What a Funder Must Establish to Sue a Massachusetts Business in New York

Start by asking what the plaintiff is relying on

There is a habit, in defending these cases, of treating the New York forum as a fact of nature. It is not. It is something the plaintiff has to be entitled to, and there are only two routes to the entitlement.

Either the contract gives it, or the long-arm statute does. A Massachusetts defendant who knows which one is being asserted knows what the fight is about.

Route one: the long-arm statute, limb by limb

CPLR § 302 confers personal jurisdiction over a non-domiciliary, as to a cause of action arising from enumerated acts done in person or through an agent. The relevant ones here:

• Transacting any business within the state, or contracting anywhere to supply goods or services in the state.
• Committing a tortious act within the state, with a defamation carve-out.
• Committing a tortious act outside the state causing injury inside it, again subject to exceptions.

Two features of that structure are worth holding onto.

First, the list is of acts, not of statuses. Being a company that sometimes deals with New York is not on it.

Second, and more usefully, the jurisdiction runs only as to a cause of action arising from the act relied on. So a plaintiff cannot point at unrelated New York activity and treat it as a general licence to sue here. The claim has to come out of the act.

For a funder suing on an advance, that means the act it points to has to be connected to the advance itself — which, where the only New York element is the paperwork, narrows the argument considerably.

Whether signing a New York contract is "transacting business"

This is the question every defendant asks next, and it is argued both ways in litigation of all kinds. A page like this one should not pretend to settle it.

What it can usefully say is that the question exists, that it is a question about facts and authority rather than about fairness, and that where the contract is the only connection to New York, the long-arm route collapses back into the clause route. Which brings us to the clause.

Route two: the clause, and the price of admission

GOL § 5-1402 is the statute that makes a forum selection clause reliable in New York, and it asks for three things together: the parties chose New York law, the transaction covers at least $1,000,000, and the agreement contains a submission to the jurisdiction of New York courts.

Where that applies, CPLR Rule 327(b) removes the court's discretion to decline the case as an inconvenient forum — the general rule in subdivision (a) being that a court may stay or dismiss where in the interest of substantial justice the action should be heard elsewhere.

Where it does not apply — which is most advances — the clause is still in the contract, and still argued, but it is argued on ordinary grounds rather than backed by statute, and CPLR 327(a) is not switched off.

So the useful first exercise is arithmetic and reading

1. What does the agreement say about governing law, as a distinct sentence?
2. Is there an express submission to New York jurisdiction?
3. What is the transaction worth, measured the way the statute measures it?
4. What does the complaint actually plead about New York?

Those four answers tell you whether you are in a statutory-forum case, a clause-only case, or a long-arm case. They are quite different problems.

None of which is a reason to wait

CPLR § 320 requires an appearance within twenty days of service of the summons, by answer, by notice of appearance, or by motion extending the time to answer, with longer periods in defined circumstances including particular methods of service. Objections to jurisdiction are made by a defendant participating in the manner the rules require, not by one staying away.

What to do first, from Massachusetts

1. Read the complaint's jurisdictional paragraphs. They tell you the theory.
2. Separate the governing-law clause from the submission clause.
3. Establish the transaction value. It decides whether the statute is available to the plaintiff.
4. Appear, and object properly. The argument is worth nothing outside the case.

How an MCA lawsuit is defended covers what comes next.