Opinion ID: 510097
Heading Depth: 1
Heading Rank: 2

Heading: Jurisdiction under New York's Long-Arm Statute.

Text: 17 Retail argues that personal jurisdiction may be exercised over the defendants under New York's long-arm statute, N.Y.Civ.Prac.Laws & Rules Sec. 302, which applies to a cause of action that arises from acts enumerated within the section, and which reaches (1) a nondomiciliary who transacts any business within the state or contracts anywhere to supply goods or services in the state, Sec. 302(a)(1); (2) a nondomiciliary who commits a tortious act within the state, Sec. 302(a)(2); and (3) a nondomiciliary who commits a tort outside the state that causes injury within the state if the defendant (i) does business in or derives substantial revenue from the state or (ii) expects or reasonably should expect the act to produce consequences in the state and derives substantial revenue from interstate commerce, Sec. 302(a)(3). 18 The district court rejected Retail's argument for jurisdiction under this long-arm statute. It found that a corporation cannot be deemed to be the agent of its directors and officers for the purposes of Sec. 302. It further believed that under New York law the fiduciary shield doctrine, which shields a corporate employee from the exercise of personal jurisdiction over him if he acted solely in a corporate capacity within the forum state, see CPC Internat'l, Inc. v. McKesson Corp., 70 N.Y.2d 268, 287-88, 519 N.Y.S.2d 804, 814, 514 N.E.2d 116 (1987), would preclude the exercise of jurisdiction over a corporate employee who acted outside the state in a corporate capacity. 19 After the district court's decision in this case, however, the New York Court of Appeals decided Kreutter v. McFadden Oil Corp., 71 N.Y.2d 460, 527 N.Y.S.2d 195, 522 N.E.2d 40 (1988), which held that the fiduciary shield doctrine does not apply to any of the provisions of New York's long-arm statute. Id. at 472, 527 N.Y.S.2d at 202, 522 N.E.2d at 47. See CPC Internat'l, Inc. v. McKesson Corp., 70 N.Y.2d at 288, 519 N.Y.S.2d at 814, 514 N.E.2d at 126 (fiduciary shield doctrine does not apply when long-arm jurisdiction is predicated on defendant's commission of tortious act within the state). 20 Kreutter has even greater significance for this appeal. There, the court held that an individual defendant (Downman, a corporate officer of McFadden Oil Corporation, a Texas corporation) and a corporate defendant (Harmony Drilling Co., a Texas corporation) transacted business in New York within the meaning of Sec. 302(a)(1), through an agent, McFadden Company, a Texas corporation that was licensed to do business in New York and had its principal place of business in New York. Id. 71 N.Y.2d at 463, 527 N.Y.S.2d at 196, 522 N.E.2d at 41. The court held that personal jurisdiction could be exercised over Downman and Harmony under Sec. 302(a)(1), and explained: 21 In this case, plaintiff did not deal directly with McFadden Oil, Harmony or Downman. He dealt with McFadden Company in New York, and the question is whether McFadden Company was acting as the agent of the Texas defendants so that its actions are attributable to them and support New York's assertion of jurisdiction over them. Plaintiff need not establish a formal agency relationship between defendants and McFadden Company. He need only convince the court that McFadden Company engaged in purposeful activities in this State in relation to his transaction for the benefit of and with the knowledge and consent of the Texas defendants and that they exercised some control over McFadden Company in the matter. 22 Id. at 467, 527 N.Y.S.2d at 199, 522 N.E.2d at 44 (citations omitted). Kreutter thus resolves the issue of whether a corporation can act as an agent for an individual for the purposes of Sec. 302(a)(1). 23 In this case, SCI engaged in purposeful activities in the state (selling franchises) with the consent and knowledge of the defendants, who both benefitted from those activities and exercised extensive control over SCI in the transaction underlying this suit. Fick and Janeski, like Downman, are primary actor[s] in the transaction in New York that is the source of this litigation, and are not some corporate employee[s] in [California] who played no part in the franchise sale. 71 N.Y.2d at 470, 527 N.Y.S.2d at 201, 522 N.E.2d at 45. Because Kreutter establishes that New York intends its long-arm statute to reach precisely the type of behavior alleged in this complaint, we must now consider whether due process allows New York to do so. 24