UNITED STATES COURT OF APPEALS

For the Second Circuit

No. 1383

August Term 1996

Argued:  April 9, 1997

Decided:  September 10, 1997

Docket No. 96-9344

BENSUSAN RESTAURANT CORPORATION, Plaintiff-Appellant,

        v.

RICHARD B. KING, Individually and doing business as The Blue
Note, Defendant-Appellee.

Before:  VAN GRAAFEILAND, WALKER and LEVAL, Circuit Judges.

Appeal from a judgment of the United States District Court for
the Southern District of New York (Stein, J.) dismissing appellant's
complaint pursuant to Fed. R. Civ. P. 12(b)(2) for lack of personal
jurisdiction.

Affirmed.

DOROTHY M. WEBER, NY, NY (Judith A. Kaminsky, Shukat Arrow Hafer
& Weber, NY, NY, of counsel), for Plaintiff-Appellant.

KERRY L. KONRAD, NY, NY (Robert A. Bourque, Lori E. Lesser,
Simpson Thacher & Bartlett, NY, NY, of counsel), for Defendant-Appellee.

VAN GRAAFEILAND, Circuit Judge:

Bensusan Restaurant Corporation, located in New York City,
appeals from a judgment of the United States District Court for the
Southern District of New York (Stein, J.) dismissing its complaint
against Richard B. King, a Missouri resident, pursuant to Fed. R. Civ.
P. 12(b)(2) for lack of personal jurisdiction.  We affirm.

Columbia, Missouri is a small to medium size city far distant
both physically and substantively from Manhattan.  It is principally a
white-collar community, hosting among other institutions Stephens
College, Columbia College and the University of Missouri.  It would
appear to be an ideal location for a small cabaret featuring live
entertainment, and King, a Columbia resident, undoubtedly found this to
be so.  Since 1980, he has operated such a club under the name "The Blue
Note" at 17 North Ninth Street in Columbia.

Plaintiff alleges in its complaint that it is "the creator of an
enormously successful jazz club in New York City called `The Blue
Note,'" which name "was registered as a federal trademark for cabaret
services on May 14, 1985."  Around 1993, a Bensusan representative wrote
to King demanding that he cease and desist from calling his club The
Blue Note.  King's attorney informed the writer that Bensusan had no
legal right to make the demand.

Nothing further was heard from Bensusan until April 1996, when
King, at the suggestion of a local web-site design company, ThoughtPort
Authority, Inc., permitted that company to create a web-site or
cyberspot on the internet for King's cabaret.  This work was done in
Missouri.  Bensusan then brought the instant action in the Southern
District of New York, alleging violations of sections 32(1) and 43(a) of
the Lanham Act, 15 U.S.C. Section(s) 1114(1) & 1125(a), and section 3(c)
of the Federal Trademark Dilution Act of 1995, 15 U.S.C. Section(s)

In addition to seeking trebled compensatory damages, punitive
damages, costs and attorney's fees, Bensusan requests that King be
enjoined from:

using the mark "The Blue Note", or any other indicia of the Blue
Note in any manner likely to cause confusion, or to cause mistake, or to
deceive, or from otherwise representing to the public in any way that
[King's club] is in any way sponsored, endorsed, approved, or authorized
by, or affiliated or connected with, Plaintiff or its CABARET, by means
of using any name, trademark, or service mark of Plaintiff or any other
names whatsoever, including but not limited to removal of Defendant's
website . . . .

The web-site describes King's establishment as "Mid-Missouri's
finest live entertainment venue, . . . [l]ocated in beautiful Columbia,
Missouri," and it contains monthly calendars of future events and the
Missouri telephone number of King's box office.  Initially, it contained
the following text:

The Blue Note's CyberSpot should not be confused with one of the
world's finest jazz club Blue Note, located in the heart of New York's
Greenwich Village.  If you should ever find yourself in the big apple
give them a visit.

This text was followed by a hyperlink *fn1 that could be used to
connect a reader's computer to a web-site maintained by Bensusan. When
Bensusan objected to the above-quoted language, King reworded the
disclaimer and removed the hyperlink, substituting the following
disclaimer that continues in use:

The Blue Note, Columbia, Missouri should not be confused in any
way, shape, or form with Blue Note Records or the jazz club, Blue Note,
located in New York.  The CyberSpot is created to provide information
for Columbia, Missouri area individuals only, any other assumptions are
purely coincidental.

The district court dismissed the complaint in a scholarly
opinion that was published in 937 F. Supp. 295 (1996).  Although we
realize that attempting to apply established trademark law in the
fast-developing world of the internet is somewhat like trying to board a
moving bus, we believe that well-established doctrines of personal
jurisdiction law support the result reached by the district court.

In diversity or federal question cases the court must look first
to the long-arm statute of the forum state, in this instance, New York.
PDK Labs, Inc. v. Friedlander, 103 F.3d 1105, 1108 (2d Cir. 1997).  If
the exercise of jurisdiction is appropriate under that statute, the
court then must decide whether such exercise comports with the
requisites of due process.  See Metropolitan Life Ins. Co. v.
Robertson-Ceco Corp., 84 F.3d 560, 567 (2d Cir.), cert. denied, 117 S.
Ct. 508 (1996).  Because we believe that the exercise of personal
jurisdiction in the instant case is proscribed by the law of New York,
we do not address the issue of due process.

The New York law dealing with personal jurisdiction based upon
tortious acts of a non-domiciliary who does not transact business in New
York is contained in sub-paragraphs (a)(2) and (a)(3) of CPLR Section(s)
302, and Bensusan claims jurisdiction with some degree of inconsistency
under both sub-paragraphs.  Because King does not transact business in
New York State, Bensusan makes no claim under section 302(a)(1).  The
legislative intent behind the enactment of sub-paragraphs (a)(2) and
(a)(3) best can be gleaned by reviewing their disparate backgrounds.
Sub-paragraph (a)(2), enacted in 1962, provides in pertinent part that a
New York court may exercise personal jurisdiction over a non-domiciliary
who "in person or though an agent" commits a tortious act within the
state.  The New York Court of Appeals has construed this provision in
several cases.  In Feathers v. McLucas, 15 N.Y.2d 443, 458 (1965),  the
Court held that the language "commits a tortious act within the state,"
as contained in sub-paragraph (a)(2), is "plain and precise" and confers
personal jurisdiction over non-residents "when they commit acts within
the state."  Id. at 460 (internal quotation marks omitted).  Feathers
adopted the view that CPLR Section(s) 302(a)(2) reaches only tortious
acts performed by a defendant who was physically present in New York
when he performed the wrongful act.  The official Practice Commentary to
CPLR Section(s) 302 explains that "if a New Jersey domiciliary were to
lob a bazooka shell across the Hudson River at Grant's tomb, Feathers
would appear to bar the New York courts from asserting personal
jurisdiction over the New Jersey domiciliary in an action by an injured
New York plaintiff." C302:17.  The comment goes on to conclude that:

As construed by the Feathers decision, jurisdiction cannot be
asserted over a nonresident under this provision unless the nonresident
commits an act in this state.  This is tantamount to a requirement that
the defendant or his agent be physically present in New York. . . .  In
short, the failure to perform a duty in New York is not a tortious act
in this state, under the cases, unless the defendant or his agent enters
the state.

The Court of Appeals adhered to the Feathers holding in Kramer
v. Vogl, 17 N.Y.2d 27, 31 (1966), and again in Platt Corp. v. Platt, 17
N.Y.2d 234, 237 (1966), where it said:

The failure of a man to do anything at all when he is physically
in one State is not an "act" done or "committed" in another State.  His
decision not to act and his not acting are both personal events
occurring in the physical situs.  That they may have consequences
elsewhere does not alter their personal localization as acts.

See also Ferrante Equip. Co. v. Lasker-Goldman Corp., 26 N.Y.2d
280, 285 (1970).

In Harvey v. Chemie Grunenthal, G.m.b.H, 354 F.2d 428, 431 (2d
Cir. 1965), cert. denied, 384 U.S. 1001 (1966), we held that this
construction of sub-paragraph (a)(2) should be followed.  Numerous lower
courts, both state and federal, have arrived at the same conclusion. See
Beckett v. Prudential Ins. Co., 893 F. Supp. 234, 239 (S.D.N.Y. 1995);
Kenetic Instruments, Inc. v. Lares, 802 F. Supp. 976, 982-83 (S.D.N.Y.
1992); Department of Economic Dev. v. Arthur Andersen & Co., 747 F.
Supp. 922, 929 (S.D.N.Y. 1990); Van Essche v. Leroy, 692 F. Supp. 320,
324 (S.D.N.Y. 1988); Rolls-Royce Motors, Inc. v. Charles Schmitt & Co.,
657 F. Supp. 1040, 1052-53 (S.D.N.Y. 1987); Bulk Oil (USA) Inc. v. Sun
Oil Trading Co., 584 F. Supp. 36, 40-41 (S.D.N.Y. 1983); Paul v. Premier
Elec. Constr. Co., 576 F. Supp. 384, 389 (S.D.N.Y. 1983); Bialek v.
Racal-Milgo, Inc., 545 F. Supp. 25, 35 (S.D.N.Y. 1982); Selman v.
Harvard Medical Sch., 494 F. Supp. 603, 612-13 (S.D.N.Y.), aff'd mem.,
636 F.2d 1204 (2d Cir. 1980); Marine Midland Bank v. Kiplinger &
Assocs., Inc., 488 F. Supp. 699 (S.D.N.Y. 1980); Lynn v. Cohen, 359 F.
Supp. 565, 568 (S.D.N.Y. 1973); Bauer Indus. Inc. v. Shannon Luminous
Materials Co., 52 A.D.2d 897-98 (2d Dep't 1976) (mem.); Glucoft v.
Northside Sav. Bank, 86 Misc.2d 1007, 1008-09 (N.Y. Civ. Ct. 1976);
Gluck v. Fasig Tipton Co., 63 Misc.2d 82, 84 (N.Y. Sup. Ct. 1970);
Balogh v. Rayner-Smith, 51 Misc.2d 1089, 1092 (N.Y. Sup. Ct. 1966).

In 1990, Judge McLaughlin, who wrote the above-quoted commentary
on section 302(a)(2), further evidenced his belief that the commentary
correctly interpreted the statute when he quoted its substance in Twine
v. Levy, 746 F. Supp. 1202, 1206 (E.D.N.Y. 1990).  As recently as 1996,
another of our district judges flatly stated:

To subject non-residents to New York jurisdiction under
Section(s) 302(a)(2) the defendant must commit the tort while he or she
is physically in New York State.

Carlson v. Cuevas, 932 F. Supp. 76, 80 (S.D.N.Y. 1996)(Baer,
J.).

Like the district court in Bulk Oil, supra, 584 F. Supp. at 41,
we recognize that the interpretation of sub-paragraph (a)(2) in the line
of cases above cited has not been adopted by every district judge in the
Second Circuit.  However, the judges who differ are in the minority.  In
the absence of some indication by the New York Court of Appeals that its
decisions in Feathers and Platt, as interpreted and construed in the
above-cited majority of cases, no longer represent the law of New York,
we believe it would be impolitic for this Court to hold otherwise.
Applying these principles, we conclude that Bensusan has failed to
allege that King or his agents committed a tortious act in New York as
required for exercise of personal jurisdiction under CPLR Section(s)
302(a)(2).  The acts giving rise to Bensusan's lawsuit -- including the
authorization and creation of King's web site, the use of the words
"Blue Note" and the Blue Note logo on the site, and the creation of a
hyperlink to Bensusan's web site -- were performed by persons physically
present in Missouri and not in New York.  Even if Bensusan suffered
injury in New York, that does not establish a tortious act in the state
of New York within the meaning of Section(s) 302(a)(2).  See Feathers,
15 N.Y.2d at 460.

Bensusan's claims under sub-paragraph (a)(3) can be quickly
disposed of.  Sub-paragraph (a)(2) left a substantial gap in New York's
possible exercise of jurisdiction over non-residents because it did not
cover the tort of a non-resident that took place outside of New York but
caused injury inside the state.  Accordingly, in 1966 the New York
Legislature enacted sub-paragraph (a)(3), which provides in pertinent
part that New York courts may exercise jurisdiction over a
non-domiciliary who commits a tortious act without the state, causing
injury to person or property within the state.  However, once again the
Legislature limited its exercise of jurisdictional largess.  Insofar as
is pertinent herein it restricted the exercise of jurisdiction under
sub-paragraph (a)(3) to persons who expect or should reasonably expect
the tortious act to have consequences in the state and in addition
derive substantial revenue from interstate commerce.  To satisfy the
latter requirement, Bensusan relies on the arguments that King
participated in interstate commerce by hiring bands of national stature
and received revenue from customers -- students of the University of
Missouri -- who, while residing in Missouri, were domiciliaries of other
states.  These alleged facts were not sufficient to establish that
substantial revenues were derived from interstate commerce, a
requirement that "is intended to exclude non-domiciliaries whose
business operations are of a local character."  Report of the
Administrative Board of the Judicial Conference of the State of New York
for the Judicial Year July 1, 1965 through June 30, 1966, Legislative
Document (1967) No. 90.  See United Bank of Kuwait v. James M. Bridges,
Ltd., 766 F. Supp. 113, 117-18 (S.D.N.Y. 1991); Markham v. Gray, 393 F.
Supp. 163, 166 (W.D.N.Y. 1975).  King's "Blue Note" cafe was
unquestionably a local operation.

For all the reasons above stated, we affirm the judgment of the
district court.

***** BEGIN FOOTNOTE(S) HERE *****

*fn1  A hyperlink is "highlighted text or images that, when
selected by the user, permit him to view another, related Web document."
Shea v. Reno, 930 F. Supp. 916, 929 (S.D.N.Y. 1996) (three-judge
court), aff'd, 65 U.S.L.W. 3323 (U.S. June 27, 1997).

***** END FOOTNOTE(S) HERE *****