Deer Consumer Prods., Inc. v LittleAnnotate this Case
Decided on July 31, 2012
Supreme Court, New York County
Deer Consumer Products, Inc., Plaintiff,
Alfred Little, JON CARNES, and JOHN DOES 1-10, Defendants.
Counsel for Plaintiff
Bostany Law Firm PLLC by John P. Bostany
75 Wall Street, Suite 24F
New York, NY 10005
Counsel for defendants Jon Carnes and EOS Holdings
Eaton & Van Winkle LLP by Joseph T. Johnson
3 Park Ave., New York, NY 10016
Carol R. Edmead, J.
This decision stems from an application by plaintiff's counsel at an in-court conference on May 9, 2012, and the filing of plaintiff's amended complaint.
Plaintiff's counsel requests that the Court's May 30, 2012 Order be modified to the extent of changing the "date of the commencement of the action" to the "date of the filing of the amended complaint in this action," based upon the Court's purported bench rulings on May 9, 2012 and June 6, 2012 discussed below.
This case stems from a claim that defendants, i.e., Alfred Little and Jon Carnes, published defamatory reports about plaintiff, a Nevada corporation doing business in China, as part of a scheme to drive plaintiff's common stock price down in order for them to short sell their positions for profit.
By Memorandum Decision, dated January 27, 2012, this Court granted the motion by "Alfred Little" to dismiss the complaint for lack of personal jurisdiction "to the extent that CPLR 302(a)(1), (a)(2), and (a)(3) do not provide a basis for jurisdiction . . . and denied, without [*2]prejudice to renew . . . upon the completion of discovery . . . based on the defendant's domicile or presence in New York pursuant to CPLR 301" and ordered jurisdictional discovery on the issue of personal jurisdiction under CPLR 301 (p. 21). It is noted that in support of the motion to dismiss for lack of jurisdiction, Jon Carnes (who proceeded anonymously) (hereinafter, "Carnes"), attested that he was "the individual defendant described in the Complaint and identified in the caption as Alfred Little," that Alfred Little was "a pseudonym."[FN1]
At a hearing on May 9, 2012, the parties held a discussion regarding jurisdictional discovery. When plaintiff's counsel explained that he was going to file an amended complaint, the Court made certain statements in dicta.[FN2]
In response to Carnes' letter request that discovery be limited to the date of the commencement of the action, the Court issued an order, dated May 30, 2012, directing that the jurisdictional discovery be "limited to two years prior to and including the date of the commencement of the action."
On June 6, 2012, during a hearing discussing the scope of deposition questions, the Court reiterated the previous statements made in dicta.[FN3]
On the same date, June 6, 2012, plaintiff filed the amended complaint, adding, inter alia, "Little Group" and EOS Holdings, LLC ("EOS Holdings") as party defendants. In the amended complaint, plaintiff alleges that Little Group includes at least, Carnes and EOS Holdings (¶¶5, 26), and that Little Group was based in New York (¶6). Plaintiff alleges that in addition to the defamatory reports previously published in March 2011 (before the original complaint was filed on March 28, 2011), "Little Group" posted other defamatory articles on September 2011, December 2011, and February 2012, causing plaintiff's stock to further drop in price (¶¶91-97).
The Court held another in-court conference on June 20th, at which time plaintiff pointed out that Carnes did not object to the Court's statement on May 9th that jurisdictional discovery would be permitted past the date of the initial complaint once the amended complaint was filed (June 20, 2012 Transcript, p. 6). Plaintiff also pointed out that while defendant claims that he was not present in New York when the actions asserted in the initial complaint allegedly occurred, there are subsequent actions asserted in the amended complaint for which Carnes was present in New York. Therefore, the jurisdictional inquiry should cover all the acts in the amended complaint. In response, Carnes noted that the issue of jurisdictional discovery arose in the context of nonparty subpoenas that were served seeking information beyond the date the action was commenced, and the Court noted that any objection was academic insofar as if the nonparties produced documents after the commencement date, the Court simply would not consider them. The Court ruled that the jurisdictional discovery ends as of the commencement of [*3]the lawsuit, and there was no formal motion or amended complaint at that time. And, additional caselaw indicates that the filing of the amended complaint does not alter the jurisdictional analysis.[FN4]
In further submissions, plaintiff argues that there are no cases directly on point, and that similar caselaw indicates that an amended complaint extends discovery to the date such amended complaint was filed. Plaintiff asserts that EOS Holdings and "Little Group" are alter egos, and that Carnes is the leader of both. Defendants collaborated a sophisticated scheme, and discovery into the allegations that are contained in the amended complaint is necessary and just for jurisdictional purposes. Otherwise, plaintiff would have to file two independent cases; one dealing with actions up to March 28, 2011 and the other dealing with actions not previously pled up to June 6, 2012, which would result in a waste of judicial resources and serve no purpose. Alfred Little was the only defendant in the case initially; Carnes was added to the complaint, and sued for the first time on June 6, 2012 (see July 18, 2012 Transcript). Therefore, it would not make jurisprudential sense to have the jurisdictional discovery as to Carnes assessed as of March of 2011 when he was not a party to the case (id. pp. 10, 12). Carnes and EOS Holdings, as well as other defendants named on June 6, 2012, were accused of things at that time for the first time, and thus, discovery, as to such defendants, should include the period of time the action was commenced as to them. Also, the fact that Federal courts have not permitted discovery into a defendant's acts that occurred after the amended complaint was filed indicates that they considered actions that took place up to the date the amended complaint was filed (July 18, 2012 Transcript). And, this Court should consider all arguments submitted by plaintiff in order to reach an equitable result on the issue of jurisdiction.
In opposition, Carnes argues that the filing of an amended complaint to allege after-arising facts does not change the timing of the domicile analysis. And, the request is premature as he has a statutory right to respond to the amended complaint, and the time within which to do so has not elapsed. Carnes also argues that the cases relied upon by plaintiff are misconstrued or inapposite. Carnes points out that along with two previously cited New York cases, four different Federal courts from the Southern District rejected arguments that the jurisdictional inquiry should be assessed from the amended complaint or based on some after-arising fact, and confirmed that the jurisdictional inquiry is at the commencement of the initial action (July 18, 2012 Transcript, pp. 7-8). Further, plaintiff's argument that discovery as to Carnes and other newly added defendants should include the period of time the action was commenced as to them, i.e., June 6, 2012, is a new issue that was not briefed and the Court did not permit reply papers on this matter (id. p. 13). In any event, the initial complaint alleged that an individual person named Alfred Little authored and published the subject reports, and Carnes challenged jurisdiction. Nor can plaintiff credibly argue that EOS Holdings and other parties were initially contemplated to be the parties to the original lawsuit (p. 14).
Upon review of the transcript, the parties' arguments on this issue, caselaw, and the parties' further submissions, the Court denies plaintiff's request, notwithstanding the informal rulings this Court made in dicta.
The "relevant time frame for the jurisdictional inquiry under § 301 is at the time of service of the summons and complaint" (Andros Compania Maritima S.A. v Intertanker Ltd., 714 F Supp 669 [SDNY 1989]; Vincent C. Alexander, McKinney's CPLR § 301, C301:7 ("The defendant who is a New York domiciliary at the time the action is commenced may be served with process anywhere (either within or outside New York), thereby conferring in personam jurisdiction" (emphasis added); Vincent C. Alexander, McKinney's CPLR § 301, C301:8 "the rule is that the corporation must be doing business in New York at the time the action is commenced. . . . If the corporation has ceased doing business here at the time of commencement, jurisdiction can be sustained only if plaintiff's claim arose out of the defendant's prior business activity"); Nasso v Seagal, 263 F Supp 2d 596 [SDNY 2003] ("Section 301 codifies the common law principle that a non-domiciliary is deemed to be present' in the state if the non-domiciliary is doing business' in the state when the action is commenced"); Jacobs v Felix Bloch Erben Verlag fur Buhne Film und Funk KG, 160 F Supp 2d 722 [SDNY 2001] ("For the purposes of the jurisdictional analysis under New York State law, the Court focuses specifically on the Defendants' amenability to suit at the time the lawsuit was filed, not when the claim arose (and not based on subsequent changes in their status"); Puerto Rico Maritime Shipping Auth. v Almogy, 510 F. Supp. 873 [DCNY 1981] ("as to section 301 jurisdiction, the defendant must be doing business here at the time the action is brought") (emphasis added throughout)).
Even where an amended complaint is filed, caselaw indicates that the Court should consider, for purposes of jurisdiction under CPLR 301 (presence), a defendant's activities undertaken before the action was commenced. For example, in Whitaker v Fresno Telsat Inc., 87 F Supp2d 227 [SDNY 1999]), plaintiff sought discovery to establish jurisdiction under CPLR 301 against defendant American Telecasting, Inc. ("ATI"), based on the fact that "[o]n September 23, 1999, ATI became a wholly-owned subsidiary of the Sprint Corporation ("Sprint"), a company doing business in New York. Upholding the rule that the "relevant time frame for a jurisdictional inquiry under CPLR § 301 is at the time of the filing of the summons and complaint" the Court reasoned that "[t]he fact that ATI may have subsequently become part of a corporation that is doing business within New York is irrelevant to the present jurisdictional analysis" (see also, Charis v Sand Technology, 1992 WL 296406 [SDNY 1992]; Metropolitan Life Ins. Co. v Robertson-Ceco Corp., 84 F 3d 560 [2d Cir 1996] (noting that "Few cases discuss explicitly the appropriate time period for assessing whether a defendant's contacts with the forum state are sufficiently "continuous and systematic" for the purposes of general jurisdiction. However, our review of general jurisdiction cases reveals that contacts are commonly assessed over a period of years prior to the plaintiff's filing of the complaint")).
Similarly, in Charis v Sand Technology (1992 WL 296406 [SDNY 1992]), the Court refused to consider defendant's actions undertaken after the commencement of the action for purposes of general personal jurisdiction, noting: "After service of the Amended complaint . . . [defendant] Mr. Kotegawa moved to the United States. . . . His move does not effect the analysis of his motion to dismiss for lack of personal jurisdiction because the relevant time frame for the jurisdictional inquiry is at [*5]the time of service of the summons and complaint. . . . Accordingly, the discussion of personal jurisdiction that follows is based upon the facts in existence at the time the summons and complaint were served upon Mr. Kotegawa.
(Internal citations omitted).
More recently, in Duravest, Inc. v Viscardi, A.G. (581 F Supp 2d 628, 639 [SDNY 2008]) the Court, in "assessing whether a defendants' contacts with New York are sufficient to establish general jurisdiction," held that "the relevant question is whether the defendant was present in New York at the time the complaint was filed." In discussing the quality of the contacts defendants' had with New York, the Court noted that those contacts defendant had with New York that occurred "after the Complaint was filed" were irrelevant (Id. at 639) ("The only contacts between Viscardi and New York that even potentially could rise to the level of "doing business" in New York—Viscardi's acquisition of a controlling interest in SGI and the two companies' single joint project in June 2008—occurred after the Complaint was filed, and are therefore irrelevant to this inquiry")).
It is the commencement of the action that serves as the benchmark at which jurisdiction must exist in order for the Court to exercise personal jurisdiction over the defendant in an action (see Lancaster v Colonial Motor Freight Line, Inc., 177 AD2d 152, 581 NYS2d 283 [1st Dept 1992] ("what is essential is . . . the requirement that defendant be shown to have been doing business' at the time when the action was commenced . . . . This is crucial to the concept of presence' upon which the jurisdiction is based, since the defendant corporation must be here' and therefore subject to the state's power, at the very time of the exercise of the jurisdiction itself") (emphasis added)).
Here, plaintiff requests permission to expand the discovery of facts to events that occurred after the original complaint was filed through the time of the filing of the amended complaint. However, the caselaw above demonstrates that Carnes' actions undertaken after the commencement of the action are irrelevant, and thus not subject to consideration for purposes jurisdictional analysis. Therefore, there is no basis to permit discovery of jurisdictional facts regarding Carnes beyond the date of the commencement of the action.[FN5]
Plaintiff's additional argument that the action was not commenced against Carnes and the other defendants until the filing of the amended complaint on June 6, 2012, and that Alfred Little [*6](or the Little Group) constitutes multiple entities ignores the procedural history of this action related to Carnes. The effect the amended complaint has on the discovery of jurisdictional facts of Carnes must be parsed from the effect of the amended complaint on discovery of jurisdictional facts of the newly added defendants, i.e., Little Group and all various permutations thereof.
As to a newly added defendant, it is noted that it "is the filing of a supplemental summons and complaint which commences an action against a newly-joined defendant . . . ." (Benn v Losquadro Ice Co., Inc., 65 AD3d 655, 886 NYS2d 32 [2d Dept 2009]). Unlike Carnes, arguably, the "action" was not commenced against the remaining, newly added defendants until the amended complaint was filed on June 6, 2012. Thus, it appears that the date of the amended complaint may mark the commencement of the action (and thus, the point of the jurisdictional analysis) as to such multiple entities. However, in the motion by Alfred Little to dismiss for lack of personal jurisdiction, the movant challenged personal jurisdiction over the person we now know as Jon Carnes, who later waived anonymity and identified himself as such. Thus, the individual "Alfred Little," against whom this action was originally commenced, never changed; Carnes is not a newly added defendant. Since the allegations asserted against "Jon Carnes" in the amended complaint concern this same individual ("Alfred Little"), against whom the action was originally commenced and for whom the jurisdictional challenge was initially made, it cannot be said that the filing of the amended complaint marked the time at which this action was commenced as against Carnes.
Furthermore, the caselaw on which plaintiff relies fails to indicate that the filing of the amended complaint extends the period of jurisdictional discovery beyond the commencement date of an action for purposes of establishing jurisdiction under CPLR 301.
For example, Badger v Lehigh Val. R.R. Co. (45 AD2d 601, 360 NYS2d 523 [4th Dept 1974]) offers little guidance because although the Court held that the plaintiff was entitled to discovery in order to show that defendant was transacting business in New York State to establish jurisdiction long-arm jurisdiction over the foreign defendant, the court did not specify the scope of discovery.
Nor is the case Northern Val. Partners, LLC v Jenkins, 27 Misc 3d 1207(A), 910 NYS2d 406 [Sup. Ct., New York County 2010]), supportive of plaintiff's request to expand discovery through the filing date of the amended complaint. Plaintiff correctly points out that the Court's focus in Northern shifted from the original complaint to the amended complaint when determining whether a plaintiff established personal jurisdiction over a defendant. However, the decision is not only silent as to discovery, but examines newly alleged facts that occurred prior to the filing of the original complaint. In Northern, the motion court initially dismissed the original complaint for fraud because "plaintiffs had failed to allege sufficient details regarding the transaction [i.e., a $4.45 million investment deal in March 2006] and its connection to New York." After plaintiff served an amended complaint (with leave), certain defendants moved to dismiss such "May 22, 2009, first amended complaint." The Court held that "Unlike the original complaint, the amended complaint is filled with detailed allegations regarding activities of Jenkins, Ogden and Hardy in New York pertaining to the contested transaction. The amended complaint details New York face-to-face meetings with plaintiffs' representative . . . , as well as formal presentations, telephone calls, and/or emails to and from this state. For example, plaintiffs now alleged that the January 23, [*7]2006, telephone call between Potter and defendant Marc Leder, wherein they discussed the structure of the plaintiffs' investment, occurred while Leder was at the New York offices of Sun Capital, . . . and that Potter had numerous telephone calls with Sun Capital's New York office to discuss and negotiate the investment. In addition, the amended complaint alleges that the financing deal closed in New York under agreements governed by New York law. This is a different story from the three New York contacts alleged in the original complaint (see Order, at 9). . . ." (Emphasis added).
The newly alleged facts in Northern had existed prior to the time the original complaint was filed; in other words, the Court in Northern was not relying on jurisdictional facts occurring subsequent to the filing of the amended complaint.
And, plaintiff's reliance on Moneygram Payment Systems, Inc. for the proposition that the conduct of the corporate defendant, EOS Holdings, LLC subjects both EOS and Jon Carnes (EOS's founder), is misplaced, as the portion of the Court's decision in Moneygram so indicating involved jurisdiction pursuant to CPLR 302(a)(1), not at issue herein (see also, Ansellem v Host Marriott Corp., 280 AD2d 357 [1st Dept 2001]). And, while the Federal Court acknowledged that "[i]n certain circumstances, jurisdiction has been predicated upon activities performed in [the forum] for a foreign corporation by an agent," immediately preceding this acknowledgment was the Court's statement that "[a]s jurisdiction attaches at the time the complaint is filed, the only relevant contacts are those predating commencement of the action . . . (emphasis added)). The Court specifically mentioned that"[d]uring the period (several years) leading up to this lawsuit, he [the defendant] maintained personal and business checking and credit card accounts at New York banks, listing addresses in New York State," indicating that the Court looked to factors existing by the time the action was commenced.
And, plaintiff's attempt to distinguish Charis on the ground that the court "did not specify which complaint" is unpersuasive in light of the court's express reference to the "summons and complaint," which may be inferred to mean the original complaint.
Thus, it remains that jurisdictional discovery is limited to two years prior to and including the date of the commencement of the action.
This constitutes the decision and order of the Court.
Dated: July 31, 2012_____________________________
Hon. Carol Robinson Edmead, J.S.C.
Footnote 1: On May 17, 2012, the caption was amended to add "Jon Carnes" as a party defendant.
Footnote 2: The Court stated "You're right. He's right, because when [plaintiff] amends, as your colleague has agreed because he knows he's right, it's a new day" (May 9, 2012 Transcript p. 50:9-11). The Court continued: "there's nothing that would be beyond the scope" in jurisdictional discovery after the filing of the amended complaint (p. 50:13-14). "[I]t's not going to be about the date now." (p. 50:17-18).
Footnote 3: The Court stated that upon the filing of the amended complaint "The bell rings anew. The date is going to change. . . with the amended complaint, the date changes" (June 6, 2012 Transcript, p. 20:12-14).
Footnote 4: The Court invited the parties to submit supplemental briefing to amend the May 30th order on the issue of the effect of the amended complaint on jurisdictional discovery (pp. 19-20). The Court extended Carnes' time to answer the amended complaint until a new date to be set by the Court upon the determination on the issue of jurisdictional discovery (pp. 25-26).
Footnote 5: Also underscoring this conclusion is the fact that jurisdictional allegations are not required to be in the complaint (MediaXposure Ltd. (Cayman) v Omnireliant Holdings, Inc., 29 Misc 3d 1215(A), fn. 2, 918 NYS2d 398 (Table) Supreme Court, New York County 2010 ]), and thus, by extension, not required to be in an amended complaint. As such, the filing of the amended complaint, in and of itself, does not alter the time by which jurisdictional facts must exist over the named defendant. Further, as it is a defendant's response served to the original pleading (unless timely challenged) that establishes the jurisdictional status of the defendant, it is the original pleading, i.e., the originally filed complaint, that sets the date by which personal jurisdiction over the defendant must exist. For example, if a defendant neither moves nor interposes a jurisdictional objection in his original answer, "he has submitted his person to the jurisdiction of the court in accordance with CPLR 3211(e), and the subsequent service by plaintiff of an amended complaint does not alter this status" or permit defendant to serve an amended answer to an amended complaint and raise a jurisdictional defense not previously raised (Sanchez v L.L.H. Recycled Aggregates, 147 Misc 2d 41, 554 NYS2d 398 [Supreme Court, Queens County 1990] (lack of personal jurisdiction defense which was absent from defendant's original answer could not be asserted in an amended answer served in response to an amended complaint]).