Commercial Division Blog

Posted: February 11, 2015 / Categories Commercial, Contracts, Jurisdiction

No Jurisdiction Over Corporate Officers Based on Contract to Which They Were Not Parties

On February 2, 2015, Justice Kornreich of the New York County Commercial Division issued a decision in Navitas Group, Inc. v. Cermed Corp., Inc., 2015 NY Slip Op. 30148(U), holding that a contract connected to New York was an insufficient basis to assert personal jurisdiction over persons who were not parties to the contract, explaining:

It is well settled that breach of contract claims are ordinarily only allowed to be asserted against contractual counterparties. [The plaintiff] admits that CerMed is the only defendant with whom it contracted. Moreover, as CPLR 302(a)(1) is a specific (as opposed to general) jurisdiction statute, jurisdiction over non-contracting parties must arise from their involvement in the subject transaction.

[The plaintiff] does not allege that any of the non-contracting defendants availed themselves of the benefits of this State in connection with the contracts in their individual capacity, as opposed to as agents or employees of [the plaintiff]. Hence, there is no basis to assert jurisdiction against them individually. Furthermore, while [the plaintiff] seeks to subject the non·contracting defendants to personal jurisdiction and liability under the contract by virtue of a conspiracy to breach the contact, such a conspiracy is conclusorily alleged. Merely alleging non-contracting parties were involved in a breach of contract is not a basis to evade the rule of privity. There are well settled exceptions to that rule, such as veil piercing, but in all cases, a basis for extending contractual liability to nonparties must be supported by facts, not bald allegations of conspiracy. Hence, where a corporate officer is the individual responsible for breach of a corporation's contractual obligations, if such breach was effectuated by the officer in his corporate capacity, that officer has no personal liability. If that were not the case, the protections of the corporate form would be illusory.

(Internal quotations and citations omitted).