Where Corporations Are: Why Casual Visits to New York Are Bad for Business

By Schroeder, Jeanne L.; Carlson, David Gray | Albany Law Review, Winter 2012 | Go to article overview
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Where Corporations Are: Why Casual Visits to New York Are Bad for Business

Schroeder, Jeanne L., Carlson, David Gray, Albany Law Review

Some time prior to 1881, the president of the Terre Haute Car & Manufacturing Co. was traveling through New York on his way to a seaside resort when he was served with process in a civil suit against his company. (1) The president was "not in his official capacity or upon any business of the defendant." (2) The company, "being a foreign corporation, had no place of business, and transacted no business, and had no property within this State." (3)

Most lawyers today would say that New York courts could not compel this corporation to stand trial in New York. But, this being the nineteenth century, before the days of International Shoe v. Washington, (4) the New York Court of Appeals in Pope v. Terre Haute Car & Manufacturing Co. happily imposed jurisdiction on the corporation. (5) It never occurred to the Pope court that the United States Constitution might constitute the slightest impediment to the imposition of jurisdiction. (6)

After International Shoe, such a holding became unthinkable. International Shoe involved a tax on businesses employing salesmen within the state. (7) A corporation had resident salesmen and a showroom in Washington. (8) The state commenced litigation against the corporation by serving process on its salesmen and mailing notice to International Shoe in St. Louis. (9) The Supreme Court upheld jurisdiction of the Washington courts because the defendant had "minimum contacts with [Washington] such that the maintenance of the suit [did] not offend 'traditional notions of fair play and substantial justice."' (10) In so holding, the Court remarked that "the casual presence of the corporate agent or even his conduct of single or isolated items of activities in a state in the corporation's behalf [would not have been] enough to subject it to suit on causes of action unconnected with the activities there." (11)

Many examples--three at the United States Supreme Court level--can be given in which the casual visit by an officer of a corporation that was not otherwise doing business in New York was an insufficient peg on which to hang the hat of New York jurisdiction. (12) The Restatement (Second) of Conflicts of Laws summarizes the matter in the following illustration:

   A brings an action in state X against the B corporation
   which was incorporated in state Y. Process is served in X
   upon C, the president of the B corporation, who happens to
   be temporarily in X on his own private business. The court
   does not thereby acquire jurisdiction over B. (13)

It would appear Pope is no longer infallible law in New York. Yet, in 2010, the New York Court of Appeals in Hotel 71 Mezz Lender LLC v. Falor (14) revived its holding in Pope and once again took the position that a casual visit to New York by a company officer is quite enough to sustain personal jurisdiction over a foreign company not otherwise doing business in New York. (15) Pope lives again, as if International Shoe had never happened.

How could the Falor court have turned back the clock to the primitive days of 1881, ignoring the minimum contacts requirement for bringing foreign businesses under New York jurisdiction? The answer is that, given the confused facts of Falor, it is likely the court failed to appreciate the logical predicates of its own holding. (l6) The case involved a pre-judgment order of attachment. (17) It seemed to be an exercise in quasi in rem jurisdiction. (18) The Falor court therefore viewed the controversy as involving jurisdiction over things, not over persons. (19) Nevertheless, Falor was indeed a holding on in personam jurisdiction over a business with no minimum contacts with New York. (20) It stands for the proposition that casual visits to New York by company agents can, without anything more, submit the company to New York jurisdiction. (21) A company officer that flies to New York to take in a Broadway show threatens to put his company at the mercy of the New York courts.

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Where Corporations Are: Why Casual Visits to New York Are Bad for Business


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