The Reliable Automatic Sprinkler Co. v. Riverside Brass & Aluminum Foundry

Background

The Reliable Automatic Sprinkler Co., Inc. manufactures and supplies fire-protection products, including fire sprinklers, and is headquartered in Elmsford, New York. Riverside Brass & Aluminum Foundry, Limited manufactures brass and aluminum products and is located in New Hamburg, Ontario. The plaintiff purchased specialized brass castings from the defendant for use in its fire sprinklers.

The plaintiff sent the defendant updated purchase-order terms in 2016. Those terms included a New York choice-of-law provision and a clause stating that lawsuits relating to the terms or any order had to be brought in the United States District Court for the Southern District of New York or New York State courts in New York County, with each party submitting to those courts’ exclusive personal jurisdiction. The defendant did not expressly accept or reject the terms, but it filled ten purchase orders issued between March 23, 2018, and January 3, 2019. The orders covered more than 440,000 castings, and the related invoices totaled more than $1.1 million.

The plaintiff later discovered that some castings cracked during routine use. It returned more than 86,000 castings, received credit for some of them, and alleged that it incurred inspection, testing, replacement, and lost-profit costs. The complaint asserted breach of contract, breach of the implied warranty of merchantability, and breach of the implied warranty of fitness for a particular purpose.

Motion and legal standard

The defendant moved to dismiss under Federal Rule of Civil Procedure 12(b)(2) for lack of personal jurisdiction. At this stage, the plaintiff had to make a preliminary showing that jurisdiction existed. The court could consider materials outside the complaint, and where the parties’ affidavits conflicted, it had to resolve factual disputes in the plaintiff’s favor for purposes of deciding the motion.

The court explained that specific personal jurisdiction based on contacts with New York generally requires two steps: determining whether New York’s long-arm statute permits jurisdiction and then determining whether jurisdiction is consistent with constitutional due-process protections. A valid and enforceable forum-selection clause can also serve as the defendant’s consent to personal jurisdiction.

Analysis

The court treated the plaintiff’s allegations of general personal jurisdiction as abandoned because the plaintiff did not oppose the defendant’s argument that the defendant was not subject to general jurisdiction in New York. The court therefore considered only specific personal jurisdiction.

The court rejected the plaintiff’s argument that the defendant had transacted business in New York under New York Civil Practice Law and Rules § 302(a)(1). Although the plaintiff adequately alleged an ongoing contractual relationship, it did not allege that the purchase orders were negotiated or executed in New York, that the defendant’s representatives visited New York to discuss the relationship, or that the defendant performed its contractual obligations in New York. The defendant received the specifications and orders in Canada, manufactured the castings in Canada, and transferred title in Canada. Sending invoices and related emails to the plaintiff’s New York office was not enough. The court also found that the New York choice-of-law provision, standing alone with the other alleged contacts, did not show that the defendant purposefully availed itself of conducting business in New York.

The court also rejected jurisdiction under the part of § 302(a)(1) covering contracts to supply goods or services in New York. The plaintiff took title to the castings in Canada and had them transported to its facility in South Carolina. The plaintiff did not allege that the defendant solicited the orders in New York or collected New York sales tax. Sending invoices to New York likewise did not establish that the defendant contracted to provide goods in New York.

The court nevertheless denied the motion because the plaintiff relied on the forum-selection clause in the purchase-order terms. The parties presented conflicting evidence about whether the defendant agreed to those terms. For purposes of the motion, the court had to accept the plaintiff’s allegation that the defendant agreed to be bound by the jurisdiction provision. The court noted that discovery might ultimately allow the defendant to prove that it never agreed to the terms, but the court could not resolve that factual dispute against the plaintiff at this stage.

Disposition

Judge Philip M. Halpern denied the defendant’s motion to dismiss. The plaintiff’s claims were allowed to proceed to discovery. The defendant was ordered to file an answer within fourteen days of the order, and the court stated that it would issue a notice of the initial pretrial conference. The order resolved personal jurisdiction only; it did not decide the merits of the breach-of-contract or warranty claims.