Opinion
No. 01 Civ. 9274 (HB)
April 30, 2002
OPINION ORDER
Mad River Holdings, L.L.C. ("Mad River Holdings"), Mad River Acquisitions, Inc. ("Mad River Acquisitions"), North Peak Resorts, L.L.C. ("North Peak Resorts"), Richard K. Deutsche, Stephen J. Mueller, Clyde Perfect, Jr., and Timothy D. Boyd (collectively, "defendants") move to dismiss Alan Stevens' ("plaintiff's") complaint pursuant to Fed.R.Civ.P. ("FRCP") Rules 12(b)(2) and 12(b)(3) for lack of personal jurisdiction and improper venue, or, in the alternative, to transfer the action to the Eastern District of Missouri pursuant to 28 U.S.C. § 1404 (a). Specifically, plaintiff brings this cause of action against defendants for allegedly failing to compensate him in the amount of $100,000.00 for obtaining a mortgage commitment in the amount of $5,000,000.00. Defendants move on the ground that the parties' contacts in New York were insufficient as a matter of law to bring an action in this Court. For the reasons detailed more fully below, defendants' motion to dismiss, or, in the alternative, to transfer is denied.
BACKGROUND
On a motion to dismiss based on lack of personal jurisdiction and absent an evidentiary hearing to determine whether personal jurisdiction exists (for which neither side asked), the Court must interpret the pleadings and affidavits in the light most favorable to the plaintiff.Central Sports Army Club v. Arena Assocs., Inc., 952 F. Supp. 181, 187 (S.D.N.Y. 1997). The following facts are derived from plaintiffs complaint and supporting affidavit.
Plaintiff is a real estate broker licensed by the State of New York and with his principal place of business in the City, County, and State of New York. (Compl. ¶¶ 3, 12). Defendant Mad River Holdings is a limited liability company organized and existing in Ohio and Missouri; defendant Mad River Acquisitions is a corporation organized and existing in Ohio and Missouri; defendant North Peak Resorts is a limited liability company organized and existing in Ohio and Missouri. The individually named defendants are all residents of Missouri and owned and/or operated the Mad River Mountain Ski Resort (the "resort") in Bellfontaine, Logan County, Ohio. (Compl. ¶¶ 4-11, 13).
On or about February 17, 2001, the parties entered into a written authorization agreement (the "agreement") retaining plaintiffs services as a broker to obtain a mortgage commitment (the "commitment") on the resort. (Compl. ¶ 14). Although the parties did not execute this agreement until February 17, 2001, they had been in the process of negotiating its terms for approximately six months before that time. (Stevens' Aff. ¶ 13). As of February 17, 2001, after plaintiff was engaged by defendants to obtain the mortgage commitment, plaintiff communicated with defendants from his office in the Southern District of New York ("New York") — communications that included the mailing and receipt of written correspondence from and to New York as well as telephonic conferences between Missouri and New York. (Stevens' Aff. ¶ 6). On June 5, 2001, defendants accepted a mortgage commitment in the amount of $5,000.000.00 that plaintiff obtained from Business Loan Express, whose office is also located in New York. (Stevens' Aff. ¶¶ 10, 14). As compensation for plaintiffs services, the agreement provided for a mortgage brokerage fee in the amount of $100,000.00. (Compl. ¶ 17). However, defendants thereafter defaulted on the agreement by refusing to close in accordance with the terms and provisions of the commitment that they had previously accepted. (Compl. ¶ 18). The agreement provided, in part, that "[i]f after accepting a commitment/contract the borrower/seller fails to close because of defects, defaults or misrepresentations by the borrower/seller, then the fee shall be immediately payable to ALAN G. STEVENS." (Compl. ¶ 19). The agreement also provided that it would be "construed and enforced in accordance with the laws of the State of New York." (Stevens' Aff. Ex. A at 2). Thus, in accordance with the terms of the agreement, plaintiff brought this action to recover compensatory damages in the amount of $100,000.00 in addition to any legal expenses incurred. (Compl. ¶ 21).
DISCUSSION
Defendants move to dismiss the complaint pursuant to FRCP Rules 12(b)(2) and 12(b)(3) for lack of personal jurisdiction and for improper venue. Alternatively, they argue that even if venue is proper, 28 U.S.C. § 1404(a) mandates that the action be transferred to the Eastern District of Missouri.
A. Personal Jurisdiction
A district court has broad discretion in determining whether to grant a motion to dismiss based on lack of personal jurisdiction, and may conduct an evidentiary hearing in order to do so. Cutco Indus., Inc. v. Naughton, 806 F.2d 361, 364 (2d Cir. 1986); First Wall St. Capital Corp. v. Int'l Prop. Corp. Ltd., No. 97 Civ. 0702 (JGK), 1998 WL 338105, at *3 (S.D.N.Y. June 24, 1998). Absent such a hearing, the plaintiff need only make a prima facie showing of personal jurisdiction over the defendants,First Wall St. Capital Corp., 1998 338105, at *3, and the court must resolve any doubts raised by the papers in the light most favorable to the plaintiff. Interface Biomed. Labs. Corp. v. Axiom Med., Inc., 600 F. Supp. 731, 735 (E.D.N.Y. 1985). A court sitting in diversity applies the law of the forum state in determining whether personal jurisdiction over the defendant exists. Cutco Indus., Inc., 806 F.2d at 365. Accordingly, plaintiff in this case contends that personal jurisdiction is conferred on defendants pursuant to the New York long arm statute, N.Y.C.P.L.R. § 302(a)(1), which provides, in relevant part, that "[a]s to a cause of action arising from any of the acts enumerated in this section, a court may exercise personal jurisdiction over any non-domiciliary, or his executor or administrator, who in person or through an agent . . . transacts any business within the state." N.Y.C.P.L.R. § 302(a)(1).
In order to establish personal jurisdiction over non-domiciliary defendants, the plaintiff must demonstrate that the defendant transacted business in New York and that the plaintiff's cause of action arises out of the defendant's contacts with New York. Hoffritz For Cutlery, Inc. v. Amajac Ltd., 763 F.2d 55, 58 (2d Cir. 1985). Some "articulable nexus between the business transacted and the cause of action sued upon" must be evident. Should the plaintiff succeed in establishing an "articulable nexus," he must then offer proof that "the transaction of business by the foreign defendant in New York . . . `bear[s] a substantial relationship to the transaction out of which the instant cause of action arose.'"Pellegrino v. Stratton Corp., 679 F. Supp. 1164, 1172 (N.D.N Y 1988) (quoting McGowan v. Smith, 52 N.Y.2d 268, 272, 419 N.E.2d 321, 323, 437 N.Y.S.2d 643, 645 (1981)). "A nondomiciliary transacts business under CPRL § 302(a)(1) when he purposefully avails himself of the privilege of conducting activities in New York, thus invoking the benefits and protections of its laws." Cutco Indus., Inc., 806 F.2d at 365 (internal quotations and citations omitted). Factors that the court may consider in making this determination include:
(i) whether the defendant has an on-going contractual relationship with a New York corporation, (ii) whether the contract was negotiated or executed in New York, and, whether, after executing a contract with a New York business, the defendant has visited New York for the purpose of meeting with parties to the contract regarding the relationship, (iii) what the choice-of-law clause is in any such contract; and (iv) whether the contract requires [the defendant] to send notices and payments into the forum state and subjects [the defendant] to supervision by the corporation in the forum state. Although all are relevant, no one factor is dispositive.Agency Rent A Car Sys., Inc. v. Grand Rent A Car Corp., 98 F.3d 25, 29 (2d Cir. 1996) (citations omitted). Although the plaintiff must show that the defendant engaged in some purposeful activity in New York in connection with the matter at issue, the defendant's actual physical presence in New York is not a prerequisite to establishing personal jurisdiction, Parke-Bernet Galleries, Inc. v. Franklyn, 26 N.Y.2d 13, 17, 256 N.E.2d 506, 508, 308 N.Y.S.2d 337, 340 (1970), and a single transaction in New York is sufficient. PDK Labs, Inc. v. Friedlander, 103 F.3d 1105, 1109 (2d Cir. 1997); First Wall St. Capital Corp., 1998 WL 338105, at *4 Indeed, "transacts any business" pursuant to § 302(a)(1) "has been interpreted to require a certain quality, rather than a specific quantity. of contacts with New York." Broad Horizons, Inc. v. Central Crude, Ltd., No. 94 Civ. 1593, 1994 WL 623075, at *2 (S.D.N.Y. Nov. 9, 1994) (citation omitted).
In this case, plaintiff has demonstrated that defendants purposefully "reached into" New York in connection with the matter at issue — namely, negotiating the agreement — not only by soliciting plaintiff to obtain a mortgage commitment but also by negotiating the terms of the agreement with plaintiff, who was continuously in New York, for a period of approximately six months prior to February 17, 2001, the date on which the agreement was executed. In addition, from February 17 to June 5, 2001. plaintiff made telephone calls to and exchanged correspondence with defendants in his effort to secure a mortgage commitment — which he in fact did obtain from a New York entity, Business Loan Express. Finally, the agreement explicitly provides that New York law will govern the agreement's construction and enforcement. While this last factor alone is not dispositive, the court in Agency Rent A Car System, Inc. noted that an agreement's "choice-of-law clause" is a relevant factor in determining whether personal jurisdiction over a non-domiciliary exists. Agency Rent A Car Sys., Inc., 98 F.3d at 29.
Defendants' reliance on McAny, Inc. v. Carpionato Corp. is misplaced. In that case, the court found that interstate telephone calls, ongoing state correspondence, and two incidental discussions in New York were insufficient to confer personal jurisdiction over non-domiciliary defendants. McAny, Inc. v. Carpionato, Corp., No. 89 Civ. 4528 (JFK), 1989 WL 120191 (S.D.N.Y. Oct. 3, 1989). However, the court based its decision primarily on the fact that the parties' interstate discussions did not "`significantly advance the making of a corporate contract of importance,'" and that the in-state meetings involved "mere discussions" rather than "substantial negotiations." McAny, Inc., 1989 WL 120191, at *2 (internal citation omitted). By contrast, in this case, the parties negotiated the terms of the agreement constituting the very basis of plaintiff's action in New York by means of an interstate exchange of telephone calls and correspondence. Furthermore, a tight nexus exists between plaintiff's claim and the business transacted in New York insofar as plaintiff secured a mortgage commitment — for which he was not paid because of defendants' default — from a New York entity, Business Loan Express. Here, then, the parties' interstate communications did "significantly advance" the agreement which formed the very basis of plaintiff's claim, and personal jurisdiction over defendants therefore exists. Accordingly, defendants' motion to dismiss pursuant to 12(b)(2) is denied.
2. Venue
Defendants move to dismiss plaintiffs complaint pursuant to Rule 12(b)(3) for improper venue. It is well-settled that when venue is challenged, it is the plaintiffs burden to prove that it is proper pursuant to 28 U.S.C. § 1391(a)(2), Saferstein v. Paul, Mardinly, Durham, James, Flandreau Rodger, P.C., 927 F. Supp. 731, 735 (S.D.N Y 1996), and must do so by showing "that the chosen forum lies in the district in which a substantial part of the events giving rise to the claim occurred." Central Sports Army Club, 952 F. Supp. at 188. Here, plaintiff has shown that a substantial part of the events giving rise to his claim occurred in New York.
That statute provides, in relevant part, that "[a] civil action wherein jurisdiction is founded only on diversity of citizenship may, except as otherwise provided by law, be brought only in . . . (2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred . . . ." 28 U.S.C. § 1391(a)(2).
3. Transfer
Defendants contend that if the Court finds that personal jurisdiction over them exists in the Southern District of New York, then it should transfer this action to the Eastern District of Missouri pursuant to 28 U.S.C. § 1404 (a), which provides that "[f]or the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought." 28 U.S.C. § 1404 (a). Although the purpose of this statute is "to prevent waste of time, energy, and money, and to protect litigants, witnesses, and the public against unnecessary inconvenience and expense," it may not be used to "defeat a plaintiffs right to bring an action in the forum of its choice." Central Sports Army Club, 952 F. Supp. at 189. Indeed, absent a showing that "`the balance of convenience and justice weighs heavily in the favor of transfer,'" courts in this circuit generally will not undo a plaintiff's choice of forum.Id. (quoting Somerville v. Major Exploration, Inc., 576 F. Supp. 902, 908 (S.D.N.Y. 1983)).
In this case, defendants point to the fact that "three of the individually named defendants are Missouri residents and one is an Indiana resident, and none of the corporate defendants have offices or places of business in New York. In addition, each of the defendants will offer testimony of witnesses who are located in Missouri and will produce documents located in Missouri." (Defs' memorandum of law at 7). Even so, plaintiffs business is in New York, all his records are here, and plaintiff will likely produce witnesses located in New York — specifically, Business Loan Express. (Stevens' Aff. ¶ 8). As the court wrote in Central Sports Army Club, 952 F. Supp. at 189, a "transfer [that] would merely serve to shift the inconveniences" from defendants to plaintiff does not overcome plaintiffs choice of forum. Furthermore, as discussed supra, I find that a substantial part of the events giving rise to plaintiffs claim occurred in New York — including, perhaps most importantly, plaintiff's successful procurement of the mortgage commitment from Business Loan Express.
Although defendants state here that three defendants are Missouri residents and one is an Indiana resident, plaintiffs complaint lists all individually named defendants as Missouri residents. (Compl. ¶¶ 8-11). Since defendants are not listed by their proper names in the memorandum of law, I am unable to determine which defendant is from Indiana.
CONCLUSION
For the foregoing reasons, defendants' motion to dismiss, a change of venue, or, in the alternative, to transfer is denied. This case is on the September trailing trial calendar.