News & Insights

When Can You Sue an Out-of-State Corporation in New York?

Most people would prefer to file a lawsuit in a court that is convenient to them. That might be fine if the defendant is also local. However, if the defendant is located out of state, specific rules apply regarding where they can be sued. A recent New York appellate case clarified these laws with respect to suing an out-of-state corporation in New York. The case is important as it helps businesses understand the risks of doing business in New York.

In order to bring a lawsuit, among the items the plaintiff must be prepared to establish is that the Court has “personal jurisdiction” over the defendant. Personal jurisdiction refers to the power of the Court to exercise authority over the parties. There are two types of personal jurisdiction:

  1. Specific jurisdiction exists when the defendant’s relationship to the specific incident at issue in the lawsuit is such that the Court can exercise jurisdiction.
  2. General jurisdiction exists when the defendant’s connection to New York is so great that it can properly be sued in New York for anything, even if the incident giving rise to the suit did not occur here. This type of jurisdiction only exists in “exceptional cases.” 

These principles apply to individuals and corporations. However, out-of-state corporations in New York are also subject to other rules that may affect jurisdiction. Under New York’s Business Corporation Law (BCL), any corporation organized outside of New York that wants to do business in New York must register with the New York Division of Corporations. One requirement of that registration is that the corporation designate an in-state agent for service of process. This means that the corporation must name a recipient and specify an address in New York where a complaint, subpoena, or other legal document can be delivered. 

The New York Court of Appeals recently clarified the question of whether a corporation is subject to general jurisdiction merely by complying with the BCL’s requirements to register and designate an agent for service of process. In Aybar v. Aybar, the Court held that registration was not a sufficient basis for finding general jurisdiction. It found that if the State Legislature wanted to require out-of-state corporations to consent to general jurisdiction as part of the registration process, it would have specified those terms within the BCL.

Importantly, the Court limited its decision to New York law. It expressly refused to decide whether registering with the State was a sufficient basis for general jurisdiction under federal due process principles. 

The important takeaway for out-of-state corporations is that, while they can be sued in New York for events that have ties to New York, they do not automatically consent to being sued here for anything and everything just by properly registering to do business here.

The Court’s decision is logical and practical because if registration alone was enough for general jurisdiction, then every company that registered to do business in New York could be sued here for any offense, even if the dispute or injury arose elsewhere. Allowing general jurisdiction also would discourage corporations that want to do business in New York from complying with BCL requirements. Instead, they would operate here without registering. 

If you are considering or defending a lawsuit, contact one of our litigation attorneys to discuss your matter.