Allen v. Canadian General Elec. Co. Ltd.

• Decision Date: 07 December 1978
• Citation: 65 A.D.2d 39,410 N.Y.S.2d 707
• Parties: Barbara ALLEN et al., Respondents, v. CANADIAN GENERAL ELECTRIC COMPANY LIMITED, Appellant.
• Court: New York Supreme Court — Appellate Division

Page 707

410 N.Y.S.2d 707

65 A.D.2d 39

Barbara ALLEN et al., Respondents, v. CANADIAN GENERAL ELECTRIC COMPANY LIMITED, Appellant.

Supreme Court, Appellate Division, Third Department.

Dec. 7, 1978.

Maynard, O'Connor & Smith, Schenectady (Richard M. Gershon, Schenectady, of counsel), for appellant.

McGivern, Shaw & O'Connor, Scotia (Gary J. O'Connor, Scotia, of counsel), for respondents.

Before MAHONEY, P. J., and SWEENEY, KANE, LARKIN and HERLIHY, JJ.

HERLIHY, Justice.

The defendant is a Canadian corporation which allegedly manufactured and sold an electric tea kettle to the plaintiffs. The tea kettle was allegedly defective and caused injuries to plaintiff, Barbara Allen. The plaintiffs' complaint noted that the defendant was not authorized to do business in New York and, as a basis for New York jurisdiction over the defendant for the injuries to Barbara Allen, it alleged that:

A. The Defendant is a subsidiary corporation of the General Electric Company, a New York corporation, and, by virtue of its relationship to the parent corporation, can be seen to be doing business in the traditional sense within the State of New York, or alternatively,

B. As will be detailed herein, the Defendant committed a tortious act without the State of New York which caused personal injury within the State of New York and the Defendant regularly does business within the State of New York and derives substantial revenue from goods used within the State of New York.

The defendant moved to dismiss the complaint upon the ground that there was a lack of jurisdiction (CPLR 3211, subd. (a), par. 8). Special Term found that the record did not establish that the defendant had a substantial presence in New York by doing business in New York and/or by identity with its parent corporation (CPLR 301). However, Special Term found that there was jurisdiction pursuant to section 302 (subd. (a), par. 3, cl. (i) of the CPLR hereinafter referred to as section 302).

Section 302 provides, in part, that when an injury to persons is committed inside New York, a foreign corporation can be subjected to personal jurisdiction here if it "regularly does or solicits business * * * or derives substantial revenue from goods used or consumed * * * in the state". Of course, this is substantially what the plaintiffs, by paraphrasing, alleged in part in subparagraph "B", quoted above. Since Special Term found that there was a failure to show that the defendant was regularly doing business in New York, jurisdiction on that basis was precluded under section 302 as well as section 301 of the CPLR.

The dispositive issue at Special Term and again upon this appeal is whether or not the evidence upon the motion shows that the defendant derived substantial income from goods used or consumed in New York.

The defendant in its motion papers referred to itself as "CGE" and stated or conceded as follows:

7. Only a small portion of CGE's total sales of goods and services are made to customers in New York State (for example, in 1976 this was less than 1% Of total CGE sales) and of these sales to customers in New York only a negligible portion are home appliances. All such customers are business purchases, and often, a portion of the goods sold to customers in New York State would be resold by them outside New York State.

The plaintiffs in opposition to the motion alleged that the defendant's total sales in 1976 were $879 million and based upon the above-quoted concession of 1% Being made in New York State, this would mean sales of $8.79 million in New York.

The defendant submitted a reply affidavit which did not dispute the plaintiffs' contention that New York sales for 1976 came to about $8.79 million. Further, that sum of money is not disputed upon this appeal by defendant. Special Term found that such a sum of money constitutes "substantial revenue" within the meaning of CPLR 302 upon its face. The defendant contends that since upon comparison with its total sales the sum of $8.79 million is only 1% Thereof, it is not "substantial revenue" as to it.

In the case of Allen v. Auto Specialties Mfg. Co., 45 A.D.2d 331, 333, 357 N.Y.S.2d 547, 550, this court held that the phrase "substantial revenue" as used in clause (ii) of paragraph 3 of subdivision (a) of section 302 of the CPLR " * * * should be construed to require comparison between a defendant's gross sales revenue from interstate or international business with total gross sales revenue * * *." There is no substantial difference between clause (i) and clause (ii) of paragraph 3 of subdivision (a) of section 302 of the CPLR as to the use of the words "substantial revenue" and under principles of Stare decisis the defendant argues that a mere 1% Of total gross revenue is not "substantial". Support for the comparison theory is found in the Practice Commentary by Joseph M. McLaughlin under CPLR 302 (McKinney's Cons.Laws of N.Y., Book 7B, CPLR 302, p. 90).

The importance of New York revenues to the total revenues of a business not actually doing business in New York State is certainly measurable by the percentage method as adopted in the Allen case. However, ordinarily it would not be expected that a small percentage of 1% Or 2% Would equal large amounts of money. (See, e. g., Kramer v. Vogel, 17 N.Y.2d 27, 32, 267...