Commercial Division Blog

Posted: October 20, 2018 / Categories Commercial, Jurisdiction, Fraudulent Conveyance

Allegation that Defendant Rendered New York Business Insolvent Through Fraudulent Transfer Sufficient to Establish Personal Jurisdiction

On October 2, 2018, Justice Scarpulla of the New York County Commercial Division issued a decision in Ezra v. Wilton Group Inc., 2018 NY Slip Op. 32491(U), holding that the allegation that a defendant rendered a New York business insolvent through a fraudulent transfer was sufficient to establish personal jurisdiction over the defendant, explaining:

On a motion to dismiss pursuant to CPLR 3211(a)(8), the plaintiff has the burden of presenting sufficient evidence, through affidavits and relevant documents, to demonstrate jurisdiction. However, to defeat a pre-answer motion to dismiss the complaint pursuant to CPLR 3211(a)(8), the plaintiff need only make a prima facie showing that the defendant was subject to the personal jurisdiction of the court. In deciding whether the plaintiffs have met their burden, the court must construe the pleadings and affidavits in the light most favorable to them and resolve all doubts in their favor.

The Company is incorporated in New York and therefore, subject to this Court's jurisdiction as a domiciliary. However, the parties dispute whether personal jurisdiction exists over the remaining Movants. According to Movants, none of the remaining Movants are New York domiciliaries, and New York's long-arm statute does not apply to render them subject to specific jurisdiction.

Putting aside the parties dispute regarding general jurisdiction, I find that plaintiffs have sufficiently pleaded specific jurisdiction over Movants. Under CPLR 302(a)(3)(ii) New York may exercise jurisdiction over a non-domiciliary who commits a tortious act without the state causing injury to person or property within the state if he expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce. Here, the complaint alleges that the Movants' receipt of fraudulent conveyances from UCG frustrated plaintiffs' ability to collect on a judgment in New York.

Rendering a creditor unable to recover on a defaulted debt in New York through a fraudulent conveyance constitutes injury in New York that is reasonably foreseeable.

(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 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.