On February 28, 1992, the U.S. District Court for the Southern District of New York held that it had personal jurisdiction over a foreign corporation on the grounds that the maintenance and use by the corporation of a bank account in New York amounted to “doing business” in New York. The decision could be troubling for foreign corporations that have structured their operations so as not to be present in New York but maintain one or more bank accounts here.

In the United Rope case, the court denied a motion by third-party defendant Seatriumph Marine Corporation to dismiss the complaint against it for lack of personal jurisdiction. The court did, however, grant a motion to certify the interlocutory order to the Court of Appeals for the Second Circuit pursuant to 28 U.S.C. § 1292(b) on the basis that the order involved a question of controlling law as to which there is substantial ground for difference of opinion. The Second Circuit has since twice refused to consider the matter.

In taking this decision, rather than claiming to depart from a well established rule of law, the district court deferred to the rule that having a New York bank account does not by itself constitute doing business in New York. Indeed, the court, in making an initial finding of jurisdiction over Seatriumph in July 1991, acknowledged this rule, characterizing it as an “unexceptionable proposition.” The court based its finding of jurisdiction on the unique facts of the case—facts that it determined were distinguishable from those analyzed by other courts ruling on CPLR Section 301 in relation to the maintenance of a bank account in New York. There is some room for questioning, however, whether the bank account or the use made of it by the foreign corporation was so substantially unique as to provide sufficiently strong support for the court’s decision.

The Seatriumph Facts

Seatriumph was the owner of a ship, the M.V. Katia, which sank with a cargo of Brazilian twine in late November 1988. At the time of the ship’s loss, the Katia was under charter. Title to the cargo had passed to its purchaser, United Rope Distributors, a Delaware corporation with its principal place of business in Minnesota. Seatriumph, a Liberian corporation with its principal place of business in Piraeus, Greece, had chartered the Katia to Copenship A/S, a Danish company, in January 1988. Copenship, in turn, had later subchartered the Katia to Kim-Sail, Ltd., a Cayman Islands corporation with its principal place of business in New York.

United Rope brought an admiralty action against Kim-Sail for damages resulting from the loss of the cargo. Kim-Sail impleaded Seatriumph, seeking indemnity or contribution should Kim-Sail be found liable to United Rope. Seatriumph brought a motion to dismiss Kim-Sail’s complaint on the ground that the court lacked personal jurisdiction over it.

Although Seatriumph had no bank account in New York, under a term of the head charter to Copenship, hire for the Katia was required to be paid in United States dollars to an account of Richmond Investments Ltd. with Continental Bank International in New York City. Seatriumph had an account with Continental Bank in Piraeus. Seatriumph also made use of another bank account in Piraeus, that of its managing agent, Global Ship Management Ltd. Richmond, Global and Seatriumph were under common control.