United States District Court, S.D. New York
RELATED COMPANIES, L.P. and MBM SUPPLY COMPANY LLC, Plaintiffs,
CARLETON RUTHLING, TESLA WALLS LLC, HUDSON WALLS LLC, RELATED SUPPLY LTD., JEANEAH PAIK, CHRISTOPHER DU, SKYE HOLDINGS LTD., and SKYE SUPPLY LLC, Defendants.
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.
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.
26, plaintiffs amended their complaint. ECF No.
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.
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.
Opinion explains the reasons for these rulings.
pertinent allegations, as set forth in plaintiffs'
amended complaint, are as follows:
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.
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.
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, ¶
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.
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.
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.
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.
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
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. The Court hereby reaffirms its bottom-line
Orders denying two of these motions and granting one, for the
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
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.
Defendant Christopher Du
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
§ 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)) .
Tortious Act Outside New York
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,
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.
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.
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.
together, these pleadings plainly satisfy the law's
requirement that plaintiffs allege a tortious act committed
by Du outside New York.
Cause of Action Arose From That Act
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.
Injury In New York
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.
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).
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
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.
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.
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).
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
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.
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.
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
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.
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).
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
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.
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.
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
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.
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.
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) .
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.
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) .
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").
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%.
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, ...