United States District Court, S.D. New York
June 22, 2005.
FREEPLAY MUSIC, INC., Plaintiff,
COX RADIO, INC., CUMULUS MEDIA, INC., ENTERCOM COMMUNICATIONS CORP., BEASLEY BROADCAST GROUP, INC., CITADEL BROADCASTING CORP., and VIACOM INC., Defendants.
The opinion of the court was delivered by: GERARD E. LYNCH, District Judge
OPINION AND ORDER
Freeplay Music, Inc. ("Freeplay"), the owner of copyrights in
certain musical compositions and sound recordings, brings this
action against defendants, corporate owners of various radio
stations, charging violations of copyright and related claims. In
a separate opinion issued this day, the Court grants in part and
denies in part a motion to dismiss for failure to state a claim
by all defendants. This opinion addresses the motion to dismiss
for lack of personal jurisdiction by one defendant, Beasley
Broadcast Group, Inc. ("Beasley"). Freeplay alleges that
Beasley's contacts with New York are sufficient to support
personal jurisdiction over it. Beasley argues that Freeplay's
conclusory allegations merely parrot the relevant statutory
language, and that the actual facts alleged in the complaint are facially
insufficient to support jurisdiction.*fn1 For the reasons
that follow, Beasley's motion will be granted. Freeplay's request
for jurisdictional discovery regarding Beasley's contacts with
New York is denied.
Freeplay is a New York corporation which creates musical
compositions and sound recordings. Freeplay alleges that Beasley
"produced, exploited and distributed in interstate commerce
certain radio programming containing certain of [Freeplay's]
[c]ompositions and [s]ound [r]ecordings," when Beasley broadcast
Freeplay's musical works "synchronized" with other audio works.
(Compl. ¶ 17; P. 12(b)(6) Mem. at 3.) Freeplay holds the
copyright registrations for the 155 musical compositions and
sound recordings at issue in this action. (Compl. ¶ 15; see
Compl. Exs. 1-9.) Freeplay contracted with Broadcast Music, Inc.
("BMI"), a performing rights society, to license permission to
perform these compositions and recordings on Freeplay's behalf.
(P. 12(b)(6) Mem. at 6.) Freeplay argues that although Beasley is
licensed by BMI to perform the Freeplay musical works in
question, that license does not grant Beasley the necessary
"synchronization rights" that would allow Beasley to use
Freeplay's musical works in the manner alleged. (P. 12(b)(6) Mem.
at 3; Fischbarg 12(b)(6) Decl. ¶ 3, Ex. B.) See generally
Freeplay Music, Inc. v. Cox Radio, Inc., No. 04 Civ. 5238
(GEL), 2005 WL ______ (S.D.N.Y. June 22, 2005). Beasley is a Delaware corporation with its principal place of
business in Naples, Florida. (Compl. ¶ 8.) Beasley "produc[es],
distribut[es], sell[s] and otherwise commercially exploit[s]
radio programming" at its 41 radio stations. (Compl. ¶ 8;
Fischbarg 12(b)(6) Decl. Ex. F.) Beasley alleges, and Freeplay
does not dispute, that it does not have an office or employees in
New York, that it does not own or operate a radio station in New
York, and that none of its stations' over-the-air broadcast
signals can reach New York. (Beasley Decl. ¶ 7.) Several of
Beasley's radio stations, however, have websites accessible in
New York through which the stations simulcast their radio
broadcasts. (P. Mem. 3; Fischbarg Decl. ¶ 6, Ex. E.)
In addition to Beasley's websites, Freeplay alleges that
Beasley has several other forms of contact with New York. Beasley
radio stations syndicate radio programming produced in New York
such as "The Howard Stern Radio Show," "Imus in the Morning,"
"ABC News," and "Bloomberg Radio News." (Fischbarg Decl. ¶ 3, Ex.
B.) Beasley executives travel to New York approximately four
times per year to meet with investment bankers. (P. Mem. 1.)
Beasley executives have also spoken at radio industry conferences
and seminars in New York at least six times since 2002. (Id. at
2.) New York companies purchase advertising time on Beasley radio
stations. (Id.) Beasley also makes payments to performing
rights societies based in New York, such as BMI and the American
Society of Composers, Authors, and Publishers, for licenses to
perform certain musical works. (Id.) Beasley has contracted
with the New York investment bank Harris Nesbitt in connection
with a $25 million stock buy-back scheduled to be completed
within the next year. (Id. at 1-2, citing D. Mem. 4.) In March
2004, Beasley announced the completion of a $225 million
revolving credit facility, funded by a consortium of lenders, and
jointly arranged by two New York banks, Harris Nesbitt and Bank
of New York. (Id.) DISCUSSION
I. Legal Standard
On a motion to dismiss for lack of personal jurisdiction
pursuant to Federal Rule of Civil Procedure 12(b)(2), the
plaintiff bears the burden to establish jurisdiction. In re
Magnetic Audiotape Antitrust Litig., 334 F.3d 204, 206 (2d Cir.
2003). Where no jurisdictional discovery has been conducted, the
plaintiff need only establish a prima facie case, and allegations
of jurisdictional fact must be construed in the light most
favorable to the plaintiff. CutCo Indus. Inc. v. Naughton,
806 F.2d 361, 365 (2d Cir. 1986). The motion must be denied if those
allegations suffice as a matter of law. Magnetic Audiotape,
334 F.3d at 206.
A federal court sitting in diversity may exercise jurisdiction
over a foreign defendant if the defendant is amenable to process
under the law of the forum state. Omni Capital Int'l Ltd. v.
Rudolf Wolff & Co., 484 U.S. 97, 105 (1987); Metro. Life Ins.
Co. v. Robertson-Ceco Corp., 84 F.3d 560, 567 (2d Cir. 1996). In
New York, a court may exercise general jurisdiction over a
nondomiciliary under New York Civil Practice Laws and Rules
("C.P.L.R.") § 301, and long-arm jurisdiction under C.P.L.R. §
302. The exercise of personal jurisdiction must also comport with
constitutional due process requirements under International Shoe
Co. v. Washington, 326 U.S. 310 (1945). Mario Valente
Collezioni, Ltd. v. Confezioni Semeraro Paolo, S.R.L.,
264 F.3d 32, 37 (2d Cir. 2001).
II. General Jurisdiction in New York: C.P.L.R. § 301
Under C.P.L.R. § 301, a New York court may exercise
jurisdiction over a defendant "engaged in such a continuous and
systematic course of `doing business' in New York as to warrant a
finding of its presence in the state." Jazini v. Nissan Motor
Co., Ltd., 148 F.3d 181, 184 (2d Cir. 1998). "A defendant is doing business such that
jurisdiction pursuant to § 301 is appropriate if it does business
in New York `not occasionally or casually, but with a fair
measure of permanence and continuity.'" Mantello v. Hall,
947 F. Supp. 92, 97 (S.D.N.Y. 1996), quoting Landoil Resources Corp.
v. Alexander & Alexander Servs., Inc., 918 F.2d 1039, 1043 (2d
Cir. 1990). This standard has been described as "stringent,"
because a defendant who is found to be doing business in New York
in a permanent and continuous manner "may be sued in New York on
causes of action wholly unrelated to acts done in New York."
Jacobs v. Felix Bloch Erben Verlag fur Buhne Film und Funk KG,
160 F. Supp. 2d 722, 731 (S.D.N.Y. 2001), quoting Ball v.
Metallurgie Hoboken-Overpelt, S.A., 902 F.2d 194, 198 (2d Cir.
Courts have relied on the following "traditional indicia" when
"deciding whether a foreign corporation is doing business in New
York . . .: (1) the existence of an office in New York; (2) the
solicitation of business in New York; (3) the existence of bank
accounts or other property in New York; and (4) presence of
employees of the foreign defendant in New York." Mantello,
947 F. Supp. at 97, citing Hoffritz for Cutlery, Inc. v. Amajac,
Ltd., 763 F.2d 55, 58 (2d Cir. 1985). Freeplay contends that its
allegations regarding Beasley's activity demonstrate Beasley's
legal presence in New York, even though Beasley has no office in
New York, and no employees working on a regular basis in New
York. Freeplay's allegations, however, do not show that Beasley
has a permanent or continuous presence in New York sufficient to
justify a finding of general jurisdiction.
Beasley's licenses and radio programming purchases from New
York corporations are insubstantial activity to warrant general
jurisdiction in New York. New York courts have held that
"obtaining licenses is not `doing business'" for the purposes of
general jurisdiction. Mantello, 947 F. Supp. at 98. Further, "the purchase of goods
from New York by a [d]efendant, even if on large scale, would
not, in an of itself, amount to `doing business' within the
state." Agency Rent A Car System, Inc v. Grand Rent A Car
Corp., 916 F. Supp. 224, 229 (E.D.N.Y. 1996), rev'd on
other grounds, 98 F.3d 25 (2d Cir. 1996). Therefore,
Beasley's purchases of programming and licenses to broadcast
copyrighted materials are insufficient to justify general
Similarly, Freeplay's allegation that Beasely solicits
advertising for its radio stations from New York companies
reflects a mere business relationship insufficient to confer
general jurisdiction. Reers v. Deutsche Bahn AG,
320 F. Supp. 2d 140, 155 (S.D.N.Y. 2004). Solicitation of business contracts
can reach a level sufficient to support general jurisdiction only
through "extensive conduct directed toward or occurring in New
York." Id. at 150. Even actual advertising within New York is
not considered to reach the level of substantial solicitation
that would suffice for general jurisdiction. See, e.g.
Muollo v. Crestwood Vill. Inc., 547 N.Y.S.2d 87, 88 (2d Dept.
1989) (finding defendant's advertisements in the New York Times
and on the radio insufficient to support personal jurisdiction);
see also Holness v. Maritime Overseas Corp.,
676 N.Y.S.2d 540, 543 (1st Dept. 1998) ("New York has no jurisdiction over a
foreign defendant company whose only contacts with New York are
advertising and marketing activities plus representatives'
occasional visits to New York."). Freeplay's allegations do not
suggest that Beasley solicited advertising from local New York
businesses, or advertising that was directed toward a New York
audience, as opposed to advertising from national companies
incorporated or headquartered in New York. Freeplay's allegation
that Beasley solicits business from New York companies does not
show that Beasley solicited that business in New York, or that
the solicitation was extensive or substantial. Thus, Beasley's
advertising contracts with New York companies are insufficient to
justify general jurisdiction.
Freeplay also alleges (and Beasley acknowledges) that Beasley
has a contract with the New York bank Harris Nesbitt for the
purposes of a $25 million stock buy-back. Regarding the stock
buy-back, New York courts "accord? foreign corporations
substantial latitude" in connection with management of their
securities on New York-based stock exchanges without subjecting
themselves to New York jurisdiction for unrelated occurrences.
Wiwa v. Royal Dutch Petroleum Co., 226 F.3d 88, 97 (2d. Cir.
2000); see also Reers, 320 F. Supp. 2d at 156 ("[T]he fact
that [defendant's] stock may be purchased in New York, and that
[defendant] retains New York-based market makers to assist in its
sales of stock, is another important factor but is insufficient
to confer general jurisdiction."). Beasley's stock buy-back
venture is limited in purpose and temporary in duration such that
it does not create legal presence in New York.
Bank accounts can be grounds for general jurisdiction because
they are a permanent locus of property or assets within the
state. However, a "bank account? standing alone cannot create
jurisdiction unless [it is] used for `substantially all' of [the
defendant's] business." Id.*fn2 Freeplay alleges in a
conclusory manner that Beasley runs its "day-to-day operations"
through a revolving credit facility jointly administered by
Harris Nesbitt and the Bank of New York (P. Mem. 2), but fails to
make any specific allegations as to the role the credit facility
plays in Beasley's business. By definition, however, a "credit
facility" is a financing arrangement, not an operational bank account. See generally GE Commercial Finance Corporate
Lending, Frequently Asked Questions, at
Plaintiff's allegation thus appears to assert, at most, that
Beasley's "day-to-day operations" are financed entirely by
borrowing through this credit facility, and not that its ordinary
payroll and checking transactions are performed through the
credit facility. Generally, "[a] single financing arrangement,
such as [a] credit facility, is insufficient to constitute the
continuous and systematic activity required to warrant the
exercise of general personal jurisdiction." Int'l Telecom, Inc.
v. Generadora Electrica del Oriente S.A., No. 00 Civ. 8695
(WHP), 2002 WL 465291, at *2 (S.D.N.Y. 2002). Therefore,
Freeplay's allegation regarding Beasley' credit facility is
insufficient to support a finding of general
Freeplay also alleges that Beasley's radio broadcasts are
available in New York via their websites. However, "the fact that
a foreign corporation has a website accessible to New York is
insufficient to confer jurisdiction under C.P.L.R. § 301."
Spencer Trask Ventures, Inc. v. Archos S.A., No. 01 Civ. 1169
(LAP), 2002 WL 417192, at *6 (S.D.N.Y. Mar. 18, 2002). Unlike a
conventional radio station that requires a nearby physical
presence in order to broadcast to a given geographical region, a
webcast can be transmitted to a distant state without any further
indicia of permanence in that state such as an office or
employees. "Moreover, even if such an exercise of jurisdiction
were proper under § 301, it would not be permissible under the
Due Process Clause [of the Fourteenth Amendment to the
U.S. Constitution] absent, at a minimum, an allegation that . . . the
website was purposefully directed toward New York." Drucker
Cornell v. Assicurazioni Generali S.p.A. Conso., No. 97 Civ.
2262 (MBM), 2000 WL 284222, at *2 (S.D.N.Y. Mar. 16, 2000).
It is undisputed that Beasley's radio stations, business
premises, and employees are all located outside New York, and
that the broadcast signals from none of its stations are heard in
New York. The occasional and insubstantial contacts alleged by
plaintiff, taken singly or together, are insufficient to amount
to "doing business" in New York. Accordingly, Freeplay fails to
allege any facts that justify general jurisdiction over Beasley.
III. New York's Long-Arm Statute: C.P.L.R. § 302
A. Transacting Business in New York: C.P.L.R. § 302(a)(1)
Under C.P.L.R. § 302(a)(1), New York courts have specific
jurisdiction over "any nondomiciliary [who] transacts any
business within the state or contracts anywhere to supply goods
or services in the state." "A nondomiciliary `transacts business'
under C.P.L.R. § 302(a)(1) when he purposefully avails [himself]
of the privilege of conducting activities within [New York], thus
invoking the benefits and protections of its laws." CutCo,
806 F.2d at 365 (internal citations omitted). The "ultimate
determination" as to whether a foreign defendant "transacts
business" in New York is made based on the totality of the
circumstances. Agency Rent A Car, 98 F.3d at 29. The Second
Circuit has said that a "variety of factors" may be considered in
making this determination, including: (1) whether the defendant
has an on-going contractual relationship with a New York
corporation, (2) 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 relationship; (3) what the choice-of-law clause is in
any such contract; and (4) whether the contract requires
franchises to send notices and payments into the forum state or
subjects them to supervision by the corporation in the forum
state. Id. "Cumulative minor activities that, individually, may
be insufficient, may suffice . . . as long as the cumulative
effect creates a significant presence within the state." O'Brien
v. Hackensack Univ. Med. Ctr., 760 N.Y.S.2d 425, 427 (1st Dept.
2003). Jurisdiction is only proper under this statutory provision
where the cause of action "arises out of the subject matter of
the business transacted." Citigroup Inc. v. City Holding Co.,
97 F. Supp. 2d 549, 564 (S.D.N.Y. 2000). "A suit will be deemed
to have arisen out of a party's activities in New York if there
is an `articulable nexus,' or `substantial relationship,' between
the claims asserted and the actions that occurred in New York."
Henderson v. I.N.S., 157 F.3d 106, 123 (2d Cir. 1998) (internal
Individually, each of Freeplay's allegations with respect to
Beasley's relationships with New York enterprises might not
necessarily be sufficient to support a finding that Beasley
transacts business in New York. See, e.g., J.L.B. Equities,
Inc. v. Ocwen Fin. Corp., 131 F. Supp. 2d 544, 551 n. 3
(S.D.N.Y. 2001) (finding that defendant did not transact business
in New York even though defendant held a New York bank account
and had various other business communications with New York
parties). Taken together, however, Freeplay's allegations could
show that Beasley has "on-going contractual relationship[s] with
New York corporation[s]," and could therefore support a finding
that Beasley transacts business in New York. Agency Rent A Car,
98 F.3d at 29. Nevertheless, jurisdiction fails under § 302(a)(1) because the
infringing conduct in question cannot be said to have arisen out
of these business transactions. "For a tort claim to arise out of
transaction of business in New York, the connection between the
transaction and the claim must be direct." Mantello,
947 F. Supp. at 100. No relationship exists between Beasley's business
transactions in New York and the alleged copyright infringement.
Therefore, Beasley's contractual contacts with New York are not a
proper basis for jurisdiction under C.P.L.R. § 302(a)(1).
The case is different with respect to Beasley's maintenance of
a website through which internet users in New York could access
the programming of at least of some of Beasley's radio stations.
Freeplay's claims arise from the production and broadcast of such
programming. Accordingly, if the maintenance of such websites
constitute their transaction of business in New York, Freeplay's
claims would have a significant nexus with those transactions.
The internet has complicated questions of personal
jurisdiction. Although Second Circuit case law provides little
guidance on this subject, Judge Sweet has aptly summarized the
state of the law as it has developed around the country:
[T]he courts have identified a spectrum of cases
involving a defendant's use of the internet. At one
end are cases where the defendant makes information
available on what is essentially a `passive' web
site. This use of the internet has been analogized to
an advertisement in a nationally-available magazine
or newspaper, and does not without more justify the
exercise of jurisdiction over the defendant. At the
other end of the spectrum are cases in which the
defendant clearly does business over the internet,
such as where it knowingly and repeatedly transmits
computer files to customers in other states. Finally,
occupying the middle ground are cases in which the
defendant maintains an interactive web site which
permits the exchange of information between users in
another state and the defendant, which depending on
the level and nature of the exchange may be a basis for jurisdiction.
Citigroup, 97 F. Supp. 2d at 565 (citations omitted). Although
this "sliding scale" model provides a useful guide to how courts
have approached such claims in the recent past, it does not
amount to a separate framework for analyzing internet-based
jurisdiction, and traditional statutory and constitutional
principles remain the touchstone of the inquiry. See Hy Cite
Corp. v. Badbusinessbureau.com, L.L.C., 297 F. Supp. 2d 1154
1160-61 (W.D. Wisc. 2004) (rejecting notion that sliding scale
framework represents a "specialized test" for internet
jurisdiction, but finding that "[t]he website's level of
interactivity may be one component of a determination whether a
defendant has availed itself purposefully of the benefits or
privileges of the forum state"); Winfield Collection, Ltd. v.
McCauley, 105 F. Supp. 2d 746
, 750 (E.D. Mich. 2000) ("[T]he
ultimate question can still as readily be answered by determining
whether the defendant did, or did not, have sufficient `minimum
contacts' in the forum state.").
Beasley's alleged broadcast of sound compositions over its
stations' websites cannot serve as a basis for jurisdiction under
§ 302(a)(1). Although there may be interactive elements to the
websites, the simulcasts of the radio broadcasts are as passive
an enterprise as are the radio broadcasts themselves. See
Realuyo v. Villa Abrille, No. 01 Civ. 10158 (JGK), 2003 WL
21537754, at *6 (S.D.N.Y. July 8, 2003) (finding that the "sheer
availability" of an allegedly defamatory article on the
defendant's website, "where it can be downloaded in New York at
no cost" could not be considered a transaction of business
sufficient to sustain jurisdiction under either C.P.L.R. §
302(a)(1) or due process). Freeplay also fails to allege that New
York residents ever accessed Beasley websites for the purposes of
listening to Beasley radio station simulcasts. It stretches the
meaning of "transacting business" too far to subject defendants
to personal jurisdiction in any state merely for operating a website, however
commercial in nature, that is capable of reaching customers in
that state, without some evidence or allegation that commercial
activity in that state actually occurred or was actively sought.
Cf. Citigroup, 97 F. Supp. 2d at 566 (finding personal
jurisdiction where bank not only maintained website equipped to
take loan applications and provide online chat with bank
representatives, but also engaged in direct mail solicitation of
New York businesses). Therefore, Beasley does not transact
business in New York when it simulcasts its radio programming via
its websites, and is not subject to jurisdiction under §
B. Tortious Action Within New York: C.P.L.R. § 302(a)(2)
Alternatively, under C.P.L.R. § 302(a)(2), a foreign defendant
may be subject to personal jurisdiction in New York if he
"commits a tortious act within the state." New York courts have
interpreted the statutory language "within the state" literally,
such that jurisdiction is only proper over a defendant who
commits a tortious act when the defendant is physically present
in the state. See Bensusan Restaurant Corp. v. King,
126 F.3d 25, 28 (2d. Cir. 1997) ("The official Practice Commentary to
C.P.L.R. § 302 explains that `if a New Jersey domiciliary were to
lob a bazooka shell across the Hudson River at Grant's tomb, [New
York case law] would appear to bar the New York courts from
asserting personal jurisdiction over the New Jersey domiciliary
in an action by an injured New York plaintiff.'"). In copyright
claims, § 302(a)(2) jurisdiction exists only when the allegedly
infringing work is offered, displayed or sold in New York.
Mantello, 947 F. Supp. at 101.
It appears that Freeplay means to allege that because the
infringing sound compositions were broadcast via Beasley
websites, they were made available in New York such that jurisdiction under C.P.L.R. § 302(a)(2) is appropriate. However,
"[a]lthough it is in the very nature of the internet that the
allegedly infringing [material] contained in these web sites can
be viewed anywhere, this does not mean that the infringement
occurred everywhere." Citigroup, 97 F. Supp. 2d at 567.
"[C]ourts have held that in the case of web sites displaying
infringing [material] the tort is deemed to be committed where
the web site is created and/or maintained. Id. at 567; see
also Bensusan, 126 F.3d at 29 (holding that a jazz club in
Missouri with the same name as a famous jazz club in New York was
not to be subject to jurisdiction under § 302(a)(2) on ths basis
of its website since the website was created and maintained in
Missouri). Freeplay makes no assertions that the websites were
created or maintained in New York, and thus, Beasley is not
subject to jurisdiction under § 302(a)(2).
C. Tortious Action Outside New York: C.P.L.R. § 302(a)(3)
Under C.P.L.R. § 302(a)(3), a foreign defendant may be subject
to personal jurisdiction in New York if he "commits a tortious
act without the state causing injury to person or property within
the state . . . if he . . . (ii) expects or should reasonably
expect the act to have consequences in the state and derives
substantial revenue from interstate or international commerce."
"Courts determining whether there is injury in New York
sufficient to warrant § 302(a)(3) jurisdiction must generally
apply a `situs-of-injury' test, . . . locat[ing] the `original
event which caused the injury.'" DiStefano v. Carozzi, Inc.,
286 F.3d 81, 84 (2d Cir. 2001). The original event is
"distinguished [both] from the initial tort [and] from the final
economic injury." Id. For New York courts to have jurisdiction
over a tortfeasor outside of New York, the first injury resulting
from the tort must be felt inside New York. See, e.g.,
Hermann v. Sharon Hosp., Inc., 522 N.Y.S.2d 581, 583 (2d Dept.
1987) (finding that the first injury was felt outside of New York when a New York plaintiff received negligent medical
treatment in Connecticut, even though the plaintiff continued to
feel the injury when she returned to New York).
Freeplay has alleged that Beasley used its copyrighted sound
recordings and musical compositions without the requisite
"synchronization license." In cases of commercial torts, "the
place of injury will usually be located where the `critical
events associated with the dispute took place.'" Rolls-Royce
Motors, Inc. v. Charles Schmitt & Co., 657 F. Supp. 1040, 1054.
In this case, the "critical events" are Beasley's alleged
unlicensed use of Freeplay's recordings and compositions. Yet,
Freeplay has not alleged that the Beasley's unlicensed use took
place in New York, or even that New York residents accessed
Beasley's webcasts and listened to the infringing sound
performances. Freeplay claims only economic loss as a result of
the alleged unlicensed use of their copyrighted material. Any
economic loss suffered, however, is only a consequence of the
injurious unlicensed use and is not the injury itself. See
Plunket v. Doyle, No. 99 Civ. 11006 (KMW), 2001 WL 175252, at
*3 (S.D.N.Y. Feb. 22, 2001) (finding a New York copyright holder
is injured where the infringing use occurred, and "the mere fact
that the plaintiff resides in New York and therefore ultimately
experiences a financial loss there is not a sufficient basis for
jurisdiction under § 302(a)(3)"). Therefore, jurisdiction under
C.P.L.R. § 302(a)(3) is not justified.
Defendant's motion to dismiss for lack of personal jurisdiction
is granted. SO ORDERED.