Opinion
10644/07.
Decided January 16, 2008.
Separate motions by defendants, Burt Williams, Doug Manner and Greg Avra [Sequence #001]; Otto Welper, Dan Morris, Viking International Petroleum, L.P., and Welper Associates, Inc. [Sequence #002]; Buckley Associates, LLP [Sequence #003]; J. Paul Mueller, Jr., Joseph P. Mueller, Patty Puig Mueller, Michelle Mueller Moffit, Joseph P. Mueller, Ltd., Mueller-Puig Family Properties, Ltd., Mueller Exploration, Inc., Clinical Research Services, Inc., MPJ-5, Inc., and Mueller Energetics Corp. (collectively referred to herein as the "Mueller Defendants") [Sequence #004]; and, Porter Hedges, LLP [Sequence #005], pursuant to CPLR 3211(a)(8), for an Order, dismissing plaintiff, Bruce Glenn's complaint on the grounds that the Court lacks in personam jurisdiction over them, are all determined as hereinafter set forth.
This case allegedly arises from a financial fraud apparently orchestrated solely for the purpose of fleecing money from unsophisticated investors, including the plaintiff, Bruce Glenn. Plaintiff alleges in his complaint that this fraud involved the offer and sale of unregistered securities, and was principally engineered by the promoters and managers of defendant, SBPartners LLC ("SBP"), a Florida based limited liability company with offices in New York. Plaintiff alleges that SBP was a newly formed limited liability company, yet it was pitched by its promoters as an industry-recognized oil exploration company offering exclusive investment opportunities to "certain select private investors" ( Complaint, ¶ 1).
Plaintiff alleges that SBP's prospectus, containing false information and numerous misrepresentations, was sent to a select group of unsophisticated and unaccredited investors, promoting the venture and encouraging the purchase of SBP securities. Plaintiff further alleges that a series of telephone conversations and personal visits from an SBP principal would follow during which the SBP unregistered private securities were solicited and sold ( Id., ¶ 2).
Plaintiff alleges that, according to the prospectus, and as later represented by SBP principals, in conversations and personal visits to the small class of potential investors, including the plaintiff, SBP's business was identifying and leasing "probable production" properties from its impressive list of oil industry partners and contacts. Based upon the representation of the use of cutting edge technology and a team of in-house experts, SBP guaranteed that these properties would yield an oil and gas supply, which SBP would extract and then pay a large return on any investment ( Id., ¶ 3). Instead, plaintiff alleges, SBP and its promoters and managers defrauded those investors, including himself, by misappropriating investor funds by (among other means) purchasing worthless or highly speculative lease interests and fictitious and/or value-less services from companies owned by SBP promoters, officers and/or managers. However, because these acquisitions and services were fraudulent, worthless or otherwise deficient, SBP never produced any profits, and the SBP securities purchased by investors remained worthless ( Id., ¶ 4). Plaintiff alleges that SBP's managers and promoters, nevertheless, told investors that SBP wells were in fact producing oil, and that, in order to ensure continued production, additional securities should be purchased, and additional investments made. This induced further investment from unsophisticated investors, and resulted in further losses to those investors. In short, plaintiff alleges that SBP and its principals and managers ran a classic "Ponzi scheme", selling unregistered securities with misrepresentations and false information, resulting in a fraud and misrepresentation on investors, and a loss of all investments ( Id., ¶ 5).
Plaintiff alleges that he became a victim of this scheme, having been induced to invest $475,000.00 in unregistered securities of SBP, but because SBP's promoters, managers and professional advisors shrouded it in an elaborate and layered cloak of legitimacy, plaintiff claims that he did not discover the truth until his investment was already appropriated and lost.
Plaintiff's complaint asserts three categories of claims: (1) claims premised on the fraudulent conduct or conduct of direct responsibility of the architects and promoters of the fraud; (2) claims premised on conduct that aided and abetted those with direct responsibility or conduct amounting to negligence; and, (3) claims premised on professional liability as a result of negligent acts.
Plaintiff alleges that the defendants associated with the first category of claims, namely, James Bona, J. Paul Mueller, Jr., Otto Welper, Dan Morris, Mueller Exploration, Inc., Mueller Energetics Corp., and Viking International Petroleum, LP, were responsible for creating, promoting and benefitting from SBP's scheme and the fraud and misrepresentation that accompanied its formation. Plaintiff refers to these defendants as the "Promoter Defendants" ( Id., ¶ 8).
Plaintiff's second category of claims is against SBP principals, managers and advisors, whose overt actions and conduct intentionally or unintentionally facilitated the Promoter Defendants' wrongful conduct and fraudulent scheme. This category of defendants includes Margarette Shim, Diane Kaern, Michael Kaern, Burt Williams, Doug Manner and Greg Avra. Plaintiff claims that these defendants were actively recruited to manage and contribute in marketing SBP to investors, to solicit investments, to give the venture the appearance of a risk-management component, and to cloak the fraud and misrepresentations in the credibility of their names and expertise. Plaintiff refers to these defendants as the "Manager Defendants" ( Id., ¶ 9).
Finally, the third category of claims is against SBP's independent outside professional firms that affiliated with SBP but failed to fulfill their professional responsibilities to its investors. This category of defendants includes certified public accounting firm, defendant Buckley Associates, LLC, SBP's outside legal counsel, defendant, Porter Hedges, LLC., and SBP's promoter, manager and general counsel, Margarette Shim. Plaintiff refers to these defendants as the "Professional Defendants" ( Id., ¶ 10).
As against the Professional Defendants, plaintiff asserts professional liability on grounds of negligence and negligent misrepresentation. Plaintiff claims, upon information and belief, that defendants Buckley Associates, LLC, Margarette Shim and Porter Hedges, LLC, each knew that they were being identified within the offering prospectus as SBP's accountants and legal counsel, and that they consented to being identified and publicized as such. Plaintiff alleges that it was their affiliation that gave potential investors, including the plaintiff, peace of mind, as it was intended, and the illusion that their investment would be watched over and safe, and that the information in the prospectus could be relied upon. Plaintiff claims that the SBP prospectus was targeted to select investors, establishing sufficient proximity to approach a privity relationship and require these defendants to answer for injury in tort ( Id., ¶ 10).
Plaintiff seeks, through this action, to recover his direct losses under various New York common law theories, including fraud, aiding and abetting fraud, breach of fiduciary duty, aiding and abetting breach of fiduciary duty and negligence, as well as under certain Texas securities statutes.
With the exception of defendants SBPartners, LLC, James Bona, Margarette Shim, Diane Kaern and Michael Kaern, the remaining defendants make these pre-answer motions for an order dismissing the complaint pursuant to, inter alia, CPLR 3211(a)(8) on the ground that the Court lacks in personam jurisdiction over them.
Sequences 001, 003 and 005
On their motions, non-domiciliary individual defendants, Burt Williams, Doug Manner and Greg Avra [Motion Sequence 001] (collectively referred to herein as "Williams"), as well as non-domiciliary corporate defendants, Buckley Associates [Motion Sequence 003] (referred to herein as "Buckley") and Porter Hedges, LLP [Motion Sequence 005] (referred to herein as "Porter"), have all demonstrated that they have not
[§ 302. Personal Jurisdiction by acts of non-domiciliaries]
[1.]transact[ed] any business within the state or contract[ed] anywhere to supply goods or services in the state; or
[2.]commit[ted] a tortious act within the state * * *; or
[3.]commit[ted] a tortious act without the state causing injury to person or property within the state . . . [by]
[I]regularly do[ing] or solicit[ing] business or engag[ing] in any other persistent course of conduct, or deriv[ing] substantial revenue from goods used or consumed or services rendered, in the state; or
[ii]expect[ed] or should [have] reasonably expect[ed] the[ir] act to have consequences in the state and deriv[ing] substantial revenue from interstate or international commerce; or
[4.]own[ed], use[d] or possess[ed] any real property situated within the state.
Said defendants have established that they are all non-domiciliaries; do not conduct any business within the State of New York; do not have any property, real or personal, within the State of New York; have never had any relationship with defendants, SBP, Bona or Shim, and have never received compensation from SBP or those individuals for any services performed.
The founding partner of defendant, Buckley Associates, John Buckley, states that the firm only had sporadic contact with James Bona in 2003, 2004 and 2005 which was unrelated to SBP ( Buckley Aff., ¶ 5). John Buckley explained in his affidavit that
"[i]n 2003, James Bona, under the company name The Oil Group, Management, L.L.C., contacted me to inquire about Buckley Associates providing professional services to his firm. Buckley Associates did not develop a professional relationship with Mr. Bona or The Oil group from that initial contact with me, nor from another brief contact in 2004 by Mr. Bona. At the time of these contacts in 2003 and 2004, I understood that Mr. Bona was located in Florida. In February 2005, Mr. Bona contacted me to request that Buckley Associates prepare tax returns for his business. He provided me with no documents and since my firm was short-staffed and Mr. Bona was located in Florida, I declined the engagement and sent him the names of several accountants in Florida who I thought might be able to assist him. I had derived those names from a publicly-available list of accountants located in Florida" ( Buckley Aff., ¶ 6).
Otherwise, the firm, Buckley Associates, as well as defendants, Williams and Porter, were not aware of the existence of SBP or of Bona or Shim's involvement with that entity during the time that Bona had contacted John Buckley, or at the time plaintiff allegedly made his investments in SBP. Defendants Williams, Buckley and Porter have also attested that they have never met, spoken to, or communicated with, the plaintiff, Bruce Glenn. Notably, plaintiff has also failed to allege in his complaint, or in his opposition, that he had any contact with the defendants, Williams, Buckley or Porter. In fact, plaintiff, in his opposition, does not dispute that defendants are Texas domiciliaries with no ongoing presence in New York, or that he ever had any contact with the moving defendants in any way.
In his opposition, plaintiff fails to come forth with definite evidentiary facts implicating the moving defendants — Williams, Buckley and Porter — in the alleged "Ponzi scheme." Plaintiff fails to present any admissible evidence to contest or otherwise controvert the facts set forth in their motions. Indeed, plaintiff presents only vague statements regarding defendants purported involvement in the alleged fraudulent scheme. Such conclusory allegations are insufficient to establish that said defendants made any specific representations or took any actions in New York to further the alleged fraudulent scheme.
Any analysis of personal jurisdiction requires a two-part inquiry: first, whether the state law basis for personal jurisdiction has been met, and second, whether the exercise of state law jurisdiction in a particular case comports with due process ( La Marca v. Pak-Mor Mfg. Co. , 95 NY2d 210, 214, 2000; Opticare Acquisition Corp. v. Castillo , 25 AD3d 238, 247, 2nd Dept., 2005). Due process requires that, in order to subject a party to a judgment in personam, the person must be present within the territory of the forum or have certain minimum contacts with it, such that the maintenance of the lawsuit does not offend traditional notions of fair play and substantial justice ( International Shoe Co. v . State of Washington , 326 US 310, 316, 1945). The test for minimum contacts is whether a defendant's conduct and connection with the forum state are such that it "should reasonably anticipate being hailed into court there" ( World-Wide Volkswagen Corp. v. Woodson , 444 US 286, 297, 1980). A Court may obtain jurisdiction over a nondomiciliary corporation if it has engaged in "purposeful activity" within the state, and there is a "substantial relationship" between the activity and the acts alleged by plaintiff ( Armouth Intn'l Inc. v. Haband Co. , 277 AD2d 189, 190, 2nd Dept., 2000).
The burden of proof rests upon the party asserting jurisdiction (Id.; see also Roldan v. Dexter Folder Co. , 178 AD2d 589, 2nd Dept., 1991; Spectra Prods. Inc. v. Indian River Citrus Specialties, Inc. , 144 AD2d 832, 833, 3rd Dept.,1988). Where a defendant submits facts that would negate a court's power to obtain jurisdiction over it, the plaintiff is required "to come forward with evidence to support the existence of a basis upon which to predicate the exercise of personal jurisdiction . . . or to at least show that such evidence may exist" ( Roldan , 178 AD2d at 589; Spectra , 144 AD2d at 833; Glassman v. Catli , 111AD2d 744, 2nd Dept., 1985; Weiss v. Chou , 234 AD2d 539, 2nd Dept., 1996).
Plaintiff argues that all of the moving defendants have submitted self-serving affidavits concerning the lack of personal jurisdiction ( Glenn Aff., ¶ 10), but plaintiff does not state a single jurisdictional fact against defendants, Porter, Buckley or Williams to meet his burden of making out a "prima facie showing that defendant[s] [are] subject to the personal jurisdiction of the Supreme Court" ( Cornely v. Dynamic HVAC Supply, LLC , 2007 WL 3210450, 2nd Dept., 2007).
Plaintiff has failed to allege any facts that contradict the specific evidence presented by the defendants. In his single blanket opposition to all the motions to dismiss, plaintiff has relied on generalized, conclusory allegations regarding alleged written or verbal representations made by the named defendants. To the extent that the plaintiff has provided any specificity, it relates principally to alleged acts and misrepresentations made by the non-moving defendants, James Bona and Margarette Shim. Plaintiff's affidavit fails to specify any particular act or alleged misrepresentation by the moving defendants, Williams, Buckley Porter.
In support of those conclusory allegations, plaintiff submits copies of the SBP prospectus and the separate operating agreement, the deposition transcript of J. Paul Mueller, Jr. from a Texas action brought by Margarette Shim, and an e-mail from Ms. Shim to an unidentified recipient. A careful examination of those documents and the Mueller deposition testimony do not sufficiently to support a finding that personal jurisdiction exists as to the movants, Williams, Buckley and Porter.
In contrast, as part of their respective motions to dismiss, the movants present specific evidence establishing, inter alia, that SBP was never a client of defendant, Buckley Associates nor of defendant Porter Hedges; that neither defendant Buckley nor defendant Porter ever performed any work for the company, much less authorized the use of their name in any document allegedly sent to prospective investors; that they ever received any fees from SBP or James Bona; that individual defendants Williams, Manner and Avra are not and have never been members or employees of SBP; and that none of the movants, Williams, Buckley or Porter, ever saw or reviewed any documents about SBP.
Taken as a whole, the evidence presented by the plaintiff fails to establish a basis for personal jurisdiction over the moving defendants, Williams, Buckley and Porter. Plaintiff has failed to dispute any of the evidence offered by said defendants regarding their lack of contacts with the State of New York and their lack of involvement in the alleged fraudulent scheme. None of the documentary evidence submitted by the plaintiff suggests a relationship between the moving defendants and SBP, James Bona or Margarette Shim, nor does it demonstrate that the movants' contacts with the State of New York or involvement in the alleged scheme. Plaintiff has failed to meet his burden of presenting admissible evidence which would establish a basis for this Court to obtain personal jurisdiction over them.
In opposition, plaintiff contends that jurisdiction can be obtained over the non domiciliary defendants based on an act in furtherance of the alleged fraud committed by an alleged co-conspirator or agent within New York. Insofar as the defendant Porter is not alleged, in the first place, to have committed any fraud against the plaintiff, this Court is precluded from exercising any personal jurisdiction over it herein ( Kestenbaum v. Suroff , 268 AD2d 560, 562, 2nd Dept., 2000). Furthermore, unless a plaintiff can adequately plead fraud against each of the defendants pursuant to CPLR 3016(b), he cannot base jurisdiction on conspiracy to commit fraud ( People ex rel. Spitzer v. H R Block, Inc ., 16 Misc 3d 1124 (A), Sup. Ct. New York 2007). Thus, herein, in the absence of any allegations of misrepresentations of material facts allegedly made by defendant, Porter, let alone any of the elements of fraud, plaintiff cannot assert fraud conspiracy jurisdiction against Porter to keep it in this case ( Barclay Arms Inc. v. Barclay Arms Associates , 74 NY2d 644, 647, 1989).
Similarly, plaintiff's failure to allege any facts to predicate the existence of an agency relationship between the moving defendant, Buckley Associates, and any other defendant, also requires dismissal of this case as against them under CPLR 3211(a)(8). In its motion, defendant Buckley Associates successfully demonstrates that its contact with defendant James Bona was limited to communications regarding The Oil Group, Management LLC ( Buckley Aff., ¶ 6). These preliminary contacts never developed into an accountant-client relationship between Buckley Associates and SBP or James Bona. Nor did Buckley Associates have any contact or relationship with Margarette Shim who, according to plaintiff's own affidavit, was his primary contact about the SBP transaction ( Glenn Aff., ¶¶ 4-5). Thus, plaintiff's contention and reliance on Travelers Indemnity Co v. Inoue , ( 111 AD2d 686, 1st Dept., 1985) and Blissworld, LLC v. Kovack , (2001 NY Misc. Lexis 547, Sup. Ct., New York, 2001) for the proposition that jurisdiction can be obtained over non-domiciliary defendants based on an act in furtherance of the alleged fraud committed by an alleged co-conspirator or agent within New York, falls short on this motion. Here, plaintiff has not alleged or presented any evidence that Buckley Associates participated in a conspiracy to defraud him. No where does plaintiff allege that Buckley Associates was a co-conspirator in the alleged fraudulent scheme.
Finally, plaintiff's contention, that jurisdiction can be obtained over the individual non-domiciliary defendants, Williams, Manner and Avra, based on their individual acts in furtherance of the alleged fraud committed by co-conspirators or agents within New York, is equally meritless. As against the individual defendants, it is noted that plaintiff has not alleged a conspiracy to commit fraud; instead, plaintiff alleges that some of the defendants, including Williams, Manner and Avra, aided and abetted an alleged fraud. To state a claim for aiding and abetting fraud under New York law, a plaintiff must plead facts showing (1) the existence of fraud, (2) defendant's knowledge of the fraud, (3) that defendant provided substantial assistance to advance the fraud's commission, and (4) damages ( The Pension Committee of the Univ. Of Montreal Pension Plan v. Banc of America Sec, LLC ., 446 F. Supp.2d 163, SDNY 2006). A careful reading of the papers submitted herewith reveals that the plaintiff has plainly failed to satisfactorily plead the elements of aiding and abetting fraud.
There is no substantive tort of conspiracy under New York law ( SRW Assocs. v. Bellport Beach Prop. Owners , 129 AD2d 328, 332-33, 2nd Dept., 1987; Routsis v. Swanson , 26 AD2d 67, 71, 1st Dept., 1966). Moreover, even if plaintiff had alleged a conspiracy, he would still have to make a prima facie factual showing of a conspiracy warranting the inference that the defendant was a member of the conspiracy ( Singer v. Bell , 585 FSupp300, 303, SDNY 1984). In addition, plaintiff must also show that each of the defendants had minimum contacts with New York to satisfy the due process requirements. The bland assertion of conspiracy or agency is insufficient to establish jurisdiction for the purposes of CPLR 302(a)(2) ( Lehigh Valley Industries, Inc. v. Birenbaum , 527 F2d 87, 93-94, 2nd Cir., 1975). Plaintiff has not pled nor offered any proof to support a theory of "conspiracy jurisdiction" upon the individual defendants, Williams, Manner and Avra.
To the extent that plaintiff relies on broad conclusory allegations that Buckley and Porter's names in the SBP documents led him to believe "that this was a sound investment and that there would be no risk of financial loss," his failure to specify any facts that connect defendants, Buckley and Porter, to the alleged fraudulent acts committed by SBP or any other named defendant, is fatal for the purpose of defeating defendants' motions. Plaintiff asserts, in his affidavit in opposition, that it was conceivable that an accounting firm would provide services to a company which conducted business within the State of New York ( Glenn Aff., ¶¶ 7, 11). He also claims that, because defendant Porter was identified as SBP's attorneys, it was, in effect, "lending credibility" to SBP, and therefore, owed plaintiff a duty to investigate the truthfulness of the statements made in the prospectus. Plaintiff asserts that Buckley and Porter's failure to do so was negligent and they should, therefore, be responsible for his alleged losses. However, as stated above, plaintiff has simply failed to offer any evidence to contradict the specific evidence submitted by Buckley and Porter, on their motions, which has established that they were not involved in the drafting, review, revision or editing of any documents distributed by SBP ( Buckley Aff., ¶ 8). In light of the evidence submitted by the defendants regarding their complete lack of involvement in the underlying transaction and the alleged fraudulent scheme, plaintiff's conclusory allegations regarding a conspiracy involving Buckley and Porter are insufficient to establish a basis for personal jurisdiction upon them ( Philan Ins. Ltd. v. Frank B. Hall Co., Inc ., 215 AD2d 112, 1st Dept., 1995).
Finally, plaintiff's argument in opposition to defendants', Williams, Buckley and Porter, motions, that it is "premature" to dismiss for lack of personal jurisdiction because discovery and a jurisdictional hearing is necessary is unavailing. Where a party establishes that additional facts, which are within the sole knowledge or possession of the moving party, are needed to properly oppose a motion to dismiss, a court may order discovery "if it has been demonstrated that such facts may exist" ( Cosmos Mason Supplies, Inc. v. Lido Beach Assocs, Inc. , 95 AD2d 818, 2nd Dept., 1983; CPLR 3211[d]). However, in the absence of any showing supporting the existence of personal jurisdiction, discovery and a jurisdictional hearing are not warranted ( Marie v. Altshuler , 30 AD3 271, 372,1st Dept., 2006; deCapriles v. Lopez Lugo , 293 AD2d 405, 406, 1st Dept., 2002). Plaintiff argues that the Court may exercise fraud-conspiracy jurisdiction over the out of state defendants. However, a complaint alleging a cause of action sounding in fraud must contain more than "bare, conclusory allegations" in order to withstand a motion to dismiss ( Glassman v. Catli , 111AD2d 744, 2nd Dept., 1985).
To the extent that plaintiff's sole cause of action against defendant Porter is negligence and negligent representation, and insofar as defendant is not alleged to have committed any fraud against the plaintiff, this Court is not permitted to exercise fraud-conspiracy jurisdiction over the out of state defendant, Porter. Further, it is well settled that, unless a plaintiff can adequately plead fraud against each of the defendants, including Williams and Buckley, pursuant to CPLR 3016(b), it cannot base jurisdiction on conspiracy to commit fraud.
Plaintiff contends that he has alleged that each defendant had sufficient contacts with New York to warrant discovery to "determine the scope and content of their involvement with [SBP]" ( Aff in Opp., ¶ 10). However, as stated above, the moving defendants here have sufficiently established that they are not subject to jurisdiction under CPLR 302(a)(1), or pursuant to tortious acts that would subject them to jurisdiction under CPLR 302(a)(2) or (3). Unlike the plaintiff in Peterson v. Spartan Industries , ( 33 NY2d 463, 1974) the plaintiff herein has failed to even allege facts that would suggest some local contacts on the part of the moving defendants or that these defendants had any involvement whatsoever with the creation of the SBP offering plan or prospectus.
Plaintiff has not established that the moving defendants has had any contact with the State of New York. There have been no telephone calls, e-mails or facsimiles from the defendants to the plaintiff or anyone else in New York, regarding SBP, its offering plan or its prospectus. Nor has anyone from the defendants performed work in New York in connection with the alleged fraudulent scheme. Moreover, plaintiff's reference to the fact that defendant, Buckley Associates has a website (Glenn Aff., ¶ 11) is insufficient to establish personal jurisdiction over said defendant ( Armouth Int'l Inc. v. Haband Co., Inc. , 277 AD2d at 190).
Plaintiff has also failed to allege facts demonstrating a "sufficient start" to obtain jurisdictional discovery as against these moving defendants — Williams, Buckley and Porter ( Marie v. Altshuler , supra at 272; Mandel v. Busch Entertainment Corp. , 215 AD2 445, 2nd Dept., 1995). Insofar as the plaintiff relies on Edelman v. Taittinger, S.A. , ( 298 AD2d 301, 1st Dept., 2002), for the proposition that he has made a "sufficient start" in establishing that defendants were doing business within the state, this Court finds that Edelman is entirely distinguishable from the procedural circumstances at hand. Unlike Edelman , plaintiff herein has failed to address the evidence presented by the defendants, Williams, Buckley Porter, on these motions and only repeats the general allegations in counsel's affidavit that all of the named defendants had some relationship directly or indirectly with SBP ( Aff in Opp., ¶ 11). Moreover, as stated above, plaintiff's own affidavit fails to detail the nature of these purported relationships or offer any facts that would establish that the moving defendants had any involvement whatsoever with the fraudulent scheme ( Armouth 277 AD2d at 190).
For these reasons, defendants' motions to dismiss (Sequence 001, 003 and 005) are herewith granted based on lack of personal jurisdiction.
Sequence 002 and 004
The Mueller defendants' motion [Motion Sequence 004] and the motion by defendants Otto Welper, Dan Morris, Viking International Petroleum, LP and Welper and Associates (collectively referred to herein as the "Welper defendants") [Motion Sequence 002] for an Order, pursuant to CPLR 3211(a)8) dismissing the plaintiff's complaint based on lack of personal jurisdiction, cannot be determined on this record.
In support of their motion to dismiss, the Mueller defendants assert that they also had no contact and no contract with the plaintiff, and did not participate with Margarette Shim or SBP in soliciting investments from the plaintiff. Similarly, the Welper defendants, in support of their motion, submit their own affidavits wherein they state that they are all domiciliaries of and/or incorporated in the State of Texas, that they did not conduct or transact business in the State of New York, and that they have never met or had any communications with the plaintiff.
However, based upon the Mueller defendants' own admissions and supporting affidavits, it is clear that the Mueller defendants' business contacts and contracts consisted of Mueller Exploration, Inc., which engaged in five separate participation agreements with The Oil Group. Moreover, in opposition to the Mueller defendants' motion, plaintiff contends that Paul Mueller's dealings outside of New York with defendant, Margarette Shim and SBP constituted a conspiracy and that acts by defendant Margarette Shim and SBP in New York subject the Mueller defendants to jurisdiction due to the instate acts of their purported co-conspirators.
Similarly, defendant Dan Morris, on behalf of the Welper defendants, states in his sworn affidavit, in pertinent part, that he "[w]as asked by Paul Mueller to edit the technical aspects related to a brochure being put together for [SBP]. It is not unusual in my business to have someone request that I edit technical information found in a brochure. As a result, I did review and edit the technical narrative for the alleged brochure. However, I never saw the entire brochure or the final draft of the document" ( Morris Aff., ¶ 10).
While it is true that "bland" assertions of conspiracy are insufficient to confer jurisdiction over out of state defendants ( Lehigh Valley Industries, Inc. v. Birenbaum , supra , pp 93-94), as to these motions [002, 004], this Court is not convinced that the plaintiff is guilty of bad faith in arguing that long arm jurisdiction exists as against the moving Mueller and Welper defendants. Plaintiff, in this case, has sufficiently shown some local contacts, albeit under a conspiracy-jurisdiction theory, on the part of the moving Mueller and Welper defendants and has shown that his position is not necessarily frivolous on the question of jurisdiction ( Peterson v. Spartan Industries , supra ).
Accordingly, affording the plaintiff the benefit of the doubt, this Court herewith respectfully refers the jurisdictional issue pertaining to the Mueller and Welper defendants to the Calendar Control Part (CCP) for a traverse hearing.
Subject to the approval of the Justice there presiding, and provided that a Note of Issue has been filed at least ten days prior thereto, this matter shall appear on the calendar of CCP for February 27, 2008, at 9:30 a.m.
A copy of this order shall be served on the calendar clerk and accompany the Note of Issue when filed. The failure to file a Note of Issue or appear as directed may be deemed an abandonment of the claims giving rise to the hearing.
The directive with respect to a hearing is subject to the right of the Justice presiding in CCP to refer the matter to a Justice, Judicial Hearing Officer or a Court Attorney/Referee as he or she deems appropriate.
This shall constitute the decision and order of this Court.