July 19, 2011
SANG CHUL LEE AND JUN GIL LEE, PLAINTIFFS-APPELLANTS,
YOUNG RAH, DEFENDANT-RESPONDENT.
On appeal from Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-9556-09.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted March 22, 2011
Before Judges Payne and Hayden.
Plaintiffs, Sang Chul Lee and Jun Gil Lee, appeal from an order dismissing their complaint alleging legal malpractice by defendant, Young Rah, a New York attorney, on grounds of lack of in personam jurisdiction.
At the time of the events at issue, Sang Chul Lee was a resident of Korea who maintained a business office in New York City located at 30 W. 39th Street, Third Floor. Jun Gil Lee was a resident of Edgewater, New Jersey. He owned and was employed as President of JGL International, Inc. a corporation located at the same address as the business address of Sang Chul Lee. From 1995 to 2002, he owned and was employed as President of Jun Trading Corp., maintaining offices in New York City.
Sang Chul Lee and Jun Gil Lee claim to have been the victims of a massive fraudulent scheme perpetrated by Daniel Choi in the period from 1999 to 2003, involving the manufacture and distribution of home AIDS/HIV testing kits and other projects. As a consequence, the Lees allege that they lost investments of more than $11,000,000. It is claimed that Choi was charged by the U.S. Attorney for the Southern District of New York with wire fraud, and he served time in custody for that crime. Additionally, in October 2003, he was named as a defendant, along with his companies, M&D Medical, L.L.C. and MDM Investments, Inc., his parents, Ok and Sung Su Choi, and his brother, Joseph Choi, in a RICO action instituted on behalf of Sang Chul Lee in the Southern District of New York and assigned to Judge Shira A. Scheindlin.
On September 22, 2002, defendant Young Rah was engaged to prepare a durable power of attorney authorizing Jun Gil Lee to act on behalf of Sang Chul Lee in connection with "bond, share and commodity transactions" involving MDM Diagnostics, Inc. and another entity. On January 23, 2003, defendant Young Rah was engaged by Sang Chul Lee and Jun Gil Lee to draft a deed transferring the ownership of residential property located in Closter, New Jersey from Daniel Choi's parents, Sung Su Choi and Ok Choi to Sang Chul Lee. Consideration for the property transfer was stated to be ten dollars. The deed was executed by the Chois on January 24, 2003. The accompanying escrow agreement, also executed by the two Chois and Sang Chul Lee on January 24, 2003, as well as by Rah as escrow agent, stated in relevant part:
Young Rah, Attorney at Law, as depositary ("Escrow Agent"), acknowledges receipt from the undersigned of the fully signed Deed ("Escrow Subject") of certain Real Property located [at designated address in] Closter, N.J. 07624 ("Premises") to Sang Chul Lee ("Grantee") for the purpose of holding in escrow until the Grantee gives notice of recording of Escrow Subject in writing to Escrow Agent or until the Grantee gives notice of release of the Escrow Subject to the undersigned. Within ten (10) business days from the receipt of such notice from Grantee, Escrow Agent shall either record or release the Escrow Subject in compliance thereto.
On June 4, 2003, Rah was again approached by Jun Gil Lee, who came to Rah's office with Ok Choi. Lee requested that Rah draft an "undertaking agreement" between Rah as Escrow Agent, Sung Su and Ok Choi, and Sang Chul Lee that recited the Chois' desire to sell the Closter property and their consent to entering into a sales listing agreement through real estate agent Mihae Lee, the wife of Jun Gil Lee, to executing a contract for the sale of the property, and to forwarding the net proceeds of sale to Rah as escrow agent to be held in trust for Sang Chul Lee. Once those steps were accomplished, the deed and escrow agreement previously entered by the parties would be deemed null and void. Additionally, the undertaking contained an agreement by the Chois to "indemnify and hold harmless Young Rah, Escrow Agent, from any claim, damage, breach of Escrow Agreement above-mentioned by any person whosoever and any governing body."
The undertaking agreement was signed by Jun Gil Lee on behalf of Sang Chul Lee by power of attorney, although Rah later testified that he never was shown the document and it has never been produced. Ok Choi executed the document for herself and on behalf of her husband, Sung Su Choi. However, when Young Rah determined that Ok Choi lacked the power to act for her husband, he drafted a power of attorney on her behalf, which she returned in executed form by telefax, later that day. The Chois were not represented by counsel at any stage of the proceedings involving the deed to their residence, the escrow agreement, the undertaking agreement, or the power of attorney. Rah claims to have had no further contact with any of the parties. He also claims that the deed was continuously held in escrow in New York and that it never was recorded in New Jersey.
At some point, the Chois defaulted on their mortgage and, at the request of Jun Gil Lee, they vacated their Closter residence. It appears that the mortgage default was cured by Jun Gil Lee, who also expended substantial sums improving the property. On August 20, 2003, a contract for the sale of the house for $775,000 to Yong Joon An and Sonjun Yoon was executed, with a closing date to be scheduled between October 30 and November 5, 2003. The real estate contract left blank the identity of the seller.
Thereafter, a copy of the deed given by the Chois to Sung Chul Lee was tendered as proof of ownership of the property. However, the purchaser's title company refused to accept the document, determining it to be irregular, having been drafted on a New York form. Instead, the company demanded that the Chois execute a deed conveying the property for $770,000 to Mihae Lee,*fn1
as well as an affidavit of title. The Chois refused to do so, claiming defects in the undertaking agreement as the result of Ok Choi's unauthorized execution of the document on her husband's behalf and a lack of consideration. Additionally, they claimed that the undertaking agreement had been executed under duress as the result of threats by Jun Gil Lee, among other things, to desecrate the Choi family graves in Korea. Upon learning of the difficulty, the purchasers made time of the essence, requiring that a closing take place by November 14, 2003, or the deal would be forfeited.
At this point, New Jersey counsel for Sang Chul Lee moved before Judge Scheindlin in the RICO action for an order compelling the Chois to execute the new deed and affidavit of title. Argument occurred on November 10, 2003, followed by a testimonial hearing on November 24, 2003. At the conclusion of the hearing, the judge denied the relief sought by Sang Chul Lee, finding that Lee had failed to demonstrate irreparable harm and the likelihood of success on the merits. The judge found that, although Lee sought specific performance, in actuality, his suit was for damages. Further, the judge found the undertaking agreement to be unenforceable, determining that it lacked consideration, there was no evidence that the signatures of Sung Su Choi and Sang Chul Lee were authorized, that Ok Choi lacked an understanding of what she signed, that a conflict of interest resulted from Rah's alleged attempts to counsel her, and that he should have advised her to retain an attorney to review the document at issue. However, the judge required that the Chois reimburse Jun Gil Lee for money expended on the property and that an attachment order be entered to prevent its alienation until the RICO action was concluded.
On appeal, Judge Scheindlin's order was affirmed by the Second Circuit. In rejecting Lee's argument of irreparable harm, the court held:
Here, Lee argues that the present injunction concerns unique real property whose loss would be irreparable. This argument is wholly without merit. It is undisputed that Lee seeks execution of the deed so that he may immediately close on the sales contract with the Ans, as part of the recovery for the money of which he was defrauded. He therefore has no interest unique to the real property, only a monetary interest. Even if he did have some interest unique to the property, it is preserved by the district court's attachment of the property, which would permit the district court to award Lee the property itself should he prove his right to it after full litigation of the issues.
Having found no irreparable harm, the court declined to address arguments regarding the likelihood of success on the merits.
Throughout the proceedings, Sung Su and Ok Choi have maintained that they played no role in the fraud allegedly committed by their son. Sang Chul Lee alleges otherwise, and in a claim for declaratory judgment contained in an amended complaint in the RICO action, he has alleged that in August and October 2002, Sung Su and Ok Choi requested $7,000,000 in additional cash for Daniel's enterprises, representing that they, along with Daniel, would "guaranty" the funds. As partial repayment of that money, the Chois tendered the deed to their Closter home in January 2003. But despite their execution of the deed and the fact that they vacated their residence and tendered the keys to Sang Chul Lee, they refused to permit title on the property to close.
Almost six years after the hearing before Judge Scheindlin, on October 29, 2009, Sang Chul Lee and Jun Gil Lee filed a legal malpractice action against Rah in the Superior Court of New Jersey. Before filing an answer, Rah moved to dismiss the complaint, but his motion was denied. Thereafter, he brought a second motion claiming lack of personal jurisdiction, which was granted by the motion judge in a written opinion. This appeal followed.
In this matter, there is no evidence that Rah has contacts with New Jersey other than his retention by a New Jersey resident and his drafting of documents concerning the disposition of New Jersey property. Rah is not licensed to practice in New Jersey, he does not solicit business here, and he has no known presence in the State. Evidence suggests that fees for his services were paid by JGL International Corp., a New York corporation. Further, there is no evidence of correspondence or communications by Rah directed either to Jun Gil Lee or his wife in New Jersey.*fn2 Nonetheless, we find that because of the foreseeable effects of Rah's conduct upon New Jersey, personal jurisdiction of the New Jersey courts over him can be sustained. We thus reverse the order dismissing the Lees' action.
In a case such as this in which specific jurisdiction arising out of the defendant's contact with the forum state is alleged, we focus our minimum contacts analysis on "the relationship among the defendant, the forum and the litigation." Shaffer v. Heitner, 433 U.S. 186, 204, 97 S. Ct. 2569, 2579, 53 L. Ed. 2d 683, 698 (1977). The "minimum contacts" requirement of due process "is satisfied so long as the contacts resulted from the defendant's purposeful conduct and not the unilateral activities of the plaintiff." Lebel v. Everglades Marina, Inc., 115 N.J. 317, 323 (1989) (citing World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297-98, 100 S. Ct. 559, 567-68, 62 L. Ed. 2d 490, 501-02 (1980)).
"This 'purposeful availment' requirement ensures that a defendant will not be haled into a jurisdiction solely as a result of 'random,' 'fortuitous,' or 'attenuated' contacts." Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475, 105 S. Ct. 2174, 2183, 85 L. Ed. 2d 528, 542 (1985) (quoting Keeton
[v. Hustler Magazine, Inc.] 465 U.S. [770,] 774, 104 S. Ct. [1473,] 1478, 79 L. Ed. 2d [790,] 797 [(1984)]; World-Wide Volkswagen, supra, 444 U.S. at 299, 100 S. Ct. at 568, 62 L. Ed. 2d at 502). The question is whether "the defendant's conduct and connection with the forum State are such that he should reasonably anticipate being haled into court there." World-Wide Volkswagen, supra, 444 U.S. at 297, 100 S.
Ct. at 567, 62 L. Ed. 2d at 501. [Id. at 323-24.]
In Lebel, the Court held that the fact that neither the defendant nor the product sold by it ever physically entered New Jersey did not preclude a finding of minimum contacts, so long as the defendant's conduct was specifically directed toward a New Jersey resident and it was aware that the sale would have direct consequences here. Id. at 327. In those circumstances, the Court determined, the defendant should have been aware of the possibility of litigation in a New Jersey forum. Id. at 328 (citing Calder v. Jones, 465 U.S. 783, 104 S. Ct. 1482, 79 L.
Ed. 2d 804 (1984)).
Significantly, in Calder, the United States Supreme Court found that the California courts had jurisdiction over the Florida-based president and editor of the National Enquirer and a reporter in a suit for libel, invasion of privacy, and intentional infliction of emotional distress arising out of an article regarding Jones that was published in the paper. In doing so, the Court held that because defendants' allegedly tortious acts were expressly aimed at Jones in California, jurisdiction was proper. Id. at 789-90, 104 S. Ct. at 1486-87,
79 L. Ed. 2d at 812-13.
The principles of Calder have been adopted in New Jersey.
In Halak v. Scovill, 296 N.J. Super. 363, 370 (App. Div.), certif. denied, 150 N.J. 28 (1997), we cited that precedent in support of our holding that "[j]urisdiction in the forum state may . . . be based on the effects in the forum state of a nonresident's actions." There, we found jurisdiction to exist over Maryland defendants who had obtained an arrest warrant against the New Jersey plaintiff following a dispute over the extent to which the plaintiff's money should be refunded upon malfunction of a rented boat and the entry by plaintiff of a stop-payment order on his check for the rental fee. Id. at 366, 371. Similarly, in Wolpert v. North Shore University Hospital, 231 N.J. Super. 378 (App. Div. 1989), we found that jurisdiction could be exercised over non-resident physicians who allegedly negligently prepared reports regarding the plaintiffs' sexual abuse of their grandson for use in a New Jersey custody dispute. There, we stated:
We see little difference between this case and any other in which a person takes an action in one state, but knows it will have effect in another. In such a case, the second state constitutionally can acquire jurisdiction over the actor. New Jersey has, in Rule 4:4-4(e), extended jurisdiction over non-residents to the full extent permitted by due process. Avdel Corporation v. Mecure, 58 N.J. 264, 268 (1971). If someone negligently discharges a firearm from across the State line, intentionally directing the bullet into New Jersey, we have little doubt that such an act satisfies the dictates of International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S. Ct. 154, 158, 90 L. Ed. 95, 101-102 (1945), and its progeny, entitling us to exercise jurisdiction over the actor. See Charles Gendler & Co. v. Telecom Equipment Corp., 102 N.J. 460, 471-472 (1986), stating that jurisdiction may be founded on a single contact where the suit arises from the particular transaction having a substantial connection to the forum. And see J.W. Sparks & Co. v. Gallos, 47 N.J. 295, 303 (1966) (a New Jersey investor purchased stock through a New Jersey office of a broker, knowing the transaction would be executed in New York; New York had a valid basis for asserting jurisdiction over the customer); Dave's Trash Removal v. Charm City, 214 N.J. Super. 497, 501-503 (App. Div. 1987) (the Maryland defendants solicitation in New Jersey of offers to purchase its truck was sufficient contact to support both a New Jersey action arising from such sale and out-of-state service on defendant); Unicon Investments v. Fisco, Inc., 137 N.J. Super. 395, 403-404 (Law Div. 1975) (an out-of-state corporation's guaranty of a New Jersey lease is a sufficient contact to warrant New Jersey's exercise of jurisdiction in a suit based on that guaranty). [Id. at 380-81.]
Here, the focus of Rah's legal efforts was upon the transfer of New Jersey property by the Chois to Sang Chul Lee and its attempted sale to third parties through Jun Gil Lee's wife, Mihae Lee. Although Rah's activities in that regard occurred in New York, he met there not only with New Jersey resident Jun Gil Lee but also with New Jersey residents Sung Su Choi and his wife Ok Choi, to whom he offered legal advice in connection with the undertaking agreement and legal services consisting of his drafting of a power of attorney for Ok Choi to use in executing the agreement. As a result, it is reasonable to conclude that Rah was well aware that his legal activities "would have direct consequences in New Jersey such that [he] should have been aware of the possibility of litigation arising in that forum." Lebel, supra, 115 N.J. at 328. As a final matter, we are satisfied that the exercise of jurisdiction in New Jersey comports with "fair play and substantial justice." Burger King, supra, 471 U.S. at 476-78, 105 S. Ct. at 2184, 85 L. Ed. 2d at 543-44. In that regard, we find that New Jersey maintains a significant interest in protecting its residents against potential malpractice, defending the suit here rather than New York imposes an insignificant additional burden on Rah, and nothing has been presented that would suggest that maintaining suit here would be unreasonable. Compare Washington v. Magazzu, 216 N.J. Super. 23, 28-29 (App. Div. 1987) (in a New Jersey legal malpractice action, finding minimum contacts with a Virginia lawyer were established but that the exercise of jurisdiction by this State's courts would not be reasonable). Accordingly, we reverse the order of dismissal in this matter and remand for further proceedings.
Reversed and remanded.