Second Circuit Ends 'Doing Business' Test In New York For General Jurisdiction

Steven Raffaele is a Partner and Sean Barry an Associate in Holland & Knight's New York office.

The Court Adopts the "Essentially at Home" Test Limiting New York Courts' General Jurisdiction Over Foreign Corporations

HIGHLIGHTS:

Following Daimler AG v. Bauman, the Second Circuit has cemented the "essentially at home test" into New York's jurisdictional jurisprudence, limiting the circumstances in which New York courts may exercise general jurisdiction over a foreign corporation. In Gucci America, Inc. v. Weixing Li, the court departed from the long-standing "doing business" test and held that a foreign corporation cannot be subject to general jurisdiction in New York based on maintaining offices and having employees in the state, when the corporation is not "essentially at home" in New York. The Southern District Court of New York recently found an "exceptional case" of general jurisdiction where the foreign defendants were neither individuals, partnerships, nor corporations, and were not "essentially at home" in a particular U.S. jurisdiction. An expedited appeal is pending before the Second Circuit. In September 2014, the Second Circuit abrogated the nearly century-old "doing business" test used by New York courts in deciding whether general jurisdiction exists over foreign corporations. In Gucci America, Inc. v. Weixing Li,1 the Second Circuit applied the "essentially at home" test set forth in the U.S. Supreme Court's Goodyear2 and Daimler3 decisions. The court determined there was no general jurisdiction over a non-party bank that maintained offices and employees in New York because it was not "essentially at home" in New York, i.e., the bank was neither incorporated in nor had its principal place of business in the state.

Pre-Daimler: The "Doing Business" Test

A personal jurisdictional analysis involving a foreign defendant requires a two-step inquiry:

first, whether the foreign defendant is subject to jurisdiction under the law of the forum state second, whether the exercise of personal jurisdiction comports with constitutional due process Since International Shoe Co. v. Washington, the touchstone principle to satisfy constitutional due process has been that foreign defendants have "certain minimum contacts with [the state] such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice."4 In the context of general or all-purpose jurisdiction, courts take a narrow view of what constitutes minimum contacts.5

Federal courts located in New York historically have permitted the exercise of general jurisdiction "over a foreign corporation that [was] engaged in such a continuous and systematic course of 'doing business' in New York as to warrant a finding of 'presence' in the state, even if the cause of action [was] unrelated to the defendant's New York activities."6 Under the "doing business" test, a court could exercise general jurisdiction over a foreign corporation that maintained an office and had employees in New York.7 Prior to Daimler...