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Cyberscan Technology, Inc. v. Opinion and Order Sema Ltd.

December 13, 2006

CYBERSCAN TECHNOLOGY, INC., PLAINTIFF,
v.
OPINION AND ORDER SEMA LIMITED, EDOUARD LE MARIE, AND MARIE-PIERRE LE MARIE, DEFENDANTS.



The opinion of the court was delivered by: Gerard E. Lynch, District Judge

Defendants Sema Limited ("Sema"), Edouard Le Marié and Marie-Pierre Le Marié move to dismiss the Amended Complaint filed by plaintiff Cyberscan Technology, Inc. ("Cyberscan"). The motion will be denied.

BACKGROUND

Plaintiff is a corporation organized under Delaware law, having its principal place of business in London, England. Its primary business is in supplying video game systems to casinos, lotteries and betting operations worldwide. (Compl. ¶ 2.) Defendant Sema is a Hong Kong corporation that offers services in connection with initial public offerings, equity private placements, mergers and acquisitions, and the like. (Id. ¶ 3.) Defendants Edouard Le Marié and Marie-Pierre Le Marié, his wife, are citizens of France and co-directors of Sema. (Id. ¶¶ 5-7.) Plaintiff claims that the Le Mariés "reside in New York City" and regularly transact business there (id. ¶ 10), an assertion which the defendants hotly dispute. (D. Mem. at 3.)

In an agreement dated July 25, 1998, Cyberscan and Sema entered into an agreement under which Sema was to act as financial advisor in connection with Cyberscan's proposed recapitalization. (Gatto Dec. Ex. C.) In December 1998, the agreement was amended. (Compl. ¶17 & Exs. B, C; Gatto Dec. ¶15 & Ex. M.) Cyberscan was dissatisfied with Sema's subsequent services, however, and in a letter dated April 26, 1999, Cyberscan terminated the agreement. (Compl. ¶¶ 21-22; Gatto Dec. ¶ 17 & Ex. P.) Mr. Le Marié acknowledged the termination by email shortly afterward. (Gatto Dec. ¶ 17 & Ex. Q.)

Some years later, in September of 2005, Sema contacted Cyberscan to demand payment of certain sums allegedly due under the agreement. (Compl. ¶ 26.) Cyberscan contends that Sema has no entitlement to these sums. It also contends that Sema was "not capable by experience and by law to have undertaken to perform the services contemplated" by the 1998 agreement, and that the agreement was therefore void ab initio. (Compl. ¶¶ 29-30.) Apparently anticipating an action against it by Sema, Cyberscan brought this action in the Supreme Court of the County of New York (Moghadassi-Weiss Dec. Ex. 14, 15), and defendants removed to federal court. (D. Mem. 6.) Cyberscan seeks a declaration of the rights and agreements of the parties under the 1998 agreement, as well as restitution and certain damages. Defendants now move to dismiss the action for lack of personal jurisdiction and on grounds of forum non conveniens.

DISCUSSION

I. Personal Jurisdiction

A. Personal Jurisdiction Standards in Diversity Cases

"In diversity cases, federal courts must look to the forum state's long-arm statute to determine if personal jurisdiction may be obtained over a nonresident defendant," Savin v. Ranier, 898 F.2d 304, 306 (2d Cir. 1990), because "the amenability of a [defendant] 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." Arrowsmith v. United Press Int'l, 320 F.2d 219, 223 (2d Cir. 1963) (en banc). Accordingly, courts must first decide whether jurisdiction is appropriate under the relevant state law, and then decide whether the exercise of jurisdiction comports with due process. See id. at 223. The plaintiff generally has the burden of proof in establishing personal jurisdiction over the defendant. See Volkswagenwerk Aktiengesellschaft v. Beech Aircraft Corp., 751 F.2d 117, 120 (2d Cir. 1984).

The parties in this case have not begun discovery. "Prior to discovery, a plaintiff may defeat a motion to dismiss based on legally sufficient allegations of jurisdiction." In re Magnetic Audiotape Antitrust Litig., 334 F.3d 204, 206 (2d Cir. 2003). The district court has "considerable procedural leeway" in deciding 12(b)(2) motions, and it may accept affidavits if it so chooses. See Marine Midland Bank v. Miller, 664 F.2d 899, 904 (2d Cir. 1981). "Where . . . the district court relies solely on the pleadings and supporting affidavits, the plaintiff need only make a prima facie showing of jurisdiction," Robinson v. Overseas Military Sales Corp., 21 F.3d 502, 507 (2d Cir. 1994), meaning "an averment of facts that, if credited . . . would suffice to establish jurisdiction over the defendant." Metro. Life Ins. Co. v. Robertson-Ceco Corp., 84 F.3d 560, 567 (2d Cir. 1996), quoting Ball v. Metallurgie Hoboken-Overpelt, S.A., 902 F.2d 194, 197 (2d Cir. 1990).

"[W]here 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." A.I. Trade Finance, Inc. v. Petra Bank, 989 F.2d 76, 79-80 (2d Cir. 1993). However, allegations that "lack the factual specificity necessary to confer jurisdiction" and "conclusory statements [] without any supporting facts" are not sufficient, and courts "are not bound to accept as true a legal conclusion couched as a factual allegation." Jazini v. Nissan Motor Co., Ltd., 148 F.3d 181, 185 (2d Cir. 1998) (internal quotations and citations omitted).

B. Whether Jurisdiction Exists Under New York Law

As noted above, to determine whether personal jurisdiction exists, courts must first determine whether the relevant state law would provide for personal jurisdiction. Defendants devote several pages of their memorandum of law to arguing that personal jurisdiction is not available under N.Y. C.P.L.R. § 301, which creates general jurisdiction over non-domiciliary defendants in certain circumstances. In its memorandum opposing the motion to dismiss, however, plaintiff relies entirely on N.Y. C.P.L.R. § 302(a)(1), so the following discussion will focus on that section.

N.Y. C.P.L.R. § 302, New York's long-arm statute, provides for specific jurisdiction over non-domiciliaries in certain circumstances. See id. § 302(c); Sole Resort, S.A. de C.V. v. Allure Resorts Mgmt., LLC, 450 F.3d 100, 103 (2d Cir. 2006). Section 302(a)(1) provides that "a court may exercise personal jurisdiction over any non-domiciliary, or his executor or administrator, who in person or through an agent . . . transacts any business within the state or contracts anywhere to supply goods or services in the state." N.Y. C.P.L.R. § 302(a)(1). "To establish personal jurisdiction under section 302(a)(1), two requirements must be met: (1) The defendant must have transacted business within the state; and (2) the claim asserted must arise from that business activity." Sole Resort, 450 F.3d at 103.

1. Transaction of Business In New York

Although the inquiry into whether an out-of-state defendant transacts business in New York requires an assessment of the totality of the circumstances, United States Theatre Corp. v. Gunwyn/Lansburgh, 825 F. Supp. 594, 596 (S.D.N.Y. 1993), there are four factors that should be given special attention: (1) whether the defendant has an on-going contractual relationship with a New York corporation; (2) whether the defendant negotiated or executed a contract in New York, and whether the defendant visited New York after executing the contract with the parties; (3) whether there is a choice of law clause in any such contract; and (4) whether the contract requires [the defendant] to send notices and payments into the forum state or subjects [the defendant] to supervision by the corporation in the forum state. Commc'ns Partners Worldwide, Inc. v. Main St. Res., No. 04 Civ.10003 (PKL), 2005 WL 1765712, at *3 (S.D.N.Y. July 26, 2005). See Agency Rent a Car Sys., Inc. v. Grand Rent a Car Corp., 98 F.3d 25, 29 (2d Cir. 1996).

The agreement in this case contains no choice-of-law provision, but "a choice of law clause alone is not dispositive," Premier Lending Servs., Inc. v. J.L.J. Assoc., 924 F. Supp. 13, 17 (S.D.N.Y. 1996), and neither is its absence. As plaintiff is not a New York corporation, it cannot be said that defendants had at the time of the events in question an on-going relationship with a New York corporation (although defendants did perhaps have an ongoing relationship with the New York law firm and public relations firms that assisted with the Private Placement Memorandum). The first and third factors, therefore, do not suggest that defendants transacted business in New York.

The second and fourth factors, however, both of which deal with post-contractual activity, strongly suggest that defendant did transact business in New York, because the parties expected significant activity in New York pursuant to the contract, and at least some of the expected activities in New York did in fact take place. See N.Y. C.P.L.R. § 302(a)(1) (providing jurisdiction over, inter alia, "any non-domiciliary . . . who . . . contracts anywhere to supply goods or services in the state"). Compare Deutsche Bank Sec., Inc. v. Montana Bd. of Invs., 21 A.D.3d 90, 94-95 (1st Dep't. 2005) (finding personal jurisdiction under § 302(a)(1) where defendant, without leaving its place of business in Montana, electronically negotiated a securities transaction in New York with a New York-based plaintiff) with PaineWebber Inc. v. Westgate Group, Inc., 748 F. Supp. 115, 119 (S.D.N.Y. 1990) (finding no personal jurisdiction where defendants' actions undertaken pursuant to the contract took place outside New York). Post-contractual behavior is relevant to the question of personal jurisdiction, as it must be; a great deal of contract litigation arises not from the execution of agreements, but from their implementation. See First Wall St. Capital Corp. v. Int'l Prop. Corp., No. 97 Civ. 702 (JGK), 1998 WL 338105, at *5 (S.D.N.Y. Jun 24, 1998) (holding that defendant's post-agreement follow-up meetings with plaintiff's representatives in New York, and telephone calls and faxes to New York City in connection with the agreement, were significant factors favoring of jurisdiction). In this case, although the agreement itself was executed outside New York, it is clear that Sema, through its representative Mr. Le Marié, transacted substantial business in New York pursuant to the agreement.

Plaintiff's reason for entering the agreement, it alleges, was to raise funds in the United States through the sale of securities, specifically with an eye toward being listed on the NASDAQ exchange. (Gatto Dec. ¶¶ 3-4.) This was apparently defendants' understanding as well. Plaintiff points to an "action list" of activities that Mr. Le Marié proposed to undertake pursuant to the agreement (Gatto Dec. Ex. H.), which appears to be a list of activities that would lead to a listing on the NASDAQ exchange. Many or most of the actions would thus take place substantially in New York. Plaintiffs also point to a letter from Mr. Le Marié discussing strategies for a NASDAQ listing (Gatto Dec. Ex. F) and another letter from Mr. Le Marié suggesting the retention of a New York law firm in this regard (Gatto Dec. Ex. G), further indicating that such a listing was prominent in the parties' minds.

Of course, merely thinking of New York does not give rise to personal jurisdiction here. Plaintiff also asserts that Mr. Le Marié, a citizen of the United States as well as France (Le Marié Dec. ¶ 1), focused his efforts pursuant to the agreement on New York City (Gatto Dec. ¶ 13), and that "the services Sema performed for [plaintiff] pursuant to the Agreement were performed primarily in New York City." (Compl. ¶ 18.) Specifically, plaintiff alleges that "Sema worked in New York to attempt to find investors for [plaintiff]," and that Mr. Le Marié "met numerous times in New York City with potential investors." (Id.) Plaintiff points to several letters to potential investors in New York, signed "Edouard F. Le Marié -- NYC" (Gatto Dec. Ex. I). Mr. Le Marié allegedly used the services of a New York-based law firm and a New York-based public relations firm to prepare, print and distribute a Private Placement Memorandum for plaintiff, in a further effort to find investors. (Gatto Dec. ¶ 13.)

Mr. Le Marié acknowledges that he spent approximately six weeks in New York working in offices provided by one of plaintiff's corporate officers. (Le Marié Dec. ¶ 23.) Plaintiff further asserts that when Mr. Le Marié was in New York providing services for plaintiff, he worked from the New York offices of two firms based in New York City, used Sema letterhead listing the corporation's address as "care of" one of those firms, and stayed in a New York hotel at plaintiff's expense. (Gatto Dec. ¶ 11 & Ex. H; see Le Marié Aff. Aug. 18, 2006 ("2d Le Marié Aff.") ¶¶ 39-41)

Moreover, Mr. Le Marié admits that he executed an amendment to the agreement in New York. (Le Marié Dec. ¶ 24; Compl. ¶ 17; Gatto Dec. Ex. N.) The fact that a modification of the contract was executed in New York would not by itself constitute transaction of business sufficient to give rise to personal jurisdiction, see Presidential Realty Corp. v. Michael Square West, Ltd., 44 N.Y.2d 672, 673-74 (1978), ...


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