A09576 Summary:

BILL NO    A09576 

SAME AS    SAME AS S07078

SPONSOR    Weinstein

COSPNSR    Weprin

MLTSPNSR   

Add S301-a, CPLR; amd S1301, BC L; amd S18, Gen Assoc L; amd S802, Lim Lil L;
amd S1301, N-PC L; amd SS121-902 & 121-1502, Partn L

Relates to consent to general jurisdiction by foreign business organizations
authorized to do business in New York.
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A09576 Actions:

BILL NO    A09576 

05/08/2014 referred to judiciary
05/13/2014 reported 
05/15/2014 advanced to third reading cal.740
06/02/2014 passed assembly
06/02/2014 delivered to senate
06/02/2014 REFERRED TO JUDICIARY
06/03/2014 SUBSTITUTED FOR S7078
06/03/2014 3RD READING CAL.427
06/20/2014 SUBSTITUTION RECONSIDERED
06/20/2014 COMMITTED TO RULES
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A09576 Votes:

A09576 06/02/2014 130/1
AbbateYCorwinYGlickYLavineYNolanYRozicYTitusY
AbinantYCrespoYGoldfedYLentolYOaksYRussellYWalterY
ArroyoYCrouchYGoodellYLiftonYO'DonneYRyanYWeinsteY
AubryYCurranYGottfriYLopezYOrtizYSaladinYWeisenbER
BarclayYCusickYGrafYLupardoYOtisYSantabaYWeprinY
BarrettYCymbrowYGuntherYLupinacYPalmesaYScarborYWrightY
BenedetYDavilaYHawleyYMageeYPalumboYSchimelYZebrowsY
BlankenYDenDekkYHeastieYMagnareYPaulinYSchimmiYMr SpkrY
BorelliYDinowitYHennessYMalliotYPeoplesYSepulveY
BraunstYDiPietrERHevesiERMarkeyYPerryYSimanowY
BrennanYDupreyYHikindERMayerYPichardYSimotasER
BrindisYEnglebrYHooperYMcDonalYPretlowYSkartadY
BronsonYFahyYJacobsERMcDonouYQuartYSkoufisY
Brook-KYFarrellYJaffeeYMcKevitYRaYSolagesY
BuchwalNOFinchYJohnsYMcLaughYRaiaYStecY
ButlerYFitzpatYKatzYMillerYRamosYSteckY
CahillYFriendYKavanagYMillmanYRiveraYStirpeY
CamaraYGalefYKearnsYMontesaYRobertsYSweeneyY
CerettoYGanttYKellnerABMorelleYRobinsoERTediscoY
ClarkYGarbariYKimYMosleyYRodriguYTenneyER
ColtonYGiglioYKolbYMoyaYRosaYThieleY
CookYGjonajYLalorYNojayYRosenthYTitoneY

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A09576 Memo:

BILL NUMBER:A9576

TITLE OF BILL:  An act to amend the civil practice law and rules, the
business corporation 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 her Advisory
Committee on Civil Practice.

This measure would amend S 1301 of the Business Corporation Law (BCL)
to reinforce the continuing viability of consent as a basis of general
(all-purpose) personal jurisdiction over foreign corporations
authorized to do business in New York. In so doing, the measure serves
a substantial public interest. Being able to sue New York-licensed
corporations in New York on claims that arose elsewhere will save New
York residents and others the expense and inconvenience of traveling
to distant forums to seek the enforcement of corporate 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
business 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 principal 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-arm 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
"textbook case" of Perkins v. Benguet Consolidated Mining Co., 342
U.S. 437 (1952), for guidance as to circumstances that permit exercise
of general jurisdiction "over a foreign corporation that has not
consented to suit in the forum.")

A foreign corporation, as a condition to doing business in New York
must apply for authorization to do so from the New York Secretary of
State. BCL S 1301(a). As a part of such licensing and registration,
BCL S 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 S 1304(a) (6). Furthermore, BCL S 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
jurisdiction 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
represent 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 jurisdiction 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
corporation's New York activity. The consent extended to all claims,
regardless 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, 174-75 (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 process" (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 constitutes consent to general jurisdiction. Le Vine v.
Isoserve, Inc., 70 Misc.2d 747, 749 (Sup,Ct. Albany Co. 1972); STX
Panocean (U.K) 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 contrary decision 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
may be 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
regulation 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 at least 98 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 S 1301 would
codify the caselaw and provide a forceful legislative declaration of
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 defendant may be sued on any and all claims." 134
S.Ct. at 760. It should be noted, however, that even when corporate
defendants are registered in New York, courts retain the discretionary


power to decline the exercise of jurisdiction over them in the
interests of justice and convenience pursuant to the doctrine of forum
non conveniens. CPLR 327; see, e.g., Bewers v. American Home Products
Corp., 99 A.D.2d 949 (1st Dep't), affd, 64 N.Y.2d 630 (1984).

BCL S 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 S 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 corporations 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 S 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 corporations 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
jurisdiction when they do business in New York and, pursuant to
statute, expressly appoint the Secretary of State as their agent upon
whom process may be served. This measure thus includes foreign joint
stock associations and business trusts (see Gen. Assoc. Law SS 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 SS 301(a); 802(a)); foreign not-for-profit
corporations (see Not-for-Profit Corp. Law SS 304, 1301, 1304(a)(6));
foreign limited partnerships (see Partnership Law SS 121-104;
121-902); and foreign limited liability partnerships (see Partnership
Law S 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 S 1310. Other
types of business organizations may likewise withdraw their
authorization or certificate 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 business 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. (S 1301(e)) recognizes that some
not-for-profits, 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 S 2-b. See also
Not-for-Profit Corp. Law S 113(b); Private Housing Finance Law S 13-a
(limited-profit housing companies). In such cases, consent-based
jurisdiction is lacking. Furthermore, foreign banks and foreign
insurance companies are excluded from this measure. Although these
foreign entities must register 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 S 200(3); Ins. Law S 1212(a).

This measure, which would have no fiscal impact on the State, would
take effect immediately.

Legislative History: None. New Proposal.
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A09576 Text:

                           S T A T E   O F   N E W   Y O R K
       ________________________________________________________________________

                                         9576

                                 I N  A S S E M B L Y

                                      May 8, 2014
                                      ___________

       Introduced  by  M. of A. WEINSTEIN -- (at request of the Office of Court
         Administration) -- read once and referred to the Committee on  Judici-
         ary

       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    S 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    S 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    S 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 REVO-
   21  CATION OF SUCH DESIGNATION SHALL CONSTITUTE A WITHDRAWAL OF  CONSENT  TO
   22  JURISDICTION.
   23    S  4.  Section  802 of the limited liability company law is amended by
   24  adding a new subdivision (c) to read as follows:

        EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                             [ ] is old law to be omitted.
                                                                  LBD14556-02-4
       A. 9576                             2

    1    (C) A FOREIGN LIMITED LIABILITY COMPANY'S APPLICATION FOR AUTHORITY TO
    2  DO BUSINESS IN THIS STATE, WHENEVER FILED, CONSTITUTES  CONSENT  TO  THE
    3  JURISDICTION  OF  THE  COURTS OF THIS STATE FOR ALL ACTIONS AGAINST SUCH
    4  LIMITED LIABILITY COMPANY.    A  SURRENDER  OF  SUCH  APPLICATION  SHALL
    5  CONSTITUTE A WITHDRAWAL OF CONSENT TO JURISDICTION.
    6    S  5. Section 1301 of the not-for-profit corporation law is amended by
    7  adding a new paragraph (e) to read as follows:
    8    (E) A FOREIGN  CORPORATION'S  APPLICATION  FOR  AUTHORITY  TO  CONDUCT
    9  ACTIVITIES  IN  THIS  STATE,  WHENEVER FILED, CONSTITUTES CONSENT TO THE
   10  JURISDICTION OF THE COURTS OF THIS STATE FOR ALL  ACTIONS  AGAINST  SUCH
   11  CORPORATION  UNLESS SUCH CORPORATION IS EXEMPT FROM ANY LAW REQUIRING IT
   12  TO DESIGNATE THE SECRETARY OF STATE AS AGENT  OF  THE  CORPORATION  UPON
   13  WHOM  PROCESS  AGAINST  IT  MAY BE SERVED AND IT HAS MADE NO SUCH DESIG-
   14  NATION.  A SURRENDER OF SUCH APPLICATION SHALL CONSTITUTE  A  WITHDRAWAL
   15  OF CONSENT TO JURISDICTION.
   16    S 6. Section 121-902 of the partnership law is amended by adding a new
   17  subdivision (e) to read as follows:
   18    (E)  A  FOREIGN  LIMITED PARTNERSHIP'S APPLICATION FOR AUTHORITY TO DO
   19  BUSINESS IN THIS STATE,  WHENEVER  FILED,  CONSTITUTES  CONSENT  TO  THE
   20  JURISDICTION  OF  THE  COURTS OF THIS STATE FOR ALL ACTIONS AGAINST SUCH
   21  FOREIGN LIMITED PARTNERSHIP.   A SURRENDER  OF  SUCH  APPLICATION  SHALL
   22  CONSTITUTE A WITHDRAWAL OF CONSENT TO JURISDICTION.
   23    S  7.  Section  121-1502 of the partnership law is amended by adding a
   24  new subdivision (r) to read as follows:
   25    (R) A FOREIGN LIMITED LIABILITY PARTNERSHIP'S NOTICE TO  CARRY  ON  OR
   26  CONDUCT  OR  TRANSACT  BUSINESS  OR  ACTIVITIES AS A NEW YORK REGISTERED
   27  FOREIGN LIMITED LIABILITY PARTNERSHIP IN  THIS  STATE,  WHENEVER  FILED,
   28  CONSTITUTES  CONSENT TO THE JURISDICTION OF THE COURTS OF THIS STATE FOR
   29  ALL ACTIONS AGAINST SUCH FOREIGN LIMITED LIABILITY PARTNERSHIP.  A WITH-
   30  DRAWAL OF SUCH NOTICE SHALL CONSTITUTE A WITHDRAWAL OF CONSENT TO JURIS-
   31  DICTION.
   32    S 8. This act shall take effect on the first of January next  succeed-
   33  ing the date on which it shall have became a law.
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