Commercial Division Blog
Posted: January 3, 2021 / Categories Commercial, Jurisdiction
Offering Services in New York Insufficient Basis for General Jurisdiction Over Out-of-State Company
On December 17, 2020, Justice Sherwood of the New York County Commercial Division issued a decision in SOC LLC v. Perspecta Enter. Solutions, LLC, 2020 NY Slip Op. 34209(U), holding that offering services in New York was an insufficient basis for asserting general jurisdiction over an out-of-state company, explaining:
CPLR 3211[a] provides that a party may move for judgment dismissing one or more causes of action asserted against him on the ground that the court has not jurisdiction of the person of the defendant. When presented with a motion under CPLR 3211[a], the party seeking to assert personal jurisdiction, the plaintiff, bears the ultimate burden of proof on this issue. The party opposing a motion to dismiss need not state all the facts necessary to establish jurisdiction. If evidence of the facts establishing jurisdiction are in the exclusive control of the moving party, CPLR 3211[d] only a requires a sufficient start, demonstrating that such facts may exist.
General jurisdiction permits a court to exercise personal jurisdiction over a defendant in its home forum based on the defendant's overall contacts with that forum even if the claim has no connection to it. The United States Supreme Court has held that in order for a court to assert personal jurisdiction over a nonresident defendant, the plaintiff must establish that the defendant has a substantial presence in the forum state so that the exercise of jurisdiction over the defendant would comport with the traditional notions of fair play and substantial justice. New York law is essentially the same. With respect to CPLR 301, the authority of the New York courts to exercise jurisdiction over a foreign corporation is based solely upon the fact that the defendant is engaged in such a continuous and systematic course of doing business here as to warrant a finding of its presence in this jurisdiction.
In 2014, the U.S. Supreme Court modified the continuous and systemic standard in its analysis of general jurisdiction. In that case, Daimler AG, a German corporation, was sued by Argentinian residents alleging that its Argentinian subsidiary committed tortious acts in Argentina; the suit was brought in a federal court in California based on services performed in California by Daimler's U.S. subsidiary, MBUSA. The question before the Supreme Court was whether Daimler's affiliations with California are sufficient to subject it to the general (all purpose) personal jurisdiction of that State's courts. In its analysis, the Supreme Court stated that only a limited set of affiliations with a forum will render a defendant amenable to all-purpose jurisdiction there. For an individual, the paradigm forum for the exercise of general jurisdiction is the individual's domicile and with respect to a corporation, the place of incorporation and principal place of business are the paradigm bases for general jurisdiction. In so holding, the Supreme Court disagreed with the formulation that would allow the exercise of general jurisdiction in every state in which a corporation engages in a substantial, continuous, and systematic course of business, characterizing such a formulation as unacceptably grasping.
While Daimler left open a possibility that, in exceptional circumstances, a corporation's operations in a forum other than its formal place of incorporation or principal place of business may be so substantial and of such a nature as to render the corporation at home in that State, such contacts must be truly exceptional. In Perkins, the defendant entity, a company incorporated under the laws of the Philippines, where it operated gold and silver mines, was unable to continue operations in the Philippines. Its president moved to Ohio, where he kept an office, maintained the company's files, and oversaw the company's activities. Ohio had become the corporation's principal, if temporary, place of business.
Here, plaintiff has failed to show that this court has general jurisdiction over defendant. As noted, both in defendant's memorandum in support and in the complaint, both parties are Delaware companies with principal places of business in Virginia. While plaintiff argues that defendant, by listing employment opportunities and staffing employees in New York State, has had continuous and systematic contact so as to effectively render Perspecta at home in New York, these facts alone are not sufficient to establish general jurisdiction as New York courts have repeatedly found that out-of-state companies employing New York residents does not rise to the level necessary to find a defendant is at home in New York. Having relied on its argument that defendant has continuous and systematic contacts with New York, plaintiff makes no argument that exceptional circumstances exist here so as to render defendant at home in New York, nor could it. For these reasons, the court finds it does not have general jurisdiction over defendant pursuant to CPLR 301.
(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.