Under New York’s Business Corporation Law, a foreign corporation pursuing authorization to conduct business in New York is required to register with New York’s Secretary of State and designate an agent for service of process in New York. Noticeably absent from the language of the statute is any explicit statement that such registration and designation also subjects a foreign corporation to general personal jurisdiction in New York. On October 8, 2021, the Court of Appeals issued its decision in Aybar v. Aybar adopting this strict statutory construction of the BCL that registration and designation is not consent to general personal jurisdiction in New York and, at least according to the lengthy dissenting opinion, overturning over 100 years of precedent dating back to the Court’s decision in Bagdon v. Philadelphia & Reading Coal & Iron Co. (217 NY 432 ).
Aybar arose out of an unfortunate and tragic July 2012 motor vehicle collision that left three passengers dead and three others seriously injured. While the collision occurred in Virginia, all of the passengers were New York residents, and lawsuits were filed in New York against the driver, manufacturer of the vehicle (Ford), and the manufacturer of the tires (Goodyear). The vehicle was purchased (used) in New York. Neither the vehicle nor the tires were initially sold, designed, or manufactured in New York. Further, Ford and Goodyear were not New York corporations and did not maintain their principal places of business in New York. Both, however, were registered with the Secretary of State as foreign corporations and had designated agents for service of process in New York.
Ford and Goodyear moved to dismiss under CPLR 3211(a)(8), arguing that the New York court lacked personal jurisdiction. Supreme Court denied the motion, citing Bagdon. The Appellate Division reversed, also citing Bagdon and agreeing with Supreme Court that Bagdon stood for the proposition that registration and designation of an agent in New York constituted consent to general personal jurisdiction in New York. However, the Appellate Division found that recent decisions from the United States Supreme Court regarding the scope of general personal jurisdiction compelled the court to hold compliance with the BCL’s registration and designation requirements did not constitute consent to general personal jurisdiction.
The Court of Appeals began its analysis by clarifying the sole issue presented – whether compliance with the BCL’s registration and designation requirement resulted in consent to general personal jurisdiction in New York. Turning to the language of the BCL itself, the Court found that the statute does not contain any language stating that a foreign corporation consents to general personal jurisdiction in the registration and designation process. To impose such a requirement not found in the statutory language itself, the Court held, would improperly amend the BCL.
Next, the Court addressed the effect of Bagdon, and rejected the plaintiffs’ interpretation of the decision. According to the Court, its decision in Bagdon, “properly understood,” was limited to the effect of the service a foreign corporation consent to, not the issue of whether registration and designation amounted to consent to general personal jurisdiction. In particular, the Court described the issue it decided in Bagdon as whether the consented-to service included actions not related to the New York business conducted by the foreign corporation. In other words, according to the Court here, Bagdon held that registration and designation was consent to accept service for any matter, with such service conferring jurisdiction over the foreign corporation in New York for claims that did not arise from the corporation’s New York business if the foreign corporation was indisputably present in New York. The Court was careful to note that this construct was in consideration of then-existing decisions from the United States Supreme Court, which differs from current United States Supreme Court law regarding where a corporation is subject to general personal jurisdiction.
The dissent was highly critical of the majority’s result. First, the dissent argued the majority’s interpretation of the BCL “eviscerate[d]” the legislature’s “clear” intent of establishing jurisdiction through consent to service. The dissent also questioned the relevance of the majority’s citation to recent United States Supreme Court decisions on the topic of general personal jurisdiction. According to the dissent, these decisions were not applicable to the subject of registration by consent. The dissent also characterized the majority’s interpretation of Bagdon as overruling over 100 years of Court precedent, noting that the use of the term “service” in the time of Bagdon was analogous to “jurisdiction.” Lastly, the dissent rejected the argument from Ford and Goodyear that consent to jurisdiction through registration and designation placed a burden on commerce, noting that any corporation could conduct business in New York without first registering with the Secretary of State by foregoing the right to commence a lawsuit in New York courts.
With this decision, New York joins the growing number of states that have reviewed their respective foreign business registration statutes, and whether registration under such statutes constitutes consent to general personal jurisdiction. Just last month, the Supreme Court of Georgia issued a decision looking at its corresponding statute (see Cooper Tire & Rubber Co. v. McCall, 2021 WL 4268074 [Ga. 2021]). There, the Court found that, while the Court’s prior interpretation of the statute “is in tension with” recent United States Supreme Court decisions, the statute did not offend federal due process. In 2020 the Nebraska Supreme Court held, as matter of due process, that the theory of consent by registration was unconstitutional (see Lanham v. BNSF, 939 NW2d 363 [Neb. 2020]). Of note, the Court reached its decision on purely constitutional grounds, noting that even though the statute at issue – like the New York statute – did not expressly state registration constituted consent to general personal jurisdiction in the state, the exercise of general personal jurisdiction was required to comport with due process. Similar conclusions were reached by the Supreme Court of Missouri (see State ex rel. Norfolk S. Railway Corp. v. Dolan, 512 SW3d 41 [Mo. 2017]) and the Supreme Court of Delaware (see Genuine Parts Co. v. Cepec, 137 A3d 123 [Del. 2016]). Given the due process implications of such statutes and their interpretation, this issue may yet find its way to the United States Supreme Court.
The Court’s holding provides foreign corporations with the knowledge that they can register in New York – thereby gaining access to New York courts – without the risk of being haled into court for litigation with no nexus to New York, an outcome not possible before. Now, there is seemingly little or no benefit to not registering as a foreign corporation under the BCL, since there no longer appears to be a risk of being held to have consented to general personal jurisdiction through registration as a foreign corporation under the BCL.
This alert does not purport to be a substitute for advice of counsel on specific matters.
Harris Beach has offices throughout New York state, including Albany, Buffalo, Ithaca, Long Island, New York City, Rochester, Saratoga Springs, Syracuse and White Plains, as well as New Haven, Connecticut and Newark, New Jersey.