Opinion
Index No. 000721/2019
06-26-2023
BANKERS HEALTHCARE GROUP, LLC, Plaintiff, v. PEDIATRIC ASSOCIATES, INC. d/b/a King of Prussia Pediatrics & Nersi Niami, Defendants.
By Notice of Motion dated March 27, 2023, Plaintiff Bankers Healthcare Group, LLC ("BHG" or the "Plaintiff") seeks an order pursuant to CPLR § 3212 directing summary judgment in favor of Plaintiff and against Defendants Pediatric Associates, Inc. d/b/a King of Prussia Pediatrics ("Pediatrics") and Nersi Niami ("Niami", and collectively as the "Defendants"), together with attorneys’ fees, interest thereon, costs and disbursements (Doc. # 12). Defendants requested adjournments (Doc. Nos. 20 & 22) and same was granted (Doc. Nos. 21 & 23). By Notice of Cross-Motion dated June 15, 2023, Defendants oppose Plaintiff's summary judgment motion and seek dismissal of the complaint (Doc. No. 24).
Plaintiff asserts it is entitled to summary judgment in the action. Plaintiff claims the action may be properly maintained in New York State Courts (see Bankers Healthcare Group, LLC v. Pasumbal, 210 AD3d 1385 [Fourth Dept. 2022] ). Plaintiff submitted the affidavit of Daniel Johnston, a Senior Manager, Portfolio Servicing for Plaintiff in support of Plaintiff's motion (Doc. No. 13). Johnston asserts that on June 29, 2017, Pediatrics executed and delivered to BHG a certain promissory note (the "Note") promising to pay BHG $293,592.00 in ninety-six monthly installments of $3,058.25 (ibid , ¶4). Pediatric also executed and delivered to BHG a security agreement (the "Security Agreement") which provided security to BHG for payment and performance under the Note (ibid ). Defendant Niami simultaneously executed a personal guaranty (the "Guaranty") in which Niami guaranteed full payment of the debt to BHG (ibid , ¶5). Pediatric defaulted on the Note and Security Agreement by failing to make timely payments and BHG sent a demand letter to Defendants (ibid , ¶7). Johnston asserts Plaintiff is entitled to $161,924.98 plus interest and attorneys’ fees (ibid , ¶8). Plaintiff prays the Court grant the requested relief.
Defendants oppose the relief sought. As conceded by Plaintiff, Defendant Niami is a resident of the Commonwealth of Pennsylvania (see Affirmation, Doc. No. 25, ¶5). Defendant Pediatric is a Pennsylvania Corporation (ibid , ¶6). Neither Defendant does any work in New York (ibid , ¶7). Plaintiff has failed to allege that Defendants either work, reside, or do any business in New York State (ibid , ¶8).
Defendant assert this Court has no personal jurisdiction over the Defendants. Defendants argue that New York Courts may only exercise personal jurisdiction over an out-of-state defendant when the nondomiciliary commits a tortious act without the state causing injury to person or property within the state and expects or should reasonably expect the act to have consequences in that state and derives substantial revenue from interstate commerce (see generally Penguin Group (USA) Inc. v. Am. Buddha, 16 NY3d 295, 303 [2011] ). Defendants argue Plaintiff has not alleged any facts to support that New York State Courts may exercise personal jurisdiction over the Defendants and the complaint must be dismissed.
Defendants further argue that the Court does not have subject matter jurisdiction over the case. Subject matter jurisdiction is not waivable and may be raised at any time (see Fry v. Vil. of Tarrytown, 89 NY2d 714, 718 [1997] ). Defendants argue that pursuant to General Obligations Law § 5-1402 a forum selection clause designating New York Courts is only valid against a non-resident of New York State if New York law is also applicable (see General Obligations Law §§ 5-1401 and 5-1402 ). The subject "Applicable Law/Jurisdiction & Venue" clause designates either Broward County, Florida or Onondaga County, New York as proper venue, but designates "the substantive and procedure laws of the State of Florida, exclusive of the principals of conflict of laws" (see Financing Agreement, Doc. No. 2). While Plaintiff is a foreign business authorized to do business in New York, Defendants note that the Financing Agreement was executed in Pennsylvania and the loan has no connection with New York. Defendants further argue Plaintiff's reference to Bankers Healthcare Group, LLC v. Pasumbal is irrelevant as there is no jurisdiction over the Defendants in the first instance.
Defendants further argue the underlying contract is unconscionable. An unconscionable contract has been defined as one which is so grossly unreasonable or unconscionable in the light of the mores and business practices of the time and place as to be unenforceable according to its literal terms (see Gillman v. Chase Manhattan Bank, N.A., 73 NY2d 1, 10 [1988] ). Defendants argue the terms of the contract are "punitive and predatory" (see Memorandum of Law, Doc. No. 26, p. 4). Defendants pray this Court deny Plaintiff's motion and grant Defendants’ motion.
Plaintiff replied, reiterated its arguments, and opposed Defendants’ cross-motion. Plaintiff relies upon the applicable law, jurisdiction, and venue clause of the financing agreement (see Affirmation in Reply, Doc. No. 28, ¶¶3, et seq. ). Plaintiff argues venue is proper pursuant to CPLR § 501 (ibid , ¶7). Plaintiff further asserts that Defendants are subject to jurisdiction within the State as they did transact business with Plaintiff who maintains a principal place of business at 201 Solar Street, Syracuse, New York (ibid , ¶12). Plaintiff argues that Defendants’ reliance on General Obligations Law §§ 5-1401, 5-1402 is "misplaced" as " § 5-1401 only applies to contracts with a New York choice of law provision, which is not present in the instant case" (ibid , ¶¶13-14). Plaintiff further argues "pursuant to the express language of § 5-1402, it only applies to contracts with a value of over $1,000,000 and which contain a New York choice of law and venue provision" (ibid , ¶15). Plaintiff addresses Defendants’ unconscionability argument by pointing out that Defendants failed to cite any caselaw to support such an argument (ibid , ¶18). Plaintiff claims that Bankers Healthcare Group, LLC v. Pasumbal is controlling and that Plaintiff's motion must be granted and that Defendants’ motion must be denied.
Discussion:
While Plaintiff has brought the initial motion for summary judgment, the Court must first address the jurisdiction questions raised by Defendants. Defendants argue that personal jurisdiction may only be had over a non-domiciliary when the defendant expects or should reasonably expect that their actions to have consequences within New York State (see Penguin Group (USA) Inc. v. Am. Buddha, 16 NY3d 295, 303 [2011] ). Plaintiff opposes this argument asserting that Defendants specifically contracted to submit to the jurisdiction of New York Courts. Plaintiff's argument necessarily rests on CPLR § 302[a][1] :
"As to a cause of action arising from any of the acts enumerated in this section, a court may exercise personal jurisdiction over any non-domiciliary, or his executor or administrator, who in person or through an agent: 1) transacts any business within the state or contracts anywhere to supply goods or services in the state" ( CPLR § 302[a][1] ).
Personal jurisdiction in this matter then turns on what was contracted. The Financing Agreement is by and between Plaintiff Bankers Healthcare Group, LLC, with an address of 10234 W State Road 84, Davie, Florida, and Defendant Pediatric Associates, Inc. d/b/a King of Prussia Pediatrics, with an address of 491 Allendale Road, Suite 121, King of Prussia, Pennsylvania (see Financing Agreement, Doc. No. 2). Defendant Pediatrics was to make 96 monthly payments of $3,058.25 to Plaintiff (ibid ). The Financing Agreement specifically provides:
"Debtor [Pediatrics] does hereby promise to pay to Creditor [BHG], at the address listed above or at such other location as otherwise designated by Creditor , the total sum of Two Hundred Ninety-Three Thousand, Five Hundred Ninety-Two DOLLARS and NO CENTS" (ibid , emphasis added ).
Defendant Niami, as guarantor of the Financing Agreement, is also a Pennsylvania domiciliary and did not have connections with New York State. Nor did the Demand Letter direct payment to an address other than Plaintiff's Davie, Florida address (see Demand Letter, Doc. No. 2). There is nothing in this record to contradict Defendants’ assertions that they have no connection to New York State. Defendants, as domiciliaries of Pennsylvania, contracted with Plaintiff, a Florida Corporation (see Complaint, Doc. No. 1). Defendants were obligated to make payments to Plaintiff at Plaintiff's Florida address. Defendants’ acts do not satisfy CPLR § 302 and therefore the Court does not have personal jurisdiction over Defendants. Defendants’ motion to dismiss in this part is granted.
Defendants next move to dismiss asserting the Court lacks subject matter justification. Plaintiff opposes this argument by claiming that the Fourth Department has already addressed this argument in Bankers Healthcare Group, LLC v. Pasumbal. While Plaintiff is correct in that the "same language in said provisions was recently analyzed by the Fourth Department" (see Memorandum of Law, Doc. No. 29, p. 3), the Fourth Department did not address the General Obligations Law arguments proffered by the instant Defendants. Another distinguishing fact between Pasumbal and the instant matter is that beyond filing a pro se answer with the trial court (Index No. 006484/2020, Doc. No. 8), Defendant Pasumbal did not participate in either of the summary judgment motions or the appeal (Index No. CA22-00190).
It is axiomatic "that freedom to contract is an important public policy in New York" (see Pasumbal at 1386, internal quotations and citations omitted ). General Obligations Law §§ 5-1401 & 5-1402 put limitations on that freedom to contract. General Obligations Law § 5-1402 provides an exception for contracts without connection to New York to be litigated in New York (see IRB-Brasil Resseguros, S.A. v. Inepar Invs., S.A., 20 NY3d 310, 314-315 [2012] ). The contract must involve at least one-million dollars and the "foreign corporation or non-resident agrees to submit to the jurisdiction of this state" ( General Obligations Law § 5-1402 ). Further, "any person may maintain an action or proceeding against a foreign corporation, non-resident, or foreign state where the action or proceeding arises out of or relates to any contract, agreement or undertaking for which a choice of New York law has been made in whole or in part pursuant to section 5-1401" (ibid ). "The statutes read together permit parties to select New York law to govern their contractual relationship and to avail themselves of New York courts despite lacking New York contacts" (IRB-Brasil Resseguros, S.A. v. Inepar Invs., S.A. at 315). " General Obligations Law § 5-1402 provides that any party may maintain an action in New York State courts where there is a contractual agreement providing for a choice of New York law and forum, and the case involves at least $1 million" ( Carlyle CIM Agent, L.L.C. v. Trey Resources I, LLC, 148 AD3d 562, 564 [First Dept. 2017] ). The public policy behind New York's liberal choice of law and forum provisions is to encourage litigants to resolve their disputes in New York and ensure New York's place as a leader as a commercial and financial center (see IRB-Brasil Resseguros, S.A. v. Inepar Invs., S.A. at 314, citing Sponsor's Mem, Bill Jacket, L 1984, Ch. 421 at 8).
Contrary to the assertions by Plaintiff, the requirement that a contract utilize New York law in some fashion is not new to the Fourth Department.
"In order for a choice of forum to be effective under section 5-1402 the statutory requirements are:
"(1) there must be an agreement ‘for which a choice of New York law has been made in whole or in part pursuant to section 5-1401 ’ ( General Obligations Law § 5-1402 [1] ), and
"(2) the agreement must involve an obligation arising out of a transaction covering not less than one million dollars, and
"(3) the agreement must contain a clause whereby the foreign corporation or nonresident agrees to submit to the jurisdiction of the courts of New York State" ( DDR Real Estate Servs. v. Burnham Pac. Props., 1 Misc 3d 802, 805 [Supreme Court, Monroe County 2003], aff'd 12 AD3d 1182 [Fourth Dept. 2004] ).
In DDR, the subject contract, similar to this action, had a designation of New York as the forum state, but had a Maryland choice of law clause ( ibid 805-806 ). The Court in DDR concluded:
"There is no choice of law provision in the parties’ agreement sufficient to demonstrate that the parties agreed that the law of New York shall govern the parties’ rights and duties in whole or in part sufficient to comply with General Obligations Law § 5-1401 (1). In order for the choice of forum provision under section 5-1402 to apply, there has to be a choice of New York law ( General Obligations Law § 5-1402 [1] ; see Creative Resources, Inc. v. Rumbellow, 244 AD2d 383, 664 N.Y.S.2d 86 [Second Dept. 1997] ). This requirement, that the parties’ agreement choose New York law to govern any disputes, is consistent with the public policy purposes of sections 5-1401 and 5-1402. Here, the only choice of law made by the parties involved in this action is to apply the laws of the State of Maryland. The parties did not agree that the law of New York State was their choice of law, either in whole or in part. Further the argument that choosing New York as a forum necessarily implies that the procedural law of New York is chosen is unpersuasive (ibid , 807-808).
Without a proper designation of New York law as required by General Obligations Law § 5-1402, the designation of New York as a forum is illusory and of no effect.
As a preliminary matter, DDR also addressed Business Corporation Law ("BCL") § 1314, governing actions or special proceedings against foreign corporations (ibid at 803). There, as here, none of the five possible bases for jurisdiction apply (see BCL § 1314[b] ; see also DDR at 803-804).
New York law was not chosen in the Financing Agreement and Plaintiff concedes the subject Financing Agreement does not satisfy General Obligation Law § 5-1402 (see Reply, Doc. No. 28, ¶¶14-16). While the Parties designated either Broward County, Florida or Onondaga County, New York as proper fora, the Parties have evidenced their preference for Florida action by only designating Florida law (substantive and procedural) as applicable. "It is well settled, however, that ‘courts may not by construction add ... terms, nor distort the meaning of those used and thereby make a new contract for the parties under the guise of interpreting the writing’ " ( Camperlino v. Bargabos, 96 AD3d 1582, 1583 [Fourth Dept. 2012], citing Vermont Teddy Bear Co. v. 538 Madison Realty Co., 1 NY3d 470, 475 [2004] ). Even if the Court were to conclude that the Parties wanted New York forum, the Court cannot simply add in "New York" to the choice of law clause. The forum selection clause is void since, as stated above, this action does not exceed one-million dollars in claims nor have the Parties chosen New York law, Plaintiff cannot avail itself to jurisdiction pursuant to General Obligations Law § 5-1402, and the Court has no choice but to grant Defendants’ motion.
As the Court has determined it lacks personal and subject matter jurisdiction, it is inappropriate for the Court to address Defendant's claims that the contract is unconscionable or Plaintiff's motion for summary judgment.
NOW, THEREFORE , upon reading and filing the papers with respect to the Motions and due deliberation having been had thereon, it is hereby
ORDERED , that the motion to dismiss as the Court lacks personal and subject matter jurisdiction brought by Defendants Pediatric Associates, Inc. d/b/a King of Prussia Pediatrics and Nersi Niami is GRANTED; and it is further
ORDERED , that the motion to dismiss as the underlying contract is unconscionable brought by Defendants Pediatric Associates, Inc. d/b/a King of Prussia Pediatrics and Nersi Niami is DENIED WITHOUT PREJUDICE; and it is further
ORDERED , that the summary judgment motion brought by Plaintiff Bankers Healthcare Group, LLC is DENIED WITHOUT PREJUDICE.