Deer Consumer Prods., Inc. v. Little

• Decision Date: 31 July 2012
• Docket Number: No. 650823/2011.,650823/2011.
• Citation: 960 N.Y.S.2d 49,2012 N.Y. Slip Op. 51422,36 Misc.3d 1221
• Parties: DEER CONSUMER PRODUCTS, INC., Plaintiff, v. Alfred LITTLE, Jon Carnes, and John Does 1–10, Defendants.
• Court: New York Supreme Court

36 Misc.3d 1221

960 N.Y.S.2d 49

2012 N.Y. Slip Op. 51422

DEER CONSUMER PRODUCTS, INC., Plaintiff,

v.Alfred LITTLE, Jon Carnes, and John Does 1–10, Defendants.

No. 650823/2011.

Supreme Court, New York County, New York.

July 31, 2012.

Bostany Law Firm PLLC by John P. Bostany and Rachel Wu, New York, for Plaintiff.

Eaton & Van Winkle LLP by Joseph T. Johnson, New York, for defendants Jon Carnes and EOS Holdings.

MEMORANDUM DECISION

CAROL R. EDMEAD, J.

This decision stems from an application by plaintiff's counsel at an in-court conference on May 9, 2012, and the filing of plaintiff's amended complaint.

Plaintiff's counsel requests that the Court's May 30, 2012 Order be modified to the extent of changing the “date of the commencement of the action” to the “date of the filing of the amended complaint in this action,” based upon the Court's purported bench rulings on May 9, 2012 and June 6, 2012 discussed below.

Factual Background

This case stems from a claim that defendants, i.e., Alfred Little and Jon Carnes, published defamatory reports about plaintiff, a Nevada corporation doing business in China, as part of a scheme to drive plaintiff's common stock price down in order for them to short sell their positions for profit.

By Memorandum Decision, dated January 27, 2012, this Court granted the motion by “Alfred Little” to dismiss the complaint for lack of personal jurisdiction “to the extent that CPLR 302(a)(1), (a)(2), and (a)(3) do not provide a basis for jurisdiction ... and denied, without prejudice to renew ... upon the completion of discovery ... based on the defendant's domicile or presence in New York pursuant to CPLR 301” and ordered jurisdictional discovery on the issue of personal jurisdiction under CPLR 301 (p. 21). It is noted that in support of the motion to dismiss for lack of jurisdiction, Jon Carnes (who proceeded anonymously) (hereinafter, “Carnes”), attested that he was “the individual defendant described in the Complaint and identified in the caption as Alfred Little,” that Alfred Little was “a pseudonym.” ¹

At a hearing on May 9, 2012, the parties held a discussion regarding jurisdictional discovery. When plaintiff's counsel explained that he was going to file an amended complaint, the Court made certain statements in dicta.²

In response to Carnes' letter request that discovery be limited to the date of the commencement of the action, the Court issued an order, dated May 30, 2012, directing that the jurisdictional discovery be “limited to two years prior to and including the date of the commencement of the action.”

On June 6, 2012, during a hearing discussing the scope of deposition questions, the Court reiterated the previous statements made in dicta.³

On the same date, June 6, 2012, plaintiff filed the amended complaint, adding, inter alia, “Little Group” and EOS Holdings, LLC (“EOS Holdings”) as party defendants. In the amended complaint, plaintiff alleges that Little Group includes at least, Carnes and EOS Holdings (¶¶ 5, 26), and that Little Group was based in New York (¶ 6). Plaintiff alleges that in addition to the defamatory reports previously published in March 2011 (before the original complaint was filed on March 28, 2011), “Little Group” posted other defamatory articles on September 2011, December 2011, and February 2012, causing plaintiff's stock to further drop in price (¶¶ 91–97).

The Court held another in-court conference on June 20th, at which time plaintiff pointed out that Carnes did not object to the Court's statement on May 9th that jurisdictional discovery would be permitted past the date of the initial complaint once the amended complaint was filed (June 20, 2012 Transcript, p. 6). Plaintiff also pointed out that while defendant claims that he was not present in New York when the actions asserted in the initial complaint allegedly occurred, there are subsequent actions asserted in the amended complaint for which Carnes was present in New York. Therefore, the jurisdictional inquiry should cover all the acts in the amended complaint. In response, Carnes noted that the issue of jurisdictional discovery arose in the context of nonparty subpoenas that were served seeking information beyond the date the action was commenced, and the Court noted that any objection was academic insofar as if the nonparties produced documents after the commencement date, the Court simply would not consider them. The Court ruled that the jurisdictional discovery ends as of the commencement of the lawsuit, and there was no formal motion or amended complaint at that time. And, additional caselaw indicates that the filing of the amended complaint does not alter the jurisdictional analysis.⁴

In further submissions, plaintiff argues that there are no cases directly on point, and that similar caselaw indicates that an amended complaint extends discovery to the date such amended complaint was filed. Plaintiff asserts that EOS Holdings and “Little Group” are alter egos, and that Carnes is the leader of both. Defendants collaborated a sophisticated scheme, and discovery into the allegations that are contained in the amended complaint is necessary and just for jurisdictional purposes. Otherwise, plaintiff would have to file two independent cases; one dealing with actions up to March 28, 2011 and the other dealing with actions not previously pled up to June 6, 2012, which would result in a waste of judicial resources and serve no purpose. Alfred Little was the only defendant in the case initially; Carnes was added to the complaint, and sued for the first time on June 6, 2012 (see July 18, 2012 Transcript). Therefore, it would not make jurisprudential sense to have the jurisdictional discovery as to Carnes assessed as of March of 2011 when he was not a party to the case ( id. pp. 10, 12). Carnes and EOS Holdings, as well as other defendants named on June 6, 2012, were accused of things at that time for the first time, and thus, discovery, as to such defendants, should include the period of time the action was commenced as to them. Also, the fact that Federal courts have not permitted discovery into a defendant's acts that occurred after the amended complaint was filed indicates that they considered actions that took place up to the date the amended complaint was filed (July 18, 2012 Transcript). And, this Court should consider all arguments submitted by plaintiff in order to reach an equitable result on the issue of jurisdiction.

In opposition, Carnes argues that the filing of an amended complaint to allege after-arising facts does not change the timing of the domicile analysis. And, the request is premature as he has a statutory right to respond to the amended complaint, and the time within which to do so has not elapsed. Carnes also argues that the cases relied upon by plaintiff are misconstrued or inapposite. Carnes points out that along with two previously cited New York cases, four different Federal courts from the Southern District rejected arguments that the jurisdictional inquiry should be assessed from the amended complaint or based on some after-arising fact, and confirmed that the jurisdictional inquiry is at the commencement of the initial action (July 18, 2012 Transcript, pp. 7–8). Further, plaintiff's argument that discovery as to Carnes and other newly added defendants should include the period of time the action was commenced as to them, i.e., June 6, 2012, is a new issue that was not briefed and the Court did not permit reply papers on this matter ( id. p. 13). In any event, the initial complaint alleged that an individual person named Alfred Little authored and published the subject reports, and Carnes challenged jurisdiction. Nor can plaintiff credibly argue that EOS Holdings and other parties were initially contemplated to be the parties to the original lawsuit (p. 14).

Discussion

Upon review of the transcript, the parties' arguments on this issue, caselaw, and the parties' further submissions, the Court denies plaintiff's request, notwithstanding the informal rulings this Court made in dicta.

The “relevant time frame for the jurisdictional inquiry under § 301 is at the time of service of the summons and complaint” (Andros Compania Maritima S.A. v. Intertanker Ltd., 714 F.Supp. 669 [SDNY 1989]; Vincent C. Alexander, McKinney's CPLR § 301, C301:7 (“The defendant who is a New York domiciliary at the time the action is commenced may be served with process anywhere (either within or outside New York), thereby conferring in personam jurisdiction” (emphasis added); Vincent C. Alexander, McKinney's CPLR § 301, C301:8 “the rule is that the corporation must be doing business in New York at the time the action is commenced .... If the corporation has ceased doing business here at the time of commencement, jurisdiction can be sustained only if plaintiff's claim arose out of the defendant's prior business activity”); Nasso v. Seagal, 263 F Supp 2d 596 [SDNY 2003] (“Section 301 codifies the common law principle that a non-domiciliary is deemed to be present' in the state if the non-domiciliary is doing business' in the state when the action is commenced”); Jacobs v. Felix Bloch Erben Verlag fur Buhne Film und Funk KG, 160 F Supp 2d 722 [SDNY 2001] (“For the purposes of the jurisdictional analysis under New York State law, the Court focuses specifically on the Defendants' amenability to suit at the time the lawsuit was filed, not when the claim arose (and not based on subsequent changes in their status ”); Puerto Rico Maritime Shipping Auth. v. Almogy, 510 F.Supp. 873 [DCNY 1981] (“as to section 301 jurisdiction, the defendant must be doing business here at the time the action is brought ”) (emphasis added throughout)).

Even where an amended complaint is filed, caselaw indicates that the Court should consider, for purposes of jurisdiction under CPLR 301 (presence), a defendant's activities undertaken before the action was commenced. For example, in Whitaker v. Fresno Telsat Inc., 87 F...