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Langenberg v. Sofair

September 11, 2006


The opinion of the court was delivered by: Kenneth M. Karas, District Judge


Plaintiff brings this action to recover money damages from Isaac Sofair ("Sofair"), Joan Sofair-Koss ("Sofair-Koss")*fn1, Landway Estates Inc., and James O. McKenna for fraud, breach of fiduciary duty, conversion, breach of contract, unjust enrichment, and fraudulent conveyance. Defendant Sofair-Koss moves to dismiss for lack of personal jurisdiction. For the reasons stated herein, this motion is GRANTED.

I. Background

The Complaint alleges six causes of action. First, that Defendants Sofair, Landway, and McKenna defrauded Plaintiff (Compl. ¶¶ 97-102); second, that Defendants Sofair, Landway, and McKenna breached their fiduciary duties to Plaintiff (Id. ¶¶ 103-08); third, that Defendants Sofair, Landway, and McKenna wrongfully converted cash assets of Plaintiff (Id. ¶¶ 109-14); fourth, that Defendants Sofair, Landway, and McKenna violated an oral contract between Defendant Sofair and Plaintiff by failing to use Plaintiff's funds for investment (Id. ¶¶ 115-19); fifth, that Defendants Sofair, Landway, and McKenna unjustly enriched themselves at Plaintiff's expense (Id. ¶¶ 120-24); and sixth, that all Defendants, including Defendant Sofair-Koss, were parties to a fraudulent conveyance (Id. ¶¶ 125-34).*fn2 Defendant Sofair-Koss is named only in the sixth and final cause of action for fraudulent conveyance.

For the purposes of this motion, the Court assumes the following of Plaintiff's allegations to be true. Plaintiff Margaret Langenberg, a resident of New York, met the principal defendant in this action, Sofair, in 1997.*fn3 (Id. ¶¶ 23-24) Plaintiff and Sofair had a personal relationship, during which Plaintiff entrusted Sofair with a total of $3,667,232 for the purpose of making investments on her behalf. (Id. ¶¶ 25, 54) Plaintiff alleges that Sofair misappropriated, stole, or lost through misuse $2,701,313 of the money entrusted to him. (Id. ¶ 95) The majority of the funds were allegedly used by Sofair for his own personal benefit, such as paying his own credit card bills and purchasing luxury goods, as well as for the benefit of his business partners and his family. (Id. ¶ 4) Specifically, the Complaint alleges that Sofair fraudulently conveyed approximately $2,100,000 to his business partners. (Id. ¶¶ 126, 132) Plaintiff further alleges that between January 1998 and September 2001 Defendant Sofair-Koss, Sofair's former wife, was the recipient of $181,900 of the fraudulently obtained funds.*fn4 (Id. ¶ 128) Plaintiff also alleges that from February 2000 to January 2001, Sofair-Koss was the trustee of trust accounts into which Sofair fraudulently transferred an additional $186,349 of Plaintiff's funds. (Id. ¶¶ 129-31) These trust funds were created to benefit Sofair and Sofair-Koss's children. Id.

The Complaint does not allege that Sofair-Koss was a participant in the alleged fraudulent scheme that Sofair used to convert the Plaintiff's funds or that Sofair-Koss had any knowledge, actual or implied, of Sofair's scheme. The Complaint also does not allege that the transfers made to Sofair-Koss and her children's trust funds were made for no consideration, or that Sofair maintained control over the funds that he transferred to Sofair-Koss. Additionally, the Complaint does not allege that Sofair-Koss did anything in the State of New York in connection with these transfers of funds.

Defendant Sofair-Koss is a resident of Maryland. (Mot. to Dismiss Ex. B ¶ 2 ("SofairKoss Aff.")) Sofair-Koss denies that she was a trustee for the trust accounts at issue. (SofairKoss Aff. ¶ 4) She further states that she is not a resident of New York and never has been. (Id. ¶ 2) Finally, she states that she has never had financial or property ties to New York. (Id. ¶¶ 5-8)

II. Discussion

A. Standard of Review

Defendant brings this motion pursuant to Federal Rule of Civil Procedure 12(b)(2). On a Rule 12(b)(2) motion to dismiss, plaintiff bears the burden of showing that the court has jurisdiction over the defendant. See In re Magnetic Audiotape Antitrust Litig., 334 F.3d 204, 206 (2d Cir. 2003). Plaintiff will be able to defeat the motion to dismiss based on legally sufficient allegations of jurisdiction, either in the form of an evidentiary hearing or affidavits. See DiStefano v. Carozzi N. Am., 286 F.3d 81, 84 (2d Cir. 2001). Where the court relies on pleadings and affidavits instead of an evidentiary hearing, the plaintiff need only make a prima facie showing that the court possesses personal jurisdiction over the defendant. Id.

Plaintiff alleges that the Court has jurisdiction over this action pursuant to 28 U.S.C. § 1332, the federal diversity jurisdiction statute. (Compl. ¶ 21) In a diversity action, a court's authority to maintain personal jurisdiction over a defendant is governed by the long-arm statute of the forum state. See Canterbury Belts Ltd. v. Lane Walker Rudin, Ltd., 869 F.2d 34, 40 (2d Cir. 1989). Courts may assert two broad categories of jurisdiction over an individual action: specific jurisdiction, which arises when the defendant's activities in the forum are the subject of the action, and general jurisdiction, which arises out of a defendant's contacts with the forum even though those contacts themselves are unrelated to the action before the court. See Bank Brussels Lambert v. Fiddler Gonzalez & Rodriguez, 305 F.3d 120, 127 (2d Cir. 2002) ("Bank Brussels II"); Commc'ns Partners Worldwide, Inc. v. Main Street Res., No. 04 Civ. 10003, 2005 WL 1765712, at *2-3 (S.D.N.Y. July 26, 2005). These two categories are reflected in New York law. Section 301 of the Civil Practice Law and Rules ("CPLR") establishes the general jurisdiction of New York courts, and section 302, the New York "long-arm statute," establishes the rules for exercise of specific jurisdiction. See Commc'ns Partners Worldwide, 2005 WL 1765712, at *3. In this action, Plaintiff asserts only that the Court has jurisdiction under CPLR section 302(a)(2), and does not argue that the Court has general jurisdiction over Sofair-Koss. (Pl.s' Mem. of Law in Opp'n to Def. Joan Sofair's Mot. to Dismiss Pursuant to FRCP 12(b)(2) 4-7)

In New York, specific jurisdiction may be exercised over non-domiciliaries who engage in any of four types of acts: (1) business transactions within New York or contracts to supply goods within the state, N.Y. C.P.L.R.§ 302(a)(1); (2) torts committed within New York, N.Y. C.P.L.R.§ 302(a)(2); (3) torts committed outside New York which cause injury within the state, so long as the tortfeasor regularly does business within New York or should reasonably expect that the tortious conduct will cause consequences within the New York, N.Y. C.P.L.R. § 302(a)(3); and (4) ownership or possession of real property within New York, N.Y. C.P.L.R.§ 302(a)(4). Accord Sole Resort, S.A. de C.V. v. Allure Resorts Mgmt. LLC, 450 F.3d 100, 106 (2d Cir. 2006); Bank Brussels Lambert v. Fiddler Gonzalez & Rodriguez, 171 F.3d 779, 784-85 (2d Cir. 1999) ("Bank Brussels I"). Here, Plaintiff argues that Sofair-Koss committed a tortious act within New York, namely fraudulent conveyance, allowing the Court to take jurisdiction under CPLR § 302(a)(2).

Since the inquiry at this stage is the preliminary question of jurisdiction, and not an analysis of the Complaint's merits, Plaintiff is not required to prove that Sofair-Koss actually committed a tort, but instead, must simply state a "colorable cause of action." Bank Brussels II, 305 F.3d at 125. Thus, personal jurisdiction over Sofair-Koss can be maintained only if the allegations within the Complaint are sufficient to maintain a colorable cause of action against her. See id. In this analysis, Plaintiff's averments of facts will be taken as true. See In re Magnetic, 334 F.3d at 206.

Finally, if there is a statutory basis for jurisdiction, the Court must determine if the extension of jurisdiction would be permissible under the Due Process Clause of the Fourteenth Amendment. See Chaiken v. V.V. Publ'g Corp., 119 F.3d 1018, 1025, 1027 (2d Cir. 1997). To satisfy this requirement, the defendant must have "certain minimum contacts" with the forum state, so that the suit does not offend "traditional notions of fair play and substantial justice." Int'l Shoe Co. v. Washington, 326 U.S. ...

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