Answer the Phone, Win a Trip to New York?
September 28, 2017
If you live in the Western Hemisphere, then you already know that New York courts may exercise personal jurisdiction over a nondomiciliary who transacts business in New York if the plaintiff’s claim arises from the transaction of such business. But what does it mean to transact business in New York? Much ink has been spilled on this very question, and there is not room enough here to even begin to cover its scope. However, a recent decision by Justice Elizabeth Hazlitt Emerson (Supreme Court, Commercial Division – Suffolk County) sheds some light.
In Katherine Sales & Sourcing, Inc. v Fiorella, plaintiff Katherine Sales & Sourcing, Inc. (“Katherine”), a New York corporation, sued defendant Robert Fiorella (“Fiorella”) in New York Supreme Court, Suffolk County. Katherine’s complaint alleged that Fiorella had submitted $220,000 in fraudulently inflated invoices to a company co-owned by Katherine in connection with an oral consulting agreement.
Fiorella, a California resident, moved to dismiss for lack of personal jurisdiction. Fiorella argued that he did not enter the State of New York to negotiate his oral consulting agreement, to complete its performance, or for any reason other than to visit his family in Buffalo for Christmas in 2014. The only contact Fiorella had with anyone in New York consisted of telephone calls and emails that he had received and responded to.
Fiorella’s motion to dismiss was granted. Per the court (citing Biz2Credit, Inc., v Kular), jurisdiction is conferred where a defendant projects himself into New York to perform services and purposefully avails himself of the privileges and benefits of performing such services in the State. In making this determination, the court in Kular noted that common factors to be considered include:
(1) whether the defendant has an ongoing contractual relationship with a New York corporation;
(2) whether the defendant negotiated or executed a contract in New York and whether the defendant visited New York after executing the contract with the parties;
(3) whether there is a choice-of-law clause in any such contract; and
(4) whether the contract requires franchisees to send notices and payments into the forum state or subjects them to supervision by the corporation in the forum state.
While Justice Emerson did not reference these factors, much less individually address each of them, her opinion appeared to rely on the second factor—namely, that Fiorella had never entered New York nor performed any part of the agreement by means of purposeful contacts with New York. Other cases cited by the court, including Wego Chemical & Mineral Corp v. Magnablend Inc., support the supreme importance of this second factor: “Courts seem generally loath to uphold jurisdiction under the `transaction in New York’ prong of CPLR 302 if the contract at issue was negotiated solely by mail, telephone, and fax without any New York presence by the defendant.”
But didn’t Fiorella’s phone calls and emails with individuals in New York count as such a “New York presence”? Under different circumstances, they might have. For example, the New York Court of Appeals has held that telephonic participation in a New York auction is sufficient to confer jurisdiction. But Fiorella was not actively transacting business during his calls. To the court, it made all the difference that Fiorella had not initiated the telephone calls and emails with individuals in New York. Moreover, these communications were deemed “incidental” to work that Fiorella was performing outside of New York.
The takeaway from this latest decision appears to be that merely answering calls from area codes “212,” “516,” and “631” does not subject oneself to jurisdiction in New York. Something more is required from the communication—the recipient of such a call must “actively project himself into New York to conduct business transactions”—in order to confer jurisdiction.