New York Law Review

Tag: CPLR 302(a)(1)

Rasheed Al Rushaid, et al. v. Pictet & Cie, et al., No. 180 (N.Y. 2016): Personal Jurisdiction Based on Correspondent Bank Account Use
Rasheed Al Rushaid, et al. v. Pictet & Cie, et al., No. 180 (N.Y. 2016)

A foreign bank purposefully avails itself of the privilege of conducting activities within New York, subjecting it to personal jurisdiction, when it repeatedly uses a New York correspondent bank account to facilitate transactions substantially related to the plaintiff’s claims.

Summary

The New York Court of Appeals held that it had personal jurisdiction over Pictet & Cie (Pictet), a Swiss bank, because of its repeated use of New York correspondent bank accounts to launder funds related to a bribery and kickback scheme. Pictet’s vice president, Chambaz, assisted ARPD employees in setting up accounts to receive funds in a scheme that harmed the plaintiffs. The court distinguished this from cases where the use of the correspondent account was passive or incidental. The court found that the defendant’s repeated and purposeful use of the New York accounts demonstrated a sufficient nexus to New York to establish personal jurisdiction, as the New York accounts were used to further the money laundering scheme. This decision clarifies the standard for establishing personal jurisdiction based on the use of correspondent accounts in New York, emphasizing purposeful availment.

Facts

Plaintiff Rasheed Al Rushaid, co-owner of Al Rushaid Petroleum Investment Corporation (ARPIC), sued Pictet, a Swiss bank, along with its Vice President Chambaz, alleging that Pictet knowingly laundered funds related to a bribery and kickback scheme involving employees of Al Rushaid Parker Drilling, Ltd. (ARPD), a subsidiary of ARPIC. ARPD employees accepted bribes and kickbacks from vendors in exchange for purchasing goods and services at inflated prices. Chambaz, a Pictet executive, assisted the employees by setting up a shell company, TSJ Engineering Consulting Co., Ltd., in the British Virgin Islands to receive the bribes. Pictet then used its New York correspondent bank accounts to transfer the funds to the shell company’s Geneva-based Pictet account and the employees' individual accounts. Documents showed numerous wire transfers totaling over $4 million through Pictet's New York correspondent accounts. The plaintiffs sought over $350 million in damages.

Procedural History

Plaintiffs sued the defendants in New York state court. The trial court granted the defendants' motion to dismiss for lack of personal jurisdiction, concluding that the use of correspondent accounts was passive. The Appellate Division affirmed, distinguishing the case from Licci v. Lebanese Canadian Bank, SAL, and holding that the defendants did not purposefully avail themselves of New York. The Court of Appeals granted leave to appeal.

Issue(s)
1. Whether the use of New York correspondent bank accounts by a foreign bank, in connection with a money-laundering scheme, constitutes transacting business within the state, thus satisfying the first prong of CPLR 302(a)(1).
2. Whether the plaintiffs' claims, based on the foreign bank's role in the money-laundering scheme, arose from the bank's transactions in New York, satisfying the second prong of CPLR 302(a)(1).
Holding
1. Yes, because Pictet's repeated use of New York correspondent accounts, as a central component of a money-laundering scheme, constituted the transaction of business within the state.
2. Yes, because the plaintiffs' claims of aiding and abetting breach of fiduciary duty and conspiracy were substantially related to Pictet's transactions in New York via its correspondent accounts.
Court’s Reasoning

The court applied CPLR 302(a)(1), New York's long-arm statute, which requires that the non-domiciliary transact business within the state and that the claim arise from that transaction. The court focused on whether Pictet's activities demonstrated "purposeful availment." The court distinguished the case from Amigo Foods Corp. v. Marine Midland Bank-NY, where the use of the correspondent account was passive and unilateral. Here, Pictet's use of the New York correspondent accounts was a deliberate and integral part of the money-laundering scheme. The court held that Pictet's repeated use of New York correspondent accounts to transfer funds for its client's benefit constituted "purposeful availment" of the New York banking system and thus satisfied the first prong of CPLR 302(a)(1). "Repeated, deliberate use that is approved by the foreign bank on behalf and for the benefit of a customer — as in Licci — demonstrates volitional activity constituting transaction of business." The court also found that the plaintiffs' claims, which included aiding and abetting breach of fiduciary duty and conspiracy, had a "substantial relationship" with Pictet's banking transactions in New York, thus satisfying the second prong of CPLR 302(a)(1).

Practical Implications

This case provides important guidance on establishing personal jurisdiction over foreign banks based on their use of New York correspondent accounts. It is vital for cases involving claims against foreign banks for financial misconduct. The ruling clarifies that a foreign bank can be subject to jurisdiction even if it does not directly direct deposits into a New York account; its active involvement in a scheme that uses such accounts is sufficient. This ruling impacts how attorneys analyze and litigate cases involving international financial transactions and potential liability for aiding and abetting illegal activities. Courts may be more willing to assert jurisdiction over foreign financial institutions that use New York's banking infrastructure to further financial schemes. It reaffirms that the quality and quantity of a foreign bank's contacts with the correspondent bank matter more than whether another bank could have been used. Later cases may cite this case to assert jurisdiction over financial institutions implicated in illicit transactions.
November 22, 2016
Paterno v. Laser Spine Institute, 24 N.Y.3d 370 (2014): Jurisdiction Over Out-of-State Medical Providers

Paterno v. Laser Spine Institute, 24 N.Y.3d 370 (2014)

A non-domiciliary medical provider is not subject to personal jurisdiction in New York under CPLR 302(a)(1) based solely on responsive communications with a New York resident who sought out the provider’s services in another state, or under CPLR 302(a)(3) where the injury occurred outside of New York.

Summary

Frank Paterno, a New York resident, sought medical treatment from Laser Spine Institute (LSI) in Florida after seeing their advertisement online. Following surgeries in Florida, Paterno sued LSI in New York, alleging medical malpractice. The New York Court of Appeals held that New York courts lacked personal jurisdiction over LSI under CPLR 302(a)(1) because LSI’s contacts with New York were primarily responsive to Paterno’s initial contact and did not constitute transacting business in New York. The court further held that CPLR 302(a)(3) was inapplicable because the injury occurred in Florida, not New York. The decision emphasizes that merely responding to a patient’s inquiries does not equate to purposefully availing oneself of the privilege of conducting business in New York.

Facts

Frank Paterno, a New York resident, saw an online advertisement for LSI, a Florida-based surgical facility, and contacted them about his back pain. He sent MRI films to LSI in Florida for evaluation. LSI sent Paterno a letter outlining preliminary treatment recommendations. Paterno scheduled surgery at LSI in Florida after being offered a discounted rate. He exchanged emails with LSI regarding registration, payment, and travel arrangements. Paterno had blood work done in New York and attempted to arrange a conference call between his New York doctor and an LSI doctor. Following surgeries in Florida, Paterno experienced pain and contacted LSI physicians, who called in prescriptions to New York pharmacies. After further issues, he eventually had another surgery in New York with a different doctor.

Procedural History

Paterno sued LSI and its doctors in New York, alleging medical malpractice. The defendants moved to dismiss for lack of personal jurisdiction under CPLR 3211(a)(8). The Supreme Court granted the motion, dismissing the case. The Appellate Division affirmed, holding that LSI was not transacting business in New York under CPLR 302(a)(1) and that CPLR 302(a)(3) was inapplicable because the injury did not occur in New York. The New York Court of Appeals granted leave to appeal.

Issue(s)

1. Whether LSI’s contacts with New York constituted transacting business within the state under CPLR 302(a)(1), thus conferring personal jurisdiction over the defendants.

2. Whether LSI committed a tortious act outside New York causing injury within the state under CPLR 302(a)(3), thus conferring personal jurisdiction over the defendants.

Holding

1. No, because LSI’s activities were primarily responsive to the plaintiff’s initial contact and did not demonstrate a purposeful availment of conducting business in New York.

2. No, because the injury occurred in Florida where the surgeries took place, not in New York where the plaintiff experienced the consequences of the injury.

Court’s Reasoning

The Court of Appeals reasoned that under CPLR 302(a)(1), a non-domiciliary transacts business when they purposefully avail themselves of conducting activities within New York, establishing a substantial relationship between the transaction and the claim. The court emphasized that the "overriding criterion" is whether the non-domiciliary "purposefully avails itself of the privilege of conducting activities within [New York]." Paterno initiated contact with LSI after seeing their online advertisement, which the court deemed a passive website. The court stated, "[i]t is not the quantity but the quality of the contacts that matters under our long-arm jurisdiction analysis." LSI’s subsequent communications were responsive to Paterno’s inquiries and facilitated his decision to undergo surgery in Florida. Contacts after the surgeries cannot form the basis of jurisdiction because "there [must be] a substantial relationship between the transaction and the claim asserted." Citing Etra v. Matta, the court noted that even sending an experimental drug to New York and acting as a consultant to a New York doctor was insufficient to constitute a transaction of business. Extending jurisdiction in this case would set a precedent for almost limitless jurisdiction over out-of-state medical providers. Regarding CPLR 302(a)(3), the court determined that the injury occurred in Florida, where the surgeries were performed, not in New York, where Paterno experienced the pain and consequences of the alleged malpractice. Therefore, the court affirmed the dismissal for lack of personal jurisdiction.

November 20, 2014
Licci v. Lebanese Canadian Bank, SAL, 20 N.Y.3d 327 (2012): Establishes Jurisdictional Reach for Foreign Banks Using NY Correspondent Accounts

Licci ex rel. Licci v. Lebanese Canadian Bank, SAL, 20 N.Y.3d 327 (2012)

A foreign bank’s repeated use of a New York correspondent account to effect wire transfers on behalf of a client constitutes transacting business in New York and establishes an articulable nexus between the transaction and alleged breaches of statutory duties, thus satisfying the requirements for personal jurisdiction under CPLR 302(a)(1).

Summary

This case addresses whether New York courts can exercise personal jurisdiction over a foreign bank, Lebanese Canadian Bank (LCB), based on its use of a correspondent bank account in New York to transfer funds for a client allegedly linked to terrorist activities. The plaintiffs, victims of rocket attacks in Israel, sued LCB, claiming that the bank’s wire transfers facilitated terrorist acts. The New York Court of Appeals held that LCB’s repeated use of the correspondent account to conduct transactions constituted transacting business in New York and created a sufficient connection between the transactions and the plaintiffs’ claims to establish personal jurisdiction under New York’s long-arm statute.

Facts

Plaintiffs, residing in Israel, were injured or lost family members in rocket attacks during the Second Lebanon War in 2006. They sued Lebanese Canadian Bank (LCB), alleging that LCB assisted Hizballah by facilitating monetary transactions through the Shahid Foundation, identified as Hizballah’s financial arm. LCB maintained a correspondent banking account with American Express Bank (AmEx) in New York. Plaintiffs alleged that LCB used this account to transfer millions of dollars via dozens of wire transfers on behalf of Shahid, knowing that Hizballah was a terrorist organization and that Shahid was supporting terrorist activities. Plaintiffs claimed LCB’s actions enabled and facilitated the attacks.

Procedural History

The case was initially filed in New York Supreme Court, then removed to the U.S. District Court for the Southern District of New York. The District Court dismissed the case for lack of personal jurisdiction, finding that LCB’s maintenance and use of the correspondent account was insufficient to establish jurisdiction and that the claims did not “arise from” the bank’s activities in New York. The plaintiffs appealed to the Second Circuit Court of Appeals, which then certified questions of New York law to the New York Court of Appeals regarding the interpretation of CPLR 302(a)(1).

Issue(s)

1. Whether a foreign bank’s maintenance and use of a correspondent bank account in New York to effect numerous wire transfers on behalf of a foreign client constitutes transacting business in New York under CPLR 302(a)(1)?

2. Whether the plaintiffs’ claims under the Anti-Terrorism Act, the Alien Tort Statute, or for negligence or breach of statutory duty in violation of Israeli law, “arise from” LCB’s transaction of business in New York within the meaning of CPLR 302(a)(1)?

Holding

1. Yes, because the foreign bank’s repeated use of a New York correspondent account to effect wire transfers constitutes a purposeful availment of New York’s banking system.

2. Yes, because there is an articulable nexus or substantial relationship between LCB’s transaction of business in New York and the plaintiffs’ claims, as the alleged breaches of statutory duties occurred when LCB used the New York account to support terrorist activities.

Court’s Reasoning

The Court of Appeals emphasized that the jurisdictional inquiry under CPLR 302(a)(1) requires examining the specific facts of each case to determine whether the defendant “purposefully availed” itself of the privilege of conducting activities in New York. The court distinguished this case from Amigo Foods Corp. v. Marine Midland Bank-N.Y., where the bank’s involvement was passive and unilateral. Here, LCB’s repeated use of the AmEx account on behalf of a client indicated a “course of dealing,” showing purposeful availment of New York’s banking system. Regarding the “arise from” prong, the Court found an “articulable nexus” between LCB’s use of the New York account and the plaintiffs’ claims. Even though the direct harm came from rocket attacks, LCB’s alleged support of terrorist activities through the New York account was sufficiently related to the cause of action. The court stated, “Complaints alleging a foreign bank’s repeated use of a correspondent account in New York on behalf of a client—in effect, a ‘course of dealing’—show purposeful availment of New York’s dependable and transparent banking system, the dollar as a stable and fungible currency, and the predictable jurisdictional and commercial law of New York and the United States.” The court also noted, “where at least one element arises from the New York contacts, the relationship between the business transaction and the claim asserted supports specific jurisdiction under the statute.”

November 20, 2012
SPCA of Upstate New York, Inc. v. American Working Collie Assn., 18 N.Y.3d 400 (2012): Limits on Long-Arm Jurisdiction in Defamation Cases

18 N.Y.3d 400 (2012)

In defamation cases, New York courts narrowly construe what constitutes transacting business within the state for the purpose of establishing long-arm jurisdiction over non-domiciliaries under CPLR 302(a)(1), requiring a substantial relationship between the defendant’s purposeful in-state activities and the defamatory statements.

Summary

This case concerns whether New York courts had personal jurisdiction over an Ohio-based collie association (AWCA) and its Vermont-resident president for allegedly defamatory statements posted on the AWCA’s website. The SPCA of Upstate New York argued that the defendants’ limited activities in New York, including visits and donations related to rescued dogs, were sufficient to establish jurisdiction. The Court of Appeals held that the defendants’ contacts were too limited and the connection to the defamatory statements too tangential to justify exercising long-arm jurisdiction, emphasizing the need to avoid chilling free speech without a clear nexus between in-state business transactions and the defamatory statements.

Facts

The SPCA of Upstate New York rescued 23 dogs. Jean Levitt, president of the Ohio-based AWCA, contacted the SPCA to offer assistance. The AWCA donated $1,000 and collars/leashes. Levitt visited the SPCA twice in New York (totaling under 3 hours) to deliver items and check on the dogs. After the visits, Levitt posted statements on the AWCA website criticizing the SPCA’s care of the dogs. The SPCA then sued AWCA and Levitt for defamation, claiming the online statements were false and damaging.

Procedural History

The Supreme Court initially denied the defendants’ motion to dismiss for lack of personal jurisdiction, finding sufficient purposeful availment. The Appellate Division reversed, granting the motion to dismiss, holding that the contacts with New York were insufficient to support personal jurisdiction in a defamation case. The New York Court of Appeals then affirmed the Appellate Division’s ruling.

Issue(s)

Whether the defendants’ activities in New York constituted transacting business within the state under CPLR 302(a)(1), such that New York courts could exercise long-arm jurisdiction over them in a defamation action arising from statements posted online after the activities concluded.

Holding

No, because the defendants’ limited activities in New York were not sufficiently related to the cause of action for defamation; thus, the required substantial relationship between the business transacted and the claim asserted was absent.

Court’s Reasoning

The Court reasoned that while CPLR 302 allows for long-arm jurisdiction based on transacting business within the state, defamation claims require a closer examination. The Court noted that defamation claims are explicitly excluded from the “tortious act” provisions of CPLR 302(a)(2) and (3). To establish jurisdiction under CPLR 302(a)(1) in a defamation case, there must be “purposeful activities” within the state and “some articulable nexus” or a “substantial relationship” between those activities and the cause of action. The court found the defendants’ activities—phone calls, brief visits, and donations—were limited and aimed at assisting the dogs, not at gathering information for the defamatory statements. The statements were written and posted after Levitt returned to Vermont, and were accessible everywhere, not particularly directed at New York. The Court emphasized that it construes “transacts any business within the state more narrowly in defamation cases.” The court cited Best Van Lines, Inc. v Walker, 490 F.3d 239, 248 (2d Cir 2007). It stated that CPLR 302 reflects a legislative intention to treat defamation differently to avoid chilling free speech. The dissent argued the AWCA purposely availed itself of conducting activities in New York when it offered its services to the SPCA, and those activities were substantially related to the allegedly defamatory statements. The majority found that the connection between the activities and the defamatory statements was too “tangential” to support jurisdiction.

February 9, 2012
Fischbarg v. Doucet, 9 N.Y.3d 375 (2007): Establishes Jurisdiction Based on Ongoing Attorney-Client Relationship

9 N.Y.3d 375 (2007)

A non-domiciliary transacts business within New York under CPLR 302(a)(1) when they purposefully solicit a New York attorney, establish an ongoing attorney-client relationship, and frequently communicate with the attorney in New York regarding the matter.

Summary

This case addresses whether New York courts can exercise personal jurisdiction over a California resident and corporation who hired a New York attorney to represent them in an Oregon lawsuit. The New York Court of Appeals held that the defendants transacted business in New York by purposefully seeking out the attorney, establishing a continuing attorney-client relationship, and engaging in frequent communication with him in New York via phone, email, and fax. This was sufficient to establish jurisdiction under CPLR 302(a)(1) because the suit for unpaid legal fees directly arose from these New York contacts.

Facts

Suzanne Bell-Doucet, a California resident and president of Only New Age Music, Inc. (ONAM), contacted Gabriel Fischbarg, a New York attorney, to discuss representing ONAM in a lawsuit in Oregon. Bell-Doucet sent a letter to Fischbarg in New York confirming the contingency fee arrangement and included relevant case documents. Fischbarg and the defendants entered into a retainer agreement via telephone, with Fischbarg working on the Oregon case from his New York office. Over nine months, defendants regularly communicated with Fischbarg in New York via phone, email, and fax. A dispute arose regarding the retainer agreement, and Fischbarg resigned. After the Oregon action settled, Fischbarg sued in New York to recover unpaid legal fees.

Procedural History

Fischbarg sued Doucet and ONAM in New York seeking damages for breach of contract and unjust enrichment. The defendants moved to dismiss for lack of personal jurisdiction. The Supreme Court denied the motion, holding that jurisdiction was proper under CPLR 302(a)(1). The Appellate Division affirmed. The Appellate Division granted leave to appeal to the New York Court of Appeals.

Issue(s)

Whether a non-domiciliary transacts business in New York under CPLR 302(a)(1) when they retain a New York attorney and engage in ongoing communications with that attorney in New York related to the representation.

Holding

Yes, because the defendants purposefully availed themselves of the privilege of conducting activities within New York by soliciting the attorney’s services, establishing a continuing relationship, and repeatedly communicating with the attorney in New York.

Court’s Reasoning

The court reasoned that CPLR 302(a)(1) allows jurisdiction over a non-domiciliary who transacts business within New York, even without physical presence, if their activities are purposeful and substantially related to the claim. “Purposeful activities are those with which a defendant, through volitional acts, ‘avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws’.” The court distinguished this case from those involving limited contacts, such as a single phone order or a consultant’s communications with a New York physician. The court emphasized the “quality” of the defendants’ contacts, noting that they “sought out plaintiff in New York and established an ongoing attorney-client relationship with him.” This “sustained and substantial transaction of business” (quoting Parke-Bernet Galleries v. Franklyn) subjected them to New York jurisdiction. The court found that the lawsuit arose directly from the defendants’ transaction of business in New York. The court distinguished Haar v. Armendaris Corp., where jurisdiction was lacking because the defendant’s contacts were with the attorney in Massachusetts, not New York. Here, the defendants directly solicited and communicated with the attorney in New York, thus projecting themselves into New York’s legal services market.

December 20, 2007
Ehrenfeld v. Bin Mahfouz, 9 N.Y.3d 501 (2007): Jurisdiction Based on Foreign Lawsuit Contacts

9 N.Y.3d 501 (2007)

A person who sues a New York resident in a non-U.S. jurisdiction, and whose contacts with New York stem from that foreign lawsuit, does not necessarily transact business within New York under CPLR 302(a)(1), even if success in the foreign suit results in acts to be performed by the subject of the suit in New York.

Summary

Rachel Ehrenfeld, a New York author, was sued for defamation in England by Khalid Salim Bin Mahfouz, a Saudi Arabian businessman, based on statements in her book. Mahfouz served papers and sent communications related to the English lawsuit to Ehrenfeld in New York. Ehrenfeld then sued Mahfouz in New York, seeking a declaration that the English judgment was unenforceable. The New York Court of Appeals held that Mahfouz’s contacts with New York, stemming solely from the English lawsuit, did not constitute transacting business in New York under CPLR 302(a)(1), and therefore, New York courts lacked personal jurisdiction over him. The court emphasized that Mahfouz’s actions did not purposefully avail him of the benefits and protections of New York law.

Facts

Rachel Ehrenfeld, a New York-based author, wrote a book, “Funding Evil,” alleging that Khalid Salim Bin Mahfouz supported terrorist groups. The book was published in the U.S., but some copies were sold in the UK. Mahfouz, a Saudi Arabian businessman, claimed the allegations were false and sued Ehrenfeld for defamation in England. Mahfouz’s lawyers contacted Ehrenfeld in New York, seeking an apology and retraction. When Ehrenfeld refused, Mahfouz sued her in England, serving her with court papers at her New York City apartment and communicating with her via mail and e-mail regarding the English action.

Procedural History

Mahfouz obtained a default judgment against Ehrenfeld in England. Ehrenfeld then filed suit against Mahfouz in the United States District Court for the Southern District of New York, seeking a declaratory judgment that the English judgment was unenforceable. The district court dismissed the case for lack of personal jurisdiction. The Second Circuit certified a question to the New York Court of Appeals regarding whether CPLR 302(a)(1) conferred personal jurisdiction over Mahfouz. The New York Court of Appeals answered in the negative.

Issue(s)

Whether CPLR 302(a)(1) confers personal jurisdiction over a person (1) who sued a New York resident in a non-U.S. jurisdiction; and (2) whose contacts with New York stemmed from the foreign lawsuit and whose success in the foreign suit resulted in acts that must be performed by the subject of the suit in New York?

Holding

No, because these contacts do not constitute the transaction of business in New York under CPLR 302(a)(1).

Court’s Reasoning

The court reasoned that under CPLR 302(a)(1), a court may exercise personal jurisdiction over a non-domiciliary who transacts business within the state if the cause of action arises from that transaction. The “overriding criterion” is whether the defendant “purposefully avails itself of the privilege of conducting activities within [New York].” The court found that Mahfouz’s contacts with New York were solely related to the English lawsuit and did not involve invoking the benefits or protections of New York law. His communications were intended to further his assertion of rights under English law. The court distinguished cases where a defendant actively sought to consummate a transaction in New York or established an ongoing relationship governed by New York law.

The court rejected the argument that Mahfouz’s refusal to waive enforcement of the English judgment in New York constituted purposeful availment. Citing Ferrante Equip. Co. v. Lasker-Goldman Corp., 26 N.Y.2d 280 (1970), the court stated that the mere receipt of a benefit or profit from a contract performed by others in New York is not sufficient to confer jurisdiction. The alleged chilling effect on Ehrenfeld’s speech did not arise from Mahfouz’s invocation of New York law, but from the English remedy and Ehrenfeld’s own activities in New York.

The court declined to adopt the Ninth Circuit’s holding in Yahoo! Inc. v. La Ligue Contre Le Racisme Et L’Antisemitisme, 433 F.3d 1199 (2006), because California’s long-arm statute is coextensive with federal due process requirements, while New York’s long-arm statute is more restrictive. The court emphasized that New York law requires purposeful availment of New York law, which was not present in this case. The court stated that using an effects test would be “an unwarranted extension of [section 302 (a) (1)] and a usurpation of a function more properly belonging to the Legislature.”

December 20, 2007
Johnson v. Ward, 4 N.Y.3d 516 (2005): Establishing Long-Arm Jurisdiction Based on Nexus to New York Transactions

4 N.Y.3d 516 (2005)

For long-arm jurisdiction to exist under CPLR 302(a)(1), there must be a substantial nexus between the defendant’s New York transactions and the plaintiff’s cause of action; the relationship cannot be too attenuated or coincidental.

Summary

Johnson sued Ward for negligence following a car accident in New Jersey. At the time of the accident, both parties were New York residents, and Ward held a New York driver’s license and car registration. Ward later moved to New Jersey and surrendered his New York license. The New York Court of Appeals held that New York lacked personal jurisdiction over Ward because the cause of action arose from the accident in New Jersey, not from Ward’s New York license or registration; therefore, the nexus between Ward’s New York activities and the claim was insufficient to establish jurisdiction under CPLR 302(a)(1).

Facts

On October 12, 1997, Roger Johnson and Monique White were injured in New Jersey when their car was struck by a vehicle driven by Daniel Ward.

At the time of the accident, Johnson, White, and Ward were all New York residents.

Ward possessed a New York driver’s license and had registered his vehicle in New York.

In December 1997, Ward moved to New Jersey and, in 1998, obtained a New Jersey driver’s license, surrendering his New York license.

In October 2000, Johnson and White commenced a negligence action against Ward in New York County.

Procedural History

The Supreme Court, New York County, granted Ward’s motion to dismiss the complaint for lack of personal jurisdiction under CPLR 3211(a)(8).

The Appellate Division reversed, reinstating the complaint, holding that Ward’s New York license and registration satisfied the “transacting business” requirement of CPLR 302(a)(1) and that there was a substantial nexus between the cause of action and Ward’s New York activities.

The New York Court of Appeals granted leave to appeal.

Issue(s)

Whether a New York court has personal jurisdiction over a non-domiciliary defendant under CPLR 302(a)(1) for a tort claim arising from an out-of-state motor vehicle accident, where the defendant held a New York driver’s license and car registration at the time of the accident.

Holding

No, because the plaintiffs failed to establish a sufficient nexus between the defendant’s purported transaction of business in New York (holding a license and registration) and the negligence claim which arose from an accident in New Jersey.

Court’s Reasoning

The Court of Appeals reversed the Appellate Division, holding that the exercise of long-arm jurisdiction was not warranted under CPLR 302(a)(1). The court reasoned that, to establish jurisdiction under this statute, (1) the defendant must transact business within the state, and (2) the cause of action must arise from that transaction of business.

The court emphasized the need for a “substantial relationship” between the defendant’s transactions in New York and the plaintiff’s cause of action, citing Kreutter v. McFadden Oil Corp., 71 N.Y.2d 460, 467 (1988).

The court found that the plaintiffs’ cause of action arose from the allegedly negligent driving in New Jersey, not from the issuance of the New York driver’s license or vehicle registration. The court stated, “The negligent driver could have had a license from any state, or no license—that defendant had a New York license and registration is merely coincidental.”

The Court distinguished cases where jurisdiction was upheld because the claim had a direct nexus to in-state transactions, such as George Reiner & Co. v. Schwartz, 41 N.Y.2d 648 (1977) (breach of employment contract entered into in New York) and Singer v. Walker, 15 N.Y.2d 443 (1965) (personal injury claim arising from the sale of a defective product in New York).

The court contrasted these cases with situations where the relationship between the claim and transaction is too attenuated, such as Talbot v. Johnson Newspaper Corp., 71 N.Y.2d 827 (1988) (defamation action where the nexus to the defendant’s activities in New York was insufficient).

The Court concluded that the nexus between the negligence claim and the defendant’s possession of a New York license and registration at the time of the accident was “too insubstantial” to warrant the exercise of personal jurisdiction. The court’s focus on the location of the tortious act (New Jersey) as the primary factor distinguishing this case from others where jurisdiction was properly asserted.

May 5, 2005
Talbot v. Macharen, 76 N.Y.2d 806 (1990): Establishes Limits on Long-Arm Jurisdiction Based on Prior Business Activity

Talbot v. Macharen, 76 N.Y.2d 806 (1990)

New York’s long-arm statute, CPLR 302(a)(1), does not permit the exercise of personal jurisdiction over non-residents based solely on prior business activity in the state when there is no substantial nexus between that activity and the present cause of action.

Summary

Leon and Jane Talbot sued Stuart Macharen, his daughter Patricia Macharen, and Johnson Newspaper Corp. for defamation based on letters written by Stuart criticizing Leon’s behavior as a coach at St. Lawrence University. The Macharens, California residents, moved to dismiss for lack of personal jurisdiction. The New York Court of Appeals affirmed the Appellate Division’s dismissal, holding that Patricia’s prior attendance at a New York university, years before the defamatory statements, did not establish a sufficient nexus to the cause of action to justify long-arm jurisdiction under CPLR 302(a)(1). The court emphasized that the long-arm statute does not extend to the limits of due process, requiring a substantial relationship between the defendant’s in-state business activity and the cause of action.

Facts

Stuart Macharen, a California resident, wrote letters criticizing Leon Talbot, a coach at St. Lawrence University, based on two incidents reported to him by his daughter, Patricia Macharen. The letters discussed a student’s death after a party at the Talbots’ home and Patricia’s observation of someone she believed to be Leon Talbot severely intoxicated at a fraternity party. Patricia Macharen had been a student at St. Lawrence University but had graduated more than two years prior to the letters being written. A local newspaper published an article featuring the letter and a phone interview with Patricia where she stated she saw the coach drinking beer. Talbot insisted it was a look-alike.

Procedural History

The Talbots commenced a defamation action against the Macharens and others. The Macharens moved to dismiss the action for lack of personal jurisdiction. Special Term denied the motion. The Appellate Division reversed and dismissed the complaint against the Macharens, finding no personal jurisdiction. The Court of Appeals affirmed the Appellate Division’s decision.

Issue(s)

Whether CPLR 302(a)(1) provides for personal jurisdiction over non-resident defendants whose only contact with New York consists of a prior educational relationship and subsequent out-of-state communications related to events occurring during that relationship.

Holding

No, because there was no substantial relationship between the Macharens’ prior activity in New York (Patricia’s attendance at the university) and the present cause of action (the defamatory statements).

Court’s Reasoning

The Court of Appeals held that CPLR 302(a)(1) requires both “purposeful activities” within New York and a “substantial relationship” between those activities and the transaction out of which the cause of action arose, citing McGowan v Smith, 52 NY2d 268, 272. Even assuming Patricia’s prior enrollment and attendance at the university constituted purposeful activity, the court found no nexus between that activity, which had terminated years prior, and the defamation claim. The court stated that New York’s long-arm statute does not automatically extend to the limits of what due process would allow, quoting Banco Ambrosiano v Artoc Bank & Trust, 62 NY2d 65, 71, indicating that the statute imposes stricter requirements than the constitutional minimum. The court emphasized that the cause of action must arise from the business transacted within the state. The court reasoned that “[a]bsent the four-year educational contract, the Macharens would not even have been in New York at the time of the basketball coach’s alleged intoxication” was not enough to establish the required nexus, as the defamation claim did not arise from the contract itself or any ongoing business activity related to it after Patricia’s graduation. The court focused on the lack of an ongoing commercial benefit or transaction in New York related to the cause of action.

March 17, 1988
Presidential Realty Corp. v. Michael Square West, Ltd., 44 N.Y.2d 672 (1978): Establishing Jurisdiction Based on Minimal Contact in New York

Presidential Realty Corp. v. Michael Square West, Ltd., 44 N.Y.2d 672 (1978)

Physical presence alone does not automatically establish jurisdiction in New York under CPLR 302(a)(1); the defendant’s activities in the state must be directly related to the transaction to confer jurisdiction.

Summary

Presidential Realty Corp. sought to establish jurisdiction in New York over Michael Square West, Ltd., a nonresident, based on a single business meeting held in New York. The contract’s material terms were negotiated outside New York. Presidential Realty argued that modifications to the contract were agreed upon at a meeting in White Plains, New York, and the agreement was signed there. The Court of Appeals held that merely signing an agreement in New York, without sufficient proof of substantial negotiations or other relevant business activity in the state, is insufficient to establish jurisdiction under New York’s long-arm statute.

Facts

Presidential Realty Corp. (plaintiff) and Michael Square West, Ltd. (defendant) engaged in negotiations for the sale of a real estate development in Mobile, Alabama. The main contract negotiations occurred in Atlanta, New Orleans, and Mobile, Alabama. Prior to the closing, the plaintiff requested a meeting in its New York office. At this meeting in White Plains, New York, alleged modifications to the contract were discussed, and the defendant’s representative signed a letter incorporating these modifications. The deal was eventually closed in Mobile, Alabama.

Procedural History

The plaintiff, Presidential Realty Corp., initiated the lawsuit in New York, attempting to assert personal jurisdiction over the defendant, Michael Square West, Ltd. The lower courts likely ruled on the jurisdictional issue based on CPLR 302(a)(1). The Appellate Division’s order was appealed to the New York Court of Appeals, which affirmed the Appellate Division’s decision.

Issue(s)

Whether the defendant’s single-day business meeting and the signing of a contract modification letter in New York constituted sufficient minimum contacts to establish personal jurisdiction under CPLR 302(a)(1), where the primary negotiations occurred outside of New York.

Holding

No, because there was insufficient evidence presented to prove that substantial negotiations occurred in New York or that the defendant engaged in other activities purposefully availing itself of the privilege of conducting activities within New York. The mere signing of the modification letter and agreement in New York was insufficient to confer jurisdiction.

Court’s Reasoning

The Court of Appeals acknowledged that a single business meeting in New York could, in some circumstances, provide the minimum contacts necessary for jurisdiction. However, it emphasized that “physical presence alone cannot talismanically transform any and all business dealings into business transactions under CPLR 302 (subd [a], par [1]).” The court found that the material terms of the contract were negotiated outside New York. Crucially, the court noted that there was no reliable evidence of the extent, if any, of actual negotiations that occurred during the New York meeting. The plaintiff failed to provide proof “by one having personal knowledge either of the fact or the extent of any negotiations.” The court distinguished this case from others where the defendant purposefully availed itself of the benefits of conducting business in New York, such as in cases where substantial contract negotiations occurred within the state. The court cited Hi Fashion Wigs v Hammond Adv., 32 NY2d 583, 586, emphasizing that simply signing an agreement in New York is not enough to establish jurisdiction.

March 23, 1978
George Reiner & Co., Inc. v. Schwartz, 41 N.Y.2d 648 (1977): Establishing Personal Jurisdiction Based on a Single Business Transaction

George Reiner & Co., Inc. v. Schwartz, 41 N.Y.2d 648 (1977)

A non-domiciliary who is physically present in New York and enters into a contract, thereby establishing a continuing relationship with a New York corporation, is subject to personal jurisdiction in New York for causes of action arising from that contract.

Summary

George Reiner & Co. sued Arnold Schwartz for violating his employment contract. Schwartz, a Massachusetts resident, argued New York lacked personal jurisdiction. The Court of Appeals held that by traveling to New York, interviewing for a job, and entering into an employment agreement with a New York company, Schwartz purposefully availed himself of the privilege of conducting activities within New York, thus establishing personal jurisdiction. This single transaction was sufficient because it created a continuing relationship and the lawsuit arose directly from that agreement.

Facts

Arnold Schwartz, a Massachusetts resident, responded to an advertisement by George Reiner & Co., a New York corporation. At the company’s request and expense, Schwartz traveled to Albany, New York, for an interview. An employment agreement was reached, and Schwartz returned to Massachusetts with a memorandum outlining his sales territory (New England), commission rate, and other employment details. Schwartz worked for Reiner for over four years, covering New England from his Massachusetts home office. Reiner later sued Schwartz, alleging he fraudulently violated the contract by retaining excess drawings over commissions.

Procedural History

Reiner sued Schwartz in New York. Schwartz moved to dismiss the action for lack of personal and subject matter jurisdiction. Special Term granted the motion based on lack of personal jurisdiction. The Appellate Division reversed and reinstated the complaint. The New York Court of Appeals granted leave to appeal and certified the question of whether Special Term erred in dismissing the case for lack of personal jurisdiction.

Issue(s)

Whether a non-domiciliary, by traveling to New York for a job interview and entering into an employment contract with a New York corporation, transacts business within New York sufficient to establish personal jurisdiction under CPLR 302(a)(1) for a cause of action arising from that contract.

Holding

Yes, because by purposefully coming into New York to seek employment, interviewing, and entering into an agreement with a New York employer that contemplated and resulted in a continuing relationship, the defendant availed himself of the privilege of conducting activities in New York, thus invoking the benefits and protection of its laws.

Court’s Reasoning

The Court relied on the principle established in International Shoe Co. v. Washington, which requires minimum contacts with the forum state such that maintaining the suit does not offend traditional notions of fair play and substantial justice. The court emphasized that CPLR 302(a)(1) allows for personal jurisdiction over a non-domiciliary who transacts any business within the state, as long as the cause of action arises from that transaction. The Court determined that Schwartz’s physical presence in New York to negotiate and enter into the employment contract constituted the transaction of business within the state. The court stated that this was the “clearest sort of case” for jurisdiction, as the contract, which established a continuing relationship, was made in New York, and the cause of action arose directly from that contract. The court distinguished this case from McKee Elec. Co. v. Rauland-Borg Corp., where the defendant’s contact with New York was a casual attempt to smooth out difficulties, not the purposeful creation of a contractual relationship. The court emphasized that Schwartz “purposefully availed himself of the privilege of conducting activities, in our jurisdiction, thus invoking the benefits and protection of our laws.”

April 28, 1977