In a case involving personal jurisdiction between two parties located outside of New York state, the Court of Appeals recently reversed the decision of the Appellate Division in D & R Global Selections v. Bodega Olegario Falcon Pineiro and held that long arm personal jurisdiction over the party exists where the furtherance of the agreement occurred in New York state.
The defendant, Bodega, is a winery located in Ponteveda, Spain and the plaintiff D&R, also located in the same town entered into an oral agreement to locate a distributor for the defendant’s wines in the United States. Pursuant to the agreement, the defendant also agreed to pay commissions to the plaintiff based on a specified rate. As the Court noted, neither party were a domiciliary of New York nor did they have any permanent presence in the state.
The parties jointly visited New York multiple times to locate a distributor. In one such event in May 2005, the defendant was introduced to Kobrand Corp. by the plaintiff. In November 2005, the defendant commenced selling wine to Kobrand. In January 2006, both plaintiff and defendant attended Kobrand’s promotional events which included the promotion of defendant’s wine. The defendant paid commissions to the plaintiff until November 2006 and in January 2007, the defendant ceased paying commissions to the plaintiff, citing that the oral agreement was for one year.
In November 2007, the plaintiff commenced cause of action against the defendant for breach of contract, quantum meruit, unjust enrichment, and an accounting. The plaintiff alleged that agreement did not terminate after one year, but would continue during the period for which Kobrand promoted the defendant’s wine. In June 2008, the plaintiff obtained default judgment on the grounds of defendant’s failure to answer the complaint. The defendant appealed the judgement. The Appellate Division vacated the judgment on grounds as to a question of fact if the court had personal jurisdiction over the defendant under CPLR 302(a)(1).
The Court began its analysis with the textual interpretation of CPLR 302(a)(1). To be subject to personal jurisdiction under CPLR 302(a)(1), either (1) the defendant needs to transact business or (2) contracts to supply goods and services in the state. In either case, there is a further two-fold query: (i) the defendant must be purposefully availing itself in cases (1) or (2) and (ii) the claim against the defendant must arise from said business transaction.
In order for the defendant to purposefully avail itself, a non-domiciliary defendant transacts business in New York when “on his or her own initiative, the non-domiciliary projects himself or herself into this state to engage in a sustained and substantial transaction of business” citing Paterno v. Laser Spine Inst., 24 NY3d 370 (2014). Furthermore, the quality of contacts is to be considered especially focusing if the non-domiciliary “seeks out and initiates contact with New York, solicits business in New York, and establishes a continuing relationship”. Thus, the Court agreed with the Appellate Division’s determination that the Defendant did conduct business in New York. First, the agreement between the parties emphasised locating a distributor in the United States; secondly, the parties visited New York multiple times to attend wine industry events and did locate a distributor and thirdly, the defendant entered into an agreement with Kobrand for the distribution and promotion of its wine. Therefore, the Court concluded that the defendant purposefully availed itself of “the privilege of conducting activities within New York, thus invoking the benefits and protections of its laws”.
The Court reiterated that simply transacting business in New York was not sufficient for long arm jurisdiction under CPLR 302(a)(1), but in addition, there must have an “articulable nexus” or “substantial relationship” with the defendant’s transaction of business and the plaintiff’s claim. It should be noted that an articulable nexus or substantial relationship exists “where at least one element arises from the New York contacts” rather than “every element of the cause of action pleaded”. Here, the Court deviated from the Appellate Division’s reasoning and concluded that such a nexus exists since the agreement was not performed entirely in Spain. Most importantly, under the Court’s analysis, the parties engaged in activities in New York in furtherance of their agreement. The parties travelled to New York multiple times to locate a distributor; the defendant was introduced to Kobrand; the meeting led to attending Kobrand’s promotional events where the defendant’s wine was purchased; and finally, the non-payment of the commissions based on the purchases was the basis of plaintiff’s claim. Therefore, the Court concluded that the plaintiff’s claim arose from the defendant’s transaction in New York.
Finally, the Court also considered whether long arm personal jurisdiction would comport with federal due process. In order to comport with the constitutional requirement, the defendant must have (1) minimum contacts with New York and should “reasonably anticipate being hauled into court” and (2) defending such suit comports with “traditional notions of fair play and substantial justice”. The first element had been established since the defendant visited New York to locate a distributor and also signed an agreement with a distributor to promote its wine. Thus, the Court concluded that the defendant could reasonably be anticipated to defend a suit in New York. With respect to the second element, the burden falls on the defendant to “present a compelling case that the presence of some other considerations would render jurisdiction unreasonable”. Here, the Court noted that defendant did not present any reason and thus long arm jurisdiction could be exercised over the defendant without violating due process.
The Court’s opinion is interesting in that “in furtherance of an agreement” could be considered a factor as to whether long arm jurisdiction can be extended to a defendant. The oral agreement appeared to have been manifested in Spain rather than New York. It didn’t appear to be the party’s intention from the onset that New York would be the sole location for locating a distributor.