Today’s decision strays from the field of prescription drug/device law, but we take this detour because Aybar v. Aybar, 2021 N.Y. LEXIS 2134 (N.Y. Ct. App. Oct. 7, 2021) is an important jurisdictional decision – one with over 100 years of legal precedent to sort out.
Plaintiffs were involved in an automobile accident in Virginia allegedly due to a defective tire. The driver had purchased the vehicle in New York from a third-party. Plaintiff brought products liability claims in New York against the manufacturer of the car, Ford, and the manufacturer of the tire, Goodyear. Ford is a Delaware corporation with its principal place of business in Michigan, and Goodyear is both incorporated in and has a principal place of business in Ohio. Id. at *2-3. Ford and Goodyear, of course, do business in New York. To do so, both companies had to comply with New York’s Business Corporation Law (“BCL”) which requires foreign companies to register with the New York Secretary of State and appoint in-state agents for service of process. Id. at *3.
Plaintiffs did not allege that the court had specific jurisdiction over either defendant. Nor did plaintiff argue that defendants were “essentially at home in New York” such that there was general jurisdiction under Goodyear Dunlop Tires Operations, S.A. v Brown, 564 US 915 (2011) or Daimler AG v Bauman, 571 US 117 (2014). Id. at *4. Plaintiffs’ sole argument was that defendants consented to general jurisdiction in New York by registering to do business and appointing an agent for service in the state. Id. at *5.
The court had a fundamental problem with plaintiffs’ argument because it did not abide by the plain terms of the BCL. The statute does not require that a defendant consent to general jurisdiction in order to do business in New York and interpreting it that way would “improperly amend the statute by adding words that are not there.” Id. at *6 (citation omitted).
But plaintiffs were not without some precedent for their argument. The linchpin of plaintiffs’ argument was the case Bagdon v. Philadelphia & Reading Coal & Iron Co., 217 N.Y. 432 (1916). Plaintiffs interpreted that case as broadly conferring general jurisdiction over any company who complied with the BCL. The Aybar court, however, did not agree that the Bagdon decision went that far.
Bagdon involved a New York resident who was injured in Pennsylvania while working for a Pennsylvania company who, like Ford and Goodyear, had complied with the BCL. Id. at *7-8. Plaintiff then served his lawsuit on the defendant in New York. Defendant argued that its agent’s authority to accept service in New York was “limited to actions which [arose] out of the business transacted in New York.” Id. at *8. As the business between plaintiff and defendant arose in Pennsylvania, defendant argued the service of process and by extension the exercise of personal jurisdiction was invalid. Id.
Bagdon, therefore, answered a narrow question – whether the service of process conferred jurisdiction over the defendant for “any subject matter jurisdiction properly exercised by New York courts.” Id. (emphasis added). In other words, Bagdon did not decide that simply registering under the BCL established general personal jurisdiction. Rather, the court was examining the “effect-of-service question” which they had to do “through the lens of the then-applicable jurisdiction principles.” Meaning, Bagdon was decided in the context of Pennoyer v Neff, 95 US 714 (1877).
[T]he Court determined that jurisdiction existed not because the corporation “consented” to it, but because then existing Supreme Court precedent established, consistent with Pennoyer v Neff‘s territorial approach, that in-state service on a foreign corporation present in the state afforded general jurisdiction.
Id. at *10. A lot has happened since Pennoyer and Bagdon. Starting with the minimum contacts test from International Shoe Co. v. Washington, 326 U.S. 310 (1945) – itself over 75 years old – which “crystalized the two categories of personal jurisdiction” – general and specific. Id. at *14-15. Since that time, the Supreme Court has simultaneously “rapidly expanded” specific jurisdiction while it “has limited general jurisdiction’s reach to a narrow class of defendants.” Id. at *15. Likely why the court noted that it has not cited Bagdon since International Shoe was decided. Id. at *16n.7.
The Supreme Court has decided that the exercise of general jurisdiction is only appropriate where the defendant’s affiliations with the state “are so continuous and systematic as to render them essentially at home in the forum state.” Id. at *16. That was not the state of the law when Judge Cardozo considered the issue. In 1916, “the defendant’s consent to service of process had the effect of conferring general jurisdiction.” Id. at *17. That was the rationale for the decision in Bagdon, not a conflation of “statutory consent to service with consent to general jurisdiction.” Id.
Today, the exercise of general jurisdiction in every state in which a corporation engages in a substantial, continuous, and systematic course of business would be “unacceptably grasping” [under Bauman.]
Id. at *15. Therefore, the court did not interpret New York’s BCL as allowing general jurisdiction based on registration to do business.
Because of this statutory interpretation, the court did not directly address due process. There is a lengthy dissent joined by two judges that we leave to our readers to explore on their own if of interest.