MDG Real Estate Global Ltd. v. Berkshire Place Assocs., LP

513 F.Supp.3d 301

MDG REAL ESTATE GLOBAL LIMITED and MDG Real Estate Global LLC, Plaintiffs,

v.BERKSHIRE PLACE ASSOCIATES, LP and Berkshire Place, Ltd., Defendants.

19-cv-4532 (ENV) (PK)

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

Signed January 15, 2021

Richard L. Yellen, Richard L. Yellen & Associates, LLP, New York, NY, for Plaintiffs.

Lisa C. Cohen, Schindler Cohen & Hochman LLP, New York, NY, Nicholas B. Carter, Pro Hac Vice, Suzanne Elovecky, Pro Hac Vice, Todd & Weld LLP, Boston, MA, for Defendants.

MEMORANDUM & ORDER

VITALIANO, D.J.

Plaintiffs MDG Real Estate Global Limited and MDG Real Estate Global LLC (together, "MDG") bring this action against defendants Berkshire Place Associates, LP and Berkshire Place, LTD (together, "Berkshire"). MDG seeks to vacate an arbitration award arising from a real estate sales contract dispute between the parties and to enjoin Berkshire from confirming the same in parallel litigation in the District of Rhode Island. Berkshire moves to dismiss or, in the alternative, transfer, reciting a potpourri of grounds. The District of Rhode Island has stayed its proceedings pending the resolution of this motion. For the reasons that follow, in the absence of personal jurisdiction over defendants, the action is ordered transferred, in the interests of justice and convenience, to the District of Rhode Island.

Background ¹

On February 22, 2018, MDG entered into an agreement with Berkshire to purchase the Berkshire Place Nursing Home facility in Providence, Rhode Island. Compl., Dkt. 1-1, ¶¶ 3, 8. MDG conducts its business in New York, and has offices in Manhattan, Queens and Brooklyn. Id. ¶ 1. Berkshire is a Rhode Island entity with offices in or around Providence. Id. ¶ 2.

MDG terminated the agreement and Berkshire began arbitration proceedings before the American Arbitration Association, claiming that MDG's termination was improper and that Berkshire was therefore entitled to retain the $1,400,000 escrow deposit it made when the parties entered into the agreement. Id. ¶¶ 4, 12. The arbitration panel found that MDG breached its contractual obligations and awarded Berkshire the full escrow deposit. Id. ¶¶ 13, 15. The deposit is held by Riverside Abstract, LLC (the "Escrow Agent"). Id. ¶ 4. The Escrow Agent's offices are in Brooklyn, as is the bank that presently holds the deposit. Id. ¶¶ 4–6.

MDG now alleges that the arbitration panel enforced "extracontractual obligations" that ran contrary to the plain terms of the agreement. Id. ¶ 14. It contends that its termination of the agreement was timely and proper, and that the arbitration panel's award was arbitrary and capricious. Id. ¶¶ 11, 22.

Procedural History

The litigation history of this case is complex and the subject of multiple disputes among the parties. Because only the questions of personal jurisdiction and venue will be addressed, it is unnecessary to recount the entire chronology of filings across the various courts.

Ordinarily, under the rules of civil practice in New York, a civil action will be commenced by the filing of a summons and complaint. N.Y. C.P.L.R. § 304. The rules also provide for a streamlined process, used by plaintiffs here, so that, on July 3, 2019, MDG filed a two-page notice-and-summons to initiate this action in state court. Dkt. 1-1, at 2–3. On August 5, 2019, MDG filed its complaint. Id. at 4–8. The next day, Berkshire removed the action to this Court. Dkt. 1.

Meanwhile, on July 9, 2019, Berkshire initiated its action to confirm the arbitration award in Rhode Island state court. Elovecky Decl. Ex. B, Dkt. 10-2, at 10–15. On August 14, MDG removed that action to the District of Rhode Island. Id. at Ex. D, 115. On January 31, 2020, the District of Rhode Island stayed Berkshire's motion to confirm the award until this Court, as the one with the first-filed action, had an opportunity to determine the proper venue. Defs.’ Reply Ex. A, Dkt. 12, at 11–25.

Discussion

I. Personal Jurisdiction

Berkshire challenges jurisdiction, moving to dismiss the case under Federal Rule of Civil Procedure 12(b)(2). Defs.’ Mem., Dkt. 10-1, at 14–16. Not only did MDG fail to respond to this part of Berkshire's motion, the complaint describes Berkshire as a Rhode Island entity, setting its opposition to the motion off with a shaky start. See Pl.’s Opp'n Mem., Dkt. 11; Compl. ¶¶ 2–6.

At any rate, it is hornbook law that the burden rests with plaintiffs to establish the Court's personal jurisdiction over defendants. See Troma Entm't, Inc. v. Centennial Pictures Inc. , 729 F.3d 215, 217 (2d Cir. 2013). Then, when considering a motion to dismiss for lack of personal jurisdiction, the district court may rely on pleadings and affidavits or conduct an evidentiary hearing. See CutCo Indus., Inc. v. Naughton , 806 F.2d 361, 364 (2d Cir. 1986). Where, as here, the motion court relies on pleadings and affidavits, plaintiffs must make a prima facie showing of personal jurisdiction. Id. In other words, plaintiffs may defeat a jurisdiction-testing motion " ‘by pleading in good faith, legally sufficient allegations of jurisdiction.’ " Dorchester Fin. Sec., Inc. v. Banco BRJ, S.A. , 722 F.3d 81, 84 (2d Cir. 2013) (quoting Ball v. Metallurgie Hoboken-Overpelt, S.A. , 902 F.2d 194, 197 (2d Cir. 1990) ). Tellingly, on the instant motion, only defendants have submitted affidavits. See Elovecky Decl. at 1–2; id. at Ex. F ("Rotella Decl."), at 122–24. But, at this stage, the Court may evaluate only the plaintiffs’ submissions. Henkin v. Gibraltar Priv. Bank & Tr. Co. , No. 16-CV-5452 (LDW), 2018 WL 557866, at *2 (E.D.N.Y. Jan. 22, 2018) (quoting Dorchester , 722 F.3d at 86 ).

Diversity cases bring their own yardstick to determine whether the court has acquired in personam jurisdiction to hear the case. It is straightforward in concept: personal jurisdiction is determined in accordance with the laws of the forum state, subject to federal due process constraints. Nautilus Ins. Co. v. Adventure Outdoors , Inc., 247 F.R.D. 356, 358 (E.D.N.Y. 2007) (citing Savin v. Ranier , 898 F.2d 304, 306 (2d Cir. 1990) ). Drilling down on this motion, New York's jurisdictional statutes provide for both general and specific personal jurisdiction.² See N.Y. C.P.L.R. §§ 301 – 302. With respect to specific jurisdiction, "the plaintiff's cause of action must arise out of defendant's contacts with the state which, although not substantial, satisfy the state's long arm statute." Nautilus Ins. Co. , 247 F.R.D. at 359 (citing N.Y. C.P.L.R. § 302). New York's long arm statute, in turn, allows courts to exercise personal jurisdiction over an out-of-state defendant who "transacts any business within the state or contracts anywhere to supply goods or services in the state"; "commits a tortious act" within the state or, in certain circumstances, outside the state; or "owns, uses or possesses any real property situated within the state." N.Y. C.P.L.R. § 302(a) (McKinney 2019).³

Returning to MDG's complaint, which is its only submission alleging any facts that could support an exercise of jurisdiction, it is apparent that personal jurisdiction over Berkshire is lacking. The shaky start begets a losing finish. MDG alleges that Berkshire is a "foreign" entity, incorporated in Rhode Island and with offices there. Compl. ¶ 2. That is its sole allegation spelling out Berkshire's non-existent relationship to the forum state. Struggling to regain its footing, MDG opts to focus instead on the Escrow Agent's and escrow deposit's connection to New York—that both are located in Brooklyn. Compl. ¶¶ 4–6. But the Escrow Agent is not a defendant nor even a named party in this case. See, e.g. , Boyce v. Cycle Spectrum, Inc. , 148 F. Supp. 3d 256, 264–66 (E.D.N.Y. 2015) (describing the long arm statute's applicability to defendants only).⁴

A closer examination is not helpful to MDG's case. Only CPLR § 302(a)(1), conferring jurisdiction over a defendant who "transacts any business within the state or contracts anywhere to supply goods or services in the state" appears remotely relevant, and it is clear that the provision does not salvage MDG's claim. First, a comparison to Levans v. Delta Airlines, Inc. is illustrative. 988 F. Supp. 2d 330 (E.D.N.Y. 2013). Plaintiffs there, unlike here, sued one defendant that was plausibly subject to the court's personal jurisdiction (Delta Airlines) and one defendant that ultimately was not (Roraima Airlines). Id. at 332–34. To establish that Roraima "transacted business in New York, plaintiff relie[d] primarily on the relationship between Roraima and Delta ," such as their agreements regarding the handling of New York residents’ luggage and the managing of regulatory compliance. Id. at 335 (emphasis added). Finding that such agreements did not amount to Roraima transacting business in New York, and observing that this analysis typically deals with contracts "between a plaintiff and a defendant ," the court concluded that the fact "[t]hat Delta may transact business in New York does not confer jurisdiction over Roraima." Id. at 336 (emphasis in original). Applying this reasoning to the instant dispute, the fact that Berkshire contracted with a New York-based Escrow Agent does not, without more, establish that Berkshire transacted business in New York, nor does it support in personam jurisdiction over Berkshire in this action.

Second, to base jurisdiction on a contract negotiated entirely outside the forum state by a non-domiciliary, as is the case here, "the contract must be to send goods [or services] specifically into New York." Boyce , 148 F. Supp. 3d at 264 (quoting Korn & Miller, et al., New York Civil Practice: CPLR ¶ 302.10 (David L. Ferstendig ed., LexisNexis Matthew Bender 2d Ed.)). MDG has not alleged the existence of such a contract, nor can it.

The presence of the Escrow Agent in New York is a dry hole for another reason. First off, the funds were deposited into the New York escrow account by MDG, not Berkshire. Compl. ¶ 9. Even if Berkshire had...