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SCHULTZ v. OCEAN CLASSROOM FOUNDATION

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).

BACKGROUND

  In August 2001, Plaintiff Kurt Schultz ("Plaintiff") filed this suit against Defendant Ocean Classroom Foundation, Inc. and Schooner Harvey Gamage Foundation, Inc. (collectively Page 2 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 Page 3 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 twenty-two transactions Page 4 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 Page 5 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 Page 6 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, ...


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