Court of Appeals April-May Session: Arguments of Interest for May 2, 2017

The Court of Appeals’ April-May Session continues back at Court of Appeals Hall on Tuesday, May 2nd with three cases on the argument docket (the Court of Appeals’ case summaries can be found here). The Court will address the following issues: (1) whether the courts have long-arm personal jurisdiction over foreign residents and corporations that drafted and executed a contract in New York, but otherwise performed all dealings outside of New York; (2) whether a foreign corporation’s attendance in New York to promote its wine with a New York distributor was enough of a contact to find long-arm jurisdiction, where the dispute concerned the payment of commissions to a Spanish wine broker in Spain with euros; and (3) whether an agreement that provided for litigation of a particular dispute concerning the division of post-judgment interest from a settlement between an insurer and the insured was subject to binding arbitration, where the insurance contract required arbitration of disputes concerning the interpretation of the agreement.

No. 62             Wilson v Dantas

It’s long-arm jurisdiction day at the Court of Appeals today, as two cases argued test the length to which minimum contacts must be established before the New York courts can exercise personal jurisdiction over a dispute.

In Wilson, the plaintiff devised a plan to allow Citibank to invest in Brazilian companies that were being privatized.  As part of the plan, Wilson and the defendant, Daniel Valente Dantas, formed Opportunity Equity Partners, Ltd. (OEP) to manage the investments, and Citibank’s lawyers in New York drafted an operating agreement, limited partnership agreement, and shareholder agreement, all of which were executed in New York.  Under the shareholder agreement, Wilson alleged he was entitled to receive 5 percent of OEP’s profits for the Brazilian investments. Only a year after setting up the entities, Citibank sued Dantas and OEP, and reached a confidential settlement.

Wilson then brought this breach of contract and fiduciary duty action against Dantas and OEP, alleging that his profits were distributed to others in the Citibank settlement. The defendants moved to dismiss for lack of personal jurisdiction and forum non conveniens.  Supreme Court dismissed, holding it lacked long-arm jurisdiction over the defendants.

The Appellate Division, First Department, however, modified with one Justice dissenting, and held that it had long-arm jurisdiction and rejected the forum non conveniens defense. The Court held that although the case involved application of Cayman Islands law and non-resident parties, the investment plan was devised in New York, the corporate entities were formed in New York, the witnesses are largely in New York, and the lack of a jury trial in Brazil or the Cayman Islands would cause hardship to Wilson. The dissenter pointed out that the only ties to New York were the execution of the agreements, which are governed by foreign law, and more compellingly, the parties are residents of Brazil where all of the transactions took place.  So, the dissenter would have affirmed the dismissal of the suit.

The Appellate Division, First Department’s order can be found here.

No. 63             D&R Global Selections, S.L. v Bodega Olegario Falcon Pineiro

In D&R Global Selections, a Spanish wine broker brought this breach of contract action after a well-known Spanish winery stopped paying commissions for arranging the importation of the defendant’s wine to New York.  After the broker found the winery a New York distributor, the winery paid commissions to the broker for almost two years and then entered an exclusive distribution agreement with the distributor directly.  The winery paid the broker commissions in Spain with euros, but did appear in New York during the two years to promote its wine.

Supreme Court issued a default judgment against the winery when it declined to appear, and then denied the winery’s motion to vacate the default and to dismiss for lack of personal and subject matter jurisdiction. The Appellate Division, First Department vacated the default, but declined to dismiss the case, holding that it was possible that long-arm jurisdiction could be established if it could be shown that the winery transacted business in New York.

On remand, Supreme Court denied the winery’s motion for summary judgment, holding that the broker might be able to establish subject matter jurisdiction under Business Corporation Law § 1314(b)(4), which permits the exercise of jurisdiction over a foreign corporation under CPLR 302, that is, a corporation that transacts business in New York or contracts anywhere to supply goods in the state.

The Appellate Division, First Department, however, reversed and dismissed the suit. Business Corporation Law § 1314(b)(4) did not apply, the Court held, because although the winery’s visits to New York to promote its wines were the transaction of business in New York, there was no substantial nexus between the claim for unpaid commissions in Spain and those contacts to New York.

The Appellate Division, First Department’s order can be found here.

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