New York Law Review

Tag: personal 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.

  • Hi Fashion Wigs, Inc. v. Peter Hammond Advertising, Inc., 32 N.Y.2d 583 (1973): Establishing Personal Jurisdiction Through Contractual Obligations

    Hi Fashion Wigs, Inc. v. Peter Hammond Advertising, Inc., 32 N.Y.2d 583 (1973)

    A non-domiciliary transacts business within New York, subjecting them to personal jurisdiction under CPLR 302(a)(1), when they purposefully avail themselves of the privilege of conducting activities within the state, especially when a contract is formed or substantially connected to New York.

    Summary

    Hi Fashion Wigs, an Oklahoma corporation, contracted with Peter Hammond Advertising, a New York corporation, for advertising services. Mike Schuminsky, Hi Fashion Wigs’ president, personally guaranteed the contract. When Hi Fashion Wigs sued Hammond, Hammond impleaded Schuminsky based on the guarantee. The New York Court of Appeals held that New York had jurisdiction over Schuminsky because he purposefully transacted business in New York by delivering the guarantee there and because the contract’s performance was substantially New York-based.

    Facts

    Hi Fashion Wigs, Inc. (plaintiff), an Oklahoma corporation doing business in New York, retained Peter Hammond Advertising, Inc. (defendant), a New York corporation, as its advertising agent. Mike Schuminsky, the president of Hi Fashion Wigs, signed a personal guarantee for the company’s payments to Hammond. The contract was negotiated in Oklahoma, but Schuminsky delivered the signed guarantee to Hammond in New York. Hammond performed the advertising services in New York, and Hi Fashion Wigs made payments to Hammond’s New York office.

    Procedural History

    Hi Fashion Wigs sued Hammond in New York for alleged fraudulent actions. Hammond counterclaimed and impleaded Schuminsky based on his personal guarantee. Schuminsky moved to dismiss for lack of personal jurisdiction. The trial court denied the motion. The Appellate Division affirmed, finding no purposeful activity by Schuminsky in New York. The New York Court of Appeals reversed, finding jurisdiction over Schuminsky.

    Issue(s)

    Whether Schuminsky, an Oklahoma resident, is subject to personal jurisdiction in New York under CPLR 302(a)(1) based on his personal guarantee of a contract performed in New York.

    Holding

    Yes, because Schuminsky purposefully availed himself of the privilege of conducting activities within New York by delivering the guarantee in New York, and the contract’s performance was substantially connected to New York.

    Court’s Reasoning

    The court reasoned that CPLR 302(a)(1) extends jurisdiction to non-domiciliaries who transact business within New York. The court emphasized that delivering the guarantee in New York was a purposeful act, as the guarantee contract was not formed until delivered in New York. Citing Hanson v. Denckla, 357 U. S. 235, 253, the court noted that Schuminsky “purposefully” availed himself ‘of the privilege of conducting activities within [this] State,’ thereby “invoking the benefits and protections of its laws.” The court also noted that the underlying contract involved advertising services performed entirely in New York, and payments were to be made in New York. Therefore, even if the guarantee wasn’t technically made in New York, Schuminsky’s contacts with the state were substantial enough to satisfy due process, referencing International Shoe Co. v. Washington, 326 U. S. 310, 316. The court distinguished Ferrante Equip. Co. v. Lasher-Goldman Corp., 104 U. S. 159, 166, stating that mere performance of a contract in New York is insufficient for jurisdiction when the guarantee is executed elsewhere and there are no other business transactions in New York.

  • 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.

  • McDonald v. Ames Supply Co., 22 N.Y.2d 111 (1968): Sufficiency of Service on a Corporation

    McDonald v. Ames Supply Co., 22 N.Y.2d 111 (1968)

    Personal service on a corporation requires delivery of the summons to a person authorized to receive service; leaving it with a receptionist who is not an employee of the corporation, even if the receptionist later delivers it to the correct person, does not constitute valid service.

    Summary

    McDonald sued Ames for injuries sustained from a defective can of spray paint. Ames then attempted to serve a third-party complaint on Aerosol, the manufacturer of the defective spray head, by leaving the summons with a receptionist in Aerosol’s New York office. The receptionist, not an employee of Aerosol, later gave the summons to Aerosol’s eastern sales manager, Schlossman. The court held that this did not constitute valid personal service on Aerosol because the summons was not “delivered” to an authorized agent of the corporation as required by CPLR 311. The requirement of delivery necessitates more than leaving the summons with any available person.

    Facts

    • John McDonald was injured by a defective can of spray paint in 1961.
    • McDonald sued Ames Supply Co., the seller of the paint can, alleging negligence and breach of warranty.
    • Ames then attempted to serve a third-party summons and complaint on Aerosol Research Co., the manufacturer of the spray head, on November 19, 1965.
    • The process server left the summons with a receptionist in Aerosol’s New York office, who was not an employee of Aerosol.
    • The receptionist later handed the summons to Jack Schlossman, Aerosol’s eastern sales manager.
    • Aerosol was not licensed to do business in New York.

    Procedural History

    • McDonald sued Ames; Ames then filed a third-party complaint against Aerosol.
    • Aerosol defaulted on the third-party complaint.
    • The trial court severed the main action and the third-party action.
    • McDonald recovered against Ames in the main action.
    • Ames was awarded recovery over against Aerosol after inquest on the default.
    • Aerosol moved to dismiss the third-party complaint for lack of personal jurisdiction.
    • The Special Referee quashed service and dismissed the third-party complaint.
    • The Appellate Division affirmed.
    • The Court of Appeals granted leave to appeal.

    Issue(s)

    1. Whether the requirement of CPLR 311 that the summons be “delivered” to a person authorized to receive service for a corporation is satisfied when the summons is left with a receptionist, not employed by the corporation, who later redelivers it to the proper person.

    Holding

    1. No, because personal delivery of a summons to the wrong person does not constitute valid personal service, even if the summons ultimately reaches the party to be served.

    Court’s Reasoning

    The Court reasoned that CPLR 311 requires that service be made by “delivering the summons” to a specified agent of the corporation. Leaving the summons with a receptionist who is not an employee of the corporation does not constitute valid delivery, even if the receptionist later hands it to an authorized agent. The Court emphasized the importance of adhering to the statutory requirements for service of process to ensure proper notice and protect against default judgments. The Court cited numerous prior cases holding that personal delivery to the wrong person is insufficient, even if the summons eventually reaches the correct party. The Court distinguished cases where the process server acted reasonably and diligently in attempting to effect service, such as when a defendant resists service, finding no evidence of such diligence here. The court reasoned that upholding service in this case would “encourage carelessness, or worse, thus increasing the risk of default by parties who in fact fail to receive the summons.” The court distinguished the facts from situations where process servers have acted with due diligence and where the redelivery was “so close both in time and space that it can be classified as part of the same act”.

  • 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.

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

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

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

    Summary

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

    Facts

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

    Procedural History

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

    Issue(s)

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

    Holding

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

    Court’s Reasoning

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

  • Johnson v. Equitable Life Assurance Society, 16 N.Y.2d 1067 (1965): Establishing Personal Jurisdiction Based on Business Activity

    16 N.Y.2d 1067 (1965)

    A court must determine whether a cause of action arises from a defendant’s transaction of business within the state or whether the defendant’s activities constitute “doing business” within the state to establish personal jurisdiction.

    Summary

    This case involves a dispute over personal jurisdiction in a tort action. The Court of Appeals of New York withheld its decision and remitted the case to the Special Term. The court directed the Special Term to determine whether the cause of action arose from the third-party defendant’s business activities within New York or if their activities met the criteria for “doing business” in the state, as defined in *Tauza v. Susquehanna Coal Co.*, to establish personal jurisdiction under CPLR 302(a)(1) and CPLR 301.

    Facts

    The underlying case involves a tort action. Equitable Life Assurance Society, as a third-party plaintiff, sought to establish personal jurisdiction over Michigan Tool Company, a third-party defendant, in New York.

    Procedural History

    The case reached the Court of Appeals of New York after proceedings at Special Term. Equitable Life Assurance Society offered transcripts of pre-trial examinations suggesting Michigan Tool Company had conducted business in New York. The Court of Appeals, finding no prior evaluation of this proof by a court with fact-finding powers, withheld its decision and remitted the case to Special Term for further proceedings and factual determination.

    Issue(s)

    1. Whether the cause of action for tort arose from the transaction of any business by the third-party defendant within New York State under CPLR 302(a)(1)?

    2. Whether the activities of the third-party defendant meet the criteria prescribed by *Tauza v. Susquehanna Coal Co.* for “doing business” within the state under CPLR 301 and 313?

    Holding

    1. The Court of Appeals withheld its decision and remitted the case. The Special Term must determine, based on the presented proof, whether the tort cause of action arose from Michigan Tool’s transaction of business within New York because a factual determination is required.

    2. The Court of Appeals withheld its decision and remitted the case. The Special Term must determine whether Michigan Tool’s activities satisfy the *Tauza* standard for “doing business” within the state because this is also a factual determination to be made by the lower court.

    Court’s Reasoning

    The Court of Appeals reasoned that it could not make a first-instance evaluation of the evidence presented by Equitable Life Assurance Society. The court emphasized that the transcripts suggesting Michigan Tool had done business in New York required further amplification and explanation. It cited *Matter of Hayes*, 263 N.Y. 219, 221, and *Employers’ Liab. Assur. Corp. v. Daley*, 297 N.Y. 745, to support its decision to remit the case. The court directed the Special Term to determine two key issues: whether the cause of action arose from the transaction of business within the state under CPLR 302(a)(1) and, if not, whether the company’s activities met the *Tauza* standard for “doing business” within the state. The court stated, “Upon remission the court at Special Term shall determine as a fact upon the basis of all the proof that may be offered by the parties whether the cause of action for tort described in the complaint arose itself from the transaction of any business by third-party defendant within the State under CPLR 302 (subd. [a], par. 1); and if it did not so arise, whether the activities of third-party defendant meet the criteria prescribed by *Tauza v. Susquehanna Coal Co.* (220 N.Y. 259) for ‘doing business’ within the State.” This approach ensures that a court with fact-finding powers properly evaluates the evidence and applies the relevant legal standards before a determination on personal jurisdiction is made.

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

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

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

    Summary

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

    Facts

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

    Procedural History

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

    Issue(s)

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

    Holding

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

    Court’s Reasoning

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

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

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

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

    Summary

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

    Facts

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

    Procedural History

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

    Issue(s)

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

    Holding

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

    Court’s Reasoning

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