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explaining that an assignment of claims between a corporation and one of only two existing shareholders and officers is treated as "presumptively collusive and as having been effectuated for the purpose of attempting to manufacture diversity jurisdiction"
Summary of this case from Bugsby Prop. LLC v. Alexandria Real Estate Equities, Inc.Opinion
00 CV 4754 (GBD)
December 17, 2003
MEMORANDUM DECISION ORDER
Defendants are moving to dismiss the complaint on a number of grounds including lack of personal and subject matter jurisdiction, and for an order granting attorneys' fees and imposing sanctions against pro se plaintiff William Falow.
In the complaint, plaintiff, a New York resident, alleges he is the assignee of all claims against defendants by Stuart Max, Inc. and Forty Six Associates, Inc. (Compl. ¶¶ 1-2). Defendant Peter Cucci ("Cucci"), is a New Jersey resident and a licensed architect, who is employed by defendant the Cucci Group, P.A. ("Cucci Group") (collectively "the Cucci defendants"). (Compl. ¶¶ 3, 5; Cucci Aff. ¶¶ 1-2). The Cucci Group is an architectural firm incorporated in New Jersey. (Compl. ¶¶ 4-5). The Cucci defendants deny working on any projects located in New York State. (Cucci Aff. ¶ 2). The instant action arises out of a previous New Jersey state court action in which the Cucci Group sued plaintiff, Forty Six Associates, Inc., and Stuart Max, Inc., to collect payment for architectural services rendered in connection with the renovation and expansion of a restaurant in New Jersey. (Compl. ¶¶ 9-10, 15, 39; Cucci Aff. Ex. E). Defendant Robert Feinberg is an attorney who represented the Cucci Group during that litigation. (Compl. ¶ 40). Feinberg is a New Jersey resident and maintains offices in New Jersey. (Compl. § 6). He has never been admitted to practice law in New York, and denies deriving substantial income from interstate or international commerce. (Feinberg Aff. ¶ 2).
After plaintiff and his son obtain a Friendly's Ice Cream Corporation franchise, plaintiff entered into negotiations with Cucci regarding hiring his firm. (Falow Aff. ¶¶ 1-2). Prior to executing the contract, plaintiff advised Cucci to substitute Stewart Max, Inc. and Forty Six Associates Inc. as the contracting parties in place of plaintiff. (Falow Aff. ¶ 3). Plaintiff's companies are incorporated in New Jersey. (Mellon Aff. Ex. A, B). Plaintiff contends that the-corporations' principal place of business was his office in New York, and hence the corporations are deemed to be New York corporations for diversity purposes. (Falow Sept. Aff. ¶¶ 13-14). In support of this claim, plaintiff submitted various correspondences mailed to the corporations at a New York address. In a subsequent affidavit, plaintiff acknowledges that neither corporation are registered in New York. (Falow supplemental Aff. ¶ 10). The New York Department of State has no record of either of these companies. (Wilsey Cert. Ex. C). Plaintiff claims he and his son are the only two shareholders and officers of the corporations. (Falow Supplemental Aff. ¶ 6(c)).
Cucci executed the contract on behalf of the Cucci Group in New Jersey. (Falow Aff. ¶ 3, Ex. 1). The contract was executed on behalf of the corporations by plaintiff in New York. (Falow Aff. ¶ 3). Cucci contends that all the work done pursuant to the contract was performed in New Jersey, including all meetings he had with both plaintiff and/or plaintiff's son. (Cucci Aff. ¶¶ 2-3). Plaintiff does not dispute this, but does note that drawing and invoices were sent to his New York office, payments were remitted from there, and he had a number of telephone conversations from New York to New Jersey to discuss the project with the Cucci defendants. (Falow Aff. ¶¶ 4-6, 8-12). Plaintiff alleges that counting telephone calls, faxes, regular mail, and federal express packages, there were in excess of forty communications between the Cucci defendants in New Jersey and either plaintiff or his son in New York. (Falow Aff. ¶ 12).
Cucci alleges that after plaintiff terminated the services of the Cucci Group, Cucci retained the services of attorney Robert Feinberg to initiate suit to collect the amount still owing. (Cucci Aff. ¶ 6). Feinberg claims all discovery, as well as the trial itself, was conduct in New Jersey, and his representation of the Cucci Group did not bring him into contact with New York. (Feinberg Aff. ¶ 3). Plaintiff was served with the summons and complaint by certified mail at his New York office. (Falow Sept. Aff. ¶ 17, Pl.'s Mem. Opp. Mot. Dismiss at 5).
In accordance with New Jersey procedure, the case was first referred to non-binding arbitration. (Cucci Aff. ¶ 12; Falow Aff. ¶ 20). The arbitrator found that plaintiff was personally one hundred percent liable in the amount of 52,569.97. (Falow Aff. Ex. 8). Thereafter, plaintiff had the case restored to the trial calendar. (Cucci Aff. ¶ 12). On the day of trial, plaintiff was dismissed from the action. (Cucci Aff. ¶ 14; Falow Aff. ¶ 21). The trial continued and the jury found in favor of the Cucci Group against Forty Six Associates, Inc. and Stuart Max, Inc., jointly and severally, in the amount of amount of $4,240.00. (Cucci Aff. Ex. K).
Plaintiff, as vice-president of Stuart Max, Inc., wrote to the trial judge requesting that the judge not sign the judgment because Cucci committed perjury during the trial, and Feinberg had suborned such perjury. (Cucci Aff. Ex. I). In response, the judge suggested that the matter be raised with the attorney for the corporation, and noted that such a complaint would normally be lodged with the county prosecutor's office. (Cucci Aff. Ex. J). The Order of Final Judgment was entered on July 5, 2000, in favor of the Cucci Group in the amount of $13,427.80 which included attorney's fees. (Cucci Aff. Ex. K). The state judgment was not appealed. (Falow Supplemental Aff. ¶ 13).
An "Assignment of Claims" was executed by plaintiff on behalf of Stuart Max, Inc. arid Forty Six, Associates, Inc. as their vice-president. (Falow Supplemental Aff. Ex. 1). In exchange for the corporations' assignment, plaintiff agreed to pay the judgment obtained by the Cucci Group in the New Jersey action. (Falow Supplemental Aff. Ex. 1). Plaintiff acknowledges that "[i]t is true that one of the motives of the assignment to myself was to establish federal jurisdiction." (Falow Supplemental Aff. ¶ 6). He indicates other reasons for the assignment including: (1) unlike a corporation, he can litigate this matter pro se and thereby not incur legal fees; (2) since the corporations lack independent funds, plaintiff would have had to personally finance the litigation; (3) he advanced Stuart Max, Inc. funds to pay for the renovations of the property as well as legal, architectural and engineering fees, and personally paid for the property itself; (4) he was a named defendant in the state action for a period of nine months; and (5) the assignment was made to reimburse plaintiff for additional monies he expended due to the Cucci defendants' conduct. (Falow Supplemental Aff. ¶ 6(a)-(e)).
Shortly after the assignment of claims, plaintiff commenced the instant action. Although plaintiff is proceeding pro se, he was an attorney admitted to practice in New York from 1961 until he was disbarred in 1997. In the Matter of Falow, 659 N.Y.S.2d 86, 88-89 (N.Y. A.D. 1997). The complaint sets forth five causes of action, namely: (1) Cucci fraudulently induced him to enter into a contract with the Cucci Group; (2) the Cucci defendants breached the contract; (3) the jury verdict in the New Jersey action was the result of perjured testimony by Cucci, which was suborned by Feinberg; (4) all defendants violated his constitutional right to a fair trial in the New Jersey action; and (5) the Cucci defendants committed professional malpractice. Plaintiff had not satisfied the outstanding New Jersey judgment prior to instituting this action. (Wilsey Aff. Ex. D). He did pay it after the Cucci defendants' indicated that they would seek to dismiss the complaint and move for sanctions if plaintiff did not withdraw the complaint.
PERSONAL JURISDICTION
All defendants are claiming that this Court lacks personal jurisdiction over them. When responding to a motion to dismiss for personal jurisdiction, pursuant to Fed.R.Civ.P. 12(b)(2), — plaintiff bears the burden of establishing jurisdiction. Bank Brussels Lambert v. Fiddler Gonzalez Rodriquez, 171 F.3d 779, 784 (2d Cir. 1999);Cutco Industries, Inc. v. Naughton, 806 F.2d 361, 365 (2d Cir. 1986). Absent an evidentiary hearing, plaintiff need only make a prima facie showing by pleadings and supporting affidavits that the court possesses the requisite jurisdiction over the defendant. Robinson v. Oversea Military Sales Corp., 21 F.3d 502, 507 (2d Cir. 1994). All pleadings and affidavits are to be construed in plaintiff's favor, and any doubts should be resolved in plaintiff's favor. Hoffritz For Cutlery, Inc. v. Amajac, Ltd., 763 F.2d 55, 57 (2d Cir. 1985).
When jurisdiction rests upon diversity, a federal court applies the choice-of-law rules of the forum state. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941). Thus, to determine whether personal jurisdiction exists over a non-resident defendant, the Court must look to the forum state's long-arm jurisdictional statute.Savin v. Ranier, 898 F.2d 304, 306 (2d Cir. 1990). New York's long-arm statute, which plaintiff exclusively relies upon, provides, in relevant part, that personal jurisdiction over a non-domiciliary is established when that person or his agent: "(1) transacts any business within the state or contracts anywhere to supply goods or services in the state; or . . . (3) commits a tortious act without the state causing injury to person or property within the state . . . if he (i) . . . engages in any other persistent course of conduct . . . in the state." N.Y. C.P.L.R. § 302(a)(1)-(3) (McKinney 2001) ("CPLR").
Personal Jurisdiction over the Cucci Defendants
Plaintiff contends that this court has personal jurisdiction over the Cucci defendants because they transact business within the state. Plaintiff notes that Cucci had delivered design plans and invoices to plaintiff's New York office on several occasions, faxed several correspondences and sketches there, had telephone conversations with plaintiff while plaintiff was in New York, and plaintiff executed the contract in New York.
Notwithstanding plaintiff's contention to the contrary, these activities do not constitute business transactions within the meaning of CPLR § 302(a)(1), so as to acquire the requisite personal jurisdiction over these defendants. Plaintiff must show that the defendants purposefully availed themselves of the privilege of conducting business activities within New York, and that the causes of action arose out of the activities within the state. Henderson v. I.N.S., 157 F.3d 106, 123 (2d Cir. 1998) (quoting Kronisch v. United States, 150 F.3d 112, 130 (2d Cir. 1998)). "It is a 'single transaction statute' and proof of one transaction in New York is sufficient to invoke jurisdiction, even though the defendant never enters New York, so long as the defendant's activities here were purposeful and there is a substantial relationship between the transaction and the claim asserted." Kreutter v. McFadden Oil Corp., 527 N.Y.S.2d 195, 198-99 (N.Y. 1988). In order to find that a cause of action arises in New York, "there must be 'an articulable nexus,' or a 'substantial relationship,' between the claim asserted and the actions that occurred in New York." Kronisch, 150 F.3d at 130 (quotingKreutter, 527 N.Y.S.2d at 198-99). Among the factors to be considered in determining whether a non-domiciliary transacted business in New York are: whether defendant had an on-going contractual relationship with a New York entity; whether the contract was either negotiated or executed in New York; after the execution of the contract, whether defendant attended business meetings in New York; and whether the contract contained a choice-of-forum provision. Agency Rent A Car System, Inc. v. Grand Rent A Car Corp., 98 F.3d 25, 29 (2d Cir. 1996) (citations omitted). "Other factors may also be considered, and the ultimate determination is based on the totality of the circumstances" as "no one factor is dispositive." Id. (citing Paine Webber Inc. v. Westgate Group, Inc., 748 F. Supp. 115, 118 (S.D.N.Y. 1990)).
An examination of the totality of the circumstances in the case at bar fails to reveal that the Cucci defendants engaged in purposeful activity in New York. This matter arose out a contractual agreement between a New Jersey based architectural firm and two New Jersey corporations for the renovation of property located in New Jersey. Cucci never visited New York to negotiate the contract, sign it, or to discuss matters relating to the contract. All of the work performed by the Cucci defendants was done in New Jersey. Contrary to plaintiff's contentions, the fact that Cucci sent various correspondences and documents to plaintiff's New York office via mail and facsimile, and had several telephone conversations with him while plaintiff was present in New York, is insufficient to establish personal jurisdiction over the Cucci defendants. See, Roper Starch Worldwide, Inc. v. Reymer Assoc., Inc., 2 F. Supp.2d 470, 474-75 (S.D.N.Y. 1998); China Resource Products (USA), Ltd. v. China Distributors, Inc., 1994 WL 440719, *6 (S.D.N.Y. Aug. 16, 1994); International Custom Assoc., Inc. v. Ford Motor Co., 893 F. Supp. 1251, 1261 (S.D.N.Y. 1995), aff'd, 201 F.3d 431 (2d Cir. 1999); Wilhehnshaven Acquisition Corp. v Ashen, 810 F. Supp. 108, 112-113 (S.D.N.Y. 1993): PaineWebber Inc., 748 F. Supp. at 119. Such communications can only be used to confer jurisdiction where the communications were utilized by defendants to "project" themselves into New York in such a manner as to purposefully avail themselves of the benefits and protections of New York laws. Wilhelmshaven, 810 F. Supp. at 112 (quoting Parke-Bernet Galleries, Inc. v. Franklyn, 308 N.Y.S.2d 337, 340-41 (N.Y. 1970)) (internal quotation marks omitted); see also, Kulas v. Adachi, 1997 WL 256957, *7 (S.D.N.Y. May 16, 1997); PainWebber Inc., 748 F. Supp at 119. Nothing in the record suggest that either defendant intended to use the subject communications as a means to project itself into business transactions in New York. The essence of defendants' contractual obligations were to be performed in New Jersey, and the New York communications, related thereto, were of minor importance.
Similarly, the fact that plaintiff executed his portion of the contract in New York is of no significance. The unilateral activity of plaintiff executing a contract in New York is an insufficient basis upon which to acquire jurisdiction over a non-domiciliary defendant. Galgay v. Bulletin Co., 504 F.2d 1062, 1065 (2d Cir. 1974); China Resource Products (USA), Ltd., 1994 WL at *8 ("As the defendant is the party who must be found to have transacted business in the forum, the plaintiff's signing and executing of the contract in New York are irrelevant."). Accordingly, personal jurisdiction over the Cucci defendants does not exist.
Personal Jurisdiction over Defendant Feinberg
Plaintiff contends that this Court has personal jurisdiction over Feinberg on two grounds. First, Feinberg's action in causing a summons and complaint, in the New Jersey state action, to be sent by certified mail to plaintiff's New York office constitutes transacting business within the meaning of CPLR § 302(a)(1). Second, Feinberg's refusal to initially dismiss plaintiff as-a named defendant in the New Jersey state action, despite plaintiff's representations to him that he was not a proper party, constitutes a persistent course of conduct in New York state pursuant to CPLR § 302(a)(3)(i). Such arguments are without merit.
As previously discussed, contact by mail generally does not provide a basis for jurisdiction absent defendant's intention to project himself into events taking place in New York. Wilhelmshaven Acquisition Corp., 810 F. Supp. at 112-113. The mailing of legal papers does not evince such an intention here. See, 3H Enterprises, Inc. v. Dwyre, 182 F. Supp.2d 249, 256 (N.D.N.Y. 2001). Moreover, Feinberg has few, if any, contacts with New York. Feinberg is a lawyer admitted to the New Jersey bar, who practices out of offices in New Jersey. He denies being admitted to the New York bar or ever maintaining a New York office.
Similarly unpersuasive is plaintiff's contention that, pursuant to CPLR § 302(a)(3)(i), Feinberg committed a tortious act without the state causing injury to a person within the state while engaged in a "persistent course of conduct . . . in the state." Jurisdiction cannot be found under this theory because Feinberg did not commit a tortious act. Absent a showing of bad faith, the mere protestations by plaintiff that he should not be named as a defendant in the New Jersey state action did not require Feinberg to independently dismiss the action against plaintiff notwithstanding Feinberg's professional obligations to his client. If plaintiff believed he was not an appropriate party to the action, his recourse was to make a motion to dismiss. Moreover, the course of conduct complained of did not occur in New York. Cf., Bank Brussels Lambert v. Fiddler Gonzalez Rodriguez, 305 F.3d 120, 126 (2d Cir. 2002).
In light of the foregoing, the Court lacks personal jurisdiction over all of the defendants, and their motions to dismiss are granted.
SUBJECT MATTER JURISDICTION
Transferring this matter to the United States District Court for the District of New Jersey would permit plaintiff to litigate this matter as personal jurisdiction over defendants could be obtained. However, defendants are also seeking to dismiss for lack of subject matter jurisdiction. The Court finds that federal jurisdiction is lacking, and hence a transfer is inappropriate.
Plaintiff claims that subject matter jurisdiction exists in this action because there is complete diversity between the parties, pursuant to 28 U.S.C. § 1332(a). In fact, plaintiff maintains that, despite their New Jersey incorporation, complete diversity would have existed even if there was no assignment of claims and Forty Six Associates, Inc. and Stuart Max, Inc. were the named plaintiff's in the action. Although plaintiff acknowledges that the assignment was undertaken in part to produce diversity, he contends that there also existed legitimate business reasons for the assignment.
Subject matter jurisdiction exists in a civil action where the matter in controversy exceeds $75,000, and there is complete diversity between the parties, meaning that the plaintiff cannot be a citizen of the same state as any defendant. 28 U.S.C. § 1332(a)(1); see also, Owen Equip. Erection Co. v. Kroger, 437 U.S. 365 (1978). For purposes of diversity jurisdiction, "a corporation shall be deemed a citizen of any State by which it has been incorporated and of the State where it has its principal place of business." 28 U.S.C § 1332(c). Therefore, for complete diversity to exist, no adversary of a corporation may be a citizen of the state in which the corporation is incorporated, or of the state in which it has its principal place of business.See, Boyd, Weir Sewell, Inc. v. Fritzen-Halcyon Lijn, Inc., 709 F. Supp. 77, 78 (S.D.N.Y. 1989). Both Forty Six Associates, Inc. and Stuart Max, Inc. are incorporated in New Jersey. Plaintiff's claim that they have a principal office in New York is unpersuasive. Neither corporation is licensed to do business in New York, and the Friendly's Restaurant, which is the nucleus of the companies, is located in New Jersey. Simply using plaintiff's office as an address for the corporations does not make New York its principal place of business.See, R.G. Barry Corp, v. Mushroom Makers, Inc., 612 F.2d 651, 655 (2d Cir. 1979); Sterling Fifth Assoc. v. Carpentile Corp., Inc., 2003 WL 22227960, *3 (S.D.N.Y. Sept. 26, 2003). Consequently, for purposes of diversity jurisdiction, Forty Six Associates, Inc. and Stuart Max, Inc. are citizens of New Jersey only. Since defendants are all citizens of New Jersey, complete diversity could not have existed had Forty Six Associates, Inc. and Stuart Max, Inc. been parties to this action.
Pursuant to 28 U.S.C. § 1359, a district court lacks jurisdiction in a civil case where a party, by assignment, has been improperly or collusively made or joined in order to obtain jurisdiction. Section 1359 should be broadly construed so as to bar any improper attempt to create diversity. Prudential Oil Corp. v. Phillips Petroleum Co., 546 F.2d 469, 475 (2d Cir. 1976). Federal jurisdiction does not lie where complete diversity is manipulated or manufactured. Kramer v. Carribean Mills, Inc., 394 U.S. 823 (1969); Prudential Oil Corp., supra; O'Brien v. Avco Corp., 425 F.2d 1030 (2d Cir. 1969). Whereas here, an assignment of claims has taken place between a corporation and one of only two existing shareholders and officers, the assignment is treated as presumptively collusive and as having been effectuated for the purpose of attempting to manufacture diversity jurisdiction. See e.g., Kahn v. C L Lisa, Co., Inc., 1986 WL 4068 (S.D.N.Y. Mar. 31, 1986) (presumption of collusion is found where the assignment of the claim was from a non-diverse corporation to a diverse individual who is the sole owner and officer of that corporation);see also, Airline Reporting Corp. v. S and N Travel, Inc., 58 F.3d 857, 863 (2d Cir. 1995) (presumption of collusion to assignment involving corporate directors and shareholdings may be appropriate where there exists a sufficient identify of corporate interests);Prudential Oil Corp., 546 F.2d at 476 ("[W]e hold that where it is shown that a non-diverse parent corporation has assigned a claim to its wholly owned diverse subsidiary engaged in no business-other than prosecution of that claim, the assignment must be treated as presumptively improper, and as having been undertaken for the purpose of attempting to manufacture diversity jurisdiction."). In such a situation, the scrutiny normally applicable must be heightened as the assignment can be easily arranged thereby increasing the possibility of collusion and compounding the difficulty in detecting the true reason for the assignment. Prudential Oil Corp., 546 F.2d at 475;Kahn, 1986 WL 4068 at *1. The presumption of collusion may be rebutted by the plaintiff offering evidence that the assignment "was made for a legitimate business purpose unconnected with the creation of diversity jurisdiction[,]" such as saving in taxes or operational costs,Prudential Oil Corp., 546 F.2d at 476, 477. Merely offering a business reason will not, however, suffice. "Instead the burden falls on the party asserting diversity to demonstrate that the reason given for the assignment is legitimate, not pretextual." Airlines Reporting Corp., 58 F.3d at 863.
It should initially be noted that it is questionable whether plaintiff has a valid assignment. Under New Jersey law, a tort claim may not be assigned prior to judgment. Brown v. Brown, 731 A.2d 1212, 1214 n. 4 (N.J. Super Ct. App. Div. 1999); Village of Ridgewood v. Shell Oil Co., 673 A.2d 300, 307-308 (NJ. Super Ct. App. Div. 1996). The assignment of a right to obtain a future judgment is a nullity. Village of Ridgewood, 673 A.2d at 307.
Even if the assignment is valid, the reasons proffered by plaintiff do not reveal a legitimate business purpose. A corporation may not assign its claims to its stockholder and officer to allow the individual to proceed pro se to prosecute the claims simply because of a lack of corporate finances or the assignee's financial interest in the corporation. Jones v. Niagara Frontier Transp. Auth., 722 F.2d 20 (2d Cir. 1983); Winchester Associates v. Gould, 1987 WL 14909 (S.D.N.Y-July 21, 1987). Similarly, plaintiff's personal interest and his own financial stake in the litigation are not legitimate business reasons. Moreover, plaintiffs unsupported and conclusory claim, that the assignment was made to reimburse him for additional monies he spent as a result of the Cucci defendants' conduct, is insufficient to rebut the presumption of collusion. Plaintiff fails to specify what expenses he allegedly incurred. Interestingly, plaintiff had not paid the judgment prior to commencing the instant action.
Plaintiff has not demonstrated any legitimate business reason for the assignment. Plaintiff admits that one of the reasons for effectuating the assignment was to establish federal diversity jurisdiction. This admission does not comport with Congress' intent under 28 U.S.C. § 1359. As the United States Supreme Court observed, "[s]uch 'manufacture of Federal jurisdiction' was the very thing which Congress intended to prevent when it enacted § 1359 and its predecessors."Kramer, 394 U.S. at 829.
Since plaintiff failed to adequately rebut the presumption of collusion, the purported assignment is improper given its only purpose was to manufacture diversity jurisdiction. Since the complaint must be dismissed for lack of both personal and subject matter jurisdiction, the defendants' remaining grounds for dismissal need not be addressed.
The Cucci defendants also argue that dismissal is warranted pursuant to the doctrines of res judicata and collateral estoppel in that all of plaintiffs claims were or could have been asserted in the New Jersey state action. Feinberg also raises forum non conveniens as a basis for dismissal as all the acts giving rise to the action, all the evidence and all the parties in the underlying lawsuit either are located in or occurred in New Jersey. Additionally, Feinberg argues that the complaint fails to state a cause of action because plaintiffs only remedy was to move to vacate the New Jersey state judgment, and a federal court has no jurisdiction to review the propriety of a New Jersey state court judgment.
SANCTIONS
Defendants are seeking an order granting attorneys' fees and imposing sanctions against plaintiff pursuant to Fed.R.Civ.P. 11. That application is denied. Although a separate notice of motion seeking sanctions was filed, defendants set forth their supporting arguments in their reply memorandums to the motion to dismiss. Such a joint memorandum is prohibited. Fed.R.Civ.P. 11(c)(1)(A); Perpetual Securities, Inc. v. Tang, 290 F.3d 132, 142 (2d Cir. 2002); Richards v. City of New York, 2000 WL 130635 (S.D.N.Y. Feb. 2, 2000); Jedrejcic v. Croatian Olympic Committee, 190 F.R.D. 60, 82 n. 31 (E.D.N.Y. 1999).In any event, the imposition of sanctions is unwarranted. Sanctions are to be imposed upon a party who submits pleadings or other papers containing "claims, defenses, and other legal contentions that are not "warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law." Fed.R.Civ.P. 11(b)(2). Any doubts to the validity of the pleadings when signed are to be resolved in favor of the signer.Eastway Construction Corp. v. City of New York, 762 F.2d 243, 254 (2d Cir. 1985). In "applying a test of objective reasonableness[,]" sanctions are appropriate "'where it is clear: (1) a reasonable inquiry into the basis for a pleading has not been made; (2) under existing precedent there is no chance of success; and (3) no reasonable argument has been advanced to extend, modify, or reverse the law as it stands." Cross Cross Properties. Ltd. v. Everett Allied Co., 886 F.2d 497, 504 (2d Cir. 1989) (quoting International Shipping Co., S.A. v. Hydra Offshore, Inc., 875 F.2d 388, 390 (2d Cir. 1989); see also, Shafii v. British Airways, PLC, 83 F.3d 566, 570 (2d Cir. 1996).
Although plaintiffs claims and his supporting arguments were not strong ones, they were no objectively unreasonable. He did cite legal authority, albeit unpersuasive, in support of his arguments. This litigation was in the early stages, as defendants moved to dismiss before filing their answer. Given the fact that Rule 11 sanctions should be imposed with caution, MacDraw Inc., v. CIT Group Equipment Financing Inc., 73 F.3d 1253, 1259 (2d Cir. 1996), the petitioner's claims were not so baseless as to necessitate sanctions.
CONCLUSION
Defendants' motions to dismiss the complaint is granted, and their motions are denied in all other respects.
SO ORDERED.