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Related Companies L.P. v. Ruthling

United States District Court, S.D. New York

December 18, 2017

RELATED COMPANIES, L.P. and MBM SUPPLY COMPANY LLC, Plaintiffs,
v.
CARLETON RUTHLING, TESLA WALLS LLC, HUDSON WALLS LLC, RELATED SUPPLY LTD., JEANEAH PAIK, CHRISTOPHER DU, SKYE HOLDINGS LTD., and SKYE SUPPLY LLC, Defendants.

          OPINION

          JED S. RAKOFF, U.S.D.J.

         Globalization provides the advantages of a worldwide marketplace, but it also can provide a convenient cover for fraud, as the allegations of the instant complaint illustrate.

         By way of background, on February 17, 2017, plaintiffs Related Companies, L.P. ("Related") and MBM Supply Company LLC ("MBM") filed suit against defendants Carleton Ruthling, Tesla Wall Systems, LLC ("Tesla I"), Tesla Walls LLC ("Tesla II"), Hudson Walls LLC ("Hudson"), Related Supply Ltd. ("Supply"), Jeaneah Paik, Christopher Du, Skye Holdings Ltd. ("Skye Holdings"), and Skye Supply LLC ("Skye Supply") in Delaware state court. On April 3, Tesla I, Tesla II, and Hudson removed plaintiffs' suit to Delaware federal court, see Notice of Removal, ECF No. 1, and on June 5, 2017, the case was transferred, on consent, to the Southern District of New York, see ECF Nos. 42, 44, 45.

         On June 26, plaintiffs amended their complaint. ECF No. 57.[1]

         On July 7, Ruthling, Tesla II, Hudson, and Skye Holdings (collectively, the "Ruthling defendants") filed a motion to dismiss plaintiffs'" amended complaint, see ECF No. 66, as did Christopher Du, see ECF No. 60, and Skye Supply, see ECF No. 63.

         After full consideration, the Court, by bottom-line Order dated August 4, 2017, denied the Ruthling defendants' motion, but granted Skye Supply's motion, and, as to Du's motion, allowed plaintiffs limited discovery to determine whether Du derived substantial revenue from interstate or international commerce as required to establish personal jurisdiction over Du in New York pursuant to C.P.L.R. § 302 (a) (3) (ii) . See ECF No. 81. Plaintiffs subsequently served supplemental requests for the production of documents on Du and conducted a telephonic deposition. On August 21 and 23, plaintiffs and Du each submitted supplemental memoranda of law. See ECF Nos. 83-86. Thereafter, the Court, by Order dated August 25, denied Du's motion to dismiss. See ECF No. 88.

         This Opinion explains the reasons for these rulings.

         The pertinent allegations, as set forth in plaintiffs' amended complaint, are as follows:

         In or around 2007, Related, a New York-based real estate conglomerate that oversees "development, acquisition, management, finance, marketing, and sales for mixed-use, residential, retail, and office properties, " Am. Compl. ¶¶ 4, 21, ECF No. 57, and MBM, an affiliate of Related, id. ¶ 4, entered into a business relationship with Carleton Ruthling, an individual residing in Thailand, id. ¶ 23, and with Supply, a Samoan entity controlled by Ruthling, id. ¶ 27. Ruthling and Supply agreed to supply high-end glass facade material (known as "curtain wall") from China and, at times assisted by Ruthling's wife Jeaneah Paik, see id. ¶ 3, to install it on the exterior of plaintiffs' U.S. building projects, see Id. ¶¶ 38, 99.

         On or about May 12, 2011, Related awarded Supply a curtain wall contract for 500 North Lake Shore Drive in Chicago, Illinois ("NLSD"), one of Related's developments. Id. ¶ 38. During the pendency of the NLSD project, Ruthling formed Tesla I, which, like Supply, manufactured, transported, and installed curtain wall for Related's buildings. Id. ¶ 5. Tesla I subsequently served as a subcontractor on three Related real estate projects: the above-mentioned NLSD development; the 111 Wacker Drive development in Chicago, Illinois; and The Village at Santa Monica development in Santa Monica, California (collectively, "the projects"). Id. ¶ 6.

         Ruthling also formed Hudson, a Delaware limited liability company, id. ¶ 26, which worked with Tesla I on the projects, id. ¶ 6, and Skye Holdings, a Hong Kong limited liability company, which held Ruthling's ownership interest in Tesla I, id. ¶ 28. Though Ruthling was the Chairman and Chief Executive Officer of Tesla I, id. ¶ 23, and through his control of Skye Holdings, its controlling owner, id. ¶ 5, Related also owned a stake in the company, held a seat on its Board of Directors, and possessed a right to approve certain corporate actions. See Declaration of Nicholas A. Gravante, Jr. in Support of Plaintiffs' Opposition to Defendants' Carleton Ruthling, Tesla Walls LLC, Hudson Walls LLC, Related Supply Ltd., and Skye Holdings Ltd.'s Motion to Dismiss ("Gravante Decl."), Ex. 6, ¶ 13.

         According to the amended complaint, Ruthling, beginning in 2007 and continuing until mid-2014, was able through his control of the above-mentioned entities to perpetrate a fraudulent scheme to overbill and defraud Related. See Am. Compl. ¶ 7. Specifically, between 2007 and 2012, Ruthling induced plaintiffs to advance millions of dollars to Supply, conspired with Paik and others to issue false invoices to Supply, and caused Supply to pay those invoices, improperly siphoning away plaintiffs' money. See id. ¶ 1. Thereafter, after forming Hudson and Tesla I in 2012, Ruthling and his associates continued their fraud by inducing plaintiffs to advance Hudson and Tesla I millions of dollars, issuing false invoices to Hudson and Tesla I, and causing Hudson and Tesla I to pay these invoices, depleting Tesla I's assets and siphoning away funds that were meant for the projects. Id. ¶ 2.

         In furtherance of this fraud, Ruthling also allegedly conspired with non-party Steve Gramling, the controlling owner of defendant Skye Supply, a Nevada limited liability company based in California, id. ¶ 29, to slow work on the projects in order to extort additional cash advances, see id. ¶ 51.

         Ruthling also allegedly conspired with Christopher Du, a CPA who provided accounting services to Tesla I. Id. ¶ 16. Du worked closely with plaintiffs and sent them numerous emails requesting additional cash for Tesla I. Id. ¶ 47. He also allegedly reclassified Related's cash advances to Tesla I as revenues, knowing that they were advances; misrepresented as expenses payments by Tesla I that were unsupported by legitimate invoices; and fabricated cash shortfalls to justify Tesla I's requests for additional funds. Id. ¶ 16.

         For example, Ruthling initiated a transaction whereby VAT refunds Tesla I received for purchases made with plaintiffs' money were transferred to Skye Holdings for no consideration, id. ¶ 10, a transaction whereby Ruthling used funds plaintiffs advanced to Tesla I to form and capitalize a new shell company in Hong Kong that never provided services or materials to Related's projects, id. ¶ 64, and a transaction whereby Ruthling used $564, 000 obtained from plaintiffs' transfers to Tesla I to pay himself for intellectual property that Related had already paid for and had a significant ownership stake in, id. ¶ 65. Du and Ruthling were also involved in concealing transactions that enriched other parties such as Paik. See id. ¶ 19. Defendants allegedly used their ill-gotten gains to, inter alia, pay Ruthling's personal legal fees, set up a sham entity in Hong Kong, and pay the rent on Ruthling's personal residence. See id. ¶ 9.

         DISCUSSION

         On the basis of the foregoing allegations, plaintiffs bring the instant action under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961, et seq., seeking to recover the millions of dollars defendants allegedly stole, plus treble damages, attorneys' fees, and costs. Plaintiffs also bring state law counts of fraud, unjust enrichment, aiding and abetting fraud, negligent misrepresentation, and breach of fiduciary duty.

         As noted, six of the defendants, by three separate motions, moved to dismiss plaintiffs' complaint on various grounds including lack of personal jurisdiction, failure to state a claim, and failure to plead fraud with particularity.[2] The Court hereby reaffirms its bottom-line Orders denying two of these motions and granting one, for the following reasons:

         I. Personal Jurisdiction

         Two defendants, Christopher Du, a resident of California, and Skye Supply, a California-based bicycle parts company incorporated in Nevada, move to dismiss plaintiffs' complaint pursuant to Federal Rule of Civil Procedure 12(b)(2).

         Federal courts evaluate personal jurisdiction under the law of the forum in which they sit, here New York. See Whitaker v. Am. Telecasting, Inc., 261 F.3d 196, 208 (2d Cir. 2001) (citing Bensusan Rest. Corp. v. King, 126 F.3d 25, 27 (2d Cir. 1997)). Plaintiffs bear the burden of establishing personal jurisdiction over Du and Skye Supply in New York. Id. At the pleading stage, plaintiffs must make a prima facie showing of personal jurisdiction and, on a motion to dismiss, the Court will construe the complaint in the light most favorable to plaintiffs, resolving all doubts in their favor. See id.

         A. Defendant Christopher Du

         Plaintiffs advance three separate bases for jurisdiction over Du in New York, including New York's long-arm statute, C.P.L.R. § 302(a) (3). See Memorandum of Law in Opposition to Defendant Christopher Du's Motion to Dismiss the Complaint ("PI. Du Mem.") at 1-2, ECF No. 70.

         Under § 302(a) (3), plaintiffs can establish jurisdiction over an out-of-state defendant by showing, inter alia, that "(1) the defendant committed a tortious act outside New York; (2) the cause of action arose from that act; (3) the tortious act caused an injury to a person or property in New York; (4) the defendant expected or should reasonably have expected the act to have consequences in New York; and (5) the defendant derived substantial revenue from interstate or international commerce." Miller Inv. Trust v. Xianqchi Chen, 967 F.Supp.2d 686, 694 (S.D.N.Y. 2013) (citinq N.Y. C.P.L.R. § 302 (a) (3) (ii)) .

         (1) Tortious Act Outside New York

         With reqard to the C.P.L.R.'s first requirement - that plaintiffs alleqe a tortious act outside New York - Related and MBM plead that Du made numerous misrepresentations reqardinq the financial condition of Tesla I, primarily via requests for additional funds sent by Du to New York from California. See, e.g., Am. Compl. ¶ 47 ("As you are aware, Tesla continues to experience dire cash flow shortfalls . . . Without additional fundinq, production in China will need to terminate as early as next week"); id. ("please send funds as soon as possible as both Tesla and Skye Holdinqs are effectively out of cash and can no lonqer fund manufacturing and installation"); see also id. ¶ 55 (quotinq other emails of this kind) . Accordinq to plaintiffs, Tesla I was not short on cash at these times, or, to the extent Tesla I may have been short on cash, it was only because defendants had fraudulently conveyed Tesla I's assets with Du's knowledge and assistance. See id. ¶¶ 35, 41.

         Plaintiffs further cite numerous instances in which Du and Ruthling conspired to cover up allegedly improper disbursements by Tesla I. See id. ¶¶ 9, 16, 75-78. For example, in an October 22, 2013 email from Ruthling to Du, Ruthling asked Du about "572K for curtain wall development costs" listed in operational expenses. Du responded that the "$564 is included in Opex." The "564" was allegedly an improper $564, 000 charge for intellectual property, not an operational expense. Id. ¶ 65.

         Plaintiffs also point to communications between Ruthling and Du that suggest that Du created false accounting records for Tesla I. For example, plaintiffs cite an August 27, 2013 email from Du to Ruthling, in which Du wrote "I think we may have opened [P]andora's box by send[ing] the bank statements" to plaintiffs, id. ¶ 77, and a September 12, 2013 email from Du to Ruthling, in which Du asked, "Do you still want to go down this path with them???? More info means more questions, " id. ¶ 78.

         In another email thread, Ruthling asked Du to produce an accounting record to send to plaintiffs with the "money we borrowed to date[.]" RL ¶ 75. "[N]eed a clean story, " Ruthling told Du, "once you send me the numbers lets discuss." Id. And, in an email sent on June 16, 2014, Du wrote "[i]n regards to the A/R schedule, this is for you [Ruthling] to review and not intended to be shared to Related. All they will see are the actual financials which will no longer show the amount owed to MBM." Id. ¶ 16.

         Taken together, these pleadings plainly satisfy the law's requirement that plaintiffs allege a tortious act committed by Du outside New York.

         (2) Cause of Action Arose From That Act

         Du does not contest that plaintiffs' claims against him for common law fraud, negligent misrepresentation, unjust enrichment, RICO fraud, and RICO conspiracy all arise out of the above-mentioned acts.

         (3) Injury In New York

         With respect to the third prong - injury in New York - Du argues that plaintiffs fail to allege that the situs of their injury is New York.

         In a case such as this one, where plaintiffs allege fraud, "the critical question [under prong (iii)] is . . . where the first effect of the tort was located that ultimately produced the final economic injury." Bank Brussels Lambert v. Fiddler Gonzalez & Rodriguez, 171 F.3d 779, 792 (2d Cir. 1999).

         While it is clear that the mere experience of economic injury in New York is not a sufficient basis for jurisdiction under § 302(a)(3), see Whitaker, 261 F.3d at 209, the "New York Court of Appeals has not specifically analyzed the situs of injury in an action where the plaintiff alleges injury due to its reliance on an out-of-state defendant's misrepresentation, " Miller Inv. Trust, 967 F.Supp.2d at 696. A number of cases in this Circuit, however, have held that the original event leading to the injury in a misrepresentation action is plaintiffs' reliance on defendant's misrepresentation. See Bank Brussels, 171 F.3d at 792 (holding that the original event causing injury was in New York where plaintiff relied on defendant's misrepresentation by disbursing funds in New York); Hargrave v. Oki Nursery, Inc., 636 F.2d 897, 900 (2d Cir. 1980) (holding that the original event causing injury was in New York where plaintiffs relied on defendant's misrepresentations by purchasing grape vines with funds in New York); Marine Midland Bank v. Keplinger & Assocs., Inc., 488 F.Supp. 699, 703 (S.D.N.Y. 1980) (holding that "since all disbursements . . . were made by [plaintiff] in New York, the situs of the injury was New York").

         Here, Du contends that the "original events" were Du's accounting services, which were provided in California and relied on by Tesla I outside of New York. See Defendant Christopher Du's Memorandum of Law in Support of Motion to Dismiss the Complaint ("Du Mem.") at 7, ECF No. 62. The mere fact that plaintiffs are located in New York and accordingly experienced harm there, Du argues, is not sufficient to establish jurisdiction under § 302 (a) (3) . Id.

         But it is not plaintiffs' presence in New York alone which gives rise to their injury in New York. The first effect of Du's out-of-state misrepresentation - i.e., the original event that caused the injury - was plaintiffs' detrimental reliance on it, which reliance manifested in the issuance of cash advances and cash payments from New York. See Am Compl. ¶¶ 56-57. Du may have been supplying accounting services to Tesla I, but he directed his alleged misrepresentations on Tesla I's behalf to plaintiffs in New York, with language expressly requesting that plaintiffs rely on these representations by disbursing funds from New York. Assuming for purposes of this motion that plaintiffs' allegations are true, the situs of their injury is therefore New York. See, e.g., Bank Brussels, 171 F.3d at 792.

         (4) Reasonable Foreseeability

         Next, the law requires plaintiffs to show that Du "'expects or should reasonably expect' his actions to have consequences in New York." Ferri v. Berkowitz, 678 F.Supp.2d 66, 78 (E.D.N.Y. 2009) (quoting Kernan v. Kurz-Hastings, Inc., 175 F.3d 236, 241 (2d Cir. 1999)). This test, which is objective, rather than subjective, id., requires plaintiffs to show "a purposeful availment of the benefits of the laws of New York such that the defendant may reasonably anticipate being haled into New York court." Forties B LLC v. Am. W. Satellite, Inc., 725 F.Supp.2d 428, 434 (S.D.N.Y. 2010) (quoting Kernan, 175 F.3d at 241)). And, under New York law, a party sending fraudulent misrepresentations into New York should reasonably expect the act to have consequences in New York. See Gabriel Capital, L.P. v. Caib Investmentbank Aktiengesellschaft, 814 N.Y.S.2d 66, 68 (App. Div. 2006).

         Here, Du repeatedly directed false statements via email to plaintiffs in New York and the content of those messages plausibly suggests that Du knew and intended his actions to have consequences in New York. See, e.g., Am. Compl. ¶ 16 ("Du reclassified Related's advances to Tesla I as revenues, knowing they were advances") / id. (Du emailed Ruthling, "[i]n regards to the A/R schedule, this is for you [Ruthling] to review and not intended to be shared to Related"); id. ¶ 47 (Du emailed Related, "please send funds as soon as possible as both Tesla and Skye Holdings are effectively out of cash and can no longer fund manufacturing and installation"); id. ¶ 77 (Du emailed Ruthling "I think we may have opened [P]andora's box by send[ing] the bank statements" to plaintiffs); id. ¶ 65 (Du miscategorized $564, 000 in intellectual property costs as operational expenses).

         These pleadings are sufficient to show Du reasonably expected his conduct to have consequences in New York, most particularly in the form of plaintiffs issuing cash advances to Tesla I. See, e.g., Hargrave, 636 F.2d at 900.

         (5) Substantial Revenue

         New York law further requires plaintiffs to show that Du derived substantial revenue from interstate or international commerce. This requirement "narrows the long-arm reach to preclude the exercise of jurisdiction over nondomiciliaries who might cause direct, foreseeable injury within [New York] but whose business operations are of a local character." AmTrust Fin. Servs., Inc. v. Lacchini, 260 F.Supp.3d 316 (S.D.N.Y. 2017) (quoting Ingraham v. Carroll, 687 N.E.2d 1293, 1296 (N.Y. 1997)).

         Though plaintiffs' complaint includes no specific allegations regarding Du's revenues, "dismissal for lack of personal jurisdiction is inappropriate under 302(a) (3) (ii), even where there is no proof that a defendant derives substantial revenue from interstate or international commerce, where that knowledge is peculiarly under the control of [the defendant], and may come to light in the course of [s]ubsequent discovery." See Energy Brands Inc. v. Spiritual Brands, Inc., 571 F.Supp.2d 458, 468 (S.D.N.Y. 2008) (internal quotation omitted). Therefore, prior to ruling on Du's motion, the Court granted plaintiffs discovery limited to this issue. See ECF No. 81.

         Du, it turns out, derives no revenue from interstate and international commerce in his individual capacity. Thus, Du argues, in the absence of alter ego or corporate veil piercing allegations, the out-of-state revenues derived by his wholly-owned business Summit CPA, Inc. ("Summit") cannot be attributed to him for jurisdictional purposes. See Supplemental Memorandum of Law, ECF No. 84; Supplemental Reply Memorandum of Law, ECF No. 85. Additionally, even if the Court attributes Summit's business revenues to him, Du argues that Summit's revenues are not sufficiently "substantial" within the meaning of the statute to permit jurisdiction by New York courts. Id.

         In support of his position, Du cites a 1975 Southern District case declining to attribute the revenue of a corporate defendant to its sole shareholder, an individual defendant, reasoning that this would constitute piercing the corporate veil, which could only be done if the plaintiff could show, for example, a failure to observe corporate formalities. Lehigh Valley Indus., Inc. v. Birenbaum, 389 F.Supp. 798, 805 (S.D.N.Y. 1975), aff'd sub nom. Lehigh Val. Indus., Inc. v. Birenbaum, 527 F.2d 87 (2d Cir. 1975). Du also cites a 1983 case, which relies on Lehigh Valley, finding that "it is the individual, and not his corporate employer, who must derive 'substantial revenue' for jurisdiction to attach under section 302 (a) (3) (ii) ." Bulk Oil (USA) Inc. v. Sun Oil Trading Co., 584 F.Supp. 36, 41 (S.D.N.Y. 1983).

         But the reasoning in these cases was repudiated by the New York Court of Appeals in a 1988 case called Kreutter v. McFadden Oil Corp., 71 N.Y.2d 460, 470 (1988). Kreutter explicitly overturned prior trial court decisions that had applied the so-called "fiduciary shield doctrine" to the N.Y. C.P.L.R. jurisdictional provisions. According to the Court of Appeals, in conducting an analysis under § 302, it is "neither necessary nor desirable to adopt the fiduciary shield doctrine, " which would prevent an individual from being subject to jurisdiction in cases where his dealings with New York were solely in a corporate capacity. Id. Specifically, the Court reasoned, nothing "in the statute's language or the legislative history relating to it suggests that the Legislature intended to accord any special treatment to fiduciaries acting on behalf of a corporation or to insulate them from long-arm jurisdiction for acts performed in a corporate capacity." Id. Though Kreutter did not address the question of substantial revenue under 302(a) (3) (ii), Kreutter effectively rejected the basis for the court's finding in Lehigh.

         Following Kreutter, a Southern District court vacated its earlier decision in a case called Facit, Inc. v. Krueger, Inc., 657 F.Supp. 1069 (S.D.N.Y. 1987) (hereinafter Facit I), vacated, 732 F.Supp. 1267 (S.D.N.Y. 1990) (hereinafter Facit II). Whereas Facit I invoked the fiduciary shield doctrine to protect the sole owner of a corporation from personal jurisdiction in New York ("[t]he fiduciary shield doctrine prevents reliance on corporate earnings as a means of asserting long-arm jurisdiction over individual defendants, " 657 F.Supp. at 1073), Facit II attributed the company's sales to the individual defendants. 732 F.Supp. at 1272-73.

         Although subsequent cases have declined to extend Facit II, they have not disturbed its central holding. For example, Siegel v. Holson Co., did not impute the revenue of a corporate entity to its president for jurisdictional purposes on the grounds that "he is a non shareholding officer of the corporation." 768 F.Supp. 444, 446 (S.D.N.Y. 1991), but it distinguished Facit II on the grounds that, in Facit II, "the officers of a corporation were subject to personal jurisdiction because they were major shareholders of the company for whom they were employed, " id.

         More recently, in Pincione v. D'Alfonso, the court noted that "if a corporation derives substantial revenue from interstate or international commerce, that revenue cannot be imputed to the company's non-shareholding officers." No. 10 Civ. 3618 (PAC), 2011 WL 4089885, at *10 (S.D.N.Y. Sept. 13, 2011), aff'd, 506 Fed.Appx. 22 (2d Cir. 2012) (citing Siegel, 768 F.Supp. at 446; Bulk Oil, 584 F.Supp. at 41). Siegel and Pincione, however, both reiterate Facit II's holding that corporate out-of-state revenues can be imputed to shareholding officers.[3]

         Here, Du personally received 100% of Summit's profits as the 100% owner of its stock. He is also its president, secretary, and sole manager. See ECF No. 84, Ex. B. Moreover, Du is the accountant who performed the work at issue in this case and who engaged in much of the wrongdoing alleged by plaintiffs. Summit's revenues were paid by plaintiffs to Tesla I, a Delaware corporation, and then to Summit and to Du. Hence, as in Facit II, Du's interstate revenues are connected to the cause of action. Thus, this is not a case where defendants' only interstate revenues are attributable to an unrelated corporation earning monies by conducting unrelated activities.

         In New York the law is clear: "[i]nasmuch as the constitutional and statutory safeguards sufficiently alleviate the equitable concerns posed by long-arm jurisdiction, there is no convincing reason why the mere fact of corporate employment should alter the jurisdictional calculus." Kreutter, 71 N.Y.2d at 471 (internal quotation omitted). Thus, the Court attributes Summit's revenues to Du for purposes of determining whether Du derives substantial revenue from interstate or international commerce.

         With regard to whether these revenues are substantial within the meaning of the statute, "[t]here is no bright-line rule regarding when a specific level of revenue becomes substantial for purposes of 302 (a) (3) (ii) ." Energy Brands Inc. v. Spiritual Brands, Inc., 571 F.Supp.2d 458, 468 (S.D.N.Y. 2008) (citing Light v. Taylor, No. 05 Civ. 5003 (WHP), 2007 WL 274798, at *4 (S.D.N.Y. Jan. 29, 2007), aff'd, 317 Fed.Appx. 82 (2d Cir. 2009)). To determine whether revenue is substantial, courts look either to the percentage of a party's overall revenue derived from interstate commerce, or to the absolute amount of revenue generated by a party's activities in interstate commerce, with each case to be decided on its own facts. City of New York v. A-l Jewelry & Pawn, Inc., 501 F.Supp.2d 369, 417 (E.D.N.Y. 2007) (citations omitted). "[T]he main concern" in a substantial revenue analysis, "is the overall nature of the defendant's business and the extent to which he can fairly be expected to defend lawsuits in foreign forums." Light, 2007 WL 274798, at *4 (internal quotations omitted) .

         The substantiality prong, in effect, represents a "bigness requirement." See Ingraham, 687 N.E.2d at 1296 (describing "substantial revenue" as essentially a "'bigness requirement' designed to assure that the defendant is 'economically big enough' to defend suit in New York") (quoting David D. Siegel, Siegel's N.Y. Prac. § 88, at 136)). Large amounts of revenues (revenues in excess of $1, 000, 000) are presumptively substantial. See Hamilton v. Accu-Tek, 32 F.Supp.2d 47, 68-69 (E.D.N.Y. 1998) (collecting cases) . For example, in Allen v. Canadian Gen. Elec. Co., the Court sustained jurisdiction where the 1% of defendant's business transacted in New York amounted to $8.79 million. 65 A.D.2d 39, 41-43 (N.Y.App.Div. 1978), aff'd, 409 N.E.2d 998 (N.Y. 1980). In reaching this determination, the court reasoned that "[i]t would be difficult to convince an economist that sales of approximately $9 million were not substantial regardless of their ratio to total sales." Id. at 43.

         Where a defendant earns less than seven figures of out-of-state revenues, courts look to the overall percentage of revenue derived from out-of-state sources, and consider whether the defendant seeks to engage in interstate or international commerce. See, e.g., United Bank of Kuwait, PLC v. James M. Bridges, Ltd., 766 F.Supp. 113, 117-18 (S.D.N.Y. 1991). For example, in Cable News Network, L.P. v. GoSMS.com, Inc. the court found that $60, 000 in revenue from Europe and Israel was sufficient to confer jurisdiction where "GoSMS.com's operations are international and in no way limited to California." No. 00 Civ. 4812 (LMM), 2000 WL 1678039, at *5 (S.D.N.Y. Nov. 6, 2000). Other cases have found that interstate revenue was substantial where, as a percentage of total revenue, that revenue was greater than five percent. See, e.g., United Res. 1988-1 Drilling & Completion Program, L.P. v. Avalon Expl., Inc., No. 91 Civ. 8703 (RPP), 1994 WL 9676, at *4 (S.D.N.Y. Jan. 10, 1994) .

         Du argues that Summit, a small, California-based accounting practice that never had more than four accountants working for it at any given time, is the type of non-domiciliary that the doctrine is meant to exclude. Du cites for this proposition a series of cases where parties have failed the "bigness" test. See, e.g., Light, 2007 WL 274798, at *5 (no "substantial revenue" where, in the five prior years, the defendant had "earned only $336 in commissions on total sales of $1, 523" received through his website); Ronar, Inc. v. Wallace, 649 F.Supp. 310, 317 (S.D.N.Y. 1986) (finding that "an individual near retirement with $6, 500 of annual income from international commerce ... is not among the entities that can, consistently with the requirements of fundamental fairness, be called upon to bear the expense and inconvenience of litigating in distant forums").

         But unlike the situations in Ronar and Light, Du markets to clients throughout the United States and has derived tens of thousands of dollars of revenue from at least eleven states and four countries. See Summit CPA, Inc. Revenue Summary, ECF No. 84, Ex. D. For example, Du's gross revenues between 2012 and 2016 ranged from approximately $250, 000 to $310, 000. Even excluding the work Du performed for Tesla I, Summit's revenues from non-California clients ranged from around $4, 000 to $7, 000 per year for 9 to 14 clients. And between 2012 and 2014, when Du worked for Tesla I, out-of-state revenues totaled $41, 585, $58, 460, and $48, 437 yielding overall percentages of 16.8%, 19.8%, and 15.5%.[4]

         Thus, Du's work for Tesla I generated material interstate revenues and those revenues are highly relevant to the Court's determination of whether Du could be expected to defend this suit in New York. Indeed, Du generally sought to do business out of state, and during the years in which he did do such business for Tesla I, that business was a significant portion of his overall activity. Moreover, it is not without consequence that, as the accountant for Tesla I, Du was well aware that his primary role was to provide financial statements to Related, based in New York, which he did directly, and to review the flow of funds into Tesla I from Related. As a result, ...


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