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Can Telephone Business Transactions with a New York Buyer Subject a Company to NY Jurisdiction?

Phone-Call-Business_On February 10, 2015, the First Department issued a ruling in Mahendra v. National Gold & Diamond Center, Inc. that may have ramifications for businesses who transact with companies in New York over the telephone. The court ruled that a New York Court had jurisdiction over a California corporation whose only dealings in New York were telephonic business transactions. CPLR § 302(a)(1) authorizes the assertion of long-arm jurisdiction over a non-domiciliary who “transacts any business within the state or contracts anywhere to supply goods or services in the state.” CPLR §302(a)(1) is a “single act statute,” thus physical presence is not required and one New York transaction is sufficient for personal jurisdiction. The statute applies where the defendant’s New York activities were purposeful and substantially related to the claim. “Purposeful'” activities are defined as “those with which a defendant, through volitional acts, avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.” While, as a general rule, telephonic transactions have not been found to satisfy CPLR 301(a)(1) for purposes of personal jurisdiction, the court  assessed defendant’s conduct and defendant’s purposeful availment of the privilege of doing business in New York. In doing so, the court found that there was an intent to do business in New York.

Perhaps more important to New York corporations, the court found that forum selections clauses may be a material alteration of inter-business agreements and thus required specific contractual approval pursuant to UCC § 2-207(2)(b). The invoices between the parties included a clear choice of forum clause in favor of New York. However, the court found that the terms of the parties’ agreement were negotiated and agreed to telephonically, and the invoice was a merely confirmatory. The fact that defendant did not sign the invoice, therefore barred enforcement of the choice of forum clause.

The takeaway of this decision is three-fold. New York corporations seeking to enforce choice of forum clauses must obtain an expressly execute agreement to do so. On the other hand, New York corporations may exercise CPLR § 302(a)(1) to obtain New York jurisdiction over potential adversaries if the out-of-state corporations engaged in telephonic or electronic (email, etc.) conduct which can be found to indicate an intent to do business in New York. Finally, out-of-state corporations wishing to avoid New York jurisdiction should take heed and tailor their conduct accordingly.

By Dylan C. Braverman, Esq.

Senior Counsel

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