Lipson v. Birch
46 F. Supp. 3d 206
E.D.N.Y2014Background
- Plaintiff Scott Lipson, a Canadian permanent resident domiciled in Nassau County, NY, alleges Pennsylvania attorneys Robert Birch and Carter Williamson (and Birch P.C.) mishandled sale of his shares in a family company, creating irrevocable trusts holding proceeds (~$1.424M net) with Birch as trustee.
- Lipson claims defendants exploited his vulnerable financial/mental status, failed to investigate assets/valuation, pressured him to accept a buyout, diverted proceeds into trusts and Birch’s IOLTA, and denied disbursements.
- Lipson signed the release and trust documents in July 2012; a forum-selection clause in the trust specified Montgomery County, Pennsylvania Orphans’ Court.
- Lipson later filed a Pennsylvania action to void the trust; discovery produced documents (including an allegedly altered retainer).
- Lipson sued in EDNY (RICO and state tort claims). Birch and Williamson moved to dismiss: arguing (1) forum-selection clause divests federal court and (2) lack of personal jurisdiction under CPLR §302 and due process.
- Court: denied dismissal based on the forum-selection clause (not reasonably communicated / unconscionable given alleged facts), found subject-matter jurisdiction (diversity and RICO), but granted dismissal for lack of personal jurisdiction over Birch and Williamson and dismissed claims against them without prejudice.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Effect of forum-selection clause (subject-matter/venue) | Clause binds Lipson and requires exclusive Pennsylvania forum | Trust forum clause governs disputes, so federal suit should be dismissed | Court: clause not reasonably communicated/adequately explained; cannot bar litigation here; motion on that ground denied |
| RICO personal jurisdiction (18 U.S.C. §1965) | Nationwide service applies to bring Birch/Williamson into EDNY for RICO claims | §1965(b) inapplicable because no defendant satisfies §1965(a) in EDNY | Court: Plaintiff failed to show any RICO defendant transacts affairs in EDNY; RICO claims dismissed without prejudice for lack of personal jurisdiction |
| New York long-arm jurisdiction (CPLR §302(a)(1)) for state torts | Continued attorney-client relationship and communications after Lipson moved to NY suffice to transact business in NY | Defendants performed services outside NY; contacts (emails/calls) insufficient | Court: contacts were insufficient under §302(a)(1); no personal jurisdiction under that provision |
| New York long-arm jurisdiction (CPLR §302(a)(3)) for torts (expectation of consequences or doing business in NY) | Tortious acts outside NY caused injury in NY; defendants should have expected consequences in NY | Defendants do not regularly solicit or do business in NY and had no purposeful availment; no substantial revenue from NY | Court: Plaintiff failed to make prima facie showing under §302(a)(3)(i)-(ii); no long-arm jurisdiction; dismissal without prejudice affirmed |
Key Cases Cited
- M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972) (forum-selection clauses presumptively valid and enforceable absent strong cause)
- New Moon Shipping Co. v. MAN B & W Diesel, 121 F.3d 24 (2d Cir. 1997) (forum-selection clause enforcement framework; plaintiff bears burden to overcome presumption)
- Phillips v. Audio Active Ltd., 494 F.3d 378 (2d Cir. 2007) (four-part inquiry to enforce forum-selection clauses)
- Fischbarg v. Doucet, 9 N.Y.3d 375 (N.Y. 2007) (New York contacts via purposeful creation of continuing relationship can support §302(a)(1))
- Mayes v. Leipziger, 674 F.2d 178 (2d Cir. 1982) (letters and calls to NY to perform services outside NY do not establish §302(a)(1) jurisdiction)
- PT United Can Co. Ltd. v. Crown Cork & Seal Co., 138 F.3d 65 (2d Cir. 1998) (§1965 nationwide service of process requires at least one defendant subject to personal jurisdiction in the forum)
- Best Van Lines, Inc. v. Walker, 490 F.3d 239 (2d Cir. 2007) (two-prong test for §302(a)(1): transacts business and claim arises from that transaction)