Defendants’ In-Person Activities in New York Sufficient to Support the Exercise of Specific Personal Jurisdiction

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Posted on: Jan 6 2023

Obtaining jurisdiction over a person or corporation that is domiciled outside of the state can be difficult. A plaintiff must plead and prove that the person or entity purposefully used the resources of the state for a court to exercise personal jurisdiction over the defendant. The failure to do so will result in dismissal of the action.

Under CPLR § 302(a)(1), a court can exercise specific personal jurisdiction over a non-domiciliary who “transacts any business within the state.” To satisfy CPLR § 302(a)(1), a plaintiff must satisfy a two-part test. First, the defendant must have “transacted business” in New York.¹ Second, the plaintiff must demonstrate “some articulable nexus between the business transacted and the cause of action sued upon.”²

CPLR § 302(a)(1) is a “single act statute,” whereby “proof of one transaction in New York is sufficient to invoke jurisdiction, even though the defendant never enters New York, so long as the defendant’s activities here were purposeful and there is a substantial relationship between the transaction and the claim asserted.”³ “Purposeful activities are those with which a defendant, through volitional acts, ‘avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.”⁴ Whether a non-domiciliary has engaged in sufficient purposeful activity to confer jurisdiction requires an examination of the totality of the circumstances.⁵ The quality of a defendant’s contacts is the “primary consideration” in establishing personal jurisdiction.⁶

As to the required nexus, the courts require “a relatedness between the transaction and the legal claim such that the latter is not completely unmoored from the former, regardless of the ultimate merits of the claim.”⁷ “[W]here at least one element arises from the New York contacts, the relationship between the business transaction and the claim asserted supports specific jurisdiction under the statute.”⁸

Further, the exercise of “personal jurisdiction under the long-arm statute must comport with federal constitutional due process requirements.”⁹ In this regard, the nondomiciliary must have “certain minimum contacts with [the forum] such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice.”¹⁰

The “minimum contacts” test “has come to rest on whether a defendant’s conduct and connection with the forum State are such that it should reasonably anticipate being haled into court there.”¹¹ Such minimum contacts exist where a defendant “purposefully avails itself of the privilege of conducting activities within the forum State.”¹² Similarly, where the non-domiciliary uses the forum to “achieve the wrong complained of”, a plaintiff will satisfy “the minimum contacts component of the due process inquiry.”¹³

Whether personal jurisdiction offends “notions of fair play and substantial justice” depends on a consideration of “the burden on the defendant, the forum State’s interest in adjudicating the dispute, the plaintiff’s interest in obtaining convenient and effective relief, the interstate judicial system’s interest in obtaining the most efficient resolution of controversies, and the shared interest of the several States in furthering fundamental substantive social policies”.¹⁴

[Ed. Note: on numerous occasions, this Blog has examined CPLR § 302(a)(1). E.g., here, here, here, and here.]

With the foregoing principles in mind, we examine People v. JUUL Labs, Inc., 2023 N.Y. Slip Op. 00040 (1st Dept. Jan. 5, 2023) (here).

The State of New York (the “People”) sued JUUL Labs, Inc. (“JUUL”), alleging that JUUL’s marketing and sales of its electronic cigarettes constituted deceptive and illegal practices, and contributed to a statewide public health crisis. Thereafter, the People amended the complaint to add as defendants certain corporate officers of JUUL (the “Officer Defendants”). The People alleged that these defendants were involved in, and approved of, JUUL’s marketing strategies. The People asserted, inter alia, causes of action pursuant to General Business Law §§ 349 and 350, for deceptive acts and practices and for false advertising, respectively; pursuant to Executive Law § 63(12), for repeated and persistent fraud and illegal conduct in violation of General Business Law §§ 349 and 350 and section 5 of the Federal Trade Commission Act (15 U.S.C. § 45); and, for public nuisance.

The Officer Defendants separately moved to dismiss the amended complaint, claiming the motion court lacked personal jurisdiction over them, and the claims were otherwise time barred.

In opposition, the People submitted internal emails and reports demonstrating, among other things, that the Officer Defendants traveled to New York City for investment meetings in December 2014 and in 2015; that the Officer Defendants personally attended JUUL’s launch party in New York City in June 2015; at around that time, JUUL also sought to arrange in-person meetings between the Officer Defendants and both “New York targets” and broadcast media organizations; and, that the Officer Defendants and JUUL considered the New York City launch to have been a success.

The record also showed that the Officer Defendants were involved in marketing strategy, which included, among other things, months of events in New York; identifying New York as the target of JUUL’s northeastern U.S. marketing efforts, at and after launch; advertising on billboards in Times Square; hosting in-store product samplings at New York vape shops and social events; and escalating marketing efforts in the New York City metropolitan area post-launch. After New York proved to be a substantial market for JUUL’s product, the Officer Defendants described their efforts as “NYC takeover” and declared that New York City users should be “the focus of [JUUL’s] branding/marketing.”

Based upon the foregoing evidence, the motion court denied the motion. On appeal, the Appellate Division, First Department affirmed.

The Court held that the motion court properly found that it had personal jurisdiction over the Officer Defendants. The Court found that the “evidence establishe[d] that [the Officer D]efendants conducted sufficient in-person activities within New York State related to the People’s claims against them in this action, and sufficiently support[ed] the exercise of specific personal jurisdiction over them pursuant to CPLR 302(a)(1)”.¹⁵

The Court also held that “[e]xercising specific personal jurisdiction over [the Officer D]efendants … comport[ed] with federal constitutional due process requirements”.¹⁶ In this regard, the Court found that there were sufficient minimum contacts within the state, stating that the Officer Defendants’ “physical presence in New York State was ‘not simply an isolated occurrence, but [arose] from [their] efforts … to serve[,] directly or indirectly, the market for [JUUL’s] product’ in the state”.¹⁷ Moreover, noted the Court, the Officer Defendants “participated in a marketing strategy to inject JUUL’s products ‘into the stream of commerce with the expectation that they … be purchased by consumers’ in New York”.¹⁸ “[I]ndeed,” said the Court, “the record establishe[d] that New Yorkers’ purchase of JUUL’s product was the very goal of that marketing strategy.”¹⁹

Further, the Court held that exercising personal jurisdiction over the Officer Defendants did not offend traditional notions of fair play and substantial justice. In this regard, the Court found that “New York State’s interests in this case, and the People’s interest in obtaining relief, outweigh[ed] the burden that exercising specific personal jurisdiction over defendants impose[d] on them”.²⁰ In fact, said the Court, because the record established activities “purposefully directed … at New York State residents”, the Officer Defendants failed to present “a compelling case that some other consideration render[ed] specific personal jurisdiction unreasonable in New York”.²¹

Takeaway

Juul Labs is another example of a court looking at the totality of the contacts within the state to determine whether a nondomiciliary has “on his or her own initiative project[ed] himself of herself into th[e] state to engage in a sustained and substantial transaction of business.”²² Thus, where, as in Juul, the evidence showed that the defendants’ contacts within the state were numerous and purposeful, a court will find that the exercise of jurisdiction over a non-domiciliary is appropriate and consistent with notions of due process.

Footnotes

McGowan v. Smith, 52 N.Y.2d 268, 271 (1981).
Id. at 272.
Deutsche Bank Secs., Inc. v. Mont. Bd. of Invs., 7 N.Y.3d 65, 71 (2006); see also Wilson v Dantas, 128 A.D.3d 176, 182-83 (1st Dept. 2015).
Fischbarg v. Doucet, 9 N.Y.3d 375, 380 (2007) (quoting, McKee Elec. Co. v. Rauland–Borg Corp., 20 N.Y.2d 377, 382 (1967)).
Id. (quoting, Farkas v. Farkas, 36 A.D.3d 852, 853 (2d Dept. 2007)).
Id.
Licci ex rel. Licci v. Lebanese Canadian Bank, SAL, 20 N.Y.3d 327, 339 (2012).
Id. at 341.
Rushaid v. Pictet & Cie, 28 N.Y.3d 316, 331 (2016).
Id. (citation omitted).
LaMarca v. Pak-Mor Mfg. Co., 95 N.Y.2d 210, 216 (2000).
Id.
Licci ex rel. Licci v Lebanese Can. Bank, SAL, 732 F.3d 161, 173 (2d Cir. 2013).
Rushaid, 28 N.Y.3d at 331 (citation omitted).
Slip Op. at *1 (citing, Matter of New York City Asbestos Litig., 206 A.D.3d 442, 443-444 (1st Dept. 2022)).
Id. at *2.
Id. (quoting, World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980)).
Id. (quoting, id. at 297-298).
Id.
Id. (citing, LaMarca, 95 N.Y.2d at 218, quoting, Asahi Metal Indus. Co. v. Superior Ct. of Cal., 480 U.S. 102, 113 (1987)).
Id. (citing, LaMarca, 95 N.Y.2d at 217-218).
Berkshire Capital Group, LLC v. Palmet Ventures, LLC, 307 Fed. App’x. 479, 481 (2d Cir. 2008) (internal quotations and citation omitted).

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.