Lámar v. American Basketball Ass'n

• Decision Date: 12 April 1979
• Docket Number: No. 76 Civ. 3051-CSH.,76 Civ. 3051-CSH.
• Citation: 468 F. Supp. 1198
• Parties: Dwight LAMAR, Plaintiff, v. AMERICAN BASKETBALL ASSOCIATION, Arena Sports, Inc. d/b/a Indiana Pacers and John Y. Brown, Defendants.
• Court: U.S. District Court — Southern District of New York

468 F. Supp. 1198

Dwight LAMAR, Plaintiff, v. AMERICAN BASKETBALL ASSOCIATION, Arena Sports, Inc. d/b/a Indiana Pacers and John Y. Brown, Defendants.

No. 76 Civ. 3051-CSH.

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

April 12, 1979.

Jerry A. Davis, New York City, for plaintiff.

Conboy, Hewitt, O'Brien & Boardman, New York City, for defendants; David Rees Davies, New York City, of counsel.

John S. Reed, Greenebaum, Doll & McDonald, Louisville, Ky., for defendant John Y. Brown.

MEMORANDUM OPINION AND ORDER

HAIGHT, District Judge:

Concepts of personal jurisdiction are continually expanding within the shifting constitutional limits of due process. At issue in this case is jurisdiction over a non-resident individual premised on his "doing business" in New York.¹ See N.Y.C.P.L.R. § 301 (McKinney 1972 & 1978-79 Supp.); ABKCO Industries, Inc. v. Lennon, 85 Misc.2d 465, 377 N.Y.S.2d 362 (S.Ct.1975), aff'd in part, 52 A.D.2d 435, 384 N.Y.S.2d 781 (1st Dept. 1976). Simply stated the question is whether a controlling shareholder, officer and chairman of a New York corporation is amenable to suit here on claims unrelated to his contacts with New York.

I.

The issue arises relatively late in the litigation. Plaintiff Dwight Lamar commenced this action on July 9, 1976, against the American Basketball Association ("ABA") and Arena Sports, Inc., doing business as the Indiana Pacers ("Pacers"). The complaint, as amended in December 1976, sought among other things damages for breach of contract relating to Lamar's employment as a professional basketball player during the 1975-76 and 1976-77 playing seasons. The contractual arrangements among Lamar, the ABA and the Pacers are set forth in a Memorandum Opinion and Order of this Court, dated June 23, 1977, and need not be reiterated here. Suffice it to say that Lamar alleged two items of damages. The first, in the amount of $15,000, represented the balance of compensation allegedly due Lamar for the 1975-76 season under his Pacers/ABA contract. The second, $35,000, represented the difference between Lamar's 1976-77 season earnings and the compensation allegedly guaranteed under his Pacers/ABA contract.

In response to plaintiff's motion for summary judgment on the $15,000 claim, this Court issued the Opinion and Order referred to above. Partial summary judgment was denied, essentially because the record was inadequate with respect to two occurrences.

The first concerned a May 1976 contract (the "Brown contract") between Lamar and John Y. Brown, "owner" of the ABA's Kentucky Colonels franchise (see note 10, infra), whereby Lamar contracted to perform player or public relations services for the Colonels, commencing October 1, 1976. The contract was apparently accompanied by a $15,000 payment from Brown to Lamar. The ABA and the Pacers urged that the Brown transaction may have constituted a novation relieving them of liability for compensation due for the 1975-76 season. However, Brown was not yet a party to the suit and the facts surrounding the $15,000 payment, and thus its legal effect, were unclear.

Secondly, it appeared that, notwithstanding the Brown contract, Lamar had played professional basketball for the Los Angeles Lakers during the 1976-77 season. The nature of the contractual arrangements among Lamar, the Pacers, Brown, and the Lakers was inadequately addressed on the summary judgment motion.

The final factor militating against summary judgment at that time was the fact that Lamar had moved, during the pendency of the summary judgment motion, to join Brown as an additional defendant.

Shortly after the denial of summary judgment, this Court entered an Order, on consent of the then parties, permitting the joinder of Brown as an additional defendant under Fed.R.Civ.P. 20, and the filing of a second amended complaint. Docket entries reflect that the following then occurred: Lamar filed a second amended complaint; the ABA and the Pacers filed their second amended answer; Brown was served and filed an answer; Lamar engaged in discovery with respect to Brown; and finally, Lamar stipulated to a dismissal with prejudice of his claims against the ABA and the Pacers, which was so ordered.

In the present posture of the litigation Lamar seeks recovery from Brown, individually, of the $15,000 and $35,000 referred to earlier, apparently based on theories of breach of the Brown contract and tortious interference with plaintiff's rights under his Pacers/ABA contract and the settlement terms of unrelated litigation spawned by the demise of the ABA. Plaintiff also seeks a declaration of rights and liabilities under the Brown contract.

II.

Discovery has been completed and Brown now moves for dismissal of the complaint, raising three defenses which were asserted by way of his answer and not otherwise waived. See Fed.R.Civ.P. 12(h)(1). Brown contends that New York law provides no basis for the exercise of jurisdiction over his person; that service of process in Florida was insufficient to confer in personam jurisdiction here; and that venue in this Court is improper.

Initially, it must be noted that the Court's order permitting joinder of an additional defendant neither dispensed with the need for acquiring valid in personam jurisdiction over Brown, cf. Fed.R.Civ.P. 19(a), nor obviated compliance with the requirements of Rule 4, Fed.R.Civ.P., respecting service of process.² See Block Indus. v. DHJ Indus., Inc., 495 F.2d 256, 259 (8th Cir. 1974); 7 Wright & Miller, Federal Practice and Procedure § 1659 (1972 ed. & 1979 Supp.). Additionally, pursuant to Rule 82, Fed.R.Civ.P., statutory venue requirements, 28 U.S.C. § 1391(a), must also be met with Brown joined as a defendant. See Wright & Miller, supra § 1659.

I have concluded, for the reasons set forth below, that considerations of judicial economy and the interests of justice weigh in favor of a transfer of this action. There is a substantial question whether personal jurisdiction exists over the defendant. Further, venue in this forum appears to be improper. While a dismissal of the action on these grounds is the usual outcome, plaintiff has requested transfer as an alternative to dismissal.³ Both the Supreme Court and the Second Circuit have sanctioned such a procedure. Goldlawr, Inc. v. Heiman, 369 U.S. 463, 82 S.Ct. 913, 8 L.Ed.2d 39 (1962); Corke v. Sameiet M.S. Song of Norway, 572 F.2d 77 (2d Cir. 1978). Transfer to a district where jurisdiction and venue are proper serves the interests of justice and spares courts and parties the burdens of a litigation premised on possibly erroneous preliminary rulings unrelated to the ultimate merits. See Columbia Pictures Indus., Inc. v. Schneider, 435 F.Supp. 742, 748 (S.D.N.Y.1977); McLaughlin v. Copeland, 435 F.Supp. 513 (D.Md.1977).

III. Personal Jurisdiction

Since subject matter jurisdiction here is based upon diversity of citizenship, 28 U.S.C. § 1332, I must look to New York law to determine whether there is a basis for the exercise of personal jurisdiction over Brown. Beja v. Jahangiri, 453 F.2d 959 (2d Cir. 1972); Arrowsmith v. United Press Internat'l, 320 F.2d 219 (2d Cir. 1963); Top Form Mills v. Sociedad Nationale Ind., 428 F.Supp. 1237 (S.D.N.Y.1977). If such a basis exists, extraterritorial service such as was effected here is authorized under § 313 of the N.Y.C.P.L.R., made applicable to federal court actions by Rule 4(d)(7), (e), (f), Fed.R.Civ.P. See, e. g., McShan v. Omega Louis Brant & Frere, S.A., 536 F.2d 516 (2d Cir. 1976); Hutton v. Piepgras, 451 F.Supp. 205 (S.D.N.Y.1978). Plaintiff bears the burden of establishing the existence of personal jurisdiction, e. g., Lehigh Valley Indus., Inc. v. Birenbaum, 527 F.2d 87 (2d Cir. 1975); Columbia Pictures Indus., Inc., supra, and that statutory prerequisites to the exercise of such jurisdiction have been met. Lehigh Valley, supra; Top Form Mills, supra.

It is uncontested that Brown is neither a citizen nor a resident of New York, and that he was not served with process while physically present in the state. The second amended complaint, and the affidavits and memorandum in opposition to this motion present no argument or factual predicate for exercising personal jurisdiction under New York's long-arm statute. C.P.L.R. § 302.⁴ Rather, it is plaintiff's contention that Brown subjected himself to jurisdiction under C.P.L.R. § 301 by "doing business" in New York.

"Doing business" for jurisdictional purposes remains an elusive concept to be applied on a case by case basis. E. g., Taca Intern'l Airlines v. Rolls-Royce, 21 A.D.2d 73, 248 N.Y.S.2d 273, 275 (1st Dept. 1964), aff'd, 15 N.Y.2d 97, 256 N.Y.S.2d 129 (1965). At its core are notions of systematic and regular business activities within the state conducted "with a fair measure of permanence and continuity." Tauza v. Susquehanna Coal Co., 220 N.Y. 259, 267, 115 N.E. 915, 917 (1917); McShan, supra. When such activities are found, a fictive "presence" arises, see, e. g., Delagi v. Volkswagenwerk AG, 29 N.Y.2d 426, 430-31, 328 N.Y.S.2d 653, 656-57, 278 N.E.2d 895 (1972), subjecting the party to the state's jurisdiction for all purposes. Tauza, supra. Thus, one doing business in New York is amenable to suit on claims even unrelated to activities in the state. E. g., Tauza, supra; Merrill Lynch v. Lecopulos, 553 F.2d 842 (2d Cir. 1977); Top Form Mills, supra.

The traditional application of "doing business" jurisdiction in New York has been with respect to corporate defendants. See McLaughlin, Practice Commentaries to C.P. L.R. § 301 (McKinney 1972 & 1978-79 Supp.). Two lower New York courts have, however, extended the reach of such jurisdiction to encompass an individual defendant sued on claims that did not arise out of his doing business in New York. ABKCO Industries, Inc., supra, 85 Misc.2d 465, 377 N.Y.S.2d 362, aff'd in part, 52 A.D.2d 435, 384 N.Y.S.2d 781.⁵ Application of the ABKCO precedent to the facts of this case requires analysis of the defendant's...