New York Court of Appeals Rejects Consent-By-Registration Rule for Personal Jurisdiction

Jones Day

In Short

The Situation: Whether an out-of-state business consents to general personal jurisdiction in a state by registering to do business there has emerged as an important question, particularly after the Supreme Court narrowed the availability of general jurisdiction in recent years. Courts and commentators have long understood New York to recognize such a rule of consent, based principally on a century-old New York Court of Appeals decision.

The Result: In Aybar v. Aybar, the New York Court of Appeals rejected that "misreading" of its precedent and held, as a matter of New York law, that a foreign corporation does not consent to general jurisdiction in New York courts when it registers to do business in New York.

Looking Ahead: Aybar is a landmark ruling for out-of-state corporations that do business in New York. But the New York legislature has passed legislation that, if signed by the governor, would create an express statutory consent-by-registration rule. Whether such a statute would comply with the Due Process Clause remains an open question.

Over the last decade, the U.S. Supreme Court has significantly restricted when courts can assert general personal jurisdiction over defendants, i.e., jurisdiction in lawsuits that do not arise out of or relate to the defendants' contacts with the forum. This has led to plaintiffs' increased use of a theory of jurisdiction by consent, under which a defendant is deemed to have agreed to general jurisdiction in a state by registering to do business there. Courts have divided on—and the U.S. Supreme Court has yet to decide—whether this theory is permissible under the Due Process Clause. But that constitutional question only arises in states that recognize consent-by-registration as a matter of state law. Courts and commentators long placed New York in that category. But the New York Court of Appeals has now held otherwise in Aybar v. Aybar.

Under New York law, a foreign corporation "shall not do business" in New York unless authorized to do so. The corporation must thus register to do business in New York and, as part of that process, designate the New York secretary of state as its agent for service of process. For decades, courts and commentators understood a 1916 New York Court of Appeals decision called Bagdon v. Philadelphia & Reading Coal & Iron Co. to hold that compliance with this registration requirement constitutes the corporation's consent to general jurisdiction in New York courts. But Aybar squarely rejects that reading.

Aybar arose from a Virginia car accident purportedly caused by a tire disablement, allegedly resulting in the deaths of three passengers and injuries to other passengers. The surviving passengers and representatives of the deceased passengers' estates sued the car and tire manufacturers in New York state court, where both companies contested personal jurisdiction. The plaintiffs did not argue for specific jurisdiction and instead asserted, on the basis of Bagdon and subsequent decisions, that the defendants consented to general jurisdiction in New York when they registered to do business in the State. The trial court agreed, but the Appellate Division reversed on the ground that a consent-by-registration rule violates the Due Process Clause, in light of Daimler AG v. Bauman and other recent U.S. Supreme Court decisions.

The New York Court of Appeals affirmed—but on state-law grounds, without reaching the constitutional question. The Court of Appeals observed that New York's Business Corporation Law, which contains the registration requirement, does not itself require a foreign corporation's consent to general jurisdiction. The Court of Appeals also acknowledged the widely held view that Bagdon established a common-law rule "that foreign corporations that have abided by the aforementioned registration and designation statutes have thereby contractually consented, not only to service of process on a designated agent, but to general jurisdiction in New York." But the Court of Appeals held that this was a "misreading" of Bagdon. In the Court of Appeals' view, Bagdon decided only the "narrow" question whether a foreign corporation's designation of an in-state agent for service of process "extended to causes of action unrelated to its business transacted in New York." When Bagdon answered that question, it did not also hold that the mere acts of registration and designation constituted consent to general jurisdiction. Rather, general jurisdiction existed in Bagdon because the foreign corporation concededly was "doing business" in New York (which, at the time, sufficed for due process purposes under Pennoyer v. Neff).

Aybar thus held that "a foreign corporation does not consent to general jurisdiction in this state merely by complying with the Business Corporation Law's registration provision." This uproots the long-prevailing understanding of the New York courts' jurisdiction—and is a helpful precedent for out-of-state defendants.

But Aybar may not mark the end of this issue in New York. In June 2021, the New York legislature passed a bill that would explicitly enact a consent-by-registration requirement. The governor, however, has yet to sign the legislation, and—if the bill becomes law—it will be subject to constitutional challenge. The question whether such a consent rule is constitutionally permissible remains debated across the country—with courts on both sides of the issue, as Justice Gorsuch recently noted in his Ford Motor Co. v. Montana concurrence in the judgment—and could be taken up by the U.S. Supreme Court soon.

Jones Day submitted an amicus brief in Aybar on behalf of the New York City Bar Association in support of the defendants.

Three Key Takeaways

  1. A foreign corporation that registers to do business in New York and designates the secretary of state as its agent for service of process does not thereby consent to general jurisdiction in New York courts.
  2. The New York legislature has passed—but the governor has not yet signed—legislation that would create a statutory consent-by-registration rule.
  3. Whether a consent-by-registration rule would violate due process has not yet been definitively resolved.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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