Opinion
01 Civ. 7555 (RCC)
September 11, 2002
Opinion Order
Pending before the Court are motions by Defendants SCS Solars Corp, Frank Wells, Andrew O'Leary, Robert Chisholm, Larry O'Brian, Silvertip Technologies and Mark Morgan (collectively "Defendants") for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(b)(2) and (3) and 12(c), or alternatively, for a transfer of venue; and by Plaintiffs Joseph Cellura, OrbitTravel.com, Corp. and OrbitTravel.com, Inc. (collectively "Plaintiffs") to file an amended complaint. For the reasons explained, the Court grants Defendants' motion to dismiss for lack of personal jurisdiction and denies Plaintiffs' motion to amend the complaint.
Defendants JGS Corp., a Montana corporation, and Porter W. Gifford, III, a Montana resident had filed, a motion for change of venue as well. Plaintiffs' counsel informed the Court on August 2, 2002, that a settlement has been reached with these two parties and that they will be discontinued. Accordingly, the Court does not consider that particular motion. Plaintiffs have 30 days from entry of this order within which to file their stipulation of discontinuance with JGS Corp. and Porter W. Gifford, III with the Court.
I. Background
Plaintiffs OrbitTravel.com Corp. ("Orbit"), a Delaware corporation, its wholly-owned subsidiary OrbitTravel.com, Inc., and their Chief Executive Officer Joseph Cellara ("Cellura") bring this action alleging breach of contract, tortious interference with contract, tortious interference with employment relationship, theft of corporate opportunity, breach of duty of loyalty, fraud, misrepresentation and conversion pursuant to state laws and violations of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1961.
Plaintiff Orbit provides travel-related services and, until December 2000, had office space in Whitefish, Montana that it rented from Defendants JGS Corporation and Porter W. Gifford, III. Complaint ¶ 38. Orbit now has an office in New York City. Plaintiff purchased TravelFile, a computer hardware and software system providing on-line travel services, from Defendant Mark Savoretti, a Florida resident, in January 2000 and made it available through an airline network known as the Global Distribution Systems and the Computerized Reservation Systems ("GDS/CRS") network. Complaint ¶¶ 41-44. Defendant Silvertip, a Montana corporation, through its employee Defendant Mark Morgan ("Morgan"), was an independent contractor to Orbit and provided technical and content support for TravelFile. Complaint ¶ 57. Defendant SCS Solars ("Solars"), a Canadian corporation, buys and resells airline tickets on-line and allegedly depended on TravelFile to reach its vendors on the Internet. Complaint ¶¶ 46-47. Defendants O'Leary, Chisholm, Wells and O'Brian are current or former officers and directors of SCS Solars and reside in Canada. In June 2000, Solars and Orbit allegedly discussed forming a joint venture regarding TravelFile. Plaintiffs claim that Solars agreed to pay $25,000 per month to the GDS/CRS network on Orbit's behalf and, in return, Orbit agreed to allow Solars to remain connected to TravelFile. Complaint ¶¶ 52, 53. Plaintiffs maintain they had confidentiality agreements with all the Defendants.
In August 2000, because a formal agreement between Orbit and Solars had not yet been reached, Orbit began negotiations to sell TravelFile to Advanstar, a Minnesota corporation with an office in New York. Complaint ¶ 71. Plaintiffs claim that the individual Solars Defendants — O'Leary, Chisholm, Wells and O'Brian — learned of the proposed sale and feared it would jeopardize Solar's access to TravelFile. Complaint ¶¶ 72-75. According to Plaintiffs, all of the Defendants then conspired to defraud Plaintiffs of the opportunity to sell TravelFile to Advanstar. First, Solar stopped making payments to the GDS/CRS network for TravelFile Complaint ¶¶ 75, 76. Next, Plaintiffs allege that Defendant Savoretti began claiming that Plaintiffs defaulted on their sale agreement and held himself out as the true owner of TravelFile software. Complaint ¶ 84. Finally, independent contractors Silvertip and Morgan allegedly facilitated the transfer of TravelFile hardware and software to Solars, while still maintaining the connection to the GDS/CRS network. Complaint ¶ 87, 106. In January 2001, Silvertip notified Orbit that it would no longer maintain TravelFile. Complaint ¶ 102.
In February 2001, Advanstar began its technical and feasibility studies for the purchase of TravelFile. Complaint ¶ 95. At the same time, Plaintiff Cellura learned of Solars' failure to pay the GDS/CRS network on Orbit's behalf. Complaint ¶ 109. Plaintiffs claim that Cellura called O'Leary in Canada and that O'Leary explained that Solars was no longer required to make payments to the network since the connection would not be guaranteed after the sale to Advanstar. Complaint ¶ 110. Further, O'Leary allegedly claimed that Solars was not required to make payments inasmuch as Orbit had defaulted on its original purchase from Savoretti. Id. In the meantime, Orbit's landlord in Montana, Defendants JGS Corp. and Porter Gifford ("Landlord Defendants") brought an eviction action to remove Orbit from its Montana office. Complaint ¶ 116. The Landlord Defendants obtained a judgment in possession, took possession of Orbit's rental space and the TravelFile software and hardware. Complaint ¶ 124. In March 2001 TravelFile lost its connection to GDS/CRS network. ¶ 128.
When Cellura confronted O'Leary with the latest development, O'Leary explained that Solars would purchase TravelFile for the same $6 million price Advanstar had offered if Orbit could guarantee the connection to the GDS/CRS network. Complaint ¶ 130. O'Leary allegedly also asked that Cellura execute an indemnity agreement releasing Solars and Silvertip from any liability for prior activities. Id. With the indemnification in hand, Solars allegedly reclaimed TravelFile's connection to the GDS/CRS network. Complaint ¶ 135. Thereafter, O'Leary allegedly informed Advanstar that Orbit defaulted on the original purchase agreement with Savoretti, that Orbit had been evicted from its space in Montana, and that Advanstar should deal directly with Solars if it was interested in TravelFile. Complaint ¶¶ 137, 139, 140. Advanstar apparently refused. Complaint ¶ 143. Finally, Plaintiff claims that the Defendants participated in the judgment sale and schemed to gain ownership and control of TravelFile and have since maintained TravelFile as their own. Complaint ¶¶ 147-150.
The Defendants now move for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(b) and (c). Defendants claim the Court lacks personal jurisdiction over the foreign defendants and that venue in this Court is improper. Additionally, Defendants submit that Plaintiffs have failed to state a claim upon which relief can be granted. Finally, and in the alternative, Defendants move to change the venue to Montana. 28 U.S.C. § 1404. If the Court decides to grant any of the Defendants' requests, Plaintiffs request an opportunity to amend the complaint.
II. Discussion
A. Personal Jurisdiction
A plaintiff faced with a Rule 12(b)(2) motion bears the burden of establishing that the court has jurisdiction over the defendant.DiStefano v. Carozzi North America, Inc., 286 F.3d 81, 84 (2001) (quotingBank Brussels Lambert v. Fiddler Gonzalez Rodriguez, 171 F.3d 779, 784 (2d Cir. 1999)). Here, rather than conducting a "full-blown evidentiary hearing," the Court will rely on the pleadings and affidavits. Accordingly, Plaintiffs need only make a prima facie showing that the Court has personal jurisdiction over the Defendants. Id. (citingBank Brussels Lambert, 171 F.3d at 784). The Court construes the pleadings and affidavits and resolves all doubts in Plaintiffs' favor.CutCo Indus., Inc. v. Naughton, 806 F.2d 361, 365 (2d Cir. 1986).
In both diversity and federal question cases "the court must look first to the long-arm statute of the forum state, in this instance, New York."Bensusan Restaurant Corp. v. King, 126 F.3d 25, 27 (2d Cir. 1997) (citingPDK Labs, Inc. v. Friedlander, 103 F.3d 1105, 1108 (2d Cir. 1997)). "If the exercise of jurisdiction is appropriate under that statute, the court then must decide whether such exercise comports with the requisites of due process." Id. (citing Metropolitan Life Ins. Co. v. Robertson-CEO Corp., 84 F.3d 560, 567 (2d Cir. 1996)). Plaintiffs assert that the Court has personal jurisdiction over Defendants pursuant to several subsections of New York's long-arm statute. N.Y.C.P.L.R. § 302(a)(1), (2) and (3)(ii).
First, Section 302(a)(1) states "a court may exercise personal jurisdiction over any non-domiciliary . . . who in person or through an agent . . . transacts any business within the state or contracts anywhere to supply goods or services in the state." First, the Court notes the Plaintiffs have not alleged that any of the Defendants has contracted to supply goods or services in New York. With respect to the transaction of business prong, a defendant's physical presence in New York is unnecessary, rather jurisdiction is extended to any non-resident who has "purposely availed [himself] of the privilege of conducting activities in New York and thereby invoked the benefits and protections of its laws . . . ." Parke-Bernet Galleries v. Franklyn, 26 N.Y.2d 13, 18 (1970). A single transaction is sufficient, as long as the relevant cause of action arises from that transaction. Bank Brussels Lambert, 171 F.3d at 787 (internal citations omitted). In determining whether a party has "transacted business in New York, [the Court] must look at the totality of circumstances concerning the party's interactions with, and activities within, the state." Id. Here, the only contacts Plaintiffs allege Defendants had with New York are phone calls with Advanstar and Cellura. Plaintiffs do not claim that any Defendant resides in New York, conducts personal business in New York, had an office, bank account or telephone listing in New York or physically entered the state in connection with the claims. Id. Plaintiffs' relationships with all the Defendants stem from their Montana office space and TravelFile, which is also in Montana. In no way have any of the Defendants thrust themselves into New York activities. Accordingly, jurisdiction according to § 302(a)(1) is improper.
Next, Plaintiffs claim jurisdiction is proper under C.P.L.R. § 302(a)(2), which gives the Court "personal jurisdiction over any non-domiciliary . . . who in person or through an agent . . . commits a tortious act within the state. . . ." "A defendant's physical presence in New York is a prerequisite to jurisdiction under § 302(a)(2)."Bank Brussels Lambert, 171 F.3d at 790 (citing Bensusan Restaurant Corp., 126 F.3d at 28)). Plaintiffs have not alleged that any Defendant was ever physically present in New York. Accordingly, § 302(a)(2) cannot serve as a proper basis for jurisdiction over the Defendants.
Finally, Plaintiffs argue § 302(a)(3)(ii) confers jurisdiction over the Defendants. A court has personal jurisdiction over a non-domiciliary who "commits a tortious act without the state causing injury to person or property within the state . . . if he expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce. . . ." C.P.L.R. § 302(a)(3)(ii). In determining whether § 302(a)(3) jurisdiction is proper, the Court must apply a "situs-of-injury test" which will "locate the `original event which caused the injury.'" Bank Brussels Lambert, 171 F.3d at 791 (citing Hermann v. Sharon Hosp. Inc., 135 A.D.2d 682, 683, 522 N.Y.S.2d 581 (2d Dep't 1987)). "The situs of the injury is the location of the original event which caused the injury, not the location where the resultant damages are felt by the plaintiff." Whitaker v. American Telecasting, Inc., 261 F.3d 196, 209 (2d Cir. 2001) (citingMareno v. Rowe, 910 F.2d 1043, 1046 (2d Cir. 1990)). Plaintiffs claim Defendants' tortious activities in Montana and Canada prevented the sale of TravelFile to Advanstar in New York. However, "[t]he occurrence of financial consequences in New York due to the fortuitous location of plaintiffs in New York is not a sufficient basis for jurisdiction under § 302(a)(3) where the underlying events took place outside New York."Id. (quoting United Bank of Kuwait v. James M. Bridges, Ltd., 766 F. Supp. 113, 116 (S.D.N.Y. 1991)). Thus, § 302(a)(3) cannot provide the basis for personal jurisdiction. As none of the provisions of New York's long-arm statute permit jurisdiction here, it is unnecessary to address the issue of due process or Defendants' other theories for dismissal or transfer.
B. Motion to Amend the Complaint
Under Rule 15(a) of the Federal Rules of Civil Procedure, the Plaintiffs are permitted to amend their pleading "once as a matter of course at any time before a responsive pleading is served. . . ." Since Defendants have filed their answers, amendment is permitted "only by leave of court, [which] shall be freely given when justice so requires." Fed.R.Civ.P. 15(a); Foman v. Davis, 371 U.S. 178, 182 (1962) (explaining leave to amend should be granted unless the circumstances of the case warrant a denial). Plaintiffs have not provided the Court with facts or an explanation that would cure the jurisdictional defects and finds an amendment would be futile. Foman v. Davis, 371 U.S. at 182; Jacobs v. Felix Bloch Erben Verlag fur Buhne Film und Funk KG, 160 F. Supp.2d 722, 745 (S.D.N.Y. 2001). Accordingly, Plaintiffs' request to amend the complaint is denied.
III. Conclusion
For the reasons explained, Plaintiffs' complaint is dismissed without prejudice to refile in a court with jurisdiction. As Plaintiffs have not offered any facts to be included in an amended complaint that would give this Court jurisdiction over the Defendants, Plaintiffs' motion to amend the complaint is denied. Plaintiffs must file their stipulation of discontinuance with Defendants JGS Corp. and Porter Gifford and inform the Court of the status of their claims against Defendant Savoretti within 30 days of entry of this order.