New York Law Review

Tag: Long-Arm Jurisdiction

  • Ehrlich-Bober & Co. v. University of Houston, 49 N.Y.2d 574 (1980): Comity and Jurisdiction Over Out-of-State Governmental Entities in Commercial Transactions

    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.

  • 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.

  • 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.

  • Glassman v. Hyder, 23 N.Y.2d 354 (1968): Attachment of Future Rents and Long-Arm Jurisdiction

    Glassman v. Hyder, 23 N.Y.2d 354 (1968)

    Future rents are considered too speculative to be attached as a debt certain to become due, and out-of-state property owners who merely correspond with a New York broker and prospective buyer do not necessarily transact business within New York for the purposes of long-arm jurisdiction.

    Summary

    Classman, a New York real estate broker, sued Hyder, New Mexico property owners, for commissions. Classman sought quasi in rem jurisdiction by attaching future rents from the property’s tenant, a corporation doing business in New York. He also claimed personal jurisdiction, arguing the Hyders transacted business in New York. The New York Court of Appeals held that future rents are not attachable as a debt and the Hyders’ limited contacts did not constitute transacting business in New York. Therefore, the court affirmed the dismissal of the complaint for lack of jurisdiction.

    Facts

    Donald, Richard, and Josephine Hyder owned property in Albuquerque, New Mexico, leased to Fireman’s Fund Insurance Company. Classman, a New York broker, contacted Donald Hyder in New Mexico to procure a buyer for the property. Classman initiated contact by telephone, offering his services. Correspondence and negotiations ensued via telephone, letters, and telegrams, with the Hyders remaining in New Mexico. A prospective buyer was found, and a proposed contract was exchanged, but the deal ultimately fell through, and the Hyders sold to a local buyer.

    Procedural History

    The Civil Court dismissed Classman’s complaint for lack of jurisdiction. The Appellate Term reinstated the attachment and the complaint. The Appellate Division reversed, agreeing with the Civil Court and vacating the attachment and dismissing the complaint. The New York Court of Appeals granted leave to appeal.

    Issue(s)

    1. Whether future rents are a debt that can be attached to establish quasi in rem jurisdiction.
    2. Whether the New Mexico property owners transacted business in New York such that New York courts could exercise personal jurisdiction over them.

    Holding

    1. No, because an obligation to pay rent is not a debt and is not certain to become due.
    2. No, because the Hyders’ activities did not constitute transacting business within New York.

    Court’s Reasoning

    The court reasoned that a debt, to be attachable, must be “past due or * * * yet to become due, certainly or upon demand of the judgment debtor” (CPLR 5201, subd. [a]). Relying on Matter of Ryan, the court stated, “The ‘covenant to pay rent creates no debt until the time stipulated for the payment arrives… On the contrary, the obligation upon the rent covenant is altogether contingent.’” The court distinguished Seider v. Roth, noting that the indemnitor’s duty to defend is a present duty, unlike the duty to pay future rents.

    The court also found that the Hyders did not transact business in New York. The brokerage contract originated with Classman’s phone call to New Mexico. “This court has previously held that there is no transaction of business in New York where an offer placed outside the State by telephone is received and accepted in New York.” The court emphasized that the Hyders’ correspondence did not elaborate on the oral brokerage commitment. The acts of the independent broker within New York could not be attributed to the owners to establish long-arm jurisdiction.

    The court acknowledged the exceptional situation presented by the defendants’ non-domiciliary status, the property’s location outside the state, and the tenant’s presence within the jurisdiction. However, the court concluded that the existing legislation on attachment and execution was not intended to reach future rents, except perhaps as income subject to specific execution procedures, which were not followed in this case.

  • 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.