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Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: September 18, 2018

No New York Personal Jurisdiction Over Student Loan Trust Trustee That Engaged New York Counsel

On September 4, 2018, Justice Scarpulla of the New York County Commercial Division issued a decision in National Coll. Master Student Loan Trust I v. Wilmington Trust Co.2018 NY Slip Op. 32194(U), holding that the court lacked personal jurisdiction over a the trustee of a student loan trust that engaged New York counsel, explaining:

Under CPLR 302(a)(l), jurisdiction may only be exercised over an out-of-state defendant if that defendant has purposefully transacted business within the state and there is a substantial relationship between the transaction and the claim asserted. Purposeful activities are those with which a defendant, through volitional acts, avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.

Plaintiffs assert that CPLR 302(a)(l) jurisdiction may be exercised over Wilmington because Wilmington transacted business in New York by signing a retainer agreement with a New York law firm on behalf of the Trusts, and the legal services were performed in New York. Plaintiffs maintain that Wilmington made innumerable telephone and e-mail communications to Chaitman in New York regarding Chaitman’s performance of legal services and payment for those services.

Wilmington executed the Retention Agreement in Delaware, solely in its representative capacity and at the direction of the Trusts’ Owners, to represent the Trusts. This action constitutes neither the performance of any act within the state nor the transaction of any business here giving jurisdiction pursuant to CPLR 302.

This situation is markedly different from other cases finding jurisdiction based on the engagement of a New York lawyer or law firm by an out-of-state entity.

Moreover, no allegation in the complaint supports Plaintiffs’ claim, which was asserted in the opposition memorandum, that Wilmington made innumerable communications via telephone and email to Chairman in New York with respect to Chaitman’s performance of legal services in the State of New York and concerning payment for those same services. These unspecified communications are not sufficient to confer CPLR 302(a)(l) jurisdiction.

At most, the allegations in the complaint regarding two communications between Chaitman and Wilmington show that Chaitman initiated communications with Wilmington to collect legal fees, to which Wilmington responded. Chaitman’s own New York activities cannot be attributed to defendants for purposes of establishing personal jurisdiction over an out-of-state defendant. Accordingly, there is an insufficient basis to exert CPLR 302(a)(l) jurisdiction over Wilmington.

(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 jlundin@schlamstone.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.

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