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Second Circuit Holds that Registering to do Business in New York Under Section 1301 of the Business Corporation Law Does Not Constitute Consent to General Personal Jurisdiction in New York Courts

In Chufen Chen v. Dunkin’ Brands, Inc., No. 18-CV-3087, 2020 WL 1522826 (2d Cir. Mar. 31, 2020), the United States Court of Appeals for the Second Circuit held that the act of registering as a foreign corporation under Section 1301 of the New York Business Corporation Law (“BCL”) does not constitute consent to general personal jurisdiction in the courts of the State.  In reaching its holding, the Court held that the United States Supreme Court’s decision in Daimler AG v. Bauman, 571 U.S. 117 (2014), effectively overruled the New York courts’ long-held interpretation that registering under BCL § 1301(a) constituted consent to general personal jurisdiction.  This decision provides clarity to companies doing business in New York but headquartered and incorporated outside the State that they will not ordinarily be subject to personal jurisdiction in New York state and federal courts.

Plaintiffs alleged that defendant Dunkin’ Brands, Inc. (“Dunkin’”) deceptively marketed its products by claiming that certain breakfast sandwiches contained “Angus Steak” when they actually contained “a ground beef patty with multiple additives.”  Plaintiffs contended that Dunkin’ consented to general jurisdiction in New York by (1) registering as a foreign corporation under the BCL and (2) maintaining sufficient contacts with New York through its extensive franchise network in the state.  Although Dunkin’ operates franchise locations in New York, it is incorporated in Delaware and headquartered in Massachusetts.

Dunkin’ moved to dismiss on the grounds of lack of personal jurisdiction and failure to state an actionable claim under consumer protection laws.  The United States District Court for the Eastern District of New York granted its motion, holding that Dunkin’ was not subject to general personal jurisdiction in New York and it did not violate the consumer protection laws.  Plaintiffs appealed.

The Second Circuit affirmed.  In rejecting the plaintiffs’ argument, the Second Circuit held that Daimler effectively overruled prior New York courts’ decisions on this issue.  Daimler held that general personal jurisdiction exists only if a corporation has contacts that are “so continuous and systematic as to render it essentially at home in the forum.”  Thus, as the Second Circuit held in Brown v. Lockheed Martin Corp., 814 F.3d 619, 627 (2d Cir. 2016), “except in a truly exceptional case, a corporate defendant may be treated as essentially at home only where it is incorporated or maintains its principal place of business.”

The Court further observed that three intermediate appellate decisions from the New York Appellate Division held unanimously that the courts’ prior longstanding interpretation of BCL § 1301(a) did not survive Daimler.  Notwithstanding that the New York Court of Appeals had yet to address the impact of Daimler, the Second Circuit held that “[w]e have little trouble concluding that were the New York Court of Appeals to decide the issue, it would agree that this conclusion is consistent with the U.S. Constitution and the evolving law surrounding general personal jurisdiction.”

The Court also rejected plaintiffs’ argument that maintaining franchise locations within New York creates sufficient contacts with the state to establish general personal jurisdiction.  Merely operating franchises failed to demonstrate that Dunkin’s relationship with New York was in any way significant or exceptional in relation to its nationwide business activity.

Although it declined to exercise general personal jurisdiction over Dunkin’, the Court did hold that the New York-based plaintiff’s claims (though not the out-of-state plaintiffs) extended specific personal jurisdiction over Dunkin’.  The Court dismissed those claims separately on more substantive grounds.

Despite the fact that the New York Court of Appeals yet to weigh in on this issue, corporations doing business in New York but headquartered and incorporated outside the State may rely upon the Second Circuit’s decision that registration under BCL § 1301(a) does not constitute consent to general personal jurisdiction in New York state or federal courts.

Copyright © 2020, Sheppard Mullin Richter & Hampton LLP.National Law Review, Volume X, Number 95

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About this Author

Sarah Aberg Government Contracts Attorney Sheppard Mullin Law Firm New York
Special Counsel

Sarah Aberg is special counsel in the White Collar Defense and Corporate Investigations Group in the firm's New York office.

Areas of Practice

Sarah's practice encompasses litigation, internal investigations and white collar defense, with a focus on financial services and securities. She has conducted multiple criminal trials and numerous internal investigations into a wide variety of allegations, including mail and wire fraud, mortgage fraud, insider trading, market manipulation, money laundering,...

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Bochan Kim, Sheppard Mullin Law Firm, Seoul, Corporate and Finance Law Attorney
Associate

Bochan Kim is an associate in the Government Contracts, Investigations and International Trade Practice Group in the firm's Seoul office. Ms. Kim is also barrister and solicitor of New South Wales, Australia and New Zealand.

Areas of Practice

Ms. Kim represents major financial institutions and companies involved in the entertainment and digital media. Her work mostly involves advising banks and other financial institutions in connection with banking law regulatory issues as well as matters in relation to internal investigations. She has worked on numerous financing deals and specializes in regulatory side of the matters. Her work for financiers includes acting for banks, entrepreneurs and financial groups, often involving secured lending and complex multi-party arrangements. Ms. Kim has worked on the commercial side of corporate deals involving renown Korean companies.

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