Broumand v. Joseph

522 F.Supp.3d 8

Stafford BROUMAND, M.D., Petitioner,

v.Jeremy JOSEPH, Patricia Hawkins, Sean Gabriel, Leigh Slaughter, and Jennifer A. Greenhall, Respondents.

20-cv-9137 (JSR)

United States District Court, S.D. New York.

Signed February 27, 2021

Paul Robert Niehaus, Emily Bab Kirsch, Kirsch & Niehaus PLLC, New York, NY, for Petitioner.

Steven A. Heath, Heath Steinbeck, LLP, Los Angeles, CA, Justin M. Sher, Yu Han, Sher Tremonte LLP, New York, NY, for Respondent Jeremy Joseph.

Patrick Gaffney, The Law Office of Patrick Gaffney, New York, NY, for Respondent Sean Gabriel.

OPINION AND ORDER

JED S. RAKOFF, U.S.D.J.

Petitioner Stafford Broumand is a party to an ongoing arbitration in New York. The arbitrator in that dispute issued subpoenas directing respondents Jeremy Joseph and Sean Gabriel, residents of California and Virginia, respectively, to appear at an evidentiary hearing in New York City and provide testimony and documents. The arbitrator thereafter ruled that the arbitration hearing would proceed by videoconference and begin on February 1, 2021.

When respondents chose to ignore the subpoenas, petitioner filed the instant petition, pursuant to Section 7 of the Federal Arbitration Act (the "FAA"), 9 U.S.C. § 7, to compel compliance. Gabriel and Joseph moved to dismiss the petition on the grounds that this Court lacked personal jurisdiction and that the subpoenas were otherwise invalid. By bottom-line Order dated January 28, 2021, the Court granted the motions to dismiss the petition. Dkt. No. 44. This Opinion and Order explains the reasons for that decision and directs the closing the case.

Background

This proceeding arises from an arbitration between petitioner and certain individuals and entities before the American Arbitration Association titled In the Matter of the Arbitration Between Stafford Broumand, M.D., and Michael Abbott, et al., AAA Case No. 01-19-0003-3836. Petition to Compel Compliance with Arbitrator's Subpoena ("Pet."), Dkt. No. 1, ¶ 10. In the underlying arbitration, petitioner alleges, among other things, that Michael Abbott and Nicholas Vita misdirected the assets of an entity in which petitioner maintained an interest, namely, VentureForth Holdings LLC ("VentureForth"), to another entity entirely controlled by Abbott and Vita, namely, Columbia Care LCC ("Columbia Care"). Declaration of Emily Kirsch ("Kirsch Decl."), Dkt. No. 32, ¶ 2.

Respondent Jeremy Joseph was the founder, CEO, and controlling shareholder of a predecessor to VentureForth. Respondent Sean Gabriel is a high-level executive of VentureForth and is also credited as a founder of Columbia Care. Id. ¶¶ 4-7. Neither is a party to the underlying arbitration.

The arbitrator, sitting in the Southern District of New York, initially issued subpoenas pursuant to 9 U.S.C. § 7 compelling Joseph and Gabriel to appear at an evidentiary hearing at the offices of petitioner's counsel in New York City "at a mutually agreeable time" and required them to bring certain documents within their possession to the hearing. Id. ¶¶ 12, 18. Joseph resides in California; Gabriel resides in Virginia. Pet. ¶¶ 2, 4. Although the subpoenas did not initially set a firm date for the evidentiary hearing, the arbitration, as noted, was set to begin on February 1, 2021. Kirsch Decl. ¶ 9. The arbitrator also decided that all hearings would proceed via videoconference. Id.

Joseph and Gabriel refused to comply with the subpoenas. Pet. ¶¶ 14, 20. On October 30, 2020, petitioner filed the instant petition to compel their compliance. Dkt. No. 1. In turn, Gabriel and Joseph moved to dismiss the petition pursuant to Federal Rule of Civil Procedure 12(b)(2) on the ground that this Court lacks personal jurisdiction and pursuant to Rule 12(b)(6) on the ground that the subpoenas are otherwise invalid. Dkt. Nos. 22 & 27. After reviewing the submissions, the Court ordered supplemental briefing to address certain questions central to the resolution of these motions, See Dkt. No. 33, and heard oral argument on January 27, 2021. Because the arbitration was slated to begin on February 1, 2021, the Court, after careful review, issued a "bottom-line" Order on January 28, 2021 granting the motions to dismiss the petition.

Discussion

I. Personal Jurisdiction

"A district court ... must have personal jurisdiction over a nonparty to compel it to comply with a valid discovery request under Federal Rule of Civil Procedure 45." Gucci Am., Inc. v. Weixing Li, 768 F.3d 122, 141 (2d Cir. 2014) ;¹ see also First Am. Corp. v. Price Waterhouse LLP, 154 F.3d 16, 20 (2d Cir. 1998) (assuming that enforcement of subpoena must "comport with due process" and the "assertion of personal jurisdiction").²

Where, as here, "a motion to dismiss for lack of jurisdiction is decided on the basis of affidavits and other written materials, the plaintiff need only make a prima facie showing of jurisdiction." Allianz Global Investors GmbH v. Bank of America Corporation, 457 F. Supp. 3d 401, 407 (S.D.N.Y. 2020). If, after "constru[ing] the pleadings and affidavits in the light most favorable to plaintiffs [and] resolving all doubts in their favor," the Court finds a prima facie showing of jurisdiction, no "controverting presentation by the moving party [will] defeat the motion." Id. A prima facie showing of personal jurisdiction requires: (1) procedurally proper service of process, (2) "a statutory basis for personal jurisdiction that renders such service of process effective" and (3) that "the exercise of personal jurisdiction ... comport with constitutional due process principles." Waldman v. Palestine Liberation Org., 835 F.3d 317, 327 (2d Cir. 2016).

A. Service of Process

Only Gabriel disputes whether service of the arbitral subpoena was procedurally proper. The petition states that the arbitrator issued the subpoena on October 7, 2020. Pet. ¶ 18. Petitioner alleges that Gabriel agreed by telephone to accept service of the subpoena. Id. ¶ 19. In a sworn affidavit, however, Gabriel explains that petitioner's counsel called him on October 8, 2020 and asked whether she could send a copy of the arbitration subpoena by email. Affidavit of Sean Gabriel ("Gabriel Aff."), Dkt. No. 27-1, ¶ 7. Gabriel, who was then unrepresented, agreed, and petitioner's counsel emailed a copy of the subpoena that same day. Id. Having since retained counsel, Gabriel now contends that he "told her she could send me a copy of the subpoena by e-mail" but "never told her that I accepted service of the subpoena." Id. Notwithstanding Gabriel's controverting evidence, however, the Court holds that petitioner has made out a prima facie case of proper service of process.³

B. Statutory Basis

"A federal statute or the law of the state in which the court is located can provide the statutory basis for personal jurisdiction." Gucci America, Inc. v. Weixing Li, 135 F. Supp. 3d 87, 93 (S.D.N.Y. 2015). "The available statutory bases in federal courts are enumerated by Federal Rule of Civil Procedure 4(k)." Licci ex rel. Licci v. Lebanese Canadian Bank, SAL, 673 F.3d 50, 59 (2d Cir. 2012).

Initially, petitioner relied solely upon Rule 4(k)(1)(A), which provides that "[s]erving a summons ... establishes personal jurisdiction over a defendant ... who is subject to the jurisdiction of a court of general jurisdiction in the state where the district court is located." On this theory, the Court must look to New York's long-arm statute to determine whether it can assert personal jurisdiction over respondents. However, following supplemental briefing on the issue, petitioner also invoked Rule 4(k)(1)(C), which states that service of process establishes personal jurisdiction over a defendant "when authorized by federal statute." The Court analyzes these potential statutory bases in turn.

1. Rule 4(k)(1)(A) -- New York's Long-Arm Statute

Petitioner asserts that respondents are subject to this Court's "general" personal jurisdiction under CPLR § 301 and "specific" personal jurisdiction under CPLR § 302(a)(1).

a. General Jurisdiction

Under CPLR § 301, a court has general personal jurisdiction over an individual if his conduct with New York is "so ‘continuous and systematic’ as to render [it] essentially at home in the forum state." Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919, 131 S.Ct. 2846, 180 L.Ed.2d 796 (2011). "To determine whether a defendant does business in the state, the Court must be able to say from the facts that the defendant is present in the State not occasionally or casually, but with a fair measure of permanence and continuity." Wallace Church & Co. Inc. v. Wyattzier, LLC, No. 20-cv-1914 (CM), 2020 WL 4369850, at *4 (S.D.N.Y. Jul. 30, 2020). "An individual defendant ‘cannot be subject to jurisdiction under CPLR § 301 unless he is doing business in New York as an individual rather than on behalf of a corporation.’ " Id. at *5 (quoting Brinkmann v. Adrian Carriers, Inc., 29 A.D.3d 615, 815 N.Y.S.2d 196, 199 (2006) ).

Petitioner contends that both respondents satisfy the requirements of CPLR § 301 because "their ties to New York arise out of their roles in the underlying facts and circumstances and their involvement with New York entities who are parties to the Arbitration." Petitioner's Memorandum of Law in Opposition to Respondents’ Motions to Dismiss for Lack of Personal Jurisdiction ("Pet. Mem."), Dkt. No. 30, at 5. Moreover, petitioner suggests that "they have both signed the arbitration agreements governing the Arbitration, which alone may be dispositive in finding jurisdiction as they have effectively submitted to the process of the Arbitration." Id.

The Court disagrees and holds that neither respondent is subject to general personal jurisdiction in New York. Their relationship to New York entities does not render them "at home" in New York. Moreover, the only arbitration agreement that the respondents appear to have signed is an agreement to arbitrate certain disputes in Washington D.C. See Dkt. 32-2, § 12.8.

b. Specific...