Stephan v. Babysport, LLC

Page 279

499 F.Supp.2d 279

Gerard STEPHAN, Plaintiff, v. BABYSPORT, LLC and Tommy Habeeb, Defendants.

No. CV-07-0478.

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

August 6, 2007.

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Law Offices of Todd Wegrovsky, PLLC, by: Todd Wengrovsky, Esq., Calverton, NY, for Plaintiff.

Danamraj & Youst, P.C., by: Kenneth Thomas Emanuelson, Esq., Dallas, TX, for Defendants.

MEMORANDUM AND ORDER

WEXLER, District Judge.

This is an action commenced by Plaintiff Gerard Stephan ("Plaintiff' or "Stephan") against Defendants Babysport, LLC ("Babysport") and Tommy Habeeb ("Habeeb") (collectively "Defendants") alleging patent infringement. Presently before the court are Defendants' motions to dismiss for lack of personal jurisdiction pursuant to Rule 12(b)(2) of the Federal Rules of Civil Procedure as well as Defendants' alternative motions for change of venue and/or dismissal for failure to state a claim upon which relief can be granted.

BACKGROUND

I. The Parties and the Allegations of the Complaint

The following facts are drawn from Plaintiffs complaint and assumed, for the purpose of this motion, to be true.

Plaintiff is an individual residing in Suffolk County, New York. Babysport is a limited liability corporation organized under the laws of the State of Texas with its principal place of business in that state. Defendant Habeeb is the Managing Member of Babysport and a resident of Dallas, Texas. There is no allegation that either Defendant maintains an address or place of business, has any employees or agents, or maintains an agent for service of process within the State of New York.

Stephan holds a patent as the inventor of a device that adapts a nipple cap from a baby's drinking bottle to a standard beverage bottle (the "Patent"). Following the issuance of the Patent, Stephan engaged the services of a marketing firm, which developed certain promotional materials geared toward the product's release. Just prior to the release of the promotional materials, Stephan alleges that he became aware of a product manufactured by Babysport that is "strikingly similar" to the invention for which he received the Patent. The product manufactured by Babysport is a similarly designed adapter and is advertised as able to turn "any bottled water into a baby bottle" (the "Babysport Product").

Babysport maintains a website that provides information about its product and allows users to e-mail the company for more information about the adapter. While the Babysport Product is not available for direct purchase at the Babysport website, it is available for online purchasing via a link to the Amazon.com website. The Babysport website also advises visitors that the product is available for purchase at retail stores including Seven Eleven. Habeeb, individually, maintains a website that outlines the details of his several entrepreneurial ventures. This site contains a short statement that he is the inventor of the "Babysport Water Bottle Nipple Adapter." Similar to the Babysport website, visitors to the Habeeb site cannot complete a transaction to directly purchase a Babysport adapter via his website.

Stephan states that he purchased the Babysport Product at Seven Eleven retail stores in Suffolk County. Documents provided to the court by Plaintiff indicate that Defendants' product came to New York by way of the McLane Company ("McLane"). McLane is a distributor that maintains regional warehouses from which products are shipped. Included among those warehouses is the McLane northeast regional warehouse located in the State of New York. That warehouse distributes to stores in New York, including the Seven Eleven where the Babysport Product was purchased. The McLane northeast regional warehouse in New York also distributes products to Pennsylvania, Virginia and New Jersey.

Plaintiffs documents show billing to McLane in Texas and an indication on certain invoices indicate that the products were bound for the McLane northeast warehouse in New York State. Defendants submit affidavit testimony setting forth the volume of sales to MacLane by Babysport. Those documents state the total sales volume from Babysport to MacLane as approximately $18,000. Of that amount, approximately $1,300 worth of product was distributed to MacLane's northeast warehouse. Of the states serviced by the northeast warehouse, Babysport estimates that less than $360 worth of the Babysport Product was ultimately sold in New York State.

DISCUSSION

I. Personal Jurisdiction

A district court may exercise jurisdiction over a defendant who would be subject to the jurisdiction of a court of general jurisdiction in the state in which the district court is located. Fed.R.Civ.P 4(k)(1)(A). "In order to survive a motion to dismiss for lack of personal jurisdiction, a plaintiff must make a prima facie showing that jurisdiction exists." See, e.g., Best Van Lines, Inc. v. Walker, 490 F.3d 239, 2007 WL 1815511 at *2 (2d Cir. June 26, 2007). Where, as here, no discovery has been conducted, all factual matters are to be resolved in the light most favorable to plaintiff. E.g., Jazini v. Nissan Motor Co., Ltd., 148 F.3d 181, 184 (2d Cir.1998). If, but only if, jur diction is proper under state law must the court address whether exercise of jurisdiction comports with constitutional standards of due process under the Fourteenth Amendment. Best Van Lines, 490 F.3d 239, 241-42.

A. Personal Jurisdiction Under New York Law

Plaintiff alleges personal jurisdiction over Defendants pursuant to sections 301, 302(a)(1), and 302(a)(3) of the New York Civil Practice Law and Rules ("CPLR"). The court considers each basis in turn.

1. Section 301

A foreign corporation is amenable to jurisdiction under CPLR section 301 if it is "doing business" in New York State. A foreign corporation is "doing business" if it engages in "such a continuous and systematic course of doing business" sufficient to support a finding of its presence in this jurisdiction. E.g., Frummer v. Hilton Hotels International, Inc., 19 N.Y.2d 533, 281 N.Y.S.2d 41, 43, 227 N.E.2d 851 (1967). A corporation is "present in New York ... if it does business in New York not occasionally or casually, but with a fair measure of permanence and continuity.'" Hoffritz for Cutlery, Inc. v. Amajac, Ltd., 763 F.2d 55, 58, (2d. Cir.1985), quoting Tauza v. Susquehanna Coal Co., 220 N.Y. 259, 267, 115 N.E. 915, 917 (1917). Accord Laufer v. Ostrow, 55 N.Y.2d 305, 449 N.Y.S.2d 456, 434 N.E.2d 692 (1982).

Factors tending to show a presence in New York and thus a finding of jurisdiction include the existence of a New York office, the presence of bank accounts in New York, ownership of property in New York, and the presence of agents or of employees in New York. Landoil Resources Corp. v. Alexander & Alexander Services, Inc., 918 F.2d 1039, 1043 (2d Cir.1990); see also Hoffritz, 763 F.2d at 58. Solicitation of business alone, however, is insufficient to find a corporate presence in this state. Landoil, 918 F.2d at 1043.

A foreign supplier of goods to an independent agency that solicits orders from New York purchasers is not "present" in this jurisdiction. Laufer, 449 N.Y.S.2d at 459, 434 N.E.2d 692. Additionally, a foreign corporation operating in this manner is not subject to jurisdiction merely because it solicits business in New York. See, e.g., Delagi v. Volkswagenwerk AG of Wolfsburg Germany, 29 N.Y.2d 426, 328 N.Y.S.2d 653, 657, 278 N.E.2d 895 (1972). Instead, where the solicitation of business is asserted in support of a "doing business" allegation, the foreign corporation's activities must rise to me level of solicitation plus "some additional activities ... sufficient to render the corporation amenable to suit." E.g., Miller v. Surf Properties, Inc., 4 N.Y.2d 475, 176 N.Y.S.2d 318, 321, 151 N.E.2d 874 (1958), quoting International Shoe Co. v. Washington, 326 U.S. 310, 314, 66 S.Ct. 154, 90 L.Ed. 95 (1945). This "solicitation-plus" standard is not satisfied merely through sales of a manufacturer's product in New York. Delagi, 29 N.Y.2d at 433, 328 N.Y.S.2d 653, 278 N.E.2d 895 ("[M]ere sales of a manufacturer's product, however substantial, have never made the foreign corporation amenable to suit in this jurisdiction."). To support the exercise of jurisdiction the defendant corporation must solicit business in New York in a manner that is "substantial and continuous" and must engage in other activities of substance in the state. Medpay Systems, Inc. v. Medpay USA, LLC, 2007 VIL 110076" at *6 (E.D.N.Y. March 29, 2007); see also Landoil, 918 F.2d at 1043-44.

Even construing the facts alleged in the light most favorable to Plaintiff, it is clear that jurisdiction cannot be maintained pursuant to Section 301. Defendants do not maintain a New York office, do not have agents in New York, do not have any employees in New York, nor maintain any New York bank accounts. The court, therefore cannot find that either defendant is "present" within this jurisdiction. While the alleged infringing product was offered for sale in New York stores, these sales — however substantial — do not create personal jurisdiction over Babysport or over Habeeb. This is true even in light of defendant's alleged solicitation via its website. This solicitation does not amount to conducting business in a manner that is "substantial and continuous" while engaging in other substantive activities in the state.

2. Section 302(a)(1)

CPLR Section 302(a)(1) provides for jurisdiction over a nondomicilliary defendant who transacts any business within the state so long as the cause of action arises out of the defendant's New York transaction. PDK Labs, Inc. v. Friedlander, 103 F.3d 1105, 1109 (2d Cir.1997). A Ending of jurisdiction under Section 302(a)(1) requires a showing that defendant: (1) "transacts any business" in New York and, (2) that the cause of action "arises from" such transaction. Best Van Lines,...