Fantis Foods, Inc. v. Standard Importing Co., Inc.

• Decision Date: 27 June 1978
• Citation: 63 A.D.2d 52,406 N.Y.S.2d 763
• Parties: FANTIS FOODS, INC., Plaintiff, v. STANDARD IMPORTING CO. INC., Atlantic Bank of New York and American Export Lines, Inc., Defendants. STANDARD IMPORTING CO. INC., Plaintiff on Counterclaim-Respondent, v. SYNERGAL, LTD., Defendant on Counterclaim-Appellant.
• Court: New York Supreme Court — Appellate Division

Page 763

406 N.Y.S.2d 763

63 A.D.2d 52

FANTIS FOODS, INC., Plaintiff, v. STANDARD IMPORTING CO. INC., Atlantic Bank of New York and American Export Lines, Inc., Defendants.

STANDARD IMPORTING CO. INC., Plaintiff on Counterclaim-Respondent, v. SYNERGAL, LTD., Defendant on Counterclaim-Appellant.

Supreme Court, Appellate Division,First Department.

June 27, 1978.

David P. Langlois, New York City, of counsel (Leo G. Kailas, New York City, with him on the brief; Milgrim, Thomajan & Jacobs, P.C., New York City, attorneys), for defendant on counterclaim-appellant.

Murray I. Sommer, New York City, of counsel (Sommer & Sklar, New York City, attorneys), for plaintiff on counterclaim-respondent.

Before KUPFERMAN, J. P., and LUPIANO, LANE, SANDLER and SULLIVAN, JJ.

LUPIANO, Justice.

Defendant Standard Importing Co., Inc., a domestic (NY) corporation with principal offices in New York City, is an importer, wholesaler and distributor in the United States of foreign cheeses and other food products. Plaintiff Fantis Foods, Inc., a domestic (NY) corporation with principal offices in New York City, is a local competitor of Standard. Fantis initiated suit against Standard and others in the Supreme Court of the State of New York, alleging, inter alia, that it purchased 300 barrels of Greek feta cheese from Synergal, Ltd., a corporation located in and doing business in Greece on or about August 6, 1976; that while the goods were in transit from Greece to New York, Synergal as shipper provided for surrender of the documents evidencing their ownership to Fantis; that upon arrival of the cheese in New York, Fantis on presentation of its documents evidencing ownership, was refused delivery, the goods having been "wrongfully" appropriated by Standard. This conversion of the 300 barrels of cheese by Standard is therefore alleged to have occurred in New York.

Standard in its answer by way of affirmative defenses and counterclaims asserts that the 300 barrels of feta cheese were part of a purchase by it pursuant to contract dated July 26, 1976 of 1200 barrels of feta cheese from Synergal, Ltd., f. o. b. Piraeus, Greece. Synergal at the time in issue was the sole or dominant seller and exporter of feta cheese made in Greece. On or about July 24, 1976, in compliance with the contract, Standard established an irrevocable credit of $150,000 in favor of Synergal and guaranteed payment of the cheese. Standard asserts that Synergal converted this cheese by subsequently selling it to Fantis and arranging for its transfer to Fantis in New York, but that as to the first 300 barrels, Standard frustrated the scheme by obtaining this first shipment. Defendant Standard commenced a third-party action against Synergal (designated as first and fourth counterclaims in its answer) seeking to recover damages, compensatory and punitive.

Synergal, Ltd. moved to dismiss Standard's third-party complaint "on the grounds that, (1) no basis exists for the Court's exercise of in personam jurisdiction over Synergal and (2) Standard and Synergal agreed to resolve all dispute in the Courts of Greece." Special Term denied the motion, observing as follows:

"Delivery of the cheese was taken by Standard in Greece, its trademark was stamped on the cheese and 300 of 1200 barrels were actually shipped. The other 900 barrels were, having been weighed, analyzed and stamped with the trademark, segregated and held at Synergal's factory pending shipment. After the 300 barrels were shipped, and copies of the shipping documents given to Standard's Greek agent, Synergal arranged to have the shipment diverted and the original shipping documents sent to the plaintiff. The 900 barrels Synergal shipped to the plaintiff."

This presentation relied on by Special Term is gleaned from the facts as pleaded and alleged. Synergal does not dispute this presentation, but contends that under same, Standard's only claim is for breach of contract; that the requirements for in personam jurisdiction over Synergal have not been met under CPLR 302(a)(3)(ii), and that the contractual forum selection clause must control.

CPLR 302(a)(3)(ii) provides that "a court may exercise personal jurisdiction over any nondomiciliary . . . who . . . commits a tortious act without the state causing injury to person or property within the state . . . if he . . . expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce." Standard's claim against Synergal clearly sounds in tort and not in (breach of) contract. The contract between Standard and Synergal provided that the sale price is $2500 per ton f. o. b. Piraeus, that "(f)rom the time it leaves the factory, the cheese is the responsibility of the Buyer" and that "(d)elivery of (c)heese: (w)ill take place in the . . . Factory or the Refrigerated Warehouses . . . ." The 1200 barrels being marked with Standard's trademark "SICO," weighed and segregated as its property, Standard accepted delivery by giving its certificate attesting to weight and physical composition. Standard as owner directed Synergal to ship the cheese in four weekly successive shipments of 300 barrels each. Synergal's subsequent attempt, as alleged by Standard, to convey the 1200 barrels to Standard's competitor Fantis, arose after Standard became entitled to rightful possession of all 1200 barrels and amounted to a conversion (the effort succeeding as to 900 barrels).

The crux of the instant appeal is whether the alleged tortious act committed by Synergal, a nondomiciliary, outside the State of New York caused injury within the State. As to the first shipment of 300 barrels, the conversion occurred in New York assuming Fantis was entitled to the goods. If Standard took possession of its own goods, there was no conversion by it and Synergal's actions in Greece did not deprive Standard of these 300 barrels. As to the remaining 900 barrels, the alleged conversion by Synergal occurred while the goods were in Greece. Of course, it is not axiomatic that in conversion, the tortious act and the tortious injury coalesce, and proper analysis of the applicability of the long-arm statute must perforce be based not on abstract principles, but on the particular circumstances of an individual case. The most essential condition is that there be an injury in New York. Addition of the 1966 amendment embodying CPLR 302(a)(3) marked a legislative departure from the overly restrictive rationale of Feathers v. McLucas, 15 N.Y.2d 443, 261 N.Y.S.2d 8, 209 N.E.2d 68 and indicated the viability of the holding of the Illinois Supreme Court in Gray v. American Radiator & Standard Sanitary Corp., 22 Ill.2d 432, 176 N.E.2d 761 (1961).

"Clause (ii) of subparagraph (3) was constructed by the Judicial Conference from several sources. It is perhaps the most important provision in the 1966 amendment. Whether a state may constitutionally assert jurisdiction over a nonresident defendant who performs acts outside the state resulting in consequences in New York has been the focus of much academic discussion . . . . Some courts have found no constitutional impediment where the defendant can reasonably foresee that his out-of-state act will have an in-state consequence. See Gray v. American Radiator & Standard Sanitary Corp. . . . . Others have boggled at the concept of foreseeability . . . . Balancing these competing considerations, the new statute attempts to strike a compromise. A defendant who foresees consequences in New York will be held accountable for those consequences only where he 'derives substantial revenue from interstate or international commerce.' While the protections of the foreseeability rules are ephemeral . . . the safeguards built into the interstate or international character of the defendant's operations are . . . reassuring" (Practice Commentaries by Dean McLaughlin to CPLR 302 in McKinney's c 302:24).

The test of foreseeability embodied in the statute is an objective one, to wit, whether the nondomiciliary, viewed as one endowed with reasonable prudence, should expect the tortious act which he commits to have consequences in New York (Allen v. Auto Specialties Mfg. Co., 45 A.D.2d 331, 357 N.Y.S.2d 547 (3rd Dept. 1974); See, also, Markham v. Gray, 393 F.Supp. 163 (D.C.N.Y.1975)).

The instant appeal involves an alleged conversion out-of-state in the commercial area by a nondomiciliary which tortious act has consequences in New York. The nondomiciliary, it is alleged, possessed a monopoly or virtual monopoly at the relevant times over the sale and exportation of Greek feta cheese. Consequently, in dealing with Standard and Fantis, importers of foreign food and cheese items who are local competitors, the nondomiciliary, Synergal was in a unique position to control the competitive relationship between Fantis and Standard insofar as this type of cheese is concerned. Accordingly, the tortious injury to Standard in consequence of the conversion by Synergal produced ramifications in New York which were occasioned not by the mere fact that Standard had its principal office here, but by numerous additional facts. Applying the reasonable man standard in the sense of foreseeability to the actions of Synergal, it must be concluded on this record that long-arm jurisdiction over this nondomiciliary exists by virtue of CPLR 302(a)(3)(ii).

To reiterate, injury to Standard in New York was foreseeable by Synergal not merely because Standard is incorporated in and has its principal office in New York (cf. Friedr. Zoellner (New York) Corp. v. Tex. Metals Co., 396 F.2d 300 (2nd Cir. 1968), but because Synergal by virtue of its monopolistic control in its dealings with Standard and its New York competitor Fantis must be deemed to foresee consequences of its actions in New York. In light of Synergal's substantial revenue from international commerce, undisputed for purposes of the motion to dismiss Standard's third-party action,...