BILL NUMBER:  S5889

 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 partnership
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 substantial 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 register 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
business 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 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 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 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 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
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
represent 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. . .
The contract deals with jurisdiction of the 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
corporation's New York activity. The consent extended to all claims,
regardless 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., Karim' 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 process" (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 constitutes consent to general jurisdiction. Le Vine v.
Isoserve, Inc., 70 Misc.2d 747, 749 (Sup.Ct. Albany Co.  1972); STX
Panocean (U.K) 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 decision 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 corporation) 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-by-case basis. In Daimler, the Supreme Court recognized the value
of having an "easily ascertainable" and "clear and certain forum in
which a corporate defendant 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
validity and value of the proposed measure. The Supreme Court, New
York County, held in Bailen v. Air & Liquid Systems Corp., 2014 WL
3885949 (Aug. 5, 2014), that Daimler "does not change the law with
respect to jurisdiction based on consent." A corporation consents to
New York jurisdiction "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 jurisdiction 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
inconsistent 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, therefore, 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 corporations 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 corporations 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
jurisdiction when they do business in New York and, pursuant to
statute, expressly appoint the Secretary of State as their agent upon
whom process may be served. This measure thus includes foreign joint
stock associations 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 business organizations may likewise withdraw their
authorization or certificate 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
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.

 2015-2016 LEGISLATIVE HISTORY :

Senate 4846 (Sen. Bonacic) (committed to Rules)
Assembly 6714 (M. of A. Weinstein) (PASSED in 2015; ordered to 3rd
Rdg., Cal. 253 in 2016)

 2014 LEGISLATIVE HISTORY :

Senate 7078 (Sen. Bonacic) (subst. by Assembly 9576)
Assembly 9576 (M. of A. Weinstein) (PASSED; committed to Rules)