Page 10 - Alternative Dispute Resolution

S10 | MONDAY, MARCH 20, 2017 | Alternative Dispute Resolution | NYLJ.COM
Enforcing Foreign Arbitral Awards Against Foreign Corporations Registered to Do Business in NY
BY HENRY WEISBURG, CHRISTOPHER RYAN AND DANIEL PURISCH
The portability of international arbitral awards is one of the reasons why arbi- tration is used to settle international business disputes. Under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention), the prevailing party in arbitration may seek to enforce a qualifying award before the courts of any of the 156 signatory countries. Such procedures are intended to be a powerful tool in the hands of an award creditor, theo- retically enabling collection from the assets of the award debtor in nearly any country.
In theory, such actions are limited only by the grounds for non-enforcement listed in Article V of the New York Convention. In the United States, however, actions to con- firm foreign arbitral awards are also subject to constitutional due process limitations on personal jurisdiction. These can be significant,
HENRY WEISBURG and CHRISTOPHER RYAN are part- ners, and DANIEL PURISCH is an associate, at Shear- man & Sterling.
since the underlying awards in such actions often concern disputes among foreign parties relating to foreign subject matter—the con- nection to the enforcement state is frequently slight. And while personal jurisdiction could previously be grounded on the award debtor’s non-dispute-related business contacts with the forum state, such ties are no longer sufficient following the U.S. Supreme Court’s decision in Daimler AG v. Bauman, 134 S. Ct. 746 (2014).
One way that award creditors have sought to establish personal jurisdiction after Daimler is through the theory that business registra- tion entails consent to general (all-purpose) jurisdiction. The U.S. Court of Appeals for the Second Circuit addressed this jurisdictional theory with respect to the Connecticut regis- tration statute in Brown v. Lockheed Martin, 814 F.3d 619 (2d Cir. 2016), which provides guidance as to how the principles established in Daimler should be applied to business regis- tration statutes and illustrates why New York courts should not be able to exercise personal jurisdiction over an award debtor solely on the basis of business registration.
Registration Jurisdiction Before ‘Daimler’
New York requires foreign corporations to register as a condition of doing business in the
state. When registering, a foreign corporation must either accept the designation of the New York secretary of state as its agent for service of process or appoint its own registered agent in the state. See N.Y. Bus. Corp. L. §§1304, 304.
Before Daimler, a line of cases held that a foreign corporation registered to do busi- ness in New York had implicitly consented to general personal jurisdiction. See Rockefeller Univ. v. Ligand Pharm., 581 F. Supp. 2d 461, 464-67 (S.D.N.Y. 2008); Steuben Foods v. Oystar Grp., 2013 WL 2105894, at *3 (W.D.N.Y. May 14, 2013). As the Third Department articulated:
[Defendant’s] authorization to do busi- ness in the State and concomitant des- ignation of the Secretary of State as its agent for service of process ... is con- sent to in personam jurisdiction. A vol- untary use of certain State procedures, as in the instant case, is in fact a form of constructive consent to personal juris- diction which has been found to satisfy due process.
Augsbury v. Petrokey, 97 A.D.2d 173, 175-76 (3d Dep’t 1983) (citations omitted). But see Albany Int’l v. Yamauchi, 978 F. Supp. 2d 138, 143 (N.D.N.Y. 2013) (registration is “strong evidence” of jurisdiction but not dispositive in the absence of actual business in New York);
Bellepointe v. Kohl’s Dep’t Stores, 975 F. Supp. 562, 564 (S.D.N.Y. 1997) (same).
Supreme Court’s ‘Daimler’ Decision
The Supreme Court’s decision in Daim- ler considerably narrowed the permissible scope of general jurisdiction, making more definite its previous holding in Goodyear Dunlop Tires Operations, S.A. v. Brown, 131 S. Ct. 2846 (2011) that doing business in a state is insufficient to establish general juris- diction there in the absence of “affiliations with the State [that] are so ‘continuous and systematic’ as to render [it] essentially at home in the forum State.” Daimler, 134 S. Ct. at 761 (quoting Goodyear, 131 S. Ct. at 2851). Daimler clarified that only a “limited set of affiliations” could meet this test: Apart from an “exceptional case,” a corporation is sub- ject to general jurisdiction only in its place of incorporation and principle place of business. Id. at 760-61, 761 n.19.
The effects of Daimler on foreign arbitral award enforcement proceedings were quickly felt. Three months later, the Second Circuit reversed an order confirming a foreign arbi- tral award in circumstances common to such proceedings—foreign party, foreign dispute, and foreign award, but some non-dispute- related business in New York—holding that the lack of sufficient contacts compelled dis- missal under Daimler. Sonera Holding B.V. v. Cukurova Holding A.S., 750 F.3d 221, 22427 (2d Cir. 2014).
Impact of ‘Daimler’: the ‘Brown’ Decision
No longer able to rely on doing business as a basis for general jurisdiction, award credi- tors have looked to alternative jurisdictional theories to ground enforcement actions. Many believed they had found their answer in the argument that by registering to do business in the state, the award debtor has consented to jurisdiction.
Some New York decisions have accepted this argument. Justice Sherry Klein Heitler of the Supreme Court, New York County, for example, held that Daimler’s due process limitations did not apply where a party had registered to do business in New York:
Although Daimler clearly narrows the reach of New York courts in terms of its exercise of general jurisdiction over foreign entities, it does not change the law with respect to personal jurisdiction based on consent. ... [A] corporation may consent to jurisdiction in New York ... by registering as a foreign corporation and designating a local agent.
Bailen v. Air & Liquid Sys., 2014 WL 3885949, at *4 (Sup. Ct. N.Y. Cnty. Aug. 5, 2014); see also Beach v. Citigroup Alt. Inv., 2014 WL 904650, at *6 (S.D.N.Y. March 7, 2014);
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