Davis v. Gahan

227 F. Supp. 867, 1964 U.S. Dist. LEXIS 8830
CourtDistrict Court, S.D. New York
DecidedMarch 31, 1964
StatusPublished
Cited by6 cases

This text of 227 F. Supp. 867 (Davis v. Gahan) is published on Counsel Stack Legal Research, covering District Court, S.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Davis v. Gahan, 227 F. Supp. 867, 1964 U.S. Dist. LEXIS 8830 (S.D.N.Y. 1964).

Opinion

SUGARMAN, District Judge.

On June 20, 1963 plaintiffs filed a complaint against defendants alleging that plaintiff Davis was a British subject and that plaintiff Elco Manufacturing (Fittings) Ltd. was a British corporation; that defendants Gahan and Steinwender (sued as Steinwendor) were citizens of New York, doing business at 500 Fifth Avenue, New York City, and that defendant Elco Steel Products, Inc. (Elco S-teel) was a Delaware corporation with its principal place of business at 500 Fifth Avenue, New York City; that jurisdiction was founded on diversity of citizenship and a claim in excess of $10,000; that since 1957 plaintiffs had built up a profitable business in the United States of selling steel pipe fittings bought in Germany; that in 1958 plaintiffs and defendants Gahan and Steinwender “formed a joint venture” to take over and expand plaintiffs’ distribution business so that defendants Gahan and Stein-wender would handle sales in the United States and plaintiffs would handle procurement in England and Germany; that to accomplish that result plaintiff Davis and defendants Gahan and Steinwender, each as a one-third shareholder, formed Elco, Inc. on August 19, 1958, of which defendant Gahan was a director and president and defendant Steinwender was secretary and treasurer; that Elco, Inc. was dissolved on August 10, 1959; that in furtherance of the joint venture plaintiffs had transferred to the joint venture certain accounts of customers in the United States and procurement arrangements with suppliers in Germany; that defendants Gahan and Steinwender in conducting the business of the joint venture had refused to furnish plaintiffs with information about sales in the United States, had refused plaintiffs access to [869]*869the records of Elco, Inc. and had failed to render a proper accounting of the joint venture.

The complaint also charged that defendants Gahan and Steinwender conspired to divert to themselves and to destroy plaintiffs’ business; that in furtherance of the alleged conspiracy they caused Elco, Inc. to be dissolved and on the same day caused Elco Steel to be organized with defendant Gahan as its president; that they diverted customers and suppliers of Elco, Inc. to Elco Steel; that they thereby breached their fiduciary duty to, unfairly competed with and improperly accounted to plaintiffs. The complaint sought an accounting of the affairs of Elco, Inc., of the distribution of its funds on dissolution and of the defendants’ commissions and profits since its dissolution, on business diverted from it; and an injunction against the defendants’ continued use of the name of Elco Steel and restraining solicitation by defendants of former customers, etc. of Elco, Inc.

As appears by the returns of the Marshal for this district, defendant Stein-wender was personally served at 500 Fifth Avenue, New York City, on June 24, 1963; defendant Elco Steel was served at the same time and place by delivery of copies of the summons and complaint to Steinwender, Vice-President; and that service could not be effected on defendant Gahan because

“Mr. Gahan does not be at above address. [500 Fifth Avenue, New York City] He resides at 2306 Barcelona Drive Fort Lauderdale, Fla.”

Defendants Steinwender and Elco Steel filed their answer on September 23, 1963.

As appears by the return of the Marshal for the Southern District of Florida, defendant Gahan was served with the summons and complaint on December 10, 1963

“by handing to and leaving a true and correct copy thereof with Mrs. Edward F. Gahan (Wife at usual place of abode.) personally at 2306 Barcelona Drive at Ft. Lauderdale Florida.”

Defendant Edmund F. Gahan now moves

“for an order, pursuant to Rule 4 of the Federal Rules of Civil Practice, [sic] quashing the service of the process herein on Edmund F. Gahan (sued herein as Edward F. Gahan) and for a dismissal of the action herein as to said Edmund F. Gahan (sued herein as Edward F. Gahan) on the ground that the process was not personally served on said defendant within the territorial limits of the State in which this United States District Court is held, as prescribed by said rule, * *

At the outset and because they enter into the decision of this motion, it is noted that amendments to F.R.Civ.P. 4 became effective on July 1, 1963 and that the effective date of New York CPLR was September 1, 1963, both of which dates were after the complaint was filed on June 20, 1963 and before defendant Ga-han was served on December 10, 1963. The amendments to F.R.Civ.P. 4 are applicable here because F.R.Civ.P. 86(e) provides that they “govern * * * all further proceedings in actions then [on July 1, 1963] pending” unless, which is not the case here, making them applicable “would work injustice”. New York CP LR is likewise applicable here because § 10003 thereof provides that the act applies “to all further proceedings in pending actions” unless, which is also not the case here, making it applicable “would not be feasible or would work an injustice”.

As amended, F.R.Civ.P. 4(e) permits service of a summons upon a party not an inhabitant of or found within the state, under the circumstances and in the manner prescribed in the statute of the state in which the district court is held. New York CPLR § 302 permits the exercise of personal jurisdiction over any non-domiciliary for a cause of action arising from an act resulting inter alia from [870]*870the transaction of business or the commission of a tortious act within the state.

The first inquiry, therefore, is whether the facts herein meet the requirements of due process for the exercise of in person-am jurisdiction over Gahan by New York under its long-arm statute, CPLR § 302.

The due process requirements are that Gahan shall have had certain minimum contacts with New York, such that the maintenance of the suit would not offend traditional notions of fair play and substantial justice. International Shoe Co. v. State of Wash, etc., 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945).

New York CPLR § 302(a) supplies three bases upon which to predicate in personam jurisdiction over a non-domiciliary, two of which apply to Gahan. It allows jurisdiction if the cause of action asserted against him arises from (1) the transaction of any business within New York or (2) the commission of a tortious act within New York. A third basis, i. e., ownership, etc. of real property within the state is not involved.

What is alleged in this action is that Gahan, with the defendant Steinwender, in the operation and winding up of the affairs of Elco, Inc. and, with the defendants Steinwender and Elco Steel, in the diversion of the customers and supply sources of Elco, Inc. to Elco Steel, breached their fiduciary duties to and defrauded plaintiffs. Defendants Stein-wender and Elco Steel in their answer to the complaint

“admit that on or about August 19, 1958 a corporation known as Elco, Inc.

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Bluebook (online)
227 F. Supp. 867, 1964 U.S. Dist. LEXIS 8830, Counsel Stack Legal Research, https://law.counselstack.com/opinion/davis-v-gahan-nysd-1964.