Pneuma-Flo Systems, Inc. v. Universal Machinery, 78 Civ. 69-CSH.

• Decision Date: 28 July 1978
• Docket Number: No. 78 Civ. 69-CSH.,78 Civ. 69-CSH.
• Citation: 454 F. Supp. 858
• Parties: PNEUMA-FLO SYSTEMS, INC. and Morton Weiss, Plaintiffs, v. UNIVERSAL MACHINERY CORP., Defendant.
• Court: U.S. District Court — Southern District of New York

454 F. Supp. 858

PNEUMA-FLO SYSTEMS, INC. and Morton Weiss, Plaintiffs, v. UNIVERSAL MACHINERY CORP., Defendant.

No. 78 Civ. 69-CSH.

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

July 28, 1978.

COPYRIGHT MATERIAL OMITTED

Edmiston, Burrows, Vaccaro & Galloway, Yonkers, N. Y., for plaintiffs; Frederick Buck, Jr., Yonkers, N. Y., of counsel.

Trubin, Sillcocks, Edelman & Knapp, New York City, for defendant; Howard M. Goldstein, New York City, of counsel.

MEMORANDUM OPINION AND ORDER

HAIGHT, District Judge:

The due process era in jurisdiction, ushered in by International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945) and continued apace by decisions such as Shaffer v. Heitner, 433 U.S. 186, 97 S.Ct. 2569, 53 L.Ed.2d 683 (1977), has undoubtedly brought about a more equitable distribution of hardships arising when a local plaintiff seeks redress against a foreign defendant. This revolution, achieved through the repudiation of simple physical presence as the sine qua non of amenability to suit and substituting the forum court's assessment of the defendant's "contacts" with the jurisdiction, has not, alas, been accomplished without cost. The price paid for the abandonment of the hard and fast rules established by Pennoyer v. Neff, 95 U.S. (5 Otto) 714, 24 L.Ed. 565 (1878) has been the virtue of certainty.

The difficulty is no better illustrated than in the present diversity action, a suit by a local sales representative and its president against a California manufacturer for commissions averred to be due and owing under two contracts. Defendant seeks an order pursuant to Rule 12(b)(2), F.R.Civ.P., dismissing the action for lack of personal jurisdiction.¹ It may come as some surprise to plaintiff, and possibly even to its counsel, to be informed that the defendant on whose behalf it has labored long and hard in this state is not amenable to suit here. Having reviewed the record in this case, this is the conclusion which the Court reaches.

I.

Defendant Universal Machinery Corporation ("Universal") exists by virtue of the laws of California, the state wherein it maintains its principal place of business.² It is engaged in the manufacture of "wicketers", a complex piece of industrial machinery used in the production and packaging of plastic bags and other wrapping materials. Universal is devoid of the usual indicia of presence in this forum, such as a license to conduct business in New York, the maintenance here of a local office, employees, designated agent, bank account or other property or a telephone listing.³

Defendant's only connection with New York exists by virtue of its relationship with plaintiff Pneuma-Flo Systems, Inc. ("Pneuma-Flo"), a wholly independent company organized under the laws of this state with its principal place of business in Yonkers, New York and having plaintiff Morton Weiss ("Weiss") as its president. It is involved in the business of selling, repairing and replacing industrial equipment such as that manufactured by Universal. In August, 1973, the parties entered into a one year sales agreement⁴ whereby plaintiff acquired the exclusive right to vend defendant's products in the Eastern United States and Canada on a commission basis. In December, 1974, a second agreement⁵ virtually identical to the prior contract, but having a three year duration, was entered into by the parties. It is averred that Weiss signed the earlier contract in New York,⁶ although it appears that both agreements were negotiated and ultimately executed in California.⁷

Those contracts established plaintiff company as a sales representative of defendant: under the procedure contemplated by those agreements, plaintiff would solicit sales here on behalf of defendant, and forward the orders received to California from which point Universal appears to ship the equipment to either the purchaser, or its sales representative, and bill the purchaser directly. In this manner, it is averred that Pneuma-Flo serviced approximately 15 customers in New York for defendant, and generated between $40,000 and $60,000 worth of business per year.⁸

During the course of the contracts, plaintiff avers that Richard Joice, then a Vice President of Universal, made several trips to Pneuma-Flo's offices for the purpose of suggesting ways in which new customers could be found and present clients induced to enlarge their orders. Meetings with one or more customers were alleged to have been held.⁹ It is further averred that in 1974, Universal's President, one Len Monaco, together with another corporate official, met with Weiss at a trade show in New York City for the purpose of discussing market conditions and trade prospects.¹⁰ Finally, plaintiff urges that Universal's presence in New York is established because its name was placed on Pneuma-Flo's office door, and because a brochure prepared by it states that "decentralized" facilities are maintained by defendant in New York for sales and repair services.¹¹

Based upon the foregoing, plaintiff posits personal jurisdiction over defendant on both Civil Practice Law and Rules ("CPLR") § 301 ("doing business") and CPLR § 302(a)(1) ("transacting business"). These contentions are considered in turn.

II.

It must be noted preliminarily that under New York law, which governs the issues at bar, plaintiff under either CPLR §§ 301 or 302(a)(1) has the burden of establishing by a preponderance of the evidence that defendant's person is properly before the court, Charles Abel, Ltd. v. School Pictures, Inc., 40 A.D.2d 944, 339 N.Y.S.2d 242 (1st Dept. 1972) (§ 301); Lamarr v. Klein, 35 A.D.2d 248, 315 N.Y.S.2d 695 (1st Dept. 1970) (§ 302a1); G.S.C. Assoc., Inc. v. Rogers, 430 F.Supp. 148 (E.D. N.Y.1977). This is entirely appropriate since it is still the rule that defendants should normally be sued where they are found, McGee v. International Life Ins. Co., 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223 (1957). In this connection, although the essential facts as set forth above are not disputed,¹² this Court has resolved all ambiguities or evidentiary conflicts in favor of the party opposing the motion to dismiss. Notwithstanding the Court's construction of the lamentably slim record before it, plaintiff has not borne its burden.

A. Jurisdiction under CPLR § 301.

A non-resident defendant may subject itself to the personal jurisdiction of a New York court under CPLR § 301 if it does business in this State ". . . not occasionally or casually, but with a fair measure of permanence and continuity," Tauza v. Susquehanna Coal Co., 220 N.Y. 259, 115 N.E. 915 (1917); see also Frummer v. Hilton Hotels Int'l., Inc., 19 N.Y.2d 533, 281 N.Y.S.2d 41, 227 N.E.2d 851, remittitur amended, 20 N.Y.2d 737, 283 N.Y.S.2d 99, 229 N.E.2d 696, cert. den., 389 U.S. 923, 88 S.Ct. 241, 19 L.Ed.2d 266 (1967). Normally, when such activity is undertaken here on defendant's behalf by an agent, Frummer v. Hilton Hotels Int'l., Inc., supra; cf. McShan v. Omega Louis Brandt et Frere, S.A., 536 F.2d 516 (2d Cir. 1976), or even an independent contractor operating with the authority and for the substantial benefit of the non-resident, Galgay v. Bulletin Co., Inc., 504 F.2d 1062 (2d Cir. 1974); Gelfand v. Tanner Motor Tours, Ltd., 385 F.2d 116 (2d Cir. 1967), cert. den., 390 U.S. 996, 88 S.Ct. 1198, 20 L.Ed.2d 95 (1968), those acts may be attributed to the non-domiciliary for the purpose of ascertaining its liability to a New York judgment in personam. Where, however, it is the local representative itself rather than a third party who seeks to reach the foreign defendant, the plaintiff's own efforts here on defendant's behalf may not be entered into the jurisdictional computation.

Such is the holding of Haar v. Armendaris Corp., 31 N.Y.2d 1040, 342 N.Y.S.2d 70, 294 N.E.2d 855 (1973), rev'g, 40 A.D.2d 769, 337 N.Y.S.2d 285 (1st Dept. 1972,¹³ wherein the New York Court of Appeals put its imprimatur upon a dissent filed in the court below, which held that an agent may not rely upon its own acts in seeking to establish long-arm jurisdiction over a non-domiciliary principal. This construction has its genesis in dicta found in Parke-Bernet Galleries, Inc. v. Franklyn, 26 N.Y.2d 13, 19 n.2, 308 N.Y.S.2d 337, 341 n.2, 256 N.E.2d 506 (1972)¹⁴ to the effect that only the independent, repeated and purposeful acts of a non-resident principal will suffice to render it liable to in personam jurisdiction in a lawsuit instituted by its agent. The rationale for this rule has not been thoroughly elucidated, although it does appear to rest on a reluctance, for equitable reasons, to allow local plaintiffs to gain personal jurisdiction over their foreign affiliates through their own unilateral conduct. This "bootstrap" doctrine has met with a chilly critical reception from courts¹⁵ and commentators¹⁶ alike; but however insupportable the rule may seem, the federal courts in this area are bound by the clear pronouncements of the forum state's highest tribunal.

In a noble effort to confine this seemingly unwarranted curtailment of state power, one New York court has declined to apply the Haar rule in cases in which personal jurisdiction over the non-resident defendant is predicated upon the more continuous and purposeful contacts required to find it "doing business" under CPLR § 301. In Traub v. Robertson-American Corp., 82 Misc.2d 222, 368 N.Y.S.2d 958 (Sup.Ct.Nassau Cty. 1975),¹⁷ the court refused to preclude a local sales agent from asserting jurisdiction over its foreign principal based only upon plaintiff's unilateral acts here. Justice Harnett contended that the limitation of the Haar doctrine to CPLR § 302(a)(1) was reasonable because a corporation "doing business" in New York was more likely than a casual "transacter of business" to be present here in the literal sense. This rationale is unpersuasive since it assumes its own conclusion: that is, it posits the doing of business which is, of course, the matter to be determined by...