District Court Finds Specific Personal Jurisdiction over Foreign Guarantor of a Lease in the U.S.

The World in U.S. Courts: Spring 2016 - Personal Jurisdiction/Foreign Sovereign Immunities Act (FSIA)/Forum Non Conveniens | March.03.2016

59th Street Associates v. Reliance Mediaworks Limited, U.S. District Court for the Southern District of New York, March 3, 2016

Plaintiff 59th Street Associates sued Defendant Reliance Mediaworks Limited ("RMW") after a subsidiary corporation owned by RMW allegedly breached a lease with the plaintiff that RMW had guaranteed. While the subsidiary was incorporated in the U.S., RMW is an Indian corporation with no physical presence in the U.S. RMW moved to dismiss the case for lack of personal jurisdiction.

The Court noted that its exercise of personal jurisdiction was governed by New York law, subject to limitations imposed by the Due Process Clause of the U.S. Constitution. Under New York's long-arm statute, specific personal jurisdiction exists over a foreign defendant that transacts any business within the State or contracts anywhere to supply goods or services in the State. Under governing precedent, a financial guarantee payable in New York counts as a contract to perform services in New York and thus can serve as a basis for jurisdiction under New York law. Therefore, the Court held that New York law provided for specific personal jurisdiction over RMW.

The Court next considered whether exercising specific personal jurisdiction in this case would comport with the Due Process Clause. This analysis required the Court first to consider whether RMW had sufficient minimum contacts with New York, which could be found where a defendant "purposefully avails" itself of the protections of the law of a forum State. The Court found that RMW reached out to guarantee a lease in New York, payable to a New York entity. Thus, it had purposefully availed itself of New York law and had the requisite minimum contacts to support the assertion of jurisdiction.

The second stage of the due process inquiry requires courts to assess whether exercise of personal jurisdiction would be reasonable—that is, in accordance with traditional notions of fair play and substantial justice. The Court used a three factor balancing test, weighing the burden imposed upon the defendant against New York's interest in adjudicating the test and the plaintiff's interest in obtaining relief. The Court held that the interest of New York and the plaintiff both clearly favored exercise of personal jurisdiction. The Court noted that 59th Street Associates is a New York general partnership, augmenting New York's interest in adjudicating the dispute. Furthermore, it discounted the burden that litigation would impose on RMW, given that RMW had established minimum contacts with New York in guaranteeing the lease and given the conveniences of modern communications and ease of transportation.

Because exercise of personal jurisdiction was consistent with both New York's long arm statute and the Due Process Clause, the Court denied RMW's motion to dismiss.

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