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Posted: December 24, 2014

Limits on Foreign Corporations’ Ability to Create Jurisdiction by Consent in New York

On December 23, 2014, the First Department issued a decision in Techo-TM, LLC v. Fireaway, Inc., 2014 NY Slip Op. 08908, holding that a New York court could not exercise long-arm jurisdiction over two foreign corporations based only on the parties’ consent to that jurisdiction.

Business Corporations Law 1314(b) provides that:

(b) Except as otherwise provided in this article, an action or special proceeding against a foreign corporation may be maintained by another foreign corporation of any type or kind or by a non-resident in the following cases only: (1) Where it is brought to recover damages for the breach of a contract made or to be performed within this state, or relating to property situated within this state at the time of the making of the contract. (2) Where the subject matter of the litigation is situated within this state. (3) Where the cause of action arose within this state, except where the object of the action or special proceeding is to affect the title of real property situated outside this state. (4) Where, in any case not included in the preceding subparagraphs, a non-domiciliary would be subject to the personal jurisdiction of the courts of this state under section 302 of the civil practice law and rules. (5) Where the defendant is a foreign corporation doing business or authorized to do business in this state.

(Emphasis added). In Techo-TM, the First Department reversed the denial of a motion to dismiss a claim by one foreign corporation against another on BCL 1314 grounds, explaining:

The parties are foreign corporations that neither do nor are authorized to do business in New York (see CPLR 302), and this case does not fall under any of the exceptions permitting an action in this State by a foreign corporation against another foreign corporation. BCL § 1314(b)(4) provides for cases against a non-domiciliary that would be subject to the personal jurisdiction of this State’s courts pursuant to CPLR 302. However, while New York recognizes consent as a basis for personal jurisdiction, it does not recognize consent as a basis for long-arm jurisdiction.

(Internal citations omitted). In short, BCL 1314(b) divests the court of subject matter jurisdiction in lawsuits between two foreign corporations unless one of the five exceptions in the statute is satisfied, even where the parties have consented to personal jurisdiction.

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