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CRAIG v. FIRST WEB BILL, INC.

United States District Court, E.D. New York
Nov 29, 2004
Civil Action No. 04-CV-1012 (DGT) (E.D.N.Y. Nov. 29, 2004)

Opinion

Civil Action No. 04-CV-1012 (DGT).

November 29, 2004


MEMORANDUM AND ORDER


Pro se plaintiff Daniel Craig commenced this action by forwarding to defendants First Web Bill, Inc. ("First Web"), Richard S. Cornejo ("Cornejo"), and Profidor AS ("Profidor"), or their agents, a document entitled "Summons and Complaint," that was styled as having been filed in the Supreme Court of the State of New York, County of Richmond. The document, encompassing a complaint, but containing no summons, and no state court index number, appears never to have actually been filed in the Supreme Court of the State of New York. On March 9, 2004, defendants removed the action to this court pursuant to 28 U.S.C. § 1441(a), invoking diversity jurisdiction pursuant to 28 U.S.C. § 1332. First Web has not contested this court's jurisdiction, and, on May 5, 2004, filed an answer to plaintiff's complaint.

Cornejo and Profidor ("moving defendants") moved to dismiss for lack of personal jurisdiction, pursuant to Fed.R.Civ.P. 12(b)(2), and for failure to state a claim upon which relief can be granted, pursuant to Fed.R.Civ.P. 12(b)(6). For the following reasons, the motion is granted.

All defendants in this action have elected to waive any motion to dismiss they might have been entitled to file under Fed.R.Civ.P. 12(b)(4) or (5) for insufficiency of process or service of process. See Fed.R.Civ.P. 12(g).

Plaintiff has consented to the dismissal of Profidor as a defendant in this action (see Plaintiff's Response to Notice of Motion Made By Defendants Richard S. Cornejo and Profidor AS to Dismiss the Complaint ("Plaintiff's Opposition") (cited herein as "Pl.'s Opp'n")); therefore, the discussion herein pertains only to Cornejo.

Background

Plaintiff Daniel Craig is a resident of the State of New York, County of Richmond. Defendant First Web is a Delaware corporation, which maintains its principal place of business in the State of California, and which at the time of the events giving rise to plaintiff's complaint was qualified to do business in the State of New York, where it maintained an office at 145 Hudson Street, in New York City. First Web provides credit card payment services to internet merchants. Defendant Cornejo, a resident of the State of California, is and was at all times referenced to herein, the President and either CEO or COO of First Web, and managed First Web's offices and operations in California. Defendant Profidor is a corporation organized and existing under the laws of the Kingdom of Denmark, with its principal place of business in Denmark.

The facts as alleged by plaintiff follow. Plaintiff was employed in First Web's New York office, and on March 1, 2002, obtained life and long-term disability insurance under policies offered by First Web to its employees. (Compl. ¶ 1.) On September 25, 2002, plaintiff was notified by First Web's Chairman, Randall K. Anderson ("Anderson"), that his last working day was to be October 31, 2002. (Compl. ¶ 3.) Anderson agreed to apply plaintiff's unused days off to keep him on the payroll through December 15, 2002, and, at plaintiff's request, to continue his life and long-term disability insurance coverage through December, 2002. (Compl. ¶ 4.) Anderson subsequently "relayed his instructions [as to the continuation of both policies] to Mr. Cornejo." (Id.) On October 8, 2002, plaintiff sent a facsimile to Anderson indicating his desire to continue his long-term disability coverage, and stating that he would remit the monthly insurance premium of $45.19 to First Web. (Compl. ¶ 5.) According to plaintiff, "Mr. Anderson agreed to plaintiff's request and relayed his instructions in this regard to Mr. Cornejo." (Compl. ¶ 6.)

For the purposes of moving defendants' 12(b)(2) motion, some facts discussed herein are derived from Plaintiff's Opposition. Moving defendants urge that the allegations contained in that submission should not be considered because they are not contained in sworn opposition. (See Moving Defendants' Reply Memorandum of Law in Support of Motion by Defendants Richard S. Cornejo and Profidor AS to Dismiss the Complaint (cited herein as "Mov. Defs.' Reply Mem. of Law") at 2.) It is true that factual allegations proffered in a brief or memorandum do not constitute facts which may be considered on this motion, unless they are supported by affidavits or other evidence. See Cornell v. Assicurazioni Generali, S.p.A., Nos. 97 Civ. 2262 and 98 Civ. 9186, 2000 WL 1191124 at *1 (S.D.N.Y. Aug. 22, 2000) (factual allegations, made in plaintiff's memorandum of law, but not in the complaint or affidavits or other evidence, do not constitute evidence that can be considered on a motion to dismiss for lack of personal jurisdiction); Gallery 13, Ltd. v. Easter, No. 93 Civ. 8865, 1995 WL 258143 at *2 (S.D.N.Y. May 2, 1995) (same);Stilley v. American Chambers Life Ins. Co., No. 91 Civ. 7022, 1992 WL 147906 at *2 (S.D.N.Y. June 18, 1992) (same). However, plaintiff's unsworn submission is essentially a three-page statement containing factual allegations in response to moving defendants' motion, which could easily be added to an amended complaint. In light of plaintiff's pro se status, and the fact that plaintiff could not prevail even taking plaintiff's additional allegations as true, those allegations have been considered for the purposes of this motion. Cf. Johnson v. Wright, 234 F. Supp. 2d 352, 356 (S.D.N.Y. 2002) (deeming factual allegations contained in pro se plaintiff's briefs to supplement his complaint).

Randall K. Anderson has not been named as a defendant in this action. Plaintiff alleges that Anderson was First Web's Chairman. (See Compl. ¶ 3; Pl.'s Opp'n ¶ 2(a).) Cornejo, in his Affidavit of May 26, 2004 (cited herein as "Cornejo Aff."), has stated that Anderson was First Web's attorney, and formerly shared offices with First Web at their New York City address, but has not disputed that Anderson also served as Chairman of First Web. (See Cornejo Aff. ¶ 3.)

The parties dispute plaintiff's actual termination date, and the date plaintiff's presence on First Web's payroll was formally suspended. Cornejo asserts that First Web's New York office was closed in August, 2002, consequently terminating plaintiff's employment, and that plaintiff remained on First Web's payroll until October 31, 2002. (See Cornejo Aff. ¶ 8.)

Two subsequent transactions concern plaintiff's claims: following his last day of employment and presence on First Web's payroll, in January, 2003, plaintiff filed a request to convert his group life insurance policy to an individual one (the "conversion request"), pursuant to conversion rights under the terms of his policy (see Compl. ¶ 10); subsequently, in January, 2004, plaintiff filed a claim for long-term disability benefits with United States Life Insurance Company In The City Of New York's ("United") benefits administrator, Disability RMS, pursuant to the policy under which he was covered while employed by First Web. (Compl. ¶ 6.)

By letter dated January 8, 2004, Disability RMS informed plaintiff that his disability claim had been denied, in part because his long-term disability coverage had been terminated on October 31, 2002. (Compl. ¶ 7.) The same day, plaintiff was also apprised that his life insurance coverage had been terminated on October 31, 2002, and accordingly, his January, 2003 conversion request had been denied, because he had not exercised his conversion rights within thirty-one days from the date coverage was terminated, as required under the terms of the policy. (Compl. ¶ 10.)

According to plaintiff, it was only on January 8, 2004 that he learned that his policies had been terminated because Cornejo had not followed Anderson's instructions to continue his coverage. (Compl. ¶ 7.) Plaintiff claims that had he remained covered under the long-term disability plan, his claim would have been approved, and if he were to remain disabled, he would be entitled to benefits equal to sixty-percent of his former annual salary until his retirement age of sixty-five. (Compl. ¶¶ 8, 9.) He also asserts that United's denial of his conversion request was the result of Cornejo's cancellation of the policy on October 31, 2002. (Compl. ¶ 7.) Because of plaintiff's discussion with Anderson on September 25, 2002, in which Anderson agreed to continue his life insurance coverage until December 31, 2002, plaintiff did not file his conversion request within thirty-one days from the termination of the policy, and consequently, his request was deemed untimely. (Id.) Plaintiff now seeks damages in the amount of $504,000.

Discussion

Plaintiff appears pro se in this action. The United States Supreme Court, as well as the Second Circuit Court of Appeals, have held that the allegations of a pro se complaint, however inartfully pleaded, are to be held to a less stringent standard than formal pleadings drafted by attorneys. Thus, plaintiff's pleadings on this motion will be construed liberally. See Haines v. Kerner, 404 U.S. 519, 520-21 (1972) (per curiam);Platsky v. C.I.A., 953 F.2d 26, 28 (2d Cir. 1991) (per curiam);Johnson, 234 F. Supp. 2d at 356; Ste Ame Isorait v. Atlantic Mut. Cos., No. 92 Civ. 3981, 1993 WL 37330 at *3 (E.D.N.Y. Feb. 4, 1993).

Cornejo moves to dismiss the complaint for lack of personal jurisdiction. To survive a motion to dismiss for lack of personal jurisdiction, the burden is on the plaintiff to make a showing of jurisdiction over each defendant. Robinson v. Overseas Military Sales Corp., 21 F.3d 502, 507 (2d Cir. 1994); A.I. Trade Fin., Inc. v. Petra Bank, 989 F.2d 76, 79 (2d Cir. 1993). Ultimately, personal jurisdiction must be established by a preponderance of the evidence, either at an evidentiary hearing or at trial, but until such a hearing is held, and such proof is tendered, a prima facie showing of jurisdiction through a plaintiff's own affidavits and supporting materials will suffice to defeat the motion. Marine Midland Bank, N.A. v. Miller, 664 F.2d 899, 904 (2d Cir. 1981); see also Ball v. Metallurgie Hoboken-Overpelt, S.A., 902 F.2d 194, 197 (2d Cir.), cert. denied, 498 U.S. 854 (1990) ("Prior to discovery, a plaintiff challenged by a jurisdiction testing motion may defeat the motion by pleading in good faith, see Fed.R.Civ.P. 11, legally sufficient allegations of jurisdiction."). Where a court addresses issues of personal jurisdiction prior to an evidentiary hearing, on the pleadings, affidavits and supporting materials alone, "all allegations 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." A.I. Trade Finance, 989 F.2d at 79-80; see also Cutco Indus., Inc. v. Naughton, 806 F.2d 361, 365 (2d Cir. 1986); Ivy Mar Co. v. C.R. Seasons Ltd., No. 95 Civ. 0508, 1997 WL 37082 at *3 (E.D.N.Y. Jan. 24, 1997). However, a court must not draw "argumentative inferences" in the plaintiff's favor.Robinson, 21 F.3d at 507 (citing Atlantic Mut. Ins. Co. v. Balfour Maclaine Int'l Ltd., 968 F.2d 196, 198 (2d Cir. 1992)).

Where federal jurisdiction is predicated on diversity of citizenship, the law of the forum state determines whether personal jurisdiction may be obtained over a nonresident defendant. CutCo Indus., Inc., 806 F.3d at 365 (citingArrowsmith v. United Press Int'l, 320 F.2d 219, 223 (2d Cir. 1963) (en banc)). Though plaintiff has not explicitly identified any New York statute pursuant to which he alleges jurisdiction over Cornejo might be obtained, a prima facie showing may be established, prior to discovery, by a good faith pleading of legally sufficient allegations. Ball, 902 F.2d at 197. Accordingly, New York Civil Practice Laws and Rules § 301, which governs general jurisdiction, and § 302, which governs specific jurisdiction, will determine whether plaintiff has established the requisite prima facie showing of jurisdiction over defendant Cornejo's person. Finally, "if the exercise of jurisdiction is appropriate under [either] statute, the court must decide whether such exercise comports with the requisites of due process." Bensusan Rest. Corp. v. King, 126 F.3d 25, 27 (2d Cir. 1997) (citingMetropolitan Life Ins. Co. v. Robertson-Ceco Corp., 84 F.3d 560, 567 (2d Cir. 1996), cert. denied 519 U.S. 1006 (1996));Nasso v. Seagal, 263 F. Supp. 2d 596, 611 (E.D.N.Y. 2003).

Because plaintiff has not alleged facts sufficient to demonstrate that exercise of jurisdiction is appropriate under either §§ 301 or 302, a due process examination is unnecessary.

(1) General Jurisdiction Pursuant to CPLR § 301

N.Y. C.P.L.R § 301 (McKinney 2001) provides: "A court may exercise such jurisdiction over persons, property, or status as might have been exercised heretofore." This section carries forward all the categories of judicial jurisdiction over persons, property and status that existed prior to adoption of the C.P.L.R. Vincent C. Alexander, Practice Commentaries, N.Y.C.P.L.R. § 301, at 8 (McKinney 2001). To find that Cornejo was "present" in New York, it must be found that he is "doing business" here so as to render him amenable to this court's jurisdiction. Personal jurisdiction exists under § 301 where a defendant is "doing business" in New York "not occasionally or casually, but with a fair measure of permanence and continuity." Tauza v. Susquehanna Coal Co., 220 N.Y. 259, 267, 115 N.E. 915 (1917). Once it is established that the non-domiciliary defendant was "doing business" at the time the action was commenced, jurisdiction will be acquired for any cause of action asserted against the defendant, whether or not the events giving rise to the cause of action occurred in New York. Pub. Adm'r of New York County v. Royal Bank of Canada, 19 N.Y.2d 127, 130, 278 N.Y.S.2d 378, 380, 224 N.E.2d 877, 878 (1967); Lancaster v. Colonial Motor Freight Line, Inc., 177 A.D.2d 152, 156, 581 N.Y.S.2d 283, 286 (1992) (citing Bryant v. Finnish Nat'l Airline, 15 N.Y.2d 426, 260 N.Y.S.2d 625, 208 N.E.2d 439 (1965)).

Although all the additional traditional bases of § 301 have been considered, only the "doing business" standard is applicable here.

Here, the complaint names Cornejo a defendant "as a shareholder and officer of First Web Bill, Inc., as well as individually." Although the New York Court of Appeals has "assume[d], without deciding, that an individual who is in fact doing business so as to be present within the State is subject to jurisdiction,"Laufer v. Ostrow, 55 N.Y.2d 305, 313, 449 N.Y.S.2d 456, 460, 434 N.E.2d 692, 696 (1982), it is clear that an officer of a corporation does not subject himself to personal jurisdiction under § 301 unless the officer was doing business in the state in his or her individual capacity. Id. at 313, 449 N.Y.S.2d at 460, 434 N.E.2d at 696; see also SMS Mktg. Telecomm., Inc. v. H.G. Telecom, Inc., 949 F. Supp. 134, 144-45 (E.D.N.Y. 1996); Ontel Prod, Inc. v. Project Strategies Corp., 899 F. Supp. 1144, 1148 (S.D.N.Y. 1995); Lancaster, 177 A.D.2d at 159, 581 N.Y.S.2d at 288.

The Appellate Division appears to be in conflict on the issue. See generally Jacobs v. Felix Bloch Erben Verlag fur Buhne Film und Funk KG, 160 F. Supp. 2d 722, 732, discussion at n. 8. (S.D.N.Y. 2001).

In the present case, plaintiff has failed to allege, let alone make a prima facie showing, that Cornejo was "doing business" in New York individually; nor can it be inferred from the pleadings that Cornejo did business in New York other than in his corporate capacity, on behalf of First Web. Plaintiff avers that "First Web's stock is owned by Richard S. Cornejo, its President, and Profidor AS, a corporation domiciled in Denmark." (Compl. ¶ 2.) Further, plaintiff alleges that Cornejo "had (and possibly still has) control of First Web's accounts(s) maintained at Citibank N.A.'s branch at 107 Hudson Street in New York, New York" (Pl.'s Opp'n ¶ 2(c)), and that Cornejo "was (and possibly is) `personally engaged' in one or more businesses, one of which is known as `Delta One.'" (Pl.'s Opp'n ¶ 2(d).) These allegations are insufficient to conclude that Cornejo does business in New York on his own account. Though plaintiff does not indicate what ownership interest he alleges Cornejo maintains in First Web, assuming arguendo that plaintiff sought to allege a controlling interest, the mere fact that a nonresident defendant is a shareholder, or even controlling shareholder, of a corporation which is amenable to personal jurisdiction in New York does not, without more, subject him or her individually to personal jurisdiction under CPLR § 301. See Lamar v. Am. Basketball Ass'n., 468 F. Supp. 1198, 1203 (S.D.N.Y. 1979) (citations omitted); see also Ivy Mar Co., 1997 WL 37082 at *8 (fifty-percent owner of company which was located and doing business in New York, and who entered New York to conduct company business was not subject to in personam jurisdiction); Ontel Prod., Inc., 899 F. Supp. at 1148 n. 5 (no jurisdiction over defendant who was CEO, President, and 100% shareholder of corporation where defendant's personal activities were taken to further the corporation's business); Ferrante Equip. Co. v. Lasker-Goldman Corp., 26 N.Y.2d 280, 283, 309 N.Y.S.2d 913, 916, 258 N.E.2d 202 (1970) (controlling shareholder of corporation not subject to in personam jurisdiction, individually, where the record did not justify piercing the corporate veil).

Both Cornejo and Profidor dispute having any ownership interest in First Web. (See Cornejo Aff. ¶ 2; May 25, 2004 Declaration of Jacob Thompson ¶ 5.) Cornejo avers that First Web is a wholly owned subsidiary of NIC Holdings Ltd., a corporation formed under the laws of the Channel Island of Jersey (Cornejo Aff. ¶ 2), and there is no indication that Cornejo retains an ownership interest in NIC.

Plaintiff's further allegation that Cornejo maintained control of First Web's bank account(s) in New York does not by itself confer jurisdiction under § 301. See, e.g., In re Med-Atlantic Petroleum Corp., 233 B.R. 644, 656 (S.D.N.Y. 1999) (President of corporation with signatory and withdrawal authority over New York bank account not subject to § 301 jurisdiction); Karabu Corp. v. Gitner, 16 F. Supp. 2d 319, 323 n. 2 (S.D.N.Y. 1998) (no basis for § 301 jurisdiction over non-domiciliary CEO, who maintained personal bank account in New York, but did not otherwise derive revenue from New York other than as a corporate employee). Moreover, plaintiff has alleged that the account(s) were "First Web's account(s)," and does not maintain that they were Cornejo's individually, whatever authority he might have had on behalf of First Web. Indeed, Cornejo has submitted evidence substantiating that First Web maintained an account at Citibank N.A. in New York City until February 26, 2003, on which account he admits to having been a signatory in his capacity as President of First Web; notably, the accounts are in the name of "First Web Bill, Inc.," listing an address at 145 Hudson Street, New York, New York. (See Cornejo Reply Aff. at Ex. A.) It cannot be said that Cornejo's signatory authority over First Web's New York bank account indicates that he was doing business in New York individually in this case. From the facts before the court, the most favorable inference that can be afforded plaintiff is that Cornejo engaged in some activities in New York on behalf of First Web.

Plaintiff has not alleged facts from which an analysis of an "alter ego" or "piercing of the corporate veil" theory need be entertained. Though he has alleged that Cornejo maintains an ownership interest in First Web, he has not specified the extent of any such interest, either in his complaint or subsequent submissions. Nor is there any indication that Cornejo maintains ownership of NIC Holdings Ltd., whom moving defendants contend is the sole owner of First Web. See supra, discussion at n. 11.

Finally, plaintiff's allegation that Cornejo "was, (and possibly is) `personally engaged' in one or more businesses, one of which is known as `Delta One'" (Pl.'s Opp'n ¶ 1(d)) is unavailing. Such conclusory allegations, without an elucidation of supporting facts, are insufficient to meet plaintiff's burden on this motion. See, e.g., Penny v. United Fruit Co., 869 F. Supp. 122, 126 n. 4 (E.D.N.Y. 1994) (plaintiff offered only conclusory allegations that defendant was "doing business" and submitted no evidence to contradict defendant's assertion that it ceased doing business in New York prior to the commencement of the action); Glacier Refrigeration Serv., Inc. v. Am. Transp., Inc., 467 F. Supp. 1104, 1107 n. 1 (S.D.N.Y. 1979) (unsupported statement that defendant was "doing business" in New York held insufficient). Cornejo concedes that he is in fact President of "Delta One Investments, Inc.," ("Delta One") a Nevada corporation. (Cornejo Reply Aff. at 2 n. 1.) However, as plaintiff has not alleged that Delta One currently does business in New York, and, additionally, that Cornejo does business individually and systematically through Delta One, there is no basis to infer that Cornejo's status as President of that corporation subjects him to § 301 jurisdiction.

Incidentally, but equally fatal to jurisdiction under this section, plaintiff has not shown that any of Cornejo's activities, in whatever capacity, were undertaken in New York as of the commencement of this action. "[A] fundamental sine qua non of all [§ 301] holdings is the requirement that defendant be shown to have been `doing business' at the time when the action was commenced." Lancaster, 177 A.D.2d at 156, 581 N.Y.S.2d at 286 (citing Gaboury v. Central Vermont Ry. Co., 250 N.Y. 233, 236-37, 165 N.E. 275, 276 (1929)). While the parties are in dispute as to the actual date First Web's New York offices were closed, plaintiff's contention, which is accepted as true for the purposes of this motion, was that the offices were closed and vacated on July 16, 2003. (Pl.'s Opp'n ¶ F(1).) First Web surrendered its authority to do business in New York on December 30, 2003. (Cornejo Aff. ¶ 2.) Plaintiff's complaint is dated February 5, 2004. The only allegation which touches upon Cornejo's activities in this state as of the commencement of this action is that Cornejo "possibly still has" control of First Web's bank accounts. (Pl.'s Opp'n ¶ 2(c).) This lone allegation will not suffice. Thus, even if it could be established that Cornejo was doing business in New York in such a capacity as to be amenable to jurisdiction here, it has not been shown that he was doing so as of the commencement of this action. Accordingly, this court lacks jurisdiction over Cornejo under § 301.

Plaintiff's complaint, dated February 5, 2004, was never formally filed in the Supreme Court; defendants removed to this court on March 9, 2004. Even if February 5, 2004 were considered to be the date this action was commenced, as far as can be discerned, First Web ceased doing business in New York prior to the commencement of the action.

(2) Specific Jurisdiction pursuant to C.P.L.R. § 302

New York's long-arm statute, C.P.L.R. § 302, provides, in pertinent part that:

[A] court may exercise personal jurisdiction over any non-domiciliary . . . who in person or through an agent:
1. transacts any business within the state or contracts anywhere to supply goods or services in the state; or

2. commits a tortious act within the state . . .; or

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 should reasonably expect the act to have consequences is the state and derives substantial revenue from interstate or international commerce. . . .

N.Y.C.P.L.R. § 302(a) (McKinney 2001).

a. § 302(a)(1): "Transacting Business"

Exercise of personal jurisdiction is proper under § 302(a)(1) where it is found that the non-domiciliary defendant (1) "transacted business" within New York, and (2) the claim "arises from" the transaction of business within the state. See Agency Rent A Car Sys., Inc. v. Grand Rent A Car, 98 F.3d 25, 29 (2d Cir. 1996). A non-domiciliary "transacts business" within the state when he purposefully avails himself of the privilege of conducting activities within New York, thus invoking the benefits and protections of New York laws. CutCo Indus., Inc., 806 F.2d at 365 (citations omitted). It is not required that the defendant physically enter the state, Kreutter v. McFadden Oil Corp., 71 N.Y.2d 460, 467, 527 N.Y.S.2d 195, 198, 522 N.E.2d 40, 43 (1988) (citations omitted), and a single act occurring in New York can suffice, so long as it was purposeful. George Reiner Co. v. Schwartz, 41 N.Y.2d 648, 651-52, 394 N.Y.S.2d 844, 846, 363 N.E.2d 551, 553 (1977); accord Int'l Shoe Co. v. Washington, 326 U.S. 310, 318 (1945) (noting that some singular or occasional acts, "because of their nature and quality and the circumstances of their commission," may be sufficient to render a defendant subject to jurisdiction). However, the totality of the circumstances, rather than demonstration of a single or isolated event, will determine whether jurisdiction over the defendant will be proper. Cutco Indus., Inc., 806 F.2d at 365.

Unlike § 301, which confers jurisdiction for any cause of action over a non-domiciliary defendant within the purview of that statute, § 302(a)(1) requires that there be an "articulable nexus between the business transacted and the cause of action sued upon." Beacon Enterprises, Inc. v. Menzies, 715 F.2d 757, 764 (2d Cir. 1983) (citing McGowan v. Smith, 52 N.Y.2d 268, 272, 437 N.Y.S.2d 643, 645, 419 N.E.2d 321, 323 (1981)); see also Talbot v. Johnson Newspaper Corp., 71 N.Y.2d 827, 829, 527 N.Y.S.2d 729, 731, 522 N.E.2d 1027, 1028 (1988) (requiring a "substantial relationship" between the business transacted and the cause of action). Such a nexus must be established for each cause of action where jurisdiction is asserted under this section. See N.Y.C.P.L.R. § 302(c) (McKinney 2001). That all of Cornejo's contacts with New York were related to his position as President or employee of First Web does not necessarily insulate him from jurisdiction, for it is now well-settled law in New York that a corporate agent may still be subject to jurisdiction under § 302 even though his or her New York-connected acts were undertaken solely on behalf of his or her employer. See Kreutter, 71 N.Y.2d at 469-70, 527 N.Y.S.2d at 200-01, 522 N.E.2d at 45-46 (rejecting the formerly applied "fiduciary shield doctrine"); see also Advanced Portfolio Techs., Inc. v. Advanced Portfolio Techs. Ltd., No. 94 Civ. 5620, 1997 WL 401810 at *3 (S.D.N.Y. July 16, 1997) (applying Kreutter's rejection of the fiduciary shield doctrine).

Turning to Cornejo's contacts with New York, in the course of thirteen months, Cornejo traveled to New York three times, for a total of eight days, to conduct business related to First Web. (See Cornejo Aff. ¶ 7.) From April 5-7, 2002, Cornejo traveled to New York to meet with Anderson at First Web's New York office. (Id. ¶ 7(a).) From November 13-15, 2002, Cornejo met with Anderson and attended a board of directors meeting, all at First Web's New York office. (Id. ¶ 7(b).) Finally, from April 14-15, 2003, Cornejo met with domestic and international customers and vendors of First Web in New York. (Id. ¶ 7(c).)

Moving defendants assert that "[n]othing . . . Cornejo did even remotely could be construed as transacting business in New York." (Mov. Defs.' Mem. of Law at 5.) Initially, it is noted, the possibility that Cornejo's activities could be construed as transacting business in New York is not as remote as they contend. Compare Ivy Mar Co., No. 95 Civ. 0508, 1997 WL 37082 at *8-9 (finding part owner of company who entered New York to attend two meetings at company's corporate offices "transacted business" within the meaning of the statute), and In re Union Carbide Corp. Consumer Prod. Bus. Sec. Litig., 666 F. Supp. 547, 572 (S.D.N.Y. 1987) (comparing cases, and finding officers' attendance at meetings in New York constituted "transacting business"), with Kinetic Instruments, Inc. v. Lares, 802 F. Supp. 976, 982 (S.D.N.Y. 1992) (President and majority shareholder's attendance at trade shows in New York, "from time to time," was insufficient to constitute "transacting business").

However, regardless of whether Cornejo's activities constitute "transacting business" within the meaning of the statute, it is clear that there is no articulable nexus between any of Cornejo's activities in and with New York, and the claims asserted by plaintiff. Plaintiff does not allege that Cornejo was a party to, or was involved in the negotiation of, his agreement with First Web and/or Anderson, either within or without New York. Nor is there any indication that Cornejo's trips to New York were in any way related to the subject agreement. Indeed, Cornejo specifically denies that there was any discussion of plaintiff's insurance at any of his meetings in New York (Cornejo Aff. ¶ 7), and plaintiff has not alleged otherwise. Further, Cornejo offers that his only communications in regard to plaintiff's insurance policy occurred between him in California, and either Anderson in England, or First Web's insurance broker in California (Cornejo Aff. ¶ 8). Plaintiff only alleges that Anderson "relayed his instructions" as to the continuation of plaintiff's insurance coverage to Cornejo, without any identification of where or when such communications were made. Because there is no articulable nexus between Cornejo's activities in this state and the claims asserted by plaintiff, jurisdiction under § 302(a)(1) cannot be sustained.

b. § 302(a)(2) and (a)(3): "Tortious Act"

"A court's inquiry concerning jurisdiction is distinct from an inquiry concerning the bonafides of a plaintiff's causes(s) of action. Nevertheless, the exercise of jurisdiction pursuant to [§] 302(a)(3) [and certainly § 302(a)(2)] requires, at a bare minimum, that the complaint adequately allege a tortious act committed by [the defendant]." Family Internet, Inc. v. Cybernex, Inc., No. 98 Civ. 0637, 1999 WL 796177 at *7 (S.D.N.Y. Oct 6, 1999) (citing Kelly v. MD Buyline, Inc., 2 F. Supp. 2d 420, 434 (S.D.N.Y. 1998)). Thus, while liability may only be considered after the defendant is shown to be subject to in personam jurisdiction, Kreutter, 71 N.Y.2d at 471, 527 N.Y.S.2d at 201-02, 522 N.E.2d at 45, jurisdictional determinations under C.P.L.R. §§ 302 (a)(2) and (a)(3) blend the question into one on the merits — specifically: "Whether the acts attributable to the defendant give rise to a claim of tort."See Vincent C. Alexander, Practice Commentaries, N.Y.C.P.L.R. § 302, at 133 (McKinney 2001). Plaintiff does not explicitly state any actionable tort on which he bases his claim against Cornejo, but liberally construing plaintiff's allegations, it might appear that he alludes that Cornejo was negligent in his failure to continue his insurance coverage, or alternatively, that Cornejo tortiously interfered with his agreement with First Web. In one instance, plaintiff states that his disability coverage was terminated because Cornejo "had not followed Mr. Anderson's instructions in this regard." (Compl. ¶ 7.) From that statement, it can be construed that plaintiff alleges Cornejo was negligent in failing to secure the continuation of his coverage. On the other hand, plaintiff also states that "First Web, at Mr. Cornejo's instigation, had ceased Plaintiff's life insurance coverage." (Id. ¶ 10.) That statement might indicate that plaintiff alleges Cornejo tortiously interfered with his agreement with First Web. Though these allegations are separately made, in reference to the two distinct policies, plaintiff does indicate that both policies were terminated by Cornejo on October 31, 2001. Thus, liberally construing plaintiff's allegations, the alternative claims will be deemed to have been made as to both policies.

As previously indicated, plaintiff only alleges that he agreed to remit his monthly insurance premiums to First Web, but does not assert that he ever did in fact relinquish any funds to First Web or Cornejo. As such, no claim for conversion has been properly stated. Cf. Key Bank of New York v. Grossi, 227 A.D.2d 841, 642 N.Y.S.2d 403 (3d Dep't 1996).

If, in fact, plaintiff did seek to advance both of these claims, that claims for negligence and tortious interference might appear to be contradictory would not bar plaintiff's right to assert both, each in the alternative. Under the Federal Rules of Civil Procedure, a party may state as many separate claims as the party has, regardless of consistency, so long as they comport with the obligations set forth in Rule 11. See Fed.R.Civ.P. 8(e)(2).

i. Negligence

In the oft-cited case of New York University v. Continental Insurance Company, the Court of Appeals of New York stated, as a general principle, that:

A tort obligation is a duty imposed by law to avoid causing injury to others. It is `apart from and independent of promises made and therefore apart from the manifested intention of parties' to a contract (Prosser and Keeton, Torts § 92, at 655 [5th ed.]). Thus, defendant may be liable in tort when it has breached a duty of reasonable care distinct from its contractual obligations, or when it has engaged in tortious conduct separate and apart from its failure to fulfill its contractual obligations. The very nature of a contractual obligation, and the public interest in seeing it performed with reasonable care, may give rise to a duty of reasonable care in performance of contractual obligations, and the breach of that independent duty will give rise to a tort claim (see, Sommer v. Federal Signal Corp., 79 N.Y.2d 540[, 583 N.Y.S.2d 957, 593 N.E.2d 1365 (1992)]). Where a party has fraudulently induced the plaintiff to enter into a contract, it may be liable in tort . . . or where a party engages in conduct outside the contract but intended to defeat the contract, its extraneous conduct may support an independent tort claim. . . .
New York Univ. v. Cont'l Ins. Co., 87 N.Y.2d 308, 316, 639 N.Y.S.2d 283, 287-88, 662 N.E.2d at 763, 767-68 (1995) (citations omitted). However, where a party is merely seeking to enforce its bargain, a tort claim will not lie. Id. (citing Sommer, 79 N.Y.2d at 552, 583 N.Y.S.2d at 961, 593 N.E.2d at 1370).

Logan v. Empire Blue Cross and Blue Shield, 275 A.D.2d 187, 714 N.Y.S.2d 119 (2d Dep't 2000) sheds light on the instant action. In Logan, Empire Blue Cross and Blue Shield provided health insurance to each of the appellants, all of whom were diagnosed with Lyme disease. Id. at 188-89, 714 N.Y.S.2d at 120. The appellants asserted that Empire improperly denied coverage of the treatment relating to their Lyme disease, and asserted, inter alia, claims for breach of contract and others sounding in tort. The appellants claimed that the nature of Empire's contractual obligation to them, and the public interest in seeing those obligations performed with reasonable care, imposed a duty of reasonable care on Empire, the breach of which gave rise to a tort "independent" of the contract. Id. at 191-92, 714 N.Y.S.2d at 122-23. Both the Supreme Court and Appellate Division disagreed, and found that Empire did not owe appellants a duty of reasonable care separate from the contractual obligation. Id. at 192-93, 714 N.Y.S.2d at 123. Finding that appellants' claims were solely financial, and were essentially seeking enforcement of their bargain, the court found the action should proceed under a contract theory.

In the instant case, plaintiff likewise seeks monetary relief for damages which have arisen from the breach of the agreement to continue his policies, essentially seeking the benefit of his "bargain." Under New York University and Logan, there was no duty of reasonable care, independent of any obligations under the agreement, which could provide the basis for a negligence claim against Cornejo.

ii. Tortious Interference

Plaintiff also fails to state a cause of action for tortious interference. "The existence of a plausible claim for breach of contract does not, without more, provide a basis for the assertion of a cause of action for interference with the contractual relations against those corporate officers and directors whose actions brought about the asserted breach." Joan Hansen Co. v. Everlast World's Boxing Headquarters Corp., 296 A.D.2d 103, 108-09, 744 N.Y.S.2d 384, 389-90 (1st Dep't 2002). Generally, "[a] corporate officer who is charged with inducing the breach of a contract between the corporation and a third party is immune from liability if it appears that he is acting in good faith as an officer * * * (and did not commit) independent torts or predatory acts directed at another." Murtha v. Yonkers Child Care Ass'n, 45 N.Y.2d 913, 915, 411 N.Y.S.2d 219, 220, 383 N.E.2d 865, 866 (1978) (quoting Buckley v. 112 Central Park South, Inc., 285 A.D. 331, 334, 136 N.Y.S.2d 233, 236 (1st Dep't 1954)) (internal quotation marks omitted); see also Mobile Data Shred, Inc. v. United Bank of Switz., No. 99 Civ. 10315, 2000 WL 351516 at *7 n. 9 (S.D.N.Y. April 5, 2000) ("officers, directors or employees of a corporation are not personally liable . . . if they act on behalf of the corporation and within the scope of their duties") (citations omitted). Personal liability can be imposed only if it is shown that the defendant acted outside the scope of his employment, by committing an independent tort, or by pursuing a personal, and not corporate, interest.Mobile Data Shred, Inc., 2002 WL 351516 at *7 n. 9. Moreover, even if it is shown that the defendant failed to act in good faith, liability will not been imposed absent a showing of an independent tort, or that the actions were designed to serve a personal interest. See Foster v. Churchhill, 87 N.Y.2d 744, 751, 642 N.Y.S.2d 583, 587, 665 N.E.2d 153, 157 (1996).

Plaintiff's allegation that Cornejo "instigated" First Web's cancellation of his insurance policies, and thus, presumably, his agreement with First Web, does not amount to a tortious interference with that agreement. A plaintiff alleging tortious interference must plead, in non-conclusory language, facts establishing all the elements of a wrongful and intentional interference with the contractual relationship. Bonanni v. Straight Arrow Publishers, 133 A.D.2d 585, 586-87, 520 N.Y.S.2d 7, 9 (1st Dep't 1987) (citing Jennings v. Burlington Indus., 19 A.D.2d 877, 878, 244 N.Y.S.2d 219 (1st Dep't 1963)). Plaintiff puts forth no facts from which it could be found that Cornejo was acting outside the scope of his employment when he caused First Web to cancel the insurance policies. Moreover, there is no indication that such action furthered any personal interest of Cornejo himself. Accordingly, as an officer of First Web, acting within the scope of his duties, Cornejo cannot be held liable for inducing First Web to breach its agreement with plaintiff.

c. Agency under Kreutter

As previously noted, since the rejection of the fiduciary shield, it is now well-settled New York law that an individual will not be insulated from personal jurisdiction merely because his or her dealings with this forum were conducted solely in a corporate capacity. Kreutter, 71 N.Y.2d at 470, 527 N.Y.S.2d at 201, 522 N.E.2d at 46. Kreutter further established that, under certain circumstances, a corporate entity may be deemed to be the corporate employee's "agent" in New York so as to render the employee amenable to jurisdiction for the purposes of C.P.L.R. § 302. Plaintiff need not establish a formal agency relationship. Id. at 467, 527 N.Y.S.2d at 199, 522 N.E.2d at 44. However, the corporation will not be deemed the employee's agent solely by virtue of that individual's title or position — rather, it must be shown that the employee was a "primary actor" in the transaction. See id. at 470, 527 N.Y.S.2d at 201, 522 N.E.2d at 45. In particular, it must be established that: (i) the corporate entity engaged in purposeful activities in this New York in relation to his transaction, (ii) the non-domiciliary consented to and benefitted from that transaction, and (iii) the non-domiciliary exercised some control over the entity in relation to that transaction. Id.; see also Retail Software Services v. Lashlee, 854 F.2d 18, 22 (2d Cir. 1988). That First Web is subject to this court's jurisdiction is not contested; therefore, it must be determined whether First Web may effectively be considered Cornejo's agent in New York for the purposes of this transaction.

Kreutter was decided in the context of § 302(a)(1), but the court explicitly rejected application of the fiduciary shield to any of the provisions of New York's long-arm statute. 71 N.Y.2d at 468, 527 N.Y.S.2d at 199, 522 N.E.2d at 44.

A determination under the doctrine formulated by Kreutter is necessarily fact-intensive; here, plaintiff's allegations concerning Cornejo's role in the underlying transaction are sparse and ambiguous. Even if it were to be found that Kreutter's requirements of knowledge, consent, and control were satisfied, it is difficult to perceive how this transaction would work to accrue a benefit to Cornejo. Generally, where the element of benefit is found, there is a discernable benefit which could be expected to emanate from the transaction, to the favor of the non-domiciliary defendant. See, e.g., Retail Software Services, 854 F.2d 18 (officer and director defendants who were also shareholders of corporation were found to have benefitted from deposits received under franchise agreements); Namer v. America Networks Int'l Inc., No. 99 Civ. 12120, 2001 WL 30663 at *2 (S.D.N.Y. Jan. 12, 2001) (director and majority shareholder's vote to cancel plaintiff's share's in corporation's stock benefitted him by increasing his own ownership); In re Sumitomo Copper Litig., 120 F. Supp. 2d 328, 336-37 (S.D.N.Y. 2000) (shareholders, who were also officers and/or directors of commodities brokerage, stood to benefit from brokerage's activities in New York which went to further an alleged conspiracy to manipulate prices of commodities and commodities futures); Levisohn, Lerner, Berger Langsam v. Medical Taping Sys., Inc., 10 F. Supp. 2d 334, 341 (S.D.N.Y. 1998) (negotiation of a law firm retainer agreement by defendant's partner, which contemplated representation of defendant by firm, implied a benefit); Basquiat v. Kemper Snowboards, No. 96 Civ. 0185, 1997 WL 527891 at *3 (S.D.N.Y. Aug. 25, 1997) (relatively high ranking position of defendant within small company implied that he would derive financial benefit from sales of infringing product); Kinetic Instruments, 802 F. Supp. 976, 984-85 (S.D.N.Y. 1992) (President and majority shareholder stood to benefit from company's sales of product alleged to be infringing on plaintiff's patent).

Conversely, where the transaction at issue does not work to benefit the defendant over whom jurisdiction is sought, an agency theory under Kreutter cannot stand. For example, in Rosner Bresler Goodman Golden v. GPA Inc., No. 95 Civ. 2652, 1996 WL 284924 at *1 (S.D.N.Y. May 29, 1996), the plaintiff, a New York law firm, commenced an action against its former corporate client and four of the corporation's shareholders seeking reimbursement for legal fees and disbursements arising from the firm's legal representation of the corporation. The firm alleged that the corporation entered into a contract to provide professional legal services with the "knowledge and consent" of the shareholders.Id. at *3. However, the court disagreed with the assertion that the firm rendered its services for the benefit of the shareholders, in addition to the corporation; as the action being prosecuted involved the corporation, and not the shareholders individually, the court found that the agreement was not entered into for the individual benefit of the shareholders. Id.; see also Packer v. TDI Systems, Inc., 959 F. Supp. 192, 201 n. 9 (plaintiffs failed to aver sufficient facts to establish that defendant benefitted from the negotiation and closing of agreements in New York, as required by Kreutter).

In the present case, the complaint alleges no discernable benefit which would accrue to Cornejo by either the performance, or non-performance under the agreement. Plaintiff was informed on September 25, 2002 that his last working day was to be October 31, 2002. On October 8, 2002 plaintiff claims that he informed Anderson via facsimile of his desire to continue his coverage by remitting the monthly premiums to First Web, and Anderson agreed. There is no indication that plaintiff ever in fact remitted any such premiums to First Web, or that those premiums were somehow converted by any of the defendants. Thus, as far as can be discerned, there was no pecuniary benefit flowing to Cornejo, or even to the corporation, and there was no duty on any of the defendants to comply with such a request. To the extent that the "goodwill" of a former employee might somehow be deemed a benefit to the corporation, it is not a benefit which would have accrued to Cornejo personally in this case. Due to the absence of a showing that this transaction was undertaken for the benefit Cornejo, jurisdiction under the agency theory promulgated by Kreutter cannot stand.

Conclusion

Because this court lacks jurisdiction over Richard S. Cornejo, the merits of the claims asserted against him need not be reached. For the foregoing reasons, the motion of Richard S. Cornejo to dismiss the complaint against him is hereby granted. Plaintiff's consent to the dismissal of Profidor AS as a defendant in this action will be treated as a voluntary dismissal made by formal notice under F.R.C.P. 41(a)(1)(i). Pursuant to Rule 41(a)(1)(i), the dismissal against Profidor AS is without prejudice.

SO ORDERED.


Summaries of

CRAIG v. FIRST WEB BILL, INC.

United States District Court, E.D. New York
Nov 29, 2004
Civil Action No. 04-CV-1012 (DGT) (E.D.N.Y. Nov. 29, 2004)
Case details for

CRAIG v. FIRST WEB BILL, INC.

Case Details

Full title:DANIEL CRAIG Plaintiff, v. FIRST WEB BILL, INC., RICHARD S. CORNEJO (as a…

Court:United States District Court, E.D. New York

Date published: Nov 29, 2004

Citations

Civil Action No. 04-CV-1012 (DGT) (E.D.N.Y. Nov. 29, 2004)

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