United States District Court, S.D. New York
May 13, 2004.
ROBERT DIAZ ASSOCIATES ENTERPRISES, INC., Plaintiff, -against- ELETE, INC.; ELETE SPORTS COUTURE; ELETECOUTURE.COM; C. LAMONT SMITH; BRIAN HUEBSCH; TIM ALEXANDER; and CASTLE STUDIOS, Defendants
The opinion of the court was delivered by: DOUGLAS EATON, Magistrate Judge
OPINION AND ORDER
Plaintiff Robert Diaz Associates Enterprises, Inc. alleges that, in
August 2003, the defendants wrongfully (a) changed the password for
plaintiff's account at a company named Interland, Inc., and (b) hacked
into Interland's computer servers and copied plaintiff's work product and
trade secrets. Plaintiff seeks compensatory damages, punitive damages,
attorneys fees, and a permanent injunction. It sues under the civil
provisions of the Electronic Communications Privacy Act of 1986
(18 U.S.C. § 2707) and the Computer Fraud and Abuse Act of 1986
(18 U.S.C. § 1030). Also, under New York state law, plaintiff sues for
conversion, misappropriation of trade secrets, and breach of contract.
On December 30, 2003, the parties consented to have this case assigned
to me for all purposes pursuant to 28 U.S.C. § 636(c).
On January 8, 2004, the first five defendants (Elete, Inc., Elete
Sports Couture, Eletecouture.com, C. Lamont Smith, and Brian Huebsch)
moved to dismiss for lack of personal jurisdiction and improper venue.
These five defendants are collectively referred to as the "Elete
On February 3, 2004, plaintiff served opposition papers. On February
20, the Elete defendants served a reply affirmation which annexed an
I find personal jurisdiction over the Elete defendants, on the basis of
the New York Civil Practice Law and Rules ("CPLR")
§ 302(a)(3)(ii), as to the first four Causes of Action, which allege tortious acts. I decline to dismiss the Fifth Cause of
Action prior to discovery. I find that venue is proper in our District.
A. Plaintiff and the defendants as initially listed
Plaintiff Robert Diaz Associates Enterprises, Inc. ("RDA") is a New
York corporation with its principal place of business in Manhattan. It is
an information technology consulting firm that developed certain
proprietary applications for the administration of web sites and for the
operation of e-commerce enterprises (also called "proprietary back-end
coding"). RDA operates an Internet consulting division, RDAOnline, based
in New York City. RDAOnline provides customers with Internet web
page design and applications. (Compl. ¶ 3.)
Elete, Inc. ("Elete") is a Delaware Corporation with its corporate
offices located in Denver, Colorado. (12/18/03 Smith Aff. ¶¶ 4, 7.)
Elete says that Elete Sports Couture and Eletecouture.com are trademarks
of Elete. Elete says that it has not operated a business under either of
these names, but that it does operate an Internet e-commerce site at
eletecouture.com. (12/18/03 Smith Aff. ¶ 5.) Elete sells sports
apparel. (See eletecouture.com.)
C. Lamont Smith ("Smith") is the principal owner of Elete, Inc.
(12/18/03 Smith Aff. ¶ 1.) He signed the contract between RDA and
Elete. (Exh. 2 to 2/3/04 Pl. Memo.)
Brian Huebsch ("Huebsch") says he is general counsel of Elete, Inc.,
Elete Sports Couture, and Eletecouture.com. (12/18/03 Huebsch Aff. ¶
Castle Studios ("Castle") is an unincorporated business entity that
maintains its principal place of business in West Hollywood, California.
It provides Internet services and consulting. (Compl. ¶ 8.) Castle
has not appeared in this action; it is unclear whether Castle has been
served with the summons and complaint.
Tim Alexander ("Alexander") owns and operates Castle. Alexander acted
as the agent of Huebsch and Elete during the time period in question.
(Compl. ¶ 8.) He was served with the summons and complaint in October
2003, but he has not yet made an appearance in our Court. If plaintiff
wishes to move for a default judgment against Castle or Alexander, it
must make the motion to Judge Herman and explain that Castle and Alexander have
not consented under 28 U.S.C. § 636(c).
Interland, Inc. ("Interland") is a Minnesota corporation with its
principal place of business in Atlanta, Georgia. It is RDA's Internet
Service Provider. RDA stores electronic information on the servers
maintained by Interland. (Compl. ¶ 9.) Interland was dismissed from
this lawsuit based on a binding arbitration provision contained in its
contract with RDA. (Docket Item # 6.)
B. The contract between RDA and Elete
On March 24, 2003, Elete retained RDA to design and implement an
Internet e-commerce website under the Internet address eletecouture.com.
Elete planned to sell sports apparel on the website. (Compl. ¶ 10.)
RDA and Elete entered into a written contract on March 24, 2003. Since
RDA is located in New York and Elete is located in Colorado, all of their
contract negotiations, as well as the execution of the contract, occurred
by telephone, by e-mail, and by facsimile. (12/18/03 Huebsch Aff. ¶¶
8-11; 12/18/03 Smith Aff. ¶¶ 7-10.)
RDA argues that the contract was formed in New York, and that it was
performed by RDA personnel in New York City. (Compl. ¶ 11.) Elete, on
the other hand, argues that the contract was not negotiated or entered
into in the State of New York, and that:
all of the activities in New York relating to
[the] aforementioned contract were performed by
the plaintiff. At no time did [the Elete
defendants] intend to confer jurisdiction on the
New York courts for any disputes arising out of
(12/18/03 Huebsch Aff. ¶¶ 12-13; 12/18/03 Smith Aff. ¶¶
11-12.) The contract contains no choice-of-law provision. The terms of
the contract provided that: (1) RDA would design and develop numerous
Internet web pages and e-commerce applications for the planned website;
(2) RDA would retain ownership of the programming codes, but the text and
graphical content would ultimately become Elete's property; and (3) Elete
could cancel the contract at any time, provided that it paid RDA for the
stages of the project on which RDA had begun work. (Compl. ¶¶ 10-11.)
The Elete defendants allege that RDA and Elete agreed to a completion
date of May 31, 2003. "However, by the end of July, the website was not completed and as a result, Elete terminated the
contract." (Def. Memo. p. 2.) But the contract's "Project Timeline" says,
"delays by Elete in submission of PREREQUISITES will affect Delivery
Dates Timeline on a day-to-day basis." (Pl. Memo. Exh. 2.) Moreover,
e-mails exchanged between the parties show that, throughout the months of
June and July, 2003, RDA was (1) waiting for Elete to send a video clip
and photographs; (2) waiting for Elete to send more information for the
news section; (3) waiting for Elete to decide how it wanted to run the
video; (4) asked by Elete to make changes to the website, such as making
the Customer Support, Contact Us, and Login and Registration areas "more
like the Store Locator Section"; (5) asked by Elete to think of ways that
RDA could incorporate two future lines that Elete wanted to add to the
website; and (6) waiting for Elete to send updated and complete
descriptions of all of Elete's products. (Pl.Memo. Exh. 3.)
C. The August 1, 2003 incident
RDA alleges that it substantially performed its obligations under the
contract by August 1, 2003, and that it was owed $24,889. (Compl. ¶¶
12, 32.) However, on August 1, Huebsch sent RDA an e-mail that said: (1)
the agreement was terminated for cause; (2) Elete's partial payments
should be returned; and (3) RDA should immediately provide him with the
passwords to the Interland servers that held RDA's work product. (Compl.
The complaint further alleges as follows. Hours later and without RDA's
knowledge or consent, Huebsch contacted Interland and convinced one of
Interland's technicians to change the master password on RDA's account,
so that Huebsch could access all of the data stored by RDA on Interland's
servers. (Compl. ¶ 13; see the 8:30 p.m. entries on Exh. 3 annexed to
2/3/04 Pl. Memo.) Huebsch then gave the password to Alexander, who had
been hired by the Elete defendants to replace RDA. Alexander used the
password to access RDA's computer files. Once inside the system, he
copied all of the work RDA had completed for Elete, including the designs
for the e-commerce web pages and RDA's proprietary back-end coding that
RDA had developed for the eletecouture.com site. (Compl. ¶¶ 13-14.)
On either Saturday August 2 or Monday August 4, 2003, RDA discovered
that its computer files had been accessed and copied. Moreover, RDA was
unable to access its own files because it did not know the new password.
(Compl. ¶ 15; Pl. Memo. p. 3.) On August 8, 2003, the Elete website
went online, using the RDA work product that had been stolen from RDA's
files. (Compl. ¶ 16.) For purposes of the present motion, the Elete
defendants do not deny that the events occurred as described in the Complaint.
On March 25 and April 8, 2004, my law clerk accessed Elete's website.
It said "Site Design By: Castle Studio web design," and "site built by:
Castle Studio web design." A click on the Castle icon brought her to a
screen that said: "Castle Studio/ Creative Pictures, Inc., Studio of
Creative Director/ Photographer Tim Alexander." Plaintiff
alleges that, by copying RDA's files, the defendants were able to access
RDA's back-end coding, which is a "valuable trade secret of RDA," and
were able to use RDA's work as their own. (Compl. ¶¶ 3, 14, 16,
A plaintiff opposing a Rule 12(b)(2) motion to dismiss for lack of
personal jursdiction bears the burden of establishing that our Court has
jurisdiction over the defendants. Cable News Network, L.P. v.
GoSMS.com, Inc., 2000 WL 1678039, at *1 (S.D.N.Y. Nov. 6, 2000)
(McKenna, J.), citing Metropolitan Life Ins. Co. v. Robertson-Ceco
Corp., 84 F.3d 560, 566 (2d Cir. 1996). Prior to discovery, such a
motion may be defeated if the plaintiff's complaint and affidavits
contain sufficient allegations to establish a prima facie
showing of jurisdiction. Id. Moreover, the plaintiff's factual
allegations are presumed to be true. Cable News Network, 2000 WL
1678039, at *1, citing, PDK Labs, Inc. v. Friedlander,
103 F.3d 1105, 1108 (2d Cir. 1997).
"In diversity or federal question cases the court must look first to
the long-arm statute of the forum state, in this instance, New York."
Bensusan Restaurant Corp. v. King, 126 F.3d 25, 27 (2d Cir.
CPLR § 302 says, in part:
(a) . . . As to a cause of action arising from any
of the acts enumerated in this section, a court
may exercise personal jurisdiction over any
non-domiciliary, or his executor or administrator,
who in person or through an agent:
1. transacts any business within the state or
contracts anywhere to supply goods or services
in the state; [or]
* * *
3. commits a tortious act without the state
causing injury to person or property within the
state, . . . 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
RDA argues that our Court has personal jurisdiction over the Elete
defendants on three bases CPLR §§ 302(a)(1), and 302(a)(3)
(i), and 302(a)(3) (ii). Four of the five Causes of Action are tort
claims. Hence, I will first discuss § 302(a)(3).
CPLR § 302(a)(3). The first four Causes of Action
clearly allege that the Elete defendants committed tortious acts outside
New York causing injury to plaintiff's property within New York. Thus,
New York has personal jurisdiction over the Elete defendants as to those
four Causes of Action if plaintiff can satisfy either subsection 3(i) or
3(ii). It is conceivable that, with discovery, plaintiff might satisfy
3(i); I need not consider this because, on the current record, plaintiff
The first question is whether the Elete defendants derive substantial
revenue from interstate commerce. I find that the answer is yes, despite
the fact that neither side submitted any evidence of the Elete
defendants' total revenue from interstate or international commerce. It
appears to be undisputed that (a) the Elete defendants received $15,000
in revenue from Macy's New York store for a shipment of goods delivered
to New York on or about December 1, 2003, and (b) as of February 3, 2004,
that New York store was the only store in the nation that sold Elete's
clothes, and (c) the Elete defendants also sell Elete's clothes from
Colorado by means of the Internet. In Cable News Network, L.P. v.
GoSMS.com, Inc., 2000 WL 1678039, at *5 (S.D.N.Y. Nov. 6, 2000),
Judge McKenna wrote:
In this case, however, at oral argument,
defendants admitted that GoSMS.com has earned
$60,000 in revenue from its operations in Europe
and Israel. . . . Although the amount is not
large, the Court recognizes that it is common for
internet companies to be viewed as extremely
successful despite the fact that they operate at a great loss. The important fact in
this analysis is that GoSMS.com's operations are
international and in no way limited to California.
Similarly, in the case at bar, I find that Elete's operations are
in no way limited to Colorado, and that the Elete defendants derive
substantial revenue from interstate commerce.
I turn now to the second requirement, whether the Elete defendants
should have expected that their actions would harm plaintiff in New York
state. My own research shows that when an unauthorized person "hacks"
into a computer to access, copy or steal files, then personal
jurisdiction may be established where the victim's computer is physically
located. U.S. v. Ivanov, 175 F. Supp.2d 367, 371-73 (D. Conn.
2001). Although Ivanov was a criminal case, it was brought under
18 U.S.C. § 1 030, the same statute invoked here in the Second Cause
of Action. Ivanov was physically located in Russia when he committed the
crimes. Judge Thompson wrote:
At the point Ivanov gained root access to OIB's
computers, he had complete control over that data,
and consequently, had possession of it. That data
was in OIB's computers. Since Ivanov possessed
that data while it was in OIB's computers in
Vernon, Connecticut, the court concludes that he
obtained it, for purposes of § 1030(a)(4), in
Vernon, Connecticut. The fact that Ivanov is
charged with obtaining OIB's valuable data by
means of a complex process initiated and
controlled from a remote location, and that he
subsequently moved that data to a computer located
in Russia, does not alter the fact that at the
point when Ivanov first possessed that data, it
was on OIB's computers in Vernon, Connecticut.
Id. at 371-72. In our case, it could be argued that
Huebsch and Alexander stole plaintiff's property from Interland's server
in Georgia. But their alleged conduct was clearly aimed at a victim
located in New York. The defendants fraudulently induced Interland to
give them the key to open RDA's New York computers; once inside RDA's
computers, the defendants were able to take what they wanted and move it
over the Internet to their own computers. Moreover, the reason they knew
the contents would be valuable to them was that they had contracted with
plaintiff and caused plaintiff to design those contents.
It is clear that Huebsch's tortious acts are properly imputed to the
four other Elete defendants. The contract was signed by defendant Smith, the CEO of Elete, Inc. Huebsch's
12/18/03 affidavit says he is general counsel of Elete, Inc., Elete
Sports Couture and Eletecouture.com.
In the Practice Commentaries to the McKinney's edition of CPLR §
302, Professor Vincent C. Alexander writes:
C302:4. Commission of Acts "Through an
The acts that can subject a defendant to
long-arm jurisdiction under CPLR 302(a) may be
performed by the defendant herself or "through an
agent." Whether a representative of the defendant
qualifies as an agent for jurisdictional purposes
does not turn on legalistic distinctions between
being an agent or independent contractor.
Furthermore, no showing of a formal relationship
between the defendant and the agent is required.
It is sufficient that the representative acted
"for the benefit of and with the knowledge and
consent of [the] defendant and that [he or she]
exercised some control over [the agent] in the
matter." Kreutter v. McFadden Oil Corp.,
1988, 71 N.Y.2d 460, 467, 527 N.Y.S.2d 195, 199,
522 N.E.2d 40, 44 (nondomiciliary held to have
transacted business in New York (CPLR 302(a)(1))
through corporation over which, in his position as
officer and owner of affiliated company, he
exercised "some control").
On the current state of the record, I find that Smith and the three
non-individual movants exercised some control over Huebsch and Alexander,
and knew that Huebsch and Alexander were committing the alleged tortious
acts for the benefit of Smith and the three non-individual movants.
Finally, it would not offend traditional notions of fair play and
substantial justice for our Court to exercise jurisdiction over all five
movants on the first four Causes of Action. See Judge Koeltl's thorough
discussion of the due process case law in Landau v. New Horizon,
2003 WL 22097989, at *8-10 (S.D.N.Y. Sept. 8, 2003).
I now turn to the one non-tort claim, the Fifth Cause of Action for
breach of contract.
CPLR § 302(a)(1). RDA argues:
In the manner in which Elete contracted with RDA
and supervised RDA's activities in minute detail,
it transacted business in New York sufficient to
confer jurisdiction under CPLR 302(a)(1).
Moreover, as an e-commerce business that solicits
business in New York and sells its goods through
an "exclusive" outlet at Macy's, it is likely that
Elete is subject to general jurisdiction in this
state and may be sued for any purpose.
(Pl. Memo. p. 7.) To sue Elete for any purpose, on any cause of
action, plaintiff would have to show something that it has concededly not
yet shown: that Elete was regularly doing business in New York within the
meaning of CPLR § 301. Under § 302(a)(1), plaintiff must show
acts which give rise to the particular cause of action in question. The
Fifth Cause of Action alleges breach of contract and seeks $24,889
allegedly due for services rendered to Elete. This cause of action does
not arise from Elete's sales of goods through Macy's. Nor does it arise
from any subsequent use of the e-commerce site by Elete to sell goods to
New Yorkers. Relevant to the Fifth Cause of Action, RDA merely asserts
that (1) the Elete defendants were aware that the contract would be
performed (on RDA's part) in New York, and (2) the Elete defendants, from
Colorado, constantly supervised RDA's work in New York through telephone
communications, facsimiles, and e-mails. (Pl. Memo. pp. 2, 7-11 and Exh.
The Elete defendants argue that they cannot be deemed to have engaged
in the New York activities that were actively performed by plaintiff.
Worldwide Futgol Assocs., Inc. v. Event Entertainment, Inc.,
983 F. Supp. 173, 177 (E.D.N.Y. 1997) (Dearie, J.); J.E.T. Advertising
Associates, Inc. v. Lawn King Inc., 84 A.D.2d 744, 745, 443 N.Y.S.2d 745,
747 (2d Dept. 1981). I agree with the Elete defendants on this
point, although I have found a contrary dictum in Geller Media
Management, Inc. v. Beaudreault, 910 F. Supp. 135, 137-38 (S.D.N.Y.
1996) (Leisure, J.).
It seems to be undisputed that the Elete defendants' contacts with
plaintiff were entirely by telephone, e-mail and fax from outside New
Plaintiff cites Parke-Bernet Galleries, Inc. v. Franklyn,
26 N.Y.2d 13, 256 N.E.2d 506, 308 N.Y.S.2d 337 (1970). The New York Court of
Appeals held that the California defendant was subject to personal
jurisdiction in New York when he placed bids at the New York plaintiff's
auction by mail, and by telephone, and through an agent attending the
auction. The Parke-Bernet case is distinguishable from the case
at bar. First, defendant's agent was actually attending the auction in
New York. Second, the Elete defendants' telephone calls, faxes and e-mails were made
solely to ensure compliance with the contract terms, and to provide
plaintiff with the information it needed to produce the website. By
contrast, in the Parke-Bernet case the California defendant's
actions affected not only Parke-Bernet, but the other participants in the
New York auction who were bidding against him.
My own research shows the following. In Roper Starch Worldwide,
Inc. v. Reymer & Associates, Inc., 2 F. Supp.2d 470 (S.D.N.Y.
1998), Judge Parker (then a District Judge) held:
In order to base jurisdiction on § 302(a)(1),
phone calls and mailings must serve to "project" a
defendant into New York in such a manner that the
defendant "purposefully avails himself" of the
protections and benefits of New York Law. . . .
Phone calls that seek to insure fulfillment of
contract terms do not "project" a defendant into a
state sufficiently to confer jurisdiction. . . .
Here, plaintiff has offered no evidence to rebut
defendant's contention that the "several"
telephone calls defendant made were solely to
ensure compliance with the contract terms, stating
through [plaintiff's employee] that the conference
calls were "to discuss changes to the work after
the preliminary tabulations were completed."
Defendant's phone calls into New York do not
suffice to confer personal jurisdiction under
2 F. Supp.2d at 474 (internal citations omitted).
But in Serendip LLC v. Franchise Pictures LLC, 2000 WL 1277370
(S.D.N.Y. Sept. 7, 2000) (Baer, J.), the non-resident defendants hired
the New York plaintiff to compose a musical score for their motion
picture. The defendants (1) solicited the plaintiff's services by
telephone, (2) initiated numerous telephone calls with her to "discuss
the music for the film and [to give] her directions on how to proceed,"
and (3) periodically sent her video tapes of the film to work with. 2000
WL 1277370, at 5. Judge Baer held:
In [Agency Rent A Car Sys., Inc. v. Grand Rent
A Car Corp., 98 F.3d 25, 29 (2d Cir. 1996)],
the Second Circuit concluded that "[t]he
[defendants'] contacts with New York have been
. . . anything but temporary, random, or tenuous.
Rather, they have been continual, repetitive, and
essential to the [defendants'] businesses."
Id. Here too, the plaintiff has alleged that Battlefield contracted for the services
of the composer in order to supply an essential
element of their motion picture: the soundtrack.
And that motion picture was produced with the
intention that it be distributed in New York and
* * *
. . . I find that Serendip has made a prima facie
showing of personal jurisdiction over the
Battlefield entities and Don Carmody. The facts
alleged by plaintiff indicate that Battlefield has
"purposefully avail[ed] [itself] of the privilege
of conducting activities within [New York], thus
invoking the benefits and protections of its
laws," and has therefore "transacted business" in
New York within the meaning of § 302(a)(1).
Serendip, 2000 WL 1277370 at *5.
However, one year later, Judge Baer reached a different conclusion. See
Ljungkvist v. Rainey Kelly Campbell Roalfe/Young & Rubicam,
Ltd., 2001 WL 1254839 (S.D.N.Y. Oct. 19, 2001). In
Ljungkvist, the non-resident defendant hired the New York
plaintiff to create artwork for a London advertising campaign. Judge Baer
held that there was no personal jurisdiction, even though (1) the parties
exchanged several faxes regarding the artwork, including faxes containing
the defendant's written comments on the sketches, and (2) the parties
spoke on the phone at. least once every day for a 10-day period. Judge
Baer ruled that those "correspondences did not project the defendants
into local commerce." 2001 WL 1254839, at *3.
Plaintiff also cites Pilates, Inc. v. Pilates Institute, Inc.,
891 F. Supp. 175, 179 (S.D.N.Y. 1995); Citigroup Inc. v. City Holding
Co., 97 F. Supp.2d 549, 564 (S.D.N.Y. 2000); and Hsin Ten
Enterprises USA, Inc. v. Clark, 138 F. Supp.2d 449, 456 (S.D.N.Y.
2000). But those cases involved trademark and patent infringement, which
is not alleged here. (Where a defendant (a) deliberately targets New York
residents to receive its products and (b) passes off its products as
those of the plaintiff, courts will apply CPLR § 302(a)(1) or §
302(a)(2) against the infringer even if he projected himself into New
York only by phone and/or mail. Pilates, 891 F. Supp. at 179,
More on point are Armouth International, Inc. v. Haband Co.,
Inc., 277 A.D.2d 189, 715 N.Y.S.2d 438 (2d Dept. 2000), and
Ainbinder v. Potter, 282 F. Supp.2d 180, 189-90 (S.D.N.Y. 2003)
(Koeltl, J.). It is possible that discovery may elicit facts showing jurisdiction
over the Fifth Cause of Action. Since the lawsuit will proceed on the
first four Causes of Action, I decline to dismiss the Fifth Cause of
Action at this early stage.
Since Elete, Inc. is a corporation, we look to 28 U.S.C. § 1391 (c)
for purposes of venue. I find that Elete, Inc.'s contacts within the
Southern District of New York "would be sufficient to subject it to
personal jurisdiction if that district were a separate State." Therefore,
§ 1391(c) deems the corporation to reside in our judicial district.
However, § 1391(c) does not apply to the four non-corporate movants.
The first two Causes of Action are based on federal-question
jurisdiction; the others are based on diversity of citizenship. We must
look to both subsections (a) and (b) of § 1391 to determine venue as
to the four non-corporate movants.
Subsections (a) and (b) each state, inter alia, that venue is
a judicial district in which a substantial part of
the events or omissions giving rise to the claim
. . . .
Venue is a federal issue, and the federal courts are not bound by New
York statutes or case law in determining whether an event or omission has
"occurred" in the forum district. The Second Circuit has ruled on the
same language quoted above:
As held by the district court, the charter party
giving rise to Titan's claim and the purported "ad
hoc" arbitration agreement giving rise to Zhen
Hua's defense were negotiated between China and
Pelham, New York via Connecticut. That many of
Zhen Hua's communications reached Titan's offices
in New York through the Connecticut brokers does
not alter the fact that Zhen Hua directed
communications to New York. Accordingly, venue in
the Southern District of New York was
proper. . . . Sacody Techs., Inc. v. Avant,
Inc., 862 F. Supp. 1152, 1157 (S.D.N.Y. 1994)
("The standard set forth in § 1391(a)(2)
[which employs the `substantial part' language,]
may be satisfied by a communication transmitted to
or from the district in which the cause of action
was filed, given a sufficient relationship between
the communication and the cause of action."). U.S. Titan, Inc. v. Guangzhou Zhen Hua Shipping Co., Ltd.,
241 F.3d 135, 153-54 (2d Cir. 2001) (brackets in the original).
Sacody was also cited with approval in TBV Holdings Ltd.
v. Schey, 2002 WL 1733649 (S.D.N.Y. July 26, 2002) (Jones, J.), and
Ainbinder v. Potter, 282 F. Supp.2d 180, 190 n. 9 (S.D.N.Y. 2003)
In the case at bar, three events gave rise to the claims in each of the
five Causes of Action:
Event 1: Defendant Smith, as CEO of Elete, Inc.,
signed a contract in Colorado and faxed it to
plaintiff in Manhattan, thus causing the plaintiff
to expend efforts in Manhattan to design a website
for the Elete defendants.
Event 2: After many e-mails to Manhattan,
defendant Huebsch, as General Counsel for the
Elete defendants, sent an e-mail to plaintiff in
Manhattan demanding that plaintiff provide him
with the passwords to the Interland servers that
held plaintiff's work product.
Event 3: A few hours later, Huebsch contacted
Interland in Georgia, fraudulently changed
plaintiff's password, and then gave it to
Alexander in order to open plaintiff's computers
Events 1 and 2 have a close relationship with Event 3. Event 1
caused the creation, in Manhattan, of the property which was later
stolen, from Manhattan.
Accordingly, I find that venue in our District is proper as to all five
of the moving defendants.
I deny the motion (Docket Item # 10) in its entirety. I direct the
attorneys to place a conference call to my Chambers (212-805-6175) to
schedule an Initial Case Management Conference.
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