District Court Finds Personal Jurisdiction Over Non-U.S. Defendants Based on Agency Theory and Maintenance of Residence

The World in U.S. Courts: Spring 2015 - Personal Jurisdiction | January.05.2015

Elsevier v. Grossman, U.S. District Court for the Southern District of New York, January 5, 2015

Plaintiff Elsevier, a leading publisher of scholarly books and journals, sued multiple customers who allegedly bought low-price individual subscriptions and, contrary to contractual limitations, resold those subscriptions to numerous institutional entities. Elsevier's RICO claim was based on an allegation of multiple and related instances of fraud in the procurement of the subscriptions.

Defendant Grossman, a citizen and resident of Brazil, and defendant PTI, a corporation organized under the laws of Brazil and having its principal place of business in Brazil, moved to dismiss for lack of personal jurisdiction. After concluding that the RICO statute did not support the exercise of personal jurisdiction over Grossman and IBIS, the District Court in New York considered whether New York's "long-arm" statute provided an alternative basis. The court reviewed a number of the very broad jurisdictional provisions of New York law and found that they had been satisfied because (i) at least one of the subscriptions procured by each defendant had been mailed to a New York address, (ii) the non-U.S. defendants should be deemed to have transacted business in New York through the one New York defendant, IBIS, which was allegedly acting as their agent, and (iii) PTI and Grossman should be deemed to have committed unlawful activity in New York through the actions in New York of IBIS.

The more significant question, however, was whether the assertion of personal jurisdiction was consistent with the independent requirements of the Due Process Clause of the U.S. Constitution. The District Court described the first of two Due Process tests to be whether the defendant "purposefully avail[ed] itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws ... such that [it] should reasonably anticipate" being sued there. The District Court found this requirement to have been satisfied in the case of the individual defendant Grossman because he maintains an apartment in New York and conducts business from that location. It was satisfied in the case of PTI because of the activities of its alleged agent, IBIS. The Court also considered the second Due Process test—whether the assertion of jurisdiction would be "reasonable." The District Court found that it would, principally based upon New York's presumed interest to provide a remedy to its corporate citizens and the location in New York of key witnesses and documents. Notably, the District Court found that the factor relating to the relative inconvenience to the defendant of litigating in a distant forum had largely been made unimportant because "the conveniences of modern communication and transportation ease what would have been a serious burden only a few decades ago."

[Editor's note: The Elsevier case is also discussed under the RICO section of this report.]

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