American Para Professional Systems v. Labone

Decision Date13 November 2001
Docket NumberNo. 01-CV-6179 (DRH).,01-CV-6179 (DRH).
PartiesAMERICAN PARA PROFESSIONAL SYSTEMS, INC., Plaintiff, v. LABONE, INC., Defendant.
CourtU.S. District Court — Eastern District of New York

Carb, Luria, Cook & Kufeld LLP, New York City, by M. William Scherer, for plaintiff.

Reboul, MacMurray, Hewitt, Maynard & Kristol, New York City, by William I. Sussman, Jennifer C. Loach, for defendant.

MEMORANDUM AND ORDER

HURLEY, District Judge.

Plaintiff has moved, pursuant to Fed.R. of Civ.P. 65, for an order

(i) restraining, enjoining and prohibiting defendant and its employees, agents, servants, independent contractors, and any and all other persons or entities acting on behalf of or in concert with any of the foregoing, during the pendency of this action, directly or indirectly, from entering into any contractual agreements (the "Prohibited Agreements") with persons or entities presently under contract to APPS, to the extent such Prohibited Agreements result in such persons or entities engaging in business which is prohibited by the non-competition restriction contained in such contracts with plaintiff and from inducing the breach of such non-competition restrictions; and

(ii) restraining, enjoining and prohibiting defendant and its employees, agents, servants, independent contractors, and any and all other persons or entities acting on behalf of or in concert with any of the foregoing, directly or indirectly, from utilizing the services, in any way, directly or indirectly of Rabah, Inc., Larry L. Goldman and Shaelene Goldman in connection with defendant's business insofar as such services involve services that are the same as or similar to the services performed by Rabah, Inc. for plaintiff under the contract between Rabah, Inc., Larry L. Goldman and Shaelene Goldman, terminated, effective August 17, 2001.

(Pl.'s Order to Show Cause filed September 17, 2001.)

Defendants have cross-moved to dismiss plaintiff's complaint "(a) for lack of personal jurisdiction, pursuant to Fed.R.Civ.P. (`Rule') 12(b)(2); (b) for improper venue, pursuant to Rule 12(b)(3); and (c) for failure to state a claim, pursuant to Rule 12(b)(6)." (Def.'s Notice Cross-Mot.)

Background

Plaintiff American Para Professional Systems, Inc. ("APPS" or "plaintiff") and defendant LabOne, Inc. ("LabOne" or "defendant") are in the paramedical service business1 and compete with one another nationally. (Watts Decl. Attached to LabOne's Cross-Mot. ¶¶ 3, 6; Gelman Aff. Opp'n to LabOne's Mot. Dismiss, ¶ 5.) APPS is a corporation organized under the laws of the State of New York with its principal place of business in Jericho, New York (Compl.¶ 1), while LabOne, also a corporation, was organized under the laws of the State of Missouri with its principal place of business in Lexexa, Kansas (id. ¶ 2).

APPS and LabOne each provide various services to insurance companies, including interviewing applicants for life, disability and health insurance, supervising the completion of medical questionnaires, and arranging for medical examinations. (Watts Decl. ¶ 3; Scherer Aff. Attached to Order to Show Cause ¶ 2.) Those services are provided largely through independent contractors, called "affiliates," which are located throughout the country. Each affiliate has a local territory and typically employs "examiners" to conduct most of the examinations.

APPS's contracts with its affiliates contain a "restrictive engagement provision" under which such "companies and individuals are prohibited from engaging in paramedical testing for a period of one (1) year following the termination of the agreement between them which restriction is limited solely to the limited geographic territory that these companies and individuals performed services prior to their termination." (Compl.¶ 7.)

APPS maintains that LabOne is endeavoring to fuel the current growth phase of its business by inducing APPS's affiliates to breach their contracts and join the ranks of LabOne. In support, APPS proffers the following:

1. a purported effort by LabOne to induce plaintiff's representative in Seattle, Washington to breach his contract (id. ¶ 13);

2. LabOne inducing "the individuals who had previously operated and been responsible for the supervision of [APPS's] Tucson, Arizona area office (Larry L. Goldman and Shaelene Goldman) to enter into an agreement with defendant pursuant to which these individuals agreed to perform services for defendant in direct violation of the provisions of the restrictive engagement agreement of which defendant had been put on notice and of which defendant was fully aware" (id. at ¶ 11); and

3. LabOne's refusal to satisfactorily respond to APPS's numerous letter requests for assurances that it would not induce individuals to breach their restrictive engagement agreements (id. at ¶ 8).

By way of format, APPS's application for a preliminary injunction will be addressed initially, to be followed by a discussion of the relief sought by LabOne in its cross-motion.

APPS'S APPLICATION FOR INJUNCTIVE RELIEF

Federal jurisdiction in this case is based on diversity. Accordingly, LabOne's amenability to suit is determined under New York law. Arrowsmith v. United Press International, 320 F.2d 219 (2d Cir. 1963). In claiming that LabOne is subject to suit here, APPS relies solely on one subsection of the New York Civil Practice Law and Rules ("CPLR"), to wit, § 302(a)(3). That subsection provides that "[a]s to a cause of action arising from any acts enumerated in this section, a court may exercise personal jurisdiction over any non-domiciliary" who:

commits a tortious act without the state causing injury to person or property within the state ... if he

(i) regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in the state, or

(ii) expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce....

CPLR § 302(a)(3).

A plaintiff bears the burden of proving the Court's personal jurisdiction over a defendant. Metropolitan Life Ins. Co. v. Robertson-Ceco Corp., 84 F.3d 560, 566 (2d Cir.1996). This burden varies, however, depending upon the procedural posture of the case. Ball v. Metallurgie Hoboken-Overpelt, S.A., 902 F.2d 194, 197 (2d Cir.1990). At an evidentiary hearing or at trial, a plaintiff must satisfy its ultimate burden of establishing jurisdiction by a preponderance of the evidence. See Metropolitan Life, 84 F.3d at 566-67; Robinson v. Overseas Military Sales Corp., 21 F.3d 502, 507 n. 3 (2d Cir.1994); Levisohn, Lerner, Berger & Langsam v. Medical Taping Systems, Inc., 10 F.Supp.2d 334, 339 (S.D.N.Y.1998).

On the other hand, where, as here, a plaintiff is faced with a Rule 12(b)(2) motion to dismiss prior to discovery, the motion may typically be defeated by alleging facts constituting a prima facie showing of personal jurisdiction. See Jazini v. Nissan Motor Co., 148 F.3d 181, 184 (2d Cir.1998); PDK Labs, Inc. v. Friedlander, 103 F.3d 1105, 1108 (2d Cir.1997). However, contrary to the position urged by APPS, a higher standard of proof is required to be satisfied for the issuance of a preliminary injunction. As explained by the Second Circuit in Weitzman v. Stein:

In its August 1988 Jurisdiction Order, the district court found only that Weitzman had made a prima facie showing of personal jurisdiction. The court stated that when it heard the merits of § 5225 motion it would also "conduct a full evidentiary hearing on the subject of jurisdiction." There was no such hearing prior to the entry of the injunction. The prima facie showing was sufficient to permit the § 5225 issues to be litigated, but it was not sufficient to permit the entry of a preliminary injunction.

Accordingly, on remand, the district court may not enter an injunctive order against Beverly without determining that Weitzman has established at least a reasonable probability of ultimate success on the question of the court's in personam jurisdiction over Beverly.

897 F.2d 653, 659 (2d Cir.1990); see also Visual Sciences, Inc. v. Integrated Communications Inc., 660 F.2d 56, 59 (2d Cir. 1981) ("a prima facie showing of jurisdiction will not suffice ... where a plaintiff seeks preliminary injunctive relief"); Thompson Medical Co., Inc. v. National Center of Nutrition, Inc., 718 F.Supp. 252, 253 (S.D.N.Y.1989).

APPS and LabOne agreed to address the jurisdictional issue based on the pleadings and affidavits, absent an evidentiary hearing. In such a case, the determination of whether the plaintiff has met its burden is arrived at by construing allegations of the pleadings and affidavits liberally in favor of jurisdiction, accepting uncontroverted allegations as true and resolving controverted facts and doubts in plaintiff's favor. See Robinson, 21 F.3d at 507; Medical Taping Systems, 10 F.Supp.2d at 339.

With the above general principles in mind, attention will be directed to the three factual proffers made by APPS in support of its assertion that LabOne is subject to in personam jurisdiction under § CPLR § 302(a)(3).

The Seattle incident was a non-incident for present purposes. APPS merely proffers that "[u]nfortunately, [it] learned that LabOne ... had contacted its representatives in Seattle, Washington and attempted to induce the breach of the restrictive engagement agreement." (Scherer Aff. Attached to Order to Show Cause ¶ 6.) Affiant Scherer does not profess to have any firsthand information concerning the alleged contact. LabOne has submitted the Declaration of Daniel B. Brinson who identifies himself as the person who called the APPS office in Seattle. Brinson gives his personal account of what transpired, which account is wholly inconsistent with the secondhand report of Scherer and lends no support for LabOne's tortious interference claim. Under the...

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