BCL § 1314: Subject Matter Jurisdiction Over Cases Involving Foreign Corporations Against Foreign Corporations

• Posted on: Apr 21 2025

By: Jeffrey M. Haber

It is well settled that the parties to an agreement may freely select any forum to resolve any disputes regarding the interpretation or performance of the agreement.[1] A forum selection clause is prima facie valid “unless-it is shown by the challenging party to be unreasonable, unjust, in contravention of public policy, invalid due to fraud or overreaching, or it is shown that a trial in the selected forum would be so gravely difficult that the challenging party would, for all practical purposes, be deprived of its day in court.”[2]

In Pearl Beta Funding, LLC v. Elegant Trio Colors Corp., 2025 N.Y. Slip Op. 02217 (2d Dept. Apr. 16, 2025) (here), the agreement at issue (a revenue repurchase agreement) contained a forum selection clause that designated New York as the forum in which disputes would be heard. The case is of note, and the reason why we are examining the case, because the agreement at issue involved parties that were not resident or domiciled in New York. Under circumstances as those present in Pear Beta Funding (i.e., non-resident or domiciled corporate parties), questions concerning the court’s ability to hear the case (i.e., the court’s subject matter jurisdiction) must be resolved under Business Corporation Law (“BCL”) § 1314.

Under BCL § 1314, a New York court has subject matter jurisdiction over actions brought by foreign corporations or non-residents against other foreign corporations only if (a) they fall into one of five specified categories (see BCL § 1314 (b)); or (ii) they fall within an exception to BCL § 1314’s limits that itself has been created by statute (see e.g. General Obligations Law (GOL) § 5-1402 (1)).[3] 

Under BCL § 1314(b), New York State courts have subject matter jurisdiction over actions brought by foreign corporations or non-residents against other foreign corporations: (1) “[w]here [the action] is brought to recover damages for the breach of a contract made or to be performed within this state, or relating to property situated within this state at the time of the making of the contract;” (2) “[w]here the subject matter of the litigation is situated within this state;” (3) “[w]here the cause of action arose within this state, except where the object of the action or special proceeding is to affect the title of real property situated outside this state;” (4) [w]here, in any case not included in the preceding subparagraphs, a non-domiciliary would be subject to the personal jurisdiction of the courts of this state under section 302 of the civil practice law and rules;”[4] and (5) “[w]here the Defendant is a foreign corporation doing business or authorized to do business in this state”.[5]

Pearl Beta Funding, LLC v. Elegant Trio Colors Corp.

In Pearl Beta Funding, plaintiff relied on BCL §§ 1314(b)(1) and (4) as the basis for subject jurisdiction over defendants.

Plaintiff is a Delaware entity authorized to do business in New York State. Defendant Leila Tolentino Cristobal (“Cristobal”) is an individual residing in California. Defendant Elegant Trio Colors Corp d/b/a Jazzy France (“Elegant”) is a California entity.

In December 2021, the parties entered into an agreement, whereby plaintiff agreed to purchase the rights to an agreed upon value for Elegant’s future receivables in exchange for a certain purchase price and that Elegant breached the agreement by failing to make required payments due thereunder. As noted above, the revenue purchase agreement contained a forum selection clause that made New York the agreed upon forum for the resolution of all disputes arising from, or out of, the agreement.

Defendants moved to dismiss the complaint pursuant to CPLR 3211(a)(2), contending that, under BCL § 1314, the motion court lacked subject matter jurisdiction over the dispute. In an order entered on June 9, 2023, the motion court granted the motion.

The motion court held that “[b]ased on a careful review of the parties’ contentions and the evidence in the record, BCL § 1314(b)(1) [did] not afford subject matter jurisdiction to this Court” over the dispute between the parties. The motion court explained that, due to conflicting affidavits submitted by the parties, there was insufficient evidence upon which to find that the Court had jurisdiction over the matter. For instance, pointing to the affidavit submitted by Cristobal, the owner and operator of Elegant, the motion court observed that “the subject contract was not made, signed, or to be performed within New York State, and that the agreement was signed in West Covina, California and transmitted by internet.” By contrast, said the motion court, Adnan Arbar, Plaintiff’s funding manager, averred in his affidavit that “he countersigned the subject agreement via DocuSign at his office located in Queens, New York on December 29, 2021” and that “some of the funds at issue were subsequently transferred through a New York bank.” Given the discrepancies between the parties, the motion court concluded that “there [was] insufficient evidence demonstrating that the contract between the parties was made or intended to be performed within New York State.”

The motion court also held that it “lack[ed] subject matter jurisdiction over [the] action under BCL § 1314(b)(4).” As noted, BCL § 1314 (b)(4) provides for subject matter jurisdiction in cases against a non-domiciliary where such foreign defendant would be subject to personal jurisdiction under New York’s long arm statute, CPLR 302.[6] The motion court rejected plaintiff’s argument that long arm jurisdiction existed over defendants pursuant to CPLR 302(a)(1) because defendants transacted business in New York and/or had a contract to supply goods or services to plaintiff in New York. In so doing, the motion court found that, as discussed above, plaintiff’s submissions did not establish that a sufficient nexus exist[ed] between New York and defendants or the transaction at issue in the litigation.

Moreover, the motion court held that “contrary to plaintiff’s contention, the forum selection clause contained in the parties’ contract indicating that the parties agreed to bring any actions arising out of the agreement in New York [was] insufficient to confer jurisdiction over [d]efendants.”[7]

Therefore, concluded the motion court, “absent personal jurisdiction under CPLR 302, [the] Court lack[ed] subject matter jurisdiction over Defendants under BCL § 1314(b)(4).”

On June 14, 2023, pursuant to the motion court’s order granting the motion, the motion court entered judgment dismissing plaintiff’s complaint. Plaintiff appealed.

The Appellate Division, Second Department unanimously reversed, holding that the motion court “erred in granting the defendants’ motion pursuant to CPLR 3211(a)(2) to dismiss the complaint.”[8]

The Court found that the Abrar affidavit was sufficient to satisfy plaintiff’s burden to show that the motion court had jurisdiction over the defendants:

In opposition to the defendants’ motion, the plaintiff submitted an affidavit of Adnan Abrar, its funding manager. In his affidavit, Abrar averred, among other things, that he reviewed and countersigned the underlying agreement in New York, that the plaintiff performed under the agreement by delivering the purchase price and making payment from its account at BankUnited located in Melville, and that the defendants remitted purchased receivables under the agreement to the plaintiff, which were accepted by the plaintiff at its account located in New York. These averments, viewed in the light most favorable to the plaintiff, were sufficient, at this early stage of the litigation, to establish that the Supreme Court could exercise subject matter jurisdiction over this action ….[9]

Accordingly, the Court ordered “that the judgment is reversed, on the law, the defendants’ motion pursuant to CPLR 3211(a)(2) to dismiss the complaint is denied, [and] the complaint is reinstated.…”[10]

_________________________________

Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP.

This article is for informational purposes and is not intended to be and should not be taken as legal advice.

[1] Brooke Group v. JCH Syndicate 488, 87 N.Y.2d 530 (1996).

[2] Stravalle v. Land Cargo Inc., 39 A.D.3d 735 (2d Dept. 2007).

[3] Under the General Obligations Law, New York courts will exercise subject matter jurisdiction over claims brought by a foreign corporation against a foreign corporation when the claim is worth in excess of one million dollars and the subject agreement contains a New York choice-of-law clause. See GOL § 5-1402; DDR Real Estate Servs., Inc. v. Burnham Pacific Props., Inc., 1 Misc. 3d 802, 804–05 (Sup. Ct., Monroe County Aug. 28, 2003), aff’d, 12 A.D.3d 1182 (4th Dept. 2004).

[4] Under CPLR 302(a)(1), “a court may exercise personal jurisdiction over any non-domiciliary” who “transacts any business within th[is] state or contracts anywhere to supply goods or services in the state.”

[5] BCL § 1314 (b)(1)-(5).

[6] See n.3, supra.

[7] Citing Techo-TM, LLC v Fireaway, Inc., 123 A.D.3d 610 (1st Dept. 2014).

[8] Slip Op. at *2.

[9] Id. (citing BCL § 1314(b)(1), (4); cf. Techo-TM, 123 A.D.3d at 610).

[10] Id. at *1.