Ferrante Equip. Co. v. Lasker-Goldman Corp., 26 N.Y.2d 280 (1970)
Under New York’s long-arm statute, CPLR 302(a)(1), a non-domiciliary is subject to personal jurisdiction in New York only if they transact business within the state, and the cause of action arises from that transaction; actions taken outside New York that merely affect business or performance within the state are insufficient to establish jurisdiction under this provision.
Summary
Ferrante Equipment Company sued Lasker-Goldman in New York. Lasker impleaded Hanover Insurance, who then impleaded Ferrante (individually), a New Jersey resident, based on an indemnity agreement executed in New Jersey. The New York Court of Appeals held that New York courts lacked personal jurisdiction over Ferrante because his business activities related to the cause of action occurred entirely in New Jersey, not New York. The court emphasized that the mere effect of Ferrante’s out-of-state actions on New York business was insufficient to establish jurisdiction under CPLR 302(a)(1). This case underscores the requirement of a direct transaction of business within New York for long-arm jurisdiction.
Facts
Lasker-Goldman Corporation was the general contractor for construction at New Paltz State College. Anchor Construction was a subcontractor. Ferrante Equipment Company leased equipment to Anchor for work on the New Paltz project. Anchor failed to provide a performance bond initially. Ferrante (individually), a substantial shareholder in Ferrante Equipment Company, approached Hanover Insurance in New Jersey to secure a performance bond for Anchor. As an inducement, Ferrante and Anchor’s president agreed in New Jersey to indemnify Hanover for any losses related to the bond. All negotiations and the execution of the indemnity agreement occurred in New Jersey. Ferrante was a New Jersey domiciliary and never entered New York in connection with these transactions.
Procedural History
Ferrante Equipment Company sued Lasker-Goldman in New York when Anchor defaulted on rental payments. Lasker impleaded Hanover Insurance. Hanover then impleaded Anchor, its president, and Ferrante (individually) based on the indemnity agreement. Ferrante, served in New Jersey, moved to dismiss the fourth-party complaint for lack of personal jurisdiction. Special Term denied the motion. The Appellate Division reversed, holding that Ferrante’s contacts with New York were insufficient for jurisdiction.
Issue(s)
Whether New York courts have personal jurisdiction under CPLR 302(a)(1) over a non-domiciliary who transacted business outside of New York, but whose actions affected the performance of work within New York.
Holding
No, because CPLR 302(a)(1) requires that the non-domiciliary transact business within New York, and the cause of action must arise from that in-state transaction. Actions taken outside New York, even if they impact work within the state, are insufficient to establish jurisdiction under this provision.
Court’s Reasoning
The Court of Appeals emphasized that CPLR 302(a)(1) requires the non-domiciliary to transact business within the state. Citing Parke-Bernet Galleries v. Franklyn, the court reiterated that the purpose of CPLR 302 is to extend jurisdiction only to non-residents who have engaged in some purposeful activity in New York in connection with the matter in suit. The court found no evidence of Ferrante transacting any business in New York. His activities, including negotiating and executing the indemnity agreement, occurred entirely in New Jersey. The court rejected the argument that Ferrante’s actions had a substantial effect on the New York job, stating that this argument attempted to improperly apply the reasoning of CPLR 302(a)(3)(ii) (tortious act outside the state causing injury within) to CPLR 302(a)(1). The court quoted the Appellate Division: “The mere receipt by a nonresident of benefit or profit from a contract performed by others in New York is clearly not an act by the recipient in this State sufficient to confer jurisdiction under our long-arm statute.” To extend jurisdiction based solely on the effects of out-of-state actions would be an unwarranted expansion of 302(a)(1) and a function belonging to the Legislature.