Deer Consumer Prods., Inc. v. Little Grp.
| Decision Date | 15 November 2012 |
| Docket Number | No. 650823/2011.,650823/2011. |
| Court | New York Supreme Court |
| Parties | DEER CONSUMER PRODUCTS, INC., Plaintiff, v. LITTLE GROUP, Jon Carnes, Eos Holdings LLC, Simon Moore, Xiaofu (Jeff) Huang, Joseph Ramelli, Andrew Wong, Shawn Jason Rhynes, Walter Carnes, International Financial Research & Analysis Group, Quantum Asset Group LLC, John Does # 1–10, Defendants. |
OPINION TEXT STARTS HERE
Bostany Law Firm PLLC by John Bostany, Esq., New York, for Plaintiff.
Eaton & Van Winkle LLP by Martin Garbus and Joseph T. Johnson, New York, for Defendant Eos Holdings LLC.
In this defamation action by plaintiff Deer Consumer Products, Inc. (“plaintiff”), defendant EOS Holdings LLC moves to dismiss the amended complaint against it pursuant to CPLR 3211(a)(8) for lack of personal jurisdiction and pursuant to CPLR 3211(a)(7) for failure to state a cause of action for tortious interference with business relations and violation of General Business Law (“GBL”) 349.
Plaintiff, a Nevada corporation doing business in Guandong, China, is a publicly traded company which manufactures and sells small home appliances. Plaintiff alleges that EOS Holdings LLC and the “Little Group” 1 are alter egos, and that the Little Group authored and published several defamatory reports on www.alfredlittle.com (the “website”) operated by the Little Group as part of an overall scheme to artificially drive down the price of plaintiff's common stock in order to profit on short sales.
Plaintiff originally commenced its action against “Alfred Little” (“Little”), alleging that he authored and published five defamatory reports in March 2011 about plaintiff as part of the short-selling scheme. Upon a motion by Little to dismiss for lack of personal jurisdiction, the Court rejected plaintiff's claim of personal jurisdiction over Little based on CPLR 302(a)(1) (transacting business in New York), (a)(2) (tortious act within the state) and (a)(3) (tortious act outside the state), but permitted discovery on the issue of jurisdiction pursuant to CPLR 301 () (Deer Consumer Products, Inc. v. Little, 35 Misc.3d 374, 938 N.Y.S.2d 767 [2012] (the “Alfred Little Decision”).2
Thereafter, on June 6, 2012, plaintiff amended the complaint to add inter alia, EOS Holdings LLC, and allege that five additional reports were published from September 2011 through February 28, 2012 concerning, inter alia, plaintiff seeking specific land use rights in China and receiving $21 million from the Chinese government through a “secret rebate” system.
In support of dismissal, EOS Holdings LLC argues that the Court lacks personal jurisdiction over the alleged dissolved EOS Holdings LLC (“EOS I”) as well as over the active corporation, EOS Holdings LLC (existing under the Commonwealth of Dominica) (“EOS II”) (collectively referred to as “EOS Funds”). It is argued that there is no general jurisdiction over EOS Funds under CPLR 301, because they were never “doing business” in New York, i.e., never had any offices, bank accounts, brokerage accounts, contractors or investors situated in New York. EOS Funds has no employees. EOS Funds were/are funds that made investments and trades through people in California, China, and Canada through brokerage accounts maintained outside of New York. And, even assuming the website could be attributable to EOS Funds, it was not directed to New York; its mission was to expose fraud and crimes committed by U.S. listed Chinese companies. Thus, such website cannot confer general jurisdiction. Further, according to defendant Jon Carnes (“Carnes”), although he used an “Eos Funds” business card with a New York contact number, the number is an online “Skype number” which permits anyone to call and speak to him online wherever he is located. And, although he also uses a fax number with a 917 area code, this fax number is an electronic number procured through eFax and is not a local New York City listing.
As to CPLR 301 jurisdiction over EOS I, EOS I maintained an office in China, and has been dissolved since November 21, 2011. On three or four occasions in 2008, Carnes, on behalf of EOS I, met with New York based investors to raise capital for a China-based company, Southwest China Cement (“SWCC”). However, EOS I did not transact any business with these investors or anyone else, and Carnes was unable to procure any investment in SWCC. In 2009, Carnes on behalf of EOS I, met with an individual in New York who sought financing from EOS I in connection with a potential investment; and, in August 2010, Carnes and an EOS I analyst met with such individual during a layover from China. However, EOS I did not make any investment and transacted no business at such times. EOS I had a single bank account in Nebraska, and to the best of [Carnes's] knowledge, EOS I had no brokerage accounts in New York. EOS I had a brokerage account with an online brokerage account service, Interactive Brokers, which, to “the best of [Carnes's] knowledge,” has only a corporate/sales office in Connecticut. EOS I also opened and maintained a brokerage account with vFinance Investments (“vFinance”) at its Florida office. In any event, EOS I did not short-sell plaintiff's shares at any time, ceased investing and trading in 2010, and thereafter, unwound its positions.
As to CPLR 301 jurisdiction over EOS II, EOS II is a foreign-based investment fund, which short-sold plaintiff's shares through its brokerage account with Interactive Brokers. In 2010, EOS II opened brokerage accounts at vFinance through individuals who worked out of vFinance's Florida office, at Roth Capital through an individual at Roth Capital's California location, at Global Hunter Securities (“Global”) through its California location, and Lightspeedtrading.com through an individual in Illinois. EOS II never solicited investors, but traded in plaintiff's stock through a brokerage account not based in New York. The sole connection EOS II has to New York was an analyst attending an investor conference in 2011 in New York City, at which no business was transacted.
Nor is there a basis for jurisdiction under CPLR 302(a)(1). This Court's previous ruling, that the website and listing/trading of plaintiff's stock on NASDAQ are insufficient to confer jurisdiction, has collateral estoppel effect, and is otherwise persuasive authority. Moreover, EOS Funds has not transacted any business in New York. The defamatory reports allegedly published by the Little Group on the website were not, as the Court already ruled, purposely directed to or targeted at a New York audience.
Further, the vaguely alleged “promotion,” “dissemination,” and “advertising” of the reports to persons in New York do not constitute the transaction of business necessary under CPLR 302(a)(1). Plaintiff's conclusory allegations that “defendants” transact a substantial portion of activities necessary to disseminate the false information about plaintiff in New York and pretend to be third parties who promote such false material to New York based analysts, brokers and traders, are insufficient.
Nor is there a basis for jurisdiction under CPLR 302(a)(2) () or (a)(3) (tortious act outside the state). Plaintiff cannot “rebrand” its defamation claim as one for violation of GBL 349 and for tortious interference with business relations. The alleged publication of false reports is at the core of each of these claims, and therefore, is subject to the exclusion for defamation claims from long-arm jurisdiction. In any event, jurisdiction under CPLR 302(a)(2) is still lacking because no tortious act was committed in New York State. And, the alleged preparation, publication, and dissemination of false information about plaintiff in New York by means of a website and “other media” and contacting New York based analysts, investors, banks and traders are insufficient. Further, no injury was sustained by a New York domiciliary, and the situs of the alleged injury to plaintiff ( i.e., location of the event which caused the injury) could not have been in New York, to support jurisdiction under CPLR 302(a)(3). Neither plaintiff nor EOS Funds is present in New York, and no event took place in New York.
And, as to CPLR 302(a)(4) (real property in New York), EOS Funds does not own, use or possess any real property in New York.
The Court should not credit the purported jurisdictional allegations which are unsupported by any facts.
It is also argued that plaintiff lacks standing to assert a claim under GBL 349 because plaintiff is not the type of plaintiff the statute was intended to protect, and a claim on behalf of shareholders does not concern consumers at large. Also, the damages alleged, i.e., a decline in plaintiff's stock price, is speculative. Further, the amended complaint does not allege that any deceptive acts occurred in New York, and securities transactions are not covered by GBL 349.
And, plaintiff cannot state a tortious interference with business relations claim as it is only complaining about internet defamation. Further, plaintiff failed to name a specific stockholder, investor or financier with whom it had a relationship, with which EOS Funds directly interfered, which is fatal to its tortious interference with business relations claim.
In opposition, plaintiff argues that jurisdictional facts exist but cannot be stated at this time, and the Court should permit plaintiff to obtain disclosure to establish such facts.
Plaintiff contends that EOS 3 is subject to CPLR 301 jurisdiction in that its website stated it had a “successful small cap focused New York based investment fund,” Carnes testified at his deposition that he and others on behalf of EOS attended at least two investment conferences in New York, and he met with potential investors in New York in 2008–2010. Carnes also stated that EOS Funds tried to solicit New...
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