Traub v. Robertson-American Corp., ROBERTSON-AMERICAN

• Decision Date: 22 May 1975
• Docket Number: ROBERTSON-AMERICAN
• Citation: 82 Misc.2d 222,368 N.Y.S.2d 958
• Parties: Jay TRAUB, Plaintiff, v.CORPORATION, Defendant.
• Court: New York Supreme Court

Page 958

368 N.Y.S.2d 958

82 Misc.2d 222

Jay TRAUB, Plaintiff, v. ROBERTSON-AMERICAN CORPORATION, Defendant.

Supreme Court, Special Term, Nassau County, Part I.

May 22, 1975.

Koch & Gluck, New York City, for plaintiff.

Aranow, Brodsky, Bohlinger, Benetar & Einhorn, New York City, for defendant.

MEMORANDUM

BERTRAM HARNETT, Justice.

Few jurisdictional points attract as much interest and litigation as the susceptibility to suit of an unlicensed foreign corporation in a state in which it is not licensed to do business.

Two broad principles embrace the area. The first allows suit generally against an unlicensed foreign corporation actually Doing business in the state. The second deals with a loosely defined area of lesser corporate presence than doing business; but, where, nevertheless, some corporate business has been transacted in the state. This second jurisdictional facet, colorfully denominated 'Long Arm,' permits suits relating to the particular transaction generating the 'Long Arm' jurisdiction. ^*

The ease of formulating the involvement, however, belies its complexity. Not only are there serious definitional questions in both Doing and Transacting business, there are overlaps in principle. The concept of doing business includes transacting it, but a transaction may not constitute the requisite course of doing business.

A particularly interesting nuance is offered when the total New York activity of the unlicensed foreign corporation is done for it by the individual who now seeks to sue it in New York. Where jurisdiction depends wholly on the 'Long Arm' of CPLR 302(a)(1), in that the foreign corporation 'transacts any business within the state,' the agent performi the transaction cannot use the statute to sue his principal. This rule is purely of judicial concoction, with no statutory compulsion. Parke-Bernet Galleries, Inc. v. Franklyn, 26 N.Y.2d 13, 308 N.Y.S.2d 337, 256 N.E.2d 506; Haar v. Armendaris Corp., 31 N.Y.2d 1040, 342 N.Y.S.2d 70, 294 N.E.2d 855, revg. 40 A.D.2d 769, 337 N.Y.S.2d 285. However, there is neither statute, nor case, nor persuasive policy argument, barring an agent from suing his principal foreign corporation where its activities amounted to 'doing business' in New York, even if he conducted all those activities. Cf. CPLR 301. This Court holds that an agent under those circumstances may bring suit here. The appeal of resembling words from 'transacting' to 'doing' business must not be precedentially blinding; the reasons for the rules spell the necessary distinction in result.

All this being so, let us study Jay Traub's activities in New York on behalf of Robertson-American Corporation (called 'RA') and that corporation's motion here to dismiss for lack of jurisdiction (and for inconvenience of the forum).

I. The Facts.

Jay Traub is a New York resident. RA is a Pennsylvania corporation, with conceded facilities in Pennsylvania, Georgia, and Ohio. Its business is manufacture and distribution of ceramic tile and related products.

Traub apparently reached an oral understanding with RA in Pennsylvania for him to sell RA products in New York. RA's president in Pennsylvania sent a letter dated January 18, 1973 to Traub in New York, which described their relationship while disclaiming that the letter was a contract.

The letter purports to outline the 'conditions of (Traub's) employment.' His 'job responsibility (was) as a 'salesman' in the metropolitan New York territory,' specifically New York City, Westchester, and Long Island. The company reserved the right to expand his territory further.

Traub was 'expected' to handle contractor promotion and sales and distributor promotion and sales 'as well as whatever architectural work is necessary to substantially expand the sale of Robertson-American products.' He had 'sales responsibility for all products' sold by RA, although no sales solicited by Traub were valid until approved by RA in Pennsylvania, and all orders were filled from Pennsylvania.

The letter further directed Traub to 'function as a full time and exclusive employee' of RA. It did give him permission to represent two other specified manufacturers, but on the understanding that this would not substantially interfere with his working for RA. That permission was rescindable at any time.

Traub's compensation was to be $12,000 annually, plus commissions, and he was entitled to join the RA employee insurance plans. He was told he could only sell at the prices, terms, and conditions of sale established by the company. And, he was instructed to alter his automobile liability insurance to include RA as a co-insured. Pursuant to this agreement, Traub generated substantial sales for RA, stated to approximate $500,000 in volume.

The arrangement continued until February 16, 1974 when Traub resigned. He felt he had insufficient cooperation from RA in building his sales and his commissions. He then sued RA for back commissions and the loss of potential earnings. RA has not yet answered the merits of the case--to this point, it seeks to dismiss Traub's claim against it in New York on jurisdictional grounds.

II. Under The Long Arm Statute, An Agent Suing A Principal Cannot Bootstrap His Own Activities To Create Jurisdiction.

The key to CPLR 302(a)(1) is whether the unlicensed foreign or nondomiciliary corporation 'transacts any business within the state.' This transaction test normally is satisfied when a nondomiciliary takes orders in the state and ships in the good to fill those orders. Singer v. Walker, 15 N.Y.2d 443, 261

N.Y.S.2d 8, 209 N.E.2d 68.

A. The Agent/Independent Contractor Distinction

Under CPLR 302(a)(1) Analyzed--Common

Law Precepts Of Agency Not Binding.

The parties argued whether Traub was an agent of RA or an independent contractor. They proceeded on some theory that the actions of an agent are traced to his principal, but the actions of an independent contractor are not. As these terms arise in Long Arm context, the common law distinctions between agent and independent contractor seem to have been muddied.

Take these two cases involving independent contractors. In Glassman v. Hyder, 23 N.Y.2d 354, 296 N.Y.S.2d 783, 244 N.E.2d 259, the Court of Appeals denied jurisdiction where a New York real estate broker sued for commissions claimed earned in attempting to sell, in New York, New Mexico property for New Mexican owners. The Court called Glassman an 'independent broker' and would not attribute his activities to the New Mexican defendants. It found that the New Mexican owner had transacted no business in New York. 23 N.Y.2d at 362, 296 N.Y.S.2d at 789, 244 N.E.2d at 263. In Kramer v. Vogl, 17 N.Y.2d 27, 267 N.Y.S.2d 900, 215 N.E.2d 159, a New Yorker contracted to buy and distribute in New York leather goods made and sold to him F.O.B. Austria. When he tried to sue his Austrian supplier for breach of contract, the Court of Appeals again denied jurisdiction finding no transaction of business in New York by defendant. The Court did not consider the act of an independent middleman as any extension of the manufacturer.

However, in Parke-Bernet Galleries, Inc. v. Franklyn, Supra, the Court of Appeals referred to the plaintiffs in both Glassman and Kramer as 'agents.' 26 N.Y.2d at 19, n. 2, 308 N.Y.S.2d at 341, 256 N.E.2d at 509. In Haar v. Armendaris Corp., Supra, an attorney, classically an independent contractor, was termed an 'agent' of his foreign client.

Accordingly, common law precepts of agency are not conclusive in determining whether a particular operative is an 'agent' for purposes of CPLR 302(a)(1). Instead, it seems to turn on the question of for whose account or substantive benefit the transaction is conducted. For whose ultimate business purpose was the business transacted? If chiefly for his principal's purpose, the principal is jurisdictionally bound by those acts. Parke-Bernet Galleries, Inc. v Franklyn, Supra; Haar v. Armendaris Corp., Supra; Elman v. Belson, 32 A.D.2d 422, 302 N.Y.S.2d 961. It is where the operative acts on his own, in pursuance of his own distinct interests and not as an extension of the foreign corporation, that his acts cannot be charged to the nondomiciliary in finding jurisdiction. Glassman v. Hyder, Supra; Standard Wine and Liquor Co., Inc. v. Bombay Spirits Co., Ltd., 20 N.Y.2d 13, 281 N.Y.S.2d 299, 228 N.E.2d 367; Kramer v. Vogl, Supra; A. Millner Co., Inc. v. Noudar, Lda., 24 A.D.2d 326, 266 N.Y.S.2d 289. Accordingly, under the Long Arm statutes, some 'independent contractors' will be deemed 'agents,' causing Long Arm jurisdiction, and some will be deemed 'independent contractors,' not subjecting the foreign corporation for whom they deal to Long Arm jurisdiction. Because of the incidents of his employment, Traub appears on the face of things to be an employee or agent for jurisdiction purposes and not an independent contractor.

In any event, under CPLR 302(a)(1), that distinction is moot where the nondomiciliary corporate activity ostensibly conferring the jurisdiction was performed wholly by the suing performer. If the performer were truly an independent contractor and not working in extension of his supplier's activity, there would be no CPLR 302(a)(1) jurisdiction right at the threshold. If he is concededly an 'agent,' a recent pair of Court of Appeals cases indicates he cannot rely anyway simply on his own activities to supply jurisdiction under

CPLR 302(a)(1). B. An 'Agent' Cannot Rely Solely On His Own

Activities For CPLR 302(a)(1) Jurisdiction.

In Parke-Bernet Galleries, Inc. v. Franklyn, 26 N.Y.2d 13, 308 N.Y.S.2d 337, 256 N.E.2d 506, the Court pondered a nondomiciliary defendant buyer who participated in a New York art auction by telephone. At the New York end of an interstate telephone line, his agent relayed his bids to the floor. In a suit brought by the auctioneer against the buyer, the Court ruled the business transacted by the agent attributable to the principal. But, in a provocative footnote,...