Commercial Division Blog
No Personal Jurisdiction Over Defendant Because Original Critical Events Did Not Take Place in New York
On July 3, 2018, the First Department issued a decision in Deutsche Bank AG v. Vik, 2018 NY Slip Op. 04958, holding that there was no personal jurisdiction over a defendant where the critical events of a claim did not take place in New York, explaining:
A plaintiff relying on CPLR 302(a)(3)(ii) must show that (1) the defendant committed a tortious act outside New York; (2) the cause of action arose from that act; (3) the tortious act caused an injury to a person or property in New York; (4) the defendant expected or should reasonably have expected the act to have consequences in New York; and (5) the defendant derived substantial revenue from interstate or international commerce. In New York, the situs of commercial injury is where the original critical events associated with the action or dispute took place, not where any financial loss or damages occurred.
Here, the original critical events giving rise to plaintiff's injury were the 2012 and 2015 Transfers. As those transfers occurred outside of New York and did not involve New York assets, the situs of injury was not in New York. That plaintiff felt economic injury in New York, alone, is an insufficient basis to confer jurisdiction. To the extent plaintiff relies on Deutsche Bank, AG v Vik (2015 Slip Op 30163[U] [Sup Ct, NY County 2015]), that case relied on federal case law that did not apply the situs of injury test, and our decision affirming that order did not determine the issue of jurisdiction under CPLR 302(a)(3)(ii).
Furthermore, even if the elements of CPLR 302(a)(3)(ii) have been met, asserting personal jurisdiction would not comport with due process. To comport with due process, there must also be proof that the out-of-state defendant has the requisite minimum contacts with the forum state and that the prospect of defending a suit here comports with traditional notions of fair play and substantial justice. The minimum contacts requirement is satisfied where a defendant's conduct and connection with the forum State are such that it should reasonably anticipate being haled into court there. Under the effects test theory of personal jurisdiction, where the conduct that forms the basis for the plaintiff's claims takes place entirely out of forum, and the only relevant jurisdictional contacts with the forum are the harmful effects suffered by the plaintiff, a court must inquire whether the defendant expressly aimed its conduct at the forum. Here, defendants did not expressly aim their tortious conduct at New York, and the foreseeability that the alleged fraudulent conveyances would injure plaintiff in New York is insufficient.
(Internal quotations and citations omitted).
This decision illustrates an issue that often arises in commercial litigation in New York. Whether the defendant is located on the other side of the world or across the Hudson in New Jersey, a New York court cannot assert jurisdiction over the defendant (that is, hear a case against it) unless there is a proper connection between the defendant and New York. Contact Schlam Stone & Dolan partner John Lundin at email@example.com if you or a client face a situation where you are unsure whether there is jurisdiction over you, or over a party with which you are having a dispute, in New York.