New York Schools Ins. Reciprocal v ICEE Corp.

[*1] New York Schools Ins. Reciprocal v ICEE Corp. 2021 NY Slip Op 50349(U) Decided on April 22, 2021 Supreme Court, Clinton County Lawliss, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 April 22, 2021
Supreme Court, Clinton County

New York Schools Insurance Reciprocal a/s/o AuSable Valley CSD, Plaintiff,

against

The ICEE Corporation, Day Wholesale, Inc. and CAB S.p.A., Defendants.



The ICEE Corporation, Third-Party Plaintiff,

against

CAB S.p.A., Defendant.



2018-1612



Congdon, Flaherty, O'Callaghan, Travis & Fishlinger, Uniondale

(Thomas Cicillini, Esq., of counsel) for New York Schools Insurance Reciprocal a/s/o AuSable Valley CSD

Law Office of John Wallace, Albany (Murry S. Brower, Esq., of counsel) for The ICEE Corporation

Bowitch & Coffey, LLC, Albany (Daniel W. Coffey, Esq., of counsel) for Day Wholesale, Inc.

MacKenzie Hughes, LLP, Syracuse (W. Bradley Hunt, Esq., of counsel) for CAB S.p.A.
Timothy J. Lawliss, J.

On November 5, 2018, Plaintiff filed the Summons and original Verified Complaint, [*2]which did not name CAB S.p.A (hereinafter "CAB") as a defendant. Thereafter, ICEE Corporation (hereinafter "ICEE"), filed a Third-Party Complaint dated February 20, 2019, in which ICEE was styled the Third-Party Plaintiff and in which CAB was named Third Party Defendant. Thereafter, Plaintiff filed an Amended Verified Complaint dated July 30, 2019, naming CAB as a defendant and alleged the following salient facts. On January 21, 2017, a fire occurred in Clinton County, New York, which caused substantial damages to the premises owned by the AuSable Valley CSD. Plaintiff New York Schools Insurance Reciprocal (hereinafter "NYSIR") maintained a policy of insurance with the school district which granted NYSIR the right of subrogation against any tortfeasor deemed liable for damages suffered by the school district as a result of the fire. NYSIR alleges that the fire was caused by a "slush puppy machine" that was manufactured by CAB, who sold the machine to ICEE, who in turn sold the machine to Day Wholesale Inc. (hereinafter "Day Wholesale"). Day Wholesale then leased the machine to the school district. On multiple legal theories, NYSIR asserts that they are entitled to damages from CAB, ICEE and Day Wholesale, while ICEE, in turn, alleges that to the extent Plaintiff is entitled to recover damages, ICEE is likewise entitled to indemnification and contribution from CAB.

Previously, by Notice of Motion dated September 17, 2019, CAB sought dismissal of all claims and third-party claims against it on various grounds, including lack of personal jurisdiction. The Court's Decision and Order dated December 11, 2019 denied said motion, except with respect to the personal jurisdiction grounds. With respect to that aspect of the motion, the Court denied it without prejudice and granted Day Wholesale's cross-motion which sought permission to engage in jurisdictional discovery.

Jurisdictional discovery has been completed.[FN1] Now, by Notice of Motion to Dismiss dated February 19, 2021, CAB seeks an Order pursuant to CPLR 3211(a)(1), CPLR 3211(a)(8), CPLR 302 and Federal Due Process Clause, dismissing all claims against CAB, third party or otherwise.[FN2] In support of the motion, CAB submitted an Affidavit of W. Bradley Hunt, Esq., dated February 19, 2021; an Affidavit of Luca Caiano, Chief Sales Officer of CAB, affirmed on February 17, 2021; and a Memorandum of Law dated February 19, 2021. In opposition to the motion, Plaintiff NYSIR submitted an Affirmation of Thomas J. Cicillni, Esq., dated March 9, 2021; Defendant Day Wholesale submitted an Affirmation of Daniel W. Coffey, Esq., affirmed on March 15, 2021, and a Memorandum of Law of even date; and, ICEE submitted an Affidavit of Murry S. Brower, Esq., dated March 16, 2021. In reply, CAB submitted a Memorandum of Law dated March 22, 2021, and an additional Affidavit of Luca Caiano affirmed on March 31, 2021.

Parties opposing a motion to dismiss for lack of personal jurisdiction pursuant to CPLR 3211(a)(8) have the burden of establishing that the Court has personal jurisdiction over the [*3]adverse parties. Gottlieb v Merrigan, 119 AD3d 1054, 1056 [3d Dept 2014]. On a motion to dismiss pursuant to CPLR 3211(a)(8), the Court must construe all of the opposing parties' allegations as true and resolve all doubts in the opposing parties' favor. Rushaid v Pictet & Cie, 28 NY3d 316, 327 [2016], quoting Leon v Martinez, 84 NY2d 83, 87-88 [1994]. Even so, while the Court must generally assume the truth of the opposing parties' allegations, "such assumption must fail where there are conclusory allegations lacking factual support." Miller v Allstate Indem. Co., 132 AD3d 1306 [4th Dept 2015] [internal citations omitted].

All parties opposing CAB's motion assert that this Court has personal jurisdiction over CAB pursuant to New York's long-arm statute under CPLR 302(a)(3)(ii), whereas only Day Wholesale advances CPLR 302(a)(1) and CPLR 302(a)(3)(i) as a basis for personal jurisdiction. CPLR 302 provides, in pertinent part:

(a) Acts which are the basis of jurisdiction. As to a cause of action arising from any of the acts enumerated in this section, a court may exercise personal jurisdiction over any non-domiciliary . . . who . . . :1. transacts any business within the state or contracts anywhere to supply goods or services in the state; or3. commits a tortious act without the state causing injury to person or property within the state if he(i) regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in the state, or(ii) expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate orinternational commerce; or . . . .

In evaluating this motion, the Court must engage in a two-step analysis. First, the Court must determine whether the requirements of CPLR 302 have been met. If the requirements of CPLR 302 have been met, the Court must then determine whether the exercise of personal jurisdiction comports with the Due Process Clause of the United States Constitution. Archer-Vail v LHV Precast, Inc., 168 AD3d 1257, 1261 [3d Dept 2019]; see also Williams v Beemiller, Inc., 33 NY3d 523, 528 [2019].

Jurisdictional discovery has disclosed the following facts. CAB is not authorized to do business in New York. CAB has never sold any products in New York. CAB has no physical presence in New York, meaning no offices, no personnel, no bank accounts and no real property. CAB only sells its products through non-exclusive distributors, who are not based in New York. CAB sells no products to end users. CAB sells its products to distributors on an "ex works" basis such that its distributors have total control over the destination. In other words, CAB delivers its products to the "door of its warehouse" and the distributors move CAB's products internationally from there. CAB has no contracts with its distributors which define geographic territories. A CAB representative generally attends two annual product exhibitions in the United States, neither of which is in New York. No representative of CAB has been present in the United States, let alone New York State, for the purpose of performing maintenance, installation, repair, or servicing of CAB manufactured machines. While CAB maintains a website which states "thanks to the quality and reliability of its products, the Company's brand is present in fifty countries worldwide on five continents," end users are not able to purchase products from the website. CAB provides no training or other services in New York. CAB has no subsidiaries or parent companies in New York. CAB's distributors are not restricted in where they sell CAB [*4]machines, and therefore, the machines could end up anywhere in the United States, including New York. Some CAB products were shipped to a New York port, destined for a New Jersey distributor, but this shipping was done at the direction of a CAB distributor, not CAB. Finally, although Day Wholesale asserts that ICEE is an exclusive distributor for CAB, they offer no proof. Counsel for ICEE asserts that ICEE's distributor relationship with CAB is not exclusive. In summary, CAB has no direct contacts to New York.

Turning now to the provisions of CPLR 302. The Court concludes that it does not have jurisdiction over CAB pursuant to CPLR 302(a)(1). First, much of Day Wholesale's argument as to CPLR 302(a)(1)'s applicability is couched upon the erroneous assertion that ICEE was an exclusive distributor of CAB's products. Therefore Day Wholesale's reliance on Surdo v Stamina Products, Inc., 2015 WL 5918318, [ED NY, Oct. 9, 2015, No. 15-CV-2532]; Darrow v Heteronic Deustchland, 119 AD3d 1142 [3d Dept 2014]; and Halas v Dick's Sporting Goods, 105 AD3d 1411 [4th Dept 2013] is misplaced. In each of those cases, the defendant, in addition to having multiple other contacts with New York State not present in the case at hand, had entered into either an exclusive or restrictive distribution agreement whereby the distributor specifically targeted New York State.

Second, as the Court of Appeals has recognized, the first step in a CPLR 302(a)(1) jurisdictional analysis is to determine whether a defendant "purposefully availed itself of 'the privilege of conducting activities' in the state by transacting business in New York. . . ," which can be accomplished by a showing that the non-domiciliary, of their own initiative, projected itself into New York to engage in a sustained transaction of business. D & R Global Selections, S.L. v Bodega Olegario Falcon Pineiro, 29 NY3d 292, 297-298 [2017] [internal citations omitted]. Here, there is simply no evidence that CAB directly transacts business within New York or that it contracts with any entity to supply goods or services in the state. Nor is there any evidence that CAB, of its own initiative, projected itself into New York, whether directly or indirectly through exclusive distributorships or other forms of contact.

The Court concludes that it does not have jurisdiction over CAB pursuant to CPLR 302(a)(3)(i). There is no record evidence that CAB "regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in the state," as is required under CPLR 302(a)(3)(i). Day Wholesale relies on the "derives substantial revenue" aspect of this provision, noting that there is case law to support the proposition that if CAB derives even a small percentage of its total revenue from use and consumption of its products in New York, the non-domiciliary can still come within the ambit of this if provision the total value revenue is "substantial." See Allen Canadian v General Electric, 65 AD2d 39 [3d Dept 1978]. However, there is simply no evidence to support the proposition that CAB derives substantial revenue from use of its products in New York. Day Wholesale asserts that since CAB sold to ICEE, and ICEE distributed CAB machines in New York, it is clear that "at least some" of CAB's revenue comes from distribution of its products in New York. However, "some" revenue is not the same as "substantial."

The Court now turns its attention to CPLR 302(a)(3)(ii). The Court of Appeals has held that jurisdiction under this long-arm provision rests on five elements: "[f]irst, that defendant committed a tortious act outside the State; second, that the cause of action arises from that act; third, that the act caused injury to a person or property within the State; fourth, that defendant expected or should reasonably have expected the act to have consequences in the State; and fifth, [*5]that defendant derived substantial revenue from interstate or international commerce. LeMarca v Pak-Mor Mfg. Co., 95 NY2d 210, 214 [2010]. As the parties focus on the fourth factor, so does the Court.

Thus, the real inquiry is whether CAB "expects or should reasonably expect their act to have consequences in [New York]" under CPLR 302(a)(3)(ii). See also LeMarca v Pak-Mor Mfg. Co., 95 NY2d at 214. A reasonable argument can be made that the facts of this action satisfy the plain language of this provision. Given that CAB uses distributors in the United States, including one in the neighboring State of New Jersey, to distribute its property without geographic limitations, it may be reasonable to expect that CAB's actions would have consequences within the State of New York. However, New York Courts must construe CPLR 302(a)(3)(ii) to preserve its constitutionality. "[C]ourts must construe statutes to preserve their constitutionality whenever possible." People v Baumann & Sons Buses, Inc., 6 NY3d 404, 408 [2006]. It is well established that statutes are "presumed to be constitutional" (Easley v New York State Thruway Authority, 1 NY2d 374, 379 [1956]) and that "every rational and reasonable presumption must first be indulged in favor of the statute." People v Arez, 64 Misc 2d 723, 725 [1st Dept 1970]. The Court will not engage in further statutory construction regarding CPLR 302(a)(3)(ii) because in the final analysis, the New York Court of Appeals' and the United States Supreme Court's interpretations of the Due Process clause render this issue academic for purposes of this action.

The New York Court of Appeals has held that for the exercise of personal jurisdiction to comport with due process demands, a non-domiciliary must have "certain minimum contacts" with the forum [state] and the "maintenance of the suit [must] not offend traditional notions of fair play and substantial justice." Williams v Beemiller, Inc., 33 NY3d at 528, citing International Shoe Co. v Washington, 326 US 310, 316 [1945]. Beemiller further established that a non-domiciliary tortfeasor will have sufficient minimum contacts with the state if it "purposefully avails itself of the privilege of conducting activities within the state." Williams v Beemiller, Inc., 33 NY3d at 528 [internal citations omitted]. This requirement envisions "something more than the 'fortuitous circumstances' that a product sold in another state later makes its way into the forum jurisdiction through no marketing or other effort of defendant." Id., citing World-Wide Volkswagen Corp v Woodson, 444 US 286, 295 [1980]. Put differently, the "mere likelihood" that a product will find its way into the forum state cannot create the connection between the defendant and the forum state such that a defendant could "reasonably anticipate being haled into Court there. Id. at 528—529, citing World-Wide Volkswagen Corp v Woodson, 444 US at 297. Finally, and crucially, the Court in Beemiller noted that it must be the defendant's conduct and contacts that form the necessary connection with the New York, and not "contacts between the plaintiff (or third parties) and the forum." Id. at 529 [internal citations omitted].

Applying the above principles to the non-domiciliary CAB, it has essentially no contacts with New York other than the fact that an item it places in the stream of commerce might eventually make its way to New York through non-exclusive distributors such as ICEE. CAB does nothing purposeful with respect to New York State and it avails itself of none of the privileges of doing business in New York State. CAB makes no efforts to directly sell or market its products in New York and its only connection with New York is through third parties. Thus, even viewing the facts in a light most favorable to the non-movants, the Court must conclude that the requisite minimum contacts are lacking in this case. CAB would not "reasonably [*6]anticipate being haled into court" in New York State and therefore, the exercise of personal jurisdiction over CAB in this matter would offend due process.

Finally, on the issue of minimum contacts, the parties sharply contested the impact and precedential value of J. McIntyre Mach., Ltd. v Nicastro, 564 US 873 [2011]. Day Wholesale contends that it is Justice Breyer's concurring opinion which controls, not the plurality opinion of the Court authored by Justice Kennedy. CAB, in reply, argues that its position is supported by either opinion. It appears to the Court that CAB is correct in this regard. Both Justices Breyer and Kennedy, though utilizing different approaches, arrived at the same conclusion under facts very similar to that of the case at hand. Personal jurisdiction did not obtain over a defendant manufacturer where its sole contacts consisted of an agreement with a distributor to sell the defendant's machines in the United States; representatives of the defendant had attended trade shows in the United States; and, though the defendant's machines might have ended up in the forum state, defendant had no offices there, paid no taxes there, had no employees there and did not advertise there. These facts led both Justices to conclude that the exercise of personal jurisdiction could not comport with the Constitutional Due Process requirements. Justice Kennedy noted that the defendant in Nicastro, much like CAB in the case at hand, directed purposeful activities at the United States, but this will not suffice where a state court's exercise of personal jurisdiction is concerned; the purposeful activities that are relevant for the constitutional inquiries are contacts with the forum state, not the United States. J. McIntyre Mach., Ltd. v Nicastro, 564 US at 886. Justice Breyer on the other hand, grounded his concurrence in prior jurisprudence which held that "something more" is needed than simply "placing a product into the stream of commerce," even if a defendant knows that the stream will sweep the product into the forum state. Id. at 889 [internal citations omitted]. Under either approach, in the Court's opinion, Nicastro supports CAB's position. Thus, controlling federal jurisprudence on this issue compels the conclusion that the exercise of personal jurisdiction over CAB would run afoul of the boundaries of due process.

The Court closes on a policy consideration. As CAB argues, were the Court to determine on the facts before it that personal jurisdiction could be exercised over CAB, the Court would essentially be holding that any manufacturer in the world who has distribution networks within the United States would be subject to assertions of personal jurisdiction within all fifty states, no matter how tenuous the contacts, both direct and indirect, with any one forum state. While New York State has an unquestionable interest in protecting its citizens from tortious conduct occurring without, that important interest must be balanced against the demands of due process.

ACCORDINGLY, IT IS HEREBY

ORDERED, that the Amended Verified Complaint dated July 30, 2019 and filed with the Office of the Clinton County Clerk on August 16, 2019, is hereby dismissed as against Defendant CAB S.p.A. only, without prejudice; and it is further

ORDERED, that the Third-Party Complaint dated February 20, 2019 and filed with the Office of the Clinton County Clerk on February 22, 2019, is hereby dismissed, without prejudice.

Signed and Dated: April 22, 2021

Plattsburgh, New York

E N T E R

Hon. Timothy J. Lawliss

Acting Supreme Court Justice Footnotes

Footnote 1:The Court notes that in its opposition papers, Day Wholesale references the possibility of additional discovery; however, the only motion or request for relief properly before the Court is CAB's dismissal motion.

Footnote 2:Although CAB's motion purports to seek relief pursuant to CPLR 3211(a)(1) [defense founded upon documentary evidence], CAB advanced no arguments concerning this ground and the Court previously denied CAB's motion to dismiss pursuant to this ground. Thus, the Court assumes that the reference to CPLR 3211(a)(1) was in error.