Back to Basics: Long-Arm Statute 101
April 29, 2019
Reflecting on your first year of law school, you begrudgingly remember learning about personal jurisdiction and the long-arm statute. As a commercial litigator, one of your first questions in representing a defendant should be: Does this court have jurisdiction over my client? If the answer to that question is no, then of course, you next consider moving to dismiss.
In an interesting decision by Justice Saliann Scarpulla, the Court analyzed whether it had jurisdiction over defendant 400 5th Avenue, L.P (“Defendant”), the owner of the historic Kaufmann’s building in Pittsburg. In AM Pitt Hotel, LLC v 400 5th Ave., L.P., Plaintiff, AM Pitt Hotel, LLC (“Plaintiff” or “AM Pitt”) purchased part of the building from the Defendant to develop a hotel. The parties entered into a sale and development agreement (the “Sale Agreement”).
However, as the adage goes, “all good things must come to an end.” Plaintiff commenced this action against the Defendant, in the New York County Commercial Division for breach of contract and implied covenant of good faith and fair dealing arising from a construction dispute over the redevelopment of the historic building. The dispute pertained to Defendant’s delay in completing the construction of the hotel.
Not surprisingly, Defendant, a Pennsylvania limited partnership with a principle place of business in Pennsylvania moved to dismiss Plaintiff’s Complaint for lack of jurisdiction. In response, Plaintiff argued that the Court can exercise jurisdiction over the Defendant pursuant to the long arm statute (CPLR 302(a)(1)). Plaintiff’s main focus in opposition to Defendant’s motion to dismiss was based on that fact that Defendant’s construction manager, Core Realty Inc. met with Melohn Group, a 95% owner of Plaintiff and a New York real estate firm regarding investment in the building, once in New York.
Here, the Court stated, as did your 1L law school professor, that the main inquiry under CPLR 302(a)(1) is whether “defendant purposefully availed itself of the privilege of conducting activities in the state by transacting business in New York,’” The Court further opined that “purposeful availment occurs when the non-domiciliary seeks out and initiates contact with New York, solicits business in New York, and establishes a continuing relationship.”
Unfortunately for Plaintiff, the single meeting in New York between Core and Melohn hardly establishes that Defendant availed itself of the privilege of transacting business in New York. The Court evaluated the following factors:
- The parties’ contractual relationship was centered in Pennsylvania;
- Defendant did not return to New York to negotiate the Sale Agreement;
- The Sale Agreement, which states that Pennsylvania law governs disputes, was executed in Pennsylvania; and
- Plaintiff traveled to Pennsylvania to evaluate the progress of the construction project.
In other words, all roads lead to Pennsylvania. The Court similarly rejected Plaintiff’s argument that Defendant’s telephonic and electronic communication with Plaintiff relating to the performance and negotiation of the Sale Agreement, while Plaintiff was in New York, conferred jurisdiction over the Defendant. In that regard, the Court stated that Plaintiff’s own New York activities cannot be attributed to the Defendant (see Kennedy v Yousaf).
Takeaway: One meeting in New York is clearly not enough to create personal jurisdiction over a defendant. Remember, even if the defendant is in a nearby state, New York courts will not be able to assert jurisdiction over the defendant unless the plaintiff can establish that the defendant availed itself of the privilege of doing business in New York, thus invoking the benefits and protections of its laws.