George Reiner & Co., Inc. v. Schwartz

• Decision Date: 28 April 1977
• Citation: 394 N.Y.S.2d 844,41 N.Y.2d 648
• Parties: , 363 N.E.2d 551 GEORGE REINER AND CO., INC., Respondent, v. Arnold SCHWARTZ, Appellant.
• Court: New York Court of Appeals Court of Appeals

Page 844

394 N.Y.S.2d 844

41 N.Y.2d 648, 363 N.E.2d 551

GEORGE REINER AND CO., INC., Respondent, v. Arnold SCHWARTZ, Appellant.

Court of Appeals of New York.

April 28, 1977.

Edward S. Haddad and William A. Sekellick, Albany, for appellant.

Harvey M. Lifset, Albany, for respondent.

COOKE, Judge.

Arnold Schwartz, a resident of Salem, Massachusetts, responded to an advertisement placed by plaintiff, a New York corporatio in the Boston Globe. At the request and expense of plaintiff, Schwartz traveled to plaintiff's corporate offices at 328 Central Avenue, Albany, New York, and was there interviewed by George Reiner, plaintiff's president. The position Schwartz sought was that of salesman, the territory was that of New England. An agreement was reached that day and, when Schwartz returned to Massachusetts, he took with him a memorandum thereof, which included notations as to his sales territory, his rate of commissions, and other incidentals of his employment. The employment relationship, entered into on December 23, 1967, apparently continued for over four years, during which time Schwartz covered the New England area, an area not including New York, using his Massachusetts home as his office.

Sometime after termination of the employment relationship, plaintiff brought an action against Schwartz, alleging that the latter "knowingly, willfully and fraudulently violated the terms of the contract". Recovery was sought in the amount of $13,553.35, which amount was alleged to represent the excess of drawings over commissions retained by Schwartz in violation of the terms of the agreement. Schwartz moved to dismiss the action on the grounds that the court lacked personal, as well as subject matter, jurisdiction. Special Term granted the motion, crediting defendant's claim of lack of personal jurisdiction. By a divided court, the Appellate Division reversed, reinstating the complaint. The following question was certified for our review: "Did Special Term err as a matter of law in granting defendant's motion to dismiss the cause of action set forth in the complaint on the ground that the court lacked jurisdiction of the person of the defendant?"

When tracing the modern notion of due process as it relates to in personam jurisdiction, it is necessary to go back no further than International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95. There the Supreme Court cast aside the narrow and rigid view taken in Pennoyer v. Neff, 5 Otto 714, 95 U.S. 714, 733, 24 L.Ed. 565, that due process required a defendant's physical presence in the territorial jurisdiction of the court for that court's judgment to be binding upon him. "Due process", the court in International Shoe wrote, "requires only that in order to subject a defendant to a judgment in personam, if he be not present within the territory of the forum, he have certain minimum contacts with it such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice' " (326 U.S. at p. 316, 66 S.Ct. at p. 158). Although the court's analysis and discussion which followed focused on the sometimes difficult task of identifying corporate activities sufficient to constitute "presence", the court recognized that there are certain acts which because of their "nature and quality and the circumstances of their commission" may be "deemed sufficient" to render a defendant, not physically present, liable to suit (326 U.S. at p. 318, 66 S.Ct. (154) at p. 159). Thus, the Supreme Court explained that there is no simple mechanical or quantitative test to be applied, due process in each case depending upon "the quality and nature of the activity in relation to the fair and orderly administration of the laws" (326 U.S., at p. 319, 66 S.Ct., at p. 160).

McGee v. International Life Ins. Co., 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223, exemplified the application of a type of qualitative test, in personam jurisdiction based and upheld solely upon a contract, a reinsurance agreement, made between a California resident and a nonresident defendant insurance company. While in McGee there was but a single contact, the court gave special weight to the nature of such contact insofar as it credited California's special interest in providing effective redress for its residents when nonresident insurers refused to pay claims on insurance solicited within its borders. In Hanson v. Denckla, 357 U.S. 235, 78 S.Ct. 1228, 2 L.Ed.2d 1283, a case decided soon after McGee, the Supreme Court stressed the qualitative aspect of the contact in McGee in order to show that the " 'minimal contacts' " requirement had been satisfied there (357 U.S., at pp. 251-252, 78 S.Ct. 1228). The court pointed out that, as the unilateral activity of those claiming relationship with nonresident defendants could not satisfy the requirement of contact with the forum State (357 U.S., at p. 253, 78 S.Ct. 1228), the Florida court in Hanson v. Denckla had no jurisdiction over the Delaware trustee, the latter neither having an office nor transacting any business in Florida. The court continued, explaining that while the application of the "minimal contacts" rule will vary with the quality and the nature of the defendant's activity, "it is essential in each case that there be some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws" (357 U.S., at p. 253, 78 S.Ct. at p. 1240; emphasis supplied).

The Supreme Court's recognition of the scope of a State's power exercisable within the newly defined limits of due process was a recognition that in personam jurisdiction could be had over a nonresident defendant on but a single act, but only if such act was of a particular quality or nature. In 1962, aware of this new due process standard, the New York Legislature enacted CPLR 302 (subd. (a)) of which in pertinent part provides that personal jurisdiction may be asserted over a nondomiciliary "who in person or through an agent * * * 1. transacts any business within the state" so long as the cause of action arises out of such transaction. The first major New York decision in the area and the one most often looked to for guidance as to the breadth of this portion of the statute is Longines-Wittnauer Watch Co. v. Barnes & Reinecke, 15 N.Y.2d 443, 261 N.Y.S.2d 8, 209 N.E.2d 68. In Longines, our court, after reviewing defendant's numerous New York activities, declined to determine the sufficiency of any one, instead holding that in combination they more than met the statutory, as well as the constitutional, standard. Such declination was not meant to indicate that a single transaction in New York out of which a cause of action arose would not be sufficient to satisfy the statutory transaction of business requirement. To the contrary, the court asserted that even appellant Barnes & Reinecke did not dispute that a single transaction might suffice. Barnes & Reinecke's argument was, rather, that neither preliminary nor subsequent New York activities could be regarded as amounting to the transaction of business if the underlying contract was not made in New York. This argument was, of course, rejected and the court counted and weighed the lesser activities to determine their sufficiency. For its holding, as already noted, the court relied upon the quantity and composite quality of the various related activities, choosing not to rely upon the quality of any particular one.

In Parke-Bernet Galleries v. Franklyn, 26 N.Y.2d 13, 308 N.Y.S.2d 337, 256 N.E.2d 506, the court again indicated that proof of a single transaction in New York would satisfy the statutory requirement, citing Longines, as well as several noted commentators (McLaughlin, Supplementary Practice Commentary to CPLR 302, McKinney's Cons.La of N.Y., Book 7B (1969 Cum.Supp.), pp. 129-130; 1 Weinstein-Korn-Miller, N.Y.Civ.Prac., par. 302.06) and quoted Dean McLaughlin's characterization of CPLR 302 as " 'a single-act statute requiring but one transaction albeit a purposeful transaction to confer jurisdiction in New York' " (26 N.Y.2d, at p. 17, 308 N.Y.S.2d, at p. 340, 256 N.E.2d, at p. 508). Although not physically present, defendant Dr. Franklyn had actively participated in a New...