Opinion
04 Civ. 05223 (SAS).
March 15, 2005
Joseph Michael Heppt, Esq., Law Office of Joseph M. Heppt New York, NY, for Plaintiff.
Mark Aaron Brandoff, Esq., Mark A. Brandoff, P.C. Jericho, NY, for Defendants.
OPINION AND ORDER
Allojet PLC ("Allojet") brings this action against Plane Plastics, Ltd. ("Plane," sued herein as Vantage Plane Plastics), and Vantage Associates, Inc. ("Vantage," sued herein as Vantage Associates), alleging breach of contract, fraudulent inducement, tortious interference with contractual relations, wrongful inducement of breach of contract, and unfair competition. Allojet, a corporation domiciled in the United Kingdom, asserts in its amended complaint that this Court has diversity jurisdiction. Defendants Plane and Vantage have filed a motion to dismiss the amended complaint based on lack of personal jurisdiction with respect to both defendants and failure to state a claim upon which relief can be granted with respect to Vantage. In the alternative, Plane and Vantage have moved to transfer the action to the United States District Court for the Western District of Oklahoma. For the reasons that follow, defendants' Rule 12(b)(2) motion is denied with leave to renew after the completion of limited discovery.
See 10/15/04 Amended Complaint ("Am. Compl.") ¶¶ 35-57.
See id. ¶¶ 1-3 (stating that Vantage is a corporation with its principal place of business in California, Plane is a corporation with its principal place of business in Oklahoma, and that the matter in controversy is between citizens of a State and a citizen of a foreign state); id. ¶ 8 (alleging the matter in controversy exceeds $75,000).
See 10/19/04 Notice of Motion to Dismiss and/or Transfer Action ("Notice of Motion").
See id. (citing 28 U.S.C. § 1404).
Because the Rule 12(b)(2) motion is denied with leave to renew after the completion of limited discovery, and this Court may yet lack personal jurisdiction over Plane and Vantage, I do not address either the Rule 12(b)(6) motion or the transfer motion.
I. BACKGROUND
A. The Parties
Allojet is a corporation that distributes plastics for general aviation aircraft in Europe, and has its principal place of business in Birmingham, United Kingdom. Vantage is a California corporation that manufactures products and provides services for several industries, including the commercial aviation, defense, medical, electronic and automotive industries. Plane is an Oklahoma corporation that manufactures and sells replacement parts for general aircraft interiors. In November 2000, Plane became a wholly owned subsidiary of Vantage.
See Am. Compl. ¶ 1; id. ¶¶ 4, 20.
See 10/29/04 Affidavit of Andrea Alpinieri-Glover, Vantage Associates, Inc. Vice-President-Finance ("Alpinieri-Glover Aff.") ¶ 3; Am. Compl. ¶ 2.
See 10/29/04 Affidavit of Scott Brown, Plane Plastics, Ltd. Vice President ("Brown Aff.") ¶ 3; Am. Compl. ¶ 3; Alpinieri-Glover Aff. ¶ 4.
See Alpinieri-Glover Aff. ¶ 4; Brown Aff. ¶ 3.
B. The Allojet-Plane Distribution Agreement
In June 2003, Allojet and Plane entered into a Distribution Agreement ("Agreement") that designated Allojet as the sole distributor of Plane's products in Europe. In that Agreement, Plane agreed to "direct all European installers to Allojet PLC for ordering" and to "direct [Plane's] European customers to Allojet PLC for ordering." Furthermore, Allojet agreed to "display [Plane's] logo on its web site saying Allojet PLC distributes [Plane] parts."
See Am. Compl. ¶ 20; 6/30/03 Allojet/PlanePlastics Distribution Agreement ("Agreement") annexed to 9/20/04 Letter from Mark A. Brandoff to the Court (stating that "[a]s of 06-30-03, AlloJet PLC will become PlanePlastics LTD sole Distributor in EUROPE").
Agreement.
Id.
Even before entering the Agreement, however, Allojet was concerned that Plane would violate its obligations under that Agreement. Allojet alleges that before signing the contract its president, Jim Achache ("Achache"), expressed his concern to Scott Brown ("Brown"), Plane's Vice-President, that Plane might include Plane brochures in its shipping boxes and that European customers might order directly from Plane in violation of the Agreement. Despite Brown's assurances of Plane's intended compliance, Allojet alleges that Plane immediately violated the Agreement by shipping products to Allojet's European customers in Plane boxes with Plane brochures and by selling products directly to European customers and installers through its website. In addition to Allojet's continuing objection to Plane's methods of shipping to European customers, Allojet also opposed Plane employees wearing Plane tee shirts at an Allojet booth at a European trade show scheduled for May 2004. According to Allojet, it cancelled its "appearance at the trade show rather than give [Plane] an opportunity to steal more of its customers."
See Am. Compl. ¶ 24.
See id. ¶ 28.
See id. ¶¶ 25-26.
See id. ¶¶ 27-29 ("Allojet objected on numerous occasions to Plane Plastics' wrongful conduct and demanded that Plane Plastics honor its contractual obligations to Allojet").
See id.
Although Allojet lodged repeated objections with Plane over its alleged violations of the Agreement, Allojet asserts that Plane continued to breach the Agreement by selling Plane products directly to European installers and customers. Allojet finally filed a complaint in this district on July 1, 2004, against both Plane and Vantage, asserting a cause of action for breach of contract.
See id. ¶¶ 29-31 (stating that in December 2003 Achache requested "that the Plane Plastics web site be modified so that European orders could not be processed directly by Plane Plastics and instead redirected to the Allojet ordering system. Plane Plastics refused to do so expressly because they [sic] did not want to lose any European orders."); id. ¶ 38; id. ¶ 31 (alleging that Brown wrote an April 1, 2004 letter that "essentially admitted that Plane Plastics had no intention of abiding by the terms of the Exclusive Distributorship Agreement").
See 7/01/04 Complaint ("Compl.").
C. The Amended Complaint
As amended on October 15, 2004, the Complaint contains five claims: (1) breach of contract based on Plane's direct sales to European installers and customers; (2) fraudulent inducement based on Brown's misrepresentations that Plane "wanted to establish a long-term relationship with Allojet," "would not interfere with Allojet's efforts to develop the European market," "would honor and not interfere with Allojet's relationship with its customers," and that "Allojet would enjoy the fruits of its labor in developing the European market for Plane Plastics' products;" (3) wrongful interference with contractual relations based on Plane's inducement of others to breach their contracts, which "caus[ed] or contribut[ed] to the destruction of Allojet's business"; (4) wrongful inducement of breach of contract; and (5) unfair competition for all of the acts alleged in the previous claims.
See Am. Compl. ¶¶ 35-39.
Id. ¶¶ 40-45.
Id. ¶¶ 47-49.
See id. ¶¶ 50-53.
See id. ¶¶ 54-57.
D. Jurisdictional Allegations
1. Personal Jurisdiction
In its complaint, Allojet asserts that this Court has personal jurisdiction over Plane and Vantage pursuant to New York's long arm statute under sections 301 and 302 of the New York Civil Practice Law and Rules ("C.P.L.R."). However, in its response to defendants' motion, Allojet argues that the "basis for jurisdiction over [Plane] in this case is New York's long arm statute, CPLR 302." Allojet bases its argument on two types of contacts between Plane and New York: (1) Plane's operation of a website that sells Plane products to consumers in New York; and (2) Plane's business relationships with at least four "accredited installers" in New York. Allojet does not allege that Vantage has any specific contacts with New York, but instead relies on its status as Plane's parent corporation. Allojet asserts that because Plane is a "mere department" of Vantage, Vantage is subject to "personal jurisdiction in New York based upon the activities of [Plane]."
See id. ¶ 15.
Plaintiff's Memorandum of Law in Opposition to Defendants' Motion to Dismiss and/or Transfer Action ("Pl. Mem.") at 7.
See id. at 7-9; Am. Compl. ¶¶ 10-16.
See Pl. Mem. at 10.
Id.
a. Plane's Website
Allojet contends that Plane operates a website where New York consumers can view product catalogs, submit orders for products, "`chat' online" with Plane representatives, and email questions to Plane employees. Plane confirms that "it has an `interactive' web site through which customers in New York can place orders" and does not dispute that New York customers can communicate with Plane representatives through the website. However, Plane emphasizes that the interactive website is Plane's only contact with New York and that this Court should not exercise personal jurisdiction over it on this basis alone.
See Am. Compl. ¶ 10.
Pl. Mem. at 8.
Brown Aff. ¶ 6.
See id. ¶¶ 5-6 ("Plane has no office or place of business in New York, has no bank accounts in New York and has no employees or agents in New York. Its office and principal place of business is located in Alva, Oklahoma. Its bank accounts are in Oklahoma. Its physical plant and employees are in Oklahoma . . . Plane's only `contact' with New York is the fact that it has an `interactive' web site through which customers in New York can place orders.").
b. Plane's Accredited Installers
Allojet asserts that Plane's website reveals that Plane has a business relationship with "at least four accredited installers in New York for the purpose of selling and installing [Plane] products within the state." According to Allojet, Plane's website describes an accredited installer as "a factory certified organization that enjoys priority services [and] terms for acquiring interior components from [Plane]." Allojet, however, does not allege that the accredited installers are employees or agents of either Plane or Vantage. Additionally, while Allojet asserts that Plane and Vantage have "derived substantial revenues" either from Plane's on-line sales into New York or its accredited installers in New York, it does not allege either the percentage of overall sales or the dollar value of sales from customers in New York via Plane's website and accredited installers.
Pl. Mem. at 8. See also Plane Web Page, Ex. B to Pl. Mem. (listing Plane's four accredited installers in New York: (1) C.B. Aviation Inc., located in Canandaigua, New York; (2) Jamestown Aviation, located in Jamestown, New York; (3) First-Air Group, located in Horseheads, New York; and (4) Global Air Interiors, located in Ronkonkoma, New York).
Am. Compl. ¶ 13.
Id. ¶ 14.
II. APPLICABLE LAW
A. Rule 12(b)(2)
A court is obligated to dismiss an action against a defendant over which it lacks personal jurisdiction. A plaintiff bears the ultimate burden of establishing, by a preponderance of the evidence, that the court has jurisdiction over the defendant. However, "[p]rior to discovery, a plaintiff challenged by a jurisdiction testing motion may defeat the motion by pleading in good faith . . . legally sufficient allegations of jurisdiction, i.e., by making a prima facie showing of jurisdiction." A plaintiff "can make this showing through [its] own affidavits and supporting materials[,] containing an averment of facts that, if credited . . ., would suffice to establish jurisdiction over the defendant." Thus, a court may consider materials outside the pleadings, but must credit the plaintiff's averments of jurisdictional facts as true. "[W]here the issue is addressed on affidavits, all allegations are construed in the light most favorable to the plaintiff and doubts are resolved in the plaintiff's favor, notwithstanding a controverting presentation by the moving party." Nonetheless, where a defendant "rebuts [a plaintiff's] unsupported allegations with direct, highly specific, testimonial evidence regarding a fact essential to jurisdiction — and [the] plaintiff do[es] not counter that evidence — the allegation may be deemed refuted."
See Fed.R.Civ.P. 12(b)(2). See also In re Ski Train Fire in Kaprun, Austria on Nov. 11, 2000, 230 F. Supp. 2d 403, 406 (S.D.N.Y. 2002) ( "In re Ski Train Fire").
See Kernan v. Kurz-Hastings, Inc., 175 F.3d 236, 240 (2d Cir. 1999); Robinson v. Overseas Military Sales Corp., 21 F.3d 502, 507 n. 3 (2d Cir. 1994).
Jazini v. Nissan Motor Co., Ltd., 148 F.3d 181, 184 (2d Cir. 1998) (quotation marks and citations omitted). See also Koehler v. Bank of Berm., Ltd., 101 F.3d 863, 865 (2d Cir. 1996).
Whitaker v. American Telecasting Inc., 261 F.3d 196, 208 (2d Cir. 2001) (quotation marks and citations omitted).
See Hsin Ten Enter. USA, Inc. v. Clark Enters., 138 F. Supp. 2d 449, 452 (S.D.N.Y. 2000).
See Metropolitan Life Ins. Co. v. Robertson-Ceco Corp., 84 F.3d 560, 567 (2d Cir. 1996).
A.I. Trade Fin., Inc. v. Petra Bank, 989 F.2d 76, 79-80 (2d Cir. 1993). Accord Whitaker, 261 F.3d at 208.
Schenker v. Assicurazioni Genereali S.p.A., Consol., No. 98 Civ. 9186, 2002 WL 1560788, at *2 (S.D.N.Y. July 15, 2002).
B. Personal Jurisdiction
The determination of whether a federal court has personal jurisdiction over a defendant is a two-step process. First, the court must determine whether the plaintiff has shown that the defendant is subject to personal jurisdiction under the forum state's laws. Second, the court must assess whether its assertion of jurisdiction pursuant to the forum state's laws comports with the requirements of due process.
See Bensusan Rest. Corp. v. King, 126 F.3d 25, 27 (2d Cir. 1997); Metropolitan Life, 84 F.3d at 567.
See Bensusan, 126 F.3d at 27; Metropolitan Life, 84 F.3d at 567. Until plaintiff can show that this Court may exercise jurisdiction over defendants under New York law there is no need to analyze the constitutional prong of the jurisdictional test.
1. General Jurisdiction
Under section 301 of the C.P.L.R., New York subjects a foreign corporation to general jurisdiction if it is "doing business" in the state. Under the "doing business" standard, "a foreign corporation is amenable to suit in [New York] courts if it is `engaged in such a continuous and systematic course of `doing business' here as to warrant a finding of its `presence' in this jurisdiction.'" That is, a "corporation is `doing business' and is therefore `present' in New York and subject to personal jurisdiction with respect to any cause of action . . . if it does business in New York `not occasionally or casually, but with a fair measure of permanence and continuity.'" The doing business standard is stringent because "a corporation amenable to jurisdiction under section 301 may be sued in New York on causes of action wholly unrelated to acts done in New York."
See N.Y.C.P.L.R. § 301 (McKinney 2003).
Frummer v. Hilton Hotels Int'l Inc., 19 N.Y.2d 533, 536 (1967) (quoting Simonson v. Int'l Bank, 14 N.Y.2d 281, 285 (1964)).
Wiwa v. Royal Dutch Petroleum Co., 226 F.3d 88, 95 (2d Cir. 2000) (quoting Hoffritz for Cutlery, Inc. v. Amajac, Ltd., 763 F.2d 55, 58 (2d Cir. 1985)).
Ball v. Metallurgie Hoboken-Overpelt, 902 F.2d 194, 198 (2d Cir. 1990).
To determine whether a foreign corporation is doing business in New York, courts focus on a traditional set of indicia: (1) whether the company has an office in the state; (2) whether it has any bank accounts or other property in the state; (3) whether it has a phone listing in the state; (4) whether it does public relations work in the state; and (5) whether it employs individuals within the state to promote its interests. However, these factors are only intended to provide guidance; they do not amount to a "formula" for testing jurisdiction. As the Second Circuit has noted, "[t]here is no talismanic significance to any one contact or set of contacts that a defendant may have with a forum state; courts should assess the defendant's contacts as a whole."
2. Specific Jurisdiction
See Wiwa, 226 F.3d at 98 (citing Hoffritz, 763 F.2d at 58; Frummer, 19 N.Y.2d at 537).
Metropolitan Life, 84 F.3d at 570 (emphasis in original). Accord Landoil Res. Corp. v. Alexander Alexander, Servs., Inc., 918 F.2d 1039, 1043 (2d Cir. 1990) ("The Court must analyze a defendant's connections to the forum state `not for the sake of contact-counting, but rather for whether such contacts show a continuous, permanent and substantial activity in New York.'") (quoting Weinstein, Korn Miller, New York Civil Practice ¶ 301.16, at 3-32) (alterations omitted).
Under section 302(a)(1) of the C.P.L.R., a court may exercise personal jurisdiction over a nondomiciliary if "the nondomiciliary transact[s] business within the state, [and] the claim against the nondomiciliary arise[s] out of that business activity." "A nondomiciliary `transacts business' under C.P.L.R. 302(a)(1) when [it] `purposefully avails [it]self of the privilege of conducting activities within New York, thus invoking the benefits and protections of its laws.'" A court's determination of whether a defendant "transacts business" in New York is based on an assessment of the sum of the defendant's activities.
Section 302(a)(1) reads, in relevant part: "[A] court may exercise personal jurisdiction over any non-domiciliary . . . who in person or through an agent transacts any business within the state or contracts anywhere to supply goods or services in the state." N.Y.C.P.L.R. § 302(a)(1) (McKinney 2003).
CutCo Indus., Inc. v. Naughton, 806 F.2d 361, 365 (2d Cir. 1986). Because jurisdiction under section 302(a)(1) requires consideration of whether a cause of action arose out of a party's transaction of business in New York, it is necessary to "determine the issue of personal jurisdiction separately for each cause of action asserted in the plaintiff's complaint." Cosmetech Int'l LLC v. Der Kwei Enter. Co., 943 F. Supp. 311, 317 (S.D.N.Y. 1996). Accord Ainbinder v. Potter, 282 F. Supp. 2d 180, 184 (S.D.N.Y. 2003).
CutCo Indus., 806 F.2d at 365 (quoting McKee Elec. Co. v. Rauland-Borg Corp., 20 N.Y.2d 377, 382 (1967)) (alterations omitted). Accord Fort Knox Music Inc. v. Baptiste, 203 F.3d 193, 196 (2d Cir. 2000) ("[T]he statute allows jurisdiction only over a defendant who has purposefully availed himself of the privilege of conducting activities within New York and thereby invoked the benefits and protections of its laws.") (quotation marks and alteration omitted)).
See Sterling Nat'l Bank Trust Co. of N.Y. v. Fidelity Mortgage Investors, 510 F.2d 870, 873 (2d Cir. 1975).
Personal jurisdiction may be asserted over a non-domiciliary pursuant to section 302(a)(2) if the non-domiciliary "commits a tortious act within the state." The New York Court of Appeals has interpreted section 302(a)(2) to cover "only a tortious act committed (by a nondomiciliary) in this State" which requires "that the defendant or his agent be physically present in New York" when committing the tortious act.
N.Y.C.P.L.R. § 302(a)(2) (McKinney 2003).
Feathers v. McLucas, 15 N.Y.2d 443, 464 (1965).
Bensusan, 126 F.3d at 28 (quoting the official Practice Commentary to N.Y.C.P.L.R. § 302).
Under section 302(a)(3), personal jurisdiction may be asserted over a non-domiciliary if the non-domiciliary "commits a tortious act without the state causing injury to person or property within the state," and either (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 deciding whether the injury in New York is sufficient to warrant the exercise of jurisdiction under section 302(a)(3), courts "generally apply a situs-of-injury test, which asks them to locate the `original event which caused the injury,'" and "`not the location where the resultant damages are felt by the plaintiff.'"
N.Y.C.P.L.R. § 302(a)(3) (McKinney 2003).
Whitaker, 261 F.3d at 209 (quoting Bank Brussels Lambert v. Fiddler Gonzalez, 171 F.3d 779, 791 (2d Cir. 1999); Mareno v. Rowe, 910 F.2d 1043, 1046 (2d Cir. 1990)).
3. Jurisdiction Based on Website Activity
"It is well settled that a court must examine the nature and quality of a defendant's activity on its web site to determine whether jurisdiction is appropriate in New York." Courts assessing whether Internet activity permits the exercise of personal jurisdiction "have identified an array of fact patterns." At one end of the spectrum are "passive" websites that display, but do not permit an exchange of, information. "At the other end of the spectrum are cases in which the defendant clearly does business over the Internet . . . Occupying the middle ground are `interactive' web sites, which permit the exchange of information between the defendant and web site viewers."
Alpha Int'l, Inc. v. T-Reprods., Inc., No. 02 Civ. 9586, 2003 WL 21511957, at *3 (S.D.N.Y. July 1, 2003) (citing Mattel, Inc. v. Adventure Apparel, No. 00 Civ. 4085, 2001 WL 286728, at *3 (S.D.N.Y. Mar. 22, 2001)).
Hsin Ten, 138 F. Supp. 2d at 456.
Id. (citations omitted).
"Most courts considering the significance of [I]nternet activity for the exercise of personal jurisdiction have done so in the context of a specific, rather than general, jurisdictional analysis." Thus, while a defendant's use of an interactive website, standing alone, may support a finding of specific jurisdiction, it generally will not confer general jurisdiction over a defendant.
Citigroup Inc. v. City Holding Co., 97 F. Supp. 2d 549, 570-71 (S.D.N.Y. 2000).
See, e.g., Alpha Int'l, Inc., 2003 WL 21511957, at *3; Hsin Ten, 138 F. Supp. 2d at 456; Zippo Mfg. Co. v. Zippo Dot Com, 952 F. Supp. 1119, 1124 (W.D. Pa. 1997).
See, e.g., In re Ski Train Fire, 230 F. Supp. 2d at 408.
4. Parent-Subsidiary Relationship to Establish Jurisdiction
Where a plaintiff claims that for the purpose of personal jurisdiction a "foreign corporation is present in New York state because of the activities there of its subsidiary, the presence of the subsidiary alone does not establish the parent's presence in the state. For New York courts to have personal jurisdiction in that situation, the subsidiary must be either an `agent' or a `mere department' of the foreign parent."
Jazini, 148 F.3d at 184 (citations omitted).
To determine whether the subsidiary is a "mere department" of the parent corporation, the Court must consider (1) "common ownership," which is "essential"; (2) "financial dependency of the subsidiary on the parent corporation"; (3) "the degree to which the parent corporation interferes in the selection and assignment of the subsidiary's executive personnel and fails to observe corporate formalities"; and (4) "the degree of control over the marketing and operational policies exercised by the parent." "The first factor, common ownership, is essential to the assertion of jurisdiction over a foreign related corporation, while the three other factors are important. The overall weighing of the various factors thus necessitates a balancing process, and not every factor need weigh entirely in the plaintiff's favor." When applying the Beech test, the "exercise of personal jurisdiction over an alleged alter ego requires application of a `less onerous standard' than that necessary for equity to pierce the corporate veil for liability purposes under New York law."
Volkswagenwerk Aktiengesellschaft v. Beech Aircraft Corp., 751 F.2d 117, 120-22 (2d Cir. 1984). Accord Jazini, 148 F.3d at 184-85 (applying Beech factors).
Northrop Grumman Overseas Serv. Corp. v. Banco Wiese Sudameris, No. 03 Civ. 1681, 2004 WL 2199547, at *9 (S.D.N.Y. Sept. 29, 2004) (citing Beech, 751 F.2d at 120-22).
D. Klein Son, Inc. v. Good Decision, Inc., Good Decision, Ltd., No. 04-1994, 2005 U.S. App. LEXIS 2764, *2 (2d Cir. Feb. 15, 2005) (citations omitted).
III. DISCUSSION
A.C.P.L.R. § 301
Allojet contends that this Court has "general jurisdiction" over Plane and Vantage under section 301 of the C.P.L.R. Allojet asserts that the defendants "solicit and transact business in New York via [Plane's] interactive internet site" and that they "have derived significant revenues from sales of Plane Plastics' products in New York" through Internet sales or sales through accredited Plane installers. Allojet's amended complaint states that "Defendants' contacts with New York have been sufficient to confer jurisdiction pursuant to New York's long arm statutes CPLR §§ 301 and 302." Nonetheless, Allojet does not specifically address section 301 in its memorandum of law.
See Am. Compl. ¶ 15.
Id. ¶ 11.
Id. ¶ 14.
Id. ¶ 15.
See Pl. Mem. at 7 ("The basis for jurisdiction over [Plane] is New York's long arm statute, CPLR 302.").
Defendants do not explain why the Court cannot assert jurisdiction under section 301, merely stating that "[p]ersonal jurisdiction over [defendants], if it exists at all, is derived from [section 302(a)]," and that Allojet's memorandum "appears to rely upon CPLR § 302(a)(1) as the basis for personal jurisdiction in this case." But defendants do provide affidavits to show that Plane and Vantage lack substantial and continuous contacts with New York. Defendants allege, and Allojet does not dispute, that Plane has no place of business, no bank accounts, no employees and no agents in New York. Defendants also offer evidence, without objection by Allojet, that Vantage has "no place of business in New York, no employees, agents or bank accounts in New York." In fact, defendants contend that the only "contact" that Plane has to New York is "the fact that it has an `interactive' web site through which customers in New York can place orders." Allojet does not dispute that both defendants lack a place of business, bank accounts, employees, agents and officers in New York. However, the defendants do not refute Allojet's allegations that defendants solicit business in New York, sell products to four accredited installers and consumers in New York, and that Plane employees interact with New York residents through the interactive chat and email functions of its website. Although Allojet does not allege either the amount or percentage of Plane's Internet sales that arise from Plane's sales in New York, Allojet's memorandum cites to news articles that indicate that both Vantage and Plane derive a substantial percentage of their overall sales from Internet sales.
Defendants' Memorandum of Law in Support of Motion to Dismiss and/or Transfer Action ("Def. Mem.") at 3.
Defendants' Reply Memorandum of Law in Support of Motion to Dismiss and/or Transfer Action ("Def. Rep. Mem.") at 2.
See Brown Aff. ¶ 5; Alpinieri-Glover Aff. ¶ 6.
See Brown Aff. ¶ 5.
Alpinieri-Glover Aff. ¶ 6.
Brown Aff. ¶ 6.
See 4/13/03 Alva and Plane Plastics a Perfect Fit, Ex. G to Pl. Mem. (stating that according to Dr. Lou Alpinieri, chairman of Vantage, "[c]urrently 35 percent of total sales come from on-line business, up from zero a year ago"); 2/17/02 Plane Plastics Expansion Exploding, Ex. H to Pl. Mem. (stating that the percentage of Plane's on-line sales by February 2002 had "grown to 28.59" percent).
Although "[m]ost courts considering the significance of [I]nternet activity for the exercise of personal jurisdiction have done so in the context of a specific, rather than general, jurisdictional analysis," some courts have considered and granted general jurisdiction on the basis of interactive websites that enable non-forum defendants to earn substantial revenue. In fact, Plane's interactive website engages in the type of interactive website activity that — in addition to Plane's other contacts with New York — could provide the basis for finding general jurisdiction under section 301 if Plane's website sales into New York are substantial and continuous. On the spectrum of company websites that courts have analyzed, Plane's website falls into at least the intermediate category of `interactive' websites and possibly into the most active category of websites where the defendant "clearly does business over the internet." First, Plane's website functions as an "interactive" website because it permits the "exchange of information between the defendant and web site viewers." Because New York customers can exchange information with Plane representatives through the website's "chat" and email functions, the website is at the very least "interactive." Second, the fact that New York customers can place orders for Plane products through Plane's website demonstrates that Plane potentially "does business" with New York customers via its website, the most active possible category of websites.
Citigroup, 97 F. Supp. 2d at 570-71.
See, e.g. Gator.com Corp. v. L.L. Bean, Inc., 341 F.3d 1072, 1078 (9th Cir. 2003), en banc hearing granted, 366 F.3d 789, 789 (9th Cir. 2004), and appeal dismissed, No. 02 Civ. 15035, 2005 WL 351228, at *6 (9th Cir. 2005) ("Given the high standard the Ninth Circuit has set, the presence of general jurisdiction in the instant case is a close question. Admittedly, L.L. Bean has few of the factors traditionally associated with physical presence, such as an official agent or incorporation. Nevertheless, we find that there is general jurisdiction in light of L.L. Bean's extensive marketing and sales in California, its extensive contacts with California vendors, and the fact that, as alleged by Gator, its website is clearly and deliberately structured to operate as a sophisticated virtual store in California.") (citations omitted); Shottenstein v. Shottenstein, No. 04 Civ. 5851, 2004 WL 2534155, at *11 (S.D.N.Y. Nov. 8, 2004) (stating that "[c]rediting Sarah's jurisdictional averments as true, this website has enabled M/I to generate 20% of its revenues from New York residents. At this early stage in the proceedings, Sarah has adequately pled that there is general jurisdiction over M/I Homes due to its interactive website advertising plus substantial sales to New York residents."); Arista Records, Inc. v. Sakfield Holding Co., 314 F. Supp. 2d 27, 35 (D.D.C. 2004) (holding that a defendant's electronic transactions with forum residents were "sufficient to support a finding of continuous and systematic contacts with the District of Columbia" and general jurisdiction over the defendant); Mieczkowski v. Masco Corp., 997 F. Supp. 782, 787 (D. Tex. 1998) (stating that it is the combination of the interactive website activities and traditional business contacts "that leads the Court to the conclusion that the defendant maintains substantial, continuous and systematic contacts with Texas sufficient to subject it to personal jurisdiction").
Hsin Ten, 138 F. Supp. 2d at 456.
Id. (citations omitted).
See Alpha Int'l, 2003 WL 21511957, at *3 (stating that "websites that permit information exchange between the defendant and viewers are deemed `interactive'") (citing Hsin Ten, 138 F. Supp. 2d at 456; Citigroup, 97 F. Supp. 2d at 565).
See Hsin Ten, 138 F. Supp. 2d at 456.
Allojet has alleged, without objection by defendants, that Vantage and Plane have solicited business in New York through Plane's website. In addition, Plane also has relationships with four accredited installers in New York and sells an unknown quantity of goods to New York customers. "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. Under this `solicitation-plus' rule, `once solicitation is found in any substantial degree very little more is necessary to a conclusion of `doing business.'" At this time, however, Allojet has not presented an argument in favor of or demonstrated substantial solicitation based on its interactive website activity, and it has not yet demonstrated that defendants engaged in "other activities of substance" sufficient to make a prima showing, especially due to a lack of information on how substantial and continuous defendants' Internet solicitation and in-state sales were. Additionally, although "the shipment of goods into New York does not ipso facto constitute `doing business,'" it is possible that a showing of substantial and continuous website sales shipments into New York, as well as other contacts to New York, could provide the basis for a finding of general jurisdiction under section 301. Because Allojet has not provided evidence supporting either the extent of defendants' solicitation or the amount or percentage of nationwide sales derived from sales to New York, Allojet has not pled facts sufficient to make a prima facie showing under section 301.
Landoil, 918 F.2d at 1043-44 (citing Beacon Enters. v. Menzies, 715 F.2d 757, 763 (2d Cir. 1983); Aquascutum of London, Inc. v. S.S. American Champion, 426 F.2d 205, 211 (2d Cir. 1970); Laufer v. Ostrow, 449 N.Y.S.2d 456, 459 (1982) (quotations omitted)).
Id.
Beacon, 715 F.2d at 763 (citations omitted). March 11, 2005
See Weinstein, Korn and Miller, New York Civil Practice ¶ 301.16, at 3-32 (2005) (stating that "a corporation may properly be held to be doing business on the basis of substantial and continuous in-state sales and shipments, even if it has no permanent office or place of business in the state") (citations omitted).
Despite not having made a prima facie showing under section 301, jurisdictional discovery is appropriate to determine if plaintiff's allegations are factually supported. "`[G]enerally, a plaintiff may be allowed limited discovery with respect to the jurisdictional issue; but until she has shown a reasonable basis for assuming jurisdiction, she is not entitled to any other discovery.'" Because Allojet has made a sufficient start toward establishing that there is general jurisdiction and has shown a reasonable basis for the Court to assume jurisdiction, discovery is permitted solely as to the facts that relate to establishing general jurisdiction under section 301.
See, e.g. Stratagem Dev. Corp. v. Heron Int'l N.V., 153 F.R.D. 535, 547-48 (S.D.N.Y. 1994) ("Although the Stratagem parties have not made a prima facie showing, they have made a sufficient start toward establishing personal jurisdiction."); BHP Trading (UK) Ltd. v. Deep Sea Int'l Shipping Co., No. 90 Civ. 2231, 1991 WL 198747, at *5 (S.D.N.Y. Sept. 23, 1991) ("To be permitted [jurisdictional] discovery plaintiff need not have made a prima facie showing, but at the very least must have made a sufficient start and shown its position to be non-frivolous") (citing Filus v. Lot Polish Airlines, 907 F.2d 1328, 1332 (2d Cir. 1990); H.L. Moore Drug Exchange, Inc. v. Smith Kline French Labs., 384 F.2d 97, 97 (2d Cir. 1967)). See also 2 Moore's Federal Practice, § 12.31[7] ("Generally, the district court should allow discovery if the jurisdictional claim has a reasonable basis and it appears that pertinent facts may be uncovered."); 16 Moore's Federal Practice, § 108.44[3] ("In cases involving an interactive website, it may be appropriate for the district court to allow jurisdictional discovery as to the amount of business activity that is actually carried on over the internet with the forum state.").
First City, N.A. v. Rafidain Bank, 150 F.3d 172, 176 (2d Cir. 1998) (quoting Filus, 907 F.2d at 1332).
B.C.P.L.R. § 302(a)(1)
Vantage and Plane argue that even assuming that Plane transacted business in New York, there is no personal jurisdiction under section 302(a)(1) because none of Allojet's claims arose from any of Plane's website activities. Although Plane may have "transacted business" in New York through its website and relationships with four accredited installers in New York, Allojet's cause of action for breach of contract does not "aris[e] from" Plane's contacts with New York, which is required in order to confer specific jurisdiction under section 302(a)(1). Rather, the dispute arises from an alleged breach of the Distribution Agreement. Defendants correctly note that the Agreement only covers Allojet and Plane's interactions with European customers and installers, but is silent as to New York consumers or installers. Allojet specifically asserts that Plane violated the Agreement by selling directly to European customers and installers instead of directing these European buyers to Allojet. But Allojet does not assert that Plane's Internet sales into New York or relationships with installers in New York have anything to do with the breach of contract, other than that a common website was used to sell to buyers in both New York and Europe. In fact, Allojet's allegation that it asked Plane to segregate its website so that Europeans and Americans would be directed to completely different web pages indicates that Allojet believed Plane's sales in the United States, including New York, were unrelated to Plane's sales in Europe.
See Def. Mem. at 4.
N.Y.C.P.L.R. § 302(a)(1) (McKinney 2003).
See Agreement ("As of 06-30-03, AlloJet PLC will become PlanePlastics LTD['s] sole Distributor in EUROPE").
See Am. Compl. ¶ 38.
See Armouth Int'l, Inc. v. Haband Co., 715 N.Y.S.2d 438, 439 (2d Dep't 2000) (holding that there was no personal jurisdiction under section 302(a)(1) in a breach of contract action because the New Jersey defendant's Internet sales to New York customers were unrelated to the dispute over the defendant's contract to ship goods to the plaintiff in Georgia, and stating that "[t]he plaintiff failed . . . to sustain its prima facie burden of establishing a substantial relationship between the Internet retail activity and the defendant's alleged breach of contract to purchase wholesale goods.").
See Am. Compl. ¶ 30.
Furthermore, Allojet's reliance on Johnson v. Ward is misplaced. In Johnson, a divided court held that there was personal jurisdiction under section 302(a)(1) over a New Jersey defendant who at the time of a car accident in New Jersey was a New York resident with a New York license and registration. The court also held that "since the cause of action sued upon arose over the operation by a driver licensed in New York of a vehicle registered in New York, [the claim] has a substantial nexus with defendant's activities here." Unlike in Johnson, however, Plane's ability to operate a website to sell to its European customers is not based on or related to any registration or licensing requirement in New York.
775 N.Y.S.2d 287 (1st Dep't 2004).
See id. at 299.
Id.
In addition, there is no specific jurisdiction under section 302(a)(1) with respect to the fraudulent inducement, tortious interference with contractual relations, wrongful inducement of breach of contract, and unfair competition claims. None of these claims "arise from" or have any connection to Vantage or Plane's alleged contacts with New York.
C.C.P.L.R. §§ 302(a)(2)-(3)
Although Allojet asserts claims for fraudulent inducement and tortious interference with contractual relations, Allojet has failed to demonstrate adequately that jurisdiction over Plane or Vantage with respect to these claims is proper under either section 302(a)(2) or 302(a)(3). Allojet does not assert that the tortious act was physically performed in New York State, a requirement for jurisdiction under section 302(a)(2). Nor does Allojet assert that Vantage or Plane committed a tortious act outside the state that injured a person inside New York State, a requirement for jurisdiction under section 302(a)(3).
See Bensusan, 126 F.3d at 28.
See N.Y.C.P.L.R. § 302(a)(3) (McKinney 2003).
D. Plane as a "Mere Department" of Vantage
Allojet asserts that it has "alleged facts sufficient to support a finding that [Plane] is a "mere department" of Vantage, and therefore this Court may exercise personal jurisdiction over Vantage, based on Plane's activities. Defendants contend that "Vantage and Plane are separate and distinct companies." The determination of whether Plane is a "mere department" of Vantage is based on consideration of the four factors set forth in Beech. Here, the parties agree on only the first of four factors, "common ownership," which is "essential." It is undisputed that Vantage "owns one hundred percent of the stock of its subsidiary [Plane]."
Pl. Mem. at 10.
Def. Mem. at 5.
See Beech, 751 F.2d at 120-123.
Id. at 120.
Pl. Mem. at 11.
Regarding the second factor, the "financial dependency of the subsidiary on the parent corporation," Defendants argue that "Plane is not financially dependant upon Vantage." Allojet offers no evidence or specific allegations that Plane is financially dependent on Vantage. However, Allojet notes that "access to [defendants'] financial information is not publicly available" because Plane and Vantage are not publicly traded corporations and that "discovery (if permitted) will likely show that [Plane] is financially dependent upon [Vantage]." At this time, Allojet has not alleged sufficient facts to indicate that the second factor of "financial dependency" favors Allojet.
Def. Rep. Mem. at 5.
Pl. Mem. at 11. I note, however, that Brown has offered evidence that Plane's purchasing decisions, accounting functions and check-issuing are separate from Vantage, and that Plane enters into distribution, licensing and other contractual relationships with other companies without the need for Vantage's approval. See 12/02/04 Reply Affidavit of Scott Brown, Vice President of Plane ("Brown Rep. Aff.") ¶¶ 4-7. Alpinieri-Glover has stated that Plane has "its own place of business, its own customers, its own officers, its own employees, its own bank accounts and files its own state tax returns." Alpinieri-Glover Aff. ¶ 5.
As to the third factor of Beech, "the degree to which the parent interferes in the selection and assignment of the subsidiary's executive personnel and fails to observe corporate formalities," Allojet alleges that Vantage "selects and assigns the personnel of [Plane]" and that Vantage's divisions (including Plane) report directly to Vantage President Paul Roy. Allojet, however, does not allege that Plane has failed to follow corporate formalities. Allojet provides documents to show that Plane Vice-President Brown was appointed or selected by Vantage President Roy, including a 2003 news article and a Vantage website press release.
Beech, 751 F.2d at 121.
Pl. Mem. at 11-12. Allojet and defendants' descriptions of Paul Roy's role in both corporations appear to contradict each other. Allojet asserts that Roy is the President of Vantage, see id., while defendants offer evidence that Roy is the President of Plane. See Brown Rep. Aff. ¶ 7. Neither party, however, has alleged that Roy serves as an officer of both Plane and Vantage.
See Pl. Mem. at 12 (citations omitted).
In determining whether there is interference with the subsidiary's executive personnel, "courts look to, inter alia, whether the parent shares officers with the subsidiary and shifts executives among its subsidiaries, whether the parent pays the executives' salaries, and whether the subsidiary holds separate meetings of its Board of Directors." Allojet does not allege that defendants share board members, have overlapping executives, fail to have separate board meetings, or that Vantage pays the salaries of Plane's executives. The only specific officer or employee of Plane whom Allojet alleges was selected by Vantage is Brown. Given that the "officers of a parent control the board of directors of a subsidiary in their capacity as representatives of the controlling stockholder," it is not out of the ordinary that Vantage may have played some role in appointing Brown. In addition, the news article and press release cited by Allojet do not specifically say that Vantage has appointed Brown, but rather that Brown was "newly appointed" without specifying whether Vantage or Plane appointed him. Brown's statement that he is responsible for all personnel decisions at Plane indicates that even if Vantage's executives played some role in selecting Brown, the practice has been limited to the selection of a single officer. Brown's statement that he has never "been required to obtain the approval of Vantage for any matter" supports defendants' contention that Vantage and Plane are independent and distinct corporations.
E.S.I., Inc. v. Coastal Corp., 61 F. Supp. 2d 35, 52 (S.D.N.Y. 1999) (citing Beech, 751 F.2d at 121-122).
Beech, 751 F.2d at 121.
See Brown Rep. Aff. ¶ 4.
Id. ¶ 8.
The allegations and evidence provided by Allojet and defendants suggest that the third factor weighs against Allojet. However, it is possible that, given discovery on the composition and role of the defendants' boards of directors, officers and other employees, this factor could favor Allojet.
Certainly, if Roy was President of both Vantage and Plane, and played an active role in both corporations, it could support "an inference that the subsidiary is not an independent entity." Beech, 751 F.2d at 121 (stating that the parent's president was also the president of the subsidiary).
As to the fourth factor, the "degree of control over marketing and operational policies of the subsidiary exercised by the parent," Allojet asserts that Vantage "exercises total control over the marketing of [Plane]" because defendants "share a common name and logo," the Vantage website "lists [Plane] among its businesses and product operations," and the "Division Vice-President of [Plane] reports to the President of [Vantage]." This provides some evidence that there is a degree of control by Vantage over marketing. However, Brown states that "Plane controls its own marketing [and a]lthough our website has references to that of Vantage Plane controls the content of its website."
Beech, 751 F.2d at 122.
Pl. Mem. at 12.
See Beech, 751 F.2d at 122 (citing Boryk v. De Davilland Aircraft Co., 341 F.2d 666, 668 (2d Cir. 1965) (parent's letterhead listed subsidiary as a branch); Public Administrator v. Royal Bank of Canada, 19 N.Y. 2d 127, 131-32 (1967) (parent's letterhead, general advertising and reports to stockholders identified subsidiary as branch)). But see In re Ski Train Fire, 230 F. Supp. 2d at 411 (stating that plaintiffs "point to the webpages of the companies, which share a `unified presentation' and use the same corporate logo . . . This fact shows that Siemens Germany exerts some control over Siemens Austria's marketing policies, but is insufficient to show `pervasive' or `complete' control, or that the distinction between the companies is more formal than real.").
Brown Rep. Aff. ¶ 5.
Although Allojet does not specifically assert that Vantage controls the "operational policies" of Vantage in its discussion of the fourth factor, Allojet describes a news article that states that Plane's Vice-President "will report to Paul Roy, Vice-President and General Manager of Vantage." Again, Roy's role is unclear based on the parties' contradictory accounts. Nonetheless, Brown's statement that he is "responsible for and in charge of [Plane's] day to day operations" indicates that Plane controls its own operational policies. In sum, the fourth factor does not appear to strongly favor either Allojet or defendants, especially given the factual conflict over Roy's role in both corporations.
Pl. Mem. at 13.
Brown Rep. Aff. ¶ 4.
Overall, Allojet has only fully satisfied the first and "essential" factor of the four-factor Beech test. The testimony of Brown and Alpinieri-Glover, if credited, strongly suggests that Allojet cannot satisfy the third and fourth factors. However, where there has been neither discovery nor an evidentiary hearing, the Court must construe all allegations in the light most favorable to Allojet, and resolve all doubts in Allojet's favor, "notwithstanding a controverting presentation by the moving party." It would therefore be premature to dismiss on the basis of defendants' factual presentation.
A.I. Trade Fin., 989 F.2d at 80.
"[I]n deciding a pretrial motion to dismiss for lack of personal jurisdiction a district court has considerable procedural leeway," and a district court may grant jurisdictional discovery to allow the plaintiff to establish facts related to whether a subsidiary corporation is a "mere department" of its parent corporation. Allojet has made a sufficient start in offering evidence to satisfy factors three and four to warrant discovery on these factors. Also, given that defendants are not publicly held corporations, which complicated Allojet's ability to ascertain the financial dependency of Plane on Vantage, discovery is warranted with respect to the second factor of the Beech test. Thus, plaintiff may conduct discovery limited to the second, third and fourth factors of the Beech test.
Marine Midland Bank, N.A. v. Miller, 664 F.2d 899, 904 (2d Cir. 1981) (stating that a district court "may determine the motion on the basis of affidavits alone; or it may permit discovery in aid of the motion; or it may conduct an evidentiary hearing on the merits of the motion.").
See, e.g. Aerotel, Ltd. v. Sprint Corp., 100 F. Supp. 2d 189, 194 (S.D.N.Y. 2000) (granting jurisdictional discovery to ascertain "the precise interrelatedness between Sprint Corporation and Sprint/Sprint Communications," despite the fact that "the allegation that Sprint Communications and Sprint Spectrum are mere departments of Sprint Corporation remains conclusory despite evidence of overlapping management and the fact that any doubts are to be resolved in the light most favorable to the plaintiff.") (citations omitted); Seema Gems v. Shelgem, Ltd., No. 93 Civ. 4473, 1994 WL 86381, at *2 (S.D.N.Y. Mar. 16, 1994) (stating that "plaintiff is entitled to limited discovery as to the relationship between the two entities" regarding whether a subsidiary was a "mere department" of the parent corporation); Gear, Inc. v. L.A. Gear California, Inc., 637 F. Supp. 1323, 1328-29 (S.D.N.Y. 1986) (granting jurisdictional discovery and denying motion to dismiss without prejudice to renewal when the "[d]efendants are interrelated" but the "actual relationship among the defendants [is] something of a mystery").
IV. CONCLUSION
For the reasons set forth above, defendants' motion is denied with leave to renew after the completion of limited discovery. The Clerk of the Court is directed to close this motion [docket # 14].
SO ORDERED.