Albino v. Global Equipment USA, Ltd.
Filing
131
DECISION ORDER denying 83 Global Equipment USA, Ltd.'s Motion to Amend or Correct the Third-Party Complaint; finding as moot ISOWA America Inc.'s 121 Motion to Dismiss for Failure to State a Claim; granting 121 ISOWA America Inc.' ;s Motion to Dismiss for Lack of Jurisdiction; finding as moot 122 ISOWA Corp.'s Motion to Dismiss for Failure to State a Claim; granting 122 ISOWA Corp.'s Motion to Dismiss for Lack of Jurisdiction. Signed by Hon. Michael A. Telesca on 7/23/18. (AFB)-CLERK TO FOLLOW UP-The Clerk of Court is directed to terminate ISOWA America Inc. and ISOWA Corp. as parties.
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NEW YORK
ALEXANDER ALBINO,
Plaintiff,
-vs-
DECISION and ORDER
No. 6:14-cv-06519(MAT)
GLOBAL EQUIPMENT USA, LTD.,
Defendant.
GLOBAL EQUIPMENT USA, LTD.,
Defendant/Third-Party Plaintiff,
-vsH. P. NEUN COMPANY, INC., ISOWA
AMERICA, INC. and ISOWA CORPORATION,
Third-Party Defendants.
I. Introduction
This
is
(“Plaintiff”)
a
diversity
against
action
Global
brought
Equipment
by
USA,
Alexander
LTD.
Albino
(“Global”),
alleging causes of action based on strict products liability and
negligent failure to warn. Before the Court are Global’s crossmotion to amend/correct the third-party complaint (ECF #83),1
motions to dismiss for lack of jurisdiction and failure to state a
1
Numerals in parentheses preceded by “ECF #” refer to document entries in
the Court’s electronic case filing system.
-1-
claim by ISOWA Corporation (“IC”) and ISOWA America, Inc. (“IAI”)
(ECF ##121 & 122). For the reasons discussed herein, the Court
grants IAI’s (ECF #121) and IC’s (ECF #122) motions to dismiss for
lack of jurisdiction; denies as moot IAI’s (ECF #121) and IC’s (ECF
#122) motions to dismiss for failure to state a claim; and denies
as futile Global’s cross-motion (ECF #83) to amend/correct the
third-party complaint.
II. Factual Background and Procedural History
On September 8, 2012, while he was operating a Flexo Die
Cutter Slotter, Model DCFS-7 (“the Machine”) at H.P. Neun, a New
York domiciliary, Plaintiff’s hand was drawn into the Machine and
injured by rotating rollers. According to Plaintiff, the guarding
on the Machine was defective and failed to prevent his fingers from
reaching the rotating rollers. Plaintiff alleges that Global failed
to warn Plaintiff and H.P. Neun about this flaw. (Complaint (ECF
#1), ¶¶ 15-23, 27-28, 33).
IC, a foreign corporation constituted under the laws of Japan,
with its principal offices in Japan, manufactured the Machine in
1979. Colorado Container Corporation (“CCC”), a non-party, ordered
the Machine from IC on November 19, 1979, and it was shipped to CCC
in May of 1980.
At some point between May of 1980 and June of 2007, the
Machine
was
acquired
by
former
-2-
third-party
defendant
Arvco
Container Corporation (“Arvco”).2 Arvco contracted with Global, an
Illinois corporation with its principal place of business in
Illinois, to list the Machine and broker any ensuing sale.
In or around May of 2008, Global approached H.P. Neun with an
offer to purchase the Machine. H.P. Neun accepted the offer, and in
July of 2008, the two companies entered into a contract for the
sale and shipment of the Machine. In August of 2008, H.P. Neun
remitted payment to Global for the Machine. Global purchased the
Machine from Arvco, which shipped the Machine to Global. In late
September of 2008, H.P. Neun took possession of the Machine and had
it shipped to New York.
From about 2010, through 2016, IAI made a number of sales and
shipments of parts for the Machine to H.P. Neun, and serviced the
Machine on one occasion after Plaintiff’s accident. IAI is a
wholly-owned subsidiary of IC and an Arizona domiciliary formed in
2002. IAI is responsible for new machine and parts sales for IC, as
well as for providing service and support for IC in North and South
America. IAI has never owned or leased property in New York;
maintained any offices in New York; maintained any bank accounts in
New York; stationed any employees in New York; been qualified,
licensed or authorized to do business in New York; appointed an
agent for service of process in New York; authorized anyone to
2
Arvco was terminated as a party in this action on March 2, 2016.
-3-
accept service on its behalf in New York; or paid taxes in New
York.
IAI
did
not
have
any
role
in
the
original
sale
and
distribution of the Machine. Neither IC nor IAI were involved in
the 2008 sale of the Machine to H.P. Neun. The parties agree that
none of the parts sold by IAI were defective or were involved in
Plaintiff’s accident.
Plaintiff filed his complaint on August 28, 2014. Global filed
its third-party complaint (ECF #32) on January 18, 2016, seeking
contribution and indemnification from IAI and IC. Global’s original
allegations of jurisdiction and liability were premised on IC’s and
IAI’s (or a predecessor’s) conduct concerning the initial design,
manufacturing, and distribution of the Machine.
IC and IAI moved to dismiss Global’s third-party complaint
(ECF ##79, 80) on the grounds that neither was subject to general
jurisdiction in New York, and that neither could be subject to
specific jurisdiction in New York based upon the initial design,
manufacture, or distribution of the Machine. IAI also argued that
it is not a successor to any company involved in the distribution
of
the
Machine,
and
therefore
Global’s
third-party
complaint
warranted dismissal for failure to state claim under Federal Rule
of Civil Procedure (“FRCP”) Rule 12(b)(6). In opposition to the
motions to dismiss, Global moved for leave to amend the third-party
complaint (ECF #83) to allege a new theory of liability and
jurisdiction—that IAI had an “special relationship” with H.P. Neun,
-4-
based on its “knowledge of the location of the Machine at H.P.
Neun’s facilities in New York, it being held out as an expert in
the sale of parts and services for the Machine, its ongoing sale of
parts for use in the Machine at the H.P. Neun facilities in New
York,” “which created for itself a duty to warn of any defects in
the manufacture, or design of the [M]achine, and/or a duty to warn
against the dangers of the use of the Machine.” (Proposed Amended
Third-Party Complaint (ECF #83-2), ¶ 55). With regard to IC, Global
alleges in its proposed amended complaint that IAI, “[i]n selling
the parts provided to it by [IC] to H.P. Neun, [IAI] was acting as
an agent of [IC].” (Id., ¶ 69). Global further alleges that IC,
through its agent, IAI, had a “special relationship” with H.P.
Neun,
“which
created
a
duty
to
warn
of
any
defects
in
the
manufacture, or design of the [M]achine, and/or a duty to warn
against the dangers of the use of the Machine.” (Id., ¶ 70).
On January 26, 2017, the Court issued a decision and order
(ECF #93) denying without prejudice IAI’s and IC’s motions to
dismiss for failure to state a claim and for lack of personal
jurisdiction. The Court also granted Global’s request to conduct
jurisdictional discovery and indicated that IAI and IC could renew
their
motions
to
dismiss
following
the
completion
of
that
discovery. The Court further declined to rule on Global’s crossmotion to amend its third-party complaint, filed in opposition to
IAI’s and IC’s first round of motions to dismiss. The Court
-5-
indicated that it would refrain from ruling on Global’s crossmotion to amend the third-party complaint pending the Court’s
resolution of IAI’s and IC’s challenges to the exercise of personal
jurisdiction.
The parties subsequently engaged in jurisdictional discovery,
which included depositions of corporate representatives from IAI
and IC. The parties have stipulated (ECF #120) that jurisdictional
discovery is now complete. IC and IAI have renewed their motions to
dismiss for lack of jurisdiction and for failure to state a claim.
IV. The Motions to Dismiss for Lack of Jurisdiction
A.
Standard of Review
To defeat a motion to dismiss pursuant to FRCP 12(b)(2), the
plaintiff
bears
jurisdiction
the
over
burden
the
of
showing
defendant.
Metro.
that
Life
the
court
Ins.
Co.
has
v.
Robertson-Ceco Corp., 84 F.3d 560, 566–67 (2d Cir. 1996) (citation
omitted). Prior to discovery, the plaintiff’s prima facie showing
may be met solely by allegations pled in good faith. Ball v.
Metallurgie Hoboken–Overpelt, S.A., 902 F.2d 194, 197 (2d Cir.),
cert. denied, 498 U.S. 854 (1990); accord, e.g., Metro. Life Ins.
Co., 84 F.3d at 567. Where, as here, the parties have conducted
“extensive discovery” regarding the defendants’ contacts with the
forum
state,
“but
no
evidentiary
hearing
has
been
held—‘the
plaintiff’s prima facie showing, necessary to defeat a jurisdiction
testing motion, must include an averment of facts that, if credited
-6-
by
[the ultimate
trier of
fact],
would
suffice
to
establish
jurisdiction over the defendant.’” Metro. Life Ins. Co., 84 F.3d at
567 (quoting Ball, 902 F.2d at 197).
B.
Personal Jurisdiction: General Principles
“[T]he 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 jurisdiction contravenes a constitutional
guarantee.” Arrowsmith v. United Press Int’l, 320 F.2d 219, 223 (2d
Cir. 1963) (en banc) (footnote omitted). Thus, a district court
first must determine whether jurisdiction may be obtained over the
non-resident defendant pursuant to the forum state’s laws. Savin v.
Ranier, 898 F.2d 304, 306 (2d Cir. 1990). The district court then
must ask whether the exercise of jurisdiction under the forum
state’s laws comports with the requirements of due process. Id.
C.
Specific Jurisdiction Under New York Law
Global asserts that specific jurisdiction over IAI and IC is
proper under New York’s long-arm statute, specifically, sections
302(a)(1) and 302(a)(3)(i) of New York’s Civil Practice Law and
Rules (“CPLR”). These sections provide in relevant part 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:
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1. transacts any business within the state or
contracts anywhere to supply goods or services in
the state; or
. . .
3. commits a tortious act without the state causing
injury to person or property within the state, . .
. 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. . . .
N.Y. CIV. PRAC. L. & R. 302(a) (McKinney’s).
With regard to CPLR 302(a)(1), Global asserts that IC is
subject
to
jurisdiction
under
an
agency
theory
because
it
transacted business within New York or contracted anywhere to
supply goods or services in New York through its putative agent,
IAI. Specifically, Global points to IAI’s sales of parts to H.P.
Neun through 2016, and IAI’s performance of a three-day service
call on the Machine in 2015. With regard to CPLR 302(a)(3)(i),
Global argues that jurisdiction is proper because IC committed a
tortious act without the state causing injury to person or property
within the state—i.e., IC manufactured the Machine outside of New
York, and
the
Machine
caused
injury
to
Plaintiff
within
New
York—and, through its agent, IAI, IC 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.
-8-
1.
CPLR 302(a)(1)
When evaluating whether personal jurisdiction may be exercised
under CPLR
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 ex rel. Licci v. Lebanese Canadian Bank, SAL,
673 F.3d 50, 60 (2d Cir. 2012) (quoting Best Van Lines, Inc. v.
Walker, 490
F.3d
239, 246
(2d
Cir.
2007)
(citation omitted;
alteration in original)). For purposes of this section, “New York
courts define ‘transact[ing] business’ as purposeful activity—some
act by which the defendant purposefully avails itself of the
privilege of conducting activities within the forum State, thus
invoking the benefits and protections of its laws.” Best Van Lines,
Inc., 490 F.3d at 246–47 (quoting McKee Elec. Co. v. Rauland–Borg
Corp., 20 N.Y.2d 377, 382 (1967) (quoting Hanson v. Denckla, 357
U.S. 235, 253 (1958) (internal quotation marks omitted)). To make
this
determination,
“[c]ourts
look
to
‘the
totality
of
the
defendant’s activities within the forum[.]’” Best Van Lines, Inc.,
490 F.3d at 247 (quoting Sterling Nat’l Bank & Trust Co. of N.Y. v.
Fidelity Mortgage Investors, 510 F.2d 870, 873 (2d Cir. 1975)
(citation and internal quotation marks omitted in original)). “The
showing
necessary
for
a
finding
that
defendant
‘transacted
business’ and is suable on a cause of action arising from that
transaction is considerably less than that needed to establish
-9-
defendant’s ‘doing business,’ which renders the defendant subject
to suit on even an unrelated cause of action.” Hoffritz for
Cutlery, Inc. v. Amajac, Ltd., 763 F.2d 55, 58 (2d Cir. 1985)
(citations omitted).
With regard to the second prong of the jurisdictional inquiry
under CPLR 302(a)(1), New York courts have interpreted the phrase
“arises from” as meaning that, “in light of all the circumstances,
there must be an ‘articulable nexus’ or ‘substantial relationship’
between the business transaction and the claim asserted.” Licci v.
Lebanese Canadian Bank, 20 N.Y.3d 327, 339 (2012) (“Licci I”)
(internal quotations omitted). The New York Court of Appeals has
“consistently held that causation is not required, and that the
inquiry under the statute is relatively permissive[.]” Id. (citing
McGowan v. Smith, 52 N.Y.2d 268, 272 (1981); Kreutter v. McFadden
Oil Corp., 71 N.Y.2d 460, 467 (1988)). Nevertheless, there must be,
“at a minimum, a relatedness between the transaction [of business]
and the legal claim such that the latter is not completely unmoored
from the former, regardless of the ultimate merits of the claim[.]”
Id. (footnote omitted).
a.
IAI Is Not Subject to Personal Jurisdiction
Under CPLR 302(a)(1)
Because jurisdiction over IAI individually is necessary to
sustain jurisdiction over IC pursuant to an agency theory, the
Court first will consider whether IAI is subject to New York’s
long-arm jurisdiction under CPLR 302(a)(1) “so as to supply the
-10-
requisite ‘link in the chain’ to IC.” (Global’s Memorandum of Law
in Opposition (“Global Mem.”) (ECF #130-10) at 14).
The New York Court of Appeals has held that “the long-arm
authority conferred by [CPLR 302(a)(1)] subdivision does not extend
to nondomiciliaries who merely ship goods into the State without
ever crossing its borders[.]” McGowan v. Smith, 52 N.Y.2d 268, 271
(1981).
Rather,
there
must
be
some
additional
“‘purposeful
activities’ within the State that would justify bringing the
nondomiciliary
defendant
before
the
New
York
courts[.]”
Id.
(citations omitted).
Global asserts that IAI engaged in “purposeful activities”
within New York by virtue of the fact that it engaged in more than
fifty (50) separate transactions with H.P. Neun for the sale of
parts and equipment relative to the Machine from 2010 to 2016. (See
Global Mem. (ECF #130-10) at 6-7, 10-11, 14 & Global’s Exhibit
(“Global Ex.”) Ex. A (ECF #130-1) (Invoices, Purchase Orders,
Packing Slips, and Receipts)). The combined revenue from these
sales was in excess of $60,000. Global asserts that this is
definitive evidence that IAI, as IC’s agent, took purposeful and
affirmative action to transact business in New York relating to the
Machine and that IC had knowledge of IAI’s actions in that regard.
Additionally, Global notes, IAI made a three-day service call to
H.P. Neun regarding the Machine in 2015. (See Global Mem. (ECF
#130-10) at 6-7, 10-11, 14 & Global Ex. A (ECF #130-1) (Invoices,
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Purchase Orders, Packing Slips, and Receipts)).
IAI acknowledges that it “made unrelated sales of parts
concerning
the
[Machine]
to
H.P.
Neun
in
New
York.”
(IAI’s
Memorandum of Law in Support (“IAI Mem.”) (ECF #121-1) at 10
(emphasis in original); see also Declaration of Ronald Miller
(“Miller Decl.”) (ECF #80-6), ¶¶ 12, 13; Reply Declaration of
Ronald Miller (“Miller Reply”) (ECF #89-1), ¶¶ 2, 5). However, IAI
maintains, “none of the parts concern the component which is
alleged to be defective in this action[.]” (IAI Mem. (ECF #121-1)
at 10 (quoting Miller Decl. (ECF #80-6), ¶ 14).3 Therefore, IAI
argues, these limited sales are irrelevant to specific jurisdiction
under CPLR 302(a)(1). (Id.). IAI acknowledges the service call but
contends it cannot be relevant to the jurisdictional inquiry
because it post-dated the accident. IAI maintains that the only
transactions that potentially can form the basis of jurisdiction
over IAI—and, by extension, IC—are its limited sales of unrelated
parts before the September 2012 incident in which Plaintiff was
injured.
The Court will evaluate the “arises from” prong first, as it
is determinative. The New York Court of Appeals has explained that
the
“arise-from”
prong
limits
the
broader
“transaction-of-business” prong to confer jurisdiction
3
Miller, IAI’s president, avers that prior to the accident, approximately
65 percent of the parts sold to H.P. Neun were manufactured by IC, while the
remaining approximately 35 percent of the parts were commercially available items
manufactured by a variety of suppliers. (Miller Reply (ECF #89-1), ¶ 11).
-12-
only over those claims in some way arguably connected to
the transaction. . . .
Licci I,
20
N.Y.3d at
339–40
(emphasis supplied).
Whether
a
plaintiff’s claim can be said to “arise[] from a defendant’s New
York
contacts
depends
upon
‘the
nature
and
elements
of
the
particular causes of action pleaded.’” Licci ex rel. Licci v.
Lebanese Canadian Bank, SAL, 732 F.3d 161, 169 (2d Cir. 2013)
(“Licci II”) (quoting Licci I, 20 N.Y.3d at 340). Every element of
the cause of action pleaded need not be related to the New York
contacts; “rather, where at least one element arises from the New
York contacts, the relationship between the business transaction
and the claim asserted supports specific jurisdiction under the
statute.” Licci I, 20 N.Y.3d at 341.
Both parties agree that the relevant claims for this inquiry
are
the
tort
claims
asserted
by
Plaintiff
in
the
original
complaint.4 “The claim does not need to sound in contract to ‘arise
out of’ a transaction of business in New York.” Stewart v. Adidas
A.G., No. 96 Civ. 6670(DLC), 1997 WL 218432, at *5 (S.D.N.Y. Apr.
30,
1997)
(citing
Joseph
McLaughlin,
Practice
Commentaries,
McKinney’s Cons. Laws of N.Y., Book 7B, CPLR C302:2, at 78 (1990)
(“Any claim, regardless of theory, which directly and proximately
4
In the context of CPLR 302(a)(3), courts have held that when a defendant
files a third-party action seeking indemnification, the relevant “injury” is the
one pleaded by the plaintiff in the primary action. UTC Fire & Sec. Americas
Corp. v. NCS Power, Inc., 844 F. Supp.2d 366, 373 n. 5 (S.D.N.Y. 2012) (citation
omitted).
-13-
arises out of a transaction of business in New York may be used as
the basis of CPLR 302 jurisdiction.”)). However, the Second Circuit
has noted, CPLR 302(a)(1) is “typically invoked for a cause of
action against a defendant who breaches a contract with plaintiff,
or commits a commercial tort against plaintiff in the course of
transacting business or contracting to supply goods or services in
New York.” Beacon Enters., Inc. v. Menzies, 715 F.2d 757, 764 (2d
Cir. 1983); see also Torres v. Monteli Travel, Inc., No. 09-CV-2714
ARR SMG, 2011 WL 2670259, at *8 (E.D.N.Y. July 7, 2011) (citing
2–301 Weinstein, Korn & Miller, NEW YORK CIVIL PRACTICE, ¶ 302.05
(“CPLR 302(a)(1) may occasionally provide the basis for a tort
claim but will most often cited as the basis for a contract
claim.”)).
Plaintiff in this case alleges causes of action sounding in
negligent
failure
to
warn
and
strict
products
liability
for
injuries he sustained while utilizing the Machine manufactured by
IC. “[T]o make out a prima facie case, in negligence or strict
liability, the plaintiff must show that: (1) the manufacturer owed
plaintiff a duty to exercise reasonable care, that is, it knew or
should have known of latent dangers resulting from intended or
reasonably foreseeable unintended uses of the product; (2) the
product was used in a reasonably foreseeable manner; and (3) the
manufacturer’s failure to warn was the proximate cause of the
plaintiff’s injury.” Monell v. Scooter Store, Ltd., 895 F. Supp.2d
-14-
398, 413 (N.D.N.Y. 2012) (citations omitted). Global contends that
Plaintiff’s allegations “‘arise from’ IC’s business transactions in
New York[, through its putative agent, IAI,] vis-à-vis the . . .
[M]achine since, as the manufacturer, IC may be held liable for the
defective design, or manufacturing of one of its machines, or for
failure to warn of dangers inherent in the operation of its
machines.” (Global Mem. (ECF #130-10) at 11) (citing Hoover v. New
Holland, N. Am., Inc., 23 N.Y.3d 41 (2014)).
As a general matter, “where a plaintiff is injured as a result
of a defectively designed product, the product manufacturer or
others in the chain of distribution may be held strictly liable for
those injuries.” Hoover, 23 N.Y.3d at 53 (citations omitted).
Global’s argument thus correctly restates a principle of products
liability law but does not show how IAI’s New York activities are
“substantially proximate,” Xedit Corp. v. Harvel Indus. Corp.,
Fidelipac,
456
F.
Supp.
725,
729
(S.D.N.Y.
1978),
to
IAI’s
“allegedly unlawful acts,” id., such that Plaintiff’s injury can be
said to “arise from” IAI’s contacts with the forum state. In other
words, it simply does not follow from the fact that the parts sold
by IAI to H.P. Neun in New York were for the Machine, and the fact
that Plaintiff was injured by the same Machine, that Plaintiff’s
products liability claims “arise out of” IAI’s sales and shipments
of parts to New York.
First, the parties do not dispute that the parts sold by IAI
-15-
to H.P. Neun prior to Plaintiff’s accident are not defective.
Second, there is no allegation that any of these parts sold by IAI
were involved in or contributed to Plaintiff’s accident. Third,
Plaintiff’s accident logically cannot be said to have “arisen out
of” the parts sales that occurred after his accident. The same is
true with regard to IAI’s service call that post-dated the accident
by about three years. See Avato v. Walker Mfg. Co., 706 F. Supp.
300, 302 (S.D.N.Y. 1989) (“[CPLR] § 302(a)(1) is inapplicable [in
a diversity action brought by plaintiffs against defendants for
personal injuries allegedly suffered when one plaintiff was struck
by part of a pneumatic jack] here, because it does not appear from
any of the materials provided by plaintiffs that Voss transacted
any business in New York, or alternatively, contracted to supply
any goods or services in New York. First, the president of Voss
testified that Voss shipped only two jacks to New York over an
11–year period; neither of those jacks is alleged to have injured
Avato. Thus, Avato’s injury did not stem from business transacted
by Voss in New York.”) (citing Tonns v. Spiegel’s, 455 N.Y.S.2d
125, 127 (2d Dep’t 1982) (CPLR § 302(a)(1) is applicable only where
“the claim is a direct consequence of purposeful New York activity
and the benefits and protections of New York law have been utilized
by the manufacturer.”); CT Chem. (USA), Inc. v. Horizons Int’l,
Inc., 106 F.R.D. 518, 520 (S.D.N.Y. 1985) (“A defendant over whom
jurisdiction is based on [CPLR] § 302(a)(1) may be sued only on
-16-
causes of action arising from the specific transaction of business
in New York.”)).
The record evidence does not permit the finding of a “direct[]
and proximate[],” McLaughlin, Practice Commentaries, supra, or
“substantially proximate,” Xedit Corp., 456 F. Supp. at 729,
linkage between the sales and shipments by IAI to H.P. Neun in New
York, and Plaintiff’s injury. Stated somewhat differently, the
Court cannot find that “at least one element [of either cause of
action] arises from [IAI’s] New York contacts,” Licci II, 732 F.3d
at 169, and therefore the necessary relationship between IAI’s
business transactions and the claim asserted is lacking. Because
Global has failed to establish the “arise from” prong of CPLR
302(a)(1), the Court finds that jurisdiction under this section
cannot be obtained over IAI.
b.
IC Cannot Be Subject to Personal Jurisdiction
Under CPLR 302(a)(1)
Global’s current theory of jurisdiction as to IC depends on
finding that (1) IAI was IC’s agent in connection with IAI’s parts
sales to H.P. Neun, and (2) jurisdiction over IC can be based on
IAI’s sales and shipments of parts to H.P. Neun in New York.
See Stewart, 1997 WL 218431, at *4 (“A foreign corporation may be
subject to personal jurisdiction in New York based on its agent’s
transaction of business. Under this rule, a plaintiff need not
establish a formal agency relationship between defendants and [the
agent]. . . .”) (quoting Kreutter v. McFadden Oil Corp., 71 N.Y.2d
-17-
460, 467 (1988); other citation omitted; brackets in original).
The
Court
has
found
that
it
cannot
exercise
personal
jurisdiction over IAI pursuant to CPLR 302(a)(1). Therefore, it
necessarily is precluded from exercising personal jurisdiction over
IC under CPLR 302(a)(1)’s agency provision.
2.
CPLR 302(a)(3)(i)
For either subsection of CPLR 302(a)(3) to apply, “(1) a
defendant must have committed a tortious act outside New York, (2)
the cause of action must arise from that tortious act, and (3) the
act must have caused injury to a person or property within New
York.” Doe v. Delaware State Police, 939 F. Supp.2d 313, 325–26
(S.D.N.Y. 2013) (citing LaMarca v. Pak–Mor Mfg. Co., 95 N.Y.2d 210,
214 (2000)). Under CPLR 302(a)(3)(i), “a plaintiff must further
demonstrate one of four forms of ongoing New York activity by the
defendant:
regularly
doing
business
in
New
York,
regularly
soliciting business in New York, engaging in a persistent course of
conduct in New York, or deriving substantial revenue from goods
used or consumed or services rendered in New York.” Levans v. Delta
Airlines, Inc., 988 F. Supp.2d 330, 338 (E.D.N.Y. 2013); see also
Ingraham v. Carroll, 90 N.Y.2d 592, 597 (1997). Regardless of
whether it is the business, conduct, or revenue component of CPLR
302(a)(3)(i)
“necessitate[]
upon
some
which
ongoing
the
plaintiff
activity
relies,
within
New
they
York
all
State.”
Ingraham, 90 N.Y.2d at 597 (1997). That said, “clause (i) [of CPLR
-18-
302(a)(3)] does not require the quantity of New York contacts that
is necessary to obtain general jurisdiction under the ‘doing
business’ test of CPLR 301.” Ingraham, 90 N.Y.2d at 597. In
addition, unlike CPLR 302(a)(1), CPLR 302(a)(3) does not require
that a cause of action arise from a defendant’s out-of-state
activity. Hearst Corp. v. Goldberger, No. 96 CIV. 3620 PKL AJP,
1997 WL 97097, at *14 (S.D.N.Y. Feb. 26, 1997) (citing 1 Weinstein,
Korn & Miller, NEW YORK CIVIL PRACTICE: CPLR § 302.14 at 3–156 to 3–157
(1996) (footnotes omitted in original); other citation omitted).
1.
IAI Is Not Subject
302(a)(3)(i)
to
Jurisdiction
Under
CPLR
Global has sufficiently alleged the elements of an out-ofstate tort (i.e., IC’s allegedly defective manufacture of the
Machine) causing an in-state injury (i.e., Plaintiff’s accident
while operating the Machine in New York). The Court next must
examine whether Global has demonstrated the requisite ongoing New
York activity by IAI.
Global does not specify which of the four forms of ongoing New
York activity by IAI are relevant here, but it appears to be
relying on the same evidence offered in support of its argument
under CPLR 302(a)(1), namely, (1) IAI’s parts sales to H.P. Neun
through 2016, which generated approximately $60,000 in revenue, and
(2) IAI’s 2015 service-call on the Machine. (See Global Mem. (ECF
#130-10) at 13). Thus, the Court interprets Global’s pleadings as
alleging
that
IAI
“does
or
solicits
-19-
business”
or
“derives
substantial revenue from goods used . . . or services rendered, in
the state.” N.Y. CIV. PRAC. L. & R. 302(a)(3)(i).
“[T]o establish that a defendant ‘does or solicits business’
in New York, it must be shown that [its] ‘overall contact with New
York is substantial enough to make it reasonable to subject [it] to
jurisdiction and feasible for [it] to defend here.’” Murdock v.
Arenson Int’l USA, Inc., 554 N.Y.S.2d 887, 888 (1st Dep’t 1990)
(quoting Siegel, New York Practice, § 88, p. 103 (6th ed.)). Almost
50 years ago, the district court in Chunky Corp. v. Blumenthal
Bros. Chocolate Co., 299 F. Supp. 110 (S.D.N.Y. 1969), noted that
there is an absence of “clear authoritative guidance” on this
question from the New York courts. Id. at 115. The drafters of CPLR
302(a)(3)(i) provided only “some general guidance, commenting that
the amount of business that must be done to satisfy the statute
sits somewhere between the substantial contacts required of general
jurisdiction
under
Section
301
and
the
‘one
shot’
business
transaction required in [CPLR] Section 302(a)(1).” Del Ponte v.
Universal City Dev. Partners, Ltd., No. 07-CV-2360 KMK LMS, 2008 WL
169358,
at
*4
(S.D.N.Y.
Jan.
16,
2008)
(quoting
Vincent
C.
Alexander, Practice Commentaries, CPLR § C302:12, 7B McKinney’s
Consol. Laws of N.Y. 158, 159 (2001)). As recently as earlier this
year, the Fourth Department of New York State Supreme Court’s
Appellate
Division
observed
that
“[a]
uniformly
dependable
yardstick for what is or is not ‘substantial’ has not yet been
-20-
devised. . . .”
Williams v. Beemiller, Inc., 159 A.D.3d 148, 153,
72 N.Y.S.3d 276 (4th Dep’t 2018) (quoting Siegel, N.Y. Prac. § 88
at 165 (5th ed. 2011)). “[C]ourts have applied both a proportion
test and a quantity test to determine what constitutes substantial
revenue within the meaning of CPLR 302(a)(3)[.]” Id. (citing
Siegel, N.Y. Prac § 88 at 165 (5th ed. 2011); other citations
omitted). Under the proportion test, “the defendant’s overall
revenue
is
compared
to
revenue
from
New
York
or
interstate/international commerce[,]” Williams, 159 A.D.3d at 154
(citations omitted), while under the quantity test, “revenue may be
deemed ‘substantial’ where the amount of revenue the defendant
derives from New York or interstate/international commerce is
great, even though it comprises only a small proportion of the
defendant’s overall business[.]” Id. (citations omitted).
With regard to its New York-derived revenue, IAI has proffered
evidence that in the years prior to the accident in 2012, IAI made
only 17 shipments of parts to H.P. Neun, with a total invoiced
value
of
$7,915.82.
From
January
1,
2012,
to
the
time
of
Plaintiff’s accident on September, 30, 2012, IAI made three parts
shipments to New York (all to H.P. Neun), with a total invoiced
value of $1,771.71. (See Miller Reply (ECF #89-1), ¶ 4). In IAI’s
fiscal year running from October 1, 2011, to September 30, 2012,
IAI’s New York revenue was $1,848, or 0.03 percent of its total
revenue. In IAI’s fiscal year October 1, 2015, through July 31,
-21-
2016, the year Global commenced the third-party action, IAI’s New
York revenue was $5,085, or 0.12 percent of total revenue. (See
Miller Decl. (ECF #80-6), ¶ 12). IAI did not enter New York to
service the
Machine
until
2015,
about
three
years
after
the
accident. (Id. at ¶ 5). IAI’s New York revenue has never been
higher than 0.49 percent of its total revenue in the years. (Id.).
As IAI notes, Global does not dispute these figures.5
In Chunky Corp., 299 F. Supp. at 115, the district court found
that “a firm with no permanent employees in New York and no other
establishment in the state . . . by virtue of the fact that about
4% of its revenue is derived from New York sources” “cannot be said
to do or solicit business on a regular basis, engage in any other
persistent course of conduct, or derive substantial revenue from
goods used or consumed in New York.” Id. Here, the percentage of
IAI’s revenue that is comprised of New York sales—.49 percent—is
significantly less than the 4 percent found insufficient in Chunky
5
The Court finds that IAI has misrepresented the holding of Vecchio v. S &
T Mfg. Co., 601 F. Supp. 55, 58 (E.D.N.Y. 1984), cited in support of its argument
regarding CPLR 302(a)(3). (See IAI’s Mem. (ECF #121-1) at 15 (stating that in
Vecchio “ the court held that $7,400 in New York revenue, which represented only
1.304% of defendant’s total revenue, was insufficient for purposes of CPLR
302(a)(3)(i)”). First of all, subsection (ii) of CPLR 302(a)(3) was at issue in
Vecchio; not subsection (i). See Vecchio, 601 F. Supp. at 56–57 (“In order for
the Court to exercise its jurisdiction over S & T, it must determine whether New
York’s CPLR section 302(a)(3)(ii) can be properly applied . . . .”). Second, the
district court actually held that the “$7,400 figure alone [was] not so large
that it would constitute prima facie evidence to satisfy the substantial revenue
requirement,” and in the absence of any indication of “the amount of defendant’s
total revenue derived from interstate and international business, that is, the
revenue derived beyond those from the two New York workstands, the [c]ourt does
not believe it may properly rule on the motion at this time without further
evidence.” Id. at 58.
-22-
Corp., 299 F. Supp. at 115. And, similarly to that case, any other
indicia of ongoing New York activity by IAI is lacking. After
scrutinizing the record and case law, the Court agrees with IAI
that more contact with New York than has been shown here is
necessary to meet the requirements of CPLR 302(a)(3)(i).6
2.
IC Cannot Be Subject to Jurisdiction Under CPLR
302(a)(3)(i)
Subjecting IC to jurisdiction under CPLR 302(a)(3)(i) is only
possible if IAI also is subject to jurisdiction under that section,
because IC has not independently engaged in any of the four
possible
forms
of
ongoing
New
York
activity
required
under
subsection (i). As discussed above, the Court has found that IAI
does not have the quantity and quality of business contacts with
New York sufficient to allow exercise of personal jurisdiction
under CPLR 302(a)(3)(i). Therefore, the Court cannot exercise
personal jurisdiction over IC.
F.
Due Process
6
Contrast with Del Ponte, 2008 WL 169358, at *5 (“[J]urisdictional discovery
has demonstrated that Ray-Art has purchased nearly a third of its inventory over
a five-year period from New York vendors. This volume of business, expressed as
percentage of overall expenditures, equals or surpasses that demonstrated in many
other cases where New York courts upheld long-arm jurisdiction under [CPLR]
Section 302(a)(3)(i).”) (citing Tonns, 455 N.Y.S.2d at 126-27 (upholding
jurisdiction with New York business sales of 4 to 7.1 percent); Allen v. Canadian
Gen. Elec. Co., 410 N.Y.S.2d 707, 708-09 (3d Dep’t 1978) (upholding jurisdiction
with New York business sales of 1 percent of total sales of $8.79 million);
Reynolds v. Aircraft Leasing, Inc., 756 N.Y.S.2d 704, 709 (Sup. Ct. 2002)
(upholding jurisdiction with New York business sales of 8.5 percent of total
income)).
-23-
Having found that the exercise of personal jurisdiction under
New York’s long-arm statute is not proper over IAI and IC, the
Court need not conduct a due process analysis. See, e.g., Rescuecom
Corp. v. Hyams, 477 F. Supp.2d 522, 532 (N.D.N.Y. 2006) (where
plaintiff had demonstrated no grounds for the assertion of long-arm
jurisdiction under CPLR 302(a), “[t]here [was] no need to consider
whether assertion of long-arm jurisdiction would comport with due
process”) (citation omitted).
IV. The Motions to Dismiss for Failure to State a Claim
IAI’s and IC’s motions to dismiss for failure to state a claim
are moot in light of the Court’s granting of their motions to
dismiss for lack of jurisdiction.
V.
The Cross-Motion to Amend the Third-Party Complaint
Given
that
the
Court
has
found
that
it
cannot
exercise
personal jurisdiction over third-party defendants IAI and IC, the
Court must deny Global’s cross-motion to amend the third-party
complaint as futile.
VI.
Conclusion
For the reasons discussed above, the Court grants IAI’s (ECF
#121)
and
IC’s
(ECF
#122)
motions
to
dismiss
for
lack
of
jurisdiction; denies as moot IAI’s (ECF #121) and IC’s (ECF #122)
motions to dismiss for failure to state a claim; and denies as
futile Global’s cross-motion (ECF #83) to amend/correct the thirdparty complaint. Global’s claims in the proposed amended third-24-
amended complaint (ECF #83-2) as to IAI and IC are dismissed, and
the Clerk of Court is directed to terminate IAI and IC as parties
in this action.
Remaining pending in this case are (1) Plaintiff’s original
complaint (ECF #1) against Global; and (2) Global’s original thirdparty complaint (ECF #32) against H.P. Neun. IAI and IC are
dismissed as parties, and Arvco was previously dismissed as a party
in 2016.
SO ORDERED.
s/ Michael A. Telesca
HONORABLE MICHAEL A. TELESCA
United States District Judge
DATED:
July 23, 2018
Rochester, New York
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