The World in U.S. Courts: Fall 2014 - Personal Jurisdiction | August.21.2014
Plaintiff AVRA is a Delaware corporation headquartered in New York. It filed suit against defendant Gormbert, a resident of Germany and a former AVRA employee, alleging breach of contract, breach of fiduciary duty, tortious interference with contractual relations, and misappropriation of property and funds. Gormbert moved to dismiss for lack of personal jurisdiction.
Gormbert, a German engineer, had been hired by plaintiff AVRA and established as an executive and 10% shareholder of a German subsidiary of AVRA. When the solvency of this subsidiary was imperiled, Gormbert took a three day trip to New York, Dallas, and San Antonio to discuss funding with AVRA executives and investors, helping to raise approximately US$500,000.
The District Court in New York considered whether this trip was an adequate basis to assert specific personal jurisdiction over Gormbert under New York law. New York law permits specific personal jurisdiction if a defendant (1) conducts business in New York; (2) commits a tortious act in New York; (3) commits a tortious act outside of New York causing injury in the state if he has solicited business or engaged in a persistent course of conduct within the state, or reasonably expects his act to have consequences within the state; and he derives substantial revenue from interstate or international commerce; or (4) owns real property in New York, which Gormbert did not.
As all of Gormbert's alleged wrongful acts occurred in Germany, the court found no personal jurisdiction on the basis of acts occurring in New York. While, at oral argument, AVRA claimed Gormbert made fraudulent misrepresentations during his trip to New York, no misrepresentation claim was alleged in the complaint itself. Furthermore, the court found that Gormbert's single trip to New York did not constitute a persistent course of conduct, nor had AVRA shown an sufficient injury sited in New York, as it alleged only an expected lack of profits, which does not confer personal jurisdiction under New York law.
Even if AVRA had shown a sufficient injury, the Court stated that it would not have had jurisdiction, as the compensation Gormbert received from AVRA (€26,225 against a promised salary of €300,000) was not enough to qualify as "substantial revenue." The court explained that the "substantial revenue" provision has been interpreted by New York courts to impose a "bigness" requirement, assuring that the defendant is economically substantial enough to defend suit in New York. In dismissing the case, the court also noted that the defendant had presented compelling arguments that the complaint against him ran afoul of constitutional due process norms as well as New York state law, but did not discuss his constitutional arguments.