Let’s say you and your family have operated a winery in Spain for decades. One day, a neighbor, whom you’ve known for years, pops in for coffee. You make great wine, she says, stirring cream into her coffee. How about I sell your wine in the United States? Give me a commission of, oh, say 4 Euros a bottle.
Now, you make a comfortable living selling your wine in Spain, in France, Italy and a few other European Union countries. You’ve never thought of branching out across the ocean and selling elsewhere.
But, you tell the neighbor, fine, if you can sell our wine we’ll pay you 4 Euros for each bottle.
A few months later, neighbor tells you she’s found an importer in the United States. So, you prepare a few cases of your wine and the neighbor picks them up at the winery. The neighbor seems to have some success selling your wine. You pay her commissions, in Spain, in Euros.
Time passes. You decide the American adventure should end; sales weren’t so great and it’s better to concentrate on selling in Europe.
What’s more surprising, she sues you in the state of New York, where you have never been, have no office, no bank account, no employees – no nothing in New York.
Your Spanish lawyers tell you that delivery of the New York suit papers to the winery is improper under Spanish law. Little do you know, but New York law doesn’t give a fig about Spanish law. You’re in default and the New York court gives your neighbor a big judgment against the winery.
Your world, calmly, quietly nurturing grapes to make wine in Spain, is suddenly turned upside down. How can a New York court, where you’ve never been, grant a judgment against the winery for a neighbor’s commissions when you’ve paid her and, in any case, she earned them in Spain?
The appellate court says New York courts have no jurisdiction over the winery; the courts here, the court says, aren’t competent, they don’t have authority to judge a Spanish winery.
The Appellate Division reversed the trial court and dismissed the suit, saying subject matter jurisdiction did not exist under Business Corporation Law § 1314(b)(4) because the nexus requirement for obtaining personal jurisdiction under CPLR 302 was not met. “We find that defendant’s visits to New York to promote its wine constitute the transaction of business here…,” it said. “However, there is no substantial nexus between plaintiff’s claim for unpaid commissions in connection with the sales of that wine, pursuant to an agreement made and performed wholly in Spain, and those promotional activities….”
And then, New York’s Court of Appeals decides to accept the case.
Why would the Court of Appeals agree to open up a unanimous, and seemingly crystal-clear, decision by the Appellate Division?
Best guess: the Court of Appeals believes it must settle this area of the law in a more definitive manner.
Perhaps the first, and hardest lesson for small to mid-sized companies to learn and apply, is to have attorneys ready to consult with for even the most mundane matters. When the vintners sat at the winery’s kitchen table with their neighbor little did they imagine one day the winery would be before the highest court in New York arguing over commissions earned in Spain. Could the journey to Albany have been avoided? Perhaps if the winery insisted a written agreement be drafted, the contract could have specified that it would be governed by the laws of Spain and conferred on the courts in Spain exclusive jurisdiction to resolve disputes concerning the agreement.
Alas, that was not done.
How else to short-circuit the tortuous trip to the Court of Appeals?