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New York Court of Appeals Holds That Registering to Do Business Does Not Confer General Jurisdiction Over a Foreign Corporation

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  • Posted on: Oct 18 2021

By Jeffrey M. Haber

In Aybar v. Aybar, 2021 N.Y. Slip Op. 05393 (Oct. 7, 2021) (here), the New York Court of Appeals was asked to determine whether a foreign corporation that registers to do business in New York consents to the general jurisdiction of the State’s courts. As explained below, in a 5-2 decision, the Court held that registration under the Business Corporation Law (“BCL”) to do business in the State does not confer general jurisdiction over the corporation.

Procedural History

Defendant Jose A. Aybar, Jr., a New York resident, was operating a Ford Explorer on an interstate highway in Virginia. The vehicle overturned multiple times after its Goodyear tire allegedly failed, resulting in the death of three passengers and injuries to three other passengers. The surviving passengers and the representatives of the deceased passengers’ estates (“plaintiffs”) commenced an action against Aybar, Ford Motor Company (“Ford”), and The Goodyear Tire & Rubber Co. (“Goodyear”), asserting, among other things, products liability claims against Ford and Goodyear.

Ford is incorporated in Delaware and maintains its principal place of business in Michigan. Goodyear is incorporated, and has its principal place of business, in Ohio. At all relevant times, Ford and Goodyear were registered with the New York Secretary of State as foreign corporations authorized to conduct business in the State and had appointed in-state agents for service of process in accordance with the BCL.

Ford and Goodyear separately moved to dismiss the complaint against them pursuant to CPLR § 3211(a)(8) on the ground that New York courts lacked personal jurisdiction over them. Plaintiffs opposed both motions, arguing, inter alia, that by registering to do business in New York and appointing an in-state agent for service of process, a foreign corporation knowingly consents to general jurisdiction in the State’s courts.

Supreme Court denied the motions in separate orders, concluding that New York courts could exercise general jurisdiction over Ford and Goodyear. Citing Bagdon v. Philadelphia & Reading Coal & Iron Co., 217 N.Y. 432 (1916), the court determined that Ford and Goodyear consented to general jurisdiction by registering to do business in New York as a foreign corporation and designating a local agent for service of process.

The Appellate Division, Second Department reversed the orders and granted the motions of Ford and Goodyear to dismiss the complaint as to them. See 169 A.D.3d 137, 152-153 (2d Dept. 2019) (here). Citing Bagdon and other authority, the Second Department agreed with the motion court that “[t]here has been longstanding judicial construction” that a foreign corporation’s registration to do business in New York and appointment of an in-state agent constituted consent to general jurisdiction (id. at 147).” The court determined, however, that “Bagdon must be understood within the historical context in which it was decided” and, in light of recent U.S. Supreme Court precedent clarifying the permissible grounds for general jurisdiction, the Second Department concluded that “it cannot be said that a corporation’s compliance with the existing business registration statutes constitutes consent to the general jurisdiction of New York courts.” Id. at 147-148.

The Court of Appeals granted plaintiffs leave to appeal and affirmed the Second Department’s decision and order.

The Majority Decision

The sole issue before the Court was whether Ford and Goodyear consented to general jurisdiction in New York by registering to do business in the State and appointing a local agent for service of process, in compliance with the BCL (also known as “consent by registration”).

The Court observed that, although the BCL requires a foreign corporation to register and designate an in-state agent for service of process to conduct business in the forum, the statute does not “condition the right to do business on consent to the general jurisdiction of New York courts or otherwise afford general jurisdiction to New York courts over foreign corporations that comply with these conditions.”1 “A different reading would improperly ‘amend [the] statute by adding words that are not there[,]’2 and would impermissibly ‘read into a statute a provision which the [l]egislature did not see fit to enact[,]’”3 said Judge Singas, the author of the majority decision. “Accordingly,” concluded the Court, “a foreign corporation’s registration to do business and designation of an agent for service of process in New York does not constitute consent to general jurisdiction under the Business Corporation Law’s plain terms.”4

In reaching this decision, the majority held that plaintiffs’ interpretation of Bagdon v. Philadelphia & Reading Coal & Iron Co., the 1916 Court of Appeals decision on which they relied, was “incorrect”.5 “[W]hen viewed in the context of the controlling jurisprudence of the time,” Judge Singas observed, “Bagdon’s holding was far narrower than plaintiffs urge.”6 Properly understood, said Judge Singas, Bagdon “was limited to the effect of service of process to which a foreign corporation consented; [the Court] did not determine that a foreign corporation consented to general jurisdiction by registering to do business and designating an agent for service of process.”7

The majority recounted how the U.S. Supreme Court has shaped the rules governing the exercise of personal jurisdiction, observing that “specific jurisdiction has rapidly expanded” over the years, while the reach of general jurisdiction is relegated “to a narrow class of defendants.”8 

Today, “[a] court may assert general jurisdiction over foreign (sister-state or foreign-country) corporations to hear any and all claims against them when their affiliations with the [s]tate are so ‘continuous and systematic’ as to render them essentially at home in the forum [s]tate.”9 “With respect to a corporation, the place of incorporation and principal place of business are paradigm … bases for general jurisdiction” because these are places where a corporation “is fairly regarded as at home.”10 Only in “exceptional cases” may “a corporation’s operations in a forum other than its formal place of incorporation or principal place of business [] be so substantial and of such a nature as to render the corporation at home in that [s]tate” for the purposes of general jurisdiction.11

[Ed. Note: This Blog wrote about the impact of Daimler here.]

The majority declined to address “whether consent-by-registration, if it existed in New York, would comport with federal due process under Daimler[,]” noting that it decision “rest[ed] solely on New York law grounds.”12 

The Dissent Opinion

Judge Wilson wrote a lengthy dissent, in which Judge Rivera concurred. The dissent criticized the majority’s interpretation of Bagdon. Specifically, the dissent found that “consent [was] the analytical lynchpin of Bagdon.”13 In historical context, explained Judge Wilson, consent to service of process was the equivalent of consent to the jurisdiction of the courts. 

The dissent chastised the majority for transposing a modern meaning to the word “service” when the historical meaning was different and broader. In context, said the dissent, it was understood that “imposing on foreign corporations a requirement to designate an agent for ‘service,’” meant that the corporation would be “subject … to jurisdiction by consent.”14 “When one understands the history of corporate structure and liability predating Bagdon,” explained Judge Wilson, “the majority’s attempt to brush it aside as a case about the ‘effect’ of service falls apart.”15 

“Until today,” said the dissent, “Bagdon’s rule of general jurisdiction by consent through registration was ‘well settled’”.16 For more than a century, continued Jude Wilson, the Court “has correctly interpreted our legislature as having ensured that residents of New York, injured by corporations that had registered to do business here and chosen to take advantage of our laws, could seek judicial relief here, even if the injury took place somewhere else. Query what offends fair play and substantial justice.”17


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.


Footnotes

  1. Slip Op. at *2.
  2. Id. (quoting American Tr. Ins. Co. v. Sartor, 3 N.Y.3d 71, 76 (2004).
  3. Id. (quoting Matter of Chemical Specialties Mfrs. Assn. v. Jorling, 85 N.Y.2d 382, 394 (1995) (internal quotation marks and citation omitted).
  4. Id. (citations omitted)
  5. Id. at *3.
  6. Id.
  7. Id.
  8. Id. at *6-*7. General jurisdiction permits a court to exercise jurisdiction over a defendant in connection with a suit arising from events occurring anywhere in the world, whereas specific jurisdiction permits a court to exercise jurisdiction only where the suit arises out of or relates to the defendant’s contacts with the forum state. See Bristol-Myers Squibb Co. v. Superior Court of Cal., San Francisco Cty., 582 US __, __, 137 S.Ct. 1773, 1780 (2017).
  9. Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011); Daimler AG v. Bauman, 571 U.S. 117,122 (2014).
  10. Daimler, 571 U.S. at 137 (internal quotation marks, brackets, and citations omitted).
  11.  Id. at 139 n.19.
  12. Slip Op. at *7.
  13.  Id. at *10.
  14. Id. at *11.
  15. Id. at *12.
  16. Id. at *17 (citations omitted).
  17. Id.
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