Opinion
01CV00511.
August 31, 2004
Report Recommendation
Before the Court is the renewed motion by Pilgrim's Pride Corporation ("Pilgrim") to dismiss and/or transfer the venue of this action (Docket No. 49).
Background
The plaintiff, Omni Consulting Group, Inc. ("Omni") commenced this action asserting various contract and commercial tort claims against Marina Consulting Inc. ("Marina") and Pilgrim's Pride Corporation ("Pilgrim"). Omni is a New York corporation previously doing business under the name Principal Consulting, Inc. ("Principal"). Omni alleges that it contracted with Marina, a Nevada corporation, to provide skilled personnel to perform computer system consulting and related services. Under a "Master Agreement" between Omni (Principal) and Marina, Marina would provide personnel to service Omni's clients. See Master Agreement dated December 31, 1997 attached as Exhibit A to the Complaint. The Master Agreement provides that it is to be governed and construed under the laws of the State of New York and that the exclusive venue rests in the courts of Erie County, New York. (Master Agreement at ¶ 11.)
In a separate "Technical Services Agreement," Omni (Principal) agreed to provide computer and consulting services to Pilgrim, which is headquartered in Texas. See Technical Services Agreement dated December 31, 1997 attached as Exhibit B to the Complaint. Under this arrangement, Marina provided Omni with the services of Robert Vance ("Vance"). Omni designated Vance to work on the Pilgrim account. Omni billed Pilgrim $175 per hour and paid Marina $100 per hour.
According to the Complaint, on or about October 31, 1998, Pilgrim notified Omni that it would no longer use Vance. It is alleged that on that same date Marina directly solicited Pilgrim to have Vance provide services directly to Pilgrim on Marina's behalf. Omni asserts that on or about February 1, 1999, Pilgrim retained Marina (and therefore Vance) to provide the services which were previously provided pursuant to the Technical Services Agreement.
Omni commenced this action alleging various breaches of the respective contacts, as well as tortious interference with a contractual relationship, theft of trade secrets and civil conspiracy. Pilgrim moved to dismiss the complaint asserting that the Court lacks personal jurisdiction over it. In the alternative, Pilgrim seeks a change of venue to the Eastern District of Texas. Marina filed a similar motion. In a Report Recommendation dated September 18, 2002, this Court found that personal jurisdiction existed over Marina due to the choice of law provisions in its contract with Omni. (Docket No. 29). The District Court affirmed this ruling on February 27, 2003. (Docket No. 34). However, the Court held that the record was not sufficiently developed to determine whether or not personal jurisdiction in New York existed as to Pilgrim. Thus, Pilgrim's motion to dismiss and/or change venue was denied without prejudice pending discovery relating to Pilgrim's contacts with New York. Pilgrim now moves to renew its motion to dismiss and/or to change venue.
Discussion
Personal Jurisdiction Venue
"When responding to a Rule 12(b)(2) motion to dismiss for lack of personal jurisdiction, the plaintiff bears the burden of establishing that the court has jurisdiction over the defendant."Bank Brussels Lambert v. Fiddler Gonzalez Rodriguez, 171 F.3d 779, 784 (2d Cir. 1999). Where, as here, a court relies on pleadings and affidavits, rather than conducting a "full-blown evidentiary hearing," the plaintiff need only make a prima facie showing that the court possesses personal jurisdiction over the defendant. Id. (quoting Marine Midland Bank, N.A. v. Miller, 664 F.2d 899, 904 (2d Cir. 1981)). The Court must construe the pleadings and affidavits in the light most favorable to the plaintiff, resolving all doubts in the plaintiff's favor. CutCo Indus., Inc. v. Naughton, 806 F.2d 361, 365 (2d Cir. 1986);Distefano v. Carozzi North America, Inc., 286 F.3d 81 (2nd Cir. 2001). In diversity cases, personal jurisdiction is determined by the law of the state in which the district court sits.Volkswagenwerk Aktiengesellschaft v. Beech Aircraft Corp., 751 F.2d 117, 120 (2d Cir. 1984) (citing Arrowsmith v. U.P.I., 320 F.2d 219 (2d Cir. 1963)).
Jurisdiction as to Pilgrim
Pilgrim argues that this Court lacks personal jurisdiction over it. Pilgrim maintains that it does not transact business in New York State and does not maintain facilities, offices or employees in New York State. The plaintiff asserts that jurisdiction may be obtained here over Pilgrim under § 301 of the New York State Civil Practice Law and Rules ("CPLR").
Section 301, the general jurisdiction statute, provides that "[a] court may exercise such jurisdiction over persons, property, or status as might have been exercised heretofore." Jurisdiction under this provision is based upon the corporate defendant's "presence" in New York State. Under New York law, a foreign corporation is subject to general personal jurisdiction in New York if it is "doing business" in the state. See Hoffritz for Cutlery, Inc. v. Amajac, Ltd., 763 F.2d 55, 58 (2d Cir. 1985);Wiwa v. Royal Dutch Petroleum Co., 226 F.3d 88, (2nd Cir. 2000). "[A] corporation is `doing business' and is therefore `present' in New York and subject to personal jurisdiction with respect to any cause of action, related or unrelated to the New York contacts, if it does business in New York `not occasionally or casually, but with a fair measure of permanence and continuity.'" Id. (quoting Tauza v. Susquehanna Coal Co., 220 N.Y. 259, 267 (1917)). In order to establish that this standard is met, a plaintiff must show that a defendant engaged in "continuous, permanent, and substantial activity in New York."Landoil Resources Corp. v. Alexander Alexander Servs., Inc., 918 F.2d 1039, 1043 (2d Cir. 1990).
Omni argues that Pilgrim is doing business in New York based upon the following commercial contacts within the State:
1. Pilgrim is a multi-national corporation with annual sales of over $2 billion. It is the second largest poultry producer in the United States.
2. Pilgrim is a publicly traded corporation listed on the New York Stock Exchange.
3. Pilgrim utilized various New York companies, including Depository Trust Company and Chase Manhattan Bank, to assist with the issuance of $200 million in corporate notes in 2001 and $100 million in corporate notes in 2003. Pursuant to the prospectus, all principal, premium and interest payments were payable at the office of the Paying Agent and Registrar within New York (Docket No. 54 at page 6).
4. Pilgrim employs the New York law firm of Weil, Gotshal Manges LLP with respect to legal matters relating to the public offerings. Id.
5. Pilgrim has made substantial payments totaling more than $16 million to the New York banking firm of Smith Barney over the past six years. Pilgrim has utilized various other New York financial institutions on a regular basis over the last several years, including Bear, Stears and Co.; Principal Consulting, Inc.; New York Stock Exchange; Emigrant Business Corp.; HSBC Business Credit, Inc.; Chase Manhattan Bank; and Key Equipment Finance Division of KCCC. (Docket No. 54 at pages 7-8).
6. In addition, Pilgram has regularly made payments to numerous New York payees for products and services. In 1998 these payments totaled $4,177.023.55; $3,414,701.66 in 1999; $4,751, 701.66 in 2000; $7,989,397.77 in 2001; $14,542,604.40 in 2002; and $18,743,975.45 in 2003. (Docket No. 54 at page 9).
7. From 1998 to 2003, Pilgrim has sold approximately $300 million of poultry products within New York. (Docket No. 54 at page 9).
8. To support such sales, Pilgrim employs a regional sales manager, Robert Alsberg, who is responsible for sales of processed turkey products in the metro New York area. Alsberg is headquartered out of his house in New Hampshire and is responsible for Pilgrim's sales in metro New York and New England (Docket No. 55, Exhibit A, page 10).
9. Pilgrim has a relationship with Favorite Brokers to assist with sales in New York. Favorite Brokers has an office in Mamaroneck, New York which is regularly visited by Mr. Alsberg at least four times a year. (Docket No. 55, Exhibit A at page 13-14). When he visits customers, like Favorite Brokers, Alsberg makes a sales presentation or sales training. (Docket No. 55, Exhibit A, at page 14, 17-19).
10. Other Pilgrim employees, although not physically stationed within New York, are responsible for sales of Pilgrim products in New York. For example, Jay Shifflett is responsible for retail deli sales in the metro New York area. (Docket No. 55, Exhibit A, page 23); Cindy Stevens (who is located in Texas) is responsible for further processed chicken sales in metro New York (Docket No. 55, Exhibit A, page 24); Brenda Ray (who is located in Virginia) is responsible for commodity chicken sales in metro New York (Docket No. 55, Exhibit A, page 24); Lynn Caricofe (who is located in Virginia) is responsible for commodity turkey sales in metro New York (Docket No. 55, Exhibit A, page 24); and Bob Krajewski (who is located in Maryland) is responsible for food service sales in New York outside of metro New York (Docket No. 55, Exhibit A, page 27).
11. Under this arrangement, a customer in New York would place an order for Pilgrim's products with a broker, such as Favorite Brokers. The broker would then forward the order to Pilgrim's facility in Virginia. The order is processed on an invoice form generated by Pilgrim, with Pilgrim's name as vendor, which is filled out by the actual customer in New York. (Docket No. 55, Exhibit A, page 33). The Pilgrim employee responsible for that product-line is often required to make adjustments to pricing and would process this paperwork at his or her home office in connection with the sale (Docket No. 55, Exhibit A, pages 30-31). A bill is then generated by Pilgrim (in Texas) and sent directly to the New York customer (not to the broker). (Docket No. 55, Exhibit A, page 33).
12. Pilgrim's regional sales representatives, such as Alsberg, also interacts directly with distributors in New York State in connection with marketing plans. Distributors will send an annual marketing plan to Pilgrim at the beginning of each year. Pilgrim will either agree with the plan or not. According to Alsberg, marketing plans include "supporting the customer by discounting our products on their monthly flyers, and supporting the customer through other efforts such as the training activity that I do." (Docket No. 55, Exhibit A, page 34, 38).
13. Alsberg annually participates in two trade shows within New York. (Docket No. 55, Exhibit A, page 35).
14. Alsberg estimates that at least one-third of his time is taken up dealing with bill discrepancies. (Docket No. 55, Exhibit A, page 39).
15. In addition to addressing bill discrepancies, Pilgrim sales representatives, such as Alsberg, also interact with actual New York customers dealing with "any issues that may arise in terms of deliveries to the customer, product quality with a customer, legal concerns of a customer." (Docket No. 55, Exhibit A, page 39-40).
16. In addition to dealing with New York customers regarding billing matters, regional sales representatives, such as Alsberg, occasionally visit customers in New York to discuss problems with their service. (Docket No. 55, Exhibit A, page 40-41).
17. Another Pilgrim employee, Mary Swecker, has traveled to Rochester, New York in connection with the sale of Pilgrim turkey products to Wegman's, a New York grocer. Swecker testified that Pilgrim manufactures a private label turkey product for sale under the Wegman's brand at Wegman's markets. (Docket No. 55, Exhibit B, page 12).
18. Swecker has also traveled to Buffalo, New York to make sales calls on Tops Markets. (Docket No. 55, Exhibit B, page 16).
19. Brenda Ray, Pilgrim's Director of Commodity Sales, sells vacuum pack products to distributors located in New York. (Docket No. 55, Exhibit C, page 12-15). She travels to New York to make sales calls two to three times a year. (Docket No. 55, Exhibit C, page 28-30). Another Pilgrim sales associate, Craig Cashmere also makes sales calls inside New York. Id. On some occasions, Ray would bring other Pilgrim admininstrators with her to sales calls in New York. (Docket No. 55, Exhibit C, page 22-23, 28).
20. Ray testified that she sells Pilgrim's products to several distributors in New York State including Ginsburg's Food Service, Maine's Paper and Food Service, Interstate Poultry, West Side, Food Direct, Prime, Dudley Poultry, Crescent Packing, Green Acres, and Market Meats. (Docket No. 55, Exhibit C, page 15-19).
21. In 2001, Pilgrim used a New York City advertising agency and its employees traveled to New York on several occasions to meet regarding advertising. (Docket No. 55, Exhibit D, page 12-15).
22. Another Pilgrim employee, James Robert Shifflett, has traveled to New York state on at least three occasions since the Spring of 2003 to visit one of Pilgrim's customer's, Olean Wholesale. (Docket No. 55, Exhibit D, page 24-25).
23. Other Pilgrim employees have made various sales or business related trips to New York, including Joel Hager (Docket No. 55, Exhibit D, page 30); Tom McDonald (Docket No. 55, Exhibit E, page 9, 14-15); David Quinn (Docket No. 55, Exhibit F, page 14-15, 17, 23, 27, 28); Cynthia Stevens (Docket No. 55, Exhibit G, page 20-21, 30-31, 38-39).
24. In addition, Omni points to the fact that Pilgrim has appeared as a defendant in the New York State courts in connection with a personal injury case wherein the plaintiff alleged that she suffered injuries from consuming contaminated turkey product produced by Pilgrim and served at a public school. (Docket No. 54 at page 9).
According to Brenda Ray, Pilgrim's Director of Commodity Sales, Favorite Brokers' role "is to work with what we call, in our industry, the street business. They make calls purhaps on restaurants, on stores. . . ." (Docket No. 55, Exhibit C, page 32). According to Ray, brokers such as Favorite Brokers deal with Pilgrim's customers' customers. (Docket No. 55, Exhibit C, page 33). These brokers have no role with Pilgrim's relationship to the distributors. (Docket No. 55, Exhibit C, page 33).
Pilgram characterizes its presence in New York as merely supplying "goods to New York residents through independent, third-party distributors." (Docket No. 50 at page 10). To the contrary, the testimony of its own employees, as noted above, suggests that Pilgrim sells millions of dollars worth of products directly to New York companies. To facilitate the transaction of this business, Pilgrim employees regularly come into New York and meet with New York customers. The record reflects a consistent pattern of sales calls and business activity by Pilgrim employees inside New York State. Pilgram sells its products directly to New York retailers, such as Wegman's Markets and employees of Pilgrim meet with officials from Wegman's inside New York to further the transaction of this business. In addition, as reflected in the testimony of Alsberg and Ray, some Pilgrim employees have substantial direct contact with residents of New York in connection with the sale of Pilgrim products. Pilgrim transacts business within New York, initiated by invoices generated by Pilgrim, executed in New York by customers within New York. Billings generated by these invoices go directly from Pilgrim to its New York customers, whether or not the customer used a broker. When questions involving these billings arise, the inquiries are handled directly by Pilgrim employees. Pilgrim employees regularly travel inside New York to deal with billing discrepancies, marketing proposals by distributors, advertising plans, and product quality issues regarding its millions of dollars of sales within the state. Certainly, this level of in-state involvement constitutes the transaction of business within New York State.
The fact that Pilgrim sells to distributors, wholesalers, and retailers in New York State, but not to the end user, does not somehow shield Pilgrim's activities as constituting the transaction of business within New York State. The fact that, in some instances, Pilgrim uses independent brokers located in New York as a pass-through does not alter the fact that it is transacting business inside New York State. The Court is also not persuaded that Pilgrim's use of an independent trucking company to transport the products from Pilgrim's facility into New York materially impacts the characterization of Pilgrim's business activities inside New York.
Despite the lack of an office, facility or other traditional indicia of commercial conduct within the State, Pilgrim's business activities inside New York constitute a "presence" within New York and demonstrate that Pilgrim is doing business "not occasionally or casually, but with a fair measure of permanence and continuity." Laufer v. Ostrow, 55 N.Y. 2d 305 (1982). The record reflects that Pilgrim has built, maintained and serviced its relationships with New York buyers through the permanent and consistent efforts of its employees, acting both outside and inside New York, to develop sales in New York.
The Court is also not persuaded by the fact that the $300 million in sales in New York represents only a small percentage of Pilgrim's overall sales, thus negating a finding that Pilgrim transacts business within the State. The cases cited by Pilgrim in support of this proposition involve vastly smaller sales than that involved in the instant case. (Hutton v. Priddy's Auction, 275 F.Supp.2d 428, 437 (S.D.N.Y. 2003) ($40,000); Bank of Taiwan v. Ulti-Med Intern., Inc., 1996 WL 502411, *1 (S.D.N.Y. 1996) ($260,000 of which only about $53,000 sold directly by defendant to New York company); New England Laminates Co., Inc. v. Murphy, 362 N.Y.S.2d 730, 733 (N.Y.Sup. Ct 1974) ($400,000). Given the fact that it is alleged that Pilgrim has annual world-wide sales of over $2 billion, there may be no single jurisdiction is which sales would amount to more than 5% of Pilgrim's total sales. Moreover, it does not appear that those cases cited by Pilgrim involve the considerable organized efforts to maintain and service its customers in New York as are present in the instant case.
Pilgrim does not appear to dispute this figure.
Other evidence in the record regarding Pilgrim's business contact with New York provides additional support for a finding that Pilgrim conducts business within New York. In this regard, Omni points to Pilgrim's use of several financial institutions in New York with respect to its corporate finance; its listing on the New York Stock Exchange, its use of New York investment firms, its use of a New York advertising agency, and its substantial purchases from New York vendors. While any of these contacts, taken alone, may be insufficient to confer jurisdiction upon a foreign domiciled corporation, collectively considered together with Pilgrim's direct efforts to market its products and service its client based inside New York, they demonstrate that Pilgrim is transacting business within New York State pursuant to § 301 of the CPLR.
Because the Court does not base its finding that any one of these items is by itself sufficient to serve as a basis for jurisdiction upon Pilgrim in New York, the Court does not address Pilgrim's specific arguments relating to whether any of these separate items may serve as such a basis.
Finally, Pilgrim argues that traditional concepts of fair play and substantial justice preclude a finding that personal jurisdiction of Pilgrim exists in New York. (Docket No. 50 at page 11). There is no merit to this argument. As described above, Pilgrim has substantial business contacts within New York. Moreover, also as noted above, Pilgrim has submitted to the jurisdiction of the New York courts in other cases. The Court cannot conclude that with its vast resources, and its demonstrated business ties to New York, that the notions of fair play or substantial justice are in any way disturbed by a finding that Pilgrim is subject to personal jurisdiction in New York.
In this regard, Pilgrim's protestations that it "has no actual or constructive nexus with New York" (Docket No. 50 at page 12) rings hollow.
Based on the above, personal jurisdiction exists over Pilgrim in New York pursuant to § 301 of the CPLR.
Venue
Pilgrim also seeks to dismiss or transfer this case on the grounds that venue is improper. Pursuant to 28 U.S.C. § 1391:
(a) A civil action wherein jurisdiction is founded only on diversity of citizenship may, except as otherwise provided by law, be brought only in (1) a judicial district where any defendant resides, if all defendants reside in the same State, (2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated, or (3) a judicial district in which any defendant is subject to personal jurisdiction at the time the action is commenced, if there is no district in which the action may otherwise be brought.
With respect to the residence of corporations, § 1391(c) provides:
(c) For purposes of venue under this chapter, a defendant that is a corporation shall be deemed to reside in any judicial district in which it is subject to personal jurisdiction at the time the action is commenced.
Because the Court has determined that Pilgrim is subject to personal jurisdiction in New York, venue of this action may be properly had in the New York District Court.
In support of its claim that venue would be more appropriate in the Eastern District of Texas, Pilgrim points to the fact that many of the operative events or omissions involved in this case took place in Texas. The agreement between Pilgrim and Marina which underlies one of the claims in this action appears to have been executed in Texas. Pilgrim states that "[t]here is no doubt that the case could have been brought in the Eastern District of Texas. (Docket No. 50 at page 16). Pilgrim also refers to "the likelihood" that Texas law applies to the plaintiff's claims. However, Pilgrim fails to address the existence of the claims against co-defendant Marina regarding the venue issue. As discussed in this Court's September 18, 2002 Report Recommendation, the agreement between Omni and Marina, which also serves as a basis for the claims in this action, expressly designates New York law as applicable and mandates "exclusive venue" regarding claims thereunder in the "courts of Erie County, New York." Thus, it does not appear that the Eastern District of Texas would have been a proper venue for all of the claims in this case.
Under these circumstances, Pilgrim's arguments under the forum non conveniens doctrine are inapposite. Moreover, Pilgrim has not demonstrated that this case involves significant documentary discovery or that significant numbers of witnesses would be required to travel for a trial in this matter. Based upon the current record, it is difficult to assess the actual advantages and disadvantages relating to document discovery or witness availability. In any event, inasmuch as it appears that the Western District of New York is a proper venue for all of the claims in this case, and that the Eastern District of Texas is not, the interests of justice and the totality of the circumstances weigh in favor of maintaining this action in the Western District of New York.
It is recommended that the motion to dismiss and/or to transfer venue to the Eastern District of Texas be denied.
Conclusion
Based upon the above, it is recommended that Pilgrim's motion to dismiss and/or for change of venue (Docket No. 49) be denied.
Pursuant to 28 U.S.C. § 636(b)(1), it is hereby ordered that this Report Recommendation be filed with the Clerk of the Court and that the Clerk shall send a copy of the Report Recommendation to all parties.
ANY OBJECTIONS to this Report Recommendation must be filed with the Clerk of this Court within ten(10) days after receipt of a copy of this Report Recommendation in accordance with 28 U.S.C. § 636(b)(1), Fed.R.Civ.P. 72(b) and WDNY Local Rule 72(a)(3). FAILURE TO FILE OBJECTIONS TO THIS REPORT RECOMMENDATION WITHIN THE SPECIFIED TIME OR TO REQUEST AN EXTENSION OF SUCH TIME WAIVES THE RIGHT TO APPEAL ANY SUBSEQUENT DISTRICT COURT'S ORDER ADOPTING THE RECOMMENDATIONS CONTAINED HEREIN. Thomas v. Arn, 474 U.S. 140, 106 S.Ct. 466, 88 L.Ed2d 435 (1985); F.D.I.C. v. Hillcrest Associates, 66 F.3d 566 (2d. Cir. 1995); Wesolak v. Canadair Ltd., 838 F.2d 55 (2d Cir. 1988).
The District Court on de novo review will ordinarily refuse to consider arguments, case law and/or evidentiary material which could have been, but was not, presented to the Magistrate Judge in the first instance. See Patterson-Leitch Co. Inc. v. Massachusetts Municipal Wholesale Electric Co., 840 F.2d 985 (1st Cir. 1988).
Finally, the parties are reminded that, pursuant to WDNY Local Rule 72(a)(3), "written objections shall specifically identify the portions of the proposed findings and recommendations to which objection is made and the basis for such objection and shall be supported by legal authority." Failure to comply with the provisions of Rule 72(a)(3)may result in the District Court's refusal to consider the objection.
So ordered.