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Defense Digest

Vetoed New York State Legislation Maintains Status Quo to Favor Out-Of-State Defendants: No Consent to Jurisdiction by Registration

Defense Digest, Vol. 30, No. 1, March 2024

March 1, 2024

by Taylor A. Bourguignon

Key Points: 

  • Corporation that registers to do business in New York does not necessarily consent to general personal jurisdiction. 
  • Proposed amendment to New York Business Corporation Law § 1301(e) would have overturned that law but was vetoed by the Governor.

A recent New York Court of Appeals case held that a corporation registering to do business in New York State does not necessarily mean it consents to general personal jurisdiction in the state. A proposed amendment to New York Business Corporation Law § 1301(e) would have overturned that law. The Bill was vetoed by the Governor, who determined that the change would have overburdened New York courts and deterred foreign corporations from doing business in New York. 

Developing case law in both New York state courts and the Supreme Court of the United States has created uncertainty regarding the scope of a court’s jurisdiction over out-of-state defendants. The recent veto of a New York Bill, at least temporarily, provides clarity on New York State’s position and protects foreign corporations from being subjected to litigation based solely on their registration to do business in New York. 

In general, a defendant can only be sued in a given location if the court has “personal jurisdiction” over that defendant. There are two types of personal jurisdiction: specific and general. First, specific personal jurisdiction exists when the cause of action arose in the state. Essentially, the defendant did something within the state which is the basis of the litigation against it. Second, general personal jurisdiction exists when the defendant does not specifically act within the state, but has sufficient “connections” with the state to be sued there. For a corporate defendant, those connections are generally the place of its incorporation and its principal place of business. 

Historically, New York expanded the scope of general personal jurisdiction over a corporation to also include when the corporation is registered to do business with the Secretary of State and consented to service of process. Essentially, when a corporation became licensed to conduct business in New York, it automatically consented to general personal jurisdiction of New York courts. That standard changed in 2021 with the New York Court of Appeals decision Aybar v. Aybar, 37 N.Y.3d 274, 280, 282 (2021). 

In Aybar, the court affirmed the appellate court’s decision in Aybar v. Aybar, 169 A.D.3d 137 (2d Dep’t 2019), which had held that an out-of-state corporation’s registration in New York does not necessarily mean it consents to the court’s personal jurisdiction. The court recognized that registering in New York does mean the corporation can be served with a lawsuit there; however, its registration does not per se mean it can be sued there for any cause of action, considering that the corporation may not even have a direct contact with New York State. 

This issue was recently addressed in the Supreme Court of the United States in Mallory v. Norfolk Southern Railway, 600 U.S. 122 (2023). The Supreme Court upheld consent by registration, holding that Norfolk Southern was subject to personal jurisdiction in Pennsylvania on the basis of being registered in the state. The Mallory case stirred uncertainty as to New York’s opposing views. 

Adding to that uncertainty was New York State Senator Michael Gianaris’ proposed amendment to Business Corporation Law section 1301(e). Gianaris’ Bill 7476 would have changed Section 1301 to read: 

(e) A foreign corporation’s application for authority to do business in this state, whenever filed, constitutes consent to the jurisdiction of the courts of this state for all actions against such corporation. A surrender of such application shall constitute a withdrawal of consent to jurisdiction.

Essentially, this change would have codified the Supreme Court’s Mallory holding into New York law and overruled the effect of Aybar. However, New York Governor Hochul was not ready to support such a change and vetoed Bill 7476 on December 22, 2023. In the memo discussing the Bill’s veto, the Governor stated: 

I vetoed substantially similar legislation in 2021 due to the concerns that the proposal would represent a massive expansion of New York’s law governing general jurisdiction, likely deterring out-of-state companies from doing business in New York because it would require them to be subject to lawsuits in the State regardless of any connection to New York. This bill would cause uncertainty for those businesses and burden the judicial system.

The Governor’s veto slows down New York’s adoption of the Mallory decision. For the time being, pursuant to the Aybar court’s 2021 decision, corporations are protected from automatically consenting to the general personal jurisdiction of New York courts simply based on registration to do business in the state. However, given the Mallory holding and recent attempts to incorporate consent by registration into the Business Corporation Law, the Aybar ruling may be on very thin ice. Corporations, and their attorneys, should keep a close eye on developments involving the scope of New York personal jurisdiction moving forward. 

*Taylor is an associate in our New York City office. She can be reached at (212) 376-6426 or TABourguignon@mdwcg.com. 

 

Defense Digest, Vol. 30, No. 1, March 2024, is prepared by Marshall Dennehey to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. ATTORNEY ADVERTISING pursuant to New York RPC 7.1. © 2024 Marshall Dennehey. All Rights Reserved. This article may not be reprinted without the express written permission of our firm. For reprints, contact tamontemuro@mdwcg.com.

Firm Highlights

Thought Leadership

The Enforceability of Online Arbitration Agreements Remains Unresolved in Pennsylvania, But the Pennsylvania Superior Court has Provided Substantive Guidance on the Issue

Key Points: The Pennsylvania Supreme Court confirms that an order compelling arbitration is not immediately appealable as collateral orders. The outcome of Chilutti II has generally left the substantive enforceability issues with browsewrap agreements unresolved in Pennsylvania. Until this issue is resolved by the Pennsylvania courts, companies operating in the Commonwealth should strive to ensure that their registration websites and/or application screens conspicuously present arbitration agreements in manners which ensure their users and consumers assent to the terms of the agreements by following the standards set forth in Chilutti I. Browsewrap agreements have been defined as agreements “‘in which a website offers terms that are disclosed only through a hyperlink and the user supposedly manifests assent to those terms simply by continuing to use the website,’ and typically do not require an electronic signature.” See, Cobb v. Tesla, Inc., 2026 WL 458470, at *1 n. 2 (Pa. Super. Feb. 18, 2026) (citation omitted). They are largely regarded as the “if you keep using this, you agree to everything buried in this link” terms embedded into almost every online agreement consumers and users sign before proceeding with purchases of goods and/or services. While consumers are generally aware of them, many almost never click on the link, nor read them in their entirety. This leaves many consumers and users ignorant of the terms and impact of such agreements. However, one’s ignorance of the otherwise neatly-tucked-away terms rarely renders them unenforceable. The issue of the enforceability of browsewrap agreements has been up for debate for some time in many jurisdictions, including Pennsylvania. Indeed, Pennsylvania had a brief grip on this issue for a period in time. Specifically, in 2023, an en banc Superior Court set forth heightened standards for companies to meet in order to secure assent and enforce browsewrap arbitration agreements. See Chilutti v. Uber Techs., Inc., 300 A.3d 430 (Pa.Super. 2023) (en banc) (“Chilutti I”) Chilutti I involved a husband and wife who sued Uber and its subsidiaries after the wife, a wheelchair bound passenger using Uber’s rideshare service, fell, struck her head, and lost consciousness due to her uber driver failing to provide a seatbelt and making an aggressive turn during the trip. The Chilutti’s filed a negligence lawsuit against Uber and its subsidiaries. In response, the defendants moved to compel arbitration, arguing that “the couple’s conduct on the company’s website and application — when they registered for the ridesharing service — signified that they agreed to be bound by the mandatory arbitration provision found in the hyperlinked terms and conditions.” The trial court granted the defendants’ petition and stayed the proceedings pending the results of arbitration, and the Chilutti’s appealed. On appeal, the Superior Court addressed two issues. First, it addressed the issue of whether it had jurisdiction to hear the appeal. A divided Superior Court determined that it did, with its basis for the holding being that the order from which the Chilutti’s appealed was a collateral order. Next, the Superior Court set out to address the merits of the Chilutti’s substantive claim. The Superior Court concluded that the parties lacked a valid agreement to arbitrate. Its rationale was that Uber’s website and application did not provide reasonably conspicuous notice of the terms to the Chiluttis. In reaching this decision, the en banc Superior Court held that browsewrap arbitration agreements are enforceable in Pennsylvania only if the registration website and application screens explicitly inform consumers that they are waiving the right to a jury trial, the registration process cannot be completed until the consumer is fully informed of this waiver, and, when the agreement is available via hyperlink, the waiver appears at the top of the first page of the terms in bold, capitalized text. Since the ruling, Pennsylvania courts have applied Chilutti I to determine if browsewrap agreements are enforceable.  For instance, the Allegheny County Court of Common Pleas invoked Chilutti I to reject an agreement that lacked an express jury-trial waiver on the assent screen.  See Miller v. Festival Fun Parks, LLC, 92 WDA 2025 (C.P. Alleg. Cnty. Mar. 24, 2025). Similarly, the Superior Court has held that notice which failed to explicitly state the consumer was waiving a jury-trial right did not “me[e]t the strict burden set forth by our en banc Court in Chilutti I.” Pierce v. FloatMe Corp., 348 A.3d 1077, 1088 (Pa. Super. 2025). While the issue of enforceability of browsewrap agreements appeared to have been resolved by Chilutti I, Pennsylvania courts’ grip on this issue has been slackened by the Pennsylvania Supreme Court’s January 21, 2026, opinion in Chilutti II. See Chilutti v. Uber Techs., Inc., 349 A.3d 826 (Pa. 2026) (“Chilutti II”). Therein, the Supreme Court did not address the merits of the Chiluttis’ substantive claim, but rather the issue of whether the Superior Court had appellate jurisdiction to immediately review the orders staying litigation pending arbitration. The Court ultimately vacated the en banc opinion on jurisdictional grounds, holding that the Superior Court did not have appellate jurisdiction because the trial court’s order from which the Chiluttis appealed did not qualify as a collateral order and, thus, the Superior Court erred in holding to the contrary and lacked jurisdiction to entertain the merits” of the Chiluttis’ substantive claim. As such, Chilutti II has rendered Chilutti I nonbinding, and the issue of enforceability of online arbitration agreements remains unresolved. However, in light of the fact the Supreme Court did not address or comment on the merits of the Chiluttis’ appeal, Chilutti I is still meaningful. Specifically, it provides guidance as to the standards a company should strive to meet to ensure they have obtained users’ assent so that they are able to enforce online arbitration agreements. Additionally, it may serve as persuasive authority in judges’ evaluations of petitions and/or motions to compel browsewrap arbitration agreements until this particular issue is properly put before our appellate courts. Keanna works in our Pittsburgh, PA office. She can be reached at (412) 803-1174 or KASeabrooks@MDWCG.com.

Thought Leadership

PA Superior Court Upholds Household Vehicle Exclusion in Favor of Erie When Stacking Was Not Implicated

Key Points: A household vehicle exclusion was upheld under an Erie Policy when the estate of deceased insureds sought UIM coverage when the insureds were occupying a motorcycle owned by the insureds, but the motorcycle was not covered by Erie’s Policy. The PA Superior Court distinguished Gallagher v. GEICO, in which Gallagher, unlike the Erie insured, had recovered UM/UIM, thus rendering the "household exclusion" an impermissible waiver of stacking. Here, with no UIM recovery from any source, the issue of stacking, much less impermissible waiver of stacking, never arose. In sum, the household vehicle exclusion is a valid exclusion when stacking is not implicated. In the Pennsylvania Superior Court case of Erie Ins. Exchange v. Estate of Kennedy, 350 A.3d 219 (Pa. Super. 2025), the court upheld Erie’s denial of coverage under the household vehicle exclusion in the Erie Policy when the insureds were occupying a motorcycle not covered under the policy. Dennis and Elissa Kennedy, Erie insureds, died in a single-vehicle motorcycle accident, with Dennis driving. Dennis insured the motorcycle with Progressive, which paid its liability limits to Elissa, after which Elissa sought household stacked Erie UIM coverage. Erie denied coverage under its "household exclusion" applicable to vehicles owned by insureds, but not covered by Erie's policy. The trial court granted judgment in favor of Erie on the ground that such benefits were barred by an exclusion applicable when an insured has suffered damages while occupying a vehicle owned by a relative and not covered under the policy, i.e. the household vehicle exclusion. Finding that the exclusion was valid, the PA Superior Court affirmed. The court found the facts of the case and policy exclusion analogous to the case of Erie Ins. Exchange v. Mione, 289 A.3d 524 (Pa. 2023). In Mione, a motorcyclist was injured in an accident with another vehicle whose driver was both at fault and underinsured. The motorcyclist's insurance policy did not include UM/UIM coverage. However, the motorcyclist had two household policies covering other vehicles, including stacked UM/UIM coverage, as well a household vehicle exclusion. UM/UIM benefits were therefore denied, and the motorcyclist argued that the exclusion was invalid because it did not comport with the statutory waiver requirements of Section 1738. The PA Supreme Court rejected the argument, explaining that UM/UIM coverage could not be procured in the "first instance" under the motorcyclist's household policies as “[F]or a household vehicle exclusion to be acting as an impermissible de facto waiver of stacking, the insured must have received UM/UIM coverage under some other policy first, or else is not implicated at all.” The motorcyclist had not received any UM/UIM benefits under his own motorcycle policy, so there was nothing for the UM/UIM benefits of the household policies to "stack on" to, and as such, Section 1738 was not implicated. The court also distinguished the case from Gallagher v. Geico, 201 A.3d 131 (Pa. 2009), in which a motorcyclist was injured in an accident caused by another driver who was underinsured. The motorcyclist had purchased two policies, each of which provided stacked UM/UIM benefits. The first policy covered only the motorcycle; the second covered two automobiles, while also containing a "household exclusion," which precluded UM/UIM benefits. The PA Supreme Court held that the exclusion was invalid because the resulting waiver of UM/UIM coverage did not comport with the statutory requirements of Section 1738. The court distinguished the Kennedy’s case from Gallagher as the Kennedy’s were attempting to stack UM/UIM coverages from (a) the Progressive Motorcycle Policy under which Dennis Kennedy was the only insured, and (b) the Erie Policy under which Dennis Kennedy and Elissa J. Kennedy were the insureds. Crucially, the court found that the party from whom the right to stack UM/UIM benefits under the Erie policy was derived (Elissa J. Kennedy) was not an insured under the motorcycle policy. In other words, no one paid for Elissa J. Kennedy to receive UM/UIM benefits under the motorcycle policy, so that policy afforded her no contractual right to such coverage in the first instance. The court further reasoned that the "miscellaneous vehicle" exclusion in the Erie Policy was valid because the insured, Elissa J. Kennedy, had not first received UM/UIM coverage under Dennis Kennedy's Motorcycle Policy. In conclusion, the Court found Gallagher inapposite, and Mione compelled the affirmance of the trial court's ruling upholding Erie’s denial of coverage pursuant to the household vehicle exclusion. Christin is a Shareholder in our King of Prussia, Pennsylvania, office. She can be reached at 610-354-8279 or clkochel@mdwcg.com.

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