Court of Appeals Rules on Jurisdiction over Foreign Corporations Doing Business in New York

By Lanier Saperstein

The New York City Bar Association, through its Council on Judicial Administration (Michael P. Regan, Chair), filed an amicus brief in the Aybar v. Aybar (APL-2019-00239) appeal recently decided by the New York Court of Appeals. We are pleased to report that the Court of Appeals acknowledged during oral argument the City Bar’s contribution, with Judge Eugene M. Fahey saying, “One of the briefs that I thought made some interesting points was the brief of the New York City Bar Association …, I felt like I learned something there….” The Court of Appeals in its recently released opinion also adopted much of the analysis in the City Bar’s amicus brief.

Background

The question in Aybar was whether a foreign corporation, by registering to do business in New York and appointing the New York Secretary of State as its agent for service of process, consents to general, all-purpose personal jurisdiction in the State. The City Bar submitted its amicus brief on a narrow issue of New York law, specifically, whether New York’s Business Corporation Law (“BCL”) provides for general jurisdiction over a foreign corporation based on the corporation’s designation of an in-state agent for service of process, either under its express terms or by incorporating a common-law rule to that effect.

The City Bar’s Interest

The City Bar was well-situated to comment on the meaning of the BCL. The BCL was enacted after years of study by the Joint Legislative Committee to Study Revision of Corporation Laws (“the Committee”). The City Bar was involved in that project and worked directly with the Committee to ensure a “maximum exchange of views” as the Committee drafted the BCL. See Joint Legislative Committee to Study Revision of Corporation Laws, Fourth Interim Report to 1960 Session of New York State Legislature, at 36-37, 1960 N.Y. Leg. Doc. No. 15. In fact, the Committee made “special note” of the City Bar’s extensive assistance, id. at 31, explaining that “[t]he development of the final text” of the BCL was accomplished only through “close cooperation with . . . the Association of the Bar of the City of New York.” Joint Legislative Committee to Study Revision of Corporation Laws, Fifth Interim Report to 1961 Session of New York State Legislature, at 29, 1961 N.Y. Leg. Doc. No. 12.

The Opinion

On October 7, 2021, the Court of Appeals in a 5-2 decision (Singas, J.) held that registration does not constitute consent to jurisdiction. The Court of Appeals agreed with much of the analysis in the City Bar’s amicus brief.

The majority first looked to the BCL provisions that require a foreign corporation to register to do business in New York. The “plain terms” of those provisions, the majority observed, did not require a foreign corporation to consent to jurisdiction as a consequence of registering to do business in New York.

The majority then turned to Bagdon v. Philadelphia & Reading Coal & Iron Co., 217 N.Y. 432 (1916), which courts – including the Supreme Court below in Aybar case – for nearly a century had interpreted to mean that appointing an in-state service agent constituted consent to jurisdiction in the State. Bagdon, the majority explained, had been misinterpreted. In the majority’s view, Bagdon only addressed service of process; it did not address jurisdiction.

Drawing on the City Bar’s analysis, the majority reasoned that its reading of Bagdon was consistent with the trajectory of the U.S. Supreme Court precedent addressing personal jurisdiction. Historically, that precedent tethered jurisdiction to presence in a state. Under that historical rubric, a corporation would be deemed present in a state if its agent was present there. Thus, proper service on a corporate agent in a state meant that the corporation was properly subject to jurisdiction there.

The majority explained that it was a mistake, though, to conflate service – the issue addressed in Bagdon – with the jurisdictional effect of service, especially with the U.S. Supreme Court’s evolution away from a presence-based rationale for jurisdiction to the contacts-based rationale articulated in International Shoe Co. v. Washington, 326 U.S. 310 (1945) and as articulated most recently in Daimler AG v Bauman, 571 US 117 (2014). “[T]he analysis necessary to determine the effect of that service under current precedent is not the same as it was when Judge Cardozo considered the issue [in Bagdon].” The majority added, “Notably, we have not cited Bagdon since International Shoe was decided in 1945.”

The majority found, echoing the City Bar’s analysis, that Bagdon did not address the effect of proper service under current precedent and could not be read as holding, under that modern framework, that appointing an agent to receive service in a state constitutes consent to jurisdiction.

In concluding, the majority wrote, “We have never conflated statutory consent to service with consent to general jurisdiction, and the fact remains that, under existing New York law, a foreign corporation does not consent to general jurisdiction in this state merely by complying with the Business Corporation Law’s registration provisions.”

The Dissent

Judge Wilson dissented in an opinion joined by Judge Rivera.

Judge Wilson disagreed with the majority’s reading of the BCL. “[T]he purpose of the statute was to subject foreign corporations to jurisdiction in New York.” He reasoned that, while it did that through an outdated mechanism, the fact remained that the purpose of the statute was to subject foreign corporations to jurisdiction in the state. Next, Judge Wilson disagreed about the relevance of changes to the U.S. Supreme Court personal jurisdiction precedent. Those changes may have made a consent-by-registration rationale for jurisdiction less essential, but the changes did not make it unavailable altogether. Lastly, Judge Wilson disagreed with the majority’s interpretation of Bagdon. “Bagdon is not a case about service, nor is it a common-law rule,” he opined. “Bagdon is a case about consent – specifically, consent through business registration as a valid basis for general jurisdiction in the courts of New York.”

Acknowledgments

Lanier Saperstein is a member of the City Bar’s Council on Judicial Administration, a partner at Dorsey & Whitney LLP and formerly a partner at Jones Day, which served as Attorneys for Amicus Curiae. The City Bar and Mr. Saperstein wish to thank the following for their work on the amicus brief: Michael P. Regan, Chair, Council on Judicial Administration; Philip V. Tisne, Chair, Amicus Subcommittee, Council on Judicial Administration; and Rajeev Muttreja, J. Benjamin Aguiñaga, and Helen Jiang of Jones Day.