Wisehart, Friou & Koch v. Hoover

• Decision Date: 22 May 1979
• Docket Number: No. 78 Civ. 1001 (CHT).,78 Civ. 1001 (CHT).
• Citation: 473 F. Supp. 945
• Parties: WISEHART, FRIOU & KOCH, Plaintiff, v. Herbert W. HOOVER, Jr., Defendant.
• Court: U.S. District Court — Southern District of New York

473 F. Supp. 945

WISEHART, FRIOU & KOCH, Plaintiff, v. Herbert W. HOOVER, Jr., Defendant.

No. 78 Civ. 1001 (CHT).

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

May 22, 1979.

Wisehart, Friou & Koch, New York City, for plaintiff; Robert E. Friou, New York City, of counsel.

Lipkowitz & Plaut, New York City, for defendant; Peter P. Kenny, New York City, of counsel.

OPINION

TENNEY, District Judge.

The defendant in this action, Herbert W. Hoover, Jr., has moved for dismissal of the complaint for lack of in personam jurisdiction and for failure to state a claim. Rules 12(b)(2), (6), Federal Rules of Civil Procedure ("Rules").¹ Hoover is a resident of Florida, and the plaintiff law firm is a resident of New York. The diversity action concerns the alleged failure of Hoover to pay legal fees in the sum of $250,000 for services purportedly rendered by the plaintiff and, in particular, by Robert E. Friou, a member of the firm. For the following reasons, the motion is denied.

The defendant is the scion of the famous industrial family and is former Chairman and President of The Hoover Company, an international corporation with annual net sales purportedly reaching many hundreds of millions. Affidavit of Robert E. Friou, sworn to March 18, 1978, ¶ 6(e) ("Friou Aff. I"). The plaintiff partnership was formed in early 1976; it states that it in part succeeded to and in part earned the alleged debt from Hoover. Affidavit of Robert E. Friou, sworn to March 23, 1978 ("Friou Aff. II"). Apparently Friou was a family friend of the defendant, see letter from Robert E. Friou to Herbert W. Hoover, Jr., dated December 1, 1977, Exh. B to Complaint, and the claim for legal services arises from an allegedly continuous course of advice to, and representative activity in behalf of, Hoover during the period 1973 to 1977.

Friou contends that he acted in New York for his client in areas of financial and estate planning, as advisor to the defendant on the affairs of The Hoover Company, as architect of a substantial loan reconsolidation at The Bank of New York, with regard to various litigations in which Hoover had an interest, and as general business and financial consultant in the many matters "of great importance" to Hoover. Friou Aff. I, ¶¶ 6-8, 13. Friou claims that the defendant participated in certain of these New York activities, once personally and often through the presence here of his personal business manager, William M. Caddey. The defendant neither contradicts Friou in his description of Caddey's function nor refutes Friou's enumeration of the occasions on which he met with Caddey and other Hoover representatives on various matters. Affidavit of Robert E. Friou, sworn to January 3, 1979, passim ("Friou Aff. III"). Instead the defendant seeks to characterize Caddey's role in the New York transactions as a "passive" one, and states that his appearances here were instigated and controlled by the plaintiff, and that he entered the state as a mere "trouble shooter." Affidavit of Peter P. Kenny, sworn to December 26, 1978, ¶ 12; Defendant's Post-Discovery Memorandum at 9. The defendant claims that his own acts and those of his agents in New York² do not amount to purposeful activity here and that the claim in issue does not in any event arise from whatever presence there was.

The reams of material submitted to the Court on this matter more befit a decision on the merits than a ruling on a jurisdictional point, especially as the matter at bar is relatively simple. To assess personal jurisdiction the federal court sitting in diversity must apply the law of the forum state to the jurisdictional facts. Arrowsmith v. United Press Int'l, 320 F.2d 219, 223 (2d Cir. 1963) (en banc). Here the plaintiff asserts jurisdiction pursuant to New York's long-arm statute, C.P.L.R. § 302(a)(1), which provides that

as to a cause of action arising from any of the acts enumerated in this section, a court may exercise personal jurisdiction over any nondomiciliary . . . who in person or through an agent:

1. transacts any business within the state.

It is settled law that in the exercise of long-arm jurisdiction over a foreign domiciliary there must be "some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws." Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 1240, 2 L.Ed.2d 1283 (1958); Longines-Wittnauer Co. v. Barnes & Reinecke, Inc., 15 N.Y.2d 443, 451-52, 261 N.Y.S.2d 8, 14, 209 N.E.2d 68 (1965). The plaintiff bears the burden of proving jurisdiction, McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 189, 56 S.Ct. 780, 80 L.Ed. 1135 (1936), but at this juncture need only make a prima facie showing that jurisdiction lies. United States v. Montreal Trust Co., 358 F.2d 239, 242 (2d Cir.), cert. denied, 384 U.S. 919, 86 S.Ct. 1366, 16 L.Ed.2d 440 (1966). That showing will suffice here because "amenability to service in long-arm situations turns on whether defendant has transacted business or `committed a tort' in the forum; thus the threshold jurisdictional question often puts in issue the facts alleged as a basis for relief." Jetco Electronic Industries, Inc. v. Gardiner, 473 F.2d 1228, 1232 (5th Cir. 1973). "To avoid precipitating too extensive an investigation of the merits at this stage of the litigation, only a prima facie showing is required on a jurisdiction motion." 4 C. Wright & A. Miller, Federal Practice & Procedure § 1608, at 250 (1969); accord, Block Industries v. D. H. J. Industries Inc., 495 F.2d 256, 259 (8th Cir.); Jetco Electronic Industries, Inc. v. Gardiner, supra; Costin v. Olen, 449 F.2d 129 (5th Cir. 1971); Ghazoul v. International Management Services, Inc., 398 F.Supp. 307 (S.D.N. Y.1975); Alosio v. Iranian Shipping Lines, S. A., 307 F.Supp. 1117 (S.D.N.Y.1970). And, where the suit is grounded in a contractual relationship, the plaintiff need not show prima facie evidence of breach, but merely prima facie evidence that the services sued on were to be performed in whole or in part in the forum state and that the suit arises from the contractual relationship. Product Promotions, Inc. v. Cousteau, 495 F.2d 483 (5th Cir. 1974).

The defendant's major argument against jurisdiction here turns on the fact that, as Hoover's attorney, Friou was also his "agent" in the situations that generated the fees now sued for. From this the defendant reasons that he is sheltered by New York precedents that forbid the local agent from suing his nonresident principal using the agent's own forum activities as a jurisdictional predicate. That is a correct statement of New York law, but it is a distortion of the facts in this case. It is true that the New York Court of Appeals has explained that agency cases in which jurisdiction has been denied

involved agents who were suing their principals, and were cases in which the plaintiff was relying on his own activities within the State, and not those of the defendant, as the basis for jurisdiction. In other words, in no one of these cases had the defendant himself engaged in purposeful activity within the State nor had the cause of action arisen out of transactions with third parties conducted through an agent.

Parke-Bernet Galleries v. Franklyn, 26 N.Y.2d 13, 19 n. 2, 308 N.Y.S.2d 337, 341 n. 2, 256 N.E.2d 506, 509 n. 2 (1970) (citations omitted). Moreover, the Parke-Bernet footnote was endorsed three years later by the New York Court of Appeals in a lawyer-client situation. In Haar v. Armendaris, 31 N.Y.2d 1040, 342 N.Y.S.2d 70, 294 N.E.2d 855 (1973), rev'g 40 A.D.2d 769, 337 N.Y.S.2d 285 (1st Dep't 1972), the attorney was retained by mail sent to him in Massachusetts from a principal in California with instructions to participate in New York negotiations. The Appellate Division sustained jurisdiction, but the Court of Appeals reversed, adopting the dissent below. There it was pointed out that this was "not an action between defendant and a third party, but rather between plaintiff as agent for defendant and defendant-principal." In those circumstances the Parke-Bernet footnote controlled because there was no evidence of any independent, purposeful activity "engaged in by the defendant itself within this State, out of which the action arose . . .." Haar v. Armendaris, supra, 40 A.D.2d at 770, 337 N.Y.S.2d at 287-88 (emphasis added).

The defendant has suggested that Haar controls, but this Court's conclusion is quite the opposite. Although the plaintiff was admittedly Hoover's agent vis-a-vis third parties in New York, to the extent that Hoover came to New York to confer with the plaintiff on these matters there can be no dispute that he entered the state and committed purposeful acts here. Moreover, to the extent that Caddey and other Hoover agents entered the state to participate with the plaintiff in advancing Hoover's interests, that activity will be imputed to Hoover. Finally, to the extent that those agents entered New York to instruct the plaintiff about further efforts in Hoover's behalf, the plaintiff was in a sense itself a "third party" whose retainer contract was being continually renewed by Hoover through Caddey and the others. Haar is inapposite on these facts.

The defendant argues in addition that the cause of action here does not "arise" from the transaction of business because no particular business transaction conducted in behalf of Hoover is now in dispute. The argument is without merit. "The defendant's New York activities must be substantially proximate to the allegedly unlawful acts before the cause of action can be said to arise out of those activities." Xedit Corporation v. Harvel Industries Corp., Fideipac, 456 F.Supp. 725, 729 (S.D. N.Y.1978). Here the plaintiff's fulfillment of its obligation as retained counsel parallels its performance of legal services for the defendant in relationships with others. The latter activity generates the...