Daimler Decision Topples Longstanding New York Cases

, New York Law Journal

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Leslie R. Bennett
Leslie R. Bennett

Almost 100 years ago, Benjamin Cardozo, then a judge on the New York Court of Appeals, rendered a decision in Tauza v. Susquehanna Coal.1 That decision withstood the test of time, and has been a centerpiece on the subject of general jurisdiction for New York courts since 1917. On Jan. 14, 2014, Justice Ruth Bader Ginsburg, joined by seven other justices, essentially rendered that decision and its progeny moot by their ruling in Daimler AG v. Bauman.2 In toppling Tauza, the Supreme Court drastically narrowed the opportunities for asserting jurisdiction in New York, particularly over large multinational and multistate corporations and other entities.

'Tauza'

The central question in Tauza was whether New York could assert jurisdiction over the defendant, Susquehanna Coal, a Pennsylvania company whose principal place of business was in Philadelphia. Plaintiff, a New York resident, sued Susquehanna Coal on a cause of action that was not related to any of the company's business activities in New York. Since the action was filed long prior to New York's adoption of its long-arm statute as part of the Civil Practice Law and Rules in 1963, the only basis for jurisdiction over Susquehanna Coal was due to the company's alleged presence in New York under principles of general jurisdiction.

Judge Cardozo concluded that Susquehanna was subject to New York's jurisdiction, because the company was in fact "here."3 Cardozo summarized the facts leading to this conclusion as follows:

In brief, the defendant maintains an office in this state under the direction of a sales agent, with eight salesmen, and with clerical assistance, and through these agencies systematically and regularly solicits and obtains orders which result in continuous shipments from Pennsylvania to New York.

(Emphasis added.)4 Continuing in his inimitable style, Cardozo stated: "To do these things is to do business within this state in such a sense and in such a degree as to subject the corporation doing them to the jurisdiction of our courts."5 Other facts were cited by later decisions and other authorities: All sales made to New York customers required confirmation by the main office in Philadelphia, the company had a bank account in New York, and the funds from that account were used to pay for the salaries of the employees in New York, including the eight salesmen operating out of the New York branch office.

No information was provided in Tauza as to the amount of coal sales generated in New York for the Pennsylvania company, either absolutely or relative to sales in Pennsylvania or elsewhere. The linchpin of the decision, as recognized in many analyses of Tauza, was Cardozo's conclusion that the company was here "not occasionally or casually, but with a fair measure of permanence and continuity."6 Cardozo added that there was "no precise test of the nature and extent of the business that must be done. All that is requisite is that enough be done to enable us to say that the company is here."7 Lastly, Cardozo observed: "We hold further, that the jurisdiction does not fail because the cause of action sued upon has no relation in its origin to the business here transacted."8

Interestingly, in rendering his decision, Cardozo cited and relied upon prior decisions of the U.S. Supreme Court, at least one of which was described as going "farther than we need to go to sustain the service here."9 Since Tauza was decided long before the due process standard articulated in International Shoe v. Washington,10 the Court of Appeals did not address any due process issues.

'Bryant'

The Court of Appeals revisited the reach of general jurisdiction in New York in 1965 in Bryant v. Finnish National Airline.11 The case is notable, because the Court of Appeals sustained jurisdiction over the defendant corporation even though the corporation's activities in, and relationship to, New York was much skimpier than in Tauza.

In Bryant, Chief Judge Charles Desmond, speaking for the Court of Appeals, upheld jurisdiction over the defendant foreign corporation arising from a suit by a New York resident arising from a personal injury in Paris, France. Plaintiff, a stewardess for TWA, alleged she was injured when she was struck by a baggage cart that was blown across the tarmac at Orly airport by a blast of air from one of defendant's planes.

Finnish National Airline was a corporation organized under the laws of Finland with a principal place of business in Helsinki. The airline was not licensed to do business in the United States, none of its officers, directors or shareholders were citizens of the United States, and none of its planes flew within the United States. It maintained a one and a half room office in Manhattan, staffed by three full-time and four part-time employees, that did not sell any airline tickets for the Finnish airline. It did, however, transmit reservations on the airline from international air carriers or travel agencies to the airline's European office and at times transmitted confirmations back to the international carriers or travel agencies. The New York office also did some publicity and advertising for the airline, including some ads regarding the airline's European services, and maintained a $2,000 bank account for payment of staff salaries, rent and office expenses.

Citing and quoting from Tauza, the Court of Appeals held that this limited footprint in New York was enough to conclude that the airline was here for jurisdictional purposes. Chief Judge Desmond observed: "The test for 'doing business' is and should be a simple and pragmatic one" and the factual record was enough to conclude that the defendant was suable in New York.12

Bryant may well be considered at or near the outside perimeter of the doctrine articulated in Tauza, i.e., that all that is required is proof of activities conducted "not occasionally or casually, but with a fair measure of permanence and continuity." In any event, Tauza and Bryant have routinely been offered up to law students and the bar as standard fare in determining whether a New York court may assert jurisdiction over an unlicensed foreign corporation where the cause of action did not arise out of activities by the defendant in New York.13

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