WHAT HAPPENS IN VEGAS STAYS IN VEGAS: ASSERTING A TORT CLAIM IN NEW YORK COURTS AGAINST A FOREIGN CORPORATION ARISING FROM A NEW YORKER'S OUT-OF-STATE ACCIDENT POST-DAIMLER.

Author:Hutter, Michael J.
 
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  1. INTRODUCTION

    A New York resident seeks legal representation regarding personal injuries she sustained in an accident or incident that occurred in another state or country. (1) The prospective defendant is a readily recognizable large national/international corporation, not incorporated in New York, that conducts business in multiple states, including New York. The first question to the attorney contacted is most likely to be: "Can I sue in New York?" She obviously does not want to have to take repeated trips to a faraway state, find a local attorney in that state, and manage an action against the defendant from afar. To respond to that inquiry, the attorney will have to determine initially whether the corporation is subject to personal jurisdiction in New York.

    The existence of personal jurisdiction over a defendant in New York is a threshold inquiry since a New York court cannot render a valid and binding judgment, enforceable in New York pursuant to New York Civil Practice Law and Rules ("CPLR") Articles 51 and 52 (2) and in other states pursuant to the Full Faith and Credit Clause, (3) in the absence of personal jurisdiction. (4) The concept of personal jurisdiction is derived from the Due Process Clause of the Fourteenth Amendment which, as construed by the United States Supreme Court, limits the power of a state court to render a valid judgment. (5) As stated by the Supreme Court: "[T]hose who live or operate primarily outside a state have a due process right not to be subjected to judgment in its courts as a general matter." (6) In this regard, a court may exercise personal jurisdiction over a defendant only if the defendant has "certain minimum contacts with [the forum] such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.'" (7)

    Prior to January 2014 when the United States Supreme Court decided Daimler AG v. Bauman, (8) the rules for exercising personal jurisdiction over a foreign corporation with respect to that corporation's conduct vis-a-vis a New Yorker occurring outside New York were relatively straightforward, easy to apply, and provided broad bases for asserting personal jurisdiction. (9) CPLR 302 provided the necessary statutory basis for the exercise of personal jurisdiction over a foreign corporation in a New York court for a cause of action arising out of activities in another state that harms a New Yorker in that state. (10) Pursuant to CPLR 301, personal jurisdiction over a foreign corporation could be exercised under a "doing business" in New York standard (11) or by consent to jurisdiction established by the corporation's acquisition of authority to do business in New York. (12) Most importantly, where personal jurisdiction existed under either basis, the dictates of the Due Process Clause were satisfied. (13) However, the decision in Daimler sent these jurisdictional standards "careening into the abyss." (14) While the Supreme Court did not per se invalidate these standards, its articulated due process analysis renders the doing business standard constitutionally impermissible as a basis for personal jurisdiction in most cases (15) and gives rise to an argument as to the unconstitutionality as well of the consent standard as a basis for personal jurisdiction. (16)

    This Article will examine the opportunities for asserting personal jurisdiction in a New York court over a foreign corporation for a tort claim arising from a New Yorker's out-of-state accident post-Daimler. It will discuss initially CPLR 301's "doing business" and "consent" bases as applied to foreign corporations. The article will next examine Daimler itself. It will then discuss Daimler's impact upon the two bases and what, if anything, is left under CPLR 301 as a means to assert personal jurisdiction. As an alternative statutory basis to CPLR 301, the Article will discuss CPLR 302(a)(1)'s "transaction of business in New York" basis and examine whether it can in fact be utilized to fill the CPLR 301 void left by Daimler with respect to tortious activity occurring outside New York to a New Yorker. In doing so, it will focus on the Court of Appeals' recent decision in D&R Global Selections, S.C. v. Bodega Olegario Falcon Pineiro (17) and its impact.

  2. CPLR 301

    1. Generally

      CPLR 301 provides: "A court may exercise such jurisdiction over persons, property, or status as might have been exercised heretofore." (18) Taking effect on September 1, 1963 when the CPLR became effective, (19) CPLR 301 incorporated into the CPLR all of the bases of jurisdiction over persons, property and status that existed prior to September 1, 1963. (20) The "persons" part of CPLR 301 refers to personal jurisdiction. (21) CPLR 301 was intended to make clear that the enactment of long-arm personal jurisdiction in CPLR 302 did not supersede or limit in any way then existing bases of personal jurisdiction permitted by statute and judicial decisions. (22) However, CPLR 301's drafters decided not to restate those bases in CPLR 301. (23)

      Prior to September 1, 1963, New York recognized four potential bases for personal jurisdiction--presence, domicile, consent, and "doing business"--for any cause of action irrespective of whether it arose from the defendant's contacts with or activities in New York. (24) These bases developed in an era governed by Pennoyer v. Neff, (25) wherein the Supreme Court held that the only permissible way of obtaining personal jurisdiction over an individual was by service of process upon the individual while the individual was present in the state. (26) The rule that developed post-Pennoyer was "in the absence of a waiver the presence of the defendant within the state was a necessary prerequisite to a court's asserting personal jurisdiction over him." (27)

      With the emergence of corporations in the American economy, an issue arose as to personal jurisdiction over corporations under Pennoyer and its physical presence requirement. (28) For the purpose of analogizing the corporation to the individual so as to determine whether the corporation is physically present within the State of New York, decisional law construing the state's statutes relating to corporations created two concepts, one a "doing business" standard (29) and the other a consent standard based on the appointment of the Secretary of State as its agent for service of process. (30) If the corporation, whether a New York or foreign corporation, were "doing business" in New York or had "consented" to the appointment of the Secretary of State as its agent for service of process, the corporation was subject to personal jurisdiction in New York, irrespective of whether the cause of action asserted against the corporation related to any other contacts or activities in New York. (31) In essence, the corporation was "present" by reason of its business activities in New York or had consented to be present in New York.

    2. "Doing Business"In New York

      The "doing business" basis is invoked where the defendant is a foreign corporation. It traces its origin to Civil Practice Act [section] 229, and its predecessors, which specified various methods by which process could be served upon a foreign corporation. (32) Although the section referred only to service of process, it was construed to establish a basis for personal jurisdiction for a foreign corporation where the corporation is "doing business" in New York. (33)

      This standard for personal jurisdiction was strictly adhered to, with one study concluding that:

      [T]he New York courts would almost certainly not feel authorized by section 229 to assume jurisdiction over a foreign corporation which does not do business in New York but which has done one or more acts in the state or has done acts outside the state which resulted in consequences in the state. (34) The seminal doing business decision is Tauza v. Susquehanna Coal Co. In Tauza, the plaintiff, a New York resident, was injured in an accident involving defendant Susquehanna Coal, a Pennsylvania corporation, that occurred outside New York. (35) The defendant maintained an office in New York under the direction of a sales agent, with a number of salesmen and with clerical assistants. (36) Through these employees, defendant "systematically and regularly solicit[ed] and obtain[ed] orders... in... New York." (37) The orders were subject to confirmation in Pennsylvania, and when confirmed the coal orders were shipped from Pennsylvania. (38) The customers paid directly to the Pennsylvania office. (39) Service of process was made on the sales agent in New York. (40)

      The Court of Appeals in an opinion by Judge Cardozo, held that the recited facts constituted "doing business" and found personal jurisdiction in New York over the defendant. (41) The standard for "doing business" was phrased:

      If in fact [the foreign corporation] is here, if it is here, not occasionally or causally, but with a fair measure of permanence and continuity, then, whether its business is interstate or local, it is within the jurisdiction of our courts. (42) Of note, the court specifically held that personal jurisdiction "does not fail because the cause of action sued upon has no relation in its origin to the business here transacted." (43) Whether the cause of action arose is irrelevant since "[t]he essential thing is that the corporation shall have come into the state. When once it is here, it may be served; and the validity of the service is independent of the origin of the cause of action." (44)

      Lastly, it should be noted that the court distinguished between the term as used in General Corporation Law section 15 and "kindred" statutes. (45) In this regard, section 15 is a qualification statute: a foreign corporation, which elects to do business in New York, must first obtain authority from the Secretary of State. (46) These "doing business" standards are different. (47)

      This classic doing business surrogate for physical "presence" test is still...

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