Opinion
No. 04 CV 0982 (SHS).
July 8, 2004
MEMORANDUM ORDER
Plaintiff Wells Fargo Bank Minnesota, National Association brings this action, as indenture trustee, to enforce both: (1) a lease agreement between Crocker Capital, Inc. and defendant ComputerTraining.Com, Inc. and (2) an agreement to guarantee that lease signed by defendant David Lee Rau, Jr. Plaintiff alleges that ComputerTraining failed to make monthly payments for equipment it leased pursuant to the lease agreement. Defendants have moved to dismiss this action for lack of personal jurisdiction pursuant to Fed.R.Civ.P. 12(b)(2). For the reasons set forth below, this Court grants defendants' motion to dismiss the complaint.
I. Background
A. The Parties
Plaintiff Wells Fargo is a national bank with its principal place of business in Minneapolis, Minnesota. (Compl. ¶ 1).
Defendant ComputerTraining is a corporation that provides training in information technology and has its principal place of business in Hunt Valley, Maryland, and additional locations in Ohio, Virginia, Pennsylvania, Delaware and New Jersey. (Compl. ¶ 2). ComputerTraining also has a website located at http://www.computertraining.com that is accessible worldwide. (Pl. Opp. Mot. Ex. 1).
Defendant Rau is an individual who, plaintiff alleges, currently resides in Baltimore, Maryland (Compl. ¶ 3). Rau is Chairman of the Board and Sole Director of ComputerTraining. (Rau Decl. ¶ 1). In addition, he held the position of President and Chief Executive Officer of ComputerTraining from 1994 until January 1, 2004. (Rau Decl. ¶ 2).
B. The Lease
In October 2000, ComputerTraining and Crocker Capital, Inc. entered into a lease (the "Lease") for office equipment to be used at ComputerTraining's facilities. (Compl. Ex. A). The Lease defines the "Lessor" as Crocker and designated ComputerTraining as "Lessee." (Id.). Pursuant to the Lease, ComputerTraining leased certain equipment and agreed to pay Crocker monthly fees. (Compl. ¶ 10). Paragraph 18 of the Lease provides that Crocker could assign the Lease and that ComputerTraining "shall recognize and hereby consents to any assignment of this Lease by [Crocker]." Paragraph 18 also provides that "assignees of [Crocker] shall have all the rights but none of the obligations of Lessor under this Lease." Paragraph 28 of the Lease provides that the parties consent to jurisdiction in the state of the Lessor's principal place of business, and that the Lease shall be interpreted in accordance with the laws of that state as well. Crocker's principal place of business is Newport Beach, California. (Compl. Ex. A).
After the Lease was signed, defendant Rau executed a guaranty (the "Guaranty") in favor of Crocker in which he "unconditionally guaranties the faithful and full performance by [ComputerTraining] of all terms and conditions of the Lease." (Compl. Ex. C).
Subsequently, Crocker entered into a contract with Terminal Marketing Company, Inc. ("Terminal") whereby Crocker agreed to "sell, transfer, convey and assign" the Lease to Terminal for $75,712.57. (Compl. Ex. D). Terminal then "sold and assigned its entire right, title and interest in and to the Equipment, the Lease and the Guaranty under the Lease" to Terminal Finance Corp. II ("TFC II"), making TFC II the owner of Terminal's interest in the Lease and Guaranty. (Compl. ¶ 19-20). In order to obtain the necessary funds to purchase the Lease, the Guaranty and the equipment rented to ComputerTraining under the Lease, TFC II issued and sold certain notes. TFC II then assigned all of its rights in the Lease, the Guaranty and the equipment to Wells Fargo, as an "indenture trustee" for the benefit of the noteholders. (Compl. ¶ 23).
Wells Fargo alleges it is entitled to receive monthly payments as assignee of the Lease and that ComputerTraining has failed to make these monthly payments and therefore is in default under the terms of the Lease. (Compl. ¶¶ 25-29). Plaintiff has now brought this litigation seeking the past due rental payments and a declaratory judgment that the Lease and Guaranty are enforceable. Defendants have moved to dismiss for lack of personal jurisdiction, pursuant to Fed.R.Civ.P. 12(b)(2).
II. Discussion
A. Standard
When bringing a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(2), plaintiff bears the burden of proving that the court has personal jurisdiction. Bank Brussels Lambert v. Fiddler Gonzalez Rodriguez, 171 F.3d 779, 784 (2d Cir. 1999). The court will view the facts in the light most favorable to the plaintiff when considering a Rule 12(b)(2) motion. See Gianino v. Panacya, Inc., No. 00 Civ. 1584, 2000 WL 1224810, at *4 (S.D.N.Y. Aug. 29, 2000). When the motion is made before any discovery has taken place, a plaintiff "need only allege facts constituting a prima facie showing of personal jurisdiction" to meet its burden. PDK Labs, Inc. v. Friedlander, 103 F.3d 1105, 1108 (2d Cir. 1997). "A plaintiff can make this showing through his 'own affidavits and supporting materials.'" Whitaker v. Am. Telecasting, Inc., 261 F.3d 196, 208 (2d Cir. 2001) (quoting Marine Midland Bank, N.A. v. Miller, 664 F.2d 899, 904 (2d Cir. 1981)). These materials should contain "an averment of facts that, if credited . . ., would suffice to establish jurisdiction over the defendant." Ball v. Metallurgie Hoboken-Overpelt, S.A., 902 F.2d 194, 197 (2d Cir. 1990); see also Whitaker, 261 F.3d at 208.
The district court must apply the law of the forum state to determine whether exercise of jurisdiction is appropriate. See Bensusan Rest. Corp. v. King, 126 F.3d 25, 27 (2d Cir. 1997). In order for this Court to assert personal jurisdiction over defendants, plaintiff must show that that exercise of jurisdiction is authorized by the laws of the State of New York pursuant to either New York C.P.L.R. § 301 or § 302. If the exercise of jurisdiction is appropriate pursuant to the C.P.L.R., a court must then decide whether the exercise of jurisdiction comports with the requirements of constitutional due process.See Bensusan Rest. Corp., 126 F.3d at 27.
B. C.P.L.R. § 301: "Doing Business"
C.P.L.R. § 301 provides that a foreign corporation that has not obtained a certificate of authorization from the New York Secretary of State may be subject to jurisdiction in New York if it is "doing business" in New York. See Jazini v. Nissan Motor Co., Ltd., 148 F.3d 181, 184 (2d Cir. 1998). At the time of the commencement of this action, ComputerTraining, a Maryland corporation, did not hold any business license from the State of New York, nor did it pay taxes in New York, nor have offices, employees or bank accounts in New York, nor did it hold any ownership interest in any New York corporation or other entity. (Rau Decl. ¶¶ 5, 6, 7, 9, 10).
"A corporation is considered to be 'doing business' when it is present in the state 'not occasionally or casually, but with a fair measure of permanence and continuity.'" Purdue Pharma L.P., 2003 WL 22070549, at *2 (quoting Landoil Resources Corp. v. Alexander Alexander Servs. Inc., 918 F.2d 1039, 1043 (2d Cir. 1990)).
When determining whether a corporation is "doing business" in New York, courts will consider "whether the defendant maintains offices and bank accounts, employs agents, and regularly solicits business in New York." Bresciani v. Leela Mumbai-A-Kempinski Hotel, 311 F. Supp. 2d 440, 444 (S.D.N.Y. 2004). Wells Fargo has not alleged that ComputerTraining pays taxes in New York or maintains offices, bank accounts or agents in New York. The only basis for its allegation that ComputerTraining "conducts business in this jurisdiction" (Compl. ¶ 2) is that it solicits business in New York because it has a website available in New York. (Pl. Opp. Mot. at 4-5).
Assuming arguendo, that having a website that is merely available in New York, and which is not purposefully directed toward New York constitutes solicitation, solicitation by itself does not constitute "doing business" within the meaning of section 301. See Drucker Cornell v. Assicurazioni Generali S.p.A., Consol., No. 97 Civ. 2262, 2000 WL 284222, at *2 (S.D.N.Y. March 16, 2000). To come within that provision, defendants must be engaged in other activities within the state.See Beacon Enterprises, Inc. v. Menzies, 715 F.2d 757, 763 (2d Cir. 1983); see also Landoil Resources, 918 F.2d at 1043-1044 ("If the solicitation is substantial and continuous, and defendant engages in other activities of substance in the state, then personal jurisdiction may properly be found to exist."). Plaintiff does not claim that either ComputerTraining or Rau is engaged in any other business-related activity in New York apart from solicitation of business via the ComputerTraining.com, Inc. website. Accordingly, defendants are not "doing business" here and therefore are not subject to personal jurisdiction pursuant to C.P.L.R. § 301.
Although "New York courts are divided over whether section 301 applies to individuals, or only to foreign corporations,"Gianino, 2000 WL 1224810, at *5, it is not necessary for this court to resolve that question because there is no allegation that Rau did anything in New York separate from ComputerTraining, i.e., have a website accessible in New York.
C. C.P.L.R. § 302: "Transacting Business"
C.P.L.R. § 302 provides authority for New York courts to exercise jurisdiction over a non-resident who "transacts any business within the state or contracts anywhere to supply goods or services in the state," as long as the cause of action arose from the transaction of business within the state or the contract is to supply goods or services in the state. N.Y.C.P.L.R. § 302(a)(1). Plaintiff must show an "articulable nexus" between the alleged cause of action and the business that was transacted in the state. See Sunward Elec., Inc. v. McDonald, 362 F.3d 17, 22 (2nd Cir. 2004); see also Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472-73 (1985). When determining whether a nexus exists, courts will consider such factors as:
(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; [and] (iii) what the choice-of-law clause is in any such contract.Sunward Elec., 362 F.3d at 22 (quoting Agency Rent A Car Sys., Inc. v. Grand Rent A Car Corp., 98 F.3d 25, 29 (2d Cir. 1996)). The court may also consider other factors, and the decision is ultimately based on "the totality of the circumstances." See Sunward Elec., 362 F. 3d at 22-23 (quoting Agency Rent A Car Sys., 98 F.3d at 29).
Wells Fargo does not contend that the causes of action arose from either the transaction of business within New York or a contract to supply goods or services within New York. Instead, it seeks to find jurisdiction in the forum selection clause of the Lease, which provides that "[the] Lease shall be considered to have been made in the state of Lessor's principal place of business" and "Lessee agrees to jurisdiction in the state of Lessor's principal place of business in any action, suit or proceeding arising out of this Lease, and concedes that it, and each of them, transacted business in the said state by entering into this Lease." (Compl. Ex. A ¶ 28).
That forum selection clause is too weak to sustain the weight Wells Fargo places on it, for regardless of whether "Lessor" within the intendment of that clause is limited to Crocker — the defined Lessor — or Wells Fargo — the ultimate assignee of the rights in the Lease — it does not aid Wells Fargo since Crocker's principal place of business is California (Compl. Ex. A) and Wells Fargo's is Minnesota (Compl. ¶ 1).
Because the exercise of personal jurisdiction here is not permitted by the law of New York, there is no need to address whether it would comport with the constitutional requirement of due process. See Bensusan Rest. Corp., 126 F.3d at 27.
D. Rau is Not Subject to Personal Jurisdiction in New York
The Guaranty, signed by Rau, provides that he "jointly and severally, unconditionally guaranties the faithful and full performance by Lessee of all terms and conditions of the lease." (Compl. Ex. C). Wells Fargo contends that this language implies that the forum selection clause contained in the Lease applies to Rau with equal force. (Pl. Opp. Mot. at 7). As set forth above, the forum selection clause in the Lease does not confer personal jurisdiction over defendant ComputerTraining. Accordingly, the clause may not be so applied to Rau as to grant jurisdiction in New York over him either. This Court has no other basis to assert personal jurisdiction over Rau.
III. Conclusion
For the reasons stated above, defendants' motion to dismiss the complaint for lack of personal jurisdiction pursuant to Fed.R.Civ.P. 12(b)(2) is granted without prejudice to its refiling in an appropriate jurisdiction.
SO ORDERED: