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Fanelli v. Latman
Factual and Procedural Background
The plaintiffs, domiciled in New York, allege that in November 2014 they entered into a contract with defendants Richard K. Latman and CRMSuite Corporation (CRM), domiciled in Florida, for the development and delivery of a "Dating App" in exchange for $100,000. The plaintiffs claim they paid the full amount but the defendants never delivered the app. The plaintiffs commenced an action in the Supreme Court, Richmond County, seeking damages for breach of contract and fraud. The defendants moved separately pursuant to CPLR 3211(a) to dismiss the complaint against them on grounds including lack of personal jurisdiction. The Supreme Court denied these motions, and the defendants appealed.
Legal Issues Presented
- Whether the Supreme Court properly exercised personal jurisdiction over defendants Richard K. Latman and CRMSuite Corporation under New York law.
- Whether the defendants' motions to dismiss for lack of personal jurisdiction pursuant to CPLR 3211(a) should have been granted.
Arguments of the Parties
Appellants' Arguments
- The Supreme Court lacked personal jurisdiction over Latman and CRM because neither is domiciled in New York nor has sufficiently continuous and systematic contacts with New York to establish general jurisdiction under CPLR 301.
- The defendants' contacts with New York do not meet the criteria for specific jurisdiction under CPLR 302(a)(1) or (a)(3), as the alleged tortious conduct occurred outside New York and the defendants' activities in New York were not purposeful or sufficient to constitute transacting business.
Respondents' Arguments
- Personal jurisdiction over Latman and CRM was proper under CPLR 301 (general jurisdiction) and CPLR 302(a)(1) and (a)(3) (specific jurisdiction).
- The defendants committed tortious acts causing injury within New York and transacted business in New York through their contract and communications with the plaintiffs.
- Discovery on personal jurisdiction was warranted to further explore jurisdictional facts.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Fischbarg v Doucet, 9 N.Y.3d 375, 381 | Burden of proving personal jurisdiction lies with party asserting it; purposeful availment standard. | Confirmed plaintiff’s burden and the standard for purposeful availment under CPLR 302(a)(1). |
| Aybar v Aybar, 169 A.D.3d 137, 142, affd 37 N.Y.3d 274 | Standards for asserting general and specific jurisdiction in New York. | Used to analyze whether defendants’ contacts warranted general or specific jurisdiction. |
| Opticare Acquisition Corp. v Castillo, 25 A.D.3d 238, 243 | Prima facie showing required to oppose dismissal for lack of jurisdiction. | Outlined evidentiary standard plaintiffs must meet to establish jurisdiction. |
| Nick v Schneider, 150 A.D.3d 1250, 1251 | Complaint and affidavits are construed in plaintiff’s favor on jurisdictional motions. | Applied to resolve doubts in favor of plaintiffs when considering jurisdictional facts. |
| Leon v Martinez, 84 N.Y.2d 83, 87-88 | Standard for reviewing personal jurisdiction motions. | Reinforced the prima facie standard and factual inferences in favor of plaintiff. |
| Daimler AG v Bauman, 571 U.S. 117, 122, 137 | Limits on general jurisdiction; defendant must be "essentially at home" in forum. | Held defendants were not "essentially at home" in New York for general jurisdiction. |
| Hermann v Sharon Hosp., 135 A.D.2d 682, 683 | In tort cases, situs of injury is where original event causing injury occurred. | Determined injury occurred in Florida, not New York, negating jurisdiction under CPLR 302(a)(3). |
| Paterno v Laser Spine Inst., 24 N.Y.3d 370, 377-381 | Distinction between passive and interactive websites for jurisdiction; purposeful availment standard. | Found defendants’ website was passive and did not confer jurisdiction; communications insufficient for purposeful availment. |
| McGowan v Smith, 52 N.Y.2d 268, 274-275 | Clarification on situs of injury for jurisdictional purposes. | Supported holding that injury location was Florida, not New York. |
| Greenbacker Residential Solar LLC. v OneRoof Energy, Inc., 174 A.D.3d 437, 438 | Economic injury felt in forum insufficient alone for jurisdiction under CPLR 302(a)(3). | Applied to reject plaintiffs’ argument that economic injury in New York established jurisdiction. |
| Deutsche Bank AG v Vik, 163 A.D.3d 414, 415 | Same as above regarding economic injury and jurisdiction. | Reinforced insufficiency of economic injury alone for jurisdiction. |
| Qudsi v Larios, 173 A.D.3d 920, 922 | Same principle on economic injury and situs of tort. | Supported court’s jurisdictional analysis under CPLR 302(a)(3). |
| Rushaid v Pictet & Cie, 28 N.Y.3d 316, 323 | Two-prong test for CPLR 302(a)(1): purposeful activities and claim arising from those activities. | Applied to analyze whether defendants transacted business and whether claims arose from such transactions. |
| D & R Global Selections, S.L. v Bodega Olegario Falcon Pineiro, 29 N.Y.3d 292, 297 | Further explanation of CPLR 302(a)(1) jurisdictional test. | Used to evaluate adequacy of defendants’ contacts with New York. |
| Kreutter v McFadden Oil Corp., 71 N.Y.2d 460, 467 | Purposeful availment can exist without physical presence if activities are purposeful. | Considered to determine whether defendants’ conduct amounted to purposeful availment. |
| McKee Elec. Co. v Rauland-Borg Corp., 20 N.Y.2d 377, 382 | Definition of purposeful availment in jurisdictional context. | Supported the standard applied to defendants’ contacts with New York. |
| State of New York v Vayu, Inc., 195 A.D.3d 1337, 1339-1340 | Analysis of purposeful availment and transacting business in New York. | Used to reject plaintiffs’ argument that contract and communications established jurisdiction. |
| Royalty Network, Inc. v Harris, 95 A.D.3d 775, 775-776 | Similar analysis of purposeful availment and jurisdiction over non-domiciliary defendants. | Applied in rejecting jurisdiction based on contract and communications. |
| Peterson v Spartan Indus., 33 N.Y.2d 463, 466-467 | Standards for granting discovery on jurisdictional issues. | Rejected plaintiffs’ request for jurisdictional discovery as unsupported. |
Court's Reasoning and Analysis
The court began by noting the burden of proving personal jurisdiction rests with the party asserting it, here the plaintiffs, who must make only a prima facie showing. The plaintiffs claimed jurisdiction under New York's general jurisdiction statute (CPLR 301) and specific jurisdiction provisions of the long-arm statute (CPLR 302[a][1] and [3]).
Regarding general jurisdiction under CPLR 301, the court found that neither defendant was domiciled in New York nor had contacts so continuous and systematic as to render them "essentially at home" in New York, citing Daimler AG v Bauman and Aybar v Aybar. Thus, general jurisdiction was not established.
For specific jurisdiction under CPLR 302(a)(3), the court held that the situs of injury is where the original tortious act occurred, not where damages were felt. Here, the injury-causing acts occurred in Florida, so jurisdiction under this provision was improper.
Under CPLR 302(a)(1), the court applied the two-prong test requiring purposeful activity in New York and that the claim arise from such activity. The court found that CRM’s website was passive and not directed at New York residents, and that the contract and communications initiated by the plaintiffs did not demonstrate purposeful availment by the defendants. Consequently, specific jurisdiction was not established.
The court also rejected the plaintiffs’ request for jurisdictional discovery, finding no factual basis to postpone the jurisdictional determination.
Because the plaintiffs failed to make a prima facie showing of personal jurisdiction, the court reversed the Supreme Court’s denial of defendants’ motions to dismiss and granted those motions.
Holding and Implications
The court REVERSED the Supreme Court order denying defendants' motions and GRANTED the separate motions of Richard K. Latman and CRMSuite Corporation pursuant to CPLR 3211(a) to dismiss the complaint against each for lack of personal jurisdiction.
This decision directly affects the parties by dismissing the claims against these defendants in New York courts for lack of jurisdiction. The court did not establish any new precedent but applied established jurisdictional standards strictly, emphasizing the limits of New York’s jurisdiction over out-of-state defendants.
Holland & Knight LLP, New York, NY (Benjamin R. Wilson and Jennifer Lada of counsel), for appellants.
Windels Marx Lane & Mittendorf, LLP, New York, NY (Ryan W. Federer and Amanda A. Meehan of counsel), for respondents.
VALERIE BRATHWAITE NELSON, J.P., REINALDO E. RIVERA, LINDA CHRISTOPHER, LARA J. GENOVESI, JJ.
DECISION & ORDER
In an action, inter alia, to recover damages for breach of contract and fraud, the defendants Richard K. Latman and CRMSuite Corporation appeal from an order of the Supreme Court, Richmond County (Orlando Marrazzo, Jr., J.), dated May 22, 2019. The order, insofar as appealed from, denied those defendants' separate motions pursuant to CPLR 3211(a) to dismiss the complaint insofar as asserted against each of them.
ORDERED that the order is reversed insofar as appealed from, on the law, with costs, and the separate motions of the defendant Richard K. Latman and the defendant CRMSuite Corporation pursuant to CPLR 3211(a) to dismiss the complaint insofar as asserted against each of them are granted.
The plaintiffs, domiciled in New York, allege that, through a series of emails in November 2014, they entered into a contract with the defendants, domiciled in Florida, wherein the defendants would develop and deliver software and related applications for the creation of a "Dating App," in exchange for $100, 000. The plaintiffs allege that they paid $100, 000, but the defendants never delivered the Dating App. The plaintiffs commenced this action in the Supreme Court, Richmond County, inter alia, to recover damages for breach of contract and fraud. The defendant CRMSuite Corporation (hereinafter CRM) and the defendant Richard K. Latman separately moved pursuant to CPLR 3211(a) to dismiss the complaint insofar as asserted against each of them, on the ground, among others, that the New York court lacked personal jurisdiction over each of them. The Supreme Court, inter alia, denied the motions. CRM and Latman together appeal.
The ultimate burden of proving a basis for personal jurisdiction rests with the party asserting jurisdiction (see Fischbarg v Doucet, 9 N.Y.3d 375, 381 n 5; Aybar v Aybar, 169 A.D.3d 137, 142, affd 37 N.Y.3d 274). When opposing a motion to dismiss the complaint pursuant to CPLR 3211(a)(8) on the ground of lack of jurisdiction, a plaintiff "need only make a prima facie showing" that personal jurisdiction over the moving defendant exists (Opticare Acquisition Corp. v Castillo, 25 A.D.3d 238, 243; see Lowy v Chalkable, LLC, 186 A.D.3d 590, 591). "The facts alleged in the complaint and affidavits in opposition to such a motion to dismiss are deemed true and construed in the light most favorable to the plaintiff, and all doubts are to be resolved in favor of the plaintiff" (Nick v Schneider, 150 A.D.3d 1250, 1251; see Leon v Martinez, 84 N.Y.2d 83, 87-88).
In opposing the separate motions of Latman and CRM, the plaintiffs asserted that jurisdiction over both defendants was proper pursuant to CPLR 301 and 302(a)(1) and (3). "Under modern jurisprudence, a court may assert general all-purpose jurisdiction or specific conduct-linked jurisdiction over a particular defendant" (Aybar v Aybar, 169 A.D.3d at 142-143; see Daimler AG v Bauman, 571 U.S. 117, 122). Contrary to the plaintiffs' contention, they did not make a prima facie showing of personal jurisdiction over Latman or CRM. The complaint itself establishes that Latman is domiciled in Florida and that CRM was incorporated in and has its principal place of business in Florida (see Daimler AG v Bauman, 571 U.S. at 137; Aybar v Aybar, 169 A.D.3d at 144). Further, the facts alleged, even if established, do not support a conclusion that CRM's contacts with New York were so "continuous and systematic" (Daimler AG v Bauman, 571 U.S. at 137 [internal quotation marks omitted]) as to render it "essentially at home" in New York (id. [internal quotation marks omitted]). Thus, the plaintiffs failed to demonstrate personal jurisdiction over Latman or CRM under New York's general jurisdiction statute, CPLR 301.
Specific jurisdiction over a defendant is obtained through New York's long-arm statute, CPLR 302. It provides, in relevant part, that New York courts may exercise personal jurisdiction over any nondomiciliary who "commits a tortious act without the state causing injury to person or property within the state" (id. § 302 [a][3]), or "transacts any business within the state or contracts anywhere to supply goods or services in the state" (id. § 302[a][1]).
Under CPLR 302(a)(3), "[t]he situs of the injury is the location of the original event which caused the injury, not the location where the resultant damages are subsequently felt by the plaintiff" (Hermann v Sharon Hosp., 135 A.D.2d 682, 683; see Paterno v Laser Spine Inst., 24 N.Y.3d 370, 381; McGowan v Smith, 52 N.Y.2d 268, 274-275). Here, the plaintiffs allege that Latman and CRM defrauded them by accepting payment for the Dating App when they knew it was not completed and did not plan to complete it. The location of the original event which caused the injury was Florida, not New York. That the plaintiffs felt economic injury in New York, alone, is an insufficient basis to confer jurisdiction under CPLR 302(a)(3) (see Greenbacker Residential Solar LLC. v OneRoof Energy, Inc., 174 A.D.3d 437, 438; Deutsche Bank AG v Vik, 163 A.D.3d 414, 415; see also Qudsi v Larios, 173 A.D.3d 920, 922).
"The CPLR 302(a)(1) jurisdictional inquiry is twofold: under the first prong the defendant must have conducted sufficient activities to have transacted business in the state, and under the second prong, the claims must arise from the transactions" (Rushaid v Pictet & Cie, 28 N.Y.3d 316, 323; see D & R Global Selections, S.L. v Bodega Olegario Falcon Pineiro, 29 N.Y.3d 292, 297). The sufficient activities prong is met "even though the defendant never enters New York, so long as the defendant's activities here were purposeful" (Kreutter v McFadden Oil Corp., 71 N.Y.2d 460, 467; see Rushaid v Pictet & Cie, 28 N.Y.3d at 323). "Purposeful activities are those with which a defendant, through volitional acts, 'avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws'" (Fischbarg v Doucet, 9 N.Y.3d at 380, quoting McKee Elec. Co. v Rauland-Borg Corp., 20 N.Y.2d 377, 382; see Rushaid v Pictet & Cie, 28 N.Y.3d at 323).
Here, the totality of the circumstances does not provide the plaintiffs with a basis for imposing long-arm jurisdiction over either Latman or CRM pursuant to CPLR 302(a)(1). The affidavits submitted on the subject motions establish that CRM advertises its services nationwide through a website that is not specifically directed toward New York residents or businesses. It is undisputed that the plaintiff Jodie Fanelli initiated the contact between the parties and solicited the defendants' services in designing the Dating App. Contrary to the plaintiffs' contention, CRM's website does not constitute transacting business within the State. The plaintiffs failed to establish that the website was more than informational or passive in nature, and there is no indication that the website permitted any users to purchase goods or services from CRM or allowed any interaction (see Paterno v Laser Spine Inst., 24 N.Y.3d at 377-378; Grimaldi v Guinn, 72 A.D.3d 37, 46-47). Further, the contract to develop and deliver the Dating App to the plaintiffs, and Latman's communications with the plaintiffs in New York regarding this development, do not demonstrate the purposeful availment necessary to confer personal jurisdiction over the defendants (see Paterno v Laser Spine Inst., 24 N.Y.3d at 378; State of New York v Vayu, Inc., 195 A.D.3d 1337, 1339-1340; Royalty Network, Inc. v Harris, 95 A.D.3d 775, 775-776).
Contrary to the plaintiffs' contention, they failed to demonstrate that facts may exist requiring discovery on the issue of personal jurisdiction so as to postpone resolution of the issue (cf. Peterson v Spartan Indus., 33 N.Y.2d 463, 466-467).
The parties' remaining contentions either are without merit or need not be reached in light of our determination.
Accordingly, the Supreme Court should have granted the separate motions of Latman and CRM pursuant to CPLR 3211(a) to dismiss the complaint insofar as asserted against each of them.
BRATHWAITE NELSON, J.P., RIVERA, CHRISTOPHER and GENOVESI, JJ., concur.
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