Laufer v. Ostrow

• Decision Date: 30 March 1982
• Parties: , 434 N.E.2d 692 Jerome LAUFER, Respondent, v. Ira OSTROW et al., Appellants.
• Court: New York Court of Appeals Court of Appeals

Page 456

449 N.Y.S.2d 456

55 N.Y.2d 305, 434 N.E.2d 692

Jerome LAUFER, Respondent, v. Ira OSTROW et al., Appellants.

Court of Appeals of New York.

March 30, 1982.

Paul S. Sibener, Commack, for appellants

David I. Rosenberg, New Hyde Park, for respondent.

OPINION OF THE COURT

MEYER, Judge.

A New Jersey corporation, the business of which is limited to sales of a product manufactured by a North Carolina company, which employs several sales representatives to solicit and service New York purchasers, and the president of which calls on such purchasers together with the sales representative handling the account, is doing business in New York and is, therefore, subject under CPLR 301 to the jurisdiction of New York courts in an action for breach of contract, conversion and an accounting brought by one of the New York sales representatives, notwithstanding that the corporation accepts all sales at its New Jersey office and has no office, telephone or bank account in New York and notwithstanding that some of the accounts involved in the action are with purchasers outside New York. The president of the New Jersey corporation is not individually subject to the jurisdiction of New York's courts, however, there being no evidence that he engaged in any activity in New York other than on behalf of the sales corporation. The order of the Appellate Division should, therefore, be modified, with costs to defendant Ostrow against plaintiff, by granting the motion to dismiss as to him for want of jurisdiction, and as so modified, should be affirmed, with costs to the plaintiff against the corporate defendant.

I

Defendant Mt. Olive Corporation is a New Jersey corporation the sole business of which is acting as sales agent for Pem-Kay Furniture Company, a North Carolina manufacturer. Ira Ostrow is president and chief salesman of Mt. Olive and a principal in Pem-Kay. Mt. Olive is not licensed to do business in New York and maintains no office, telephone or bank account in New York. Plaintiff Laufer, a New York resident, was hired by Ostrow to act as one of several sales representatives for Mt. Olive on a commission basis and was paid for his services by that corporation. The relationship continued for several years, during which plaintiff solicited the business of purchasers both within and outside New York, and serviced the accounts he obtained by following up on the order, attending to complaints, delivering swatches and sales materials, and running clinics for the personnel of the purchasers. Though he was not required by Mt. Olive to do so and was not reimbursed for the expense of doing so, plaintiff maintained an office in his home. Representatives other than plaintiff also solicited and serviced New York accounts as well as accounts outside New York. Ostrow on at least 8 to 10 occasions per year called on New York accounts with plaintiff, as he did also with the other representatives.

Sales orders obtained by Mt. Olive in 1978 approximated $2,000,000 from such New York accounts as Macy's, Saks Furniture, W&J Sloane and Gertz. All sales were approved by Mt. Olive in New Jersey and forwarded by Mt. Olive to Pem-Kay to be filled. The furniture purchased was shipped by Pem-Kay directly to the purchaser, which made payment either to Pem-Kay or its factors in North Carolina.

Plaintiff's relationship with Mt. Olive having terminated in 1979 by mutual consent, plaintiff brought an action in New York seeking to recover commissions due, for conversion of moneys due and owing plaintiff and for an accounting. Defendants moved to dismiss pursuant to CPLR 3211 (subd. par. 8) and plaintiff cross-moved for discovery. The cross motion was granted and after discovery was had the jurisdictional issue was tried by Trial Term. Following that trial the Trial Term Judge denied the motion to dismiss the complaint finding that defendants' New York contacts were "systematic, regular and continuous" (107 Misc.2d 690, 695, 435 N.Y.S.2d 873), and expressly rejected defendants' argument that mere solicitation was an insufficient basis for jurisdiction on the ground that the business of Mt. Olive was solicitation.

The Appellate Division, 79 A.D.2d 969, 437 N.Y.S.2d 927, with one dissent, affirmed on the reasoning of Trial Term but granted leave to appeal to our court on a certified question asking whether its order was properly made. The dissenting Justice voted to dismiss the complaint because solicitation did not constitute doing business, even though the sole business of the corporation was soliciting sales. Neither court below differentiated between the individual defendant and corporate defendant. We conclude that the corporate defendant was amenable to jurisdiction because it was doing business in New York, but that the individual defendant, who performed no act in New York for himself, as distinct from the corporation, is not.

II

Under CPLR 301 "the authority of the New York courts is based solely upon the fact that the defendant is 'engaged in such a continuous and systematic course of "doing business" here as to warrant a finding of its "presence" in this jurisdiction' " (McGowan v. Smith, 52 N.Y.2d 268, 272, 437 N.Y.S.2d 643, 419 N.E.2d 321, quoting from Simonson v. International Bank, 14 N.Y.2d 281, 285, 251 N.Y.S.2d 433, 200 N.E.2d 427; accord Delagi v. Volkswagenwerk AG of Wolfsburg, Germany, 29 N.Y.2d 426, 430-431, 328 N.Y.S.2d 653, 278 N.E.2d 895; Frummer v. Hilton Hotels Int., 19 N.Y.2d 533, 281 N.Y.S.2d 41, 227 N.E.2d 851, cert. den. 389 U.S. 923, 88 S.Ct. 241, 19 L.Ed.2d 266). The test, though not "precise" (Tauza v. Susquehanna Coal Co., 220 N.Y. 259, 268, 115 N.E. 915), is a "simple pragmatic one" (Bryant v. Finnish Nat. Airline, 15 N.Y.2d 426, 432, 260 N.Y.S.2d 625, 208 N.E.2d 439): is the aggregate of the corporation's activities in the State such that it may be said to be "present" in the State "not occasionally or casually, but with a fair measure of permanence and continuity" (Tauza v. Susquehanna Coal Co., 220 N.Y. 259, 267, 115 N.E. 915, supra) and is the quality and nature of the corporation's contacts with the State 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 here (International Shoe Co. v. Washington, 326 U.S. 310, 316, 320, 66 S.Ct. 154, 158, 160, 90 L.Ed. 95; see, also, Rush v. Savchuk, 444 U.S. 320, 327, 100 S.Ct. 571, 577, 62 L.Ed.2d 516; World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 292, 100 S.Ct. 559, 564, 62 L.Ed.2d 490; Frummer v. Hilton Hotels Int., 19 N.Y.2d 533, 536, 281 N.Y.S.2d 41, 227 N.E.2d 851, supra).

Solicitation of business alone will not justify a finding of corporate presence in New York with respect to a foreign manufacturer or purveyor of services (Miller v. Surf Props., 4 N.Y.2d 475, 480, 176 N.Y.S.2d 318, 151 N.E.2d 874), but when there are activities of substance in addition to solicitation there is presence and, therefore, jurisdiction (Bryant v. Finnish Nat. Airline, 15 N.Y.2d 426, 432, 260 N.Y.S.2d 625, 208 N.E.2d 439, supra Elish v. St. Louis Southwestern Ry. Co., 305 N.Y. 267, 270, 112 N.E.2d 842 see, also, Miller v. Surf Props., 4 N.Y.2d 475, 481, 176 N.Y.S.2d 318, 151 N.E.2d 874, supra; Aquascutum of London v. S.S. American Champion, 426 F.2d 205, 211; Dunn v. Southern Charter, 506 F.Supp. 564, 567). Mt. Olive argues from Miller v. Surf Props. (supra ), and Delagi v. Volkswagenwerk AG of Wolfsburg, Germany, 29 N.Y.2d 426, 328 N.Y.S.2d 653, 278 N.E.2d 895, supra, that as a matter of law it cannot be found present in New York, its activity here, no matter what the volume of sales concluded, being no more than solicitation. Those cases afford it no protection, however, for they hold simply that a iforeign supplier of goods or services for whom an independent agency solicits orders from New York purchasers is not present in New York and may not be sued here, however substantial in amount the resulting orders. In the context of the present case the rules of those cases would, as Trial Term noted, protect Pem-Kay Furniture Company, the North Carolina manufacturer, from suit in New York on the basis of Mt. Olive's activity here, unless it could be shown additionally that Pem-Kay exercised parent-subsidiary control over Mt. Olive ( Delagi v. Volkswagenwerk AG, supra, at p. 432, 328 N.Y.S.2d 653, 278 N.E.2d 895).

At issue here, however, is not jurisdiction over the foreign supplier but over Mt. Olive, the soliciting agency. A corporation, the business of which is limited to the soliciting of orders and servicing of purchasers' accounts, engages directly in its corporate activity when, by persons in its employ and present in New York, it solicits and services New York accounts on a continuous basis (Grunder v. Premier Ind. Corp., 12 A.D.2d 998, 211 N.Y.S.2d 421, mot. for lv. to app. den. 13 A.D.2d 717, 215 N.Y.S.2d 1023; Benware v. Acme Chem. Co., 284 App.Div. 760, 135 N.Y.S.2d 207; see Artcraft Sample Card Co. v. Stein, 3 Misc.2d 562, 155 N.Y.S.2d 672). In Benware, Justice Bergan, as he then was, stated for the court that a foreign corporation which had no office, no bank account and no property in New York but employed six full-time sales...