Kennedy v Berthel, Fisher & Co. Fin. Servs., Inc.
Annotate this CaseDecided on July 12, 2017
Supreme Court, New York County
Michael Kennedy, as trustee of the MICHAEL L. KENNEDY 1998 TRUST, dtd 9/30/98, Plaintiff,
against
Berthel, Fisher & Company Financial Services, Inc., CABOT INVESTMENT PROPERTIES, LLC, THOMAS R. BIESHEUVEL, CARLTON P. CABOT, and TIMOTHY J. KROLL, Defendants.
153222/2016
For Plaintiff:
Gana LLP
345 Seventh Avenue, 70 Lafayette Street — 2nd Floor
New York, NY 10001
By: Daniel Gwertzman, Esq.
For Defendants:
Winget Spadafora & Schwartzberg
45 Broadway, 19th FL
New York, NY 10006
By: Marni Rae Robin, Esq.
Robert R. Reed, J.
Defendants Berthel Fisher & Company Financial Services, Inc. (Berthel) and Thomas R. Biesheuvel (Biesheuvel) (together, the moving defendants) move, pursuant to CPLR 302, 327, and 3211 (a) (8), to dismiss the complaint brought by plaintiff Michael Kennedy, as trustee of the Michael L. Kennedy 1998 Trust dtd 9/30/08.
BACKGROUND
Plaintiff is a resident of California. Defendant Berthel is a registered broker-dealer with its principal place of business in Iowa. Defendant Biesheuvel is a resident of California and a financial advisor. Defendant Cabot Investment Properties, LLC (CIP) is a Massachusetts Limited Liability Company with its principal place of business in New York. CIP's members are defendant Carlton P. Cabot (Cabot), a resident of Massachusetts, and Timothy J. Kroll (Kroll), a resident of New York.
Plaintiff alleges that, in 2005, his accountant recommended that he speak to Biesheuvel, a Berthel broker, about potential investment solutions for proceeds from his property sales. Plaintiff [*2]contends that Berthel and Biesheuvel induced him to invest in nine unsuitable tenant-in-common properties (TICs) which significantly decreased in value and caused him substantial damages. One of the TICs, the Cabot Northpark TIC, was sponsored by CIP, Cabot, and Kroll. The Cabot Northpark TIC is located in Indiana. The other TICs are located in various states, none of which are New York or California.
Pursuant to Berthel's customer agreement, which required arbitration of the issues alleged before the Financial Industry Regulatory Authority (FINRA), plaintiff submitted an arbitration claim against Berthel. FINRA declined to accept jurisdiction over the matter. On April 15, 2016, plaintiff filed this action alleging 17 causes of action. Plaintiff argues that jurisdiction is proper in this court because all defendants transact or have transacted business to supply services in New York, and that venue is proper because CIP's principal place of business is in New York County.
The moving defendants argue that they should be dismissed from the complaint based on forum non conveniens. They assert that (1) the claims at issue in plaintiff's complaint arose in California; (2) California is available as a forum for this action and has a significant interest in the outcome; (3) New York would be unnecessarily and improperly burdened by this action; (4) litigation in New York will create substantial hardship for the defendants and witnesses; and (5) plaintiffs and defendants are nonresidents of New York.
In the alternative, the moving defendants contend that Biesheuvel must be dismissed for lack of personal jurisdiction. They assert that Biesheuvel is not subject to this court's jurisdiction under CPLR 301 or 302 because he has not transacted business in New York; the complaint does not allege tortious acts in New York; there is no New York injury; and the complaint does not allege that Biesheuvel owns, uses, or possesses real property situated within New York. They argue that this court's exercise of personal jurisdiction over Biesheuvel would offend notions of fair play and substantial justice and would violate due process.
In opposition, plaintiff contends that (1) the moving defendants failed to meet the burden for dismissal under forum non conveniens; (2) there is a clear factual nexus between New York and this dispute; (3) the defendants will not face hardship if this action is heard in New York; (4) the residency of the parties weighs in favor of keeping the case in New York; (5) litigating this action in New York would not place an undue burden on the New York courts; and (6) dismissal would not be warranted even if California was an equally convenient forum.
Further, plaintiff avers, this court has personal jurisdiction over Biesheuvel. He states that this action arises out of Biesheuvel's actions in New York, and this court's exercise of personal jurisdiction over Biesheuvel comports with due process.
DISCUSSION
Jurisdiction
The Court addresses first defendants' argument that this court does not have jurisdiction over Biesheuvel (see e.g. Edelman v Taittinger, S.A., 298 AD2d 301, 303 [1st Dept 2002] [the court may not reach the issue of dismissal based on forum non conveniens in the absence of resolving an issue of jurisdiction over the defendant]). CPLR 302 (a) (1) confers jurisdiction over any non-domiciliary who transacts business in the state. The non-domiciliary's actions must be purposeful and establish a substantial relationship between the transaction and plaintiff's claim (Rushaid v Pictet & Cie, 28 NY3d 316, 323 [2016]).
Plaintiff argues that Biesheuvel explicitly availed himself of jurisdiction in New York through a form that he signed in connection with his registration to offer and sell securities in New York. The court notes that because the conduct at issue did not involve the offer or sale of securities [*3]in New York, this argument is unavailing. However, plaintiff's argument - that Biesheuvel's due diligence in consummating the Cabot Northpark TIC transaction necessarily required him to work with CIP, a New York entity - adequately demonstrates that jurisdiction "may exist" (see Hessel v Goldman, Sachs & Co., 281 AD2d 247, 247 [1st Dept 2001] [a demonstration that jurisdiction "may exist" is enough to defeat a motion to dismiss for lack of long-arm jurisdiction where discovery is incomplete]). Plaintiff establishes the relationship between Biesheuvel's due diligence and his claim, and raises an issue of fact as to the scope of Biesheuvel's interaction with CIP (see id. [the nature of defendant's relationship with a New York corporation created an issue of fact as to whether defendant purposely forged ties with New York]).
Forum Non Conveniens
Notwithstanding the foregoing, the complaint is dismissed against the moving defendants pursuant to CPLR 327.
The common-law doctrine of forum non conveniens, also articulated in CPLR 327, permits a court to stay or dismiss such actions where it is determined that the action, although jurisdictionally sound, would be better adjudicated elsewhere. The burden rests upon the defendant challenging the forum to demonstrate relevant private or public interest factors which militate against accepting the litigation and the court, after considering and balancing the various competing factors, must determine in the exercise of its sound discretion whether to retain jurisdiction or not. Among the factors to be considered are the burden on the New York courts, the potential hardship to the defendant, and the unavailability of an alternative forum in which plaintiff may bring suit. The court may also consider that both parties to the action are nonresidents and that the transaction out of which the cause of action arose occurred primarily in a foreign jurisdiction. No one factor is controlling.(Islamic Republic of Iran v Pahlavi, 62 NY2d 474, 478-79 [1984] [citations and footnote omitted].)
The moving defendants have met their burden. This case does not have a substantial nexus with New York and California has a significant interest in its outcome (see Shin-Etsu Chem. Co., Ltd. v ICICI Bank Ltd., 9 AD3d 171, 176-78 [1st Dept 2004] [complaint dismissed on forum non conveniens grounds where the dispute had no substantial nexus with New York and a foreign forum had a substantial interest in adjudicating the action]). While plaintiff correctly contends that his choice of forum should generally not be disturbed, his convenience alone is not enough to negate the finding that the action would be better adjudicated in California.
Plaintiff and both moving defendants are nonresidents and the underlying transaction occurred entirely in California (see id. at 172 [the court considered that neither party was a New York resident and none of the underlying events occurred in New York]). Although Kroll is a New York resident and CIP is a New York company, as defendants point out, Cabot and Kroll have not answered in this action and plaintiff may move for a default judgment against them. The moving defendants have established that litigating this action in New York would cause them hardship as neither is a New York resident, whereas plaintiff has not persuasively articulated any hardship that he would endure if this case were tried in California (see Intertec Contr. v Turner Steiner Intern., S.A., 6 AD3d 1, 4 [1st Dept 2004] [courts may consider hardship to the respective parties]). None of the parties have set forth specific names or locations of potential witnesses (see Shin-Etsu Chem. Co., Ltd., 9 AD3d 171 at 180 [court considered convenience to the witnesses when determining the most suitable forum]).
Further, plaintiff is not left without an alternative forum to bring this suit (see id. at 178 [although not dispositive, availability of an alternative suitable forum is an important [*4]consideration]). As discussed above, California is better suited to adjudicate the claims. Finally, though plaintiff demonstrates that Biesheuvel may have interacted with CIP while conducting due diligence, the Cabot Northpark TIC is only one of nine TICs at issue in this litigation and the location of its sponsors is a tenuous connection when considering the logical forum for this action as a whole (see Rakuten Bank, Ltd. v Royal Bank of Can., 136 AD3d 481, 481 [1st Dept 2016] [where defendants allegedly fraudulently induced plaintiff to purchase notes, plaintiff's contention that the marketing and design of the notes was partially done by employees of a New York-based defendant did not outweigh the fact that all aspects of the actual sale occurred outside New York]).
Accordingly, it is
ORDERED that the motion to dismiss by Berthel, Fisher & Company Financial Services, Inc. and Thomas R. Biesheuvel is granted and the complaint is dismissed as against them with costs and disbursements to defendants as taxed by the Clerk of the Court; and it is further
ORDERED that the Clerk is directed to enter judgment accordingly.
Dated: July 12, 2017
ENTER:
____________________________
J.S.C.
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