Opinion
602655/07.
Decided February 23, 2009.
Plaintiff was represented by Michael H. Klein, Esq., Kestenbaum, Dannenberg Klein, LLP, New York, New York.
Defendant Studium, Inc. was represented by James Klatsky, Esq., Paykin Mahon Rooney Krieg, LLP, New York, New York.
Defendant Materials Marketing Corporation was represented by Donald J. Tobias, Esq., New York, New York.
This action involves vintage stone tiles which were installed in or about 2000 around the outside deck area and pool area of plaintiff Manny Haber's summer home in Deal, New Jersey. Plaintiff now claims that the tiles, which were sold by defendant Studium, Inc. ("Studium"), a New York based decorator and design company, and manufactured by defendant Materials Marketing Ltd., successor by merger to defendant Materials Marketing Corporation ("Materials"), have deteriorated and delaminated because, contrary to the warranties of the defendants, the tiles are not suitable for outdoor application and could not withstand the frost/thaw conditions.
Plaintiff also maintains a residence in New York.
Plaintiff's Complaint seeks to recover damages (i) against both defendants for breach of express warranty (first cause of action) and violation of the Magnuson-Moss Warranty Act, 15 USC § 2301 et seq. (second cause of action), and (ii) against defendant Studium for breach of the purchase agreements (third cause of action), breach of implied warranty (fourth cause of action) and breach of warranty (fifth cause of action).
Defendant Materials now moves for an order pursuant to CPLR § 3212 granting summary judgment dismissing plaintiff's Complaint and the cross-claims against it on the grounds that: (i) there is no basis to exercise general jurisdiction over it because Materials is not "doing business" in New York State within the meaning of CPLR § 301; and (ii) there is no basis to assert specific jurisdiction over it pursuant to CPLR § 302.
Plaintiff and defendant Studium both argue in opposition that (i) jurisdiction is properly asserted pursuant to CPLR § 301 because Materials was, and is still is, "doing business" in the State of New York; and (ii) jurisdiction is properly asserted pursuant to CPLR § 302(a)(1) because Materials "transacted business" in the State of New York and plaintiff's claims arise out of that "transaction of business."
The parties have already conducted limited discovery on issues relating to long-arm jurisdiction. Materials has produced its President, Jeff Glasener, for deposition and has provided a redacted version of its New York sales over the last 5 years.
A foreign corporation is amenable to suit in New York courts under CPLR 301 if it has engaged in such a continuous and systematic course of "doing business" here that a finding of its "presence" in this jurisdiction is warranted (citations omitted). The test for "doing business" is a "simple [and] pragmatic one," which varies in its application depending on the particular facts of each case (citation omitted). The court must be able to say from the facts that the corporation is "present" in the State "not occasionally or casually, but with a fair measure of permanence and continuity" (citation omitted).
Landoil Resources Corp. v Alexander Alexander Services, Inc., 77 NY2d 28, 33 (1990). See also, Adamowicz v Besnainou, _ AD3d _, 872 NYS2d 47 {58 AD3d 546} (1st Dep't 2009).
"To determine whether a foreign corporation is doing business in New York, courts have focused on a traditional set of indicia: (1) whether the company has an office in the state; (2) whether it has any bank accounts or other property in the state; (3) whether it has a phone listing in the state; (4) whether it does public relations work there; and (5) whether it has individuals permanently located in the state to promote its interests." In re Ski Train Fire in Kaprun, Austria, 230 FSupp2d 376, 381-382 (SDNY 2002). See also, Zipper v Nichtern, 2007 WL 1041667 (EDNY 2007).
It is well settled that "a foreign manufacturer is not present' in New York simply because its subsidiary sells its product through a New York distributor. (citation omitted)." Spencer Trask Ventures, Inc. v Archos, S.A., 2002 WL 417192 (SDNY 2002). See also, Sound Around Inc. v Audiobahn, Inc., 2008 WL 5093599 (EDNY 2008).
Likewise, "[s]olicitation of business alone will not justify a finding of corporate presence in New York with respect to a foreign manufacturer or purveyor of services (citation omitted) . . ." Laufer v Ostrow, 55 NY2d 305, 310 (1982). See also, Pellegrino v Stratton Corp., 679 FSupp 1164 (NDNY 1988).
However, "[s]olicitation and servicing by a foreign corporate sales agency of New York accounts through sales representatives present in New York, if systematic and continuous, is enough to subject the sales agency corporation to New York jurisdiction. The volume of business thus generated, while not determinative, may have relevance." Laufer v Ostrow, supra at 311.
In the instant case, Materials argues that there is no basis to exercise long-arm jurisdiction against it under CPLR § 301 because Materials maintains no office facilities, locations, employees, telephone listings and/or bank accounts in New York, and neither owns nor leases any real property in New York.
In addition, Jeff Glasener, the President of Materials, stated in his Reply Affidavit that the volume of Material's business in New York, including sales to independent decorator companies like Studium, has not exceeded, at any point within the last five years, 1% of its annual sales.
"[C]ourts have generally found that a foreign corporation is not present in New York where the corporation derives less than 5% of its overall revenue from New York customers. (citation omitted)." Yanouskiy v Eldorado Logistics Systems, Inc., 2006 WL 3050871, *5 (EDNY).
Plaintiff, however, claims that Materials is, in fact, present and "doing business" in New York because (i) Materials admits' on its website that it maintains a showroom in New York; (ii) Materials employed an individual in New York during the period, June 6, 2005 through June 30, 2006; (iii) Materials has conducted business with 31 different entities in New York, including Studium, in the last 10 years; (iv) Materials has distributed catalogues and selected samples of its products to home decoration and design businesses in New York; and (v) Materials has solicited business from people in New York through its interactive website.
In addition, Studium contends that Materials has a long pattern of conducting business in New York with Studium, and that Materials used Studium's place as a de facto' showroom in the late 1990s.
Studium represents that it sold approximately $150,000 worth of Materials' products per year from 1998 through 2004.
According to Studium, 30% of the floor space in its showroom was devoted to Materials' products during this period.
Glasener acknowledged during his deposition that the company did, in fact, employ a sales representative in Long Island who worked exclusively from her home from June 6, 2005 through
June 30, 2006. When the individual left the company's employ in 2006, all references to New York were to have been removed from the website. The brief textual mention of a New York location, Materials contends, was a mere oversight.
Notably, this period of employment occurred after the sale of the tiles at issue and prior to the commencement of this action.
Materials further denies that it now or has ever maintained a showroom of its own in New York, and plaintiff has not produced any evidence to the contrary.
Plaintiff, however, argues that Materials systematically and continuously solicits business in New York through an interactive website.
It has been repeatedly held that "the fact that a foreign corporation has a website accessible to New York is insufficient to confer jurisdiction under CPLR § 301. (citation omitted)." Spencer Trask Ventures, Inc. v Archos, S.A., supra at *6. See also, Indemnity Ins. Co. of North America v K-Line America, 2007 WL 1732435, *6 (SDNY), which held that the defendant's website which provided consumers with product information and the locations of retailers who carried its products, but did not sell goods directly via the website, did "not constitute solicitation of business in New York because it is not targeted at New York"; Yanouskiy v Eldorado Logistices Systems, Inc., supra at *5, which held that a website which contained information about the defendant's products and an inventory search device, but did not allow buyers to directly place an order without further communication, was an insufficient basis to assert jurisdiction; Holey Soles Holdings v Foam Creations, Inc., 2006 WL 1147963, *4-*5 (SDNY), which held that a defendant's website, which included information about its products and authorized retailers and even allowed customers around the globe to purchase products from defendant's out-of-state headquarters, was insufficient to confer jurisdiction in New York without evidence of "substantial and continuous" solicitation and engagement" in other activities of substance in the State.' (citation omitted)"; Schultz v Ocean Classroom Foundation, Inc., 2004 WL 488322 *6 (SDNY), which held that even when viewed in connection with the defendant's other activities and in the light most favorable to the nonmovant, a website which listed prices solely in Canadian dollars, made no mention of New York, and had only one link to a New York corporation, was insufficient to establish jurisdiction under CPLR § 301.
At least one court has noted that "[w]ere it otherwise, every entity or individual that ran a highly interactive website from anywhere in the world could be sued for any reason in New York." In re Ski Train Fire in Kaprun, Austria, supra at 383.
Some courts, on the other hand, have held that "interactive websites", which "permit the exchange of information between the defendant and website viewers," as opposed to "passive' websites that display but do not permit an exchange of information", may, in addition to other activities in New York, "support the proposition that the defendant is doing business in the state". Hollins v. U.S. Tennis Ass'n, 469 FSupp2d 67, 74 (EDNY 2006). See also, Bankrate, Inc. v Mainline Tavistock, Inc., 18 Misc 3d 1127 (A) (Sup Ct, Kings Co 2008).
In Chestnut Ridge Air, Ltd. v 1260269 Ontario Inc. , 13 Misc 3d 807, 810 (Sup Ct, NY Co 2006), for example, the court [Acosta, J.] found that a defendant "[i]n essence, . . . created a virtual community in New York that meets all its clients' needs" through an interactive website in which it "substantially" solicited New York business. The court thus held that "[t]he fact that [the defendant] is not physically present in New York is of no moment."
The court noted that the website operated by the defendant, an aircraft maintenance company, enabled the user to obtain a quote on the company's services; stated that the company would e-mail or send computer drawings to the customer for proposed painting projects; maintained a "Forum" on the site that enabled prospective customers to post questions directly to the company's personnel, to receive replies regarding painting, maintenance and custom designed interiors that the company could install, and allowed users to post items for sale or rent; and provided customers a "private website" to monitor a project's daily progress.
Similarly, in Thomas Publishing Co. v Industrial Quick Search, Inc., 237 FSupp2d 489 (SDNY 2002), the court held that plaintiffs had adequately alleged that the defendant had solicited business substantially in New York through its interactive website, and engaged in "additional commercial activity" so as to subject the defendant to personal jurisdiction under CPLR § 301.
In that case, plaintiffs alleged that in addition to listing 269 entities on its website, the defendant had also contacted sales associates in New York to attempt to get them to sell ads for its website, featured more than 75 paid advertisers from New York, and defendant's agent had visited New York "on a series of occasions to further [defendant's] business interests." Thomas Publishing Co. v Industrial Quick Search, Inc., supra at 491.
In the instant case, plaintiff argues that Materials' website supports the proposition that the defendant is doing business in the state because the website provides potential customers with (i) what appears to be a toll-free telephone number so that potential customers can contact Materials, (ii) a forum in which a customer may ask and receive answers to questions, and (iii) a vehicle by which potential customers can obtain from Materials a price quote on a project.
However, although Materials' website may contain these interactive features, there is no indication that a buyer may order products directly from Materials' website. See, Spencer Trask Ventures, Inc. v Archos, S.A., supra; Indemnity Ins. Co. of North America v K-Line America, supra; Yanouskiy v Eldorado Logistics Systems, Inc., supra . Thus, the instant website falls short of creating a "virtual community" in New York.
Viewing the limited interactive features of the website in connection with Materials' other activities, and taking into account all the relevant factors, including Materials' lack of physical presence in New York and the relatively limited volume of business generated in New York in relation to Materials' overall sales, this Court finds that Materials is not amenable to suit in New
York pursuant CPLR § 301.
CPLR § 302(a)(1)
CPLR 302(a)(1) confers in personam jurisdiction over a non-domiciliary if the non-domicilary transacts business within New York State and the claim arises out of that transaction. Even one instance of purposeful activity directed at New York is sufficient to create jurisdiction, whether or not defendant was physically present in the State, as long as that activity bears a substantial relationship to the cause of action (citation omitted).
Corporate Campaign, Inc. v Local 7837, United Paperworkers International Union, 265 AD2d 274, 274-275 (1st Dep't 1999).
However, "[t]he exercise of long arm jurisdiction over Defendants by a New York court must also satisfy constitutional due process standards (citation omitted)" ( Sunward Electronics, Inc, v McDonald, 362 F3d 17, 24 [2nd Cir 2004]); namely, "there must be at minimum, some act by which the defendant purposefully avails itself of the privilege of conducting activities with the forum State, thus invoking the benefits of the protections of its laws.' [citations omitted]." Spencer Trask Ventures, Inc. v Archos, S.A., supra at *3. Thus, "jurisdiction cannot be predicated solely on the plaintiff's acts within the State (citation omitted)." Corporate Campaign, Inc. v Local 7837, United Paperworkers International Union, supra at 275.
Moreover, it is well settled that
mere solicitation [by defendant] of business within the state does not constitute the transaction of business within the state, unless the solicitation in New York is supplemented by business transactions occurring in the state (citation omitted), or the solicitation is accompanied by a fair measure of the defendant's permanence and continuity in New York which establishes a New York presence (citations omitted).
O'Brien v Hackensack Univ. Med. Ctr., 305 AD2d 199, 201 (1st Dep't 2003). See also, CK's Supermarket Ltd. v Peak Entertainment Holdings , 37 AD3d 348 (1st Dep't 2007).
Defendant Materials argues that there is no basis to exercise long-arm jurisdiction against it under CPLR § 302(a)(1). Although plaintiff placed the order for the tiles through Studium in New York, the tiles were apparently shipped from Materials' Texas-based production facility to plaintiff's home in New Jersey. Moreover, there is no evidence that Materials was involved in negotiations of any kind in New York, and no document that was issued and/or executed in connection with the subject transaction contained a New York choice of law provision.
There is no dispute that Materials sent catalogues and/or display products to Studium's New York showroom. However, such activity falls within the category of "mere solicitation" of business
and does not constitute the "transaction of business" within New York. See, O'Brien v Hackensack Univ. Med. Ctr., supra at 201.
Nor, for the reasons discussed above, does Materials' website constitute purposeful activity directed at New York. In addition, plaintiff cannot satisfy his burden of showing that his claims in this action are substantially related to Materials' internet activity. See, Armouth Int'l, Inc. v Haband Co., 277 Ad2d 189 (2nd Dep't 2000).
Therefore, even viewing the evidence in the light most favorable to plaintiff and after considering the "totality of the circumstances" ( Spencer Trask Ventures, Inc. v Archos, S.A., supra at *3), this Court finds that there is an insufficient basis to confer jurisdiction over Materials pursuant to CPLR § 302(a)(1).
Alternatively, plaintiff argues that this motion should be denied as premature on the ground that additional disclosure, including the production of purchase orders which Materials received from Studium from 2001 through 2007 and the further deposition of Mr. Glasener, may reveal information relating to the question of jurisdiction.
However, plaintiff has "failed to advance any non-conjectural ground to believe that the [supplemental] disclosure sought would be productive of evidence supporting an exercise of jurisdiction over" defendant Materials. Warck-Meister v Lowenstein Fine Arts , 7 AD3d 351, 352 (1st Dep't 2004). See also, Greenblatt v Gluck , 15 AD3d 317 (1st Dep't 2005); Turbel v Societe Generale, 276 AD2d 446, 447 (1st Dep't 2000).
Accordingly, based on the papers submitted and the oral argument held on the record on May 14, 2008, this Court must grant defendant Materials' motion for summary judgment. The Clerk may enter judgment dismissing plaintiff's Complaint and all cross-claims against defendant Materials only without costs or disbursements. Plaintiff's claims against defendant Studium are severed and continued.
This constitutes the decision and order of this Court.