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Palmer v. Globalive Communications Corp.

August 1, 2008

PATRICK V. PALMER, INDIVIDUALLY AND DERIVATIVELY ON BEHALF OF ALL SHAREHOLDERS OF FREEFONE, INC., PLAINTIFF,
v.
GLOBALIVE COMMUNICATIONS CORP., ANTHONY LACAVERA, MARK RIDER, DAVID PARKES, AND RICHARD LANGER, DEFENDANTS.



The opinion of the court was delivered by: Cedarbaum, J.

OPINION

Patrick V. Palmer, inventor of "Freefone," filed this action against Globalive Communications Corp. ("Globalive"), Anthony Lacavera, Mark Rider, David Parkes, and Richard Langer for the following claims arising out of defendants' conduct with respect to Palmer's role in and relationship with Freefone, Inc.: (1) declaratory relief for fraudulent misappropriation of the Freefone trademark (against Globalive, Lacavera, Rider, and Parkes), (2) misuse of the Freefone trademark in violation of the Lanham Act, 15 U.S.C. § 1051, et seq., (against Globalive, Lacavera, Rider, and Parkes), (3) fraudulent inducement of contract (against Globalive, Lacavera, and Rider), (4) knowingly participating in fraudulent inducement of contract (against Langer), (5) fraudulent inducement of the trademark assignment (against Globalive, Lacavera, Rider, and Parkes), (6) conversion (against Globalive, Lacavera, Rider, and Parkes), (7) tortious interference with an employment contract (against Globalive, Lacavera, Rider, and Parkes), (8) breach of a shareholders' agreement (against Globalive, Lacavera, Rider, and Parkes), and (9) prima facie tort (against all defendants). Palmer is a resident of Texas. Globalive and Freefone, Inc. are Canadian entities. Lacavera, Rider, and Parkes are all residents of Canada. Only Langer is a resident of New York.

Palmer has withdrawn all derivative and minority shareholder claims against defendants. The claims against Rider, a shareholder of Globalive, have been dismissed for lack of personal jurisdiction. Parkes, former President and CEO of Freefone, Inc., was never properly served with a complaint. Palmer was given one week from May 28, 2008 to make a final attempt to have process served on Parkes. No such proof has been proffered. Accordingly, the claims against Parkes are dismissed without prejudice.

Globalive and Lacavera, CEO of Globalive, move to dismiss claims one and two pursuant to Fed. R. Civ. P. 12(b)(1) for lack of subject matter jurisdiction; claims three, five through seven, and nine pursuant to Fed. R. Civ. P. 12(b)(6) for failure to state a claim upon which relief can be granted; and all claims on the ground of forum non conveniens. Lacavera moves to dismiss the amended complaint pursuant to Fed. R. Civ. P. 12(b)(2) for lack of personal jurisdiction. At oral argument on May 28, 2008, the motion to dismiss claims three, five, seven, and nine was denied, as was the forum non conveniens motion. The motion to dismiss claim six was granted.

For the reasons set forth below, the motion to dismiss claims one and two for lack of subject matter jurisdiction is denied. With respect to personal jurisdiction over Lacavera, an evidentiary hearing was held on October 24, 2007. Lacavera's motion to dismiss for lack of personal jurisdiction is granted because Palmer has not shown by a fair preponderance of the credible evidence that Lacavera has sufficient contacts with New York to permit the exercise of jurisdiction over him.

BACKGROUND

The following relevant facts were established through the testimony of Palmer, Lacavera, and Langer at the evidentiary hearing. In 1996-97 Palmer invented Freefone, a free public courtesy telephone system that would derive revenue from advertisements. By 2003, Palmer had developed an internet-based system of delivering advertisements through Freefone. In the summer of 2003, while Palmer was considering outside investors for Freefone, Langer, who works in the telecommunications industry, put Palmer in touch with Lacavera. Palmer and Lacavera discussed a proposed investment in Freefone by Globalive, by which Globalive would provide financing and other resources to help launch the Freefone product. These discussions were conducted primarily by telephone and email. Lacavera also visited Palmer in Texas that summer to view the Freefone product and discuss the investment.

The proposed terms of this relationship were memorialized in a letter of intent dated July 18, 2003. Palmer testified credibly that he met with Lacavera in New York in July to review and sign the letter of intent. According to Palmer, the parties reviewed the previously negotiated terms, which were already "final," and then signed the letter. Palmer testified credibly that at the meeting Lacavera told him that Palmer would have "an active role in the company" and that they would need Palmer's "knowledge about the product, feedback, [and] development."

In a sworn declaration dated March 27, 2007, Lacavera stated that "[a]round July 2003" he met with Palmer in New York, where they "executed" the letter of intent. Lacavera testified at the evidentiary hearing, however, that the meeting in New York actually took place in late August, and that the letter of intent must have been signed in Toronto on July 18 prior to that meeting, or that it may have been re-signed at that meeting. His testimony regarding where the letter of intent was signed was not credible. Nonetheless, while Palmer and Lacavera disagree as to where the letter of intent was officially signed, both agree that the letter was finalized prior to the New York meeting, and that it was negotiated between the parties by email and telephone while both parties were outside of New York. They also agree that a meeting in New York regarding Freefone did take place. The parties later signed a shareholders' agreement in Toronto and incorporated Freefone, Inc. in Ontario, Canada on September 15, 2003.

At the hearing, Langer testified about his role in introducing Palmer to Lacavera, and his subsequent involvement with the Freefone product. He testified that he met with Lacavera a number of times in New York in regard to various business opportunities, including Freefone. Langer received 500,000 shares of stock in Freefone, Inc. as a finder's fee for introducing Palmer to Lacavera.

According to the amended complaint, Palmer received 4,500,000 shares, or 45% of the company's shares. Palmer transferred 565,000 shares to Parkes in exchange for a three-year employment contract, effective January 1, 2004, leaving Palmer with 3,935,000 shares, or 39% of the company's shares. Around May of 2004, Palmer assigned his rights in the Freefone mark, U.S. Registration No. 2,578,929, to Freefone, Inc. Palmer alleges that, after the transfer of the trademark, Globalive, Lacavera, Rider, and Parkes took a number of steps to freeze him out of the company, including various board actions without notice to him, an attempt to remove him as a director of Freefone, Inc., the termination of his employment contract, and the ultimate absorption of Freefone, Inc. into Globalive. Based on these grievances, Palmer sues Globalive and Lacavera for the claims noted above.

DISCUSSION

I. Subject Matter Jurisdiction

Globalive and Lacavera move to dismiss claims one and two pursuant to Fed. R. Civ. P. 12(b)(1) for lack of subject matter jurisdiction. Although claims one and two invoke the Lanham Act, there is complete diversity of citizenship in this case.

Accordingly, the motion to dismiss for lack of subject matter jurisdiction is denied. See 28 U.S.C. § 1332.

II. Personal Jurisdiction over Lacavera

At an evidentiary hearing before trial, plaintiff bears the burden of proving personal jurisdiction by a fair preponderance of the credible evidence. Wilhelmshaven Acquisition Corp. v. Asher, 810 F. Supp. 108, 111 (S.D.N.Y. 1993). Whether there is personal jurisdiction over Lacavera is a matter of New York law. Id. If jurisdiction under New York law is established, a due process analysis under the Fourteenth Amendment is required. Best Van Lines, Inc. v. Walker, 490 F.3d 239, 242 (2d Cir. 2007).

At the evidentiary hearing, Palmer attempted to prove general personal jurisdiction over Lacavera under N.Y. C.P.L.R. ยง 301 for "doing business" in New York, and specific jurisdiction arising from the meeting in New York and signing of the letter of ...


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