Court Grants Motion to Dismiss for Lack of Personal Jurisdiction

On March 6, 2024, Justice Joel M. Cohen of the New York County Commercial Division issued a decision in Dembicki v. Synergy Health Network, Inc., 2024 NY Slip Op 30704(U), granting Defendants’ motion to dismiss for lack of personal jurisdiction. The Court held that the parties’ agreement to New York law, and to an arbitration clause requiring arbitration of the parties’ claims in New York, was insufficient to create personal jurisdiction over Defendants, who otherwise had no connection to New York. The Court explained:

The only basis asserted for personal jurisdiction is that the parties chose New York as the forum for arbitration in the Executive Employment Agreements and that New York law shall apply. This is not sufficient to confer personal jurisdiction over Defendants in this action.

First, "[t]he fact that the contract chooses New York law does not 'constitute a voluntary submission to personal jurisdiction in New York"' (ABK CO Music, Inc. v McMahon as Tr. Of Andrea Marless Cooke Family Tr., 175 AD3d 1201, 1201 [1st Dept 2019]). Second, although "it is well-settled that an arbitration clause containing a forum selection will be upheld by courts," "it is equally well-settled that such a clause will be enforced only insofar as it applies to arbitration proceedings and will not be construed to mean consent to jurisdiction in the courts of New York State" (Merrill Lynch, Pierce, Fenner & Smith, Inc. v East, 121067/93, 1993 WL 7 64642, at *2 [Sup Ct, NY County 1993]; see also Aero-Bocker Knitting Mills, Inc. v Allied Fabrics Corp., 54 AD2d 647, 648 [1st Dept 1976]).

Plaintiffs' contention that declining to exercise personal jurisdiction in these circumstances will reward Defendants' defaults in the arbitration is unavailing. Even assuming that is so, the Court cannot simply create personal jurisdiction where none exists. The parties could have added a broader New York forum selection clause to the Executive Employment Agreements (see ABKCO Music, Inc., 175 AD3d at 1202), but chose not to do so. Further, Plaintiff does not argue that there are no alternative forums in which to pursue its claims.

Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning personal jurisdiction or agreements to arbitrate.