Senate Bill S4846

                                 BILL NUMBER:  S4846               REVISED 2/23/16

 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 is 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-individuals and New York companies alike-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 Susquohanna
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. lie 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 Basilan, 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 Slates 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 Delft 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); SiX Panocean (UK) Co., Ltd. v. Glory Wealth Shipping
he 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 Idle 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 nearly 100 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
ease-bycase 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.

Post-Daimler caselaw strongly supports the validity and value of the
proposed measure. The Supreme Court, New York County, held in Batten
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."
See also Corporate Jet Support, Inc, v. Lobosco Ins. Group, L LC
2015 WL 5883026 (Oct.7, 2015, Sup.Ct.N.Y,Co.) (same).

The Appellate Division, First Department, also relied upon consent
principles in B & Kingstone, LLC v. Mega Int '1 Commercial Bank Co.,
131 A.D.3d 259 (1st Dep't 2015), motion for leave to appeal dismissed,
2015 WI, 6457032, to require a Taiwanese bank, a branch of which was
registered and doing business in New York, to respond to a
post-judgment information subpoena concerning any assets held by
certain third-party judgment debtors at the New York branch or any of
the bank's non-New York branches. Daimler did not preclude the
exercise of such jurisdiction. The relevant registration statute,
Banking Law § 200, confers jurisdiction for causes of action against a
foreign registered bank, or its branches, that arise out of a
transaction in New York§ 200(3)), but the case here did not involve a
cause of action against the bank-only participation in discovery
proceedings concerning a judgment against other parties. The bank
"consented to..  regulatory oversight in return for permission to
operate in New York. .. . This legal status also confers obligations
to participate as (a) third-part(y) in lawsuits which involve() assets
under (its) management." (On a separate point, the IAS court denied
the judgment creditor's request to enforce a restraining notice. The
separate-entity rule of Motorola Credit Corp. v. Standard Chartered
Bank, 24 N.Y.3d 149 (2014), prohibits the enforcement of restraining
notices served on New York bank branches with respect to accounts in
other branches of the bank located in foreign countries. This aspect
of the IAS court's order was not appealed. The Appellate Division
stressed that the Motorola Court limited its application of the
separate-entity rule to restraining notices and turnover orders and
therefore did not preclude enforcement of the information subpoena in
the instant case,)

Several federal district courts have explicitly held that consent
based on corporate registration survives Daimler as a constitutional
basis for the exercise of general jurisdiction for claims against
foreign corporations. See, e.g., Acorda Therapeutics, Inc. v. Mylan
Pharmaceuticals Inc., 78 F.Supp.3d 572 (D.Del, 2015); Forest
Laboratories, Inc. v. Amneal Pharmaceuticals LLC, 2015 WL 880599
(D.Del. 2015); Otsuka Pharmaceutical Co. v. Mylan Inc.. 2015 WL
1305764 (D.N.J. 2015); Perrigo Co. v. Merle! Ltd., 2015 WL 1538088
(D.Neb.  2015). See also Beach v, Citigroup Alternative Investments
I,2014 WL 904650 (S.D.N.Y.  2014) (dicta).

To be sure, some federal courts have disagreed. For example,
AstraZeneca AB v. lifylcut Pharmaceuticals, Inc., 72 F.Supp.3d 549
(D.Del. 2014), held that consent jurisdiction and contacts-based
jurisdiction-the latter being the matter at issue in Daimler-both
require due process scrutiny, which corporate registration fails. The
AstraZeneca court reasoned that one of the premises of Daimler was
that a corporation is entitled to "some minimum assurance as to where
its conduct will and will not render (it) liable to suit," and such
notice is absent when registration is treated as consent to general
personal jurisdiction. The court,silso argued that a corporate
defendant registered in multiple states could be exposed to suits all
over the country, a result that Daimler's at home" test sought to
preclude. See also Chatwa Hotels & Resorts LLC v, Dollywood Co., 90
F.Supp.3d 97 (S.D.N.Y. 2015); Public Impact, LLC v. Boston Consulting
Group, Inc., 2015 WL 4622028 (M.D.N.C. 2015) (applying pre-Daimler
Fourth Circuit precedent).

AstraZeneca was convincingly answered by Acorda Therapeutics, Inc. v.
Mylan Pharmaceuticals Inc.. 2015 WL 186833 (D.Del. 2015), where the
court held that consent is an entirely separate basis of jurisdiction
from that based on minimum contacts. Daimler itself indicated that the
issue before the Court was the scope of jurisdiction over corporations
that had not consented to jurisdiction. 134 S.Ct. at 755-56. Daimler
simply does not overrule or even call into question Supreme Court
precedents upholding corporate registration as a constitutional basis
for general jurisdiction. Acorda also rejected the argument that
jurisdiction based on registration creates unpredictability. On the
contrary, "(w)hen . the basis for jurisdiction is the voluntary
compliance with a state's registration statute, which has long and
unambiguously been interpreted as constituting consent to general
jurisdiction in that state's courts, the corporation can have no
uncertainty as to the jurisdictional consequences of its action." The
number of states in which a corporation voluntarily registers to do
business is irrelevant. (The split within the Delaware District Court
is expected to be resolved in a consolidated appeal of AstraZeneca and
Acorda to the Court of Appeals for the Federal Circuit. See 2015 WL
1467321.)

In short, the developing caselaw firmly supports New York's statutory
reaffirmance that a foreign corporation that registers to do business
in New York consents to general personal jurisdiction.

It is important to note that the doctrine of forum non conveniens
provides a safety valve against unreasonable exercises of
jurisdiction, even when corporate defendants are registered in New
York. Forum non conveniens, codified in CPLR 327, authorizes courts,
in their discretion, to dismiss cases that have no connection to New
York. Recently, for example, the court in Corporate Jet Support, Inc.
v. Lobosco Ins. Group, L.L.C., 2015 WL 5883026 (Oct. 7, 2015,
Sup.Ct.N.Y.Co.), dismissed a New York action against a New
York-registered corporate defendant, even though such registration
conferred general jurisdiction, because New Jersey was a more
appropriate forum: the case involved a New Jersey corporation suing
another New Jersey corporation with respect to events that took place
in New Jersey. See also Bewers v, American Home Products Corp., 99
A.D.2d 949 (1st Dep't), air d, 64 N.Y.2d 630 (1984) (court dismissed
on forum non conveniens grounds where English citizens sued New York
corporations for personal injuries allegedly caused by defendants'
pharmaceutical products that were manufactured, tested, labelled,
marketed, prescribed and ingested in England).

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 "regulates 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. Hatper 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., High/ill, 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. 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 LEGISLATIVE HISTORY :  Senate 4846 (Sen. Bonacic) (committed to
Rules) Assembly 6714 (M. of A. Weinstein) (PASSED)

 2014 LEGISLATIVE HISTORY :  Senate 7078 (Sen. Bonacic) (subst. by
Assembly 9576) Assembly 9576 (M. of A. Weinstein) (PASSED)