Opinion
5:01-CV-882 (HGM/GJD)
September 16, 2002
Douglas B. Fox, Esq., David W. Smith, Esq., Cozen O'Connor Cherry Hill, NJ, for Plaintiff.
Philip W. Crawford, Esq., Gibbons, Del Deo, Dolan, Griffinger Vecchione, P.C., Newark, NJ, for Defendant Constab.
Daniel M. Schiavetta, Esq., Murphy Higgins LLP, New Rochelle, NY, for Defendant Ciba.
MEMORANDUM-DECISION AND ORDER
BACKGROUND
Plaintiff Great Northern Insurance Company issued an insurance policy to Felix Schoeller Technical Papers, Inc. and Schoeller Technical Papers, Inc. (together "Insureds"). The insureds are in the business of manufacturing photographic papers and conduct their business operations at 170 County Route 2A in Pulaski, New York.
On February 8, 1993, defendant Constab Polymer-Chemie GmbH Co. ("Constab") entered into a supply agreement ("Agreement") with the insureds' parent corporation, Felix Schoeller GmbH Co. KD ("Schoeller-Germany"), a German corporation located in Osnabrück, Germany. Constab is a German corporation with its principal place of business in Germany.
Pursuant to the terms of the Agreement, Constab delivered products to Schoeller-Germany's various plants and facilities, including to the insureds. As part of their business operations, the insureds utilized Masterbatch UV 1032 LD ("Masterbatch"), a chemical manufactured by Constab and delivered to the insureds pursuant to the agreement. A key ingredient of Masterbatch is Chimassorb 944 ("Chimassorb"), a chemical manufactured and distributed by defendant Ciba Spezialitatenchemie Lampertheim GmbH ("Ciba"). Ciba is also a German corporation with its principal place of business in Germany.
In August 1998, the insureds received complaints from their customers that photographic papers sold and supplied were defective and commercially useless. Plaintiff alleges that the Masterbatch delivered to the insureds by Constab was defective in that it contained defective Chimassorb manufactured by Ciba, causing desensitized spots on the photographic papers. As a result, the insureds' customers rejected the defective papers and caused the insureds to sustain damages in the approximate amount of $499,017.93. Plaintiff compensated the insureds for their damages pursuant to the insurance policy and is now subrogated to the rights of the insureds.
On June 1, 2001, plaintiff filed the current lawsuit to recover for the damages caused to the photographic papers by the allegedly defective chemicals. Plaintiff set forth claims against Ciba and Constab for indemnity, contribution, negligence, breach of warranty, breach of contract, and strict products liability.
Currently before this court are motions by each defendant. Ciba has filed motions to dismiss for lack of personal jurisdiction pursuant to Rule 12(b)(2) of the Federal Rules of Civil Procedure, or, in the alternative, for failure to state a claim pursuant to Rule 12(b)(6). Similarly, Constab has filed motions to dismiss for lack of personal jurisdiction pursuant to Rule 12(b)(2), or, in the alternative, pursuant to the doctrine of forum non conveniens. Plaintiff has entered opposition to each of the motions and oral argument was heard in Albany, New York on July 29, 2002.
DISCUSSION
On a motion to dismiss for lack of personal jurisdiction, the plaintiff bears the burden of establishing that a court may exercise personal jurisdiction over a defendant. See Kernan v. Kurz-Hastings Inc., 175 F.3d 236, 240 (2d Cir. 1999). Where the motion to dismiss is made prior to discovery, the plaintiff must make a prima facie showing of jurisdiction to defeat the motion. See DiStefano v. Carozzi North America, Inc., 286 F.3d 81, 84 (2d Cir. 2001). For purposes of determining whether the plaintiff has met its burden, only the factual allegations contained in the pleadings and affidavits are deemed true — not assertions of legal conclusions, unsupported by competent facts. See Jazini v. Nissan Motor Co., 148 F.3d 181, 184 (2d Cir. 1998). Accordingly, in order to avoid dismissal, the plaintiff must come forward with legally sufficient allegations of jurisdiction that, if credited, will satisfy the criteria for assertion of personal jurisdiction over each defendant.
In a diversity case, personal jurisdiction is based upon the law of the state in which the federal court sits, which in this case is New York. See DiStefano, 286 F.3d at 84. There are two ways that a New York court can exercise personal jurisdiction over a non-resident defendant: general jurisdiction pursuant to N.Y.C.P.L.R. § 301 or specific jurisdiction pursuant to N.Y.C.P.L.R. § 302. In the present case, plaintiff seeks to premise personal jurisdiction over both defendants on New York's long-arm provision, § 302. Section 302 does not require the same level of contacts with New York as are required for jurisdiction under § 301; however, the cause of action must arise out of the established contacts. See 3H Enterprises, Inc. v. Dwyre, 182 F. Supp.2d 249, 255 (N.D.N.Y. 2001) (McAvoy, J.). Purposeful availment is the cornerstone of long-arm jurisdiction in New York; therefore, jurisdiction is appropriate where the party has projected itself into New York, and where it has put itself in the position to receive the benefits of New York law and commerce. See id. (citations omitted).
In deciding a question of personal jurisdiction based on a long-arm statute, a court must conduct a two-part analysis, looking first to the state's long-arm statute and then analyzing whether jurisdiction comports with federal due process. See Mario Valente Collezioni, Ltd. v. Confezioni Semeraro Paolo, S.R.L., 264 F.3d 32, 37 (2d Cir. 2001).
I. Personal Jurisdiction Over Ciba
Plaintiff asserts that this court can exercise personal jurisdiction over Ciba pursuant to § 302(a)(3)(ii). Section 302(a)(3)(ii) provides in relevant part that personal jurisdiction exists over a non-domiciliary who:
commits a tortious act without the state causing injury to person or property within the state, . . ., if he . . . (ii) expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce.
In order for the court to assert personal jurisdiction over the defendants pursuant to § 302(a)(3)(ii), five elements must be met. See Hein v. Cuprum, S.A. de CV., 136 F. Supp.2d 63, 67 (N.D.N.Y. 2001) (Kahn, J.). First, the defendant must commit a tortious act outside New York. See id.
Second, plaintiff's cause of action must arise from that act. See id. Third, the act must cause injury to a person or property within New York. See id. Fourth, the defendant must expect or reasonably expect that the act will have consequences in New York and fifth, the defendant must derive substantial revenue from interstate or international commerce. See id.
Arguably, plaintiff has alleged sufficient facts to meet its prima facie burden on the first, second, third, and fifth elements of § 302(a)(3)(ii). However, the same cannot be said for the fourth element — the defendant must expect or reasonably expect that the act will have consequences in New York. In support of its argument that this element has been satisfied, plaintiff merely points out that "Ciba's Swiss parent and its subsidiaries, including [Ciba], are not strangers to New York" and that "[t]hese entities have a global reach." See Pltf.'s Memo of Law In Opposition to the Motion to Dismiss of Deft. Ciba, at 11-12. This statement does not constitute an allegation supported by competent facts sufficient to meet plaintiff's prima facie burden of showing that personal jurisdiction exists over Ciba. Plaintiff has failed to show how Ciba must expect or reasonably expect that its actions would have consequences in New York. Ciba is a German corporation that entered into a contract with Constab, another German corporation, for the supply of chemicals in Germany. Absent legally sufficient assertions to the contrary, this court cannot conclude that Ciba expected or should have reasonably expected that its actions would have consequences with New York. Therefore, plaintiff has failed to make a prima facie showing of personal jurisdiction over Ciba necessary to defeat the motion to dismiss.
II. Personal Jurisdiction Over Constab
Plaintiff asserts that this court can exercise personal jurisdiction over Constab pursuant to § 302(a)(3)(ii) or § 302(a)(1).
A. N.Y.C.P.L.R. § 302(a)(3)(ii)
As previously stated, there are five elements of § 302(a)(3)(ii). Similar to its assertion of personal jurisdiction over Ciba, plaintiff has arguably alleged sufficient facts to meet its prima facie burden on the first, second, third, and fifth elements of § 302(a)(3)(ii). Satisfaction of the fourth element is a question that requires closer examination.
"The test of whether a defendant expects or should reasonably expect his act to have consequences within the State is an objective rather than a subjective one." Kernan, 175 F.3d at 241 (quoting Allen v. Auto Specialties Mfg. Co., 357 N.Y.S.2d 547, 550 (3d Dep't 1974)). New York courts have sought to avoid conflict with federal due process limits on state court jurisdiction by applying the "reasonable expectation" requirement in a manner consistent with Supreme Court precedent. See id. Therefore, New York courts have asserted that the simple likelihood or foreseeability "that a defendant's product will find its way into New York does not satisfy this element, and that purposeful availment of the benefits of the laws of New York such that the defendant may reasonably anticipate being haled into New York court is required." Id. (quoting In re DES Cases, 789 F. Supp. 552, 570-71 (E.D.N.Y. 1992).
Plaintiff argues that Constab could reasonably expect that its actions would have consequences in New York because the existence of Schoeller-Germany's New York plant was disclosed in the Agreement and Constab did, in fact, ship Masterbatch to New York. Therefore, plaintiff argues, it was clearly foreseeable to Constab that any defect in its product would have direct consequences in New York.
In opposition, Constab points out that the Agreement was with Schoeller-Germany, a German corporation, for the direct purchase of chemical products and delivery to locations as requested by Schoeller-Germany. The Agreement was negotiated in Germany, was written in German, established the place of performance as Rüthen, Germany, and called for jurisdiction over disputes to exist in Warstein, Germany. Constab never solicited business in New York — it merely fulfilled its obligations under the Agreement by delivering Masterbatch to a German shipping company, Nosta Transport GmbH, for shipment to New York and the risk of loss transferred to plaintiff upon delivery to the shipping company.
After reviewing the parties' arguments, the court concludes that plaintiff has not alleged sufficient facts to meet its prima facie burden on the fourth element of § 302(a)(3)(ii). Despite the fact that it was foreseeable that the Agreement would result in shipments of Masterbatch to New York and the fact that shipments were made to the insureds in New York, this court cannot conclude that Constab purposefully availed itself of the benefits of the laws of New York such that it could reasonably anticipate being haled into a New York court. The various terms and conditions of the Agreement itself and the circumstances surrounding its signing fail to support a conclusion that Constab reasonably expected that its actions would have consequences in New York.
Therefore, plaintiff has not made a prima facie showing sufficient to meet its burden under § 302(a)(3)(ii) and necessary to defeat the motion to dismiss.
B. N.Y.C.P.L.R. § 302(a)(1)
Section 302(a)(1) provides that personal jurisdiction exists over a non-domiciliary who "transacts any business within the state or contracts anywhere to supply goods or services in the state." Long-arm jurisdiction extends only to a "cause of action arising out from any of the acts enumerated" in § 302(a)(1), that is, there must be "some articulable nexus between the business transacted and the cause of action sued upon." Ulster Scientific, Inc. v. Guest Elchrom Scientific AG, 181 F. Supp.2d 95, 100 (N.D.N.Y. 2001) (Mordue, J.) (quoting McGowan v. Smith, 52 N.Y.2d 268, 272, 437 N.Y.S.2d 643, 419 N.E.2d 321 (1981)).
In order to determine whether a non-domiciliary defendant "transacts business" in New York, the court must consider the totality of the circumstances surrounding the contract action. See id. The factors that a court may consider include whether the defendant has an ongoing contractual relationship with a New York business; whether the contract was negotiated or executed in New York; whether the defendant visited New York to meet with the parties to the contract regarding performance thereof after the execution of the contract; and whether the contract required the defendant to send notices and payments into New York or otherwise perform in New York. See id. (internal citations omitted).
In the present case, personal jurisdiction cannot be premised on the "transacting business" clause of § 302(a)(1). Simply stated, Constab never contracted with a New York business. As previously discussed, the Agreement was executed between two German corporations. The Agreement was negotiated in Germany, was written in German, established the place of performance as Rüthen, Germany, and called for jurisdiction over disputes to exist in Warstein, Germany. No one from Constab ever visited New York for any purpose related to the Agreement and Constab was never required to send any notices or payments to New York. For these reasons, this court cannot conclude that personal jurisdiction can be premised on the "transacting business" clause of § 302(a)(1).
The "contracting to supply goods or services" clause of § 302(a)(1) was added in 1979 to extend New York jurisdiction to the limits of due process. See id. at 101 (citing Island Wholesale Food Supplies, Inc. v. Blanchard Inds., Inc., 476 N.Y.S.2d 192, 195 (2d Dep't 1984). When applying this provision, courts may consider whether the purchase orders and other documents provide for shipment to New York; whether the defendant collected New York sales tax in connection with the transaction; whether the defendant solicited the contract in New York; whether the defendant entered New York for purposes of performing the contract; and any other factor showing that defendant voluntarily and purposefully availed itself of the privilege of transacting business in New York. See id.
In the present case, personal jurisdiction cannot be premised on the "contracting to supply goods or services" clause of § 302(a)(1) either. Although purchase orders from the insureds provide for shipment to New York, the other factors do not weigh in favor of jurisdiction. Constab never collected New York sales tax on the chemical products shipped to NewYork. Additionally, Constab did not solicit the Agreement in New York — it took place in Germany. Also, as previously stated, no one from Constab entered New York for the purposes related to the performance of the Agreement. Finally, plaintiff has not shown that defendant voluntarily and purposefully availed itself of the privilege of transacting business in New York. For these reasons, this court cannot conclude that personal jurisdiction can be premised on the "contracting to supply goods or services" clause of § 302(a)(1).
Because plaintiff has failed to show that personal jurisdiction can be premised on either the "transacting business" or "contracting to supply goods or services" provisions of § 302(a)(1), plaintiff has not made a prima facie showing of personal jurisdiction over Constab sufficient to meet its burden and necessary to defeat the motion to dismiss.
CONCLUSION
WHEREFORE, for the foregoing reasons, it is hereby
ORDERED, that defendants' motions to dismiss for lack of personal jurisdiction pursuant to Rule 12(b)(2) of the Federal Rules of Civil Procedure are GRANTED and the complaint is hereby DISMISSED in its entirety. It is further
ORDERED, that the Clerk of the Court serve a copy of this Memorandum — Decision and Order upon the parties by regular mail.
IT IS SO ORDERED.