New York Law Review

Tag: CPLR 302

  • Sung Hwan Co. v. Rite Aid Corp., 7 N.Y.3d 78 (2006): Enforcing Foreign Judgments Based on Tortious Acts Causing Economic Injury

    7 N.Y.3d 78 (2006)

    New York courts will generally enforce foreign judgments under the principles of comity, even if the foreign court’s substantive law differs from New York’s, provided the foreign court had jurisdiction and the judgment doesn’t violate New York’s public policy.

    Summary

    Sung Hwan Co., a Korean company, sought to enforce a Korean court judgment against Rite Aid Corporation in New York. The Korean judgment was based on a tort claim alleging that Rite Aid’s defective ice cream caused economic injury to Sung Hwan in Korea. Rite Aid argued that the Korean court lacked jurisdiction because the claim was essentially a breach of contract, and New York law doesn’t allow economic damages for negligence. The New York Court of Appeals reversed the lower courts, holding that the Korean court’s exercise of jurisdiction was proper under New York’s long-arm statute (CPLR 302) and that the difference in substantive tort law between Korea and New York was not a sufficient basis to deny comity.

    Facts

    Sangshin Trading Co., a Korean company, contracted with Thrifty Payless, Inc. (later acquired by Rite Aid) to purchase ice cream for resale in Korea.

    Sung Hwan Co. contracted with Sangshin to buy Thrifty ice cream for its stores in Korea.

    Sales of Thrifty ice cream grew rapidly, but declined sharply after the Korean government found listeria in the ice cream.

    Sung Hwan sought compensation from Thrifty (later Rite Aid) for losses but received no offer of settlement.

    Sung Hwan sued Rite Aid in Korea, alleging a tort claim based on Rite Aid’s negligence in failing to properly test the ice cream.

    Rite Aid failed to respond to the Korean lawsuit, and a default judgment was entered against them.

    Procedural History

    Sung Hwan sought to enforce the Korean judgment in New York.

    The Supreme Court dismissed the complaint, finding no basis for personal jurisdiction over Rite Aid.

    The Appellate Division affirmed the dismissal.

    The New York Court of Appeals granted leave to appeal and reversed the Appellate Division’s order.

    Issue(s)

    1. Whether the Korean court’s exercise of jurisdiction over Rite Aid was consistent with New York’s concept of personal jurisdiction, specifically under CPLR 302(a)(3), which allows jurisdiction over non-domiciliaries who commit tortious acts outside the state causing injury within the state.

    2. Whether the difference in substantive tort law between Korea and New York, specifically regarding the recovery of economic damages for negligence, is a sufficient basis to deny comity to the Korean judgment.

    Holding

    1. Yes, because for purposes of establishing long-arm jurisdiction, a tort should be broadly defined to encompass one that causes economic injury.

    2. No, because differing remedies do not violate the principles of comity between the two jurisdictions.

    Court’s Reasoning

    The Court of Appeals stated that New York has a history of generously enforcing foreign judgments under the doctrine of comity. CPLR Article 53 codifies this principle, allowing enforcement of foreign judgments unless the foreign court lacked jurisdiction or the judgment violates New York’s public policy.

    The court focused on whether the Korean court’s exercise of jurisdiction was consistent with CPLR 302(a)(3), New York’s long-arm statute, which allows jurisdiction over non-domiciliaries who commit tortious acts outside the state causing injury within the state. The court determined that the key question was whether Rite Aid committed a “tortious act” outside of Korea causing injury within Korea.

    Rite Aid argued that Sung Hwan’s claim was essentially a breach of contract claim disguised as a tort, and that New York law doesn’t allow recovery for economic loss based on negligence. The Court rejected this argument, stating that the focus should be on whether a tortious act occurred, not on the remedy sought. The court cited Sybron Corp. v. Wetzel, stating that CPLR 302 does not limit the kinds of tortious acts covered to personal injury and property damage.

    The Court emphasized that interfering with another jurisdiction’s legislative and judicial actions undermined the principles of comity. The Court concluded that although Korean law may be more expansive than New York law in imposing liability for economic loss under a tort theory, this difference alone is not enough to deny comity to the Korean judgment, citing Loucks v Standard Oil Co. of N.Y.

    “If a foreign statute gives the right, the mere fact that we do not give a like right is no reason for refusing to help the plaintiff in getting what belongs to him. We are not so provincial as to say that every solution of a problem is wrong because we deal with it otherwise at home.”

  • Kreutter v. McFadden Oil Corp., 71 N.Y.2d 460 (1988): Rejecting the Fiduciary Shield Doctrine in New York Long-Arm Jurisdiction

    Kreutter v. McFadden Oil Corp., 71 N.Y.2d 460 (1988)

    New York’s long-arm statute, CPLR 302(a)(1), does not recognize the fiduciary shield doctrine, meaning that corporate officers or employees are not automatically shielded from personal jurisdiction in New York simply because their actions were taken on behalf of a corporation.

    Summary

    Plaintiff Kreutter invested in a Texas oil venture through McFadden Company, a New York corporation acting as an agent for Texas-based McFadden Oil and Harmony Drilling. After losing his investment, Kreutter sued the Texas defendants, including Downman, an officer of both McFadden Oil and Harmony, seeking jurisdiction under New York’s long-arm statute. The Court of Appeals reversed the Appellate Division, holding that the fiduciary shield doctrine does not protect Downman from jurisdiction and that Harmony also transacted business in New York through McFadden Company. The court emphasized that constitutional due process and the specifics of CPLR 302 adequately address fairness concerns, and the fiduciary shield doctrine is unnecessary and undesirable as a matter of public policy.

    Facts

    Brian McFadden and Eugene Burch Downman formed McFadden Company in New York to market investments in Downman’s Texas oil operations. McFadden Company sold participation shares, retaining a commission and forwarding the balance to McFadden Oil. Kreutter, a New York resident, invested $70,000 for the purchase of an oil rig. The funds, after commission, were eventually directed to Harmony Drilling, a company owned by Downman, his wife, and daughter. Kreutter received nothing and sued the defendants for fraud, conversion, and breach of contract.

    Procedural History

    The Supreme Court denied the Texas defendants’ motion to dismiss for lack of jurisdiction. The Appellate Division modified, sustaining jurisdiction over McFadden Oil but dismissing the action against Downman and Harmony, invoking the fiduciary shield doctrine for Downman and finding insufficient contacts for Harmony. The New York Court of Appeals granted leave to appeal.

    Issue(s)

    1. Whether the fiduciary shield doctrine protects a corporate officer from personal jurisdiction in New York when their contacts with the state were solely on behalf of the corporation.
    2. Whether Harmony Drilling transacted business in New York through its relationship with McFadden Company.

    Holding

    1. No, the fiduciary shield doctrine does not protect a corporate officer from personal jurisdiction in New York, because the statute’s language and history do not support such protection, and constitutional due process adequately addresses fairness concerns.
    2. Yes, Harmony Drilling transacted business in New York, because it used McFadden Company to secure Kreutter’s investment and received funds directly from McFadden Company.

    Court’s Reasoning

    The court rejected the fiduciary shield doctrine, finding no support for it in CPLR 302 or its legislative history. The court reasoned that due process considerations and the limitations within CPLR 302 adequately protect against unfair assertions of jurisdiction. The court found that fairness concerns are addressed by constitutional due process requirements. The Court highlighted that the objective is to acquire jurisdiction over an individual who was a primary actor in the transaction in New York. The Court noted “Inasmuch as the constitutional and statutory safeguards sufficiently alleviate the equitable concerns posed by long-arm jurisdiction, there is ‘no convincing reason why the mere fact of corporate employment should alter the jurisdictional calculus.’” Regarding Harmony, the court found that Harmony used McFadden Company in New York to secure Kreutter’s investment and benefitted from that relationship. The Court concluded, “Jurisdiction over Harmony was properly sustained because Harmony used McFadden Company in New York to secure plaintiffs investment, it paid McFadden Company for that service, and it received the balance of the invested funds directly from McFadden Company when it issued a check payable to Harmony.” The Court found the Appellate Division’s finding was against the weight of the evidence.

  • Banco Ambrosiano, S.P.A. v. Artoc Bank & Trust Ltd., 62 N.Y.2d 65 (1984): Quasi-in-Rem Jurisdiction and Minimum Contacts

    Banco Ambrosiano, S.P.A. v. Artoc Bank & Trust Ltd., 62 N.Y.2d 65 (1984)

    Quasi-in-rem jurisdiction over a non-domiciliary defendant is permissible in New York when the defendant has minimum contacts with the state, and the cause of action is related to property located within the state, even if CPLR 302 does not authorize in personam jurisdiction.

    Summary

    Banco Ambrosiano, an Italian bank, sued Artoc Bank, a Bahamian bank, in New York to recover $15 million allegedly loaned to Artoc. Ambrosiano attached Artoc’s New York bank account. The New York Court of Appeals held that quasi-in-rem jurisdiction was proper because Artoc had sufficient minimum contacts with New York through its regular use of a New York bank account to effectuate international transactions, and because the lawsuit arose directly from transactions involving that account. The court emphasized that while CPLR 302 may not always provide for in personam jurisdiction to the full extent permitted by due process, quasi-in-rem jurisdiction could fill this gap when minimum contacts are present.

    Facts

    Banco Ambrosiano (Ambrosiano), an Italian bank, loaned $15 million to Artoc Bank & Trust Limited (Artoc), a Bahamian bank. The loan consisted of three $5 million transactions. Artoc directed Ambrosiano to deposit the funds into Artoc’s account at Brown Brothers Harriman in New York. Repayment, according to Artoc’s documentation, was to be made to Ambrosiano’s account at its New York correspondent bank. Artoc argued the loans were intended for Ambrosiano’s Peruvian subsidiary, and repayment was contingent on the subsidiary’s repayment to Artoc. Artoc’s only contact with New York was its maintenance of the correspondent bank account at Brown Brothers.

    Procedural History

    Ambrosiano commenced the action by obtaining an ex parte order restraining Brown Brothers from transferring funds in Artoc’s account. Ambrosiano moved to confirm the attachment; Artoc challenged the jurisdiction. Special Term granted Ambrosiano’s motion, finding a reasonable relationship between the property and the cause of action, sufficient for quasi-in-rem jurisdiction. The Appellate Division affirmed. The New York Court of Appeals granted leave to appeal.

    Issue(s)

    Whether the exercise of quasi-in-rem jurisdiction over Artoc’s New York bank account is consistent with due process, given that Artoc’s sole contact with New York is the maintenance of this account and the loan transactions involved deposits into and repayments to accounts within the state.

    Holding

    Yes, because Artoc’s New York bank account was closely related to Ambrosiano’s claim, Artoc regularly used the account for international banking, and Artoc directed funds to be deposited into and repaid to New York accounts, thus establishing sufficient minimum contacts with New York to satisfy due process for quasi-in-rem jurisdiction.

    Court’s Reasoning

    The Court of Appeals analyzed the impact of Shaffer v. Heitner, which extended the minimum contacts analysis of International Shoe to quasi-in-rem jurisdiction. The court acknowledged that Shaffer limited the use of quasi-in-rem jurisdiction. However, it emphasized that a “gap” exists in New York law because CPLR 302 doesn’t extend in personam jurisdiction to the constitutional limit. The court stated that in such cases, quasi-in-rem jurisdiction is appropriate. The court found that Artoc’s contact with New York was not merely the presence of property. “This is not a case in which property is coincidentally located within the State’s borders and forms the only relevant link to defendant; rather, Artoc’s account with Brown Brothers is closely related to plaintiff’s claim.” The court also pointed out Artoc’s regular use of the account for international banking and the fact that Artoc directed funds to be deposited and repaid through New York accounts. These factors, taken together, establish sufficient minimum contacts to satisfy due process. The court further held that the lower courts did not abuse their discretion in refusing to dismiss the action on the grounds of forum non conveniens and that Ambrosiano, as a foreign banking corporation, could maintain the action under Banking Law § 200-b (subd 2, par [a]).

  • Etra v. Matta, 61 N.Y.2d 455 (1984): Establishing Personal Jurisdiction Over Non-Resident Physicians

    Etra v. Matta, 61 N.Y.2d 455 (1984)

    A non-resident physician’s limited contacts with New York, such as consulting with a New York physician and providing an experimental drug as part of treatment initiated outside New York, are insufficient to establish personal jurisdiction in a New York medical malpractice suit.

    Summary

    This case addresses the limits of personal jurisdiction over a non-resident physician in a medical malpractice action. The New York Court of Appeals held that a Massachusetts physician, Dr. Lown, who treated a patient in Massachusetts and consulted with a New York physician after the patient returned to New York, did not have sufficient contacts with New York to warrant the exercise of personal jurisdiction. The court reasoned that Dr. Lown’s actions, including providing an experimental drug and consulting with the New York doctor, were incidental to the treatment initiated in Massachusetts and did not constitute transacting business in New York.

    Facts

    Plaintiffs’ decedent sought treatment from Dr. Lown in Massachusetts for a heart condition. Dr. Lown prescribed an experimental drug, Aprindine. After discharge, the patient returned to New York and was treated by Dr. Matta, a New York physician, to whom Dr. Lown referred the patient. Dr. Lown continued to consult with Dr. Matta via phone and letter regarding the Aprindine regimen and allegedly sent an additional supply of the drug to the patient in New York. The patient was later admitted to a New York hospital and died shortly after Aprindine treatment was discontinued.

    Procedural History

    Plaintiffs sued Dr. Matta and the drug manufacturer in New York, alleging that the decedent’s death was caused by a side effect of Aprindine. Dr. Matta impleaded Dr. Lown, alleging Dr. Lown failed to inform him of the drug’s precise side effects. Dr. Lown moved to dismiss the third-party complaint for lack of personal jurisdiction. The Appellate Division agreed with Dr. Lown. The New York Court of Appeals affirmed the Appellate Division’s order, finding no basis for personal jurisdiction over Dr. Lown in New York.

    Issue(s)

    Whether Dr. Lown’s contacts with New York, including consulting with Dr. Matta and providing Aprindine, constitute transacting business within the state under CPLR 302(a)(1), thus subjecting him to personal jurisdiction in New York. Whether Dr. Lown contracted to supply goods or services in New York, within the meaning of CPLR 302(a)(1), subjecting him to personal jurisdiction in New York.

    Holding

    No, because Dr. Lown’s contacts were insubstantial and did not amount to transacting business within New York as contemplated by CPLR 302(a)(1). No, because the provision of Aprindine was incidental to medical treatment rendered primarily in Massachusetts and was not the type of transaction the legislature intended to cover under CPLR 302(a)(1).

    Court’s Reasoning

    The court reasoned that Dr. Lown’s contacts with New York were insufficient to constitute a transaction of business within the state. The court emphasized that Dr. Lown had referred the patient to a New York physician, and his subsequent communications and provision of the drug were merely consultative. The court cited McGowan v Smith, 52 NY2d 268 and Rothschild, Unterberg, Towbin v McTamney, 89 AD2d 540, affd 59 NY2d 651, to support the principle that the contacts must be substantial to warrant subjecting a non-domiciliary to suit in New York. Regarding the supply of Aprindine, the court stated that the amendment to CPLR 302(a)(1) was “not meant, in our view, to cover a transaction of this nature…The incidental provision of a drug, as part of a course of treatment rendered in another State, cannot be said to fall within the contemplation of the statute so as to confer personal jurisdiction over the physician.” The court focused on the limited nature of Dr. Lown’s involvement in New York, emphasizing that the primary treatment occurred in Massachusetts, and his subsequent actions were merely ancillary to that treatment. The court implied that allowing jurisdiction in such a case would unduly burden physicians who treat patients from other states.

  • Parke-Bernet Galleries, Inc. v. Franklyn, 41 N.Y.2d 103 (1976): Establishing Jurisdiction Based on Business Transactions and Tortious Acts

    Parke-Bernet Galleries, Inc. v. Franklyn, 41 N.Y.2d 103 (1976)

    A New York court lacks personal jurisdiction over non-residents when their activities in New York are minimal and do not constitute transacting business or causing tortious injury within the state.

    Summary

    Parke-Bernet Galleries sued Florida residents in New York to recover property transferred as compensation for services. The defendants moved to dismiss for lack of personal jurisdiction. The New York Court of Appeals affirmed the dismissal, holding that the defendants’ limited contacts with New York, such as contacting banks for property appraisals and a single visit to view property, did not constitute transacting business within the state under CPLR 302(a)(1). Furthermore, the alleged tortious conduct (fraud and misrepresentation) did not occur in New York, nor did it cause injury to person or property in New York, precluding jurisdiction under CPLR 302(a)(2) and (3).

    Facts

    Plaintiffs transferred real and personal property in Florida to defendants, who resided in Florida, as compensation for services related to a tax-saving plan. The plan involved transferring assets in trust to a Georgia-based tax-exempt corporation. Real property in New York was conveyed to the charitable corporation as the trust res. The plaintiffs alleged that the defendants contacted New York banks for property appraisals. One defendant visited New York to view the property with a representative of the charitable corporation. The plaintiffs alleged fraud and deceit in obtaining compensation, including collusion with the tax-exempt corporation and misrepresentation of legal authority to conduct business in New York. All negotiations and payment of compensation occurred in Florida.

    Procedural History

    Plaintiffs brought suit in New York seeking to recover real and personal property. Defendants cross-moved to dismiss the complaint for lack of personal jurisdiction in response to a motion by plaintiffs to compel examination before trial. The Appellate Division granted the defendants’ cross-motion to dismiss. The New York Court of Appeals affirmed the Appellate Division’s order.

    Issue(s)

    1. Whether the defendants were transacting business within the State of New York within the contemplation of CPLR 302(a)(1) such that personal jurisdiction could be established.
    2. Whether the defendants committed a tortious act within or without the State of New York, causing injury to person or property within the state under CPLR 302(a)(2) and (3), thereby establishing personal jurisdiction.

    Holding

    1. No, because the defendants’ activities in New York were minimal and did not constitute a purposeful availment of the privilege of conducting activities within the state, thus not satisfying the requirements of CPLR 302(a)(1).
    2. No, because the alleged tortious conduct did not occur in New York, nor did it cause injury to person or property within the state, thus precluding jurisdiction under CPLR 302(a)(2) and (3).

    Court’s Reasoning

    The Court reasoned that the plaintiffs failed to demonstrate that the defendants transacted business in New York within the meaning of CPLR 302(a)(1). The negotiations, agreement for compensation, and payment all occurred in Florida. The defendants’ contacts with New York, limited to contacting banks for appraisals and a single visit to view the property, were insufficient to establish jurisdiction. These activities did not constitute the purposeful transaction of business within the state, nor did they establish a direct relationship between the cause of action and the defendants’ contacts with New York.

    Regarding the alleged tortious conduct, the Court found no evidence that any misconduct occurred in New York or that any injury was caused to person or property in New York. “Whatever may be said of the legal sufficiency of these allegations, there is no showing that any of the misconduct charged took place in New York or that any injury was caused to person or property in New York.” Therefore, jurisdiction could not be sustained under CPLR 302(a)(2) or (3).

    The Court emphasized that the burden of proof rests on the party asserting jurisdiction to demonstrate an adequate basis for it. The plaintiffs failed to meet this burden by providing sufficient evidence of the defendants’ activities in New York.

  • 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.

  • Parke-Bernet Galleries, Inc. v. Franklyn, 26 N.Y.2d 13 (1970): Long-Arm Jurisdiction and Tortious Acts

    Parke-Bernet Galleries, Inc. v. Franklyn, 26 N.Y.2d 13 (1970)

    A defendant’s failure to act while physically present in one state does not constitute a tortious act committed in another state, even if the omission has consequences in the latter.

    Summary

    This case addresses the scope of New York’s long-arm statute concerning personal jurisdiction over non-residents. The plaintiff, a New York corporation, sued a Florida resident, who was a director, for failing to perform his duties in New York. The defendant remained in Florida and did not attend meetings or perform any director duties in New York. The court held that the defendant’s failure to act in New York while physically in Florida did not constitute a tortious act committed within New York, precluding personal jurisdiction under CPLR 302(a)(2). The court distinguished between acts and omissions, emphasizing that an omission cannot be an act in a particular place unless the person is physically present there.

    Facts

    1. Franklyn, the defendant, resided in Florida.
    2. Parke-Bernet Galleries, Inc., the plaintiff, was a New York corporation.
    3. Franklyn was a director of the plaintiff corporation.
    4. The plaintiff sued Franklyn for failing to attend director’s meetings in New York and neglecting his director duties, resulting in corporate losses.
    5. Franklyn never came to New York for any corporate business. Instead, he executed consents, waivers of notice, and a certificate in lieu of a meeting, all in Florida.

    Procedural History

    The plaintiff served the defendant with process in Florida. The defendant challenged the court’s jurisdiction under New York’s long-arm statute. The Special Term initially sustained jurisdiction, as did the Appellate Division. This appeal followed after the Court of Appeals decision in Feathers v. McLucas, which clarified the requirements for long-arm jurisdiction in tort cases.

    Issue(s)

    1. Whether a director’s failure to attend meetings or perform duties in New York, while physically remaining in Florida, constitutes a “tortious act” committed within New York under CPLR 302(a)(2), thus establishing personal jurisdiction.
    2. Whether the defendant’s actions in Florida related to the directorship constitute transacting business within New York under CPLR 302(a)(1).

    Holding

    1. No, because the failure to act while physically present in one state is not an “act” committed in another, even if it has consequences there.
    2. No, because the defendant never conducted any business in New York related to the corporation.

    Court’s Reasoning

    The court reasoned that CPLR 302(a)(2) requires the defendant to commit a tortious act “within the state.” The court emphasized the distinction between an act and an omission, stating, “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.” The court referenced Feathers v. McLucas to support its interpretation of the statute’s plain words. The court distinguished this case from Gray v. American Radiator & Sanitary Corp., an Illinois case with a similar statute, as it would not support jurisdiction under these facts even if the Gray rule were applied in New York. Furthermore, the court rejected the argument that the defendant transacted business in New York under CPLR 302(a)(1), stating that the defendant never entered New York to conduct any business related to the corporation. The court emphasized that accepting the directorship and executing documents in Florida were insufficient to establish jurisdiction in New York. The court noted legislative proposals to broaden New York’s long-arm statute but observed that even the proposed language would not encompass jurisdiction over the defendant in this case. In essence, the court adhered to a strict interpretation of the long-arm statute, requiring a physical connection to New York for a tortious act to be deemed committed within the state.

  • Kramer v. Vogl, 17 N.Y.2d 27 (1966): Establishes Limits on Long-Arm Jurisdiction for Out-of-State Businesses

    17 N.Y.2d 27 (1966)

    A non-domiciliary’s transaction of business within New York, for purposes of long-arm jurisdiction under CPLR 302(a)(1), requires more than merely shipping goods into the state pursuant to an order sent from within the state; the cause of action must arise from in-state business activity.

    Summary

    Kramer, a New York resident, sued Vogl, an Austrian leather producer, for fraud, alleging that Vogl falsely promised Kramer exclusive U.S. distribution rights. Kramer claimed he relied on these promises, purchasing and promoting Vogl’s leather, only to discover Vogl was also selling to another distributor, Chilewich. Service was made on Vogl in Austria. The New York Court of Appeals held that New York courts lacked personal jurisdiction over Vogl. The court reasoned that Vogl’s actions did not constitute transacting business within New York under CPLR 302(a)(1) because Vogl had no direct sales, promotion, or advertising activities in the state. Furthermore, the tortious act did not occur within New York under CPLR 302(a)(2), as all actions by Vogl occurred in Europe. The court affirmed the dismissal of the action.

    Facts

    Plaintiff Kramer, a New York leather importer, claimed that Defendants Vogl, Austrian leather producers doing business as “Yogi”, fraudulently induced him into becoming their exclusive U.S. distributor. Vogl allegedly promised Kramer exclusive distribution rights (except for one specific customer) to incentivize Kramer to purchase and promote Yogi leathers. Kramer purchased large quantities of leather from Vogl between August 1960 and March 1962, and again in March 1962 when the agreement was allegedly renewed with the same exclusivity assurances. However, Kramer asserted that Vogl had already arranged to sell to Chilewich and associated companies by the time of the renewal in March 1962. All shipments from Vogl to Kramer were f.o.b. European ports. Vogl never conducted direct sales, promotion, or advertising within New York. The initial agreement was formed at a meeting in Paris in 1959, followed by a confirmation letter from Vogl in Austria to Kramer in New York. Kramer purchased the leather outright; he was not paid on commission or salary.

    Procedural History

    Kramer sued Vogl in New York, serving them in Austria. Vogl moved to dismiss for lack of personal jurisdiction, arguing they transacted no business in New York. The lower courts granted the motion to dismiss. The Appellate Division affirmed. Kramer appealed to the New York Court of Appeals, which granted leave to appeal.

    Issue(s)

    1. Whether the defendant’s actions constituted commission of a tortious act within New York State under CPLR 302(a)(2)?
    2. Whether the defendant’s actions constituted transacting business within New York State under CPLR 302(a)(1), such that New York courts could exercise personal jurisdiction over the non-domiciliary defendants?

    Holding

    1. No, because under CPLR 302(a)(2), the defendant’s act or omission must occur within the State of New York, and in this case, all actions by Vogl occurred in Europe.
    2. No, because the cause of action did not arise from the transaction of business within the state, as the defendants did not conduct any direct sales, promotion, or advertising activities in New York.

    Court’s Reasoning

    Regarding the tortious act claim under CPLR 302(a)(2), the court relied on its prior decisions in Feathers v. McLucas and Singer v. Walker, clarifying that the statute requires the tortious act itself to be committed within New York, not just the injury. The court emphasized that the statutory phrase is not synonymous with “commits a tortious act without the state which causes injury within the state.” Here, all of Vogl’s actions took place in Europe, negating jurisdiction under this provision.
    Regarding the transaction of business claim under CPLR 302(a)(1), the court acknowledged its liberal interpretation of the statute but stated that the facts did not meet the threshold. The court distinguished the case from situations where a non-resident defendant has local salesmen or solicits business in New York through catalogs or advertisements. In this case, Vogl merely sold goods f.o.b. to a local distributor. The court noted that Vogl’s sales to Kramer represented a small percentage of Vogl’s overall sales. Therefore, the cause of action could not be said to have arisen out of any transaction of business within the state. The court declined to decide whether it would be constitutional for New York to exercise jurisdiction over any outsider who ships goods into the state.

  • Feathers v. McLucas, 15 N.Y.2d 443 (1965): Jurisdiction Based on Tortious Act Within the State

    15 N.Y.2d 443 (1965)

    A state’s long-arm statute, requiring that a tortious act be committed within the state for the assertion of personal jurisdiction over a non-domiciliary, is not satisfied by the mere occurrence of injury within the state resulting from an out-of-state tortious act.

    Summary

    The New York Court of Appeals addressed the scope of New York’s long-arm statute, CPLR 302, in three consolidated cases. Specifically, the court interpreted whether jurisdiction could be asserted over non-domiciliary corporations based on either transacting business within the state or committing a tortious act within the state. In Feathers v. McLucas, the court held that the statute requires the tortious act itself to occur within New York, not merely the resulting injury. The court rejected the argument that injury within the state, resulting from a negligent act elsewhere, was sufficient to establish jurisdiction under the statute. This decision clarified the limits of New York’s long-arm jurisdiction in cases involving out-of-state manufacturers.

    Facts

    Mr. and Mrs. Feathers sought damages for personal injuries and property damage caused by an explosion of a tractor-drawn steel tank carrying flammable gas on a New York highway near their home. The tank was manufactured in Kansas by The Darby Products of Steel Plate Corporation under contract with Butler Manufacturing Co. Darby allegedly knew that Butler would mount the tank on a wheelbase and sell it to E. Brooke Matlack, an interstate carrier operating in multiple states, including New York. The Feathers sued Darby, alleging negligence and breach of warranty in the tank’s manufacture.

    Procedural History

    Darby was served in Kansas. Darby moved to dismiss the complaint for lack of personal jurisdiction, asserting it had no business or presence in New York. Special Term granted the motion. The Appellate Division, Third Department, reversed, holding that the long-arm statute applied because the injury occurred in New York. The Appellate Division granted leave to appeal to the New York Court of Appeals.

    Issue(s)

    Whether, under CPLR 302(a)(2), a non-domiciliary commits a tortious act within New York when the act of negligence occurs outside the state, but the injury occurs within New York.

    Holding

    No, because CPLR 302(a)(2) requires that the tortious act itself, not merely the injury, occur within New York.

    Court’s Reasoning

    The court emphasized that the language of CPLR 302(a)(2) explicitly requires the defendant to commit a tortious act “within the state.” The court reasoned that the mere occurrence of injury in New York is insufficient to transform an out-of-state tortious act into one committed within the state. The court noted that the legislative history supported this interpretation, indicating that the statute was intended to confer jurisdiction only when the defendant’s act occurred within the state. The court rejected the argument that the place of wrong for conflict of laws purposes (where the last event necessary to liability occurs) dictates the place of the tortious act for jurisdictional purposes. The court distinguished Gray v. American Radiator & Sanitary Corp., where the Illinois Supreme Court interpreted similar language differently, finding that its interpretation was unconvincing and disregarded the plain language of the statute. The court stated, “The language of paragraph 2… is too plain and precise to permit it to be read, as has the Appellate Division, as if it were synonymous with ‘commits a tortious act without the state which causes injury within the state.’” Because Darby’s allegedly negligent manufacturing occurred in Kansas, and Darby did not transact business in New York, the court concluded that New York courts lacked personal jurisdiction over Darby. The court explicitly declined to address the constitutional question of whether minimum contacts were satisfied, as the statutory requirements were not met. The Court emphasized that expansion of the statute’s scope was a legislative, not judicial, matter.