Falik v. Smith

• Decision Date: 27 April 1995
• Docket Number: No. 93 Civ. 8267 (RLC).,93 Civ. 8267 (RLC).
• Parties: Harold FALIK, Plaintiff, v. David T. SMITH and James Moscowitz, Defendants.
• Court: U.S. District Court — Southern District of New York

884 F. Supp. 862

Harold FALIK, Plaintiff, v. David T. SMITH and James Moscowitz, Defendants.

No. 93 Civ. 8267 (RLC).

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

April 27, 1995.

Alan Lebenbaum, Minneapolis, MN, for plaintiff c/o D. Graham C. Clark, Jr.

Phillips, Lytle, Hitchcock, Blaine & Huber, New York City (Frank Maas, of counsel), for defendant David T. Smith.

OPINION

ROBERT L. CARTER, District Judge.

Preliminary Statement

Plaintiff Harold Falik, a New Jersey resident, is seeking judgment against defendants David T. Smith and James Moscowitz, California residents, for failure to indemnify him, as required by indemnification agreements, for legal expenses he incurred in Myron Karr v. Emerson Radio, No. 90 Civ. 1315, a lawsuit instituted in this court. This is a diversity action and the amount in controversy exceeds $50,000, exclusive of interest and costs.

Defendant seeks to have this action dismissed for lack of personal jurisdiction, improper venue, and insufficiency of service of process pursuant to Rule 12(b), F.R.Civ.P., or if the court declines to dismiss, to have this action transferred to the Central District of California or the District of New Jersey pursuant to 28 U.S.C. §§ 1404(a) and 1406(a).

Smith is the Chief Executive Officer ("C.E.O.") of D.T. Smith, Inc., a California corporation involved in real estate development. Prior to April, 1985, Smith and Moscowitz formed David T. Smith Associates ("Smith Associates"), a New Jersey general partnership, of which Smith and Moscowitz are general partners. On or about April 1, 1985, Smith Associates and Emerson Financial Services, Inc. ("Emerson Financial"), a New Jersey corporation, formed the New Jersey general partnership, Emerson Equities, in order to organize, manage and sell limited partnership interests in real estate syndications and to be general partner of Emerson Equities. Dolphin Village, one of the limited partnerships was the subject of the Karr lawsuit, which involved real property in Florida and which arose out of losses sustained by investors who bought securities which were registered and sold in New York. Plaintiff Falik was named as an individual defendant in Karr.

On August 30, 1990 Smith signed an agreement (the "indemnification agreement," "indemnity agreement" or "agreement") with Emerson Financial and Smith Associates stating that Smith personally and as general partner of Smith Associates must indemnify Emerson Financial and its representatives for legal expenses arising out of the Karr lawsuit involving Dolphin Village. (Compl., Ex. C, p. 4, agreement § 4(A)(i)). In addition, paragraph 12B of the agreement states that "the parties ... consent to exclusive jurisdiction and venue in the state and federal courts sitting in the State of New Jersey." Id. at 9. Plaintiff Falik is suing defendants for breach of the indemnification agreement.¹

I.

Smith contends that the action should be dismissed for want of personal jurisdiction. Personal jurisdiction may be contested under Rule 12(b)(2), F.R.Civ.P., and the plaintiff bears the burden of proving that jurisdiction exists. First City Nat'l Bank and Trust Co. v. Simmons, 878 F.2d 76, 79 (2d Cir.1989); Beacon Enters., Inc. v. Menzies, 715 F.2d 757, 762 (2d Cir.1983); Colson Servs. Corp. v. Bank of Baltimore, 712 F.Supp. 28, 29 (S.D.N.Y.1989) (Carter, J.). "In deciding a pretrial motion to dismiss for lack of personal jurisdiction a district court has considerable procedural leeway," Marine Midland Bank, N.A. v. Miller, 664 F.2d 899, 904 (2d Cir.1981), and where the court chooses not to conduct a fullblown evidentiary hearing on the motion, the "plaintiff need only make a prima facie showing that jurisdiction exists ... and all pleadings and affidavits are construed in the light most favorable to plaintiff." Hoffritz for Cutlery, Inc. v. Amajac, Ltd., 763 F.2d 55, 57 (2d Cir.1985) (quoting cases); Welinsky v. Resort of the World D.N.V., 839 F.2d 928, 930 (2d Cir.1988); Marine Midland Bank, 664 F.2d at 904; Colson Servs. Corp., 712 F.Supp. at 29.

In order for the court to have a basis for personal jurisdiction over the defendant in a diversity case, the state statute of the forum court must confer personal jurisdiction over the nonresident defendant, and the exercise of jurisdiction must comport with federal constitutional principles of due process. Beacon Enters., 715 F.2d at 762 (citing United States v. First Nat'l City Bank, 379 U.S. 378, 381, 85 S.Ct. 528, 530, 13 L.Ed.2d 365 (1965)); Sultanik v. Cobden Chadwick, Inc., 94 F.R.D. 123, 124 (E.D.N.Y.1982). When determining whether the court has jurisdiction over nonresidents, sections 301 and 302(a)(1) of the New York Civil Practice Law ("CPLR") are controlling.

A. General Jurisdiction — CPLR 301

A nonresident is subject to personal jurisdiction in any cause of action pursuant to section 301 if he is "engaged in such a continuous and systematic course of `doing business' here as to warrant a finding of his `presence' in this jurisdiction." Beacon Enters., 715 F.2d at 762 (quoting Simonson v. International Bank, 14 N.Y.2d 281, 251 N.Y.S.2d 433, 436, 200 N.E.2d 427, 429 (1964)); accord Welinsky, 839 F.2d at 929. The non-domiciliary must be "doing business" in New York "`not occasionally or casually, but with a fair measure of permanence and continuity,'" Beacon Enters., 715 F.2d at 762 (quoting Laufer v. Ostrow, 55 N.Y.2d 305, 449 N.Y.S.2d 456, 458, 434 N.E.2d 692, 694 (1962) (citing cases)), and the quality and nature of those contacts must be "sufficient to make it reasonable and just according to traditional notions of fair play and substantial justice that it be required to defend the action" in the state. Diskin v. Starck, 538 F.Supp. 877, 880 (E.D.N.Y.1982) (quoting Laufer, 449 N.Y.S.2d at 458, 434 N.E.2d at 694) (applying test to corporations); see also Diskin, 538 F.Supp. at 880 (test is applied to individuals also).

When determining whether a non-domiciliary is doing business in the state, the courts use a "simple pragmatic" test, taking into account the aggregate of the non-domiciliary's activities in the state and considering factors such as whether the non-domiciliary has an office, bank account, property or employees working in the state and whether he solicits business here. See Hoffritz for Cutlery, 763 F.2d at 58; Central Gulf Lines, Inc. v. Cooper/T. Smith, Stevedoring, 664 F.Supp. 127, 129 (S.D.N.Y.1987) (Kram, J.) (quoting Bryant v. Finnish Nat'l Airline, 15 N.Y.2d 426, 260 N.Y.S.2d 625, 629, 208 N.E.2d 439, 441 (1965)).

Under the above standard, Smith's activities in New York are too limited to justify the court's personal jurisdiction. Smith does not maintain a residence or domicile in New York, nor has he consented to New York's jurisdiction. (Smith Decl. ¶¶ 2, 3). Smith does not personally transact business in New York, nor does he have an office, bank account or property within the state. Id. at ¶ 3. Smith is a California resident and C.E.O. of a California corporation involved in real estate development in California. Id. at ¶¶ 2, 3.

Falik argues that as general partner of Smith Associates, Smith "regularly and systematically engaged in the sale of securities in the city and state of New York." (Mem. in Opp'n to Defs.' Mot. to Dismiss ¶ 6). However, Falik does not provide any specific evidentiary facts to support this conclusory allegation. "In order for a plaintiff to subject an out-of-state defendant to jurisdiction in New York, it is necessary to do more than put forward an unsupported allegation. The plaintiff must come forward with some definite evidentiary facts to connect the defendant with transactions occurring in New York." Socialist Workers Party v. Attorney Gen. of the U.S., 375 F.Supp. 318, 322 (S.D.N.Y.1974) (Griesa, J.); see Lehigh Valley Indus., Inc. v. Birenbaum, 527 F.2d 87, 91 (2d Cir.1975) ("conclusory allegations of the complaint" and an affidavit that lacked specificity and was unsupported by the record resulted in lack of jurisdiction under 302(a)(1)); Lamarr v. Klein, 35 A.D.2d 248, 315 N.Y.S.2d 695, 698 (1st Dept.1970) ("conclusory allegations ... for the plaintiff ... must fail in the face of the positive assertions found in the affidavit of the defendant" under New York long-arm statute), aff'd, 30 N.Y.2d 757, 333 N.Y.S.2d 421, 284 N.E.2d 576 (1972).

Falik also asserts that the Karr lawsuit arose out of losses sustained by investors who bought securities which were registered and sold in New York by Emerson Equities, of which Smith Associates is a joint venturer. (Mem. in Opp'n to Defs.' Mot. to Dismiss ¶¶ 2, 3, 7). On the other hand, Smith asserts that Smith Associates is a New Jersey general partnership which does not conduct business in New York. (Smith Decl. ¶ 5). Smith states that

Smith Associates (1) has no employees residing or domiciled in New York; (2) has not contracted with persons residing in New York to act on its behalf with respect to marketing, distributing or servicing any goods or products; (3) has no branch office or comparable facilities in New York, or telephone listings or mailing addresses in New York; (4) has no bank accounts or other tangible personal or real property in New York; (5) does not direct any advertising specifically toward New York residents, nor advertise any publications that are directed primarily toward New York residents; (6) does not conduct meetings, business conferences or similar functions within the State of New York; or (7) has not consented to jurisdiction in New York by contractually consenting by way of a forum-selection clause or by designating a local agent for service of process.

Id.

Even if the court had jurisdiction over Smith Associates, this would not necessarily convey jurisdiction over its general partner Smith. "Jurisdiction depends only upon each defendant's relationship with the forum.... Regardless of their joint liability, jurisdiction over each defendant must be established individually." Sher...