The opinion of the court was delivered by: Kenneth M. Karas, District Judge
On July 13, 2007, Chief Magistrate Judge Lisa Margaret Smith issued a Report and Recommendation rejecting Defendant Ray-Art Enterprises, Inc.'s ("Ray-Art") Motion to Dismiss for Lack of Personal Jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(2). (See Report and Recommendation of July 13, 2007 ("R&R").) Ray-Art subsequently filed a series of specific objections to Magistrate Judge Smith's Report and Recommendation. For the reasons that follow, the Court adoptsMagistrate Judge Smith's Report and Recommendation and denies Ray-Art's Motion to Dismiss.
Although the Court will assume a general familiarity with the facts as discussed in Magistrate Judge Smith's Report and Recommendation, the Court will briefly summarize the facts most salient to this motion.
On May 28, 2006, Plaintiffs Dominic Del Ponte, an infant by his mother Linda Del Ponte, and Linda Del Ponte (herein collectively, "Plaintiffs"),purchased two necklaces from a kiosk at Universal Studios Theme Park in Orlando, Florida. (Compl. at ¶ 25.) Plaintiffs are both New York residents. (Compl. at ¶ 1.) Upon return to New York, Dominic Del Ponte began to chew on both of the necklaces purchased from the Universal Studios kiosk. (Mem. of Law in Opp. to the Mot. of Def. Ray-Art to Dismiss Ex. A at 1 (Affidavit of Linda Del Ponte at 1) ("Del Ponte Affidavit").) Linda Del Ponte discarded one of the necklaces, but kept the other. (Id.) Shortly thereafter, routine pediatric tests revealed that Dominic Del Ponte had elevated levels of lead in his blood. (Id. at 2.) Searching to explain the contamination, Plaintiffs examined their home and possessions for the presence of lead. (Id.) Testing of the home came up negative, but testing of the remaining necklace revealed elevated levels of lead. (Id.)
Plaintiffs subsequently filed the instant Complaint against Universal City Development Partners Corp. ("Universal"), the owner and operator of Universal Studios Theme Park, and RayArt, the operator of the kiosk that allegedly sold the necklaces to Plaintiffs. (Compl. at ¶ 22-23.) After the case was removed to federal court on grounds of diversity, Defendant Ray-Art filed a motion to dismiss for lack of personal jurisdiction. (Docket. No. 6.) In response, Magistrate Judge Smith permitted Plaintiffs to conduct limited discovery into Ray-Art's connections with the New York forum. This limited discovery, conducted via five interrogatories, disclosed that Ray-Art had purchased approximately thirty-one percent of its inventory from New York vendors between the years of 2002 and 2006, (Def. Ray-Art's Obj. and Responses to Pls.' Interrogatories at 5 ("Interrogatories")), and that Ray-Art principals had visited New York each year from 2003 to 2006 (Interrogatories at 6). In response to Plaintiffs' final interrogatory, which requested the name of the supplier and/or distributor of the necklace analyzed by Plaintiffs, Ray-Art stated that it had purchased an inventory item that "resembles" the necklace from a Pennsylvania based company, Magic Touch Corp. ("Magic Touch"). (Interrogatories at 7.) Ray-Art then filed a Third-Party Complaint against Magic Touch, alleging that Magic Touch had supplied Ray-Art with the necklace in question. (Third-Party Complaint at ¶¶ 17-18.) Magic Touch disputes Ray-Art's allegations and denies that it supplied the necklace to Ray-Art. (Ray-Art's Answer, Affirmative Defenses to Third-Party Compl., Counterclaim, and Cross-Claims at ¶¶ 17-18.)
A. Standard of Review of the Magistrate Judge's Report and Recommendation
A district court reviewing a report and recommendation addressing a dispositive motion "'may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge.'" Donahue v. Global Home Loans & Fin., Inc., No. 05-CV-8362, 2007 WL 831816, at *1 (S.D.N.Y. Mar. 15, 2007) (quoting 28 U.S.C. § 636(b)(1)(C)). Under 28 U.S.C. § 636(b)(1) and Federal Rule of Civil Procedure 72(b), parties may submit objections to the magistrate judge's report and recommendation. The objections must be "specific" and "written," see Fed. R. Civ. P. 72(b), and must be made "within 10 days after being served with a copy of the recommended disposition." Id.; see also 28 U.S.C. § 636(b)(1)(C).
Where a party submits timely objections to a report and recommendation, as Defendant Ray-Art has here, the district court reviews the parts of the report and recommendation to which the party objected under a de novo standard of review. See 28 U.S.C. § 636(b)(1)(C) ("A judge of the court shall make a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made."); Fed. R. Civ. P. 72(b) ("The district judge to whom the case is assigned shall make a de novo determination upon the record, or after additional evidence, of any portion of the magistrate judge's disposition to which specific written objection has been made in accordance with this rule."); see also Donahue, 2007 WL 831816, at *1. The district court may adopt those portions of a report to which no objections have been made, as long as those portions are not clearly erroneous. See Pizarro v. Bartlett, 776 F. Supp. 815, 817 (S.D.N.Y. 1991).
B. Standard of Review under Fed. R. Civ. P. 12(b)(2)
"[R]esolution of a 12(b)(2) motion to dismiss for lack of personal jurisdiction made in the Southern District of New York requires a two-step analysis." See Bank Brussels Lambert v. Fiddler Gonzalez & Rodriguez, 305 F.3d 120, 124 (2d Cir. 2002). "First, the court must determine if New York law would confer upon its courts the jurisdiction to reach the defendant," such as under the New York long-arm statute. Id. If such a basis for jurisdiction exists, the court must then determine whether the extension of jurisdiction is permissible under the Due Process Clause of the Fourteenth Amendment. See id.
On a Rule 12(b)(2) motion to dismiss, a plaintiff has the burden of establishing that the court maintains jurisdiction over the defendant. See Kernan v. Kurz-Hastings, Inc., 175 F.3d 236, 240 (2d Cir. 1999). However, "[p]rior to discovery, a plaintiff challenged by a jurisdiction testing motion may defeat the motion by pleading in good faith . . . legally sufficient allegations of jurisdiction, i.e., by making a prima facie showing of jurisdiction." Jazini v. Nissan Motor Co., 148 F.3d 181, 184 (2d Cir. 1998) (internal quotation marks and citations omitted); see also Metro. Life Ins. Co. v. Robertson-Ceco Corp., 84 F.3d 560, 566 (2d Cir. 1996). "[A] prima facie showing of jurisdiction does not mean that plaintiff must show only some evidence that defendant is subject to jurisdiction; it means that plaintiff must plead facts which, if true, are sufficient in themselves to establish jurisdiction." Bellepointe, Inc. v. Kohl's Dep't Stores, Inc., 975 F. Supp. 562, 564 (S.D.N.Y. 1997). A plaintiff may "make this showing through [its] own affidavits and supporting materials[,] containing an averment of facts that, if credited . . . , would suffice to establish jurisdiction over the defendant." Whitaker v. Am. Telecasting, Inc., 261 F.3d 196, 208 (2d Cir. 2001) (internal quotation marks and citations omitted). While a court may consider materials beyond the pleadings, the court must credit a plaintiff's allegations in support of jurisdiction. See A.I. Trade Fin., Inc. v. Petra Bank, 989 F.2d 76, 79-80 (2d Cir. 1993) ("[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, notwithstanding a controverting presentation by the moving party."). Thus, the question before the Court is whether Plaintiffs have made a prima facie showing, based on their pleadings and affidavits, that the Court has personal jurisdiction over Ray-Art.*fn1
C. Ray-Art's Objections to Magistrate Judge Smith's Report and Recommendation
Plaintiffs contend that Defendant Ray-Art is subject to specific personal jurisdiction under Section 302(a)(3)(i) of New York's long-arm statute. (R&R at 4.) Section 302(a)(3)(i) authorizes a New York court to exercise personal jurisdiction when: (1) a defendant commits a tort outside of New York State that causes injury within New York State; and (2) the defendant either regularly does or solicits business in New York, engages in any persistent course of conduct in New York, or derives substantial revenue from goods used or consumed or services rendered in New York. See e.g., Overseas Media Inc., v. Skvortsov, 407 F. Supp. 2d 563, 575 (S.D.N.Y. 2006) (explicating Section 302(a)(3)(i)). Magistrate Judge Smith concluded that Plaintiffs had established a prima facie case under 302(a)(3)(i): she found that Plaintiff had alleged that Ray-Art had committed a tort outside New York (R&R at 10-11); that the aforementioned tort caused injury in New York (Id.); that Ray-Art regularly does business in New York (Id. at 10-11); and that jurisdiction would not violate due process (Id. at 17).
Ray-Art's objections to Magistrate Judge Smith's Report and Recommendation state four specific concerns, which can be summarized as follows:
1. Magistrate Judge Smith erred in determining that purchases of items from New York vendors and related trips to New York by Ray-Art officers were sufficient to establish that Ray-Art regularly conducts business in New York. (Def. Ray Art's Objections to Report & Recommendation of Mag. Judge Lisa M. Smith 3 ("Objections").)
2. Magistrate Judge Smith overlooked factual evidence that Ray-Art's contacts with New York distributors were not in any way related to the causes of action at issue. As a result, there are insufficient minimum contacts to survive due process analysis. (Id. at 9-10.)
3. Magistrate Judge Smith overlooked Helicopteros Nacionales de Columbia, S.S. v. Hall, which held that "mere purchases and related trips, even if occurring at related intervals, are not enough to warrant a State's assertion of in personem jurisdiction over a non-resident corporation in a cause of action ...