1983 U.S. Dist. LEXIS 17877, *
NATHAN SCHWARTZ and BARRY J. LEVIEN, Plaintiffs, against WAMSLEY DEVELOPMENT, INC., Defendants.
No. 82 Civ. 4979 (WCC)
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK
1983 U.S. Dist. LEXIS 17877
April 8, 1983
CASE SUMMARY
PROCEDURAL POSTURE: Plaintiff brokers filed an action against defendant corporation and sought recovery of commissions allegedly owed to the brokers by the corporation for the brokers' efforts in securing a construction loan for the corporation. The corporation filed a motion to dismiss for lack of personal jurisdiction, or in the alternative, to transfer the action to the district court in South Carolina.
OVERVIEW: The brokers pursued different financing possibilities for the corporation for the corporation's plan to build an adult community in South Carolina, with the understanding that the brokers would receive a commission of two percent on the loan. The brokers set up financing between a lender and the corporation, but after a meeting between the lender and the corporation, the loan was never made. The brokers filed an action to recover the commission. The corporation filed a motion to dismiss the action on the ground that the court lacked personal jurisdiction because the corporation was incorporated in South Carolina. The corporation alternatively sought to transfer the action to the district court in South Carolina. The court denied the corporation's motion and held that the brokers met their burden of establishing a prima facie showing of a transaction between the brokers and the corporation that was sufficient to confer jurisdiction over the corporation under N.Y. C.P.L.R. 302(a)(1), that the corporation's convenience was not the appropriate test for determining whether a change of venue was proper, and that the corporation was not entitled to a transfer of the action.
OUTCOME: The court denied the corporation's motion to dismiss or transfer the brokers' action to recover a commission owed by the corporation for the brokers' work in securing financing for the corporation for the construction of an adult community.
CORE TERMS: personal jurisdiction, negotiation, financing, loan commitment, purposeful, co-broker, lack of personal jurisdiction, motion to dismiss, confer, trip, construction loan, physical presence, choice of forum, prima facie, inconvenience, presentation, convenience, convenient, transacted, threshold, juncture, securing, renewal, principal place of business, substantially different, doing business, telephone, litigate, isolated
LexisNexis(R) Headnotes Hide Headnotes
Civil Procedure > Jurisdiction > Personal Jurisdiction & In Rem Actions > Personal Jurisdiction
HN1 N.Y. C.P.L.R. 302(a)(1) provides for personal jurisdiction for New York courts over nondomicilaries who transact any business within the state. More Like This Headnote
Civil Procedure > Jurisdiction > Personal Jurisdiction & In Rem Actions > Personal Jurisdiction
HN2 In order for the plaintiff to assert personal jurisdiction over defendant pursuant to N.Y. C.P.L.R. 302(a)(1), they must establish not only that the defendant transacted business in New York, but also that the cause of action arises out of that business. Moreover, any exercise of jurisdiction by a court under this section must be based upon sufficient minimum contacts to satisfy the constitutional requirements of due process. While the plaintiffs have the burden of sustaining their assertion of personal jurisdiction, for purposes of the defendant's motion to dismiss for lack of personal jurisdiction, the pleadings and affidavits are to be construed in the light most favorable to the plaintiffs as the non-moving parties. More Like This Headnote
Civil Procedure > Jurisdiction > Personal Jurisdiction & In Rem Actions > Personal Jurisdiction
HN3 Where the factual issues underlying the issue of personal jurisdiction will play a material role in resolving the merits of the dispute, the plaintiff need only show threshold jurisdiction sufficient to demonstrate the fairness of allowing the suit to continue. More Like This Headnote
Civil Procedure > Jurisdiction > Personal Jurisdiction & In Rem Actions > Personal Jurisdiction
HN4 In applying personal jurisdiction under N.Y. C.P.L.R. 302(a)(1), the New York courts have determined that even a single, brief visit to New York may amount to transaction of business upon which jurisdiction can be based. The relevant inquiry is whether a defendant has performed purposeful acts in New York in relation to the contract albeit preliminary or subsequent to its formation. More Like This Headnote
Civil Procedure > Jurisdiction > Personal Jurisdiction & In Rem Actions > Personal Jurisdiction
HN5 It is the quality, and not the quantity, of New York contacts that determine the issue of personal jurisdiction over a defendant; even an isolated contact, if sufficiently meaningful, is enough to confer jurisdiction under N.Y. C.P.L.R. 302(a)(1). More Like This Headnote
Civil Procedure > Jurisdiction > Personal Jurisdiction & In Rem Actions > Personal Jurisdiction
HN6 Physical presence alone does not automatically give rise to personal jurisdiction under N.Y. C.P.L.R. 302(a)(1). More Like This Headnote
Civil Procedure > Jurisdiction > Personal Jurisdiction & In Rem Actions > Personal Jurisdiction
HN7 In determining personal jurisdiction over a defendant, the New York courts have distinguished between casual visits in which a defendant is merely passing the time of day with a plaintiff in New York and purposeful acts taken in relation to the contract. The court must be satisfied not merely that a meeting took place in New York but that the discussions there were intended to further the transaction at issue. More Like This Headnote
Civil Procedure > Venue > Change of Venue in Federal Courts
HN8 28 U.S.C.S. § 1404(a) states that for 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. More Like This Headnote
Civil Procedure > Venue > Change of Venue in Federal Courts
HN9 Although a lesser showing of inconvenience is required for a 28 U.S.C.S. § 1404(a) transfer than for a dismissal under the earlier doctrine of forum non conveniens, a plaintiff's choice of forum is still entitled to considerable weight. Thus, a plaintiff's choice of forum will not be disturbed unless the defendant clearly shows that the proposed transferee court is a more convenient one and that the interests of justice would be better served there. More Like This Headnote
COUNSEL: [*1]
HALPERIN, SHIVITZ, EISENBERG, SCHNEIDER & GREENAWALT, ESQS., 11 East 44th Street, New York, New York 10017, WILLIAM S. GREENAWALT, ESQ., ROBERT RUESCHER, ESQ., for Plaintiffs
DEUTSCH & SCHNEIDER, ESQS.
DEUTSCH & SCHNEIDER, ESQS., 3450 Fulton Street, Brooklyn, New York 11208, SIDNEY SCHNEIDER, ESQ., for Defendant
OPINIONBY: CONNER
OPINION: OPINION AND ORDER
CONNER, D.J.:
Plaintiffs Nathan Schwartz (Schwartz") and Barry J. Levien ("Levien") have sued defendant Wamsley Development, Inc. ("Wamsley Inc.") seeking to recover $72,000 in commissions allegedly owed plaintiffs for their efforts in securing a construction loan for defendant. The case is currently before the Court on defendant's motion to dismiss the complaint for lack of personal jurisdiction, Rule 12(b)(2), F.R.Civ.P., or, alternatively, to transfer the case to the District Court for the District of South Carolina for the convenience of the parties and witnesses. 28 U.S.C. § 1404(a). For the reasons stated below, the motion is denied in all respects.
Background
The parties have submitted affidavits setting forth their respective versions of the facts, most of which are not seriously disputed and can be quickly summarized. [*2] Plaintiffs Levien and Schwartz are licensed real estate brokers doing business in New York. Wamsley, Inc., a company incorporated and doing business in South Carolina, is engaged in certain construction projects. The instant dispute involves Wamsley Inc.'s attempts to obtain financing for construction of the Granville Club, an adult residential community in Hilton Head, South Carolina.
In December of 1981, Schwartz met with Thomas Wamsley ("Wamsley"), president of Wamsley Inc. in Hilton Head, where they discussed the possibility of procuring financing for the project. On January 4, 1982, after Schwartz had returned to New York, Wamsley wrote to him stating that he would be available to meet with any potential investors. Wamsley also sent Schwartz some additional information about the Granville Club. During the next few months plaintiffs pursued various financing possibilities for defendant but communications between the parties were limited to telephone calls and letters between New York and South Carolina.
On March 15, however, plaintiffs and their co-broker, Pergolis-Swartz, obtained a construction loan commitment for Wamsley Inc. from Southern Investors Management Company, [*3] Inc. ("SIMCO"), a Louisiana corporation with its principal place of business in Baton Rouge, Louisiana. Plaintiffs claim that this commitment, which is the basis for the lawsuit, incorporated terms and conditions that Wamsley Inc. had indicated were acceptable to it. Wamsley was notified of this development and agreed to come to New York on March 18 to sign the loan documents.
The parties vehemently disagree about the substance of the March 18 meeting. Wamsley claims that he made the trip on Schwartz's representation that plaintiffs had secured a mortgage commitment for $3,600,000 at two percent above prime, with all up-front points to be paid from the loan proceeds. When he arrived at the meeting, however, he found that the loan was based on substantially different terms than he allegedly had been led to believe the commitment contained. Specifically, Wamsley asserts that he could not accept, nor had he ever agreed to, the requirement of an interest payment at closing that could not be funded by the loan. Defendant further claims that it was surprised by the provision giving the lender equity participation during the first phase of development. According to Wamsley, he immediately [*4] informed Schwartz that the loan commitment was unacceptable and that he would have to review it in South Carolina with his counsel. Wamsley firmly maintains that at no time during the meeting did he engage in any substantive discussions or negotiations concerning the loan.
Plaintiffs, on the other hand, contend that the March 18 meeting involved substantial negotiations over the loan commitment. According to the affidavit of Gerald Swartz, plaintiffs' co-broker, n1 the meeting lasted about two hours, during which time Wamsley raised no objections to the loan's essential terms. Rather, Swartz states that Wamsley thoroughly reviewed the documents and discussed at length approximately ten contractual terms, including provisions dealing with the release of individual condominium units from the mortgage, whether SIMCO would require performance bonds from subcontractors and how the loan proceeds would be allocated and disbursed. Although Wamsley isolated provisions that he wished to review with his lawyer, Swartz claims that none of those terms dealt with the loan's major requirements. In Swartz's opinion, the negotiations were substantial in that they narrowed the items of difference [*5] between SIMCO and Wamsley and, apparently, advanced the finalization of the loan.
n1 Swartz is vice president of Pergolis-Swartz, Inc., which was employed by plaintiffs a co-broker to assist in securing the loan for Wamsley. Pergolis-Swartz has released plaintiffs from all claims arising from the Wamsley transaction and is not a party to this action.
After Wamsley's return to South Carolina, he submitted a counterproposal to the commitment containing substantially different terms. This proposal was not agreeable to SIMCO, and as a result the loan was never made. Plaintiffs now seek recovery of their two percent commission on that loan.
Discussion
Defendant seeks dismissal of the complaint on the ground that personal jurisdiction over it is lacking. Wamsley Inc. has its principal place of business in Hilton Head, South Carolina and neither is registered to do nor does any business in New York. n2 Accordingly, the only conceivable basis for personal jurisdiction over defendant is HN1N.Y.C.P.L.R. § 302(a)(1), which provides for personal jurisdiction over nondomicilaries who "transact any business within the state. . . ." n3
n2 Defendant does not maintain an office, telephone or sales office of any kind within the state.
n3 New York law controls this Court's exercise of personal jurisdiction in a diversity case. E.g., Aluminal Industries, Inc. v. Newtown Commercial Associates, 89 F.R.D. 326, 328 (S.D.N.Y. 1980). [*6]
HN2In order for plaintiffs to assert personal jurisdiction over defendant pursuant to Section 302(a)(1), they must establish not only that Wamsley Inc. transacted business in New York, but also that the cause of action arises out of that business. E.g., Chertook v. Ethyl Corp. of Canada, 341 F. Supp. 1251, 1254 (S.D.N.Y. 1972). Moreover, any exercise of jurisdiction by a court under this section must be based upon sufficient "minimum contacts" to satisfy the constitutional requirements of due process. See generally International Shoe Co. v. Washington, 326 U.S. 310 (1945). While plaintiffs have the burden of sustaining their assertion of personal jurisdiction, for purposes of this motion, the pleadings and affidavits are to be construed in the light most favorable to plaintiffs as the non-moving parties. See Freeman v. Gordon and Breach, Science Publishers, Inc., 398 F. Supp. 519, 520 (S.D.N.Y. 1975).
In the present case, plaintiffs rely on Wamsley's presence and participation at the March 18 meeting as a "purposeful activity" giving rise to personal jurisdiction over defendant. Clearly, the parties have offered entirely incompatible versions of what occurred at that meeting. Wamsley [*7] asserts that there was really no meeting at all; that as soon as he saw the loan commitment he told plaintiffs he could not accept it and returned to South Carolina to confer with counsel before submitting a counter-proposal. In contrast, plaintiffs have submitted Swartz's affidavit in which he describes the meeting as involving substantial negotiations and discussion about the loan.
At this point, however, the Court need not resolve this factual dispute. HN3Where, as here, the factual issues underlying the issue of personal jurisdiction will play a material role in resolving the merits of the dispute, the plaintiff need only show "threshold" jurisdiction sufficient to demonstrate the fairness of allowing the suit to continue. Gazoul v. International Management Services, Inc., 398 F. Supp. 307, 309 (S.D.N.Y. 1975). Clearly, the facts as to the substance and extent of the March 18 meeting will bear on whether the parties entered into a contract and whether defendant subsequently breached that agreement by refusing to accept the loan agreement as presented. Accordingly, plaintiffs at this juncture need only establish a prima facie showing of a transaction sufficient to confer personal [*8] jurisdiction. See United States v. Montreal Trust Co., 358 F.2d 239, 242 (2d Cir.), cert. denied, 384 U.S. 919 (1966).
On this record, the Court is satisfied that plaintiff has met its initial burden. If plaintiffs' account of the events is true, then personal jurisdiction over Wamsley Inc. is clearly proper under Section 302(a)(1). HN4In applying that statute, the New York Court of Appeals has determined that even a single, brief visit to New York may amount to "transaction of business" upon which jurisdiction can be based. See George H. Reiner & Co. v. Schwartz, 41 N.Y.2d 648, 394 N.Y.S.2d 844 (1977). The relevant inquiry is whether defendant has performed purposeful acts in New York in relation to the contract albeit preliminary or subsequent to its formation. See Longines-Wittnauer Watch Co. v. Barnes & Reinecke, Inc., 15 N.Y.2d 443, 261 N.Y.S.2d 8, cert. denied, 382 U.S. 905 (1965).
In Reiner, supra, the New York Court of Appeals determined that jurisdiction was proper over a defendant whose only activity in New York involved the negotiation of his employment contract here. 41 N.Y.2d at 649; 394 N.Y.S.2d at 848. In reaching this conclusion, the court emphasized the nature [*9] of the defendant's admittedly brief visit in the state and noted that the purposeful activity in New York was intimately connected with the establishment of a contractual relationship. Id. at 654; 394 N.Y.S.2d at 846. Thus, under Reiner, HN5it is the quality, and not the quantity, of New York contacts that determine the issue; even an isolated contact, if sufficiently meaningful, is enough to confer jurisdiction under Section 302(a)(1). See Id.; see also American Contract Designers v. Cliffside, Inc., 458 F. Supp. 735, 739 (S.D.N.Y. 1979) (jurisdiction proper under § 302(a)(1) based on defendants' two visits to New York even though no negotiations involved, where sole purpose of visits was in furtherance of contract); Development Direction, Inc. v. Zachary, 430 F. Supp,. 783, 785 (S.D.N.Y. 1976) (defendant subject to personal jurisdiction based on trip to New York to review presentation, which was critical aspect of transaction, and on trips by defendant's agent to address labor problems arising out of transaction); Mendelson v. Fleischmann, 386 F. Supp. 436, 438-39 (S.D.N.Y. 1973) (defendant-building owners who attended meeting in New York at which plaintiff negotiated terms of lease [*10] with tenants "transacted business" New York under § 302(a)(1)).
Although defendant is quite correct in its argument that HN6physical presence alone does not automatically give rise to personal jurisdiction under Section 302(a)(1), see Presidential Realty Corp. v. Michael Square West Ltd., 44 N.Y.2d 672, 673, 405 N.Y.S.2d 36, 37 (1978) ("physical presence alone cannot talismanically transform any and all business dealings into business transactions under CPLR 302"), plaintiff's version of the events goes far beyond mere presence.
HN7The New York Court of Appeals has distinguished between "casual visits" in which the defendant is mrely "passing the time of day" with a plaintiff in New York and "purposeful acts [taken] in relation to the contract." See Reiner, supra, 41 N.Y.2d at 654 (distinguishing McKee Electric Co. v. Rauland-Borg Corp., 20 N.Y.2d 377, 283 N.Y.S.2d 34 (1967)). Under this authority the court must be satisfied not merely that a meeting took place in New York but that the discussions there were intended to further the transaction at issue. See Presidential Realty Corp., supra, 44 N.Y.2d at 673, 405 N.Y.S.2d at 38 (court lacked jurisdiction over nonresident defendant [*11] under § 302(a)(1) despite fact that meeting held in New York at which defendant signed modification letter and agreement; court could place no reliance on any attendant negotiations at meeting since no proof offered by one having personal knowledge of fact or extent of negotiations).
In the present case, unlike Presidential Realty Corp., there is evidence tending to show that the meeting involved substantial and serious negotiation concerning the loan commitment. For example, Schwartz's affidavit states that the parties spent about two hours going through the various terms of the loan documents. Based on plaintiffs' version of the facts, the primary, if not sole, purpose for Wamsley's visit to New York was to obtain financing for his project, which is the basis of the alleged agreement between the parties. If plaintiffs' version of the facts is true, defendant thrust himself into New York for the purpose of obtaining plaintiffs' assistance with the financing and his acts while here directly furthered that end.Such activity evidences a voluntary invocation of and submission to the laws of New York, see Development Direction, Inc., supra, 430 F.Supp. at 786, and invokes the jurisdiction [*12] of this Court. See Id.
While this evidence is obviously not dispositive of the ultimate issue in light of Wamsley's affidavit to the contrary, plaintiffs are not required to win the case at this stage. See United States v. Montreal Trust Co., supra, 358 F.2d at 24. The Court concludes that plaintiffs have satisfied their burden of establishing "threshold" jurisdiction by a prima facie showing of a transaction sufficient to confer personal jurisdiction. See id.; see also Cranston Print Work Company v. Brockman International A.G., et al., No. 81 Civ. 1350(WCC), slip op. at 10 (S.D.N.Y. July 10, 1981). Accordingly, defendant's motion to dismiss for lack of personal jurisdiction is denied. The denial is without prejudice to renewal of the motion by defendant following a more complete presentation of the relevant facts at trial.
Defendant alternatively requests that the Court transfer the action to the District court for the District of South Carolina pursuant to 28 U.S.C. § 1404(a). HN8Section 1404(a) states 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 [*13] it might have been brought.
HN9Although "a lesser showing of inconvenience" is required for a Section 1404(a) transfer than for a dismissal under the earlier doctrine of forum non conveniens, Norwood v. Kirkpatrick, 349 U.S. 29, 32 (1955), a plaintiff's choice of forum is still entitled to considerable weight. A. Olnick & Sons v. Dempster Brothers, Inc., 365 F.2d 439 (2d Cir. 1966). Thus, a plaintiff's choice of forum will not be disturbed unless the defendant clearly shows that "the proposed transferee court is a more convenient one and that the interests of justice would be better served there." Schneider v. Sears, 265 F. Supp. 257, 263 (S.D.N.Y. 1967).
Defendant has failed to make such a showing here. Rather, Wamsley Inc. has only established that it would be more convenient for defendant to litigate the matter in South Caorlina than it would be to litigate it here. But that is not the test. See id. Both plaintiffs live and work in this state and they plan to call witnesses from this area at trial. n4 While defendant has named five residents of South Carolina that it intends to call as witnesses, there is no explanation of the relevance or importance of their testimony.Nor [*14] is there any elaboration on defendant's assertion that all the relevant documents are in South Carolina.
n4 Specifically, Swartz and Richard Pergolis, plaintiffs' co-brokers, live and work in the New York City metropolitan area.
Thus, because it appears at this juncture that a transfer would merely shift the burden of inconvenience from one party to the other, n5 the Court declines to exercise its discretion to transfer the case pursuant to Section 1404(a).
n5 Insofar as defendant objects to producing witnesses in New York for discovery purposes, I would note that it is the Court's long-standing policy not to require an out-of-state defendant to appear for a deposition in New York.
Conclusion
Defendant's motion to dismiss for lack of personal jurisdiction is denied without prejudice. The motion to transfer under Section 1404(a) is also denied without prejudice to its renewal upon a proper showing. The parties are directed to appear for a pretrial conference on April 15, 1983 at 9:30 A.M. in Room 608 of the U.S. Courthouse.
SO ORDERED.