Gordian Group, LLC v. Syringa Exploration, Inc.
Filing
26
OPINION & ORDER re: 6 MOTION to Dismiss filed by Syringa Exploration, Inc. Defendant's motion to dismiss is granted pursuant to Rule 12(b)(2) of the Federal Rules of Civil Procedure because the Court lacks personal jurisdiction over Sy ringa. The Court need not determine whether Plaintiff failed to join an indispensable party as required by Rule 19. This action is therefore dismissed without prejudice to Plaintiff to refile it in another forum. The Clerk of Court is respectfully directed to close item number 6 on the docket and to close this case. (As further set forth in this Order.) (Signed by Judge Ronnie Abrams on 3/10/2016) (adc)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
USDC-SDNY
DOCUMENT
ELECTRO NI CALLY FILED
DOC#:
DATE FILED: 03/10/2016
GORDIAN GROUP, LLC,
Plaintiff,
No. 15-CV-1312 (RA)
v.
OPINION & ORDER
SYRING A EXPLORATION, INC.,
Defendant.
RONNIE ABRAMS, United States District Judge:
Plaintiff Gordian Group, LLC brings this diversity action against Defendant Syringa
Exploration, Inc. alleging breach of an investment banking services contract. Syringa moved to
dismiss pursuant to Rule 12(b)(2) of the Federal Rules of Civil Procedure for lack of personal
jurisdiction and pursuant to Rule 12(b)(7) for failure to join an indispensable party. For the reasons
that follow, the Court concludes it lacks personal jurisdiction over Defendant. Defendant's motion
to dismiss is therefore granted without prejudice to Plaintiff to refile this lawsuit in another forum,
and the Court thus need not determine whether Plaintiff failed to join an indispensable party.
BACKGROUND
I.
Factual Background 1
A.
The Parties
Plaintiff, a Delaware limited liability company with its principal place of business in New
York, is an investment bank "specializing in financial and advisory services in complex and
distressed situations." Compl. i1i116, 18. Defendant is an Idaho corporation with its principal
1 The facts are drawn from the Complaint, the affidavits submitted by the parties in connection with
Defendant's motion, and the exhibits accompanying the Complaint and affidavits.
place of business in Idaho. Id.~ 17. Its "only business consists of the ownership and management
of an 80 percent membership interest" in nonparty Crescent Mine, LLC ("Crescent Mine"). Gross
Aff. ~ 3. Crescent Mine, a Delaware limited liability company with its principal place of business
in Idaho, is "engaged in the business of owning, acquiring, selling, exploring and operating mineral
and metal mines." Id.
B.
~~
6-7.
The Letter Agreement
On October 7, 2013, Plaintiff entered into a letter agreement (the "Agreement") with
nonparty United Silver Corp. ("USC") to "be [USC's] exclusive investment banker as [USC]
sought to emerge from its financial distress and either restructure or repay its secured debt."
Compl. ~ 19 & Ex. 1 ("Agreement"). At that time, USC owed approximately $9 million to an
affiliate of Hale Capital Partners, LLC ("Hale"), and the debt was secured by "substantially all of
[USC's] assets." Compl. ~ 5. USC's "primary asset of value" was Crescent Mine by virtue of
USC's complete ownership of a subsidiary called United Mine Services, Inc. ("UMS"), which in
tum wholly owned Defendant and its 80 percent interest in Crescent Mine. Id. ~ 27; Gross Aff.
~ 3. Two Hale subsidiaries held the remaining 20 percent interest in Crescent Mine. Klein Aff.
~
3.
In the Agreement, Gordian agreed to assist "the Company"-a term defined to mean USC
"together with its subsidiaries"-reduce its debt burden by providing advice and services.
Agreement at 1. USC's interim chief executive officer, Greg Stewart, executed the Agreement on
behalf of USC. Id. at 8. No other individual signed the Agreement on behalf of USC or any of its
subsidiaries, though Plaintiff alleges that at that time Mr. Stewart was also Defendant's president
and therefore "had actual authority to bind Syringa to the terms of the [A]greement." Compl.
2
ii
28. Plaintiff's president, Peter S. Kaufman, executed the Agreement on behalf of Gordian.
Agreement at 8.
As is relevant here, the Agreement provides that Plaintiff would be paid a "Transaction
Fee" in the amount of five percent of "the principal amounts of any existing debt ... directly or
indirectly amended, assumed, repaid, satisfied, compromised, exchanged, refinanced, restructured,
credit bid or retired" by "the Company" as a result of a "Financial Transaction." Id. at 2-3. The
term "Financial Transaction" is defined to include, among other events, "a restructuring,
amendment, exchange, repayment, satisfaction, assumption, refinancing, extension, compromise
or other modification of some or all of the Company's debt." Id. at 1. Plaintiff alleges that the
Agreement entitles Gordian to a Transaction Fee "solely on the occurrence of a Financial
Transaction" because the Agreement "does not include any 'causation' or 'origination'
requirement, or state that Gordian was obligated to have any minimum specified level of
involvement in the Financial Transaction giving rise to the obligation to pay a Transaction Fee."
Compl.
ii 23.
The Agreement also provides that:
The Company's obligations hereunder shall be joint and several
obligations of [USC] and any subsidiaries, it being understood and
agreed that the Company will cause the subsidiaries of the
Company, if any, to perform the Company's obligations hereunder;
provided, however, that no such subsidiary shall be required to pay
any amount that would cause it to become insolvent and any such
amount not so paid shall be reallocated among the remaining such
subsidiaries.
Agreement at 7. In addition, the Agreement contains a mandatory arbitration clause, a New York
choice of law clause, and two forum selection clauses. See id. at 6-7. Specifically, the Agreement
provides that "the parties ... consent to the non-exclusive jurisdiction of the federal and state
courts sitting in New York City for the purpose of entering judgment upon and enforcing [an
3
arbitration award]" and that "[t]he Company ... consents to venue and jurisdiction in any court in
which Gordian ... is sued or otherwise found or brought." Id.
Plaintiff and USC negotiated the executed the Agreement by telephone and email from
their respective offices in New York and Idaho. Gross Aff.
C.
~
14; Kaufman Aff.
~~
4-5.
The Parties' Performance
Plaintiff alleges that after executing the Agreement, it "commenced a series of discussions
with Hale" to propose ways that USC could retire some or all of its debt obligations, including "(i)
extensions of time that could allow a real third-party exploration process, (ii) conversion of Hale's
defaulted debt into more permanent capital, and (iii) a spinoff of certain assets away from Hale
and to ... other stockholders." Compl.
~
30. These discussions occurred between October 2013
and January 2014, and Plaintiff performed substantially all of its work pursuant to the Agreement
in New York.
Id.~~
31-36; Kaufman Aff.
~
6.
Plaintiff also alleges that on November 25, 2013, Mr. Stewart, traveled to New York on
behalf of USC and-accompanied by Plaintiff's chief executive officer-"personally met with
representatives from Hale" at Hale's offices in New York City. Kaufman Aff.
~
7 & Ex. 1.
According to Plaintiff, after the meeting "Mr. Stewart returned to Gordian's offices and met with"
various Gordian employees. Id. Although Defendant acknowledges that "a USC representative
traveled into New York at one point to negotiate with Hale," it contends that "Gordian was not
present at that meeting," "those negotiations were not undertaken pursuant to the [Agreement],"
and "nobody acting on behalf of Syringa has ever entered New York." Gross Aff.
~~
15-16.
On January 4, 2014, Hale sought an order from the Ontario Superior Court of Justice, in
Canada, appointing a receiver for USC.
Compl.
~
36. On March 4, 2014, UMS-the USC
subsidiary that wholly owned Defendant-entered into a consensual foreclosure agreement with a
4
Hale affiliate whereby the affiliate acquired all of UMS' assets, including Defendant, in exchange
for relieving $7.5 million of USC's debt. Id.
D.
~
37.
Plaintifrs Attempts to Obtain a Transaction Fee
Plaintiff contends that UMS' "foreclosure and its associated debt relief constituted a
Financial Transaction under the [Agreement], pursuant to which Gordian is entitled to a
Transaction Fee." Compl.
~
38. In March 2014, Plaintiff sent invoices to USC's appointed
receiver, UMS, Syringa, and Crescent Mine, but did not receive payment. Id.
~~
39-40.
On April 3, 2014, Plaintiff initiated arbitration proceedings against UMS, Syringa, and
Crescent Mine. Id.
~
41. Syringa and Crescent Mine commenced an Article 75 petition in the
Commercial Division of New York Supreme Court to stay the arbitration, and Plaintiff moved to
dismiss the petition.
Id.~
42. On October 16, 2014, the court denied Plaintiff's motion, reasoning
that because Syringa and Crescent Mine did not sign the Agreement, they were not bound by the
arbitration clause contained therein.
Id.~~
43-45; Gross Aff. Ex. 13. Of particular concern to the
state court was the fact that by agreeing to arbitration, "you are giving up your right to come to an
open Court, you are giving up your right to appeal a decision made by a trial [j]udge, and you give
up all sorts of other rights, a trial by jury, ... motions, ... discovery-all sorts of rights." Gross
Aff. Ex. 13 at 18:7-12. Plaintiff did not appeal the state court order. Compl.
~
46. On November
20, 2014, the court granted Syringa and Crescent Mine's petition and stayed the arbitration.
II.
Procedural History
After Plaintiff initiated this action "against the one remaining joint and several obligor that
it believes both has assets and over which it can establish jurisdiction," Compl.
~
46, Defendant
moved to dismiss, Dkt. 6. The Court heard oral argument on Defendant's motion on February 22,
2016. Dkt. 22.
5
LEGAL STANDARD
"The plaintiff bears the burden of establishing that the court has jurisdiction over the
defendant." Wallert v. Atlan, _
F. Supp. 3d __ , 2015 WL 6459219, at *6 (S.D.N.Y. Oct. 26,
2015) (quoting DiStefano v. Carozzi N. Am., Inc., 286 F.3d 81, 84 (2d Cir. 2001)). "Prior to
discovery, a plaintiff challenged by a jurisdiction testing motion may defeat the motion by pleading
in good faith, legally sufficient allegations of jurisdiction. At that preliminary stage, the plaintiff's
primafacie showing may be established solely by allegations." Dorchester Fin. Securities, Inc. v.
Banco BRJ, SA., 722 F .3d 81, 84-85 (2d Cir. 2013) (quoting Ball v. Metallurgie HobokenOverpelt, SA., 902 F.3d 194, 197 (2d Cir. 1990)). "This showing may be made through the
plaintiff's 'own affidavits and supporting materials, containing an averment of facts that, if
credited, would suffice to establish jurisdiction over the defendant."' S New Eng. Tel. Co. v.
Global NAPs Inc., 624 F.3d 123, 138 (2d Cir. 2010) (quoting Whitaker v. Am. Telecasting, Inc.,
261 F.3d 196, 208 (2d Cir. 2001 )). The Court must "construe the pleadings and affidavits in the
light most favorable to plaintiffTJ, resolving all doubts in [its] favor." Id. (quoting Porina v.
Marward Shipping Co., 521 F.3d 122, 126 (2d Cir. 2008)). "Nevertheless, the Court 'will not
draw argumentative inferences in the plaintiff's favor' and need not 'accept as true a legal
conclusion couched as a factual allegation."' Waller!, 2015 WL 6459219, at *6 (quoting In re
Terrorist Attacks on Sept. I 1, 2001, 714 F.3d 659, 673 (2d Cir. 2013)).
DISCUSSION
Defendant argues that the Complaint should be dismissed both under Rule l 2(b )(2) for lack
of personal jurisdiction over Syringa and under Rule 12(b)(7) for failure to join Crescent Mine,
which Defendant contends is an indispensable party under Rule 19. See Def. 's Mem. 10-24. 2 "[A]
2
Defendant also seeks an order pursuant to Rule 26(c) staying discovery pending resolution of its motion to
dismiss. See Def. 's Mem. 24-25. Plaintiff did not respond to this argument in its opposition brief. On May 7, 2015,
6
district court must generally ... establish that it has federal constitutional jurisdiction" before
considering other grounds for dismissal. Alliance for Envtl. Renewal, Inc. v. Pyramid Crossgates
Co., 436 F.3d 82, 85 (2d Cir. 2006) (citing Steel Co. v. Citizens.for a Better Environment, 523 U.S.
83, 101 (1998)). "[T]his principle applie[ s] equally to personal jurisdiction." Mones v. Com. Bank
of Kuwait, SA.K., 204 F. App'x 988, 989 (2d Cir. 2006) (citing Ruhragas AG v. Marathon Oil
Co., 526 U.S. 574, 584 (1999)). The Court therefore must determine first whether it can exercise
personal jurisdiction over Defendant.
I.
Personal Jurisdiction
Plaintiff argues the Court has personal jurisdiction over Defendant by virtue of the forum
selection clause in the Agreement and, independently, New York's long-arm statute. See Pl.'s
Mem. 14-21. 3 Taking the facts as Plaintiff alleges them and assuming that Defendant is bound by
the Agreement-as Plaintiff argues but which Defendant contests-the Court disagrees.
A.
The Forum Selection Clause
"Parties can consent to personal jurisdiction through forum-selection clauses in contractual
agreements." D.H. Blair & Co. v. Gottdiener, 462 F.3d 95, 103 (2d Cir. 2006). "Where an
agreement contains a valid and enforceable forum selection clause, ... it is not necessary to analyze
jurisdiction under New York's long-arm statute or federal constitutional requirements of due
process." Export-Import Bank of US v. Hi-Films SA. de CV, No. 09-CV-3573 (PGG), 2010
WL 3743826, at *4 (S.D.N.Y. Sept. 24, 2010) (citing Koninklijke Philips Elecs. v. Digital Works,
Inc., 358 F. Supp. 2d 328, 333 (S.D.N.Y. 2005)). This is so because "(a]n enforceable forum
the parties jointly requested-and the Court so ordered-that the initial pretrial conference be adjourned pending
resolution of Defendant's motion. See Dkt. 17. Defendant's request for an order formally staying discovery is thus
denied as moot.
3
The parties agree, as does the Court, that Defendant is not subject to general personal jurisdiction in New
York. See Def.'s Mem. 23; Oral Arg. Tr. 20-21.
7
selection clause amounts to consent to personal jurisdiction." Farrell Lines Inc. v. Columbus
Cello-Poly Corp., 32 F. Supp. 2d 118, 127 (S.D.N. Y. 1997).
Courts determine whether forum selection clauses are enforceable by asking:
( 1) whether the clause was reasonably communicated to the party
resisting enforcement; (2) whether the clause is mandatory or
permissive, i.e., whether the parties are required to bring any dispute
to the designated forum or simply permitted to do so; and (3)
whether the claims and parties involved in the suit are subject to the
If the forum selection clause was
forum selection clause.
communicated to the resisting party, has mandatory force and covers
the claims and parties involved in the dispute, it is presumptively
enforceable. A party can overcome this presumption only by (4)
making a sufficiently strong showing that enforcement would be
unreasonable or unjust, or that the clause was invalid for such
reasons as fraud or overreaching.
Martinez v. Bloomberg LP, 740 F.3d 211, 217 (2d Cir. 2014) (internal quotations, alterations, and
citations omitted). Treating forum selection clauses that satisfy the first three steps of the analysis
as presumptively enforceable "reflects a strong federal public policy of its own," namely "reducing
uncertainties about where suit may be brought." Id. at 218. More expansively, "[fJorum selection
clauses 'further vital interests of the justice system, including judicial economy and efficiency,
ensure that parties will not be required to defend lawsuits in far-flung fora, and promote uniformity
of result.'" Id. at 219 (quoting Magi XXL Inc. v. Stato dell a Citta del Vaticano, 714 F.3d 714, 722
(2d Cir. 2013)). They should therefore be invalidated only when "it would be unfair, unjust, or
unreasonable to hold [a] party to his bargain." MIS Bremen v. Zapata Off-Shore Co., 407 U.S. 1,
18 (1972).
Forum selection clauses "that do not apply to an ascertainable forum, however, undermine
those goals, and for that reason courts refuse to enforce them." Conopco, Inc. v. PARS Ice Cream
Co., No. 13-CV-1083 (JSR), 2013 WL 5549614, at *5 (S.D.N.Y. Sept. 26, 2013). Indeed, forum
selection clauses that do not indicate where suit may be brought enhance uncertainty about where
8
litigation may occur rather than reduce it. Such clauses also make it more likely that parties will
have to defend lawsuits in far-flung fora, rather than less, all without promoting judicial economy,
judicial efficiency, or uniformity of result. In light of the federal policies that support enforcing
forum selection clauses as a general matter, it is therefore "unfair, unjust, or unreasonable to hold"
parties to clauses that do not provide sufficient notice as to the forum being selected. MIS Bremen,
407 U.S. at 18.
Although notice can be sufficient without explicitly naming the jurisdiction in which
contracting parties agree to litigate, a forum selection clause must nonetheless allow the parties to
predict with a reasonable degree of certainty where they may be haled into court. Federal courts
thus generally enforce forum selection clauses tied to a party's principal place of business despite
the risk that the party might relocate. See A.I. Credit Corp. v. Liebman, 791 F. Supp. 427, 429
(S. D .N. Y. 1992) (enforcing forum selection clause selecting jurisdiction of potential transferee's
principal place of business); accord GT Performance Grp., LLC v. Kayo USA, Corp., No. 12-CV83 (TWP), 2013 WL 4787329, at *2 (S.D. Ind. Sept. 6, 2013) (enforcing forum selection clause
"that mandates that the state in which the filing party is located ... is the agreed upon jurisdiction");
IFC Credit Corp. v. Burton Indus., Inc., No. 04-CV-5906 (RAG), 2005 WL 1243404, at *3 (N.D.
Ill. May 12, 2005) ("Despite the inherent uncertainty, courts have concluded ... that a forumselection clause identifying the forum solely as one party's principal place of business is valid.").
Federal courts have not, however, extended this principle to enforce forum selection clauses
containing even more uncertainty, such as preemptively waiving any personal jurisdiction defense
no matter where suit is brought or agreeing to jurisdiction in any state that may be relevant to a
party's contractual performance. See Conopco, 2013 WL 5549614, at *5-6 (refusing to endorse
forum selection clause that waived any personal jurisdiction defense); Redrock Trading Partners,
9
LLC v. Baus Mgmt. Corp., No. 13-CV-43 (JRH), 2014 WL 5106998, at *3 (S.D. Ga. Oct. 10,
2014) (refusing to enforce an "impermissibly vague" forum selection clause that authorized suit in
any "such [s]tate in connection with any action or proceeding arising out of' the contract).
The relevant forum selection clause in the Agreement-in contrast to the Agreement's
forum selection clause related to enforcing arbitration awards-does not apply to an ascertainable
forum. The clause provides that "[t]he Company ... consents to venue and jurisdiction in any
court in which Gordian ... is sued or otherwise found or brought." Agreement at 6. This language
is far from a paragon of clarity. It cannot be read, for example, to bind the parties to litigate only
in the jurisdiction in which Plaintiff is located by virtue of having its principal place of business
there. Read most broadly, it could be interpreted to obligate USC and its subsidiaries to litigate
"in any court" Plaintiff may select by filing suit and thus being "found" there.
Such an
interpretation would allow Plaintiff to choose to litigate in any jurisdiction-or in other words,
would provide USC's "consent to be sued anywhere in the world"-and the clause would be
plainly unenforceable. A.I. Credit Corp., 791 F. Supp. at 429.
Plaintiff argues that the forum selection clause should be read more narrowly, specifically
to agree to litigation in New York (where Defendant's president "had to know that Gordian ...
could be found" because that is where Plaintiffs office is located) or Delaware (where Plaintiff is
registered as a limited liability company). Dkt. 24 at 1; see Oral Arg. Tr. 18-19. According to
Plaintiff, because Gordian can be "found" in these two states, reading the forum selection clause
to apply to any other jurisdiction "is wholly implausible." Dkt. 24 at 1. 4 The Court disagrees.
This argument ignores those portions of the forum selection clause authorizing litigation in any
4
Plaintiffs counsel speculated at oral argument that the forum selection clause may also "leave[] open the
possibility that if Gordian performed a significant amount of work in some other jurisdiction for that client, perhaps
Gordian could establish jurisdiction there." Oral Arg. Tr. 20.
10
court in which Gordian is "sued" or "brought." Presumably those words must expand the scope
of the forum selection clause beyond where Plaintiff is "found," or else they would be superfluous.
But how do they expand it? Does "sued" refer to any court in which Gordian has been a defendant?
Or only those courts in which Gordian is a defendant in a lawsuit related to the Agreement? Or
perhaps those courts in which Gordian could be sued and subject to personal jurisdiction? What
about "brought"? Does that word anticipate that Gordian may change its principal place of
business in the future? Or does it refer to the possibility that Gordian's performance under the
Agreement could require substantial work outside its New York office? Plaintiff does not say, and
neither can the Court from the language of the forum selection clause alone. For this reason, even
accepting Plaintiffs interpretation of the word "found," the clause is "impermissibly vague,"
Redrock Trading Partners, 2014 WL 5106998, at *3, and fails to "reduc[e] uncertainties about
where suit may be brought" at the time Plaintiff and USC executed the Agreement, Martinez, 740
F.3d at 218.
Because the forum selection clause at issue contravenes the federal policies that support
enforcing such clauses, it is unenforceable and provides no ground to support personal jurisdiction
over Defendant. In reaching this conclusion, the Court need not determine whether Defendant is
bound by the Agreement as a whole. That issue-which goes directly to the merits of Plaintiffs
claim-should properly be determined by a court of competent jurisdiction.
B.
Long-Arm Jurisdiction
As is relevant here, New York's long-arm statute authorizes courts to exercise personal
jurisdiction "over any non-domiciliary ... who in person or through an agent ... transacts any
business within the state" so long as the cause of action "aris[ es] from" that transaction. N. Y.
C.P.L.R. ยง 302(a)(l). Thus, "a plaintiff may exercise 'personal jurisdiction over a non-domiciliary
11
if two conditions are met: first, the non-domiciliary must transact business within the state; second,
the claims against the non-domiciliary must arise out of that business activity."' Aquiline Capital
Partners LLC v. FinArch LLC, 861 F. Supp. 2d 378, 386 (S.D.N.Y. 2012) (quoting CutCo Indus.,
Inc. v. Naughton, 806 F.2d 361, 365 (2d Cir. 1986)).
"[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." Licci ex rel. Licci v. Lebanese Canadian Bank, SAL, 673 F .3d 50, 61 (2d Cir. 2012)
(quoting Ehrenfeld v. Bin Mahfouz, 881 N.E.2d 830, 834 (N.Y. 2007)). "A defendant need not
physically enter New York State in order to transact business, 'so long as the defendant's activities
here were purposeful."' Id. (quoting Fischbarg v. Doucet, 880 N.E.2d 22, 26 (N.Y. 2007)). In
Licci, the Second Circuit surveyed New York Court of Appeals case law and concluded that "it is
the quality of the defendants' New York contacts that is the primary consideration." Id. at 62
(quoting Fischbarg, 880 N.E.2d at 26). In some cases, therefore, "[a] single act within New York
will ... satisfy the requirements of section 302(a)(l)." Id. (citing Deutsche Bank Sec., Inc. v.
Montana Bd. ofinv., 850 N.E.2d 1140, 1143 (N.Y. 2006)). In others, "when an individual act in
New York will not suffice, an ongoing course of conduct or relationship in the state may." Id.
(citing Fischbarg, 880 N .E.2d at 28). In the end, "whether a defendant has purposefully availed
itself of the New York forum is a fact-intensive inquiry inasmuch as it requires the trial court, in
the first instance, to 'closely examine the defendant's contacts for their quality."' Licci ex rel.
Licci v. Lebanese Canadian Bank, SAL, 732 F.3d 161, 168 (2d Cir. 2013) (quoting Licci v.
Lebanese Canadian Bank, 984 N.E.2d 893, 899-900 (N.Y. 2012)).
The Second Circuit has articulated four relevant factors when determining whether a
defendant transacts business in New York via contract. Courts must consider:
12
(i) whether the defendant has an on-going contractual relationship
with a New York corporation; (ii) whether the contract was
negotiated or executed in New York and whether, after executing a
contract with a New York business, the defendant has visited New
York for the purpose of meeting with parties to the contract
regarding the relationship; (iii) what the choice-of-law clause is in
any such contract; and (iv) whether the contract requires franchisees
to send notices and payments into the forum state or subjects them
to supervision by the corporation in the forum state.
Sunward Electronics, Inc. v. McDonald, 362 F.3d 17, 22-23 (2d Cir. 2004) (quoting Agency Rent
A Car Sys., Inc. v. Grand Rent A Car Corp., 98 F.3d 25, 29 (2d Cir. 1996). "Although all factors
are relevant, no one factor is dispositive and other factors may be considered." Id. at 23. Courts
must ultimately decide "based on the totality of the circumstances." Id. (quoting Agency Rent A
Car Sys., 98 F.3d at 29).
Here, even assuming the Agreement binds Defendant, Plaintiff has failed to allege
sufficient facts to make a prima facie case that the Court may exercise personal jurisdiction over
Syringa. The factors identified by the Second Circuit, as well as those additional factors Plaintiff
argues the Court should consider, are each analyzed in turn.
1.
Ongoing Contractual Relationships
Plaintiff argues that because it "is a citizen of the State of New York by virtue of the
location of its principal offices," the Agreement created an ongoing contractual relationship with
a New York corporation "[f]rom October 7, 2013 (the date the [Agreement] was signed) until
March 2014 (when Hale entered into the consensual foreclosure with [UMS])." Pl.'s Mem. 21
n.6. During this approximately six-month period, Plaintiff argues that it "provided investment
banking services to and for the benefit of [USC] and all of its subsidiaries, and those services were
performed by Gordian almost exclusively in New York." Id. Defendant counters that, as a matter
of law, ongoing contractual relationships are "seldom ... found" when the disputed contract is the
only contract between the parties. Def.'s Reply 7.
13
The Court agrees with Defendant that Gordian and Syringa did not have an ongoing
contractual relationship. "[D]istrict courts within this Circuit have held that a single short-term
contract is not enough to constitute an 'ongoing contractual relationship' for the purposes of
personal jurisdiction." Sandoval v. Abaco Club on Winding Bay, 507 F. Supp. 2d 312, 317
(S.D.N.Y. 2007) (citing Mortgage Funding Corp. v. Boyer Lake Pointe, L. C, 379 F. Supp. 2d 282,
287 (E.D.N.Y. 2005); Burrows Paper Corp. v. R.G. Engineering, Inc., 363 F. Supp. 2d 379, 385
(N.D.N.Y. 2005)). In Sandoval, the court held that no ongoing contractual relationship existed
between a New York-based corporation and a foreign defendant to install an irrigation system, the
physical labor for which was performed between December 2003 and October 2004. See id. at
314. This ten- or eleven-month period exceeds the six-month period during which Plaintiff alleges
it performed work on Defendant's behalf. Because the Agreement is the only source of contractual
obligations between the parties, it is therefore properly characterized as a single short-term contract
and not the foundation of an ongoing contractual relationship.
Plaintiff characterizes Sandoval as "an outlier" and urges the Court to rely instead on
Deutsche Bank Securities and Fischbarg, two New York Court of Appeals decisions holding that
New York courts could exercise personal jurisdiction over out-of-state defendants who sought to
contract with New York-based entities. Oral Arg. Tr. 23-24; Dkt. 24 at 2. As this Court has
previously noted, however, Deutsche Bank Securities and Fischbarg do not "stand for the
proposition that initiating a transaction with a plaintiff in New York amounts to transacting
business." Three Five Compounds, Inc. v. Scram Technologies, Inc., No. 11-CV-1616 (RJH),
2011 WL 5838697, at *9 (S.D.N.Y. Nov. 21, 2011). Those cases, rather, "fit well into a line of
decisions emphasizing [] 'the purposeful creation of a continuing relationship with a New York
14
corporation."' Id. at *10 (quoting George Reiner & Co. v. Schwartz, 363 N.E.2d 551, 554 (N.Y.
1977)).
In Deutsche Bank Securities, the Court of Appeals held that New York courts could
exercise personal jurisdiction over "a Montana state agency charged with managing an investment
program for public funds, the public retirement system and state compensation insurance fund
assets" after an employee at the agency electronically negotiated a $15 million bond sale with one
of the plaintiffs employees in New York. 850 N.E.2d at 1141. In analyzing the agency's contacts
with New York, the court noted that bond transactions such as the one in dispute were "a major
aspect of [the agency's] mission" and that "over the preceding 13 months, [the agency] had
engaged in approximately eight other bond transactions with [plaintiffs] employee in New York."
Id. at 1143. The court therefore concluded that the agency had "avail[ed] itself of the benefits of
conducting business" in New York despite never physically entering the state. Id.
Defendant's relationship with Plaintiff is scant by comparison. The Agreement was the
first transaction between USC and Plaintiff, and the relationship existed for a significantly shorter
period of time than the relationship at issue in Deutsche Bank Securities. The Agreement's subject
matter, moreover, involved investment banking services and debt relief, which Plaintiff does not
allege were "major aspect[s]" of Defendant's or USC's silver mining business. Deutsche Bank
Securities therefore does not mandate the conclusion that Defendant here sought to avail itself of
conducting business in New York.
Plaintiffs reliance on Fischbarg fares no better. In Fischbarg, the Court of Appeals held
that an out-of-state defendant who hired a New York attorney was subject to personal jurisdiction
in New York. See 880 N.E.2d at 24. Crucial to this conclusion was the fact that, by retaining a
New York lawyer, the defendant was protected by New York's laws regarding "the attorney-client
15
relationship" throughout the representation. Id. at 28. By contrast, the relationship created by the
Agreement did not implicate any specific New York law by virtue of Plaintiffs location in the
state.
These features of Deutsche Bank Securities and Fischbarg "explain[] why courts in this
district have found personal jurisdiction where parties' communications were part and parcel of an
extended relationship involving multiple transactions or the provision of services over multiple
years." Three Five Compounds, 2011 WL 5838697, at *10. Far from being an outlier, Sandoval
is consistent with these cases because it found jurisdiction to be lacking when the parties had
neither "multiple transactions" nor "multiple years" of contract performance. See id. & n.4. The
same is true here.
2.
Location of Negotiation and Execution and Visits to New York
Plaintiff argues this factor favors the exercise of personal jurisdiction both because the
Agreement was partially negotiated and executed in New York and because Mr. Stewart
(concurrently USC's interim chief executive officer and Defendant's president) visited New York
once after the Agreement was signed to meet with representatives of Plaintiff and Hale. The Court
again disagrees.
With regard to the negotiation and execution of the Agreement, Plaintiff argues that
"Gordian negotiated and executed [the Agreement] from its offices in New York, so at least its
half of that process was unquestionably in this jurisdiction." Pl.'s Mem. 21 n.6. Plaintiff does not
dispute that USC negotiated and executed the Agreement from Idaho and communicated with
Gordian in New York only by telephone and email. See Gross Aff.
~
14. Plaintiffs argument is
therefore "inappropriately focused on [the plaintiffs] own activities in New York and not [the
defendant's]." Centerboard Securities, LLCv. Benefuel, Inc., No. 15-CV-71(PAC),2015 WL
16
4622588, at *2 (S.D.N.Y. Aug. 3, 2015); see also Falow v. Cucci, No. OO-CV-4754 (GBD), 2003
WL 22999458, at *5 (S.D.N.Y. Dec. 19, 2003) ("The unilateral activity of plaintiff executing a
contract in New York is an insufficient basis upon which to acquire jurisdiction over a nondomiciliary defendant.").
"[T]he prevailing rule is that [a defendant's] 'communications into New York will only be
sufficient to establish personal jurisdiction if they were related to some transaction that had its
center of gravity inside New York, into which a defendant projected himself."'
Three Five
Compounds, 2011 WL 5838697, at *7 (quoting Maranga v. Vira, 386 F. Supp. 2d 299, 306
(S.D.N.Y. 2005)). For example, when an out-of-state defendant participates by telephone in a live
auction occurring in New York, it is "highly significant that, on his own initiative, the defendant,
in a very real sense, project[s] himself into the auction room in order to compete with the other
prospective purchasers who [a]re there." Parke-Bernet Galleries, Inc. v. Franklyn, 256 N.E.2d
506, 508 (N. Y. 1970). By contrast, when an out-of-state defendant contracts with a New Yorkbased company to "obtain services to sell [the defendant's] stock or assets," the connection to New
York is too "random" and "attenuated" to be jurisdictionally significant. Paine Webber Inc. v.
WHV, Inc., No. 95-CV-52 (LMM), 1995 WL 296398, at *3 (S.D.N.Y. May 16, 1995); see also
Lamco Grp .. Inc. v. Universal Life Ins. Co., 903 F. Supp. 612, 613-14 (S.D.N.Y. 1995) (relying
on Paine Webber to conclude jurisdiction was lacking over defendant who contracted with "a New
York merchant banking firm" to assist defendant "in connection with its efforts to complete a sale
or merger of its business").
Nothing in the record suggests that Defendant projected itself into a New York-based
transaction when USC executed the Agreement. The Agreement itself provides that USC retained
Plaintiff "to provide certain financial advisory and investment banking services" related to USC's
17
Idaho-based business without reference to any transaction in New York.
Agreement at 1.
Although Plaintiff alleges it performed its obligations from New York, nothing in the Agreement
required it to do so. See Centerboard Securities, 2015 WL 4622588, at *2 (noting that "nothing
in the contract required [plaintiff] to perform in New York"). UMS' foreclosure agreementbecause of which Plaintiff contends it is entitled to payment under the Agreement-moreover, was
executed in Canada, not New York. See Compl.
iii! 36-37. Even assuming that Mr. Stewart's
communications from Idaho to New York during the process of negotiating and executing the
Agreement can be attributed to Defendant, therefore, such communications are insufficient to
establish personal jurisdiction.
As to Mr. Stewart's physical presence in New York, Plaintiff cites to a meeting in New
York City on November 25, 2013 between Mr. Stewart, Gordian's chief executive officer, and
representatives of Hale, after which Mr. Stewart visited Gordian's offices and met with other
Gordian employees. See Pl.'s Mem. 18; Kaufman Aff.
if 7 &
Ex. 1. Even assuming Mr. Stewart
represented both USC and Defendant while in New York, this argument also fails to establish
personal jurisdiction over Syringa.
Courts are "skeptical of attempts to assert personal jurisdiction over a defendant based on
a single meeting in New York, especially where that meeting did not play a significant role in
establishing or substantially furthering the relationship of the parties." Posven, CA. v. Liberty
Mut. Ins. Co., 303 F. Supp. 2d 391, 398 (S.D.N.Y. 2004); see also Three Five Compounds, 2011
WL 5838697, at *4-5 (collecting cases). When a single meeting in New York is not related to the
negotiation of a contract, courts afford it even less weight. See CutCo Industries, 806 F.2d at 368
(holding that a party's visit to New York after a contract was formed "should be considered
jurisdictionally irrelevant inasmuch as attempts to renegotiate an existing contract do not constitute
18
a CPLR 302 'transaction of business"'); Three Five Compounds, 2011 WL 5838697, at *11-12
(concluding that meetings that "did not occur during contract negotiations and did not result in any
contract" did not amount to the transaction of business); Lam co Grp., 903 F. Supp. at 613
(determining that personal jurisdiction was lacking when "defendant's only visit to New York
occurred after the execution of the contract" and "[t]he visit was unproductive in that it did not
result in the sale of defendant's company"); Paine Webber, 1995 WL 296398, at *3 (deciding that
the court could not exercise personal jurisdiction over defendant who attended three meetings in
New York).
Mr. Stewart's November 25, 2013 meeting in New York is insufficient to establish personal
jurisdiction over Defendant. First, the meeting occurred well after the Agreement was executed
on October 7, 2013. Second, even interpreting the facts alleged in the light most favorable to
Plaintiff, the meeting did not "substantially further[]" Defendant's relationship with Plaintiff.
Po:-,yen, CA., 303 F. Supp. 2d at 398. The meeting also included Hale, and was apparently
unsuccessful given that Hale subsequently initiated receivership proceedings against USC in
Canada. Given these circumstances, Mr. Stewart's single meeting in New York is insufficient to
confer personal jurisdiction over Defendant.
The facts at issue here are almost identical to those in Paine Webber and Lamco Group. In
Paine Webber, the defendant was a California-based corporation that executed a contract by which
the plaintiff: a New York-based entity, would "act as a financial adviser and an exclusive agent for
purposes of sale of [defendant's] stock and/or assets." 1995 WL 296398, at* 1. No representative
of the defendant visited New York during contract negotiations. See id. After the contract was in
place, the plaintiff performed its obligations in New York, and representatives of the defendant
visited New York three times to meet with the plaintiff. See id. Noting that the meetings "did not
19
involve contract negotiations," "no contracts were signed" at them, and one meeting "was
unproductive since it did not, as planned, result in the expansion of [plaintiff's] efforts to sell
[defendant]," the court concluded that they did not subject the defendant to personal jurisdiction
in New York. Id. at *3.
Similarly, in Lamco Group, the defendant was an out-of-state corporation that entered into
a contract with a New York-based "merchant banking firm [that] specialize[d] in providing
financial advisory services" to "assist [defendant] in connection with its efforts to complete a sale
or merger of its business." 903 F. Supp. at 613. The parties negotiated the contract by telephone,
and the defendant made one visit to New York after the contract was executed "for the purpose of
meeting a candidate." Id. That meeting "was unproductive in that it did not result in the sale of
defendant's company." Id. The court found the facts to be "virtually indistinguishable" from
Paine Webber. Id. at 614.
So too here. USC negotiated and executed a financial advisory services contract with a
New York-based entity without visiting the state before the contract was finalized. Plaintiff's
performance occurred in New York, and after the contract was executed, one meeting occurred in
New York that was ultimately unsuccessful. Just as in Paine Webber and Lamco Group, these facts
do not confer personal jurisdiction on Defendant in New York. 5
5
Plaintiffs attempts to distinguish Paine Webber and Lamco Group are unavailing. First, Plaintiff argues
that these cases "no longer reflect[] the current state ofNew York law regarding long-arm jurisdiction" in light of the
New York Court of Appeals' decisions in Deutsche Bank Securities and Fischbarg. Dkt. 24 at 2. As noted above,
however, Deutsche Bank Securities and Fischbarg do not "stand for the proposition that initiating a transaction with
a plaintiff in New York amounts to transacting business" for the purposes of establishing personal jurisdiction. Three
Five Compounds, 2011 WL 5838697, at *9. Second, Plaintiff argues that the facts here are unlike those in
PaineWebber and Lamco Group because Plaintiff"had' to perform its obligations in New York given the fact that
Hale is also based in New York. Dkt. 24 at 2. As in Lamco Group, however, nothing in the Agreement required
Plaintiff to perform in New York. Nor did the Agreement require Plaintiff to negotiate with Hale to effect a Financial
Transaction. The fact that Hale is located in New York therefore does not dictate the result of the jurisdictional
analysis.
20
3.
Choice-of-Law Clause
There is no dispute that the Agreement contains a New York choice-of-law clause. See
Agreement at 6 ("This Agreement shall be governed and construed in accordance with the laws of
the State of New York (without reference to its principles of conflict of law)."). "While it is
appropriate to give some weight to [a] choice of law provision, a choice of law clause alone is not
dispositive." Premier Lending Services, Inc. v. JL.J Associates, 924 F. Supp. 13, 17 (S.D.N.Y.
1996) (internal citation omitted).
4.
Franchisees Required to Send Notices or Payments to New York
Plaintiff argues that "although the [Agreement] is silent on the subject of notices, payments
under the [Agreement], when and if due, were to be made to Gordian in New York." Pl.' s Mem.
21 n.6.
The Agreement indeed provides that upon a Financial Transaction occurring, "the
Company shall pay or cause to be paid to Gordian" the applicable Transaction Fee. Agreement at
2.
The Agreement does not, however, create a franchise relationship between Plaintiff and
Defendant.
This factor accordingly "do[es] not provide any support for finding personal
jurisdiction." Three Five Compounds, 2011 WL 5838697, at *6.
5.
Other Factors
Plaintiff makes two additional arguments as to why Defendant is subject to personal
jurisdiction in New York. See Sunward Electronics, 362 F.3d at 23 (noting that "other factors
[beyond the four specifically articulated) may be considered").
Neither weighs in favor of
exercising jurisdiction.
First, Plaintiff argues that it performed its obligations under the Agreement "almost
exclusively in New York" and that Defendant "accepted the benefits of Gordian's services." Pl.'s
Mem. 18. This argument fails "because a plaintiff's unilateral activities cannot support a finding
21
of personal jurisdiction over a defendant." Navaera Sci., LLC v. Acuity Forensic Inc., 667 F. Supp.
2d 369, 375 (S.D.N.Y. 2009); see also Centerboard Securities, 2015 WL 4622588, at *3 (rejecting
argument that "having virtually all of the contract performed by the [plaintiff] in New York"
supported exercise of personal jurisdiction over defendant).
Second, Plaintiff argues that Defendant has agreed, in other contracts, to exclusive forum
selection clauses selecting New York courts and has in fact litigated other cases in New York
courts. See Pl. 's Mem. 20-21. When evaluating a defendant's contacts with a forum, "there is
some authority for the proposition that 'personal jurisdiction exists where a defendant
independently seeks affirmative relief in a separate action before the same court concerning the
same transaction or occurrence."' China Nat 'l Chartering Corp. v. Pactrans Air & Sea, Inc., 882
F. Supp. 2d 579, 591-92 (S.D.N.Y. 2012) (quoting Dow Chem. Co. v. Calderon, 422 F.3d 827,
834 (9th Cir. 2005) ). Only one of the examples Plaintiff cites "concern[ s] the same transaction or
occurrence" as this lawsuit: Defendant's Article 75 petition in New York State court to stay
Plaintiffs arbitration proceeding. That petition, however, was effectively a defense to Plaintiffs
arbitration, not an effort "independently seek[ing] affirmative relief." Nor was it filed "before the
same court" as this lawsuit. Accordingly, none of Defendant's other agreements selecting New
York as a forum for litigation or experience litigating in New York courts supports the exercise of
personal jurisdiction over Defendant in this lawsuit.
*
*
*
In sum, the only factor supporting the exercise of personal jurisdiction is the Agreement's
choice-of-law clause. Even assuming Defendant is bound by the Agreement, this factor alone is
insufficient to make a prima facie case that the Court may exercise personal jurisdiction over
Defendant.
See Premier Lending Services, 924 F. Supp. at 17 ("In this case, where the
22
jurisdictional contacts fall far short of the purposeful availment requirement, the choice of law
clause simply does carry enough weight for plaintiff to meet its burden.").
II.
Joinder
Because the Court cannot exercise personal jurisdiction over Defendant, it need not
determine whether Plaintiff failed to join an indispensable party. See Hovensa LLC v. KristensonsPetroleum, Inc., No. 12-CV-5706 (SAS), 2013 WL 1803694, at *6 (S.D.N.Y. Apr. 26, 2013)
("Because [defendant's motion to dismiss for lack of personal jurisdiction] is granted, I do not
reach the alternate grounds of failure to join an indispensable party under Rule 12(b)(7).").
CONCLUSION
Defendant's motion to dismiss is granted pursuant to Rule 12(b)(2) of the Federal Rules of
Civil Procedure because the Court lacks personal jurisdiction over Syringa. The Court need not
determine whether Plaintiff failed to join an indispensable party as required by Rule 19. This
action is therefore dismissed without prejudice to Plaintiff to refile it in another forum. The Clerk
of Court is respectfully directed to close item number 6 on the docket and to close this case.
SO ORDERED.
Dated:
March 10, 2016
New York, New York
23
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