N.Y. Court Of Appeals Abolishes Jurisdiction Over Foreign Corporations Solely Based On Consent By Registration

• Published date: 13 January 2022
• Subject Matter: Litigation, Mediation & Arbitration, Trials & Appeals & Compensation
• Law Firm: Lewis Brisbois Bisgaard & Smith LLP
• Author: Mr Maxwell S. Margulies and Peter T. Shapiro

New York, N.Y. (January 11, 2022) - The New York Court of Appeals' decision in Aybar v. Aybar, 2021 N.Y. Slip Op. 05393, issued on October 7, 2021, overturned over 100 years of precedent in ruling that foreign corporations are no longer subject to being dragged into lawsuits in New York State court under the theory of "consent by registration."

The case at issue was filed in New York state court by plaintiff accident victims after a Virginia motor vehicle accident. They sued the driver, car manufacturer Ford Motor Company (Ford), and tire manufacturer Goodyear Tire and Rubber Co. (Goodyear). Ford and Goodyear separately moved to dismiss the suit pursuant to New York CPLR 3211(a)(8) for lack of personal jurisdiction. Both defendants argued that they were foreign corporations not subject to New York jurisdiction because they were not incorporated in New York and did not have their principal places of business there and New York had an insufficient nexus to the case. The plaintiffs opposed the motion based on New York Business Corporation Law (BCL) Section ' 1301(a), 1304(a)(6), and 304(a) & (b). They argued that the New York courts have long followed the decision in Bagdon v. Philadelphia & Reading Coal & Iron Co., 217 N.Y. 432 (1916), which had been understood to connote that when a foreign corporation designates an in-state agent for service of process and registers the business as a foreign company with the secretary of state, the corporation consents to both service of process on a designated agent and general jurisdiction in New York.

That rule resulted in many foreign corporations such as Ford and Goodyear being held subject to jurisdiction because such corporations that transact any business in New York State are required to register and designate an agent for service. Foreign corporations are required to register even when they cannot be held to be doing business in New York to an extent necessary to give rise to general jurisdiction.

The Court of Appeals essentially overturned the precedents that emanated from the 1916 Bagdon decision in order to hold that a foreign corporation does not consent to the exercise of general jurisdiction by the New York courts simply by registering to do business in New York and designating a local agent for service of process (a.k.a. consent by registration). The Bagdon decision had relied on the then-relevant territorial approach to personal jurisdiction established in the 19th century in Pennoyer v. Neff, 95 U.S....