PI, Inc. v. Valcour Imprinted Papers, Inc.

• Decision Date: 27 February 1979
• Docket Number: No. 78 Civ. 3590.,78 Civ. 3590.
• Citation: 465 F. Supp. 1218
• Parties: PI, INC., Plaintiff, v. VALCOUR IMPRINTED PAPERS, INC., Frederick H. Collins and Jiffy Manufacturing Company, Inc., Defendants.
• Court: U.S. District Court — Southern District of New York

465 F. Supp. 1218

PI, INC., Plaintiff, v. VALCOUR IMPRINTED PAPERS, INC., Frederick H. Collins and Jiffy Manufacturing Company, Inc., Defendants.

No. 78 Civ. 3590.

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

February 27, 1979.

Burns, Jackson, Miller, Summit & Jacoby, New York City, for plaintiff; Ruth Balen, New York City, of counsel.

Burns, Van Kirk, Greene & Kafer, New York City, for defendants Valcour Imprinted Papers, Inc. and Frederick H. Collins; DiFabio & Couch, P. C., Albany, N. Y., of counsel.

Lilly, Sullivan & Purcell, P. C., New York City, for defendant Jiffy Manufacturing Co., Inc.; Little, Hall & Steinmann, P. A., Baltimore, Md., of counsel.

LASKER, District Judge.

From May, 1969 through February, 1975 Frederick Collins was employed by PI, Inc., a Massachusetts corporation that manufactures and sells polyethylene foam. As a condition of his employment, Collins promised not to disclose at any time any confidential information obtained in the course of his employment, and not to compete with PI, directly or indirectly, for three years after the termination of his employment.

In 1973 PI developed a secret method for extruding polyethylene foam that was lighter than the foam then available from other producers. In 1975 Collins left PI and took a job with Valcour Imprinted Papers, Inc. Shortly thereafter, Valcour began to produce low density polyethylene foam, and entered negotiations with Jiffy Manufacturing Company to form a joint venture, called Jifcour, to produce more foam. In 1977, Jiffy began to produce low density foam, and later that year Jifcour was formed.

PI charges that Collins disclosed PI's trade secret to Valcour and Jiffy, and that Valcour and Jiffy induced him to do so, thereby misappropriating the secret; that Collins breached his contract not to compete and that Valcour and Jiffy induced him to do so; and that these actions of Valcour, Jiffy, and Collins "constitute a grossly unfair method of competition by theft, conspiracy, breach of confidence, and fraud." Complaint ¶ 41.

Jiffy moves to dismiss the action against it for lack of personal jurisdiction over it, and both Jiffy and Valcour move to dismiss for improper venue, or to transfer the case to the Northern District of New York. Following discovery limited to the questions of jurisdiction and venue, the defendants' motions are denied.

Jurisdiction over Jiffy

Under N.Y.Civ.Prac.Law § 302(a), jurisdiction exists over non-domiciliaries in cases alleging causes of action arising out of business transacted or "tortious acts" committed in New York. Beyond question Jiffy has transacted business in New York.¹ The question is whether PI's claims against Jiffy arose out of transactions here.

PI contends that Jiffy illegally induced Collins to breach his agreement with PI by disclosing to Jiffy PI's secret technology for extruding low density polyethylene foam, and by competing with PI through his employment with and financial participation in Jifcour. Almost every contact that Collins had with Jiffy was in New York.² Representatives of Jiffy met with Collins several times in Glens Falls, New York,³ and communicated with him there by telephone and letter.⁴ In addition, representatives of Jiffy and Valcour met seventeen times in New York between August, 1975 and December, 1977 to negotiate the formation of Jifcour and discuss business and marketing plans.⁵ See Liquid Carriers Corp. v. American Marine Corp., 375 F.2d 951, 956 (2d Cir. 1967). Whether these activities are characterized as "transaction of business" in New York or "tortious acts" committed in New York is immaterial: If Jiffy did induce Collins to breach his agreement, it must have done so in New York. PI's claims against Jiffy arise out of Jiffy's activities in New York, and jurisdiction is thus established.

Venue⁶

PI suggests⁷ that venue is proper in the Southern District of New York under 28 U.S.C. § 1392(a), which provides that

"any civil action, not of a local nature, against defendants residing in different districts in the same State, may be brought in any of such districts."

Collins is a resident of the Northern District of New York, and Valcour, a New York corporation, is a resident of every district of the state of its incorporation.⁸ PI contends that Jiffy's activities in the Southern District amount to "doing business" here within the meaning of 28 U.S.C. § 1391(c),⁹ and consequently that Jiffy is a resident of the district "for venue purposes." Thus, according to PI, all the defendants "reside in different districts in the same State," and venue is proper in the Southern District, where some of the defendants reside. Vance Trucking Co. v. Canal Insurance Co., 338 F.2d 943, 944 (4th Cir. 1964); Kirkland v. New York State Department of Correctional Services, 358 F.Supp. 1349, 1350 (S.D. N.Y.1973); De George v. Mandata Poultry Co., 196 F.Supp. 192, 195 (E.D.Pa.1961).

The question whether Jiffy is "doing business" in the Southern District of New York within the meaning of 28 U.S.C. § 1391(c) is distinct from any jurisdictional question.¹⁰ "What constitutes `doing business' for purposes of venue is governed by federal law, even though, in a diversity case, it is state law which determines whether a corporation is `doing business' in the state for purposes of jurisdiction." Control Data Corp. v. Carolina Power & Light Co., 274 F.Supp. 336, 340 (S.D.N.Y. 1967); accord, Honda Associates, Inc. v. Nozawa Trading, Inc., 374 F.Supp. 886, 889-90 (S.D.N.Y.1974). Moreover, venue is geared to federal districts, whereas jurisdiction is geared to states, and consequently the inquiry involved in determining residence for purposes of venue necessarily has a different focus from that involved in determining residence for purposes of jurisdiction.

The "underlying rationale of the venue statutes . . . is to protect defendants from the inconvenience of defending actions in areas remote from their residences or, in the case of corporations, where they have significant activities." Honda Associates, Inc. v. Nozawa Trading, Inc., 374 F.Supp. at 889. In the present case it is clear that Jiffy engages in "significant activities" in the Southern District of New York, and would not be substantially inconvenienced by suit here. Jiffy delivered products worth $1,614,900. to customers in the Southern District in 1977 and 1978,¹¹ and its officers and employees made some sixty business trips to the Southern District during those years.¹² In addition, Jiffy has solicited purchases of its low density polyethylene foam in this district through its attendance at a trade fair here in September 1977¹³ and in visits to some fifty potential customers in 1977 and 1978.¹⁴ Jiffy lists the phone numbers of its New Jersey head office and its New Jersey plant in the New York City telephone directory.¹⁵ Finally, Jiffy representatives met with Valcour representatives in the New York City area on nine occasions to discuss business and marketing plans and negotiate the formation of Jifcour.¹⁶ In sum, Jiffy's "presence" in the Southern District of New York is sufficiently palpable that Jiffy must be deemed to be "doing business" here within the meaning of 28 U.S.C. § 1391(c), and therefore a resident of this district for venue purposes.

There remains one possible objection to PI's claim (under 28 U.S.C. § 1392(a)) that venue here is proper. It has been argued that the purpose of this provision is to relieve plaintiffs of the burden of bringing multiple suits against defendants who reside in different districts in the same state, and therefore that venue under section 1392(a) should be available only when there is no district in which the defendants can be sued under section 1391. This argument has been rejected where the only district in which the defendants can be sued is that in which the claim arose, an alternate which will always be available. Kirkland v. New York State Department of Correctional Services, 358 F.Supp. 1349, 1350 (S.D.N. Y.1973). The question left open in Kirkland is whether venue is proper under section 1392(a) in any district in which one of the defendants resides, when venue in another district in the same state is proper (under section 1391) because all defendants reside there. The answer appears to be that Congress used "absolutely unambiguous language" in section 1392(a), id., language which contains not the slightest hint that venue under that section is available only when there is no one district in which all defendants reside. There is no reason not to construe section 1392(a) to mean what it says. Accordingly, venue in this case is properly laid in the Southern District of New York. See 1 J. Moore, Federal Practice ¶ 0.1431 at 1455 (1974); De George v. Mandata Poultry Co., 196 F.Supp. 192 (E.D.Pa.1961).

Motion to Transfer

The defendants move to transfer this action to the Northern District of New York on the grounds that trial there would be more convenient for the parties and witnesses, and in the interest of justice. 28 U.S.C. § 1404(a). The defendants bear the burden of showing that trial in the Northern District would be substantially more convenient than trial here. Ford Motor Co. v. Ryan, 182 F.2d 329, 330 (2d Cir.), cert. denied, 340 U.S. 851, 71 S.Ct. 79, 95 L.Ed. 624 (1950); Schneider v. Sears, 265 F.Supp. 257, 263 (S.D.N.Y.1967) (Weinfeld, J.); see Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508, 67 S.Ct. 839, 91 L.Ed. 1055 (1947). The defendants' burden is not appreciably diminished in the present case simply because PI is not suing in its home forum, since the Southern District of New York and the State of New York are related to the controversy. Pesin v. Goldman, Sachs & Co., 397 F.Supp. 392, 394 (S.D.N.Y.1975); Allied International Products Ltd. v. Textron Industries, Inc., 382 F.Supp. 210, 213 (S.D.N. Y.1974); Rodgers v. Northwest Airlines, Inc., 202 F.Supp. 309, 312 (S.D.N.Y.1962). In this case, the defendants have not carried their burden.

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