Russeck Fine Art Group, Inc. v Theodore B. Donson, Ltd.

[*1] Russeck Fine Art Group, Inc. v Theodore B. Donson, Ltd. 2008 NY Slip Op 51476(U) [20 Misc 3d 1119(A)] Decided on June 27, 2008 Supreme Court, New York County Shafer, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 June 27, 2008
Supreme Court, New York County

Russeck Fine Art Group, Inc., Plaintiff,

against

Theodore B. Donson, Ltd., Defendant.



601339/06



Counsel for Defendant/Third-Party Plaintiff Theodore B. Donson, LTD: Cozen O'Connor by David Y. Loh, Esq.

Counsel for Third-Party Defendants Galerie Koller and Galerie Koller Zurich: Wuersch & Gering, LLP by Samuel D. Levy, Esq.

Marilyn Shafer, J.

In this action, stemming from transit-related damage to a Renoir drawing, third-party defendants Galerie Koller and Galerie Koller Zurich (collectively, Galerie Koller) move for an order, pursuant to CPLR §§ 3211 (a) (2)[FN1] and 3211 (a) (8), dismissing the third-party complaint.

[*2]BACKGROUND

Galerie Koller, an auction house, is a Swiss company with offices in Zurich and Geneva, where it holds auctions of various art objects (Koller Aff., ¶ 5). Galerie Koller is not licensed to conduct business in New Yorkand it does not have any employees in New York. Nor does it have a telephone listing, an office, or a bank account in New York (Koller Aff., ¶¶ 8-11).

Galerie Koller is a member of International Auctioneers, a partnership of eight auction houses in Europe and the United States, which maintains its own website and publishes a magazine (Loh Aff., at 2-4, exhibit 10, at 2). The magazine, called International Auctioneers, describes objects of art offered for sale by participating members and can be viewed online on International Auctioneers' website (Loh Aff., ¶ 7, exhibit 11, at 1) and is also distributed in New York in hard copy (Donson Aff., ¶¶ 17-19, exhibit 6). International Auctioneers magazine lists Galerie Koller as a member auction house and contains "numerous references to auction items offered for sale by Galerie Koller" (Donson Aff., ¶ 19, exhibit 6).

The parties dispute the extent of business dealings that Galerie Koller has in New York. Galerie Koller contends that it "does not have regular or systematic business dealings in New York, and only occasionally over the years, has had an art buyer located in New York participate in one of Galerie Koller's Swiss auctions" (Koller Aff., at 2-3, ¶ 7).Defendant/third-party plaintiff Theodore B. Donson, LTD. (Donson), on the other hand, claims to have "purchased scores and scores of art from Galerie Koller," over several decades, averaging one item per year and as many as six items in a single year (Donson Aff., ¶ 20). Galerie Koller allegedly advertises that it "sells over 70% of its top priced works at auction to foreign buyers" (Loh Aff., ¶ 15, exhibit 19). Donson contends that New York City is a major art trade center, and "Galerie Koller regularly sells numerous works of art to various buyers . . . in New York City [and] generates significant income from the purchase and sale of works of art which travel to and from the New York City area" (Donson Aff., ¶ 21).

The relevant facts giving rise to this action are as follows. On June 23, 2004, Donson purchased a pastel by Renoir (the "drawing") at an auction held by Galerie Koller in Switzerland (Donson Aff., ¶ 3; Koller Aff., ¶¶ 5-6). Donson participated in the auction via telephone from its office in London, England, and was acting as an agent for Howard Russeck, the principal of plaintiff Russeck Fine Art Group, Inc. (Russeck), which was the ultimate buyer of the drawing (Donson Aff., ¶ 3; Koller Aff., ¶¶ 5-6).

Galerie Koller contends that its Auction Conditions, which in Paragraph 17 contains a Swiss choice of law and forum selection clause, governs the subject transaction with Donson (Koller Aff., ¶ 13, exhibit 1).

On June 23, 2004, from its London office, Donson faxed an invoice to Howard Russeck instructing him to pay for the drawing directly to Galerie Koller (Donson Aff., ¶ 4, exhibit 2). Donson also directed Russeck to pay Donson separately to cover the cost of transportation of the drawing, its insurance, and Donson's five percent commission (Donson Aff., ¶¶ 4-5, exhibit 2). [*3]On June 28, 2004, Galerie Koller issued an invoice to Donson, addressed to Donson's New York office (Donson Aff., ¶ 6, exhibit 3).

It is undisputed that Galerie Koller was responsible for the packaging of the drawing and its frame for purposes of shipment. On July 9, 2004, from its New York office, Donson faxed a letter to Galerie Koller, instructing it to remove the drawing from its frame, package the drawing separately from its frame, and ship both items via either DHL or FedEx (Donson Aff., ¶¶ 7-8, exhibit 4). On July 20 and 22, 2004, Donson re-transmitted the letter with instructions to Galerie Koller (Donson Aff., ¶ 9, exhibit 4).

Galerie Koller shipped the drawing to Donson's New York office via DHL (Donson Aff., ¶ 13; Koller Aff., ¶ 6). On or about July 23, 2004, the drawing arrived in New York while Theodore Donson, Donson's principal, was away (Donson Aff., ¶ 13, 16, exhibit 5; see also complaint, ¶ 5, attached to Loh Aff. as exhibit 7). On July 29, 2004, Theodore Donson opened a wooden crate in which the drawing was shipped and discovered that the drawing was shipped in its frame (Donson Aff., ¶ 13). Theodore Donson did not remove the bubble-wrap covering the frame or the blue tape covering the glass within the frame and, hence, did not observe the condition of the drawing (id., exhibit 5). On July 29, 2004, Donson released the drawing to one of Russeck's employee (id.). Later, on July 29, 2004, Russeck advised Donson that when the packaging was removed, it was discovered that the glass "within the frame had shattered and the drawing was damaged" (id., ¶ 14).In the main action, Russeck alleges that the damage to the drawing resulted in a 50% loss of its value and contends that Donson: (i) breached its contract with Russeck by failing to obtain insurance or to process the insurance claim, and (ii) caused damage to the drawing, breaching its duties as a bailee of the drawing (complaint, at 3-4, attached to Loh Aff. as exhibit 7). In the third-party action, Donson alleges that any damage to the drawing was caused by Galerie Koller's failure to follow Donson's instructions as to the drawing's packaging for international shipment (third-party complaint, at 2-3, attached to Loh Aff. as exhibit 9). Donson contends that Galerie Koller "should be required to indemnify and hold DONSON harmless for any amount they may be required to pay" (id. at 3).

Motion to Dismiss Third-Party Complaint

In its motion to dismiss the third-party complaint, Galerie Koller contends that this court does not have either "general" jurisdiction, pursuant to CPLR § 301, or "specific" jurisdiction, pursuant to CPLR § 302. Additionally, Galerie Koller contends that a forum selection clause in its "Auctions Conditions," designating the courts of Zurich, must be upheld.

DISCUSSION

Personal Jurisdiction

In order to obtain jurisdiction over a non-domiciliary third-party defendant, the third-party plaintiff bears a burden to establish a basis for jurisdiction (see e.g. Duffy v Grand Circle Travel, 302 AD2d 324 [1st Dept 2003]). CPLR §§ 301 and 302 provide two separate bases for exercising personal jurisdiction over a nonresident corporation. In its opposition papers, Donson does not dispute Galerie Koller's contention that this court cannot maintain [*4]jurisdiction over Galerie Koller pursuant to CPLR § 301. Donson, however, argues that jurisdiction can be maintained pursuant to CPLR 302 (a) (1), (2), and (3) (ii) (Donson Memorandum of Law at 5-11).

Long-Arm Jurisdiction Pursuant to CPLR § 302 (a) (1)

CPLR § 302 (a) (1) provides that "specific" jurisdiction exists where a non-domiciliary "transacts any business within the state or contracts anywhere to supply goods or services in the state" (see e.g. Lancaster v Colonial Motor Frgt. Line, 177 AD2d 152, 157 [1st Dept 1992]). An entity can be found to transact business within the meaning of CPLR§ 302 (a) (1)even based upon a single transaction (see e.g. First Natl. Bank & Trust Co. v Wilson, 171 AD2d 616, 617 [1st Dept 1991] ["proof of a single transaction albeit a purposeful' transaction, in New York, satisfies the statutory requirement"]). To acquire jurisdiction under CPLR 302 (a) (1), a showing needs to be made that the non-domiciliary "had some business contacts within this State and that the cause of action sued upon arose out of those business contacts" (see Lancaster, 177 AD2d at 158). "[A] substantial relationship or nexus" must be established "between the business transacted by defendant in this State and the plaintiff's cause of action" (id., citing McGowan v Smith, 52 NY2d 268 [1981]).In this respect, Galerie Koller contends that it "has not entered New York with regard to the [drawing,]" because the drawing "was acquired at a Swiss auction, and then negotiations about shipping and payment were made with Donson in New York" (Galerie Koller Reply Memorandum of Law, at 2; see also Koller Aff., ¶¶ 5-6). This, Galerie Koller argues, is insufficient to implicate CPLR § 302jurisdiction (Galerie Koller Reply Memorandum of Law, at 2-7). Donson, on the other hand, argues that "the totality of circumstances" surrounding the acquisition of the drawing warrants a finding of jurisdiction pursuant to CPLR § 302 (a) (1) (Donson Memorandum of Law, at 5-8, see also Donson Aff., ¶¶ 6-9, exhibits 3-4).

Indeed, the courts may consider "the totality of the circumstances" to determine whether a party has "transacted business" in New York, within the meaning of CPLR § 302 (a) (1) (see e.g. Liberatore v Calvino, 293 AD2d 217, 220 [1st Dept 2002] ["the nondomiciliary's contact with New York must be purposeful and the totality of the circumstances indicate that the exercise of jurisdiction would be proper"] [internal quotation marks and citation omitted]). To this end, the courts have considered such factors as "(1) whether the [non-domiciliary] defendant has an ongoing contractual relationship with a New York corporation; (2) whether the contract was negotiated or executed in New York; (3) [] [whether the contract has a] choice of law clause; and (4) whether the contract requires notices and payments to be sent into the forum state" (Bluman v Labock Tech., Inc., 13 Misc 3d 1244A, *2-*3, 2006 WL 3500860, 2006 NY Misc LEXIS 3662[Sup Ct, NY County 2006] [internal quotation marks and citation omitted]). "The key inquiry is whether defendant purposefully availed itself of the benefits [and protections] of New York's laws" (Courtroom Tel. Network v Focus Media, 264 AD2d 351, 353 [1st Dept 1999] [citing Parke-Bernet Galleries v Franklyn, 265 NY2d 13 (1970)]). Similarly, for the "contracts anywhere" prong of CPLR § 302 (a) (1) to apply, the non-domiciliary has to project itself into New York to supply goods or services in this state and purposefully avail itself of the privileges and benefits of the laws of New York (see e.g. Liberatore, 293 AD2d at 220). [*5]

In this case, the totality of circumstances indicates that Galerie Koller did not have purposeful contact with New York to justify application of CPLR § 302 (a) (1). Specifically, Donson does not claim that it acquired the drawing from Galerie Koller pursuant to an ongoing contractual relationship between the parties. Nor is there any indication that such contractual relationship even exists. Donson further does not claim that it purchased the drawing as a result of Galerie Koller's soliciting, or other commercial activities, in New York, or Galerie Koller's participation in International Auctioneers alliance. Rather, Donson purchased the drawing from Galerie Koller at an auction held in Switzerland, in which Donson participated via telephone from its office in London. Auction Conditions contain a Swiss choice-of-law clause. Furthermore, contrary to Donson's contention, Theodore Donson faxed a letter to Russeck with payment instructions from his office in London (Donson Aff., exhibit 2). Moreover, Galerie Koller packaged the drawing in Switzerland and shipped it to New York via a common carrier (Donson Aff., ¶ 13; Koller Aff., ¶ 6). Galerie Koller did not ship the drawing to Donson for Donson to resell it in New York on Galerie Koller's behalf. From Galerie Koller's perspective, the transaction between the parties was over once it packaged the drawing and handed it over to DHL in Switzerland for delivery to Donson. Finally, Galerie Koller did not enter into a contract with Donson, which obligated Galerie Koller to ship the drawing to New York. Rather, Galerie Koller would have shipped the drawing anywhere in the world. Since Donson was in New York, Galerie Koller shipped the drawing to New York.

It is true that some aspects of this transaction did involve New York. Specifically, Galerie Koller issued an invoice addressed to Donson's New York office (Donson Aff., exhibit 3), Russeck transferred funds from New York to Galerie Koller's Swiss account, and Donson faxed a letter to Galerie Koller from its New York office with packaging instructions (Donson Aff., exhibit 4). However, these New York contacts, in their totality, are insufficient to confer jurisdiction pursuant to CPLR § 302 (a) (1) (see e.g. Granat v Bochner, 268 AD2d 365 [1st Dept 2000] ["sending faxes and making phone calls to this State are not, without more, activities tantamount to transacting business' within the meaning of" CPLR § 302 (a) (1)]). On these facts, Galerie Koller cannot be said to have purposefully availed itself of the benefits of New York's laws (cf. Courtroom TV Network, 264 AD2d 351, supra [domiciliary plaintiff performed commercial activities in New York on non-domiciliary defendant's behalf]). Accordingly, the court lacks jurisdiction over Galerie Koller, pursuant to CPLR § 302 (a) (1).

Long-Arm Jurisdiction Pursuant to CPLR § 302 (a) (2)

Donson argues that Galerie Koller is subject to personal jurisdiction underCPLR § 302 (a) (2), which confers jurisdiction over a non-domiciliary who "commits a tortious act within the state" (Donson Memorandum of Law, at 8-10).

CPLR § 302 (a) (2)applies where the actionable conduct takes place in this state, and it does not apply when the tortious conduct takes place outside New York, even though it causes injury within New York (see e.g. Storch v Vigneau, 162 AD2d 241, 242 [1st Dept 1990]). Here, Donson alleges that the actionable conduct is Galerie Koller's improper packaging of the drawing, which indisputably took place in Switzerland. This conduct fails to satisfy the requirement of CPLR § 302 (a) (2) that the tortious act takes place in New York.Hence, the [*6]court lacks jurisdiction over Galerie Koller, pursuant to CPLR § 302 (a) (2).

Long-Arm Jurisdiction Pursuant to CPLR § 302 (a) (3)

Donson next contends (Donson Memorandum of Law, at 10-12) that this court can exercise jurisdiction over Galerie Koller pursuanttoCPLR § 302 (a) (3), which provides that jurisdiction is possible over a non-domiciliary who

commits a tortious act without the state causing injury to person or property within the state, except as to a cause of action for defamation of character arising from the act, if he

***

(ii) expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce . . .

(emphasis added).

The conferral of jurisdiction under this provision rests on five elements: [(1)] that defendant committed a tortious act outside the State; [(2)] that the cause of action arises from that act; [(3)] that the act caused injury to a person or property within the State; [(4)] that defendant expected or should reasonably have expected the act to have consequences in the State; and [(5)] that defendant derived substantial revenue from interstate or international commerce

(LaMarca v Pak-Mor Mfg. Co., 95 NY2d 210, 214 [2000]). "[T]he situs of the injury for long-arm purposes is where the event giving rise to the injury occurred, not where the resultant damages occurred" (Marie v Altshuler, 30 AD3d 271, 272-273 [1st Dept 2006]).

In this case, the injury is the physical damage to the drawing and the resultant damages is loss of half of its value. The event that gave rise to the injury is when the shattered glass within the frame punctured the drawing. According to Donson, this damage resulted from Galerie Koller's improper packaging of the drawing (third-party complaint, at 3, ¶ 8, attached to Loh Aff. as exhibit 9). To invoke "specific" jurisdiction, pursuant to CPLR § 302 (a) (3), Donson has a burden of showing that the very act of the shattered glass puncturing the drawing took place within this state (see Marie, 30 AD3d 271, supra ; see also Duffy, 302 AD2d 324, supra [plaintiff has a "burden to establish a basis for jurisdiction over defendant"]). Donson has failed to meet this burden, and the court can only speculate as to where exactly the damage took place, whether in Switzerland, or in New York, or some other location where the drawing happened to be during its transatlantic shipment. Accordingly, the court finds that it lacks personal jurisdiction over Galerie Koller, pursuant to CPLR § 302 (a) (3) (ii) (see e.g. Uzan v Telsim Mobil Telekomunikasyon Hizmetleri,AD3d , 856 NYS2d 625 [1st Dept 2008]).

Since Galerie Koller's relationship with New York does not fall within the terms of CPLR §302, the court does not need to determine whether Galerie Koller had minimum contacts with New York so as to be amenable to jurisdiction under federal due process standards (cf. LaMarca, 95 NY2d at 216-219 [federal due process considered where requirements of CPLR § 302 (a) (3) (ii) were satisfied]). [*7]

Request for Limited Discovery

Donson requests leave to conduct limited discovery on the question of jurisdiction (Donson Memorandum of Law, at 16). Donson, however, has failed to makea "sufficient start" to establish that Galerie Koller had the requisite minimum contacts with New York (see e.g. Insurance Co. of N. Am. v EMCOR Group, Inc., 9 AD3d 319, 320 [1st Dept 2004]). Even if the court were to grant such leave, discovery sought by Donson pertains to Galerie Koller's solicitation activities, and its volume of sales, in New York, as well as its ownership interest in International Auctioneers. As already indicated, Donson does not allege that the purchase of the drawing resulted from Galerie Koller's solicitation, or other commercial activities, in New York, or its membership with International Auctioneers. Accordingly, Donson's request for leave to conduct limited discovery is denied.

The court need not address the substantive issue of the forum selection clause contained in the Auction Conditions, the contract between Donson and Galerie Koller, since the court finds that it lacks personal jurisdiction over Galerie Koller.

CONCLUSION

Accordingly, it is hereby

ORDERED that the motion of third-party defendants Galerie Koller and Galerie Koller Zurich to dismiss the third-party complaint is granted and the third-party complaint is dismissed with costs and disbursements to third-party defendants as taxed by the Clerk of the Court; and it is further

ORDERED that the Clerk is directed to enter judgment accordingly; and it is further

ORDERED that the main action shall continue.

Dated: ___________

ENTER:

J.S.C. Footnotes

Footnote 1: Although in its notice of motion Galerie Koller seeks relief pursuant to CPLR § 3211 (a) (2), its memorandum of law and reply memorandum of law contain virtually no discussion of subject matter jurisdiction. Accordingly, the court does not address entitlement of Galerie Koller to relief pursuant to CPLR § 3211 (a) (2).