NYS Governor Vetoed Bill Which Would Have Expanded Jurisdiction Over Foreign Corporations

On December 22, 2023, Governor Hochul vetoed Senate Bill S7476, which sought to amend several provisions of New York law, including the Civil Practice Laws and Rules, the Business Corporation Law, the General Associations Law, the Limited Liability Company Law, the Not-For-Profit Corporation Law, and the Partnership Law. In short, the proposed bill provided that a foreign corporation’s application for authority to do business in New York State constitutes consent to jurisdiction of New York State courts.

State Senator Michael Gianaris introduced the bill shortly before the June 27, 2023, United States Supreme Court decision in Mallory v. Norfolk Southern Railway Co., 143 S. Ct. 2028 (2023), where a divided Court held that a state can require foreign corporations to consent to general jurisdiction as a condition of doing business within that state, regardless of any direct connection, without violating the Due Process Clause. Mallory effectively held that anyone could sue a business registered in a particular state even if the case has nothing to do with that state and none of the parties live in that state. This would seem problematic, as was raised in Justice Barrett’s dissent and even mentioned in Justice Alito’s concurring opinion, as a potential violation of the Commerce Clause.

Nearly six months after Mallory, Governor Hochul vetoed Senate Bill S7476—not due to potential constitutional concerns or Due Process—but citing concerns that the bill would not only burden the courts; it would also deter out-of-state corporations from doing business in New York State since they would be subject to in-state lawsuits regardless of any connection to New York.

Prior to Governor Hochul’s veto, the issue of “consent by registration” had most recently been addressed by the New York State Court of Appeals in Aybar v. Aybar, 37 N.Y.3d 274 (2021). The court held that foreign corporations do not consent to general jurisdiction simply by registering to do business in New York and designating an agent for service of process. That is the current law regarding general jurisdiction in New York State. It remains to be seen whether New York’s lawmakers will attempt to reintroduce similar legislation following the Mallory decision.