Rolls-Royce Motors, Inc. v. Charles Schmitt & Co.

Decision Date03 April 1987
Docket NumberNo. 85 Civ. 5078 (PKL).,85 Civ. 5078 (PKL).
Citation657 F. Supp. 1040
PartiesROLLS-ROYCE MOTORS, INC., Plaintiff, v. CHARLES SCHMITT & CO. and Charles D. Schmitt, Defendants.
CourtU.S. District Court — Southern District of New York

COPYRIGHT MATERIAL OMITTED

Schnader, Harrison, Segal & Lewis, Donald H. Rivkin, W. Michael Garner, Marjorie L. Cohen, New York City (William P. Kennedy, General Counsel Rolls-Royce Motors, Inc., of counsel), for plaintiff.

Jacob, Medinger & Finnegan, New York City, for defendants.

LEISURE, District Judge:

Plaintiff Rolls-Royce Motors Inc. ("Rolls-Royce"), a Delaware corporation with its headquarters in New Jersey, has brought this action against Charles Schmitt & Co. ("Schmitt Co."), a Missouri corporation, and Charles D. Schmitt ("Schmitt"), a resident of Missouri and president and principal stockholder of Schmitt Co. Schmitt Co., by virtue of a 1984 agreement ("Dealer Agreement") with plaintiff, has been a dealer of new automobiles imported by plaintiff. The contract, which was not executed in New York, provides that Schmitt Co. will "develop the retail sale" of plaintiff's product in St. Louis, Missouri, but does not prevent the defendant from dealing in Rolls-Royce automobiles elsewhere. The Dealer Agreement expressly states that it shall be deemed a New York contract, and shall be interpreted according to New York law.

While Schmitt Co. has been a successful dealer of plaintiff's product, there apparently has been conflict between the parties over the nature of Schmitt Co.'s advertising, alleged misrepresentations by defendants concerning the Rolls-Royce product, alleged false utterances concerning plaintiff's employees, and other alleged breaches of the Dealership Agreement. Despite several meetings between Schmitt and a executive of plaintiff in New York City, these differences were not resolved. Instead, on June 14, 1985, plaintiff terminated Schmitt Co.'s status as a dealer pursuant to a contractual provision providing for such action in the event of an uncured, material breach of the Dealership Agreement by the dealer.

Plaintiff instituted this action seeking: 1) a declaratory judgment that termination of the Dealership Agreement was lawful, to be granted pursuant to the Declaratory Judgment Act, 28 U.S.C. §§ 2201 and 2202; 2) damages for breach of contract; 3) equitable relief in the form of an injunction preventing defendants from uttering statements or engaging in conduct that might impair both plaintiff's business reputation and the integrity of plaintiff's trademark, and that might threaten the safety of plaintiff's employees and representatives; 4) damages and equitable relief in the form of an injunction preventing defendants from uttering statements or engaging in conduct that might impair plaintiff's business reputation or business pursuant to New York's trade-mark and trade name anti-dilution statute, N.Y.Gen.Bus.Law § 368-d; and 5) treble damages for alleged violations of the Racketeer Influenced and Corrupt Practices Act, 18 U.S.C. § 1961 et seq. ("RICO").

Plaintiff alleges that Schmitt Co. breached the Dealership Agreement by impugning the reputation of the Rolls-Royce organization, fellow dealers, and the Rolls-Royce product; by altering automobiles in violation of federal regulations; by altering automobiles and thereby invalidating plaintiff's warranty; by failing to adhere to record-keeping requirements mandated by the Dealership Agreement; by engaging in deceptive advertising; and by conducting its business affairs in a "notorious and outrageous" manner so that plaintiff has been exposed to "ridicule" by virtue of its association with defendants. Plaintiff alleges further that on at least one occasion, while Schmitt was in New York, he uttered disparaging statements over the telephone to plaintiff's employee in Illinois concerning plaintiff and the plaintiff's New York dealer. Schmitt is alleged to have acted similarly, on other occasions, while in St. Louis, Missouri.

The case is now before the Court upon defendants' motion seeking the dismissal of plaintiff's amended complaint due to lack of personal jurisdiction, improper venue, insufficiency of process, and insufficiency of service of process, pursuant to Fed.R. Civ.P. 12(b)(2)-(5). Alternatively, defendants have moved requesting the transfer of this action to the District Court for the Eastern District of Missouri.

DISCUSSION

In deciding whether to dismiss plaintiff's complaint, this Court is guided by the following principles of jurisdictional analysis. Plaintiff's pleadings are to be construed in the light most favorable to it, see Hoffritz for Cutlery, Inc. v. Amajac, Ltd., 763 F.2d 55, 57 (2d Cir.1985), and plaintiff must merely make out a prima facie case of personal jurisdiction, see Beacon Enterprises, Inc. v. Menzies, 715 F.2d 757, 768 (2d Cir.1983), despite contrary allegations by the moving party. See Marine Midland Bank, N.A. v. Miller, 664 F.2d 899, 904 (2d Cir.1981). Given that no evidentiary hearing has been held, plaintiff need not, at this point, prove jurisdiction by a preponderance of the evidence. See Visual Sciences, Inc. v. Integrated Communications, Inc., 660 F.2d 56, 58 (2d Cir. 1981).1

A. Jurisdiction over the Corporate Defendant

Subject matter jurisdiction over the claims against Schmitt Co. is based on diversity of citizenship, 28 U.S.C. § 1332.2 Therefore, the issue of personal jurisdiction is determined by the law of the forum state, in this case, New York. See, e.g., Arrowsmith v. United Press Int'l, 320 F.2d 219, 223 (2d Cir.1963). New York Civil Practice Law and Rules ("CPLR") §§ 301 and 302 set forth the bases upon which New York courts may assert jurisdiction over a non-resident person or foreign corporation. It is beyond cavil that "New York ... has not chosen to extend its long arm jurisdiction to the limits of constitutional tolerance." China Express, Inc. v. Volpi & Son Machine Corp., 513 N.Y.S.2d 388 (N.Y.Sup.Ct. 1st Dep.1987) (Sullivan, J.).

1. The Corporate Defendant is not "Doing Business" Pursuant to CPLR § 301

CPLR § 301 states that "a court may exercise such jurisdiction over persons, property, or status as might have been exercised heretofore." With respect to a foreign corporation, § 301 preserves the case law existing prior to its enactment, which provided that a corporation is "doing business" and is therefore "present" in New York and subject to personal jurisdiction with respect to any cause of action, related or unrelated to the New York contacts, if it does business in New York "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, 917 (1917); accord Laufer v. Ostrow, 55 N.Y.2d 305, 449 N.Y. S.2d 456, 434 N.E.2d 692 (1982). "A non-domiciliary may be served outside New York, and sued upon any cause of action, if it engages in a continuous and systematic course of doing business in New York." Hoffritz, supra, 763 F.2d at 58 (citing Frummer v. Hilton Hotels International, Inc., 19 N.Y.2d 533, 536, 281 N.Y.S.2d 41, 43, 227 N.E.2d 851, 853, cert. denied, 389 U.S. 923, 88 S.Ct. 241, 19 L.Ed.2d 266 (1967); Liquid Carriers Corp. v. American Marine Corp., 375 F.2d 951, 953 (2d Cir.1967)). Whether a corporation may be deemed to be present by virtue of its doing business in the jurisdiction depends upon the application of a "simple and pragmatic" test. Bryant v. Finnish National Airline, 15 N.Y.2d 426, 432, 260 N.Y.S.2d 625, 628-29, 208 N.E.2d 439, 441 (1965). However, the only clear conclusion derivable from these decisions is that a "doing business" determination is unique to each case, requiring consideration of all the facts and circumstances, without relying unduly on any one factor.

As a threshold matter, the Court notes that Schmitt Co. is not incorporated or licensed to do business in New York. "The New York courts, however, in applying the pragmatic test for section 301 jurisdiction, have focused upon additional factors including: the existence of an office in New York; the solicitation of business in the state; the presence of bank accounts and other property in the state; and the presence of employees of the foreign defendant in the state." Hoffritz, supra, 763 F.2d at 58 (citations omitted) (emphasis added). New York courts also look at whether defendant lists a telephone number in the state. When considering this criteria, the facts presented by plaintiff fail to establish that Schmitt Co.'s presence in New York is sufficiently continuous and substantial to warrant the exercise of jurisdiction pursuant to § 301.

As previously noted, Schmitt Co. is not licensed to conduct business in the state. Schmitt Co. does not: (1) maintain a local office or bank account in New York3; (2) possess property in New York; or (3) have a local telephone number. See New World Capital v. Poole Truck Line, Inc., 612 F.Supp. 166, 171 (S.D.N.Y.1985). Nor does Schmitt Co. have shareholders, possess records or employ individuals in this state.

Plaintiff, unable to rely on these classic factors of § 301 jurisdiction, argues that Schmitt Co. is "doing business" in New York because Schmitt Co. has allegedly solicited business in this state. Plaintiff concedes, as it must, that the long-standing New York rule is that solicitation alone, no matter how substantial, will not subject a foreign corporation to the jurisdiction of the New York courts. See Laufer, supra, 55 N.Y.2d at 310, 434 N.E.2d at 694, 449 N.Y.S.2d at 459; Miller v. Surf Properties, 4 N.Y.2d 475, 480, 151 N.E.2d 874, 876, 176 N.Y.S.2d 318, 321 (1958); Beacon Enterprises, supra, 715 F.2d at 763. Nevertheless, plaintiff insists that Schmitt Co. has engaged in a variety of activities amounting to "solicitation plus" in New York.

In Aquascutum of London, Inc. v. S.S. American Champion, 426 F.2d 205 (2d Cir.1970), Judge Friendly examined the "solicitation plus" doctrine. The Court of Appeals noted that:

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