H. Heller & Co., Inc. v. Novacor Chemicals Ltd.

• Decision Date: 25 October 1988
• Docket Number: No. 88 Civ. 0340 (PKL).,88 Civ. 0340 (PKL).
• Parties: H. HELLER & CO., INC., Plaintiff, v. NOVACOR CHEMICALS LTD., Defendant.
• Court: U.S. District Court — Southern District of New York

726 F. Supp. 49

H. HELLER & CO., INC., Plaintiff, v. NOVACOR CHEMICALS LTD., Defendant.

No. 88 Civ. 0340 (PKL).

United States District Court, S.D. New York.

October 25, 1988.

Debevoise & Plimpton, New York City (John H. Hall, Edwin G. Schallert, Albert L. Wells, Jr., of counsel), for plaintiff.

Paul, Weiss, Rifkind, Wharton & Garrison, New York City (Moses Silverman, Robert Tilewick, of counsel), for defendant.

OPINION AND ORDER

LEISURE, District Judge:

Plaintiff H. Heller & Co. ("Heller"), a Delaware corporation with its principal place of business in Palm Beach, Florida, has brought this action against Novacor Chemicals Ltd. ("Novacor" or "NCL"), a Canadian corporation with its principal place of business in Calgary, Alberta, Canada, seeking to recover commissions allegedly owing under an oral agreement. Novacor is a manufacturer of plastic raw materials and is a wholly-owned subsidiary of NOVA, an Alberta corporation.

Plaintiff alleges that in 1985 it entered into an agreement with Union Carbide Canada Ltd. ("UCC") under which Heller was to receive a commission of five percent of the sale price of all UCC material purchased by Atlantic Packaging Product Ltd. ("Atlantic"). In February 1987, UCC sold its polyethylene plant and associated business to NOVA. Plaintiff alleges that Novacor was responsible for continuing the polyethylene business previously run by UCC and that the commission agreement between Heller and UCC was assigned to Novacor. Heller and Novacor continued to perform under the agreement through October 1987. At the end of September 1987, Novacor stated that it intended to end the agreement after October 31, 1987. Thereafter, defendant refused to pay Heller commissions for materials shipped to Atlantic by Novacor. Heller now seeks to recover commissions on all sales to Atlantic by Novacor since November 1, 1987, as well as commissions on all future sales.

The case is currently before the Court upon defendant's motion to dismiss the complaint under Fed.R.Civ.P. 12(b)(2) for lack of personal jurisdiction or dismissing the action on forum non conveniens grounds.

DISCUSSION

A. Personal Jurisdiction

In deciding whether to dismiss plaintiff's complaint for lack of personal jurisdiction over the defendant, the plaintiff's pleadings are to be construed in the light most favorable to it. See Hoffritz for Cutlery, Inc. v. Amajac, Ltd., 763 F.2d 55, 57 (2d Cir.1985). Although Heller ultimately bears the burden of establishing by a preponderance of the evidence this Court's jurisdiction over Novacor, see Marine Midland Bank, N.A. v. Miller, 664 F.2d 899, 904 (2d Cir.1981), given that no evidentiary hearing has been held, plaintiff at this juncture must merely make out a prima facie case of personal jurisdiction. See Welinsky v. Resort of the World, D.N.V., 839 F.2d 928, 930 (2d Cir.1988); Cutco Industries, Inc. v. Naughton, 806 F.2d 361, 365 (2d Cir.1986).

Subject matter jurisdiction over the claims against Novacor is based on diversity of citizenship, 28 U.S.C. § 1332. Therefore, the issue of personal jurisdiction is determined by the law of the forum state, in this case, New York. See, e.g., Arrowsmith v. United Press Int'l, 320 F.2d 219, 223 (2d Cir.1963). New York Civil Practice Law and Rules ("CPLR") §§ 301 and 302 set forth the bases upon which New York courts may assert jurisdiction over a nonresident foreign corporation. Plaintiff does not dispute Novacor's assertion that CPLR § 302 is inapplicable to this case.¹ Therefore, plaintiff must show that Novacor was "doing business" within the meaning of CPLR § 301 in order to make out a prima facie case of personal jurisdiction over the defendant.

1. CPLR § 301: "Doing Business"

CPLR § 301 states that "a court may exercise such jurisdiction over persons, property, or status as might have been exercised heretofore." With respect to foreign corporations § 301 preserves the case law existing prior to its enactment, which provided that a corporation is "doing business" and is therefore "present" in New York and subject to personal jurisdiction with respect to any cause of action, related or unrelated to the New York contacts, if it does business in New York "not occasionally or casually, but with a fair measure of permanence and continuity." Tauza v. Susquehanna Coal Co., 220 N.Y. 259, 267, 115 N.E. 915, 917 (1917); accord Laufer v. Ostrow, 55 N.Y.2d 305, 449 N.Y. S.2d 456, 434 N.E.2d 692 (1982). The test is said to be "simple and pragmatic." Bryant v. Finnish National Airline, 15 N.Y.2d 426, 432, 260 N.Y.S.2d 625, 628-29, 208 N.E.2d 439, 441 (1965). A foreign corporation is amenable to suit in New York if it "is engaged in such a continuous and systematic course of `doing business' as to warrant a finding of its `presence' in this jurisdiction." Frummer v. Hilton Hotels Int'l, Inc., 19 N.Y.2d at 536, 281 N.Y.S.2d at 43, 227 N.E.2d at 853, cert. denied, 389 U.S. 923, 88 S.Ct. 241, 19 L.Ed.2d 266 (1967). Occasional or casual connections with the state of New York will not suffice. Loria & Weinhaus, Inc. v. H.R. Kaminsky & Sons, Inc., 495 F.Supp. 253, 256 (S.D.N. Y.1980). However, the only clear conclusion derivable from these decisions is that a "doing business" determination is unique to each case, requiring consideration of all the facts and circumstances, without relying unduly on any one factor.

As a threshold matter, the Court notes that none of the "classic indicia" of "doing business" are present in this case. Pneuma-Flo Systems v. Univ. Machinery Corp., 454 F.Supp. 858, 861 (S.D.N.Y.1978); see also Nordic Bank PLC v. Trend Group, Ltd., 619 F.Supp. 542, 565 (S.D.N. Y.1985). Novacor is not licensed to conduct business in New York. It maintains no local offices, employees, telephone listings or designated agents in New York. It has no bank account or other property within the state. Affidavit of Warren J. Courtney ("Courtney Aff. I"), sworn to on April 29, 1988, ¶ 4.

Plaintiff, unable to rely on these classic factors of § 301 jurisdiction, argues that Novacor is "doing business" in New York because Novacor has allegedly made sales and solicited business in this state. See Hoffritz for Cutlery, Inc. v. Amajac, Ltd., 763 F.2d 55, 58 (2d Cir.1985). In support of its claim plaintiff has amassed 220 jurisdictional "contacts" with New York. The Court notes at the outset that "a corporation's New York contacts must be evaluated not for the sake of contact-counting, but rather for whether such contacts show a continuous, permanent and substantial activity in New York." 1 J. Weinstein, H. Korn, A. Miller, New York Civil Practice, ¶ 301.16, at 3-32 to 3-33. Upon close analysis, the contacts alleged by plaintiff fall into two categories. They are (1) Novacor's sales to the Far East, using four New York brokers and (2) sales to New York by an affliate of Novacor, Novacor Chemicals, Inc. ("NCI").

Turning first to Novacor's own activity in New York, plaintiff alleges that NCL made substantial sales to and shipments² into New York. These transactions involved sales by Novacor to the Far East. In these transactions Novacor made sales overseas, using New York brokers or exporters. The products were sent directly from Canada to the Far East. Payments were made by the Far Eastern companies directly to Novacor. The brokers received a one percent commission on these sales³ after Novacor received payment directly from the buyer. In essence, Novacor sells its product in the Far East through independent agencies⁴ located in New York.

New York courts have long held that the type and extent of services performed by the brokers in this case are insufficient to establish the jurisdictional presence of a foreign corporation. See, e.g., Cohen v. Vaughan Bassett Furniture Co., 495 F.Supp. 849 (S.D.N.Y.1980); Fried v. Lakeland Hide & Leather Co., 14 Misc.2d 208, 157 N.Y.S.2d 633 (Sup.Ct.1956); Knapp v. Roberton Manufacturing Co., 155 N.Y. S.2d 490, 493 (Sup.Ct.1956). A foreign manufacturer's transactions in New York through an independant agency do not make the foreign corporation amenable to suit in New York. See, e.g., McShan v. Omega Louis Brandt Et Frere, 536 F.2d 516, 517-18 (2d Cir.1976); Cohen v. Vaughan Bassett Furniture Co., 495 F.Supp. 849, 851-52 (S.D.N.Y.1980) (independent sales agent soliciting business for defendant in "continuous and systematic manner" insufficient). Nor, even taking at face value plaintiff's allegation that Novacor made over $40 million dollars in sales into New York can jurisdiction over defendant be found. Jurisdiction has been found lacking on far more substantial sales activity in New York. Nordic Bank PLC v. Trend Group. Ltd., 619 F.Supp. 542 (S.D. N.Y.1985) (sale of over $100 million in commercial paper to New York brokerage firms). In the present case, Novacor's contacts with New York due to its use of brokers to effect sales to the Far East are limited, sporadic, and not so substantial and continuous as to support a finding that Novacor is doing business here.

Plaintiff also alleges that Novacor is subject to jurisdiction under the solicitation-plus rule. Heller concedes, as it must, that the long-standing New York rule is that solicitation alone, no matter how substantial, will not subject a foreign corporation to the jurisdiction of the New York courts. See Laufer, 55 N.Y.2d at 310, 434 N.E.2d at 694, 449 N.Y.S.2d at 459; Miller v. Surf Properties, 4 N.Y.2d 475, 480, 151 N.E.2d 874, 876, 176 N.Y.S.2d 318, 321 (1958). But once a plaintiff establishes solicitations in New York by a foreign entity, then certain additional "activities of substance" may create jurisdiction. See Laufer v. Ostrow, 55 N.Y.2d 305, 310, 449 N.Y.S.2d 456, 459, 434 N.E.2d 692, 695 (1982). Generally, however, once solicitation is found in any substantial degree courts have required very little more to support a conclusion of "doing business." See Beacon Enterprises v. Mary Rose Menzies, 715 F.2d 757, 762 (2d Cir.1983); Bulova Watch Co., Inc. v....