Northland Paper Company v. Mohawk Tablet Company

• Decision Date: 18 May 1967
• Docket Number: No. 66 Civ. 2517.,66 Civ. 2517.
• Citation: 271 F. Supp. 763
• Parties: NORTHLAND PAPER COMPANY, Inc., Plaintiff, v. MOHAWK TABLET COMPANY, Defendant.
• Court: U.S. District Court — Southern District of New York

271 F. Supp. 763

NORTHLAND PAPER COMPANY, Inc., Plaintiff, v. MOHAWK TABLET COMPANY, Defendant.

No. 66 Civ. 2517.

United States District Court S. D. New York.

April 5, 1967.

On Motion for Certification May 18, 1967.

COPYRIGHT MATERIAL OMITTED

Weisman, Celler, Allan, Spett & Sheinberg, by Milton Waxenfeld, New York City, for plaintiff.

Townley, Updike, Carter & Rodgers, by John Paul Reiner, New York City, for defendant.

OPINION

TYLER, District Judge.

In this diversity action, defendant Mohawk Tablet Company ("Mohawk"), a Delaware corporation whose principal place of business and only plant are in Chicago Heights, Illinois, moves for an order dismissing the complaint for breach of contract by plaintiff Northland Paper Company, Inc., a New York corporation which has its principal office in New York City and a paper mill in Norfolk, New York.

Defendant moves pursuant to Rule 12 (b) (2), F.R.Civ.P., for dismissal because of lack of in personam jurisdiction on the ground that it did not transact business in New York State within the meaning of Section 302(a) (1) of the Civil Practice Law and Rules ("CPLR"), New York's jurisdictional "long-arm statute". Defendant also moves, pursuant to Rule 12(b) (4), F.R.Civ.P., for dismissal because of insufficiency of process upon it at its office in Chicago Heights, Illinois.

Because of the presence of issues of fact bearing on this jurisdictional question, a hearing was held on January 4, 1967, to adduce evidence on this aspect of the controversy. The following discussion incorporates the findings of fact and conclusions of law reached by the court as a result of that hearing.

I. THE LOCUS OF THE NORTHLAND - MOHAWK NEGOTIATIONS

Section 302 of the CPLR provides, in relevant part:

"(a) Acts which are the basis of jurisdiction. A court may exercise personal jurisdiction over any nondomiciliary * * * as to a cause of action arising from any of the acts enumerated in this section, in the same manner as if he were a domiciliary of the state, if, in person or through an agent, he:

1. transacts any business within the state * * *."¹

"Mohawk basically contends that it conducted no business in New York State which was related to the contract; specifically, Mohawk maintains that no part of the contract negotiations was conducted here. The validity of these arguments will be decided within the factual framework which is summarized below."

In the spring of 1965, Mohawk wanted to purchase some paper in order to fulfill its obligations under a government contract. On April 9, Alex Golden, then president of Mohawk, came to New York City to discuss a contract for the sale of the needed paper with Harry Zucker, who was vice-president of Monodon Paper Corporation. Golden proceeded to Zucker's office at 200 Park Avenue where he was introduced to Jerome Sonnenborn, who was president of Monodon. Following negotiations, to be described and analyzed hereinafter, a contract was agreed upon by the three men and a written commitment for the sale was given to Golden.

When Golden returned to Chicago, he had one of his employees draw up a purchase order to "Monodon Paper Corporation". This order was subsequently sent to the offices of Zucker and Sonnenborn and represented the formal confirmation of the contract between Monodon and Mohawk. A few days later, however, Zucker called Golden and asked him to rewrite the purchase order to the "Northland Paper Company" instead of to Monodon. There was no discussion as to changes or possible changes in any of the terms and conditions set out in the original purchase order drawn to Monodon. The requested new order was duly drawn up and sent to Zucker as requested.

On the basis of these facts, defendant urges that the Northland-Mohawk contract, here sued upon, was not negotiated in New York. In essence, defendant contends that since the original purchase order written to Monodon was replaced by one written to Northland, which was, in fact, a wholly-owned subsidiary of Monodon, the court cannot take into consideration the April 9 negotiations among Golden, Zucker, and Sonnenborn in deciding whether or not this court has jurisdiction over Mohawk pursuant to Section 302(a) (1) of the CPLR.

Defendant's position is untenable because it seeks to have the court rule on a highly technical basis which gives form unwarranted pre-eminence over substance. It is clear that the contract in question here resulted from the negotiations of April 9. Conversely, it is clear that but for the April 9 talks among Golden, Zucker, and Sonnenborn, this contract would never have been consummated. The issuance of a second purchase order drawn to Northland rather than Monodon resulted in no alteration of the terms and conditions of the original contract nor was any modification mentioned when the subject of the second purchase order was discussed. Although the corporate identity of the selling firm was changed, the same men remained responsible for the formation and the execution of the contract. In sum, the substitution of Northland for Monodon had no practical or economic effect on the contract agreed to by Golden, Zucker, and Sonnenborn on April 9. Accordingly, there is no sound reason why it should have any legal effect.²

II. THE "TRANSACTION OF BUSINESS" IN NEW YORK

An application of the plain meaning of Section 302(a) (1) of the CPLR suggests that the New York courts have jurisdiction over the case at bar. This conclusion is based upon the uncontroverted fact that an officer of the defendant corporation did come to New York to negotiate the terms and conditions of the contract which is the subject of this suit.³ Such activity by defendant would apparently amount to a transaction of business within the state from which this cause of action arises.

An analysis of judicial interpretations of Section 302(a) by the New York courts indicates, however, that an application of the statute's plain meaning may not be appropriate. See, e. g., Kramer v. Vogl, 17 N.Y.2d 27, 267 N.Y.S.2d 900 (1966); Longines-Wittnauer Co. v. Barnes & Reinecke, 15 N.Y.2d 443, 261 N.Y.S.2d 8, 209 N.E.2d 68 (1965). Instead, the issue of jurisdiction should apparently be decided in terms of the totality of defendant's "purposeful activity" within the state which is related to the transaction of business in question. See Longines-Wittnauer Co. v. Barnes & Reinecke, supra; 1965 Supplementary Practice Commentary by Joseph M. McLaughlin, McKinney's CPLR § 302, 1966 Supp., pp. 69-75.

Since the issue must be decided in this context, it is necessary to summarize and analyze defendant's activities in New York which had a bearing on the contract here in question.

Prior to January, 1965, an invitation to bid on a government contract was published by the General Services Administration ("GSA") on behalf of the United States of America. The subject of the contract was the supply of paper writing tablets for use by government employees. Mohawk submitted a bid in writing and forwarded the same to GSA in New York City. Monodon also submitted a bid.

In January, 1965, the bids were opened in New York City and Mohawk was announced as low bidder. Mr. Alex Golden, then president of Mohawk, and Mr. Harry Zucker, then vice-president of Monodon, were physically present. Although the bidders were not required to attend the opening, they were able to get advance information, which would be of use for planning purposes, as to who would be the low bidder. In this sense, the presence of Mr. Golden at the opening of the bids amounted to the transaction of business which, as the following discussion will show, was related to the contract here in issue. Apparently, Golden and Zucker had no conversation inter sese which had any direct bearing upon the contract. (SM 18)

Thereafter, about the end of March or beginning of April, 1965, the GSA mailed an award of contract to Mohawk's offices in Chicago Heights, Illinois. On April 8, Zucker called Golden in Chicago and told him that he, Zucker, had learned of the award of the contract to Mohawk by GSA. Zucker stated that, since his company⁴ had purchased a paper mill in upper New York State, it could supply the paper (in rolls) that would be required by Mohawk to fulfill the GSA contract. Zucker further asserted that his firm could manufacture the paper to government specifications. (SM 62-63). Golden responded to this information by telling Zucker that if the latter's company could supply the paper, he, Golden, would come to New York to negotiate the price.

On April 9, the day following the telephone conversation, Golden arrived in New York. He proceeded directly to Zucker's office at 200 Park Avenue where he met Zucker and Jerome Sonnenborn.

This meeting has already been described in part in the earlier section of this memorandum dealing with the locus of the Northland-Mohawk negotiations. Because of the meeting's critical bearing on the problem of transaction of business, the following discussion will describe the meeting in more detail.

Golden began his conference with Zucker and Sonnenborn at approximately 10:30 a. m. The formal conference lasted about two hours and was followed by lunch. During their conversations, the three men discussed, and ultimately agreed upon, all of the terms and conditions of a purchase by Mohawk of six thousand tons of paper. Those components of the contract specifically discussed were as follows: price, specifications, terms of delivery, terms of payment, and shipping requirements.

Defendant would have the court find that all components, except for price, had been agreed upon during the Zucker-Golden telephone conversation of the previous day. To a limited extent this is true in that there is evidence that quantity and the ability of Northland (or Monodon) to meet the government specifications were discussed over the telephone. The fact that these items were further discussed and agreed upon during the conference shows, however, that they had...