Summary
In Ljungkvist, the non-resident defendant hired the New York plaintiff to create artwork for a London advertising campaign.
Summary of this case from Robert Diaz Associates Enterprises, Inc. v. Elete, Inc.Opinion
01 Civ. 1681 (HB)
October 17, 2001
OPINION ORDER
Plaintiff Laura Ljungkvist ("Ljungkvist"), a New York artist, brings this action against defendants Rainey Kelly Campbell Roalfe/Young Rubicam, Ltd., f/k/a Young Rubicam, Ltd., Young Rubicam Group, Ltd. and Rainey Kelly Campbell Roalfe, Ltd. (collectively, the "defendants") for copyright infringement, unfair competition, false designation of origin, breach of contract, breach of fiduciary duty, fraud, negligent misrepresentation, theft of ideas and fraudulent inducement to contract. Defendants moved for summary judgment pursuant to Fed.R.Civ.P. 56 for lack of personal jurisdiction. For the following reasons, defendants' motion is GRANTED.
I. BACKGROUND
The following facts are undisputed, unless otherwise noted, and presented in the light most favorable to the plaintiff. Although consisting of nine claims, the complaint in essence sounds in breach of contract and copyright infringement, all of which arose from a London-based advertising agency's alleged misuse of an artist's artwork and failure to pay her.
Ljungkvist is a local artist with her principal place of business in New York City. She also maintains an agency in London. Her artwork is characterized by a distinct style. She designs shapes and objects connected by one continuous line. Defendants are a group of advertising agencies incorporated in London. Some time prior to October 8, 1999, Stuart Elkins ("Elkins"), the defendants' Art Director in London, contacted Ljungkvist's London agency and informed her agent that the defendants were considering Ljungkvist as a candidate to create artwork for an advertising campaign. Elkins ordered a copy of Ljungkvist's portfolio, which was then sent to him by the London agency. On October 8, 1999, the defendants informed Ljungkvist's London agent that she had been selected to create artwork for an upcoming advertising campaign for a London company called Trainline.com. The campaign would advertise the sale by Trainline.com of British train tickets via a website. (Plts. Brown Dec., Ex. A). That same day, Ljungkvist's agent informed her that she had been selected and would have to submit sketches to the defendants the following week. Ljungkvist began work immediately. Subsequently, Elkins called from London to talk with Ljungkvist in New York "to discuss the requirements of the campaign." (Compl. ¶ 30).
The exact placement of the defendants within the overall corporate structure of their parent organizations, and their relationship to each other, is somewhat complex. According to the defendants, they are within the larger WPP Group plc, ("WPP") a diversified advertising holding company in London. Young and Rubicam, Inc. ("Young") is based in New York, and a subsidiary of WPP. Young owns 100% of Young Rubicam International Group BV, of the Netherlands, and 100% of the YR Group of Companies, Inc., in Canada, and both of these companies jointly own Young Rubicam Development (Holdings), Ltd. This latter company in turn owns 100% of Rainey Kelly Campbell Roalfe ("RKCR"), one of the defendants in this case, which it acquired in August, 1999. Shortly after that acquisition, RKCR transferred its assets and employees to Young Rubicam, Ltd., a wholly owned subsidiary of defendant Young Rubicam Group, Inc. Young Rubicam, Ltd., however, was then renamed as defendant Rainey Kelly Campbell Roalfe/Young Rubicam, Ltd. (Dfds. Brennan Dec., Ex. F).
On October 15, 1999, Ljungkvist and the defendants entered into two contracts. (Dfds. Brennan Dec., Exs. A and B). The contracts together commissioned Ljungkvist to provide 5 illustrations to the defendants in exchange for 60,000 British pounds. The contracts included a "kill fee" provision, which set, among other things, an amount that defendants would pay if the agreement was cancelled prior to Ljungkvist's submission of her final artwork. Additionally, the contracts stated that original artwork would remain Ljungkvist's property. The defendants agreed in both contracts to wire payments to Ljungkvist's account at the Bank of New York in Manhattan. (Dfds. Brennan Dec., Exs.A and B).
Within two weeks, Ljungkvist provided the defendants with several sketches. On several occasions, Elkins, telephoned Ljungkvist in New York to discuss the designs. (Compl. ¶ 43). Additionally, upon receiving artwork from Ljungkvist by fax, Elkins would write his comments on the papers and fax them back to the plaintiff. (Compl. ¶ 44). At some point, the defendants informed Ljungkvist's London agency, and Ljungkvist herself, that they "would not be using her artwork. On February 4, 2000, the defendants tendered to Ljungkvist the "kill fee", a check for 2,996.25 British pounds, which she never cashed. (Compl. ¶ 54).
Ljungkvist alleges that the defendants, despite sending her the "kill fee" and indicating that they were not using her artwork, nevertheless launched the advertising campaign for Trainline.com utilizing the same designs and ideas she provided. (Compl. ¶ 50).
Ljungkvist claims she obtained the exclusive rights to the artwork and received a certificate of Copyright registration dated May 22, 2000. (Compl. ¶ 60, Ex. A).
Ljungkvist subsequently brought this action against the defendants alleging nine causes of action related to the alleged copyright infringement and breach of contract Defendants now move for summary judgment on all the claims.
In a previous complaint, Ljungkvist initially sued Young Rubicam, Inc., but later voluntarily dismissed the suit without prejudice on February 28, 2001. See Ljungkvist v. Young Rubicam, Inc., 00 Civ. 8541 (HB).
II. DISCUSSION
A. Summary Judgment Standard of Review
A motion for summary judgment may not be granted unless the Court determines there is no genuine issue of material fact to be tried. Fed.R.Civ.P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-52 (1986). The moving party has the burden of demonstrating the absence of any genuine issue of material fact. See Adickes v. S.H. Kress Co., 398 U.S. 144, 157 (1970). Furthermore, the court must "draw all factual inferences in favor of the party against whom summary judgment is sought." Cronin v. Aetna Life Ins. Co., 46 F.3d 196, 202 (2d Cir. 1995). Although all reasonable inferences are drawn in favor of the non-moving party, however, that party must raise more than "some metaphysical doubt as to the material facts." Matsushita Electrical industrial Co., Ltd., v. Zenith Radio Co., 475 U.S. 574, 586 (1986); see Kulak v. City of New York, 88 F.3d 63, 71 (2d Cir. 1996) ("conclusory statements, conjecture, or speculation" do not defeat summary judgment).
B. Personal Jurisdiction
In her complaint, Ljungkvist alleges personal jurisdiction under three sections of New York State's long-arm statute, C.P.L.R. §§ 302(a)(1) — (a)(3). In her answering papers, she additionally asserts, for the first time, jurisdiction pursuant to Fed.R.Civ.P. 4(k)(2). The burden of establishing the court's jurisdiction rests "upon the party who asserts it." Lehigh Valley Indus., Inc. v. Birenbaum, 527 F.2d 87, 92 (2d Cir. 1975). Ljungkvist fails to establish jurisdiction on any of the grounds alleged.
The controversy at stake here implicates a series of facts and transactions that transpired an ocean's length away from the forum in which Ljungkvist now seeks to entertain her claims. The defendants are companies incorporated in London with their principal place of business there. All substantive negotiations and discussions concerning the contracts between the parties were conducted in London, and involved not the plaintiff, but Ljungkvist's London agent. The defendants initially solicited Ljungkvist's services via the London agent rather than coming or calling to New York. It was Ljungkvist's London agent who executed the contract, and Ljungkvist is not even a signatory. Further, the entire transaction of business was intended to provide an advertising campaign for the defendants' London-based client, a company also incorporated in London, that planned to sell British train passes on the internet. Accordingly, any alleged acts of copyright infringement and related wrongful acts were committed on foreign soil, where they must remain for purposes of adjudication.
Although Ljungkvist does not raise the argument, the defendants here can not be said to have negotiated and executed the contracts in New York merely by their interaction with a London agent whose principal resides in New York. The physical location of an agent is not attributed to the principal but rather stands on its own in a jurisdictional analysis. See, e.g., C.P.L.R. § 302(a)(2) (providing in pertinent part that a New York court may exercise personal jurisdiction over a non-domiciliary who "in person or though an agent" commits a tortious act within the state); PDK Labs v. Friedlander, 103 F.3d 1105, 1109 (2d Cir. 1997) (finding that actions of defendant's agent in New York constituted a transaction of business of the defendant for purposes of C.P.L.R. 302 (a)(1)).
1. C.P.L.R. 302(a)(1)
Jurisdiction is established under section 302(a)(1) when (i) the defendant has transacted business within the state, and (2) the claim arises out of that activity. See Bank Brussels Lambert v. Fiddler Gonzalez Rodriguez, 171 F.3d 779, 786 (2d Cir. 1999). Courts focus on the "totality of circumstances" to determine whether a party has "transacted business" within the meaning of section 302(a)(1). National Tel. Directory Consultants, Inc. v. BellSouth Adver. Publ'g Corp., 25 F. Supp.2d 192, 195 (S.D.N.Y. 1998). The relevant factors typically weighed in such a determination are: (1) whether the defendant has an ongoing contractual relationship with a New York corporation; (2) whether the contract was negotiated or executed in New York and whether, after executing a contract with a New York entity, the defendant visited New York for meetings devoted to the contractual relationship; (3) what the choice of law clause (if any) is in the contract; and (4) whether the contract requires defendant to send notices and payments into New York, or subjects defendant to supervision by the plaintiff corporation in New York. Agency Rent A Car Sys., Inc. v. Grand Rent A Car Corp., 98 F.3d 25, 29 (2d Cir. 1996). The plaintiff fails on all these factors save the last one.
To show that the defendants transacted business so as to come within the purview of section 302(a)(1), Ljungkvist points to the following: (1) the defendants on numerous occasions conducted fax and telephone calls into the forum state to discuss her artwork, and (2) the defendants contractually agreed to deposit money into her New York bank account. It can hardly be said that the defendants, who seemingly did everything possible to avoid New York altogether, in fact intended to avail themselves of the privilege of conducting business here. See, e.g., McKee Elec. Co. v. Rauland-Borg Corp., 20 N.Y.2d 377, 382 (1967) (quoting Hanson v. Denckla, 357 U.S. 235, 253 (1958)) (finding that jurisdiction under 302(a)(1) can only comport with federal due process if the defendant "purposefully avails itself of the privilege of conducting activities within [New York], thus invoking the benefits and protections of its laws"). Simply stated, an agreement to send payments to New York, without more, can not constitute "transacting business" under section 302(a)(1). See, e.g., ESI, Inc. v. Coastal Corp., 61 F. Supp.2d 35, 60 (S.D.N.Y. 1999) (contractual requirement to send payments to New York is insufficient on its own to establish jurisdiction); Roper Starch Worldwide, Inc. v. Reymer Assocs., Inc., 2 F. Supp.2d 470 (S.D.N.Y. 1998) ( "merely sending payment to New York is not sufficient to establish personal jurisdiction" under section 302(a)(1)). In addition to the defendants' agreement to send payments to New York, Ljungkvist also contends that the repeated telephone calls and faxes between her and Elkins contribute to meet the requisite "transacting business" standard. While the defendants and Ljungkvist exchanged several faxes regarding the artwork and spoke on the phone at least once every day over a 10-day period, (Ljungkvist Dec., ¶¶ 10 — 18), these correspondences did not project the defendants into local commerce. See, e.g. National Tel. Directory Consultants, 25 F. Supp.2d at 197 (telephone calls and faxes will not confer jurisdiction unless the defendant used those communications as a means to participate in the local commerce); Premier Lending Servs., Inc. v. J.L.J Assocs., 924 F. Supp. 13, 16 (S.D.N.Y. 1996). To influence a determination of section 302(a)(1) jurisdiction, telephone and fax communications must generally be of the quality and nature of those described in the seminal New York Court of Appeals case on the issue, Parke-Bernet Galleries, Inc. v. Franklyn, 26 N.Y.2d 13 (1970) (holding jurisdiction proper over California defendant who participated in New York art auction by telephone link to auctioneer's agent who then relayed defendant's bids). The phone calls between Elkins and Ljungkvist together with the defendants' agreement to send payments to New York fall short of the "transacting business" standard when the totality of London-based circumstances are weighed. Since I find that the defendants have not transacted business pursuant to section 302(a)(1), I need not reach the statute's second prong that requires a substantial nexus between the plaintiff's cause of action and the defendants' in-state activities. See Beacon Enter, Inc. v. Menzies, 715 F.2d 757, 764 (2d Cir.1983) (citing McGowan v. Smith, 52 N.Y.2d 268, 272 (1981)).
Additionally, Ljungkvist erroneously argues that her performance in New York under the contracts provides further evidence of defendants contacts there. (Plts. Opp. Memo p. 15). This argument is beside the point. I have previously held that the relevant focus under section 302 is on what the defendant did in New York in connection with the cause of action, not on the plaintiff's actions. See Serendip, LLC., v. Franchise Pictures, LLC., 2000 WL 1277370 *5 (S.D.N.Y. 2000).
In any event, it is doubtful that the asserted nine causes of action could pass the "nexus test," which "is interpreted very narrowly by the New York courts." Pieczenik v. Dyax Corp., 2001 WL 1079057 *3 (Fed. Cir. Sept. 17, 2001).
2. C.P.L.R. 302(a)(2)
The defendants contest personal jurisdiction under section 302(a)(2). Ljungkvist, however, does not attempt to address jurisdiction under this section, and I need not either, as any such assertion would clearly be defeated by prevailing case law.
As I have stated before, "[t]o subject non-residents to New York jurisdiction under section 302(a)(2) the defendant must commit the tort while he or she is physically in New York State." Carlson v. Cuevas, 932 F. Supp. 76, 80 (S.D.N.Y. 1996) (emphasis added).
3. C.P.L.R 362(a)(3)
Ljungkvist seeks to establish jurisdiction under section 302(a)(3), which authorizes personal jurisdiction over non-domiciliaries where the non-domiciliary "commits a tortious act [outside] the state causing injury to person and property within the state, [among other requirements]." C.P.L.R. § 302(a)(3). Jurisdiction over the defendants can not lie here because Ljungkvist fails to show how the defendants' alleged actions caused injury "to person and property within the state." C.P.L.R. § 302(a)(3). The Second Circuit employs a "situs-of-injury" test to determine whether there is injury in New York sufficient to warrant section 302(a)(3) jurisdiction. See Bank Brussels Lambert, 171 F.3d at 791 (citation omitted). "[T]he situs of the injury is the location of the original event which caused the injury, not the location where the resultant damages are felt by the plaintiff." Mareno v. Rowe, 910 F.2d 1043, 1046 (2d Cir. 1990) (internal citation/quotations omitted) (where plaintiff lived in New York and sued his New Jersey employer for wrongful discharge, situs of injury was location of events which caused injury, i.e., New Jersey, not place where economic consequences were felt, i.e., New York); see also United Bank of Kuwait v. James M. Bridges, Ltd., 766 F. Supp. 113, 116 (S.D.N.Y. 1991) ("The occurrence of financial consequences in New York due to the fortuitous location of plaintiffs in New York is not a sufficient basis for jurisdiction under § 302(a)(3) where the underlying events took place outside New York."); Hermann v. Sharon Hosp., Inc., 135 A.D.2d 682, 683, 522 N.Y.S.2d 581, 583 (2d Dep't 1987) (in medical malpractice action, situs of injury was place where plaintiff received medical treatment, not where the effects of the doctor's negligence were felt). Further, the situs-of-injury test applies to commercial torts such as those alleged by Ljungkvist. See Bank Brussels Lambert, 171 F.3d at 793. Ljungkvist notes, without further elaboration, various injuries suffered in New York, all of which are at most speculative and nebulous. She claims that she was injured in New York because (1) her New York customers were deceived and confused by the defendants wrongful acts, (2) her artwork that appeared on the Trainline.com website had the potential to damage her goodwill and ability to attract New York customers, and (3) she failed to receive international recognition for her work. The loss of potential customers in New York may constitute an injury under section 302(a)(3) only if it is a consequence of "the original event that caused the injury." See Bank Brussels Lambert, 171 F.3d at 799 (finding that defendant's tortious disbursements of funds to third party in New York was the "original event" that caused the injury of economic loss to the plaintiffs). Unlike in Brussels, the original events here underlying the alleged commercial torts occurred in London where the defendants' passed off Ljungkvist's artwork to Trainline.com. Any economic injury to the plaintiff through the deception or loss of her New York customers could have only arisen by an indirect causal chain too remote to establish jurisdiction. 4. Fed.R.Civ.P. 4(k)(2)
Ljungkvist also argues that she was injured by the defendants' failure to compensate her in New York pursuant to the contracts. Jurisdiction under 302(a)(3), however, must be premised on tortious acts, not breach of contract claims. See C.P.L.R. § 302(a)(3). In any event, the defendants alleged wrongful breach occurred in London where the withholding of money due on the contract took place.
In other words, the New York injury would only result following a multi-step process after the defendants first misappropriated Ljungkvist's artwork to Trainline.com and Trainline.com, in turn, projected the artwork on its website, which only then could have been viewed by Ljungkvist's New York customers. Adding further doubt to this indirect line, it is highly suspect that Ljungkvist's New York customers such as the New York Times Co. and Takashimaya of New York, were the targeted audience of the Trainline.com website, which was designed to sell train tickets inside Britain.
In her opposition memorandum, Ljungkvist raises for the first time the argument that if personal jurisdiction can not be found under New York's long arm statute, it should alternatively be granted under Rule 4(k)(2) because her claims of copyright infringement and violations of the Lanham Act arise under federal law. In relevant part, Rule 4(k)(2) provides that:
[i]f the exercise of jurisdiction is consistent with the Constitution and the laws of the United States, serving a summons or filing a waiver of service is also effective, with respect to claims arising under federal law, to establish personal jurisdiction over the person of any defendant who is not subject to the jurisdiction of the courts of general jurisdiction of any state.
Ljungkvist's assertion here must pass constitutional muster, which it does not. The Second Circuit requires that any exercise of jurisdiction under Rule 4(k)(2) must comport with the Fifth Amendment due process standard. See Chew v. Dietrich, 143 F.3d 24, 28 (2d Cir. 1998). The due process standard has two related components: the "minimum contacts" inquiry and the "reasonableness" inquiry. See Metropolitan Life Insurance Co., v. Robertson-Ceco Corp., 84 F.3d 560, 567 (2d Cir. 1996).
To show that due process is satisfied under the first component, Ljungkvist sets forth the following contacts: (1) defendants used accountants, attorneys, investment bankers and other professionals located in the State of New York to facilitate YRG's parent corporation's, Young Rubicam Group (Holdings), Ltd. acquisition of RKCR in August 1999; (Compl. ¶¶ 11, 15) (2) defendants are an international advertising agency and derive substantial revenue from international commerce; (Compl. ¶¶ 18, 63); (3) defendants, via Elkins, contacted Ljungkvist through telephone and fax communications; (Compl. ¶¶ 43 — 44) (4) defendants regularly solicit New York artists for assistance in advertising campaigns; (Compl. ¶ 61) (5) defendants derive substantial revenue from "goods used or consumed or from services rendered in New York;" (Compl. ¶ 62) (6) defendants developed an advertising campaign allegedly using Ljungkvist's work and which appeared on it's client's website that is viewable in the United States and New York; (Compl. ¶ 57) (7) defendant's parent company, Young Rubicam, Inc. is located in New York and advertises the defendants' services here via a website, (Compl. ¶ 66) and (8) defendants' personnel have traveled to New York for business purposes (Compl. ¶ 67).
Additionally, under the Fifth Amendment standard, the court can consider the defendants contacts throughout the United States because the "forum" is not limited to just one state. See Chew, 143 F.3d at 28 n. 4.
The Second Circuit distinguishes between specific and general jurisdiction, in that specific jurisdiction exists when "a State exercises personal jurisdiction over a defendant in a suit arising out of or related to the defendant's contacts with the forum." See Metropolitan Life Insurance, 84 F.3d at 567-68. On the other hand, "general jurisdiction is not related to the events giving rise to the suit" and courts therefore "impose a more stringent test, requiring the plaintiff to demonstrate the defendant's contacts are "continuous and systematic." See Id at 567-68.
Ljungkvist does not specify whether she seeks specific or general jurisdiction. However, I find that because the defendants' contacts with New York, and the United States, are not "continuous and systematic," and because they are not related to the claims asserted in these actions, they do not amount to "minimum contacts with [the forum] such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice." Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 (1984) (quoting International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)). Significantly, Ljungkvist fails to provide a single case to support her due process argument.
The Second Circuit has cited the facts of Perkins v. Benguet Consolidated Mining Co., 342 U.S. 437, 445-46 (1952), as an example of the nature and quality of sustained contacts that can give rise to general jurisdiction under due process. See Metropolitan Life Insurance, 84 F.3d at 571. In Perkins "the Supreme Court first articulated the idea that a court may exercise personal jurisdiction over a foreign corporation based on general business operations within the forum state. The defendant (a Philippine mining corporation) was found to have met the standard where the general manager and president of the company moved his office to Ohio during the Japanese occupation of the Philippines during World War II, maintained records, held directors' meetings, and generally "carried on in Ohio a continuous and systematic supervision of the necessarily limited wartime activities of the company." Id. (citing Perkins, 342 U.S. at 448). In the instant case, in contrast to Perkins, the defendants' contacts appear closer to haphazard and intermittent.
Ljungkvist additionally neglects to address how the exercise of personal jurisdiction pursuant to Rule 4(k)(2) could survive the due process "reasonableness" requirements. See Metropolitan Life Insurance, 84 F.3d at 573 (stating that courts consider five factors in determining whether jurisdiction comports with due process and the "traditional notions of fair play and substantial justice"). In the final analysis, the weaker the plaintiff's showing of minimum contacts, the less a defendant need argue unreasonableness to defeat jurisdiction. See Metropolitan Life Insurance, 84 F.3d at 568 (citations omitted). It is doubtful that the efficient administration of justice would be furthered by litigating Ljungkvist's case in the United States. See Id. (declining to extend jurisdiction, even in the presence of minimum contacts, where such jurisdiction would be unreasonable and incompatible with notions of fair play and substantial justice) (citing Asahi Metal Industry Co., Ltd., v. Superior Court of California, 480 U.S. 102, 113 (1987)). In evaluating this factor, which strongly favors the defendants here, courts generally consider where witnesses and evidence are likely to be located. Virtually none of the witnesses, save for the plaintiff herself, are here. Neither New York nor the United States has served as the focal point of the facts giving rise to the controversy at stake. See Id at 574-75 (finding significant that the locus of the alleged tort was out of the forum in suit that unreasonably burdened the efficient administration of justice).
C. DISCOVERY
As her final effort, Ljungkvist alleges that the defendants withheld discovery on the issue of personal jurisdiction which prevented her from fairly presenting the extent of the defendants' minimum contacts. As a result, Ljungkvist concludes that the court should sanction the defendants pursuant to Fed.R.Civ.P. 37(b)(2) and as a sanction find that the defendants waived personal jurisdiction. It is not evident from the papers how any additional areas of discovery would demonstrate contacts by the defendants that have not been raised, analyzed on their face by the court, and determined to fall short of the requisite "continuous and systematic" standard. Although the parties have evidently engaged in at least partial discovery, Ljungkvist's jurisdictional arguments do not survive the due process standard even when judged merely on their face, as has been done here. See A.I. Trade Finance, Inc. v. Petra Bank, 989 F.2d 76, 79 (2d Cir. 1993) (stating that when parties have not yet engaged in jurisdictional discovery, the plaintiff is required only to make a prima facie showing that personal jurisdiction exists). Ljungkvist argues that the defendants submitted their motion prior to the end of the discovery period, albeit just barely, set in my pre-trial scheduling order. In general, defendants are not required to wait until the completion of discovery to submit a summary judgment motion to defeat jurisdiction. See Metropolitan Life Insurance, 84 F.3d at 566 (stating that the plaintiff must show a "legally sufficient allegation" of personal jurisdiction prior to the completion of discovery).
In my pre-trial scheduling order of April 6, 2001, I set with the parties consent the period for discovery to conclude by June 30, 2001. The defendants served notice of their motion on June 21, 2001.
Based on the facial insufficiency of plaintiff's jurisdictional allegations, and the fact that this is not the first time plaintiff has conducted discovery on these facts, see Ljungkvist v. Young Rubicam, Inc., 00 Civ. 8541 (HB), to permit even more discovery would be pointless,
III, CONCLUSION
For the foregoing reasons, defendants' summary judgment motion to dismiss plaintiff's complaint is GRANTED. The Clerk of the Clerk is directed to close the case.