Bassili v. Chu

• Decision Date: 24 December 2002
• Docket Number: No. 02-CV-00585C(SR),02-CV-00585C(SR)
• Citation: 242 F.Supp.2d 223
• Parties: John BASSILI, Ph.D., and Duece Industries, Ltd., Plaintiffs, v. Victor CHU and Maxline, Defendants. No. 02-CV-00585C(SR).
• Court: U.S. District Court — Western District of New York

242 F.Supp.2d 223

John BASSILI, Ph.D., and Duece Industries, Ltd., Plaintiffs, v. Victor CHU and Maxline, Defendants. No. 02-CV-00585C(SR).

No. 02-CV-00585C(SR)

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

December 24, 2002.

Getman & Biryla (David R. Koepsell, Esq., of Counsel), Buffalo, NY, for Plaintiffs.

Trutanich & Associates (Anthony M. Horaites, Esq., of Counsel), San Pedro, CA, for Defendants.

CURTIN, District Judge.

Plaintiffs brought this action seeking injunctive relief and damages for commercial defamation pursuant to the Lanham Act, 15 U.S.C. § 1125, and other common law and statutory provisions, and have moved for preliminary injunctive relief (Item 8). Defendants move to dismiss for lack of personal jurisdiction, or in the alternative to dismiss or transfer the action based on improper venue (Item 14). For the following reasons, defendants' motion to transfer venue is granted.

BACKGROUND

Plaintiff John Bassili, Ph.D., is President and owner of Deuce Industries, Ltd., an Ontario corporation engaged in the business of importing and manufacturing tennis equipment, including racquet stringing machines marketed under the name "Silent Partner." The complaint alleges that Deuce Industries maintains a principal place of business at 221 Kenmore Avenue, Unit 106, Buffalo, New York (Item 1, ¶2), which is described by Mr. Bassili as a "principal place of distribution" for its stringing machine inventory (Item 8, Bassili Deck, ¶1). Defendant Victor Chu is a resident of Torrance, California, doing business as "Maxline," and is engaged in the business of manufacturing and selling tennis racquet stringing machines marketed under the name "Eagnas"

As alleged in the complaint, Maxline conducts its business entirely by mail order and Internet sales through its website at www.eagnas.com. The website has a section entitled "Racquet Stringing Machines Frequently Asked Questions (FAQ)." Plaintiffs claim that the FAQ section of defendants' website contains false, disparaging and defamatory statements about plaintiffs' Silent Partner "e.Stringer" model stringing machine, causing plaintiffs to lose revenues due to decreased purchase orders and inquiries. The complaint sets forth causes of action for intentional interference with prospective economic advantage, trade libel, and product disparagement, and seeks relief in the form of damages (including treble damages) and a "Lanham Act 43(a)" injunction.¹ Plaintiffs also seek preliminary injunctive relief ordering defendants to remove from their website the false statements regarding the e.Stringer, pending the outcome of this litigation.

Defendants move to dismiss the complaint for lack of personal jurisdiction, or in the alternative to dismiss or transfer the action to the United States District Court for the Central District of California based on improper venue. Argument of defendants' motion took place by telephone on November 22, 2002. The court directed further submissions on the factual and legal issues raised by the motion. These submissions were received by the court on December 18, 2002. For the following reasons, defendants' motion is granted to the extent it seeks transfer of venue to the United States District Court for the Central District of California.

DISCUSSION

I. Personal Jurisdiction

Personal jurisdiction over a non-domiciliary defendant in a diversity or federal question case² is determined by reference to the law of the state in which the court sits. Bensusan Restaurant Corp. v. King, 126 F.3d 25, 27 (2d Cir.1997). On a motion to dismiss for lack of personal jurisdiction, the plaintiff bears the burden of showing that the court has jurisdiction over the defendant. Kernan v. Kurz-Hastings, Inc., 175 F.3d 236, 240 (2d Cir.1999). At the pleadings stage of a case, a plaintiff is required only to make a prima facie showing of jurisdiction. Ball v. Metallurgie Hoboken-Overpelt S.A., 902 F.2d 194, 197 (2d Cir.) (discussing plaintiffs varying obligation to establish personal jurisdiction depending on procedural posture of the litigation), cert, denied, 498 U.S. 854, 111 S.Ct. 150, 112 L.Ed.2d 116 (1990). In determining whether the plaintiff has met this burden, the court must assume that all of the plaintiffs factual allegations are true, and "doubts are resolved in the plaintiffs favor, notwithstanding a controverting presentation by the moving party." A.I. Trade Fin., Inc. v. Petra Bank, 989 F.2d 76, 79-80 (2d Cir.1993) (citing Hoffritz for Cutlery, Inc. v. Amajac, Ltd., 763 F.2d 55, 57 (2d Cir.1985)).

When considering a motion to dismiss for lack of personal jurisdiction, the court must conduct a two-part inquiry. "First, it must determine whether the plaintiff has shown that the defendant is amenable to service of process under the forum state's laws; and second, it must assess whether the court's assertion of jurisdiction under these laws comports with the requirements of due process." Metropolitan Life Ins. Co. v. Robertson-Ceco Corp., 84 F.3d 560, 567 (2d Cir.1996), quoted in Kernan, 175 F.3d at 240.

Plaintiffs allege personal jurisdiction under N.Y.C.P.L.R. § 302, New York's "long-arm" statute, which provides as follows:

Personal jurisdiction by acts of nondomiciliaries

(a) Acts which are the basis of jurisdiction. As to a cause of action arising from any of the acts enumerated in this section, a court may exercise personal jurisdiction over any non-domiciliary, or his executor or administrator, who in person or through an agent:

1. transacts any business within the state or contracts anywhere to supply goods or services in the state; or

2. commits a tortious act within the state, except as to a cause of action for defamation of character arising from the act; or

3. commits a tortious act without the state causing injury to person or property within the state, except as to a cause of action for defamation of character arising from the act, 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 ....

Specifically, plaintiffs allege long-arm jurisdiction under § 302(a)(1), based on defendants transaction of business within New York State via the Internet. Alternatively, plaintiffs rely on § 302>(a)(3)(ii), alleging tortious conduct (trade defamation) committed outside of New York causing injury to property located within the state. Each of these jurisdictional bases is examined separately below.

A. C.P.L.R. § 302(a)(1): Transaction of Business in New York

Section 302(a)(1) confers jurisdiction over a defendant who "purposefully avails itself of the privilege of conducting activities within New York, thus invoking the benefits and protections of its laws," where the cause of action arises out of the subject matter of the business transacted. Citigroup Inc. v. City Holding Company, 97 F.Supp.2d 549, 564 (S.D.N.Y.2000). New York courts look to the totality of circumstances to determine whether the defendant has engaged in some purposeful activity in New York in connection with the matter in controversy. Id. (citing Longines-Wittnauer Watch Co. v. Barnes & Reinecke, Inc., 15 N.Y.2d 443, 457 & n. 5, 261 N.Y.S.2d 8, 209 N.E.2d 68 (1965)). A single transaction of business is sufficient to give rise to jurisdiction under C.P.L.R. § 302(a)(1), even where the defendant never enters the state, if the claim arises out of the transaction. Id.

Stated somewhat more succinctly, § 302(a)(1) "is a `single act statute' and `proof of one transaction in New York is sufficient to invoke jurisdiction, even [if] the [defendant] never enters the state, so long as the [defendant's] activities [in New York] were purposeful and there is a substantial relationship between the transaction and the claim asserted.'" Roberts-Gordon, LLC v. Superior Radiant Products, Ltd., 85 F.Supp.2d 202, 212-13 (W.D.N.Y.2000) (quoting Kreutter v. McFadden Oil Corp., 71 N.Y.2d 460, 467, 527 N.Y.S.2d 195, 522 N.E.2d 40 (1988); other citations omitted). Under this standard, "[i]f the defendant has `transacted business' in New York, it is suable on any cause of action that arises out of the transaction." Hoffritz, 763 F.2d at 58, quoted in Roberts-Gordon, 85 F.Supp.2d at 213.

In this case, all of the activity engaged in by defendants giving rise to the tortious interference, trade libel, and product disparagement claims set forth in the complaint occurred via the Internet. The Second Circuit has made it clear that a court should not exercise personal jurisdiction over a defendant simply because the defendant maintains a website on the Internet which residents of New York may visit. See Bensusan Restaurant Corp., 126 F.3d at 29; see also Phat Fashions, L.L.C. v. Phat Game Athletic Apparel, Inc., 2001 WL 1041990, at *5 (S.D.N.Y. Sept. 7, 2001). Rather, courts must examine the "nature and quality of commercial activity that an entity conducts over the Internet." K.C.P.L., Inc. v. Nash, 1998 WL 823657, at *5 (S.D.N.Y. Nov. 24, 1998) (quotation marks and citations omitted).

Several cases have addressed the question of what type of Internet activity may be deemed as sufficient to support the exercise of long-arm personal jurisdiction over a non-domiciliary defendant. For example, upon examination of the emergent case law, the court in Citigroup Inc. noted:

[T]he courts have identified a spectrum of cases involving a defendant's use of the internet. At one end are cases where the defendant makes information available on what is essentially a "passive" web site. This use of the internet has been analogized to an advertisement in a nationally-available magazine or newspaper, and does not without more justify the exercise of jurisdiction over the defendant. At the other end of the...