Cavalier Label Co., Inc. v. Polytam, Ltd.

• Citation: 687 F. Supp. 872
• Decision Date: 24 May 1988
• Docket Number: No. 87 Civ. 3579 (RJW).,87 Civ. 3579 (RJW).
• Parties: CAVALIER LABEL CO., INC. d/b/a/ Young Rebels, Plaintiff, v. POLYTAM, LTD., Defendant.
• Court: United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York

687 F. Supp. 872

CAVALIER LABEL CO., INC. d/b/a/ Young Rebels, Plaintiff, v. POLYTAM, LTD., Defendant.

No. 87 Civ. 3579 (RJW).

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

May 24, 1988.

COPYRIGHT MATERIAL OMITTED

Cole & Deitz, New York City, for plaintiff; Joseph Di Benedetto, David Florendo, of counsel.

Yerushalmi Shiboleth, Yisraeli & Roberts, New York City, for defendant; Maralyn B. Fairberg, of counsel.

OPINION

ROBERT J. WARD, District Judge.

Plaintiff, Cavalier Label Co., Inc. ("Cavalier"), brought this action claiming breach of contract and fraud against Polytam, Ltd. ("Polytam"), an Israeli corporation. Polytam has moved to dismiss the complaint for lack of personal jurisdiction pursuant to Rule 12(b)(2), Fed.R.Civ.P. For the reasons that follow, the motion is denied.

BACKGROUND

Plaintiff Cavalier is a clothing wholesaler based in New York, engaged generally in the business of importing outerwear for resale to retail outlets in the United States. Cavalier is a New York corporation. Its sole office is in New York, and it is not licensed to do business in any other state or foreign country. Bernard Shur is an officer, director and shareholder of Cavalier.

Defendant Polytam is an Israeli manufacturer of women's sportswear. Chaim Steigman is a director of Polytam. His son, Michael Steigman, is an officer and director of Polytam, and at all relevant times was in charge of production. Polytam has never maintained an office, employee, sales agent, or any other continuous contact with New York State. Polytam does not solicit business in the United States, either by means of advertising in the United States, mailings into the United States, or telephone solicitations.

Ami Blachman is a representative of Tredia, which operates in the clothing industry as a "finder." A finder works independently, introducing manufacturers to wholesale distributors and collecting a commission on contracts that he facilitates. A finder may also serve to supervise production and delivery, and to inspect the goods. Blachman introduced the parties after learning of Cavalier's need for a manufacturing source for coats and determining that Polytam would be best suited for the production of Cavalier's order. Blachman participated in the negotiations between Cavalier and Polytam that led to a contract for the manufacture and delivery of 87,245 women's woolen coats for the fall 1986 selling season. Negotiations commenced in August 1985, and were carried out for the most part through telexes and telephone conversations. The contract was signed February 6, 1986.

Deliveries commenced in March 1986, but Polytam was not able to maintain its production schedule, and Cavalier was dissatisfied with the quality of the coats. The parties differ as to the reasons for these problems. While on a visit to New York in May, Chaim Steigman met with Shur, and the two renegotiated a contract completion date of August 30, 1986, instead of the original date of July 30. Cavalier, however, terminated the contract a few weeks later, claiming that Polytam would be unable to honor the revised delivery schedule and that Polytam's coats would arrive too late for Cavalier to meet its commitments to its retailing customers. Chaim Steigman met once more with Shur in New York on August 8, 1986 to discuss the cancellation of the contract, but it quickly became clear that negotiation would be fruitless, and Steigman returned to Israel after a single day in New York. Michael Steigman also visited New York once in connection with Polytam's business with Cavalier, but the parties differ as to both the timing and the purpose of his visit.

Cavalier filed this action May 22, 1987, claiming breach of contract and fraud. Thereafter, Polytam filed the instant motion to dismiss.

DISCUSSION

On this motion to dismiss, all pleadings and affidavits are to be construed in the light most favorable to plaintiff Cavalier and all doubts are to be resolved in its favor. Cutco Indus., Inc. v. Naughton, 806 F.2d 361, 365 (2d Cir.1986); Hoffritz for Cutlery, Inc. v. Amajac Ltd., 763 F.2d 55, 57 (2d Cir.1985). Because the Court has not conducted an evidentiary hearing in the matter, Cavalier must make out only a prima facie case of personal jurisdiction. Beacon Enters., Inc. v. Menzies, 715 F.2d 757, 768 (2d Cir.1983).

In this federal diversity action, defendant Polytam's amenability to suit is to be determined according to the law of the state in which the federal court sits. Arrowsmith v. United Press Int'l, 320 F.2d 219 (2d Cir.1963). New York law applies herein. Cavalier asserts that jurisdiction is proper under section 302(a)(1) and section 302(a)(3) of New York's Civil Practice Law and Rules. As the reach of the long-arm statute is in some respects narrower and in other respects broader than the constitutionally permissible outer limits of the Due Process Clause, it is necessary to determine whether the exercise of jurisdiction here will satisfy both. Cleopatra Kohlique, Inc. v. New High Glass, Inc., 652 F.Supp. 1254, 1256 (E.D.N.Y.1987).

A. Jurisdiction under Section 302(a)(1)

Section 302(a)(1) authorizes a court to assert personal jurisdiction over a nonresident defendant who in person or through an agent "transacts any business within the state or contracts anywhere to supply goods or services in the state," as to any cause of action arising out of these acts. N.Y.Civ.Prac.L. & R. § 302(a)(1) (McKinney 1972 & Supp.1988).

1. The "Transacting Business" Prong of Section 302(a)(1)

It is doubtful, in light of Polytam's limited contacts with the forum, that Cavalier could establish that defendants have transacted business in New York within the meaning of the statute. The law requires there be "some articulable nexus between the business transacted and the cause of action sued upon." McGowan v. Smith, 52 N.Y.2d 268, 272, 419 N.E.2d 321, 323, 437 N.Y.S.2d 643, 645 (1981) (quoted in Beacon Enters., Inc. v. Menzies, supra, 715 F.2d at 764). When assessing whether a defendant's contacts are sufficient to warrant a finding of transaction of business, a court should focus on "the nature and quality of the visits" rather than simply the amount of time spent in the forum. George Reiner & Co., Inc. v. Schwartz, 41 N.Y.2d 648, 654, 363 N.E.2d 551, 555, 394 N.Y.S.2d 844, 848 (1977).

Cavalier seeks to attribute to Polytam the activities of Ami Blachman, on the theory that Blachman was Polytam's agent. For an agency relationship to be recognized under section 302, it must be shown that the alleged agent "acted in New York for the benefit of, with the knowledge and consent of, and under some control by, the nonresident principal." Grove Press, Inc. v. Angleton, 649 F.2d 121, 122 (2d Cir.1981) (applying section 302(a)(2)). Accord Louis Marx & Co. v. Fuji Seiko Co., Ltd., 453 F.Supp. 385, 390 (S.D.N.Y.1978). There has been no such showing here. The very contract sued upon names Blachman as Cavalier's "buying agent." Exhibit A, annexed to Notice of Motion, filed December 4, 1987. Furthermore, Cavalier, in a telex to Polytam, described Blachman as Cavalier's "eyes and ears in Israel." Exhibit B, annexed to Notice of Motion, filed December 4, 1987. Cavalier asserts that Blachman "touted" Polytam to Cavalier, Affidavit of Bernard Shur, filed February 5, 1988 ("Shur Aff.") ¶ 3, and that Polytam paid Blachman's fees. Id. ¶ 12. These assertions, though, even if taken as true, do not contradict the documentary evidence and Blachman's own affidavit that he worked as an independent "finder" or perhaps as Cavalier's agent. Cavalier, then, has failed to make out a prima facie case that Blachman operated as Polytam's agent. Accordingly, Blachman's contacts with the forum cannot be attributed to Polytam for purposes of the present motion.

Cavalier also seeks to base personal jurisdiction over Polytam on an alleged visit to New York by Michael Steigman "to finalize the agreement." Cavalier asserts that Michael Steigman's presence in New York "was a large factor in the long awaited `closing' of the contract in February, 1986." Shur Aff. ¶ 4. Polytam asserts, to the contrary, that Michael Steigman did not visit New York until September of 1986 and that the purpose of his visit was to attempt to mitigate damages. Affidavit of Chaim Steigman, filed December 4, 1987 ("C. Steigman's Dec. Aff.") ¶ 8. Furthermore, Polytam has presented a copy of Michael Steigman's passport, indicating that he did not visit the United States at all between August 1985 and February 1986. Exhibit A, annexed to Affidavit of Michael Steigman, filed February 5, 1988 ("M. Steigman Aff."). Cavalier has not rebutted the documentary evidence presented by Polytam. The Court, then, cannot credit Cavalier's characterization of Michael Steigman's visit to New York and must accept Polytam's version of the visit.

Chaim Steigman met with Bernard Shur twice in New York in connection with the disputed transaction. The first visit occurred on May 22, 1986 while Chaim Steigman was in New York visiting his brother. Steigman and Shur had lunch together, but the parties differ as to the substance of their conversation. Compare C. Steigman's Dec. Aff. ¶ 10 and Affidavit of Chaim Steigman, filed February 5, 1988 ¶¶ 4, 5 with Shur Aff. ¶ 8. Chaim Steigman's second visit to New York occurred in August of 1988 for the purpose of discussing the default on the contract. C. Steigman's Dec. Aff. ¶ 11. Steigman stayed in New York for just one day, and returned directly to Israel when it became clear that further discussion would not be fruitful.

It is doubtful that the totality of Polytam's contacts with the forum — Chaim Steigman's two visits to New York and Michael Steigman's single visit — would be sufficient to confer upon this Court personal jurisdiction over Polytam pursuant to the "transacting business" prong of section 302(a)(1). See Arrow Trading Co. v. Sanyei Corp. (Hong Kong), Ltd., 576 F.Supp. 67, 70-71 (S.D.N.Y.1983) (one visit to forum to...