RAKOFF v. ST. CLAIR, CPAS, P.C. et al
Filing
33
OPINION FILED. Signed by Judge Joseph E. Irenas on 3/12/13. (js)
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
MARTIN D. RAKOFF,
HONORABLE JOSEPH E. IRENAS
Plaintiff,
v.
CIVIL ACTION NO. 12-5996
(JEI/JS)
ST. CLAIR, CPAS, P.C., et al.,
OPINION
Defendants.
APPEARANCES:
BUDD LARNER,
By: Sonya M.
1500 John F.
Short Hills,
Counsel
P.C.
Longo
Kennedy Parkway, CN 1000
NJ 07078
for Plaintiff
ROYER COOPER COHEN BRAUNFELD L.L.C.
By: Barry L. Cohen
101 West Elm Street, Ste. 220
Conshohocken, PA 19428
Counsel for St. Clair, CPAS, P.C.
STERNS & WEINROTH, P.C.
By: Graig P. Corveleyn
50 West State Street, Ste. 1400
P.O. Box 1298
Trenton, NJ 08067
Counsel for Jeffrey Harrison, CPA
LIGHTMAN, MANOCHI
By: Gary Paul Lightman
Glenn A. Manochi
8 Ranoldo Terrace
Cherry Hill, NJ 08034
Counsel for Michael P. Rudy, CPA and Michael P. Rudy, CPA &
Associates
1
IRENAS, Senior District Judge:
Plaintiff Martin D. Rakoff initiated this action against
Defendants St. Clair, CPAs, P.C. (“St. Clair”); Jeffrey Harrison,
CPA; Michael P. Rudy, CPA; and Michael P. Rudy, CPA & Associates
(the “Rudy Firm”), alleging professional malpractice.1
The
Complaint asserts claims against all parties for negligence,
professional negligence, breach of fiduciary duty, and breach of
contract.
Pending before the Court are Defendant St. Clair’s
Motion to Dismiss the Complaint pursuant to Fed. R. Civ. P.
12(b)(6), and Defendants Rudy and the Rudy Firm’s (collectively
the “Rudy Defendants”) Motion to Dismiss the Complaint pursuant
to Fed. R. Civ. P. 12(b)(2) and 12(b)(6).
For the reasons
discussed below, St. Clair’s Motion will be denied, and the Rudy
Defendants’ Motion will be granted.
I.
In April 2008, Plaintiff retained St. Clair to prepare his
2007 personal income tax returns.
(Compl. ¶ 17.)
Plaintiff owned four residential properties.
At this time,
(Compl. ¶ 12.)
These properties were located in: Glenmore, Pennsylvania;
Poughkeepsie, New York; Ocean City, NJ; and New Middletown, Ohio.
(Compl. ¶¶ 12-15.)
Plantiff’s Complaint identifies the Ohio
1
Subject matter jurisdiction is based on diversity of citizenship. See
28 U.S.C. § 1332(a). Plaintiff is a citizen of Ohio, while Defendant St.
Clair is a citizen of Pennsylvania, Defendant Harrison is a citizen of New
York, and Defendant Rudy and his firm are citizens of Pennsylvania. (Compl.
¶ 4-8.) The amount in controversy is alleged to exceed $75,000. (Compl.
¶ 2).
2
residence as his current domicile (Compl. ¶ 12), and the New York
residence as his primary residence in 2007.
the New Jersey property in 2002.
Plaintiff purchased
(Pl.’s Aff. in Opp. to Rudy
¶ 5.)2
According to Plaintiff, while Plaintiff advised St. Clair
that he owned residential property in four states, St. Clair did
not discuss with Plaintiff his indicia of residency in each
state.
(Compl. ¶¶ 18-19.)
Instead, St. Clair allegedly
determined that Plaintiff’s smallest tax liability would be in
Pennsylvania, and therefore advised Plaintiff to claim
Pennsylvania as his residential state.
(Compl. ¶¶ 19-20.)
On
November 10, 2008, St. Clair allegedly filed resident
Pennsylvania and nonresident New York State personal income tax
returns for 2007 on Plaintiff’s behalf.
(Compl. ¶ 22.)
In December 2009, Plaintiff was notified by the New York
State Department of Taxation and Finance that his 2007
nonresident income tax return was the subject of an audit (the
“audit”).
(Compl. ¶ 24.)
Plaintiff retained Defendant Harrison
to advise him concerning the audit in January, 2010, and executed
a power of attorney with Harrison.
(Compl. ¶ 27.)
According to
Plaintiff, Harrison allegedly failed to communicate consistently
with Plaintiff regarding the audit.
2
(Compl. ¶ 32.)
Citations in this form are to the “Affidavit of Martin D. Rakoff in
Opposition to the Rudy Defendants’ Motion to Dismiss,” which is attached to
the Plaintiff’s “Brief in Opposition to the Rudy Defendants’ Motion to
Dismiss.”
3
Specifically, Plaintiff alleges that Harrison did not advise
Plaintiff about New York’s residency requirements (Compl. ¶ 28),
did not consent to residency related audit changes required by
the New York State Department of Taxation and Finance (Compl. ¶
29), failed to file an amended return in Pennsylvania indicating
Plaintiff’s non-resident status in that state and seeking a
return of unnecessarily paid taxes (Compl. ¶ 30), and failed to
inform Plaintiff of the statute of limitations for filing an
amended return in Pennsylvania, which expired in November 2011.
(Compl. ¶ 31).
As a result of Harrison’s alleged mishandling of Plaintiff’s
audit, Plaintiff hired Defendant Rudy to serve as a substitute
accountant in January 2011.
(Compl. ¶¶ 32, 36.)
Plaintiff
stated in an affidavit that prior to this hiring, Rudy had been
providing tax and accounting advice to Plaintiff on other matters
since the year 2000.
(Pl.’s Aff. in Opp. to Rudy ¶ 6.)
Plaintiff’s Complaint alleges that Rudy committed much of the
same misconduct as Harrison.
Specifically, Plaintiff alleges
that Rudy did not consent to residency related audit changes
required by the New York State Department of Taxation and Finance
(Compl. ¶ 37), did not file an amended tax return in Pennsylvania
(Compl. ¶ 39), and did not advise Plaintiff of the statute of
limitations for filing such an amended return. (Compl. ¶ 38.)
Rudy is a Pennsylvania Certified Public Accountant.
4
(Compl.
¶ 7.)
The Rudy Firm is located at 3521 E. Lincoln Highway in
Thorndale, Pennsylvania. The Rudy Defendants operate a website,
www.mrcpa.net.
The website includes information about the Rudy
Firm, such as employee biographies and general tax information.
(Pl.’s Br. in Opp. to Rudy, Ex. A-G.)
The website also includes
forms which visitors can use to contact the Rudy Firm, such as a
general contact form, a form for requesting a quote, and a form
for scheduling an appointment.
A-G.)
(Pl.’s Br. in Opp. to Rudy, Ex.
There is a link to the New Jersey Department of Taxation
on the bottom of a page entitled “Tax Information.”
in Opp. to Rudy, Ex.C.)
(Pl.’s Br.
This link is the only mention of New
Jersey on the Rudy Firm’s website.
The Rudy Firm’s website is accessible in all states,
including New Jersey.
However, Rudy stated in an affidavit that
he routinely rejects online inquiries from non-Pennsylvania
residents, and that less than one percent of the Rudy Firm’s
annual revenue is derived from the filing of New Jersey tax
returns.
(Rudy’s Second Aff. ¶¶ 13, 26).3
Plaintiff initiated the instant litigation by filing his
Complaint on September 24, 2012.
Defendant St. Clair filed a
3
Citations in this form are to the “Second Affidavit of
Michael P. Rudy and Michael P. Rudy, CPA & Associates in Further
Support of their Motion to Dismiss Plaintiff’s Complaint,”
attached to the Rudy Defendants’ “Reply Memorandum of Law in
Further Support of Their Motion to Dismiss Plaintiff’s
Complaint.”
5
Motion to Dismiss the Complaint for failure to state a claim on
November 29, 2012, and the Rudy Defendants filed a Motion to
Dismiss the Complaint for lack of personal jurisdiction and
failure to state a claim on December 28, 2012.
Plaintiff has
asked the Court to allow jurisdictional discovery if the Court
finds that Plaintiff has not satisfied his burden to show the
Court has personal jurisdiction over the Rudy Defendants.
(Pl.’s
Br. in Opp. to Rudy at 24.)
II.
A.
St. Clair’s Motion to Dismiss
Fed. R. Civ. P. 12(b)(6) Standard
Federal Rule of Civil Procedure 12(b)(6) provides that a
court may dismiss a complaint “for failure to state a claim upon
which relief can be granted.”
In order to survive a motion to
dismiss, a complaint must allege facts that raise a right to
relief above the speculative level.
Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 555 (2007); see also Fed. R. Civ. P.
8(a)(2).
While a court must accept as true all allegations in
the plaintiff’s complaint, and view them in the light most
favorable to the plaintiff, Phillips v. County of Allegheny, 515
F.3d 224, 231 (3d Cir. 2008), a court is not required to accept
sweeping legal conclusions cast in the form of factual
allegations, unwarranted inferences, or unsupported conclusions.
Morse v. Lower Merion Sch. Dist., 132 F.3d 902, 906 (3d Cir.
1997).
The complaint must state sufficient facts to show that
6
the legal allegations are not simply possible, but plausible.
Phillips, 515 F.3d at 234.
“A claim has facial plausibility when
the plaintiff pleads factual content that allows the court to
draw the reasonable inference that the defendant is liable for
the misconduct alleged.”
Ashcroft v. Iqbal, 129 S. Ct. 1937,
1949 (2009).
In deciding a motion to dismiss, the Court can only consider
the allegations contained in the Complaint, matters of public
record, orders, and exhibits attached to the Complaint.
See
Smajlaj v. Campbell’s Soup Co., 782 F. Supp. 2d 84, 92 (D.N.J.
2011) (citing Chester Cnty. Intermediate Unit v. Pennsylvania
Blue Shield, 896 F.2d 808, 812 (3d Cir. 1990)).
Consequently, in
cases where a defendant argues that a claim is barred by a
statute of limitations, “a court may dismiss an action if the
complaint shows facial noncompliance with the statute of
limitations.”
Wolk v. Olson, 730 F. Supp. 2d 376, 377 (E.D.P.A.
2010) (citing Jones v. Bock, 549 U.S. 199, 215 (2007), and
Oshiver v. Levin, Fishbein, Sedran & Berman, 38 F.3d 1380, 1385
n.1 (3d Cir. 1994)).
B.
Tort Claims Against St. Clair
Counts One, Four, and Ten of Plaintiff’s Complaint assert
tort claims against St. Clair.
Specifically, Count One alleges
ordinary negligence, Count Four alleges breach of fiduciary duty,
and Count Ten alleges professional negligence and malpractice.
7
(Compl. ¶¶ 42-47, 60-66, 99-107.)
these claims.
St. Clair seeks to dismiss
St. Clair argues that Pennsylvania law governs,
and that these claims are not timely under Pennsylvania’s two
year statute of limitations for tortious conduct.
Br. at 5-12.)4
(St. Clair’s
In response, Plaintiff argues that New Jersey law
governs, and that the claims are timely under New Jersey’s six
year statute of limitations.
10-12.)5
(Pl.’s Br. in Opp. to St. Clair at
Plaintiff further argues that even if Pennsylvania law
applies, his claims are timely.
(Pl.’s Br. in Opp. to St. Clair
at 13-15.)
The Court does not need to decide at this stage whether
Pennsylvania or New Jersey law applies because, either way, the
Court cannot dismiss Plaintiff’s tort claims.
Clearly, under New
Jersey law, Plaintiff’s claims are not time barred.
New Jersey
has a six year statute of limitations for accounting malpractice.
See N.J.S.A. § 2A:14-1; Arnold v. KPMG LLP, 945 A.2d 132, 145-46
(N.J. Super. Ct. Law Div. 2007).
on September 24, 2012.
Plaintiff filed his Complaint
Therefore, only claims accruing prior to
September 24, 2006 would be time barred.
In this case, Plaintiff
did not even retain St. Clair to prepare his tax returns until
4
Citations in this form are to St. Clair’s Brief in
Support of its Motion to Dismiss Plaintiff’s Complaint, filed on
November 29, 2012.
5
Citations in this form are to Plaintiff’s Brief in
Opposition to Defendant St. Clair, CPAS, P.C.’s Motion to Dismiss
the Complaint, filed on January 8, 2013.
8
April 2008, and all alleged malpractice occurred after that date.
(Compl. ¶ 17).
Under Pennsylvania law, tort claims for accounting
malpractice are subject to a two year statute of limitations.
See Pa. C.S.A. § 5524; Baehr v. Touche Ross & Co., 62 B.R. 793
(E.D.Pa. 1986).
Nonetheless, even assuming Pennsylvania law
governs Plaintiff’s tort claims, the Court cannot dismiss these
claims at this stage.
To determine when a statute of limitations begins to run,
Pennsylvania courts generally apply the occurrence rule.
See
Robbins & Seventko Orthopedic Surgeons, Inc. v. Geisenberger, 674
A.2d 244, 246 (Pa. Super. Ct. 1996).
Under the occurrence rule,
“the statute of limitations is ‘triggered upon the occurrence of
the alleged breach of duty.’” In re CITX Corp, Inc., 2004 WL
2850046, at *3 (quoting Bigansky v. Thomas Jefferson Univ.
Hospital, 658 A.2d 423, 426 (Pa. Super. Ct. 1995)); see also
Knopick v. Connelly, 639 F.3d 600, 607 (3d Cir. 2011) (“The
trigger for the accrual of a legal malpractice action is not the
realization of actual loss, but the occurrence of a breach of
duty.”).
In certain cases, however, the Pennsylvania courts recognize
exceptions to the occurrence rule which toll the statute of
limitations.
See Fine v. Checcio, 870 A.2d 850, 858 (Pa. 2005).
One such exception is the discovery rule.
9
Id.
“The discovery
rule originated in cases in which the injury or its cause was
neither known nor reasonably knowable.”
Id.
The purpose of the
discovery rule is “to exclude from the running of the statute of
limitations that period of time during which a party who has not
suffered an immediately ascertainable injury is reasonably
unaware he has been injured.”
Id.
As the discovery rule has
developed, “the salient point giving rise to its application is
the inability of the injured, despite the exercise of reasonable
diligence, to know that he is injured and by what cause.”
Id.
Reasonable diligence “is not an absolute standard, but is what is
expected from a party who has been given reason to inform himself
of the facts upon which his right to recovery is premised.”
Id.
Tolling under the discovery rule ceases when the plaintiff has
“sufficient critical facts to place him on notice that a wrong
has been committed against him and that prudence dictates further
investigation into the matter.”
Andritz Sprout-Bauer, Inc. v.
Beazer East, Inc., 12 F. Supp. 2d 391, 415 (M.D.Pa. 1998).
In the instant case, St. Clair concedes that the discovery
rule applies.
(St. Clair’s Br. at 9-10.)
However, St. Clair
argues that even under the discovery rule, Plaintiff should have
become aware of any alleged malpractice on December 6, 2009, when
he received a notice of audit from the New York State Department
of Taxation and Finance.
disagrees.
(St. Clair’s Br. at 10.)
The Court
As courts in at least one other jurisdiction have
10
recognized, there are “many different possible fact scenarios in
the cumbersome, maze-like world of taxes and accountants.”
Kennedy v. Goffstein, 815 N.E.2d 646, 650 (Mass. App. Ct. 2004).
Thus, while “in one case it might be readily apparent from an
audit letter that malpractice had been committed,” in other cases
“knowledge of negligence and consequent harm might become evident
after the audit was completed.”
Id.
The Complaint does not address whether Plaintiff became
aware of St. Clair’s malpractice when he was advised that his tax
return was going to be the subject of an audit.
Further, the
Complaint does not describe what Plaintiff was told by the New
York State Department of Taxation and Finance when he was advised
of the audit.
Consequently, the Court cannot determine from the
face of the Complaint whether in this case the audit letter
provided Plaintiff with “sufficient critical facts to place him
on notice” of St. Clair’s alleged malpractice.
Sprout-Bauer, 12 F. Supp. 2d at 415.
See Andritz
Therefore, St. Clair’s
Motion to Dismiss is denied as to Counts One, Four and Ten of
Plaintiff’s Complaint.
C.
Contract Claims Against St. Clair
Count Seven of the Complaint asserts a breach of contract
claim against St. Clair.
St. Clair argues that this claim must
be dismissed because Plaintiff materially breached the contract
by failing to pay St. Clair in 2007.
11
(St. Clair’s Br. at 12.)
Consequently, St. Clair argues that Plaintiff cannot claim that
St. Clair failed to perform under the contract.
(St. Clair’s Br.
at 12.)
The Complaint does not address at what point, if ever,
Plaintiff ceased paying St. Clair for preparing the 2007 tax
returns.
Addressing St. Clair’s argument would thus require the
Court to consider more than the allegations contained in the
Complaint, matters of public record, orders, and exhibits
attached to the Complaint.
See Smajlaj, 782 F. Supp. 2d at 92
(D.N.J. 2011) (citing Chester Cnty. Intermediate Unit, 896 F.2d
at 812 (3d Cir. 1990)).
Such considerations are inappropriate in
deciding a motion to dismiss under Fed. R. Civ. P. 12(b)(6).
Therefore, St. Clair’s Motion to Dismiss is denied as to Count
Seven of the Complaint.
III.
A.
Rudy Defendants’ Motion to Dismiss
Fed. R. Civ. P. 12(b)(2) Standard
Plaintiff bears the burden of presenting evidence
establishing a prima facie case of personal jurisdiction over
each defendant.
Miller Yacht Sales, Inc. v. Smith, 384 F. 3d 93,
94 (3d Cir. 2004).
“‘[P]laintiff must sustain its burden of
proof in establishing jurisdictional facts through sworn
affidavits and competent evidence. . . .
At no point may a
plaintiff rely on the bare pleadings alone in order to withstand
a defendant’s Rule 12(b)(2) motion to dismiss for lack of
12
personal jurisdiction.
Once the motion is made, plaintiff must
respond with actual proofs, not mere allegations.’”
Machulsky v.
Hall, 210 F. Supp. 2d 531, 537 (D.N.J. 2002) (quoting Patterson
v. Fed. Bureau of Investigation, 893 F.2d 595, 603-04 (3d Cir.
1990)).
The framework for analyzing jurisdiction over the parties is
well known.
A federal court sitting in New Jersey has
jurisdiction over the parties to the extent provided under New
Jersey state law.
See Fed. R. Civ. P. 4(e).
New Jersey courts
may exercise personal jurisdiction to the extent permitted by the
United States Constitution.
Miller Yacht Sales, 384 F. 3d at 96.
Due process requires that each defendant have “minimum
contacts” with the forum state (in this case New Jersey) and that
the Court’s exercise of jurisdiction over the parties comport
with “traditional notions of fair play and substantial justice.”
Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945).
“Minimum
contacts must have a basis in ‘some act by which the defendant
purposefully avails itself of the privilege of conducting
activities within the forum state, thus invoking the benefits and
protection of its laws.”
Asahi Metal Indust. Co. v. Sup. Ct. of
Cal., 480 U.S. 102, 109 (1987) (quoting Burger King Corp. v.
Rudzewicz, 471 U.S. 462, 475 (1985)).
Within this framework, personal jurisdiction may be examined
under two distinct theories: general and specific jurisdiction.
13
See Remick v. Manfredy, 238 F. 3d 248, 255 (3d Cir. 2001).
“General jurisdiction is based upon the defendant’s continuous
and systematic contacts with the forum and exists even if the
plaintiff’s cause of action arises from the defendant’s non-forum
related activities.”
Id. at 255 (citations omitted).
The Third
Circuit “requires a very high showing before a court may exercise
general jurisdiction.”
Snyder v. Dolphin Entertainers Ltd., 235
F. Supp. 2d 433, 437 (E.D.Pa. 2002) (citing Gehling v. St.
George’s School of Medicine, Ltd., 773 F. Supp. 2d 539, 542 (3d
Cir. 1985).
A “plaintiff must show significantly more than mere
minimum contacts to establish general jurisdiction.”
Nat’l Bank, 819 F.2d 434, 437 (3d Cir. 1987).
Provident
When evaluating a
business’s ties to a state for purposes of general jurisdiction,
“a court should not necessarily focus on the percentage of income
that a corporation derives from those affiliations; rather, the
court should look to the party’s ‘purposeful and extensive
availment’ of a forum.”
Molnlycke Health Care AB v. Dumex
Medical Surgical Products LTD., 64 F. Supp. 2d 448, 450 (E.D.Pa.
1999) (quoting Provident, 819 F.2d at 437).
Additionally, “[a]
court should also consider the degree to which a corporation’s
contacts with a given forum are ‘central to the conduct of its
business.’” Molnlycke, 64 F. Supp. 2d at 450 (quoting Provident,
819 F.2d at 438).
In contrast with general jurisdiction, “specific
14
jurisdiction is present only if the plaintiff’s cause of action
arises out of defendant’s forum-related activities, such that the
defendant should reasonably anticipate being haled into court in
that forum.”
Remick, 238 F.3d at 255 (citations omitted).
“A
‘relationship among the defendant, the forum, and the litigation’
is the essential foundation” of specific jurisdiction.
Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408,
414 (1984) (quoting Shaffer v. Heitner, 433 U.S. 186, 204
(1977)).
If it is determined that a defendant has purposefully
established minimum contacts with the forum state, then it
remains to be determined if exercise of specific jurisdiction
would be reasonable and “comport with notions of fair play and
substantial justice.”
Asahi Metal, 480 U.S. at 113.
This
determination requires evaluation of several factors, including
the burden on the defendant, the interest of the forum state in
resolving the dispute, and the plaintiff’s interest in obtaining
relief.
Id.
In cases involving an out of state defendant who operates a
website accessible in the forum state, whether the forum state
may exercise jurisdiction over the defendant depends on “the
nature and quality of commercial activity that the entity
conducts over the Internet.”
Toys “R” Us, Inc. v. Step Two,
S.A., 318 F.3d 446, 453 (3d Cir. 2003).
15
To assess the nature and
quality of such commercial activity, the Third Circuit has
adopted the framework outlined by the Western District of
Pennsylvania in Zippo Mfg. Co. v. Zippo Dot Com, Inc.
See
Spuglio v. Cabaret Lounge, 344 Fed. Appx. 724, 725 (3d Cir.
2009).
The Zippo court analyzed the commercial activity of
websites on a sliding scale, broadly classifying websites into
three categories:
At one end of the spectrum are situations where a
defendant clearly does business over the Internet. If
the defendant enters into contracts with residents of a
foreign jurisdiction that involve the knowing and
repeated transmission of computer files over the
Internet, personal jurisdiction is proper. At the
opposite end are situations where a defendant has
simply posted information on an Internet Web site which
is accessible to users in foreign jurisdictions. A
passive Web site that does little more than make
information available to those who are interested in it
is not grounds for the exercise personal jurisdiction.
The middle ground is occupied by interactive Web sites
where a user can exchange information with the host
computer. In these cases, the exercise of jurisdiction
is determined by examining the level of interactivity
and commercial nature of the exchange of information
that occurs on the Web site.
952 F. Supp. 1119, 1124 (W.D.Pa 1997) (internal citations and
quotations omitted).
Thus, under Zippo, “the mere operation of a commercially
interactive website should not subject the operator to
jurisdiction anywhere in the world.”
454.
Toys “R” Us, 318 F.3d at
Instead, “there must be evidence that the defendant
purposefully availed itself of conducting activity in the forum
16
state, by directly targeting its website to the state, knowingly
interacting with residents of the forum state via its web site,
or through sufficient other related contacts.”
Id.
While in Zippo the Western District of Pennsylvania utilized
the sliding scale framework to determine whether it had specific
jurisdiction over the plaintiff’s claim, “a court may also apply
the Zippo framework in cases where the plaintiff asserts general
jurisdiction.”
Roscoe v. P.O.W. Network, 2010 WL 3906793, at *5
(D.N.J. 2010).
However, “[t]he advent of the internet did not
alter the Third Circuit’s requirement that the plaintiff make a
very high showing before a court exercises general personal
jurisdiction over a non-resident defendant.”
Supp. 2d at 439.
Snyder, 235 F.
Therefore, plaintiffs relying on the Zippo
framework to assert general jurisdiction “have a tough hill to
climb, as courts regularly decline to exercise general
jurisdiction based on this framework, even with interactive web
sites.”
Gianfredi v. Hilton Hotels Corp., Inc., 2010 WL 1381900,
at *5 (D.N.J. 2010).
For example, in Molnlycke Health Care AB v. Dumex Medical
Surgical Products Ltd., the Eastern District of Pennsylvania held
that “the establishment of a website through which customers can
order products does not, on its own, suffice to establish general
jurisdiction.”
64 F. Supp. 2d 448, 451 (E.D.Pa. 1999).
According to the Eastern District of Pennsylvania, “[t]o hold
17
that the possibility of ordering products from a website
establishes general jurisdiction would effectively hold that any
corporation with such a website is subject to general
jurisdiction in every state.”
B.
Id.
General Jurisdiction Over the Rudy Defendants
The Court lacks general jurisdiction over the Rudy
defendants.
Plaintiff argues that the Rudy Firm’s website,
www.mrcpa.net, is an “interactive website designed to actively
solicit business from New Jersey residents,” giving the Court
general jurisdiction over the Rudy defendants.
Opp. to Rudy at 16.)
The Court disagrees.
(Pl.’s Br. in
Although the Rudy
Firm’s website does have certain interactive features, such as a
general contact form which visitors can use to send questions or
suggestions to the Rudy Firm,
(Pl.’s Br. in Opp. to Rudy, Ex.
F,) a page through which visitors can request a free quote,
(Pl.’s Br. in. Opp. to Rudy, Ex. E,) and a page where visitors
can setup an appointment with the Rudy Firm,
(Pl.’s Br. in Opp.
to Rudy, Ex. D, G.), unlike in Molnlycke, none of these pages
even allows the visitor to purchase products or services from the
Rudy Firm, or otherwise enter into contracts with the Rudy Firm.
Therefore, the establishment of the Rudy Firm’s website, on its
own, cannot possibly suffice to establish general jurisdiction.
See Molnlycke, 64 F. Supp. 2d at 451.
18
In order to find general
jurisdiction, the Court must determine if the Rudy Defendants
have “sufficient other related contacts” with New Jersey.
To this end, the Court first notes that the interactive
portions of the Rudy Firm’s website are not at all targeted to
New Jersey.
In fact, none of these pages makes mention of any
specific state.
The only mention of New Jersey on the Rudy
Firm’s website is a link on the bottom of one page to the New
Jersey Division of Taxation.
(Pl.’s Br. in Opp. to Rudy, Ex. C.)
It can hardly be said on the basis of this one mention of New
Jersey that the Rudy Firm has directly targeted its website to
New Jersey.
See Toys “R” Us, 318 F.3d at 454.
Second, Plaintiff has not proved that the Rudy Defendants
have engaged in any advertising beyond the Rudy Firm website
targeted at New Jersey.
Rudy stated in an affidavit that neither
he nor the Rudy Firm have advertisements targeted towards New
Jersey.
(Rudy’s Second Aff. ¶ 5).
While Plaintiff contests
Rudy’s statement, Plaintiff does so solely on the basis that the
Rudy Firm’s website is targeted at New Jersey, (Pl.’s Br. in Opp.
to Rudy at 16,) an argument which the Court has already rejected.
Lastly, Plaintiff has also failed to show that either the
website or the state of New Jersey is central to the Rudy
Defendants’ business.
The Rudy Defendants’ affidavits state that
between 2006 and 2011, the Rudy Firm prepared between seven and
eleven New Jersey state tax returns on an annual basis, (Rudy’s
19
Second Aff. ¶ 23), that the income derived from these tax returns
is far less than one percent of the Rudy Firm’s annual business
revenue (Rudy’s Second Aff. ¶ 26), and that Rudy has not traveled
to New Jersey to prepare any of the New Jersey returns. (Rudy’s
First Aff. ¶ 22.)
Rudy’s statements.
Plaintiff does not contest the truth of any of
However, Plaintiff does characterize the
income the Rudy Defendants receive from New Jersey tax work as
“consistent annual revenue.”
(Pl.’s Opp. to Rudy at 18.)
Despite the Plaintiff’s characterization, as the Eastern District
of Pennsylvania stated in Molnlycke, “without some other
indication of the quality and nature of the business with [the
forum state], it is impossible for the court to find that the
small percentage of sales constitute continuous and systematic
business within the forum state.”
64 F. Supp. 2d 448, 452.
On these facts, a finding that the Court has general
jurisdiction over the Rudy Defendants would “effectively hold
that any [business] with such a website is subject to general
jurisdiction in every state.”
Molnlycke, 64 F. Supp. 2d at 451.
Therefore, the Court holds that it does not have general personal
jurisdiction over the Rudy Defendants.
C.
Specific Jurisdiction Over the Rudy Defendants
In contrast with the general jurisdiction analysis above, in
the context of specific jurisdiction the Rudy Firm’s website is
not immediately relevant.
Plaintiff nowhere asserts that he
20
learned of the Rudy Firm by accessing the Rudy Firm’s website in
New Jersey.
In fact, Plaintiff stated that he first retained the
Rudy Defendants in 2000, which is two years prior to Plaintiff’s
purchase of his New Jersey property.
¶¶ 5-6.)
(Pl.’s Aff. in Opp. to Rudy
Therefore, it is clear that Plaintiff’s cause of action
against the Rudy Defendants does not arise out of the
accessibility of the Rudy Firm’s website in New Jersey.
Remick,
238 F.3d at 255 (“Specific jurisdiction is present only if the
plaintiff’s cause of action arises out of defendant’s forum
related activities.”).
The Court is also convinced that Plaintiff’s Cause of Action
does not arise from any of the Rudy Defendants’ other New Jersey
contacts.
Plaintiff argues that specific jurisdiction is
appropriate because the Rudy Defendants had been providing tax
work to the Plaintiff since the year 2000, part of that tax work
involved Plaintiff’s New Jersey property, and Plaintiff decided
to hire Rakoff to handle the New York audit as a result of this
“ongoing advisory relationship.”
(Pl.’s Br. in Opp. to Rudy at
17.)
This argument is unpersuasive.
The Court does not doubt
that the fact that Plaintiff had worked with the Rudy Defendants
in the past played some role in the Plaintiff’s decision to hire
Rudy in this case.
However, it strains credulity to believe that
Plaintiff’s decision had anything to do with the Rudy Defendants’
21
specific work pertaining to Plaintiff’s New Jersey property.
No
New Jersey tax returns are at issue in this case, Plaintiff’s New
Jersey property is just one of four properties Plaintiff owned
during the relevant time period, Plainitiff has never identified
the New Jersey property as a primary residence, and no tax work
regarding the New Jersey property is at all at issue in the
instant litigation.
Moreover, Plaintiff has provided no evidence
as to what type of work the Rudy Defendants ever performed
relating to the New Jersey property, or explained why this work
would have led Plaintiff to hire the Rudy Defendants to handle
the audit.
Because Plaintiff’s cause of action against the Rudy
Defendants does not arise from any of the Rudy Defendants
contacts with New Jersey, the Court lacks specific personal
jurisdiction over the Rudy Defendants.
D.
Jurisdictional Discovery
Plaintiff has asked the Court to allow jurisdictional
discovery in the event the Court finds that Plaintiff has not
satisfied his burden of showing that the Court has personal
jurisdiction over the Rudy Defendants.
Rudy at 24.)
(Pl.’s Br. in Opp. to
In the Third Circuit, “although the Plaintiff bears
the burden of demonstrating facts that support personal
jurisdiction, courts are to assist the plaintiff by allowing
jurisdictional discovery unless the plaintiff’s claim is clearly
22
frivolous.”
Toys “R” Us, 318 F.3d at 456 (internal citations and
quotations omitted).
Thus, while leave to conduct jurisdictional
discovery should be “freely granted,” “the scope of this
discovery is within the court’s discretion, and allowing such
discovery is premised on the assumption that further discovery
would be worthwhile.”
Molnlycke, 64 F. Supp. 2d at 454.
In the instant case, the Court concludes that allowing
further discovery would not be worthwhile.
Plaintiff argues that
jurisdictional discovery should be granted because the Rudy
Defendants did not file a Corporate Disclosure Statement which
would have included information “such as the identification of
the parent corporation of [the Rudy Firm] or any publicly held
corporation owning 10% or more of its stock, the places of
incorporation of those companies, and the locations of the
various offices of those corporations.”
Rudy at 26).
(Pl.’s Br. in Opp. to
The Rudy Defendants have since filed a Corporate
Disclosure Statement which states that the Rudy Firm “does not
have a parent corporation, nor is there any publicly held
corporation that owns 10% or more” of the Rudy Firm’s stock.
(Corp. Disclosure Stmt., Dkt. No. 26.)
Therefore, ordering
jurisdictional discovery based on the lack of a corporate
disclosure statement at this point would be frivolous.
Plaintiff also argues that jurisdictional discovery should
be granted “with respect to the Rudy defendants’ interactive
23
website, business generated in New Jersey from the website, noninternet business and revenues generated by the Rudy defendants,
and all other general New Jersey tax advice and services provided
by the Rudy defendants.”
(Pl.’s Br. in Opp. to Rudy at 26.)
Such jurisdictional discovery would amount to no more than a
fishing expedition.
The Court has already considered all aspects
of the Rudy Firm’s website.
Moreover, the Rudy Defendants’
affidavits state that less than one percent of the Rudy Firm’s
annual business revenue is derived from preparing New Jersey tax
returns, (Rudy’s Second Aff. ¶ 26,) that the Rudy Firm’s business
is based solely in Pennsylvania, and that the vast majority of
individual tax returns filed consist of Pennsylvania and Delaware
returns. (Rudy’s Second Aff. ¶ 16.)
Plaintiff does not provide
the Court with any reason to question the truth of these sworn
statements by the Rudy Defendants.
Consequently, the Court will
exercise its discretion and deny the request for further
discovery.
E.
See Molnlycke, 64 F. Supp. 2d at 454.
Rudy Defendants’ Fed. R. Civ. P. 12(b)(6) Motion
Because the Court has found that it does not have personal
jurisdiction over the Rudy Defendants, it does not need to
consider the Rudy Defendants’ Motion to Dismiss for failure to
state a claim under Fed. R. Civ. P. 12(b)(6).
IV.
For the foregoing reasons, St. Clair’s Motion to Dismiss is
24
hereby denied, and the Rudy Defendants’ Motion to Dismiss is
hereby granted.
An appropriate Order will accompany this
Opinion.
Dated: March
12
, 2013
s/Joseph E. Irenas
Joseph E. Irenas, S.U.S.D.J.
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