New York Law Review

Tag: personal jurisdiction

Gibson, Dunn & Crutcher LLP v. Koukis, 2025 NY Slip Op 01565: Factual Disputes Regarding Attorney Authority and Waiver of Personal Jurisdiction

2025 NY Slip Op 01565

When the record reveals a material factual dispute regarding an attorney’s authority to act on a client’s behalf, a court must hold a hearing to resolve the dispute before determining issues such as the validity of a waiver of personal jurisdiction.

Summary

The New York Court of Appeals reversed the Appellate Division’s decision, holding that the lower court erred by deciding without a hearing whether an attorney, Mr. Santamarina, was authorized to waive a client’s (Mr. Koukis) personal jurisdiction defenses. The court found that a factual dispute existed as to whether Mr. Koukis had authorized Mr. Santamarina to represent him or subsequently ratified Mr. Santamarina’s actions, necessitating a hearing to determine the validity of the waiver. This ruling emphasizes the importance of resolving factual disputes regarding attorney authority before making legal determinations that affect a party’s rights.

Facts

Gibson Dunn sought to enforce a judgment against Be In, Inc., and its investors, including Mr. Koukis, who resided in Switzerland. An attorney, Mr. Santamarina, entered an appearance on behalf of Mr. Koukis and other defendants, and subsequently signed a stipulation that waived the defendants’ defenses based on personal jurisdiction and service of process. Later, Mr. Koukis claimed Mr. Santamarina lacked authority to represent him and moved to vacate the default judgment. He submitted evidence, including his own emails, to that effect. The lower courts addressed the motion without an evidentiary hearing, finding that personal jurisdiction existed pursuant to CPLR 302(a)(2). The Appellate Division reversed, concluding that there was no basis to conclude that Koukis authorized Santamarina to appear and waive all jurisdictional defenses on his behalf.

Procedural History

1. Gibson Dunn sued to enforce a judgment. Mr. Santamarina entered an appearance on behalf of Mr. Koukis and others.

2. The trial court granted Gibson Dunn’s motion for a default judgment against Mr. Koukis.

3. The Appellate Division reversed the trial court, concluding that Mr. Koukis had not authorized Mr. Santamarina to represent him and lacked personal jurisdiction.

4. The Court of Appeals granted leave to appeal.

Issue(s)

1. Whether the Appellate Division erred in concluding there was no basis to conclude that Koukis authorized Santamarina to appear and waive all jurisdictional defenses on his behalf without a factual hearing.

Holding

1. Yes, because the court found that there was a material factual dispute as to whether Mr. Koukis authorized or ratified the waiver of personal jurisdiction by his attorney, Mr. Santamarina, the Court of Appeals reversed and remitted for further proceedings.

Court’s Reasoning

The Court of Appeals emphasized that a hearing is required when the record reveals a material factual dispute. The court found that evidence, including emails, suggested Mr. Koukis may have given Joseph D’Anna apparent authority to retain Mr. Santamarina. Further, the Court noted that Mr. Koukis may have ratified Mr. Santamarina’s actions by his acquiescence and retaining the benefit of that representation. The court cited agency law principles, stating that an attorney-client relationship is subject to these laws. Specifically, an attorney needs specific authorization to “compromise or settle a claim.”

Practical Implications

This case underscores the significance of resolving factual disputes before determining legal issues, especially those concerning attorney authority and waivers of jurisdictional defenses. Attorneys must ensure they have clear authorization from their clients, preferably in writing, for critical actions like waiving personal jurisdiction. Businesses and individuals facing lawsuits should promptly verify the authority of any attorney claiming to represent them and provide an express statement as to whether or not the attorney is authorized to represent them.

March 18, 2025
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.
June 8, 2017
Rasheed Al Rushaid, et al. v. Pictet & Cie, et al., No. 180 (N.Y. 2016): Personal Jurisdiction Based on Correspondent Bank Account Use
Rasheed Al Rushaid, et al. v. Pictet & Cie, et al., No. 180 (N.Y. 2016)

A foreign bank purposefully avails itself of the privilege of conducting activities within New York, subjecting it to personal jurisdiction, when it repeatedly uses a New York correspondent bank account to facilitate transactions substantially related to the plaintiff’s claims.

Summary

The New York Court of Appeals held that it had personal jurisdiction over Pictet & Cie (Pictet), a Swiss bank, because of its repeated use of New York correspondent bank accounts to launder funds related to a bribery and kickback scheme. Pictet’s vice president, Chambaz, assisted ARPD employees in setting up accounts to receive funds in a scheme that harmed the plaintiffs. The court distinguished this from cases where the use of the correspondent account was passive or incidental. The court found that the defendant’s repeated and purposeful use of the New York accounts demonstrated a sufficient nexus to New York to establish personal jurisdiction, as the New York accounts were used to further the money laundering scheme. This decision clarifies the standard for establishing personal jurisdiction based on the use of correspondent accounts in New York, emphasizing purposeful availment.

Facts

Plaintiff Rasheed Al Rushaid, co-owner of Al Rushaid Petroleum Investment Corporation (ARPIC), sued Pictet, a Swiss bank, along with its Vice President Chambaz, alleging that Pictet knowingly laundered funds related to a bribery and kickback scheme involving employees of Al Rushaid Parker Drilling, Ltd. (ARPD), a subsidiary of ARPIC. ARPD employees accepted bribes and kickbacks from vendors in exchange for purchasing goods and services at inflated prices. Chambaz, a Pictet executive, assisted the employees by setting up a shell company, TSJ Engineering Consulting Co., Ltd., in the British Virgin Islands to receive the bribes. Pictet then used its New York correspondent bank accounts to transfer the funds to the shell company’s Geneva-based Pictet account and the employees' individual accounts. Documents showed numerous wire transfers totaling over $4 million through Pictet's New York correspondent accounts. The plaintiffs sought over $350 million in damages.

Procedural History

Plaintiffs sued the defendants in New York state court. The trial court granted the defendants' motion to dismiss for lack of personal jurisdiction, concluding that the use of correspondent accounts was passive. The Appellate Division affirmed, distinguishing the case from Licci v. Lebanese Canadian Bank, SAL, and holding that the defendants did not purposefully avail themselves of New York. The Court of Appeals granted leave to appeal.

Issue(s)
1. Whether the use of New York correspondent bank accounts by a foreign bank, in connection with a money-laundering scheme, constitutes transacting business within the state, thus satisfying the first prong of CPLR 302(a)(1).
2. Whether the plaintiffs' claims, based on the foreign bank's role in the money-laundering scheme, arose from the bank's transactions in New York, satisfying the second prong of CPLR 302(a)(1).
Holding
1. Yes, because Pictet's repeated use of New York correspondent accounts, as a central component of a money-laundering scheme, constituted the transaction of business within the state.
2. Yes, because the plaintiffs' claims of aiding and abetting breach of fiduciary duty and conspiracy were substantially related to Pictet's transactions in New York via its correspondent accounts.
Court’s Reasoning

The court applied CPLR 302(a)(1), New York's long-arm statute, which requires that the non-domiciliary transact business within the state and that the claim arise from that transaction. The court focused on whether Pictet's activities demonstrated "purposeful availment." The court distinguished the case from Amigo Foods Corp. v. Marine Midland Bank-NY, where the use of the correspondent account was passive and unilateral. Here, Pictet's use of the New York correspondent accounts was a deliberate and integral part of the money-laundering scheme. The court held that Pictet's repeated use of New York correspondent accounts to transfer funds for its client's benefit constituted "purposeful availment" of the New York banking system and thus satisfied the first prong of CPLR 302(a)(1). "Repeated, deliberate use that is approved by the foreign bank on behalf and for the benefit of a customer — as in Licci — demonstrates volitional activity constituting transaction of business." The court also found that the plaintiffs' claims, which included aiding and abetting breach of fiduciary duty and conspiracy, had a "substantial relationship" with Pictet's banking transactions in New York, thus satisfying the second prong of CPLR 302(a)(1).

Practical Implications

This case provides important guidance on establishing personal jurisdiction over foreign banks based on their use of New York correspondent accounts. It is vital for cases involving claims against foreign banks for financial misconduct. The ruling clarifies that a foreign bank can be subject to jurisdiction even if it does not directly direct deposits into a New York account; its active involvement in a scheme that uses such accounts is sufficient. This ruling impacts how attorneys analyze and litigate cases involving international financial transactions and potential liability for aiding and abetting illegal activities. Courts may be more willing to assert jurisdiction over foreign financial institutions that use New York's banking infrastructure to further financial schemes. It reaffirms that the quality and quantity of a foreign bank's contacts with the correspondent bank matter more than whether another bank could have been used. Later cases may cite this case to assert jurisdiction over financial institutions implicated in illicit transactions.
November 22, 2016
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.

November 20, 2014
Licci v. Lebanese Canadian Bank, SAL, 20 N.Y.3d 327 (2012): Establishes Jurisdictional Reach for Foreign Banks Using NY Correspondent Accounts

Licci ex rel. Licci v. Lebanese Canadian Bank, SAL, 20 N.Y.3d 327 (2012)

A foreign bank’s repeated use of a New York correspondent account to effect wire transfers on behalf of a client constitutes transacting business in New York and establishes an articulable nexus between the transaction and alleged breaches of statutory duties, thus satisfying the requirements for personal jurisdiction under CPLR 302(a)(1).

Summary

This case addresses whether New York courts can exercise personal jurisdiction over a foreign bank, Lebanese Canadian Bank (LCB), based on its use of a correspondent bank account in New York to transfer funds for a client allegedly linked to terrorist activities. The plaintiffs, victims of rocket attacks in Israel, sued LCB, claiming that the bank’s wire transfers facilitated terrorist acts. The New York Court of Appeals held that LCB’s repeated use of the correspondent account to conduct transactions constituted transacting business in New York and created a sufficient connection between the transactions and the plaintiffs’ claims to establish personal jurisdiction under New York’s long-arm statute.

Facts

Plaintiffs, residing in Israel, were injured or lost family members in rocket attacks during the Second Lebanon War in 2006. They sued Lebanese Canadian Bank (LCB), alleging that LCB assisted Hizballah by facilitating monetary transactions through the Shahid Foundation, identified as Hizballah’s financial arm. LCB maintained a correspondent banking account with American Express Bank (AmEx) in New York. Plaintiffs alleged that LCB used this account to transfer millions of dollars via dozens of wire transfers on behalf of Shahid, knowing that Hizballah was a terrorist organization and that Shahid was supporting terrorist activities. Plaintiffs claimed LCB’s actions enabled and facilitated the attacks.

Procedural History

The case was initially filed in New York Supreme Court, then removed to the U.S. District Court for the Southern District of New York. The District Court dismissed the case for lack of personal jurisdiction, finding that LCB’s maintenance and use of the correspondent account was insufficient to establish jurisdiction and that the claims did not “arise from” the bank’s activities in New York. The plaintiffs appealed to the Second Circuit Court of Appeals, which then certified questions of New York law to the New York Court of Appeals regarding the interpretation of CPLR 302(a)(1).

Issue(s)

1. Whether a foreign bank’s maintenance and use of a correspondent bank account in New York to effect numerous wire transfers on behalf of a foreign client constitutes transacting business in New York under CPLR 302(a)(1)?

2. Whether the plaintiffs’ claims under the Anti-Terrorism Act, the Alien Tort Statute, or for negligence or breach of statutory duty in violation of Israeli law, “arise from” LCB’s transaction of business in New York within the meaning of CPLR 302(a)(1)?

Holding

1. Yes, because the foreign bank’s repeated use of a New York correspondent account to effect wire transfers constitutes a purposeful availment of New York’s banking system.

2. Yes, because there is an articulable nexus or substantial relationship between LCB’s transaction of business in New York and the plaintiffs’ claims, as the alleged breaches of statutory duties occurred when LCB used the New York account to support terrorist activities.

Court’s Reasoning

The Court of Appeals emphasized that the jurisdictional inquiry under CPLR 302(a)(1) requires examining the specific facts of each case to determine whether the defendant “purposefully availed” itself of the privilege of conducting activities in New York. The court distinguished this case from Amigo Foods Corp. v. Marine Midland Bank-N.Y., where the bank’s involvement was passive and unilateral. Here, LCB’s repeated use of the AmEx account on behalf of a client indicated a “course of dealing,” showing purposeful availment of New York’s banking system. Regarding the “arise from” prong, the Court found an “articulable nexus” between LCB’s use of the New York account and the plaintiffs’ claims. Even though the direct harm came from rocket attacks, LCB’s alleged support of terrorist activities through the New York account was sufficiently related to the cause of action. The court stated, “Complaints alleging a foreign bank’s repeated use of a correspondent account in New York on behalf of a client—in effect, a ‘course of dealing’—show purposeful availment of New York’s dependable and transparent banking system, the dollar as a stable and fungible currency, and the predictable jurisdictional and commercial law of New York and the United States.” The court also noted, “where at least one element arises from the New York contacts, the relationship between the business transaction and the claim asserted supports specific jurisdiction under the statute.”

November 20, 2012
Penguin Group (USA) Inc. v. American Buddha, 16 N.Y.3d 309 (2011): Establishing Personal Jurisdiction in Online Copyright Infringement Cases

Penguin Group (USA) Inc. v. American Buddha, 16 N.Y.3d 309 (2011)

In copyright infringement cases involving online distribution, the location of the copyright holder is the situs of injury for determining long-arm jurisdiction under N.Y. C.P.L.R. § 302(a)(3)(ii).

Summary

Penguin Group, a New York-based publisher, sued American Buddha, an Oregon non-profit, for copyright infringement due to the unauthorized uploading of Penguin’s copyrighted books on American Buddha’s websites. The key issue was whether New York courts had personal jurisdiction over American Buddha under CPLR 302(a)(3)(ii), which requires the injury to occur within New York. The Court of Appeals held that, in online copyright infringement cases, the location of the copyright holder (Penguin, in New York) is the situs of the injury, satisfying the jurisdictional requirement. This ruling acknowledges the unique challenges posed by online infringement and the broad rights afforded to copyright holders.

Facts

Penguin Group (USA), a book publisher with its principal place of business in New York, alleged that American Buddha, an Oregon not-for-profit corporation operating websites hosted in Oregon and Arizona, infringed on Penguin’s copyrights by publishing complete copies of copyrighted books on its websites, making them freely available online.

Procedural History

Penguin sued American Buddha in the Southern District of New York. The District Court dismissed the case for lack of personal jurisdiction, finding the injury occurred where the books were uploaded (Oregon or Arizona). The Second Circuit then certified a question to the New York Court of Appeals regarding the situs of injury in online copyright infringement cases for purposes of long-arm jurisdiction under CPLR 302(a)(3)(ii).

Issue(s)

In copyright infringement cases involving the uploading of a copyrighted printed literary work onto the Internet, is the situs of injury for purposes of determining long-arm jurisdiction under N.Y. C.P.L.R § 302 (a) (3) (ii) the location of the infringing action or the residence or location of the principal place of business of the copyright holder?

Holding

Yes, because in cases involving online copyright infringement, where a copyrighted work is uploaded to the internet, the location of the copyright holder is considered the situs of the injury.

Court’s Reasoning

The Court reasoned that the Internet’s nature necessitates a departure from the traditional “place of injury” analysis used in commercial tort cases. Unlike traditional torts, online copyright infringement causes dispersed injury. The court found that the intent of the infringing party is to make the works available to anyone with an internet connection, including computer users in New York. The injury to a New York copyright holder is broader than a purely indirect financial loss, given the spectrum of rights accorded by copyright law, including the right to exclude others from using the property. The court distinguished this case from Fantis Foods v. Standard Importing Co., where the injury was a derivative economic loss based solely on the plaintiff’s domicile. Here, the act of making copyrighted material freely available online directly infringes the copyright holder’s exclusive rights. The court noted that “the digital environment poses a unique threat to the rights of copyright owners” because “digital technology enables pirates to reproduce and distribute perfect copies of works—at virtually no cost at all to the pirate”. Finally, the court emphasized that CPLR 302(a)(3)(ii) contains safeguards requiring the defendant to expect consequences in New York and derive substantial revenue from interstate or international commerce, and that federal due process requirements of minimum contacts and fair play must still be met.

March 24, 2011
Galliano v. Stallion, Inc., 16 N.Y.3d 78 (2010): Enforceability of Foreign Judgments with Forum Selection Clauses

Galliano v. Stallion, Inc., 16 N.Y.3d 78 (2010)

A New York court will generally recognize a foreign money judgment when the defendant had previously agreed to submit to the jurisdiction of the foreign court, provided that the exercise of jurisdiction by the foreign court comports with New York’s concept of personal jurisdiction and notions of fairness.

Summary

Galliano, S.A. sought to enforce a French court judgment against Stallion, Inc. in New York. The dispute arose from a licensing agreement between the parties, which contained a forum selection clause designating Paris courts for dispute resolution. Stallion argued the French court lacked personal jurisdiction due to inadequate service, as the documents were in French without English translation. The New York Court of Appeals held that Stallion’s prior agreement to the forum selection clause in the licensing agreement was sufficient to confer jurisdiction on the French court. Further, Stallion had sufficient notice of the proceedings. Therefore, the French judgment was enforceable in New York.

Facts

In 1998, Stallion entered a licensing agreement with Les Jardins D’Avron (later replaced by Galliano) to use the “John Galliano” trademark. The agreement stipulated that French law governed and designated the Paris Court of Appeals’ jurisdiction for disputes. Disputes arose over royalty payments and expenses. Galliano sued Stallion in Paris in 2002. Service was attempted three times under the Hague Convention, delivering French documents to Stallion. Stallion did not appear, and a judgment was entered against it in 2004. Galliano then sought to enforce the judgment in New York in 2007.

Procedural History

The Commercial Court in Paris entered a judgment in favor of Galliano. Galliano commenced a proceeding in New York to enforce the judgment. The Supreme Court initially ruled in favor of Galliano. The Appellate Division affirmed. Stallion appealed to the New York Court of Appeals, which granted leave to appeal.

Issue(s)

1. Whether a New York court should recognize a foreign money judgment when the defendant had agreed to submit to the jurisdiction of the foreign court via a forum selection clause, but claims inadequate notice because the service documents were not in English.

Holding

1. Yes, because Stallion agreed to submit to the jurisdiction of the French courts through the forum selection clause, and had sufficient notice of the proceedings, the French judgment should be recognized.

Court’s Reasoning

The Court of Appeals emphasized New York’s tradition of generously enforcing foreign money judgments under CPLR Article 53. While CPLR 5304 allows non-recognition based on lack of personal jurisdiction or insufficient notice, CPLR 5305 stipulates that a foreign judgment should not be refused recognition if the defendant previously agreed to submit to the foreign court’s jurisdiction. The court reasoned that Stallion knowingly agreed to French jurisdiction via the licensing agreement’s forum selection clause. The court acknowledged the importance of notice, stating, “if recognition of a foreign money judgment were sought in New York and the defendant had received no meaningful notice of the foreign proceeding, that lack of notice would serve as a legitimate basis for not enforcing the judgment in our state.” However, Stallion was aware of the ongoing disputes and the agreement’s stipulation for French adjudication. The court emphasized that “the inquiry turns on whether exercise of jurisdiction by the foreign court comports with New York’s concept of personal jurisdiction, and if so, whether that foreign jurisdiction shares our notions of procedure and due process of law.” Since Stallion received the court papers, even in French, and the Paris Commercial Court presumably satisfied itself that service was proper under the Hague Convention, the enforcement of the French judgment did not offend New York’s notions of fairness. The Court noted that under the Hague Convention, the French court was required to consider whether service was properly made and in sufficient time for Stallion to defend itself. Thus, the judgment was enforceable.

June 8, 2010
Hotel 71 Mezz Lender LLC v. Falor, 14 N.Y.3d 303 (2010): Attachment of Intangible Property When Personal Jurisdiction Exists

Hotel 71 Mezz Lender LLC v. Falor, 14 N.Y.3d 303 (2010)

When a court has personal jurisdiction over a non-domiciliary present in New York, it also has jurisdiction over that individual’s tangible or intangible property, even if the situs of the property is outside New York.

Summary

Hotel 71 Mezz Lender LLC sued guarantors of a defaulted mezzanine loan in New York. The plaintiff obtained a pre-judgment order of attachment against the defendants’ ownership interests in out-of-state LLCs, serving the order on defendant Mitchell while he was in New York. The New York Court of Appeals held that because the defendants had submitted to personal jurisdiction in New York, the attachment of their intangible property (LLC membership interests), served on a proper garnishee (Mitchell) present in New York, was valid, even though the LLCs were located outside of New York. The Court also upheld the appointment of a receiver to manage those interests.

Facts

Plaintiff made a mezzanine loan to Chicago H & S Senior Investors, LLC for hotel renovations. The loan agreement was executed in New York, and funds were disbursed from New York. The defendants, including Mitchell, guaranteed the loan, agreeing to be jointly and severally liable and submitting to New York jurisdiction. The borrower defaulted and filed for bankruptcy. Plaintiff sued the guarantors in New York to enforce the guaranty. Plaintiff sought a pre-judgment order of attachment to secure any potential judgment against the defendants’ property interests in various out-of-state entities. The property at issue consisted of the defendants’ interests in 22 limited liability companies formed in Delaware, Georgia and Florida and a Florida corporation solely owned by defendant Mitchell. Unlike stock certificates, which are tangible property, defendants’ ownership/membership interests are intangible and uncertificated.

Procedural History

The Supreme Court (trial court) granted the order of attachment and later confirmed it, holding that the defendants’ intangible interests were attachable. The court also appointed a receiver for the out-of-state entities. The Appellate Division reversed, finding that the Supreme Court lacked jurisdiction over the out-of-state interests. The Appellate Division granted leave to appeal to the New York Court of Appeals.

Issue(s)

1. Whether a New York court can attach a non-domiciliary defendant’s intangible personal property (ownership/membership interests in out-of-state business entities) when the defendant has voluntarily submitted to personal jurisdiction in New York.

2. Whether the Supreme Court abused its discretion in appointing a receiver pursuant to CPLR 5228.

Holding

1. Yes, because when a court acquires jurisdiction over the person of one who owns or controls property, it can compel observance of its decrees by proceedings in personam against the owner within the jurisdiction.

2. No, because the appointment of a receiver pursuant to section 5228 (a) is a matter within the court’s discretion, and a special reason appeared to justify one.

Court’s Reasoning

The Court of Appeals reasoned that attachment serves to provide security for a potential judgment against a debtor. Where a court has personal jurisdiction over a defendant, it also has jurisdiction over their property, even if the property is located outside the state. This case was not about using attachment to gain quasi in rem jurisdiction; the defendants had already submitted to personal jurisdiction. The Court found that the defendants’ LLC membership interests were assignable and transferable, making them “property” subject to attachment under CPLR 6202. Because the interests were uncertificated, the Court applied the principles of Harris v. Balk, holding that the situs of the debt (or, in this case, intangible property) is wherever the debtor (or the garnishee) is present. The Court stated, “The obligation of the debtor to pay his debt clings to and accompanies him wherever he goes. He is as much bound to pay his debt in a foreign state when therein sued upon his obligation by his creditor, as he was in the state where the debt was contracted” (quoting Harris v. Balk). Therefore, serving the order of attachment on Mitchell while he was in New York was sufficient to establish the situs of the property in New York. The Court distinguished National Broadway Bank v Sampson, which held that the situs of intangible property is the domicile of the debtor, noting that Harris v Balk overruled that earlier holding. As for the receivership, the court considered (1) alternative remedies available to the creditor; (2) the degree to which receivership will increase the likelihood of satisfaction; and (3) the risk of fraud or insolvency if a receiver is not appointed.

February 16, 2010
Matter of Feldman v. Board of Assessment Review, 12 N.Y.3d 176 (2009): Technical Defects in Tax Certiorari Proceedings

Matter of Feldman v. Board of Assessment Review, 12 N.Y.3d 176 (2009)

In Real Property Tax Law Article 7 proceedings, the omission of a return date from a notice of petition does not automatically deprive the court of personal jurisdiction, especially where the assessing authority suffers no prejudice from the omission.

Summary

Feldman, a property owner, initiated a tax certiorari proceeding but left the return date blank on the notice of petition, following instructions from the County Clerk due to a judicial vacancy. The Board of Assessment Review moved to dismiss for lack of personal jurisdiction. The Court of Appeals reversed the Appellate Division’s dismissal, holding that the omission of the return date was a technical defect that did not deprive the court of personal jurisdiction because the Board demonstrated no prejudice. The court emphasized the remedial nature of tax assessment review and the absence of prejudice to the Board, aligning with the principle that substance should prevail over form.

Facts

Petitioner Feldman challenged his property tax assessment by filing a petition and notice of petition with the Board of Assessment Review. The notice of petition lacked a return date. Feldman stated he was instructed by the Ontario County Clerk to leave the date blank due to a judicial vacancy. The Clerk informed him the court would set the return date and notify all parties once the vacancy was filled. The Town acknowledged being informed of the scheduled return date by the Clerk.

Procedural History

Supreme Court denied the Board’s motion to dismiss. The Appellate Division reversed, granting the Board’s motion and dismissing the petition. The Court of Appeals granted Feldman’s motion for leave to appeal.

Issue(s)

Whether the failure to include a return date in a notice of petition in an RPTL Article 7 proceeding deprives the court of personal jurisdiction over the respondent taxing authority.

Holding

No, because the omission of the return date in the notice of petition, under the specific circumstances of this case and without demonstrable prejudice to the respondent, constitutes a technical defect that does not deprive the court of personal jurisdiction in an RPTL Article 7 proceeding.

Court’s Reasoning

The Court of Appeals reasoned that while CPLR 403(a) requires a notice of petition to specify the hearing’s time and place, strict compliance is not always necessary, especially in RPTL Article 7 proceedings. The court highlighted the practical difficulty of setting a return date when a judge has not yet been assigned, coupled with the short statute of limitations in RPTL Article 7. Drawing upon Matter of Great E. Mall v Condon, 36 NY2d 544 (1975), the court reiterated that tax assessment proceedings are remedial and should be liberally construed to ensure taxpayers can have their assessments reviewed. The court emphasized that technical defects should not defeat meritorious claims, especially when the respondent suffers no prejudice. The Board failed to demonstrate any prejudice resulting from the missing return date. The purpose of the return date—to notify the respondent—is less critical in RPTL Article 7 proceedings, where the allegations in the petition are deemed denied if no answer is served (RPTL 712[1]). The court distinguished the case from situations where a fictitious return date was used, finding it incongruous to approve a fictitious date but condemn an absent one, referencing Matter of National Gypsum Co., Inc. v Assessor of Town of Tonawanda, 4 NY3d 680 (2005). The Court concluded that requiring strict compliance with CPLR 403(a) would unfairly prevent petitioners from challenging tax assessments through no fault of their own. The court explicitly limited its holding to RPTL Article 7 proceedings where the petitioner cannot designate a return date. The court noted, “Critical to the analysis in Great E. Mall was our long-standing view that the law regarding real property assessment proceedings is ‘remedial in character and should be liberally construed to the end that the taxpayer’s right to have his assessment reviewed should not be defeated by a technicality’ (36 NY2d at 548 [internal quotation marks omitted], quoting People ex rel. New York City Omnibus Corp. v Miller, 282 NY 5, 9 [1939]).”

October 15, 2009
Koehler v. Bank of Bermuda Ltd., 12 N.Y.3d 533 (2009): Enforceability of Turnover Orders for Out-of-State Assets

Koehler v. Bank of Bermuda Ltd., 12 N.Y.3d 533 (2009)

A New York court with personal jurisdiction over a garnishee can order the garnishee to produce assets located outside of New York to satisfy a judgment, regardless of whether the judgment debtor is subject to the court’s jurisdiction.

Summary

Koehler, a judgment creditor, sought to enforce a Maryland judgment against Dodwell, a judgment debtor, by compelling the Bank of Bermuda (BBL) to turn over Dodwell’s stock certificates held as collateral in Bermuda. The New York Court of Appeals addressed whether a New York court, with personal jurisdiction over BBL, could order the turnover of assets located outside New York. The Court held that personal jurisdiction over the garnishee (BBL) allows the court to order the turnover of out-of-state assets, even if the judgment debtor (Dodwell) is not subject to the court’s jurisdiction. This decision clarifies the reach of CPLR Article 52, facilitating judgment enforcement against entities with a presence in New York, regardless of the asset’s location.

Facts

Koehler obtained a judgment against Dodwell in Maryland and registered it in the Southern District of New York. Dodwell owned stock certificates in a Bermuda corporation, held by BBL in Bermuda as collateral for a loan. Koehler initiated a proceeding in the Southern District of New York, seeking a turnover order against BBL to compel delivery of the stock certificates or their equivalent value. BBL initially contested personal jurisdiction but later consented to it.

Procedural History

The U.S. District Court for the Southern District of New York initially dismissed Koehler’s petition, citing a lack of in rem jurisdiction over the shares. The Second Circuit Court of Appeals certified a question to the New York Court of Appeals: whether a New York court, with personal jurisdiction over a defendant other than the judgment debtor, can order the delivery of assets located outside New York. The New York Court of Appeals accepted the certified question.

Issue(s)

Whether a court sitting in New York may order a bank over which it has personal jurisdiction to deliver stock certificates owned by a judgment debtor (or cash equal to their value) to a judgment creditor, pursuant to CPLR article 52, when those stock certificates are located outside New York?

Holding

Yes, because CPLR Article 52 contains no express territorial limitation, and having personal jurisdiction over the garnishee allows the court to compel observance of its decrees via proceedings in personam.

Court’s Reasoning

The Court reasoned that CPLR Article 52 governs post-judgment enforcement, requiring personal jurisdiction over the person against whom the order is issued, unlike pre-judgment attachment under Article 62, which requires jurisdiction over the property. The Court emphasized that no express territorial limitation exists within Article 52 barring a turnover order requiring a garnishee to transfer assets into New York. The Court cited the First Department’s holding in Gryphon Dom. VI, LLC v APP Intl. Fin. Co., 41 AD3d 25 (1st Dept 2007), affirming that New York courts can order judgment debtors to turn over out-of-state assets under CPLR article 52 because the court had personal jurisdiction over the defendant. The court stated, “[H]aving acquired jurisdiction of the person, the court[ ] can compel observance of its decrees by proceedings in personam against the owner within the jurisdiction”. The court further stated that “As long as the debtor is subject to the court’s personal jurisdiction, a delivery order can be effective even when the property sought is outside the state”. The Court distinguished this situation from attachment proceedings, where jurisdiction is based on the property’s location within New York. The dissent argued that the majority’s holding creates an expansive garnishment remedy, unsupported by precedent, and raises concerns about forum shopping and potential constitutional issues under Shaffer v. Heitner, 433 U.S. 186 (1977). The dissent argued that the judgment creditor should not be permitted to do what the judgment debtor could not do, citing United States v First Natl. City Bank, 321 F2d 14 (1963). Nonetheless, the majority held that personal jurisdiction over a defendant, be it a judgment debtor or garnishee, allows a New York court to order the turnover of out-of-state property.

June 4, 2009