Minnie Rose, LLC v. Yu, No. 1:15-cv-01923 (S.D.N.Y. Mar. 11, 2016) [click for opinion]

Plaintiff Minnie Rose LLC ("Plaintiff"), a New York clothing retailer and fashion brand, brought this suit against Defendants Anna Yu ("Yu") and Elva Green Clothing Company Ltd. (collectively, "Defendants"), a Hong Kong domiciliary and a Hong Kong corporation with its principal place of business in Hong Kong, respectively, for fraudulent misrepresentation and unjust enrichment. Plaintiff specifically alleged that Defendants, who were responsible for selecting factories to manufacture Plaintiff's clothing, supervising production, negotiating prices, and coordinating Plaintiff's payment of the factories' invoices, had entered into a fraudulent scheme whereby Defendants artificially inflated sums on the factory invoices such that Defendants could pocket the price differences and recover higher commissions.

Defendants moved to dismiss Plaintiff's claims, in part, on the basis that the court did not have personal jurisdiction over the foreign defendants. In support of this argument, Defendants alleged: (1) that they never had an office, bank account, property, employee, or agent in New York; (2) that although Defendants had a business relationship with Plaintiff, all supply sources were located in Hong Kong, all communications with these sources occurred in Hong Kong, and all invoices were prepared in China or Hong Kong; and (3) that Plaintiff is the one who pursued the relationship and visited Defendants in China and Hong Kong many times.

The Southern District of New York, however, found Defendants' arguments unpersuasive, citing to "the growth of national markets for commercial trade and [to] technological advances that [have] enable[d] a party to transact enormous volumes of business within a state without physically entering it" as a bases for extending jurisdiction over Defendants in this case.

According to the complaint, Defendants regularly communicated via email and telephone with Plaintiff in New York, regularly made shipments to Plaintiff in New York, and sent allegedly fraudulent invoices to Plaintiff in New York. Defendant Yu also traveled to New York on three separate occasions and discussed at least some business with Plaintiff there. Moreover, the financial scope of Defendants' relationship with Plaintiff was substantial, i.e., $ 1.4 million in legitimate commissions. Viewing these contacts together, the court determined that the foreign defendants had purposefully transacted business in New York. Furthermore, because that business led to the allegedly fraudulent scheme at issue, Defendants were subject to the court's jurisdiction under New York's long-arm statute, C.P.L.R. § 302(a)(1).

The court then considered whether exercise of such jurisdiction comported with Constitutional due process requirements. Turning to the first prong of the due process inquiry, the Southern District of New York concluded that for the same reasons outlined above, Defendants had sufficient minimum contacts with the forum state to justify exercising personal jurisdiction. Likewise, looking to the second prong of the due process inquiry, the court determined that, on balance, Defendants had not presented a compelling argument as to why exercising jurisdiction in this case would be unreasonable. The court noted, among other reasons, that the conveniences of modern communication and transportation have markedly reduced the burden on foreign defendants to litigate in the United States, and that while many witnesses were likely in Hong Kong, documentary evidence was likely in both Hong Kong and New York. Thus, the court ultimately held Defendants subject to its specific personal jurisdiction.