To be Argued by:
JESSE WILKINS
(Time Requested: 10 Minutes)
CTQ 2015-00001
Second Circuit Court of Appeals Docket No.: 14-1021-cv
Qtnurt nf Appeals
nftqr
nf New tnrk ______ _. .. ._ ____ __
N097.
THE MINISTERS AND MISSIONARIES BENEFIT BOARD,
Interpleader Plaintiff,
-against-
LEON SNOW, et al.,
-against-
THE ESTATE OF CLARK FLESHER, et al.,
BRIEF FOR APPELLANTS
PRESTON & WILKINS, LLC
Attorneys for Appellants
Appellants,
Respondents.
3000 Hempstead Turnpike, Suite 317
Levittown, New York 11756
Tel.: (212) 809-5808
Fax: (212) 898-9034
Date Completed: June 9, 2015
TABLE OF CONTENTS
Pages
TABLE OF AUTHORITIES ................................................................................... iii
PRELIMINARY STATEMENT .............................................................................. 1
JURISDICTION ......................................................................................................... 3
CERTIFIED QUESTIONS PRESENTED ............................................................... .4
Brief Responses to Certified Questions ................................................................ 5
STATEMENT OF FACTS ........................................................................................ 5
SUMMARY OF ARGUMENT ............................................................................... 12
ARGUMENT ........................................................................................................... l4
I. THE GOVERNING LAW PROVISIONS IN THE MMBB PLANS DO
NOT REQUIRE THE APPLICATION OF ESTATES, POWERS, AND
TRUSTS LAW §3-5.l(B)(2) ......................................................................... 14
A. The Governing Law Provisions in The MMBB Plans Do Not Require
Application of Estates, Powers and Trusts Law §3-5.l(b)(2) because This
Statutory Provision Addresses Wills and Testamentary Dispositions
Thereunder ................................................................................................ 18
B. Given That the Courts of New York, California and Colorado All Are
Likely To Honor Governing Law Provisions Chosen by Contracting
Parties, There Exists No Conflict of State Laws and the Law of New
York, the Forum State, Is the Appropriate Substantive Contract Law to
Be Applied to the MMBB Plans ............................................................... 23
1
C. Although the MMBB Plans Were Not Consummated Expressly Pursuant
to the New York General Obligations Law §5-1401, the Underlying
Legislative Intent Warrants Application of the IRB-Brasil Holding on the
Use of New York Substantive Contract Law Principles .......................... 27
D. The Governing Law Provisions of the MMBB Plans Designating New
York Law as Applicable Mandate New York Substantive Contract Law
Principles Only ......................................................................................... 34
E. Public Policy Mandates the Application of New York Law in
Determining the Right to the Disputed Funds, as Between The Snows and
The Estate ................................................................................................. 36
F. A Choice of Law Analysis, If Required, Would Result in the Use of New
York Substantive Contract Law Principles Because There Are Sufficient
Contacts Between the Contracts Herein and the State of New York ...... .40
G. New York Substantive Law Is the Applicable and Controlling Law for
the MMBB Plans and Estates, Powers and Trusts Law §5-1.4 Properly
Determines the Effect of Divorce, if Any, on the Snows' Rights as
Designated Beneficiaries in the MMBB Plans ........................................ .41
II. THE SNOWS HAVE ANSWERED THE FIRST CERTIFIED QUESTION
IN THE NEGATIVE. SHOULD THIS COURT, HOWEVER,
DETERMINE THAT ESTATES, POWERS AND TRUSTS LAW §3-
5.1(b)(2) IS RELEVANT TO THE MMBB PLANS, THE BENEFITS
THEREUNDER CANNOT BE DEEMED "PERSONAL PROPERTY OF
THE DECEDENT NOT DISPOSED OF BY WILL" ................................. .45
CONCLUSION ........................................................................................................ 47
ii
TABLE OF AUTHORITIES
Pages
Cases
2004 Stuart Moldaw Trust v XE L.I.F.E., L.L.C.,
642 F Supp 2d 226, No. 08 Civ. 9421 (PKC), 2009
U.S. Dist. LEXIS 64658 [SD NY July 27, 2009] ................................. 40,42
Allstate Ins. Co. v Stolarz,
81 NY2d 219 [1993] ............................................................... 23
Bank of N.Y. v Yugoimport,
745 F3d 599 [2d Cir 2014] ..................................................................... 16, 27
Bio Med Techs. Corp. v Sorin CRM USA, Inc.,
2015 U.S. Dist. LEXIS 10917 [D Colo 2015] ............................................ 25
Burke v Sterling Trust Co.,
2014 U.S. Dist. LEXIS 50359 [D Colo 2014] ............................... 24, 25
Economu v. Borg-Warner Corp.,
652 F Supp 1242 [D Conn 1987] .................................................. 34
Estate of Susan Rudolph,
2007 N.Y. Misc. LEXIS 6450 [Sur Ct Aug. 31, 2007] ............................... 46
Fieger v Pitney Bowes Credit Corp.,
251 F3d 386 [2d Cir 2001] .......................................................................... 24
Gramercy Inv. Trust v Lakemont Homes Nev., Inc.,
198 Cal App 4th 903, No. £051384, 2011 Cal. App.
LEXIS 1111 [Aug. 24, 2011] ...................................................................... 26
Bartol Prods. Corp. v Prudential Ins. Co.,
290 NY 44 [1943] ......................................................................................... 15
IBM v Liberty Mut. Ins. Co.,
363 F3d 137 [2d Cir 2004] ........................................................................... 26
iii
Pages
IRE-Brasil Resseguros, S.A. v Inepar Invs., S.A.,
20 NY3d 310 [2012] .............................................................................. passim
In re Estate of King,
196 Misc2d 250 [Sur Ct 2003] ..................................................................... 46
In re Estates of Covert,
97 NY2d 68 [2001] ....................................................................................... 15
In re Planet Hollywood Int'l, Inc.,
2000 U.S. Dist. LEXIS 23309 [D Del2000] ..................................... 31
Indian Harbor Ins. Co. v City of San Diego, 9
72 F Supp 2d 634 [SD NY 2013] ........................................................... 31, 32
J. Aron & Co. v Chown,
231 AD2d 426 [1st Dept 1996] ................................................................ 23, 27
Koob v IDS Fin. Servs.,
213 AD2d 26 [1st Dept 1995] ........................................................................ 16
Loeser v Gabae Dev. ULC,
No. 12 Civ. 187 (LTS)(JCF), 2013 U.S. Dist.
LEXIS 114521 [SD NY Mar. 25, 2013] ...................................................... 34
Mastrobuono v Shearson Lehman Hutton, Inc.,
514 us 52 [1995] ................................................................................... 35, 36
Matter of Thomas,
63 AD 3d 1081 [2nct Dept 2009] ................................................................... 20
McCarthy v Aetna Life Ins. Co.,
92 NY2d 436 [1998] .............................................................................. 22, 38
McCarthy v Aetna Life Ins. Co.,
231 AD2d 211 [1st Dept 1997] ............................................................ passim
iv
Pages
McPhee v. Gen. Elec. Int'l, Inc.,
736 F Supp2d 676 [SD NY 2010] ................................................. 34
Ministers & Missionaries Benefit Bd. v Est. of Flesher,
2014 U.S. Dist. LEXIS 37822 [SD NY 2014] ............................................ 19
Nedlloyd Lines B. V. v Superior Ct.,
3 Cal 4th 459, 834 P2d 1148, No. Nos. S015917, S019540,
1992 Cal. LEXIS 4143 [Aug. 31, 1992] ................................................ 25,26
Neto v Thorner,
718 F Supp 1222 [SD NY 1989] ........................................................... 45, 46
Osterweil v Bartlett,
20 NY3d 1058 [2013] .................................................................................... 3
Packman v Great-W. Life & Annuity Ins. Co.,
2014 U.S. Dist. LEXIS 138854 [2014] ....................................................... 17
Patel v N.Y. Life Ins. Co., No. 11 Civ. 4895 (JPO),
2012 U.S. Dist. LEXIS 72717 [SD NY May 21, 2012] ........................ 23,40
Reger v Natl. Asso. of Bedding Mfrs. Group Ins. Trust Fund,
83 Misc2d 527 [Sup Ct 1975] ...................................................................... 17
Skandia Am. Reins. Corp. v Schenck,
441 F Supp 715 [SD NY 1977] ................................................................... 17
Smith Barney Shearson Inc. v Sacharow,
91 NY2d 39 [1997] ................................................................................ 35, 36
State v Home Indem. Co.,
66 NY2d 669 [1985] .................................................................................... 14
Std. Sec. Life Ins. Co. v Bedell,
113 Mise 2d 259 [Sup Ct 1982] ................................................................... 31
v
Pages
Sun Life As sur. Co. of Can. v Gruber,
No. 05 Civ. 10194 (NRB), 2007 U.S. Dist.
LEXIS 92141 [SD NY Dec. 14, 2007] .................................................. 14, 15
TerraMatrix, Inc. v U.S. Fire Ins. Co.,
939 P2d 483 [Colo App 1997] ..................................................................... 25
VFS Fin. Inc. v Elias-Savion-Fox L.L.C.,
2014 U.S. Dist. LEXIS 166240 [SD NY 2014] .......................................... 32
Welsbach Elec. Corp. v MasTec N. Am., Inc.,
7 NY 3d 624 [2006] .. .. .. .... .. .. .. .. .. .. .. .. .. .. .. .. .. .. .... .. .. ............ ...... .. .. .... .. .. .. .... .. .. 16
Wood Bros. Homes, Inc. v Walker Adj. Bur.,
198 Colo 444 [1979] .................................................................................... 24
Woodling v. Garrett Corp.,
813 F2d 543 [2d Cir 1987] ......................................................... 34
Zasuly v Mut. Ben. Health & Ace. Assn., 1
19 NY2d 385 [1967] .................................................................................... 16
Statutes
28 usc§§ 1291, 1294 ............................................................................................. 3
28 usc§§ 1332, 1335 ............................................................................................. 3
Estates, Powers and Trusts Law§ 3-5.1 (a) (2) ............................................... 19, 45
Estates, Powers and Trusts Law§ 3-5.1 (b) (2) ............................................. passim
Estates, Powers and Trusts Law § 5-1.4 .......................................................... 41, 44
Estates, Powers and Trusts Law§ 13-3.2 .............................................................. 46
vi
Pages
Estates, Powers and Trusts Law§ 13-3.2 (a) ................................................... 37, 38
General Obligations Law § 5-1401 .. . .. .. . .. .. . .. . . . . . . . . . . . .. .. . .. .. . . . .. . . .. .. . . . . . .. . . .. . . . .. . . passim
General Obligations Law§ 5-1402 ............................................................ 28, 29, 33
Rules
USCS Ct App 2d Cir, Local R 27.2 ....................................................... 3
22 NYCRR § 500027 ........................................................................ 3
Other
Restatement (Second) of Conflict of Laws §187 [1971] ..................... 24. 25, 26,33
Vll
PRELIMINARY STATEMENT
The United States Court of Appeals for the Second Circuit ("Second Circuit")
certified two questions to this Court that are directly related to the proper
determination of which of two competing claimants are entitled to receive benefits
from a decedent's group death benefit plan and a group retirement plan. The
decedent, while married, designated his now former spouse and her father
respectively as the primary and the contingent beneficiaries on the two plans. The
decedent, subsequent to the divorce from the former spouse, never changed either of
the plans' designated beneficiaries. The plans each contained a governing law
provision that stated the laws of the State of New York would to be applied to any
contractual disputes.
The first question certified to this Court inquires whether the governing law
provision that states the contract is to be governed by and construed in accordance
with New York law may require the application of New York Estates, Powers &
Trusts Law § 3-5.1(b)(2), which statutory provision may require the application of
the law of another state. In framing the first question, the Second Circuit identifies
the contract as one that is not expressly consummated pursuant to New York General
Obligations Law§ 5-1401. Because New York courts regularly uphold choice-of-
law provisions that do not run afoul of New York public policy, the contracts'
governing law provisions could be upheld in the matter herein with a finding that
1
there is no need to reach beyond New York contractual principles to apply Estate
Powers & Trusts Law§ 3-5.1(b)(2), a statutory provision that addresses wills and
testamentary dispositions.
Should this Court answer the first question in the affirmative, the second
certified question inquires whether a person's entitlement to the proceeds of the
plans, paid upon the death of the person having made the beneficiary designations,
constitute "personal property ... not disposed of by will' within the meaning of the
statutory provision [Estates, Powers & Trusts Law§ 3-5.1(b)(2)]. A determination
that the governing law provisions do not require the application of the statutory will
provision would seemingly end the inquiry presented to this Court on the issue raised
in the second question.
Assuming, arguendo, that the statutory will provision has any degree of
relevancy to the contracts herein, the contractual benefits should not be found to be
"personal property not disposed of by will". Such benefits derive from contracts
made between the decedent, as a plan participant in each of the plans, and the plan
administrator, obligated to pay in accordance with the decedent's instructions
contained in the designated beneficiary forms held by the plan administrator, and
subject, at most, to other statutory constraints such as the effect of divorce on the
designations pursuant to the applicable governing law.
2
The Second Circuit, in certifying the two questions to this Court, recognized
that the questions are likely of great importance to New York law, and likely to
implicate significant issues of public policy. Accordingly, the appellants
respectfully submit that this Court should answer each of the two certified questions
with a "No", thereby ruling as an initial matter that the governing law provisions do
not require the application of Estates, Powers & Trusts Law § 3-5.1(b)(2). It the
statutory provision is not to be applied, the plan benefits cannot be deemed "personal
property otherwise not disposed of by will" as defined in the statutory provision.
JURISDICTION
This case was originally filed as an interpleader action in the United States
District Court for the Southern District of New York on December 23, 2011. [A14].
The District Court had jurisdiction over this action pursuant to 28 USC §§ 1332,
1335. On March 26, 2014, the District Court entered a final judgment granting
summary judgment for the Estate of Clark Flesher and Michele Arnoldy, and
denying summary judgment for Leon and LeAnn Yowell Snow. [A243].
Interpleader-Defendants-Appellants filed a timely Notice of Appeal on April 7,
2014. [A248]. The United States Court of Appeals for the Second Circuit had
jurisdiction pursuant to 28 USC §§ 1291, 1294. This Court has jurisdiction to
entertain this appeal pursuant to § 500.27 of this Court's Rules of Practice. See,
3
Osterweil v Bartlett, 20 NY3d 1058 [2013] [accepting certification pursuant to 22
NYCRR § 500.27].
The Second Circuit certified two questions to the New York Court of Appeals
pursuant to New York Court of Appeals Rule 500.27 and Second Circuit Rule 27 .2.
[A248]. This Court accepted the certified questions on March 26, 2015. [A263].
CERTIFIED QUESTIONS PRESENTED
The United States of Appeals for the Second Circuit certified two questions
to the New York Court of Appeals:
1. Whether a governing-law provision that states that the contract will be
governed by and construed in accordance with the laws of the State of New
York, in a contract not consummated pursuant to New York General
Obligations Law§ 5-1401, requires the application of New York Powers and
Trusts Law, § 3-5.1(b)(2), a New York statute that may, in tum, require
application of the law of another state?
2. If so, whether a person's entitlement to proceeds under a death benefit or
retirement plan, paid upon the death of the person making the designation,
constitutes "personal property ... not disposed of by will" within the meaning
of New York Estates, Powers & Trusts Law section 3-5.1(b)(2)?
4
Brief Responses to Certified Questions:
1. No.
2. No.
STATEMENT OF FACTS
The Interpleader Defendants Named as Designated Beneficiaries
LEANN YOWELL SNOW, is currently known, officially and professionally,
as Rev. Dr. LeAnn Snow Flesher (hereinafter "LeAnn Snow"). [A174, n .• 1.1-1
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in L'l'rlain rnnt:rad.H invr>lving at
lt•:thl two lmndrt•d fl.fty dn!·-
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!"his hill adds tww nth! 2 tn ,\rticle 5 of the Gt>ncrnl Obligations Law, to provide f1.1r
th•· ···nfnn: .. m,·nt of the dw:ice of t\cw York law as govl.'rning lnw in a non-consumer tram;:..
:tl'l i••n inv,,lving at least $250,000. ·
This bill adds a new paragraph to Section 1314, subdivision (b) of the Business Corp-
••ral ion L1w, SN:t ion 200-b, subdivision 2, of the B;mking Law, Section 121-1, StJbdivision
2 of the Partnurship Law, and Section 1315, subdivision (b) of the Not-for-Profit
Law, to grant to New York courts subject matter jurisdiction in an action
l-rought by a non-New York plaintiff against a non-New York defendant when the action
arises out of a non-consu111er contract (a) which involves at least $250,00, (b) in which
the (kfc•ndant agrees to submit to the jurisdiction of the New York courts, and (c)
which either (i) provides that New York law i.s to govern it or (ii) has as a party a
person with significant New York contacts.
This bill modifies Rule 327 of the Civil Practice l.aw and Rules to provide that in the
case of un action nri.sing out of a contract which involves at least $250,000 and :Is
stated to be governed by New York law, the court will not grant a stay or dismissal
that rule if the party seeking such stay or dismi.ssal has wai.ved the defense of an
inconvenient forum (forum non conveniens).
FOR SUPPORT
York is one of the world's major financial and commercial centers, but its position
is by no mt• -.
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it i:. th•L trll«'t:::"''l t .. J. :1 ,.,,llrt I<• !>,· I<'rk ,·otii'IS. 'I\1 thL· t·>:!.l•nl lll:ll Lltl'J't' is llll••·rtalnty nlwut . lt lvould :11:--.o• J,(•tH?fit corporations doing
husint:ss in Nvw York to IH' mnn:o certain that suits cnn hL· brought in York cv(.•n wiK'J'e
the contract is not !',t•venlC'd by New York law.
The policies underlying tltt< proposed legisLHion are consistent with the concept of
liadting the involvvm('nt of New York Courts to c-ases where there are requisite New York
contracts. The <'l'ntrnl prPmisc of the proposa•l is that where parties at arms' length
agre(.• to resolv{' disputes arising out of thc·ir contract in New York courts, and C>ither
s(•]cct Nt!W York Llw to gov(•rn their contract, or have another important contact \>'ith
York, then NPw 'r\1rk dnvs have, by virtue of tht, mutunl consent of all parti.es to
the cPnlract, significilnt contact with the p;lrtil"s :tnd the underlying tra!lSactions.
The• propdsvd lr·gislat ion is dvsi.gned not only to promote the i.nte1·est of cC'rtainty in
int1·1'ild ;unvndments arc 1 ilwly to be de and in
:my l'VPnt far outwt•ighcd by tlw benefits. it is true that the New York court
is supported by gL·nCsult in s0me incrc>nses in litigation, there are also likely to be
!tidden, off-setting efficiencies - for example, in the form of reduced court time
(k·volt:d t,) presc·ntly-c·xJsting motion practice litigating the issue of proper forum and
other i s•>tJi!S add res::a•d by I he amc•ndmen t s.
Tlw propt'sed amendments wi 11 undoubtedly rl!Slll t in t'conomic benefit to the financial
cor:ununity as a whole (including bnt comp:mies) and the service industries which !>upport such
(for example, food, hotel and allied industri.es, and printing, accounting, and legal
btJsinesses). Steps taken to enhance the attractiveness of New York as major financial
capital will have henc>ficial effects rc.:1ching far beyond the financial community itself.
Until existing ambigLiities in the jurisdictional laws of New York are addressed, parties
to substantial multi-jurisdiction contrricts will continue to be reluctant to choose
York law to govc•rn them if, parties 1 willingness to submit
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tt• till' l•>ll ,,, llll· Nl'W \'11rk '"'"'lh, ll"''' Is"''" llk"IHu•od tluH Mm:h (·ourtto
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t. tun,; .. :. ":n,·ni<'llS grutiiHIH tu ;tn ;wllull 1111 rlu: umtfllC'I Jf fl dlNputu tfot•"
1 t .,, • l• t.. ,,.., it h lu Y11rk In lw the w11r I d 1 r-; f I 11 111c l11l ond 1 egal capflal tH•·
.. , • •i''''·'''"' .. nd IIIL• bvu,·flts to !'\t•w York In twrmittlng bualnctts around tlw
\, ... , l.t ,,, • '""'• Ynrk l:tw fnr rlwlr ,·onlrat·ts art· tw l'lt·ar. lhat the rittk of JSH!nl·
\'<'1'\' ··ll!'.ht ill. rv.thl' in !Ill• <'liS(' },,ad of tlw (';(•W York t'lllll'tH l'iltl be withPIII
un,IIIL' .tl 1 I
It· i· II f I\' ItA II
!his act shall rak(· l'lft•,·t .ond sl1all Ill <·onlrllcts enttored into aflt>r
tht· 1'1 fpct lvl' datt> lwl"l'tll .111d .q•ply to vo•nt l'ill'lS •·nt••r"'d into on or lwfore th£•
t•ffL•ctivt· date· hen•of in l'lll11Wl'tinn with ;Jny ;tc·t inn or procce>ding commenced on or
aft ... •r thP pfft·l·t iVL' dntt• hL>rl'of.
009
J\(jf)(;J·:•r REP\JH'l' ON B 1 LJ .. 3
P.F:CC:•lNEriDI\'1' ION Session Year l9B4
St:NA'fE
ASSEMBI,Y
7307--/\
Title: AN ACT to amend the general obliryations law and the civil practice law and rules, in relation to providing for the mandatory enforcement of governing law clauses in certain contracts involving at least two hundred fifty thousand dol!r1rs
The above bill has been referred to the Division of the Budget for comment. After careful review, we find that the bill has no appreciable effect on State finances or programs, and/or that this Division does not have the technical expertise to comment on the bill •
. /\:'-! (}" # We therefore make no recommendat1on. ·
010
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COMMUN.T'f OFF"J•:f.
NEW ¥ORr<, NEW YOR:IP( l0028
THE ASSEMBLY
STATE OF" NEW YORK
ALBANY
July 24, 1984
Honorable Gerald c.
Counsel to the Governor
Executive Chamber
Albany, NY 12224
Dear Mr. Crotty:
CMAiJI
(-.0t.1Mt'f'Tit- 0"1 toollf.),M(.jllt
Ot:flotOCfiA.TtC ftt ._;f)'t
tot(:M.f::A
ST,.,NDll-4;} -·'•
C.O'/[ OJlf ,_.., .. ,' .q · .
Pursuant to your request, I am writing in support of
Assembly Bill 7307-A which is currently before Governor Cuomo
for executive action. This legislation provides for the
enforcement of the choice of New York law as governing law
in a nonconsumer contractual obligation involving at least
$250,000. The legislation also permits foreign corporations,
non-residents or foreign states to be sued in the case of a
non-consumer contractual obligation involving at least
$1,000,000 and in which the defendant agrees to submit tothe
jurisdiction of New York Courts and which either (i) provides
that New York law is to govern in whole or in part or (ii) has
as a party a person with significant New York contacts •.
Accordingly, the legislation modifies Rule 327, Civil Practice
Law and Rules to render the inconvenient forum doctrine
inapplicable in such situations.
Under present New York law, it is possible that
some New York Courts would reject a contractual choice of
New York law on the grounds that the particular contract had
insufficient "contact" or "relationship" with New Yt')rk ... This
uncertainty has deterred parties from choosingthlr:tbll! Gerald C. Crotty
Coun:;el to the Governor
Exccut i Vl! Ch:t:nher
State Capitol
Albany, York
Dear :Otr. Crotty:
12224
,\.I.OANY, NE'W YOIIK
11, 1I:Ui RT J SISE
' ,,,t""f ArJrnnH!'I.ttittlvt: Jurtge
STATE OF NEW YORK
UNIFIED COURT SYSTEM
(OFFiCE OF COURT ADMINISTRATIONI
270 BROADWAY
NEW YORK. NEW YORK 10007
(212) 5872010
July 5, 1984
Honorable Gerald c. Crotty
Counsel to the Governor
Executive Chamber
Albany, New York
Re: Assembly 7307-A
Dear Mr. Crotty:
/1-73 0 7nable
relation to New York. Present law generally
. .
the ability of parties to stipulate in thelr
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.
that the law of a particular state will govern contruction
of the contract. See, A.S. Rarnpell, Inc. v. Hyster Co.,
3 NY2d 369 (1957); UCC 1-105. Nevertheless, the parties•
ability to choose governing law is not unlimited and will
not be given effect unless there is a reasonable relation-
ship to New York. This rule is universally followed. See,
Restatement, Conflict of Laws 2d §187.
This bill would create a major exception to
this rule. While t he bill only covers contracts involving
more b1an $250,000 ,a sum which would sernrningly mean that
sophisticated busine!=is persons are involved and know what
they are doing, nonetheless, the need for this bilr, should
be closely scrutinized to af!certain if it is truly needed.
This follows because of the severe inroads placed upon.the
New York courts ability to disregard such clauses when no
such relation is present.
The bill would also mandate under new GOL §5,;;:.1042
that a contractual provision specifying that thE!
agree to subrni t to the jurisdiction of the New York.·. courts
. . :··. :... . .··. ', {:'>:"·. :.::·::_.
be enforced provided that New York law is ·to .. :u_ndef
§5-104, and the contract involves at lea:st$1
. . - ' - . .
This is reinforced by an amendment to CPLR)2'7·i;:,
provide that the doctrine of
- 2 -
apply to such a contractually agreed upon forum. No
requirement that any of the parties be a New York resident
or that the contract affects New York is imposed. Thus,
under the section, a California citizen and Illinois citizen
could agree that a dispute between them over a contract
involving Texas oil be heard in New York under New York
law, and a New York court must hear it if $1,000,000 is
at stake. This too changes present law. See, Siegel,
New York Practice §98.
This provision could lead to New York courts
being the forum for countless suits in the future. New
York courts' already scarce resources could be spent there-
fore in determining cases which wi 11 have absolutely no
impact on New York or its citizens. Again, whether there
is a true need for the bill should be ascertained.
0 . . '· ; t.
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Honorable Mario M. Cuomo
THE CITY OF NEW YORK
OFFICE OF THE MAYOR
NEw YoRK, N.Y. tooo7
July 10, 1984
A#7307-A - by M. of A. Siegel
AN ACT to amend the general obligations law
and the civil practice law and rules,
in relation to providing for the
mandatory enforcement of governing
law clauses in certain contracts
involving at least two hundred fifty
thousand dollars
APPROVAL RECOMMENDED
Governor of the State of New York
Albany, New York
Dear Governor Cuomo:
The above bill is before you for executive action.
This bill adds new Title 14 to Article 5 of the General Obli-
gations Law, to provide for the enforcement of the choice of New York
law as governing law in a non-consumer contractual obligation involving
at least $250,000. It also modifies the limitation contained in
varinuR statutes, such as Section 1314, subdivision (b} of the Business
Corporation Law and Section 200b, subdivision (2) of the Banking Law, ·
to permit foreign corporations or non-residents to be sued in the case
of a non-consumer contractual obligation involving at least $1 ,·000, 000
and in which the defendant agrees to submit to the jurisdictiorf 6f the
New York Courts and which either (i) provides that New y()·rk law is to
govern in whole or in part or (ii) has as a party a perso_n with; signifi-
cant New York contracts. Finally, this bill modifies Rule 3270f the ·
Civil Practice Rules to render inapplicable the inconvenien.t,,:fqr\llft'
doctrine if non-consumer obligations involve at least $1·,ooo:;OO'O ;and
in which the defendant agrees to submit to the jurisdiction. of the
New York courts. ·
New York is one of the world's major arld .
centers. Its position, however, is by no means it .... !
important that the State remain alert to ways ih wJ!icl:),
little cost, its position can be enhanced. · ·) ·'
Honorable Mario M. Cuomo
July 10, 1984
Page two
A#7307-A
As business has become more geographically diverse, the typical
commercial, mercantile or financial contract has become more and more
likely to involve parties located in more than one state or more than
one nation. Indeed, financial contracts involving signatories based in
a dozen or more jurisdictions are by no means uncommon.
It is standard practice in such contracts to prescribe that
the contract shall be governed by and construed in accordance with the
law of a jurisdiction with a well developed system of commercial
jurisprudence, and the parties thereto wish to have the option of electing
such laws. However, it is possible that, under present New York law,
some New York Courts would reject a choice of New York law on the ground
that the particular contract had insufficient "contr•ct" or "relation-
ship" with New York. The mere existence of this possibility has
frequently deterred parties from the law of.New York for major
contracts, to the detriment of the standing of New York as a commercial
and financial center.
In order to encourage the parties to significant commercial,
mercantile or financial contracts to choose New York' law, it is important
not only that the parties be certain that their choice of law will not be
rejected by a New York Court but also that, in the unlikely event that
a dispute does arise and the parties have agreed that such dispute may
be heard by a New York Court, such Court will in fact proceed to hear
and determine the case. New York courts are the tribunals most expert
in New York law, and although it is not uncommon for a court to be
required to apply the law of another jurisdiction to the facts before
it, it is to be expected that the parties to a contract who decide to
choose New York law will also wish to provide that actions on such
contracts be heard by the New York Courts. To the extent there is
uncertainty about any aspect of the ability of a contracting party
effectively to submit itself to the jurisdiction of the New York Courts_,
such uncertainty will almost certainly operate to deter the parties
selecting New York law in the first Flace. However, it is not intended;
by virtue of the proposed modification to the inconvenient fortim rule
to imply that any action arising out of or relating to any contract,
agreement or undertaking not covered by the new rule is to be stayed or
dismissed under the existing rule.
The policies underlying the proposed legislation are consistent
with the concept of limitir.J the involvement of New York Courts to
cases with requisite New York contact. The central premise _:of the
proposal is that where parties at arms length agref!>,to
in a New York Court, and select New York law to York ·
Joes have, by virtue of the mutual consent of all
contact with the parties and the underlying trartsacti(f)i'f. ·. ··J' · ·
the bill refers to United States dollars for .,,, ·ot ,
applicability, it is assumed that New York
lent in foreign currency and/or goods and serviC:ei. · ·• '}:' · :;> ·· · · · · . i . .. ··-·· - "'t
·j)2l···
Honorable Mario M. Cuomo
July 10, 1984
Page three
AI7307•A
Until existing ambiguities in the jurisdictional lc!\\f• ()!New
York are addressed, parties to substantial multijurisdictipn contracts
will continue to be reluctant to choose New law to them if,
notwithstanding the parties• willingness to submit to thejurisdiction
of the New York Courts, there is any likelihood thatsucl1 will
refuse to accept the choice of New York law or refuse on efther
jurisdictional or forum non conveniens grounds t:()ientertain-an action
on the contract if a dispute does arise: In 'that: cortllE!cttdn, _it is
assumed that the New York courts will interpret the word "bOn-resident"
in Section 5-1402 liberally for purposes of Rulf;! 327 fol"t:dgn
sovereigns and instrumental! ties as well as par;trierships. The
benefits to New York in being a world financial:and capital are
of such importance and the benefits to New York ih
around the world to choose New York law for their are clear
that the risk of some very slight increase in the .case load of the New
York Courts can be accepted without undue alarm. ·· ·.·
Accordingly, I urge your approval of this bill which is part
of the City•s 1984 Legislative Program.
Very trulyyc>,tits,
EDWARD
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'•rri ting to urge tht7! c .sign
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.·::-;., of law and choice of .: ce:t.tain
,; E..,act::ment o.f this bill .,i.l.) )::;.,;:: i.ei.ng governed by ani ted JU.ugdom
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ur;:;1f.2.c:.ant aJK>unt of !!lOney ar,d wbe.r•.· ae b·.
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new york state bankers association
..iames P. Murphy. Executive Vice Presidentf212) 949·1170
Han. Gerald C. Crotty
Counsel to the Governor
Executive Chamber
State Capitol
Albany, New York 12224
RE: A. 7307-A (Siegel)
Dear Mr. Crotty:
July 11, 1984
48S LEXINGTON AVENUE
NFWYORK,N.V. 10017
12121 949·1155
The New York State Bankers Association, representing the conmercial banking
industry in this State, strongly recommends that the above-referenced bill be
approved. Enactment of this legislation will enhance New York's.positlon as the
nation's leading commercial center by facilitating access to New York courts
and expanding the applicability of New York law for parties involved in
substantial commercial transactions.
Specifically, thiS bill would allow parties to a COIIIIIercial agreement involving
$250,000 or more to provide that their transaction will be gOverned by New York
law. It further allows for an action to be maintained in a New Yotk court
against a non-domiciliary where the underlying agreement
or more and contains a provision whereby the non-resident to
the jurlsdication of New York courts. These provisions will eliminate several
existing substantive ana procedural obstacles that serve to deter parties to
significant international or interstate commercial agreements from designating
that their contracts will be governed by New York law.
Commercial contracts often involve parties located in mote than one state ot
one country, and transactions involving parties based ina doZen mote
jurisdictions have become increasingly common. Parties tO these ... e.!ll"t:
widely regard New York as a forLa which neutrally and cOtll(le!tet,t
stable and sophisticated body of .c011111erciallaw, and are
disposed to agreeing that their contracts be governed by
accordance with New York law. 1-bwever, bt=cause of the ..
York court would reject such a choice of law or forum on
transaction was not sufficiently related to New York, .
choose to be governed by the la'fs of. another jurisc:Uctic:Jn .. · ThJ.s •"t®deS
York's position as one of the world's leadinJ financial and
This legislation will not only prove beneficial to l"nr•t:Piirot'
will also provide significant this State
Parties without substantial connections here 11ay be ,'lVIII,_
in New York. if r:an be assured of
determine their rights and duties •. The business aNd
York will also benefit if these significant commercial agreements are governed by New York law, as will the service industries that support these communities. Most significantly, this legislation will serve to preserve and enhance New York's stature as a preeminate financial and commercial center.
This important legislation can be implemented with little burden on the State's court system. Although its provisions render the doctrine of incovenient forum inapplicable to nonconsumer contracts of at least $1,000,000, only a minute number of such multi-jurisdictional contracts actually result in litigation. Moreover, this legislation will eliminate the necessity of litigating the issue of proper law and forum that may arise from these contracts under current law. Accordingly, the benefits of this legislation substantially outweigh any detriments and we respectfully request that it be approved.
JPM/eg
Very truly
'l ') r--u ... ;)
JO::>f.PH D Bt::CKt::H
CHAIR
lTHFL·JOR
ONE BROADWAY
NEW YORK 10004
(212l 480·4800
Gerald Crotty, Esq.
THE Al:JSO(';IA TION Ot' THI' SAR
OF THE CIT) Ot' NEI'V YORK
42 WEST 44TH STREt:T
NEW YORK 10036
COMMI I TEE ON FOREIGN AND COMI'ARATIVE lAW
July 9, 1984
Counsel to the Governor
Executive Chamber - Capitol
Albany, New York 12224
Re: A. 7307-A (March 28, 1983)
Dear Mr. Crotty:
EZEQUJEL A CAMERINI
71HFLOOR
ONE BROADwAY
NEW YORK 10004
(212> 480·4800
we understand that the above bill has been passed
by the Legislature and is now on the Governor's desk for
signature. The bill would give effect to choice.of law and
choice of forum clauses in contracts involving sizable
transactions.
This Committee strongly supported an earlier
version of the bill and believes that the bill as passed
achieves the major objectives of the earlier ver.sion; We
accordingly urge that the Governor give his assent tothe
bill as passed.
Very truly yoU.:tsl. . .
.• f ..
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