New York Law Review

Tag: Amigo Foods Corp.

  • Amigo Foods Corp. v. Marine Midland Bank-New York, 39 N.Y.2d 391 (1976): Establishing Long-Arm Jurisdiction Over Out-of-State Banks

    Amigo Foods Corp. v. Marine Midland Bank-New York, 39 N.Y.2d 391 (1976)

    A correspondent bank relationship alone, without evidence explaining its essence, is insufficient to establish long-arm jurisdiction over an out-of-state bank under New York’s CPLR 302(a)(1).

    Summary

    Amigo Foods Corp., a New York wholesaler, sued E.H. Parent, Inc., a Maine potato distributor, and Aroostook Trust Company, a Maine bank, alleging breach of contract or wrongful failure to deliver payment via a letter of credit. Amigo sought to establish jurisdiction over Aroostook based on its correspondent relationship with Irving Trust Company in New York. The New York Court of Appeals held that a mere correspondent banking relationship, without further evidence of the out-of-state bank’s activities in New York, is insufficient to establish long-arm jurisdiction. The Court reversed the Appellate Division’s decision and ordered that discovery be permitted to determine the extent of Aroostook’s activities and involvement in New York.

    Facts

    Amigo Foods, a New York-based wholesaler, contracted with E.H. Parent, a Maine potato grower, to purchase potatoes. Payment was to be made via a letter of credit through Aroostook Trust Company, a Maine bank. Amigo obtained a letter of credit from Marine Midland Bank in New York, which was then delivered to Irving Trust Company, Aroostook’s New York correspondent. A dispute arose concerning whether Parent received payment, leading Amigo to sue Parent and the banks.

    Procedural History

    Aroostook moved to dismiss for lack of personal jurisdiction, arguing it conducted no business in New York. Special Term initially ordered discovery on the jurisdictional issue. The Appellate Division reversed, granting Aroostook’s motion to dismiss. The New York Court of Appeals reversed the Appellate Division’s order, remanding the case to the Supreme Court and ordering discovery to determine if jurisdiction exists.

    Issue(s)

    Whether a correspondent bank relationship, without other evidence of activity in New York, is a sufficient basis for New York courts to exercise long-arm jurisdiction over an out-of-state bank under CPLR 302(a)(1)?

    Holding

    No, because a correspondent bank relationship alone, without any other indicia or evidence to explain its essence, does not form the basis for long-arm jurisdiction under CPLR 302(a)(1).

    Court’s Reasoning

    The court reasoned that CPLR 302(a)(1) allows jurisdiction over non-domiciliaries who transact business within the state. However, the mere existence of a correspondent banking relationship, without further evidence of the out-of-state bank’s purposeful availment of New York’s laws, is insufficient. The Court distinguished the case from older precedent, Bank of Amer. v Whitney Bank, 261 US 171, noting that it was decided before the development of long-arm jurisdiction. The Court emphasized the need for discovery to determine the scope of Aroostook’s activities in New York and the precise nature of its relationship with Irving Trust. Quoting Hanson v Denckla, 357 US 235, 253, the Court stated that it is necessary to determine whether Aroostook “purposely availed itself of the privilege of conducting activities in New York thereby invoking the benefits and protections of its laws”. The Court also rejected the argument that a breach of contract automatically constitutes a tortious act sufficient for long-arm jurisdiction under CPLR 302(a)(2) and (3). Because the critical facts regarding Aroostook’s activities were still obscure or in dispute, the Court ordered discovery.