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Star Video Entertainment v. Video USA Associates 1 L.P.

Decided: January 16, 1992.

STAR VIDEO ENTERTAINMENT, L.P., PLAINTIFF-APPELLANT,
v.
VIDEO USA ASSOCIATES 1 L.P.; VIDEO USA ASSOCIATES 1(B) L.P.; VIDEO USA ASSOCIATES 2(A) L.P.; VIDEO USA ASSOCIATES 2(B) L.P.; VIDEO USA ASSOCIATES 2(C) L.P.; VIDEO USA ASSOCIATES 2(D) L.P.; VIDEO USA ASSOCIATES 4, L.P.; VIDEO USA ASSOCIATES, INC., NO. 1; VIDEO USA ASSOCIATES, INC., NO. 2; VIDEO USA ASSOCIATES, INC., NO. 2(D); VIDEO USA ASSOCIATES, INC., NO. 4; MARVIN GREENFIELD; NORMAN NICK; JOHN DOES, I THROUGH X, DEFENDANTS-RESPONDENTS, AND VIDEO USA, LTD.; STEVEN CANTOR; AND BRUCE GREENBERG, DEFENDANTS



On appeal from Superior Court, Law Division, Hudson County.

Brody, Muir, Jr.*fn1 and Landau. The opinion of the court was delivered by Landau, J.A.D.

Landau

LANDAU, J.A.D.

This appeal calls for us again to address fact-sensitive circumstances in order to determine whether due process permits New Jersey to subject out-of-state defendants to the jurisdiction of its courts.

Over a period of approximately two years, plaintiff Star Video ("Star"), a distributor of prerecorded videocassettes with headquarters in Jersey City, sold tapes to defendant Video USA, Ltd., a Delaware corporation with principal place of business in Brooklyn, New York. Video USA purchased the tapes on behalf of a series of limited partnerships (sometimes herein referred to as "LPs"), also named defendants herein, which own and operate retail video sales and rental stores throughout the eastern United States. Star was the sole supplier of tape sales and rental inventory for these stores. Pursuant to their agreement, negotiated at Star's New Jersey head-quarters, Star invoiced Video USA for tapes ordered and dropshipped them from New Jersey, per Video USA instructions, to the LPs' various stores. By the time the complaint was filed in this matter, Video USA owed $556,000 on its account with Star.

Star sued on that account in the Law Division, Hudson County, on September 29, 1989, naming as defendants Video USA, its principals and directors,*fn2 the limited partnerships*fn3 and their corporate general partners.*fn4 In addition to the unpaid account of $556,000, the complaint included claims for unjust enrichment and conspiracy to defraud.

None of the defendants answered the Complaint. In consequence, Star obtained judgment by default against all defendants in November 1989. A few days later, the present appellants*fn5 moved pursuant to R. 4:6-2 to dismiss the Complaint against them for lack of personal jurisdiction, insufficiency of process, and/or insufficiency of service and for a protective order pursuant to R. 4:10-3. By supplemental motion, these same defendants ("moving defendants") further sought to vacate the default and default judgments entered.

The parties subsequently agreed by stipulation entered January 30, 1990, to conduct discovery limited to the jurisdictional issue and to reappear before the court at the Conclusion of such discovery. Star agreed to refrain from execution on the default judgments in the interim. Months dragged by as plaintiff's

counsel attempted first by multiple requests, and then by court order, to compel discovery.

The parties ultimately appeared again on February 1, 1991, for hearing on defendants' motion to dismiss. The Judge rendered his oral decision April 2, finding on the basis of the agency relationship of Video USA to the limited partnerships*fn6 that the non-resident limited partnerships had purposely availed themselves of the privilege of conducting business with a New Jersey corporation. Since the deliveries of videocassettes were invoiced, reasoned the Judge, the LPs knew or should have known that at least some of the tapes delivered to them were coming from a New Jersey source. The Judge concluded that the limited partnerships could reasonably have anticipated defending suit in New Jersey. Star correctly points out that the issue of jurisdiction over the limited partnerships is now final as it has not been appealed. R. 2:4-2.

All claims against the LP general partners, nonetheless, were dismissed for lack of jurisdiction on the basis of findings that their only connection to the New Jersey forum consisted of their relationship to Video USA. The Judge ruled that jurisdiction over the limited partnerships did not in and of itself confer jurisdiction over their incorporated general partners.

The Judge likewise determined that Greenfield and Nick's contacts with the State were insufficient to sustain New Jersey's exercise of jurisdiction, finding their only relationship to the forum to be their positions as shareholders of Video USA and officers of the corporate general partners. Rejecting plaintiff's argument that the court should pierce the corporate veil of Video USA to obtain ...


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