Tribul Merchant Servs., LLC v Cypers

[*1] Tribul Merchant Servs., LLC v Cypers 2013 NY Slip Op 51528(U) Decided on August 30, 2013 Supreme Court, Kings County Schmidt, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 August 30, 2013
Supreme Court, Kings County

Tribul Merchant Services, LLC, Plaintiff,

against

Rory ("Reuven") Cypers, et ano., Defendants.



13301/12



Plaintiff Attorney: Shapiro Tamir Law Group, PLLC, 30 Broad Street, Suite 1418, New York, NY 10004

Defendant Attorney: Goldberg & Rimberg, PLLC, 115 Broadway, 3rd Floor, New York, NY 10006

David I. Schmidt, J.

Upon the foregoing papers, plaintiff Tribul Merchant Services, LLC moves, by order to show cause, for an order, pursuant to Judiciary Law §§ 750 and 753, holding defendants Rory ("Rueven") Cypers and Residual Income Opportunities, Inc. (RIO) as well as Frederick Abramson, Esq., Kenneth J. Catanzarite, Esq., the Abramson Law Group and the Catanzarite Law Corporation in civil and criminal contempt for violating the temporary restraining order issued on June 27, 2012 and, pursuant to Judiciary Law §§ 773 and 774, imposing a fine or term of imprisonment.[FN1] Defendants move for an order, pursuant to CPLR 3211 (a)(8), dismissing the complaint for lack of personal jurisdiction over defendants or, in the alternative, setting this matter down for a traverse hearing.

Plaintiff commenced this action on June 27, 2012 by filing an order to show cause with temporary restraining order (TRO) along with a summons and complaint. Plaintiff is an independent sales organization (ISO) which provides merchants with services associated with credit card processing, acting as a "middle-man" between the merchants and Cynergy, a "Super-ISO," which provides the actual processing services. Pursuant to a contract with Cynergy, plaintiff recruits the merchants for Cynergy, which thereafter contracts directly with the merchants for the credit processing services. Plaintiff also provides certain services and functions for the merchants and holds liability for the risk of certain losses sustained by the merchants, including those incurred as the result of "chargebacks." Under its contract with Cynergy, plaintiff is entitled to collect commissions or "residuals" generated from each credit and debit transaction processed by Cynergy on behalf of the merchants recruited by plaintiff. [*2]

In order to recruit merchants for Cynergy, plaintiff engages the services of agents or "sub-ISOs" who canvas the marketplace. Rory Cypers' company, RIO, became a sub-ISO for plaintiff under a contract entered into on October 1, 2008. Among the provisions in this contract is that "[n]either ISO nor any ISO principal, director or equity owner will directly or indirectly refer Merchants to any other entity that provides services similar to those provided by [plaintiff]." The contract also contains a non-solicitation provision which states:

"During the term of this Agreement and for the later of 5 years after termination of this Agreement or termination of any Merchant Agreement, neither ISO, nor any Sales Agent, nor any principal or affiliate of ISO or a Sales Agent will directly or indirectly: (A) solicit or endeavor to obtain any Tribul employee, independent contractor, consultant or Tribul independent sales organization or sales agent to work for any third party or contract directly with ISO, or (B) solicit for itself or for any third party or contract with any Merchant for any product or service that is similar to any Tribul service. The parties understand and agree that any violation of this Section 2.4 would cause irreparable harm to Tribul, that the damages associated with such violation would be difficult to calculate, and therefore that, upon evidence that ISO has violated this Section, ISO shall owe and shall immediately pay to Tribul $5,000 per Merchant as liquidated damages and not as a penalty, as payment in full, which is the parties' reasonable estimate of fair compensation for the foreseeable losses that might result from the breach. In addition, all Residuals will cease upon a breach of this Section."

According to the complaint, defendants breached the above non-solicitation provision as well as other provisions of the contract by their alleged misrepresentations to and involvement with Insomniac, Inc., a merchant which comprised over 50% of plaintiff's business. In sum and substance, plaintiff contends that defendants acted to induce Insomniac, Inc. to sever its business relationship with plaintiff and move to a competing ISO. Along with the summons and complaint, plaintiff filed the order to show cause and TRO to enjoin defendants and anyone acting under their direction or on their behalf from interfering with the business relationship between plaintiff and its merchants and/or harassing or disparaging plaintiff or any of plaintiff's administrators, members, assigns, agents, officers, directors, employees and representatives. The TRO was signed by this court on June 27, 2012.

According to the affidavit of service of Joaquin Tinoco, sworn to on July 10, 2012, RIO was served with the order to show cause and the summons and complaint by personal delivery of same on June 27, 2012 to Robert Cypers, identified as the "agent for service" of RIO. According to the affidavit of service of Jared Phillips, sworn to on July 10, 2012, Rory Cypers and RIO were served with the "order to show cause for a temporary restraining order," and "supporting papers" on July 5, 2012 by delivery of same to a mail clerk at 23371 Mullholland Drive, Suite 288, Woodland Hills, CA 91364, the business address for RIO listed with the California Secretary of State and the actual place of business of Rory Cypers, and by mailing the documents to the same address. Jared Phillips also avers that Rory Cypers was served with the order to show cause on July 9, 2012 by affixing the papers to the door at 25350 Malibu Road Apt. D, Malibu, CA 90265, identified as the actual place of residence of Rory Cypers, and mailing process to the same address. The July 10, 2012 affidavit of Jared Phillips does not expressly indicate that the summons and complaint were served upon Rory Cypers or RIO. According to the affidavit of service of Jared Phillips sworn to on October 15, 2012, Rory Cypers and RIO were served with the summons and complaint by delivery of same on September 28, 2012 to Rosa Gonzalez, a person of suitable age and discretion at Rory Cypers' actual dwelling place at 29260 Sea Lion Place, Malibu, CA 90265. According to a separate affidavit of service from plaintiff's counsel, Jacob H. Nemon, Esq., the summons and complaint were mailed to Rory Cypers and RIO at 29260 Sea Lion Place, Malibu, CA 90265 on October 4, 2012.

Plaintiff thereafter brought the order to show cause to have defendants and their counsel held in contempt for their alleged violation of the temporary restraining order, citing communications and actions between defendants and Cynergy regarding Insomnia, Inc. and the commencement of a lawsuit against plaintiff in California following the commencement of this action. Defendants [*3]submitted opposition to the motion for contempt, arguing that neither defendant was properly served with the TRO and summons and complaint and therefore the court lacks personal jurisdiction over defendants. The matter was thereafter set down for a traverse hearing, which was subsequently withdrawn by order dated April 22, 2013. The order further directed "defendant. . .to serve an answer [within] 20 days" of the date of the order and stated that "plaintiff may obtain discovery after issue is joined on whether or not defendant had notice of the stay."

On May 13, 2013, defendants moved to dismiss the complaint pursuant to CPLR 3211 (a)(8) for lack of personal jurisdiction or, alternatively, to set this matter down for a traverse hearing. In support of their motion, defendants submit the affidavits of Rory Cypers, his parents, Robert Cypers and Karen Cypers, defendants' counsel in California, Kenneth J. Catanzarite, Esq. and a paralegal in Mr. Catanzarite's firm, Brandon E. Woodward. In his affidavit, Rory Cypers avers that the address for RIO listed with the California Secretary of State- 23371 Mulholland Drive, Suite 288, Woodland Hills CA 91364- is merely a mail drop and not the actual place of business of RIO or Rory Cypers. Additionally, Rory Cypers asserts that prior to July 1, 2012, RIO's actual place of business was 29260 Sea Lion Place, Milibu CA 90265, and that RIO's actual place of business following July 1, 2012 was 28720 Roadside Drive, Suite 254, Agoura Hills, CA 91301. Rory Cypers avers that his parents, Robert and Karen Cypers, have never been shareholders, directors, officers, managing agents or employees of RIO. Robert and Karen Cypers also assert in their own affidavits that they were not officers, directors or shareholders of RIO. Mr. Catanzarite avers in his affidavit that the identification of Karen and Robert Cypers as officers of RIO in the corporate filing to the California Secretary of State, dated June 27, 2012, was the result of an error by a paralegal in his firm, Brandon E. Woodward. In his own affidavit, Mr. Woodward states that when he prepared the corporate filing, he mistakenly listed Karen Cypers as Secretary of RIO and Robert Cypers as Chief Financial Officer of RIO as the result of a clerical error. In addition to the affidavits, defendants submit copies of leases to show that RIO's actual place of business as of July 1, 2012 was 28720 Roadside Drive, Suite 254, Agura Hills, CA 91301 and that Rory Cypers's residence as of July 1, 2012 was at 29260 Sea Lion Place, Malibu, CA 90265.

Purported Service Upon RIO

CPLR 311 (a) provides that personal service on a corporation may be accomplished by, inter alia, delivering the summons "to an officer, director, managing or general agent, or cashier or assistant cashier or to any other agent authorized by appointment or by law to receive service" (CPLR 311 [a] [1]). CPLR 6313 (b) provides that "[u]nless the court orders otherwise, a temporary restraining order together with the papers upon which it was based, and a notice of hearing for the preliminary injunction, shall be personally served in the same manner as a summons."

A process server's affidavit ordinarily constitutes a prima facie showing of proper service (see U.S. Bank, N.A. v Arias, 85 AD3d 1014, 1015 [2011]; Wells Fargo Bank, N.A. v Christie, 83 AD3d 824, 825 [2011]; Engel v Boymelgreen, 80 AD3d 653, 654 [2011]). However, "[a] defendant can rebut a process server's affidavit by a detailed and specific contradiction of the allegations in the process server's affidavit" (Bankers Trust Co. of Cal. v Tsoukas, 303 AD2d 343, 344; see Mortgage Access Corp. v Webb, 11 AD3d 592, 592 [2004]).

In his affidavit of service, Tinoco avers that he served the TRO and summons and complaint on Robert Cypers on June 27, 2012. Tinoco indicates that Robert Cypers' "Title" was "Agent for Service." The main point of contention between plaintiff and defendants regards the effect of the California Secretary of State filing, dated June 27, 2012, which indicates that Robert Cypers was the Chief Financial Officer of RIO. It is unclear whether or not Tinoco had knowledge of the information in the June 27, 2012 filing and relied on this information when he personally served Robert Cypers. Defendants argue that Tinoco could not have relied on the June 27, 2012 filing as it would not have appeared in the public records for several weeks afterward. According to the prior filing, which defendants contend would be the document appearing in the public records at the time of purported service on June 27, 2012, Rory Cypers was designated as the Chief Financial Officer while David S. Fisher was listed as the agent for service of process. [*4]

If there is a representation that a certain individual has authority to receive service on behalf of a corporation, service upon this individual may be proper even if he or she did not actually have such authority (see generally Fashion Page, Ltd. v Zurich Ins. Co., 50 NY2d 265 [1980]).Even if Tinoco did not have knowledge of the information in the June 27, 2012 filing, if Robert Cypers was, in fact, an officer of RIO at the time the TRO and summons and complaint were personally delivered, then jurisdiction would be obtained over RIO pursuant to CPLR 311 [a][1], and RIO would be bound by the terms of the TRO and subject to a finding of contempt if such terms were violated. Insofar as there is an issue of fact as to whether Robert Cypers was actually appointed Chief Financial Officer of RIO as of June 27, 2012 or whether the information in the filing was properly relied on by plaintiff's process server, the issue of service upon RIO must be resolved at a traverse hearing.

Purported Service at Rory Cypers' Actual Place of Business

To the extent that plaintiff argues that the purported "leave and mail" service upon Rory Cypers at 23371 Mullholland Drive, Suite 288, Woodland Hills, CA 91364 (Cypers' and RIO's "actual place of business") on July 5, 2012 constitutes service upon RIO, it is settled that service of process pursuant to CPLR 311 [a][1] requires that it be delivered personally to those individuals authorized by the statute; jurisdiction cannot be obtained by substituted service on the agent (Lakeside Concrete Corp. v Pine Hollow Bldg. Corp., 104 AD2d 551 [1984], affd 65 NY2d 865 [1985]). Further, the process server, Jared Phillips, states only that the mail drop clerk at the subject address was a "person of suitable age and discretion," not an agent for service for RIO. Thus, the affidavit of service, on its face, is insufficient to establish any kind of service of process over RIO.

At any rate, the process server indicates only that the "order to show cause for a temporary restraining order" was served at the subject address. There is no statement in the process server's affidavit to establish that the summons and complaint were delivered and mailed. This court cannot assume that the term "supporting papers" as stated in the affidavit refers to the summons and complaint. Since jurisdiction over Rory Cypers is not established by Phillips' affidavit, the court cannot find that Rory Cypers was bound by the TRO as of July 5, 2012 (see Norlee Wholesale Corp. v 4111 Hempstead Turnpike Corp., 138 AD2d 466 [1988]; Leadsinger, Inc. v Cole, US Dist Ct, SDNY, Aug. 4, 2006, Pitman, Magistrate J.). Moreover, even if jurisdiction was properly secured over Rory Cypers on July 5, 2012, there is no indication that he had any prior knowledge of the TRO (Gerelli Ins. Agency, Inc. v Gerelli, 23 AD3d 341 [2005]["the party to be held in contempt must have had knowledge of the order"]), and the motion for contempt, brought on the same date (July 5, 2012) as the purported service on Rory Cypers at his actual place of business, seeks to punish Cypers for acts occurring prior thereto. As stated above, Rory Cypers could not be bound by the TRO where personal jurisdiction was lacking.

Service Upon Rory Cypers

CPLR 308 (2) provides that service upon a natural person may be made:

"by delivering the summons within the state to a person of suitable age and discretion at the actual place of business, dwelling place or usual place of abode of the person to be served and by either mailing the summons to the person to be served at his or her last known residence or by mailing the summons by first class mail to the person to be served at his or her actual place of business."

Valid service pursuant to CPLR 308 (2) may be made by delivery of the summons and complaint to a person of suitable age and discretion who answers the door at a defendant's residence, but is not a resident of the subject property (see U.S. 1 Brookville Real Estate Corp. v Spallone, 21 AD3d 480, 481-482 [2005]; Chesman v Lippoth, 271 AD2d 567 [2000]). There is no dispute that Rory Cypers' actual dwelling place on September 28, 2012 was 29260 Sea Lion Place, Malibu, CA 90265 and that the summons and complaint was delivered to "Rosa Gonzalez" with copies thereafter mailed to the premises on October 4, 2012. According to the affidavit of service, Rosa Gonzalez was the housekeeper of Rory Cypers and admitted that "her boss was the person being served." The [*5]process server further avers that Rosa Gonzalez appeared to be fifty years old and "spoke English well."

A person of "suitable age and discretion" must objectively be of "sufficient maturity, understanding and responsibility under the circumstances so as to be reasonably likely to convey the summons to the defendant" (Citibank, N.A. v Kollen, 162 Misc 2d 883, 887 [1994]; see Prochillo v Acker, 108 AD2d 800, 802 [1985]; City of New York v Chemical Bank, 122 Misc 2d 104, 108-109 [1983]). There is nothing on the face of the affidavit of service to indicate that Rosa Gonzalez was anything but a person of suitable age and discretion. Rory Cypers' unsubstantiated allegations that Rosa Gonzalez was only a temporary worker, that he is "not aware" that she speaks English and that he never received the summons and complaint are insufficient to rebut the contents of the affidavit of service (US Consults v APG, Inc., 82 AD3d 753 [2011][bare and unsubstantiated denials insufficient to rebut the presumption of proper service]). Accordingly, the court finds that personal jurisdiction was obtained over Rory Cypers on October 4, 2012 (the date of the subsequent mailing of process). However, since a corporation cannot be served by substituted service, jurisdiction was not obtained over RIO by the leave and mail service upon Rory Cypers at his dwelling place.

As a result, that part of defendants' motion to dismiss the complaint as against Rory Cypers for lack of personal jurisdiction is denied.

This matter shall be referred to the Special Referee Part for a traverse hearing to determine whether Robert Cypers held the title of Chief Financial Officer on June 27, 2012 and whether Tinoco (the process server), or the person under whom he took direction, properly relied on the June 27, 2012 Secretary of State filing in determining that Robert Cypers was a proper agent for service upon RIO. The hearing shall be scheduled on or after November 4, 2013. That part of defendants' motion to dismiss the complaint as against RIO is held in abeyance pending the traverse hearing.

Plaintiff's motion for an order holding Rory Cypers, RIO, Kenneth J. Catanzarite Esq. and the Catanzarite Law Corporation in contempt is denied without prejudice to renew in the event that RIO is found to have been properly served on June 27, 2012.

The foregoing constitutes the decision and order of the court.

E N T E R,

J. S. C. Footnotes

Footnote 1:By order dated August 6, 2012, the plaintiff agreed to withdraw the motion for contempt as against Frederick Abramson, Esq. and the Abramson Law Group.