House of Diamonds v. Borgioni, LLC

737 F.Supp.2d 162

HOUSE OF DIAMONDS, Plaintiff,

v.BORGIONI, LLC, et al., Defendants.

No. 08 Civ. 6760(RJS)(RLE).

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

Aug. 25, 2010.

Mark J. Eberle, Augustine & Eberle LLP, New York, NY, for Plaintiff.

Joseph Zrelak, Tampa, FL, pro se.

Livada Diamond Corp., Tampa, FL, c/o Rhonda A. Bartolacci, Registered Agent, Tampa, FL, J. Charles and Company, Inc., d/b/a J. Charles Custom Jewelers, Tampa, FL, c/o A1A Registered Agent, Inc., Royal Palm Beach, FL, Jan Charles Chrissafis, Tampa, FL, for Defaulting Defendants.

MEMORANDUM OPINION & ORDER

RONALD L. ELLIS, United States Magistrate Judge:

I. INTRODUCTION

On July 29, 2008, Plaintiff House of Diamonds, Inc. ("House of Diamonds") filed a Complaint against Defendants Borgioni LLC, Rhonda A, Bartolacci, Tiffany A, Bartolacci (collectively, the "Borgioni Defendants"); Livada Diamond Corp. ("Livada"); J. Charles and Company, Inc. d/b/a J. Charles Custom Jewelers ("J. Charles"); Joseph Zrelak; and Jan Charles Chrissafis, alleging breach of contract, breach of the covenant of good faith, fraud, account stated, and conversion. (Compl. ¶¶ 57-90.) By stipulation dated April 16, 2009, House of Diamonds and the Borgioni Defendants, who both consented to the jurisdiction of the undersigned pursuant to 28 U.S.C. § 636(c), settled for $38,000, and agreed to dismiss the case as to the Borgioni Defendants, with prejudice and without costs orfees to either party. ( See Doc. Nos. 16, 29.) As such, the Borgioni Defendants are not included in this Opinion. The remaining Defendants, who did not consent to the jurisdiction of the undersigned (Livada, J. Charles, and Chrissafis), failed to answer, or otherwise respond to the Complaint. On August 26, 2009, District Judge Sullivan entered a default judgment against them (Doc. Nos. 30-31), but damages were not decided at that time ¹. Accordingly, these Defendants are not included in this Opinion. Both Zrelak and House of Diamonds consented to the jurisdiction of the undersigned pursuant to 28 U.S.C. § 636(c). (Doc. No. 16.) Pending before the Court is House of Diamonds's motion for summary judgment against Zrelak (Doc. No. 38), which is unopposed by Zrelak. For the reasons which follow, the motion is GRANTED. The Court orders that House of Diamonds be awarded judgment against Zrelak, jointly and severally with all remaining Defendants, as follows: (1) $118,985.50² in damages; (2) pre-judgment interest at 9% per annum ³; and (3) post-judgment interest pursuant to 28 U.S.C. § 1961(a).

II. BACKGROUND

Zrelak began his relationship with House of Diamonds in July 2007 at a Las Vegas trade show, where he indicated his interest in obtaining diamonds on consignment. (House of Diamonds Statement of Uncontested Facts ("Diamonds' SOF") ¶¶ 3-5.) Zrelak began submitting requests for, and receiving, diamonds from House of Diamonds from July 2007 until May 2008. ( Id.) For each diamond delivery, House of Diamonds delivered the goods pursuant to a consignment memorandum. ( Id. ¶ 6.) Beginning in October 2007, Zrelak failed to pay for, or return, the diamonds. ( Id. ¶ 7.) The total damage to House of Diamonds for the unreturned diamonds is $156,985.50. ( Id. ¶¶ 8-16.) In May 2008, Zrelak contacted House of Diamonds to inform it that he had delivered the diamonds to Chrissafis (another diamond dealer), who had then sold them without paying Zrelak. ( Id. ¶ 17.) Zrelak filed a police report against Chrissafis for failure to pay him for the diamonds. ( Id. ¶ 18.) Chrissafis admitted to the police that he had sold the diamonds for less than their value because he was having financial difficulties. (House of Diamonds' Mem. of Law in Support of Summary Judgment ("Diamonds' Mem."), Jain Decl., Ex. C.) Zrelak was aware that Chrissafis was having difficulties in making payments to him, yet he continued to sell to him. ( Id.; Diamonds' SOF ¶ 18.) Once Zrelak revealed these facts to House of Diamonds, it began issuing written and verbal demands for the return of the diamonds or full payment of the amounts due on each consignment memorandum. (Diamonds' SOF ¶ 19.) Zrelak failed to make the payments to House of Diamonds. ( Id.) In his Answer, he admits that he was the primary party dealing with House of Diamonds, and that he received the diamonds from House of Diamonds. (Zrelak's Answer at 1.) He also admits that Chrissafis sold the diamonds and failed to pay Zrelak the proper amount. ( Id. at 2.) He sets forth no defenses or denials. Additionally, he haschosen to not respond to the instant motion and it remains unopposed.

III. DISCUSSION

A. Jurisdiction

This Court has subject matter jurisdiction over the claims in the instant action pursuant to 28 U.S.C. § 1332. Generally, a district court sitting in diversity has 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." Fed. R. Civ. P. 4(k)(1)(A). To determine whether personal jurisdiction over Zrelak is proper, the Court uses a two-step analysis. First, the Court must determine whether New York's long-arm statute, N.Y. C.P.L.R. § 302, confers jurisdiction over Zrelak to New York State Courts of general jurisdiction. Secondly, the Court must establish whether the exercise of personal jurisdiction over Zrelak would be permissible under the Due Process Clause of the United States Constitution. Metro. Life Ins. Co. v. Robertson-Ceco Corp., 84 F.3d 560, 567 (2d Cir.1996), cert. denied, 519 U.S. 1006, 117 S.Ct. 508, 136 L.Ed.2d 398 (1996).

1. Zrelak Conducts Business Within the Meaning of New York's Long-Arm Statute

a. N.Y. C.P.L.R. § 302(a)(1)

New York's long-arm statute grants personal jurisdiction over a non-domiciliary defendant if the defendant "transacts business within the state." N.Y. C.P.L.R. § 302(a)(1). A defendant is found to transact business within the state if it "purposefully avails itself of the privileges of conducting activities within New York." Ehrenfeld v. Bin Mahfouz, 9 N.Y.3d 501, 851 N.Y.S.2d 381, 881 N.E.2d 830, 834 (2007) (quoting McKee Elec. Co. v. Rauland-Borg Corp., 20 N.Y.2d 377, 283 N.Y.S.2d 34, 229 N.E.2d 604 (1967)). It is not necessary that the defendant be physically present in New York for jurisdiction to be proper. Fischbarg v. Doucet, 9 N.Y.3d 375, 849 N.Y.S.2d 501, 880 N.E.2d 22, 26 (2007). In fact, courts have found that actions such as telephone, fax, and email communications suffice for jurisdictional purposes, so long as the defendant's activities in the state are purposeful and substantially related to the asserted claims. Deutsche Bank Sec., Inc. v. Montana Bd. Of Invs., 7 N.Y.3d 65, 818 N.Y.S.2d 164, 850 N.E.2d 1140 (2006), cert. denied, 549 U.S. 1095, 127 S.Ct. 832, 166 L.Ed.2d 665 (2006). Courts have found that a defendant who purposefully created and maintained a continuous relationship with a New York corporation, even in the absence of any further business contacts with the state, was "transacting business" within the meaning of C.P.L.R. § 302(a)(1). George Reiner & Co., Inc. v. Schwartz, 41 N.Y.2d 648, 394 N.Y.S.2d 844, 363 N.E.2d 551 (1977). A relationship as brief as nine months may be sufficiently continuous for jurisdictional purposes. See, e.g., Fischbarg, 849 N.Y.S.2d 501, 880 N.E.2d at 27-28.

In the instant case, Zrelak purposefully approached House of Diamonds at a jewelry show in Las Vegas, and sought to create a relationship with it, knowing it was a New York corporation. (Diamonds' SOF ¶¶ 3-5.) Over a period of approximately one year, Zrelak maintained continuous communications with House of Diamonds by fax and mail, and regularly requested and received diamonds on consignment. ( Id.) By agreeing to the terms of the numerous consignment memoranda, Zrelak contracted to receive goods and services in New York, and thereby projected himself onto the New York diamond market and invoked the benefits and protections of New York laws relating to the handling and sale of precious stones andmetals. See Fischbarg, 849 N.Y.S.2d 501, 880 N.E.2d at 28; see also Parke-Bernet Galleries, Inc. v. Franklyn, 26 N.Y.2d 13, 308 N.Y.S.2d 337, 256 N.E.2d 506 (1970). There is no indication that Zrelak sought to end his relationship with House of Diamonds, or that he in any way attempted to avoid or limit his contacts with New York. Moreover, the instant action arises directly out of Zrelak's contacts with House of Diamonds. Thus, by purposefully creating a continuous relationship with a New York corporation and by maintaining constant communications with it over the period of approximately one year, Zrelak availed himself of the benefits and privileges of transacting business in New York and is therefore subject to jurisdiction under N.Y. C.P.L.R. § 302(a)(1).

b. N.Y. C.P.L.R. § 302(a)(3)

In addition to jurisdiction over non-residents who transact business in New York, under limited circumstances, New York's long-arm statute also applies to out-of-state actors who cause an injury in New York. Acts that fall under C.P.L.R. § 302(a)(3) include committing a tortious act (except defamation) outside the state that causes injury to person or property within the state, if the tortfeasor:

(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 or international commerce;

N.Y. C.P.L.R. § 302(a)(3). Thus, for jurisdiction to be proper under the statute, the Court must determine that Zrelak has caused injury in New York by committing a tortious act outside of New York, and that he meets the requirements of either subsection (i) or subsection (ii). The Court does not inquire into Zrelak's ultimate liability, but rather only looks at whether House of Diamonds has presented a colorable tort claim under New...