Commercial Division Finds Work Performed by Subcontractor in New York Insufficient To Establish Personal Jurisdiction Over Prime Contractor Outside of New York
In December 2020, the Suffolk County Supreme Court decided a novel question of personal jurisdiction law in Black Diamond Aviation Group LLC v. Spirit Avionics, Ltd.[i] Justice James Hudson determined that personal jurisdiction was not established when the contractor defendant released an aircraft for transport to a New York airport in order for its subcontractor to perform necessary upgrade and maintenance work there. In so holding, the Court provided a helpful recitation of the type of contacts necessary to establish personal jurisdiction under New York’s long-arm statute and the Due Process clause.
The Black Diamond case concerns upgrade work that was performed on a Dassault Falcon 7X business jet (“Falcon Jet”) owned by Black Diamond Aviation Group LLC (“Black Diamond”)—a private jet charter company incorporated in Delaware and headquartered in Connecticut.[ii] In January 2019, Black Diamond reached an agreement (the “2019 Contract”) with Spirit Avionics, Ltd. (“Spirit”)—an Ohio LLC—to perform maintenance and refurbishment work on the Falcon Jet, including installation of a speaker system, WIFI system, and USB outlets, and modifications to cabin.[iii] Spirit in turn subcontracted this work to an Illinois-based entity called Aircraft Engineering Solutions LLC (“ASES”).[iv] Although ACES began the work in Columbus, Ohio, ultimately it was determined that the job would need to be completed at MacArthur Airport in Islip, New York. In return for partial payment under the 2019 Contract, Spirit agreed to sign the necessary paperwork to release the Falcon Jet for transfer to New York.[v] Upon completion, Black Diamond paid the remaining balance due under the 2019 Contract to Spirit, and subsequently contracted directly with ASES for additional work.[vi] When ASES presented Black Diamond with an invoice that charges for both the work it performed on behalf of Spirit under the 2019 Contract and the work performed under the new contract, Black Diamond made partial payment for the work performed under the new contract, but insisted that Spirit was responsible for the remaining balance.[vii]
Black Diamond filed a declaratory judgment action against Spirit, asserting that Spirit was obliged to pay the ASES invoice. Spirit moved to dismiss on various grounds, including lack of personal jurisdiction.[viii]
The Court began its opinion by taking a brief tour of the Supreme Court’s Due Process Clause jurisprudence on personal jurisdiction, elucidating the principals that apply to any motion to dismiss for lack of the same. The Court observed that in evaluating whether to exercise personal jurisdiction over a litigant courts must consider “the burden on the defendant; the forum state interest; the plaintiff's interest in litigating in the forum; the efficient resolution of controversies; and finally, the shared interest of the several states in furthering fundamental substantive policies.”[ix] The Court further noted that “when a state court seeks to assert jurisdiction over a defendant there must be a strong affiliation between the specific claim that is at issue in the case and the forum state.”[x]
Applying those principals to the facts of this case, the Court found that Spirit had no connection to New York State that was sufficient to establish personal jurisdiction. Specifically, the Court determined that “[t]he only connection that Spirit has to New York State is the fact they agreed to release the aircraft from their care to Islip MacArthur Airport upon plaintiff's request that it be worked upon by ASES. Spirit did not send any staff to work on the aircraft in New York State. Therefore, there is no specific jurisdiction over Spirit in this case because there is no strong affiliation with the forum state.”[xi]
In reaching this decision, the Court rejected the argument that Spirit had “transact[ed] business” within the state pursuant to New York’s long-arm statute, CPLR 302(a)(1). Specifically, the Court observed that Spirit had no “course of dealing” in New York, and did not conduct “repeated use of New York facilities for maintenance of the airplane.”[xii] The Court also rejected the contention that the 2019 Contract was a sufficient basis on which to exercise jurisdiction over Spirit, noting that the 2019 Contract was not negotiated in New York and the work was not required to take place in New York under its terms. Lastly, the Court noted that “Spirit does not have an office in New York State and does not have any employees or property in New York State. Further, Spirit does not solicit business in New York and does not maintain a bank account or pay taxes in New York.”[xiii] On these facts, the Court determined that no jurisdiction existed over Spirit in New York State, despite the fact that the maintenance work was ultimately performed in New York on Spirit’s behalf by its subcontractor ASES.
This case is notable in that there does not appear to be a dispute that the 2019 Contract was at least partially performed in New York, albeit by a subcontractor, and that Spirit signed the necessary paperwork to transfer the Falcon Jet to New York in order for that work to be performed. The Court’s decision thus suggests that it may be possible for an out-of-state contractor to shield itself from personal jurisdiction in New York by engaging a subcontractor to perform any work that is required to be performed within the state. Black Diamond has filed a notice of appeal to the Second Department, and we will continue to monitor the case for future developments.
[i] 70 Misc. 3d 823, 137 N.Y.S.3d 890 (Sup. Ct. 2020).
[ii] Id. at 824.
[iii] Id. at 824-25.
[iv] Id. at 824.
[v] Plaintiff Black Diamond Aviation Group LLC's Opposition Br. at 4.
[vi] Id. at 825.
[vii] Id. at 824-25.
[viii] The Court never reached Spirit’s other grounds for dismissal, because it determined that the Court did not have jurisdiction.
[ix] Id. at 827 (citing Daimler AG v. Bauman, 571 U.S. 117 (2014)).
[x] Id. (citing Bristol-Myers Squibb Co. v. Superior Court, 137 S. Ct. 1773 (2017)).
[xi] Id. at 827-28.
[xii] Id. at 828.
[xiii] Id. at 829.