Opinion
01-CV-0521E(Sc)
May 29, 2002
MEMORANDUM and ORDER
Plaintiff ("Steuben") commenced this action against its former employee ("Morris") and Morris's new employer ("Savannah") alleging that defendants unlawfully solicited several employees of Steuben in violation of a non-solicitation agreement that Morris had executed when he was a Steuben employee. Presently before this Court is Savannah's motion to dismiss pursuant to Rule 12 of the Federal Rules of Civil Procedure for lack of personal jurisdiction and defendants' alternative motion to transfer venue to the United States District Court for the Southern District of Georgia pursuant to 28 U.S.C. § 1404(a). For the reasons stated herein, such motions will be denied.
Morris does not contest personal jurisdiction. Although the notice of motion indicates that it is made on behalf of both defendants, the Brief in support thereof is made only on behalf of Savannah.
Whether a federal court has personal jurisdiction over a given defendant in a diversity case is determined according to the law of the forum state. Under New York law, this Court's two-step inquiry involves consideration of the relevant long-arm provisions — section 302 of New York's Civil Practice Law and Rules ("CPLR") is relevant here — and of federal due process requirements. Bank Brussels Lambert v. Fiddler Gonzalez Rodriguez, 171 F.3d 779, 784 (2d Cir. 1999). Where personal jurisdiction is challenged prior to discovery or an evidentiary hearing, the plaintiff may overcome the challenge by making a prima facie showing of personal jurisdiction over the defendant. DiStefano v. Carozzi North Amer., Inc., 286 F.3d 81, 84 (2d Cir. 2001). The Court considers the pleadings and affidavits in the light most favorable to the plaintiff. Id.
Bensusan Rest. Corp. v. King, 126 F.3d 25, 27 (2d Cir. 1997).
Steuben employed Morris as the manager of its Tetra Brik Department from January 4, 1999 until March of 2000, when Morris accepted employment with Savannah as its Plant Manager. Compl. at ¶¶ 9, 19. As part of his employment with Steuben, Morris executed a non-solicitation agreement dated December 4, 1998 ("Non-Solicitation Agreement") in which Morris agreed, inter alia, as follows
Steuben and Savannah are rivals in the business of co-manufacturing food and beverage products for companies that sell brand-name products. Compl. ¶ at 16. For example, Savannah, a Georgia corporation, processes raw materials for products for companies — such as Hershey Foods (chocolate milk), E.A.S. (Nutritional drinks), and SoBe (fruit flavored botanical drinks) — that own name-brand products. Schlossberg Aff. at ¶ 8. Steuben has expertise in aseptic processing and Tetra Brik packaging methods, which allow perishable products to have an unrefrigerated shelf-life of up to one year. Compl. at ¶ 16. Including Savannah and Steuben, there are only five co-manufacturers in the country with expertise in these specialized processing and packaging methods. Id. at ¶¶ 16-18. It is expensive and time-consuming to train employees in these specialized processes; it takes approximately 1½ years to train Tetra Brik mechanics and even longer for higher-level Tetra Brik personnel. Ibid.
"*** I agree that following termination of my employment with the Company, I will not entice, solicit, or in any manner encourage or induce employees of the Company to leave its employ. Further, I will not make known the names or any other information regarding any employees of the Company to any third party." Compl. at ¶ 12, Exh. A at ¶ 4.
The Non-Solicitation Agreement also contained confidentiality provisions prohibiting Morris from using Steuben's confidential and proprietary information for the benefit of himself or third parties. Compl. at 66 13-15.
While employed at Steuben, Morris was "intimately involved in all aspects of plant operations, including but not limited to recruitment of personnel." Compl. at ¶ 10. Morris also supervised various personnel, including Tetra Brik mechanics John Law and Lawrence Wilkins and Tetra Brik Department Manager David Schmitt (collectively "Solicited Employees"). Ibid. It is alleged that Morris, on behalf of and ostensibly in concert with Savannah, recruited the Solicited Employees in violation of the Non-Solicitation Agreement. Compl. at ¶¶ 19-32.
Steuben alleges that Morris acted on behalf of and in concert with Savannah. Accordingly and as the alleged agent of Savannah, Morris's conduct will be imputed to Savannah for purposes of this motion. Kreutter v. McFadden Oil Corp., 71 N.Y.2d 460, 467 (1988).
In August 2000 Morris and/or Savannah successfully solicited Law to leave Steuben to join Savannah. Id. at ¶ 20. On August 1, 2000 Steuben's general counsel wrote a letter to Savannah (to the attention of Morris) advising Savannah of Morris's obligations under the Non-Solicitation Agreement ("Warning Letter"). Id. at ¶ 22. In this same July-August 2000 time period, Morris and/or Savannah also solicited Wilkins. Id. at ¶¶ 23-26. As part of this solicitation, Morris picked Wilkins up at the airport and entertained him. Ibid. Wilkins, however, ultimately remained at Steuben at the behest of Steuben's Human Resources Manager. Ibid. Furthermore, Morris used Steuben's proprietary information in soliciting Schmitt to leave Steuben for employment with Savannah in June of 2001. Id. at ¶¶ 27-30. Steuben further alleges that Morris provided Savannah with the names and employment information of the Solicited Employees in violation of the confidentiality provisions of the Non-Solicitation Agreement. Id. at ¶ 32. Accordingly, plaintiff asserts claims against Morris for breaching the Non-Solicitation Agreement (including its confidentiality provisions) and claims against Savannah for inducement of breach of the non-solicitation agreement and for unfair competition. Plaintiff seeks damages and injunctive relief (to prevent further solicitation by Morris/Savannah).
Law returned to Steuben six months later. Compl. at ¶ 31.
Plaintiff's second and fifth "causes of action" seek injunctive relief, which is a remedy rather than a cause of action.
Steuben asserts jurisdiction under New York's long-arm jurisdictional provisions contained in CPLR section 302(a). As discussed below, this Court finds that it may exercise personal jurisdiction over Savannah under either section 302(a)(1) or section 302(a)(3).
Section 302(a)(3) provides:
"As to a cause of action arising from any of the acts enumerated in this section, a court may exercise personal jurisdiction over any non-domiciliary *** who in person or through an agent: *** (3) commits a tortious act without the state causing injury to person or property within the state *** if he (i) regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in the state, or (ii) expects or reasonably should expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce;"
Accordingly, this Court may exercise jurisdiction over Savannah under section 302(a)(3)(ii) where Savannah allegedly committed a tort outside of New York that caused injury in New York where it expected (or should reasonably should have expected) the act to have consequences in New York and where Savannah derives substantial revenue from interstate or international commerce. See LaMarca v. Pak-Mor Mfg. Co., 95 N.Y.2d 210, 214 (2000) (holding that the "conferral of jurisdiction under [CPLR section 302(a)(3)(ii)] rests on five elements: [f]irst, that defendant committed a tortious act outside the State; second, that the cause of action arises from that act; third, that the act caused injury to a person or property within the State; fourth, that defendant expected or should reasonably have expected the act to have consequences in the State; and fifth, that defendant derived substantial revenue from interstate or international commerce.").
As applied, Savannah (either through or with Morris) recruited the Solicited Employees, allegedly in violation of Morris's Non-Solicitation Agreement with Steuben. This alleged conduct constitutes tortious conduct outside of New York that caused injury to Steuben in New York. Moreover, Savannah should have reasonably expected that its recruitment of the Solicited Employees would have consequences in the State of New York. Finally, Savannah derives substantial revenue from interstate commerce where it does $15 million in business with a variety of interstate companies such as Hershey Foods and Pepsi Cola. Pl's Mem. Of Law at 11. Accordingly, personal jurisdiction exists over Savannah under CPLR 302(a)(3)(ii).
Bank Brussels held that, "courts determining whether there is injury in New York sufficient to warrant § 302(a)(3) jurisdiction must generally apply a situs-of-injury test, which asks them to locate the `original event which caused the injury.'" Bank Brussels, at 791 (citation omitted). Under the situs-of-injury test, Steuben was injured in New York, which is where it felt the loss of its Solicited Employees. DiStefano, at 84-85 (applying situs-of-injury test and holding that an employee, working in New York for a nondomiciliary with few New York contacts, was injured in New York despite the fact that he was terminated in New Jersey); McCrory Corp. v. Cloth World, Inc., 378 F. Supp. 322, 325 (S.D.N.Y. 1974) (holding that unlawful recruitment of plaintiff's employees in New York constituted New York injury). In DiStefano, the Second Circuit Court of Appeals held that, "when a person is employed in New York (or performs a substantial part of the duties of his or her employment in New York), his or her removal from that employment (or from those duties) is a New York event that constitutes `the first effect of the tort' of discharging the employee." DiStefano, at 85 (holding that the removal of an employee constituted a New York injury within the meaning of section 302(a)(3)). Likewise, unlawfully recruiting employees who work in New York constitutes a New York injury to the New York employer that loses (or risks losing) such employees. McCrory, at 325. Defendants' attempt to distinguish McCrory is unavailing because they apparently misread such decision (as did plaintiff), which applied section 302(a)(3)(ii), whereas defendants contend that it stands for the proposition that "phone calls from outside of New York constitute a tortious act within New York." Def. Reply Br. at 9 (emphasis added). This assertion, and the cases cited by defendant in an attempt to distinguish McCrory, relate to section 302(a)(2) — which is not the basis for the McCrory decision.
Indeed, Steuben's Warning Letter dated August 1, 2000 provided Savannah with express notice that its continued recruitment of Steuben's employees could potentially have consequences in New York. Despite the Warning Letter, Savannah allegedly recruited Schmitt in June, 2001 — after Savannah had ample reason to expect that it might well be haled into a court in New York to defend against Steuben' claims. Regardless of the Warning Letter, however, Savannah should have reasonably expected that its recruitment of Steuben's employees would have consequences in New York. McCrory Corp., at 325 — see footnote 7, supra — (finding that defendant who unlawfully recruited plaintiff's employees located in New York "certainly expected or should have expected their alleged acts to have consequences in New York"); cf. Sybron Corp. v. Wetzel, 46 N.Y.2d 197, 206 (1978) (corporation suffered injury in New York where it lost New York customers such as Eastman Kodak as a result of allegedly unlawful use of its trade secrets by former employee and his new employer located in New Jersey). The expectation element of section 302(a)(3)(ii) is a "foreseeability requirement" that "relates to forum consequences generally and not to the specific event which produced the injury within the state." Fantis Foods, Inc. v. Standard Importing Co., 49 N.Y.2d 317, 327 n. 4 (1980). This ensures that there is "some link between a defendant and New York State to make it reasonable to require a defendant to come to New York to answer for tortious conduct committed elsewhere." Ingraham v. Carroll, 90 N.Y.2d 592, 598 (1997). Where a company unlawfully raids a New York company for its employees located in New York, it is foreseeable that the corporate raider will cause injury in New York and reasonable that it may be haled into court there.
The substantial interstate commerce revenue element "narrows the long-arm reach to preclude the exercise of jurisdiction over nondomiciliaries who might cause direct, foreseeable injury within the State but `whose business operations are of a local character.'" Ingraham, at 599 — see footnote 8, supra — (citations omitted). In other words, this provision attempts to ensure that the defendant is "economically big enough to defend suit in New York." Ibid. (citations omitted). Savannah is "economically big enough" to defend this suit in New York.
See LaMarca, at 213-216 (finding that $18,245,292 constitutes "substantial revenue"); Palace Exploration Co. v. Petroleum Dev. Co., 41 F. Supp.2d 427, 436 (S.D.N.Y. 1998) (finding that $378,000 constitutes "substantial revenue").
In the alternative, this Court finds that it may exercise personal jurisdiction over Savannah under CPLR 302(a)(1). It is well settled that a defendant need not be physically present in New York to be found to have transacted business here. Indeed, the New York Court of Appeals has held that section 302(a)(1) is
"a `single act 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 claims asserted." Kreutter, at 467.
See footnote 4, supra.
See also Bank Brussels, at 787 (citing Parke-Bernet Galleries, Inc. v. Franklyn, 26 N.Y.2d 13, 16 (1970)). It is sufficient that a defendant be deemed to have intentionally conducted activities within the state and thereby taken advantage of the privileges and protections of New York laws. Thus, it is clear that a single transaction may suffice for purposes of section 302(a)(1) "so long as the relevant cause of action also arises from the transaction." Bank Brussels, at 787.
For example, in Parke-Bernet — the seminal New York Court of Appeals case — the defendant was found to have engaged in "the sustained and substantial transaction of business here" where he "projected himself" into New York by participating by telephone from California in an art auction in New York. The Court of Appeals distinguished the defendant's conduct from the "simple placing of an order by telephone" in part because it affected not only the plaintiff but all those in the auction room. Parke-Bernet, at 17-18. Likewise here, solicitations by Savannah and/or Morris of the Solicited Employees affected the Solicited Employees and Steuben, and are thus distinguishable from the line of cases holding that merely placing an order does not constitute "transact[ing] any business" under section 302(a)(1). Ibid.
Parke-Bernet, at 18 (citing Hanson v. Denckla, 357 U.S. 235, 253 (1958)).
Accordingly, Savannah transacted business within the meaning of section 302(a)(1) where it projected itself into New York to recruit the Solicited Employees because such recruitment was "purposeful" and is substantially related to plaintiff's claims.
Inasmuch as this Court may exercise personal jurisdiction over Savannah under the long-arm statutes contained in CPLR 302(a)(1) and 302(a)(3)(ii), it is now appropriate to determine whether exercising personal jurisdiction over Savannah comports with the Due Process Clause of the Fourteenth Amendment to the Constitution. This analysis requires courts to determine (1) whether defendant has sufficient "minimum contacts" with the forum state and (2) whether exercising personal jurisdiction over the defendant would offend "traditional notions of fair play and substantial justice" — i.e., whether it is "reasonable" to exercise personal jurisdiction over the defendant under the circumstances of the case. Metropolitan Life Ins. Co. v. Robertson-Ceco Corp., 84 F.3d 560, 567 (2d Cir. 1996) (discussing Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)).
Ingraham, at 596-597 — see footnote 8, supra — ("It is appropriate to point out that establishment of long-arm jurisdiction in connection with a New York injury under either [clause (i) or (ii) of CPLR section 302(a)(3)] does not implicate constitutional due process concerns. [T]he subdivision [302(a)(3)] was not designed to go to the full limits of permissible jurisdiction. The limits contained in subparagraphs (i) and (ii) were deliberately inserted to keep the provision `well within constitutional bounds. Thus, in this case, we are bound by a limitation more stringent than any constitutional requirement — the specific requirements of CPLR 302(a)(3).") (citations and internal quotations omitted); Topps Co. v. Gerrit J. Verburg Co., 961 F. Supp. 88, 90 (S.D.N.Y. 1997) (same).
In determining whether Savannah has "certain minimum contacts with [the forum] such that the maintenance of the suit does not offend `traditional notions of fair play and substantial justice,'" Int'l Shoe, at 316, this Court must consider whether Savannah's "conduct and connection with the forum State are such that [it] should reasonably anticipate being haled into court there." World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980).
Citations omitted.
As discussed above, Savannah should have reasonably anticipated being haled into court in New York when it allegedly recruited Steuben's employees located in New York despite its awareness of Morris's Non-Solicitation Agreement and the Warning Letter. Indeed, by recruiting the Solicited Employees, Savannah "purposefully directed" its activities at New York residents such that Savannah had "fair warning" that it could be subject to suit in New York. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472-476 (1985). Moreover, Steuben' claims arise from Savannah's contacts with the Solicited Employees in New York (i.e., there is specific jurisdiction over Savannah). Id. at 472-473. Accordingly, this Court finds that Savannah has sufficient "minimum contacts" with New York.
See footnote 8, supra.
See Calder v. Jones, 465 U.S. 783, 789 (1984) (finding that a California court could exercise personal jurisdiction over defendants because their tortious conduct was "expressly aimed at California"); Roberts-Gordon LLC v. Superior Radiant Prods., Ltd., 85 F. Supp.2d 202, 217 (W.D.N.Y. 2000) (noting that, for cases involving torts committed outside the forum, "the `purposeful availment' threshold is lower and it is sufficient that the defendant's purpose was to target the forum state and its residents.") (citations omitted).
Kernan v. Kurz-Hastings, Inc., 997 F. Supp. 367, 377 (W.D.N.Y. 1998) (noting that the Second Circuit Court of Appeals recognized in Metropolitan Life that "the due process `minimum contacts' inquiry is similar to, and often `merges with,' the `foreseeability plus purposeful act' test for determining statutory jurisdiction under [section 302(a)(3)(ii)]"), aff'd, 175 F.3d 236 (2d Cir. 1999).
In determining whether it would be "reasonable" to exercise personal jurisdiction over Savannah — (i.e., it would not offend the "traditional notions of fair play and substantial justice") — this Court must consider the following factors: (1) the burden on the defendant in defending in the forum; (2) the interests of the forum state in adjudicating the matter; (3) the plaintiff's interest in obtaining effective and convenient relief; (4) the interstate judicial system's interest in obtaining the most efficient resolution of the controversy; and (5) the shared interests of the states in furthering substantive social policies. These factors have been applied on a sliding scale relative to the "minimum contacts" test; in other words, where there is a strong showing of minimum contacts, there need not be as strong a showing of "reasonableness" and vice versa. Metropolitan Life, at 568 (citing Burger King, at 477).
World-Wide Volkswagen, at 292; Metropolitan Life, at 568.
As applied here, this Court finds that it is reasonable to exercise jurisdiction over Savannah. First, it will not unduly burden Savannah to defend this action in New York because it is "economically big enough." Second, New York has a strong interest in adjudicating the interests of a resident corporation for injuries principally felt in New York. Third, Steuben has a strong interest in obtaining effective and convenient relief in the forum of its choice, which should be given deference. Fourth, the interstate judicial system's interest in an efficient resolution of the controversy is evenly split inasmuch as the witnesses appear to be located in both Georgia and New York. Fifth, the shared interest of the several states in furthering substantive social policy is also evenly split inasmuch as the adjudication of this matter in New York would not anymore further any such interest than would the adjudication thereof in Georgia. Accordingly, on balance, the reasonableness factors weigh in favor of this Court exercising personal jurisdiction over Savannah such that "traditional notions of fair play and substantial justice" would not be offended. Int'l Shoe, at 316. Therefore, it is constitutionally permissible for this Court to exercise personal jurisdiction over Savannah.
See Metropolitan Life, at 574 (In evaluating this factor, courts generally consider where witnesses and evidence are likely to be located.").
Because Savannah's motion to dismiss for lack of personal jurisdiction will be denied, this Court must now turn its attention to defendants' request that this matter be transferred to the Southern District of Georgia pursuant to 28 U.S.C. § 1404(a), which provides that
"[f]or the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought."
The objective of section 1404(a) "`is to prevent waste of time, energy and money and to protect litigants, witnesses and the public against unnecessary inconvenience and expense.'" By the same token, a plaintiff's choice of forum should be given special deference where, as here, the plaintiff is located in the district where the suit was filed, and should be upheld by the court unless the following criteria weigh strongly in the defendant's favor — the convenience of the parties, the convenience of material witnesses, the relative means of the parties, the locus of operative fact and relative ease of access to sources of proof, attendance of witnesses, the required deference to the plaintiff's forum choice, the availability of process to compel any unwilling witnesses, the desirability of having the case tried by the forum familiar with the substantive law to be applied, relative efficiency and cost, and how best to serve the interests of justice based on the totality of material circumstances. Schomann Int'l Corp. v. N.Wireless, Ltd., 35 F. Supp.2d 205, 214 (N.D.N.Y. 1999).
Laumann Mfg. Corp. v. Castings USA, 913 F. Supp. 712, 720 (E.D.N.Y. 1996) (quoting Van Dusen v. Barrack, 376 U.S. 612, 616 (1964).
After a careful assessment of the above factors — particularly the equally divided presence of witnesses and evidence in the Western District of New York and in the Southern District of Georgia, the roughly comparable means and resources of the parties, the fact that the Solicited Employees were initially recruited here, the fact that the Non-Solicitation Agreement is governed by the law of New York and the deference due the plaintiff's choice of forum — this Court finds that the defendants have failed to show "that the balance of convenience and justice weighs heavily in favor of transfer." Central Sports Army Club v. Arena Assoc., Inc., 952 F. Supp. 181, 189 (S.D.N.Y. 1997) (declining to transfer action related to contract dispute involving a Russian hockey prodigy).
Accordingly, it is hereby ORDERED that Savannah's motion to dismiss is denied and that defendants' motion to transfer venue is denied.