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Three Five Compounds, Inc v. Scram Technologies

November 22, 2011


The opinion of the court was delivered by: Richard J. Holwell, District Judge


Defendant Scram Technologies, Inc. ("STI") moves pursuant to Federal Rule of Civil Procedure 12(b)(2) to dismiss this contract action brought by Three Five Compounds, Inc. ("Three Five") for lack of personal jurisdiction. For the reasons that follow, the motion is GRANTED.


STI is a Maryland corporation with its principal place of business in Maryland. (See Compl. ¶ 4; Aff. of R. Kwong, June 9, 2011 (Kwong Aff.) ¶¶ 1,3.) STI is an optical engineering company that produces advanced projector displays, some of which use light emitting diodes, or LEDs. (Id. ¶ 5.)

For some time prior to 2009, STI had used LED chips produced by Cree, Inc., a company based in Durham, North Carolina. (Id. ¶ 6.) In early 2009, STI decided to increase production of certain advanced projectors using LEDs. Ray Kwong, STI's President, contacted Cree to determine whether Cree could meet STI's increased demand for LED chips. (Id. ¶¶ 7-8.) Cree referred STI to Three Five, its exclusive distributor of LED chips in the United States. (Id. ¶¶ 8-9; Aff. of P. Guan, July 11, 2011 ("Guan Aff.") ¶ 5.) Three Five is a New York corporation with its principle place of business in New York, New York. (Compl. ¶¶ 1-3.)

STI contacted Three Five by telephone regarding the amount and kind of LED chips that it needed. (Kwong Aff. ¶ 11; Guan Aff. ¶ 6.) Three Five confirmed that it could provide LED chips with the required specifications. (Kwong Aff. ¶ 11.) Over the ensuing several weeks, STI and Three Five personnel had a series of telephone conversations and exchanged numerous e-mails. (Guan Aff. ¶ 7.)

These discussions resulted in an agreement whereby STI would purchase 1.2 million LED chips for $2.16 million. (Guan Aff. ¶ 9; Kwong Aff. ¶ 11, Ex. C; Compl. ¶ 14 .) Three Five would deliver the LED chips to STI in Maryland in monthly shipments to be completed no later than one year from the date of the agreement. (Guan Aff. ¶ 9; Kwong Aff. ¶ 11.) On October 8, 2009, STI e-mailed Three Five a purchase order to that effect. (See Kwong Aff. Ex. C; Compl. ¶ 10.) No meeting between STI officers on the one hand and Three Five officers on the other took place in New York or anywhere else prior to the execution of the written purchase order.

On October 13, 2009 and February 17, 2010, Three Five delivered to STI sample shipments of LED chips. (Compl. ¶ 15, 18; Kwong Aff. ¶ 12; Guan Aff. ¶ 11.) STI issued checks for these shipments which Three Five deposited in bank accounts in New York. (Compl. ¶¶ 17, 20; Guan Aff. ¶¶ 12-13.)

The parties' accounts differ as to what happened next. According to STI, tests revealed that the chips did not meet the required specifications and STI cancelled its order. (Kwong Aff. ¶ 12.) For its part, Three Five alleges that it "prepared all materials ordered and designated by SCRAM TECH in the Agreement" and "has fully preformed all of its obligations under the agreement." (Compl. ¶¶ 21-22.) In Three Five's account, STI "refused to set a time for delivery and payment" and "demanded that the specifications for the chips needed to be changed and required a narrower range of frequencies," demands that "were completely inconsistent with the purchase order." (Guan Aff. ¶¶ 19-20.)

The parties do agree, however, that in March and April 2010, Three Five executives met in New York with N. Wayne Bailey, Vice President of Sales for STI, to discuss "issues as to delivery and the specifications of the LED chips in the purchase order agreement." (Guan Aff. ¶¶ 14-15; Aff. of N. W. Bailey, June 10, 2011 ("Bailey Aff.") ¶ 1.)

On March 11, 2010, Bailey and Three Five General Manager Peter Guan met at the Cornell Club in Manhattan. (Bailey Aff. ¶ 8.) According to Bailey, "the conversation was general in nature" and Guan assured him that he "would be able to view the LED chips after the meeting." (Id. ¶ 9.) However, at the end of the meeting, Guan told Bailey that "Three Five had customers in the building and that it was not . . . a good time [to] see the LED chips." (Id.)

Guan does not dispute this account. In a sworn affidavit, however, he avers that at this meeting Bailey presented "his Scram Tech business card with his contact information, which included his Brooklyn, New York office address and telephone number" and said "that he conducts his Scram Tech business from his office" at that address. (Guan Aff. ¶¶ 17-18.) However, Guan has not produced the business card from the meeting.

In response, STI has submitted an affidavit from Bailey in which he avers that he "neither had in [his] possession nor presented to Three Five [] a[n] STI business card with a New York address and/or New York telephone number located on it." (Aff. of N.W. Bailey, July 21, 2011 ("Bailey Reply Aff.") ¶ 5.) Bailey's affidavit attaches an STI business card with his name and an address and telephone number in for STI in Maryland. (See id. Ex. 1.)

In his reply affidavit, Bailey further avers that he and Guan "discussed, at length, the building in which [he] reside[s] which was formerly the old Daily News Plant and which has since become a residential condominium" that houses 36 Chevrolet Corvettes belonging to the Pop artist Peter Max. *fn1 (Id. ¶ 9.) According to Bailey, due to his interlocutors' interest in these cars, he "sometimes hand[s] out [his] 'private social card' so that those who are generally interested in the building/corvettes [] can obtain additional information about the same." (Id.) Bailey speculates that, in talking to Guan about his residence, he "may have" given Guan his private social card. (Id.) Bailey's affidavit also attaches a copy of his private social card. (See id. Ex. 3.) The card lists a telephone number with a Manhattan area code and does not list any address other than the phrase "New York. NY." (See id.)

On April 1, 2010, Bailey and Three Five President Thomas Guan met at a Starbucks in New York. According to Bailey, he and Guan "exchanged pleasantries and discussed some of the issues surrounding STI's issues with LED chips" but that Guan "was focused on shipping the LED chips to STI immediately." (Bailey Aff. ¶¶12-13.) Three Five points to no evidence that contradicts Bailey's account.

Three Five does, however, point to other communications. Guan's sworn affidavit further avers that STI officers "placed many telephone calls to Three Five's offices in New York" and sent "hundreds of e-mails" to Three Five regarding the purchase order. (Guan Aff. ¶¶ 22-23.) In addition, Guan avers that Three Five arranged a testing meeting at Cree to show that the LED chips did meet STI's specifications but STI did not send any representative to the meeting. (Id. ¶ 21.) Bailey avers that these allegations are "grossly exaggerated in number by Three Five and unsupported by the record." (Bailey Reply Aff. ¶ 18.) No record of any communications between Three Five and STI appears in the record.

On March 9, 2011, Three Five filed this action alleging that STI breached the purchase order agreement by refusing to take delivery of additional shipments of LED chips. On June 10, 2011, Defendants moved [8] under Federal Rule of Civil Procedure 12(b)(2) to dismiss the action for lack of personal jurisdiction.


"The burden of establishing jurisdiction over a defendant, by a preponderance of the evidence, is upon the plaintiff." Hoffritz for Cutlery, Inc. v. Amjac, Ltd., 763 F.2d 55, 57 (2d Cir. 1985). "If the court chooses to rely on pleadings and affidavits, the plaintiff need only make a prima facie showing of personal jurisdiction over defendant. . . ." Cutco Indus., Inc. v. Naughton,806 F.2d 361, 365 (2d Cir. 1986). In that procedural posture, "all pleadings and affidavits are construed in the light most favorable to plaintiff, and where doubts exist, they are resolved in the plaintiff's favor." Hoffritz for Cutlery, Inc., 763 F,2d at 57.

"A court sitting in diversity applies the law of the forum state in determining whether it has personal jurisdiction over the defendants." Agency Rent A Car Sys., Inc. v. Grand Rent A Car Corp., 98 F.3d 25, 29 (2d Cir. 1996). Hence "[t]o determine whether it has personal jurisdiction over" STI, "the Court engages in a two-part inquiry. First, it must determine whether there is personal jurisdiction over" STI "under New York state law; second, if New York law provides for personal jurisdiction, the Court must determine whether the assertion of jurisdiction ...

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