Traditionally, NY case law considered foreign entities registered to do business in New York as having affirmatively consented to the state’s general personal jurisdiction. See, STX Panocean (UK) Co. v. Glory Wealth Shipping Pte Ltd., 560 F.3d 127, 131 (2d Cir. 2009); Augsbury Corp. v. Petrokey Corp., 470 N.Y.S.2d 787 (N.Y. App. Div. 3d Dep’t 1983); Pohlers v. Exeter Mfg. Co., 56 N.E.2d 582 (N.Y. 1944); Neirbo Co. v. Bethlehem Shipbuilding Corporation, 308 U.S. 165, 175 (1939); Bagdon v. Philadelphia & Reading Coal & Iron Co., 111 N.E. 1075 (N.Y. 1916).
States courts still still hold that by registering to do business in New York and appointing a local agent for service of process, a foreign entity affirmatively accepts to be sued in this state for any reason. This is true even though there is no provisions in the registration statute that expressly requires foreign entities to consent to general jurisdiction as a condition to register as a foreign corporation doing business in the state.
However, lately, federal district case law in New York seems to have stirred away from that view and have found that the Fourteenth Amendment due process principle no longer allows New York general jurisdiction over foreign entities based solely on their registration to do business in the state See e.g., Justiniano v. First Student Mgmt. LLC, 2017 U.S. Dist. LEXIS 65379. See also Daimler AG v. Bauman,
Those federal courts found New York general personal jurisdiction over a foreign entity exists only when the foreign entity is “essentially at home in New York”, no matter if it was registered to do business in the State. Meaning that “[a] court may assert general jurisdiction over foreign (sister-state or foreign-country) corporations to hear any and all claims against them when their affiliations with the State are so ‘continuous and systematic’ as to render them essentially at home in the forum State.”
Daimler standard is difficult to meet. Two alternatives for suing a foreign entity in New York:
Forum selection clause. The first solution to sue a foreign entity in New York is to have a contract in place with such entity explicitly consenting to jurisdiction in New York by virtue of a forum selection clause. Each forum-selection clause shall be properly incorporated into the parties’ agreement and enforceable. More on forum selection clauses – especially on how to draft enforceable forum selection clause – is available here (Enforceability of Forum Selection Clause: A “Gallant Knight” Still Seeking Eldorado, together with Nathan M. Crystal, 8 S.C. J. Int’l. L. & Bus 203.)
But what if the contract did not contain such a clause?
Long arm statutes. The second solution involves a case-by-case consideration of the facts and circumstances and the outcome is not always predictable.
Under New York’s long arm statute, New York courts may establish specific jurisdiction when the defendant’s activities within New York are purposeful and that there is a substantial “nexus” between the transaction of business and the claim asserted. “Ultimately, the analysis must focus on the nature and quality of the individual defendant’s contact with the forum and whether such contact has a strong relationship to the claims based on the totality of the circumstances. So for example, to establish specific personal jurisdiction under CPLR § 302(a)(1), a plaintiff must show that the foreign entity transacted business within the state and that that transaction is related to the asserted claim.
Contact us for more information: Francesca Giannoni-Crystal & Federica Romanelli.