Opinion
00 Civ. 2981 (MBM)
February 23, 2001
Leslie Trager, Esq., New York, NY, Attorney for Plaintiff.
Leonard S. Reiss, Esq., New York, NY, Attorney for Defendant.
OPINION ORDER
Thomas Hennigan sues Taser International, Inc. ("Taser"), Patrick W. Smith and Phillips Smith for damages arising from, inter alia, the alleged termination of Hennigan's distribution agreement with Taser. Defendants move to dismiss Hennigan's complaint for lack of personal jurisdiction or venue or, in the alternative, to transfer venue. For the reasons set forth below, defendants' motion to dismiss for lack of personal jurisdiction is granted. Defendants' motion to transfer venue is denied.
I.
The following facts are presented in the light most favorable to the plaintiff. Taser is a corporation with its principal place of business in Arizona. (Patrick W. Smith Aff. ¶ 3) Taser markets and manufactures the Air Taser Stun Gun, a non-lethal, self-defense device. (Compl. ¶ 15; Patrick W. Smith Aff. ¶ 7) Phillips Smith is, and at all times relevant to this action was, a shareholder and Chairman of the Board of Taser. (Patrick W. Smith Aff. ¶ 31; Phillips Smith Aff. ¶ 3) Patrick W. Smith is the President and Chief Executive Officer of Taser. (Patrick Smith Aff. ¶ 2) Patrick W. Smith and Phillips Smith are residents of Arizona. (Patrick W. Smith Aff. ¶ 32; Phillips Smith Aff. ¶ 3)
Hennigan is a federally licensed firearms dealer and a resident of New York. (Compl. ¶ 14) According to the complaint, Hennigan and Taser entered into what Hennigan calls a "joint venture," under which it was agreed, via telephone, that Hennigan would distribute Taser products. (Compl. ¶ 19) No written agreement was executed between Hennigan and Taser. Moreover, no representatives of Taser ever visited New York in connection with the negotiation or execution of Hennigan's distribution agreement.
In late 1997, Hennigan, along with his associate, H.A. "Buzz" Russell, began contacting law enforcement agencies throughout the United States with the purpose of selling the Taser products. (Id. ¶ 22) Among the agencies contacted were the New York City Police Department, the Nassau County Police Department and the New York State Police, for whom Hennigan arranged demonstrations of the Air Taser. (Id. ¶ 24) Representatives of Taser, including Patrick Smith, also participated in at least five of these demonstrations, which took place in New York. (Hennigan Aff. ¶ 6) According to Hennigan, by March 3, 1999, the New York City Police Department was "in a position to buy significant quantities of the Air Tasers." (Compl. ¶ 34) Moreover, at some point during this period, Hennigan entered into a "sole source agreement" with the New York City Police Department. (Hennigan Aff. ¶ 8) Although the complaint and accompanying affidavits are unclear as to the nature of this agreement, it appears to designate Hennigan as the New York City Police Department's sole supplier of the Air Taser. (Id.)
The complaint alleges that, on January 6, 2000, Taser attempted to change the terms of its distribution agreement with Hennigan by, inter alia, substantially reducing the number of accounts assigned to him. (Compl. ¶ 42) Hennigan rejected the changes to the agreement. (Id.) On February 21, 2000, Taser terminated its agreement with Hennigan. (Id. ¶ 44) Patrick W. Smith subsequently notified the New York City Police Department of the termination. (Patrick Smith Aff. ¶ 30) Hennigan also alleges that, prior this termination, Taser representatives informed the New York City Police Department that Hennigan was not the exclusive distributor of the Air Taser. (Compl. ¶ 64)
Hennigan started this action in New York State Supreme Court, with claims for breach of contract, quantum meruit, promissory estoppel, breach of fiduciary duty, tortious interference with contractual relations, prima facie tort, fraud and a claim styled "commissions". The action was then removed to this Court.
II.
As noted, defendants move to dismiss for lack of personal jurisdiction. In a diversity case, such as this one, the issue of personal jurisdiction is determined according to the law of the forum state. See Omni Capital Int'l Ltd. v. Rudolf Wolff Co., 484 U.S. 97, 105-10 (1987). If the exercise of jurisdiction is appropriate under the state's statutes, the court must then decide whether such exercise is consistent with due process. Bensusan Restaurant Corp. v. King, 126 F.3d 25, 27 (2d Cir. 1997). Where, as here, there has been no discovery, the plaintiff need only make a prima facie showing by its pleadings and affidavits that jurisdiction over the defendant is proper.Cutco Indus., Inc. v. Naughton, 806 F.2d 361, 365 (2d Cir. 1986). Moreover, a plaintiff seeking to withstand a Rule 12(b)(2) motion is entitled to have its complaint and affidavits interpreted, and doubts resolved, in its favor. See Metropolitan Life Ins. Co. v. Robertson-Ceco Corp., 84 F.3d 560, 566 (2d Cir. 1996).
Hennigan argues that Taser is subject to jurisdiction under N.Y. C.P.L.R. § 301 as a corporation "doing business" in New York. (Pl. Mem. at 9) To satisfy the "doing business" requirement, a plaintiff must establish that the corporation is engaged in a "continuous and systematic" course of business in the forum state. See Jurlique, Inc. v. Austral Bio Lab PTY, Ltd., 187 A.D.2d 637, 639, 590 N.Y.S.2d 235, 237 (2d Dep't 1992). Hennigan has failed to satisfy this burden.
As noted, Taser is an Arizona corporation with its principal place of business in Arizona. (Patrick W. Smith Aff. ¶ 3) Taser has no certificate of incorporation, office, bank account, property or telephone number in New York. (Id. ¶ 4) Taser employees have visited New York only a handful of times since 1997. (Id. ¶ 9) In addition, Taser's sales to New York during 1998 and 1999 amounted to approximately 3% of its nationwide sales. (Id. ¶ 6) These contacts with New York are neither continuous nor systematic, and cannot form the basis for jurisdiction under C.P.L.R. § 301. Moreover, Hennigan's presence in New York as Taser's distributor is insufficient to establish jurisdiction over Taser. See Jurlique, 187 A.D.2d 637, 590 N.Y.S.2d 235 (presence of distributor in New York insufficient to establish jurisdiction over foreign corporation)
Hennigan argues that, notwithstanding the evidence set forth above, Taser is subject to jurisdiction under § 301. He alleges that, beginning in 2000, the New York City Police Department "planned to purchase approximately $1.2 million [worth] of Air Tasers" and that sales to New York at the time of this lawsuit "probably represent 25%-50% of Taser's total sales." (Hennigan Aff. ¶ 5) (emphasis added) However, this evidence fails to demonstrate Taser's "continuous and systematic" contacts with New York. First, vague and generalized allegations, such as these, are insufficient to make a prima facie showing of jurisdiction over an out-of-state defendant. See Ring Sales v. Wakefield Engineering, 90 A.D.2d 496, 454 N.Y.S.2d 645 (2d Dep't 1982) Second, Hennigan's allegations are directly contradicted by evidence submitted by others with personal knowledge of the facts. According to Patrick W. Smith, sales to all New York customers during the first five months of 2000 amounted to $61,555.77 or 4.54% of Taser's total sales — a number significantly less than the $1.2 million conjectured by Hennigan. (Patrick W. Smith Suppl. Aff. ¶ 7) Although a plaintiff opposing a Rule 12(b)(2) motion is entitled to have his complaint and affidavits interpreted, and doubts resolved, in his favor, see Metropolitan Life, 84 F.3d at 566, affidavits premised on personal knowledge are credited over contradictory affidavits based on information and belief. See Raskin v. Compania de Vapored Realsma, S.P., 521 F. Supp. 337 (S.D.N.Y. 1981); see also Birmingham Fire Ins. Co. of Pennsylvania v. KOA Fire and Marine Ins. Co., Ltd., 572 F. Supp. 962, 965 (S.D.N.Y. 1983). Accordingly, Hennigan has failed to make a prima facie showing that Taser is subject to jurisdiction under § 301.
Hennigan argues also that Taser is subject to personal jurisdiction under § 302(a)(1) of New York's Long Arm Statute. Section 302(a) (1) permits a court to exercise jurisdiction over an out-of-state defendant who "transacts any business within the state" and whose claim "arises out of that business activity." Cutco, 806 F.2d at 365. In determining whether and out-of-state defendant has transacted business in New York, a court must look to the totality of the circumstances to determine the existence of such purposeful activity, and may not subject the defendant to jurisdiction based on "random, fortuitous, or attenuated contacts." K.C.L.P., Inc. v. Nash, No. 98 Civ. 3773, 1998 WL 823657, at *4 (S.D.N.Y. Nov. 24, 1998) (citing Cutco, 806 F.2d at 365). Moreover, a claim "arises out of" a defendant's transaction of business in New York when there exists a "substantial nexus" between the business transacted and the cause of action sued upon. See Agency Rent A Car Sys., Inc. v. Grand Rent A Car Corp., 98 F.3d 25, 31 (2d Cir. 1996).
To show that Taser is subject to jurisdiction under § 302(a)(1), Hennigan points to the following: (1) Hennigan's distribution agreement with Taser; (2) the presence of Taser representatives at six meetings in New York with local police departments; and (3) telephone calls made by Taser to local New York police departments regarding Air Taser. Even assuming the truth of these allegations, however, they do not provide a basis for jurisdiction under § 302(a)(1).
First, the contract between Hennigan and Taser was negotiated and executed, if at all, via telephone while Taser remained in Arizona. This is insufficient to establish jurisdiction over Taser in New York. See,e.g., Agrashell, Inc. v. Bernard Sirotta Co., 344 F.2d 583, 587 (2d Cir. 1965) (holding that negotiation and execution of contracts by mail and telephone with persons residing in New York was insufficient to give New York personal jurisdiction over non-domiciliaries). Further, although Taser's other New York activities arguably relate to business transacted in New York, none of Hennigan's claims arose from these activities. For example, Taser's telephone calls to New York police departments and the meetings between Taser representatives and local police departments in New York did not relate to Taser's agreement with Hennigan, but rather to Taser's attempt to promote and sell its product. Were the police departments suing Taser, these meetings and telephone calls could perhaps constitute a basis for exercising jurisdiction. However, in the instant case, Taser's activities in New York lack the required "substantial nexus" to Hennigan's claims to give rise to jurisdiction. See Stein v. Microelectronic Pkg., No. 98 Civ. 8952, 1999 WL 540443, at *4 (S.D.N.Y. July 26, 1999) (holding out-of-state defendant's New York activities relating to transactions with non-plaintiffs were insufficient to establish jurisdiction over defendant).
Hennigan argues that defendants are subject to jurisdiction also under § 301(a)(2) of New York's Long Arm Statute, which permits a court to exercise jurisdiction over a defendant who "commits a tortious act within the state." N.Y. C.P.L.R. § 302(a)(2) (McKinney 2000). Hennigan's argument fails, however, because none of the tortious acts of which Hennigan complains — fraud, tortious interference with contractual relations, prima facie tort and breach of fiduciary duty — was committed in New York.
Under § 302(a)(2), a defendant's physical presence in New York is a prerequisite to jurisdiction. See Bensusan, 126 F.3d at 29. Here, although Hennigan alleges that defendants were in New York on several occasions, he fails to offer any evidence that defendants committed torts while they were present in this forum. Hennigan's most persuasive allegation that defendants were present in New York at the time of their tortious acts is contained in his affidavit, which states that "[t]he fraudulent statements described in paragraph 69 of the complaint were made to me by Patrick W. Smith when he was in New York." (Hennigan Aff. ¶ 9) However, this allegation, without more, does not constitute a prima facie showing that the exercise of jurisdiction over defendants would be proper. See Ring Sales, 90 A.D.2d 496, 454 N.Y.S.2d 745 (holding that vague and generalized allegations of defendant's in-state contacts were insufficient to withstand motion to dismiss).
D.C.P.L.R. § 302(a)(3)
With respect to his tortious interference and prima facie tort claims, Hennigan argues that Patrick W. Smith and Phillips Smith are subject to jurisdiction under C.P.L.R. § 302(a)(3), which provides for jurisdiction over a defendant who, inter alia, "commits a tortious act without the state causing injury to person or property within the state." N.Y. C.P.L.R. § 302(a)(3) (McKinney 2000). I disagree. As discussed, in order to survive a motion to dismiss, a plaintiff need only make a prima facie showing by its pleadings and affidavits that jurisdiction over the defendant is proper. Cutco, 806 F.2d at 365. However, under § 302(a)(3), this prima facie showing requires the plaintiff to show not only that the defendant committed acts causing an injury within the forum state, but also that those acts were tortious.See Family Internet, Inc. v Cybernex, Inc., No. 98 Civ. 0637, 1999 WL 796177, at *7 (S.D.N Y Oct. 6, 1999) ("the exercise of jurisdiction pursuant to section 302(a)(3) requires, at a bare minimum, that the complaint adequately allege a tortious act committed by [the defendant].")
In this case, Hennigan has failed to adequately allege tortious interference on the part of Patrick W. Smith and Phillips Smith. To state a claim for tortious interference, a plaintiff must allege (1) the existence of a valid contract between itself and a third party for a specific term; (2) defendant's knowledge of that contract; (3) defendant's intentional procuring of its breach; (4) damages. See Foster v. Churchill, 87 N.Y.2d 744 (1996). Here, Hennigan alleges that Patrick W. Smith and Phillips Smith informed the New York City Police Department that Hennigan was not a sole source provider and that other Taser dealers were free to compete with Hennigan. (Compl. ¶ 64) First, it is unclear from Hennigan's submissions whether he has any agreement at all with the New York City Police Department. Rather, the complaint implies that Hennigan was simply "designated" sole source supplier "by Taser." (Compl. ¶ 64) (emphasis added) Second, even assuming a contract exists, Hennigan fails to allege, as required, that the contract was for a specific term. He also fails to allege, as required, that there has been a breach of that contract. Accordingly, these allegations are insufficient to establish the commission of a tortious act as required by § 302(a)(3).
Hennigan's prima facie tort allegations also are inadequate. Prima facie tort consists of (1) intentional infliction of harm, (2) causing special damages, (3) without excuse or justification, (4) by an act or series of acts that would otherwise be lawful. Curiano v. Suozzi, 63 N.Y.2d 113, 117, 480 N.Y.S.2d 466, 468 (1984). To state a claim for prima facie tort, a plaintiff must allege that the defendant's "sole motivation . . . was disinterested malevolence." Id. (emphasis added). When there are other motives, such as profit, self-interest or business advantage, no recovery under a prima facie tort theory is permitted. See Marcella v. ARP Films, Inc., 778 F.2d 112, 119 (2d Cir. 1985). Here, Hennigan's prima facie tort allegations are deficient in several respects. Most notably, Hennigan has failed to allege, as required, that defendants' sole motivation in contacting the New York City Police Department about his termination was to harm him. Rather, the only reasonable inference from the complaint is that defendants were motivated by economic and business interests, which undermines Hennigan's prima facie tort claim. Additionally, Hennigan has failed to plead special damages by providing "a particularized statement of the reasonably identifiable and reasonable losses suffered." Western Meat Co., Inc. v. IBP, Inc., 683 F. Supp. 415, 420 (S.D.N.Y. 1988) (internal citations and quotations omitted) "[R]ound sums without any attempt at itemization are not sufficient." Doolittle v. Ruffo, 882 F. Supp. 1247, 1258 (N.D.N.Y. 1994). Hennigan roundly alleges damages of $50 million, and seeks punitive damages of $150 million. Once again, these allegations are insufficient to establish the commission of a tortious act as required by § 302(a)(3)
E. Agency
Finally, Hennigan argues that jurisdiction may be exercised over Patrick W. Smith and Phillips Smith because Taser was subject to their domination and control and therefore acted as their agent in New York. (Pl. Mem. at 12) Although the individual defendants dispute the accuracy of Hennigan's allegations regarding their control and ownership of Taser, resolution of this dispute is not necessary to dispose of the instant motion. As discussed above, Taser is not subject to jurisdiction in New York. Thus, even assuming that Patrick W. Smith and Phillips Smith dominated and controlled Taser's day-to-day activities, jurisdiction over them, as a result of Taser's New York contacts, would be improper.
III.
Defendants also have moved to dismiss the complaint for improper venue or, in the alternative, to transfer this case to the District of Arizona. Because Hennigan's complaint must be dismissed for lack of personal jurisdiction, I decline to consider the issue of venue. In particular, I decline the transfer motion because, as noted, this case initially was filed in state court and was removed. Accordingly, Hennigan may prefer another state forum to a federal court in Arizona.
For the reasons set forth above, defendants' motion to dismiss for lack of personal jurisdiction is granted. Defendants' other motions are denied as moot.