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Coast to Coast Energy, Inc. v. Gasarch

Supreme Court of New York, First Department

January 26, 2017

Coast to Coast Energy, Inc., et al., Plaintiffs-Appellants, Margaret M. Spence, et al., Plaintiffs,
Mark Gasarch, et al., Defendants-Respondents. John and Jane Does 1-100, Defendants.

          Law Offices of Edward J. Boyle, Manhasset (Edward J. Boyle of counsel), for appellants.

          Law Offices of Mark Gasarch, New York (Mark Gasarch of counsel), for Mark Gasarch and Petro-Suisse Limited, respondents.

          Engelhardt Law, New York (David Engelhardt of counsel), for John Wampler, respondent.

          Tom, J.P., Mazzarelli, Andrias, Manzanet-Daniels, Gesmer, JJ.

         Order, Supreme Court, New York County (Eileen Bransten, J.), entered July 24, 2014, which, to the extent appealed from as limited by the briefs, granted defendant John Wampler's motion to dismiss the third amended complaint in its entirety, on jurisdictional grounds, and granted the motion of defendants Mark Gasarch and Petro-Suisse Limited to dismiss plaintiffs' causes of action for breach of fiduciary duty, breach of the covenant of good faith and fair dealing, unjust enrichment, and plaintiffs' demand for punitive damages, and dismissed the fraud cause of action only insofar as asserted by plaintiffs Mark Gonsalves, Lawrence Doherty, and the Coast to Coast plaintiffs, affirmed, without costs.

         Pursuant to CPLR 302(a)(1) a New York court may exercise personal jurisdiction over a nondomiciliary if the nondomiciliary has purposefully transacted business within the state and there is "a substantial relationship between the transaction and the claim asserted" (Paterno v Laser Spine Inst., 24 N.Y.3d 370, 376 [2014] [internal quotation marks omitted]). "Purposeful activities are volitional acts by which the non-domiciliary avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws" (id. [internal quotation marks omitted]). "More than limited contacts are required for purposeful activities sufficient to establish that the non-domiciliary transacted business in New York" (id.).

         On a motion to dismiss pursuant to CPLR 3211(a)(8), the plaintiff has the burden of presenting sufficient evidence, through affidavits and relevant documents, to demonstrate jurisdiction (see Fischbarg v Doucet, 9 N.Y.3d 375');">9 N.Y.3d 375, 381 n5 [2007]; Copp v Ramirez, 62 A.D.3d 23, 28 [1st Dept 2009], lv denied 12 N.Y.3d 711');">12 N.Y.3d 711 [2009]). Here, plaintiffs failed to carry their burden in pleading purposeful activities in New York by defendant John Wampler, allegedly a resident of Switzerland and Texas, sufficient to establish long-arm jurisdiction pursuant to CPLR 302(a)(1).

         The dissent would hold that in the third amended complaint plaintiffs adequately pleaded jurisdiction under CPLR 302(a)(1) based on allegations that Wampler "transacted" business in New York through his agents, defendants Mark Gasarch and Petro-Suisse Limited (PSNY).

         To establish that a defendant acted through an agent, a plaintiff must "convince the court that [the New York actors] engaged in purposeful activities in this State in relation to [the] transaction for the benefit of and with the knowledge and consent of [the defendant] and that [the defendant] exercised some control over [the New York actors]" (Kreutter v McFadden Oil Corp., 71 N.Y.2d 460, 467 [1988]). "[T]]o make a prima facie showing of control, a plaintiff's allegations must sufficiently detail the defendant's conduct so as to persuade a court that the defendant was a primary actor' in the specific matter in question; control cannot be shown based merely upon a defendant's title or position within the corporation, or upon conclusory allegations that the defendant controls the corporation" (Northern Val. Partners, LLC v Jenkins, 23 Misc.3d 1112 (A), ***4 [Sup Ct, New York County 2009] quoting Karabu Corp. v Gitner, 16 F.Supp.2d 319, 324 [SD NY 1998]; see also Polansky v Gelrod, 20 A.D.3d 663, 664 [3d Dept 2005]).

         The dissent contends that the third amended complaint satisfies these principles by virtue of plaintiff's allegations that Wampler was in daily communication with PSNY concerning the subject oil exploration partnerships and drilling operations, that Wampler instructed Gasarch concerning distributions and "routinely" directed him to transfer funds, and that Gasarch acted for the benefit of and with the knowledge and consent of Wampler, who exercised "some control." However, Wampler's status as a principal of PSNY does not in and of itself confer jurisdiction. Plaintiffs failed to allege facts demonstrating that Wampler controlled Gasarch and PSNY's activities sufficient to support New York jurisdiction, and plaintiff's vague, conclusory and unsubstantiated allegations do not suffice to establish long arm jurisdiction (see Cotia (USA) Ltd. v Lynn Steel Corp., 134 A.D.3d 483, 484 [1st Dept 2015] ["Plaintiff has offered nothing but conclusory assertions to support long-arm jurisdiction under CPLR 302 (a)(1)"]; Polansky v Gelrod, 20 A.D.3d at 664 ["plaintiff offers only the conclusory allegation that Gelrod was their agent, with no supporting evidentiary facts establishing control").

         The allegations that Gasarch only accessed PSNY's New York bank accounts at Wampler's direction were previously asserted upon information and belief in the second amended complaint, and plaintiffs offered no new facts or explanation for the change in the third amended complaint. Although plaintiffs added an allegation that "according to bank records, Wampler would routinely direct Gasarch to withdraw investor funds from PSNY, " they provided no details regarding any such bank records or how they might reflect Wampler's involvement, and did not attach the bank records as an exhibit to their complaint.

         The allegation that Wampler was in daily communication with PSNY concerning the oil exploration partnerships and drilling operations is conclusory, and plaintiff failed to proffer any specific facts to demonstrate how or when Wampler participated in preparing the Private Placement Memoranda for the investments. Similarly, the allegation that Gasarch acted for benefit of and with knowledge and consent of Wampler, who exercised "some control" contains no detail as to what statements were made, when they were made, what contract they were made in regards to, and whether or not the alleged misrepresentations were relied upon in such a way that would imply liability.

         The dissent also cites plaintiffs' allegations that Wampler personally solicited plaintiffs' investment in the funds during several visits to New York in 2006 and 2007. However, "the transitory presence of a corporate official" does not support jurisdiction (see Fischbarg v Doucet, 9 N.Y.3d at 380) and plaintiffs do not explain how Wampler engaged in any tortious or actionable misconduct at these meetings that would subject him to jurisdiction in New York. There is no indication when the first two meetings took place, other than providing the year; there is no detail as to where the first meeting took place; it is not clear which drilling projects the meetings pertained to; and the allegations of Wampler's alleged misrepresentations are provided in only very general terms (see Mahtani v C. Ramon, 168 A.D.2d 371');">168 A.D.2d 371');">168 A.D.2d 371');">168 A.D.2d 371 [1st Dept 1990]). It is not alleged that Wampler negotiated with a party, and the center of gravity of the contract was in Trinidad and Tobago. [1]

         Plaintiff-appellant Mark Gonsalves has not pleaded his reliance on the alleged misrepresentations, or injury, sufficient to support a claim for fraud, as he did not allege that he invested in the partnerships at issue (see Lama Holding Co. v Smith Barney, 88 N.Y.2d 413, 421 [1996]). The Coast to Coast ...

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