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Defendant Not Equitably Estopped From Asserting a Personal Jurisdiction Defense Says the First Department

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  • Posted on: May 8 2019

This Blog has previously written about the equitable estoppel doctrine in the context of the statute of limitations (here). See General Stencils v. Chiappa, 18 N.Y.2d 125, 128 (1966); Zumpano v. Quinn, 6 N.Y.3d 666, 674 (2006); Matter of Steyer, 70 N.Y.2d 990, 993 (1988). The doctrine has also been used as a basis to reject a jurisdictional defense. Matre v. Erie County Pub. Adm’r., 283 A.D.2d 1025, 1026 (4th Dept. 2001) (applied to personal jurisdiction and statute of limitations defenses); Brown v. Snell, 57 N.Y. 286, 303 (1874) (court applied the doctrine to prevent the defendant from asserting lack of jurisdiction). While the circumstances under which the doctrine is asserted may differ, the analysis of the doctrine remains the same: a plaintiff seeking to apply the doctrine of equitable estoppel must establish that the defendant’s actions prevented him/her from taking action and that he/she justifiably relied on the defendant to his/her detriment.

“The purpose of equitable estoppel is to preclude a person from asserting a right after having led another to form the reasonable belief that the right would not be asserted, and loss or prejudice to the other would result if the right were asserted.” Matter of Shondel J. v. Mark D., 7 N.Y.3d 320, 326 (2006). In Shondel J., the Court of Appeals observed, the doctrine is applied “as a matter of fairness.” Id. Courts apply the defense “to prevent someone from enforcing rights that would work injustice on the person against whom enforcement is sought and who, while justifiably relying on the opposing party’s actions, has been misled into a detrimental change of position.” Id. See also Nassau Trust Co. v. Montrose Concrete Prods. Corp., 56 N.Y.2d 175, 184 (1982).

Application of the doctrine requires only reliance and prejudice; it does not require the “existence of fraud or an intent to deceive.” Rodriguez v. Morales, 200 A.D.2d 406, 407 (1st Dept. 1994). Whether the doctrine applies “rests largely on the facts and circumstances of the particular case.” Ayer v. Board of Educ., 69 Misc. 2d 696, 699 (Sup. Ct. Monroe County 1973) (citation omitted).

In Homeward Residential, Inc. v Thompson Hine, LLP, the court addressed the foregoing principles, affirming the dismissal of an action on personal jurisdiction grounds. Homeward Residential, Inc. v Thompson Hine, LLP, 2019 N.Y. Slip Op. 03542 (1st Dept. May 7, 2019) (here).

In doing do, the court rejected the plaintiff’s equitable estoppel defense that its attorneys relied on the defendant’s filings as a foreign partnership with the New York Department of State (“DOS”), which identified a New York address as the Defendant’s “Principal Executive Office,” and on a complaint filed by the defendant in an unrelated action in which it alleged that its principal place of business was in New York.

Homeward Residential arose out of legal work performed by the defendant for the plaintiff in connection with a lawsuit pending in a federal court in Georgia. Plaintiff serviced home mortgage loans and hired the defendant to represent it in a lawsuit brought by a property owner. Plaintiff claimed that the defendant failed to timely assert a claim relating to punitive damages resulting in a $3 million punitive damages judgment awarded against it. Plaintiff contended that had the defendant provided proper representation, it would have cited to a Georgia statute that limited punitive damages to $250,000.

The defendant moved to dismiss for lack of personal jurisdiction, arguing that the court did not possess general jurisdiction or specific jurisdiction over it. The defendant maintained that it is a limited liability partnership organized under the laws of Ohio and its principal place of business is in Cleveland, Ohio. The defendant argued that New York had no connection to the underlying lawsuit that occurred in Georgia, and that none of its New York-based attorneys were involved in the Georgia action. The defendant also noted that it registered with the Department of State as a foreign limited liability partnership.

The plaintiff argued in opposition that it found information about the defendant on the DOS website, which showed that the defendant had changed its principal place of business from Cleveland to New York City. The plaintiff also pointed to a filing in another litigation based in New York in which the defendant asserted that its principal place of business is in New York City.

The motion court granted the motion to dismiss. (Here.)  

The court held that there was no general or specific jurisdiction over the defendant – it found that the defendant was incorporated in Ohio and maintained its principal place of business in Ohio. The Court rejected the plaintiff’s equitable estoppel defense that the defendant held itself out to be a New York entity because of the information filed with the DOS:

Here, plaintiffs purported reliance on these DOS printouts to support its equitable estoppel argument is simply unreasonable. The fact is that New York had nothing to do with the parties’ relationship. Plaintiff is not based in New York. Defendant represented plaintiff in a lawsuit in Georgia. Plaintiff does not even contend that any of defendant’s lawyers based in New York did anything in connection with the Georgia trial. And, in reply, defendant submits check vouchers in connection with the Georgia action that purportedly show that payments were made to defendant in Cleveland.

The Court observes that the term ‘Principal Executive Office’ appears to relate primarily to issues of venue; it is not a synonym for principal place of business. Moreover, defendant argues that it means its principal office within New York state; that claim is supported by the current registration form for foreign LLPs created by DOS the third box asks the entity to list “the address of the principal office of the foreign limited liability partnership in New York state”. It is not defendant’s fault if the DOS extrapolates from that form to put on its website something that may not be accurate.

Orig’l emphasis; citations omitted.

The motion court went on to say that “to arrive at plaintiff’s conclusion,” “one would have to selectively rely on information that supports plaintiff’s position to the exclusion of everything else.” That is not how the equitable estoppel doctrine works said the court: “Equitable estoppel cannot apply where plaintiff cherry-picks which information to rely on and which facts to ignore.”

The plaintiff appealed.

The Appellate Division, First Department, “unanimously affirmed, with costs.”

The Court found that the defendant had “demonstrated that there [was] no basis for asserting specific or general personal jurisdiction over it in New York because it is a limited liability partnership formed in Ohio, with a principal place of business in Ohio, and it rendered legal services to plaintiff in Georgia and Ohio only, not in New York.” Slip Op. at *1.

The Court further found that the plaintiff was aware of facts, which had it conducted an investigation would have revealed that the defendant was not at home in New York. As such, the equitable estoppel doctrine was not available to it:

However, defendant presented evidence showing that any search for public information would disclose that it is an Ohio-based law firm, with its principal place of business in Cleveland, and, moreover, that plaintiff was aware of this, as it had dealt with the firm in Georgia and Ohio only and sent payments to the Cleveland office. Defendant also showed that it did not affirmatively misrepresent its place of business in its DOS filings, which disclose that it is a foreign limited liability corporation and provide its Cleveland address for service of process. Plaintiff’s “timely awareness of the facts requiring [it] to make further inquiry” and failure to make such inquiry before bringing suit in New York render equitable estoppel inappropriate as a matter of law.

Id. at **1-2 (citation omitted).

Takeaway

Homeward Residential is an interesting case because of the approach taken by the plaintiff to demonstrate personal jurisdiction. Instead of trying to affirmatively show that the defendant had sufficient contacts in New York to establish specific jurisdiction, the plaintiff “claim[ed] that [the] defendant [was] equitably estopped from arguing about personal jurisdiction.” (Orig’l emphasis.) To the motion court, if it were to adopt such an approach, it would have “require[d] the [c]ourt to block out all other information showing the reality: that defendant is based in Ohio and that plaintiff is aware of that fact given the parties’ prior relationship in Georgia.” As the motion court concluded, since “the principle of equitable estoppel relies on fairness,” “it would be inherently unfair for defendant to be subject to general jurisdiction in New York because plaintiff relied exclusively on its own interpretation of information compiled by a third-party over which defendant had no control.” Or, as the First Department observed, a plaintiff cannot avail itself of the doctrine if it is aware of information that calls into question its reliance and fails to investigate further.

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