I. Cruise.Com Corp. v Aliksanyan

[*1] I. Cruise.Com Corp. v Aliksanyan 2007 NY Slip Op 51476(U) [16 Misc 3d 1119(A)] Decided on May 23, 2007 Supreme Court, New York County Diamond, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on May 23, 2007
Supreme Court, New York County

I. Cruise.Com Corp. and Riverside Investment Partners, L.P., Plaintiffs,

against

Alex Aliksanyan et al., Defendants.



602682/06

Marylin G. Diamond, J.

Upon the foregoing papers, it is ordered that: Motion sequence numbers 006 and 007 are consolidated herein for decision. Plaintiff I. Cruise.Com Corp. ("I Cruise") is a New York corporation and defendant Alex Aliksanyan is its former president. Defendant Lisa Geller, a resident of California, is married to Aliksanyan and was employed at one time by I Cruise as its Secretary. Defendant Kit Wah Cheng is the former technical officer of I Cruise. Plaintiffs' lengthy complaint asserts twenty-one causes of action. Plaintiffs claim, inter alia, that Aliksanyan and Cheng conspired to extort money or property from I Cruise by causing members of the company's technical support staff to quit, leaving the company in a precarious position. The complaint also alleges that Aliksanyan and/or Geller unlawfully converted corporate funds. According to the complaint, Aliksanyan received money via a wire transfer which was improperly authorized by defendant Commerce Bank, the financial institution in which I Cruise maintained a commercial account. In his answer, Aliksanyan has asserted various counterclaims against I Cruise and co-plaintiff Riverside Investment Partners, LP, as well as against Mark T. Ocepek, the majority shareholder and CEO of I Cruise, and Jared Smith, the president of I Cruise.

In motion sequence number 006, Ocepek has moved to dismiss the sixth counterclaim, which asserts a cause of action against him for defamation, on the ground that the court lacks personal jurisdiction over him. In motion sequence number 007, Commerce Bank has moved for summary judgment dismissing the complaint as against it. Plaintiffs have cross-moved for summary judgment against Commerce Bank.

Discussion

1. The Counterclaim Against Ocepek for Defamation - The sixth counterclaim alleges that Aliksanyan was defamed by Ocepek in February or March, 2006 during a telephone conversation between Ocepek and Carlos Romero, a minority shareholder of I Cruise, in which Ocepek offered to buy all of Romero's shares. According to the pleadings, Ocepek stated to Romero that Aliksanyan [*2]"had ruined I Cruise," "run the company to the ground" and stolen from the company. Aliksanyan claims that Ocepek later reiterated this charge in an e-mail to Romero. In moving to dismiss this claim on the ground that the court lacks personal jurisdiction over him, Ocepek, a resident of Florida, claims that he was never in New York in the Winter of 2006 and therefore, even if the statements alleged in Aliksanyan's answer were actually made to Romero, who is also a Florida resident, they were made outside of New York. In opposing the motion to dismiss, Aliksanyan points out that I Cruise's principal place of business is in New York and argues that, in his role as the CEO and majority shareholder of the company, Ocepek came to New York on a regular basis to transact business so as to make him amenable to the long-arm jurisdiction of this State.

It is well settled that CPLR 302(a)(1) permits a New York court to exercise personal jurisdiction over a nondomiciliary if the nondomiciliary conducts "purposeful" activities within the state and the claim against the nondomiciliary involves a transaction bearing a "substantial relationship" to those activities. See Deutsche Bank Sec., Inc. v. Montana Bd. Of Invs., 7 NY3d 65, 71 (2006); Talbot v. Johnson Newspaper Corp., 71 NY2d 827, 829 (1988). Even one instance of purposeful activity directed at New York is sufficient to create jurisdiction, whether or not the defendant was ever physically present in the State, so long as that activity bears a substantial relationship to the cause of action. See Corporate Campaign, Inc. v. Local 7837, United Paperworkers International Union, 265 AD2d 274, 275 (1st Dept. 1999). If a court determines that a nondomiciliary had transacted business within the meaning of CPLR 302(a)(1), jurisdiction is proper as long as it does not offend due process, i.e., " [s]o long as a party avails itself of the benefits of [New York], has sufficient minimum contacts with it, and should reasonably expect to defend its actions there, due process is not offended if that party is subjected to jurisdiction even if not present in that State." Kreutter v. McFadden Oil Corp., 71 NY2d 460, 466 (1988).

Here, although it appears that Ocepek transacted business in New York, his doing so did not bear a substantial relationship to the defamation claim asserted against him. It is undisputed that Ocepek's conversations with Romero which are the subject of the sixth counterclaim took place in Florida between two Florida residents. These conversations, which concerned the purchase of stock, were not substantially related to Ocepek's visits to New York. See Curto v. Medical World Communications, Inc., 388 FSupp 2d 101, 114 (EDNY 2005). There is no merit to Aliksanyan's argument that the defamation arises out of Ocepek's New York transactions since it was only because of Ocepek's activities in New York as the CEO of I Cruise that Romero reasonably believed that Ocepek was stating a fact about Aliksanyan. Such an attenuated connection does not satisfy the long-arm requirement that the cause of action be substantially related to the transaction of business in New York. Id. at 114. Ocepek's motion to dismiss must therefore be granted.

2. The Plaintiffs' Claims Against Commerce Bank - In motion sequence number 007, Commerce Bank moves for summary judgment dismissing the complaint as against it. Plaintiffs have cross-moved for summary judgment against Commerce. Of the 21 causes of action asserted in plaintiffs' complaint, four concern Commerce Bank. These causes of action are for breach of contract (sixteenth cause of action), negligence (seventeenth cause of action), violation of section 4-401 of the Uniform Commercial Code (eighteenth cause of action) and conversion (nineteenth [*3]cause of action). All four claims involve a wire transfer of $423,609.41 made on July 27, 2005 from I Cruise's account at Commerce to an account maintained by Aliksanyan. Plaintiffs allege that Commerce Bank had been instructed by I Cruise's Board of Directors that two signatures were required on all disbursements from, or transfers of, funds out of the bank account in excess of $100,000. Plaintiffs allege that the transfer to Aliksanyan was supported by only one authorized signature, that of Aliksanyan himself, and should therefore not have been permitted. According to plaintiffs, Commerce Bank violated section 4-401 of the UCC, which only allows a bank to charge against a customer's account items that are "properly payable".

In moving for summary judgment, Commerce Bank argues, as a threshold matter, that plaintiffs' common law theories of liability for breach of contract, conversion and negligence must be dismissed since article 4-A of the UCC has preempted the field and exclusively governs electronic fund transfers. This argument is supported by case law and by the legislative history of article 4-A. See Aleno Intl. v. Citibank, 160 Misc 2d 950, 951 (Sup Ct NY Co1994); Banco de la Provincia de Buenos Aires v. BayBank Boston N.A., 985 FSupp 364, 369-70 (SDNY 1997). Notably, the plaintiffs do not seriously dispute or even address this point. The sixteenth, seventeenth and nineteenth causes of action must therefore be dismissed.

As to the eighteenth cause of action, the issue is whether Commerce Bank is required under the UCC to refund to I Cruise the funds which it wired to Aliksanyan on July 27, 2005. In moving for summary judgment, the bank argues that plaintiffs' claim for a refund under UCC § 4-401 is barred by the terms of the Deposit Account Agreement accepted by I Cruise when it opened the account and by other provisions of the Code. As to the Deposit Account Agreement, its rules provide that the monthly account statements sent to I Cruise by Commerce will be considered correct and Commerce will not be held liable for any incorrect or unauthorized payments unless I Cruise notifies the bank in writing of any claimed errors. Commerce asserts that although the July, 2005 account statement mailed to I Cruise showed a $423,609.41 debit on July 27, 2005, it never received any written objection from I Cruise.

Plaintiffs, however, argue that the Deposit Account Agreement rule which the bank relies on only applies to forged or altered checks and not to wire transfers. The rule, found in a section entitled "Account Statement," provides, in pertinent part: You are responsible for promptly examining your statement each statement period and reporting any irregularities to us. The periodic statement will be considered correct for all purposes and we will not be liable for any payment made and charged to your account unless you notify us in writing within certain time limits after the statement and checks are made available to you. We will not be held liable for any check that is altered or any signature that is forged unless you notify us in writing within a reasonable period of time, not to exceed thirty calender days after the statement and the altered or forged items(s) are made available. . . . You agree that our retention of checks does not alter or waive your responsibility to examine your statements or change the time limits for notifying us of any errors.

Plaintiffs argue that because this rule largely concerns checks and the time limit applicable [*4]thereto, it somehow only applies to checks. This argument is without merit. The plaintiffs' interpretation is contrary to the clear and broad language which covers objections to payments of any type listed in the monthly statement. Thus, the first two sentences of the rule plainly and unambiguously provide that Commerce Bank is not liable for any payment made and charged to I Cruise's account and reflected in the account statement unless I Cruise provides written notice of any claimed improper payment, such as checks or wire transfers, within the applicable time period. The phrase "certain time limits" clearly refers to the different time limits applicable to the different types of payments, i.e, checks or wire transfers. For checks, the applicable time period, as set forth in the rule itself, is thirty days. For wire transfers, since the rule does not specify a time limit, the applicable limit is found under section 4-A-505 of the UCC. Section 4-A-505, which applies to wire transfers, provides that a bank is not obligated to refund a customer's account where an improper payment has been made if the customer did not object to the debiting of the account within one year after receiving notification.

Plaintiffs also argue that the Deposit Account Agreement improperly imposes an additional term on UCC § 4-A-505 by requiring that the notice of objection be in writing. In making this argument, plaintiffs rely on the Court of Appeals decision in Regatos v. N. Fork Bank, 5 NY3d 395 (2005), which held that the one-year period of repose in UCC § 4-A-505 may not be modified by agreement. The court held that doing so would impair and/or alter the customer's right to a refund, a modification that the UCC expressly forbids. Id. at 402-03. However, in Regatos, the Court of Appeals merely addressed the issue of whether a bank could, by agreement with its customer, abbreviate the time period for reporting improper wire transfer claims. Here, the agreement between I Cruise and Commerce Bank did not affect the time period in which to assert a claim of improper payment. Rather, it only requires that the claim be made in writing. Unlike Regatos, there is nothing in this requirement which would impair or modify the customer's right to a refund. Indeed, plaintiffs have not cited any cases which have invalidated or refused to enforce an agreement under which a bank customer's objection to a wire transfer must be made in writing. On the contrary, as Commerce points out, the terms of the deposit account agreement at issue in Regatos appears to be similar to the terms of the agreement at issue in this case. Moreover, an agreement which requires that objections to wire transfers be made in writing is both commercially reasonable and protective of both parties since it eliminates uncertainty as to whether any objection was made timely or at all. Thus, nothing in Regatos prohibits an agreement between a bank and its customer requiring that notice of an objection to an allegedly unauthorized wire transfer be in writing.

Plaintiffs' other arguments against granting Commerce Bank summary judgment are also without merit. The fact that Commerce Bank may have violated I Cruise's Corporate Banking Resolution by failing to obtain two signatures before authorizing the wire transfer to Aliksanyan is of no significance since plaintiffs did not object in writing to the transfer within one year of receipt of I Cruises's monthly account statement. Similarly insignificant is the fact that plaintiffs may not have reviewed the July, 2005 statement until November, 2005 because Aliksanyan allegedly concealed the statement from the other officers of I Cruise until that time. Plaintiffs do not dispute Commerce Bank's contention that the statement was mailed to I Cruise's offices in New York. That Ocepek, who by his own admission rarely came to New York, may not have actually received notice [*5]of the transfer until a number of months later is of no moment since Commerce Bank acted properly and fulfilled its obligations by mailing the statement to I Cruise's principal place of business. Under the circumstances, since I Cruise failed to provide written notice of its objection to the wire transfer within one year after it was notified that the transfer had been made, it is not entitled to obtain a refund of the payment.

Accordingly, in motion sequence number 006, Ocepek's motion to dismiss is granted and Aliksanyan's sixth counterclaim is hereby dismissed. In motion sequence number 007, Commerce Bank's motion for summary judgment is granted and the sixteenth, seventeenth, eighteenth and nineteenth causes of action are hereby dismissed. Plaintiffs' cross-motion for summary judgment is denied.

ENTER ORDER

Dated:5-23-07MARYLIN G. DIAMOND, J.S.C.

Check one:[] FINAL DISPOSITION[X] NON-FINAL DISPOSITION