NAOMI REICE BUCHWALD, District Judge.
Plaintiff AVRA Surgical Robotics, Inc. ("AVRA") brings this diversity action against defendant Bernd Gombert, a German engineer whom plaintiff recruited and employed in Germany from 2012 to 2013. AVRA pleads multiple causes of action against Gombert for alleged wrongful activity occurring during his term of employment, including breach of contract, breach of fiduciary duty, tortious interference with contractual relations, and misappropriation of property and funds. Now pending before the Court is defendant's motion to dismiss the complaint for lack of personal jurisdiction or, in the alternative, for failure to state a claim. For the reasons stated herein, defendant's motion is granted based upon a lack of personal jurisdiction over the defendant.
Defendant Bernd Gombert is a lifelong German citizen who has continuously lived and worked in Germany. Def. Mem. at 1-2; Gombert Decl. ¶ 15. Gombert is a decorated engineer who studied mechanical and precision engineering at German universities, later became the head of a mechanics lab at a German robotics institute, and ultimately authored many scientific papers and won multiple engineering awards, including Germany's Federal Cross of Merit. Gombert Decl. ¶¶ 15-19. Gombert has never lived, worked, owned property, maintained a bank account, or employed anyone in New York. Def. Mem. at 2; Gombert Decl. ¶¶ 6-12.
Plaintiff AVRA is a Delaware corporation with its principal place of business in New York.
After months of Germany-based meetings, Gombert, Cohen and AVRA executives decided to form a subsidiary company responsible for the design, marketing, and distribution of the as-yet undeveloped surgical robotics system. Def. Mem. at 3. On July 7, 2012, AVRA, Gombert and another AVRA executive, Stephen Sagolla, also a German citizen, established the subsidiary, MIS-Robotics, GmbH ("MIS"). Def. Mem. at 4. Gombert and Sagolla, as co-managing directors of MIS, each owned 10% of the subsidiary's shares; AVRA held the remaining 80% equity position in MIS. Def. Mem. at 4; Pl. Opp. at 2. MIS was incorporated under German law and maintained its only offices in Seefeld, Germany. Def. Mem. at 4; Gombert Decl. ¶ 25.
The following month, AVRA's Board of Directors simultaneously appointed Gombert as AVRA's Chief Scientist and Technical Officer and Sagolla as AVRA's Chief Executive Officer. Def. Mem. at 4. Although AVRA's board made the appointments in August 2012, Gombert did not
Among other terms, the employment contract provided for Gombert's 300,000 euro base salary and various benefits, and provided for termination of employment by resignation, discharge by AVRA or death. Gombert Decl. Ex. 2 at ¶¶ 2, 3, 5. The contract also included a confidentiality clause affirming that certain unspecified "confidential information is the exclusive property of AVRA," that Gombert would use that confidential information "solely for the purpose of performing [his] duties on behalf of AVRA," and that he would not use such information "to the detriment of AVRA." Id. ¶ 4. The contract went on to state that if Gombert terminated his employment with AVRA, he would not "own, manage or control any business that competes with AVRA" for a two-year period thereafter. Id. Finally, the contract contained a "Governing Law" clause, providing that "[t]his Agreement will be governed by and construed in accordance with the law of the State of New York without giving effect to the rules of conflicts of law." Id. at ¶ 6. The contract contained no choice of forum clause.
To pursue development of the surgical robotics system, the newly created subsidiary MIS entered into a Development and Manufacturing Agreement in October 2012 with RGM, Gombert's German engineering company, whereby RGM agreed to conduct the engineering work necessary to developing and manufacturing the surgical robotics system and bill MIS accordingly. Def. Mem. at 4-5; Pl. Opp. at 2. Pursuant to this agreement, Gombert assigned RGM engineers to the project and directly supervised their work. Def. Mem. at 5.
AVRA agreed to provide capital for the project to its subsidiary MIS, which would, in turn, pay the invoices issued by RGM for the engineering work. Def. Mem. at 5; Pl. Opp. at 2. To that end, beginning in September 2012, AVRA sold shares in its own corporate entity to American investors, including New York-based investors, and wired that money to Germany. Pl. Opp. at 3. According to Gombert, AVRA's expected financing was supposed to amount to at least 20 million euros in the form of shareholder loans. Def. Mem. at 5; Gombert Decl. ¶ 37. Over the course of the next six months, AVRA provided to MIS loans totaling over 3 million euros, or approximately 4.5 million U.S. dollars. Def. Mem. at 5; Pl. Opp. at 3.
In late 2012, this funding arrangement faltered and the relationship soured. As of December 2012 or before, Gombert began articulating serious concerns about AVRA's failure to fund MIS as promised. Def. Mem. at 5-6. Gombert advised AVRA executives Cohen and General Counsel Jared Stamell of meaningful shortfalls in funding in a December 18, 2012 email entitled "Red Flag — RG Mechatronics is running out of money." Gombert Reply Decl. Ex. 3. In that email, Gombert reiterated financial difficulties he had raised "already several times," and further noted that "[t]his month we can't pay any more the checks for the engineers." Id. Gombert also flagged "unpaid invoices of about USD 900,000 (AVRA) and open invoices of our supplier of about USD 250,000 (RGM)," amounting to "a lack of cash of about USD 1,150,000." Id. Gombert summarized thus: "[In] other word[s]: we need immediately USD 1,500,000 otherwise the party is over." Id.
Over the course of the next few weeks, Gombert's concerns regarding the company's
At the same time, AVRA began to fall behind in its payments of Gombert's salary, guaranteed by his employment contract. The parties do not dispute that AVRA satisfied only the first payroll installment owed to Gombert, amounting to only 26,225 euros. Gombert Decl. ¶ 31; Cohen Decl. ¶ 21. This non-payment prompted Gombert to email AVRA executives in January 2013 and complain that "the salary for my contractually-agreed full-time employment for AVRA/MIS has also not yet been paid," a failure that Gombert viewed as symptomatic of AVRA's overall inability to perform as promised.
Against the backdrop of this breakdown in the parties' business relationship, Gombert and partner Sagolla, then AVRA's CEO, began pursuing alternative business opportunities. On December 7, 2012, Gombert and Sagolla incorporated a German company, Robosmart GmbH, with an eye toward competing in the surgical robotics industry. Pl. Opp. at 3; Cohen Decl. ¶¶ 8-9. In a December 27, 2012 email to Sagolla, Gombert discussed these steps at greater length, noting that Robosmart and "Plan B" was a direct response to AVRA's failure to provide the necessary development capital. Pl. Opp. at 3-4
Shortly thereafter, in an effort to address the serious funding shortages, Gombert made his first and only trip to New York in late January 2013. Def. Mem. at 6; Pl. Opp. at 6-7. Gombert spent three days — January 26, 2013 and January 29 through January 30, 2013 — in New York, making other trips to Dallas and San Antonio in the interim. Id. While in New York, Gombert attended a meeting with Cohen, Stamell and AVRA President Sudhir Srivastava, at which AVRA's funding commitments and the project's financial survival were discussed. Def. Mem. at 6. At that meeting, Gombert was appointed AVRA's Executive Vice President. Id. Also while in New York, Gombert dined with AVRA executives and an AVRA investor and participated in presentations to investment bankers wherein Gombert reported on technical developments. Id.; Pl. Opp. at 6-7. According to plaintiff, AVRA raised approximately $500,000 from New York investors as a result of the January 2013 fundraising effort. Pl. Opp. at 7. This trip represented the only time Gombert was present in New York during the relevant time period. Gombert Decl. ¶ 45.
Further meetings followed in February 2013, wherein Gombert, Cohen, Stamell and company accountants convened in Seefeld, Germany to discuss AVRA's continued failure to fund MIS and pay Gombert's salary. Def. Mem. at 7. Those meetings failed to result in a productive solution to the capital shortages, which eventually included 1 million euros in unpaid invoices from RGM alone. Id. Consequently, and in accordance with the notice he provided earlier in the year, Gombert terminated his position with AVRA on March 1, 2013. Id. As managing director of MIS, Gombert then filed an insolvency petition in Germany on April 12, 2013. Compl. ¶¶ 43-46.
On March 20, 2013, AVRA brought its initial complaint in New York State Supreme Court alleging only two causes of action, breach of contract and breach of fiduciary duty, which was served upon defendant Gombert in Germany on April 14, 2013. Def. Mem. at 7. On May 16, 2013, defendant removed the case to federal court and, on June 6, 2013 filed an initial motion to dismiss. With the Court's leave, plaintiff filed an amended complaint on September 19, 2013, and defendant withdrew his initial motion to dismiss. The amended complaint set forth an expanded set of five causes of action: (1) breach of Gombert's employment contract with AVRA, (2) breach of Gombert's fiduciary duty to AVRA, (3) tortious interference with contractual relations as to the investment contract between AVRA and MIS, (4) misappropriation of property, funds and business opportunities, and (5) a request for an injunction enforcing and transferring title to plaintiff in the assets defendant allegedly obtained as a result of misconduct.
Defendant moved to dismiss the amended complaint on October 10, 2013, plaintiff filed an opposition brief on November 21,
At oral argument, the parties advised the Court of three legal proceedings currently underway in Germany. The first, mentioned in the complaint, is the MIS insolvency proceeding initiated by Gombert pursuant to his obligations under German law as MIS's managing director. Tr. at 4-5; Compl. ¶¶ 44-46. In connection with that proceeding, the German court appointed an expert who confirmed, after due investigation, that MIS was indeed insolvent. Tr. at 5. Thereafter the German court appointed an administrator with authority similar to that of U.S. bankruptcy trustees to seek out company assets on behalf of creditors. Id. Defense counsel represented to the Court, with no objection from plaintiff, that the German bankruptcy administrator is also empowered to pursue action against Gombert to the extent it is determined that he misappropriated any of the company's funds. Tr. at 6.
The remaining two German legal actions were initiated by Gombert against MIS after AVRA, an 80% shareholder of MIS, acted to remove Gombert as MIS's managing director. Tr. at 4. In one of Gombert's actions against MIS, AVRA intervened on MIS's behalf in German court. Tr. at 4-5. All three proceedings remain ongoing in Germany.
On a motion to dismiss for lack of personal jurisdiction pursuant to Fed.R.Civ.P. 12(b)(2), the plaintiff bears the burden of showing that jurisdiction exists over the defendant. See DiStefano v. Carozzi North America, Inc., 286 F.3d 81, 84 (2d Cir.2001) (citing Bank Brussels Lambert v. Fiddler Gonzalez & Rodriguez, 171 F.3d 779, 784 (2d Cir.1999)). Prior to discovery, plaintiff must only make a prima facie showing of jurisdiction to defeat a motion to dismiss. See Bank Brussels Lambert, 171 F.3d at 784 (citing Marine Midland Bank, N.A. v. Miller, 664 F.2d 899, 904 (2d Cir.1981)).
"Because [a] Rule 12(b)(2) motion is inherently a matter requiring the resolution of factual issues outside of the pleadings... all pertinent documentation submitted by the parties may be considered in deciding the motion." Woods v. Pettine, No. 13 Civ. 290(PGG), 2014 WL 292363, at *1 (S.D.N.Y. Jan. 27, 2014) (quoting CMNY Capital L.P. v. Perry, No. 97 Civ. 6172(MBM), 1998 WL 132846, at *1 (S.D.N.Y. Mar. 23, 1998)) (quotation marks omitted). At this stage, the court must assume the truth of all allegations in the complaint and must resolve all doubts in plaintiff's favor "notwithstanding a controverting presentation by the moving party." A.I. Trade Finance, Inc. v. Petra Bank, 989 F.2d 76, 79-80 (2d Cir.1993) (citing Hoffritz for Cutlery, Inc. v. Amajac, Ltd., 763 F.2d 55, 57 (2d Cir.1985)).
In the alternative, defendant moves to dismiss for failure to state a claim pursuant to Fed.R.Civ.P. 12(b)(6). To survive a Rule 12(b)(6) motion to dismiss, "a complaint must contain sufficient factual matter, accepted as true, to `state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). A court deciding such a motion must accept as true all factual allegations in the complaint and draw all reasonable inferences in favor of the non-moving party. Anderson News, L.L.C. v. Am. Media, Inc., 680 F.3d 162, 185 (2d Cir.2012) (citations omitted). However, plaintiff's "[f]actual allegations must be enough to raise a
Defendant's principal challenge to the complaint — and our primary inquiry here — concerns this Court's personal jurisdiction over defendant, a German citizen and non-resident of New York. "In deciding a question of personal jurisdiction, district courts must conduct a two-part analysis, looking first to the state's long-arm statute and then analyzing whether jurisdiction comports with federal due process." Mario Valente Collezioni, Ltd. v. Confezioni Semeraro Paolo, S.R.L., 264 F.3d 32, 37 (2d Cir.2001). We begin, then, with an evaluation of the applicable New York statute.
Under New York law, a court may exercise personal jurisdiction over a non-resident defendant based on either general or specific jurisdiction. Overseas Ventures, LLC v. ROW Mgmt., Ltd., No. 12 Civ. 1033(PAE), 2012 WL 5363782, at *8 (S.D.N.Y. Oct. 26, 2012) (citing Realuyo v. Abrille, 93 Fed.Appx. 297, 298-99 (2d Cir. 2004); Delagi v. Volkswagenwerk AG, 29 N.Y.2d 426, 430, 328 N.Y.S.2d 653, 278 N.E.2d 895 (1972)); N.Y. C.P.L.R. 301-302. Because plaintiff cannot and does not seek to establish general jurisdiction over defendant, the relevant inquiry is whether specific jurisdiction exists under New York's long-arm statute, codified at section 302 of the state's Civil Practice Law and Rules ("CPLR"). See Pl. Opp. at 10 n. 2. Specifically, section 302(a) provides:
N.Y. C.P.L.R. 302(a). Plaintiff here claims jurisdiction over defendant on three separate grounds: the alleged transaction of business pursuant to CPLR § 302(a)(1); the alleged commission of a tortious act within the state pursuant to CPLR § 302(a)(2); and the alleged commission of a tortious act outside the state causing injury within the state pursuant to CPLR § 302(a)(3).
Considering each subsection in turn, this Court finds that plaintiff has not demonstrated that specific personal jurisdiction exists under any of the grounds set forth in § 302. Accordingly, defendant's motion to dismiss must be granted.
We begin, as does plaintiff, with § 302(a)(1), whereby long-arm personal jurisdiction
For the purposes of this motion, we can assume for the sake of argument that a sufficient transaction of business has been pled. Even if so, however, AVRA cannot establish specific jurisdiction under § 302(a)(1) because it fails to show that any of its claims against Gombert arise from a transaction of business in New York. In order to fulfill this required second element of § 302(a)(1) jurisdiction, plaintiff must show "the existence of some articulable nexus between the business transacted and the cause of action sued upon," which amounts to "a substantial relationship to the transaction out of which the instant cause of action arose." McGowan v. Smith, 52 N.Y.2d 268, 272, 437 N.Y.S.2d 643, 419 N.E.2d 321 (1981). A "merely coincidental" connection is "too attenuated" to form the necessary nexus in this fact-specific inquiry. Johnson v. Ward, 4 N.Y.3d 516, 520, 797 N.Y.S.2d 33, 829 N.E.2d 1201 (2005).
Here, no such "substantial relationship" has been established. This jurisdictional shortcoming is evident from the particular causes of action pled: (1) breach of Gombert's employment contract with AVRA, (2) breach of Gombert's fiduciary duty to AVRA, (3) tortious interference with contractual relations as to the investment contract between AVRA and MIS, and (4) misappropriation of property and funds.
Perhaps perceiving this weakness in its complaint and briefing, plaintiff pursued a new and different approach at oral argument. Plaintiff now argues that, even if the various alleged breaches and misappropriations took place in Germany, Gombert made additional fraudulent misrepresentations to AVRA and to investors while in New York in January 2013, which formed the jurisdictional hook necessary under § 302(a)(1). Tr. at 18 ("[H]e made misrepresentations to AVRA and to people who invested in New York ... and the loss of the funds was that they were invested under the false thinking that they were going to AVRA's product."); Tr. at 26 ("[H]e came to New York in January and he misrepresented to people that he was developing a surgical robotics system for AVRA Surgical Robotics when it wasn't true."). See related discussion infra note 8.
Plaintiff's late-breaking allegations of fraudulent misrepresentation do not shield
Having failed to establish that its claims against Gombert arise out of alleged in-state transactions of business, plaintiff cannot establish jurisdiction under CPLR § 302(a)(1).
Plaintiff also fails to show the existence of personal jurisdiction under CPLR § 302(a)(2), which extends specific jurisdiction to claims arising from the commission of a tortious act within the state. As an initial matter, New York law limits § 302(a)(2) jurisdiction to tort claims, so plaintiff cannot rely on this provision to authorize specific jurisdiction for its contract claim. Pramer S.C.A. v. Abaplus Int'l Corp., 76 A.D.3d 89, 97, 907 N.Y.S.2d 154 (N.Y.App.Div. 1st Dept.2010) (citing Fantis Foods v. Standard Importing Co., 49 N.Y.2d 317, 324, 425 N.Y.S.2d 783, 402 N.E.2d 122 (1980)). As to its tort claims, plaintiff's resort to § 302(a)(2) is similarly futile. The New York Court of Appeals has construed this provision to require that the defendant was physically present in New York when he committed the tort. See Bensusan Restaurant Corp. v. King, 126 F.3d 25, 28 (2d Cir.1997) (citing Feathers v. McLucas, 15 N.Y.2d 443, 458, 261 N.Y.S.2d 8, 209 N.E.2d 68 (1965)). As discussed supra, however, the torts alleged in the complaint admittedly occurred far from New York, in Germany.
Plaintiff's final argument for jurisdiction under CPLR § 302(a)(3) is similarly unavailing.
With regard to the first clause of § 302(a)(3), a cursory glance at the facts here makes clear that Gombert's single, anomalous three-day trip to New York does not constitute "regularly do[ing] or solicit[ing] business" in New York or, indeed, any persistent course of conduct in New York, as is required under the first clause. Nor did Gombert derive substantial — or, in fact, any — revenue from goods used or consumed or services rendered in New York, since AVRA and MIS never even approached the point where a surgical robotics product was ready for marketing or sale in New York. Tr. at 2-3.
Plaintiff is equally unable to establish the required elements of the second clause of § 302(a)(3), whereby specific jurisdiction may exist if a defendant who derives substantial revenue from interstate or international commerce commits a tort outside New York, causing injury in New York, where he should reasonably expect the act to have consequences. Section 302(a)(3), like § 302(a)(2), is expressly limited to tortious conduct, and thus cannot confer jurisdiction over plaintiff's breach of contract claim. See Warck-Meister v. Diana Lowenstein Fine Arts, 7 A.D.3d 351, 775 N.Y.S.2d 859, 860 (1st Dept.2004). As to plaintiff's remaining three claims for breach of fiduciary duty, tortious interference with contractual relations, and misappropriation, plaintiff has sufficiently shown neither the requisite injury sited in New York nor defendant's receipt of substantial revenue from interstate or international commerce.
As defendant argues, "the suffering of economic damages in New York is insufficient, alone, to establish a direct injury in New York for N.Y. C.P.L.R. § 302(a)(3)." Troma Entertainment, Inc. v. Centennial Pictures Inc., 729 F.3d 215 (2d Cir.2013) (quoting Penguin Group (USA) Inc. v. Am. Buddha, 609 F.3d 30, 38 (2d Cir. 2010)); see also Def. Mem. at 16. The New York Court of Appeals instructs that § 302(a)(3) "requires as a predicate for personal jurisdiction `a closer expectation of consequences within the State' than the indirect loss of profits." Hargrave v. Oki Nursery, Inc., 636 F.2d 897, 900 (2d Cir. 1980) (quoting Fantis Foods Inc. v. Standard Importing Co., 49 N.Y.2d 317, 326, 425 N.Y.S.2d 783, 402 N.E.2d 122 (1980)). Accordingly, without more, there is no sufficient showing of in-state economic injury where, as here, "a defendant commits a business tort such as unfair competition or diversion of opportunities in one state and the ultimate result is a loss of profits to the plaintiff which is fortuitously domiciled in another state." Id. (citations omitted). Rather, especially for claims involving "a nonphysical, commercial injury," the situs of injury "is where the critical events associated with the dispute took place." Weiss v. Greenburg, Traurig, Askew, Hoffman, Lipoff, Quentel & Wolff, P.A., 85 A.D.2d 861, 446 N.Y.S.2d 447, 449 (3d Dep't 1981) (internal quotation marks and citations omitted). See also Bank Brussels Lambert v. Fiddler Gonzalez & Rodriguez, 171 F.3d 779, 784 (2d Cir.1999) ("The situs of the injury is the location of the original event which caused the injury, not the location where the resultant damages are
Pursuant to this precedent, the situs of injury — i.e., the location of the events causing the injury, rather than the location where resultant damages were felt — belongs in Germany rather than New York. To the extent that Gombert breached his fiduciary duty to AVRA by incorporating under German law the competing company Robosmart, or interfered via his Germany-based conduct with a valid investment contract between AVRA and the German corporate entity MIS, or misappropriated monies that AVRA had previously wired to MIS's German bank accounts, those injuries were firmly sited in Germany, where AVRA also maintained corporate offices. Plaintiff makes little attempt here to establish otherwise. See Pl. Opp. at 13. That AVRA's principal place of business is New York is merely a matter of "fortuitous[] domicile[]" rather than situs of injury. Hargrave, 636 F.2d at 900.
Finally, and in addition to these deficiencies, plaintiff is unable to establish that defendant Gombert "derives substantial revenue from interstate or international commerce," which is also required for jurisdiction under CPLR § 302(a)(3). The undisputed facts here instead indicate that Gombert received compensation of only 26,225 euros, a fraction of his promised 300,000 euro salary, which partially motivated his complaints to AVRA and the breakdown of the parties' relationship. See supra Section I. Further, as a legal matter, the substantial interstate commercial revenue requirement is intended to "narrow[] the long-arm reach to preclude the exercise of jurisdiction over nondomiciliaries who might cause direct, foreseeable injury within the State but whose business operations are of a local character." Ingraham v. Carroll, 90 N.Y.2d 592, 599, 665 N.Y.S.2d 10, 687 N.E.2d 1293 (1997) (citation omitted). The New York Court of Appeals regards this provision as a "bigness requirement designed to assure that the defendant is economically big enough to defend suit in New York." Id. The defendant in the instant action is no large corporate entity, but rather an individual engineer. The entirety of his roughly 18-month business relationship with plaintiff occurred in Germany, with the sole exception of a three-day trip to New York. He personally received only 26,225 euros in remuneration from abroad. Given the comparatively little revenue this individual defendant derived from interstate commerce, CPLR § 302(a)(3) does not extend personal jurisdiction over him.
Plaintiff has failed to meet its burden of establishing jurisdiction under any of the enumerated provisions of New York's long-arm statute. Accordingly, it is unnecessary to engage in the federal due process inquiry, whereby courts consider "minimum contacts," "traditional notions of fair play and substantial justice" International Shoe Co. v. State of Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945), and a defendant's "purposeful[] avail[ment] of the privilege of conducting activities within the forum State." World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980). We thus merely observe, without deciding, that defendant has put forth compelling arguments that to extend personal jurisdiction over him would run afoul of constitutional due process norms. Parenthetically, we further note that, given the many close contacts with Germany and the ongoing legal proceedings in that country, this action would seem to be much better suited to litigation and resolution in a German forum. As to the case sub
Having found a lack of personal jurisdiction, this Court will not consider whether plaintiff's allegations are sufficient to state a claim. Accordingly, we do not reach defendant's second proffered ground for dismissal pursuant to Federal Rule of Civil Procedure 12(b)(6).
For the foregoing reasons, defendants' motion to dismiss is granted insofar as this Court has no personal jurisdiction over defendant Gombert for the purposes of this action. This Memorandum and Order resolves Docket No. 18, and the Clerk of Court is respectfully requested to close this case.