Motion sequence numbers 003 and 004 are herein consolidated for disposition.

Defendants SGS SA and SGS-CSTC Shanghai Branch (SGS Shanghai) move for an order, pursuant to CPLR 4403, confirming the report of Special Referee Sue Ann Hoahng, entered May 29, 2007 (the Report), holding that the court lacks personal jurisdiction over defendants SGS SA, pursuant to CPLR 301, and SGS Shanghai pursuant to CPLR 302 (mot. seq. no. 003).

Plaintiff New World Sourcing Group, Inc. moves, pursuant to CPLR 4403, for an order rejecting the Report on the ground that the Report is unsupported in fact and law, and further determining that the defendants SGS SA, SGS Group and SGS Shanghai are subject to the court's jurisdiction (mot. seq. no. 004). On June 23, 2006, the court dismissed the action as against SGS Group on the ground that it is not a justiciable entity.

This action arises out of an allegedly negligent inspection of textile fabric owned by plaintiff. Said textiles were manufactured in China, and, were inspected in China by SGS Shanghai, a subsidiary of SGS SA. SGS Shanghai's inspection of the fabric was performed under subcontract between SGS US Testing Company, Inc. and Land-N' Sea, Inc. (LSI), a New York state clothing manufacturer. LSI and plaintiff entered into a contract wherein plaintiff agreed to sell LSI the fabric at issue. Three Fabric Inspection Reports, prepared by SGS Shanghai, indicating the grade level of fabric, were e-mailed to LSI in New York.Defendants moved, pursuant to CPLR 3211 (a) (8), for an order dismissing the complaint on the grounds that the court lacks personal jurisdiction over them. By order dated June 23, 2006, the court referred the matter to a Special Referee to: (1) supervise limited discovery concerning defendants connection to New York; and (2) hear and report on the issue concerning whether the court has personal jurisdiction over SGS SA pursuant to CPLR 301 and SGS Shanghai pursuant to CPLR 302. The motion was held in abeyance.

Once the matter was referred to the Special Referee, the parties engaged in discovery. On November 22, 2006, a hearing was scheduled. At the hearing plaintiff offered no witnesses. [*2]Defendants offered the testimony of: (1) Daniel Stone, president and chief executive officer of nonparty SGS Testcom, subsidiary of SGS North America Inc. (SGS NA); (2) William Chau, deputy director of soft line inspections ^[FN1] of SGS Shanghai; (3) Benjamin F. Rodriguez, assistant general counsel for non-parties SGS NA and its subsidiary, SGS U.S. Testing Company, Inc. (SGS US Testing). Both sides submitted post-hearing briefs.

In the Report, the Special Referee concluded that

"[u]pon review of the credible testimony of the witness[es] and the exhibits marked as evidence, I find, that the evidence presented at the hearing clearly warrants a finding in favor of defendants-movants on all issues referred to the Special Referee. Defendants-movants have established that they do not have presence in [New York] pursuant to CPLR 301, and that they do not have any type of systematic course of doing business in [New York] as required by CPLR 302 (a) (1). Accordingly, I report and recommend a finding against plaintiff"

(see Report, pp. 14-15, Affidavit of Harlan M. Lazarus, Esq., Exhibit A).

"It is well settled that the report of a Special Referee shall be confirmed whenever the findings contained therein are supported by the record and the Special Referee has clearly defined the issues and resolved matters of credibility ..., since the Special Referee is considered to be in the best position to determine the issues presented" (Nager v Panadis, 238 AD2d 135, 135-136 [1st Dept 1997] [internal citations omitted]; see also Adelaide Productions, Inc. v BKN Int'l AG, —AD3d—, 2008 NY Slip Op 04785 [1st Dept May 29, 2008]). Pursuant to CPLR 4403, courts have the power to confirm, in whole or in part, the findings and recommendations of a Special Referee.

Determination as to SGS SA

New World argues that personal jurisdiction over SGS SA is warranted, pursuant to CPLR 301, based on the presence and activities of its two subsidiaries, SGS US Testing and SGS Testcom, Inc. (SGS Testcom). In order to have personal jurisdiction over a foreign parent, New World was required to show that the subsidiary does all the business the parent corporation could do were it in New York by its own officials, i.e. that the subsidiary is acting as an agent or mere department of the parent corporation (see Delagi v Volkswagenwerk AG of Wolfsburg, Germany, 29 NY2d 426 [1972]; Taca Int'l Airlines, S.A. v Rolls-Royce of England, Limited, 15 NY2d 97, 102 [1965]).

Based on the hearing testimony, it was established that SGS SA has no offices or employees in New York. SGS SA owns non-party SGS U.S. Holding, Inc., a Delaware corporation, which in turn, owns SGS NA. SGS NA owns 99% of SGS Testcom, the remaining 1% is owned by an individual. SGS Testcom's officers and managers were selected by Stone. SGS Testcom develops its own business plans and conducts its own day-to-day operations. SGS SA is not involved in the hiring of SGS Testcom personnel, does not sit on the board, and plays no role in developing Testcom's business plan.

SGS US Testing is wholly owned by SGS NA. Other than appointing SGS US Testing's [*3]board of directors, SGS NA exerts no control over SGS US Testing.

The Special Referee correctly found, "plaintiff failed to submit any proof to substantiate its allegations that SGS SA manages SGS Testcom or that SGS SA has substantial influence over SGS Testing" (Report, at p. 13, ¶ 9). Moreover, the Special Referee, properly found, based on the testimony of Rodriguez and Stone, that "SGS SA has no involvement in its three-levels-removed subsidiary SGS Testcom. Plaintiff failed to show that SGS Testcom and/or SGS US Testing are mere departments or agents of SGS SA in order to establish general jurisdiction under CPLR 301" (id.).

Nor is the Special Referee's decision unsupported because of the existence of a worldwide website for the SGS Group (comprised of SSG SA and its affiliates and subsidiaries), wherein SGS SA is listed. Although inspection reports are available online to certain customers, the website does not specifically target New York and is not interactive. As these findings are supported, the court confirms the Special Referee's recommendation with respect to the court's lack of personal jurisdiction over defendant SGS SA.

Determination as to SGS Shanghai

CPLR 302 (a) (1) provides that "a court may exercise personal jurisdiction over any non-domiciliary ..., who in person or through an agent transacts any business within the state or contracts anywhere to supply goods or services in the state." One business transaction in New York may be enough to invoke jurisdiction, even though the out-of-state defendant never entered New York, as long as its activities in the state were purposeful and there is substantial relationship between the transaction and the claim asserted (McGowan v Smith, 52 NY2d 268 [1981]; see also Johnson v Ward, 4 NY3d 516 [2005]). As the Special Referee noted "mere telephone calls and correspondence sent into N[ew] Y[ork], by a non-domiciliary defendant who is outside N[ew] Y[ork], generally are insufficient to establish personal jurisdiction (Report, p. 12, ¶ 7, citing Beatie & Osborn, LLP v Patriot Scientific Corp., 431 F Supp 2d 367, 388 [SD NY 2006]). However, personal jurisdiction has been found under CPLR 302 (a) (1), where non-domiciliary defendants sought legal advice from plaintiff regarding an Oregon copyright case, by telephone calls, facsimile transmissions, mail and courier communications, on a consistent basis over a period of approximately one year (Fischbarg v Doucet, 38 AD3d 270, 273-275 [1st Dept], aff'd 9 NY3d 375 [2007]; see also L & R Exploration Venture v Grynberg, 22 AD3d 221 [1st Dept 2005] [substantial activity in the form of telephone calls, letters and visits to New York may provide a basis for jurisdiction]).

Here, New World solely relies on the undisputed fact that three Fabric Inspection Reports prepared by SGS Shanghai were e-mailed to LSI in New York. However, unlike in Fischbarg, the few invoices offered by plaintiff were not sent on a consistent basis over a period of one year and no telephone calls or other modes of communication was used. Accordingly, it was appropriate for the Special Referee to conclude that these limited contacts were not enough to support jurisdiction.

CPLR 302 (a) (3) provides that a court may exercise personal jurisdiction as to a cause of action arising from acts of a non-domiciliary who commits a tortious act outside of New York causing injury in New York if he:

(i) regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in the state, or; [*4]

(ii) expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce.

While not expressly referencing CPLR 302 (a) (3), in the Report, the Special Referee correctly concluded that SGS Shanghai does not regularly conduct or solicit business or engage in any other persistent course of conduct in New York, and that the little revenue that SGS Shanghai derives from New York, namely, .0065% of SGS Shanghai's total $100 million of sales (see Report p. 13, ¶ 8), is insufficient to warrant jurisdictions as required under CPLR 302 (a) (3) (see e.g., Cortlandt Racquet Club, Inc. v Oy Saunatec, Ltd., 978 F Supp 520 [SD NY 1997] [holding lack of in personam jurisdiction pursuant to CPLR 302 (a) (3), based on derivation of substantial revenues from state, where New York sales commissions accounted for .0043% of manufacturer's total sales]).

Accordingly, the court confirms the Special Referee's recommendation with respect to the court's lack of personal jurisdiction over defendant SGS Shanghai.

In light of the foregoing, plaintiff's motion to reject the Special Referee's report and recommendation is denied.

As the Special Referee has determined, and this Court has confirmed as set forth above, that New York has no jurisdiction over defendants, dismissal is therefore required under CPLR 3211 (a) (8) (see Seevers v Tang, 268 AD2d 249 [1st Dept 2000]). The complaint is therefore dismissed.

ORDERED that the Special Referee's report is confirmed in its entirety; and it is further

ORDERED that the motion by plaintiff New World Sourcing Group, Inc. for an order rejecting the Referee Report is denied; and it is further

ORDERED that the defendants motion to dismiss the complaint against defendants SGS SA and SGS-CSTC Shanghai Branch is granted and the Clerk of the court is directed to enter judgment in favor of said defendants, dismissing the complaint against them, with costs and disbursements to defendants as taxed by the Clerk.

This Constitutes the Decision and Order of the Court.

Dated: June 24, 2008

ENTER:

______________________

J.S.C.