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Post&nbsp;Mallory v. Norfolk Southern Railway Co., are foreign corporate defendants “found within the district” for purposes of Rule B by registering to do business in New York and appointing an agent for service of process?

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For years, federal courts in the Second Circuit consistently held that registration with the New York Department of State to conduct business in New York, and designation of an agent within the district upon whom process may be served, constituted being “found within the district” for purposes of Rule B of the Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions of the Federal Rules of Civil Procedure (the “Admiralty Rules”). This precedent was clearly established in&nbsp;STX Panocean (UK) Co. v. Glory Wealth Shipping Pte Ltd., 560 F.3d 127, 133 (2d Cir. 2009), where the Second Circuit unequivocally held that “a company registered with the Department of State is ‘found’ [within the district] for purposes of Rule B….”

However, subsequent developments in the law of personal jurisdiction combined with the absence of clear legislative statements in the New York registration statutes[<a href="/news-and-events/can-foreign-corporate-defendants-be-found-registering-and-appointing-agent-post/" id="26548">1</a>] have cast doubt on the continuing viability of STX Panocean’s holding, and the extent to which a court can exercise general jurisdiction over foreign corporate defendants, especially under New York law.

With the Supreme Court of the United States’ recent pronouncement on this issue in&nbsp;Mallory v. Norfolk Southern Railway Co., 600 U.S. ____, 143 S. Ct. 2028 (2023), one could argue that&nbsp;STX Panocean&nbsp;has been reinvigorated. However, while&nbsp;Mallory&nbsp;foreclosed any argument that foreign corporate defendants are not subject to personal jurisdiction when they expressly consent to in-state suits in order to do business in the forum, the Court was less clear about whether the same would be true in states like New York where registration to do business does not require a corporate defendant to appear in the state’s courts to defend causes of action unrelated to its activities within the state. In fact, New York statutes are silent on this issue.

Rule B of the Admiralty Rules allows a maritime claimant to attach a defendant’s tangible or intangible personal property as security for a maritime claim.&nbsp;Specifically, Rule B (1)(a) states, in relevant part, that “[i]f a defendant is not found within the district, when a verified complaint praying for attachment and the affidavit required by Rule B (1)(b) are filed, a verified complaint may contain a prayer for process to attach the defendant’s tangible or intangible personal property—up to the amount sued for—in the hands of garnishees named in the process.”

Historically, maritime attachments were created due to the difficulty in obtaining jurisdiction over parties to a maritime dispute compared to parties to a traditional civil action. In maritime disputes, parties are peripatetic and their assets transitory. Therefore, the policy underlying maritime attachment was to permit attachments wherever the defendant’s assets could be found, “thereby obviating the need for a plaintiff to ‘scour the globe’ to find a proper forum for suit, or property of the defendant sufficient to satisfy a judgment.”

Although the Admiralty Rules do not define what it means to be “found within the district,” the Second Circuit held in&nbsp;Seawind Compania, S.A. v. Crescent Line, Inc., 320 F.2d 580, 582 (2d Cir. 1963) that this requirement presents “a two-pronged inquiry: First, whether (the respondent) can be found within the district in terms of jurisdiction, and second, if so, whether it can be found for service of process.” In&nbsp;Winter Storm Shipping, Ltd. v. TPI, 310 F.3d 263, 268 (2d Cir. 2002), the Second Circuit clarified that “a defendant will be considered ‘found within the district’ in which the plaintiff brings its action if the defendant has sufficient contacts with the district to meet minimum due process standards and can be served with process in the district.”

Federal law defines the requirements necessary for satisfaction of Rule B, while federal courts look to the relevant state law to determine if those requirements are met.

Until recently, it was well settled under New York law that registration to do business in New York subjected foreign companies to personal general jurisdiction in the State. Relying on New York law, federal courts within the Second Circuit consistently held that registration with the New York Department of State to conduct business in New York, and designation of an agent within the district upon whom process may be served, constituted being “found within the district” for purposes of Rule B. Aside from the fact that under New York law registration to do business in New York subjected foreign companies to personal general jurisdiction in the State, federal courts also considered “amenability to suit, rather than a party’s economic and physical activities in the district at issue, [to be] the touchstone of the first prong of the&nbsp;Seawind&nbsp;Test.” After all, “[i]n the context of peripatetic defendants with transient assets, maritime attachment is aimed at obviating a plaintiff’s need to determine where the defendant is amenable to suit. However, no ‘scour[ing of] the globe’—and, therefore, no attachment—is necessary where the defendant has already voluntarily subjected itself to the district’s jurisdiction by reason of its registration with the State.”

Post-Daimler AG v. Bauman&nbsp;Status

In 2014, the Supreme Court in&nbsp;Daimler AG v. Bauman, 571 U.S. 117 (2014), addressed the question of whether, consistent with due process, a foreign corporation may be subject to a court’s general jurisdiction based on the contacts of its in-state subsidiary. The Court held that a corporation may be subject to general jurisdiction in a state only where its contacts are so “continuous and systematic,” judged against the corporation’s national and global activities, that it is “essentially at home” in that state. The Court further stated that aside from “an exceptional case,” a corporation is at home only in a state where it is incorporated or it has its principal place of business.

Since the Supreme Court’s decision in&nbsp;Daimler, New York state and federal courts have concluded registration under New York Business Law § 1304 does not alone subject foreign companies to personal jurisdiction in New York (non-Rule B cases). See, e.g., Chufen Chen v. Dunkin’ Brands, Inc. 954 F.3d 492, 499 (2d Cir. 2020) (“Accordingly, in light of&nbsp;Daimler, our own precedent, and the unanimous conclusion of the three New York intermediate courts to have considered the issue, we now hold that a foreign corporation does not consent to general personal jurisdiction in New York by merely registering to do business in that state and designating an in-state agent for service of process under BCL § 1301(a)”);&nbsp;Brown v. Lockheed Maritime Corp., 814 F.3d 619, 640 (2d Cir. 2016) (“If mere registration and the accompanying appointment of an in-state agent … sufficed to confer general jurisdiction …&nbsp;Daimler’s ruling would be robbed of any meaning … .”);&nbsp;Aybar v. Aybar, 93 N.Y.S.3d 159, 165 (NY App. 2d Dep’t 2019) (“A corporate defendant’s registration to do business in New York … does not constitute consent by the corporation to submit to the general jurisdiction of New York for causes of action that are unrelated to the corporation’s affiliations with New York) (citing&nbsp;Daimler);&nbsp;Best v. Gurhie Med. Grp., P.C., 107 N.Y.S.3d 258, 261-62 (NY App. 4th Dep’t 2019) (same);&nbsp;Fekah v. Baker Hughes Inc., 110 N.Y.S. 3d 1, 2 (NY App. 1st Dep’t 2019) (same).

In the Rule B context, in two unpublished decisions, federal courts in the Southern District of New York addressed the issue of whether registration is “found within the district” for purposes of Rule B in the wake of&nbsp;Daimler&nbsp;and&nbsp;Chufen Chen. In&nbsp;Beauty Maritime v. Sigma Tankers, No. 20-cv-4376 (VSB) (S.D.N.Y. June 12, 2020), Judge Vernon S. Broderick considered whether&nbsp;Chufen Chen&nbsp;abrogated&nbsp;STX Panocean (UK) Co.&nbsp;and found it did not, noting:

STX did not establish that the Due Process Clause’s general personal jurisdiction test was coterminous with Rule B’s “found within the district” requirement, and Chufen Chen says nothing about admiralty law or Rule B. Indeed, STX counseled that a party’s “amenability to suit, rather than [the] party’s economic and physical activities in the district at issue, is the touchstone of the first prong of the Seawind Test.”&nbsp;Id.&nbsp;at 131–32.

Several months later, in&nbsp;Classic Maritime v. XCoal Energy and Resources, No. 21-cv-0766 (ACL) (S.D.N.Y. February 26, 2021), Judge Andrew L. Carter, Jr., in considering the same arguments raised in the&nbsp;Beauty Maritime&nbsp;case, denied the defendant’s motion to vacate the maritime attachment, finding registration was no longer sufficient to meet the “found within the district” prong under&nbsp;Daimler&nbsp;and&nbsp;Chufen Chen.

Mallory v. Norfolk Southern Railway Co., 143 S. Ct. 2028 (2023)

On June 27, 2023, the Supreme Court issued its decision in the&nbsp;Mallory&nbsp;case. In&nbsp;Mallory, also a non-Rule B case, an employee and Virginia resident commenced an action in Pennsylvania state court against his former employer, Norfolk Southern Railway Co., a Virginia railroad corporation (incorporated and headquartered in Virginia), under the Federal Employers’ Liability Act (“FELA”) to recover for injuries allegedly caused by exposure to carcinogens in Virginia and Ohio.&nbsp;To maintain jurisdiction over the defendant in Pennsylvania, plaintiff&nbsp;pointed to defendant’s&nbsp;substantial presence in Pennsylvania and the fact that it had registered to do business in the State. In fact, Pennsylvania requires out-of-state companies that register to do business in the Commonwealth to agree to appear in its courts on “any cause of action” against them.&nbsp;See&nbsp;42 Pa. Cons. Stat. § 5301(a)(2)(i),&nbsp;(b). Plaintiff argued that, by submitting to Pennsylvania’s statutory regime, the defendant had consented to be sued in Pennsylvania on any claim, including the one at hand, which had no connection to the State.

In holding that the defendant was subject to jurisdiction in the state of Pennsylvania, the Court relied on prior precedent established by&nbsp;Pennsylvania Fire Ins. Co. of Philadelphia v. Gold Issue Mining &amp; Milling Co., 243 U.S. 93 (1917). In&nbsp;Pennsylvania Fire, the Court upheld jurisdiction over an insurance company that had registered to do business in the state of Missouri, even though the lawsuit had nothing to do with Missouri. In the Court’s own words, “Pennsylvania Fire could be sued in Missouri by an out-of-state plaintiff on an out-of-state contract because it had agreed to accept service of process in Missouri on any suit as a condition of doing business there.” (emphasis added) (Missouri law required any out-of-state insurance company “desiring to transact any business” in the State to file paperwork agreeing to (1) appoint a state official to serve as the company’s agent for service of process, and (2) accept service on that official as valid&nbsp;in any suit.)

Much like&nbsp;Pennsylvania Fire, the&nbsp;Mallory&nbsp;Court found that Pennsylvania law also provided for similar requirements as Missouri, including registration and appointment of an agent for service of process. Most importantly, the Court found that Pennsylvania law is explicit that “qualification as a foreign corporation” shall permit state courts to “exercise general personal jurisdiction” over a registered foreign corporation, just as they can over domestic corporations.&nbsp;42 Pa. Cons. Stat. § 5301(a)(2)(i). Therefore, the Court had no difficulty in finding that Norfolk Southern Railway Co. had consented to jurisdiction in the state of Pennsylvania over any cause of action, even if unrelated to its activity in the State.

The current statutes in New York addressing registration and appointment of an agent for service of process are silent as to whether a corporation registering to do business in the State is also subjecting itself to jurisdiction for any and/or all causes of actions, related or unrelated to the business being conducted. The absence of specificity was made clear by the New York State Legislature when, in 2018, they attempted to amend New York’s licensing and registration statutes to inform a foreign corporation that if it applied for authority to do business in New York, it was then consenting to general jurisdiction in the State for all purposes.[<a href="/news-and-events/can-foreign-corporate-defendants-be-found-registering-and-appointing-agent-post/" id="26548">2</a>] N.Y. State Bill S5889 appears to have died in the State Senate but, if it ever becomes law, the issue of whether or not registration and appointment of an agent for service of process amount to being “found within the district” for Rule B purposes will certainly become moot.

Looking at the nature of Rule B attachments and their underlying purpose, federal courts in New York may conclude the Supreme Court’s decision in&nbsp;Mallory&nbsp;is consistent with&nbsp;STX Panocean&nbsp;and that registering to do business in New York and appointing an agent for service of process constitutes being “found within the district” because Rule B attachments involve different due process considerations, which focus primarily on the plaintiff’s “amenability to suit, rather than a party’s economic and physical activities in the district.”

On the other hand, because&nbsp;Mallory&nbsp;is not an admiralty case, federal courts in New York may feel compelled to follow&nbsp;Chufen Chen&nbsp;and subsequent district court decisions finding registration and appointment of an agent for service of process to be insufficient to meet due process standards as required by&nbsp;Daimler&nbsp;and its predecessor&nbsp;Goodyear. Thus, unless a foreign corporate defendant is incorporated in New York, has its principal place of business in New York, or has contacts that are so “continuous and systematic,” that it is “essentially at home” in New York, the foreign corporate defendant may not be “found within the district” for purposes of Rule B and its assets may be subject to attachment. In view of&nbsp;Mallory, this appears to be a much more difficult argument to overcome.

Due to&nbsp;Mallory’s precedent, it remains to be seen whether the federal courts in New York will find registration and appointing an agent for service, as specified in&nbsp;STX Panocean, sufficient to defend against Rule B or whether it is no longer enough under&nbsp;Chufen Chen. Stay tuned.

This article is one in a series of articles written for Blank Rome’s <a href="/news-and-events/mainbrace-september-2023/" id="26545">MAINBRACE: September 2023</a> edition.

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[<a href="/news-and-events/can-foreign-corporate-defendants-be-found-by-registering-and-appointing-an-agent-post-mallory/" id="26548">1</a>] See NY Bus Corp. §§ 304, 1301 &amp; 1304.

<a href="https://www.blankrome.com/publications/can-foreign-corporate-defendants-be-found-registering-and-appointing-agent-post#_ftnref2">[</a><a href="/news-and-events/can-foreign-corporate-defendants-be-found-by-registering-and-appointing-an-agent-post-mallory/" id="26548">2</a><a href="https://www.blankrome.com/publications/can-foreign-corporate-defendants-be-found-registering-and-appointing-agent-post#_ftnref2">]</a> N.Y. State Bill S5889 (2017–2018), <a href="https://www.nysenate.gov/legislation/bills/2017/S5889">nysenate.gov/legislation/bills/2017/s5889</a> (last visited August 20, 2023).

Can Foreign Corporate Defendants Be “Found” by Registering and Appointing an Agent Post Mallory?

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Can Foreign Corporate Defendants Be “Found” by Registering and Appointing an Agent Post Mallory?

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