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France and Singapore Corps prof of economics served in Philadelphia | Lack of personal jurisdiction

Krepps v. Reiner
U.S. DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

Judge Sweet

Defendant Insead (hereinafter “Insead”) has moved for dismissal of the complaint filed by plaintiff Matthew B. Krepps, pro se, (“Krepps”) based on: (1) insufficient service of process under Rule 12(b)(5) and Rule 4, Fed. R. Civ. P.; and (2) lack of personal jurisdiction pursuant to Rule 12(b)(2), Fed. R. Civ. P. Defendant further moves for sanctions against plaintiff, pursuant to Rule 11, Fed. R. Civ. P. For the reasons set forth below, the motion to dismiss is granted and the motion for sanctions deferred. In view of Krepps’ pro se status, entry of judgment will be deferred for thirty days to permit Krepps to make a further factual submission or to initiate jurisdictional discovery.

Prior Proceedings

Plaintiff filed his complaint on January 6, 2005, commencing this action against defendant Edward Reiner (“Reiner”), who is alleged to be a New York resident, and Insead, which is alleged to be an association incorporated under the laws of Singapore and France, with its principal place of business in Singapore and Fountainebleau. The initial complaint alleged six causes of action: fraud, fraudulent omission, fraud by Reiner, tortious interference with business relations, quantum meruit and unjust enrichment. An amended complaint, filed on April 28, 2005, added a cause of action for copyright infringement.

Insead moved to dismiss the complaint on grounds of forum non conveniens, waiver, res judicata, judicial estoppel, laches, lack of jurisdiction, and failure of proper service. The motion was heard and marked fully submitted on March 23, 2005.

Insead moved for sanctions against Krepps on March 30, 2005. Krepps opposed this motion on April 14, 2005, to which Insead responded on April 25, 2005. The motion was taken on submission on May 11, 2005.

The Facts

The Facts are set forth in the statements of the parties and are not in dispute except as noted below. All well-pleaded allegations are accepted as true for the purpose of this motion. See Chambers v. Time Warner, Inc., 282 F.3d 147, 153 (2d Cir.2002). The following statements do not constitute findings of the Court.

This is the third action commenced between Krepps, the company solely owned by Krepps named “Economist’s Advocate” (hereinafter “EA”), and Insead. See Economist’s Advocate LLC v. Cognitive Arts Corp., No. 01 Civ. 9468 (RWS), 2004 WL 728874 (S.D.N.Y. Apr. 6, 2004); see Economist’s Advocate LLC v. Cognitive Arts Corp., No. 01 Civ. 9468(RWS), 2004 WL 1878795 (S.D.N.Y. Aug. 23, 2004). Familiarity with the factual and procedural history set forth in both of these opinions is presumed.

The second action between these parties (hereinafter the “EA” action) was resolved at trial with Insead ultimately satisfying a jury verdict, plus interest and costs, by making a wire payment of $340,000 to EA’s counsel. The instant action (hereinafter “Krepps II”) was filed by Krepps one week after Insead made the above-referenced wire transfer.

Discussion

In addressing the present motion, the Court is mindful that the plaintiff is proceeding pro se and that his submissions should be held to “less stringent standards than formal pleadings drafted by lawyers . . . ” Hughes v. Rowe, 449 U.S. 5, 9, 101 S.Ct. 173, 66 L.Ed.2d 163 (1980) (quoting Haines v. Kerner, 404 U.S. 519, 520, 92 S.Ct. 594, 30 L.Ed.2d 652 (1972)); see also Ferran v. Town of Nassau, 11 F.3d 21, 22 (2d Cir.1993). Indeed, district courts should “read the pleadings of a pro se plaintiff liberally and interpret them to raise the strongest arguments they suggest.” McPherson v. Coombe, 174 F.3d 276, 280 (2d Cir.1999) (quoting Burgos v. Hopkins, 14 F.3d 787, 790 (2d Cir.1994)). Nevertheless, pro se status does not exempt a party from compliance with relevant rules of procedural and substantive law. Traguth v. Zuck, 710 F.2d 90, 95 (2d Cir.1983) (quotations omitted).

A. Standard of Review

A motion to dismiss pursuant to Rule 12 must be denied “unless it appears beyond doubt that the plaintiff can prove no set of Facts in support of his claim which would entitle him to relief.” Scheuer v. Rhodes, 416 U.S. 232, 236 (1974) (quoting Conley v. Gibson, 355 U.S. 41, 45-46 (1957)). For purposes of a Rule 12 motion, all well pleaded allegations are accepted as true, and all inferences are drawn in favor of the pleader. Mills v. Polar Molecular Corp., 12 F.3d 1170, 1174 (2d Cir.1993).

B. Insufficient Service of Process

Insead contends that service of process was defective pursuant to Rule 4 of the Federal Rules of Civil Procedure. In order to properly serve Insead in this case, Krepps had to comply with the requirements for service set forth in the Rule 4(h)(1), Fed. R. Civ. P., which establishes that service is effected upon a corporation or association “by delivering a copy of the summons and of the complaint to an officer, a managing or general agent, or to any other agent authorized by appointment or law to receive service of process . . . ” See J. & L. Parking Corporation, Inc. v. United States, 834 F. Supp. 99, 101 (S.D.N.Y. 1993).

Rule 4(h)(1) further provides that service upon a corporation may be made “in the manner prescribed for individuals by subdivision (e)(1) . . . .” Fed. R. Civ. P. Rule 4(h)(1). Rule 4(e)(1), in turn, provides that service may be made “pursuant to the law of the state in which the district court is located, or in which service is effected . . . .” Fed. R. Civ. P. Rule 4(e)(1). Section 311(1) of the New York Civil Practice Law and Rules provides that personal service may be effected by delivery of the documents to “an agent authorized by appointment to receive process.” N.Y.C.P.L.R. §311(1).

To demonstrate adequate service, Krepps has relied upon his service on Timothy Van Zandt, an Insead professor of economics in a hotel lobby in Philadelphia. (Van Zandt Decl. ¶2). However, Insead has established by affidavit that Van Zandt is not a managing agent of Insead and is not authorized to accept service. (Van Zandt Dec. ¶3, Roudoux Decl. March 8, 2005, ¶7.)

Krepps has failed to establish by qualified evidence that service upon Van Zandt effected proper service upon Insead in satisfaction of Rule 4(h)(1), Fed. R. Civ. P. The motion to dismiss the complaint for insufficient service of process is therefore granted.

C. Jurisdiction Has Not Been Established

Insead contends that Krepps’s complaint should be dismissed for lack of personal jurisdiction pursuant to Rule 12(b)(2), Fed. R. Civ. P., arguing that Krepps has not shown that Insead has sufficient contacts to the forum to subject it to jurisdiction.

Plaintiffs bear the burden of establishing that the court has jurisdiction over a defendant when served with a Rule 12(b)(2) motion to dismiss. DiStefano v. Carozzi North American Inc., 286 F.3d 81, 84 (2d Cir.2001); Robinson v. Overseas Military Sales Corp., 21 F.3d 502, 507 (2d Cir.1994). Because an evidentiary hearing has not been held, the plaintiffs need only make a prima facie showing of jurisdiction through the complaint’s allegations and affidavits in order to defeat the motion to dismiss. CutCo Indus., Inc. v. Naughton, 806 F.2d 361, 365 (2d Cir.1986); Network Enterprises, Inc. v. APBA Offshore Prods. Inc., 01 Civ. 11765, 2002 WL 31050846, at 8 (S.D.N.Y. Sept. 12, 2002).

The Facts must be construed in the light most favorable to plaintiffs. Cooper, Robertson & Partners L.L.P. v. Vail, 143 F.Supp.2d 367, 370 (S.D.N.Y.2001) (citing Hoffritz for Cutlery Inc. v. Amajac, Ltd., 763 F.2d 55, 57 (2d Cir.1985)). In assessing whether personal jurisdiction is authorized, the court must look first to the long-arm statute of the forum state. Bensusan Rest. Corp. v. King, 126 F.3d 25, 27 (2d Cir. 1997). If the exercise of jurisdiction is appropriate under that statute, the court must decide whether such exercise comports with the requisites of due process. Id.

In a diversity action, the law of the state in which the district court sits governs personal jurisdiction over a nonresident defendant. Fed. R. Civ. P. 4(k)(1)(A), United States v. First National City Bank, 379 U.S. 378, 381-82 (1965). Here, Krepps argues that Insead is amenable to suit under New York’s corporate presence doctrine and under its long arm statute. See N.Y. C.P.L.R. §§301, 302(a)(1). In the alternative, Krepps further alleges that this Court has jurisdiction over Insead as a tort feasor under N.Y. C.P.L.R. §302(a)(2).

Corporate Presence Doctrine

Pursuant to caselaw codified by section 301 of New York’s Civil Practice Law and Rules (“CPLR”), an unlicensed foreign corporation is subject to the general personal jurisdiction of the courts of New York if such corporation is “doing business” in the state. See Landoil Resources Corp. v. Alexander & Alexander Servs., Inc., 77 N.Y.2d 28, 33, 563 N.Y.S.2d 739, 741, 565 N.E.2d 488, 490 (1990); accord Wiwa v. Royal Dutch Petroleum Co., 226 F.3d 88, 95 (2d Cir.2000). A defendant corporation is deemed to be “doing business” in New York if it has engaged in “such a continuous and systematic course of [business] here that a finding of its ‘presence’ in this jurisdiction is warranted[.]” Landoil, 77 N.Y.2d at 33, 563 N.Y.S.2d at 741, 565 N.E.2d at 490 (citing Laufer v. Ostrow, 55 N.Y.2d 305, 309-310, 449 N.Y.S.2d 456, 458, 434 N.E.2d 692, 694 (1982); Delagi v. Volkswagenwerk AG, 29 N.Y.2d 426, 430- 31, 328 N.Y.S.2d 653, 655-56, 278 N.E.2d 895, 896 (1972); Frummer v. Hilton Hotels Int’l, 19 N.Y.2d 533, 536, 281 N.Y.S.2d 41, 43, 227 N.E.2d 851, 853 (1967).

Insead argues that it cannot be found to have been “doing business” in New York because it possessed “none of the factors indicative of presence” in New York. Mareno v. Rowe, 910 F.2d 1043, 1046 (2d Cir.1990). That is, Insead states that it had no offices, representatives, employees, business ties, presence or activities in the State of New York. See also Fremay, Inc. v. Modern Plastic Mach. Corp., 15 A.D.2d 235, 241-42, 222 N.Y.S.2d 694, 700-01 (1st Dept.1961) (holding that for the purpose of determining whether defendant corporation was doing business in New York, it was of “no particular moment” that (1) the defendant’s corporate officers resided in New York and (2) that such officers used their personal offices for incidental transactions relating to their status as officers/-investors.)

Long Arm Jurisdiction

Section 302(a)(1) gives the courts of New York personal jurisdiction over a cause of action involving a nondomiciliary defendant who, in person or through an agent, “transacts any business within the state [,]” provided that the cause of action arises from such transaction. C.P.L.R. §302(a)(1). For the purpose of determining whether a given foreign corporation defendant transacted business in New York, “what counts is not the quantity of contacts with New York, but rather the nature and quality of the contacts.” Lawrence Wisser & Co., Inc. v. Slender You, Inc., 695 F.Supp. 1560, 1563 (S.D.N.Y.1988). This inquiry focuses on whether the defendant “‘engaged in some purposeful activity [here] . . . in connection with the matter in suit.'” Parke-Bernet Galleries, Inc. v. Franklyn, 26 N.Y.2d 13, 16, 308 N.Y.S.2d 337, 340, 256 N.E.2d 506, 507 (1970) (quoting Longines-Wittnauer Watch Co. v. Barnes & Reinecke, 15 N.Y.2d 443, 457, 261 N.Y.S.2d 8, 18-19, 209 N.E.2d 68, 75 (1965)). Section 302(a)(1) requires purposeful activities within New York and a “substantial nexus between the transaction of business and the cause of action sued upon.” Kahn Lucas Lancaster, Inc. v. Lark Int’l Ltd., 956 F. Supp. 1131, 1134 (S.D.N.Y. 1997). Failure to satisfy either requirement mandates dismissal of the claim for lack of jurisdiction.

The relationship between the business conducted in New York and the claims alleged by a plaintiff must be direct. See Jacobs v. Felix Bloch, 160 F. Supp. 2d 722, 739 (S.D.N.Y. 2001) (holding no personal jurisdiction over plaintiff’s copyright infringement claim despite defendant engaging in numerous transactions in New York related to the copyright infringement that was the substance of the suit since these transactions were not directly tied to the plaintiff’s claims); see Pieczenik v. Dyax Corporation, 265 F.3d 1329, 1333-34 (Fed. Cir. 2001) (holding no personal jurisdiction over patent infringement claim because mere existence of a contract between foreign defendant and a corporation domiciled in New York was insufficient to prove that foreign defendant transacted business in New York which had a nexus to the induced infringement claims).

Krepps, by memorandum, has alleged that Insead is registered to do business in New York, solicits funds in New York, maintains a bank account in New York, and has sold its work product in New York (Krepps Memorandum, pp. 22-23.) As stated earlier, to prevail in the pre-discovery stage, Krepps must make a prima facie showing of jurisdiction, and, under a proper Rule 12(b)(2) analysis, all Facts must be construed in the light most favorable to Krepps. However, despite this standard, Krepps fails to develop a record that yields a conclusion of prima facie jurisdiction. Krepps provides no Facts to support his allegations that Insead conducted purposeful business activities within New York from which this suit arises, and such unsubstantiated statements1 do not establish a presence in New York under C.P.L.R. 302(a)(1). See Cutco Indus. at 365; Network Enterprises, Inc. at 8; Socialist Workers Party v. Attorney General of the United States, 375 F.Supp. 318, 322 (S.D.N.Y. 1974).

As the factual record fails to make the requisite showing of prima facie jurisdiction, section 302(a)(1) of the New York State long-arm statute does not confer personal jurisdiction to this Court over Insead in the instant matter.

Commission of a Tortious Act

New York’s long-arm statute also allows for personal jurisdiction over a non-domiciliary when that person or his or her agent:

(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 [or she] (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)(2)-(3) (McKinney 2001). To obtain jurisdiction under this section, the defendant must have been physically present in New York while committing the tort. Feathers v. McLucas, 15 N.Y.2d 443, 459, 261 N.Y.S.2d 8, 209 N.E.2d 68 (1965); see also Bensusan, 126 F.3d at 29 (denying jurisdiction under §302(a)(2) where acts were performed by persons physically present in Missouri even though injury may have been suffered in New York); Carlson v. Cuevas, 932 F.Supp. 76, 80 (S.D.N.Y.1996) (“To subject non-residents to New York jurisdiction under §302(a)(2), the defendant must commit the tort while he or she is physically in New York state.”).

The tortious act alleged by Krepps is, according to the allegation in the Seventh Cause of Action, that “Insead has infringed on my United States copyrights, including through sales in New York.” (Amended Complaint, at ¶39.) This naked assertion in the Seventh Cause of Action in the context of a motion to dismiss for lack of jurisdiction does not establish the commission of a tort in New York sufficient to establish jurisdiction under C.P.L.R. 302(a)(2). Conclusory allegations do not substitute for evidentiary Facts; again, Krepps fails to make a showing of prima facie jurisdiction.

For the foregoing reasons, Insead’s motion to dismiss the complaint for lack of personal jurisdiction will be granted.

Entry Of Judgment Will Be Deferred

Because of Krepps pro se status, he will be granted thirty days to submit any factual material or to initiate any jurisdictional discovery. It is well established in this circuit that prior to discovery, plaintiff can avoid Rule 12(b)(2) dismissal by making a prima facie showing that personal jurisdiction exists. Jazini by Jazini v. Nissan Motor Co., 148 F.3d 181, 184 (2d Cir.1998) (quoting Ball v. Metallurgie Hoboken-Overpelt, S.A., 902 F.2d 194, 197 (2d Cir.1990)); Hoffritz for Cutlery, Inc. v. Amajac, Ltd., 763 F.2d 55, 57 (2d Cir.1985).

Motion for Sanctions Will Be Deferred

Given this deferral, the motion for sanctions will also be deferred in the event that Krepps may be able to substantiate certain statements which have been the subject of the instant motion.

Conclusion

The motion to dismiss for lack of jurisdiction and failure of service are granted. Entry of judgment will be deferred for thirty (30) days.

It is so ordered.