New York State Assembly

 
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A07769 Summary:

A07769 Actions:

A07769 Committee Votes:

Committee:JUDICIARY   Chair:Lavine      
DATE:05/26/2021AYE/NAY:15/6  Action: Favorable refer to committee Codes        
Lavine
Aye
Montesano
Nay
Zebrowski
Aye
Norris
Nay
Weprin
Aye
Walsh
Nay
Braunstein
Aye
Byrnes
Nay
Quart
Aye
Brown
Nay
Steck
Aye
Tannousis
Nay
Seawright
Aye
Joyner
Aye
Abinanti
Aye
Wallace
Aye
Walker
Aye
Cruz
Aye
McMahon
Aye
Mitaynes
Aye
Rajkumar
Aye

Committee:CODES   Chair:Dinowitz      
DATE:06/02/2021AYE/NAY:16/6  Action: Favorable refer to committee Rules        
Dinowitz
Aye
Morinello
Nay
Pretlow
Aye
Giglio
Nay
Cook
Aye
Montesano
Nay
Cymbrowitz
Aye
Reilly
Nay
O'Donnell
Aye
Mikulin
Nay
Lavine
Aye
Tannousis
Nay
Perry
Aye
Abinanti
Aye
Weprin
Aye
Hevesi
Aye
Fahy
Aye
Seawright
Aye
Rosenthal
Aye
Walker
Aye
Vanel
Aye
Cruz
Aye

Committee:RULES   Chair:Gottfried      
DATE:06/09/2021AYE/NAY:24/4  Action: Favorable         
Heastie
Excused
Barclay
Aye
Gottfried
Aye
Hawley
Nay
Nolan
Excused
Giglio
Aye
Weinstein
Aye
Blankenbush
Aye
Pretlow
Aye
Norris
Nay
Cook
Excused
Montesano
Nay
Glick
Aye
Ra
Aye
Aubry
Aye
Brabenec
Nay
Englebright
Aye
Dinowitz
Aye
Colton
Aye
Magnarelli
Aye
Perry
Aye
Paulin
Aye
Peoples-Stokes
Aye
Benedetto
Aye
Lavine
Aye
Lupardo
Aye
Zebrowski
Aye
Thiele
Aye
Braunstein
Aye
Dickens
Aye
Davila
Aye

A07769 Floor Votes:

A07769 Memo:

NEW YORK STATE ASSEMBLY
MEMORANDUM IN SUPPORT OF LEGISLATION
 submitted in accordance with Assembly Rule III, Sec 1(f)



 
BILL NUMBER: A7769
 
SPONSOR: Weinstein

 
TITLE OF BILL:
 
An act to amend the civil practice law and rules, the business corpo-
ration law, the general associations law, the limited liability company
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
 
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 2014 decision in 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 main-
tenance of its principal 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 75556, citing the "textbook case" of Perkins
v. Benguet Consolidated Mining Co., 342 U.S. 437 (1952), for guidance as
to circumstances that pennit exercise of general jurisdiction "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 until the decision in Daimler, New York courts - State and
Federal held that a foreign corporation's registration to do business in
New York constitutes consent by the corporation to general personal
jurisdiction 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. . .  that whenever jurisdiction
of the subject matter is present, service on the agent shall give juris-
diction 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 corporation's New York activity. The consent
extended to all claims, regardless of where they arose. Id. at 438.
 
The applicable New York statutes, both in 1916 and now, do not explicit-
ly state that registration to do business or designation of a local
agent to accept service of process constitutes consent to general juris-
diction. Until recently, this omission was not viewed as a constitu-
tional impediment to litigation against a registered foreign corporation
The United States Supreme Court 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:
" 
When 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.) The critical facts that the corporation had agreed
to subject itself to the regulation of the state of New York and thereby
had consented to general personal jurisdiction. This is "part of the
bargain by which  
the foreign corporation enjoys the business freedom
of the State of New York."  Neirbo Co. v. Bethlehem Shipbuilding Corp.,
308 U.S. 165, 174 (1939).  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.
In the years since the Daimler decision, a number of courts have consid-
ered whether the absence of explicit statutory notice that registration
constitutes consent to general jurisdiction eliminates consent to such
jurisdiction by the mere act of registration. The United States Court of
Appeals for the Second Circuit, in dismissing an action brought in a
Connecticut state court and removed to the Federal District Court, wrote
that the Connecticut registration of foreign corporations statute "was
neither explicit about the scope of jurisdiction conferred, nor had
there issued an authoritative state judicial decision construing the
statute." Brown v. Lockheed, 814 F3d 619, 637 (2nd Cir. 2016) That deci-
sion was relied on by the Appellate Division in dismissing a case in New
York relying on general jurisdiction solely by virtue of registration
under the current BCL, Aybar v Aybar, 169 A.D.3d 137 (2nd Dept.2019),
leave dismissed 33 NY3d 1004). Aybar has been followed by Appellate
Division decisions in other departments, Best v.. Guthrie Med. Group,
175 A.D.3d 1048 (4th Dept 2019), and Fekah v.  Baken Hughes Inc., 2019
N.Y.App.Div> LEXIS 7463 (1st Dept. 2019).  However, other courts have
held that under statutes similar to the current BCL registration stat-
ute, consent jurisdiction is preserved, see, e.g. In re Sealed Case, 932
F.3d 915 (Fed. Cir. 2019),1 The question has attracted substantial
academic analysis, compare, for example, Consent to Judicial Jurisdic-
tion: the Foundation of "Registration" Statutes, 73 N.Y.U. Ann. Surv.
Am. L. 159 (Professor Oscar Chase 2018), supporting such jurisdiction
with Registration Statutes, General Jurisdiction, and the Fallacy of
Consent, 36 Cardozo L. Rev. 1343 (Professor Tanya Monestier 2015)
rejecting such jurisdiction. For an exhaustive analysis of the issue
from the pen of a Federal appellate judge, dealing with general juris-
diction over foreign corporations registering under the Delaware statute
analogous to New York's BCL, see Acorda Therapeutics, Inc. v. Mycal
Pharms., Inc, 817 F.3d 755 (Fed. Cir. 2016, O'Malley, C.J., concurring).
 
The addition of the proposed new subdivision (e) to BCL § 1301 would
avoid the recent Appellate Division case law restricting general juris-
diction, by providing an explicit and 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.

The same position has been adopted in Minnesota, Missouri, Nebraska,
Arkansas, and New Jersey. See Am. Dairy Queen Corp. v. W.B. Mason Co,
2019 U.S.Dist.LEXIS 3314, *9-12 (Jan 8, 2019 D.C.Minn.), collecting
cases., and most recently in New Mexico Schmidt v. Navistar, Inc., 2019
U.S.Dist.LEXIS 35064 (March 4, 2019 D.C.N.M.),
 
There is substantial judicial support for the proposition that the
proposed addition to BCL sec. 1301 would pass constitutional muster.
The Pennsylvania registration statute has for years provided that "qual-
ification" of a foreign corporation "shall constitute a sufficient basis
of jurisdiction to enable the tribunals of this Commonwealth to exercise
general personal jurisdiction", and that explicit notice has insulated
general jurisdiction claimants from dismissal in a plethora of cases.
See, e.g., Healthcase Servs. Grp.  V. Moreta, 2019 U.S.Dist. LEXIS
198954 (E.D.Pa.), and Gronch Co., Inc. v Simon Prop. Group, Inc., 2019
N.Y.Misc. LEXIS 1821, *7 (Sup.Ct.N.Y.Co) rejecting general jurisdiction
because section 1304, as currently written, "does not expressly require
a corporation to consent to jurisdiction to do business within the
state."  Enactment of the proposed addition to BCL sec. 1304 will not
burden the New York courts with cases which ought not to be litigated
here 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.  Ameri-
can Home Products Corp., 99 A.D.2d 949 (1st Dep't), affd, 64 N.Y.2d 630
(1984).
 
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
business 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-profits, 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 juris-
diction is lacking. Furthermore, foreign banks and foreign insurance
companies are excluded from this measure. Although these foreign enti-
ties must register to do business in New York, their concomitant desig-
nation 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.
 
 
2019-2020 LEGISLATIVE HISTORY:
 
A7595 (Weinstein)  
ref to Rules-2019; reported to Rules 2020
 
S6352 (Kaplan)  
ref to Rules-2019; recommitted to Rules 2020
 
 
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 3rd Rdg., Cal. 253-2016
 
 
2014 LEGISLATIVE HISTORY:
 
S7078 (Bonacic)  
subst. by Assembly 9576
 
A9576 (Weinstein)  
PASSED; committed to Rules
 
 
 
 
 
 
 
 
 
 

A07769 Text:

 
                STATE OF NEW YORK
        ________________________________________________________________________
 
                                          7769
 
                               2021-2022 Regular Sessions
 
                   IN ASSEMBLY
 
                                      May 21, 2021
                                       ___________
 
        Introduced  by  M. of A. WEINSTEIN -- (at request of the Office of Court
          Administration) -- read once and referred to the Committee on  Judici-
          ary
 
        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.
                                                                   LBD10576-01-1
        A. 7769                             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.

A07769 LFIN:

 
NO LFIN

A07769 Chamber Video/Transcript: