New York Law Review

Tag: CPLR 302(a)(1)

  • Hi Fashion Wigs, Inc. v. Peter Hammond Advertising, Inc., 32 N.Y.2d 583 (1973): Establishing Personal Jurisdiction Through Contractual Obligations

    Hi Fashion Wigs, Inc. v. Peter Hammond Advertising, Inc., 32 N.Y.2d 583 (1973)

    A non-domiciliary transacts business within New York, subjecting them to personal jurisdiction under CPLR 302(a)(1), when they purposefully avail themselves of the privilege of conducting activities within the state, especially when a contract is formed or substantially connected to New York.

    Summary

    Hi Fashion Wigs, an Oklahoma corporation, contracted with Peter Hammond Advertising, a New York corporation, for advertising services. Mike Schuminsky, Hi Fashion Wigs’ president, personally guaranteed the contract. When Hi Fashion Wigs sued Hammond, Hammond impleaded Schuminsky based on the guarantee. The New York Court of Appeals held that New York had jurisdiction over Schuminsky because he purposefully transacted business in New York by delivering the guarantee there and because the contract’s performance was substantially New York-based.

    Facts

    Hi Fashion Wigs, Inc. (plaintiff), an Oklahoma corporation doing business in New York, retained Peter Hammond Advertising, Inc. (defendant), a New York corporation, as its advertising agent. Mike Schuminsky, the president of Hi Fashion Wigs, signed a personal guarantee for the company’s payments to Hammond. The contract was negotiated in Oklahoma, but Schuminsky delivered the signed guarantee to Hammond in New York. Hammond performed the advertising services in New York, and Hi Fashion Wigs made payments to Hammond’s New York office.

    Procedural History

    Hi Fashion Wigs sued Hammond in New York for alleged fraudulent actions. Hammond counterclaimed and impleaded Schuminsky based on his personal guarantee. Schuminsky moved to dismiss for lack of personal jurisdiction. The trial court denied the motion. The Appellate Division affirmed, finding no purposeful activity by Schuminsky in New York. The New York Court of Appeals reversed, finding jurisdiction over Schuminsky.

    Issue(s)

    Whether Schuminsky, an Oklahoma resident, is subject to personal jurisdiction in New York under CPLR 302(a)(1) based on his personal guarantee of a contract performed in New York.

    Holding

    Yes, because Schuminsky purposefully availed himself of the privilege of conducting activities within New York by delivering the guarantee in New York, and the contract’s performance was substantially connected to New York.

    Court’s Reasoning

    The court reasoned that CPLR 302(a)(1) extends jurisdiction to non-domiciliaries who transact business within New York. The court emphasized that delivering the guarantee in New York was a purposeful act, as the guarantee contract was not formed until delivered in New York. Citing Hanson v. Denckla, 357 U. S. 235, 253, the court noted that Schuminsky “purposefully” availed himself ‘of the privilege of conducting activities within [this] State,’ thereby “invoking the benefits and protections of its laws.” The court also noted that the underlying contract involved advertising services performed entirely in New York, and payments were to be made in New York. Therefore, even if the guarantee wasn’t technically made in New York, Schuminsky’s contacts with the state were substantial enough to satisfy due process, referencing International Shoe Co. v. Washington, 326 U. S. 310, 316. The court distinguished Ferrante Equip. Co. v. Lasher-Goldman Corp., 104 U. S. 159, 166, stating that mere performance of a contract in New York is insufficient for jurisdiction when the guarantee is executed elsewhere and there are no other business transactions in New York.

  • Ferrante Equip. Co. v. Lasker-Goldman Corp., 26 N.Y.2d 280 (1970): Long-Arm Jurisdiction and Transaction of Business

    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.

  • Johnson v. Equitable Life Assurance Society, 16 N.Y.2d 1067 (1965): Establishing Personal Jurisdiction Based on Business Activity

    16 N.Y.2d 1067 (1965)

    A court must determine whether a cause of action arises from a defendant’s transaction of business within the state or whether the defendant’s activities constitute “doing business” within the state to establish personal jurisdiction.

    Summary

    This case involves a dispute over personal jurisdiction in a tort action. The Court of Appeals of New York withheld its decision and remitted the case to the Special Term. The court directed the Special Term to determine whether the cause of action arose from the third-party defendant’s business activities within New York or if their activities met the criteria for “doing business” in the state, as defined in *Tauza v. Susquehanna Coal Co.*, to establish personal jurisdiction under CPLR 302(a)(1) and CPLR 301.

    Facts

    The underlying case involves a tort action. Equitable Life Assurance Society, as a third-party plaintiff, sought to establish personal jurisdiction over Michigan Tool Company, a third-party defendant, in New York.

    Procedural History

    The case reached the Court of Appeals of New York after proceedings at Special Term. Equitable Life Assurance Society offered transcripts of pre-trial examinations suggesting Michigan Tool Company had conducted business in New York. The Court of Appeals, finding no prior evaluation of this proof by a court with fact-finding powers, withheld its decision and remitted the case to Special Term for further proceedings and factual determination.

    Issue(s)

    1. Whether the cause of action for tort arose from the transaction of any business by the third-party defendant within New York State under CPLR 302(a)(1)?

    2. Whether the activities of the third-party defendant meet the criteria prescribed by *Tauza v. Susquehanna Coal Co.* for “doing business” within the state under CPLR 301 and 313?

    Holding

    1. The Court of Appeals withheld its decision and remitted the case. The Special Term must determine, based on the presented proof, whether the tort cause of action arose from Michigan Tool’s transaction of business within New York because a factual determination is required.

    2. The Court of Appeals withheld its decision and remitted the case. The Special Term must determine whether Michigan Tool’s activities satisfy the *Tauza* standard for “doing business” within the state because this is also a factual determination to be made by the lower court.

    Court’s Reasoning

    The Court of Appeals reasoned that it could not make a first-instance evaluation of the evidence presented by Equitable Life Assurance Society. The court emphasized that the transcripts suggesting Michigan Tool had done business in New York required further amplification and explanation. It cited *Matter of Hayes*, 263 N.Y. 219, 221, and *Employers’ Liab. Assur. Corp. v. Daley*, 297 N.Y. 745, to support its decision to remit the case. The court directed the Special Term to determine two key issues: whether the cause of action arose from the transaction of business within the state under CPLR 302(a)(1) and, if not, whether the company’s activities met the *Tauza* standard for “doing business” within the state. The court stated, “Upon remission the court at Special Term shall determine as a fact upon the basis of all the proof that may be offered by the parties whether the cause of action for tort described in the complaint arose itself from the transaction of any business by third-party defendant within the State under CPLR 302 (subd. [a], par. 1); and if it did not so arise, whether the activities of third-party defendant meet the criteria prescribed by *Tauza v. Susquehanna Coal Co.* (220 N.Y. 259) for ‘doing business’ within the State.” This approach ensures that a court with fact-finding powers properly evaluates the evidence and applies the relevant legal standards before a determination on personal jurisdiction is made.