Add S301-a, CPLR; amd S1301, BC L; amd S18, Gen Assoc L; amd S802, Lim Lil L; amd S1301, N-CP L; amd
SS121-902 & 121-1502, Partn L
Provides that a foreign corporation's application for authority to do business in this state constitutes consent to jurisdiction of the courts of this state and a surrender of such application constitutes withdrawal of such consent.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A6714 Revised 09/27/16
SPONSOR: Weinstein (MS) TITLE OF BILL:
An act to amend the civil practice law and rules, the business corpo-
ration law, the general associations law, the limited liability company
law, the not-for-profit corporation law and the partnership law, in
relation to consent to jurisdiction by foreign business organizations
authorized to do business in New York
This is one in a series of measures being introduced at the request of
the Chief Administrative Judge upon the recommendation of his Advisory
Committee on Civil Practice.
This measure would amend § 1301 of the Business Corporation Law (BCL) to
reinforce the continuing viability of consent as a basis for general
(all-purpose) personal jurisdiction over foreign corporations authorized
to do business in New York. In so doing, the measure serves a substan-
tial public interest. Being able to sue New York-licensed corporations
in New York on claims that arose elsewhere will save New York resi-
dents-individuals and New York companies alike-the expense and inconven-
ience of traveling to distant forums to seek the enforcement of corpo-
rate obligations. The measure likewise amends the General Associations
Law, the Limited Liability Company Law, the Not-for-Profit Corporation
Law, and the Partnership Law to encompass other similarly situated
foreign business organizations that must register to do business in New
York.
Until recently, a foreign corporation doing business in New York could
be sued here on claims arising anywhere in the world. The doing of busi-
ness in New York, such as soliciting and facilitating orders for New
York sales from an office in New York staffed by corporate employees,
was treated as corporate "presence," which traditionally allowed for the
assertion of general personal jurisdiction. When general jurisdiction
exists, the claim being sued upon need not arise out of activity of the
corporate defendant in New York. These principles were articulated in
the 1917 case of Tauza v. Susquehanna Coal Co., 220 N.Y. 259, and
carried forward by CPLR 301.
In the recent decision of Daimler AG v. Bauman, 134 S.Ct. 746 (2014),
however, the U.S. Supreme Court held that due process requires more than
the doing of business in a state before the courts of that state may
assert general jurisdiction. By analogy to the assertion of general
jurisdiction over individuals domiciled in the state, the corporation
must be "at home" in the state. This means that the only type of local
activity by a corporation that will ordinarily qualify for general
jurisdiction is incorporation in the state or maintenance of its princi-
pal place of business in the state. Id. at 760-62. Doing business in the
state, by itself, will not suffice, even if such business is conducted
on a regular and systematic basis from a local office or other facility.
Tauza-type general jurisdiction, therefore, is no longer available in
New York for those seeking to enforce corporate obligations incurred
outside the state. On the other hand, Daimler's at-home requirement has
no application to cases in which a corporation is subject to "specific"
jurisdiction pursuant to a long-aim statute, such as CPLR 302, which
confers jurisdiction for claims arising from a defendant's local acts.
Because Daimler's limitation on general jurisdiction was decided on the
basis of constitutional due process, amending the CPLR to explicitly
confer general jurisdiction over foreign corporations simply because
they are doing business in the state would be futile. The Daimler
Court, however, did not address consent-based general jurisdiction that
occurs through corporate licensing and registration with the Secretary
of State. (See 134 S.Ct. at 755-56, citing the "textbook case" of
Perkins v. Benguet Consolidated Mining Co., 342 U.S. 437 (1952), for
guidance as to circumstances that permit exercise of general jurisdic-
tion "over a foreign corporation that has not consented to suit in the
forum.")
A foreign corporation, as a condition of doing business in New York,
must apply for authorization to do so from the New York Secretary of
State. BCL § 1301(a). As a part of such licensing and registration, BCL
§ 304(b) specifies that the corporation must designate the Secretary of
State as its agent upon whom process may be served in a New York action.
See also BCL § 1304(a)(6). Furthermore, BCL § 304(c) provides that
foreign corporations already authorized to do business in New York as of
the 1963 effective date of the BCL were "deemed" to have made such
designation. (During the statutory regime that preceded adoption of the
BCL, foreign corporations seeking authorization to do business in New
York could appoint either a private individual or a public officer as
agent upon whom process could be served. See Karius v. All States
Freight, Inc., 176 Misc. 155, 159 (Sup.Ct. Albany Co. 1941)).
From 1916 to the present, New York courts - State and Federal - have
held that a foreign corporation's registration to do business in New
York constitutes consent by the corporation to general personal juris-
diction in the New York courts. Judge Benjamin N. Cardozo wrote in
Bagdon v. Philadelphia & Reading Coal & Iron Co., 217 N.Y. 432 (1916),
that such consent flows from the foreign corporation's statutorily
required designation of a New York agent for service of process:
"The person designated is a true agent. The consent that he shall repre-
sent the corporation is a real consent. He is made the person "upon whom
process may be served." The actions in which he is to represent the
corporation are not limited. The meaning must, therefore, be that the
appointment is for any action which under the laws of this state may be
brought against a foreign corporation. . . . The contract deals with
jurisdiction of the person. . . . It means that whenever jurisdiction of
the subject matter is present, service on the agent shall give jurisdic-
tion of the person."
Id. at 436-37. Judge Cardozo rejected the notion that the consent at
issue in Bagdon was limited to claims that arose from the foreign corpo-
ration's New York activity. The consent extended to all claims, regard-
less of where they arose. Id. at 438.
Although the applicable New York statutes, both in 1916 and now, do not
explicitly state that registration to do business or designation of a
local agent to accept service of process constitutes consent to general
jurisdiction, judicial interpretation of the statutes is what matters.
The Supreme Court has twice recognized that a corporation's statutorily
required designation of a local agent to accept process rationally may
be interpreted as consent to general jurisdiction: "(W)hen a power is
actually conferred by a document, the party executing it takes the risk
of the interpretation that may be put upon it by the courts. The
execution was the defendant's voluntary act." Pennsylvania Fire Ins. Co.
of Philadelphia v. Gold Issue Mining & Milling Co., 243 U.S. 93, 96
(1917); see also Neirbo Co. v. Bethlehem Shipbuilding Corp., 308 U.S.
165, 17475 (1939).
From the time of Bagdon, almost all New York courts have held that
consent to general personal jurisdiction is the inherent by-product of
registration to do business in New York. Some have reasoned, as in
Bagdon, that the act of consent is the designation of the Secretary of
State or some other person as agent in New York (see, e.g., Karius v.
All States Freight, Inc., supra, 176 Misc. at 159; Robfogel Mill-Andrews
Corp. v. Cupples Co., 67 Misc.2d 623, 624 (Sup.Ct. Monroe Co. 1971);
see also Restatement of the Law (Second) of Conflict of Laws § 44
(1971)), while others have held that a foreign corporation consents to
general jurisdiction as a result of both registration "and concomitant
designation of the Secretary of State as its agent for service of proc-
ess" (Augsbury Corp. v. Petrokey Corp., 97 A.D.2d 173, 175 (3d Dep't
1983); see also The Rockefeller University v. Ligand Pharmaceuticals
Inc., 581 F.Supp.2d 461, 466-67 (S.D.N.Y. 2008)). Still others have
simply held that becoming licensed to do business in New York consti-
tutes consent to general jurisdiction. Le Vine v. Isoserve, Inc., 70
Misc.2d 747, 749 (Sup.Ct. Albany Co. 1972); STX Panocean (UK) Co., Ltd.
v. Glory Wealth Shipping Pte Ltd., 560 F.3d 127, 131 (2d Cir. 2009);
China National Chartering Corp. v. Pactrans Air & Sea, Inc., 882
F.Supp.2d 579, 596 (S.D.N.Y. 2012); Steuben Foods, Inc. v. Oystar Group,
2013 WL 2105894 (W.D.N.Y. 2013) (observing in n.1 that a contrary deci-
sion in Bellepointe, Inc. v. Kohl's Dep't Stores, Inc., 975 F.Supp. 562,
564 (S.D.N.Y. 1997), has been rejected by the Second Circuit).
Because authorization to do business is not possible today without
designation of the Secretary of State as an agent upon whom process
maybe served (BCL §§ 304(b)-(c)), the acts of designating the Secretary
of State and becoming registered are co-equal in effect. The critical
fact is that the corporation has agreed to subject itself to the regu-
lation of the state of New York and thereby has consented to general
personal jurisdiction. This is "part of the bargain by which (the
foreign corporation) enjoys the business freedom of the State of New
York." Neirbo Co. v. Bethlehem Shipbuilding Corp., supra, 308 U.S. at
175. For nearly 100 years, foreign corporations have been on notice that
becoming licensed to do business in New York is a consent to general
personal jurisdiction.
The addition of the proposed new subdivision (e) to BCL § 1301 would
codify the caselaw and provide a forceful legislative declaration as to
the effect of a foreign corporation's registration to do business in New
York. Consent to general jurisdiction is a fair requirement to impose on
corporations that benefit from conducting business in New York. Such
consent provides the certainty of a forum with open doors for the
enforcement of obligations of New York-licensed corporations without the
expense and burden of proving jurisdiction on a case-by-case basis. In
Daimler, the Supreme Court recognized the value of having an "easily
ascertainable" and "clear and certain forum in which a corporate defend-
ant may be sued on any and all claims." 134 S.Ct. at 760.
Post-Daimler caselaw strongly supports the validity and value of the
proposed measure. The Supreme Court, New York County, held in Bailen v.
Air & Liquid Systems Corp., 2014 WL 3885949 (Aug. 5, 2014), that Daimler
"does not change the law with respect to jurisdiction based on consent."
A corporation consents to New York jurisdiction "by registering as a
foreign corporation and designating a local agent." See also Corporate
Jet Support, Inc. v. Lobosco Ins. Group, L.L.C., 2015 WL 5883026 (Oct.7,
2015, Sup.Ct.N.Y.Co.) (same).
The Appellate Division, First Department, also relied upon consent prin-
ciples in B & M Kingstone, LLC v. Mega Intl Commercial Bank Co., 131
A.D.3d 259 (1st Dep't 2015), motion for leave to appeal dismissed, 2015
WL 6457032, to require a Taiwanese bank, a branch of which was regis-
tered and doing business in New York, to respond to a post-judgment
information subpoena concerning any assets held by certain third-party
judgment debtors at the New York branch or any of the bank's non-New
York branches. Daimler did not preclude the exercise of such jurisdic-
tion. The relevant registration statute, Banking Law § 200, confers
jurisdiction for causes of action against a foreign registered bank, or
its branches, that arise out of a transaction in New York (id. §
200(3)), but the case here did not involve a cause of action against the
bank-only participation in discovery proceedings concerning a judgment
against other parties. The bank "consented to . . regulatory oversight
in return for permission to operate in New York. . . . This legal status
also confers obligations to participate as (a) third-part(y) in lawsuits
which involve() assets under (its) management." (On a separate point,
the IAS court denied the judgment creditor's request to enforce a
restraining notice. The separate-entity rule of Motorola Credit Corp. v.
Standard Chartered Bank, 24 N.Y.3d 149 (2014), prohibits the enforcement
of restraining notices served on New York bank branches with respect to
accounts in other branches of the bank located in foreign countries.
This aspect of the IAS court's order was not appealed. The Appellate
Division stressed that the Motorola Court limited its application of the
separate-entity rule to restraining notices and turnover orders and
therefore did not preclude enforcement of the information subpoena in
the instant case.)
Several federal district courts have explicitly held that consent based
on corporate registration survives Daimler as a constitutional basis for
the exercise of general jurisdiction for claims against foreign corpo-
rations. See, e.g., Acorda Therapeutics, Inc. v. Mylan Pharmaceuticals
Inc., 78 F.Supp.3d 572 (D.Del. 2015); Forest Laboratories, Inc. v.
Amneal Pharmaceuticals LLC, 2015 WL 880599 (D.Del. 2015); Otsuka Pharma-
ceutical Co. v. Mylan Inc., 2015 WL 1305764 (D.N.J. 2015); Perrigo Co.
v. Meriel Ltd., 2015 WL 1538088 (D.Neb. 2015). See also Beach v. Citi-
group Alternative Investments LLC, 2014 WL 904650 (S.D.N.Y. 2014)
(dicta).
To be sure, some federal courts have disagreed. For example, AstraZeneca
AB v. Mylan Pharmaceuticals, Inc., 72 F.Supp.3d 549 (D.Del. 2014), held
that consent jurisdiction and contacts-based jurisdiction-the latter
being the matter at issue in Daimler-both require due process scrutiny,
which corporate registration fails. The AstraZeneca court reasoned that
one of the premises of Daimler was that a corporation is entitled to
"some minimum assurance as to where its conduct will and will not render
(it) liable to suit," and such notice is absent when registration is
treated as consent to general personal jurisdiction. The court also
argued that a corporate defendant registered in multiple states could be
exposed to suits all over the country, a result that Daimler's "at home"
test sought to preclude. See also Chatwal Hotels & Resorts LLC v. Dolly-
wood Co., 90 F.Supp.3d 97 (S.D.N.Y. 2015); Public Impact, LLC v. Boston
Consulting Group, Inc., 2015 WL 4622028 (M.D.N.C. 2015) (applying pre-
Daimler Fourth Circuit precedent).
AstraZeneca was convincingly answered by Acorda Therapeutics, Inc. v.
Mylan Pharmaceuticals Inc., 2015 WL 186833 (D.Del. 2015), where the
court held that consent is an entirely separate basis of jurisdiction
from that based on minimum contacts. Daimler itself indicated that the
issue before the Court was the scope of jurisdiction over corporations
that had not consented to jurisdiction. 134 S.Ct. at 755-56. Daimler
simply does not overrule or even call into question Supreme Court prece-
dents upholding corporate registration as a constitutional basis for
general jurisdiction. Acorda also rejected the argument that jurisdic-
tion based on registration creates unpredictability. On the contrary,
"(w)hen . . the basis for jurisdiction is the voluntary compliance with
a state's registration statute, which has long and unambiguously been
interpreted as constituting consent to general jurisdiction in that
state's courts, the corporation can have no uncertainty as to the juris-
dictional consequences of its action." The number of states in which a
corporation voluntarily registers to do business is irrelevant. (The
split within the Delaware District Court is expected to be resolved in a
consolidated appeal of AstraZeneca and Acorda to the Court of Appeals
for the Federal Circuit. See 2015 WL 1467321.)
In short, the developing caselaw firmly supports New York's statutory
reaffirmance that a foreign corporation that registers to do business in
New York consents to general personal jurisdiction.
It is important to note that the doctrine of forum non conveniens
provides a safety valve against unreasonable exercises of jurisdiction,
even when corporate defendants are registered in New York. Forum non
conveniens, codified in CPLR 327, authorizes courts, in their
discretion, to dismiss cases that have no connection to New York.
Recently, for example, the court in Corporate Jet Support, Inc. v.
Lobosco Ins. Group, L.L.C., 2015 WL 5883026 (Oct. 7, 2015,
Sup.Ct.N.Y.Co.), dismissed a New York action against a New York-regis-
tered corporate defendant, even though such registration conferred
general jurisdiction, because New Jersey was a more appropriate forum:
the case involved a New Jersey corporation suing another New Jersey
corporation with respect to events that took place in New Jersey. See
also Bewers v. American Home Products Corp., 99 A.D.2d 949 (1st Dep't),
aff'd, 64 N.Y.2d 630 (1984) (court dismissed on forum non conveniens
grounds where English citizens sued New York corporations for personal
injuries allegedly caused by defendants' pharmaceutical products that
were manufactured, tested, labelled, marketed, prescribed and ingested
in England).
BCL § 1312(a) will continue to provide an indirect enforcement mechanism
to encourage foreign corporations doing business in New York to become
authorized and thereby confer consent to general jurisdiction. BCL §
1312(a) states that a foreign corporation doing business in New York
without authority may not maintain an action in the state's courts until
it obtains the necessary authorization and pays relevant fees, taxes,
penalties and interest charges. This statute "regulate(s) foreign corpo-
rations which are conducting business in New York so that they will not
be on a more advantageous footing than domestic corporations." Reese v.
Harper Surface Finishing Systems, 129 A.D.2d 159, 162 (2d Dep't 1987).
BCL § 1312(a) applies to corporations engaged in "regular, systematic
and continuous" business in New York. See, e.g., Highfill, Inc. v.
Bruce and Iris, Inc., 50 A.D.3d 742, 743 (2d Dep't 2008). This standard
encompasses corporations that maintain offices or other facilities in
New York for the purpose of engaging in a mix of local and interstate
business and provides sufficient flexibility for the inclusion of corpo-
rations that do business in New York without a fixed location, as was
the case in Highfill. It has been noted that the "regular, systematic
and continuous business" standard helps to ensure compliance with
constitutional limits on state regulation of purely interstate business.
See Airtran New York, LLC v. Air Group, Inc., 46 A.D.3d 208, 214 (1st
Dep't 2007).
Consistent with the history, policy and caselaw relating to foreign
business corporations, this measure also codifies the principle that
other types of foreign business organizations consent to general juris-
diction when they do business in New York and, pursuant to statute,
expressly appoint the Secretary of State as their agent upon whom proc-
ess may be served. This measure thus includes foreign joint stock asso-
ciations and business trusts (see Gen. Assoc. Law §§ 18; 2(4) (these are
the only "associations" that must designate the Secretary of State as
agent)); foreign limited liability companies (see Ltd. Liability Co. Law
§§ 301(a); 802(a)); foreign not-for-profit corporations (see Not-for-
Profit Corp. Law §§ 304, 1301, 1304(a)(6)); foreign limited partnerships
(see Partnership Law §§ 121-104; 121-902); and foreign limited liability
partnerships (see Partnership Law § 121-1502).
Authorized foreign corporations not wishing to continue their consent to
jurisdiction may, of course, surrender their authority to do business in
New York at any time in accordance with BCL § 1310. Other types of busi-
ness organizations may likewise withdraw their authorization or certif-
icate of designation to do business in the State. Currently, however,
there is no statutory language specifically delineating the date upon
which the consent to jurisdiction is deemed withdrawn. Accordingly, this
measure would also enact a new CPLR 301-a to provide that where a busi-
ness organization which is registered, authorized or designated to do
business in this state surrenders, withdraws or otherwise revokes its
registration, authorization or certificate of designation, its consent
to jurisdiction terminates on the date of such surrender, withdrawal or
revocation.
With respect to not-for-profit corporations, the amendment of the Not-
for-Profit Corporation Law (§ 1301(e)) recognizes that some not-for-pro-
fits, such as religious corporations, are exempt from the requirement
that they designate the Secretary of State as an agent upon whom process
may be served. See Relig. Corp. Law § 2-b. See also Not-for-Profit
Corp. Law § 113(b); Private Housing Finance Law § 13-a (limited-profit
housing companies). In such cases, consent-based jurisdiction is lack-
ing. Furthermore, foreign banks and foreign insurance companies are
excluded from this measure. Although these foreign entities must regis-
ter to do business in New York, their concomitant designation of the
Secretary of Banking and the Secretary of Insurance, respectively, as an
agent upon whom process may be served is explicitly limited by statute
to a narrow range of claims. See Banking Law § 200(3); Ins. Law §
1212(a).
This measure, which would have no fiscal impact on the State, would take
effect on the first of January next succeeding the date on which it
shall have become law.
2015 LEGISLATIVE HISTORY:
Senate 4846 (Sen. Bonacic) (committed to Rules)
Assembly 6714 (M. of A. Weinstein) (PASSED)
2014 LEGISLATIVE HISTORY:
Senate 7078 (Sen. Bonacic) (subst. by Assembly 9576)
Assembly 9576 (M. of A. Weinstein) (PASSED)
STATE OF NEW YORK
________________________________________________________________________
6714
2015-2016 Regular Sessions
IN ASSEMBLY
March 30, 2015
___________
Introduced by M. of A. WEINSTEIN, SEAWRIGHT -- (at request of the Office
of Court Administration) -- read once and referred to the Committee on
Judiciary
AN ACT to amend the civil practice law and rules, the business corpo-
ration law, the general associations law, the limited liability compa-
ny law, the not-for-profit corporation law and the partnership law, in
relation to consent to jurisdiction by foreign business organizations
authorized to do business in New York
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. The civil practice law and rules is amended by adding a new
2 section 301-a to read as follows:
3 § 301-a. Termination of consent to jurisdiction in certain cases.
4 Where a business organization registered, authorized or designated to do
5 business in this state surrenders, withdraws or otherwise revokes its
6 registration, authorization or certificate of designation, its consent
7 to jurisdiction terminates on the date of such surrender, withdrawal or
8 revocation.
9 § 2. Section 1301 of the business corporation law is amended by adding
10 a new paragraph (e) to read as follows:
11 (e) A foreign corporation's application for authority to do business
12 in this state, whenever filed, constitutes consent to the jurisdiction
13 of the courts of this state for all actions against such corporation. A
14 surrender of such application shall constitute a withdrawal of consent
15 to jurisdiction.
16 § 3. Section 18 of the general associations law is amended by adding a
17 new subdivision 5 to read as follows:
18 5. An association's certificate of designation prescribed by this
19 section, whenever filed, constitutes consent to the jurisdiction of the
20 courts of this state for all actions against such association. A revoca-
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD09693-01-5
A. 6714 2
1 tion of such designation shall constitute a withdrawal of consent to
2 jurisdiction.
3 § 4. Section 802 of the limited liability company law is amended by
4 adding a new subdivision (c) to read as follows:
5 (c) A foreign limited liability company's application for authority to
6 do business in this state, whenever filed, constitutes consent to the
7 jurisdiction of the courts of this state for all actions against such
8 limited liability company. A surrender of such application shall consti-
9 tute a withdrawal of consent to jurisdiction.
10 § 5. Section 1301 of the not-for-profit corporation law is amended by
11 adding a new paragraph (e) to read as follows:
12 (e) A foreign corporation's application for authority to conduct
13 activities in this state, whenever filed, constitutes consent to the
14 jurisdiction of the courts of this state for all actions against such
15 corporation unless such corporation is exempt from any law requiring it
16 to designate the secretary of state as agent of the corporation upon
17 whom process against it may be served and it has made no such desig-
18 nation. A surrender of such application shall constitute a withdrawal of
19 consent to jurisdiction.
20 § 6. Section 121-902 of the partnership law is amended by adding a new
21 subdivision (e) to read as follows:
22 (e) A foreign limited partnership's application for authority to do
23 business in this state, whenever filed, constitutes consent to the
24 jurisdiction of the courts of this state for all actions against such
25 foreign limited partnership. A surrender of such application shall
26 constitute a withdrawal of consent to jurisdiction.
27 § 7. Section 121-1502 of the partnership law is amended by adding a
28 new subdivision (r) to read as follows:
29 (r) A foreign limited liability partnership's notice to carry on or
30 conduct or transact business or activities as a New York registered
31 foreign limited liability partnership in this state, whenever filed,
32 constitutes consent to the jurisdiction of the courts of this state for
33 all actions against such foreign limited liability partnership. A with-
34 drawal of such notice shall constitute a withdrawal of consent to juris-
35 diction.
36 § 8. This act shall take effect on the first of January next succeed-
37 ing the date on which it shall have become a law.
