By Cara M. Pascarella, Esq.
On October 7, 2021, the New York Court of Appeals addressed the issue of whether a foreign corporation consents to general jurisdiction by registering to do business in the State of New York and designating a local agent for service of process as required by Article 13 of the NY Business Corporation Law in order to be authorized to transact business in the state. General jurisdiction refers to a state where a person or entity can be sued for any claim, regardless of where the actions underlying the claim occurred. A court may assert general personal jurisdiction over a defendant in the state where the defendant is “home,” which is generally limited to the state of the company's place of incorporation or principal place of business.
In the matter of Aybar v. Aybar, 2021 NY Slip Op 05393, the plaintiffs consisted of the estates of three deceased passengers and three surviving passengers who were riding in defendant, Jose Aybar, Jr.’s Ford Explorer. The vehicle overturned multiple times on an interstate highway in Virginia when its Goodyear tire allegedly failed. Although the vehicle was purchased in New York, Ford did not originally sell the vehicle in New York, nor did it design or manufacture the vehicle in New York. Similarly, Goodyear did not design, manufacturer, or initially sell the tire in New York. While neither Ford nor Goodyear were incorporated or had their principal place of business in New York, the issue before the Court was whether New York had general jurisdiction over these defendants because both were registered with New York’s secretary of state as a foreign corporation authorized to do business in the state and had appointed in-state agents for service of process in accordance with NY Business Corporation Law.
In arguing that both Goodyear and Ford consented to general jurisdiction based on their registration and appointment of state agents, plaintiffs relied heavily on a hundred-year-old Court of Appeals decision, Bagdon v. Philadelphia & Reading Coal & Iron Co., 217 N.Y. 432 (1916). While the dissent in Aybar points out that for more than a century, courts and commentators have widely understood that by registering to do business in New York, a corporation consents to personal jurisdiction in our courts, the majority held that this is a misreading of the Bagdon decision, as the decision decided solely the narrow issue of whether a foreign corporation’s designation of an in-state service of process agent “extended to causes of action unrelated to its business transacted in New York.” In Bagdon, it was determined that a foreign corporation's registration to do business and appointment of a local agent for service of process constituted consent to accept service of process in New York in connection with any matter, and the effect of that service there, where the defendant's presence in New York was not disputed, was to afford New York courts jurisdiction even over claims that did not arise from the corporation's New York business. Bagdon does not hold that a foreign corporation consents to general jurisdiction in this state merely by complying with the registration provisions of NY Business Corporation Law.
The Court has now held that a foreign corporation’s registration to do business in the state and designation of an agent for service of process in New York does not constitute consent to general jurisdiction. This determination relied heavily on the plain language of Article 13 of the NY Business Corporation Law, which 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. As such, a finding that Ford and Goodyear consented to general jurisdiction would add terms to the statute that are simply not present. As a result, the Court of Appeals rejected plaintiffs’ theory that Ford and Goodyear consented to general jurisdiction under New York law and those defendants’ motions to dismiss were granted.
January 5, 2022 Update: While the issue of whether a foreign corporation’s application for authority to do business in New York State would constitute consent to jurisdiction to the courts of New York was making its way to the Court of Appeals, the state legislature introduced Senate Bill S7253. The Bill sought to codify that a foreign corporation’s application for authority to do business in the state would constitute consent to jurisdiction, while surrendering of an application would constitute withdrawal of such consent. However, following the Court of Appeals decision in Aybar in October 2021, holding that a foreign corporation’s registration to do business in the state and designation of an agent for service of process in New York does not constitute consent to general jurisdiction, the proposed legislation and statutory amendments was vetoed by New York Governor Kathy Hochul on December 31, 2021 and has been tabled.
