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Why New York Residency Alone Can't Confer Jurisdiction for Fiduciary Breach

In my experience, one of the most confusing areas to non-lawyers considering bringing a lawsuit is the concept of jurisdiction, i.e., under what circumstances New York's courts - be they Federal or State courts - will have the power to hear and determine the outcome of the lawsuit. For reasons that are beyond the scopy of this particular article, suffice it to say that the rules in this regard are drawn from New York State's procedural laws.

 

To that end, New York's Civil Practice Law & Rule 302 sets forth a number of circumstances under which a plaintiff can seek to subject a defendant to New York jurisdiction even when the defendant is foreign, or in other words, is not a New York resident. One example is provided by Section 302(a)(3), which states that any non-domiciliary who in person or through an agent "commits a tortious act without the state causing injury to person or property within the state" may be subject to personal jurisdiction if he "(i) regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in the state, or (ii) expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce…." Bank Brussels Lambert v. Fiddler Gonzalez & Rodriguez, 171 F.3d 779, 790-91 (2d Cir. 1999).

 

There is an important caveat to this rule, however. Contrary to what you may think, just because you reside in New York and were damaged doesn't mean you qualify for New York jurisdiction under this rule.

 

Or, as New York's courts have explained the rule:

 

"It is settled New York law that the suffering of economic damages in New York is insufficient, alone, to establish a 'direct' injury in New York for N.Y. C.P.L.R. §302(a)(3) purposes." Penguin Group (USA) Inc. v. Am. Buddha, 609 F.3d 30, 38 (2d Cir. 2010); see also Lehigh Valley Indus. v. Birenbaum, 527 F.2d 87, 94 (2d Cir. 1975) ("[S]ection 302(a)(3) is not satisfied by remote or consequential injuries such as lost commercial profits which occur in New York only because the plaintiff is domiciled or doing business here.").

"[C]ourts determining whether there is injury in New York sufficient to warrant §302(a)(3) jurisdiction must generally apply a situs-of-injury test, which asks them to locate the 'original event which caused the injury.'" Bank Brussels Lambert, 171 F.3d at 791 (citing Hermann v. Sharon Hosp., Inc., 135 A.D.2d 682, 683 (2d Dept. 1987) ("The situs of the injury is the location of the original event which caused the injury, not the location where the resultant damages are subsequently felt by the plaintiff."); see also Weiss v. Greenburg, Traurig, Askew, Hoffman, Lipoff, Quentel & Wolff, P.A., 85 A.D.2d 861, 862 (3d Dept. 1981) (quoting Am. Eutectic Welding Alloys Sales Co. v. Dytron Alloys Corp., 439 F.2d 428, 433 (2d Cir. 1971)) ("[I]t has been held that the situs of a nonphysical, commercial injury is where 'the critical events associated with the dispute took place.'").