Registration as a Foreign Company is Not Consent to General Jurisdiction in New York | Harris Beach SA
Under the New York Business Companies Act, a foreign company seeking authorization to operate in New York is required to register with the New York Secretary of State and appoint an attorney. for service of pleadings in New York. There is notoriously absent from the wording of the statute any explicit statement that such registration and designation also subject a foreign company to the general personal jurisdiction of New York. On October 8, 2021, the Court of Appeal rendered its decision in Aybar vs. Aybar adopting this strict statutory interpretation of the BCL that registration and designation does not constitute consent to general personal jurisdiction in New York and, at least according to the long dissenting opinion, reversing more than 100 years of precedent dating back to the ruling of the Court in Bagdon v. Philadelphia & Reading Coal & Iron Co. (217 NY 432 ).
Aybar is the result of an unfortunate and tragic motor vehicle collision in July 2012 which left three people dead and three others seriously injured. While the collision occurred in Virginia, all of the passengers were New York residents and lawsuits were filed in New York against the driver, the vehicle manufacturer (Ford) and the tire manufacturer (Goodyear). The vehicle was purchased (used) in New York. Neither the vehicle nor the tires were originally sold, designed or manufactured in New York City. In addition, Ford and Goodyear were not New York companies and did not have their main locations in New York. Both, however, were registered with the Secretary of State as foreign companies and had appointed agents for the service of pleadings in New York.
Ford and Goodyear sought dismissal under CPLR 3211 (a) (8), arguing that the New York court lacked personal jurisdiction. The Supreme Court dismissed the petition, citing Bagdon. The Appeal Division reversed, also citing Bagdon and agreeing with the Supreme Court that Bagdon defended the proposition that registration and appointment of an agent in New York constituted consent to general personal jurisdiction in New York. However, the Appeals Division found that recent decisions of the United States Supreme Court regarding the scope of general personal jurisdiction required the court to consider that compliance with the registration and designation requirements of the BCL did not apply. did not constitute consent to general personal jurisdiction.
The Court of Appeal began its analysis by clarifying the only issue presented – whether compliance with the BCL’s registration and designation requirement resulted in consent to general personal jurisdiction in New York. Regarding the language of the BCL itself, the Court concluded that there is no provision in the law indicating that a foreign company consents to general personal jurisdiction in the registration and designation process. According to the Court, imposing such a requirement which is not found in the actual wording of the law would unduly modify the BCL.
Next, the Court considered the effect of Bagdon, and rejected the applicants’ interpretation of the decision. According to the Court, its decision in Bagdon, “Understood”, was limited to the effect of the service to which a foreign company was consenting, not whether registration and designation amounted to consent to general personal jurisdiction. In particular, the Court described the issue it decided in Bagdon as if the agreed service included actions unrelated to New York business carried out by the foreign company. In other words, according to the court here, Bagdon held that registration and designation amounted to consent to accept service for any matter, such service conferring jurisdiction on the foreign company in New York for claims that did not arise from the company’s activities in New York if the foreign company was unquestionably present in New York. The Court was careful to note that this construction took into account then-existing decisions of the United States Supreme Court, which differs from the current United States Supreme Court law regarding where a company is subject to jurisdiction. general personal.
The dissent was very critical of the majority result. First, the dissent argued that the BCL’s majority interpretation to “eviscerate[d]»The legislator« clear»The intention to establish jurisdiction by consent to service. The dissent also questioned the relevance of the majority’s quote to recent US Supreme Court decisions on the subject of general personal jurisdiction. According to the dissent, these decisions were not applicable to the subject of consent recording. Dissent has also characterized the interpretation of the majority of Bagdon as nullifying more than 100 years of case law of the Court, noting that the use of the term “service” at the time of Bagdon was analogous to “jurisdiction”. Finally, the dissent rejected Ford and Goodyear’s argument that consent to jurisdiction through registration and designation imposed a burden on commerce, noting that any company could do business in New York without first registering. to the Secretary of State by waiving the right to commence a trial in New York courts.
With this ruling, New York joins the growing number of states that have revised their respective foreign business registration statutes, and whether registration under those statutes constitutes consent to general personal jurisdiction. Last month, Georgia’s Supreme Court issued a ruling reviewing its corresponding law (see Cooper Tire & Rubber Co. v. Mccall, 2021 WL 4268074 [Ga. 2021]). In that case, the Court found that, although the Court’s earlier interpretation of the law “conflicts with” recent decisions of the United States Supreme Court, the law did not violate federal due process. . In 2020, the Nebraska Supreme Court ruled, in due process, that the theory of consent by registration was unconstitutional (see Lanham v. BNSF, 939 NW2d 363 [Neb. 2020]). It should be noted that the Court rendered its ruling on purely constitutional grounds, noting that even though the law at issue – like New York law – did not expressly provide for state registration constituted consent to jurisdiction. general personal jurisdiction in the State, the exercise of general personal jurisdiction was required to comply with due process. Similar conclusions were made by the Missouri Supreme Court (see Ex rel. Norfolk S. Railway Corp. vs. Dolan, 512 SW3d 41 [Mo. 2017]) and the Delaware Supreme Court (see Genuine Parts Co. v. Cepec, 137 A3d 123 [Del. 2016]). Given the implications of these laws and their interpretation for due process, this issue could still end up in the United States Supreme Court.
Court detention lets foreign companies know they can register in New York – thereby gaining access to New York courts – without risking being taken to court for litigation unrelated to New York, a previously impossible outcome. Now, there is apparently little or no advantage in not registering as a foreign company under the BCL, since there appears to be no longer any risk of being considered to have consented to general personal jurisdiction by registering as a foreign company under the BCL.