Coast to Coast Energy, Inc. v. Gasarch , 149 A.D.3d 485 ( 2017 )

Order, Supreme Court, New York County (Eileen Bransten, J.), entered July 24, 2014, which, to the extent appealed from as limited by the briefs, granted defendant John Wampler’s motion to dismiss the third amended complaint in its entirety, on jurisdictional grounds, and granted the motion of defendants Mark Gasarch and Petro-Suisse Limited to dismiss plaintiffs’ causes of action for breach of fiduciary duty, breach of the covenant of good faith and fair dealing, unjust enrichment, and plaintiffs’ demand for punitive damages, and dismissed the fraud cause of action only insofar as asserted by plaintiffs Mark Gonsalves and the Coast to Coast plaintiffs, affirmed, without costs.

Pursuant to CPLR 302 (a) (1) a New York court may exercise personal jurisdiction over a nondomiciliary if the nondomicili-ary has purposefully transacted business within the state and there is “a substantial relationship between the transaction and the claim asserted” (Paterno v Laser Spine Inst., 24 NY3d 370, 376 [2014] [internal quotation marks omitted]). “Purposeful activities are volitional acts by which the non-domiciliary avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws” {id. [internal quotation marks omitted]). “More than limited contacts are required for purposeful activities sufficient to establish that the non-domiciliary transacted business in New York” {id.).

On a motion to dismiss pursuant to CPLR 3211 (a) (8), the plaintiff has the burden of presenting sufficient evidence, through affidavits and relevant documents, to demonstrate jurisdiction (see Fischbarg v Doucet, 9 NY3d 375, 381 n 5 [2007]; Copp v Ramirez, 62 AD3d 23, 28 [1st Dept 2009], lv denied 12 NY3d 711 [2009]). Here, plaintiffs failed to carry their burden in pleading purposeful activities in New York by defendant John Wampler, allegedly a resident of Switzerland and Texas, sufficient to establish long-arm jurisdiction pursuant to CPLR 302 (a) (1).

The dissent would hold that in the third amended complaint plaintiffs adequately pleaded jurisdiction under CPLR 302 (a) (1) based on allegations that Wampler “transacted” business in New York through his agents, defendants Mark Gasarch and Petro-Suisse Limited (PSNY).

To establish that a defendant acted through an agent, a plaintiff must “convince the court that [the New York actors] engaged in purposeful activities in this State in relation to [the] transaction for the benefit of and with the knowledge and consent of [the defendant] and that [the defendant] exercised some control over [the New York actors]” (Kreutter v McFadden Oil Corp., 71 NY2d 460, 467 [1988]). “[T]o make a prima facie showing of ‘control,’ a plaintiff’s allegations must sufficiently detail the defendant’s conduct so as to persuade a court that the defendant was a ‘primary actor’ in the specific matter in question; control cannot be shown based merely upon a defendant’s title or position within the corporation, or upon conclusory allegations that the defendant controls the corporation” (Northern Val. Partners, LLC v Jenkins, 23 Misc 3d 1112[A], 2009 NY Slip Op 50721 [U], *4 [Sup Ct, NY County 2009], quoting Karabu Corp. v Gitner, 16 F Supp 2d 319, 324 [SD NY 1998]; see also Polansky v Gelrod, 20 AD3d 663, 664 [3d Dept 2005]).

The dissent contends that the third amended complaint satisfies these principles by virtue of plaintiff’s allegations that Wampler was in daily communication with PSNY concerning the subject oil exploration partnerships and drilling operations, that Wampler instructed Gasarch concerning distributions and “routinely” directed him to transfer funds, and that Gasarch acted for the benefit of and with the knowledge and consent of Wampler, who exercised “some control.” However, Wampler’s status as a principal of PSNY does not in and of itself confer jurisdiction. Plaintiffs failed to allege facts demonstrating that Wampler controlled Gasarch and PSNY’s activities sufficient to support New York jurisdiction, and plaintiff’s vague, conclusory and unsubstantiated allegations do not suffice to establish long arm jurisdiction (see Cotia [USA] Ltd. v Lynn Steel Corp., 134 AD3d 483, 484 [1st Dept 2015] [“Plaintiff has offered nothing but conclusory assertions to support long-arm jurisdiction under CPLR 302 (a) (1)”]; Polansky v Gelrod, 20 AD3d at 664 [“plaintiff offers only the conclusory allegation that Gelrod was their agent, with no supporting evidentiary facts establishing control”]).

The allegations that Gasarch only accessed PSNY’s New York bank accounts at Wampler’s direction were previously asserted upon information and belief in the second amended complaint, and plaintiffs offered no new facts or explanation for the change in the third amended complaint. Although plaintiffs added an allegation that “according to bank records, Wampler would routinely direct Gasarch to withdraw investor funds from PSNY,” they provided no details regarding any such bank records or how they might reflect Wampler’s involvement, and did not attach the bank records as an exhibit to their complaint.

The allegation that Wampler was in daily communication with PSNY concerning the oil exploration partnerships and drilling operations is conclusory, and plaintiff failed to proffer any specific facts to demonstrate how or when Wampler participated in preparing the Private Placement Memoranda for the investments. Similarly, the allegation that Gasarch acted for benefit of and with knowledge and consent of Wampler, who exercised “some control” contains no detail as to what statements were made, when they were made, what contract they were made in regards to, and whether or not the alleged misrepresentations were relied upon in such a way that would imply liability.

The dissent also cites plaintiffs’ allegations that Wampler personally solicited plaintiffs’ investment in the funds during several visits to New York in 2006 and 2007. However, “the transitory presence of a corporate official” does not support jurisdiction (see Fischbarg v Doucet, 9 NY3d at 380) and plaintiffs do not explain how Wampler engaged in any tortious or actionable misconduct at these meetings that would subject him to jurisdiction in New York. There is no indication when the first two meetings took place, other than providing the year; there is no detail as to where the first meeting took place; it is not clear which drilling projects the meetings pertained to; and the allegations of Wampler’s alleged misrepresentations are provided in only very general terms (see Mahtani v C. Ramon, 168 AD2d 371 [1st Dept 1990]). It is not alleged that Wampler negotiated with a party, and the center of gravity of the contract was in Trinidad and Tobago.^*

Plaintiff-appellant Mark Gonsalves has not pleaded his reliance on the alleged misrepresentations, or injury, sufficient to support a claim for fraud, as he did not allege that he invested in the partnerships at issue (see Lama Holding Co. v Smith Barney, 88 NY2d 413, 421 [1996]). The Coast to Coast entities have not stated a claim for fraud, because they, too, have not alleged injury (id.).

The causes of action for breach of fiduciary duty, unjust enrichment, and breach of the implied covenant of good faith and fair dealing were properly dismissed as duplicative of the breach of contract cause of action, which was sustained as against the defendants other than Wampler (Feld v Apple Bank for Sav., 116 AD3d 549, 551 [1st Dept 2014], lv denied 23 NY3d 908 [2014]; Ellington v Sony/ATV Music Publ. LLC, 85 AD3d 438, 439 [1st Dept 2011]).

Plaintiffs have not alleged that defendants acted with the requisite “high degree of moral turpitude” to support their demand for punitive damages (Hoeffner v Orrick, Herrington & Sutcliffe LLP, 85 AD3d 457, 458 [1st Dept 2011] [internal quotation marks omitted]).

We have considered the parties’ remaining arguments and find them unavailing.

Concur — Tom, J.P., Mazzarelli, Andrias and Gesmer, JJ.

* As the dissent observes, the Court of Appeals concluded in Fischbarg that defendants’ retention and subsequent communications with plaintiff in New York established a continuing attorney-client relationship in this state and thereby constituted the transaction of business under CPLR 302 (a) (1). However, in Fischbarg the record established that defendants called Fischbarg, a New York attorney, in order to represent them in an action in Oregon, entered into a retainer agreement, and participated in that relationship via telephone calls, faxes and e-mails over many months. Thus, the Court found that defendants purposefully projected themselves into New York. In contrast, here plaintiffs rely on conclusory allegations and have not demonstrated that Wampler engaged in sustained and substantial business with plaintiffs in New York.