United States District Court, N.D. New York
PREGIS CORPORATION; and PREGIS INTELLIPACK CORPORATION, Plaintiffs,
FRANKLIN LOGISTICAL SERVICES, INC., f/k/a Welch Paper Company; and KENNETH GORDON WELSH, JR., Individually and in His Capacity as Chief Executive Officer and Chairman of the Board of Franklin Logistical Services, Inc., f/k/a Welsh Paper Company, Defendants.
HEATHER K. ZIMMERMAN, ESQ., GOLDBERG SEGALLA LLP, Counsel for Plaintiffs, Syracuse, NY.
WILLIAM J. DECAIRE, ESQ., CARTER, CONBOY, CASE, BLACKMORE, MALONEY & LAIRD, P.C., Counsel for Defendant Welsh Albany, NY.
DECISION and ORDER
GLENN T. SUDDABY, District Judge.
Currently before the Court, in this diversity action for breach of contract, unjust enrichment and conversion filed by Pregis Corporation and Pregis Intellipack Corporation ("Plaintiffs") against Franklin Logistical Services, Inc., and Gordon Welsh, Jr. ("Defendants"), are Defendant Welsh's motion to dismiss Plaintiffs' Complaint for lack of subject-matter jurisdiction, lack of personal jurisdiction and improper venue pursuant to Fed.R.Civ.P. 12(b)(1), (2), (3), and Plaintiffs' motion for default judgment against Defendant Franklin Logistical Services, Inc., pursuant to Fed.R.Civ.P. 55. (Dkt. Nos. 9, 20.) For the reasons set forth below, Defendant Welsh's motion to dismiss is denied without prejudice to renewal after jurisdictional and venue discovery occurs; and Plaintiffs' motion for default judgment is denied without prejudice to renewal fourteen days after the Clerk of the Court enters Defendant Franklin Logistical Services, Inc.'s default for purposes of Fed. R. Civ. 55(a) and Local Rule 55.1 of the Local Rules of Practice.
I. RELEVANT BACKGROUND
A. Plaintiffs' Complaint
Generally, Plaintiffs' Complaint alleges that, between March 1, 2012, and November 3, 2012, Welsh Paper Company, the predecessor of Defendant Franklin Logistical Services, Inc. ("Defendant Franklin"), submitted numerous purchase orders to Plaintiff Pregis Corporation ("Plaintiff Pregis") for packaging supplies, which Plaintiff Pregis accepted, filled and shipped in part or in whole from its manufacturing and production facility in Glens Falls, New York, but which Plaintiff Pregnis never received payment for from Defendant Franklin, causing Plaintiffs to incur $233, 750.18, plus interest, in damages. (Dkt. No. 1.) Based on these factual allegations, Plaintiffs' Complaint asserts five claims against Defendants: (1) a claim for breach of contract under New York common law; (2) an "action for the price" under New York Uniform Commercial Code § 2-709; (3) a claim for unjust enrichment under New York common law; (4) a claim for piercing the corporate veil; and (5) a claim for conversion under New York common law. ( See generally Dkt. No. 1.) Familiarity with the particular nature of these claims and the factual allegations supporting them is assumed in this Decision and Order, which is intended primarily for the review of the parties.
B. Parties' Briefing on Defendant Welsh's Motion to Dismiss
1. Defendant Welsh's Memorandum of Law
Generally, in support of his motion to dismiss, Defendant Welsh asserts three arguments. (Dkt. No. 9, Attach. 4 [Def. Welsh's Memo. of Law].) First, Defendant Welsh argues that Plaintiffs' Complaint must be dismissed for lack of subject-matter jurisdiction under Fed.R.Civ.P. 12(b)(1), because the parties are not completely diverse for purposes of 28 U.S.C. § 1332(a) in that the Complaint expressly alleges that, like him, Plaintiff Pregis is a citizen of North Carolina. ( Id. )
Second, Defendant Welsh argues that, in the alternative, Plaintiffs' claims against him must be dismissed for lack of personal jurisdiction under Fed.R.Civ.P. 12(b)(2), because the Complaint fails to allege facts plausibly suggesting that he has the minimum contacts with New York State necessary to satisfy N.Y. C.P.L.R. § 302(a)(1), but rather alleges merely that "some or all of the packaging supplies [that Plaintiffs] sold to the co-defendant [Franklin] were manufactured at and/or shipped from [Plaintiffs'] manufacturing and production facility in Glens Falls, New York." ( Id. )
Third, Defendant Welsh argues that, again in the alternative, Plaintiffs' Complaint must be dismissed for improper venue under 28 U.S.C. § 1391(b) and Fed.R.Civ.P. 12(b)(3) for the following reasons: (a) he is domiciled in, and thus a citizen of, North Carolina; and (b) the only events occurring in New York State that give rise to the claims in question were Plaintiffs' manufacturing and/or shipping some of the products at issue from New York State. ( Id. )
2. Plaintiff's Opposition Memorandum of Law
Generally, in response to Defendant Welsh's motion to dismiss, Plaintiffs assert four arguments. (Dkt. No. 13, Attach. 7 [Plfs.' Opp'n Memo. of Law].) First, Plaintiffs argue that the Court has subject-matter jurisdiction over Plaintiffs' Complaint because that pleading erroneously alleges that Plaintiff Pregis is a citizen of Delaware and North Carolina, when in fact Plaintiff Pregis is a citizen of Delaware and Illinois, a fact established by the affidavit of Kenneth Scharmann (in which he states that he works "at Pregis' headquarters at 1650 Lake Cook Road, Suite 400 Deerfield, Illinois"). ( Id. )
Second, Plaintiffs argue that the Court has personal jurisdiction over Defendants because Defendant Franklin-"and by extension, [Defendant] Welsh"-have had extensive contacts with Plaintiff Pregis' facility located in New York State, through the following activities: (a) being a customer of Plaintiff Pregis since 1997; (b) ordering products from Plaintiff Pregis' Glens Falls facility between 1997 and 2009; (c) ordering some products from that facility between 2009 and 2013 (including some of the products giving rise to this action); (d) receiving customer service regarding those products from that facility; (e) sending payment for those products to that facility; and (f) receiving collection efforts from that facility between mid-2012 and mid-2013. ( Id. )
Third, Plaintiffs argue that venue is proper in this District under 28 U.S.C. § 1391(b) for the following reasons: (a) pursuant to 28 U.S.C. § 1391(c)(2), both Defendants are "residents" of the Northern District of New York for purposes of venue, because (i) the Court has personal jurisdiction over Defendant Franklin and (ii) Defendant Welsh is the Chief Executive Officer and Chairman of the Board thereof; and (b) in any event, a substantial amount of the activity giving rise to Plaintiffs' claims (including Defendant Franklin's ordering of the products, Plaintiff Pregis' processing of those orders and provision of customer service regarding them, the location at which Defendant Franklin's was to make payment, and Plaintiff Pregis' efforts to collect the amounts owed) occurred at Plaintiff Pregis' Glens Falls facility, which is in the Northern District of New York. ( Id. )
Fourth, Plaintiffs argue that, in the alternative, if the Court finds that Plaintiffs' Complaint and motion papers do not establish a prime facie showing of jurisdiction and venue, Plaintiffs should be permitted to conduct jurisdictional discovery in order to confirm jurisdiction and venue. ( Id. )
3. Defendant Welsh's Reply Memorandum of Law
Generally, in reply to Plaintiffs' response, Defendant Welsh asserts three arguments. (Dkt. No. 16 [Def. Welsh's Reply Memo. of Law].) First, Defendant Welsh argues that Plaintiffs have failed to meet their burden of rebutting the Complaint's allegation that North Carolina is Plaintiff Pregis' principal place of business for the following reasons: (a) Kenneth Scharmann, in his affidavit, carefully avoids using the term "principal place of business" when describing the place at which he works in Illinois, and fails to offer any corporate-formation documentation that would indicate that Illinois is Plaintiff Pregis' principal place of business; (b) the status of Illinois as being Plaintiff Pregis' principal place of business is undermined by (i) the September 7, 2012, invoice attached as Exhibit A to Mr. Scharmann's affidavit, which directs the recipient to make its check payable to Plaintiff Pregis at "Charlotte, NC, " (ii) the invoice terms and conditions attached as Exhibit B to Mr. Scharmann's affidavit, which refers to Plaintiff's "Main Office in Glens Falls, N.Y., " and (iii) the affidavit of Lisa O'Donnell, which indicates that "much of the customer service" for Plaintiffs' business is located in North Carolina; and (c) Plaintiffs have not filed a cross-motion to amend their Complaint, which expressly alleges that Plaintiff Pregis "has its principal place of business in the State of North Carolina." ( Id. )
Second, Defendant Welsh argues that, while Plaintiffs have shown that Defendant Franklin had contacts with Plaintiff Pregis between 1997 and 2013, they have not shown that (a) the contacts that occurred in 2012 (only some of which were with Plaintiff Pregis' Glens Falls facility) included those contacts giving rise to this action, or (b) Plaintiffs had any contact directly with Defendant Welsh, who swears that he has not transacted any business in New York State. ( Id. )
Third, Defendant Welsh argues that Plaintiffs venue arguments are unpersuasive for the following reasons: (a) they cite no case law or precedent for their assertion that, if the Court has long-arm jurisdiction over Defendant Welsh, he becomes a "resident" of the District for venue purposes; and (b) they have not shown that a substantial amount of the activity giving rise to their claims occurred at Plaintiff Pregis' Glens Falls facility, because the three affidavits that they adduce (i) carefully avoid stating that a substantial part of the transactions giving rise to Plaintiffs' claims took place in the District, (ii) qualify the number of purchase orders that originated from Defendant Franklin and were processed at Plaintiff Pregis' Glens Falls facility in 2012 as "some, " and (iii) do not expressly state that any purchase orders from Defendant Franklin in 2012 were sent into this District. ( Id. )
B. Parties' Briefing on Plaintiffs' Motion for Default Judgment
Generally, in support of their motion for default judgment against Defendant Franklin, Plaintiffs argue as follows: (a) Plaintiffs served their Summons and Complaint against Defendant Franklin on January 3, 2014; (b) despite the granting of a 30-day extension of time in which to answer the Complaint (i.e., until February 26, 2014), Defendant Franklin did not do so; (c) more than three months after passed since the expiration of that filing deadline, and Defendant Franklin still has not answered the Complaint; (d) as a result, it is appropriate for "the Clerk of this Court and/or the Court itself [to] enter a default against [Defendant] Franklin... pursuant to... Fed.R.Civ.P. 55(a)"; (e) moreover, Plaintiffs have, through their Complaint and record evidence, made out a prima facie case of liability on their first, second, third and fifth claims pursuant to Fed.R.Civ.P. 55(b); and (f) finally, Plaintiffs have set forth documentary evidence and/or detailed affidavits as to the amount of damages pursuant to Fed.R.Civ.P. 55(b). (Dkt. No. 20, Attach. 5 [Plfs.' Memo. of Law].)
Defendant Franklin has not responded to Plaintiffs' motion for default judgment. (See ...