Matter of Palco Group Enters. LLC v Collect Edge Servs. LLC
Annotate this CaseDecided on June 6, 2007
Supreme Court, Nassau County
In the Matter of Palco Group Enterprises, LLC, Petitioner,
against
Collect Edge Services, LLC, NORMAN WEKSELMAN, and MICHAEL KOLODIN, , Respondents.
20942-06
COUNSEL FOR PLAINTIFF
Siler & Ingber, LLP
The Garden City Center
1399 Franklin Avenue - Suite 103
Garden City, New York 11530
COUNSEL FOR DEFENDANT
Saltzman Chetkof & Rosenberg, LLP
300 Garden City Plaza - Suite 130
Garden City, New York 11530
Leonard B. Austin, J.
Petitioner Palco Group Enterprises, LLC ("Palco") moves for an order permitting it inspect the financial books and records of Respondent Collect Edge Services LLC ("Collect Edge"). Collect Edge and Respondent Norman Wekselman ("Wekselman") cross-move to dismiss this proceeding on the ground that they are not subject to the jurisdiction of this Court.
BACKGROUND
Palco is the holder of a 30% interest in the profits, losses, distributions and capital of Collect Edge.
Palco alleges that it has made numerous demands upon Collect Edge to obtain access to and inspection of the Collect Edge's records including its minute book and by- laws, all books of account, all bank and check books, tax returns, contracts and other records. Palco further alleges its request to inspect these records has been denied.
Collect Edge and Wekselman do not contest the merits of the application. They seek to have this proceeding dismissed on the ground that they are not subject to the jurisdiction of New York's courts.
Collect Edge is a limited liability company organized and existing pursuant to the laws of the State of New Jersey. Wekselman is the managing member of Collect Edge.
He presently resides in Piscataway, New Jersey. He has resided there for the past five years.
Collect Edge's Certificate of Formation, which was filed with the New Jersey Department of Treasury on August 2004, indicates that its main business address is located in East Brunswick, New Jersey. The order to show cause commencing this proceeding indicates Collect Edge as having an office in Somerset, New Jersey.
Collect Edge is not, and has never been, a foreign limited liability company authorized to do business in New York. See, Limited Liability Company Law Article VIII.
DISCUSSION
Palco asserts that Collect Edge is subject to the long arm jurisdiction of this Court. More specifically, Palco contends that this Court has jurisdiction pursuant to CPLR 302(a)(1) which provides:
"(a) Acts which are the basis of jurisdiction. As to a cause of action arising from any of the acts enumerated in this section, a court may exercise personal jurisdiction over any non-domiciliary,...,who in person or through an agent:
1. transacts any business within the state or contracts anywhere to supply goods
or services in the state;"
Palco claims Collect Edge is subject to the jurisdiction of New York because Collect Edge executed agreements with Palco in New York, held numerous meetings to discuss business with Palco in New York, maintains office space in New York, has full time employees in New York, transacts collection services in New York and sends and receives mail at an office in New York. [*2]
Wekselman denies any personal contact with New York. He further avers that Collect Edge has never had and does not presently maintain office space in New York. Wekselman claims that he met with Joseph Palumbo, Palco's principal, in Westbury, New York on one occasion. Wekselman states that the agreement by which Palco and Palumbo became members of Collect Edge was not executed New York.
New York's long-arm statute is a "single transaction statute." Siegel, New York Practice 4th §86. One transaction of business in New York will be sufficient to subject a non-domiciliary to New York's jurisdiction provided that the non-domiciliary engaged in purposeful activity in New York and there is a substantial relationship between the transaction and the cause of action. Johnson v. Ward, 4 NY3d 516 (2005); Kreutter v. McFadden Oil, Corp., 71 NY2d 460 (1988); Edelman v. Taittinger. S.A., 298 AD2d 301 (1st Dept. 2002); and People v. Concert Connection, Ltd., 211 AD2d 310 (2nd Dept. 1995).
An essential element in determining whether a non-domiciliary should be subject to the jurisdiction of New York is whether the quality and nature of the defendant's activities in New York are such that it would be fair and reasonable to require the defendant to defend the claim in New York. Riblet Products Corp. v. Nagy, 191 AD2d 626 (2nd Dept. 1993).
The party asserting long-arm jurisdiction bears the burden of establishing that the non-domiciliary should be subject to the jurisdiction of the Court of New York. Ying Jun Chen v. Lei Shi, 19 AD3d 407 (2nd Dept. 2005); Roldan v. Dexter Folders, 178 AD2d 589 (2nd Dept. 1991) and Spectra Products, Inc. v. Indian River Citrus Specialties, Inc., 144 AD2d 832 (3rd Dept. 1988). Such party "...need only make out a prima facie case of personal jurisdiction, and in deciding whether the plaintiffs have met their burden, the court must construe the pleadings and affidavits in the light most favorable to them and resolve all doubts in their favor. (see CutCo Indus. v. Naughton, 806 F.2d 361, 365)" Brandt v. Toraby, 273 AD2d 429, 430 (2nd Dept. 2000).
Even assuming all that Palco says is true, as this Court must, this Court does not have jurisdiction over this proceeding. This is a special proceeding relating to the rights a member of a foreign limited liability company to inspect the financial books and records of that company.
Issues relating to the internal affairs of a business are governed by the law of the state of its formation. See, Zion v. Katz, 50 NY2d 92 (1980). The issues in this case are not related to Collect Edge's business transactions in New York. The issue this Court is being asked to determine relates to the rights of a member of a New Jersey limited liability company to inspect its books and records. See, N.J. Stat. Ann. §42:2B-25.
Even were the Court to find that it has jurisdiction over the subject matter and parties herein, this Court also believes that New York is not a convenient forum for this proceeding.CPLR 327(a) and the common law doctrine of forum non conveniens permit the court to dismiss an action over which the court would have jurisdiction if it
would be better adjudicated in another jurisdiction. Islamic Republic of Iran v. Pahlavi, 62 NY2d 474 (1984), cert. den., 469 U.S. 1108 (1985).
The party seeking dismissal on this ground must establish that the selection of New York as the venue will not serve the interests of substantial justice. Banco Ambrosiano, S.P.A. v. Artoc Bank & Trust Co., 62 NY2d 65 (1984); Yoshida Printing Co., Inc. v. Aiba, 213 AD2d 275 (1st Dept. 1995); and Stamm v. Deloitte and Touche, 202 AD2d 413 (2nd Dept. 1994).
The fact that one or more of the parties is a resident of New York does not preclude [*3]dismissal on this ground. Silver v. Great American Ins. Co., 29 NY2d 356 (1972). The courts of New York are not compelled to retain jurisdiction over an action or proceeding that does not have a substantial nexus to New York. Cheggour v. R'Kiki, 293 AD2d 507 (2nd Dept. 2002); and Wentzel v. Allen Machinery, Inc., 277 AD2d 446 (2nd Dept. 2000).
The records Palco seeks to inspect are almost certainly located and maintained in New Jersey. Wekselman resides in New Jersey. Palco's rights and remedies are governed by New Jersey law. Enforcement of any order this Court enters would have to be obtained in New Jersey.
Additionally, a demand for inspection of the records of a limited liability company made pursuant to N.J. Stat. Ann. §42:2B-25 must be in writing and state the purpose of the demand. See, N.J. Stat. Ann. §42:2B-25(e). Petitioner has failed to establish that is has made a written demand for the records or the purpose of its demand.
Issues relating to inspection of records of a New Jersey limited liability company such as Collect Edge should be heard by the courts of New Jersey.
Since the court is dismissing this proceeding on the grounds that it lacks jurisdiction and forum non-conveniens, Palco's application for an order compelling inspection of Collect Edge records must be denied. The dismissal is without prejudice to renewal in proper forum.
Accordingly, it is,
ORDERED, that Respondents' cross-motion to dismiss is granted; and it is further,
ORDERED, that Petitioners' motion fo an order granting it permission to inspect the records of Collect Edge is denied without prejudice to renewal in the proper forum.
This constitutes the decision and Order of the Court.
Dated: Mineola, NY_____________________________
June 6, 2007Hon. LEONARD B. AUSTIN, J.S.C.
XXX
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