49 N.Y.2d 574 (1980)

When a commercial transaction is centered in New York, New York courts are not precluded by comity from exercising jurisdiction over an out-of-state governmental entity, despite the entity’s state law limiting suits to specific venues, especially when New York has a strong interest in providing a forum for such transactions.

Summary

Ehrlich-Bober & Co., a New York securities dealer, sued the University of Houston, a Texas state agency, in New York for breach of contract related to reverse repurchase agreements. The University argued it was immune from suit in New York due to a Texas law restricting suits against it to specific Texas counties. The New York Court of Appeals held that New York courts could exercise jurisdiction. It reasoned that the transactions were centered in New York, and New York has a strong interest in providing a forum for commercial transactions within the state. Comity did not require deference to the Texas venue restriction.

Facts

Ehrlich-Bober, a New York-based securities dealer, engaged in multiple reverse repurchase agreements with the University of Houston. These transactions, totaling approximately $44 million, involved the sale and repurchase of securities. Many transactions were initiated by phone calls to Ehrlich-Bober’s New York office. On several occasions, a University employee visited Ehrlich-Bober’s office in New York. Two specific agreements were at issue, involving Government National Mortgage Association (Ginnie Mae) securities. Ehrlich-Bober delivered the purchase price to Manufacturer’s Hanover in New York, and the securities were delivered to Ehrlich-Bober. The University refused to repurchase the securities as agreed, causing Ehrlich-Bober a loss.

Procedural History

Ehrlich-Bober sued the University of Houston in New York. The University moved to dismiss, arguing sovereign immunity, lack of long-arm jurisdiction, and forum non conveniens. Special Term granted the motion to dismiss. The Appellate Division affirmed the dismissal based on sovereign immunity, but found long-arm jurisdiction existed and forum non conveniens did not apply. Ehrlich-Bober appealed to the New York Court of Appeals.

Issue(s)

1. Whether New York courts should, as a matter of comity, recognize and enforce a Texas statute that limits suits against the University of Houston to specific counties in Texas.

Holding

1. No, because New York’s interest in providing a forum for commercial transactions centered in New York outweighs Texas’s interest in limiting the venue for suits against its agencies, especially when the transaction has only an indirect relation to the governmental function of the University.

Court’s Reasoning

The Court of Appeals recognized that while New York could choose to defer to the Texas law as a matter of comity, it was not compelled to do so. The court emphasized that comity is a matter of practice, convenience, and expediency, not a binding rule of law. The court stated, “Whatever the New York rule may once have been…it is abundantly clear that the rule has undergone a substantial evolution over six decades…Today in New York the determination of whether effect is to be given foreign legislation is made by comparing it to our own public policy; and our policy prevails in case of conflict”.

The court identified New York’s strong public policy in maintaining its status as a major commercial and financial center, which includes providing ready access to its courts for redress of injuries arising from transactions within the state. The court distinguished this case from situations where the foreign law goes to the heart of a governmental function. The Texas statute, as interpreted by Texas courts, was deemed a restrictive venue provision for administrative convenience, not a limitation on liability essential to the governmental function.

The court emphasized that the transactions were centered in New York: initiated by a call to New York, accepted in New York, with money paid and securities delivered in New York, and repurchases to occur in New York. The court reasoned that requiring New York financial institutions to review the laws of every jurisdiction before doing business with its agencies would be an intolerable burden.

The dissenting opinion argued that the court was confusing the requirements for obtaining long-arm jurisdiction with considerations of comity. It contended that New York should respect Texas’s decision to limit suits against its state entities, similar to New York’s own restrictions on suits against the State University of New York. The dissent warned that the majority’s decision could allow suits against New York state entities in other states, despite New York’s intent to limit such suits to the New York Court of Claims.