Complexions, Inc. v. Industry Outfitters, Inc.
Filing
79
MEMORANDUM-DECISION AND ORDER denying 70 Motion to Dismiss. ORDERED, that third-party defendants motion (Dkt. No. 70) to dismiss the third-party complaint pursuant to Fed. R. Civ. P. 12(b)(2) is DENIED; it is furtherORDERED, that the parties are di rected to proceed to discovery before the Magistrate Judge on the issue of personal jurisdiction; it is furtherORDERED, that third-party defendants motion (Dkt. No. 70) to dismiss the third-party complaint for insufficient service of process is DENIE D; it is furtherORDERED, that third-party defendants motion (Dkt. No. 70) to dismiss the third-party complaint pursuant to BCL § 1312 is DENIED; it is furtherORDERED, that third-party defendants motion (Dkt. No. 70) to dismiss the third-party complaint pursuant to the doctrine of forum non conveniens is DENIED. Signed by U.S. District Judge Mae A. D'Agostino on 8/9/11. (ban)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF NEW YORK
____________________________________________
COMPLEXIONS, INC. d/b/a
COMPLEXIONS DAY SPA,
Plaintiff,
vs.
1:09-CV-1402
(MAD/DRH)
INDUSTRY OUTFITTERS, INC., a corporation
formed under the laws of the State of Florida,
Defendant,
and
INDUSTRY OUTFITTERS, INC., a corporation
formed under the laws of Canada,
Defendant,
and
GREENBANK CUSTOM WOODWORKING, LTD.,
Defendant.
____________________________________________
GREENBANK CUSTOM WOODWORKING, LTD.,
Third-Party Plaintiff,
vs.
ZYTEK, INC.,
Third-Party Defendant.
____________________________________________
APPEARANCES:
OF COUNSEL:
BREAKELL LAW FIRM, P.C.
10 Airline Drive
Albany, New York 12205
Attorneys for Plaintiff
Paul C. Marthy, Esq.
Walter G. Breakell, Esq.
LeCLAIR RYAN
830 Third Avenue
5th Floor
New York, New York 10022
Attorneys for Defendant
Industry Outfitters, Inc.
Jeffrey M. Zalkin, Esq.
TOMASELLI LAW OFFICES
P.O. Box 97
Poestenkill, New York 12140
Attorneys for Defendant/Third
Party Plaintiff
Greenbank Custom Woodworking, Ltd.
Patrick J. Tomaselli, Esq.
GIBSON, McASKILL LAW FIRM
69 Delaware Avenue
Suite 900, Chemical Bank Building
Buffalo, New York 14202
Attorneys for Third Party Defendant
Zytek, Inc.
Victor Oliveri, Esq.
Mae A. D’Agostino, U.S. District Judge:
MEMORANDUM-DECISION AND ORDER
INTRODUCTION
Plaintiff Complexions, Inc. d/b/a Complexions Day Spa (“Complexions” or “plaintiff”)
commenced this action against defendants Industry Outfitters, Inc. of Florida and Canada
(“Industry Outfitters”) and Greenbank Custom Woodworking, Ltd. (“Greenbank” or “third-party
plaintiff”) for breach of contract and breach of warranty.1 Greenbank commenced a third-party
1
On December 17, 2009, plaintiff filed a complaint in this action. (Dkt. No. 1). On March 22, 2010, plaintiff
filed an amended complaint. (Dkt. No. 12). On July 15, 2010, plaintiff filed a second amended complaint. (Dkt. No.
27).
2
action against Zytek, Inc.2, (“Zytek” or “third-party defendant”) alleging breach of warranty,
breach of contract and seeking indemnification.3
Presently before the Court is Zytek’s motion for an order: (1) dismissing the third-party
complaint for lack of personal jurisdiction pursuant to Fed. R. Civ. P. 12(b)(2) or, in the
alternative; (2) dismissing the third-party complaint for insufficient service of process or, in the
alternative; (3) dismissing the third-party complaint pursuant to 1312(a) of the New York
Business Corporation Law or, in the alternative; (4) dismissing the third-party complaint based
upon the doctrine of forum non conveniens.4 (Dkt. No. 70).
BACKGROUND
The facts of the case are taken from plaintiff’s complaint and third-party plaintiff’s
complaint and are, for the purpose of third-party defendant’s motions, presumed to be true.
Complexions is a New York corporation with its principal place of business in Colonie, New
York. Industry Outfitters is a Florida and Canadian corporation with its principal place of
business in Ontario, Canada. Greenbank is a limited liability company formed under the laws of
Canada with its principal place of business in Ontario, Canada. Zytek was a Canadian
corporation with its principal place of business at 524 Watson Street East, Whitby, Ontario,
Canada. According to Zytek’s President, Harlin Gale Schock, Zytek was in the business of
manufacturing and selling adhesives, blend solvents and manufactured lacquer coatings, i.e., glue.
2
Third-party defendant asserts that the correct name is “580090 Ontario Inc.” and that third-party defendant
has been incorrectly sued as Zytek. However, the caption has not been amended and thus, the Court will refer to
third-party defendant as Zytek.
3
On November 19, 2010, Greenbank filed a third-party complaint. (Dkt. No. 46). On March 11, 2011,
Greenbank filed an amended third-party complaint. (Dkt. No. 65).
4
For purposes of this motion, “third party complaint” refers to the “amended third party complaint”.
3
In December 2007, plaintiff entered into an agreement with Industry Outfitters wherein
Industry Outfitters agreed to design, furnish and install custom cabinetry, display cases, desks and
other items at plaintiff’s day spa in Colonie, New York for payment in the sum of $231,000.00.
Industry Outfitters entered into a subcontract agreement with Greenbank to assemble, furnish and
install the cabinetry and casework at the day spa. Shortly thereafter, Zytek sold and delivered
adhesive for Greenbank to utilize in the assembly and construction of the custom cabinetry and
casework. According to Schock, in September 2008, Zytek sold its assets to Adhpro Adhesives,
Inc. (“Adhpro”), another Canadian glue manufacturer.5 After the asset sale, Adhpro’s principal
place of business became 524 Watson Street East.
Following delivery and installation of the cabinetry and casework, the wood veneer and
surfaces of the cabinetry and casework began to delaminate. On July 15, 2010, plaintiff
commenced an action against Industry Outfitters and Greenbank alleging four causes of action
based in breach of contract and breach of warranty seeking unliquidated damages in an amount
expected to exceed $300,000.00. On November 12, 2010, Greenbank commenced a third-party
action against Zytek alleging five causes of action for indemnification, breach of warranty, breach
of contract and negligence.
DISCUSSION
I.
Motion to Dismiss for Lack of Personal Jurisdiction
Zytek moves to dismiss the third-party complaint based upon lack of personal jurisdiction.
See Fed. R. Civ. P. 12(b)(2). The amenability of a foreign corporation to suit in a federal court in
a diversity action is determined in accordance with the law of the state where the court sits, with
“federal law” entering the picture only for the purpose of deciding whether a state's assertion of
5
Schock asserts that the assets sold also included the name “Zytek, Inc.” and therefore, third-party defendant
changed its name to “580090 Ontario Inc.”
4
jurisdiction contravenes a constitutional guarantee. Arrowsmith v. United Press Int’l., 320 F.2d
219, 223 (2d Cir. 1963). District courts resolving issues of personal jurisdiction must therefore
engage in a two-part analysis. Bank Brussels Lambert v. Fiddler Gonzalez & Rodriguez, 171
F.3d 779, 784 (2d Cir. 1999). First, they must determine whether there is jurisdiction over the
defendant under the relevant forum state's laws. Id. Second, they must determine whether an
exercise of jurisdiction under these laws is consistent with federal due process requirements. Id.
Since there has been no discovery and no evidentiary hearing on jurisdiction, third-party
plaintiff need make only a prima facie showing that jurisdiction is proper. See Ball v. Metallurgie
Hoboken-Overpelt, S.A., 902 F.2d 194, 196-97 (2d Cir. 1990). The Court must construe the
pleadings and supporting affidavits in the light most favorable to third-party plaintiff. See PDK
Labs v. Friedlander, 103 F.3d 1105, 1108 (2d Cir. 1997). The Second Circuit explains:
In deciding a pretrial motion to dismiss for lack of personal
jurisdiction a district court has considerable procedural leeway. It
may determine the motion on the basis of affidavits alone; or it may
permit discovery in aid of the motion; or it may conduct an evidentiary
hearing on the merits of the motion. If the court chooses not to
conduct a full-blown evidentiary hearing on the motion, the plaintiff
need make only a prima facie showing of jurisdiction through its own
affidavits and supporting materials. Eventually, of course, the plaintiff
must establish jurisdiction by a preponderance of the evidence, either
at a pretrial evidentiary hearing or at trial. But until such a hearing is
held, a prima facie showing suffices, notwithstanding any
controverting presentation by the moving party, to defeat the motion.
Marine Midland Bank N.A. v. Miller, 664 F.2d 899, 904 (2d Cir.1981) (citations omitted). “[A]
prima facie showing of jurisdiction . . . means that plaintiff must plead facts which, if true, are
sufficient in themselves to establish jurisdiction.” Darby Trading Inc. v. Shell Int’l Trading and
Shipping Co. Ltd., 568 F.Supp.2d 329, 333 -334 (S.D.N.Y. 2008) (citation omitted). A plaintiff
may “make this showing through [its] own affidavits and supporting materials[,] containing an
5
averment of facts that, if credited . . ., would suffice to establish jurisdiction over the defendant.”
Id. (citation omitted).
A.
N.Y. C.P.L.R. § 302(a)(3)(ii)6
Third-party plaintiff contends that Zytek is subject to specific jurisdiction under New
York’s long-arm statute because the third-party claims arise from third-party defendant’s
commission of a tort outside New York causing injury to plaintiff in New York. See N.Y.
C.P.L.R. § 302(a)(3)(ii).7 Under C.P.L.R. § 302(a)(3)(ii), personal jurisdiction may be asserted
over a non-domiciliary if the non-domiciliary “commits a tortious act without the state” injuring a
person within New York, and (ii) expects or should reasonably expect the act to have
6
In the motion to dismiss, third-party defendant discusses C.P.L.R. § 301 and argues that general jurisdiction
may not serve as a basis for jurisdiction in this matter. Third-party plaintiff does not oppose this portion of the motion
but rather, relies solely upon the long arm statute as a basis for jurisdiction in this matter. Thus, the Court will
confine the analysis to the applicable sections of C.P.L.R . § 302. Moreover, while third-party defendant argues that
the exercise of personal jurisdiction pursuant to § 302(a)(1) would violate the long arm statute, third-party plaintiff
presents no argument in support of jurisdiction pursuant to this subsection. Accordingly, the Court will confine its
analysis to § 302(a)(3)(ii).
7
N.Y. C.P.L.R. § 302(a) provides:
Acts which are the basis of jurisdiction. As to a cause of action arising from any of the acts enumerated
in this section, a court may exercise personal jurisdiction over any non-domiciliary, or his executor or
administrator, 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, except as to a cause of action for defamation of character
arising from the act; or
3. commits a tortious act without the state causing injury to person or property within the state, except
as to a cause of action for defamation of character arising from the act, 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 in the state and derives
substantial revenue from interstate or international commerce; or
4. owns, uses or possesses any real property situated within the state.
6
consequences in the state and derives substantial revenue from interstate or international
commerce. Zytek concedes, for the purposes of this motion only, that Zytek’s production of the
glue at issue constitutes commission of tort outside of New York. Therefore, Zytek’s motion
focuses on the remaining factors in § 302(a)(3)(ii). To wit, Zytek argues that Greenbank cannot
establish the “foreseeability” requirement and further, that Zytek did not derive substantial
revenue from interstate or international commerce.
“The test of whether a defendant expects or should reasonably expect his act to have
consequences within the State is an objective rather than subjective one.” Kernan v.
Kurz-Hastings, Inc., 175 F.3d 236, 241 (2d Cir. 1999) (citation omitted). “New York courts have
asserted that the simple likelihood or foreseeability ‘that a defendant's product will find its way
into New York does not satisfy this element, and that purposeful availment of the benefits of the
laws of New York such that the defendant may reasonably anticipate being haled into New York
court is required’”. Id. (to avoid conflict with federal constitutional due process limits, New
York Courts apply the “reasonable expectation” requirement). “Stated differently, the
foreseeability requirement is not satisfied unless there are tangible manifestations showing that
the nondomiciliary defendant either should have known where its product was destined or was
attempting to reach a New York market.” Yash Raj Films (USA) Inc. v. Dishant.com LLC, 2009
WL 4891764, at *10 (E.D.N.Y. 2009) (quoting Capitol Records, LLC. v. VideoEgg, Inc., 611
F.Supp.2d 349, 362 (S.D.N.Y. 2009)). “[The] simple likelihood . . . that a defendant's product will
find its way into New York” does not constitute foreseeability of harm in the state for purposes of
§ 302(a)(3) - it “must be coupled with evidence of a purposeful New York affiliation.” Id. (citing
Kernan, 175 F.3d at 241).
7
In addition to the foreseeability requirement, to establish jurisdiction under this section of
the long arm statute, third-party plaintiff must also establish that Zytek derives substantial
revenue from interstate or international commerce. Substantial revenue can mean either a
substantial sum of money or that the defendant’s interstate revenue is a substantial portion of its
total revenue. Launer v. Buena Vista Winery, Inc., 916 F.Supp. 204, 211 (E.D.N.Y. 1996).
“Among the most important facts of each case are the overall nature of the defendant's business
and the extent to which he can fairly be expected to defend lawsuits in foreign forums.” Ronar,
Inc. v. Wallace, 649 F.Supp. 310, 318 (S.D.N.Y.1986). Court must assess (1) the percentage of a
party’s overall revenue derived from interstate or foreign commerce; and (2) the absolute revenue
generated by a defendant’s interstate or international commerce. Light v. Taylor, 2007 WL
274798, at *4 (S.D.N.Y. 2007) (citations omitted). The amount of business that must be
conducted to satisfy this standard “is less than that which is required to satisfy the conventional
doing business standard”. Hollins v. U.S. Tennis Ass'n, 469 F.Supp.2d 67, 77 (E.D.N.Y. 2006).
Substantial revenue can be measured in an absolute or relative sense or by qualitative or
quantitative means. Jin v. EBI, Inc., 2006 WL 3335102, at *5 (E.D.N.Y. 2006). Even if the
amount of revenue a company generates in New York is only 1% percent of its total revenue, it
can still be considered substantial if the absolute amount appears substantial. Id. (citing Ball, 902
F.2d at 199). On a motion to dismiss for lack of jurisdiction pursuant to § 302(a)(3), defendant
has the burden of showing the absence of substantial revenue. Ingraham v. Carroll, 90 N.Y.2d
592, 604 (1997).
“The year in which the complaint is filed is the proper point in time for determining
whether defendant . . . meets the ‘substantial revenue’ prong of 302(a)(3)(ii).” Bank of California
v. Smith Barney, Inc., 1997 WL 736529, at *5, n. 5 (N.D.N.Y. 1997) (citing Ball, 902 F.2d at 1998
200); Drake v. Lab. Corp. of Am. Holdings, 2007 WL 776818, at *10 (E.D.N.Y. 2007). However,
courts will also consider a period of years around the time that the complaint was filed. Drake,
2007 WL 776818, at *10 (citation omitted); see also Traver v. Officine Meccaniche Toshci SpA,
233 F.Supp.2d 404, 413-14 (N.D.N.Y. 2002) (citing Barricade Books, Inc. v. Langberg, 2000 WL
1863764, at *5 (S.D.N.Y. 2000)) (the court considered the defendant’s revenues over a three-year
period).
In support of the motion, third-party defendant submitted an affidavit from Harlin Gale
Schock, the owner of “580090 Ontario Inc.", the company formerly known as Zytek. Between
2002 and 2008, Schock was President and owner of Zytek. Schock makes the following
assertions regarding Zytek’s business:
•
Zytek never maintained an office or place of business
anywhere in the State of New York;
•
Zytek did not own real or personal property within New York;
•
Zytek did not maintain any bank accounts in New York;
•
Zytek did not transact any business within New York;
•
Zytek employed 10 individuals in Ontario, Canada and did not
send any of its employees into New York;
•
Zytek was never authorized to do business within New York
and never filed any papers with the New York Secretary of
State;
•
From 2007 to 2008, Zytek’s gross sales were $2,100,000.00
and only 3.5% of sales were to the United States;
•
Zytek had no customers in New York;
•
Zytek did not promote sales of its product outside of Canada.
With respect to the transaction between Greenbank and Zytek, Schock asserts:
9
•
Zytek sold a water-based glue product to Greenbank in
February and April 2008;
•
The manufacture, sale and delivery of the glue involved only
Zytek and Greenbank and occurred within Ontario;
•
Zytek was aware that Greenbank was in the cabinetry business
but had no knowledge of the use for which the glue was
purchased;
•
Zytek had no knowledge of Greenbank’s customer base or any
dealings between Greenbank and the plaintiff or defendant,
Industry Outfitters;
•
All payments made in connection with this sale occurred in
Ontario and the orders did not require the glue to be shipped
to New York.
In further support of the motion, Zytek provided an affidavit from Rommel Hariprashad, a
chemist formerly employed by Zytek. In 2008, Mr. Hariprashad met with a Greenbank
representative at Greenbank’s place of business in Whitby, Ontario regarding the adhesive and
gave the representative a sample. Greenbank then placed two orders for the water-based adhesive
which were filled from Zytek’s only location in Whitby, Ontario. Mr. Hariprashad avers that he
was not told or provided with any information regarding Greenbank’s intended use of the product
and did not know the product would be used in products shipped to New York.
In opposition to the motion, plaintiff provided affidavits from James Martinek, the
President of Greenbank and Dennis Dubois, the President of Complexions. Martinek does not
contest any of Schock’s assertions regarding the subject transaction. Instead, Martinek provided
the names of four companies with whom Greenbank conducted business. Industry Outfitters and
Complexions are not included on that list. Indeed, there are no New York companies on that list.
The list includes customers in Florida, Minnesota, Illinois and California.
10
Martinek also provided a list of work performed by Greenbank that was shipped
assembled and then furnished to the United States. According to Martinek, the only contact
Greenbank had with New York was in 2006:
•
We fabricated 4 department store boutique shops for Elizabeth
Arden fragrances located in New York, Miami and Los
Angeles; and
•
We constructed 3 Prescriptives department store boutique
shops located in New York, Dallas, Boston.
Based upon the aforementioned, Martinek concludes:
Because of the aforesaid action by Zytek in marketing and selling its
products to other companies conducting business in New York, it is
submitted that Zytek made a conscious effort to serve the New York
market. I further submit that, given the foregoing, it is probable Zytek
conducted business with woodworking businesses in New York that
performed the same services as Greenbank.
In further support of the motion, Dubois avers,
I find it impossible to believe that Zytek, which we maintain sold the
defective glue to Greenbank that was utilized in assembling the
cabinetry, casework and desk installed at the Complexions facility,
was not fully aware that its product would end up in the New York
marketplace. Since Zytek sold their adhesive product to woodworking
businesses in the province of Ontario, Canada, which shares part of a
border with the State of New York, they were certainly aware that
their glue would be used to assemble products being shipped into New
York State.
Based upon a review of the evidence submitted, the Court is unpersuaded by third-party
plaintiff’s assertions. Third-party plaintiff presents no evidence that Zytek purposefully sought to
conduct business in New York or avail itself of the benefits of the laws of New York. Where, as
here, there is a sale to a foreign distributor who then makes the independent decision to utilize the
product in New York, personal jurisdiction is sustained only where it can be shown that when the
named defendant made the out of state sale, it sought a “purposeful affiliation” with the State of
11
New York. Stephan v. Babysport, LLC, 499 F.Supp.2d 279, 290 (E.D.N.Y. 2007) (citations
omitted); see also Pentel of Am., Ltd. v. Sanford Corp., 1992 WL 190145, at *3 (S.D.N.Y. 1992)
(transaction between the third-party defendant and the third-party plaintiff was in Japan and had
no knowledge of the sale of its pencils in New York). Here, the record, as it presently exists,
contains no evidence that Zytek had any knowledge or reason to know that its glue would be used
in New York. However, third-party plaintiff argues that since there has been no discovery at this
stage of the litigation, all doubt with regard to Zytek’s efforts to serve New York must be
resolved in favor of Greenbank. Third-party plaintiff asserts, "[a]t a minimum Greenbank should
be provided with the opportunity to examine Zytek's personnel and obtain discovery information
regarding its marketing activities, as well as information concerning revenue generated by Zytek
in the years prior to 2007, and also to verify the alleged amount Zytek claims as its percentage of
revenue from international sales during 2007 and 2008".
B.
Jurisdictional Discovery
Whether to permit discovery or to resolve the jurisdictional issue is for this court to
decide. Marine Midland Bank, 664 F.2d at 904. In the Second Circuit, district courts have
allowed jurisdictional discovery where a plaintiff has made less than a prima facie showing but
has demonstrated “a sufficient start toward establishing personal jurisdiction.”. Hollenbeck v.
Comeq, Inc., 2007 WL 2484299, at *2 (N.D.N.Y. 2007); see also Drake v. Lab. Corp. of Am.
Holdings, 2007 WL 776818, at *9 (E.D.N.Y. 2007) (citing Aerotel, Ltd. v. Sprint Corp., 100
F.Supp.2d 189, 194 (S.D.N.Y. 2000) (denying motion to dismiss to permit plaintiff to take
jurisdictional discovery despite plaintiff's “conclusory” allegations)).
Presently, there is not enough evidence in the record to conclude that it would be
appropriate to exercise jurisdiction over third-party defendant. Specifically, there is a dearth of
12
information regarding third-party’s business relationships with New York. Moreover, there is
insufficient evidence regarding the revenue that Zytek derived from commerce within Canada and
outside Canada. See Traver, 233 F.Supp.2d at (the plaintiff was permitted to serve interrogatories
upon the defendant regarding the subject sale and contract and for financial statements from 1998
to present). The 2007-2008 figure provided in Schock’s affidavit does not indicate what
percentage of Zytek’s sales were to countries other than the United States. “[S]ection
302(a)(3)(ii) does not require that the substantial revenue from international commerce be linked
to New York or the United States.”. Traver, 233 F.Supp.2d at 413 (“this prong is intended to
preclude the exercise of personal jurisdiction over non-domiciliaries ‘whose business operations
are of a local character.’”) (citing inter alia Bensusan Rest. Corp. v. King, 126 F.3d 25, 29 (2d
Cir. 1997)). Plaintiff’s complaint was filed in 2009 and the third-party complaint was filed in
2010. Thus, the Court finds it necessary to consider third-party defendant’s revenues from 2008
(the time of the transaction) until 2010 (the date of the filing of the third-party complaint). See id.
at 414.
Accordingly, third-party defendant’s motion for dismissal pursuant to Rule 12(b)(2) is
denied with leave to renew upon completion of jurisdictional discovery including whether
personal jurisdiction over third-party defendant would comport with due process.
II.
Insufficient Service of Process
In the alternative, Zytek moves for dismissal based upon insufficient service of process.
“According to Rule 4(h)(2), ‘service upon a . . . foreign corporation . . . shall be effected . . . in a
place not within any judicial district of the United States in any manner prescribed for individuals
by subdivision (f) except personal delivery as provided in paragraph 2(C)(i) thereof’”. Zipper v.
Nichtern, 2007 WL 1041667, at *2 (E.D.N.Y. 2007). Fed.R.Civ.P. 4(f)(1) permits service “in a
13
place not within any judicial district of the United States: by any internationally agreed means
reasonably calculated to give notice, such as those means authorized by the Hague Convention on
the Service Abroad of Judicial and Extrajudicial Documents.” In the cases to which it applies, the
Hague Convention preempts all methods of service which are inconsistent with its provisions.
Taft v. Moreau, 177 F.R.D. 201, 203 (D. Vt. 1997) (the Hague Convention applies in all civil
cases in which there is occasion to transmit a judicial document for service abroad). Article 10(a)
of the Hague Convention states: “Provided the State of destination does not object, the present
Convention shall not interfere with . . . the freedom to send judicial documents, by postal
channels, directly to persons abroad.” Anderson v. Canarail, Inc., 2005 WL 2454072, at *4
(S.D.N.Y. 2005) (citing 20 U.S.T. 361, Art. 10 (Convention on Service Abroad of Judicial and
Extrajudicial Documents in Civil and Commercial Matters, Nov. 19, 1965)). The United States
and Canada are both contracting parties to the Hague Convention. Id. Canada does not object to
service by postal channels. Girafa.com, Inc. v. Smartdevil Inc., 728 F.Supp.2d 537, 543 (D. Del.
2010). In Ackermann v. Levine, 788 F.2d 830, 838-39 (2d Cir.1986), the Second Circuit held that
service of process by registered mail satisfies the Hague Convention.. The Second Circuit
concluded that ‘send’ in Article 10(a) was intended to mean ‘service’ and held that service
through registered mail was appropriate. Id. Therefore, the plaintiffs' use of registered mail,
return receipt requested, to transmit the summons and complaint was in compliance with the
Hague Convention. Id.
Service of process must also satisfy Rule 4 of the Federal Rules of Civil Procedure and
constitutional due process. Id. at 838. Methods of service must be “reasonably calculated to give
notice.” Fed.R.Civ.P. 4(f). Where a plaintiff “attempted in good faith to comply with the Hague
Convention” and the defendant does “not dispute having received the complaint in this action ...
14
there is no prejudice to him [or her].” In re South African Apartheid Litigation, 643 F.Supp.2d
423, 432 (S.D.N.Y. 2009).
Here, the third-party complaint was forwarded, by registered mail, to Zytek’s last known
address: 524 Watson Street East, Whitby, Ontario. In December 2010, Hank Mueller, an Adhpro
employee, received a registered mail package addressed to Zytek at the Watson street location.
Schock avers that prior to the asset sale, Zytek’s principal place of business and headquarters was
at 524 Watson Street East. Schock also admits that Zytek’s asset sale to Adhpro did not include
Zytek’s real property and place of operation, 524 Watson Street East, Whitby, Ontario. Rather,
that property was leased to Adhpro and Adhpro operated from that location. Schock does not
assert, nor does the record establish, that 524 Watson Street East was not Zytek’s last known
address. As such, Zytek has failed to establish that service of the third-party complaint by
registered mail, pursuant to the Hague Convention, was improper.
Greenbank also argues that since Schock admitted to retrieving two packages containing
the complaint, Zytek had sufficient notice and there is no prejudice. Mr. Mueller provided an
affidavit and stated that since Adhpro purchased the assets of Zytek, he opened the package.
Upon review of the contents, he determined that the mail was intended for Zytek and called
Schock. Indeed, in his affidavit, Schock states that he picked up two packages from Hank
Mueller which, “Mueller . . . had opened then realized were intended for me as the President and
owner of the company formerly known as Zytek”. Schock does not state when he retrieved these
packages but Mueller avers that it was sometime in mid-January 2011. As such, third–party
defendant received notice of the third-party action and has not established prejudice sufficient to
warrant dismissal on this basis.
III.
Business Corporation Law (“BCL”) § 1312
15
In the alternative, Zytek argues that the third-party complaint should be dismissed
pursuant to BCL § 1312(a) because Greenbank is a Canadian corporation unauthorized to do
business in New York. Conversely, third-party plaintiff argues that § 1312(b) permits Greenbank,
as a defendant in the action commenced by Complexions, to maintain a third-party action.
BCL § 1312(a) provides:
A foreign corporation doing business in this state without authority
shall not maintain any action or special proceeding in this state unless
and until such corporation has been authorized to do business in this
state and it has paid to the state all fees and taxes imposed under the
tax law or any related statute, as defined in section eighteen hundred
of such law, as well as penalties and interest charges related thereto,
accrued against the corporation. This prohibition shall apply to any
successor in interest of such foreign corporation.
However, BCL 1312(b) provides:
[T]he failure of a foreign corporation to obtain authority to do
business in this state shall not impair the validity of any contract or act
of the foreign corporation or the right of any other party to the contract
to maintain any action or special proceeding thereon, and shall not
prevent the foreign corporation from defending any action or special
proceeding in this state.
Courts in New York have determined that once haled into court as a defendant, a foreign
corporation may assert third-party claims. MacQuesten Gen. Contracting, Inc. v. HCE, Inc., 296
F.Supp.2d 437, 448 -450 (S.D.N.Y. 2003) (citations omitted). The cases do not differentiate
among different types of third-party claims or limit such claims to indemnification and
contribution. Id. (“Just as there is no ‘distinct provision’ precluding counterclaims or third-party
claims generally, there is none prohibiting specific categories of third-party claims”). “If the
statute precludes a third-party action, the defendant will be forced to institute a separate action in
order to obtain full relief. Since such action would fail to serve the ends of judicial economy, it is
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surely not within contemplation of the statute.” Williams Erectors of Suffolk County v. Mulach
Steel Corp., 684 F.Supp. 357, 358 (E.D.N.Y. 1988).
Zytek asserts that the third-party action is a “guise” for Complexions to recover against
Zytek through Greenbank due to the liquidating agreement. Zytek has provided no caselaw in
support of this position. Greenbank is a defendant in an action in New York. Greenbank’s thirdparty complaint has four causes of action for indemnification and breach of warranty arising out
of the same transaction and occurrences which are the basis of the original complaint.
Accordingly, the Court denies this portion of third-party defendant’s motion.
IV.
Forum Non Conveniens
Third-party defendant argues that New York is not a convenient forum requiring dismissal
pursuant to Rule 12(b)(3) of the Federal Rules of Civil Procedure and the doctrine of forum non
conveniens. Zytek argues that Canada is an adequate alternative forum for the following reasons:
Greenbank and Zytek are Canadian corporations; the transaction occurred in Canada; witnesses
and documents are in Canada; and New York has little interest in adjudicating a dispute between
two Canadian companies. Greenbank argues that Canada may not be an alternate forum as the
statute of limitations may have passed. Moreover, third-party plaintiff argues that the underlying
action was filed in the home of plaintiff which was the situs of the injury and all witnesses
including Complexion’s representatives, laboratory representatives and contractors reside in New
York.
Forum non conveniens affords a court broad discretion to dismiss an action where
adjudication in another forum “will best serve the convenience of the parties and the ends of
justice.” Koster v. (Am.) Lumbermens Mut. Cas. Co., 330 U.S. 518, 527 (1947); accord PT
United Can Co. Ltd. v. Crown Cork & Seal Co. Inc., 138 F.3d 65, 73 (2d Cir. 1998). The Second
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Circuit has outlined a three-step process in analyzing a motion for dismissal based upon forum
non conveniens: (1) what degree of deference is properly accorded to the plaintiff's choice of
forum; (2) whether the alternative forum proposed by the defendant is adequate to adjudicate the
parties' dispute; and (3) an analysis of the private and public interests implicated in the choice of
forum. Norex Petroleum Ltd. v. Access Indus., Inc., 416 F.3d 146, 153 (citing Iragorri v. United
Techs. Corp., 274 F.3d 65, 71-73 (2d Cir. 2001)). The Supreme Court has articulated some of
the factors to be examined in determining whether a case should be dismissed on forum non
conveniens grounds:
the relative ease of access to sources of proof; availability of
compulsory process for attendance of unwilling, and the cost of
obtaining attendance of willing, witnesses; possibility of view of
premises, if view would be appropriate to the action; and all other
practical problems that make trial of a case easy, expeditious and
inexpensive. There may also be questions as to the enforcibility of a
judgment if one is obtained.
Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508 (1946). However, “unless the balance is strongly in
favor of the defendant, the plaintiff's choice of forum should rarely be disturbed.” Id.; see also
Pollux Holding Ltd. v. Chase Manhattan Bank, 329 F.3d 64, 71 (2d Cir. 2003) (“It is well settled
that a plaintiff's choice of forum is entitled to substantial deference”). When reviewing a motion
to dismiss for forum non conveniens, there is an assumption that the plaintiff's choice of forum
will stand unless the defendant can demonstrate that reasons exist to afford it less deference.
Pollux Holding, 329 F.3d at 71 (citing Iragorri, 274 F.3d at 70-71). A "plaintiff's choice of forum
is generally entitled to great deference when the plaintiff has sued in the plaintiff's home forum."
In re Ski Train Fire In Kaprun Austria on November 11, 2000, 2007 WL 1771582, at *3
(S.D.N.Y. 2007) (internal citations omitted). In any situation, the balance must be very strongly
in favor of the defendant, before the plaintiff's choice of forum should be disturbed, and the
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balance must be even stronger when the plaintiff is an American citizen and the alternative forum
is a foreign one. Olympic Corp. v. Societe Generale, 462 F.2d 376, 378 (2d Cir.1972) (internal
citations and citations omitted).
The possibility of litigating the primary action and a third-party action in another forum is
a significant factor to be considered on a motion to dismiss for forum non conveniens. See Alcoa
S.S. Co. Inc. v. MIV Nordic Regent, 654 F.2d 147, 159 (2d Cir. 1941) (en banc) (citing with
approval the district court's opinion, 453 F.Supp. 10, 13 (S.D.N.Y. 1978)). In cases where the
underlying and third-party actions emanate from the same events, the interest in having a single
forum litigate both disputes was deemed relevant to resolution of the forum non conveniens
question. Excel Shipping Corp. v. Seatrain Intern. S.A., 584 F.Supp. 734, 742 (D.C.N.Y. 1984)
(“[s]ince the [third party plaintiff] already must defend the action commenced by the plaintiffs in
this forum, to compel it to litigate elsewhere its own third-party action, arising out of the same
voyage [], would cause it substantial hardship”). Courts have held that, “where . . . the plaintiff in
the action is itself a defendant and instituted the third-party action in New York not to “harass” or
“oppress” the third-party defendants by the choice of an inconvenient forum, but rather to protect
itself from the possibility of inconsistent verdicts”, the plaintiff’s choice of forum is afforded
deference. Foremost Guar. Corp. v. Public Equities Corp., 1988 WL 125667, at *6 (S.D.N.Y.
1988).
Here, Greenbank is a defendant in an action commenced by a New York corporation in
New York State. Thus, Greenbank is compelled to litigate the underlying claims in New York
and as part of its defense, commenced a third-party action against Zytek. Third-party defendant
has not proven that the action was meant to “harass” or “oppress”. “The balance of convenience
and hardships [does not] tip in favor of” a transfer to Canada “because the third-party action is
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ancillary and dependent upon ‘plaintiff's success in the main suit in [New York]”. See Garner v.
Enright, 71 F.R.D. 656, 661 (E.D.N.Y. 1976). Third-party defendant has failed to overcome the
strong presumption in favor of Complexion’s choice of forum. Zytek has not cited any case law
in which a third party defendant has successfully moved to dismiss a case on forum non
conveniens grounds over the objections of both plaintiffs and defendants. In re Air Crash near
Nantucket Island, Mass., on October 31, 1999, 2004 WL 1824385, at *5 (E.D.N.Y. 2004).
Therefore, requiring Zytek to defend the third-party claims in New York is an “appropriate
exercise of this Court’s discretion”. See Excel, 584 F.Supp. at 742.
CONCLUSION
Accordingly, it is hereby
ORDERED, that third-party defendant’s motion (Dkt. No. 70) to dismiss the third-party
complaint pursuant to Fed. R. Civ. P. 12(b)(2) is DENIED; it is further
ORDERED, that the parties are directed to proceed to discovery before the Magistrate
Judge on the issue of personal jurisdiction; it is further
ORDERED, that third-party defendant’s motion (Dkt. No. 70) to dismiss the third-party
complaint for insufficient service of process is DENIED; it is further
ORDERED, that third-party defendant’s motion (Dkt. No. 70) to dismiss the third-party
complaint pursuant to BCL § 1312 is DENIED; it is further
ORDERED, that third-party defendant’s motion (Dkt. No. 70) to dismiss the third-party
complaint pursuant to the doctrine of forum non conveniens is DENIED.
IT IS SO ORDERED.
Dated: August 9, 2011
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