A recent decision from the Manhattan Commercial Division reminds us that even substantial and high-profile transactions tied to the state may not be enough to establish personal jurisdiction over an out-of-state defendant. In Zeng v HH Fairchild Holdings, LLC, the court held that a multimillion-dollar sale of surgical gowns to the City of New York during the height of the COVID-19 pandemic was not enough to maintain a breach of contract lawsuit in New York. In short, without a strong legal nexus to the state, long-arm jurisdiction will not reach as far as some plaintiffs might hope.
In Zeng, an out-of-state plaintiff—who had contracted to assist a New Hampshire limited liability company (the “NH Company”) in securing personal protective equipment (PPE) manufactured in China—brought a breach of contract suit against NH Company in New York. The PPE, consisting of 10 million surgical gowns, was ultimately sold by the NH Company to the City of New York. The NH Company moved to dismiss, arguing that the court lacked personal jurisdiction under New York’s long-arm statute.
Commercial Division Justice Joel M. Cohen granted the NH Company’s motion to dismiss, ruling that it lacked long-arm jurisdiction, despite the significant sale of PPE to the City of New York. The court stated that while New York’s long-arm under CPLR 302 (a)(1) allows for jurisdiction based on a single act or transaction in New York, the NH Company’s activities must be purposeful and there must be a substantial relationship between the transaction and the claim asserted.
“[T]he plaintiff’s cause of action must have an ‘articulable nexus’ or ‘substantial relationship’ with the defendant’s transaction of business here.” . . . “[A]n articulable nexus or substantial relationship exists ‘where at least one element arises from the New York contacts’ rather than ‘every element of the cause of action pleaded[.]’ The nexus is insufficient where the relationship between the claim and transaction is ‘too attenuated’ or ‘merely coincidental’”
In opposition to the NH Company’s motion, the plaintiff argued that New York’s long-arm statute conferred jurisdiction because the NH Company sold the PPE to the City of New York. The court disagreed, stating that “[e]ven if this one transaction is sufficient to show [that the NH Company] transacted business in New York . . . the necessary New York nexus is missing.” The court further emphasized that without any element of a claim for breach of contract—promise, reliance, performance, breach, damages—occurring in New York, a single sale does not establish personal jurisdiction. In Zeng, the claims arose from a contract between non-New York parties, which was allegedly negotiated, performed, and breached outside of New York. The plaintiff’s alleged entitlement to a share of profits from the sale of PPE to the City of New York was not enough to confer long-arm jurisdiction over the NH Company.
A single sale of goods in New York—even one exceeding $10 million—is not enough for New York courts to hear a case between out-of-state parties. There must be a strong connection between the dispute and New York. If you are going to sue an out-of-state defendant in New York, be prepared to demonstrate a substantial nexus to New York.