United States District Court, Southern District of New York
May 12, 2003
ASTOR HOLDINGS, INC., AND ROBOT WARS LLC, PLAINTIFFS, AGAINST STEEFEL, LEVITT & WEISS, P.C., DEFENDANT.
The opinion of the court was delivered by: Shira A. Scheindlin, United States District Judge
OPINION AND ORDER
Plaintiffs brought a legal malpractice action against Steefel, Levitt & Weiss, P.C. ("Steefel") in New York State Supreme Court by filing a Summons With Notice. Steefel removed the action to this Court based on diversity of citizenship and then moved to dismiss for lack of personal jurisdiction or, alternatively, to transfer the case to the Northern District of California pursuant to either 28 U.S.C. § 1404 (a) ("section 1404(a)") or 28 U.S.C. § 1406 ("section 1406"). This was done without the benefit of a Complaint and before any jurisdictional discovery. Hence, there are neither jurisdictional allegations nor any specific allegations regarding the nature and scope of the alleged malpractice. Given this dearth of information, there is no basis on which to decide whether Steefel is subject to jurisdiction in New York or whether a change of venue is warranted for the convenience of parties and witnesses. However, because venue in the Southern District of New York is improper, the action will be transferred to the Northern District of California pursuant to section 1406.
A. The Parties and Other Relevant Persons
Steven Plotnicki is the president and sole shareholder of Astor Holdings, Inc. ("Astor"), a New York corporation, and the managing member of Robot Wars LLC ("RW"), a New York limited liability company. See Affidavit of Steven Plotnicki ("Plotnicki Aff.") ¶¶ 1-2. Plotnicki resides in New York which is also the principal place of business for both Astor and RW. See Id. ¶ 2. Steefel is a California professional law corporation with its principal place of business in San Francisco, California. See Declaration of Michael Early in Support of Defendant Steefel, Levitt & Weiss' Motion to Dismiss or Transfer ("Early Decl.") ¶¶ 1-2. Steefel was founded in 1980 and employees approximately 75 attorneys, one of whom maintains an office in Stamford, Connecticut. See Id. ¶¶ 2-3. Harvey S. Schochet is a practicing attorney at Steefel. See Declaration of Harvey S. Schochet in Support of Defendant Steefel, Levitt & Weiss' Motion to Dismiss or Transfer ("Schochet Decl.") at ¶ 1.
Marc Thorpe was a former business partner of Plotnicki who, along with Plotnicki, formed a venture known as "Robot Wars," which involved combat events between radio-controlled robots. See Id. ¶ 2. Fran Jacobs is a member of the law firm Duane, Morris & Heckscher ("DMH"), a law firm that represented Plotnicki and Astor in a New York litigation against Thorpe. See id. William Pascoe is an attorney retained by Plotnicki to represent RW in Thorpe's bankruptcy proceedings. See Plotnicki Aff. ¶ 8.
B. Thorpe's Bankruptcy Proceedings
On May 27, 1998, Thorpe and his wife, both of whom are California residents, filed for bankruptcy in the United States Bankruptcy Court for the Northern District of California (In re Marc Thorpe and Denise Thorpe, Debtors, Chapter 11 Case No. 98-11963). See 8/8/00 Memorandum of Decision of United States Bankruptcy Judge Alan Jaroslovsky ("Adversary Decision"), Ex. A to Schochet Decl. at 2. On February 2, 1999, Astor and Thorpe reached a settlement regarding the Robot Wars venture. See Schochet Decl. ¶ 4. The Settlement Agreement was approved by Judge Jaroslovsky on March 5, 1999. See id. Shortly thereafter, each side accused the other of breaching the settlement agreement. See id. After a year of informal negotiations, Thorpe commenced an adversary proceeding against Astor (Marc Thorpe v. Profile Holdings, Adversary Proceedings No. 00-1031) seeking a declaration that Astor must pay him the $250,000 specified in the 1999 settlement agreement. See Adversary Decision at 2. After a trial on the adversary proceeding, Judge Jaroslovsky found Thorpe in breach of the settlement agreement, assessed Astor's damages at $225,000, and offset those damages against the $250,000 due Thorpe, resulting in a net judgment of approximately $25,000 against Astor. See id. at 4. Pascoe represented Plotnicki and Astor in the bankruptcy and adversary proceedings. See Schochet Decl. at ¶ 4.
Seeking to appeal Judge Jaroslovsky's decision, Jacobs contacted attorney Schochet, of the Steefel firm, on behalf of Plotnicki. See id. ¶ 5. Steefel accepted the engagement to prosecute the appeal. See id. Jacobs informed Schochet, however, that Steefel's role would be limited to the appellate proceedings and that Pascoe would continue to represent Plotnicki and Astor in the Thorpe bankruptcy proceedings. See id. ¶ 6. During the remainder of 2000, Schochet worked very closely with Jacobs, Plotnicki and Pascoe in briefing the appeal to the United States District Court for the Northern District of California. See id. In January 2001, while the appeal was still being briefed, Thorpe filed a Plan of Reorganization (the "Plan") in the main bankruptcy proceeding.*fn1 See id. ¶ 8. One of the Plan's provisions sought to change the jurisdictional provisions agreed to in the 1999 Settlement Agreement. See Plotnicki Aff. at ¶ 9.
C. The Action Against Thorpe
RW, which was a party to the 1999 Settlement Agreement, sought advice from Schochet regarding its rights under the Settlement Agreement. See id. ¶ 10. Schochet allegedly advised RW that in order to prevent the Bankruptcy Court from changing the jurisdictional terms of the Settlement Agreement, a separate action against Thorpe would have to be commenced in the Southern District of New York prior to the Plan's confirmation hearing. See id. From his office in San Francisco, Schochet participated in several conference calls with Jacobs and Plotnicki in which the viability of a separate New York action against Thorpe was discussed. See Schochet Decl. ¶ 11. After receiving a copy of the Complaint drafted by Jacobs, Schochet allegedly advised Plotnicki that the Complaint did not violate the Bankruptcy Code and authorized its filing. See Plotnicki Aff. ¶ 11. On April 16, 2001, prior to the confirmation hearing,*fn2 Jacobs filed an action on behalf of RW against Thorpe in the Southern District of New York (the "New York action"). See Schochet Decl. ¶ 12.
Thorpe's attorney informally asked Jacobs to dismiss the New York action by May 2, 2001. See Chandler Letter. Because the New York action was not dismissed,*fn3 Thorpe filed a second adversary proceeding on May 3, 2001, naming Astor, RW, Plotnicki and his New York counsel, Jacobs and DMH (Marc Thorpe v. Robot Wars, LLC, Fran Jacobs, Duane, Morris & Heckscher, LLP, Astor Holdings and Steven Plotnicki, Adversay Proceeding No. 01-1061).*fn4 See Schochet Decl. ¶ 14. This adversary proceeding sought a declaration that the New York action against Thorpe violated Judge Jaroslovsky's discharge order in connection with the Plan confirmation. See id. ¶ 15. Thorpe simultaneously applied for a temporary restraining order,*fn5 a development that was discussed by Schochet, Plotnicki, Jacobs and Pascoe during a telephone conference.*fn6 See id. ¶ 17. In May of 2001, while attending his son's graduation at an east coast college, Schochet met with Plotnicki and Jacobs for more than two hours at her New York City office. See Plotnicki Aff. ¶ 19; Schochet Decl. ¶ 7. The participants discussed various strategies regarding Thorpe's adversary proceeding and the temporary restraining order entered by Judge Jaroslovsky. See Plotnicki Aff. ¶ 19. According to Plotnicki, Schochet did not advise him during that meeting that the consequences of a discharge violation would be a civil contempt hearing. See id. On the eve of trial, Plotnicki decided to settle the second adversary proceeding, the details of which were handled by Pascoe. See id. ¶ 24.
Plotnicki now accuses Steefel of legal malpractice because Schochet failed to advise him that the filing of the New York action against Thorpe could be considered a violation of the discharge order entered in connection with the confirmation of the Thorpe Plan and that the penalty for such a violation would be a finding of civil contempt against Plotnicki and his companies. See Plotnicki Aff. ¶ 4. Had Plotnicki received proper advice from Schochet, he claims that he would never have filed the New York action or would have withdrawn it prior to the filing of any adversary proceeding. See id. Plotnicki allegedly incurred more than one million dollars in additional legal fees and settlement payments as a result of Schochet's faulty advice. See id.
A. Dismissal for Lack of Personal Jurisdiction
1. Legal Standard
A court is obligated to dismiss an action against a defendant over whom it has no personal jurisdiction. See Fed.R.Civ.P. 12(b)(2); Laborers Local 17 Health and Benefit Fund v. Philip Morris, Inc., 26 F. Supp.2d 593, 597 (S.D.N.Y. 1998). "Prior to discovery, a plaintiff challenged by a jurisdiction testing motion may defeat the motion by pleading in good faith legally sufficient allegations of jurisdiction, i.e. by making a `prima facie showing' of jurisdiction." Jazini v. Nissan Motor Co., 148 F.3d 181, 184 (2d Cir. 1998) (quoting Ball v. Metallurgie Hoboken-Overpelt, S.A., 902 F.2d 194, 197 (2d Cir. 1990)). A plaintiff can make this showing through its own affidavits and supporting materials. See Whitaker v. American Telecasting, Inc., 261 F.3d 196, 208 (2d Cir. 2001) (quotation marks and citation omitted). "[W]here the issue is addressed on affidavits, all allegations are construed in the light most favorable to plaintiff and doubts are resolved in the plaintiff's favor." A.I. Trade Fin., Inc. v. Petra Bank, 989 F.2d 76, 79-80 (2d Cir. 1993).
2. Application to the "Facts"
Despite the fact that no jurisdictional allegations have been pled given the absence of a Complaint, plaintiffs maintain that this Court has both general and specific personal jurisdiction over Steefel. According to plaintiffs, Steefel is "doing business" in New York, thus subjecting it to general jurisdiction under New York law.*fn7 See Laufer v. Ostrow, 449 N.Y.S.2d 456, 459 (1982) ("Solicitation and servicing by a foreign corporate sales agency of New York accounts through sales representatives present in New York, if systematic and continuous, is enough to subject the sales agency corporation to New York jurisdiction."). Plaintiffs point to several factors in support of their argument that Steefel is doing business in New York. First, plaintiffs note that Steefel maintains a one-man office in Stamford, Connecticut headed by Richard Tannenbaum, a bankruptcy attorney. See Excerpt from Martindale-Hubbell Law Directory 2002, Ex. B to the Declaration of Jonathan Rogin ("Rogin Decl."), counsel for plaintiffs. Plaintiffs then cite the April 2002 edition of "The Counselor," a self-promotional bulletin published by Steefel, which contains an article entitled "Steefel's Stamford Office Provides Coast to Coast Service For Clients." Steefel's purported attempt to break into the New York market is arguably supported by the fact that: (1) Richard Tannenbaum represented a party in an action brought in the Southern District of New York in 1998; and (2) Ray Triana of Steefel's San Francisco office represented an entity in a 2002 New York real estate transaction. See Docket Report for Citicorp Leasing v. Logan Medical Foundation and an 8/7/02 New York Law Journal Article, Exs. C and E to Rogin Decl. These facts, without more, do not establish that Steefel is doing business in New York such that it is amenable to general jurisdiction.
Steefel denies being subject to general jurisdiction in New York for a number of reasons. Steefel has no office in New York and has never appeared in New York for Astor or RW during the pendency of the underlying bankruptcy proceedings, all of which were venued in California. See Memorandum of Law in Support of Defendant Steefel, Levitt & Weiss' Motion to Dismiss or Transfer ("Def. Mem.") at 12. Steefel claims that it had no contacts with New York which would make it amenable to jurisdiction and never sought to avail itself of the rights and privileges of doing business in New York regarding its representation of plaintiffs. See id. Given Steefel's relatively few and insubstantial contacts with New York, the assertion of general jurisdiction over it would arguably offend "`traditional notions of fair play and substantial justice.'" International Shoe Co. v. State of Washington, Office of Unemployment Compensation and Placement, 326 U.S. 310, 316 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463 (1940)).
In sum, whether Steefel meets the definition of doing business such that the assertion of general jurisdiction would not offend due process cannot be decided on the present record. The extent of Steefel's New York business activity cannot be determined without knowing the dates, frequency and number of New York litigations handled by the firm, the revenue derived therefrom compared to overall revenue, and the level of advertising expenditures specifically directed to the New York market. Without jurisdictional discovery, whether Steefel is present in New York "`not occasionally or casually, but with a fair measure of permanence and continuity'" is an open question. Landoil Resources Corp. v. Alexander & Alexander Servs., Inc., 563 N.Y.S.2d 739, 741 (1990) (quoting Tauza v. Susguehanna Coal Co., 220 N.Y. 259, 267 (1917)). At this early stage, plaintiffs have failed to show that Steefel is subject to general jurisdiction in New York.
Plaintiffs also argue that specific personal jurisdiction exists over Steefel pursuant to New York's long-arm statute.*fn8 According to plaintiffs, Steefel committed legal malpractice both within and outside of New York thereby subjecting itself to jurisdiction under sections 302(a)(2) and (3). Schochet arguably committed legal malpractice in New York when he met with Plotnicki and Jacobs in her New York office and failed to advise Plotnicki of the possibility of a civil contempt hearing. Because the New York action had already been filed at this point, most of the legal malpractice had already occurred from Schochet's office in San Francisco. However, plaintiffs claim that Schochet's faulty advice at the May 2001 meeting constitutes "continual malpractice."
Applying section 302(a)(3) (tort committed outside the state causing injury to a person within the state) is problematic for the same reasons pertaining to the assertion of general personal jurisdiction, i.e., insufficient information to determine whether Steefel regularly does or solicits business in New York. And while Schochet was physically present in New York for at least one meeting regarding the New York action, the assertion of jurisdiction under section 302(a)(2) (tort committed within the state) is problematic for a different reason. Even if jurisdiction is technically proper under the long-arm statute, its exercise must not violate due process.
Because the "constitutional touchstone remains whether the defendant purposefully established `minimum contacts' in the forum," a defendant must reasonably anticipate litigation in an out-of-state forum so as not to violate due process. Burger King v. Rudzewicz, 471 U.S. 462, 475 (1985) (citing International Shoe, 326 U.S. at 316). This required foreseeability results when a defendant "`purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.'" Id. (quoting Hanson v. Denckla, 357 U.S. 235, 253 (1958)).
This "purposeful availment" requirement ensures that a
defendant will not be haled into a jurisdiction solely
as a result of "random," "fortuitous," or "attenuated"
contacts, or of the "unilateral activity of another
party or a third person." Jurisdiction is proper,
however, where the contacts proximately result from
actions by the defendant himself that create a
"substantial connection" with the forum State.
Burger King, 471 U.S. at 475 (emphasis in original). See also Agency Rent A Car System, Inc. v. Grand Rent A Car Corp., 98 F.3d 25, 32 (2d Cir. 1996) (holding that due process is satisfied if defendant's contact with New York is not "random," "fortuitous", or "attenuated").
Given the circumstances surrounding Schochet's trip to New York, it is unlikely that Steefel purposefully availed itself of New York as a forum during its representation of Astor and RW. See Schochet Decl. ¶ 27 ("During the course of our firm's representation of Astor and RW, at no time did I ever agree on Steefel's behalf to subject the firm to the jurisdiction of the courts of the State of New York nor to be subject to or have disputes resolved in accordance with New York law, nor to utilize New York as a forum for dispute resolution."). In addition, because the number and sufficiency of Steefel's minimum contacts with New York cannot be determined without some jurisdictional discovery, the assertion of personal jurisdiction may or may not be constitutional. Because I am transferring this case on different grounds, however, I need not decide the jurisdictional issue.
B. Transfer Under 28 U.S.C. § 1404 (a)
Section 1404(a) permits a change of venue, in the interest of justice, "[f]or the convenience of parties and witnesses." 28 U.S.C. § 1404 (a). See also Strauss v. West Highland Capital, Inc., No. 00 Civ. 1184, 2000 WL 1505957, at *1 (S.D.N.Y. Oct. 6, 2000). Factors to be considered in evaluating a motion to transfer include: "(1) the convenience and location of witnesses; (2) the location of relevant documents; (3) the ease of access to sources of proof; (4) the convenience of the parties; (5) the locus of operative facts; (6) the availability of process to compel the attendance of unwilling witnesses; (7) the weight accorded the plaintiff's choice of forum; and (8) trial efficiency and the interest of justice, based on the totality of circumstances." Id.
Here, the parties characterize the scope of the alleged malpractice differently. Defendant defines the scope of malpractice broadly, stating that "the crux of [plaintiffs'] claim for legal malpractice against Steefel is based upon Steefel's role as plaintiffs' counsel in the underlying bankruptcy proceedings in the Northern District of California." Def. Mem. at 13. This interpretation is presumably premised on the Summons With Notice which states that "this is an action for legal malpractice relating to your representation of the Plaintiffs in the bankruptcy case (and related proceedings) filed by debtors Marc A. Thorpe and Denise Thorpe in the United States Bankruptcy Court for the Northern District of California (Santa Rosa Division) (Case No. 98-11963-AJ)." Ex A. to Rogin Decl. Plaintiffs take a more limited view of the alleged malpractice. See Plaintiffs' Memorandum of Law in Opposition to Defendant's Motion to Dismiss for Lack of Personal Jurisdiction and to Transfer Venue ("Pl. Mem.") at 11 ("The essence of the malpractice is that at various points throughout Steefel's representation of Plotnicki and his companies, Schochet failed to properly advise Plotnicki regarding the consequences of filing an action in New York against Thorpe vis-a-vis Thorpe's bankruptcy discharge in California.").
The parties' divergent descriptions of the alleged malpractice have differing effects on the section 1404(a) calculus. Whether the alleged malpractice is limited to Schochet's faulty advice or encompasses other acts of malpractice in connection with the underlying bankruptcy proceedings determines, in large part, the most convenient forum for the witnesses. Defendant has identified fifteen potential witnesses, only two of whom are New York residents. See Schochet Decl. ¶ 26. Under defendant's broad description, some or all of these witnesses may be relevant to the instant action. Plaintiffs, on the other hand, have identified only five potentially relevant witnesses: Plotnicki, Schochet, Jacobs, Joe Burton (Jacobs' San Franciso based partner), and Andre Kress of Kaye Scholer, LLP (Plotnicki's current bankruptcy counsel). Given that the relevance of Kress's testimony is suspect, the convenience of the remaining witnesses under plaintiffs' more limited view is in equipoise: Plotnicki and Jacobs are New York residents while Schochet and Burton are residents of California.*fn9 Without knowing how plaintiffs will actually plead their malpractice claim, it is impossible to accurately assess the convenience of likely witnesses. This, in turn, makes a section 1404(a) transfer determination impracticable. However, because venue in the Southern District of New York is inappropriate, I need not decide whether a change of venue is warranted under section 1404(a).
C. Transfer Under 28 U.S.C. § 1406
When subject matter jurisdiction is based on diversity of citizenship, venue is proper in, inter alia, "a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred." 28 U.S.C. § 1391 (a) (emphasis added). Furthermore, if a case is filed laying venue in the wrong district, the district court "shall dismiss, or if it be in the interest of justice, transfer such case to any district or division in which it could have been brought." 28 U.S.C. § 1406.
Here, it is undisputed that most of Schochet's allegedly erroneous advice originated from his office in San Francisco. See Schochet Decl. ¶¶ 11, 17 ("I participated in several conference calls with Jacobs and Plotnicki (from my office in San Francisco) concerning whether Plotnicki, through Astor or RW, could include Thorpe as a defendant in the contemplated New York litigation. . . ."). In fact, plaintiffs point to the May 2001 meeting in Jacobs' office as the only instance in which advice was given by Schochet while he was physically present in New York. See Pl. Mem. at 12 ("To the extent that the continuous commissions of malpractice . . . did not take place during the May 2001 New York meeting, they necessarily occurred while Schochet was outside New York."). The May 2001 meeting, where Schochet allegedly failed to advise Plotnicki that the consequences of a discharge violation would be a civil contempt hearing, see Plotnicki Aff. ¶ 19, took place after the New York action had already been filed. The advice given at the May 2001 meeting, even if it were to continue the New York action, was tangential to the core of the alleged malpractice, which was the advice to file the action in the first place. The advice given at the May 2001 meeting cannot be considered a substantial part of Steefel's overall malpractice, the majority of which occurred in California. Accordingly, a substantial part of the events or omissions giving rise to plaintiffs' malpractice claim did not occur in the Southern District of New York, thereby making venue in this district inappropriate. Because most of Schochet's faulty advice originated from San Francisco, this case could have been brought in the Northern District of California. Therefore, pursuant to section 1406, this case is hereby transferred to the Northern District of California.
For the foregoing reasons, this case is transferred to the Northern District of California. The Clerk of the Court is directed to close this case and transfer the file forthwith. The parties are directed to inform United States District Judge Joseph C. Spero of this transfer.