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Two recent decisions — one by the Appellate Division, 1st Department, the other by the 2nd U.S. Circuit Court of Appeals — illustrate the ever-expanding reach of the New York long-arm statute (Civil Practice Law and Rules, CPLR 302) over malpractice-related claims against out-of-state lawyers. Significantly, in neither case did the defendants physically set foot in New York in connection with the legal services that comprised the subject matter of the claims against them. Nevertheless, the attorneys’ purposeful, claim-related contacts with New York were sufficient in both cases to satisfy CPLR 302 and the requirements of due process. Unlike the approach taken in some states, the New York long-arm statute has not been interpreted as authorizing the exercise of personal jurisdiction in every case that due process would allow. [FOOTNOTE 1] Rather, the exercise of long-arm jurisdiction requires a showing that the plaintiff’s claim and the defendant’s New York-related activity fall within at least one of the categories specified in CPLR 302(a). The due process issue must be considered only if one of the provisions of CPLR 302(a) applies. [FOOTNOTE 2] If the due process level of analysis is reached, the inquiry is twofold: Does the defendant have sufficient “minimum contacts” with the state, and will “maintenance of the suit … offend traditional notions of fair play and substantial justice”? [FOOTNOTE 3] ‘LIBERATORE v. CALVINO’ In Liberatore v. Calvino, [FOOTNOTE 4] the conduct of a Rhode Island attorney brought him within two categories of long-arm jurisdiction specified in CPLR 302(a)(1). Subdivision (a)(1) applies when the plaintiff’s cause of action arises out of either a transaction of business in New York or a contract made anywhere to supply goods or services in New York. The plaintiff, also a Rhode Islander, was injured in a bus accident while visiting New York City. Upon returning to Rhode Island, she retained the defendant, who was licensed to practice law only in Rhode Island and Massachusetts, to pursue a personal injury claim on her behalf. During the next three years, the defendant “secured New York no-fault benefits to cover her ongoing medical bills, obtained plaintiff’s medical records from Bellevue Hospital in New York City … , investigated her accident by contacting the New York Police Department and the bus company, and attempted to negotiate a settlement of her claims with the bus company, on several occasions threatening to commence a legal action in New York.” [FOOTNOTE 5] The defendant engaged in all of this activity by telephone and mail from his Rhode Island office. When the defendant determined that suit against the bus company was necessary, he arranged for a New York attorney to prosecute the plaintiff’s case but agreed to continue his long-distance involvement in settlement negotiations. Due to expiration of the statute of limitations, the suit collapsed and the plaintiff accepted a settlement for a relatively meager amount. She then commenced a malpractice action in New York. TELEPHONIC, WRITTEN MESSAGES Reversing the lower court’s dismissal, the appellate division ruled that the “totality of the circumstances” justified the exercise of long-arm jurisdiction under CPLR 302(a)(1). A transaction of business occurs in New York, the court said, when the defendant “purposefully avails [himself] of the privilege of conducting activities within [New York], thus invoking the benefits and protections of its laws.” [FOOTNOTE 6] Here, the defendant “purposefully pursu[ed] redress for plaintiff over a three-year period,” engaging in “numerous written and telephonic communications with New York entities on plaintiff’s behalf in an effort to broker a settlement and earn legal fees.” [FOOTNOTE 7] He took advantage of New York statutes that benefited his client and laid the groundwork for litigation in New York. This was enough to constitute a transaction of business in New York, and plaintiff’s claim of malpractice arose from the transaction. The same conduct was also held to fall within the second prong of CPLR 302(a)(1), i.e., a contract to “supply services in the state.” The appellate division observed that isolated telephone calls and mailings to New York generally do not rise to the level of transacting business or supplying services in New York within the meaning of CPLR 302(a)(1). The statute will be satisfied, however, if the defendant, by use of the telephone and mail, in effect “projects himself” into the state in such manner as to “actively participate in business transactions in New York.” [FOOTNOTE 8] Although the appellate division does not cite Parke-Bernet Galleries, Inc. v. Franklyn, [FOOTNOTE 9] this seminal case on CPLR 302(a)(1), decided by the Court of Appeals in 1970, recognized that “in this day of instant long-range communications, one can engage in extensive purposeful activity here without ever actually setting foot in the State.” [FOOTNOTE 10] It is submitted that the quantity and quality of the attorney’s New York-directed communications in Liberatore, which had a significant impact on the conduct of other persons and entities in New York, were the type of jurisdictionally sufficient contacts contemplated by the Parke-Bernet court. ‘BANK BRUSSELS LAMBERT’ A lesser level of communication activity by the out-of-state attorneys in Bank Brussels Lambert v. Fiddler Gonzalez & Rodriguez [FOOTNOTE 11] produced a different outcome under CPLR 302(a)(1). The litigation in that case had its origins in a $245 million loan by a group of five banks, including Bank Brussels Lambert (BBL), to two oil companies collectively known as “Arochem.” The principal collateral for the loan was an Arochem oil refinery in Puerto Rico. Chase Manhattan Bank (Chase New York), leader of the five-bank group, recommended the Puerto Rico law firm of Fiddler Gonzalez & Rodriguez (Fiddler) for the limited purpose of providing an opinion letter concerning the validity and enforceability of the security interest. Fiddler undertook the job and agreed to address the opinion to Chase New York as agent for the banks. Shortly after the New York closing of the loan transaction between the banks and Arochem, Chase New York received the Fiddler opinion and BBL disbursed its $75 million share of the loan from its New York branch. Two years later, Arochem defaulted on the loan, and it came to light that Arochem had misrepresented the value of its assets. BBL subsequently learned that Fiddler, on the same day as the New York closing of the Arochem loan, received information from one of its other clients that Arochem had fraudulently manipulated its financial reports. BBL thereupon sued Fiddler in federal district court in New York, alleging breach of fiduciary duty. BBL’s theory was that Fiddler, as counsel to BBL with respect to the loan collateral, should have disclosed the adverse information about Arochem or, if precluded from doing so by a duty of confidentiality to its other client, should have withdrawn from representation of the lending group. Fiddler’s withdrawal, BBL alleged, would have prompted BBL to pull out of the loan transaction. The 2nd Circuit held that jurisdiction over Fiddler could not be premised on either prong of CPLR 302(a)(1). All of Fiddler’s legal services relevant to its opinion letter were performed in Puerto Rico. Fiddler did not represent the banks at the New York closing of the loan nor did it attend either in person or by conference call. Although Fiddler communicated with BBL in New York by phone, fax and mail, those communications related only to the firm’s retainer, an exchange of some editorial comments on the draft of its final opinion and some interactions concerning the closing of the security documents in Puerto Rico. The court concluded that Fiddler, unlike the defendant in Parke-Bernet, did not “project itself into New York to participate in any activities localized in the state.” [FOOTNOTE 12] TORTIOUS INJURY IN NEW YORK Jurisdiction over Fiddler was ultimately sustained, however, under subdivision (a)(3) of CPLR 302. That branch of the long-arm statute encompasses a claim arising from the defendant’s commission of a tortious act outside the state causing injury in New York if the defendant either: (i) regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in the state, or (ii) expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce. The 2nd Circuit concluded that Fiddler’s alleged tortious misconduct was an act of omission, i.e., the firm failed to either inform BBL of the adverse information about Arochem or to withdraw from representation of BBL. This act of omission occurred outside New York. [FOOTNOTE 13] The more difficult question was whether injury to BBL occurred in New York within the meaning of CPLR 302(a)(3). The prevailing test used by lower state courts is whether New York was “the location of the original event which caused the injury.” [FOOTNOTE 14] The 2nd Circuit, however, perceived difficulty with this articulation of the rule because it can lead to a merging of the place of injury with the location of the tortious act. In the 2nd Circuit’s view, a more appropriate statement of the rule, based on New York Court of Appeals case law involving economic harm, is that injury occurs where the plaintiff experiences the “first effect” of the tortious act. [FOOTNOTE 15] In BBL’s case, the first injurious effect of Fiddler’s omission was BBL’s disbursement of funds to Arochem, which occurred in New York. PERSISTENT COURSE OF CONDUCT Having determined that BBL’s claim was within the conceptual framework of CPLR 302(a)(3), the 2nd Circuit remanded the case to the district court for a determination of whether subset (i) or (ii) of subdivision (a)(3) was satisfied. On a subsequent appeal, the 2nd Circuit concluded that Fiddler was indeed subject to New York’s long-arm jurisdiction. [FOOTNOTE 16] In addition to its commission of a tortious act causing injury in New York, Fiddler had engaged in a “persistent course of conduct” in New York by maintaining a Manhattan apartment over an eight-year period for the use of partners who visited New York for mixed vacation and business purposes. Thus, one of the additional New York contacts specified in subset (i) was satisfied. The court rejected Fiddler’s argument that the type of “persistent conduct” contemplated by the statute must be solely business-related. [FOOTNOTE 17] The 2nd Circuit’s ruling on this point is significant because state court authority is sparse with respect to the meaning of “other persistent course of conduct.” DUE PROCESS Turning to the due process inquiry, the 2nd Circuit found that Fiddler’s overall contacts with New York were sufficient to satisfy the “minimum contacts” requirement, i.e., Fiddler “purposefully availed itself” of the privilege of conducting New York activity related to plaintiff’s claim. Whereas the district court focused solely on Fiddler’s New York contacts relevant to the Arochem loan, the 2nd Circuit held that consideration should also be given to Fiddler’s other purposeful New York activities, many of which sought to generate New York business for the firm. Fiddler’s rental of the Manhattan apartment was for the purpose, at least in part, of servicing New York clients. In addition, Fiddler faxed newsletters to various persons in New York describing developments in Puerto Rican law, and it performed work in Puerto Rico for numerous New York clients and New York law firms. [W]hile these contacts may not have directly given rise to the plaintiff’s cause of action, they certainly “relate to” it. Law firms obtain new business largely through reputation and word of mouth, and thus the activities of a firm which maintains its presence and reputation in a particular legal market certainly can be said to be a proximate cause of the engagements it obtains in that market. [FOOTNOTE 18] Although Fiddler did not solicit BBL’s business — Chase New York recommended Fiddler based on the firm’s representation of a Chase Puerto Rico branch — the representation of BBL “developed in a market [Fiddler] had deliberately cultivated and which, after all, the firm voluntarily undertook.” [FOOTNOTE 19] Finally, the court found that jurisdiction over Fiddler did not offend “traditional notions of fair play and substantial justice.” Here, the court evaluated the reasonableness of adjudicating BBL’s claim in New York. In this case, Fiddler would not be unduly burdened by litigation in New York; New York, situs of the loan transaction and BBL’s disbursement of funds, had an interest in local adjudication of the claim; and BBL had an interest in a New York forum for the convenience of its witnesses. CONCLUSION BBL’s attorney, in one of his briefs, made the cogent observation that “lawyers and other professionals today transact business with their pens, their fax machines and their conference calls — not with their feet.” [FOOTNOTE 20] When out-of-state lawyers perform legal services by such means and thereby “project themselves” into New York, as in Liberatore, or cause economic injury to a client in New York, as in Bank Brussels Lambert, they may fairly be held subject to the jurisdiction of the New York courts for claims arising from their activity. Vincent C. Alexander is a professor of law at St. John’s University School of Law. If you are interested in submitting an article to law.com, please click here for our submission guidelines.


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