Opinion
1856-05
Decided June 7, 2005.
Satran Associates, PLLC, Rockville Centre, New York, COUNSEL FOR PLAINTIFF.
Law Offices of Ira D. Wincott, Mineola, New York, COUNSEL FOR DEFENDANTS.
Plaintiff moves for an order enjoining the Defendants from prosecuting an action against him in the Superior Court of New Jersey, Bergen County ("Superior Court").
BACKGROUND
Plaintiff, Jeffrey H. Miller ("Miller"), is an attorney duly admitted to practice law in the State of New York. He maintains an office to practice law in Nassau County, New York.
Miller asserts that in April 2001, he drafted form agreements ("Investment Agreement") for his client, Maybe Mom, Inc., to be used by Maybe Mom in securing investments from potential investors such as Defendants. Miller alleges that he forwarded the agreements to Maybe Mom in blank; that Maybe Mom modified the agreements without his knowledge or consent; and that Maybe Mom used the agreements as part of its obtaining investments in the business.
Defendants, Gerald Wincott, Harold Wolland, Paul Elefers, Jacqueline Elefers, Ira D. Wincott, DCI Technical Inc. and Irma L. Beckley (collectively "Investors") all invested in Maybe Mom. The Investors all signed the agreement drafted by Miller as modified by Maybe Mom.
Maybe Mom is a New Jersey corporation. All of the Investors are residents and domiciliaries of New York.
When Maybe Mom defaulted on its obligations to the Investors, they commenced an action in the Superior Court of New Jersey, Bergen County ("New Jersey Action") seeking to dissolve Maybe Mom and recover under the terms of the Investment Agreements they executed. Approximately one year after that action had been commenced, the Investors served an amended complaint adding Miller as a party defendant. The amended complaint alleged that Miller had committed legal malpractice in preparing the Investment Agreement.
The Investors have discontinued the action against Maybe Mom and its principal on the grounds that they are insolvent. This left Miller as the sole Defendant in the New Jersey Action.
Paragraph 8 of the Investment Agreement signed by all of the Defendants specifically provides that interpretation, validity and performance of the agreement is to be governed by New York law. This paragraph also contains a provision mandating that the venue for any action arising out of the agreement shall be in Nassau County, New York.
Miller moved in the Superior Court to dismiss the New Jersey Action. The grounds asserted by Miller for the dismissal of the New Jersey action are not before the Court since Miller did not submit copies of the motion papers filed in connection with his motion to dismiss the New Jersey Action. The motion to dismiss the New Jersey Action was denied by order of the Hon. Jonathan N. Harris dated January 21, 2005. Judge Harris' order did not set forth any basis for denying Miller's motion. Neither party has provided this Court with either a written or oral decision from Judge Harris in which he explained the factual and/or legal underlying in his January 21, 2005 order.
Jeffrey W. Herrmann, Esq., the attorney who represents the Investors in the New Jersey Action submitted an affidavit in opposition to this motion in which he states that Miller moved to dismiss the New Jersey Action on the grounds that New York law applied, that the action was barred by the applicable statute of limitations and on the grounds of forum non conveniens. Mr. Hermann asserts that Superior Court Judge Harris considered the aforementioned arguments and decided that New Jersey law was applicable to the action.
Miller does not have the same right to an interlocutory appeal from Judge Harris' order as he would in New York. He can obtain such a review by seeking leave to appeal to the Appellate Division of the Superior Court which has absolute discretion as to whether to hear such an appeal. If Miller were to make an application to the Appellate Division of the Superior Court for leave to appeal and that application was denied, Miller would be able to appeal as of right only after the action has been fully adjudicated and a final judgment had been entered.
After Miller's motion to dismiss the New Jersey action was denied, he commenced this action seeking a judgment permanently enjoining the Investors from proceeding against him in the New Jersey. When Miller commenced this action, he sought a preliminary injunction to enjoin the prosecution of the New Jersey Action pending the final disposition of this action. By agreement of all parties, the prosecution of the New Jersey Action was stayed.
Miller asserts that the Investors sued him in New Jersey to avoid the three (3) year New York statute of limitations applicable to legal malpractice actions, to avoid the choice of law and venue provisions in the Investment Agreement and to avoid the law of New York which is alleged to require the existence of an attorney-client relationship in order to maintain a legal malpractice action.
DISCUSSION
The party seeking a preliminary injunction must demonstrate (1) a likelihood of success on the merits, (2) a danger of irreparable harm in the absence of the preliminary injunction, and (3) a balancing of the equities favors the granting of an injunction. Aetna Ins. Co. v. Capasso, 75 NY2d 860 (1990); Doe v. Axelrod, 73 NY2d 748 (1988); Fayez v. Mayfield, 8 AD3d 311 (2nd Dept. 2004); and 1659 Ralph Avenue Laundromat Corp. v. Ben David Enterprises, LLC, 307 AD2d 288 (2nd Dept. 2003).
A preliminary injunction may be issued to preserve the status quo pending a full hearing on the merits of the action. Olympic Tower Condominium v. Cocoziello, 306 AD2d 159 (1st Dept. 2003); and Livas v. Mitzner, 303 AD2d 381 (2nd Dept. 2003).
The party seeking a preliminary injunction must demonstrate a clear right to the relief based upon the undisputed facts. Hoeffner v. John F. Frank, Inc., 302 AD2d 428 (2nd Dept. 2003); and Peterson v. Corbin, 275 AD2d 35 (2nd Dept. 2000).
In this case, Plaintiff has failed to establish his entitlement to a preliminary injunction since he has failed to establish a likelihood of success on the merits.
Generally,
. . . the Courts of this State will decline to interfere by injunction to restrain its citizens from proceeding in an action commenced in the courts of a sister State. It is only in extreme and extraordinary cases that the court will break the rule of comity with forbids the granting of an injunction to stay proceedings which have been commenced in a foreign court of competent jurisdiction."
E.B. Latham Co. v. Mayflower Industries, 278 App.Div. 90, 94 (1st Dept. 1951).
The courts of New York will enjoin a foreign court from proceeding where the suit was brought to harass the party seeking the injunction or where the foreign suit was motivated by fraud or to evade the law of domicile of the parties. Id.; and Paramount Picture v. Blumenthal., 256 App.Div. 756 (1st Dept. 1939).
In this case, Plaintiff has failed to establish that the New Jersey Action was brought to harass him or was motivated by fraud. He asserts that the New Jersey Action was brought to evade the law of New York. Miller claims that the Investors sued him in New Jersey to evade the New York statute of limitations and to evade the New York rule that an attorney may be sued for malpractice only by one with whom the attorney had an attorney-client relationship.
The claims against Miller in the New Jersey Action are premised upon violations of the New Jersey Blue Sky laws. N.J.S.A. 49:3-47, et seq. The New Jersey Blue Sky laws make it illegal to offer securities for sale in New Jersey unless the security is duly registered, a covered federal security or the transaction is exempt from registration.
See, N.J.S.A 49:3-50 and N.J.S.A. 49:3-60. The Investors allege that Miller prepared the Investment Agreements with knowledge that they would be used without first registering the securities with the Securities and Exchange Commission, the New Jersey Bureau of Securities or obtaining an exemption from registration. They further allege that Miller failed to include language in the Investment Agreement which indicated that they were purchasing unregistered securities and/or that they were not receiving information about Maybe Mom which was required by federal and New Jersey securities law. Investors allege that Miller's failure to take these actions constitute legal malpractice.
The New Jersey Action was not brought to evade New York law. The New Jersey Action is premised upon Miller's alleged violation of New Jersey statutes. The residence and domicile of the Investors is irrelevant to the New Jersey Action. The Investors are suing to enforce rights granted to them as a result of their having invested in a New Jersey corporation. This is not in an attempt to evade New York law.
Miller knew when he prepared the Investment Agreement that Maybe Mom was a New Jersey corporation. By performing legal work for a New Jersey corporation, Miller should have realized that he might be subjecting himself to the laws of the State of New Jersey and the possibility that he would be sued in New Jersey for damages resulting from these actions.
At the time, Miller was licensed to practice law in the State of New Jersey.
It must be remembered that the theories of recovery asserted by the Investors in the New Jersey Action are not governed by the venue and choice of law provisions since Miller was the drafter of, but not a signatory to, the Investment Agreement.
Miller's assertion that this Court may enjoin the New Jersey Action because he has not yet interposed an answer in the New Jersey Action is without merit. Special appearance has been superceded. See, Field v. Field, 31 N.J. Super. 139 (A.D. 1954); and N.J. Court Rules, 1969 R. 4:6-2. A defendant may contest the jurisdiction of the court either by asserting same in its answer or by pre-answer motion. Id. Where the defendant seeks some judicial action on the merits of the case and does not raise an objection to the jurisdiction of the court, the objection to the court's jurisdiction is waived. B.R. Waldron Sons Co., Inc. v. Venezia, 31 N.J. 161 (1959); and Allan B. Du Mont Laboratories, Inc. v. Marcalus Manufacturing Co., 30 N.J. 290 (1959).
Miller moved to dismiss in the New Jersey Action which he attacked the merits of the Investors' claim. He also moved to dismiss that action on the ground of forum non conveniens. Thus, Plaintiff has already made a general appearance in the New Jersey Action. He did not move to dismiss on the grounds that he was not subject to the in personam jurisdiction of the Superior Court. Since Miller has made a motion addressing the merits of the Investors' claims and did not raise the issue that the New
Jersey courts do not have in personam jurisdiction over him, he has waived that objection and that defense.
Many of Miller's arguments for seeking a preliminary injunction are nothing more than defenses to the New Jersey Action such should be raised and prosecuted there.
Since Miller has consented to the jurisdiction of the Superior Court and the Investors are suing in New Jersey to vindicate rights granted to them under the New Jersey Blue Sky Laws, Miller has not established a likelihood of success on the merits. Therefore, his request for a preliminary injunction must be denied.
Miller's application for a preliminary injunction is actually an attempt to get this Court to act as an appellate court and overrule Judge Harris' January 21, 2005 Order.
In essence, Miller is asking this Court to determine that the law of New York and not New Jersey applies to this action. Most certainly, the Superior Court had the ability and the obligation to determine whether New Jersey or New York law would apply to the New Jersey Action. If Miller wishes to seek review of the order of Judge Harris, he must do so in the New Jersey courts.
In denying Miller's motion for a preliminary injunction, the merits of his claim herein have been addressed. In finding that Miller does not have a likelihood of success on the merits, the application for a preliminary injunction is being denied. In so doing, this Court is dismissing this action as well. Such dismissal is only on the question of whether this Court should supercede the jurisdiction of the Superior Court.
It should not be construed as making any dispositive determination on the merits of the New Jersey Action. All issues relating to the merits of the Investors' claims and Miller's defenses are respectfully referred to the Superior Court for determination.
Accordingly, it is,
ORDERED, that Plaintiff's motion for a preliminary injunction is denied; and it is further,
ORDERED, that the consent Temporary Restraining Order granted herein is hereby vacated; and it is further,
ORDERED, that on the Court's own motion, this matter is dismissed in favor of the New Jersey Action.
This constitutes the decision and Order of the Court.