Opinion
05 CV 4960 (LAP).
July 12, 2010
MEMORANDUM AND ORDER
Plaintiffs Ziegler, Ziegler Associates LLP ("ZZA") and Scott Ziegler (collectively "Plaintiffs") bring this action against China Digital Media Corporation ("China Digital" or "Defendant") and John Does 1-10 alleging libel, conversion, trespass to chattels, negligence, violation of the Lanham Act, 15 U.S.C. § 1125(a), and unjust enrichment in connection with Defendant's purported agent's conversion of Plaintiffs' electronic mail ("e-mail") address. Defendant now moves to dismiss the complaint for lack of personal jurisdiction. For the reasons set forth below, Defendant's motion is GRANTED.
I. BACKGROUND
A. Parties
Defendant is a publicly traded Nevada corporation with business operations in the People's Republic of China. (Declaration of Daniel Ng ("Ng Decl.") ¶ 2.) The company is the sole contractor and operator of digital television services in Nanhai, a city in the Guangdong province of China. (Id.) Defendant's stock is quoted for trading on the Over-the-Counter bulletin board operated by the NASDAQ Stock Market ("OTCBB"). (Complaint ("Compl.") ¶ 4.)
ZZA is a New York law firm specializing in securities law. (Id. ¶ 2.) Mr. Ziegler is a New York licensed attorney specializing in securities law and is a principal of ZZA. (Id. ¶ 3.) Plaintiffs own and maintain the internet domain "zza.net" and use it to communicate information about ZZA's legal services and the lawyers that are employed by the firm. (Id. ¶ 8.) Mr. Ziegler also owns the e-mail address "saz@zza.net" and uses the email address for business purposes. (Id. ¶ 9.) Plaintiffs hold exclusive rights to web and e-mail addresses under the domain zza.net. (Id. ¶ 11-12.) Verizon, Inc. is an internet service provider which facilitates the sending and receiving of e-mail from any e-mail address under the domain zza.net, including saz@zza.net. (Id. ¶ 13.)
B. Allegations
During the last days of April 2005, Mr. Ziegler became aware that thousands of e-mail messages were being sent from his e-mail address without his knowledge. (Id. ¶ 15.) The e-mails encouraged recipients to buy Defendant's stock in anticipation of a forthcoming jump in price. (Id. Ex. A.) Plaintiffs neither created the e-mail nor authorized its distribution. (Id. ¶ 27.) According to the e-mail, the stock promoter distributing the e-mails would receive 600,000 shares of Defendant's stock as compensation for its services "from a third party, not an officer, director or affiliate shareholder." (See id. ¶¶ 31-34.)
After contacting Defendant and expressing his concern, Mr. Ziegler spoke with Defendant's counsel and received e-mail messages from Defendant's Chief Executive Officer, Daniel Ng. (Id. ¶ 34.) Mr. Ziegler received an e-mail from Mr. Ng dated May 11, 2005, stating, in relevant part:
"We have discussed the e-mails at length with our stock promoter and emphasized that any reference to zza.net had to stop even if they were not responsible for it. You should know that they denied sending out any e-mails with zza.net as a return address. We can only conclude that while it could have been the stock promoter, they have denied all responsibility, and since we have paid them a great deal of money to do this promotion in a professional manner, we must take their word about what they say they did or did not do."
(Id. Ex. B.)
Plaintiffs initiated this action on May 24, 2005 [dkt. no. 1]. On July 1, 2005, Defendant moved the Court to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(2) for lack of personal jurisdiction [dkt. no. 4]. On December 2, 2005, the Court ordered that Defendant's motion be held in abeyance while Plaintiffs conducted jurisdictional discovery [dkt. no. 13]. Mr. Ng was deposed by Plaintiffs on September 15, 2006. (Affidavit of Christopher Brennan dated April 29, 2008 ("Brennan Aff.") ¶ 9.) On May 31, 2007, Mr. Ng was ordered by the Court to appear for a second deposition session [dkt. no. 18]. Mr. Ng appeared for the deposition on September 25, 2007. (Brennan Aff. ¶ 11.) On March 26, 2008, the Court issued an order restoring the motion to dismiss to the calendar [dkt. no. 24].
In apparent contravention of his statements in the May 11, 2005 e-mail, Mr. Ng testified in his deposition that Defendant did not enter into any agreement with its stock promoter, WallSt.Net, until July 2005 (Defendant's Sur-Reply Memorandum of Law in Support of Motion to Dismiss ("Def. Sur Memo.") at 11.) Regardless of the ambiguity in Mr. Ng's testimony and the obvious issue of credibility, at this stage of the litigation factual disputes are resolved in favor of Plaintiffs. The Court will assume for purposes of this motion, therefore, that the agreement between Defendant and WallSt.Net was entered into prior to the sending of the e-mails.
II. DISCUSSION
A. Personal Jurisdiction Standard
Personal jurisdiction in a diversity action is determined by the law of the state in which the court sits. Hoffritz for Cutlery, Inc. v. Amajac, Ltd., 763 F.2d 55, 57 (2d Cir. 1985). "On a Rule 12(b)(2) motion to dismiss for lack of personal jurisdiction, the plaintiff bears the burden of showing that the court has jurisdiction over the defendant." Metro. Life Ins. Co. v. Robertson-Ceco Corp., 84 F.3d 560, 566 (2d Cir. 1996). In this case,
where the parties have conducted extensive discovery regarding the defendant's contacts with the forum state, but no evidentiary hearing has been held — the plaintiff's prima facie showing, necessary to defeat a jurisdiction testing motion, must include an averment of facts that, if credited by [the ultimate trier of fact], would suffice to establish jurisdiction over defendant.Id. at 567. Additionally, at this stage, the pleadings and affidavits "'are construed in the light most favorable to the plaintiff and doubts are resolved in the plaintiff's favor, notwithstanding a controverting presentation by the moving party.'" O'Brien v. Okemo Mountain, Inc., 17 F. Supp.2d 98, 100 (D. Conn. 1998) (quoting A.I. Trade Fin., Inc. v. Petra Bank, 989 F.2d 76, 79-80 (2d Cir. 1993)). If personal jurisdiction may be exercised under New York law, the Court must also "assess whether the court's assertion of jurisdiction under [New York] law[] comports with the requirements of due process." Kernan v. Kurz-Hastings, Inc., 175 F.3d 236, 240 (2d Cir. 1999) (internal quotation marks omitted).
Defendant misstates the proper standard governing this motion. Defendant cites Beacon Enters. Inc. v. Menzies for the proposition that Plaintiffs "must demonstrate that there is no genuine issue as to any material fact on the jurisdictional question." 715 F.2d 757, 762 (2d Cir. 1983). That case, however, was stating the proper standard "[f]or a plaintiff to prevail on summary judgment when defendant contests personal jurisdiction."Id. In response to a motion for summary judgment the "burden is even greater" than in response to a Rule 12(b)(2) motion — the motion to be decided here. Id.
B. Defendant Is Not Subject To General Personal Jurisdiction Under CPLR § 301
Plaintiffs argue that Defendant is subject to general personal jurisdiction in New York pursuant to N.Y. C.P.L.R. § 301. Section 301, "as construed by the New York courts, permits a court to exercise jurisdiction over a foreign corporation on any cause of action if the defendant is 'engaged in such a continuous and systematic course of doing business here as to warrant a finding of its presence in this jurisdiction.'" Landoil Res. Corp. v. Alexander Alexander Servs., Inc., 918 F.2d 1039, 1043 (2d Cir. 1990) (quoting McGowan v. Smith, 52 N.Y.2d 268, 272 (1981) (internal quotation marks omitted)). "In order to establish that this standard is met, a plaintiff must show that a defendant engaged in 'continuous, permanent, and substantial activity in New York.'" Wiwa v. Royal Dutch Petroleum Co., 226 F.3d 88, 95 (2d Cir. 2000) (quotingLandoil, 918 F.3d at 1043); see also Laufer v. Ostrow, 55 N.Y.2d 305, 309 (1982) ("The test, though not precise, is a simple pragmatic one: is the aggregate of the corporation's activities in the State such that it may be said to be present in the State not occasionally or casually, but with a fair measure of permanence and continuity. . . .") (internal quotation marks and citations omitted). The factors that are generally considered include: "'whether the company has an office in the state, whether it has any bank account or other property in the state, whether it has a phone listing in the state, whether it does public relations work there [or solicits business there], and whether it has individuals located in the state to promote its interests.'" Nursan Metalurji Endustrisi A.S. v. M/V Torm Gertrud, No. 07 CV 7687 (GBD), 2009 WL 536059, at *2 (S.D.N.Y. Feb. 27, 2009) (quoting Wiwa, 266 F.3d at 98) (alteration in original).
Conduct sufficient to confer jurisdiction under § 301 may be performed by either Defendant itself or Defendant's agent. Wiwa, 226 F.3d at 95 ("The continuous presence and substantial activities that satisfy the requirement of doing business do not necessarily need to be conducted by the foreign corporation itself. In certain circumstances jurisdiction has been predicated upon activities performed in New York for a foreign corporation by an agent."). In order for general personal jurisdiction to attach on an agency basis, however, the New York agent must "render[] services on behalf of the foreign corporation that go beyond mere solicitation and are sufficiently important to the foreign entity that the corporation itself would perform equivalent services if no agent were available." Id. Although "a plaintiff need demonstrate neither a formal agency agreement nor that the defendant exercise[s] direct control over its putative agent," the plaintiff must show that the agent is "primarily employed by the defendant and not engaged in similar services for other clients." Id. (citations omitted).
Plaintiffs assert that three facts require a finding that Defendant is subject to general personal jurisdiction in New York: (1) Defendant's hiring of an investor relations firm in New York to perform promotional services for Defendant; (2) Defendant's retention of an entity located in New York to perform mass e-mail distributions on its behalf; and (3) Mr. Ng's travel to New York for the purpose of soliciting New York investors. (Plaintiff's Supplemental Memorandum of Law in Opposition to Motion to Dismiss for Lack of Personal Jurisdiction ("Pl. Supp. Memo.") at 9.)
Plaintiffs' initial memorandum of law also attached jurisdictional significance to the fact that Defendant issued corporate announcements over a New York-based newswire. (Affidavit of Scott Ziegler in Opposition to Motion to Dismiss dated August 12, 2005 ("Ziegler Aff.") ¶ 55.) Plaintiffs appear to have abandoned this argument in subsequent submissions. Regardless, this allegation does not alter the Court's conclusion.
Defendant disputes the timing of these activities and asserts that they occurred after the alleged tortious conduct and should be disregarded for jurisdictional purposes. In fact, the testimony in this regard is neither clear nor appears particularly reliable. Regardless, at this stage of the proceedings the affidavits and pleadings are construed in favor of the Plaintiff regardless of a contrary showing by Defendant.A.I. Trade Fin., 989 F.2d at 79-80. For purposes of this motion, therefore, the Court will presume that these events occurred at the time that Plaintiffs allege.
The New York public relations firm and stock promoter that Defendant hired were not "primarily employed" by Defendant. Wiwa, 226 F.3d at 95. Rather, the agents were hired to perform discrete functions: the investor relations firm, CEO Cast, recorded promotional interviews with Mr. Ng and posted them for viewing on their website, and the stock promoter, WallSt.Net, sent one million promotional e-mails. (Brennan Aff. ¶¶ 31-36.) Plaintiffs do not attempt to argue that these agents were primarily employed by Defendant and did not perform similar services for various other clients. Cf. Wiwa, 226 F.3d at 95-96 (finding New York Investor Relations Office was agent of the defendants for jurisdictional purposes where office "devoted one hundred percent of their time to defendant's business [and its] sole business function was to perform investor relations services on the defendants' behalf"). Accordingly, the presence of these agents in New York does not permit this Court to exercise general personal jurisdiction over Defendant.
Additionally, "the prevailing caselaw accords foreign corporations substantial latitude to list their securities on New York-based stock exchanges and to take steps necessary to facilitate those listings (such as making SEC filings and designating a depository for their shares) without thereby subjecting themselves to New York jurisdiction for unrelated occurrences." Wiwa, 226 F.3d at 97. Such contacts stemming from "legal or logistical requirements incumbent upon corporations that list their shares" on New York stock exchanges are insufficient when they are the defendant's only contacts with the forum state. Id. at 97. Although Defendant's alleged contacts with New York exceeded mere incidental facilitation of their stock listings and "all contacts related to stock exchange listings are [not] stripped of jurisdictional significance," id., the contacts alleged here are nonetheless insufficiently "continuous and systematic," Metro. Life Ins. Co., 84 F.3d at 568 (internal quotation marks omitted), to subject Defendant to general personal jurisdiction in New York. Compare Wiwa 226 F.3d at 98 (finding defendants were "doing business" in New York because the Investor Relations Office "constitute[d] a substantial physical corporate presence in the State, permanently dedicated to promoting the defendants' interests").
Defendant asserts that the OTCBB exchange "has nationwide offices, and is not necessarily operated from New York state" and, therefore, "Plaintiffs have failed to show that the Defendant's listing . . . involves any New York based activity whatsoever." (Defendant's Sur-Reply Memorandum of Law in Support of Motion to Dismiss ("Def. Sur Memo.") at 4.) First, Plaintiffs allege additional contacts with New York beyond those incidental to maintaining a stock listing in New York. Regardless, Plaintiffs' argument fails for other reasons so the precise location and nature of OTCBB will not be addressed.
Plaintiffs' allegations also do not satisfy the "solicitation plus" test. See Laufer, 55 N.Y.2d at 310 (holding that the corporation must be engaged in "activities of substance in addition to solicitation" in order to establish general personal jurisdiction"). Although stock promotion qualifies as solicitation, see Wiwa, 226 F.3d at 98, Plaintiffs have failed to allege the requisite additional substantial contacts. Even construing the affidavits and pleadings in the light most favorable to Plaintiffs so as to assume that Mr. Ng's visits to New York occurred before the alleged wrongful conduct, these visits cannot be characterized as anything more than occasional and casual. See, e.g., Del Med. Imaging Corp. v. CR Tech USA, Inc., No. 08 Civ. 8556 (LAP) (DFE), 2010 WL 1487994, at * (S.D.N.Y. Apr. 13, 2010) (holding that occasional visits by employees to repair products "is not sufficient additional contact with New York to satisfy the solicitation-plus standard"); Pacamor Bearings, Inc. v. Molon Motors Coil, Inc., 477 N.Y.S.2d 856, 357 (App. Div., 3d Dep't, 1984) (holding that, in addition to substantial solicitation by independent contractor, occasional trips to New York by sales managers and engineering support to one New York buyer were insufficient to subject the defendant to the court's jurisdiction); Holness v. Maritime Overseas Corp., 676 N.Y.S.2d 540, 543 (App. Div., 1st Dep't, 1998) (rejecting personal jurisdiction over corporation whose agent supplied office space, represented the corporation at bid openings and solicited new clients, and noting that, "[i]n general, New York has no jurisdiction over a foreign company whose only contacts with New York are advertising and marketing activities plus representatives' occasional visits to New York");Savoleo v. Couples Hotel, 524 N.Y.S.2d 52 (App. Div., 2d Dep't, 1988) ("The mere periodic sending of corporate officers or employees into the State on corporate business is not enough to predicate a finding that a foreign corporate defendant is present for jurisdictional purposes."). Accordingly, § 301 does not provide a basis for this Court to exercise general personal jurisdiction over Defendant.
C. Defendant Is Not Subject To Specific Personal Jurisdiction Under § 302
Section 302(a) provides that a court may exercise specific personal jurisdiction over a non-domiciliary defendant who performs certain actions "in person or through an agent." N.Y. C.P.L.R. 302(a). "[U]nlike the higher standard for establishing agency under section 301, the standard for 'determining whether an agency relationship exists for the purposes of Section 302, . . . [is that] the alleged agent 'must have acted in the state for the benefit of, and with the knowledge and consent of, the non-resident principal.'" AIG Fin. Prods. Corp. v. Public Util. Dist. No. 1 of Snohomish County, Wash., 675 F. Supp. 2d 354, 364 n. 8 (S.D.N.Y. 2009) (quoting Cavu Releasing, LLC. v. Fries, 419 F. Supp. 2d 388, 392 (S.D.N.Y. 2005) (alterations in original) (internal quotation marks omitted)). Furthermore, "[w]hile the principal need not exercise absolute control over the decisions or acts of the putative agent, a sufficient amount of control 'may involve the ability of the principal to influence such acts or decisions by virtue of the parties' respective roles.'" Cavu, 419 F. Supp. 2d at 392 (quoting Scholastic, Inc. v. Stouffer, No. 99 Civ. 11480 (AGS), 2000 WL 1154252, at *5 (Aug. 14, 2000)).
The Court will presume for the purposes of this motion that Plaintiffs have sufficiently alleged that WallSt.Net was acting on behalf of, and as the agent for, Defendant in allegedly sending out the e-mails in question.
1. Defendant is not subject to specific personal jurisdiction under § 302(a)(3)
In the absence of general personal jurisdiction, § 302(a)(3) provides specific personal jurisdiction may be exercised where a defendant commits a tortious act outside of the state causing injury within the state. Jurisdiction under § 302(a)(3) also requires that the defendant be one which "(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 should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce." N.Y. C.P.L.R. 302(a)(3). "'Under § 302(a)(3), each element is essential, and if plaintiffs fail to proffer sufficient evidence for any element, it is dispositive of the issue of personal jurisdiction under this provision.'" Virgin Enter. Ltd. v. Virgin Eyes LAC, 2009 WL 3241529, at *5 (S.D.N.Y. Sep. 30, 2009) (quoting Overseas Media, Inc. v. Skvortsov, 407 F. Supp. 2d 563, 575 (S.D.N.Y. 2006)).
Plaintiffs' failure to demonstrate that Defendant derives substantial revenue from international commerce is fatal to their attempt to attach personal jurisdiction under § 302(a)(3). The substantial revenue requirement "is intended to exclude non-domiciliaries whose business operations are of a local character." Bensusan Rest. Corp. v. King, 126 F.3d 25, 29 (2d Cir. 1997) (internal quotation marks omitted). Plaintiffs acknowledge that Defendant is a holding company with an interest in a Chinese company named Arcotect Limited whose sole asset is a contract to provide sales and marketing services to a Chinese government-owned cable television company. (Brennan Aff. ¶ 19-21.) In other words, Defendant sells no product or service outside of China. Nonetheless, Plaintiffs argue that Defendant "derive[s] substantial revenue from the trading of its shares in the United States." (Pl. Supp. Memo. at 7.) Plaintiffs misinterpret the substantial revenue requirement. "Capital infused into a corporation by means of stock purchases cannot be considered revenue per se, because it is not profit from sales."Hammond v. Alpha 1 Biomedicals, Inc., No. 91-CV-1477, 1992 WL 44365, at *4 (N.D.N.Y. Mar. 02, 1992). Rather, "the revenues required under § 302(a)(3)(ii) must derive from sales of goods or services in interstate [or international] commerce." Id. "[T]here is no cognizable authority or other persuasive argument to indicate that investment capital should constitute 'revenue' from interstate [or international] commerce within the plain meaning of § 302(a)(3)(ii). See also Trafalgar Capital Corp. v. Oil Producers Equip. Corp., 555 F. Supp. 305, 311 (S.D.N.Y. 1983) (rejecting the proposition that "an appreciation in the value of stock is 'revenue' to shareholders for purposes of the statute"). Because Plaintiffs have failed to allege that Defendant derives any, let alone substantial, revenue from interstate commerce, personal jurisdiction cannot attach under § 302(a)(3).
Plaintiffs' failure to allege that Defendant derives substantial revenue from interstate or international commerce disposes of the § 302(a)(3)(ii) argument, and the Court need not address whether Defendant should reasonably have expected its actions to have an effect in New York.
Plaintiffs have also failed to allege that Defendant "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" as required for the exercise of personal jurisdiction under § 302(a)(3)(i). Whether Defendant "regularly does or solicits business" "cannot be answered by any bright line rule." Del Ponte v. Universal Dev. Partners, Ltd., No. 07-CV-2360 (KMK) (LMS), 2008 WL 169358, at *4 (S.D.N.Y. Jan. 16, 2008). The requisite level of activity is less than that required under the § 301 "doing business" standard but is greater than the single transaction required under § 302(a)(1). Id.; see also Granada Television, Int'l, Ltd. v. Lorindy Pictures Int'l Inc., 606 F. Supp. 68, 72 n. 5 (S.D.N.Y. 1984) ("[T]he persistent course of conduct may involve a great range of human activity which, while it might fall beyond the pale of 'business' conduct, would, because of its consistency, serve as a solid link of jurisdiction to New York.") (internal quotation marks omitted). Plaintiffs allege only that Defendant entered into discreet agreements with a public relations firm and a stock promoter and that Defendant's CEO visited New York on several occasions. Although "[c]onsistent business visits to New York can . . . serve to establish a defendant's connection to the forum under Section 302(a)(3)(i)," Del Ponte, 2008 WL 169358, at *5, such visits must be "systematic." See Granada, 606 F. Supp. at 72 (finding sufficient contacts where defendant owned property in New York and visited New York for 124 days in eighteen months);Del Ponte, 2008 WL 169358, at *5 ("[S]ystematic visits, in combination with substantial purchases from New York vendors, evince the kind of intentional and continuous business activities in New York necessary to satisfy the requirements of Section 302(a)(3)(i)."). The handful of visits to New York by Mr. Ng and the two agreements with New York investor relations firms cannot reasonably be deemed either regular or persistent. Additionally, as explained above, Defendant is not alleged to derive revenue from activities within the state. Accordingly, § 302(a)(3) does not provide a basis for this Court to exercise personal jurisdiction over Defendant.
Because these deficiencies dispose of Plaintiffs' § 302(a)(3) argument, the Court need not address Defendant's contention that no injury was suffered within the state as a result of the allegedly tortious conduct. (Def. Sur Memo. at 14.)
2. Defendant is not subject to specific personal jurisdiction under § 302(a)(2)
Plaintiffs do not argue that Defendant is amenable to jurisdiction under § 302(a)(1) which provides for jurisdiction over any defendant who "transacts any business within the state." N.Y. C.P.L.R. 302(a)(1). The argument, therefore, will not be considered by the Court.
New York law provides that a court may exercise specific personal jurisdiction over a foreign defendant who commits a tortious act within New York. N.Y. C.P.L.R. 302(a)(2). "To subject non-residents to New York jurisdiction under § 302(a)(2) the defendant [or its agent] must commit the tort while he or she is physically in New York State." Bensusan, 126 F.3d at 29 (quoting Carlson v. Cuevas, 932 F. Supp. 76, 80 (S.D.N.Y. 1996));see also Daventree Ltd. v. Republic of Azerbaijan, 349 F. Supp. 2d 736, 758-59 (S.D.N.Y. 2004) ("[T]he alleged tort must be committed by a defendant or an agent when he or she was physically present in New York.") (internal quotation marks and alterations omitted). The claims asserted must also "arise[] from the tortious act" alleged. Bensusan Rest. Corp. v. King, 937 F. Supp. 295, 299 (S.D.N.Y. 1996); Daventree, 349 F. Supp. 2d at 759 (same). For purposes of the jurisdictional inquiry, the Court is not required to address the viability of Plaintiffs' claims.Lehigh Valley Indus., Inc. v. Birenbaum, 527 F.2d 87, 92 (2d Cir. 1975). Rather, it is only required to determine where the alleged tort occurred. Id. However, "the bland assertion of conspiracy or agency is insufficient to establish jurisdiction for the purposes of section 302(a)(2)." Id. at 93-94.
Although "several New York Supreme Court cases [held] that a defendant need not be present in New York for § 302(a)(2) to apply, the New York Court of Appeals has interpreted the subsection to reach only tortious acts performed by a defendant who was physically present in New York when he committed the act." Virgin Enter. Ltd., 2009 WL 3241529, at *4 (citation omitted). Additionally, "the [Second Circuit] Court of Appeals declined to deviate from the New York Court of Appeals' decision . . . recognizing that it would be 'impolitic . . . to hold otherwise.'" Id. (quoting Bensusan, 126 F.3d at 29 (alteration in original)).
New York law construes strictly the § 302(a)(2) requirement that the tort be committed while the defendant or its agent is physically present in the state. See, e.g., Paul v. Premier Elec. Constr. Co., 576 F. Supp. 384 (S.D.N.Y. 1983) (holding that court was unable to exercise personal jurisdiction under § 302(a)(2) in action alleging tortious interference with business relations and libel where document in question was mailed to New York from Chicago); Bialek v. Racal-Milgo, Inc., 545 F. Supp. 25, 35 (S.D.N.Y. 1982) (holding that there was no personal jurisdiction because defendant was out of town when he made allegedly fraudulent statements); Bauer Indus. Inc. v. Shannon Luminous Materials Co., 383 N.Y.S.2d 80 (2d Dep't 1976) (holding that there was no § 302(a)(2) personal jurisdiction because misrepresentations were mailed from outside of the state).
Nonetheless, Plaintiffs have failed to offer more than conclusory allegations in support of their contention that Defendant's putative agent committed a tort within New York. Although for purposes of this motion the Court must credit as true Plaintiffs' assertion that WallSt.Net was responsible for the mailing of the e-mails in question, Plaintiffs have failed to allege that the tort itself was committed in New York. The fact that Defendant's purported agent is a domiciliary of New York does not establish that the tort was necessarily committed there. See, e.g., Nasso v. Seagal, 263 F. Supp. 2d 596, 614 (E.D.N.Y. 2003) (holding that "the fact that [the defendants] were domiciliaries of New York . . . does not establish that the tort itself was committed there. [Plaintiff] does not even allege that the remaining torts — the conversions and the misrepresentation — took place in New York").
The extent of Plaintiffs' argument that a tort was committed in New York is illustrated in the following statement:
[T]he defendant hijacked property in New York for the purpose of distributing spam e-mail promoting their stock. Defendant's [sic] engaged in a conspiracy to avoid detection by disguising their identity with the identity of a New York lawyer at a New York law firm. . . . A person or entity should not be permitted to avoid submitting to the personal jurisdiction of this Court by engaging in a conspiracy to prevent disclosure of their physical location at the time they are directing tortuous [sic] activity in New York.
(Ziegler Aff. ¶¶ 28-29.)
Plaintiffs neither allege that Defendant or its agent was physically present in New York when the alleged tort was committed nor, except in conclusory fashion, that a tort was committed in New York at all. Plaintiffs specifically assert the following causes of action against Defendant: (1) libel; (2) conversion; (3) trespass to chattels; (4) negligence; (5) violations of the Lanham Act; and (6) unjust enrichment. Each will be addressed in turn.
Even if the Court were to follow the more lenient approach adopted by some New York courts, which does not require that the defendant be physically present in New York, it would not conclude that § 302(a)(2) confers personal jurisdiction in this case. The more lenient approach holds that the defendant's "actual presence within New York is not necessarily a prerequisite to jurisdiction under CPLR § 302(a)(2), provided the tortious act itself, committed by defendant, occurs within New York State." Davidoff v. Davidoff, No. 101728/06, 2006 WL 1479558, at *6 (N.Y. Sup. Ct. May 10, 2006). Just as Plaintiffs fail to allege or proffer evidence showing that Defendant or its agent was present in New York when the tort was committed, Plaintiffs also fail to demonstrate that a tortious act was committed in New York at all, regardless of the tortfeasor's physical location.
First, libel and defamation are specifically exempted from the provisions of § 302(a)(2). N.Y. C.P.L.R. 302(a)(2) ("[A] court may exercise personal jurisdiction over any non-domiciliary . . . who in person or through an agent . . . (2) commits a tortious act within the state, except as to a cause of action for defamation of character arising from the act. . . ."); see also Misek-Falkoff v. McDonald, 177 F. Supp. 2d 224, 230 (S.D.N.Y. 2001) (noting that § 302(a)(2) "does not extend to 'long arm' service of process on non-residents in an action for defamation."). Plaintiffs' libel claim, therefore, cannot form the basis for jurisdiction under § 302(a)(2).
Second, even if Plaintiffs' theory — that the sending of the e-mails constituted conversion of Plaintiffs' e-mail address — were legally valid, this conversion took place at the geographic origin of the e-mails, which is not necessarily where the sender is domiciled. See, e.g., Nasso, 263 F. Supp. 2d at 614 (holding that failure to allege that conversion took place in New York precluded the court from exercising jurisdiction on the basis of § 302(a)(2)). Plaintiffs have failed to allege that the e-mails originated in New York and, therefore, jurisdiction cannot attach on this basis.
Trespass to chattels occurs when the defendant "intentionally, and without justification or consent, physically interfere[s] with the use and enjoyment of personal property in [plaintiff's] possession, [and the plaintiff is] harmed thereby."Sch. of Visual Arts v. Kuprewicz, 771 N.Y.S.2d 804, 807 (N.Y. Sup. Ct. 2003) (citing N.Y. Pattern Jury Instruction Civil 3:9);see also Biosafe-One, Inc. v. Hawks, 639 F. Supp. 2d 358, 368 (S.D.N.Y. 2009) (same). Although Plaintiffs allege that the injury stemming from Defendant's conduct was felt in New York on Mr. Ziegler's personal computer, "it is insufficient that the damages were felt by [Plaintiffs] in New York. The relevant inquiry is whether a tortious act occurred in New York by the defendants." Davidoff, 2006 WL 1479558, at *11. In the context of tortious interference with a plaintiff's website, "the content of plaintiff's Website cannot be deemed to be located wherever the content may be viewed, for jurisdictional purposes, as it has been held that the mere fact that the posting appears on the website in every state will not give rise to jurisdiction in every state." Id.; see also Bensusan, 126 F.3d at 29 (holding that actions giving rise to lawsuit, namely the creation of a website, "were performed by persons physically present in Missouri and not in New York [and] [e]ven if [the plaintiff] suffered injury in New York, that does not establish a tortious act in the state of New York within the meaning of § 302(a)(2)"). A similar analysis is appropriate here. Although Plaintiffs felt the alleged injury in New York, jurisdiction cannot be held to attach wherever Plaintiffs access their e-mail. Rather, the tort is committed where the alleged tortfeasor accessed the e-mail account and sent the unauthorized e-mails. Because Plaintiffs have not made any allegations in regard to the sender's location at the time of the alleged commission of the tort, jurisdiction cannot attach on the basis of Plaintiffs' trespass to chattels claim.
Plaintiffs' negligent hiring claim also cannot form the basis for jurisdiction. Plaintiffs allege that Defendant "was negligent and did not act as a reasonable person and/or reasonable corporation" in "choosing to hire an individual(s) or an entity to promote its stock." (Compl. ¶¶ 61-62.) Any negligent activity on behalf of Defendant presumably took place in China, and Plaintiffs have not alleged otherwise.
"'Trademark infringement can be a 'tort' for [the] purpose of determining long-arm jurisdiction.'" Energy Brands Inc. v. Spiritual Brands, Inc., 571 F. Supp. 2d 458, 470-71 (S.D.N.Y. 2008) (quoting PDK Labs, Inc. v. Proactive Labs, Inc., 325 F. Supp. 2d 176, 180 (E.D.N.Y. 2004) (alteration in original)). For jurisdictional purposes under § 302(a)(2), "a Lanham Act violation sufficient to confer personal jurisdiction need only amount to an attempt to 'pass off' a good as that of the plaintiff's — no actual sale is required." Aerogroup Int'l, Inc. v. Marlboro Footworks, Ltd., 956 F. Supp. 427, 433 (S.D.N.Y. 1996). Where a Lanham Act violation is alleged, "the wrong takes place . . . where the passing off occurs, that is, where the goods are offered for sale or sold." Id.; see also, e.g., Pilates Inc. v. Pilates Inst., Inc., 891 F. Supp. 175, 180 (S.D.N.Y. 1995) (finding jurisdiction under § 302(a)(2) where defendant mailed materials soliciting orders into New York). In this case, therefore, any Lanham Act violation took place in the jurisdiction where the offending e-mails were received. As Plaintiffs have failed to allege that any e-mails were received in New York, personal jurisdiction cannot attach on the basis of the Lanham Act claim.
Plaintiffs' failure to allege that the e-mails were either sent from, or received in, New York is fatal to their attempt to attach jurisdiction on the basis of § 302(a)(2). Compare Aitken v. Commc'ns Workers of Am., 496 F. Supp. 2d 653, 659 (E.D. Va. 2007) (finding Virginia's long-arm jurisdiction statute satisfied on ground defendants caused injury by an act within Virginia because they "sent the allegedly tortious email messages to Virginia computers over Virginia servers"). Plaintiffs allegations thus fail to satisfy the requirements of New York's long-arm statute, and the Court need not make any due process determination.
Plaintiffs complain throughout their submissions that Defendant has not been forthcoming with documents and other information that would have substantiated their assertion of personal jurisdiction in this district. (See, e.g., Pl. Supp. Memo. at 5-6.) Plaintiffs' after-the-fact complaint, however, cannot correct for their failure to notify the Court of any irreconcilable disputes regarding the scope of discovery or the production of specific documents at the time they arose. Plaintiffs were granted permission to conduct jurisdictional discovery on December 2, 2005 [dkt. no. 13]. This process continued for over two years until March 26, 2008 when Defendant's motion to dismiss was restored to the calendar after being held in abeyance pending jurisdictional discovery [dkt. no. 24]. Plaintiffs were free throughout this period to request the production of documents and, in the event that Defendant was not forthcoming, to move the Court to compel production of relevant documents pursuant to Federal Rule of Civil Procedure 37(a). Plaintiffs' failure to obtain information or documents that they believe they were entitled to receive is thus entirely their own.
Because personal jurisdiction does not exist over Defendant in this district, the Court must also determine whether the case should be transferred to a district where the action "could have been brought." 28 U.S.C. § 1406(a). Plaintiffs neither requested such a transfer nor indicated a proper forum and, therefore, the Court declines to transfer the case.
III. CONCLUSION
For the foregoing reasons, Defendant's motion to dismiss [dkt. no. 5] is GRANTED, and Plaintiffs' complaint against Defendant is dismissed in its entirety without prejudice. The Clerk of Court shall mark this action CLOSED and all pending motions DENIED as moot.
SO ORDERED: