Commercial Division Blog
Travelling to New York for Preliminary Negotiations Insufficient Basis for Personal Jurisdiction
On February 25, 2021, the First Department issued a decision in USA Sevens LLC v. World Rugby Ltd., 2021 NY Slip Op. 01223, holding that travelling to New York for preliminary negotiations was an insufficient basis for asserting personal jurisdiction in New York, explaining:
Plaintiffs' contention that World Rugby is subject to jurisdiction pursuant to CPLR 302(a)(3)(ii) is likewise unavailing because plaintiffs did not plead that New York is the situs of the alleged commercial injury they sustained. Instead, plaintiffs allege World Rugby made fraudulent statements and procured USA Rugby's breach of its contract with USA Sevens LLC in Ireland. Thus, the original critical events did not occur in New York, and the fact that plaintiffs may have suffered economic loss in New York is an insufficient basis upon which to base personal jurisdiction.
Plaintiffs also contend that World Rugby is subject to jurisdiction pursuant to CPLR 302(a)(1). Plaintiffs — which have their principal place of business within the state — argue that World Rugby transacted business in New York by engaging in a 13-year relationship with them and by negotiating the 2014 Host Union Agreement in New York. However, plaintiffs fail to allege a sufficient nexus between the parties' broad, overall relationship and plaintiffs' specific claims in this suit.
Plaintiffs allege that, in August 2014, a representative of World Rugby came to New York at plaintiffs' request for preliminary negotiations. This meeting, which did not result in an agreement between the parties, did not constitute the transaction of business sufficient to confer long-arm jurisdiction over defendants.
As to the overall relationship, while the president of plaintiff United World Sports LLC submitted an affidavit that he regularly communicated with World Rugby by phone and email and in person, he did not tie these communications to plaintiffs' claims. Nor does World Rugby's sending of payments to New York satisfy CPLR 302(a)(1).
(Internal 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 firstname.lastname@example.org 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.