Foreign LLC Doing Business in New York Lacks Capacity to Sue Unless Registered To Do Business in New York

On December 12, 2023, Justice Barry R. Ostrager of the New York County Commercial Division issued a decision in South Beach Tristar 800 LLC v. Lincoln Arts ERFR LLC, Index No. 654461/2023, holding that a plaintiff foreign limited liability company doing, but not licensed to do, business in New York lacked legal capacity to sue, but nonetheless denying defendant's motion to dismiss on the condition that plaintiff promptly register to do business in New York, explaining:

The indicia for “doing business” in New York, established in the case law, include the company’s designation of its principal place of business in New York, as RFR alleges has been the case here since October 2014 when the parties’ Agreement was signed. Also relevant are the business meetings in New York attested to in the Reifler Affidavit. To acquire the requisite authority to sue, a foreign limited liability company must obtain a certificate of authority from the New York Department of State by (1) submitting a “certificate of existence” and an application “for authority to do business in this state” [LLC Law § 802(a)], and (2) complying with certain publication requirements, including publishing a copy of its application in two newspapers for six successive weeks, and then filing proof of the publication with the Department of State [LLC Law § 802(b)].

RFR has produced evidence of the failure by South Beach to obtain the requisite certificate, which, if true, would bar South Beach from maintaining this action.

. . .

Having considered the papers and various arguments presented by the parties, the Court denies the motion to dismiss without prejudice on the condition that South Beach fully comply with the statute and present to RFR by February 26, 2024, proof that South Beach has satisfied the statutory requirements needed to obtain authority to do business in New York, including the publication requirements. In the opinion of the Court, the $2.75 million claim by South Beach in its Complaint should proceed on the merits once all the requirements of the LLC Law have been met. Granting RFR’s motion and dismissing the action would serve no purpose, as plaintiff South Beach could easily commence the action anew once New York State issues the certificate of doing business. Nor would judicial or party resources be wisely spent on discovery and a hearing to determine whether or not South Beach is doing business in New York. The most efficient course of action is for South Beach to complete the registration process as expeditiously as possible. Should South Beach fail to obtain the certificate of authority to do business in New York, RFR may renew its motion in 2024 before the Commercial Division Justice assigned to the case after this Court retires from the Commercial Division Bench at the end of 2023.***

***Justice Ostrager retired from the bench as of December 31, 2023.

A foreign LLC doing business business in New York must be registered to do business in New York; otherwise, the foreign LLC may not bring suit in state court in New York. But this defect is not fatal. As this case shows, courts generally give a noncompliant plaintiff an opportunity to correct this issue.

Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning a foreign LLC's capacity to sue in state court in New York.