New York Law Review

Tag: Transaction of Business

  • Fischbarg v. Doucet, 9 N.Y.3d 375 (2007): Establishes Jurisdiction Based on Ongoing Attorney-Client Relationship

    9 N.Y.3d 375 (2007)

    A non-domiciliary transacts business within New York under CPLR 302(a)(1) when they purposefully solicit a New York attorney, establish an ongoing attorney-client relationship, and frequently communicate with the attorney in New York regarding the matter.

    Summary

    This case addresses whether New York courts can exercise personal jurisdiction over a California resident and corporation who hired a New York attorney to represent them in an Oregon lawsuit. The New York Court of Appeals held that the defendants transacted business in New York by purposefully seeking out the attorney, establishing a continuing attorney-client relationship, and engaging in frequent communication with him in New York via phone, email, and fax. This was sufficient to establish jurisdiction under CPLR 302(a)(1) because the suit for unpaid legal fees directly arose from these New York contacts.

    Facts

    Suzanne Bell-Doucet, a California resident and president of Only New Age Music, Inc. (ONAM), contacted Gabriel Fischbarg, a New York attorney, to discuss representing ONAM in a lawsuit in Oregon. Bell-Doucet sent a letter to Fischbarg in New York confirming the contingency fee arrangement and included relevant case documents. Fischbarg and the defendants entered into a retainer agreement via telephone, with Fischbarg working on the Oregon case from his New York office. Over nine months, defendants regularly communicated with Fischbarg in New York via phone, email, and fax. A dispute arose regarding the retainer agreement, and Fischbarg resigned. After the Oregon action settled, Fischbarg sued in New York to recover unpaid legal fees.

    Procedural History

    Fischbarg sued Doucet and ONAM in New York seeking damages for breach of contract and unjust enrichment. The defendants moved to dismiss for lack of personal jurisdiction. The Supreme Court denied the motion, holding that jurisdiction was proper under CPLR 302(a)(1). The Appellate Division affirmed. The Appellate Division granted leave to appeal to the New York Court of Appeals.

    Issue(s)

    Whether a non-domiciliary transacts business in New York under CPLR 302(a)(1) when they retain a New York attorney and engage in ongoing communications with that attorney in New York related to the representation.

    Holding

    Yes, because the defendants purposefully availed themselves of the privilege of conducting activities within New York by soliciting the attorney’s services, establishing a continuing relationship, and repeatedly communicating with the attorney in New York.

    Court’s Reasoning

    The court reasoned that CPLR 302(a)(1) allows jurisdiction over a non-domiciliary who transacts business within New York, even without physical presence, if their activities are purposeful and substantially related to the claim. “Purposeful activities are those with which a defendant, through volitional acts, ‘avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws’.” The court distinguished this case from those involving limited contacts, such as a single phone order or a consultant’s communications with a New York physician. The court emphasized the “quality” of the defendants’ contacts, noting that they “sought out plaintiff in New York and established an ongoing attorney-client relationship with him.” This “sustained and substantial transaction of business” (quoting Parke-Bernet Galleries v. Franklyn) subjected them to New York jurisdiction. The court found that the lawsuit arose directly from the defendants’ transaction of business in New York. The court distinguished Haar v. Armendaris Corp., where jurisdiction was lacking because the defendant’s contacts were with the attorney in Massachusetts, not New York. Here, the defendants directly solicited and communicated with the attorney in New York, thus projecting themselves into New York’s legal services market.

  • Ferrante Equip. Co. v. Lasker-Goldman Corp., 26 N.Y.2d 280 (1970): Long-Arm Jurisdiction and Transaction of Business

    Ferrante Equip. Co. v. Lasker-Goldman Corp., 26 N.Y.2d 280 (1970)

    Under New York’s long-arm statute, CPLR 302(a)(1), a non-domiciliary is subject to personal jurisdiction in New York only if they transact business within the state, and the cause of action arises from that transaction; actions taken outside New York that merely affect business or performance within the state are insufficient to establish jurisdiction under this provision.

    Summary

    Ferrante Equipment Company sued Lasker-Goldman in New York. Lasker impleaded Hanover Insurance, who then impleaded Ferrante (individually), a New Jersey resident, based on an indemnity agreement executed in New Jersey. The New York Court of Appeals held that New York courts lacked personal jurisdiction over Ferrante because his business activities related to the cause of action occurred entirely in New Jersey, not New York. The court emphasized that the mere effect of Ferrante’s out-of-state actions on New York business was insufficient to establish jurisdiction under CPLR 302(a)(1). This case underscores the requirement of a direct transaction of business within New York for long-arm jurisdiction.

    Facts

    Lasker-Goldman Corporation was the general contractor for construction at New Paltz State College. Anchor Construction was a subcontractor. Ferrante Equipment Company leased equipment to Anchor for work on the New Paltz project. Anchor failed to provide a performance bond initially. Ferrante (individually), a substantial shareholder in Ferrante Equipment Company, approached Hanover Insurance in New Jersey to secure a performance bond for Anchor. As an inducement, Ferrante and Anchor’s president agreed in New Jersey to indemnify Hanover for any losses related to the bond. All negotiations and the execution of the indemnity agreement occurred in New Jersey. Ferrante was a New Jersey domiciliary and never entered New York in connection with these transactions.

    Procedural History

    Ferrante Equipment Company sued Lasker-Goldman in New York when Anchor defaulted on rental payments. Lasker impleaded Hanover Insurance. Hanover then impleaded Anchor, its president, and Ferrante (individually) based on the indemnity agreement. Ferrante, served in New Jersey, moved to dismiss the fourth-party complaint for lack of personal jurisdiction. Special Term denied the motion. The Appellate Division reversed, holding that Ferrante’s contacts with New York were insufficient for jurisdiction.

    Issue(s)

    Whether New York courts have personal jurisdiction under CPLR 302(a)(1) over a non-domiciliary who transacted business outside of New York, but whose actions affected the performance of work within New York.

    Holding

    No, because CPLR 302(a)(1) requires that the non-domiciliary transact business within New York, and the cause of action must arise from that in-state transaction. Actions taken outside New York, even if they impact work within the state, are insufficient to establish jurisdiction under this provision.

    Court’s Reasoning

    The Court of Appeals emphasized that CPLR 302(a)(1) requires the non-domiciliary to transact business within the state. Citing Parke-Bernet Galleries v. Franklyn, the court reiterated that the purpose of CPLR 302 is to extend jurisdiction only to non-residents who have engaged in some purposeful activity in New York in connection with the matter in suit. The court found no evidence of Ferrante transacting any business in New York. His activities, including negotiating and executing the indemnity agreement, occurred entirely in New Jersey. The court rejected the argument that Ferrante’s actions had a substantial effect on the New York job, stating that this argument attempted to improperly apply the reasoning of CPLR 302(a)(3)(ii) (tortious act outside the state causing injury within) to CPLR 302(a)(1). The court quoted the Appellate Division: “The mere receipt by a nonresident of benefit or profit from a contract performed by others in New York is clearly not an act by the recipient in this State sufficient to confer jurisdiction under our long-arm statute.” To extend jurisdiction based solely on the effects of out-of-state actions would be an unwarranted expansion of 302(a)(1) and a function belonging to the Legislature.

  • Kramer v. Vogl, 17 N.Y.2d 27 (1966): Establishes Limits on Long-Arm Jurisdiction for Out-of-State Businesses

    17 N.Y.2d 27 (1966)

    A non-domiciliary’s transaction of business within New York, for purposes of long-arm jurisdiction under CPLR 302(a)(1), requires more than merely shipping goods into the state pursuant to an order sent from within the state; the cause of action must arise from in-state business activity.

    Summary

    Kramer, a New York resident, sued Vogl, an Austrian leather producer, for fraud, alleging that Vogl falsely promised Kramer exclusive U.S. distribution rights. Kramer claimed he relied on these promises, purchasing and promoting Vogl’s leather, only to discover Vogl was also selling to another distributor, Chilewich. Service was made on Vogl in Austria. The New York Court of Appeals held that New York courts lacked personal jurisdiction over Vogl. The court reasoned that Vogl’s actions did not constitute transacting business within New York under CPLR 302(a)(1) because Vogl had no direct sales, promotion, or advertising activities in the state. Furthermore, the tortious act did not occur within New York under CPLR 302(a)(2), as all actions by Vogl occurred in Europe. The court affirmed the dismissal of the action.

    Facts

    Plaintiff Kramer, a New York leather importer, claimed that Defendants Vogl, Austrian leather producers doing business as “Yogi”, fraudulently induced him into becoming their exclusive U.S. distributor. Vogl allegedly promised Kramer exclusive distribution rights (except for one specific customer) to incentivize Kramer to purchase and promote Yogi leathers. Kramer purchased large quantities of leather from Vogl between August 1960 and March 1962, and again in March 1962 when the agreement was allegedly renewed with the same exclusivity assurances. However, Kramer asserted that Vogl had already arranged to sell to Chilewich and associated companies by the time of the renewal in March 1962. All shipments from Vogl to Kramer were f.o.b. European ports. Vogl never conducted direct sales, promotion, or advertising within New York. The initial agreement was formed at a meeting in Paris in 1959, followed by a confirmation letter from Vogl in Austria to Kramer in New York. Kramer purchased the leather outright; he was not paid on commission or salary.

    Procedural History

    Kramer sued Vogl in New York, serving them in Austria. Vogl moved to dismiss for lack of personal jurisdiction, arguing they transacted no business in New York. The lower courts granted the motion to dismiss. The Appellate Division affirmed. Kramer appealed to the New York Court of Appeals, which granted leave to appeal.

    Issue(s)

    1. Whether the defendant’s actions constituted commission of a tortious act within New York State under CPLR 302(a)(2)?
    2. Whether the defendant’s actions constituted transacting business within New York State under CPLR 302(a)(1), such that New York courts could exercise personal jurisdiction over the non-domiciliary defendants?

    Holding

    1. No, because under CPLR 302(a)(2), the defendant’s act or omission must occur within the State of New York, and in this case, all actions by Vogl occurred in Europe.
    2. No, because the cause of action did not arise from the transaction of business within the state, as the defendants did not conduct any direct sales, promotion, or advertising activities in New York.

    Court’s Reasoning

    Regarding the tortious act claim under CPLR 302(a)(2), the court relied on its prior decisions in Feathers v. McLucas and Singer v. Walker, clarifying that the statute requires the tortious act itself to be committed within New York, not just the injury. The court emphasized that the statutory phrase is not synonymous with “commits a tortious act without the state which causes injury within the state.” Here, all of Vogl’s actions took place in Europe, negating jurisdiction under this provision.
    Regarding the transaction of business claim under CPLR 302(a)(1), the court acknowledged its liberal interpretation of the statute but stated that the facts did not meet the threshold. The court distinguished the case from situations where a non-resident defendant has local salesmen or solicits business in New York through catalogs or advertisements. In this case, Vogl merely sold goods f.o.b. to a local distributor. The court noted that Vogl’s sales to Kramer represented a small percentage of Vogl’s overall sales. Therefore, the cause of action could not be said to have arisen out of any transaction of business within the state. The court declined to decide whether it would be constitutional for New York to exercise jurisdiction over any outsider who ships goods into the state.