How Many Telephone Calls Or Emails Are One Too Many?

The First Department recently adjudicated an appeal in which one of the several issues considered was whether telephone and email communications to New York from an out-of-state party sufficed to find purposeful activity or contacts that conferred personal jurisdiction.

In C. Mahendra (NY), LLC v. National Gold & Diamond Ctr., Inc., 2015 NY Slip Op 01157 (First Dept. February 10, 2015), the Appellate Division unanimously reversed, on the law, an Order of Supreme Court, New York County (Coin, J.), that "granted defendants' motion to dismiss the complaint for lack of personal jurisdiction.

The Court summarized the facts:

Plaintiff is a New York wholesale supplier of loose diamonds on consignment to vendors; defendant is a California seller of jewelry, including goods that it accepted on consignment. The parties began doing business with each other in 2002; defendant placed numerous orders, totaling millions of dollars, by telephoning plaintiff in New York and negotiating terms of size, price range, and description of the diamonds. In the course of their dealings, plaintiff shipped diamonds to defendant "on memorandum" so that defendant could examine the diamonds and decide whether to keep them. Plaintiff then sent defendant invoices for the diamonds it purchased. Both the memoranda and invoices contained conditions regarding jurisdiction, each stating: "[Y]ou consent to the exclusive jurisdiction of the State and Federal courts situate[d] in New York County. This contract shall be construed and governed in accordance with the laws of New York, without giving effect to its choice of law principles."

Several years into the parties' business arrangement, defendant allegedly failed to pay a balance of around $14,000 for a June 2009 consignment. Similarly, defendant allegedly failed to pay more than $50,000 for a March 2011 consignment. Plaintiff commenced this action, seeking to recover more than $64,000. In its complaint, plaintiff interposed causes of action for, among other things, account stated, goods sold and delivered, and breach of contract.

The prior proceedings with respect to jurisdiction:

Defendant moved to dismiss the complaint on several grounds, including lack of personal jurisdiction. On the motion, defendant argued that its telephone calls, letters, and faxes to plaintiff — defendant's only connection to New York — did not constitute sufficient "purposeful activity" or sufficient contacts to subject it to personal jurisdiction in this state.

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[Supreme Court] found, personal jurisdiction was lacking on a "transaction of business" theory because defendant's telephone orders from California to New York were not sufficiently purposeful activity to confer jurisdiction. Indeed, the court noted, defendant's employees did not travel to New York on business, but rather, plaintiff's employees traveled to California to establish business relations and display merchandise[.]

And held that:

Here, during telephone discussions, the parties negotiated the essential terms required for contract formation, and the invoices were merely confirmatory...Thus, the forum selection clause is an additional term that materially altered the parties' oral contracts, and defendant did not give its consent to that additional term...

However, the motion court erred in finding that the parties' telephone dealings over several years and in the two transactions at issue were insufficient as a matter of law to confer personal jurisdiction over defendant pursuant to CPLR 302(a)(1). CPLR 302(a)(1) authorizes the assertion of long-arm jurisdiction over a non-domiciliary who "transacts any business within the state or contracts anywhere to supply goods or services in the state." CPLR 302(a)(1) is a "single act statute"; accordingly, physical presence is not required and one New York transaction is sufficient for personal jurisdiction. The statute applies where the defendant's New York activities were purposeful and substantially related to the claim..."Purposeful" activities are defined as "those with which a defendant, through volitional acts, avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws"...

We recognize that courts of this state have generally held telephone communications to be insufficient for finding purposeful activity conferring personal jurisdiction...However, there are exceptions to this general rule, and in some cases, telephone communications will, in fact, be sufficient to confer jurisdiction...

Here, the court did not assess defendant's conduct or defendant's purposeful availment of the privilege of doing business in this forum...Although the motion court distinguished [a prior case] by pointing to the sophistication of the parties and the magnitude of the transactions in that case, those two factors do not determine the question of personal jurisdiction. On the contrary, as the Court of Appeals found [in a prior decision], the "quality of defendant's contacts" is the primary consideration in deciding the question of long-arm jurisdiction...That the circumstances of the defendant's telephone calls in this case were different from those in [a prior case] does not make defendant's calls any less "purposeful." While the business dealings in this case were not especially complex, they also did not fall on the opposite end of the spectrum — that is, a single consumer transaction...The quality of the defendant's conduct was sufficient to subject defendant to long-arm jurisdiction.

The Decision of the First Department in C. Mahendra relied upon the analysis in two Court of Appeals decisions.

Deutsche Bank Sec., Inc. v. Montana Bd. Of Invs., 2006, NY Slip Op 04338 (7NY3d 65) [Court of Appeals, decided on June 6, 2006), arose out of the following facts:

[A] March 25, 2002 bond transaction between plaintiff Deutsche Bank Securities, Inc. (DBSI) and defendant Montana Board of Investments (MBOI). DBSI, a Delaware corporation with its headquarters in New York, is (among other things) engaged in trading securities for its own account and for clients. MBOI is a Montana state agency charged with managing an investment program for public funds, the public retirement system and state compensation insurance fund assets. In the 13 months...