*fn1 Nor, for that matter, are those asserted burdens unique to the Vrooms. While the Vrooms assert that "all" relevant documents and witnesses are located in Canada, United Media contends otherwise, and were this case instead to go forward in a Canadian court, United Media almost certainly would face a reciprocal burden of transporting to Canada documents and witnesses that support its version of the facts. See Byrne v. British Broadcasting Corp., 132 F. Supp.2d 229, 238 (S.D.N.Y. 2001) (relative costs of obtaining attendance of witnesses is neutral factor where "[t]here has been no showing that [such costs] would be significantly greater for either side in either forum"). The existence of the forum selection clause in the Written Agency Agreement makes clear that the parties themselves agreed that litigation in this forum would be mutually acceptable and convenient, and the Vrooms have failed to demonstrate that the testimony of any critical witness would be unavailable if this action proceeds before this Court. See ESI, Inc. v. The Coastal Corp., 61 F. Supp.2d 35, 65 (S.D.N.Y. 1999). Finally, the Vrooms do not suggest that a judgment of this Court would be unenforceable in Canada.

The public interest factors also weigh against dismissal. "Court congestion" is not a factor weighing in the Vrooms' favor. While the Vrooms assert that Ontario offers an "expedited judicial process" to resolve disputes such as this one, Cooperman Aff. ¶ 8, they offer no evidence indicating how expeditious that process actually is relative to the process available here. Absent any such evidence, there is little basis to conclude that the courts of the Southern District of New York suffer from any more congestion than the courts of Ontario. See DiRienzo v. Philip Services Corp., 232 F.3d 49, 63 (2d Cir. 2000) (noting that "Ontario courts, like the Southern District of New York, suffer from congestion," and finding this factor to be neutral), petition for reh'g en banc filed, Nos. 99-7825, 997776 (2d Cir. Nov. 22, 2000); Ingram Micro, Inc. v. Airoute Cargo Express, Inc., No. 99 Civ. 12480(SAS), 2001 WL 282696, at *5 (S.D.N.Y. Mar. 22, 2001) (finding relative court congestion to be neutral factor where defendant "offered no evidence that [Ontario courts are] any less busy" than courts of the Southern District of New York).*fn2

Moreover, since the harms that United Media claims to have suffered at the hands of the Vrooms, including infringement of its copyrights, were experienced in New York, those harms are "of local interest to the United States and an American jury has an interest in evaluating [those] harm[s]." Ingram Micro, Inc., 2001 WL 282696, at *16; see also World Film Servs., Inc. v. RAI Radiotelevisione Italiana S.p.A., No. 97 Civ. 8627(LMM), 1999 WL 47206, at *9 ("It is well-settled that the United States has an interest in protecting the intellectual property rights of its citizens."). Finally, ensuring that the forum is familiar with the applicable law and avoiding unnecessary problems involving conflicts of law also are neutral factors, at best. United Media maintains that New York law, with which this Court is intimately familiar, governs all of its claims, and even if that argument is mistaken, the Vrooms have failed to demonstrate that application of Canadian law would be unusually difficult or burdensome to this Court. See Manu Int'l, S.A. v. Avon Prods., Inc., 641 F.2d 62, 67 (2d Cir. 1981) ("[T]he need to apply foreign law is not in ...


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