NBTY Acquisition LLC v Marlyn Neutraceuticals, Inc.

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NBTY Acquisition LLC v Marlyn Neutraceuticals, Inc. 2012 NY Slip Op 31132(U) April 26, 2012 Supreme Court, Suffolk County Docket Number: 38959-10 Judge: Thomas F. Whelan Republished from New York State Unified Court System's E-Courts Service. Search E-Courts (http://www.nycourts.gov/ecourts) for any additional information on this case. This opinion is uncorrected and not selected for official publication. [* 1] SHORT I'ORM ORDER INDEX No. 38959-10 SUPREME COURT - STATE OF NEW YORK IAS. PART 45 - SUFFOLK COUNTY PRESENT: Hon. THOMAS F. WHELAN Justice of the Supreme Court MOTION DATE_2_/1_7_1I_2 ADJ. DATES 3/23/12 Mot. Seg. #001 - MG CDISP Y__ N _x_ _ ---------------------------------------------------------------X NBTY ACQUISITION LLC d/b/a LEINER HEALTH PRODUCTS, Plaintiff: -against. MARLYN NEUTRACEUTICALS, INC. SClIOEMAN, UPDIKE & KAUFMAN Attys. For Plaintiff 60 E. 42"' St. New York, NY 10165 McGIVNEY & KLUGER, PC Attys. For Defendant/Third-Party 80 Broad St. New York, NY 10004 Pltf. Defendant. ---------------------------------------------------------------X MARL YN NEUTRACEUTICALS, INC., DUANE MORRIS, LLP Attys. For Third-Party Defendant 1540 Broadway New York, NY 10036 Third-Party Plaintiff -againstKELATRON CORPORATION, Third-Party Defendant. ---------------------------------------------------------------X Upon thl.:following papers numbered 1 to --l.l- read on this motion by third-paJ1y defendant to dismiss (hI.: thirdpartv complaint; Notice of Motion/Order to Show Cause and supporting papers 1 - 3 , Notice of Cross Motion and supporting papers ; Answering Affidavits and suppol1ing papcrs ; Replying Affidavits3nd supporting papers 4 ; Other 5 (affidavit); 6-7 (affirmation); 8 (affidavit); 9 (affidavit); 10 (Memorandum); J I (memorandum); 12-13 (memorandum) ; (and aRe! hemitig WtlllSel ill 3tIpport and opposed to tlte l1loti01Y it is, ORDERED that this motion (#001) by third-party defendant, Kelatron Corporation, for an order dismissing the third-palty complaint is considered under CPLR 3211(a) and is granted. This action arises out of contracts for the purchase of effervescent products in 2009 by the plaintiff, NBTY Acquisition LLC (hereinafter NBTY) from defendant, Marlyn Ncutraceuticals, Inc. (hereinafter Marlyn). The plaintiff alleges that under the tenns of its purchase orders, Marlyn agreed to [* 2] NBTY Acquisition LLC v Marlyn Neutraceulicals. Inc. Index No. 38959-10 Pagc 2 to tender and deliver to the pIaintiJT products which were free of the presence allergens such as soy. The plaintiff claims that Marlyn breached the contracts by delivering and tendering non-conforming eOervescent products containing soy. The plaintiff seeks recovery of damages from the defendant under theories of contract, warranty and tort. Marlyncommenced the above captioned third-party action against third-party deJendant Kelatron Corporation (hereinafter Kclatron) Kelatron is a Utah company and it supplied Marlyn, an Arizona company, with selenium chelate whieh Marlyn used in the production of the effervescent products it sold to the plaintiff. In its third-party complaint, Marlyn charges Kelatron with breaches of contract, warranties and tort, for which, recovery of derivative and direct damages are demanded. By the instant motion, Kelatron moves to dismiss the third-party complaint. Among the grounds alleged are: a lack of jurisdiction over Kelatron; a Utah forum selection clause in the Sales Agreement between it and Marlyn; a written disclaimer of warranties in said Sales Agreement; and an enforceable settlement agreement which allegedly precludes Marlyn's continued prosecution of its claims against Kelatron. First considered arc Kelatron's claims for dismissal of the third party complaint which rest upon certain of the provisions contained in Kelatron's "Sales Agreement". In support of these claims, Kelatron principally relies upon: copies of invoice purchase orders reflecting items sold to Marlyn in 2009, an internal handbook or manual describing standards and procedures for lilIing orders; and a copy of a document entitled ''Tcrms and Conditions of Sale", Within the Terms and Condition of Sale [hereinafter TCS], is the forum selection clause wherein courts situated in Utah arc designated as thc forum in which disputes arising under the TCS are to be litigated. The TCSs also contains-a written disclaimer of warranties. Kelatron argues that these documentary submissions conclusively establish the contractual defenses asserted in support of the instant motion to dismiss the third party complaint. Marlyn opposes the motion contending, in part, that the documents relied upon by Kelatron are insullicicnt to establish the contractual defenses derived from the relied upon portions of the TeS. Marlyn emphasizes that the copy of the TeS attached to Kelatron's moving papers appears to be a separate document that is not referable to the invoice orders reflecting items sold to Marlyn. Since the TeS supplied by Kelatron all this motion is not attached to the invoice purchase orders nOT incorporated by reference therein, the terms of the TCS are allegedly nol binding on Marlyn due to a lack of a'iSent. '" A party seeking dismissal pursuant to CPLR 3211 (a)(1) on the ground that its defense is founded upon documentary evidence has the burden of submitting documentary evidence that resolves alllactual issues as a matter of law, and conclusively disposes of the plaintiffs claim'" (Flushing Sall. Bank, FSB l-' Siunykalimi. _AD3d --' 2012 WI., 1194408 [2d Dept 2012J, quoting Mazur Bros. Rea/~" He v Slale af New Yark, 59 A03d 401,402, 873 NYS2d 326 [2d Oept 2009]). The nature of the proof must be such thai it "utterly refute[sJ plaintifl's factual allegations. conclusively establishing a defense as a matter of law" (HSBC Balik. USA l-' Pugkhem, 88 AD3d 649, 931 NYS.2d 635 [ld Dept 2011]. quoting Goshen l-' Mutual Life IllS. Co. of N. Y., 98 NY2d 314, 326, 746 NYS2d 858l2002]). [n order to be considered "documentary" under CPLR 321(a)( I), the evidence must be unambiguous and of undisputed authenticity, that is, it must be essentially unassailable (see Torah l-' Dell Equity, LLC, 90 AD3d 746, 746-747, 935 NYS2d 33 [2d Oept 2011]). [* 3] NBTY Acquisition LLC v Marlyn Neutraceuticals, Inc. Index No. 38959-10 Page 3 Here, Kelatron failed to satisfy its burden of proof under CPLR 3211 (a)(1) and the above cited cases authorities. The documents relied upon by Kelatron to establish its contractual defenses did not uuerly refute plaintiff's factual allegations conclusively estabJishmg a such defenses as a matter of law. None orthe documenls submitted constituted integrated writings by which the terms of the TCS were attached, incorporated by reference or were otherwise referable to the invoice orders reflecting the items purchased by Marlyn Irom Kelatron. The internal policy instruction manual for order placement relied upon by Kelatron did not fill this documentary gap as said instruction manual is not "documentary" within the purview ofCPLR 3211 (a)(I). The court thus finds that Kelatroll is not entitled to adismissal of the third party complaint pursuant to CPLR 321 1(a)(1 ). J lowever, those portions of Kelatron 's motion which are premised upon its claims for dismissal pursuant to CPLR 321 I(a)(8) are meritorious. In support or its asserted defense that this court lacks personal jurisdiction over it, Kelatron advances the following facts: Kelatron is a Delaware corporation having its principle place of business in Ogden, Utah. It manufactures and sells mineral products, including selenium chelate which is an antioxidant. Kelatron does not maintain an office in New York, has no employees In New York and is not authorized to do business therein. Kc1atron owns no New York property and has no agcnt designated to receive process in New York. The bulk ofKelalron products are shipped to west coast customers, including California. Direct sales to New York customers have averaged 1.3% of Kelatron's total sales for the years 2003-2011. Marlyn is an Arizona company and it manufactures nutritional products. Although Marlyn has purchased products from Kelatron since 2003, the claims asserted by the plamtiff in the main action appear to be limited to five purchase orders in the fall of 2009. In 2009, Kelatron shipped selenium chelate FOB from its shipping dock in Ogden, Utah to Marlyn in Phoenix, Arizona. Some of that product ultimately made its way to the plaintiff located in New York lhrough Marlyn. In opposing this motion, Mariyn admits that all business between it and Kc1atron took place from their respective facilities in Arizona and Utah. Marlyn further admits that it did not inform Kelatron that Marlyn's ultimate customer was in New York and that such non disclosure arguably eliminates any claim lor jurisdiction under New York's speeiallong ann statute coditied at CPLR 302 (see p.7 ofMarlyn's Memorandum of Law in opposition). Marlyn nevertheless contends that there is sufficient proof for the attachment of jurisdiction over Kelatron under CPLR 301, New York's gencral jurisdictional statute (see page 7 of Marlyn's memorandum oflaw in opposition). Alternatively, Marlyn argues that there are sufficient facts regarding the possibility that jurisdiction exists over Kelatron to warrant discovery on the jurisdictional issue. For the reasons stated below, the court disagrees and thus sustains Kc1atron's lack of jurisdiction defensc. New York courts have traditionally exercised personal jurisdiction over non- domiciliary, corporate defendants where such defendants engage in a "continuous and systematic course of doing business" as to warrant a finding of its "presence" in this state (see Londoil Resources Corp. vAlexamla & Alexllnder Serv., 77 NYS2d 28, 563 NYS2d 739 11990J; Touzo v Susquehanna Coal Co., 220 NY 259,115 NE 915119171). The "doing-business" rule, which evolved at common law and iSllowcodificd under the general jurisdictional statute set forth in CPLR 30 I, imposes a stringent standard since a corporation which is found amenable to suit thereunder may bc sued on causes of action wholly unrelaled to acts done in New York (see Lmll/oil Resources Corp. vAlexoflder & Alexander Serv., 77 NYS2d 28, supra; Ball v Metal/urgie Hoboken-Ovenpe/t. SA,. 902 fo2d 194 12d Cir. 19901; (I CPLR 302[a1). [* 4] NBTY Acquisition LLC v Marlyn Neutraccuticals, Inc. Index No. 38959-10 Page 4 Engagement in occusional or casual business in New York does not su11iceunder CPLR 30 I nor docs mere solicitation of New York customers (see Landoil Resources Corp. v Alexander & Alexander Servs., 77 NY2d 28, 34, 563 NYS2d 739 119901; Laufer v Ostrow, 55 NY2d 458, 449 NYS2d 456 [1982J; Daniel B. Katz & Assoc. Corp. v Midland, 90 AD3d 977, 937 NYS2d 236 [2d Dcpt 2011]). Instead, a finding of "doing business" under CPLR 30 I is dependent upon the existence of traditional indicia, from which, the court may conclude that the foreign defendant has sufficient contacts with New York to warrant a linding that it is present here. Such indicia include whether the corporation bas employees, agents, offices or property within the state; whether it is authorized to do business here and the volume of business which it conducts with New York residents (see LQl~fer v Ostrow, 55 NY2d 305, slIpra; Frummer v f1i1tollllofels lutl.,Inc, 19 NY2d 533, 281 NYS2d 41 [1967]). While the courts have long espoused that the mere solicitation of business which attracts customers here or results in sales to New Yorkers is insufficient to confer jurisdiction under thc traditional doing business rule CPLR 301, they have recognized that substantial solicitation by the foreign corporate defendant, coupled with financial or other commercial dealings in New York, may be sufficient for a finding of doing business here (see Arroyo v Moulltaill School, 68 J\D3d 603, 892 NYS2d 74, [1st Oept 20091; Lalldoil Resources Corp. v Alex{lIlder & AlexClnder Serv., /Ilc., 918 F2d I039 L2dCir. 1990]). This second prong ofthe doing business test is known as the "solicitation-plus" rule. Under this rule, engagement in solicitation that is substantial and continuous, coupled with other activities of substance in the New York, may warrant a finding ora general jurisdiction under CPLR 30] (see Arroyo v Mountai" School, 68 A03d 603, supra; Seelig v. Okemo Mountain, 204 AU2d 709, 612 NYS2d 643 [2d Dcp! 1994J; WeilvAmericall Ulliv., 2008 WL 126604,2008 U.S. Dist. LEXIS 1727 [SD NY 2008J; Landoil Resources Corp. vAlexmrder& Ale.xallderServs., 918 F2d 1039, supra; Browll v Ghost Towll in t!le Sky, 2001 WL 1078341 [ED NY 2001]). Clearly, the ultimate burden of proof rests with the party assertingjurisdiction and to successfully defeat a motion to dismiss based upon a lack of long-arm jurisdiction the plaintiff mllst show, prima facie, that the defendant is subject to the personal jurisdiction ofthe court (see College v Brady, 84 AD3d 1322,924 NYS2d 529 [2d Dcp! 20011; LOllg v WycoffHgt,·. Med. Ctr., 55 AD3d 793, 866 NYS2d 313 [2d Dcpt 2008J; Comely v Dy"amic HVACSapply, LLC, 44 AD3d 986,986,845 NYS2d 797 [2d Del'! 2007]). However, the plaintiff may delay determination of a motion to dismiss pursuant to CPLR 3211 (a)(8) on the ground that discovery on the issue of personal j urisdietion is necessary. In such a case, the plaintiff need not make a prima facie showing of juris diet ion, but instead "need only demonstrate that facts 'may exist' to exercise personal jurisdiction over the defendant" (Yillg lUll Chell v Lei SId, 19 AD3d 407, 796 NYS2d 126 (2d Oept 2005]; quoting; Petersoll v Spartlln/ndus., 33 NY2d 463, 467, 354 NYS2d 905 [1974 J). If"it appear[s] from affidavits submitted in opposition to fthe 1 motion ... that faets essential to.i ustify opposition may exist but cannot then be stated," a court may, in the exercise of its discretion, postpone resolution ofthe issue ofpersonaljurisdiction pending discovery (CPLR3211 (d); see Ying JUIl Chell v Lei SId, 19 i\D3d at 407--408, supra). 1lere, Kelatron sufficiently established that is not subject to the jurisdiction of this cOUl1because Kclalron is not doing business here in New York within the contemplation ofCPLR 301. The absence of an office, employees, authori7.ation of an agent for service of process and the absence of any real property interests in New Yark reflects that Kelatron has insuffiCient traditional indicia of a presence in New York. Although Kelatron does ship to New York customers, the paltry volume or such business [* 5] NBTY Acquisition LLC v Marlyn Ncutraceuticals, Index No. 38959-10 Page 5 Inc. compared to that which it conducts with non-New York customers provides an insufficient basis on which jurisdiction may attach. There is no evidence of the existence of any "continuous and systematic course of doing business" nor of any ';solicitation-plus" contacts here in New York which would warrant a finding of Kelatron's "presence" in this state. The opposing papers of Marlyn failed to establish facts necessary to support a finding that Kclatron may be deemed to have a presence under the ';doing business" rule of CPLR 301 or to defer determmation of this motion until discovery on the issue ofKelatron's business activities is conducted. As indicated above, jurisdictJOn under CPLR 301 may be acquired over a foreign corporation or other business entity only ifthat corporation or entity does business here, not occasionally or casually, but with a hlir measure of permanence and continuity so as to warrant a finding of its presence in this jurisdiction (see Dalliel B. Katz & Assoc. Corp. v Midland, 90 AD3d 977, supra). Other than innuendo and speculative assertions regarding Kelatron's possible solicitation of business in New York, Marlyn failed to establish that facts "may exist" to exercise personal jurisdiction over Kclatron and that they constitute a ;'sufficient start" to warrant further discovery on the issue as contemplated by CPLR 3211 (d) ((/.., Ying iun Clten v Lei SlIi, 19 AD3d 407, 408 supra). Nor is therc any basis in the record for a finding that jurisdiction may exist under New York's specialized long arm statute codified at CPLR 302. Under CrLR 302(a)(1), a court may exercise jurisdiction over any nondomicilimy who ;;transacts any business within the state or contracts anywhere to supply goods or services in the state." Courts have held that CPLR 302(a) is a ;;single act statute [and] ... proof of one transaction in New York is sufficient to invoke jurisdiction, even though the defendant never cntcrs New York, so long as the defendant's activities here were purposeful and there is a substantial relationship between the transaction and the claim asserted" (Kimco Exch. Place Corp. v Thomas Benz, Inc., 34 AD3d 433, 434, 824 NYS2d 353 [2d Dept 2006]). Even if Kelatron transacted business withm New York, Marlyn's injury and the claims predicated upon it cannot be said to havc arisen directly out ofthis transaction. The affidavit ofMarlyn's president submitted in opposition to this motion failed to demonstrate that facts essential to justify opposition may exist so as to warrant the postponement of the resolution of the issue of personal jurisdiction pending discovery(see 32il[dJ). cruz Kelatron's alternative clema'nds for relief, namely, an order enforcing a purported settlement are without merit (see CPLR 21 04; Williams I'. Bushman. 70 AD3d 679, 894 NYS2d 94 L2d Dept 2010]). view ofthc foregoing, the instant motion (#001) by third-party defendant Kelatron to dismiss the third-party complaint on the grounds that this court lacks personal jurisdiction over Kclatron, a nondomiciliary corporation, is granted pursuant to CPLR 3211 (a)(8). All other demands for relief are denied. The third-party complaint is thus dismissed and the caption amended to delete the third-pm1y action and the parties thereto. [n \(, I DATED: I// -' ~ ~ I J I~ ! -iEI.AN, .J.S.C.

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