New York Law Review

Tag: doing business

  • Frummer v. Hilton Hotels Int’l, 19 N.Y.2d 533 (1967): Establishing Jurisdiction Over Foreign Corporations Based on ‘Doing Business’ in New York

    Frummer v. Hilton Hotels Int’l, 19 N.Y.2d 533 (1967)

    A foreign corporation is subject to personal jurisdiction in New York if it engages in a continuous and systematic course of “doing business” within the state, such that it is deemed “present” in the jurisdiction, even if the cause of action arises outside of New York.

    Summary

    Frummer, a New York resident, sued Hilton Hotels (U.K.) for injuries sustained in a London Hilton hotel. The New York Court of Appeals addressed whether New York courts had jurisdiction over the British corporation. Although the plaintiff’s cause of action did not arise from any transaction of business within New York under CPLR 302(a)(1), the court held that jurisdiction was properly acquired because Hilton (U.K.) was “doing business” in New York through its agent, the Hilton Reservation Service. The court reasoned that the Reservation Service performed all the functions that Hilton (U.K.) would perform if directly present in New York, thus establishing the corporation’s presence for jurisdictional purposes.

    Facts

    Plaintiff Frummer, a New York resident, was injured in 1963 while staying at the London Hilton Hotel, operated by Hilton Hotels (U.K.) Ltd., a British corporation.
    Frummer sued Hilton (U.K.) and related entities (Hilton Hotels Corporation and Hilton Hotels International) in New York, seeking $150,000 in damages.
    Hilton (U.K.) moved to dismiss the complaint, arguing that the New York court lacked personal jurisdiction over it.
    Hilton Hotels International owned almost all shares of Hilton (U.K.). Hilton Hotels Corporation was the American parent company.
    Hilton Reservation Service, jointly owned by Hilton Hotels Corporation and Hilton Hotels International, maintained a New York office and bank account.
    The Reservation Service advertised its ability to confirm availabilities at any Hilton hotel, including the London Hilton, and provided liaison services for travel agents.

    Procedural History

    Hilton (U.K.) moved to dismiss the complaint under CPLR 3211(a)(8) for lack of personal jurisdiction.
    The lower courts upheld jurisdiction over Hilton (U.K.).
    The Court of Appeals granted leave to appeal and certified the question of whether the order was properly made.

    Issue(s)

    Whether New York courts have personal jurisdiction over a foreign corporation, Hilton (U.K.), based on the activities of its agent, Hilton Reservation Service, in New York, even though the cause of action arose outside of New York.

    Holding

    Yes, because Hilton (U.K.) was “doing business” in New York through the Hilton Reservation Service, which performed all the functions that Hilton (U.K.) would perform if it were directly present in New York, thus establishing its presence for jurisdictional purposes.

    Court’s Reasoning

    The court determined that CPLR 302(a)(1), New York’s long-arm statute, was inapplicable because the plaintiff’s cause of action did not arise from any transaction of business within New York by Hilton (U.K.).
    The court analyzed jurisdiction under CPLR 301, focusing on whether Hilton (U.K.) was “doing business” in New York in the traditional sense, referencing landmark cases such as Tauza v. Susquehanna Coal Co. and International Shoe Co. v. Washington.
    The court stated, “a foreign corporation is amenable to suit in our courts if it is ‘engaged in such a continuous and systematic course of “doing business” here as to warrant a finding of its “presence” in this jurisdiction.’”
    The court distinguished the case from Miller v. Surf Props., noting that the Hilton Reservation Service did more than mere solicitation; it both accepted and confirmed room reservations at the London Hilton.
    The court emphasized that the Hilton Reservation Service “does all the business which Hilton (U. K.) could do were it here by its own officials.”
    The court considered the common ownership between Hilton (U.K.) and the Reservation Service as a factor supporting the broad scope of the agency relationship.
    The court noted that engaging in international trade comes with the responsibility of being subject to litigation in foreign jurisdictions where business is conducted extensively.
    Dissent: Judge Breitel argued that extending jurisdiction based solely on the relationship between affiliated corporations, without evidence of fraud or intermingling of activities, was an overreach. He believed the Hilton Reservation Service’s activities amounted to mere solicitation, similar to the situation in Miller v. Surf Props.
    The dissent also highlighted policy concerns regarding the potential for reciprocal manipulation against American enterprises operating abroad if such broad jurisdictional principles were adopted.

  • Public Administrator of the County of New York v. Royal Bank of Canada, 19 N.Y.2d 127 (1967): Establishing Jurisdiction Over Foreign Branches of a Bank

    Public Administrator of the County of New York v. Royal Bank of Canada, 19 N.Y.2d 127 (1967)

    A foreign bank’s branch operating in New York subjects the entire bank, including its separately incorporated foreign branches, to the jurisdiction of New York courts, provided the foreign branch is essentially an alter ego of the main bank.

    Summary

    The case addresses whether service of process on the New York branch of the Royal Bank of Canada (RBC) confers jurisdiction over its separately incorporated French branch, Royal Bank of Canada (France). The court held that it does. Given the high degree of operational integration between RBC and its French branch, including shared management, standardized banking practices, and consolidated financial reporting, RBC (France) was effectively doing business in New York through RBC’s presence. Therefore, service on the New York branch established jurisdiction over the entire entity, including its French branch.

    Facts

    The Royal Bank of Canada (RBC) operated a branch in New York. RBC also had a branch in France, the Royal Bank of Canada (France), which was separately incorporated. All stock in the French corporation was owned by RBC. The assets and liabilities of the French branch were carried on RBC’s books as part of its own. RBC advertised that France was one of many countries in which it had branches. The French branch was established “to conduct the business of the Bank in Paris.” The French branch’s staff were recruited and trained by RBC in Montreal, and personnel were frequently shifted between Paris and RBC’s home office. The French branch was merely notified and not consulted on accounts which were transferred to it from other RBC branches, and the moneys in those accounts were reflected only in bookkeeping entries rather than by an actual transfer of the funds to France.

    Procedural History

    The plaintiff served process on the New York branch of Royal Bank of Canada, attempting to establish jurisdiction over both Royal Bank of Canada and its French branch, Royal Bank of Canada (France). The lower courts held that jurisdiction was properly obtained over the French branch. The Appellate Division affirmed this decision and certified a question to the New York Court of Appeals. The Court of Appeals then reviewed the case.

    Issue(s)

    Whether service of process on the New York branch of a foreign (Canadian) bank suffices to give New York courts jurisdiction over an incorporated branch of the same bank located in France.

    Holding

    Yes, because the Royal Bank of Canada (France) was not merely a subsidiary of the Royal Bank of Canada but was, in fact, if not in name, the Royal Bank of Canada itself. Since the two defendants are one and the same corporation, there is realistically no basis for distinguishing between them for the purposes of this suit.

    Court’s Reasoning

    The court reasoned that the Royal Bank of Canada (France) was essentially the same entity as the Royal Bank of Canada, despite its separate incorporation. The court focused on the degree of control and integration between the two entities. The court noted that the French branch was wholly owned by the Royal Bank of Canada, operated under the bank’s name, and conducted the bank’s business in Paris. The staff were trained and transferred by the Royal Bank of Canada. Deposits and bookkeeping entries were standardized and controlled by the Royal Bank of Canada. "In short, then, the facts detailed tend to establish that the Royal Bank of Canada (France) is not merely a subsidiary of the Royal Bank of Canada but is, in fact, if not in name, the Royal Bank of Canada itself." Because the Royal Bank of Canada was doing business in New York, its French branch was also subject to jurisdiction there. The court distinguished between “doing business” jurisdiction under CPLR 301 and “long-arm” jurisdiction under CPLR 302. CPLR 301 allows jurisdiction over a foreign corporation doing business in New York for any cause of action, regardless of where it arose. CPLR 302, the long-arm statute, allows jurisdiction only if the cause of action arises from the defendant’s transaction of business in New York.

  • 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.

  • Bryant v. Finnish National Airline, 15 N.Y.2d 426 (1965): Establishing Jurisdiction Over Foreign Corporations

    Bryant v. Finnish National Airline, 15 N.Y.2d 426 (1965)

    A foreign corporation is subject to personal jurisdiction in New York if it engages in a continuous and systematic course of “doing business” within the state, even if the cause of action arises outside of New York.

    Summary

    Bryant, a New York resident, sued Finnish National Airline (Finnair) for negligence after being injured in Paris by a baggage cart allegedly propelled by the blast of Finnair’s aircraft. Finnair moved to dismiss for lack of personal jurisdiction, arguing it wasn’t “doing business” in New York. The Court of Appeals reversed the Appellate Division’s dismissal, holding that Finnair’s New York office, which conducted activities like public relations, maintaining contacts with other airlines, and transmitting requests for space, constituted sufficient “doing business” to warrant jurisdiction.

    Facts

    The plaintiff, a New York resident and employee of Trans World Airlines, sustained injuries at an airport in Paris after being struck by a baggage cart, allegedly due to the excessive blast of air from a Finnair aircraft. Finnair is a Finnish corporation with its principal place of business in Helsinki, Finland. Finnair maintained a one and a half-room office in New York City, staffed with three full-time and four part-time employees. This office received reservations for Finnair flights from international air carriers and travel agencies, which were then transmitted to Finnair’s space control office in Europe. The New York office also engaged in information and publicity work for Finnair, including advertising its European services. The office had a bank account with an average balance of less than $2,000, used for salaries, rent, and operating expenses.

    Procedural History

    The Supreme Court, Special Term, denied Finnair’s motion to dismiss for lack of personal jurisdiction, finding that Finnair’s activities in New York constituted “doing business” within the state. The Appellate Division reversed, dismissing the complaint. The New York Court of Appeals then reversed the Appellate Division, reinstating the Special Term’s order and allowing the case to proceed in New York.

    Issue(s)

    Whether Finnair’s activities in New York State, specifically maintaining an office for publicity, public relations, and transmitting reservation requests, constitute “doing business” sufficient to subject it to personal jurisdiction in New York, even though the cause of action arose outside of New York.

    Holding

    Yes, because Finnair maintains a New York office that systematically and continuously engages in activities that promote its business, including public relations, maintaining contacts with other airlines and travel agencies, and transmitting requests for space, which is enough to constitute “doing business” within New York and subject Finnair to personal jurisdiction there.

    Court’s Reasoning

    The Court reasoned that the test for “doing business” should be a simple, pragmatic one. While Finnair did not operate its airplanes within New York State, its New York office was one of many directly maintained by the airline in various parts of the world. The office had a lease, employed several people, maintained a bank account, did public relations and publicity work, maintained contacts with other airlines and travel agencies, and transmitted requests for space to Finnair in Europe. The Court emphasized that the New York office helped generate business for Finnair. The court distinguished Miller v. Surf Props., emphasizing the person served in that case was an independent travel agency, not an employee of the defendant. Citing Berner v. United Airlines, the court noted that operating airplanes within the state isn’t determinative. The court stated, “The test for ‘doing business’ is and should be a simple pragmatic one, which leads us to the conclusion that defendant should be held to be suable in New York.”

  • TACA International Airlines, S.A. v. Rolls-Royce of England, Ltd., 15 N.Y.2d 97 (1965): Establishing Jurisdiction Over a Foreign Corporation Through a Subsidiary

    TACA International Airlines, S.A. v. Rolls-Royce of England, Ltd., 15 N.Y.2d 97 (1965)

    A foreign parent corporation is subject to personal jurisdiction in New York if its subsidiary operates as a mere department or instrumentality of the parent, effectively conducting the parent’s business within the state.

    Summary

    TACA International Airlines sued Rolls-Royce of England (Ltd.) for damages. Ltd. moved to vacate service of process, arguing it wasn’t doing business in New York. The New York Court of Appeals considered whether Rolls-Royce, Inc. (Inc.), the American subsidiary of Ltd., operated as a mere department or instrumentality of the parent company. The court held that Ltd. was subject to jurisdiction in New York because Inc. functioned as its sales and service department, thus Ltd. was doing business in New York through Inc.

    Facts

    TACA sued Rolls-Royce of England, Ltd. (Ltd.), a British corporation, for damages to its airplane allegedly caused by negligence. Ltd. moved to set aside service of the summons, which was served on Rolls-Royce, Inc. (Inc.), a Delaware corporation and a subsidiary of Ltd., in New York City. Ltd. manufactured and sold motor cars and airplane engines worldwide. Rolls-Royce of Canada, Ltd. owned all stock of Rolls-Royce, Inc., and Rolls-Royce of England, Ltd. owned all stock of the Canadian company. Inc.’s business was solely the sale and servicing of products manufactured by Ltd.

    Procedural History

    Special Term granted Ltd.’s motion to vacate service, finding Ltd. was not doing business in New York and Inc. was not its representative. The Appellate Division reversed, holding Inc. functioned as a department of Ltd. The dissenting judge believed Special Term’s finding of Inc.’s independence was justified. The case then went to the New York Court of Appeals.

    Issue(s)

    Whether Rolls-Royce, Inc. operated as a mere department or instrumentality of Rolls-Royce of England, Ltd., such that service on Inc. constituted valid service on Ltd. for the purpose of establishing personal jurisdiction.

    Holding

    Yes, because Rolls-Royce, Inc. functioned as a department of Rolls-Royce of England, Ltd., acting as the American sales and service department of the British corporation. The court found the claimed independence of the American subsidiary was illusory.

    Court’s Reasoning

    The court relied heavily on the factual findings regarding the relationship between Ltd. and Inc. The court noted the common directors and executive personnel, frequent conferences to determine policies, technical training provided by Ltd. to Inc. employees, and sales literature written and published by Ltd. Inc. bought cars from Ltd. at a fixed price, and Ltd. provided warranties directly to purchasers, with Inc. delivering the warranties. Ltd. paid Inc. a fixed annual fee for services rendered under these warranties. All of Inc.’s net income went to Rolls-Royce of Canada, and then appeared on the balance sheet of Ltd. Key personnel were frequently exchanged between New York and England and considered part of the Rolls-Royce employee “group”. All operations of Inc. were reported to Ltd. and Canada, Ltd., and all American business appeared in the consolidated earnings statements of Ltd. The court found these facts showed Inc. was not an independent entity. The court cited Rabinowitz v. Kaiser-Frazer Corp. as a controlling authority. The court emphasized that the question was whether Inc. was “a really independent entity or a mere department of Ltd.? If the latter, then obviously Ltd, was doing extensive business in our State through its local department separately incorporated as Inc.” The court determined the latter was true here.