Chaffetz Lindsey Team Obtains Preliminary Injunction in Aid of Arbitration

All bids are final … New York Court of Appeals: Seller of syndicated loan was bound by its acceptance of plaintiff’s winning auction bid absent “forthright, reasonable signal” conditioning seller’s intent to be bound on parties’ execution of a written agreement.

Stonehill Capital Mgmt., LLC v. Bank of the West, 28 N.Y.3d 439 (Dec. 20, 2016).

When the defendant in a breach of contract action contends that it never entered a binding agreement with the plaintiff, New York courts look to the “objective manifestations” of the parties’ intent as reflected in their “expressed words and deeds” to determine whether (and on what terms) a contract was formed.  When the parties have reached agreement on material terms but one party does not wish to be bound until the agreement has been reduced to writing, it must give a “forthright, reasonable signal” to that effect.  Otherwise, that party risks being bound even absent a written contract.

Applying these principles, the New York Court of Appeals held that the defendant’s acceptance following an online auction of the plaintiff’s bid for a syndicated loan “subject to” execution of a written agreement and payment of a non-refundable 10% deposit gave rise to a binding agreement for the sale of the loan.  Yet after learning of an anticipated increase in the value of the loan, the defendant notified the plaintiff that it “[would] not proceed with this trade because it has no obligation to do so.”

The court rejected the seller’s attempt to back out of the transaction.  It found that “the terms of the sale were preset” by the underlying offering memorandum, and that the defendant’s email accepting the plaintiff’s bid confirmed the material terms of the parties’ agreement, including “the sale price, the specific loan to be sold, the timing of the closing, and the manner of payment and wire instructions.”  And although the plaintiff proposed some technical modifications to the deal documents, the defendant never responded that those modifications were unacceptable.

The court characterized the defendant’s statement that its acceptance was “subject to mutual execution of an acceptable [written agreement]” as “formulaic,” holding that “less ambiguous and more certain language is necessary” to establish the parties’ “intent not to be bound absent a writing.”  The court contrasted this “subject to” formulation with an auctioneer’s statement in a prior case disclaiming any obligation to sell “unless and until” a written contract was executed, which the court deemed sufficient to foreclose any sale absent a written agreement.  Here, the court characterized the execution of a written contract and payment of the deposit as “post-agreement requirements necessary for the consummation of the transfer.”  If anything, therefore, these requirements amounted to conditions precedent to performance—not conditions to contract formation.

Read the court’s full decision here.

A pocket guide to proving “out of pocket” damages for fraud … First Department: Plaintiff alleging fraudulent inducement of corporate merger agreement failed to establish compensable damages; absent formal appraisal, plaintiff could not prove difference between merger consideration paid and target company’s actual value.

Kumiva Grp., LLC v. Garda USA Inc., 146 A.D.3d 504 (1st Dep’t Jan. 12, 2017).

Under New York law, a plaintiff suing for breach of contract may claim “benefit of the bargain” damages. The purpose of such damages is to put the plaintiff in the same economic position as if the contract had been fully performed.  In contrast, a plaintiff alleging fraudulent inducement of a contract typically may recover only “out of pocket” damages, i.e., compensation for the actual pecuniary loss directly caused by the fraudulent inducement.

This decision illustrates some of the pitfalls that a fraud plaintiff seeking to prove out of pocket damages should take care to avoid. The Appellate Division, First Department affirmed the dismissal of a corporate acquirer’s claim for tens of millions of dollars in damages resulting from a merger agreement the acquirer claimed was fraudulently induced by the target company’s misrepresentations concerning its recent acquisition of another company.

The court explained that out of pocket damages “are calculated in three steps”: First, “the plaintiff must show the actual value of the consideration it received” under the challenged contract.  Second, the plaintiff must prove that as a direct result of the defendant’s misrepresentations, it agreed to deliver consideration that was more valuable than what it received from the defendant in return.  Third, the plaintiff’s out of pocket damages are the difference in value between the consideration it provided and the consideration it received.

The court held that the plaintiff “failed to properly calculate” its out of pocket damages for two reasons. First, the plaintiff “conflated the first and second steps” by assuming that the stipulated purchase price for the target company under the merger agreement reflected the target’s actual value “instead of conducting a formal appraisal to determine that actual value.”  The court rejected the plaintiff’s argument that because the contract price was the result of arm’s length negotiations, it should be deemed the “best measure” of the target company’s value.

Second, the court rejected the plaintiff’s expert evidence that the target company’s misrepresentations “inflated” the contract price. Having failed to proffer “admissible evidence of [the target]’s actual value on the relevant date,” the plaintiff could not establish compensable out of pocket damages on the basis that it “would have made a lower offer” but for the alleged misrepresentations.

Read the court’s full decision here.

Demise of the two-step tango for award enforcement against alter egos … Second Circuit: New York Convention does not require a party to seek confirmation of a foreign arbitral award before enforcing the award against third parties.

CBF Indústria De Gusa S/A v. AMCI Holdings, Inc., 850 F.3d 58 (2d Cir. Mar. 2, 2017).

When it proves difficult to enforce an arbitral award against the award debtor, the creditor may pursue enforcement against third parties that were not parties to the arbitration or named in the award. Frequently, the creditor will argue that enforcement against the third parties is warranted because they are the debtor’s alter egos.  This decision reaffirms that under the New York Convention, the creditor may enforce a foreign arbitral award directly against the debtor’s alter egos—without first having to seek confirmation against the debtor.

At issue on appeal were the district court’s rulings (1) that the award creditors could enforce the award only after it was confirmed by a “court of competent jurisdiction”; and (2) that the award could not be confirmed against the Swiss award debtor because the latter had been formally dissolved and therefore lacked the capacity to be sued under Swiss law. Together, these rulings deprived the award creditors of their ability to enforce the award in the United States.

The Second Circuit reversed, holding that the New York Convention and Chapter 2 of the Federal Arbitration Act require that recognition (i.e., the court’s determination that a foreign arbitral award “is entitled to preclusive effect”) and enforcement (i.e., the process of “reducing a foreign arbitral award to a domestic judgment”) must “occur together” in a “single proceeding.”

The court further held that, under the Convention, “the law of the enforcing jurisdiction, here the Southern District of New York,” determines whether a foreign arbitral award may be enforced against a third party not named in the award. On that basis, the court remanded the case to the district court to decide whether the defendants were liable for the award as the debtor’s alter egos.

The court took the unusual step of issuing a new opinion on March 2, 2017 to correct one aspect of its original, January 18, 2017 decision. Originally, the court instructed the district court to consider whether the parties’ arbitration agreement reserved “the question of whether a non-signatory can be bound” for the arbitral tribunal or for the court to decide.  And if the district court found it could decide that question, it was to apply “ordinary principles of contract and agency” to determine whether the third parties could be bound by the award.  But the Association of the Bar of the City of New York urged the court to correct these instructions because “[t]he effectiveness or ineffectiveness of an award against third parties . . . does not depend on the intended scope of the arbitration agreement.”  The court ultimately agreed.

Read the court’s full decision here.

This blog post is a service to our clients and friends. It is designed only to give general information on the developments actually covered. It is not intended to be a comprehensive summary of recent developments in the law, treat exhaustively the subjects covered, provide legal advice, or render a legal opinion.

“Sham transaction” violates champerty statute … New York Court of Appeals: Court affirms dismissal of multi-hundred million dollar lawsuit against German bank.  Assignment of securities for the sole purpose of enabling the assignee to bring suit deemed champertous.

Justinian Capital SPC v. WestLB AG, No. 155, — N.Y.3d —, 2016 WL 6270071 (N.Y. Oct. 27, 2016)

New York’s champerty statute (Judiciary Law § 489(1)) restricts individuals and corporations from purchasing or taking an assignment of notes or other securities “with the intent and for the purpose of bringing an action or proceeding thereon.”  Courts have construed this prohibition narrowly so that it applies only where the acquirer’s primary purpose is to bring suit on the security.  Moreover, § 489(2) establishes a “safe harbor” exempting otherwise champertous transactions in notes or securities “having an aggregate purchase price of at least five hundred thousand dollars” from the prohibition.

The Court of Appeals held that a German bank’s assignment to “a Cayman Islands shell company with little or no assets” of notes originally worth some €180 million, but which had “lost much (if not all) of their value,” was champertous as a matter of law.  The transaction was designed to enable the assignee to bring a lawsuit against another German bank that the assignor for political reasons was reluctant to pursue in its own right.  The assignee agreed to pay the assignor a base purchase price of $1 million, plus a percentage of any proceeds recovered.  Within days of the assignment, and shortly before the statute of limitations expired, the assignee brought suit on the notes in New York state court.

On these facts, the court held that the defendant was entitled to summary judgment dismissing the assignee’s complaint against it.  The court found there was “no evidence” that the assignee’s acquisition of the notes “was for any purpose other than” commencement of the lawsuit.  Additionally, the assignment amounted to a “sham transaction” because the assignee was not bound to pay the $1 million base purchase price “unless the lawsuit was successful.”  Consequently, the assignee was “not entitled to the protection of the safe harbor.”  The court “emphasize[d]” that it had “no problem with parties structuring their agreements to meet the safe harbor’s requirements”—as long as they satisfy the $500,000 minimum threshold under § 489(2) through “actual payment” or a “transfer of financial value” in that amount.

Two of the seven judges dissented.  They would not have found the assignment champertous as a matter of law.  Instead, they emphasized that whether a transaction is champertous turns on “the intent and purpose of the purchaser or assignee,” which “is usually a factual question that cannot be decided on summary judgment.”  They also expressed concern that “the majority’s decision discourages transactions aimed at fostering accountability in commercial dealings.”

Read the court’s full decision here.

Caveat venditor (let the seller beware) … Second Circuit:  Court reverses dismissal of putative consumer class action because online retailer Amazon could not establish as a matter of law that it gave customers reasonable notice of mandatory arbitration provision.

Nicosia v. Amazon.com, Inc., No. 15-423-CV, — F.3d —-, 2016 WL 4473225 (2d Cir. Aug. 25, 2016)

Increasingly, companies require consumers to consent to mandatory arbitration as part of their general terms and conditions.  Courts in the United States have deemed such arbitration agreements binding and enforceable, provided that consumers receive adequate notice of the terms and conditions.  Businesses can satisfy this notice requirement by demonstrating “constructive” or “inquiry” notice (i.e., that the consumer had reasonable “notice of the existence” of the terms and conditions—whether or not the consumer actually “read or understood” them).

In this putative class action arising from Amazon’s online sale of a dietary supplement, the Second Circuit found that “reasonable minds could disagree” on whether Amazon’s website provided the named plaintiff with reasonable notice of Amazon’s terms and conditions requiring arbitration of his claims.  As a result, Amazon was not entitled to dismissal as a matter of law.

The court explained that a party’s “assent to an online contract is not meaningfully different” from a “paper contract.”  Both are governed by ordinary “principles of contract formation” under state law (in this case, Washington law).   For online transactions, adequacy of notice “depends heavily on whether the design and content” of the particular webpage renders the terms and conditions “reasonably conspicuous.”  The court identified so-called “clickwrap” agreements (which require users “to click an ‘I agree’ box after being presented with a list of terms or conditions”) as “the easiest method of ensuring that terms are agreed to.”  At the other end of the spectrum are “browsewrap” agreements, which “involve terms and conditions posted via hyperlink” but “do not request an express manifestation of assent.”

Amazon argued that its conditions of use fell somewhere “in between” a clickwrap agreement and a browsewrap agreement.  Unlike a clickwrap agreement, Amazon’s webpage did not require users to tick an “I agree” box, but it did inform them that by placing their order, they agreed to Amazon’s conditions.  Yet the court deemed that language insufficient to establish reasonable notice as a matter of law because it was “not bold, capitalized, or conspicuous in light of the whole webpage,” which also included many other links and various other text in a number of different sizes and colors “alongside multiple buttons and promotional information.”

Read the court’s full decision here.

Litigating on borrowed time … First Department: Parties’ contractual choice of New York law does not preclude application of New York’s borrowing statute.  Court applies Ontario’s shorter limitations period to hold that Canadian plaintiff’s breach of contract claims are time-barred.

2138747 Ontario, Inc. v. Samsung C & T Corp., No. 1509, — A.D.3d —, 2016 WL 5888697 (1st Dep’t Oct. 11, 2016)

Under New York’s “borrowing statute” (CPLR § 202), the statute of limitations that applies to an out-of-state plaintiff’s cause of action accruing outside New York is the shorter of (1) the statute of limitations in the jurisdiction where the claim accrued; or (2) New York’s statute of limitations.  The borrowing statute’s purpose is to prevent forum shopping by out-of-state plaintiffs who otherwise might seek to take advantage of potentially longer New York limitations periods.  The borrowing statute does not apply to claims asserted by in-state plaintiffs.  Such claims are always governed by New York’s statute of limitations (even if they accrued outside New York).

The Appellate Division, First Department applied the borrowing statute to hold that a Canadian plaintiff’s breach of contract claims accruing in Ontario, Canada were time-barred under Ontario’s two-year limitations period—even though the parties’ agreement contained a broad New York choice-of-law clause and the claims would have been timely under New York’s six-year statute of limitations.  The court agreed that the choice of law clause providing that the agreement “shall be governed by, construed and enforced in accordance with” New York law reflected “the parties’ intent to apply both the substantive and procedural law of New York State to their disputes.”  But the court deemed that circumstance irrelevant because the borrowing statute “is a statute of limitations in its own right” rather than “a statutory choice-of-law directive” that might have been superseded by the parties’ contractual choice of New York law.

On that basis, the court found that application of the borrowing statute was “perfectly consistent” with existing New York Court of Appeals precedent.  The court recognized that the plaintiff raised “valid” policy arguments against application of the borrowing statute on these facts, “including that it is inconsistent with New York’s current policy to encourage businesses to use New York courts” to resolve their disputes, and that the parties’ contractual choice of New York law obviated any “forum shopping” concerns.  But the court concluded that such policy issues “are best left to the state legislature to resolve.”

Read the court’s full decision here.

This blog post is a service to our clients and friends. It is designed only to give general information on the developments actually covered. It is not intended to be a comprehensive summary of recent developments in the law, treat exhaustively the subjects covered, provide legal advice, or render a legal opinion.

Common interest doctrine cannot protect business communications …  New York Court of Appeals: Doctrine shields from disclosure only communications concerning pending or anticipated litigation.  Majority disagrees with dissenters, who would have extended common interest protection to communications concerning a “transformative business enterprise.”

Ambac Assur. Corp. v. Countrywide Home Loans, Inc., No. 80,
— N.Y.3d —, 2016 WL 3188989 (N.Y. June 9, 2016)

New York has long recognized the common interest doctrine as a narrow exception to the general rule that disclosing privileged attorney-client communications to a third party waives the privilege.  The doctrine protects communications among parties represented by separate counsel if, and only if, the parties share a “common legal interest” and their communications “concern pending or reasonably anticipated litigation.”  In Ambac, New York’s highest court declined to extend the common interest doctrine to protect communications among parties with a common legal interest unrelated to litigation.

At issue were communications between the troubled home mortgage issuer Countrywide and Bank of America concerning their 2008 merger.  Bank of America argued that the parties’ merger-related communications should be protected in subsequent litigation because “highly regulated financial institutions constantly face a threat of litigation” due to the nature of their business.  The Court disagreed.

The Court held that the potential benefits of discarding the longstanding requirement of “pending or anticipated litigation . . . are outweighed by the substantial loss of relevant evidence, as well as the potential for abuse.”  It found no evidence that New York’s narrow application of the common interest doctrine had resulted in “a corporate crisis.”  Nor did the court find it “anomalous” that communications among parties represented by separate counsel receive less protection than communications among parties represented by a single attorney—a circumstance in which the parties “share a complete alignment of interests.”  Two judges dissented; they would have expanded the common interest doctrine to cover communications occurring during a “transformative business enterprise.”

Read the court’s full decision here.

Timing is everything … Second Circuit: Willful contract breach is not fraud absent fraudulent intent at time of contracting.  

U.S. ex. rel. O’Donnell v. Countrywide Home Loans, Inc., 822 F.3d 650 (2d Cir. May 23, 2016)

Under New York law, “a representation is fraudulent only if made with the contemporaneous intent to defraud.”  Therefore, a plaintiff pursuing a fraud claim grounded in a contractual misrepresentation “must prove fraudulent intent at the time of contract execution; evidence of a subsequent, willful breach cannot sustain the claim.”

Applying these well-established common law rules in the “novel” context of a federal statute imposing civil penalties for mail and wire fraud, the Second Circuit reversed a $1.2 billion judgment against home mortgage issuer Countrywide.  The latter entered into contracts with two government-sponsored enterprises (“GSEs”) to sell them “investment quality” home mortgages.  The Government proved that Countrywide later sold the GSEs mortgages it “knew were not of the quality” it had promised in the contracts.  But the Government failed to prove “that at the time the contracts were executed Countrywide never intended to perform its promise of investment quality.”

Because the Government established only a “post-contractual intentional breach” of Countrywide’s prior representations to the GSEs, the Second Circuit held that “the jury had no legally sufficient basis” to find Countrywide liable for fraud.  The court rejected the Government’s argument that proof of fraudulent intent at the time of contracting should not be required, holding that abandonment of the contemporaneous fraudulent intent requirement would result in “a dramatic expansion of fraud liability” under New York law.

Read the court’s full decision here.

Enforcing arbitral awards against non-parties … Southern District of New York:  In confirmation proceeding under the FAA and New York Convention, court lacked authority to enforce arbitral award against non-parties to the award on an alter ego theory where (i) the New York Convention was the sole basis for jurisdiction and (ii) the alter ego question presented complex fact issues.  However, court issued sweeping asset preservation injunction to prevent further dissipation of assets while award creditor pursued alter ego theory in separate action. 

GE Transp. (Shenyang) Co. v. A-Power Energy Generation Sys., Ltd., No. 15 CIV. 6194 (PAE), 2016 WL 3525358 (S.D.N.Y. June 22, 2016)

Courts in the Second Circuit are reluctant to enforce arbitral awards against non-parties to the award on an “alter ego” theory in confirmation proceedings under the Federal Arbitration Act (“FAA”) and New York Convention.  With limited exceptions, the award creditor must establish the non-parties’ alter ego liability in a separate action before the creditor can enforce the award against them.  In the meantime, the court in the confirmation proceeding can maintain the status quo by enjoining the award debtor from transferring assets to the alleged alter egos or causing them to dissipate their existing assets.

The court in GE Transportation confirmed a nearly US$477 million Hong Kong International Arbitration Centre (“HKIAC”) award in favor of a Chinese party against a British Virgin Islands debtor arising out of a payment guarantee.  But the court held that it lacked authority in the confirmation proceeding to enforce the HKIAC award against the debtor’s alleged alter egos, including its chairman and CEO; various direct or indirect, wholly or partly-owned subsidiaries; and an unrelated company of which the debtor’s chairman and CEO was a former director, and to which he had transferred “substantial assets.”

Applying Orion Shipping & Trading Co. v. E. States Petroleum Corp. of Panama, S.A., 312 F.2d 299 (2d Cir. 1963), the court held that an action to confirm an arbitral award “is not the proper time . . . to ‘pierce the corporate veil.’”  Although courts in the Second Circuit recognize two exceptions to this general rule, neither exception applied.  The first exception provides that a court may confirm an arbitral award and enforce it in the same action against non-parties the court determines are the award debtor’s alter egos where a “separate jurisdictional basis” (such as diversity of citizenship of the parties) exists for enforcement against the alter egos.  But this exception does not apply where the court’s jurisdiction is based solely on the FAA’s grant of jurisdiction for cases falling under the New York Convention (as was the case here).  Second, even absent a separate jurisdictional basis, a court may enforce an arbitral award against non-parties in the same action if doing so will not “unduly complicate” the confirmation proceeding—i.e., where enforcement is “straightforward” and does not hinge on a “complex factual inquiry.”  That exception did not apply because enforcement against the “web of corporate entities” alleged to be the debtor’s alter egos was not a “straightforward task.”

Consequently, the court declined to enforce the award against the non-parties “without reaching the issue [of] whether they would qualify as alter egos.”  The court emphasized that this conclusion “in no way precludes [the creditor], in a separate proceeding, from pursuing liability against the alleged alter egos.”  Indeed, the court granted the creditor “fulsome relief” against the risk of further asset dissipation by not only permanently enjoining the award debtor from “transferring, dissipating or otherwise disposing of or diminishing in value any of its assets wherever they are located,” but also requiring the debtor “to exercise its control over any entities or persons owned or controlled by [it] to ensure that they and/or their subsidiaries do not remove, encumber, dissipate, or otherwise dispose of or deal with or diminish in value any of their assets.”

Read the court’s full decision here.

This blog post is a service to our clients and friends. It is designed only to give general information on the developments actually covered. It is not intended to be a comprehensive summary of recent developments in the law, treat exhaustively the subjects covered, provide legal advice, or render a legal opinion.

Spreading the (sovereign) wealth…(Second Circuit).  Foreign Sovereign Immunities Act permits federal securities fraud claims against Kazakhstan’s sovereign wealth fund.  Court finds that alleged misrepresentations outside the United States had a “direct effect” on U.S. investors.

Atlantica Holdings, Inc. v. Sovereign Wealth Fund Samruk-Kazyna, JSC, 813 F.3d 98 (2d Cir. Feb. 3, 2016)

Under the Foreign Sovereign Immunities Act (“FSIA”), a foreign sovereign has general immunity from suit in the U.S., subject to certain exceptions, including one for the foreign state’s “commercial activity.”  When the commercial activity takes place outside the United States, the commercial activity exception applies if the activity “causes a direct effect in the United States.”  28 U.S.C. § 1605(a)(2).  Atlantica Holdings addresses two important aspects of this “direct effect” clause.

First, the requisite direct effect may be an effect upon any United States investors (whether parties or not).  Plaintiffs asserting this basis for jurisdiction may be either U.S. or foreign investors; the absence of any U.S. investor plaintiffs is not a bar to jurisdiction.

Second, when the United States is the locus delicti—or “place of the wrong”—there is a “direct effect in the United States.”  Previous decisions recognized that the United States is the place of the wrong in contract cases when “the United States is the place of performance of the breached [contractual] duty.”  For tort cases, however, the place of the harm is not the place of the breached tort duty—here, the misrepresentations—but the initial place where the tort victim suffers harm from the breach.  In a fraud claim alleging purely financial loss (as contrasted with financial loss that is derivative from some other harm, such as loss of property in a conversion), the place of the loss is typically the tort victim’s residence.

Read the court’s full decision here.

Court boots footwear distributor out of Australian proceeding… (NYS Supreme Court, Commercial Division).  Contractual choice of New York as an exclusive forum prohibited Australian distributor from pursuing litigation in Australia against subsidiary of well-known footwear designer Steve Madden.  NY court issued a rare anti-suit injunction.

Madden Int’l, Ltd. v. Lew Footwear Holdings Pty Ltd., No. 650209/2015, 2016 WL 237637, 2016 N.Y. Slip. Op. 50061(U) (Sup. Ct. N.Y. County Jan. 15, 2016)

New York has a “strong public policy” of enforcing contractual choice of forum clauses between “sophisticated business entities,” particularly where one of the parties is based in New York.  In this action arising from the termination of a licensing and distribution agreement, the court enforced this public policy in the face of the distributor’s “purposeful disregard of its contractual obligations in favor of an unsanctioned suit in its home country of Australia.”

The court characterized this case as particularly “thorny” because the Australian court previously declined to enforce the parties’ choice of forum agreement on public policy grounds, reasoning that the distributor’s statutory claims against Madden for deceptive trade practices under Australian law had no analog under New York law and would be unavailable to the distributor in the New York proceeding.  Nevertheless, the court stepped in to award the very rare relief of an anti-suit injunction.

Read the court’s full decision here.

“Extraordinarily unlikely” and “truly exceptional”…Second Circuit decision underscores the difficulty of establishing general personal jurisdiction over out-of-state corporate defendants even where they maintain a substantial physical presence in the forum state.

Brown v. Lockheed Martin Corp., 814 F.3d 619 (2d Cir. Feb. 18, 2016)

In Daimler v. Bauman, 134 S.Ct. 746 (2014), the United States Supreme Court made it very difficult (if not impossible) for plaintiffs to establish general personal jurisdiction over out-of-state (including foreign-country) corporations under a traditional contacts-based theory.  Daimler left open the possibility that, “in an exceptional case,” a corporation might be amenable to general jurisdiction in a state where it is neither incorporated nor maintains its principal place of business.  But the Second Circuit in Brown deemed it “extraordinarily unlikely” that an out-of-state corporation’s contacts with the forum state—“no matter how ‘systematic and continuous’”—will ever “add up to an ‘exceptional case’” sufficient to confer general jurisdiction.

In this case, Brown sued Lockheed Martin in Connecticut based on asbestos exposure that took place outside Connecticut.  Lockheed was neither incorporated nor maintained its principal place of business in Connecticut.  The Second Circuit declined to find general jurisdiction based solely on Lockheed’s longstanding physical presence in Connecticut, which the court held did not make for “a truly ‘exceptional’ case” under Daimler.  The court also declined to construe Lockheed’s registration to do business in Connecticut and appointment of an agent for service of process there as a consent to general jurisdiction.

In dicta, the court noted differences between Connecticut’s registration statute and New York’s analog.  The Court observed (without holding) that New York’s registration statute might subject a registered foreign corporation to general jurisdiction in New York, and that legislation pending in New York would make that rule explicit.  The court raised the question whether that legislation might violate the United States Constitution’s Due Process clause, but the court gave no indication how it would rule on that issue, which was not immediately before it.

Read the court’s full decision here.

This blog post is a service to our clients and friends. It is designed only to give general information on the developments actually covered. It is not intended to be a comprehensive summary of recent developments in the law, treat exhaustively the subjects covered, provide legal advice, or render a legal opinion.