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Posted: October 7, 2017

Reaching Out to New York Bank to Negotiate Loan Agreements Created Personal Jurisdiction

On September 25, 2017, Justice Scarpulla of the New York County Commercial Division issued a decision in Bank of India, N.Y. Branch v. Essar Steel Holdings Ltd., 2017 NY Slip Op. 32032(U), holding that reaching out to New York to negotiate loan agreements created personal jurisdiction, explaining:

In this case, BOI-NY has met its prima facie burden of demonstrating that its claim arose from Essar’s transaction of business in New York under CPLR 302(a)(1). It has presented proof, not contradicted by Essar, that Essar reached into New York to negotiate the contracts, and executed them in New York. In fact, the SLC Agreement clearly states, at the top of the first page, “Place: NEW YORK,” indicating that it was executed here. In addition, BOI-NY presented proof that, in connection with the pledge and security agreement, which was part of the parties’ transaction, Essar pledged its interest in a certificate of deposit, in the principal amount of $1.5 million, maintained in Essar’s account at BOI-NY, as partial security for its obligations under the SLC.

Moreover, for seven years after the initial transaction, Essar reached out to BOINY to negotiate modifications and extensions of those agreements. The transaction was the foundation for the continuing relationship between the parties, which lasted for seven years, with Essar reaching out to BOI-NY by phone and email to negotiate for the modifications and extensions of the SLC Agreement. Further, the letter of credit security agreement, and the security agreement for the pledge of the certificate of deposit, both provided for the application of New York law. In sum, Essar purposefully availed itself of New York law by engaging in those negotiations, executing the contracts in New York, and establishing a continuing relationship between the parties. Thus, viewing the transaction as a whole, and based on the totality of the circumstances, Essar can be said to have transacted business in New York.

As to the second prong of the test, BOI-NY’s claim clearly arises from Essar’s New York transactions. The standard only requires a plaintiff to show that in light of all the circumstances, there is an articulable nexus or substantial relationship between the business transaction and the claim asserted. BOI-NY’s claims arise from the SLC, and all of Essar’s New York contacts are related to that agreement.

Finally, a finding that New York courts have personal jurisdiction over Essar also comports with due process. So long as a party avails itself of the benefits of the forum, has sufficient minimum contacts with it, and should reasonably expect to defend its actions there, due process is not offended if that party is subjected to jurisdiction. Here, Essar had sufficient minimum contacts with New York by purposefully entering the state to negotiate and execute contracts with BOI-NY, a New York entity, and those contracts established an ongoing relationship between the parties that lasted seven years. The nature and quality of Essar’s New York activities are sufficient to satisfy due process.

(Internal quotations and citations omitted).

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