Work Performed in the Forum State May Be Insufficient to Establish Personal Jurisdiction Over Out-Of-State Defendants
December 18, 2020
Recently, Justice James Hudson issued a decision testing the limits of New York’s Long Arm Statute. The Court was tasked with determining whether personal jurisdiction exists over an out-of-state defendant, based on a claim arising from an out-of-state contract, but where a portion of the work under the contract was performed in New York.
In Black Diamond Aviation Group LLC v Spirit Avionics, Ltd., plaintiff Black Diamond Aviation Group LLC (“Black Diamond”) brought a declaratory judgment action, asking the court to determine whether defendant Spirit Avionics, Ltd. (“Spirit) was obligated to pay non-party Aircraft Structures Engineering Solution (“ASES”) for work performed by ASES on Black Diamond’s aircraft.
Black Diamond, a company organized under Delaware Law with a principal place of business in Greenwich, Connecticut, offers airplanes for private charter. Spirit performs aircraft maintenance and refurbishment out of Ohio. ASES is an aerospace engineering service company domiciled and located in Illinois.
In 2018, Black Diamond contacted Spirit to perform work on its Dassault Falcon 7X Jet (“Falcon 7X”). In January, 2019, Black Diamond and Spirit signed a proposal for work to be performed on the Falcon 7X (i.e. installation of a speaker system, WIFI system, USB outlets, and modifications to windows and doors) which included a price estimate for work to be done by subcontractors–namely ASES. The agreement was modified in May, 2019, via email, which stated Spirit would perform a host of upgrades to the Falcon 7X for $91,000 (the “May 2019 Agreement”). Spirit then used ASES as the subcontractor to perform some of the work.
At first, work on the Falcon 7X took place in Columbus, Ohio. But it was soon after realized that some of the work would need to take place at Islip MacArthur Airport, in Suffolk County, New York. The Falcon 7X was transported to McArthur Airport under the condition that Black Diamond pay half of the $91,000 to Spirit at the time of transport, and the other half upon completion. Black Diamond paid half its balance to Spirit, the Falcon 7X was brought to McArthur Airport, and upon completion Black Diamond paid the remaining balance of the $91,000 to Spirit.
In October, 2019, Black Diamond requested Spirit perform additional work to the Falcon 7X, to which Spirit instructed Black Diamond to engage ASES directly. Black Diamond did so, and received a cost estimate invoice which included both the cost of the new work, as well as the cost of some of the work previously provided under the May 2019 Agreement. Black Diamond paid ASES an advance payment of $23,214 to cover the new work, but when ASES invoiced Black Diamond for the remaining $59,903, Black Diamond refused to pay. Black Diamond contends that Spirit is responsible for paying the balance to ASES, and brought the subject action seeking a declaratory judgment holding the same.
Spirit moved to dismiss, asserting, inter alia, lack of personal jurisdiction. In its complaint, Black Diamond alleged the court had jurisdiction over the matter because the action arose out of services performed in Ronkonkoma, New York, and because Spirit purposely availed itself of the privilege of transacting business in New York. In determining whether personal jurisdiction over Spirit existed, the Court looked to whether Black Diamond properly invoked New York’s Long Arm Statute under CPLR § 302.
Justice Hudson’s decision takes its reader through a history of the salient personal jurisdiction decisions and is likely reminiscent of your 1L civil procedure outline. The highlights are as follows:
- World-Wide Volkswagen Corp v Woodson – a court may exercise jurisdiction over a defendant only where there are “sufficient contacts with the forum state and substantial evidence that the defendant purposely availed themselves of the protections of the forum state.”
- Daimler AG v Bauman – a corporation’s association with the forum state must be “so continuous and systematic as to render the corporation at home in the state.” A court should consider the following factors: (i) burden on the defendant; (ii) the forum state interest; (iii) the plaintiff’s interest in litigating in the forum; (iv) efficient resolution of controversies; and (v) the shared interest of the several states in furthering fundamental substantive policies.
- Bristol-Myers Squibb Co. v Superior Court– there must be a “strong affiliation” between the specific claim at issue in the case and the forum state.
- Licci v Lebanese Canadian Bank – Although determining what facts constitute “purposeful availment” is an objective inquiry, it always requires a court to closely examine the defendant’s contacts for their quality.
- Pichardo v Zayas – for personal jurisdiction to exist there must be an “articulable nexus” or “substantial relationship” in light of all the relevant circumstances. There must be some “relatedness between the transaction and the legal claim at issue.”
Under the facts alleged in Black Diamond’s complaint, the Court determined no specific jurisdiction exists over Spirit because it has “no strong affiliation” with New York. The work performed by Spirit was performed solely in Columbus, Ohio; Spirit did not send any staff to work in New York; and the only connection Spirit had to New York was they agreed to release the Falcon 7X from their care to MacArthur Airport to be worked done by ASES.
The court emphasized that when a contract is negotiated via e-mail, or telephone, as it was here, and no business is performed within the forum state, the foreign defendant is not subject to personal jurisdiction (see AM Pitt Hotel LL C v 400 5th Ave LP). Here, the entirety of the May 2019 Agreement was negotiated and agreed upon between Spirit’s office space in Ohio and Black Diamond’s office in Connecticut, and the bargained for work pursuant to that agreement did not take place in New York, but rather Ohio. The court found, relying on an affidavit from the CEO of Spirit, that Spirit does not have an office in New York State and does not have any employees or property in New York State. Only upon request from Black Diamond did Spirit release the Aircraft to New York where the work was completed. Thus, the Court found Spirit did not avail itself the protections of the New York nor does it have sufficient contacts within New York and therefore personal jurisdiction could not be properly asserted over Spirit.
Upshot: Work performed in the forum state in connection with an out-of-state contract may be insufficient to establish personal jurisdiction over a foreign defendant.