Court Declines to Exercise Personal Jurisdiction Over Foreign Corporation with No Constitutional Contacts to New York

• Posted on: Jan 21 2019

Commercial transactions very often involve parties from different states. One party can be domiciled in New York, for example, while the other can be incorporated or headquartered in Delaware. When a dispute arises between such geographically diverse parties, questions concerning the jurisdiction of a court over the parties often gets litigated.  This becomes even more pronounced when the corporation is a multinational company, which conducts business across the county and the world.

In Daimler Ag v. Bauman, the United States Supreme Court addressed the constitutional parameters of general jurisdiction and held that a court has general jurisdiction over a foreign corporation when the corporation’s “affiliations … are so continuous and systematic as to render it essentially home [in a particular state]” (134 S. Ct. 746, 761 (2014) (citing Goodyear Dunlop Tires Operations, SA v. Brown, 131 S. Ct. 2846 (2011)), i.e., the state “where [it] is incorporated or has its principal place of business.” Id. at 760. The Court rejected the notion that a court could exercise general jurisdiction “in every State in which a corporation ‘engages in a substantial, continuous, and systematic course of business,” stating that such a “formulation” was “unacceptably grasping.” Id. at 761.

Although the “paradigm forum for the exercise of general jurisdiction” over an individual is his/her “domicile” and for a corporation, its “place of incorporation and principal place of business” 134 S.Ct. at 760 (citation omitted), the Court also held that in the absence of these bases, a court could exercise jurisdiction over a corporation in the place where it is “essentially at home in the forum state.” Justice Sotomayor, concurring in the judgment, explained that the phrase “at home” signifies continuous and substantial contacts by a foreign corporation within a forum state such that it is “akin to those of a local enterprise that actually is ‘at home’ in the State.” Id. at 769. (citation omitted). Such proof, however, is difficult to muster. Thus, the Court “cast significant doubt on the notion that a corporation could ever be subject to general jurisdiction in a State that is neither its State of incorporation or its principal place of business.” Amelius v. Grand Imperial LLC, 2017 N.Y. Slip Op. 27297, at *10 (Sup. Ct. N.Y. Cnty. Sept. 11, 2017).

After Daimler, parties have litigated whether a particular location constitutes a corporation’s principal place of business. In Hertz Corp. v. Friend, 559 U.S. 77 (2010), the Supreme Court held that a company’s principal place of business is the place “where [its] officers direct, control, and coordinate the corporation’s activities,” or its nerve-center. Id. at 92-93. The analysis focuses on where a corporation’s “high-level” decisions are made. St. Paul Fire and Marine Ins. Co. v. Scopia Windmill Fund, LP, 87 F. Supp. 3d 603, 605 (S.D.N.Y. 2015). See also CBRE Inc. v. Pace Gallery LLC, No. 1:17-CV-2452, 2018 WL 740994, at *2 (S.D.N.Y. Feb. 6, 2018).

In Kline v. Facebook, Inc., 2019 NY Slip Op 30103(U) (Sup. Ct. N.Y. Cnty. Jan. 10, 2019) (here), the foregoing issues were before Justice Kathryn E. Freed, who held that the petitioner was unable to demonstrate that the respondents (multinational corporations) were “at home” in New York.

Kline was decided in the context of a special proceeding under CPLR § 3102(c), in which the petitioner, Torin Kline (“Kline”), moved for pre-action discovery from respondents, Facebook, Inc. (“Facebook”) and Google, LLC (“Google”). Kline demanded that Facebook provide the identity(ies) of the person(s) who posted and/or sent false and defamatory posts about him on the Facebook website and/or mobile application. Kline also demanded that Google provide the identity of the person who maintained and used an email address that Kline argued had been used to send false and defamatory statements about him.

[Ed. Note: This Blog recently posted an article concerning pre-action discovery under the CPLR (here).]

Although the Court did not discuss the bases upon which Facebook and Google opposed the petition, a review of the briefing shows that each corporation argued, among other things, that the Court could not exercise general jurisdiction over them. The Court agreed with Facebook and Google and dismissed the petition.

In dismissing the petition, the Court held that the paradigm bases on which general jurisdiction can be found were not present as to each respondent. In that regard, the Court observed that neither Facebook nor Google were “incorporated in New York” and neither “have their principal places of business” in the State, facts that Kline admitted. Slip op. at **2-3.

The Court also found that neither company was otherwise “at home” in New York, despite having “offices in New York City.” Id. at *3. The Court rejected Kline’s argument that maintaining such offices “signifie[d] that respondents had the required ‘continuous and systematic’ affiliations with the State of New York.” Id. “Rather,” said the Court, “petitioner merely assets that respondents are ‘at home’ in New York because they have such large offices, and employ so many people, in New York.” Id.

Takeaway

Historically, under New York law, an out-of-state corporate defendant was subject to a court’s general jurisdiction when it was “doing business” in the State on a “continuous and systematic” basis.  Lebron v. Encarnacion, 253 F. Supp. 3d 513, 518 (E.D.N.Y. 2017) (citing Laufer v. Ostrow, 55 N.Y.2d 305, 309-10 (1982)).

However, in Daimler, “the Supreme Court largely eschewed New York’s traditional ‘doing business’ standard in favor of an inquiry into whether a defendant’s affiliations with New York rendered it essentially ‘at home’ here.” Lebron, 253 F. Supp. 3d at 518.

As Kline shows, after Daimler “only a limited set of affiliations with a forum will render a defendant amenable to all-purpose jurisdiction there.” Daimler, 134 S.Ct. at 760. Thus, as to foreign corporations, “[t]he paradigm forum for general jurisdiction” is “the place of incorporation and the principal place of business.” Sonera Holding B.V. v. Cukurova Holding A.S., 750 F.3d 221, 225 (2d Cir. 2014). As the Supreme Court noted, a foreign corporation cannot be found to be “doing business” through agents and subsidiaries in multiple jurisdictions. Daimler, 134 S.Ct. at 762 n.20 (noting that “[a] corporation that operates in many places can scarcely be deemed at home in all of them.”).

Kline also shows the difficulty a plaintiff has in demonstrating that a foreign corporation is otherwise “at home” in a jurisdiction. Indeed, it is “[o]nly on truly ‘exceptional’ occasions [that] general jurisdiction [may] extend over [corporations] who are ‘at home’ in a state that is not otherwise their domicile.” Sonera Holding B.V., 750 F.3d at 225 (citation omitted). As Kline learned, having an office in a particular forum is not the type of “exceptional occasion” contemplated by the Supreme Court in Daimler.

Tagged with: Commercial Litigation, General Jurisdiction, Personal Jurisdiction