New York’s Civil Practice Law & Rules (CPLR), their own remarkable thing.

For regular readers, I am spending considerable time on “the project”, which, as you know, had its first pre-motion conference in Westchester County, New York last week.

For today’s installment, the short of it is something called “personal jurisdiction”. For a claim to be heard before a judge in the United States court system, the judge needs both subject matter jurisdiction and personal jurisdiction.

There are no exact definition to these terms, though.

In our federal court system, the federal judges are usually required to adopt the personal jurisdiction rules of the state where the district court sits, if Congress did not provide some other means. There is also, in the Federal Rules of Civil Procedure, a section 4(k)(2), that I have mentioned about before here, nicknamed the “federal long-arm rule”. It is ambiguously worded, and if I get a chance, I will link to a law review article that I think highlights the ambiguity the best.

Tonight, I spent considerable time reading case law to get a firm understanding of New York state’s personal jurisdiction rule as it relates to corporations.

I am not a New York lawyer, and, as I am routinely saying, this is a blog–not a legal resource. So, please do your own homework.

New York divides the activity a company (any company) does into two general categories: “doing business”, which is CPLR Rule 301; and “transacting business”, which is CPLR Rule 302. Easy, right? No.

Here is what Rule 301 says:

2006 New York Code – Jurisdiction Over Persons, Property Or Status.

§ 301. Jurisdiction over persons, property or status. A court may
exercise such jurisdiction over persons, property, or status as might
have been exercised heretofore.

This really says a lot by saying very little. It sounds like you have to go back to whatever case law existed before Section 301 to figure out if a “person” (in my case, corporate person) was subject to personal jurisdiction in New York.

The attorney for the other side was tricky. He claimed that the Japan unit of the corporation did not “transact” business in New York. But he did not say that the subsidiary is not “doing business” for purposes of Rule 301. And that really was key.

Rule 301 itself contains two doctrines, “mere department” and “agency”. An out of state corporation may fall into either one, or both, of these categories. I leave you to read more about them if that is your cup of tea.

There is no debate that the parent company, based in Westchester County, is subject to jurisdiction of New York. But what about a 100% owned subsidiary that is a foreign corporation in another country?

It turned out that there was a 1975 case in the federal district court for the Southern District of New York called Freeman versus Gordon & Breach. In Freeman, the court ruled that if New York has jurisdiction over the parent company, then a Rule 301 analysis can be applied to a foreign subsidiary, the same as if the situation were reversed (i.e. foreign company owning a New York subsidiary).

There isn’t this whole body of case-law fighting about Rule 301, because when a lot of the issues have been settled in the law, the parties don’t seem to bring them up over and over again. It makes me wonder what the deal was with the opposing counsel. It seems like they were just trying to take advantage of the fact that plaintiff is an out-of-state guy.

Foreign country people in Japan tended to comment on America like it is this overconfident bully that simply must always have its way. But if you look at how our court system operates, that is far from it. These personal jurisdiction rules, even in a liberal state like New York, require there to be a specific, “fair play and substantial justice” reason for why a defendant has to appear in a particular court. It isn’t “Gitmo” for any non-American.

I wish those people would consider how America screws its own over by some of the things we do to be “fair” to other countries, and to let big corporations set up these corporate mazes to pretend that they aren’t American in the end.

In the end, maybe they aren’t.

[Update 7/23/11: I was surprised to find that the case law interpreting New York’s Section 301 even goes into topics like the Alien Tort Statute, which is a 200 year old Congressional act that allows non-citizens to bring actions for personal harm, which occurred outside of the United States, into federal district court. The law had been been without a published case for 170 years, until the matter of Filartiga v. Penya-Irala in 1980. Then, a more recent Wiwa v. Royal Dutch Petroleum (Shell), made the relevance of Section 301 to causes of action beyond mere business dealing more apparent.

America seems to be more fair in helping out non-Americans than we do our own, doesn’t it?]

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