Eternal Asia Supply Chain Management (USA) Corp. v. Amergence Technology, Inc. et al
Filing
26
MEMORANDUM AND ORDER granting 10 Motion to Dismiss for Lack of Jurisdiction; denying 14 Motion for Default Judgment. For the foregoing reasons, Plaintiffs motion for default judgment is DENIED and Defendants motion to dismiss is GRANTED without prejudice. The Clerk of Court is directed to close the motion entries at Dkt. Nos. 10 and 14, and to close this case. SO ORDERED.(Signed by Judge J. Paul Oetken on 4/25/2013) (ama)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
--------------------------------------------------------------X
:
ETERNAL ASIA SUPPLY CHAIN
:
MANAGEMENT (USA) CORP.,
:
Plaintiff, :
:
-against:
:
YIAN CHEN a/k/a DAVID CHEN,
:
Defendant. :
:
------------------------------------------------------------- X
12 Civ. 6390 (JPO)
MEMORANDUM AND
ORDER
J. PAUL OETKEN, District Judge:
Presently before the Court are Plaintiff Eternal Asia Supply Chain Management (USA)
Corporation’s motion for default judgment and Defendant David Chen’s motion to dismiss for
lack of personal jurisdiction. For the reasons that follow, Plaintiff’s motion is denied and
Defendant’s motion is granted.
I.
Background 1
Plaintiff alleges that it is the assignee of claims maintained by EA Display Ltd. (“EAD”)
against Defendant, a California resident, relating to Defendant’s acts as President and a director
of Amergence Technology, Inc. (“Amergence”). Specifically, Plaintiff alleges that in June 2010,
Amergence—acting by and through Defendant—enticed, cajoled, and solicited EAD to enter
into a purported joint venture agreement forming a corporation in the State of California for the
1
A motion to dismiss for lack of personal jurisdiction is “‘inherently a matter requiring the
resolution of factual issues outside of the pleadings[,] . . . [and] all pertinent documentation
submitted by the parties may be considered in deciding the motion.’” Yellow Page Solutions,
Inc. v. Bell Atl. Yellow Pages Co., No. 00 Civ. 5563, 2001 WL 1468168, at *1 (S.D.N.Y. Nov.
19, 2001) (citation omitted). Therefore, the following facts are drawn from the complaint,
declarations, and exhibits submitted by the parties, and are construed in the light most favorable
to Plaintiff. Id.; see also A.I. Trade Fin., Inc. v. Petra Bank, 989 F.2d 76, 79-80 (2d Cir. 1993).
1
purported purposes of developing a company with product, channel, marketing, operations,
service and financial return. Plaintiff further alleges that Defendant and Amergence planned to
and did defraud EAD out of hundreds of thousands of dollars in merchandise and EAD’s initial
investment in working capital. Plaintiff alleges causes of action for fraud and conversion.
The Complaint in this case was filed on August 21, 2012. On January 7, 2013, Plaintiff
obtained a Clerk’s Certificate of Default as to Defendant. On February 11, 2013, Defendant filed
a motion to dismiss for lack of personal jurisdiction. The next day, February 12, 2013, Plaintiff
filed a motion requesting entry of default judgment against Defendant.
In support of his motion to dismiss, Defendant has submitted an affidavit in which he
explains that he lacks connections to New York: 2
I have never been a resident of New York. I have never
maintained a bank account in New York. I have never had a
telephone listing or a mailing address in New York. I have never
owned, leased, or otherwise possessed any real or personal
property in New York. I have never paid any taxes to New York.
I have never worked for an entity incorporated or registered in
New York. I do not have business relationships with any New
York residents or businesses incorporated in New York. I have
never made a general appearance as a party in any lawsuit in New
York.
Defendant adds that he currently resides in California, that he last visited New York about five to
seven years ago for a day trip, and that “it would be a severe hardship for [him] to defend a
lawsuit in the Southern District of New York” because he “cannot afford to travel to New York
as would be necessary for [him] to meet with [his] counsel or to appear in court.” With respect
to Amergence, Defendant makes the following statements:
2
This affidavit also includes statements about the alleged inadequacy of service of process upon
Defendant, but the Court need not address that issue due to its conclusion that Plaintiff has failed
to adduce a basis for personal jurisdiction consistent with New York law and due process.
2
Amergence Technology, Inc., a California entity of which I was
then President, a shareholder and a member of the board of
directors, entered into a joint venture agreement with [EAD], a
Chinese entity, to form a California entity called Rich Tech
International Co., Ltd. Appendix A, Paragraph D(4) of that
agreement stated that the agreement would be “governed by,
construed and interpreted in accordance with, the laws of the State
of Calfornia” . . . . I never spoke or otherwise dealt with any
representative of [Plaintiff] or any other New York persons or
entities regarding the transaction(s) which are the subject of this
case. I only interacted with [EAD] directly.
In an affidavit, counsel for Plaintiff states that the joint venture undertaken by Defendant
and EAD contemplated the sale of electronic products at reduced prices to “wholesalers and
suppliers throughout the country including in New York State.” He states that Defendant,
“through his companies[,] derived a portion of their [sic] revenue from interstate commerce, and
made sales of goods within New York State and derived revenues from such sales,” adding that
“[i]t is reasonably foreseeable that [Defendant] knew goods would be delivered and sold in New
York State, as it is a major electronics market.” Counsel to Plaintiff adds that:
On Amergence’s website, they describe themselves as a “Strong
Sales and Global Purchasing Network” and describe how they
have “channels in place around the globe to purchase or sell
consumer electronics products.
Amergence’s website further describes how their “large warehouse
is available to use as a redistribution center.”
In the alternative, Plaintiff requests jurisdictional discovery to ascertain the extent of Defendant’s
contacts with and activities in New York State.
II.
Discussion
A.
Motion for Default Judgment
Federal Rule of Civil Procedure 55(c) authorizes a court to “set aside an entry of default
for good cause.” “In determining whether to set aside a party’s default, the district court should
3
consider principally ‘(1) whether the default was willful; (2) whether setting aside the default
would prejudice the adversary; and (3) whether a meritorious defense is presented.’”
Powerserve Int’l, Inc. v. Lavi, 239 F.3d 508, 514 (2d Cir. 2001) (quoting Enron Oil Corp. v.
Diakuhara, 10 F.3d 90, 96 (2d Cir. 1993)). “Because there is a preference for resolving disputes
on the merits, doubts should be resolved in favor of the defaulting party.” Id. (quotation marks
and citation omitted). Accordingly, “‘good cause’ under Rule 55(c) should be construed
generously, and [t]he dispositions of motions for entries of defaults . . . and relief from the same
under Rule 55(c) are left to the sound discretion of a district court because it is in the best
position to assess the individual circumstances of a given case.” Del Med. Imaging Corp. v. CR
Tech USA, Inc., No. 08 Civ. 8556, 2010 WL 1487994, at *4 (S.D.N.Y. Apr. 13, 2010) (citations
omitted). Here, there is no evidence that Defendant’s default was “willful,” there is no reason to
believe that setting aside the entry of default would prejudice Plaintiff, and Defendant has
presented a meritorious defense based on lack of personal jurisdiction. It is also significant that
Defendant filed his motion to dismiss before Plaintiff filed its motion for default judgment,
thereby actively engaging in this case and asserting meritorious arguments at an early stage
following the entry of default.
Accordingly, the entry of default against Defendant is set aside pursuant to Rule 55(c)
and the motion for default judgment is denied.
B.
Motion to Dismiss Granted Due to Lack of Personal Jurisdiction
1.
General Legal Standard for Personal Jurisdiction
“A plaintiff bears the burden of demonstrating personal jurisdiction over a person or
entity against whom it seeks to bring suit.” Penguin Gr. (USA) Inc. v. Am. Buddha, 609 F.3d 30,
34 (2d Cir. 2010) (citation omitted). “In order to survive a motion to dismiss for lack of personal
4
jurisdiction, a plaintiff must make a prima facie showing that jurisdiction exists.” Thomas v.
Ashcroft, 470 F.3d 491, 495 (2d Cir. 2006). “Such a showing entails making ‘legally sufficient
allegations of jurisdiction,’ including ‘any averment of facts that, if credited[,] would suffice to
establish jurisdiction over the defendant.’” Penguin Gr., 609 F.3d at 35 (citation omitted). In
the absence of jurisdictional discovery, “allegations of jurisdictional fact must be construed in
the light most favorable to the plaintiff.” National Union Fire Ins. Co. of Pittsburgh, PA. v. BP
Amoco PLC, 319 F. Supp. 2d 352, 357 (S.D.N.Y. 2004) (citing CutCo Indus., Inc. v. Naughton,
806 F.2d 361, 365 (2d Cir. 1986)). “However, ‘[c]onclusory allegations are not enough to
establish personal jurisdiction’ and the allegations must be well-pled.” Sikhs for Justice v. Nath,
No. 10 Civ. 2940, 2012 WL 4328329, at *22 (S.D.N.Y. Sept. 21, 2012) (quoting Mende v.
Milestone Tech., Inc., 269 F. Supp. 2d 246, 251 (S.D.N.Y. 2003)); see also Accurate Grading
Quality Assur., Inc. v. Thorpe, No. 12 Civ. 1343, 2013 WL 1234836, at *2 (S.D.N.Y. Mar. 26,
2013) (“The Court . . . will not draw argumentative inferences’ in the plaintiff’s favor and need
not accept as true a legal conclusion couched as factual allegation.” (quotation marks and
citations omitted)). District courts enjoy “considerable procedural leeway” in addressing Rule
12(b)(2) motions and may decide them on “the basis of affidavits alone.” Marine Midland Bank,
N.A. v. Miller, 664 F.2d 899, 904 (2d Cir. 1981); accord Buccellati Holding Italia SPA v. Laura
Buccellati, LLC, No. 11 Civ. 7268, 2013 WL 1248416, at *3 (S.D.N.Y. Mar. 27, 2013).
A prima facie case for personal jurisdiction must satisfy three elements: (1) proper
service of process upon the defendant; (2) a statutory basis for personal jurisdiction; and (3)
accordance with constitutional due process principles. See Licci ex rel. Licci v. Lebanese
Canadian Bank, SAL, 673 F.3d 50, 59-60 (2d Cir. 2012). Because Plaintiff cannot satisfy the
second and third requirements, the Court does not address service of process.
5
With respect to the requisite statutory basis, “[t]he breadth of a federal court’s personal
jurisdiction is determined by the law of the state in which the district court is located.” Thomas,
470 F.3d at 495. In this case, that rule directs the Court’s attention to the laws of New York. To
establish personal jurisdiction over a defendant under New York law, a plaintiff must
“demonstrate either that the defendant was ‘present’ and ‘doing business’ in New York within
the meaning of [CPLR] § 301, or that the defendant committed acts within the scope of New
York's long-arm statute, [CPLR] § 302.” Schultz v. Safra Nat. Bank of New York, 377 Fed.
Appx. 101, 102 (2d Cir. 2010).
Under § 301, “a foreign corporation is subject to general personal jurisdiction in New
York if it is ‘doing business’ in the state.” Wiwa v. Royal Dutch Petroleum Co., 226 F.3d 88, 95
(2d Cir. 2000) (citing N.Y. C.P.L.R. § 301). “A corporation is ‘doing business’ and is therefore
‘present’ in New York and subject to personal jurisdiction with respect to any cause of action,
related or unrelated to the New York contacts, if it does business in New York not occasionally
or casually, but with a fair measure of permanence and continuity.” Id. (internal quotation marks
and bracketing omitted). “In order to establish that this standard is met, a plaintiff must show
that a defendant engaged in continuous, permanent, and substantial activity in New York.” Id.
(internal quotation marks omitted).
Section 302(a), New York’s long-arm statute, provides as follows:
(a) 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 ... who in
person or through an agent:
(1) transacts any business within the state or contracts anywhere to
supply goods or services within the state; or
6
(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 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). This section confers “specific jurisdiction over a non-domiciliary
defendant arising out of particular acts.” Accurate Grading, 2013 WL 1234836, at *2.
“[I]n determining whether personal jurisdiction may be exercised under section
302(a)(1), a court must decide (1) whether the defendant transacts any business in New York
and, if so, (2) whether this cause of action aris[es] from such a business transaction.” Licci, 673
F.3d at 60 (quotation marks and citation omitted). “[T]he overriding criterion necessary to
establish a transaction of business is some act by which the defendant purposefully avails itself
of the privilege of conducting activities within New York.” Id. at 61 (internal quotation
omitted). “[A] suit will be deemed to have arisen out of a party’s activities in New York if there
is an articulable nexus, or a substantial relationship, between the claim asserted and the actions
that occurred in New York.” HSH Nordbank AG N.Y. Branch v. Street, No. 11 Civ. 9405, 2012
WL 2921875, at *4 (S.D.N.Y. July 18, 2012) (citing Licci, 673 F.3d at 66); see also Lyons v.
Rienzi & Sons, Inc., 856 F. Supp. 2d 501, 507 (E.D.N.Y. 2012).
“The Due Process Clause protects an individual’s liberty interest in not being subject to
the binding judgments of a forum with which he has established no meaningful contacts, ties, or
7
relations.” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 471-72 (1985) (citation omitted).
Accordingly, “the exercise of personal jurisdiction must comport with constitutional due process
principles.” Licci, 673 F.3d at 60. As the Second Circuit has explained:
Due process permits a court to exercise personal jurisdiction over a
non-resident where the maintenance of the suit would not offend
traditional notions of fair play and substantial justice. To
determine whether this is so, we apply a two-step analysis in any
given personal jurisdiction case. First, we ask whether the
defendant has sufficient minimum contacts with the forum to
justify the court’s exercise of personal jurisdiction . . . . If the
defendant has sufficient minimum contacts, we proceed to the
second stage of the due process inquiry, and consider whether the
assertion of personal jurisdiction is reasonable under the
circumstances of the particular case.
Porina v. Marward Shipping Co., Ltd., 521 F.3d 122, 127 (2d Cir. 2008) (quotation marks and
internal citations omitted). These requirements interact: “the weaker the plaintiff’s showing [on
minimum contacts], the less a defendant need show in terms of unreasonableness to defeat
jurisdiction.” Tymoshenko v. Firtash, No. 11 Civ. 2794, 2013 WL 1234943, at *3 (S.D.N.Y.
Mar. 27, 2013) (internal quotation marks and citations omitted).
Courts recognize two forms of personal jurisdiction, specific and general:
Specific jurisdiction exists when a State exercises personal
jurisdiction over a defendant in a suit arising out of or related to
the defendant’s contacts with the forum; a court’s general
jurisdiction, on the other hand, is based on the defendant’s general
business contacts with the forum state and permits a court to
exercise its power in a case where the subject matter of the suit is
unrelated to those contacts. Because general jurisdiction is not
related to the events giving rise to the suit, courts impose a more
stringent minimum contacts test, requiring the plaintiff to
demonstrate the defendant’s continuous and systematic general
business contacts.
Metro. Life Ins. Co. v. Robertson-Ceco Corp., 84 F.3d 560, 567-68 (2d Cir. 1996) (quotation
marks and citations omitted). “[I]t is essential . . . that there be some act by which the defendant
8
purposefully avails itself of the privilege of conducting activities within the forum State, thus
invoking the benefits and protections of its laws.” Hanson v. Denckla, 357 U.S. 235, 253 (1958).
2.
Application of Law to Facts
a.
Jurisdiction Under New York Law
“Under CPLR § 301[,] general jurisdiction, which arises out of a defendant’s contacts
with the forum even if the contacts are unrelated to the action before the Court, is established
over a foreign [defendant] engaging in a continuous and systematic course of doing business in
New York.” Doe v. Delaware State Police, No. 10 Civ. 3003, 2013 WL 1431526, at *6
(S.D.N.Y. Apr. 4, 2013). Defendant states that he owns no property in New York, controls no
businesses within New York or with New York persons or entities, pays no New York taxes, and
has not visited New York in over five years. In response, Plaintiff musters only the vague
allegation that Plaintiff’s business venture in California with a Chinese company contemplated
the sale and movement of goods in interstate commerce, which could have included New York
State. These allegations fall far short of the required showing of a “continuous and systematic
course of doing business in New York” prerequisite to jurisdiction under CPLR § 301.
In the alternative, Plaintiff might seek to rely on CPLR § 302(a)(1), which provides, in
pertinent part, that a court “may exercise personal jurisdiction over any non-domiciliary . . . who
in person or through an agent . . . transacts any business within the state,” so long as the
plaintiff’s “cause of action aris[es] from” that transaction.” It is possible that, read in the light
most favorable to Plaintiff, Defendant purposefully availed himself of the New York forum by
selling electronics products in a national market, including New York. 3 The Court need not
3
To be clear, however, Plaintiff could not satisfy the “transacts business” requirement by
gesturing to Defendant’s website, which describes “channels in place around the globe to
9
resolve that question, however, because Plaintiff has failed to identify any articulable nexus or
substantial relationship between its claims and Defendant’s actions in New York. See Chang
Young Bak v. Metro-N. R. Co., No. 12 Civ. 3220, 2013 WL 1248581, at *3 (S.D.N.Y. Mar. 26,
2013) (noting that, because § 302 is a “specific jurisdiction provision,” it requires that “the cause
of action arise from defendant’s connection to New York”). The alleged fraud by a California
resident on a Chinese company in the course of a joint venture in California simply does not bear
the necessary connection to New York. In fact, it bears no connection whatsoever.
Finally, Plaintiff might look to CPLR § 302(a)(3), which authorizes jurisdiction where a
defendant “commits a tortious act without the state” and thereby causes “injury to a person or
property within the state,” subject to two conditions: “(i) [he] 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) [he] expects or should reasonably
expect the act to have consequences in the state and derives substantial revenue from interstate or
international commerce.” This claim would fail, however, because Plaintiff has not identified
any “injury to a person or property” within New York State. The injury in this case was suffered
by EAD, not by Plaintiff, and the bare fact that EAD decided to assign its claim to Plaintiff does
not shift the locus of the injury. 4 Cf. Buccellati Holding Italia, 2013 WL 1248416, at *6
purchase or sell consumer electronics products” and describes a “large warehouse” as “available
to use as a redistribution center.” Such vague allegations of an online presence, without any
specific allegations linking the online presence to New York state or a targeting of New York
state consumers, would not suffice under CPLR § 302(a). See Lawson v. Full Tilt Poker Ltd.,
No. 11 Civ. 6087, 2013 WL 950871, at *4 (S.D.N.Y. Mar. 7, 2013) (noting that only “[a]n
individual who operates or maintains a comprehensive service website targeted at New York
state consumers will meet the ‘transacts business’ requirement.”).
4
Plaintiff appears to address the requirements of CPLR § 302(a)(3)(i) and (ii) when it argues that
“[s]urely Defendant Chen through his companies obtained some portion of their revenue from
10
(S.D.N.Y. Mar. 27, 2013) (“[T]he vast weight of authority is that a finding of personal
jurisdiction may not rest solely on an act such as this instigated by a plaintiff.”).
Because Plaintiff cannot identify any statutory basis for personal jurisdiction over
Defendant, this case must be dismissed.
b.
Constitutional Limits on Personal Jurisdiction
Even if Plaintiff had alleged facts sufficient to support personal jurisdiction under New
York’s long arm law, the Court would nonetheless dismiss this case on due process grounds.
First, the facts alleged by Plaintiff do not come close to describing continuous and
systematic general business contacts, and therefore fall far short of the standard for general
jurisdiction. See Metro. Life Ins., 84 F.3d at 568. This is as true of Defendant’s website, see
UTC Fire & Sec. Americas Corp., Inc. v. NCS Power, Inc., 844 F. Supp. 2d 366, 371 (S.D.N.Y.
2012) (“It is well-established that a website accessible to New York residents—even a website
with interactive components—is insufficient to support general jurisdiction.” (collecting cases)),
as it is of their placement of goods into the stream of national commerce, see Goodyear Dunlop
Tires Operations, S.A. v. Brown, 131 S. Ct. 2846, 2857 (2011).
Second, the Constitution does not permit an exercise of specific jurisdiction over
Defendant. With respect to the minimum contacts inquiry, Plaintiff relies on two factual
allegations: (1) that Defendant placed goods into the stream of national commerce with
knowledge that some of those goods might end up in New York, a major electronics center, and
interstate commerce, and made sales of goods within New York State and derived revenues from
such sale. It is reasonably foreseeable that Defendant Chen knew goods would be delivered and
sold in New York State, as it is a major electronics market.” Plaintiff also invokes Amergence’s
website in support of these claims. The Court does not rule on whether these allegations satisfy
the requirements set forth in the subsections of CPLR § 302(a)(3), since Plaintiff does not satisfy
the primary condition of that part of New York’s long arm statute.
11
(2) that Amergence maintained a website on which it advertised “channels in place around the
globe to purchase or sell consumer electronics products” and a “large warehouse . . . available to
use as a redistribution center.” Neither of these factual allegations is sufficient.
Plaintiff’s first factual allegation directly implicates the “stream of commerce” theory of
specific personal jurisdiction that a plurality of a divided Supreme Court recently attempted to
clarify in J. McIntyre Mach., Ltd. v. Nicastro:
This Court has stated that a defendant’s placing goods into the
stream of commerce “with the expectation that they will be
purchased by consumers within the forum State” may indicate
purposeful availment. But that statement does not amend the
general rule of personal jurisdiction. It merely observes that a
defendant may in an appropriate case be subject to jurisdiction
without entering the forum—itself an unexceptional proposition—
as where manufacturers or distributors “seek to serve” a given
State’s market. The principal inquiry in cases of this sort is
whether the defendant's activities manifest an intention to submit
to the power of a sovereign. In other words, the defendant must
“purposefully avai[l] itself of the privilege of conducting activities
within the forum State, thus invoking the benefits and protections
of its laws.” Sometimes a defendant does so by sending its goods
rather than its agents. The defendant’s transmission of goods
permits the exercise of jurisdiction only where the defendant can
be said to have targeted the forum; as a general rule, it is not
enough that the defendant might have predicted that its goods will
reach the forum State.
131 S. Ct. 2780, 2788 (2011) (citations omitted). In the concurring (and controlling) opinion,
Justice Breyer agreed that in the absence of a “regular . . . flow” or “regular course” of sales to a
state, and the absence of “something more, such as special state-related design, advertising,
advice, marketing, or anything else,” the Constitution does not allow jurisdiction on the basis of
a stream of commerce theory. Id. at 2792 (Breyer, J., concurring) (quotation marks omitted).
Applying that rule to this case, Plaintiff’s allegations do not suffice to support a finding
of minimum contacts. Plaintiff has not alleged a regular course of sales in New York, nor has it
12
alleged anything “more” that reveals particular targeting of New York State. Rather, Plaintiff
alleges only that Defendant intended to place goods into a national stream of commerce and
knew (or should have known) that some of them might end up being sold in New York. While
the potential volume of sales of Defendant’s products makes this a close question, since Plaintiff
alleges that New York is a major market for electronics goods, the absence of any allegations of
a “regular course” of sales in New York and the absence of anything “more” to indicate targeting
of the New York forum preclude a finding of minimum contacts on this basis. 5
Plaintiff also suggests that the website maintained by Amergence supports a finding of
the requisite minimum contacts. That argument does not succeed. Although courts and scholars
have recognized that the application of traditional due process inquiries for personal jurisdiction
to the Internet may raise novel and hard questions, see, e.g., ALS Scan v. Digital Service
Consultants, 293 F.3d 707 (4th Cir. 2002); Sportschannel New England, LLP v. Fancaster, Inc.,
2010 WL 3895177 (D. Mass., Oct. 1, 2011); Hy Cite Corp. v. Badbusinessbureau.com, L.L.C.,
297 F. Supp. 2d 1154, 1160-61 (W.D. Wis. 2004); Martin Redish, Of New Wine and Old Bottles:
Personal Jurisdiction, the Internet, and the Nature of Constitutional Evolution, 38 Jurimetrics J.
575, 578 (1998), this case falls within the heartland of traditional due process jurisprudence.
In a leading case, Zippo Mfg. Co. v. Zippo Dot Com, Inc., a court in the Western District
of Pennsylvania concluded that “the likelihood that personal jurisdiction can be constitutionally
exercised is directly proportionate to the nature and quality of commercial activity that an entity
conducts over the Internet.” 952 F. Supp. 1119, 1124. That court described a “sliding scale” to
guide the due process inquiry for Internet-based minimum contacts:
5
This conclusion would remain the same if the Court applied the Nicastro plurality’s
‘submission to a sovereign’ test, as there is no factual support for the proposition that Defendant
manifested any intent with respect to submission to the laws of New York State.
13
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.
Id. at 1124 (citations and footnotes omitted).
The Second Circuit, however, has noted that “[w]hile analyzing a defendant’s conduct
under the Zippo sliding scale of interactivity may help frame the jurisdictional inquiry in some
cases . . . traditional statutory and constitutional principles remain the touchstone of the inquiry.”
Best Van Lines, Inc. v. Walker, 490 F.3d 239, 252 (2d Cir. 2007) (quotation marks and citations
omitted). The Second Circuit is thus aligned with other circuits skeptical of calls for major
doctrinal innovation while applying settled principles of personal jurisdiction to the Internet.
See, e.g., Illinois v. Hemi Group, LLC, 622 F.3d 754, 758 (7th Cir. 2010) (“[W]e think that the
traditional due process inquiry described earlier is not so difficult to apply to cases involving
Internet contacts that courts need some sort of easier-to-apply categorical test.”); GTE New
Media Servs., Inc. v. Bellsouth Corp., 199 F.3d 1343, 1349 (D.C. Cir. 2000) (“We do not believe
that the advent of advanced technology, say, as with the Internet, should vitiate long-held and
inviolate principles of federal court jurisdiction. The Due Process Clause exists, in part, to give a
degree of predictability to the legal system that allows potential defendants to structure their
primary conduct with some minimum assurance as to where that conduct will and will not render
14
them liable to suit.” (citation omitted)). But see Lakin v. Prudential Sec., Inc., 348 F.3d 704, 711
(8th Cir. 2003) (“The circuits that have addressed which analytical model to apply to a case of
general jurisdiction have split on whether to accept the Zippo ‘sliding scale.’” (citations
omitted)); ALS Scan, 293 F.3d at 712 (“Applying the traditional due process principles governing
a State’s jurisdiction over persons outside of the State based on Internet activity requires some
adaptation of those principles because the Internet is omnipresent.”).
Here, Plaintiff suggests that Defendant has engaged in minimum contacts through the
Amergence website, which describes the Amergence business and gestures toward a larger
commercial operation, including a warehouse available for use as an operation center. This
passive website, which does not afford users an interface for commercial activity or expressly
target the New York market in any way, could not suffice as a basis for personal jurisdiction.
See, e.g., McBee v. Delica Co., 417 F.3d 107, 124 (1st Cir. 2005) (“[T]he mere existence of a
website that is visible in a forum and that gives information about a company and its products is
not enough, by itself, to subject a defendant to personal jurisdiction in that forum. Something
more is necessary, such as interactive features which allow the successful online ordering of the
defendant’s products.” (citations omitted)); Jennings v. AC Hydraulic A/S, 383 F.3d 546 (7th Cir.
2004) (“[A] defendant’s maintenance of a passive website does not support the exercise of
personal jurisdiction over that defendant in a particular forum just because the website can be
accessed there.”); ALS Scan, 293 F.3d at 714 (“[A] person who simply places information on the
Internet does not subject himself to jurisdiction in each State into which the electronic signal is
transmitted and received. Such passive Internet activity does not generally include directing
electronic activity into the State with the manifested intent of engaging business or other
interactions in the State thus creating in a person within the State a potential cause of action
15
cognizable in courts located in the State.”); see also Bird v. Parsons, 289 F.3d 865, 874 (6th Cir.
2002) (holding that “[t]he operation of an Internet website can constitute the purposeful
availment of the privilege of acting in a forum state” where “the website is interactive to a degree
that reveals specifically intended interaction with residents of the state” (quotation marks and
citations omitted)); Soma Medical International v. Standard Chartered Bank, 196 F.3d 1292
(10th Cir. 1999) (finding no personal jurisdiction where “[t]he website appears to be a passive
Web site that does little more than make information available to those who are interested and
one in which [the defendant] has simply posted information on an Internet Web site which is
accessible to users in foreign jurisdictions.” (internal quotation marks and citations omitted)). 6
Separate and apart from the minimum contacts inquiry, Plaintiff must also demonstrate
that it would be “reasonable under the circumstances of [this] particular case” for the Court to
exercise personal jurisdiction over Defendant. Porina, 521 F.3d at 127. Plaintiff cannot satisfy
that requirement. Factors relevant to a reasonableness determination include:
(1) the burden that the exercise of jurisdiction will impose on the
defendant; (2) the interests of the forum state in adjudicating the
case; (3) the plaintiff’s interest in obtaining convenient and
effective relief; (4) the interstate judicial system’s interest in
obtaining the most efficient resolution of the controversy; and (5)
the shared interest of the states in furthering substantive social
policies.
Del Monte Fresh Produce N.A., Inc. v. M/V AFRICA REEFER, No. 12 Civ. 3597, 2013 WL
1129998, at *5 (S.D.N.Y. Mar. 19, 2013) (quotation marks and citations omitted). Almost none
6
Indeed, even if the website did contain interactive features, that would still not end the inquiry.
See, e.g., Johnson v. Arden, 614 F.3d 785, 797 (8th Cir. 2010) (“[W]hether specific personal
jurisdiction could be conferred on the basis of an interactive website depends not just on the
nature of the website but also on evidence that individuals in the forum state accessed the
website in doing business with the defendant.”); Toys “R” Us, Inc. v. Step Two, S.A., 318 F.3d
446, 454 (3d Cir. 2003); Mink v. AAAA Development, LLC, 190 F.3d 333 (5th Cir. 1999).
16
of those factors favor Plaintiff. Defendant has stated that it would be a weighty burden for him
to defend the case in New York, a state with no discernible interest in a controversy centered
around the State of California, and there is no reason for either the interstate judicial system or
any particular state to favor resolution of this case in the Southern District of New York. While
it may be more convenient for Plaintiff, as assignee of EAD’s claims, to litigate this case in New
York, that consideration is far from sufficient to tip the scales.
Accordingly, the Due Process Clause of the Constitution prohibits an exercise of personal
jurisdiction over Defendant in this case.
3.
Jurisdictional Discovery
At the jurisdictional stage, “district courts enjoy broad discretion in deciding whether to
order discovery.” In re Terrorist Attacks on September 11, 2001, 349 F. Supp. 2d 765, 811
(S.D.N.Y. 2005), aff’d, 538 F.3d 71 (2d Cir. 2008). The failure to make out a prima facie case
does not always bar jurisdictional discovery. Ehrenfeld v. Mahfouz, 489 F.3d 542, 550 n. 6 (2d
Cir. 2007). However, “if the plaintiff offers only speculations or hopes . . . that further
connections to [the forum] will come to light in discovery,” the court should dismiss the
complaint without allowing discovery. Rosenberg v. PK Graphics, No. 03 Civ. 6655, 2004 WL
1057621, at *1 (S.D.N.Y. May 10, 2004) (quotation marks and citation omitted). Given the
absence of any reason even to speculate that Plaintiff could reveal further connections to New
York State during jurisdictional discovery, and the weakness of the allegations offered by
Plaintiff in support of personal jurisdiction, jurisdictional discovery is unwarranted.
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III.
Conclusion
For the foregoing reasons, Plaintiff’s motion for default judgment is DENIED and
Defendant’s motion to dismiss is GRANTED without prejudice. The Clerk of Court is directed
to close the motion entries at Dkt. Nos. 10 and 14, and to close this case.
SO ORDERED.
Dated: New York, New York
April 25, 2013
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