Add §301-a, CPLR; amd §1301, BC L; amd §18, Gen Assoc L; amd §802, Lim Lil L; amd §1301, N-PC L; amd
§§121-902 & 121-1502, Partn L
Provides that a foreign corporation's application for authority to do business in this state constitutes consent to jurisdiction of the courts of this state and a surrender of such application constitutes withdrawal of such consent.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A7595
SPONSOR: Weinstein TITLE OF BILL: An act to amend the civil practice law and rules, the
business corporation law, the general associations law, the limited
liability company law, the not-for-profit corporation law and the part-
nership law, in relation to consent to jurisdiction by foreign business
organizations authorized to do business in New York
This is one in a series of measures being introduced at the request of
the Chief Administrative Judge upon the recommendation of his Advisory
Committee on Civil Practice.
This measure would amend § 1301 of the Business Corporation Law (BCL) to
reinforce the continuing viability of consent as a basis for general
(all-purpose) personal jurisdiction over foreign corporations authorized
to do business in New York. In so doing, the measure serves a substan-
tial public interest. Being able to sue New York-licensed corporations
in New York on claims that arose elsewhere will save New York residents
and others the expense and inconvenience of traveling to distant forums
to seek the enforcement of corporate obligations. The measure likewise
amends the General Associations Law, the Limited Liability Company Law,
the Not-for-Profit Corporation Law, and the Partnership Law to encompass
other similarly situated foreign business organizations that must regis-
ter to do business in New York.
Until recently, a foreign corporation doing business in New York could
be sued here on claims arising anywhere in the world. The doing of busi-
ness in New York, such as soliciting and facilitating orders for New
York sales from an office in New York staffed by corporate employees,
was treated as corporate "presence," which traditionally allowed for the
assertion of general personal jurisdiction. When general jurisdiction
exists, the claim being sued upon need not arise out of activity of the
corporate defendant in New York. These principles were articulated in
the 1917 case of Tauza v. Susquehanna Coal Co., 220 N.Y. 259, and
carried forward by CPLR 301.
In the recent decision of Daimler AG v. Bauman, 134 S.Ct. 746 (2014),
however, the U.S. Supreme Court held that due process requires more than
the doing of business in a state before the courts of that state may
assert general jurisdiction. By analogy to the assertion of general
jurisdiction over individuals domiciled in the state, the corporation
must be "at home" in the state. This means that the only type of local
activity by a corporation that will ordinarily qualify for general
jurisdiction is incorporation in the state or maintenance of its princi-
pal place of business in the state. Id. at 760-62. Doing business in the
state, by itself, will not suffice, even if such business is conducted
on a regular and systematic basis from a local office or other facility.
Tauza-type general jurisdiction, therefore, is no longer available in
New York for those seeking to enforce corporate obligations incurred
outside the state. On the other hand, Daimler's at-home requirement has
no application to cases in which a corporation is subject to "specific"
jurisdiction pursuant to a long-arm statute, such as CPLR 302, which
confers jurisdiction for claims arising from a defendant's local acts.
Because Daimler's limitation on general jurisdiction was decided on the
basis of constitutional due process, amending the CPLR to explicitly
confer general jurisdiction over foreign corporations simply because
they are doing business in the state would be futile. The Daimler
Court, however, did not address consent-based general jurisdiction that
occurs through corporate licensing and registration with the Secretary
of State. (See 134 S.Ct. at 755-56, citing the "textbook case" of
Perkins v. Benguet Consolidated Mining Co., 342 U.S. 437 (1952), for
guidance as to circumstances that permit exercise of general jurisdic-
tion "over a foreign corporation that has not consented to suit in the
forum.")
A foreign corporation, as a condition of doing business in New York,
must apply for authorization to do so from the New York Secretary of
State. BCL § 1301(a). As a part of such licensing and registration, BCL
§ 304(b) specifies that the corporation must designate the Secretary of
State as its agent upon whom process may be served in a New York action.
See also BCL § 1304(a)(6). Furthermore, BCL § 304(c) provides that
foreign corporations already authorized to do business in New York as of
the 1963 effective date of the BCL were "deemed" to have made such
designation. (During the statutory regime that preceded adoption of the
BCL, foreign corporations seeking authorization to do business in New
York could appoint either a private individual or a public officer as
agent upon whom process could be served. See Karius v. All States
Freight, Inc., 176 Misc. 155, 159 (Sup.Ct. Albany Co. 1941)).
From 1916 to the present, New York courts - State and Federal - have
held that a foreign corporation's registration to do business in New
York constitutes consent by the corporation to general personal juris-
diction in the New York courts. Judge Benjamin N. Cardozo wrote in
Bagdon v. Philadelphia & Reading Coal & Iron Co., 217 N.Y. 432 (1916),
that such consent flows from the foreign corporation's statutorily
required designation of a New York agent for service of process:
The person designated is a true agent. The consent that he shall repre-
sent the corporation is a real consent. He is made the person "upon whom
process may be served." The actions in which he is to represent the
corporation are not limited. The meaning must, therefore, be that the
appointment is for any action which under the laws of this state may be
brought against a foreign corporation. . . person. . . . It means that
whenever jurisdiction of the subject matter is present, service on the
agent shall give jurisdiction of the person.
Id. at 436-37. Judge Cardozo rejected the notion that the consent at
issue in Bagdon was limited to claims that arose from the foreign corpo-
ration's New York activity. The consent extended to all claims, regard-
less of where they arose. Id. at 438.
Although the applicable New York statutes, both in 1916 and now, do not
explicitly state that registration to do business or designation of a
local agent to accept service of process constitutes consent to general
jurisdiction, judicial interpretation of the statutes is what matters.
The Supreme Court has twice recognized that a corporation's statutorily
required designation of a local agent to accept process rationally may
be interpreted as consent to general jurisdiction: "(W)hen a power is
actually conferred by a document, the party executing it takes the risk
of the interpretation that may be put upon it by the courts. The
execution was the defendant's voluntary act." Pennsylvania Fire Ins. Co.
of Philadelphia v. Gold Issue Mining & Milling Co., 243 U.S. 93, 96
(1917); see also Neirbo Co. v. Bethlehem Shipbuilding Corp., 308 U.S.
165, 174-75 (1939).
From the time of Bagdon, almost all New York courts have held that
consent to general personal jurisdiction is the inherent by-product of
registration to do business in New York. Some have reasoned, as in
Bagdon, that the act of consent is the designation of the Secretary of
State or some other person as agent in New York (see, e.g., Karius v.
All States Freight, Inc., supra, 176 Misc. at 159; Robfogel Mill-Andrews
Corp. v. Cupples Co., 67 Misc.2d 623, 624 (Sup.Ct. Monroe Co. 1971);
see also Restatement of the Law (Second) of Conflict of Laws § 44
(1971)), while others have held that a foreign corporation consents to
general jurisdiction as a result of both registration "and concomitant
designation of the Secretary of State as its agent for service of proc-
ess" (Augsbury Corp. v. Petrokey Corp., 97 A.D.2d 173, 175 (3d Dep't
1983); see also The Rockefeller University v. Ligand Pharmaceuticals
Inc., 581 F.Supp.2d 461, 466-67 (S.D.N.Y. 2008)). Still others have
simply held that becoming licensed to do business in New York consti-
tutes consent to general jurisdiction. Le Vine v. Isoserve, Inc., 70
Misc.2d 747, 749 (Sup.Ct. Albany Co. 1972); STX Panocean (UK) Co., Ltd.
v. Glory Wealth Shipping Pte Ltd., 560 F.3d 127, 131 (2d Cir. 2009);
China National Chartering Corp. v. Pactrans Air & Sea, Inc., 882
F.Supp.2d 579, 596 (S.D.N.Y. 2012); Steuben Foods, Inc. v. Oystar Group,
2013 WL 2105894 (W.D.N.Y. 2013) (observing in n.1 that a contrary deci-
sion in Bellepointe, Inc. v. Kohl's Dep't Stores, Inc., 975 F.Supp. 562,
564 (S.D.N.Y. 1997), has been rejected by the Second Circuit).
Because authorization to do business is not possible today without
designation of the Secretary of State as an agent upon whom process may
be served (BCL §§ 304(b)-(c)), the acts of designating the Secretary of
State and becoming registered are co-equal in effect. The critical fact
is that the corporation has agreed to subject itself to the regulation
of the state of New York and thereby has consented to general personal
jurisdiction. This is "part of the bargain by which
the foreign corpo-
ration enjoys the business freedom of the State of New York." Neirbo
Co. v. Bethlehem Shipbuilding Corp. supra, 308 U.S. at 175. For at least
98 years, foreign corporations have been on notice that becoming
licensed to do business in New York is a consent to general personal
jurisdiction.
The addition of the proposed new subdivision (e) to BCL § 1301 would
codify the case law and provide a forceful legislative declaration as to
the effect of a foreign corporation's registration to do business in New
York. Consent to general jurisdiction is a fair requirement to impose on
corporations that benefit from conducting business in New York. Such
consent provides the certainty of a forum with open doors for the
enforcement of obligations of New York-licensed corporations without the
expense and burden of proving jurisdiction on a case-bycase basis. In
Daimler, the Supreme Court recognized the value of having an "easily
ascertainable" and "clear and certain forum in which a corporate defend-
ant may be sued on any and all claims." 134 S.Ct. at 760. It should be
noted, however, that even when corporate defendants are registered in
New York, courts retain the discretionary power to decline the exercise
of jurisdiction over them in the interests of justice and convenience
pursuant to the doctrine of forum non conveniens. CPLR 327; see, e.g.,
Bewers v. American Home Products Corp., 99 A.D.2d 949 (1st Dep't),
aff'd, 64 N.Y.2d 630 (1984).
Post-Daimler caselaw supports, both directly and indirectly, the validi-
ty and value of the proposed measure. The Supreme Court, New York Coun-
ty, held in Bailen v. Air & Liquid Systems Corp., 2014 WL 3885949 (Aug.
5, 2014), that Daimler "does not change the law with respect to juris-
diction based on consent." A corporation consents to New York jurisdic-
tion "by registering as a foreign corporation and designating a local
agent." Similarly, two federal courts in New York have said that consent
to general jurisdiction based on corporate registration presents an
inquiry that is independent of Daimler. Gucci America, Inc. v. Weixing
Li, 768 F.3d 122, 136 n.15 (2d Cir. 2014) (although jurisdiction could
not be based on the mere doing of business in New York, district court
could "consider whether
a corporation has consented to personal juris-
diction in New York by applying for authorization to conduct business in
New York and designating the New York Secretary of State as its agent
for service of process"); Beach v. Citigroup Alternative Investments
LLC, 2014 WL 904650 (S.D.N.Y. 2014).
Of particular interest is the decision of the Federal District Court in
AstraZeneca AB v. Mylan Pharmaceuticals, Inc., 2014 WL 5778016 (D.Del.
2014), which held that Delaware's corporate consent regime was incon-
sistent with the premise of Daimler. However, the Delaware registration
legislation, like the current BCL in New York, does not explicitly state
that registration constitutes consent to jurisdiction. The proposition,
rather, is established by caselaw. The Delaware district court, there-
fore, confined its holding "to Delaware's statutes specifically," noting
that a more difficult question is raised when a state statute "expressly
indicate(s) that foreign corporations consent to general jurisdiction by
complying with the statutes." Id. at n. 6. Adoption of the proposed
amendments to the BCL and related statutes would clarify and confirm the
well-established New York policy on corporate consent, as to which
foreign corporations have been on notice for nearly a century.
BCL § 1312(a) will continue to provide an indirect enforcement mechanism
to encourage foreign corporations doing business in New York to become
authorized and thereby confer consent to general jurisdiction. BCL §
1312(a) states that a foreign corporation doing business in New York
without authority may not maintain an action in the state's courts until
it obtains the necessary authorization and pays relevant fees, taxes,
penalties and interest charges. This statute "regulate(s) foreign corpo-
rations which are conducting business in New York so that they will not
be on a more advantageous footing than domestic corporations." Reese v.
Harper Surface Finishing Systems, 129 A.D.2d 159, 162 (2d Dep't 1987).
BCL § 1312(a) applies to corporations engaged in "regular, systematic
and continuous" business in New York. See, e.g., Highfill, Inc. v.
Bruce and Iris, Inc., 50 A.D.3d 742, 743 (2d Dep't 2008). This standard
encompasses corporations that maintain offices or other facilities in
New York for the purpose of engaging in a mix of local and interstate
business and provides sufficient flexibility for the inclusion of corpo-
rations that do business in New York without a fixed location, as was
the case in Highfill. It has been noted that the "regular, systematic
and continuous business" standard helps to ensure compliance with
constitutional limits on state regulation of purely interstate business.
See Airtran New York, LLC v. Air Group, Inc., 46 A.D.3d 208, 214 (1st
Dep't 2007).
Consistent with the history, policy and caselaw relating to foreign
business corporations, this measure also codifies the principle that
other types of foreign business organizations consent to general juris-
diction when they do business in New York and, pursuant to statute,
expressly appoint the Secretary of State as their agent upon whom proc-
ess may be served. This measure thus includes foreign joint stock asso-
ciations and business trusts (see Gen. Assoc. Law §§ 18; 2(4) (these are
the only "associations" that must designate the Secretary of State as
agent)); foreign limited liability companies (see Ltd. Liability Co. Law
§§ 301(a); 802(a)); foreign not-for-profit corporations (see Not-for-
Profit Corp. Law §§ 304, 1301, 1304(a)(6)); foreign limited partnerships
(see Partnership Law §§ 121-104; 121-902); and foreign limited liability
partnerships (see Partnership Law § 121-1502).
Authorized foreign corporations not wishing to continue their consent to
jurisdiction may, of course, surrender their authority to do business in
New York at any time in accordance with BCL § 1310. Other types of busi-
ness organizations may likewise withdraw their authorization or certif-
icate of designation to do business in the State. Currently, however,
there is no statutory language specifically delineating the date upon
which the consent to jurisdiction is deemed withdrawn. Accordingly, this
measure would also enact a new CPLR 301-a to provide that where a busi-
ness organization which is registered, authorized or designated to do
business in this state surrenders, withdraws or otherwise revokes its
registration, authorization or certificate of designation, its consent
to jurisdiction terminates on the date of such surrender, withdrawal or
revocation.
With respect to not-for-profit corporations, the amendment of the Not-
for-Profit Corporation Law (§ 1301(e)) recognizes that some not-for-pro-
fits, such as religious corporations, are exempt from the requirement
that they designate the Secretary of State as an agent upon whom process
may be served. See Relig. Corp. Law § 2-b. See also Not-for-Profit Corp.
Law § 113(b); Private Housing Finance Law § 13-a (limited-profit housing
companies). In such cases, consent-based jurisdiction is lacking.
Furthermore, foreign banks and foreign insurance companies are excluded
from this measure. Although these foreign entities must register to do
business in New York, their concomitant designation of the Secretary of
Banking and the Secretary of Insurance, respectively, as an agent upon
whom process may be served is explicitly limited by statute to a narrow
range of claims. See Banking Law § 200(3); Ins. Law § 1212(a).
This measure, which would have no fiscal impact on the State, would take
effect on the first of January next succeeding the date on which it
shall have become law.
2017-2018 LEGISLATIVE HISTORY:
S5889 (Bonacic) (committed to Rules-2017; referred to Judiciary-2018)
A5918 (Weinstein)(advanced to 3rd Rdg-2017; ordered to 3rd Rdg Cal.
421-2018)
2015-2016 LEGISLATIVE HISTORY:
S4846 (Bonacic) (committed to Rules)
A6714 (Weinstein) (PASSED in 2015; ordered to 3'd Rdg., Cal. 253-2016)
2014 LEGISLATIVE HISTORY:
S7078 (Bonacic) (subst. by Assembly 9576)
A9576 (Weinstein) (PASSED; committed to Rules)
STATE OF NEW YORK
________________________________________________________________________
7595
2019-2020 Regular Sessions
IN ASSEMBLY
May 13, 2019
___________
Introduced by M. of A. WEINSTEIN, DINOWITZ -- (at request of the Office
of Court Administration) -- read once and referred to the Committee on
Judiciary
AN ACT to amend the civil practice law and rules, the business corpo-
ration law, the general associations law, the limited liability compa-
ny law, the not-for-profit corporation law and the partnership law, in
relation to consent to jurisdiction by foreign business organizations
authorized to do business in New York
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. The civil practice law and rules is amended by adding a new
2 section 301-a to read as follows:
3 § 301-a. Termination of consent to jurisdiction in certain cases.
4 Where a business organization registered, authorized or designated to do
5 business in this state surrenders, withdraws or otherwise revokes its
6 registration, authorization or certificate of designation, its consent
7 to jurisdiction terminates on the date of such surrender, withdrawal or
8 revocation.
9 § 2. Section 1301 of the business corporation law is amended by adding
10 a new paragraph (e) to read as follows:
11 (e) A foreign corporation's application for authority to do business
12 in this state, whenever filed, constitutes consent to the jurisdiction
13 of the courts of this state for all actions against such corporation. A
14 surrender of such application shall constitute a withdrawal of consent
15 to jurisdiction.
16 § 3. Section 18 of the general associations law is amended by adding a
17 new subdivision 5 to read as follows:
18 5. An association's certificate of designation prescribed by this
19 section, whenever filed, constitutes consent to the jurisdiction of the
20 courts of this state for all actions against such association. A revoca-
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD11616-01-9
A. 7595 2
1 tion of such designation shall constitute a withdrawal of consent to
2 jurisdiction.
3 § 4. Section 802 of the limited liability company law is amended by
4 adding a new subdivision (c) to read as follows:
5 (c) A foreign limited liability company's application for authority to
6 do business in this state, whenever filed, constitutes consent to the
7 jurisdiction of the courts of this state for all actions against such
8 limited liability company. A surrender of such application shall consti-
9 tute a withdrawal of consent to jurisdiction.
10 § 5. Section 1301 of the not-for-profit corporation law is amended by
11 adding a new paragraph (e) to read as follows:
12 (e) A foreign corporation's application for authority to conduct
13 activities in this state, whenever filed, constitutes consent to the
14 jurisdiction of the courts of this state for all actions against such
15 corporation unless such corporation is exempt from any law requiring it
16 to designate the secretary of state as agent of the corporation upon
17 whom process against it may be served and it has made no such desig-
18 nation. A surrender of such application shall constitute a withdrawal of
19 consent to jurisdiction.
20 § 6. Section 121-902 of the partnership law is amended by adding a new
21 subdivision (e) to read as follows:
22 (e) A foreign limited partnership's application for authority to do
23 business in this state, whenever filed, constitutes consent to the
24 jurisdiction of the courts of this state for all actions against such
25 foreign limited partnership. A surrender of such application shall
26 constitute a withdrawal of consent to jurisdiction.
27 § 7. Section 121-1502 of the partnership law is amended by adding a
28 new subdivision (r) to read as follows:
29 (r) A foreign limited liability partnership's notice to carry on or
30 conduct or transact business or activities as a New York registered
31 foreign limited liability partnership in this state, whenever filed,
32 constitutes consent to the jurisdiction of the courts of this state for
33 all actions against such foreign limited liability partnership. A with-
34 drawal of such notice shall constitute a withdrawal of consent to juris-
35 diction.
36 § 8. This act shall take effect on the first of January next succeed-
37 ing the date on which it shall have become a law.
