On December 27, 2021, Justice Borrok of the New York County Commercial Division issued a decision in Haussmann v. Baumann, 2021 NY Slip Op. 51232(U), holding that engaging New York counsel and investment banks in a deal was an insufficient basis for asserting personal jurisdiction for a claim relating to the deal, explaining:
CPLR 302(a)(1) provides for jurisdiction over any non-domiciliary who, either in person or through an agent, transacts business within the state or contracts to supply goods or services within the state. The parties do not dispute that the individual defendants did not come to New York to transact business with respect to the Moonshot Transaction, and the Plaintiffs have not sufficiently alleged that the Bayer Defendants transacted business in New York through an agent related to the harms alleged as to the Moonshot Transaction.
The seminal case discussing long arm jurisdiction established through an agent is Kreutter v McFadden Oil Corp., 71 NY2d 460 (1988). In Kreutter, Albert Kreutter, a resident of New York, invested $70,000 in Brian McFadden and Company, Inc. (McFadden Company), a Texas corporation headquartered in New York City. After various transfers involving McFadden Oil Corporation (McFadden Oil) and Harmony Drilling Company, Inc. (Harmony), both Texas corporations, and Eugene Downman, a Texas resident who owned Harmony and exercised management control over McFadden Oil, McFadden Company paid the balance of the funds to Harmony to buy certain oil rights to be leased back to Harmony. Mr. Kreutter, however, received nothing for his money, so he sued in New York state court.
Mr. Downman argued the court lacked jurisdiction over him personally because he did not transact business in New York nor as the corporate agent of McFadden Oil or Harmony. He further argued that because Mr. Kreutter’s claims did not arise out of the McFadden Oil’s business, but out of the leaseback investment with Harmony and Harmony did not transact business within New York, jurisdiction was not proper in New York.
The Court disagreed, holding that NY jurisdiction was proper. The McFadden Company, in which Mr. Kreutter invested, had its headquarters in New York and engaged in purposeful activities in New York, including in relation to Mr. Kreutter’s transaction, which was for the benefit of, and with the knowledge and consent of, the Texas defendants, which defendants exercised control over the New York-headquartered McFadden Company. The Court reasoned that jurisdiction over McFadden Oil was proper because the sale-leaseback of the oil rig was presented to Mr. Kreutter as a transaction with McFadden Oil and that jurisdiction over Harmony was proper because Harmony transacted business in the state. The Court further explained that Harmony used the McFadden Company to secure Mr. Kreutter’s investment, paid the McFadden Company for its service, and received the balance of Mr. Kreutter’s invested funds directly from the McFadden Company. Lastly, the Court rejected Harmony and Mr. Downman’s argument that the conduct of McFadden Company could not be attributed to them because there was no agency relationship between them because the sole reason that Mr. Kreutter did not know about the relationship with the McFadden Company is because Harmony and Downman used McFadden Oil to conceal their involvement. Thus, the Court of Appeals found an agency relationship and held that jurisdiction was proper over all defendants.
This is not Kreutter. That Bayer engaged New York-based attorneys and arranged funding through New York institutions simply does not constitute purposeful availment as it relates to the cause of action, which relates to due diligence activities as to a Missouri-based company and the decisions made in Germany to proceed with the acquisition forming the basis of this lawsuit. It is simply too tenuous of a connection to New York. Investors in Bayer—a German company, based in Germany, and listed on German stock exchanges—are from all over the world, and the decision to keep the investment in Bayer and not sell based on the understanding that Bayer would not make changes in its corporate direction was not tied to any particular New York-related contact or activity. Thus, dismissal as to the Bayer Defendants based on lack of personal jurisdiction is also appropriate.