Considerations For Foreign Parties Sued In New York’s Courts

When individuals and companies located outside of the United States are sued in New York courts, there are often a number of issues that can be raised with the court at the very earliest phase of the lawsuit, which can potentially result in the case being dismissed. Experienced legal counsel for foreign defendants will explore and, if appropriate, raise such issues at the beginning of a case because failure to do so may result in one or more of these legal arguments being waived if not asserted at the proper time. In this article we explore some of these issues.

Service of Process

After a lawsuit has been filed in New York, a copy of the Complaint must be served (i.e. delivered) on the defendants. Until service of process has been effectuated, a defendant is not required to respond to the legal proceedings. The manner in which service of process is to be performed is governed by statute and/or by international treaty. If service of process is not done properly, a defendant may seek to have the case against it dismissed based on such defective service. And, if a case is dismissed for defective service and the statute of limitations (the period in which a lawsuit may be brought) has expired, then it may be too late for the plaintiff to re-serve the Complaint.

Personal Jurisdiction

When a foreign individual or legal entity is named as a defendant in a lawsuit filed in New York, the court must have personal jurisdiction over the defendant for the lawsuit to proceed. Personal jurisdiction is governed by statute as well as by Constitutional considerations. In general, jurisdiction is determined based on the contacts that the defendant has with New York. In certain circumstances, even a single contact can provide the court with personal jurisdiction over a defendant if the claims in the lawsuit arise out of that contact. Moreover, jurisdiction over a foreign party may exist based on the contacts that that party’s agent has with New York. Like service of process, arguments concerning a lack of personal jurisdiction should be raised by the defendant at the earliest stages of the lawsuit and, if successful, may result in the lawsuit being dismissed.

Forum Non Conveniens   

Even when a court has personal jurisdiction over a foreign party, the case may nevertheless still be dismissed based on the doctrine of forum non conveniens. This doctrine, which is discretionary with the court, examines whether there is another jurisdiction more appropriate for the case to be determined. Various factors are considered in evaluating a request that a case be decided elsewhere including, among others, the existence of an alternative forum, the situs of the underlying transaction, the residency of the parties, the potential hardship to the defendant, the location of documents, the location of a majority of the witnesses, and the burden on New York courts. Not all factors are considered or given equal weight in every case.

Door Closing Statutes

In New York, there are various statutes (sometimes referred to as “Door Closing Statutes”) which bar a plaintiff from pursuing a lawsuit when the plaintiff is a non-New York legal entity doing business in the state and has failed to obtain a required certificate of authority to do business in New York. If, when the issue is raised by the defendant the court agrees that the Door Closing Statute applies, then the case may be dismissed, or stayed pending plaintiff obtaining the necessary certificate of authority.

Other Considerations

In addition to the above issues, there are numerous other considerations to be addressed when a foreign individual or legal entity has been sued in New York. The attorneys at Kravet & Vogel, LLP have significant experience working with non-U.S. parties involved in New York litigation and handling these types of matters for foreign clients.