Emerald Asset Advisors, LLC v. Schaffer
895 F. Supp. 2d 418
E.D.N.Y2012Background
- Emerald Asset Advisors, LLC sues Schaffer, Wong, MVP, Swetel, Selective, Walter Ross, and Ross Pacific for $200,000 escrow funds in a financing deal for Eternal Image, Inc.
- Wong and MVP allegedly induced Emerald to place $200,000 in Schaffer’s client trust account as security for a $2 million financing that never materialized.
- $200,000 was wired in four transfers to Schaffer’s escrow/trust account in November-December 2009 as part of the contemplated financing.
- Emerald alleges Schaffer misappropriated the funds for personal use and that Wong and Swetel facilitated or concealed the diversion.
- Schaffer moves to dismiss for lack of personal jurisdiction or, alternatively, to transfer venue; Emerald seeks Rule 11 sanctions.
- Court addresses service of process, finds good cause to extend service for Wong and other defendants; MVP properly served; others not yet served within 120 days.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Schaffer is subject to New York jurisdiction | Schaffer is an agent/co-conspirator for Wong; his acts in NY connect him to the dispute. | No sufficient NY contacts; defendant resides outside NY and did not act in NY. | Yes; Court has personal jurisdiction under CPLR 302(a)(2) via agency/conspiracy theory. |
| Whether the exercise of jurisdiction comports with due process | Schaffer purposefully availed himself of NY by participating in the scheme and benefiting from NY acts. | Distance and forum inconvenience negate due process concerns. | Yes; due process satisfied; minimum contacts and fair play and substantial justice shown. |
| Whether venue is proper or transfer is appropriate | Venue proper in NY because substantial events occurred there; parties reside outside NY but activity centered here. | If no jurisdiction, venue should be improper and transfer appropriate. | Venue is proper; 1406 transfer denied; 1404 transfer not yet appropriate and denied without prejudice. |
| Whether the case should be dismissed for failure to prosecute as to the Additional Defendants | Efforts extended and good cause shown to locate and serve; dismissal would be premature. | Lack of service within 120 days warrants dismissal absent good cause. | Not dismissed; good cause found for service delay; MVP to be served/default judgment; others to be served with proof within 60 days. |
| Whether Rule 11 sanctions against Schaffer are warranted | Schaffer’s briefing was frivolous and filed in bad faith to delay proceedings. | No improper purpose; arguments were legally colorable. | Sanctions denied; no extraordinary circumstances shown. |
Key Cases Cited
- Bensusan Restaurant Corp. v. King, 126 F.3d 25 (2d Cir. 1997) (physical presence required for CPLR 302(a)(2) unless agency/conspiracy theory applies)
- Kreutter v. McFadden Oil Corp., 71 N.Y.2d 460 (N.Y. 1988) (agency concept for § 302(a) analysis; control and benefit considerations)
- CutCo Indus., Inc. v. Naughton, 806 F.2d 361 (2d Cir. 1986) (definition of ‘agent’ for CPLR § 302(a))
- Chrysler Capital Corp. v. Century Power Corp., 778 F. Supp. 1260 (S.D.N.Y. 1991) (conspiracy-based jurisdiction and agency theories under § 302(a)(2))
- Lehigh Valley Indus., Inc. v. Birenbaum, 527 F.2d 87 (2d Cir. 1975) (conspiracy jurisdiction requires prima facie showing)
- Grosser v. Commodity Exchange, Inc., 639 F. Supp. 1293 (S.D.N.Y. 1986) (conspiracy evidence may be circumstantial and multifactorial)
- Heinfling v. Colapinto, 946 F. Supp. 260 (S.D.N.Y. 1996) (elements of establishing conspiratorial jurisdiction under 302(a)(2))