Aybar v. Aybar: New York Court of Appeals finds registering to do business in the state does not mean consent to general jurisdiction

In a 5-2 decision, the New York Court of Appeals has decided Aybar, et al. v. Aybar, et al. finding, as a matter of New York law that Ford and Goodyear did not consent to general jurisdiction in New York courts simply by virtue of registering to do business in New York.

The court was asked to determine whether under New York’s Business Corporation Law a corporation that registers to do business in New York consents to the general jurisdiction of New York courts and if that exercise of jurisdiction is consistent with the Due Process Clause of the Fourteenth Amendment to the US Constitution. As explained in depth below, on October 7, 2021, the court held that it did neither.

Procedural history

The plaintiffs sued Ford Motor Company, The Goodyear Tire & Rubber Co. and Jose Aybar in New York asserting product liability claims for injuries sustained when Aybar’s vehicle overturned in a motor vehicle accident in Virginia.

Neither Ford nor Goodyear is incorporated in or has its principal place of business in New York.[1] However, both companies are registered with the New York Secretary of State as foreign corporations authorized to do business in the state and have appointed in-state agents for service of process in accordance with the New York Business Corporation Law.

Ford and Goodyear moved to dismiss the complaint for lack of personal jurisdiction. The plaintiffs opposed, arguing that registering to do business in New York and appointing an in-state agent for service of process equates to a foreign corporation knowingly consenting to general jurisdiction in New York courts. The New York Supreme Court denied the motions to dismiss, but the Appellate Division reversed the decision in light of recent US Supreme Court precedent concerning general personal jurisdiction. The Court of Appeals granted the plaintiffs leave to appeal.

Summary of Aybar, et al. v. Aybar, et al.

The sole issue before the New York Court of Appeals was whether Ford and Goodyear – two foreign corporations – consented to general jurisdiction in New York by registering to do business in the forum and appointing a local agent for service of process in compliance with the New York Business Corporation Law (known as “consent by registration”).

Notably, New York Business Corporation Law does not explicitly contain consent to general jurisdiction language. That statute sets forth the steps a foreign corporation must take to be authorized to do business in New York. One such step requires designating an in-state agent for service of process. The majority noted that this requirement, however, does not constitute consent to general jurisdiction.

In reaching this decision, the majority found no basis in the statutory language of the Business Corporations law for a consent-by-registration theory and eschewed the plaintiffs’ contentions that New York precedent has held the opposite. The plaintiffs had relied upon Bagdon v. Philadelphia & Reading Coal & Iron Co., a 1916 Court of Appeals decision they believed supported their theory of consent by registration. The majority of judges disagreed, noting Bagdon must be interpreted more narrowly as “limited to the effect of service of process to which a foreign corporation consented . . . [and] not . . . that a foreign corporation consented to general jurisdiction by registering to do business and designating an agent for service of process” in New York. In short, service does not equal jurisdiction. 

Indeed, the majority noted that because it has never “conflated statutory consent to service with consent to general jurisdiction,” there was no consent to general jurisdiction in the plain language of the statute; therefore, this was a straightforward interpretation of New York statute and it need not opine on the constitutionality of consent by registration. Despite this, the majority still recounted recent US Supreme Court personal jurisdiction decisions – including in particular, the US Supreme Court’s observation that only in “exceptional cases” may “a corporation’s operations in a forum other than its formal place of incorporation or principal place of business [] be so substantial and of such a nature as to render the corporation at home in that [s]tate” for the purposes of general jurisdiction.[2]

The dissent

Two judges dissented and criticized the majority’s Bagdon interpretation, specifically finding that Bagdon had been the law as applied to registration to do business and jurisdiction since 1916 and interpreted the goal of the New York legislature to grant jurisdiction through consent to service.  The dissent emphasized that corporations had knowledge of Bagdon since then and notice of the consent to jurisdiction.  If a corporation did not want to consent to jurisdiction it could always conduct business in the state without registering – with little if any issue.  

Impact

Recent US Supreme Court decisions have held that general personal jurisdiction is properly exercised where a corporation’s operations are so substantial, continuous, and systematic as to render the corporation essentially “at home” in the state. See Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919, 929 (2011). The connections rendering a corporation “at home” in a jurisdiction – incorporation and principle place of business location – are “affiliations [that] have the virtue of being unique[,] . . . ordinarily indicat[ing] only one place . . . .” Daimler AG v. Bauman, 571 U.S. 117, 137 (2014).

Despite the fact that the US Supreme Court has left open the question of supposed consent by registration, as the Aybar majority indicated, other courts have held consent by registration incompatible with the modern approach to specific and general jurisdiction. See, eg , Brown v. Lockheed Martin Corp., 815 F.3d 619 (2d Cir. 2016); Lanham v. BNSF, 939 N.W.2d 363 (Neb. 2020); DeLeon v. BNSF, 426 P.3d 1 (Mont. 2018). Even the Georgia Supreme Court, which recently approved of consent by registration, has acknowledged the argument’s tenuousness, suggesting that the Georgia Assembly amend the state’s Long Arm Statute to “tailor [it] within constitutional limits.” Cooper Tire & Rubber Co. v. McCall, No. S20G1368, 2021 WL 4268074, 2021 Ga. LEXIS 626, at *29 (Ga. Sept. 21, 2021).

Avoiding consent by registration by not registering to do business in New York poses graver consequences than the dissent suggests. Under the Business Corporation Law, the New York Attorney General can restrain a foreign corporation from doing unauthorized business in the state. See Business Corporation Law §§ 1301, 1303. That is, the state may prevent an unregistered entity from doing business in the state, entirely.

Considering the unconstitutional conditions concerns and that consent by registration renders recent US Supreme Court personal jurisdiction holdings “robbed of meaning by a back-door thief,” as the Second Circuit Court of Appeals noted in Brown, state consent by registration regimes will hopefully continue to fail when challenged.

Learn more about the implications for your business of Aybar v Aybar and other consent by registration cases by contacting the authors or your usual DLA Piper attorney.