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VENTURA ASSOCIATES, INC. v. INT'L OUTSOURCING SERV.

July 12, 2005.

VENTURA ASSOCIATES, INC., Plaintiff,
v.
INTERNATIONAL OUTSOURCING SERVICES, INC., Defendant.



The opinion of the court was delivered by: PETER LEISURE, District Judge

OPINION AND ORDER

This case arises from an oral agreement between plaintiff and defendant, which provided that they would administer a promotional campaign for a third party client of plaintiff. Plaintiff, Ventura Associates, Inc. ("Ventura"), alleges that defendant, International Outsourcing Services, Inc. ("IOS"), breached the agreement and caused Ventura to incur liabilities of $131,787.30 to its client. Consequently, Ventura seeks damages in that amount from IOS. IOS now petitions the Court to dismiss Ventura's claim for lack of personal and subject matter jurisdiction pursuant to Federal Rules of Civil Procedure 12(b)(2) and 12(b)(1), or, in the alternative, to enjoin its prosecution to defer to IOS's declaratory judgment action that was pending in the Western District of Texas. For the reasons below, defendant's motion to dismiss is denied.

  BACKGROUND

  Ventura is a New York corporation engaged in the business of promotion fulfillment. (See Affidavit of Nigel Morgan dated October 22, 2004 ("Morgan Aff.") ¶ 1.) On October 1, 2001, Ventura contracted with Masterfoods USA ("Masterfoods") to fulfill an advertising promotion for Whiskas Cat Food, one of Masterfoods' products. (Id. ¶ 5.) As part of the promotion, Ventura was responsible for arranging the distribution of 5,000 $25 gas cards to purchasers of Whiskas Cat Food and others. (Id.)

  On January 2, 2002, Ventura entered into an oral agreement with IOS, an Indiana limited liability company that provides a variety of outsourced services to businesses around the world. (See Affidavit of Frank Clausen dated October 5, 2004 ¶ 3.) The oral agreement provided that IOS would conduct the actual distribution of the gas cards throughout the United States. (Id. ¶ 6; see also Complaint ("Compl.") ¶ 6.) According to IOS, it distributed 137 gas cards on December 14, 2003, but withheld the remaining 4,863 cards because a Ventura employee informed it that the gas cards may be defective. (See Affidavit of Patrick J. Corbett, Esq. dated October 27, 2004, Ex. 10.) The remaining cards were never distributed and subsequently expired. (Id., Ex. 6.) When Ventura informed Masterfoods that the cards had not been distributed, Masterfoods sought reimbursement of $131,787.30 from Ventura, which is the pro-rated amount Masterfoods paid for the remaining cards. (Id., Ex. 8.) Ventura then filed a claim with its insurer, The Hartford Fire Insurance Company ("Hartford"), for this amount. (See Morgan Aff. ¶ 9.) Ultimately, Masterfoods was reimbursed in full, with $106,787.30 paid by Hartford and $25,000 paid by Ventura in the form of its deductible. (Id.)

  After some correspondence between counsel for Ventura and counsel for IOS in which Ventura's counsel asserted that IOS was responsible for the full amount paid to Masterfoods, IOS filed an action in Texas state court on July 9, 2004 seeking a declaratory judgment that it had not breached the oral agreement with Ventura. Ventura later removed the case to federal court and filed a motion to dismiss for failure to state a claim or, in the alternative, to transfer the case to this District. On August 2, 2004, Ventura filed this breach of contract action against IOS, claiming damages of $131,787.30. In November 2004, IOS submitted the instant motion to dismiss.

  On December 7, 2004, District Judge David Briones of the United States District Court for the Western District of Texas, El Paso Division, granted Ventura's motion to transfer, denied its motion to dismiss as moot, and transferred the action to the Southern District of New York. See Int'l Outsourcing Servs. v. Ventura Assocs., No. 04 CA 353, 2004 U.S. Dist. LEXIS 27761 (W.D. Tex. Dec. 7, 2004). Subsequently, this Court accepted IOS's transferred action as related to Ventura's action.*fn1 In the instant motion, IOS argues that (1) Ventura's breach of contract claim should be dismissed because the Court cannot properly exercise personal jurisdiction over IOS and (2) Ventura fails to satisfy the $75,000 amount in controversy requirement for diversity jurisdiction. Moreover, even if there are proper jurisdictional bases to proceed, IOS contends that this case should be enjoined to defer to its properly commenced action in Texas pursuant to the first to file rule. Plainly, this argument has been rendered moot by the subsequent transfer of IOS's action to this District. Therefore, the Court need only consider IOS's two jurisdictional arguments.

  DISCUSSION

  I. Personal Jurisdiction over IOS

  When considering a Rule 12(b)(2) motion to dismiss for lack of personal jurisdiction, it is well established that "the plaintiff bears the burden of showing that the court has jurisdiction over the defendant." In re Magnetic Audiotape Antitrust Litigation, 334 F.3d 204, 206 (2d Cir. 2003) (per curiam); Metro. Life Ins. Co. v. Robertson-Ceco Corp., 84 F.3d 560, 566 (2d Cir. 1996). "Prior to discovery, a plaintiff may defeat a motion to dismiss based on legally sufficient allegations of jurisdiction." Metro. Life, 84 F.3d at 566. "Eventually, personal jurisdiction must be established by a preponderance of the evidence, either at an evidentiary hearing or at trial. But where the issue is addressed on affidavits, all allegations are construed in the light most favorable to the plaintiff and doubts are resolved in the plaintiff's favor, notwithstanding a controverting presentation by the moving party." A.I. Trade Fin., Inc. v. Petra Bank, 989 F.2d 76, 79-80 (2d Cir. 1993); see also Whitaker v. Am. Telecasting, Inc., 261 F.3d 196, 208 (2d Cir. 2001).

  Furthermore, "[a]bsent a specific grant of jurisdiction, the reach of a federal district court's personal jurisdiction is coterminous with that of the personal jurisdiction of a court of general jurisdiction in the state in which the court sits." Geller Media Mgmt., Inc. v. Beaudreault, 910 F. Supp. 135, 137 (S.D.N.Y. 1996) (Leisure, J.) (citing Fed.R.Civ.P. 4(k)(1)(A)). Thus, "the amenability of a foreign corporation to suit in a federal court in a diversity action is determined in accordance with the law of the state where the court sits, with `federal law' entering the picture only for the purpose of deciding whether a state's assertion of jurisdiction contravenes a constitutional guarantee." Metro. Life, 84 F.3d at 567 (quoting Arrowsmith v. United Press Int'l, 320 F.2d 219, 223 (2d Cir. 1963) (en banc)). To determine whether it has personal jurisdiction over IOS, the Court must engage in a two-part inquiry. First, it must determine whether there is personal jurisdiction over IOS under New York state law; second, if New York law provides for personal jurisdiction, the Court must determine whether the assertion of jurisdiction comports with the constitutional requirements of due process. Id.

  There are two types of jurisdiction that a court may exercise over a defendant: general and specific. See Helicopteros Nacionales de Colombia v. Hall, 466 U.S. 408, 414 (1984). In the case of general jurisdiction, plaintiff's claim need not arise out of defendant's contacts with the forum state, but defendant's contacts must be substantial; with specific jurisdiction, however, defendant's contacts need not be as substantial but plaintiff's claim must arise out of the contacts. These two types of jurisdiction are reflected both in New York's jurisdictional statutes, see N.Y.C.P.L.R. §§ 301-302 (McKinney 2001), and in the jurisprudence interpreting the Due Process limits of jurisdiction, see Helicopteros, 466 U.S. at 414.

  Here, the parties have submitted competing affidavits in support of their divergent views on jurisdiction. Relying on the affidavits of its Chief Financial Officer, Nigel Morgan, and Executive Vice-President, Lisa Manhart, Ventura contends that the Court has personal jurisdiction over IOS pursuant to Sections 301 and 302 of the New York Civil Practice Law and Rules ("CPLR"). (See Memorandum Of Law In Opposition To Defendant's Motion To Dismiss Or Transfer ("Pl. Mem.") at 4-8.) IOS, meanwhile, maintains that it is a New Jersey company that has no connection ...


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