MAGWITCH, L.L.C., Aрpellant, v PUSSER’S INC. et al., Respondents.
Appellate Division of the Supreme Court of New York, First Department
February 24, 2011
923 N.Y.S.2d 455
Magwitch, L.L.C., Appellant, v PUSSER’S INC. et al., Respondents. [923 NYS2d 455]—
Order, Supreme Court, New York County (Barbara R. Kapnick, J.), entered July 1, 2009, which granted defendants’ motion to dismiss the complaint for lack of personal jurisdiction, affirmed, without costs.
On May 9, 2002, plaintiff entered into an assignment agreement with Barclays Bank PLC, whereby plaintiff purchased $3,300,000 of the debt owed by Pusser’s Ltd. to Barclays in exchange for $1,500,000. Plaintiff was assigned the note and all security held by Barclays in Pusser’s Ltd.’s assets. The agreement was governed by BVI law, and was signed by all parties in the BVI except plaintiff, which executed the agreement in New Jersey. The assignment of the security agreements, which provided for the collateral in the United States that secured the note, was executed by defendant Charles S. Tobias in the BVI and was governed by BVI law.
Following Pusser’s Ltd.’s default on the note, plaintiff commenced an actiоn in New Jersey federal court to recover on the note against the same defendants sued herein, namely, Pusser’s Ltd., two entities affiliated with Pusser’s Ltd. (one incorporated in Florida and the other in the BVI), and Tobias, a resident of the BVI who controls the corporate defendants. After the New Jersey action was dismissed for lack of personal jurisdiction, plaintiff commenced this action in Supreme Court, New York County. Defendants timely removed the action to federal court, based on the alleged existence of federаl diversity jurisdiction; the removal was effected before the expiration of defendants’ time to respond to the complaint by answer or motion. Plaintiff moved to remand the action to New York Supreme Court for lack of diversity, and defendants moved to dismiss for laсk of personal jurisdiction. The federal court granted plaintiff’s motion and directed that the entire matter, including defendants’ pending motion to dismiss, be remanded to state court. Upon remand, Supreme Court granted the motion to dismiss. We affirm.
Contrary to the argument of plaintiff and the dissent, defendants did not waive any defenses based on lack of personal jurisdiction by removing the action to federal court. We agree with the view of the Third Department, expressed in a decision issued
The motion court properly dismissed the action for lack of personal jurisdiction. Although
The court also properly found that it could not exercise personal jurisdiction over defendants pursuant to
Here, the original event that caused the injury was not, as plaintiff maintains, the disbursement of funds from New York to purchase the note from Barclays, since there would not have been any injury if payment had been made when due. Rather, the injury was caused by misrepresentations about the transfer of assets and the transfer and diversion of funds, which occurred in the BVI and locations other than New York, and resulted in the unavailability of funds to pay plaintiff the amounts due on the note. The second part of the test also cannot be satisfied, since defendants do nоt either: regularly do or solicit business, or engage in any other persistent course of conduct, or derive substantial revenue from goods or services used or rendered in New York; or reasonably expect the alleged tortious act to have consequеnces in the state, and derive substantial revenue from interstate or international commerce (see
McGuire, J., dissents in a memorandum as follows: This appeal is controlled by Farmer v National Life Assn. of Hartford, Conn. (138 NY 265 [1893]) and our decision in Quinn v Booth Mem. Hosp. (239 AD2d 266 [1997]). In Farmer, the plaintiff commenced an action in state Supreme Court, the defendant removed it to federal court, and the federal court remanded it to Supreme Court. The defendant then moved to dismiss on the grounds that it had not been properly served and that the admission of service was defective. On the defendant’s appeal to the Court of Aрpeals from the denial of its motion, the Court held that the defendant had waived this objection when it removed the action to federal court: “It is unnecessary to consider what force, if any, the objections to the mode of service of process in this case and to the sufficiency of the admission of service might have had, if they had been seasonably made, for we think it must be held that the defendant necessarily submitted itself to
As is evident, the Cоurt concluded both that the act of removing the case necessarily entailed a concession by the defendant that jurisdiction of its person had been properly acquired by the state court, and that the concession was conclusive. The Court reiterated this rationale in the course of discussing with approval a federal case in which, following the removal of an action commenced in state court, the court denied the defendant’s motion to dismiss on the ground of defective service, reasoning thаt, “[b]y bringing it here, he voluntarily treats it as properly commenced and actually pending in the state court, and he cannot, after it is entered here, treat it otherwise” (id. at 271, quoting Sayles v Northwestern Ins. Co., 2 Curtis C.C. 212, 21 F Cas 608 [Cir Ct RI 1856, No. 12,421]). The Court stated: “The principle thus formulated, is, we think, sound, reasonable and just. It cannot be tоlerated that a defendant shall question the jurisdiction of a state tribunal over his person, after he has effected a transfer of the cause to another court, by placing upon its records an affirmation under oath of the pendency of the actiоn, and of his relation to it as a party, and obtained the approval of the court of the bond required as a condition of its removal. If the cause is subsequently remanded, he cannot be heard to say that his own proceedings have in effect been coram non judice” (id. at 271-272).
We followed Farmer in Quinn, holding that the defendants’ “filing of a removal petition to Federal court effected a general appearance precluding their objections to defective service under
Defendants argue that Farmer and Quinn are not controlling because “both cases involv[e] a challengе to [personal jurisdiction
Defendants also argue that: (1) “a combined reading of
At least implicitly, the majority rejects defendants’ attempt to distinguish Farmer and Quinn. The majority, however, chooses to follow the recent decision of a panel of the Third Department in Benifits by Design Corp. v Contractor Mgt. Servs., LLC (75 AD3d 826 [2010]), because its reasoning is persuasive and a
“uniform construction of the CPLR throughout the state” is desirable. The ratiоnale of Farmer certainly is open to question, its inconsistency with federal law is clear, and it arguably unduly burdens the exercise of a federal right. But it has not been overruled by the Court of Appeals, and Quinn and Benifits by Design come to different conclusions on the question of whether Farmer was superseded by the CPLR. Moreover, defendants do not contend that Farmer is nо longer good law but seek only to distinguish it, and thus the majority decides this appeal on a ground not raised by defendants (see Misicki v Caradonna, 12 NY3d 511, 519 [2009] [“to decide this appeal on a distinct ground that we winkled out wholly on our own would pose an obvious problem of fair play“]). For these reasons, I would follow Farmer despite my reservations about its rationale.
Accordingly, I would reverse and deny defendant’s motion to dismiss for lack of personal jurisdiction.