Analysis of N.Y. Long-Arm Jurisdiction

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INTERNATIONAL

The 2nd Circuit ruled that any transaction of business in New York in connection with a contract containing the arbitration clause would bear an "articulable nexus" to the challenge to an arbitration award for purposes of determining whether the requirements of long-arm jurisdiction have been satisfied in a proceeding to vacate the award.

Solé Resort and Allure Resorts, both non-U.S. corporations, entered into an agreement under which Allure would manage a hotel owned by Solé that was located in Tulum, Mexico. The agreement provided for Delaware law to govern and stated that disputes would be resolved by arbitration in Miami. The relationship between Solé and Allure soured, leading Solé to terminate the contract. Allure commenced an arbitration against Solé in Miami. The arbitrators awarded Allure $2.1 million in lost future profits. Solé filed a petition in the Southern District of New York to vacate the award. Allure moved to dismiss the petition for lack of personal jurisdiction, and the district court granted the motion. Applying New York's long-arm statute, the district court concluded that the parties' contacts with New York were insufficient to support an exercise of personal jurisdiction because Sole's complaint was based solely on actions of the arbitrators (i.e., that the arbitrators alleged acted in manifest disregard of the law) in Florida.

The issue before the 2nd Circuit was a novel one: whether the long-arm statute permits a court to look only to the actions of the arbitrators when determining whether there is personal jurisdiction over a petition to vacate an arbitration award (as Allure argued) or whether the jurisdictional inquiry "includes an examination of the parties' activities related to the contract underlying the arbitrated dispute." The court chose the second course.

To establish personal jurisdiction under N.Y.'s long-arm statute, a defendant must have transacted business in New York and the claim asserted must "arise from" that business activity. …