ADMI INC. v. JOSEPH R. CELLURA

Background

ADMI Inc., SIR, Inc., Michael Ghiselli, Bruce Houle, and Baynon International Corporation, also known as Global Brands Capital Corporation, sued Joseph R. Cellura, Emelia Baer Cellura, Malibu 55 Inc., and three unnamed defendants. The plaintiffs alleged fraudulent conduct involving a Sports Illustrated brand license and funds associated with that business. Their claims included securities fraud, breach of contract, fraudulent misrepresentation and inducement, conspiracy to commit embezzlement and conversion, and a claim labeled “prima facie tort.” The complaint also sought remedies including a constructive trust, an accounting, declaratory relief, and injunctive relief.

The defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(2), arguing that the court lacked personal jurisdiction, meaning sufficient legal authority over the defendants. They also moved under Rule 12(b)(3), arguing that venue—the proper federal court location—was incorrect. In the alternative, they requested transfer to the District of Nevada under 28 U.S.C. § 1404.

Personal Jurisdiction

The court held that the plaintiffs had not established either general or specific personal jurisdiction in New York. The plaintiffs did not respond to the defendants’ argument concerning general jurisdiction, so the court treated that argument as conceded.

The court then analyzed specific jurisdiction under New York Civil Practice Law and Rules § 302. For Section 302(a)(1), the court accepted that Cellura had transacted business in New York by executing the Sports Illustrated license agreement on ADMI’s behalf. But the court found that the plaintiffs had not shown the required connection between that transaction and their claims. According to the court, the alleged mismanagement, misappropriation, and misrepresentation of funds were not alleged to have occurred in New York. The connection between the New York licensing transaction and the claims was therefore too indirect.

The court also rejected the plaintiffs’ arguments that jurisdiction over Malibu and Baer could be based on agency, alter-ego status, or conspiracy. The complaint did not allege facts showing that Malibu or Baer controlled Cellura, that Cellura was completely dominated by either of them, or that New York recognizes the proposed conspiracy-based jurisdiction theory under Section 302(a)(1).

The court separately considered Section 302(a)(2), which concerns tortious acts committed in New York. It found that the plaintiffs had not alleged that the defendants physically committed a tort in New York. Communications sent to New York were insufficient, and the complaint’s general assertion that each defendant committed an act in New York in furtherance of a conspiracy was too conclusory. The court also noted that breach of contract is not a tort for purposes of Section 302(a)(2).

Venue and Transfer

The court found that venue was improper in the Southern District of New York. The plaintiffs had not directly addressed the defendants’ venue argument, and the lack of personal jurisdiction also meant that venue was not proper under the relevant federal venue statute.

Because venue was improper, the court concluded that transfer under 28 U.S.C. § 1404 was not the appropriate mechanism. Instead, it applied 28 U.S.C. § 1406, which permits a court to dismiss or, in the interest of justice, transfer a case filed in the wrong district. The court found that transfer was appropriate because the defendants reside in Nevada, the action could have been brought there, and the court found no indication that the plaintiffs’ claims were made in bad faith.

Disposition

Judge Kenneth M. Karas granted the defendants’ motion. The Clerk was directed to transfer the action to the U.S. District Court for the District of Nevada under 28 U.S.C. § 1406. The opinion resolved jurisdiction and venue issues and did not decide the merits of the plaintiffs’ underlying claims.