Bankrate, Inc. v Mainline Tavistock, Inc.

[*1] Bankrate, Inc. v Mainline Tavistock, Inc. 2008 NY Slip Op 50213(U) [18 Misc 3d 1127(A)] Decided on January 14, 2008 Supreme Court, Kings County Pfau, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 January 14, 2008
Supreme Court, Kings County

Bankrate, Inc., Plaintiff,

against

Mainline Tavistock, Inc., Linda Patton a/k/a Lunda B. Patton, Nick Santini and Daniel Patton a/k/a Daniel J. Patton, Defendants.



16673/07



Appearances of Counsel:

Attorney For Plaintiff

Laura M. Dilimetin

Dilimetin & Dilimetin

1979 Marcus Avenue, Ste. 210, Rm.139

Lake Success, New York 11042

516-622-2369 (Tel)

516-622-2289 (fax)

Attorney For Defendant(s)

Jeremy D. Platek

O'Connor Redd, LLP

200 Mamaroneck Avenue

White Plains, New York 10601

914-686-1700 (tel)

914-328-3184 (fax)

Ann Pfau, J.

Before this Court is defendants' motion to dismiss the complaint of plaintiff Bankrate Incorporated for lack of personal jurisdiction, pursuant to CPLR 3211(a)(8). For the reasons stated below, the motion is DENIED, without prejudice to renew following limited discovery as described herein.

Background and Procedural History

A. Plaintiff's Complaint

In its complaint dated May 11, 2007, plaintiff sues for breach of contract based on three separate agreements between plaintiff and defendants, by which defendants (defendant corporation, or "Mainline," and three individually-named guarantors/employees) were to participate in a "rate directory" that plaintiffs would distribute for publication in various newspapers. The agreements referenced in, and attached to, the complaint were for publication in Michigan, New Jersey, and Pennsylvania, and are dated May 2005, August 2004, and February 2003, respectively.

Plaintiff claims that defendants have failed to make full payments for the "work, labor and services" provided pursuant to these contracts, despite plaintiff's demands. Plaintiff claims that Bankrate sent invoices indicating the amounts due, to which defendants did not object but also did not pay.

Plaintiff also claims that pursuant to these agreements, the individually-named defendants personally guaranteed all debts owed to plaintiffs by defendant corporation, and that defendants are obligated to pay plaintiff's attorney fees as part of the agreement. Plaintiff seeks $291,029.26 plus interest for unpaid debt, and $72,757.32 for attorney's fees, for a total of $363,786.58.

B. Defendants' Motion to Dismiss

In response, defendants submitted a motion to dismiss pursuant to CPLR 3211(a)(8) for lack of personal jurisdiction. In their motion papers, defendants concede, arguendo, that they were signatories to the agreements in question and argue that the Court lacks personal jurisdiction because defendants are not located in the state and do not conduct any business in the state, and there is no basis for long-arm jurisdiction.

Defendants argue that plaintiff cannot present evidence that defendants are engaged in a "continuous and systematic" course of "doing business" here under CPLR 301(a). They include an affidavit from one individually-named defendant Daniel Patton, an employee of Mainline, which they rely on to "conclusively establish" that defendant corporation does "absolutely no business" in New York.

The Patton affidavit states that defendant Mainline has never originated a loan in New York State or brokered transactions with lenders or banks in New York, is not licensed to finance a transaction within New York, has never transacted a loan with anyone that resides in New York, and does not derive any revenue from activities within the state. Defendants argue that "[e]ven assuming some New Yorkers have transacted business with Mainline to procure mortgages ...out of New York State, it has never been within New York State and has never involved a New York State financial institution."

The Patton affidavit also states that no employee of plaintiff has ever "physically [*2]communicated" with defendant corporation or its employees and that "to [his] knowledge," no phone calls were made by employees of plaintiff to "persons outside of New York State." The affidavit also alleges that no one has ever contacted Daniel Patton from plaintiff's office regarding the contracts at issue in this litigation.

Defendants further argue that a different company, Mortgage Management Information Systems ("MMIS"), entered into the contracts with defendants and that Bankrate later acquired this company. Defendants assert that plaintiffs present "no evidence" that this acquisition was complete at the time defendants entered into these contracts with MMIS. Defendants claim that the affidavit of Bankrate's president, Paul Runko, submitted with plaintiff's opposition papers, confirms that MMIS, not Bankrate, entered into the subject contracts, and that Mr. Runko does "not state that MMIS was in any way connected to New York" at that time.

Defendants assert that the long-arm statute for breach of contract actions, CPLR 302 (a)(1), also is inapplicable in this case because the agreements in question provide for performance outside of New York State. Therefore, defendants allege, the action does not arise out of business transacted within the state, as required by the statute. Defendants urge that plaintiff's alleged sporadic phone calls made to defendants regarding the alleged breach of contract, defendant's website which does not mention New York, corporate defendant's minimal use of New York lender institutions, and advertising in states next to New York, do not rise to the level of "doing business" or "transacting business" for purposes of establishing a jurisdictional nexus.

C. Plaintiff's Opposition to the Motion

On October 31, 2006, plaintiff submitted its opposition to defendants' motion.[FN1] In its opposition papers, plaintiff argues that the Court may exercise jurisdiction over defendants based on the CPLR § 301 "doing business" test, or based on CPLR 302(a), the long-arm statute. Because the exercise of jurisdiction is fact-specific, and because plaintiff has allegedly pled a prima facie showing of jurisdiction, plaintiff argues that discovery should proceed in order to "gather the facts necessary to determine jurisdiction."

I. CPLR § 301

Plaintiff argues that defendants are doing business regularly and continuously in New York in that defendants' interactive website amounts to an "electronic presence" in New York. Plaintiff notes that the website does not restrict New York residents from using its services and claims that, upon information and belief, "New Yorkers availed themselves of defendants' products and loans, and received advise [sic] from defendants." Bankrate also alleges that defendants use New York-based mortgage lenders and banks and other "contacts in New York." Plaintiff asserts that defendants "intend to act and transact business within the state."

Plaintiff also argues that the Court may exercise personal jurisdiction over defendants under CPLR § 301 based on a theory of "solicitation plus," where a defendant engages in [*3]"substantial solicitation of New York business" and "other activities of substance" in the state. Plaintiff advances this argument based on, among other things, defendants' purported contact with New York customers and continuous solicitation of their business over the Internet.

II. CPLR § 302(a)(1)

Plaintiff alternatively contends that the Court may exercise jurisdiction under the long-arm statute, based on the transaction of business in New York and the nexus between that business and plaintiff's claim. Plaintiff views defendants' website, their active solicitation of business in New York through their website, and the parties' agreements to be "inextricably linked," in that the advertisements defendants contracted for with plaintiff send customers to the website. Plaintiff also asserts that defendants have had dealings with plaintiff's senior executives in New York throughout the many years that they have been doing business with plaintiff, and that the three agreements between the parties are connected to New York because defendants dealt with plaintiff and its executives in their New York office relating to these agreements and other business.

In short, plaintiff argues that it has made a prima facie showing of jurisdiction, and that it has at least alleged facts sufficient to "support the granting of discovery to determine whether or not the New York Court can retain jurisdiction," a showing plaintiff urges may be established by mere allegations.Analysis

A.CPLR 3211

CPLR 3211(a)(8) establishes that a party may move to dismiss one or more causes against him on the ground that "the court has not jurisdiction of the person of the defendant." While the ultimate burden of proof rests on the party asserting jurisdiction, to survive a motion to dismiss pursuant to CPLR 3211, plaintiff need only prove a prima facie showing that the defendant is subject to the jurisdiction of the Court. Alden Personnel, Inc. v. David, 38 AD3d 697, 698 (2d Dept. 2007). The evidence submitted must be viewed in the light most favorable to the plaintiff. Id.

If plaintiff demonstrates that facts essential to establish a jurisdictional basis may be uncovered during discovery, the Court should deny defendant's motion to dismiss without prejudice to renewal after discovery limited to the issue of personal jurisdiction, in accordance with CPLR 3211(d). National Union Fire Ins. Co. v. Ideal Mut. Ins. Co., 122 AD2d 630 (1st Dept. 1986) [holding that even though defendant claimed it was not a New York Corporation, that it was not authorized to do business in New York, and that it never maintained an office or employed agents in New York and never derived revenue from services performed in New York, plaintiff demonstrated that facts may exist to establish jurisdiction over defendants and should be granted discovery on that issue pursuant to CPLR 3211(d)]; cf. Mandel v. Busch Entertainment Corp., 215 AD2d 455 (2d Dept. 1995). New York courts have ordered discovery pursuant to CPLR 3211(d) to resolve conflicting affidavits concerning whether facts exist to establish a jurisdictional basis. National Union Fire Ins. Co., supra.; but see Mandel, supra (holding that plaintiff's assertion of jurisdictional basis must not be "frivolous").

i. CPLR 301: The "Doing Business" Test

CPLR 301, the "doing business" statute, provides that New York courts may exercise [*4]jurisdiction over a foreign corporation where it solicits business in New York and is engaged in some other continuous activity here. Laufer v. Ofstrow, 55 NY2d 305, 309-310 (1982). A defendant is doing business in New York, for purposes of the personal jurisdiction statute, if it has engaged in such a continuous and systematic course of activities in New York that it can be deemed present in the state. Id.

The "doing business test" is simple and pragmatic, varying in application depending on the specific facts of each case. Landoil Resources Corp. v. Alexander & Alexander Servs., Inc., 77 NY2d 28 (1990). The "salient issue in determining jurisdiction" is whether "the aggregate of the corporation's activities in the State" are enough to amount to defendant's presence in the State "not occasionally or casually, but with a fair measure of permanence and continuity." Atlantic Veal & Lamb, Inc. v. Silliker, Inc., 2006 NY Slip Op. 50527U at 5 (Sup. Ct., Kings County, March 29, 2006) (Demarest, J.), citing Laufer v. Ostrow, 55 NY2d 305 (1982); International Shoe Co. v. State of Washington et. al., 326 U.S. 310, 316 (1945).

Factors that New York courts have found especially relevant to establish jurisdiction under CPLR 301 include whether the corporation has employees, offices or property within the state, whether the corporation is authorized to conduct business within the state, and the volume of business that the corporation conducts with New York residents. Laufer v. Ostrow, supra; Atlantic Veal, supra. The sale of products or solicitation of business in the state by itself is not enough to confer jurisdiction, absent conduct specifically directed at New York. Id. New York courts have held that soliciting New York business through an interactive website, together with other factors, constitutes a basis for jurisdiction under CPLR 301, even where defendant is not physically present in the state. Chestnut Ridge Air, Ltd. v. 1260269 Ontario Inc., 13 Misc 3d 807 (Sup. Ct. NY County 2006); Thomas Publ'g Co. v. Indus. Quick Search, Inc., 237 F. Supp. 2d 489, 492 (S.D.NY 2002); Citigroup Inc. v. City Holding Co., 97 F. Supp. 2d 549, 566 (S.D.NY 2002); see also Deutsche Bank Sec., Inc. v. Mont. Bd. of Invs., 7 NY3d 65 (2006); cf. Atlantic Veal, 2006 NY Slip Op. 50527U at 5.

To determine whether soliciting business over a website confers jurisdiction in New York, Courts have looked to additional factors such as the extent of the website's "interactive nature," whether the company has "substantially solicited" New York business through its website, and whether defendant's servicing of New York customers has been "systematic and continuous." See Chestnut Ridge Air, Ltd., supra, at 810 (holding that because company's website amounted to a "virtual community," with a forum for customers to post questions and items for sale or rent, and a private website' to monitor their own projects' completion, and because company obtained 4% of its yearly revenue from customers with a New York mailing address and spent 14 weeks per year servicing projects for these customers, company was subject to CPLR 301 jurisdiction.); cf. Atlantic Veal, supra, at 5 (holding that although defendant maintained a website which indicated its "ability and willingness...to conduct audits in a variety of markets around the world," the aggregate of its business activities in the state were not "sufficiently systematic or continuous to support jurisdiction pursuant to CPLR 301.").

Although the record establishes that defendants do not maintain an office in New York and do not have employees in New York, further important facts, including the jurisdictional significance of defendants' website, are not conclusively established by the record. Neither side submits evidence to establish whether defendant corporation's website is sufficiently interactive to rise to a level described above, towards establishing jurisdiction in New York. Further, the [*5]record currently lacks sufficient evidence to establish whether defendants have New York customers and derive "substantial revenue" from sales to New York customers, or whether their business with New York customers has been of a continuous nature. As plaintiff correctly points out, defendants, not plaintiff, likely possess the relevant evidence to establish or negate these jurisdictional facts.

Therefore, plaintiff has established that discoverable facts may exist to find defendants' doing business in New York for the purposes of asserting jurisdiction under CPLR 301. National Union Fire Ins. Co., 122 AD2d at 630; cf. Mandel, 215 AD2d at 455. The Court will therefore order limited discovery to allow for a jurisdictional determination on a more complete record.

ii.CPLR § 302(a)(1): The Long-Arm Statute

New York's long-arm statute provides that "a court may exercise personal jurisdiction over any non-domiciliary . . . who in person or through an agent . . . transacts any business within the state or contracts anywhere to supply goods or services in the state," with respect to a cause of action "arising from" such acts. CPLR § 302 (a)(1). By this "single act statute. . . proof of one transaction in New York is sufficient to invoke jurisdiction, even though the defendant never enters 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." Kreutter v McFadden Oil Corp., 71 NY2d 460, 467 (1988).

New York courts have held that purposeful activity exists, sufficient to satisfy CPLR 302, where defendant company or its agents "projected itself" into business transactions occurring within New York State through electronic means by knowingly initiating and pursuing a negotiation with plaintiff's employees in New York. Deutsche Bank Sec., Inc., 7 NY3d at 65 (finding electronic communications, telephone calls and letters sufficient). Similarly, New York courts have found jurisdiction where the defendant acted purposefully to negotiate a contract within the state, and plaintiff's claim arose from that business activity. Opticare Acquisition Corp. v. Castillo, 25 AD3d 238 (2d Dept. 2005). Further, "[a]nother factor to be considered in evaluating the availability of CPLR 302(a)(1) jurisdiction is whether the defendant engaged in activities in the jurisdiction in furtherance of creating an ongoing course of dealing or contractual relationship between the parties out of which the cause of action arose." Atlantic Veal, 2006 NY Slip Op. 50527U at 7, citing Reiner & Co. v. Schwartz, 41 NY2d 649, 653 (1977); see also Fischbarg v. Doucet, 2007 NY Slip Op 996 (December 20, 2007) (Ciparick, J.); Opticare Acquisition Corp., supra. In the present case, the parties' affidavits conflict as to the nature, extent, and New York focus of their business relationship. Notably, defendants only submit an affidavit from one of Mainline's employees to negate plaintiff's allegations of extensive contact between plaintiff and defendants over the years that they have been doing business together. Other pertinent facts concerning the circumstances surrounding the negotiation and execution of the contract between defendants and plaintiff, such as when Bankrate acquired MMIS[FN2], whether defendants actively reached out to form a business [*6]relationship with plaintiff, and whether and to what extent defendants had contacts with New York during the contracts' negotiation and execution and during the business relationship overall, cannot be determined on this record.

To summarize, plaintiff's affidavits have made enough of a showing, not negated by defendant's submissions, to justify limited discovery in accordance with 3211(d). Plaintiff's allegations include that defendant has dealt with plaintiff in New York numerous times, including concerning the contracts at issue in this litigation. To be sure, plaintiff has not conclusively established jurisdiction under CPLR 302, but has alleged that facts may exist to justify long-arm jurisdiction based on an ongoing New York-based relationship between plaintiff and defendant, and based on the breach of a contract that arose out of this relationship. These factual issues cannot be resolved by the instant record. Therefore, discovery also is warranted on these jurisdictional facts. Peterson v. Spartan Industries, Inc., 33 NY2d 463 (1974)[affirming the trial court's decision to hold in abeyance a motion to dismiss for lack of personal jurisdiction, because plaintiff demonstrated that facts may exist in opposition to the motion, entitling them to discovery and inspection in accordance with CPLR 3211(d)]; National Union Fire Ins. Co., 122 AD2d at 630.

Conclusion

Plaintiff has demonstrated that facts may exist which establish jurisdiction under both CPLR 301 and 302(a)(1) sufficiently to entitle plaintiff to discovery pursuant to CPLR 3211(d). Defendants' motion is therefore denied, without prejudice to renew, following limited discovery on the issue of personal jurisdiction. The parties are directed to commence that discovery, addressing the jurisdictional facts referred to herein. The parties are further directed that 90 days from the date of this Order, they should contact the clerk of this Part to set a conference to address their progress with said discovery and, if the discovery is complete, whether the motion should be renewed, in light of a fuller record. This constitutes the Decision and Order of the Court.

E N T E R,

J. S. C. Footnotes

Footnote 1:The Court originally entered a default against plaintiff when plaintiff's counsel failed to submit opposition papers or to appear for oral argument on August 10, 2007. Thereafter, based on good cause shown, and because plaintiff established a meritorious defense, the Court granted plaintiff's application to lift the default and is now addressing defendants' motion on the merits. See CPLR 5015.

Footnote 2:Bankrate's president Paul Runko's affidavit, attached to plaintiff's motion papers, states that "Bankrate, Inc. operates Mortgage Market Information Systems," ("MMIS") and that "all contracts signed by MMIS belong to Bankrate."