The collection-litigation market in New York is as aggressive as ever. From a defense perspective, this blog explores the potent defenses of a) lack of subject matter jurisdiction, b) lack of personal jurisdiction, and c) legal capacity. We'll start by examining Business Corporation Law.

New York's Business Corporation Law (BCL) establishes fundamental rules governing how corporations operate within the state. Three critical sections - §§ 202, 1312, and 1314 - work together to define corporate powers and regulate both domestic and foreign corporations' abilities to conduct business and engage in litigation.

What is the Purpose of Business Corporate Law § 302 (General Powers)

The purpose of BCL § 202 is to grant corporations the legal capacity to:

1. Sue and be sued in courts: This allows corporations to initiate legal actions against others and to be defendants in lawsuits, just like natural persons (individuals).
2. Participate in various types of proceedings: This includes not just court cases, but also administrative hearings, arbitrations, and other legal or quasi-legal proceedings.
3. Have legal standing: It establishes that corporations have legal personhood for the purposes of engaging in legal actions and proceedings.
4. Act "in like cases as natural persons": This phrase emphasizes that corporations have similar rights and abilities as individuals when it comes to legal matters.

This provision is fundamental to the operation of corporations in the legal system, ensuring they can protect their interests, enforce contracts, defend themselves against claims, and generally participate in the legal process. It's a key aspect of corporate personhood in legal contexts.

Foreign Corporation Authorization Requirements: BCL § 1312

This statute creates a balanced framework for unauthorized foreign corporations operating in New York:

Filing Requirements

• Foreign corporations must obtain proper authorization before maintaining legal actions
• Must pay all state fees, taxes, penalties, and interest charges
• Requirements extend to successor corporations

Protected Rights

• Contracts remain valid despite lack of authorization
• Other parties can still sue on contracts with unauthorized corporations
• Unauthorized corporations retain right to defend against legal actions

The statute effectively encourages compliance with state business regulations while preserving basic contract rights and legal defenses. It acts as both a enforcement mechanism and a protection of legitimate business interests.

Jurisdiction Over Foreign Corporations: BCL § 1314

This statute establishes a two-tier system for actions against foreign corporations in New York:

Broad Access for NY Residents and Domestic Corporations

• NY residents and domestic corporations can sue foreign corporations for any cause of action
• No additional jurisdictional requirements needed

Limited Access for Non-residents and Foreign Corporations

Five specific circumstances permit suits:

1. Contract cases with NY connection (formation or performance)
2. Litigation involving NY property
3. Causes of action arising in NY
4. Cases meeting NY's long-arm statute requirements
5. Foreign corporations doing business in NY

Federal Corporation Exception

• Different rules apply to U.S. corporations with NY offices
• These entities exempt from restrictions on non-resident suits

Statutory Text:

Business Corporation Law § 1314. Actions or special proceedings against foreign corporations

(a) An action or special proceeding against a foreign corporation may be maintained by a resident of this state or by a domestic corporation of any type or kind for any cause of action.

(b) Except as otherwise provided in this article, an action or special proceeding against a foreign corporation may be maintained by another foreign corporation of any type or kind or by a non-resident in the following cases only:

(1) Where it 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) Where the subject matter of the litigation is situated within this state.

(3) Where 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) Where, 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.

(5) Where the defendant is a foreign corporation doing business or authorized to do business in this state.

(c) Paragraph (b) does not apply to a corporation which was formed under the laws of the United States and which maintains an office in this state.

Harmonizing Corporate Litigation Statutes: BCL §§ 202(a)(2), 1312, and 1314 under New York Law

This analysis reconciles the provisions of BCL §§ 202(a)(2), 1312, and 1314, which together form a complex framework governing corporate litigation rights in New York:

1. General Capacity (BCL § 202(a)(2)):
   • Establishes the fundamental right of all corporations to sue and be sued in New York courts.
   • Provides the baseline legal capacity for corporate entities in litigation.
2. Limitations on Unauthorized Foreign Corporations (BCL § 1312):
   • Restricts the ability of unauthorized foreign corporations doing business in New York to maintain actions.
   • Does not prevent these corporations from defending actions or invalidate their contracts.
   • Acts as an enforcement mechanism for state registration and tax compliance.
3. Jurisdiction over Foreign Corporations (BCL § 1314):
   • Outlines specific circumstances under which foreign corporations can be sued in New York.
   • Distinguishes between actions brought by residents/domestic corporations and those brought by non-residents/foreign corporations.

Logical Interaction between BCL §§ 202(a)(2), 1312, and 1314:

1. Comprehensive Framework:
   • § 202(a)(2) establishes the general rule.
   • § 1312 creates exceptions for plaintiff actions by unauthorized foreign corporations.
   • § 1314 defines when foreign corporations can be defendants in New York courts.
2. Balancing Access and Regulation:
   • While § 202(a)(2) grants broad litigation rights, §§ 1312 and 1314 refine these rights based on corporate status and the nature of the dispute.
   • This balance ensures court access while maintaining regulatory control over foreign entities.
3. Asymmetry in Rights:
   • Unauthorized foreign corporations face restrictions as plaintiffs (§ 1312) but can still be sued under certain conditions (§ 1314).
   • This asymmetry incentivizes proper registration while protecting the rights of potential plaintiffs.
4. Jurisdictional Nuances:
   • § 1314 provides specific grounds for jurisdiction over foreign corporations, complementing the general capacity established in § 202(a)(2).
   • It distinguishes between actions by residents/domestic corporations and those by non-residents/foreign corporations, adding another layer of complexity to the litigation landscape.
5. Protection of State Interests:
   • Together, these statutes protect New York's interests by: a) Ensuring all corporations have basic legal capacity (§ 202(a)(2)). b) Encouraging compliance with state regulations (§ 1312). c) Defining clear jurisdictional boundaries for suits against foreign corporations (§ 1314).
6. Comprehensive Coverage:
   • These statutes cover various scenarios: a) Domestic corporations suing or being sued. b) Foreign corporations' rights as plaintiffs based on their authorization status. c) Circumstances under which foreign corporations can be defendants in New York courts.

In conclusion, these three statutes work together to create a nuanced system that balances the rights of corporations to access New York courts with the state's interest in regulating foreign business activities. This framework ensures that while all corporations have fundamental legal capacity, their ability to utilize New York courts is moderated by their compliance with state laws and the nature of their connection to New York.

General vs. Specific Jurisdiction in NY: Understanding CPLR 301 and 302

CPLR 301 - General Jurisdiction ("Doing Business")

• Allows jurisdiction over foreign corporations for ANY cause of action
• Based on continuous and systematic business activities in NY
• Corporation must be "present" in NY through substantial business activities
• The claim does NOT need to arise from NY activities
• Higher threshold: Corporation must be essentially "at home" in NY
• Examples: Having offices, employees, bank accounts, conducting regular business

CPLR 302 - Specific/Long-Arm Jurisdiction

• Only allows jurisdiction for claims ARISING FROM specific NY contacts
• Based on specific acts connected to NY
• Lower threshold: Even a single transaction may be sufficient
• The claim MUST arise from enumerated NY contacts:
  1. Transacting business in NY
  2. Committing tortious act in NY
  3. Causing injury in NY
  4. Owning/using/possessing NY property

Key Difference:

• CPLR 301 = General jurisdiction over ANY claim if substantial NY presence
• CPLR 302 = Specific jurisdiction only over claims CONNECTED to NY activities

Cases

Case 1: Foreign Corporation's Minimal New York Transactions Insufficient to Bar Lawsuit Under BCL § 1312(a)

A Florida corporation brought a mortgage foreclosure action in New York. Defendants moved to dismiss, arguing the plaintiff lacked capacity to sue under Business Corporation Law § 1312(a) for failing to obtain authorization to do business in New York. The court denied the motion, finding the plaintiff's limited New York activities did not constitute "doing business" in the state.

Key Legal Principles:

1. BCL § 1312(a) bars unauthorized foreign corporations "doing business" in New York from maintaining lawsuits in the state.
2. Absent proof otherwise, a foreign corporation is presumed to be doing business in its state of incorporation, not New York.
3. To be "doing business" in New York, a foreign corporation's activities must be systematic, regular, and show continuity of activity in the state.

Conclusion: The court held that having one bank account, occasionally using a New York office, and entering into three or four transactions over eight years were insufficient to constitute "doing business" in New York. The main takeaway is that minimal, sporadic activities in New York do not trigger BCL § 1312(a)'s bar on maintaining lawsuits.

Citation: Airline Exch., Inc. v Bag, 266 AD2d 414 (2d Dept 1999).

Case 2: Consent Cannot Create Long-Arm Jurisdiction Between Unauthorized Foreign Corporations Under BCL § 1314(b)

When two unauthorized foreign corporations attempted to litigate in New York Supreme Court, the First Department reversed the lower court's denial of dismissal for lack of subject matter jurisdiction. Neither corporation was authorized to do business in New York, yet one argued that consent could establish jurisdiction under BCL § 1314(b)(4) and CPLR 302.

Key Legal Principles:

1. Unauthorized foreign corporations can only sue each other in NY under specific exceptions in BCL § 1314(b)
2. Consent can establish personal jurisdiction under CPLR 301, but not long-arm jurisdiction under CPLR 302
3. Without statutory authorization or qualification to do business in NY, foreign corporations cannot access NY courts through consent alone

Conclusion: The case establishes that consent between foreign corporations cannot create jurisdiction where neither corporation is authorized to do business in New York and no statutory exception applies. This reinforces strict interpretation of BCL § 1314(b)'s jurisdictional requirements.

Citation: Techo-TM, LLC v Fireaway, Inc., 123 AD3d 610 (1st Dept 2014).

Case 3: Forum Selection Clause Cannot Create Subject Matter Jurisdiction Between Foreign Corporations Without NY Choice of Law

A foreign corporation sued another foreign corporation in New York Supreme Court based on a contract containing a New York forum selection clause but Maryland choice of law provision. The contract involved over $1 million in obligations, and a California court had previously stayed proceedings based on the forum selection clause. The NY court dismissed for lack of subject matter jurisdiction.

Key Legal Principles:

1. BCL § 1314(b) strictly limits when foreign corporations can sue each other in NY courts
2. GOL § 5-1402 requires both NY forum selection and NY choice of law to create jurisdiction
3. A forum selection clause alone, without choosing NY law, cannot create subject matter jurisdiction between foreign corporations

Conclusion: The court held that even where parties contractually select NY as their forum, subject matter jurisdiction does not exist between foreign corporations unless they also choose NY law to govern their dispute or meet other statutory exceptions. A California court's stay based on the forum selection clause cannot create jurisdiction where none exists under NY law.

Citation: DDR Real Estate Servs., Inc. v Burnham Pac. Props., Inc., 1 Misc 3d 802 (Sup Ct 2003).

Case 4: Parent Company's NY Office Insufficient to Establish BCL § 1314(c) Exception Without Showing Subsidiary is Mere Department

A Utah bank subsidiary of a NY-headquartered parent company sought default judgment in a collection action against out-of-state borrowers. The bank relied on BCL § 1314(c)'s exception allowing federally-formed corporations with NY offices to sue foreign corporations, claiming its parent company's NY office satisfied the statute. Though service was valid under a Utah-law-governed forum selection clause, the court denied default judgment.

Key Legal Principles:

1. The alter-ego/department test used for BCL § 1314(b) also applies to § 1314(c)'s office requirement
2. A parent company's NY office can only be imputed to its subsidiary if the parent's control makes the subsidiary merely a department
3. A loan agreement need not be signed to be enforceable under Utah law if proper notice and subsequent credit use are shown

Conclusion: The court held that a foreign corporation cannot rely on its parent company's NY office to satisfy BCL § 1314(c) without demonstrating the parent exercises such pervasive control that the subsidiary is merely a department of the parent. This establishes a significant hurdle for subsidiaries attempting to use their parent's NY presence to access NY courts.

Citation: Am. Express Natl. Bank v Pino Napoli Tile & Granite, LLC, 79 Misc 3d 668 (Sup Ct 2023).

​

Case 5: Foreign Corporation's Registration Does Not Constitute Consent to General Jurisdiction in New York

Several New York residents were involved in a car accident in Virginia while driving a vehicle purchased in New York. The plaintiffs sued the vehicle and tire manufacturers in New York. Though the manufacturers were registered to do business in New York, the Court of Appeals held that such registration does not constitute consent to general jurisdiction in New York courts for claims unrelated to the company's in-state activities.

Key Legal Principles:

1. 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.
2. New York's Business Corporation Law requires foreign corporations to register and designate an agent for service, but does not condition this on consent to general jurisdiction.
3. The Court's prior ruling in Bagdon v. Philadelphia & Reading Coal & Iron Co. was limited to the effect of service of process, not consent to general jurisdiction.

Conclusion: The main takeaway is that under New York law, a foreign corporation does not consent to general jurisdiction merely by complying with the Business Corporation Law's registration provisions. This decision clarifies the scope of jurisdiction over foreign corporations registered to do business in New York.

Citation: Aybar v Aybar, 37 NY3d 274 (2021).

Case 6: New York Personal Jurisdiction Over Foreign Bank Based on Correspondent Account Use

A Saudi Arabian company sued a Swiss bank in New York for aiding employees in a bribery and kickback scheme. The Court of Appeals held that the bank's repeated use of a New York correspondent account to transfer funds related to the scheme was sufficient to establish personal jurisdiction under New York's long-arm statute.

Key Legal Principles:

1. A foreign bank's repeated use of a New York correspondent account on behalf of a client can constitute purposeful availment of New York's banking system, satisfying the "transacts business" requirement of CPLR 302(a)(1).
2. To establish personal jurisdiction under CPLR 302(a)(1), there must be an articulable nexus or substantial relationship between the business transacted in New York and the cause of action asserted.
3. The exercise of personal jurisdiction must comport with federal due process requirements, considering whether the defendant's conduct and connection with the forum state are such that it should reasonably anticipate being haled into court there.

Conclusion: The main takeaway is that a foreign bank's knowing and repeated use of a New York correspondent account to facilitate illegal activity can subject it to personal jurisdiction in New York, even if the bank did not directly initiate the transfers. This decision expands the reach of New York courts over foreign financial institutions involved in international wrongdoing.

Citation: Al Rushaid v Pictet & Cie, 28 NY3d 316 (2016).

Case 7: New York Lacks Personal Jurisdiction Over Out-of-State Aircraft Maintenance Company

A non-domiciliary aircraft charter company sued a non-domiciliary aircraft maintenance company in New York, seeking a declaration that the maintenance company was obligated to pay for work performed on the charter company's jet in New York. The court dismissed the case for lack of personal jurisdiction over the maintenance company.

Key Legal Principles:

1. For a court to exercise personal jurisdiction over a foreign corporation, the corporation's association with the forum state must be "so continuous and systematic as to render the corporation at home in the state."
2. Under CPLR 302(a)(1), there must be an "articulable nexus" or "substantial relationship" between the defendant's transaction of business in New York and the cause of action.
3. When a contract is negotiated via email or telephone and no business is performed within the forum state, the foreign defendant is not subject to personal jurisdiction under the long-arm statute.

Conclusion: The main takeaway is that New York courts cannot exercise personal jurisdiction over an out-of-state company that has no significant contacts with New York, even if some work related to the dispute occurred in New York at the plaintiff's request. This case demonstrates the limits of New York's long-arm statute in establishing jurisdiction over foreign defendants.

Citation: Black Diamond Aviation Group LLC v Spirit Avionics, Ltd., 70 Misc 3d 823 (Sup Ct, Suffolk County 2020).

Case 8: Personal Jurisdiction Over Out-of-State Defendants in Equipment Sale and Service Case

A New York cookie manufacturer sued an out-of-state equipment company and its principal for breach of contract and fraud regarding the sale and setup of a defective cookie processing machine. The defendants moved to dismiss for lack of personal jurisdiction and failure to state a claim for fraud.

Key Legal Principles:

1. Under CPLR 302(a)(1), a single transaction can establish personal jurisdiction if the defendant's activities in New York were purposeful and substantially related to the claim.
2. Sending employees into New York to set up and service equipment in performance of contractual duties can satisfy the "minimum contacts" requirement for personal jurisdiction.
3. A fraud claim that merely restates a breach of contract claim without alleging representations collateral or extraneous to the contract must be dismissed.

Conclusion: The court denied the motion to dismiss for lack of personal jurisdiction over both defendants, finding the equipment company's actions in New York sufficient to establish jurisdiction. However, the court dismissed the fraud claim against the individual defendant as it was not distinct from the breach of contract claim. The key takeaway is that out-of-state equipment sellers may be subject to New York jurisdiction when they send employees to perform setup and service in the state.

Citation: Josef's Organic Corp. v Equip. Relocation Servs. Inc., 23 Misc 3d 1129(A), 889 NYS2d 505 (Sup Ct, Kings County 2009).

Case 9: New York Court of Appeals Rejects Fiduciary Shield Doctrine in Long-Arm Jurisdiction Cases

A New York investor sued out-of-state corporations and an individual for fraud and breach of contract related to an oil investment. The Court of Appeals addressed whether New York courts could exercise personal jurisdiction over the non-domiciliary defendants under the state's long-arm statute, particularly focusing on the applicability of the fiduciary shield doctrine. The case involved a non-domiciliary corporate agent who never entered New York but was a primary actor in the transaction, used a New York-licensed company to secure the plaintiff's investment, and received funds through that company.

Key Legal Principles:

1. New York's long-arm statute (CPLR 302(a)(1)) allows jurisdiction over non-domiciliaries for claims arising from a single business transaction in the state, even if the defendant never enters New York.
2. To establish agency for jurisdictional purposes, the plaintiff need not show a formal agency relationship, but must demonstrate that the alleged agent engaged in purposeful activities in New York for the benefit and with the knowledge and consent of the non-domiciliary defendants.
3. The fiduciary shield doctrine, which would protect corporate agents from personal jurisdiction for acts done on behalf of the corporation, is rejected in New York as unnecessary and undesirable.

Conclusion: The Court of Appeals, New York's highest court, rejected the fiduciary shield doctrine, holding that it is neither necessary nor desirable in interpreting New York's long-arm statute. The main takeaway is that corporate agents can be subject to personal jurisdiction in New York for their corporate acts if the statutory and constitutional requirements for jurisdiction are met, even if they never physically enter the state.

Citation: Kreutter v McFadden Oil Corp., 71 NY2d 460, 527 NYS2d 195 (1988).

Case 10: Single Business Transaction Establishes New York Long-Arm Jurisdiction

A New York corporation sued a non-resident salesman for breach of employment agreement. The salesman had traveled to New York to interview and negotiate the employment contract, but performed work exclusively in New England. The court considered whether this single visit was sufficient to establish personal jurisdiction under New York's long-arm statute.

Key Legal Principles:

1. A single purposeful transaction in New York can be sufficient to establish personal jurisdiction under CPLR 302(a)(1).
2. Physical presence in New York when negotiating and entering into a contract can constitute "transacting business" for jurisdictional purposes.
3. Courts consider the quality and nature of the defendant's activities in relation to the fair administration of laws when determining if minimum contacts exist for due process.

Conclusion: The court held that New York had personal jurisdiction over the non-resident defendant based on his purposeful act of coming to New York to negotiate and enter into the employment agreement, even though his subsequent work was performed outside the state. This case demonstrates that a single in-person business transaction can be sufficient to establish long-arm jurisdiction if it creates a continuing relationship with a New York entity.

Citation: George Reiner & Co. v Schwartz, 41 NY2d 648 (1977).

Case 11: Long-Arm Jurisdiction Based on Telephone Participation in New York Auction

A New York auction house sued a California resident for failing to pay for two paintings he successfully bid on during a New York auction. The defendant participated in the auction via telephone, with an auction house employee relaying his bids. The court considered whether this remote participation constituted "transacting business" within New York for the purposes of establishing personal jurisdiction under the state's long-arm statute.

Key Legal Principles:

1. Physical presence is not required to establish personal jurisdiction under CPLR 302; purposeful activity within the state is sufficient.
2. A single transaction in New York can satisfy the statutory requirement for "transacting business" within the state.
3. Courts may consider both direct personal involvement and activities conducted through an agent when determining if a non-resident has transacted business in New York.

Conclusion: The court held that the defendant's active participation in the New York auction via telephone, coupled with the assistance of an auction house employee acting as his agent, constituted transacting business within the state. This case demonstrates that remote participation in state-based activities can establish personal jurisdiction over non-residents under New York's long-arm statute.

Citation: Parke-Bernet Galleries v Franklyn, 26 NY2d 13 (1970).

Case 12: No Personal Jurisdiction Over Out-of-State Investor Based Solely on Appointment of New York Attorney-in-Fact

A New York joint venture sued an Illinois resident to recover on a promissory note he executed when investing in the venture. The investor had appointed a New York corporation as his attorney-in-fact for the venture, but had no other significant contacts with New York. The court considered whether this was sufficient to establish personal jurisdiction under New York's long-arm statute.

Key Legal Principles:

1. A single purposeful transaction in New York can be sufficient to establish personal jurisdiction under CPLR 302(a)(1).
2. To be considered an agent for jurisdictional purposes, the local agent must have engaged in purposeful activities in New York with the knowledge, consent, and control of the non-resident defendant.
3. There must be a substantial relationship between the defendant's New York transactions and the plaintiff's cause of action.

Conclusion: The court held that appointing a New York corporation as attorney-in-fact, without the ability to control its activities, was insufficient to establish personal jurisdiction over the out-of-state investor. This case demonstrates the limits of using agency relationships to establish long-arm jurisdiction over non-residents with minimal New York contacts.

Citation: Am./Intl. 1994 Venture v Mau, 146 AD3d 40 (2d Dept 2016).

Case 13: New York Has Personal Jurisdiction Over Out-of-State Clients in Attorney Fee Dispute

The New York Court of Appeals considered whether New York courts could exercise personal jurisdiction over California clients who retained a New York attorney to represent them in an Oregon federal court case. The clients never physically entered New York but communicated extensively with the attorney via phone, email, and fax over several months.

Key Legal Principles:

1. A single purposeful transaction in New York can establish jurisdiction under CPLR 302(a)(1) if substantially related to the claim.
2. Physical presence in New York is not required for long-arm jurisdiction if the defendant projects themselves into the state to engage in sustained, substantial business transactions.
3. Establishing an ongoing attorney-client relationship with a New York lawyer can constitute transacting business within the state for jurisdictional purposes.

Conclusion: The Court of Appeals held that the California clients' retention of and regular communication with the New York attorney established a continuing attorney-client relationship, constituting the transaction of business in New York sufficient for long-arm jurisdiction. This case demonstrates that out-of-state parties can be subject to New York jurisdiction through remote interactions with in-state professionals.

Citation: Fischbarg v Doucet, 9 NY3d 375 (2007).

Case 14: Second Circuit Holds Foreign Law Firm's Legal Opinion for New York Transaction May Establish Personal Jurisdiction Under CPLR 302(a)(3)

The U.S. Court of Appeals for the Second Circuit considered whether New York courts could exercise personal jurisdiction over a Puerto Rican law firm sued by a Belgian bank with a New York branch for fraud and breach of fiduciary duty. The case involved a legal opinion provided by the law firm for a New York loan transaction, despite the firm never entering New York and only communicating with the bank via phone, fax, and mail. The Second Circuit examined various provisions of New York's long-arm statute to determine if jurisdiction could be established.

Key Legal Principles:

1. Physical presence in New York is not required to establish jurisdiction under CPLR 302(a)(1) for transacting business, but the defendant must purposefully avail itself of the privilege of conducting activities within New York.
2. For jurisdiction under CPLR 302(a)(3), the "original event" causing injury is distinguished from the initial tort and the final economic injury.
3. In commercial tort cases, the situs of injury for CPLR 302(a)(3) purposes can be where the plaintiff first disbursed funds or lost business, even if the defendant's tortious act occurred elsewhere.

Conclusion: The Second Circuit held that the law firm's alleged tort may have caused injury in New York where the bank first disbursed funds, potentially establishing jurisdiction under CPLR 302(a)(3). This case demonstrates that out-of-state professional services related to New York transactions can potentially subject providers to New York jurisdiction, even without physical presence in the state.

Citation: Bank Brussels Lambert v Fiddler Gonzalez & Rodriguez, 171 F3d 779 (2d Cir 1999).

Case 15: Foreign Corporation's Failure to Timely Challenge Service Waives Defense Despite Invalid Service Through Out-of-State Secretary

After a propane tank explosion caused injuries, plaintiffs attempted to serve a foreign corporation through the Ohio Secretary of State. Although service was technically invalid because plaintiffs failed to establish statutory prerequisites under Ohio law for serving through the Secretary of State, the defendant waived its defense of improper service by not moving to dismiss within 60 days as required by CPLR 3211(e).

Key Legal Principles:

1. Service on a foreign state's Secretary of State is valid only if that state's laws properly designate the Secretary as an agent for service of process and all statutory prerequisites are met
2. Personal jurisdiction, unlike subject matter jurisdiction, can be conferred through consent, stipulation, or waiver
3. CPLR § 3211(e)'s 60-day deadline to challenge service applies to pending cases and failure to meet this deadline waives the defense of improper service

Conclusion: While improper service through a foreign state's Secretary of State will not establish jurisdiction over a foreign corporation absent satisfaction of that state's statutory requirements, this defense can be waived through failure to timely challenge the service under CPLR § 3211(e).

Citation: Breer v Sears, Roebuck & Co., 184 Misc 2d 916 (Sup Ct 2000).

Case 16: Single Act of Business Within Jurisdiction Sufficient for Personal Jurisdiction in Conspiracy Case Under New York Long-Arm Statute

A nonresident corporation was subject to New York jurisdiction based on alleged participation in a fraudulent conspiracy, even though its only contacts with New York were through mail and telephone. The court found that executing and performing allegedly fraudulent agreements in New York, coupled with conspiracy allegations, satisfied the state's long-arm statute requirements for personal jurisdiction.

Key Legal Principles:

1. A defendant need not be physically present in New York to be subject to jurisdiction under the state's long-arm statute if they engage in purposeful activity there
2. Under conspiracy theory, a co-conspirator's tortious acts within New York can establish jurisdiction over out-of-state conspirators
3. Plaintiff must provide definite evidentiary facts connecting defendant to New York transactions, not merely unsupported conspiracy allegations

Conclusion: When alleging conspiracy as a basis for personal jurisdiction, a plaintiff must demonstrate prima facie evidence connecting the out-of-state defendant to specific tortious acts committed within the jurisdiction, even if the defendant never physically entered the state.

Citation: Ghazoul v International Management Services, Inc., 398 F Supp 307 (SD NY 1975).

New York Corporate Litigation Multiple Choice Quiz

1. Under BCL § 202, what fundamental right is granted to corporations? A) The right to own property only B) The right to sue and be sued in courts C) The right to issue stock only D) The right to hire employees only
2. What must foreign corporations obtain before maintaining legal actions in New York? A) A New York business address B) A New York bank account C) Authorization to do business in New York D) A New York-licensed attorney
3. Under BCL § 1314(a), who can maintain an action against a foreign corporation for any cause? A) Only New York residents B) Only domestic corporations C) Both New York residents and domestic corporations D) Anyone without restriction
4. Two unauthorized foreign corporations want to create jurisdiction through mutual consent. Can they? A) Yes, if both agree in writing B) Yes, if they have a New York office C) Yes, if they choose New York law D) No, consent cannot create jurisdiction between unauthorized foreign corporations
5. Which is NOT one of the circumstances under BCL § 1314(b) allowing non-residents to sue foreign corporations? A) Breach of NY contract B) Subject matter in NY C) Having a NY bank account D) Cause of action arose in NY
6. According to Aybar v Aybar, what is the effect of a foreign corporation's registration to do business in NY? A) Creates automatic general jurisdiction B) Does not constitute consent to general jurisdiction C) Creates limited jurisdiction for NY-based claims only D) Creates jurisdiction only for contract claims
7. Under CPLR 301 (General Jurisdiction), what level of activity must a foreign corporation show? A) Any business activity B) One-time transaction C) Continuous and systematic business activities D) Annual business meeting in NY
8. What distinguishes CPLR 301 from CPLR 302? A) 301 requires physical presence, 302 doesn't B) 301 allows jurisdiction over any claim with substantial NY presence, 302 only over claims connected to NY C) 301 is for domestic corporations, 302 for foreign ones D) 301 is for contract claims, 302 for tort claims
9. In Al Rushaid v Pictet & Cie, what established jurisdiction over a foreign bank? A) Having a NY office B) Repeated use of a NY correspondent account C) Hiring NY employees D) Advertising in NY
10. According to Airline Exch., Inc. v Bag, which activity level constitutes "doing business"? A) One transaction in NY B) Having a NY phone number C) Systematic, regular, and continuous activity D) Annual board meetings in NY
11. Under BCL § 1314(c), which corporations are exempt from paragraph (b) restrictions? A) All foreign corporations B) NY corporations only C) U.S. corporations with NY offices D) European corporations
12. What test determines if a parent company's NY office applies to its subsidiary? A) Revenue test B) Alter-ego/department test C) Employee count test D) Physical presence test
13. What creates jurisdiction between foreign corporations under GOL § 5-1402? A) NY forum selection clause only B) NY choice of law only C) Both NY forum selection AND NY choice of law D) Either NY forum selection OR NY choice of law
14. In Kreutter, what doctrine did the Court of Appeals reject? A) Forum non conveniens B) Fiduciary shield doctrine C) Business judgment rule D) Corporate veil doctrine
15. Based on George Reiner & Co. v Schwartz, can a single transaction establish jurisdiction? A) Never B) Only for contracts over $1 million C) Yes, if purposeful and substantially related to the claim D) Only with multiple follow-up contacts
16. According to Parke-Bernet Galleries, is physical presence required for CPLR 302 jurisdiction? A) Yes, always B) No, purposeful activity is sufficient C) Yes, but only for corporations D) Only for contract claims
17. Under BCL § 1312, what happens to contracts made by unauthorized foreign corporations? A) They are void B) They are voidable C) They remain valid D) They require court approval
18. In Fischbarg v Doucet, what relationship established jurisdiction? A) Ongoing attorney-client relationship B) Property ownership C) Employment relationship D) Banking relationship
19. Per Bank Brussels Lambert, where is the commercial tort injury situs for CPLR 302(a)(3)? A) Where the defendant is located B) Where the plaintiff is incorporated C) Where plaintiff first disbursed funds D) Where the contract was signed
20. What can unauthorized foreign corporations do under BCL § 1312? A) Sue but not be sued B) Neither sue nor be sued C) Sue and be sued D) Defend against actions but not maintain them

Answer Key

1. B
2. C
3. C
4. D
5. C
6. B
7. C
8. B
9. B
10. C
11. C
12. B
13. C
14. B
15. C
16. B
17. C
18. A
19. C
20. D

Related Blog: Sued in New York for a Loan? How BCL § 1314 and GOL § 5-1402 Protect Out-of-State Borrowers