Opinion ID: 148585
Heading Depth: 1
Heading Rank: 3

Heading: Legal Arguments For and Against Finding New York To Be the Situs of Injury

Text: 1. Legal Arguments in Favor of Deeming New York To Be the Situs of Injury. Penguin's strongest legal argument would appear to be an argument based on the logic this Court employed in DiStefano. The question there was the location of the situs of injury for section 302(a)(3) purposes where an employee who lived and worked in New York was fired at a meeting held in New Jersey. DiStefano, 286 F.3d at 82-83. We concluded that to determine whether there is an injury in New York sufficient to warrant § 302(a)(3) jurisdiction[, courts] must generally apply a situs-of-injury test, which asks them to locate the original event which caused the injury. Id. at 84 (internal quotation marks omitted). `This original event is, however, generally distinguished not only from the initial tort but from the final economic injury and the felt consequences of the tort.' Id. (quoting Bank Brussels Lambert v. Fiddler Gonzalez & Rodriguez, 171 F.3d 779, 791 (2d Cir.1999)). [T]he original event occurs where the first effect of the tort that ultimately produced the final economic injury is located. Id. at 84-85 (internal quotation marks and ellipsis omitted). In Mr. DiStefano's case, the original event occurred in New York because the `original event' [was] DiStefano's experience of being removed from his job. Id. at 85. DiStefano experienced the `first effect' of losing his job in New York, even though he was fired in New Jersey. Id. Penguin argues that similarly here, although the copying that allegedly infringed its copyright occurred in Oregon or Arizona, Penguin experienced the effect of the infringing conduct in New York, where its business was located and its copyright was located for present purposes. See, e.g., Appellant's Br. at 21 (alleging that the injury was experienced by Penguin in New York, where its offices and personnel are located, and where its copyrights are held); cf. Calder v. Jones, 465 U.S. 783, 789-90, 104 S.Ct. 1482, 79 L.Ed.2d 804 (1984) (concluding that jurisdiction over Florida defamation defendants in California satisfied Due Process standards because the defendants wrote and edited article they knew would have a potentially devastating impact upon the plaintiff, a California resident). Although we have never extended this logic to conclude that there was jurisdiction in New York courts over a defendant in an intellectual property dispute, district courts in this Circuit have. See, e.g., McGraw-Hill Cos., Inc. v. Ingenium Techs. Corp., 375 F.Supp.2d 252, 256 (S.D.N.Y.2005) (The torts of copyright and trademark infringement cause injury in the state where the allegedly infringed intellectual property is held.); [5] Design Tex Group, Inc. v. U.S. Vinyl Mfg. Corp., No. 04 Civ. 5002, 2005 WL 357125, at , 2005 U.S. Dist. LEXIS 2143, at  (S.D.N.Y. Feb. 14, 2005) ([B]ecause the plaintiffs (and their intellectual property) are based in New York, the injury is felt within the state no matter where the infringement takes place.). [6] Similarly, in Savage Universal Corp. v. Grazier Constr., No. 04 Civ. 1089, 2004 WL 1824102, 2004 U.S. Dist. LEXIS 16088 (S.D.N.Y. Aug. 13, 2004), the district court found the situs of injury under section 302(a)(3) to be New York State where an out-of-state defendant committed trademark infringement that affected a New York-based defendant's website through damage to its goodwill, lost sales, or lost customers. Id., 2004 WL 1824102 at , 2004 U.S. Dist. LEXIS 16088, at -30 (citing Citigroup Inc. v. City Holding Co., 97 F.Supp.2d 549, 568 (S.D.N.Y.2000)). Although, as noted, Penguin does allege copyright infringement through the distribution of its copyrighted work over the Internet, Compl. ¶ 28, Penguin does not specifically allege the loss of customers or other direct harm in New York, distinguishing this case from most of those cited, see, e.g., id. ; Citigroup, 97 F.Supp.2d at 568. But these cases can be read to suggest that the injury from the infringement of an intellectual property right committed outside of New York may be a New York injury for section 302(a)(3) purposes if it adversely affects the plaintiff and his intellectual property in New York. 2. Legal Arguments Against Deeming New York To Be the Situs of Injury. Looking not to domicile or residence but to lost business at the site of the allegedly infringing action taken by the defendant, some other district courts in this Circuit have concluded that injuries resulting from intellectual property torts occur where the infringing action is taken. See e.g., Art Leather Mfg. Co., Inc. v. Albumx Corp., 888 F.Supp. 565, 568 (S.D.N.Y.1995) (A patent holder suffers economic loss at the place where an infringing sale is made because the holder loses business there.); Freeplay Music, Inc. v. Cox Radio, Inc., No. 04 Civ. 5238, 2005 WL 1500896, at , 2005 U.S. Dist. LEXIS 12397 at  (S.D.N.Y. June 23, 2005) (In cases of commercial torts, the place of injury will usually be located where the critical events associated with the dispute took place. In this case, the critical events are [the defendant's] alleged unlicensed use of [the plaintiff's] recordings and compositions. (internal quotation marks and citation omitted)). The district court relied on this line of cases to conclude that Penguin's injury occurred where the book was impermissibly copied, since that is where the sale was lost. See Penguin, 2009 WL 1069158, at , 2009 U.S. Dist. LEXIS 34032, at -12.
The question whether defining the situs of injury here as New York so as to give rise to jurisdiction in New York over Penguin's claims against American Buddha would violate American Buddha's right to Due Process is beyond the scope of this appeal. We do not, as a general matter, conduct the due process analysis until we have first determined that there is personal jurisdiction under New York's Long-Arm Statute. See Best Van Lines, 490 F.3d at 242; Savin, 898 F.2d at 306. Here, were we eventually to agree with Penguin, contrary to the district court's decision, that the situs of injury was indeed New York, the proper course would be to remand to the district court to consider the remaining four factors for personal jurisdiction under the long-arm statute. See LaMarca, 95 N.Y.2d at 214, 735 N.E.2d at 886, 713 N.Y.S.2d at 307 (setting out five-part test for jurisdiction under section 302(a)(3)). At least two of those factorsthat American Buddha reasonably expected an injury to occur in New York and that American Buddha derives substantial revenue from interstate or international commercewere not analyzed by the district court. Penguin, 2009 WL 1069158, at , 2009 U.S. Dist. LEXIS 34032, at  ([I]t is not necessary to explore whether plaintiff has met its burden on the other elements necessary to establish jurisdiction under Rule 302(a)(3)(ii), or whether the exercise of jurisdiction would comport with due process.). Inasmuch as these issues likely involve additional questions of fact, they would best be decided by the district court, if necessary, in the first instance.
The rules of this Circuit provide that [i]f state law permits, the court may certify a question of state law to that state's highest court. 2d Cir. R. 27.2; see also Prats v. Port Auth. of N.Y. & N.J., 315 F.3d 146, 150-51 (2d Cir.2002). Our certification to the New York Court of Appeals is discretionary, see McCarthy v. Olin Corp., 119 F.3d 148, 153 (2d Cir.1997), and we have recognized several factors as guiding that discretion. First, and most important, certification may be appropriate if the New York Court of Appeals has not squarely addressed an issue and other decisions by New York courts are insufficient to predict how the Court of Appeals would resolve it. See Kuhne v. Cohen & Slamowitz, LLP, 579 F.3d 189, 198 (2d Cir.2009); O'Mara v. Town of Wappinger, 485 F.3d 693, 698 (2d Cir.2007). As discussed above, there are two competing lines of cases dealing with the issue here. The proper resolution of this appeal depends on a determination as to which of those lines of cases is correct. Second, certification may be appropriate if the statute's plain language does not indicate the answer. Riordan v. Nationwide Mut. Fire Ins. Co., 977 F.2d 47, 51 (2d Cir.1992); Colavito v. N.Y. Organ Donor Network, Inc., 438 F.3d 214, 229 (2d Cir.2006). Here, for the reasons discussed, we think that neither the plain language nor the legislative history of section 302(a)(3) makes clear the location of the situs of injury in a copyright infringement case. Third, certification may be appropriate if a decision on the merits requires value judgments and important public policy choices that the New York Court of Appeals is better situated than we to make. See Colavito, 438 F.3d at 229; Blue Cross & Blue Shield of N.J., Inc. v. Philip Morris USA, Inc., 344 F.3d 211, 221 (2d Cir. 2003). Resolution of this appeal requires deciding how the New York Legislature intended to strike the balance between the protection of New York-based intellectual property holders and the rights of defendants with few if any apparent ties to New York beyond the availability of material they have uploaded to a website out-of-state. The New York Court of Appeals is better situated to ascertain the New York State Legislature's intent than are we. Finally, certification may be appropriate if the questions certified will control the outcome of the case. See O'Mara, 485 F.3d at 698 (analyzing earlier version of the Second Circuit local rule governing certification). Here, resolution of the certified issue will determine how we resolve this appealif not necessarily whether jurisdiction will ultimately be found appropriate in New York State. If the New York Court of Appeals deems the situs of injury under the circumstances presented by this case to be the location of the infringing conduct, we will doubtless affirm the district court's judgement. If the Court of Appeals decides the situs of injury to be the location of the plaintiff and the intellectual property at issue, then the district court's opinion must, with virtual certainty, be vacated and we expect to remand for further proceedings. Because all four factors weigh in favor of certification, we hereby certify the question restated below.