Opinion
91 Civ. 5925 (JSM).
February 4, 1992
MEMORANDUM OPINION AND ORDER
Defendant moves to dismiss plaintiff's legal malpractice claim for lack of personal jurisdiction. For reasons set out below, the Court finds that this claim does not fall within the scope of New York's long arm statute, and therefore the Court lacks personal jurisdiction. However, instead of dismissing the action the Court in the interest of justice, pursuant to 28 U.S.C. § 1406(a), transfers it to the Northern District of Texas.
Background
The U.S. Mexican Development Corporation's ("U.S.M.D.C.") legal malpractice claim arises out of litigation brought by Suzanne McDonough against U.S.M.D.C. in Texas state Court. The suit resulted from a dispute regarding a contract which was negotiated in New York between U.S.M.D.C., a resident of Connecticut, and McDonough, a Chicago resident, concerning property located in Mexico. U.S.M.D.C., through its attorney A. Joseph Tandet, retained defendant C.A. Searcy Miller (now deceased) to interpose a special appearance to challenge the jurisdiction of the Texas State court over the action. Miller failed to verify the special appearance as required by Texas law. U.S.M.D.C. retained another law firm in an attempt to cure the defect in the special appearance. The Texas court, however, found that the plaintiff had made a general appearance in the action, since the special appearance was unverified, and directed the parties to proceed with discovery. U.S.M.D.C. then filed suit against McDonough in the Southern District of New York. The Southern District court dismissed the suit because of the litigation pending in Texas.
The complaint on page four refers to U.S.M.D.C. as a resident of Connecticut, while on page one it states that it is a Delaware corporation doing business in New York.
Plaintiff alleges that the actions of defendant Miller severely prejudiced plaintiff by permitting the Texas court to retain jurisdiction despite the action having nothing to do with Texas. In particular, plaintiff contends that it incurred extensive legal fees in addition to being forced to submit to the jurisdiction of Texas and relinquishing its rights in New York.
Personal Jurisdiction Under New York's Long Arm Statute
Plaintiff asserts that New York long arm jurisdiction is proper based on either N.Y. Civ. Prac. L. R. § 302(a)(1) or (3) (McKinney 1990). These sections provide:
As 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:
1. transacts any business within the state or contracts anywhere to supply goods or services in the state; or
. . . .
3. commits a tortious act without the state causing injury to person or property within the state, except as to a cause of action for defamation of character arising from the act, if he
(i) regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in the state, or
(ii) expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce. . . .
"In a motion to dismiss for lack of jurisdiction," the Court must construe the affidavits and pleadings "in the light most favorable to the plaintiff." Painewebber Inc. v. Westgate Group, Inc., 748 F. Supp. 115, 118 (S.D.N.Y. 1990). Taking into consideration the above standard, the Court now will evaluate whether the plaintiff's claim fulfills the requirements of New York's long arm statute.
A. Tortious Act Causing Injury in New York
U.S.M.D.C. alleges that defendant Miller's malpractice in Texas caused injury to plaintiff by not allowing plaintiff to pursue its litigation in the Southern District rather than the Texas court. Plaintiff argues that the situs of its injury was New York, since the malpractice prejudiced the plaintiff's rights in New York, and therefore the Court has long arm jurisdiction over the defendant based on N.Y. civ. Prac. L. . R. § 302(a)(3). This statute permits New York courts to exercise personal jurisdiction when a defendant's tortious act outside the state causes injury to a person or property within the state, as long as other additional requirements enumerated in § 302(a)(3)(i) or (ii) are met. N.Y. Civ. Prac. L. . R. § 302(a)(3).
In essence, however, as made clear in its complaint, plaintiff is claiming financial injury stemming from defendant's malpractice in Texas. This type of indirect injury in New York cannot support New York long arm jurisdiction under N.Y. Civ. Prac. L. R. § 302(a)(3), since such jurisdiction would be based solely on the plaintiff's place of business. "It has . . . long been held that the residence or domicile of the injured party within a State is not a sufficient predicate for jurisdiction, which must be based upon a more direct injury within the State and a closer expectation of consequences within the State than the indirect financial loss resulting from the fact that the injured person resides or is domiciled there." Fantis Foods, Inc. v. Standard Importing Co., 49 N.Y.2d 317, 425 N.Y.S.2d 783, 787, 402 N.E.2d 122 (1980). In the case of a commercial, nonphysical tort such as this, the cite of the injury is where "the critical events associated with the dispute took place." Smith v. Morris Manning, 647 F. Supp. 101, 104 (S.D.N.Y. 1986) (quoting American Eutectic Welding Alloy Sales Co. v. Dytron Alloys Corp., 439 F.2d 428, 433 (2d Cir. 1971); Faherty v. Fender, 572 F. Supp. 142, 149 (S.D.N.Y. 1983); Weiss v. Greenburg, Traurig, Askew, Hoffman, Lipoff, Quentel Wolff. P.A., 85 A.D.2d 861, 446 N.Y.S.2d 447, 449 (App.Div. 1981)),vacated and transferred, 657 F. Supp. 180 (S.D.N.Y. 1987); accord Chemical Bank v. World Hockey Ass'n, 403 F. Supp. 1374, 1379 (S.D.N.Y. 1975).
Plaintiff might seek to assert that in addition to the pecuniary damage, he also lost his right to bring suit in New York, a potential loss within the contemplation of the alleged tortfeasor, and a more localized injury than financial detriment. However, we can equate the loss of the right to sue in New York with a financial loss equivalent to the increased cost of litigating the case in a far off jurisdiction. Since the choice of forum at most indirectly influences the choice of law, and the plaintiff has not argued that he was or will be disadvantaged by the choice of law, this alleged deprivation of a "right" in actuality reduces to financial damage.
In both Weiss v. Greenburg, Traurig, Askew, Hoffman, Lipoff, Quentel Wolff, P.A., 85 A.D.2d 861, 446 N.Y.S.2d 447 (App. Div. 1981) and Smith v. Morris Manning, 647 F. Supp. 101 (S.D.N.Y. 1986), vacated and transferred, 657 F. Supp. 180 (S.D.N.Y. 1987), the courts considered similar legal malpractice claims and found New York jurisdiction to be inappropriate. In Weiss, plaintiff, who was domiciled in New York, retained a Florida law firm to handle a foreclosure dispute in Florida. Plaintiff alleged that his attorney did not represent him adequately, causing him to suffer financial loss to his note and second mortgage, both of which were held in New York. Weiss, 446 N.Y.S.2d at 448. The court found that, despite the location of the note, mortgage, and plaintiff in New York and the decrease in value of the financial instruments, this did not meet the requirement of "injury to person or property within the state." Weiss, 446 N.Y.S.2d at 449. Because the alleged malpractice took place in Florida and the underlying litigation arose out of a dispute over a security interest in Florida property, the injury could not be regarded as a New York injury. Weiss, 446 N.Y.S.2d at 449.
In Smith the plaintiff, a resident of New York, hired the defendants, Georgia attorneys, to advise him on estate and tax planning. The defendants performed all their services for plaintiff in Georgia. According to Smith, the defendants' advice concerning a building he owned in New York cost him over $200,000 dollars in increased tax liabilities as well as additional legal fees. The Smith court found the injury to have occurred in Georgia because this was the cite of the "critical events."Smith, 647 F. Supp. at 104.
Similarly, although the contract which gave rise to the suit between U.S.M.D.C. and McDonough in Texas was negotiated in New York, there is no reason why this should be considered a "critical event." The holdings in Smith and Weiss illustrate that "the critical events associated with [a malpractice] dispute" should generally be regarded as taking place where the alleged malpractice occurred, since the malpractice claim, rather than the underlying action, is the relevant dispute. Thus, the "critical event" in the instant case is the defendant's alleged failure to properly interpose a special appearance in Texas. Therefore, the place of the injury is Texas and the claim falls outside the scope of N.Y. Civ. Prac. L. R. § 302(a)(3).
B. Transaction of Business within the State
U.S.M.D.C. also attempts to assert New York long arm jurisdiction based on N.Y. Civ. Prac L. R. § 302(a)(1), arguing that the defendant was transacting business within the state. Plaintiff's contention, however, is without merit.
Plaintiff relies on defendant's limited contacts with New York to support jurisdiction. U.S.M.D.C. argues that by Miller allowing his name to be included in an index of attorneys willing to act as local counsel for Joseph A. Hamerman Associates Miller was soliciting business in New York. Plaintiff points out that Tandet, plaintiff's New York counsel, obtained defendant's name from Levy, an attorney at the Hamerman firm. Plaintiff also emphasizes that Levy previously had retained Mr. Miller in ten to fifteen matters. Furthermore, U.S.M.D.C. contends that the contract at issue in the underlying litigation was negotiated in New York.
First, plaintiff's contention that defendant solicited business in New York is shaky at best. The affidavit (submitted by plaintiff) of Mr. Levy, general counsel to the firm of Joseph A. Hamerman Associates, Inc., describes the alleged solicitation: "Joseph A. Hamerman Associates, Inc. maintained a card file index listing attorneys throughout the United States that would accept referrals of . . . subrogation claims. One of the attorneys on that list was the decedent C.A. Searcy Miller." Levy does not indicate that defendant sought to have himself included in this index, or even knew of the existence of such an index. Apparently, the firm maintained the listing to help it carry out its business of handling subrogation claims on behalf of insurance carriers. If, as the affidavit suggests, Mr. Miller played a passive or non-existent role in the maintenance of the listing, such behavior does not constitute solicitation within the traditional meaning of the term. See Webster's Third New International Dictionary 2169 (1986).
Even if Miller solicited business in New York, a non-domiciliary's solicitation of business or advertising within New York generally does not in and of itself constitute transaction of business within the state. Selman v. Harvard Medical School, 494 F. Supp. 603, 612 (S.D.N.Y. 1980) ("Mere solicitation, advertising, or telephone calls to New York do not satisfy the `transaction of business test.'"), aff'd without opinion, 636 F.2d 1204 (2d Cir. 1980); see, e.g. Carte v. Parkoff, 152 A.D.2d 615, 616, 543 N.Y.S.2d 718, 719-20 (App. Div. 1989) (solicitation of customers by listing telephone numbers in New York telephone directory does not constitute transaction of business within New York); Ziperman v. Frontier Hotel of Las Vegas, 374 N.Y.S.2d 697, 699, 50 A.D.2d 581 (App.Div. 1975) (defendant's maintenance of an "800" telephone number in New York for reservations and a listing in the New York telephone directory does not "constitute the transaction of business within the state requisite for jurisdiction under CPLR 302 (subd. [a], par. 1)."). Something more is necessary. See Rolls-Royce Motors, Inc. v. Charles Schmitt Co., 657 F. Supp. 1040, 1052 (S.D.N.Y. 1987).
Although plaintiff refers to other contacts to bolster his assertion of personal jurisdiction, neither of these alleged contacts gave rise to the malpractice cause of action, as required by N.Y. Civ. Prac. L. R. § 302(a)(1). To meet the standards of N.Y. Civ. Prac. L. R. § 302, there must be an "articulable nexus between the business transaction and the cause of action sued upon." McGowan v. Smith, 52 N.Y.2d 268, 272, 437 N.Y.S.2d 643, 645, 419 N.E.2d 321, 322 (1981); accord Hvide Marine Int'l, Inc. v. Employers Ins. of Wausau, 724 F. Supp. 180, 183 (S.D.N.Y. 1989). It is not enough that the defendant allegedly engaged in business transactions in New York, but the cause of action asserted must arise out of these New York activities. Nordic Bank PLC v. Trend Group, Ltd., 619 F. Supp. 542, 567 (S.D.N.Y. 1985).
Although U.S.M.D.C. and McDonough negotiated and executed their contract in New York, the malpractice cause of action did not result from this contract, but rather from defendant's alleged negligence in Texas. In Faherty v. Fender, 572 F. Supp. 142 (S.D.N.Y. 1983), a case involving very similar facts to the one at bar, the court considered whether it had long arm jurisdiction over a suit in New York in which plaintiffs claimed that defendant sought to deceive a Texas court regarding a contract action brought in that state. The agreements in question in the Texas litigation were executed in New York, and discussions regarding these agreements occurred in New York. Faherty, 572 F. Supp. at 145-46. The Faherty court held:
[T]he conduct of which plaintiffs complain was committed by defendant in the State of Texas. That is where defendant sued plaintiffs and allegedly obtained the unenforceable judgments, abused process, and committed the acts resulting in plaintiff['s] harm. It is this conduct upon which plaintiffs' claims are based, and not the contract. . . . Thus, plaintiffs;' causes of action arise out of defendant's activities in New York only to the extent that such activities were a link in the chain of events leading to the Texas lawsuit. . . . [T]his connection is insufficient to satisfy the requirement of § 302 that plaintiff's cause of action bear a `substantial relationship' to defendant's forum activity."Faherty, 572 F. Supp. at 148. similarly, the U.S.M.D.C./McDonough contract also bears only an attenuated relationship to the present action, and certainly did not give rise to it except in the most indirect manner.
with respect to plaintiff's other alleged New York contact, obviously any work Miller did for Levy in the past is totally irrelevant to this suit, and thus fails to meet the nexus requirements of Section 302(1).
Lastly, even if Miller's alleged solicitation of business in New York constitutes a transaction of business for the purposes of section 302(1), this contact also fails to meet the nexus requirement. Levy does not suggest that the firm generally used the index to assist others in obtaining local counsel in other jurisdictions. Thus, at most, Mr. Miller, through the inclusion of his name in the file, was soliciting business from Joseph A. Hamerman Associates, Inc., a firm he had frequently dealt with in the past. In the case at bar, plaintiff asked Levy to recommend a Texas attorney, and Levy supplied Miller's name to plaintiff. Thus, plaintiff cannot show that defendant solicitedhis business, and the alleged solicitation did not give rise to this cause of action.
In fact, Mr. Tandet's affidavit states that Mr. Miller "maintained minimum contacts with New York by his solicitation of business from Joseph A. Hamerman Associates, Inc." (emphasis added)
Thus, this claim does not meet Section 302(a)(1)'s criteria for personal jurisdiction based on the transaction of business in New York.
Conclusion
This claim fails to meet the standards for personal jurisdiction under New York's long arm statute. We therefore do not have to reach the question of whether personal jurisdiction would comply with constitutional due process requirements.
Despite the court's lack of personal jurisdiction over the matter, it lies within our power to transfer this case in "the interest of justice." Goldlawr. Inc. v. Heiman, 369 U.S. 463, 465, 82 S. Ct. 913, 916 (1962); Corke v. Sameiet M. S. Song of Norway, 572 F.2d 77, 80 (2d Cir. 1978); Smith v. Morris Manning, 657 F. Supp. 180, 182 (S.D.N.Y. 1987). If we dismiss plaintiff's claim the Texas statute of limitations could bar plaintiff from refiling the case in the proper district. Therefore, in the interest of justice, to help preserve plaintiff's claim, the Court transfers this action to the Northern District of Texas. See Bolar v. Frank, 938 F.2d 377, 380 (2d Cir. 1991) (transferring the case and noting that the interest of justice is served by avoiding a statute of limitations bar to adjudication of the action). As the Court finds that venue for this case does not lie in the Southern District of New York, it transfers the matter pursuant to 28 U.S.C. § 1406(a), the transfer statute for claims filed in the "wrong division or district."
SO ORDERED.