Jurisdiction (Personal)

• Author: International Law Group
• Pages: 127-129

Page 127

SolÈ Resort, S.A. de C.V., a Mexican company (Plaintiff), owned a hotel in Tulum, Mexico. Plaintiff entered into an agreement whereby Allure Resorts Management, LLC, also a non-U.S. corporation (Defendant), would manage the hotel. After ten months of disappointing performance by Defendant, Plaintiff terminated the contract. The formation, performance, and termination of the contract involved several contacts with New York state.

As provided for in the contract, Defendant began an arbitration proceeding against Plaintiff in Miami, Florida, alleging a breach of contract.

Page 128

The arbitrators found in favor of Defendant and awarded $2.1 million in lost future profi ts. Plaintiff then sued Defendant in a New York federal court to vacate the arbitration award. Defendant moved to dismiss for lack of personal jurisdiction, which the district court granted.

Applying New York's "long-arm" statute (LAS), the district court fi rst concluded that the New York contacts were not enough to support personal jurisdiction; Plaintiff 's claim rests solely on the actions of the arbitrators, all of which took place in Florida.

Next, the court decided that it did not gain personal jurisdiction on the theory that Defendant had committed a tort elsewhere that caused injury in New York. The arbitration panel had determined that Defendant did not commit a tort and Plaintiff 's action did not challenge that fi nding. Therefore, the court reasoned, Plaintiff has no colorable claim that Defendant had committed a tort causing injury in New York.

On Plaintiff's appeal, the U.S. Court of Appeals for the Second Circuit vacates the dismissal and remands the case to the lower court to reconsider whether the parties' contacts with New York were enough to establish jurisdiction under the LAS.

The Court first examined ß302(a)(1) of the LAS which provides for specifi c jurisdiction over nondomiciliaries. See N.Y.C.P.L.R. ß302. To establish personal jurisdiction under ß302(a)(1), a plaintiff has to meet two requirements. First, the defendant must have transacted business within the state; and, secondly, the claim asserted must arise from that business activity. McGowan v. Smith, 52 N.Y.2d 268, 273 (1981). The New York courts have generally held that a claim "arises from" a particular transaction when "there is a substantial relationship between the transaction and the claim asserted." Kreutter v. McFadden Oil Corp., 71 N.Y.2d 460, 467 (1988).

The Circuit Court...