February 12, 2015

Second Circuit Ends "Doing Business" Test in New York for General Jurisdiction

The Court Adopts the "Essentially at Home" Test Limiting New York Courts’ General Jurisdiction Over Foreign Corporations
Holland & Knight Alert
Steven Raffaele


  • Following Daimler AG v. Bauman, the Second Circuit has cemented the "essentially at home test" into New York's jurisdictional jurisprudence, limiting the circumstances in which New York courts may exercise general jurisdiction over a foreign corporation.
  • In Gucci America, Inc. v. Weixing Li, the court departed from the long-standing "doing business" test and held that a foreign corporation cannot be subject to general jurisdiction in New York based on maintaining offices and having employees in the state, when the corporation is not "essentially at home" in New York.
  • The Southern District Court of New York recently found an "exceptional case" of general jurisdiction where the foreign defendants were neither individuals, partnerships, nor corporations, and were not "essentially at home" in a particular U.S. jurisdiction. An expedited appeal is pending before the Second Circuit.

In September 2014, the Second Circuit abrogated the nearly century-old "doing business" test used by New York courts in deciding whether general jurisdiction exists over foreign corporations. In Gucci America, Inc. v. Weixing Li,1 the Second Circuit applied the "essentially at home" test set forth in the U.S. Supreme Court's Goodyear2 and Daimler3 decisions. The court determined there was no general jurisdiction over a non-party bank that maintained offices and employees in New York because it was not "essentially at home" in New York, i.e., the bank was neither incorporated in nor had its principal place of business in the state.

Pre-Daimler: The "Doing Business" Test

A personal jurisdictional analysis involving a foreign defendant requires a two-step inquiry:

  • first, whether the foreign defendant is subject to jurisdiction under the law of the forum state
  • second, whether the exercise of personal jurisdiction comports with constitutional due process

Since International Shoe Co. v. Washington, the touchstone principle to satisfy constitutional due process has been that foreign defendants have "certain minimum contacts with [the state] such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice."4 In the context of general or all-purpose jurisdiction, courts take a narrow view of what constitutes minimum contacts.5

Federal courts located in New York historically have permitted the exercise of general jurisdiction "over a foreign corporation that [was] engaged in such a continuous and systematic course of 'doing business' in New York as to warrant a finding of 'presence' in the state, even if the cause of action [was] unrelated to the defendant's New York activities."6 Under the "doing business" test, a court could exercise general jurisdiction over a foreign corporation that maintained an office and had employees in New York.7 Prior to Daimler, well-established Second Circuit precedent held that satisfying New York's "doing business" test also comported with constitutional due process.

Post-Daimler: The "Essentially at Home" Test

In line with Goodyear and Daimler, New York's general jurisdictional jurisprudence has changed dramatically to the benefit of foreign corporations. Now, general jurisdiction over a corporation exists only when its contacts with the state are so continuous and systematic as to render the corporation essentially at home in the forum state, which, absent "an exceptional case," means its state of incorporation or where it maintains its principal place of business.8 As explained in Daimler, the "essentially at home" test provides a level of ascertainability and predictability previously unavailable to foreign defendants.

No General Jurisdiction Over Foreign Bank

In Gucci America, the Second Circuit held that general jurisdiction did not exist over a non-party bank that was neither incorporated in nor maintained its principal place of business in New York. In this case, the plaintiff-manufacturers of high-end merchandise brought suit against the defendant-sellers of counterfeit products for violating the plaintiffs' trademarks. The plaintiffs obtained an injunction enjoining the defendants from selling the counterfeit goods and freezing their assets, which implicated the defendants' accounts at the non-party Bank of China. The plaintiffs served Bank of China's New York branch with the asset-freeze injunction and a subpoena to produce documents concerning the defendants' unlawful conduct. In response, Bank of China produced documents that were in the possession of its New York branches, but refused to produce any documents from any branches or offices in China.

The plaintiffs moved to compel compliance. Bank of China opposed the motion and moved to modify the court's orders as they related to assets located and held in China. The District Court granted the plaintiffs' motion to compel and denied Bank of China's motion to modify. Bank of China moved for reconsideration citing a letter from Chinese regulatory agencies stating that Chinese law prohibits commercial banks from freezing assets or turning over account records pursuant to foreign court orders. The District Court denied the motion for reconsideration and sanctioned Bank of China for failing to comply with the court’s order. Bank of China appealed, requesting the Second Circuit determine, inter alia, whether the District Court had jurisdiction over Bank of China to issue and compel compliance with the injunction and subpoena.

On appeal, the Second Circuit reversed and held that, in light of Daimler (decided after oral argument), Bank of China was not subject to the general jurisdiction of the District Court, and the district court could not compel Bank of China to comply with the subpoena. The court also rejected Bank of China's argument that the District Court needed personal jurisdiction over a non-party in order to issue the asset freeze injunction. The court noted that Daimler addressed for the first time "the question of whether, consistent with due process, 'a foreign corporation may be subjected to a court's general jurisdiction based on the contacts of an in-state subsidiary.'" The Second Circuit further highlighted that Daimler "expressly cast doubt on previous Supreme Court and New York Court of Appeals cases that permitted general jurisdiction on the basis that a foreign corporation was doing business through a local branch office in the forum."

In applying the "essentially at home" test, the Second Circuit held that Bank of China could not be subject to general jurisdiction in New York based solely on its maintaining subsidiary branch offices in the state. The court specifically noted that Bank of China:

  • is not incorporated anywhere in the United States (including New York)
  • maintains its principal place of business in China
  • conducts only a small portion of its worldwide activity in New York, with only four of 10,000 branches located in the U.S.

The court also concluded that this "clearly" was not the "exceptional case" as contemplated by Daimler.

District Court Finds an "Exceptional Case"

In Sokolow v. Palestine Liberation Organization9 (PLO), the Southern District of New York recently analyzed what it deemed an "exceptional case" of general jurisdiction over foreign defendants pursuant to the U.S. Antiterrorism Act. The court found that, by their own admission, defendants were "not foreign corporations and therefore are not subject to the traditional analysis of determining a defendant's place of incorporation or principal place of business." Although the defendant argued that it had several embassies, missions and delegations around the world that were larger than its delegation in the United States, the court declined to find the PLO "at home" in any one of those countries. Thus, the court deemed it appropriate to aggregate the PLO defendants' "continuous and systematic business and commercial contacts" within the U.S.

The court acknowledged the Supreme Court's warning in Daimler (and repeated in Gucci America) that cautioned against taking "an overly expansive view of general jurisdiction inconsistent with 'the fair play and substantial justice' due process demands," but found that a comity analysis further supported asserting personal jurisdiction because there would be no conflict with any foreign country law or sovereign interest. An expedited appeal is pending before the Second Circuit.

Foreign Defendants Gain Strong Basis to Challenge General Jurisdiction

Following Daimler and Gucci America, foreign defendants will have a strong basis to challenge the court's exercise of general jurisdiction.10 The jurisdictional limitations imposed by these decisions make it extremely difficult for plaintiffs to rely on the presence of subsidiary offices or employees for the purpose of alleging general jurisdiction. Greater emphasis will fall on the specific jurisdiction analysis to determine whether the defendant’s case-related contacts are sufficiently related to the forum.11 Additionally, whether registering to do business in the forum constitutes consent to jurisdiction will take on even greater significance in cases applying Daimler. Although New York state and federal courts generally have held that a foreign corporation’s registration and designation of a local agent for service of process constitutes consent,12 courts in other jurisdictions have taken a contrary position in regard to their respective state corporate registration laws.13 It is likely that such issues will be at the forefront of post-Daimler jurisprudence. 



1768 F.3d 122 (2d Cir. 2014). Prior to Gucci America, the Second Circuit recognized but did not reconcile the tension under New York law between the "doing business" and "essentially at home" tests. See Sonera Holding B.V. v. Cukurova Holding A.S., 750 F.3d 221, 223-24 n.2 (2d Cir. 2014) ("[W]e note some tension between Daimler's 'at home' requirement and New York's 'doing business' test for corporate 'presence[.]'... Daimler's gloss on due process may lead New York courts to revisit Judge Cardozo's well-known and oft-repeated incantation.").

2 Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. __, 131 S. Ct. 2846 (2011). The Goodyear Court applied the "essentially at home" test and concluded there was no general jurisdiction over the defendants because they were neither incorporated in nor maintained their principle place of business in North Carolina. Id. at 2851-52. See Holland & Knight alert, "Goodyear and McIntyre: Two Supreme Court Decisions Refocus Personal Jurisdiction Inquiry for Foreign Manufacturers of Goods Sold in the United States," May/June 2011.  

3 Daimler AG v. Bauman, 571 U.S. __, 134 S. Ct. 746 (2014).

4 See Goodyear, 131S. Ct. at 2852 (quoting Int'l Shoe Co. v. Wash., 326 U.S. 310, 316 (1945)).

5See In re Terrorist Attacks on September 11, 2001, 714 F.3d 659, 674 (2d Cir. 2013) (because "general jurisdiction is not related to the events giving rise to the suit, ... courts impose a more stringent minimum contacts test").

6Jazini v. Nissan Motor Co., 148 F.3d 181, 184 (2d Cir. 1998). New York's general or all-purpose jurisdiction principle is codified in Section 301 of the New York Civil Procedure Law and Rules. See N.Y. C.P.L.R. §301.

7Cf. BWP Media USA Inc. v. Hollywood Fan Sites, LLC, __ F. Supp. 3d __, No. 14-cv-121, 2014 WL 6077247, at *3 (S.D.N.Y. Nov. 14, 2014) (holding that finding of general jurisdiction turns on where the defendant is "essentially at home," not where the defendant has an office).

8See Sonera,750 F.3d at 225; see also Daimler, 134 S. Ct. at 762, n.2 ("A corporation that operates in many places can scarcely be deemed at home in all of them.").

9No. 04-cv-397, 2014 WL 6811395 (S.D.N.Y. Dec. 1, 2014), appeal docketed sub nom., In re Palestine Liberation Organization, No. 14-4449 (2d Cir. Dec. 9, 2014).

10See BWP Media USA Inc., 2014 WL 6077247, at *3; Zucker v. Waldmann, No. 503476/13, 46 Misc. 3d 1214(A), 2015 N.Y. Slip Op. 50055(U) (N.Y. Sup. Ct. [Kings Cnty.] Jan. 23, 2015).

11New York's long-arm or specific jurisdiction principle is codified in Section 302 of the New York Civil Procedure Law and Rules. See N.Y. C.P.L.R. §302.

12See, e.g., Beach v. Citigroup Alternative Investments LLC, No. 12-cv-7717, 2014 WL 904650, at *6 (S.D.N.Y. Mar. 7, 2014) ("a corporation may consent to jurisdiction in New York under CPLR §301 by registering as a foreign corporation and designating a local agent"); see also Zucker, 46 Misc. 3d 1214(A), at *4 ("Without [defendant’s] express written consent to jurisdiction ... by registering to do business, it cannot be involuntarily subjected to this Court's jurisdiction.").

13See WorldCare Ltd. Corp. v. World Ins. Co., 767 F. Supp. 2d 341, 352-53 (D. Conn. 2011) (noting a Circuit split and analyzing the "widely divergent approaches" by lower courts in deciding consent to personal jurisdiction in the forum by registering to do business); see also AstraZeneca AB v. Mylan Pharm., Inc., __ F.3d __, No. 14-696-GMS, 2014 WL 5778016 (D. Del. Nov. 5, 2014), appeal docketed, No. 15-117 (Fed. Cir. Dec. 30, 2014) (finding compliance with foreign corporate registration statutes would expose companies with a national presence to suit all over the U.S., a result at odds with Daimler).


Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.

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