New York Law Review

Tag: long-arm statute

  • D&R Global Selections, S.L. v. Bodega Olegario Falcon Pineiro, 28 N.Y.3d 295 (2016): Determining When a Foreign Corporation Transacts Business in NY for Long-Arm Jurisdiction

    D&R Global Selections, S.L. v. Bodega Olegario Falcon Pineiro, 28 N.Y.3d 295 (2016)

    A court may exercise personal jurisdiction over a foreign corporation under New York’s long-arm statute if the corporation transacts business within the state, and the cause of action arises from that business activity.

    Summary

    A Spanish winery (defendant) contracted with a Spanish company (plaintiff) to find a U.S. distributor for its wine. The defendant traveled to New York multiple times to meet potential distributors and promote its wine. Eventually, the defendant began selling wine to a New York-based distributor. When the defendant stopped paying commissions to the plaintiff, the plaintiff sued in New York for breach of contract. The court held that New York had personal jurisdiction over the defendant because the defendant transacted business in New York, and the plaintiff’s claim arose from those New York contacts. The court emphasized the “articulable nexus” between the business conducted in New York and the claim.

    Facts

    The defendant, a Spanish winery, entered into an oral agreement with the plaintiff, a Spanish company. Under this agreement, the plaintiff would find a U.S. distributor for the defendant’s wine, and the defendant would pay the plaintiff commissions. The defendant, along with the plaintiff, traveled to New York several times to meet potential distributors and promote its wine. The defendant attended wine industry events in New York, including one where it met Kobrand Corp., a New York-based distributor. The defendant subsequently began selling wine to Kobrand. When the defendant stopped paying commissions, the plaintiff sued the defendant in New York for breach of contract.

    Procedural History

    The plaintiff initially obtained a default judgment in New York Supreme Court. The defendant moved to vacate the default judgment, claiming lack of personal jurisdiction. The Supreme Court denied the motion. The Appellate Division reversed, holding that whether the court had personal jurisdiction raised an issue of fact. On remand, the Supreme Court again denied the defendant’s motion for summary judgment. The Appellate Division reversed, holding that the defendant was not subject to personal jurisdiction under CPLR 302 (a)(1), claiming that the promotional activities in New York did not have a substantial nexus to the plaintiff’s claim. The New York Court of Appeals granted leave to appeal.

    Issue(s)

    1. Whether a New York court has personal jurisdiction over the defendant under CPLR 302(a)(1).
    2. If so, whether the plaintiff’s claim arises from the defendant’s transaction of business in New York.

    Holding

    1. Yes, because the defendant transacted business in New York.
    2. Yes, because the plaintiff’s claim arises from the defendant’s transaction of business in New York.

    Court’s Reasoning

    The court applied CPLR 302(a)(1), which allows New York courts to exercise jurisdiction over non-domiciliaries who transact business within the state. The court followed a two-fold inquiry: whether the defendant purposefully availed itself of the privilege of conducting activities within New York, and whether the claim arises from that business. The court found that the defendant purposefully availed itself of doing business in New York by seeking out and initiating contact with New York, soliciting business, and establishing a continuing relationship. The court held that the plaintiff’s cause of action had an “articulable nexus” or “substantial relationship” with the defendant’s New York business activities. The court reasoned that “at least one element arises from the New York contacts.” The court emphasized that the defendant’s activities in New York directly related to the claim for unpaid commissions.

    The court stated that “a non-domiciliary defendant transacts business in New York when ‘on his or her own initiative[,] the non-domiciliary projects himself or herself into this state to engage in a sustained and substantial transaction of business.’” Furthermore, the court stated that an articulable nexus exists “where at least one element arises from the New York contacts.”

    Practical Implications

    This case is crucial for determining personal jurisdiction over foreign corporations in New York. It clarifies that a foreign company can be subject to New York jurisdiction if it purposefully engages in business activities within the state, even if the primary agreement was made outside of New York. It underscores the importance of establishing an “articulable nexus” between the business conducted in New York and the claim. Legal practitioners should carefully analyze a foreign defendant’s contacts with New York to determine whether those contacts meet the threshold of “transacting business” and whether the plaintiff’s claim arises from those contacts. This case also highlights that foreign companies who take purposeful actions to generate business in New York can reasonably expect to be haled into court in the state. Later cases have cited this case to establish jurisdictional nexus in the state. This has implications for international contracts and business deals.

  • 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.

  • 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.

  • Peterson v. Spartan Industries, Inc., 33 N.Y.2d 463 (1974): Establishing Jurisdiction Through Discovery

    33 N.Y.2d 463 (1974)

    A plaintiff is not required to establish prima facie jurisdiction before being allowed discovery on a foreign corporation’s motion to dismiss for lack of personal jurisdiction; the plaintiff need only demonstrate that facts “may exist” to defeat the motion.

    Summary

    Joseph Peterson sued Guard All Chemical Company for injuries sustained using a garden torch fueled by their product. Guard All, a Connecticut corporation, moved to dismiss for lack of personal jurisdiction, arguing it didn’t transact business in New York. Peterson cross-moved for a continuance and production of records, arguing essential facts to oppose the motion were unavailable. The court ordered a hearing on jurisdiction and allowed discovery. The Court of Appeals held that a plaintiff need not establish prima facie jurisdiction to obtain discovery related to jurisdiction; showing that facts “may exist” to defeat the motion is sufficient.

    Facts

    Joseph Peterson was injured while using a garden torch. The fuel for the torch was manufactured by Guard All Chemical Company, Inc., a Connecticut corporation.
    Peterson and his wife sued Guard All in New York, alleging negligence in the manufacture and sale of the torch.
    Guard All was served in Connecticut.
    Guard All moved to dismiss the complaint for lack of personal jurisdiction, claiming it did not transact business in New York.
    Plaintiffs cross-moved for a continuance and production of records, arguing that facts essential to justify opposition to the motion may exist but could not then be stated.

    Procedural History

    The Supreme Court directed a hearing before a Special Referee on the issue of jurisdiction, holding Guard All’s motion to dismiss in abeyance.
    Prior to the determination of the motion to dismiss, the plaintiffs served a notice of discovery and inspection.
    Guard All moved for a protective order to vacate the notice, which was denied.
    The Appellate Division affirmed the order denying the protective order.
    Two Justices dissented in part, arguing that a prima facie showing of jurisdiction was required before disclosure is allowed.
    The Court of Appeals granted leave to appeal and certified the question of whether the order of the Supreme Court was properly made.

    Issue(s)

    Whether a plaintiff must establish “prima facie jurisdiction” under CPLR 302 before disclosure may be allowed in a hearing, ordered pursuant to CPLR 3211(d), on a foreign corporation’s motion to dismiss for lack of personal jurisdiction.

    Holding

    No, because CPLR 3211(d) protects a party to whom essential jurisdictional facts are not presently known, especially where those facts are within the exclusive control of the moving party; the opposing party need only demonstrate that facts “may exist” whereby to defeat the motion, not that they “do” exist.

    Court’s Reasoning

    The Court reasoned that CPLR 3211(d), adapted from Federal Rule of Civil Procedure 56(f), protects parties lacking essential jurisdictional facts, especially when those facts are controlled by the moving party. The court emphasized that the opposing party only needs to demonstrate that facts “may exist” to defeat the motion, not that they “do” exist, as this determination awaits discovery. Requiring a prima facie showing of jurisdiction could impose undue obstacles for plaintiffs, especially under long-arm statutes where jurisdictional issues are often complex. Discovery is desirable and may be essential for an accurate judgment. The court cited the plaintiffs’ production of records at the hearing indicating that Guard All misrepresented Fire Department approval of their product. The court found that the plaintiffs made a sufficient start and their position was not frivolous. The Court quoted *Surpitski v. Hughes-Keenan Corp.*, 362 F.2d 254, stating the plaintiffs should have further opportunity to prove contacts and activities of the defendant in New York. The court noted that the plaintiff’s notice of discovery was overly broad and allowed the defendant to reapply for a protective order appropriately limiting disclosure to that reasonably related to the jurisdictional issue. The court also noted that discovery in aid of opposing the motion for summary judgment is expressly sanctioned. *First Nat. Bank v. Cities Serv.*, 391 U.S. 253, 290-299.

  • McKee Electric Co. v. Bombay Spirits Co., 26 N.Y.2d 15 (1970): Establishing Personal Jurisdiction Over Foreign Corporations

    McKee Electric Co. v. Bombay Spirits Co., 26 N.Y.2d 15 (1970)

    A foreign corporation is not subject to personal jurisdiction in New York solely because it sells goods to an independent distributor who then resells those goods in New York, even if the contract was signed in New York and obligates the plaintiff to promote the defendant’s products.

    Summary

    McKee Electric Co., a New York corporation, sued Bombay Spirits Co., a Scottish corporation, for breach of contract. McKee claimed Bombay breached an exclusive distribution agreement by allowing other distributors to sell Bombay gin in McKee’s territory. Bombay moved to dismiss for lack of personal jurisdiction. The New York Court of Appeals held that Bombay was not subject to jurisdiction in New York because it did not transact business within the state. Bombay’s sales to an independent distributor, Penrose, did not constitute transacting business in New York, even though the contract was signed in New York and required McKee to promote Bombay’s products.

    Facts

    McKee Electric Co. was a New York liquor distributor. Bombay Spirits Co. was a Scottish corporation that manufactured Bombay gin. Penrose & Co., a Pennsylvania corporation, had the U.S. distribution rights to Bombay products. In 1961, McKee, Bombay, and Penrose entered into an agreement granting McKee the exclusive right to sell Bombay products in the New York metropolitan area. Bombay and Penrose agreed not to grant distribution rights to anyone else in that territory, and McKee promised to use its best efforts to promote Bombay’s products. Bombay signed the agreement in Scotland; McKee signed it last in New York. McKee alleged that Bombay and Penrose breached the agreement by giving distribution rights to other companies, who were selling Bombay spirits in McKee’s territory.

    Procedural History

    McKee sued Bombay, Penrose, and other distributors in New York, seeking injunctive relief and damages. Bombay was served in Great Britain. Bombay moved to dismiss the complaint for lack of personal jurisdiction. The trial court denied the motion. The Appellate Division reversed, granting Bombay’s motion to dismiss. McKee appealed to the New York Court of Appeals.

    Issue(s)

    Whether Bombay Spirits Co., a Scottish corporation, is subject to personal jurisdiction in New York under CPLR 302(a)(1) based on its contract with a New York distributor and the distributor’s activities in New York to promote Bombay’s products.

    Holding

    No, because Bombay did not transact business within New York. The fact that McKee signed the contract in New York and was obligated to promote Bombay’s products in New York is not sufficient to establish jurisdiction.

    Court’s Reasoning

    The court reasoned that Bombay did not transact any business within New York. Bombay maintained no offices, bank accounts, telephone listings, or warehouses in New York. It did not employ any salesmen, solicit any orders, make any sales, or conduct any shipping activities in New York. Instead, Bombay sold its products to Penrose, an independent distributor, F.O.B. Great Britain, who then imported and sold the products in the United States. The court distinguished this case from prior cases where jurisdiction was found because in those cases, the foreign corporation had directly engaged in activities in New York, such as sending employees to promote business or buying stolen property. The court relied on Kramer v. Vogl, 17 N.Y.2d 27 (1966), where it held that jurisdiction was lacking over a foreign corporation that sold small quantities of leather F.O.B. Austria to a New York distributor and did not engage in any sales, promotion, or advertising activities in New York. The court stated that it is “not * * * determinative” that the plaintiff signed the contract in New York or that it was obligated therein “to promote” the purchases of Bombay’s products in this State. The court concluded that since Bombay was not transacting business in New York, service of process upon it abroad was insufficient to give New York courts jurisdiction over it.

  • Rosenblatt v. American Cyanamid Co., 16 N.Y.2d 24 (1965): Establishing Jurisdiction Over Non-Resident Executors

    16 N.Y.2d 24 (1965)

    A state court can exercise personal jurisdiction over a non-domiciliary’s executor or administrator for causes of action arising from acts the non-domiciliary committed within the state, provided the exercise of jurisdiction comports with due process.

    Summary

    This case addresses whether New York courts can constitutionally exercise personal jurisdiction over non-resident executors of a deceased defendant who was properly served while alive. The suit was brought by stockholders against corporate directors for alleged breaches of fiduciary duty. One director, Burg, was served in Massachusetts but later died. The plaintiffs sought to substitute Burg’s executors, who resided in Massachusetts. The executors challenged the court’s jurisdiction. The New York Court of Appeals held that exercising jurisdiction over the non-resident executors was constitutional, as the original action was properly commenced against Burg based on his business activities in New York, and the state has a legitimate interest in providing a forum for resolving disputes arising from those activities.

    Facts

    Plaintiffs, stockholders of Hotel Corporation of America, sued 19 individual defendants, including A.S. Burg, for allegedly realizing personal profits through real estate transactions with the corporation, constituting a breach of fiduciary duties.
    Burg, a director, was personally served in Massachusetts under CPLR 302(a)(1) based on his transaction of business in New York.
    Burg voluntarily appeared by filing an answer.
    Burg died, and executors were appointed in Massachusetts.
    Plaintiffs moved to substitute Burg’s non-resident executors as defendants.

    Procedural History

    The other defendants moved for a stay pending the posting of security by the plaintiffs, which was granted. After the stay was lifted, plaintiffs moved for substitution of Burg’s executors. Special Term ordered the substitution. The Appellate Division unanimously affirmed. The case reached the New York Court of Appeals by certified question regarding the constitutionality of jurisdiction over the non-resident executors.

    Issue(s)

    1. Whether New York courts can constitutionally obtain in personam jurisdiction over non-resident executors who have committed no acts or transacted no business in the state, where the deceased defendant was properly served before death based on in-state business activity.
    2. Whether the plaintiffs’ application for substitution was made within a reasonable time after the decedent’s death, as required by CPLR 1015(a) and 1021.

    Holding

    1. Yes, because the deceased defendant was properly served while alive due to transacting business in New York, and the state’s long-arm statute permits jurisdiction over the executor in such circumstances, consistent with due process.
    2. Yes, because the delay was not unreasonable given a stay of proceedings was in effect for a significant portion of the time following the defendant’s death, and the decision to allow substitution was within the court’s discretion.

    Court’s Reasoning

    The Court addressed the constitutionality of CPLR 302 and 313, which authorize personal jurisdiction over a non-domiciliary’s executor or administrator when the cause of action arises from acts within the state. The court noted a shift in jurisdictional concepts since International Shoe Co. v. Washington, which established that due process requires only that a defendant have minimum contacts with the forum state such that maintaining the suit does not offend traditional notions of fair play and substantial justice.
    The court distinguished prior New York cases that questioned the constitutionality of obtaining jurisdiction over foreign executors, emphasizing that CPLR 302 and 313 are narrowly tailored to apply only to causes of action having minimum contacts with New York.
    The court cited McGee v. International Life Ins. Co., noting the trend toward expanding the permissible scope of state jurisdiction over non-residents based on a substantial connection with the state. The Court also referenced United States v. Montreal Trust Co., where the Second Circuit upheld the constitutionality of CPLR 302, finding that the defendant had transacted sufficient business in New York to justify service of process upon his estate.
    The court emphasized that the statutes provide procedural safeguards required for due process of law and are applicable only to causes of action having certain minimum contacts with the state, similar to the reasoning used to uphold non-resident motorist statutes in Leighton v. Roper. The court implicitly adopts the view that the state has an interest in providing a forum for claims arising from activities within its borders, even after the death of the non-resident defendant.
    The court found no abuse of discretion in allowing the substitution despite the delay, given the stay of proceedings. The court considered the objection that a judgment might not be enforceable in Massachusetts as speculative and premature, citing Leighton v. Roper.