United States District Court, S.D. New York
March 15, 2004.
KURT SCHULTZ, Plaintiff, -against- OCEAN CLASSROOM FOUNDATION, INC. and SCHOONER HARVEY GAMAGE FOUNDATION, INC., Defendants, OCEAN CLASSROOM FOUNDATION, INC. and OCEAN CLASSROOM FOUNDATION, INC. d/b/a SCHOONER HARVEY GAMAGE FOUNDATION, INC., Third-Party Plaintiffs, -against- LUNENBURG FOUNDRY & ENGINEERIN LIMITED, Third-Party Defendant
The opinion of the court was delivered by: DEBORAH BATTS, District Judge
MEMORANDUM & ORDER
Third-Party Defendant Lunenburg Foundry & Engineering Limited' s
("LIFE" or "Third-Party Defendant") has moved to dismiss the Third-Party
Complaint for lack of personal jurisdiction pursuant to Federal Rule of
Civil Procedure 12(b)(2).
In August 2001, Plaintiff Kurt Schultz ("Plaintiff") filed this suit
against Defendant Ocean Classroom Foundation, Inc. and Schooner Harvey
Gamage Foundation, Inc. (collectively
known as "Ocean" or "Third-Party Plaintiffs") to recover damages for
personal injuries he allegedly sustained from a defective windlass*fn1
while on board the sailing vessel HARVEY GAMAGE, owned and operated by
Ocean, off the coast of Puerto Rico. At the time of the accident, Schultz
alleges he was employed by Ocean. (Compl. at ¶¶ 7, 9; Third-Party Compl. at
¶¶ 7, 9.) Ocean is a New York corporation, and Schultz is a resident of
the State of Texas. (Compl. at ¶ 5; Third-Party Compl. at ¶¶ 1, 2.)
Ocean commenced a third-party action in accordance with Rule 14(a) of
the Federal Rules against Lunenburg Foundry & Engineering Limited
("LIFE" or "Third-Party Defendant"), the alleged manufacturer of the
windlass.*fn2 The Third-Party Complaint was filed against LIFE, the
alleged manufacturer of
the windlass on the HARVEY GAMAGE. (Third-Party Compl. at ¶ 13.)
LIFE, a limited liability company, has its principal and only place of
business in Lunenberg, Canada in the province of Nova Scotia. (Kinley
Decl. at ¶ 4; Kinley Depo. at 7-9.) LIFE operates a ship yard and a
foundry in Lunenburg where it manufactures marine hardware and other
equipment for the marine trade and repairs vessels. (Kinley Decl. at ¶
5; Kinley Depo. at 13-16.) LIFE designs its marine hardware using Canadian
standards and directs its products and services principally to the
Canadian market, which accounts for over 90% of its business. (Kinley
Decl. at ¶ 5; Kinley Depo. at 87.) LIFE is not organized under the laws
of, is not registered to do business in, does not maintain any offices
in, and does not have any employees, sales agents, or officers in the
State of New York or any other state. (Kinley Decl. ¶ 6.) Moreover, the
company does not maintain any bank accounts in New York, nor have a
registered agent who can legally receive service of process in New York
or any other state. (Id.)
Though the bulk of LIFE'S business originates in Canada, it does
transact some business with American companies and individuals and does
maintain some business relationships with American-based corporations.
From January 1997 through August 2002, LIFE entered approximately
involving shipments to New York destinations totaling $13,328*fn3
Canadian dollars in sales, amounting to 0.07% of all of LIFE'S sales for
the same time period. (Kinley Depo. at 48.) As Peter Kinley, the Chief
Executive Officer of LIFE, explained in his Deposition, the typical sale
to an individual or company in New York state:
Well, the standard for any customer would be that
they'd call us and tell us what they wanted and we'd
make it and there'd be some issue about terms, how
they'd pay for it. There'd be some issue about
specific sizes of things, you know, getting the
specification right, produce it, get the money, ship
it to them or sometimes there'd be a partial payment
even before the job was started and then the final
payment. Generally, anything going out of the country
we ask for payment up front.
(Id. at 49-50.)
All these transactions were carried out in Canadian dollars. (Kinley
Decl. at ¶¶ 13-15.)
In addition to these transactions, on August 18, 1999, Andrew Moore,
the sole owner and President of Navigator Stove Works ("Navigator"),
(Navig. Depo. at 7-9), a corporation based in Brooklyn, New York,
directly approached LIFE in Nova Scotia to negotiate a licensing
agreement ("Agreement") to manufacture stoves whose design and
manufacture LIFE once oversaw. (Navig. Depo. at 10-12; Kinley Depo. at
36-38). Navigator arranged in
the Agreement to license seven plates of foundry stove patterns from
LIFE, guaranteeing LIFE a 6% royalty on any stoves manufactured and sold
from these plates. (Navig. Depo. at 8, 13, 21, 22). For example, for the
years 2001-2002, LIFE'S royalties totaled approximately $1,600.00.
(Kinley Decl. at 16).
In his deposition, Andrew Moore describes the meeting which produced
the Agreement: "Yeah. I picked them up when I was up there [in Canada].
We signed the licensing agreement and put the patterns in the back of my
pick-up and drove home." (Navig. Depo. at 8, 22). Moore also stated that
he had never met with LIFE employees in New York. (Id. at 16.)
Navigator currently produces two types of stoves from these patterns.
(Id. at 25). The Agreement also designates LIFE as a distributor of
Navigator stoves for the Canadian provinces of Prince Edward Island, Nova
Scotia and Newfoundland. (Id. at 38.) Navigator and LIFE also agreed,
that when LIFE sells a stove, it would get a twenty-percent discount off
retail. (Id. at 38, 56, 57). LIFE displays a Navigator stove at its place
of business and calls Navigator two to four times annually requesting
pamphlets about these stoves. (Id. at 38). To date, LIFE has not sold any
Navigator stoves. (Id. at 38, 39). The Agreement does not prevent
Navigator from doing business with other companies. (Id. at 21).
LIFE also advertises occasionally in general trade
magazines that have a North American circulation, including New York, and
sends representative to various trade shows, including some in the
states. (Kinley Depo. at 57-58; Kinley Decl. ¶ 10.) None of the trade
shows in the past several years has been in New York; Kinsley did recall
attending one trade show in the Javits Center in New York City some many
years ago. (Kinley Depo. at 29; Kinley Decl. ¶ 10.)
LIFE maintains a Website (the "Website"), accessible on the worldwide
web, containing links to other websites relevant to the boating
community. (Kinley Decl. at ¶¶ 7-9.) The Website is highly interactive and
displays many of the companies products, including windlasses (Decl.
Fromm, Exh. K.). The prices on the Website are quoted only in Canadian
dollars; the Website makes no mention of New York. However, among the
links contained on the LIFE Website is one to the Navigator's homepage,
as negotiated in the Agreement. (Navig. Depo. at 44, 46-7.). Navigator
maintains a reciprocal link, one of thirteen such links on its website.
(Id. at 31, 48, 49, 61).
In its Answer, LIFE asserted that this Court lacked personal
jurisdiction over it. (Third-Party Ans. at Aff. Defs. f 3.) At a
subsequent Rule 16 Conference on November 22, 2002, the Court issued a
Briefing Schedule for this Motion. Third-Party Defendant timely filed
their Motion to Dismiss, to which
Third-Party Plaintiffs have responded. LIFE filed a Reply.
I. Standards for Motion to Dismiss for Lack of Personal Jurisdiction
in New York
It is well-established that "[i]n resolving questions of personal
jurisdiction in a diversity action, a district court must conduct a
two-part inquiry. First, it must determine whether the plaintiff has
shown that the defendant is amenable to service of process under the
forum state's laws; and second, it must assess whether the court's
assertion of jurisdiction under these laws comports with the requirements
of due process." Metropolitan Life Ins. Co. v. Robertson-Ceco Corp.,
84 F.3d 560, 567 (2d Cir. 1996)(citation omitted); see also Fed.R.Civ.P.
17(b) ("The capacity of a corporation to sue or be sued . . . shall be
determined by the law of the state in which the district court is
held."); Asahi Metal Ind. Co. v. Superior Crt. of Calif. 480 U.S. 102
(1987)(holding that once personal jurisdiction is established, exercise
of that jurisdiction must still qualify as fair and reasonable under the
Due Process Clause of the Fourteenth Amendment).
Although the party asserting personal jurisdiction ultimately bears the
burden of demonstrating such jurisdiction, where no evidentiary hearing
has been held, it is sufficient for
that party to simply make a prima facie showing of jurisdiction. See
Jazini v. Nissan Motor Co., 148 F.3d 181, 184 (2d. Cir. 1998). As such,
"the court must view all of the allegations in the light most favorable
to plaintiffs and resolve all doubts in plaintiffs' favor." In re Ski
Train Fire in Kaprun, Austria on Nov. 11, 2000, 230 F. Supp.2d 403, 406
(S.D.N.Y. 2002)(citing Hoffritz for Cutlery, Inc. v. Amajac, Ltd.,
763 F.2d 55, 57 (2d Cir. 1985)).
However, w[a]fter discovery, the plaintiff's prima facie showing,
necessary to defeat a jurisdiction testing motion, must include an
averment of facts that, if credited by the trier, would suffice to
establish jurisdiction over the defendant." Ball v. Metallurgie
Hoboken-Overpelt, S.A., 902 F.2d 194, 197 (2d Cir. 1990). This averment
can come in the form of a Rule 12(b)(2) motion, "which assumes the truth
of the plaintiff's factual allegations for purposes of the motion and
challenges their sufficiency." Id.
Here, Third-Party Plaintiffs premise jurisdiction under general and
specific personal jurisdiction, respectively, §§ 301 and 302 of New
York's Civil Practice Law & Rules ("CPLR"). Since jurisdictional
discovery has been conducted, the Court looks to the sufficiency of
Third-Party Plaintiffs' factual allegations.
A. General Personal Jurisdiction under § 301
General personal jurisdiction may be asserted over corporations "doing
business" in New York under CPLR § 301, which states in pertinent part,
"[a] court may exercise such jurisdiction over persons, property or
status as might have been exercised heretofore." As interpreted by
courts, § 301 permits "a court to exercise jurisdiction over a foreign
corporation on any cause of action if the defendant is engaged in such a
continuous and systematic course of `doing business' here as to warrant a
finding of its `presence' in this jurisdiction." Landoil Resources Corp.
v. Alexander & Alexander Servs., Inc., 918 F.2d 1039, 1043 (2d Cir.
1990)(internal quotations omitted)(citations omitted). "Doing business"
requires that the defendant be present in New York "not occasionally or
casually, but with a fair measure of permanence and continuity." Id.
(citing Tauza v. Susquehanna Coal Corp., 220 N.Y. 259, 267 (1917)). This
inquiry is a "simple and pragmatic" test, and courts have traditionally
focused on a "traditional set of indicia," including the (1) existence of
a company office in the state, (2) the presence of bank accounts or
property in the state, (3) the maintaining of a phone listing in the
state, (4) any public relations work done in the state, and (5) attempts
by the company to promote its interests through agents or other
individuals permanently located in the state. Wiwa v. Royal
Dutch Petroleum Co., 226 F.3d 88, 98 (2d Cir. 2000)(citations omitted),
cert. denied, 532 U.S. 941 (2001).
Courts have also asserted jurisdiction under § 301 over entities that
"regularly solicit business [in New York] and engage in some
additional commercial activity within the state," Thomas Publishing
Company, 237 F. Supp.2d 489, 491 (S.D.N.Y. 2002). This is known as the
"solicitation plus" doctrine. Kinsepp at 27 (citing Aquascutum of
London, Inc. v. S.S. American Champion, 426 F.2d 204, 211 (2d Cir.
1970)). This doctrine requires that the case involve "either financial or
commercial dealings in New York, either personally or through an agent,"
Id. at 27 (citing Aquascutum, at 212)), and its key question "is whether
the defendant (or its agent) behaved in such a way so as to encourage
others to spend money (or otherwise act) in a manner that would benefit
the defendant." Wiwa, 226 F.3d at 98. Finally, the solicitation must be
substantial and done from a permanent location within the state for a
party asserting jurisdiction to invoke this doctrine. See Pellegrino v.
The Stratton Corp., 679 F. Supp. 1164, 1170 (N.D.N.Y. 1988)("Basically,
New York courts have required `substantial solicitation' that is done
with a `considerable measure of continuity and from a permanent locale'
within the state.")(citing Beacon Enterprises, Inc. v. Menzies,
715 F.2d 757, 763 (2d Cir. 1983)).
B. "Doing Business" under CPLR § 301
Third-Party Defendant argues that § 301 does not confer jurisdiction
over it here. The "simple and pragmatic" test is not satisfied because
LIFE has no office, employees, bank accounts or property in New York. It
is not licensed to do business in New York. LIFE further contends that it
does not meet the requirements of the "solicitation plus" doctrine as its
solicitation of business in New York is neither "substantial" nor
transacted with a considerable measure of continuity and from a permanent
locale in the state.
Third-Party Plaintiffs argue that when LIFE'S highly interactive
Website, its advertisements in magazines circulated in New York, and its
contractual obligations with Navigator arising from the Agreement are
examined in toto, it is clear that LIFE actively does business in New
York, sufficient for this Court to exercise jurisdiction over Third-Party
Third-Party Plaintiffs also argue that under the "solicitation plus"
doctrine, LIFE actively solicits business in New York by maintaining a
website accessible in New York, advertising in publications that are
distributed throughout the United States including New York, and
attending trade shows in the United States. When such solicitation is
coupled with LIFE'S sales to New York residents, its Agreement with
§ 301's requirements have been met.
It is indisputable that LIFE does not have any offices in New York
State, nor does it maintain a telephone listing here.
It has no assets of any kind in the state in the form of real property
or liquid assets, and it has no agents who are permanently (or even
occasionally) in New York.
It has only one contractual relationship with a New York company, and
the Agreement was signed in Canada at the sole initiative of Navigator,
not LIFE. In the past few years, LIFE has sold $13,000 to New York
addresses, constituting no more than 0.07% of its overall sales during
that time period.
LIFE'S advertising does not specifically target New York. In his
deposition, Kinley could not even state whether the several magazines in
which LIFE advertises are circulated in New York (Kinley Depo. at 58-59);
LIFE instead placed those advertisements to reach the Maritime Provinces
market, in which it is located. LIFE has never sent agents to New York to
buy advertising or to promote its business there through any public
relations medium, nor it seems conducted any public relations work.
Furthermore, advertisements in newspapers and radio will not satisfy the
jurisdictional requirements of § 301. Muollo v. Crestwood Village, Inc.,
547 N.Y.S.2d 87, 88 (N.Y.2d Dept 1989)(finding no jurisdiction over a
foreign company that advertised extensively in New York). Indeed, New
have long held that "absent a showing of an office or employees or agents
in New York, the use of New York media for advertising defendant's
foreign business . . . has been held insufficient to confer jurisdiction
over the defendant in New York." Carbone v. Fort Erie Jockey Club, Ltd.,
366 N.Y.S.2d 485, 487 (N.Y. 4th Dept 1975)(citing Frummer v. Hilton
Hotels Int'l, 19 N.Y.2d 533 (1967); see also Cardone v. Jiminy Peak,
Inc., 667 N.Y.S.2d 82, 83 (N.Y.3d Dept 1997)(finding no jurisdiction over
a Massachusetts ski resort which among other things placed advertisements
on New York radio stations, television stations, and print media). Here,
it is not even a. close question when occasional advertisements were
placed in three journals, none of which are New York-specific
The trade shows to which LIFE has sent representatives all took place
in other states, save one that took place at the Javits Center years
ago. It is a rather attenuated argument that LIFE has done business in
New York by attending trade shows in other states where potential New
York customers might be; this hardly amounts to systematic conduct in the
forum state. Cf. Holness v. Maritime Overseas Corp., 676 N.Y.S.2d 540,
543 (1st Dept 1998)(no jurisdiction over a corporation who advertises in
New York and even sends agents occasionally to the state)(citing McGowan
v. Smith, 52 N.Y.2d 268, 272 (1981)).
Finally, Third-Party Plaintiff's substantial reliance on
LIFE'S Website to establish their jurisdictional argument is misplaced.
"[T]he fact that a foreign corporation has a website accessible in New
York is insufficient to confer jurisdiction under CPLR § 301," In re Ski
Train Fire in Kaprun, Austria on Nov. 11, 2000, 230 F. Supp.2d 376, 383
(S.D.N.Y. 2002)(quoting Spencer Trask Ventures v. Archos S.A., No. 01
Civ. 1169, 2002 WL 417192 at *6-*7 (S.D.N.Y. Mar. 18, 2002)), and is
rather a question to determine under § 302. Even when viewed in
connection with LIFE'S other activities and in the light most favorable
to the nonmovant, the Website proves nothing. Indeed, the Website lists
prices solely in Canadian dollars, makes no mention of New York, and has
only one link to a New York corporation.*fn4 In short, under § 301's
traditional indicia, Third-Party Plaintiffs' factual allegations are
In analyzing the facts here under the "solicitation plus" doctrine, the
Court first notes that the doctrine requires that the defendant's
solicitation activities be substantial enough to bring it within the
doctrine. Dunn v. Southern Charters, Inc., 506 F. Supp. 564, 567
(E.D.N.Y. 1981). In Dunn, the court found it doubtful at best that a
company deriving no more than 1.5% of
its revenues could have jurisdiction exercised over it, citing cases in
which 2% and 4% were also deemed insufficient. Id. (citing Stark Carpets
v. M-Geough Robinson, Inc. 481 F. Supp. 499, 505 (S.D.N.Y. 1980); New
England Laminates Co. v. Murphy, 362 N.Y.S.2d 730, 732-33 (Sup.Ct.
1974)). Here, LIFE derived only 0.07% of its revenues from New York.
Furthermore, LIFE has no employees or agents permanently located in New
York to promote and solicit business on its behalf, as the doctrine
requires.*fn5 The Court is therefore not persuaded that the factual
averments demonstrate that the "solicitation doctrine" is even
implicated here. Accordingly, the Court declines to analyze the case
under the doctrine.
In sum, Third-Party Plaintiffs have failed to aver sufficient facts
that § 301 confers jurisdiction over LIFE.
B. Specific Personal Jurisdiction
Under CPLR § 302(a)(3), specific jurisdiction may in certain
circumstances be asserted over a foreign company by a New York federal
court. Section 302 reads in pertinent part:
[A] court may exercise personal jurisdiction over
any non-domiciliary, who . . .
3. commits a tortious act without the state causing
injury to person or property within the state, except
as to a cause of action for defamation of character
arising from the act, if he
(i) regularly does or solicits business, or engages in
any other persistent course of conduct, or derives
substantial revenue from goods used or consumed or
services rendered, in the state, or
(ii) expects or should reasonably expect the act to
have consequences in the state and derives substantial
revenue from interstate or international commerce; or
C.P.L.R. § 302(a).
"Courts determining whether there is injury in New York sufficient to
warrant § 302(a)(3) jurisdiction must generally apply a situs-of-injury
test, which asks them to locate the `original event which caused the
injury.'" Bank Brussels Lambert v. Fiddler Gonzalez & Rodriguez,
171 F.3d 779
, 791 (2d Cir. 1999)(citations omitted). The original event
distinguished not only from the initial tort but from the final economic
injury and the felt consequences of the tort." Id., (citing Hermann v.
Sharon Hosp., Inc., 522 N.Y.S.2d 581, 583 (2d Dept. 1987)(citing McGowan
v. Smith, 52 N.Y.2d 268, 273-74 (1981)). Furthermore, an "injury does not
occur within the state simply because the plaintiff is a resident."
Mareno v. Rowe, 910 F.2d 1043
, 1046 (2d Cir. 1990).
In certain situations, financial loss and damage in New York can
constitute the "injury" necessary to establish jurisdiction under § 302.
The Second Circuit has held that § 302 is satisfied if a tortious act
results in an immediate, not subsequent, financial injury in New York.
See Hargrave v. Oki Nursery, Inc., 636 F.2d 897 (2d Cir. 1980). Of
paramount importance to this analysis is that "the exercise of personal
jurisdiction must be based" on a "direct injury within the state" and a
close "expectation of consequences within the state" stemming from the
tortious act. Mareno, 910 F.2d at 1046.
Third-Party Defendant argues that the injury was suffered in Puerto
Rico, not New York. LIFE further argues that the lawsuit filed in New
York by Schultz is not the proper injury by which to determine
jurisdiction under § 302 since the underlying tort occurred in Puerto
Rico. "The possible economic loss to be suffered by Ocean in N.Y. if
any, is simply a remote and consequential effect of the accident and
injury in Puerto Rico."
(Def. Reply Memo, of Law at 14.)
Third-Party Plaintiffs argue that LIFE committed the tortious act of
negligently designing and manufacturing a defective windlass and that
this act caused the injury of a lawsuit brought in New York against
Third-Party Plaintiffs. In Ocean's estimation, this lawsuit constitutes
financial injury and establishes the site of injury as New York.
The nature of the injury is open to question. While for purposes of
this Motion, Third-Party Defendant concedes their records indicate one of
their windlasses was sold to the prior owners of the HARVEY GAMAGE, it is
not clear whether the defect, if any, was in the windlass' manufacture,
installation, or maintenance. However, assuming arguendo that the
windlass was made by LIFE, was defective, and caused the injury to
Plaintiff Schultz, it appears to the Court that the initial tort would
have occurred in the manufacture of the windlass. The "original event"
transpired on the HARVEY GAMAGE in Puerto Rico, which in turn, gave rise
to the lawsuit in New York. Thus, the lawsuit, while certainly a
financial injury that Third-Party Plaintiffs must bear, is not an
immediate and direct result of the original event, but rather an indirect
and consequential event.*fn6
Southern District case law reinforces the Court's determination here.
In Atlantic Mutual Ins. Co., Inc. v. CSX Expedition, 2002 WL 202195
(S.D.N.Y. Feb. 7, 2002), Atlantic Mutual, an insurance company, alleged
that the defendants had negligently repaired a container ship, which
later carried one of Atlantic Mutual's insured's cargo and damaged it
when water leaked into the ship. Atlantic Mutual then had to pay a claim
under its policy in New York and brought suit against the company that
had repaired the ship. Judge McKenna ruled that the original event
occurred at sea and not in New York and that the payment on the claim was
a consequential "effect" of the injury under § 302 analysis. Id. at 4. §
302(a) did not extend jurisdiction over a foreign corporation because the
too remote and indirect. This is precisely the case at bar. An allegedly
defective item results in an accident at sea whose ramifications include
claims in New York. The Court agrees with Atlantic Mutual that the
original event did not occur in New York, thus making § 302
inapplicable. As such, jurisdiction over LIFE under § 302 cannot lie.
Because jurisdiction is not applicable here under either CPLR §§ 301
or 302, this Court need not resolve whether the assertion of jurisdiction
here would comport with federal due process requirements. Accordingly,
the Court GRANTS Third-Party Defendant's Motion to Dismiss.