The opinion of the court was delivered by: Lee L. Holzman, J.
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the printed Official Reports.
In this proceeding in which the guardian ad litem for two infants seeks to recover on their behalf funds that were allegedly misappropriated, two of the respondents, American Heritage Federal Credit Union (Heritage), a Pennsylvania financial institution, and Anoka Hennepin Federal Credit Union (Anoka), a Minnesota financial institution, each made a separate motion, pursuant to CPLR 3211 (a) (8), to dismiss the petition for lack of personal jurisdiction. The guardian ad litem and two of the other respondents, the City of New York (City) and the law firm that represented the infants' mother in her capacity both as the guardian of their property and as the administratrix of their father's estate, oppose the motion.
The funds at issue were recovered in an action alleging that medical malpractice caused the infants' father's wrongful death. Although the decrees appointing the infants' mother as guardian of their property and the decree approving the compromise of the wrongful death action directed that all funds for the infants' benefit should be made payable to their mother as guardian of each infants' property jointly with the guardianship clerk of this court, the City issued two checks drawn on a bank in New York State payable to the order of the mother "PNG" of each infant jointly with Apple Bank. The parties disagree as to whether the checks read "JHO" Apple Bank or "JWO" Apple Bank. The City mailed the checks to the respondent law firm which, in turn, forwarded the checks to the mother in Pennsylvania. The law firm sent two letters to the mother which might be viewed as contradictory with respect to whether these checks belonged to her or her children. In any event, and even though the checks were not endorsed by Apple Bank, the mother negotiated the two checks at the Philadelphia branch of the movant Heritage. Heritage then transmitted the funds to the movant Anoka in Minnesota for deposit in the mother's personal checking account. It appears that the mother withdrew most of the infants' funds before her account was restrained.
Both movants contend that they have insufficient contacts with New York for this court to exercise personal jurisdiction over them with respect to the transactions at issue herein. In support of Heritage's motion, its vice president of branch operations avers that: 1) Heritage's 20 credit union branches are located in Pennsylvania, its employees all work in Pennsylvania, and it is authorized to do business only in Pennsylvania; 2) it owns no property and conducts no business in New York; 3) it participates in a shared branching issuer participation agreement with Pennsylvania Credit Union Services Corporation (PACUSC) limited to transactions processed within Pennsylvania; 4) PACUSC, in turn, maintains an agreement with Credit Union Services Corporation (CUSC), to afford Heritage members access to their accounts when they travel outside of Pennsylvania; and, 5) Heritage derives minimal revenue from its participation in CUSC, and the revenue generated barely covers the costs of its participation in the shared branch network.
In support of Anoka's motion, its chief financial officer and a vice president avers that: 1) substantially all of Anoka's 21,000 credit union members are residents of Minnesota; 2) it is authorized to do business only in Minnesota where all of its offices, branches and employees are located; 3) it has no contracts, agreements or affiliations with any New York entity, it has no agents in New York and does not solicit business in New York; 4) it participates in a shared service center network agreement with Minnesota Credit Union Services Corporation (MnCUSC) and with CUSC; 5) the CUSC network is available to its members as a benefit, and it is not a revenue-generating endeavor, as Anoka does not charge and collect fees for member transactions at other CUSC credit unions and, instead, Anoka pays a fee whenever its members transact business within the CUSC network; 6) pursuant to its agreement with MnCUSC and CUSC, Anoka is required to provide separate tellers and equipment dedicated solely for the purpose of providing non-members access to the shared services network; and, 7) although it collects fees for non-member transactions at its local credit union branches, the cost associated with providing separate tellers and equipment outweigh the fees generated, resulting in a financial loss for each year that it maintains the MnCUSC and CUSC agreements.
The parties opposing the motion contend that the movants have sufficient contacts with New York for this court to exercise personal jurisdiction under either SCPA 210 (b) or CPLR 302 (a) (1) or (3). With respect to the two checks at issue they note that the New York payor of the check, the City of New York, issued the checks as a result of an order entered in this court, the checks were drawn on a New York bank and paid by that bank. Moreover, they assert that the movants were negligent in permitting the checks to be deposited without the endorsement of one of the payees. They further argue that the movants' membership in CUSC, which has 99 branches in New York, creates a sufficient nexus between the movants and New York for the exercise of personal jurisdiction over the movants. In the alternative, they request an evidentiary hearing on the jurisdictional issue.
CPLR 302 provides in pertinent part as follows:
"(a) Acts which are the basis of jurisdiction. As to a cause of action arising from any of the acts enumerated in this section, a court may exercise personal jurisdiction over any non-domiciliary, . . . who in person or through an agent:
1. transacts any business within the state or contracts anywhere to supply goods or services in the state; or . . .
3. commits a tortious act without the state causing injury to person or property within the state, . . . , if he
(i) regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in the state, or
(ii) expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce; . . ."
CPLR 302 was enacted to expand the power of the state to exercise personal jurisdiction over a non-domiciliary even though the party has no physical presence in the state, provided that the party has sufficient minimum contacts with New York and benefitted therefrom, thus fulfilling due process requirements for exercising such jurisdiction. Nonetheless, personal jurisdiction may be exercised over a non-domiciliary for a single transaction only where the "activities here were purposeful and there is a substantial relationship between the transaction and the claim asserted" (Kreutter v ...