Home Jurisdiction Commercial Division Says ‘No, Not Enough’ When Using Local Lawyer to Establish Personal Jurisdiction | Farrell Fritz, PC

Commercial Division Says ‘No, Not Enough’ When Using Local Lawyer to Establish Personal Jurisdiction | Farrell Fritz, PC


Business transactions often involve parties from different states. When a dispute arises between various parties, the question of whether a party can obtain personal jurisdiction over a defendant becomes critical. This issue becomes even more apparent when the defendant is a foreign company that conducts business around the world. In a recent decision by the Manhattan Commercial Division, Judge Andrew Borrok reminds us that “[t]”Hiring New York-based lawyers (and closing a firm’s New York office) and funding through New York banks” is simply not enough to gain jurisdiction over a defendant in New York.

In Haussmann versus Baumann, plaintiffs Rebecca R. Haussmann, trustee of Konstantin S. Haussmann Trust, and Jack E. Cattan (collectively, the “plaintiffs”) are shareholders of defendant Bayer AG (“Bayer”), a Germany-based pharmaceutical company headquartered in Leverkusen, Germany. In or around 2016, Bayer negotiated and agreed to acquire the Monsanto Company (“Monsanto”), a Delaware-incorporated, Missouri-headquartered agricultural products company for $66 billion (the ” Moonshot transaction”). During the due diligence period of the transaction, Bayer engaged several banks, including Bank of America and Credit Suisse Group AG (collectively, the “Bank Defendants”). Additionally, Bayer hired a New York-based law firm Wachtell Lipton Rosen & Katz to finalize the transaction. Notably, neither Bayer nor the bank defendants were present at the closing, and none of Bayer’s board meetings were held in New York in connection with the clearance of the transaction.

Following the completion of the Moonshot transaction, Bayer was “crushed by a tsunami of Monsanto legacy tort lawsuits and legacy liabilities”, resulting in a loss of $12 billion. Accordingly, on or about December 9, 2020, Plaintiffs filed a Second Amended Complaint (the “Complaint”) in the form of a Shareholder Derivative Action with the Commercial Division of Manhattan against Bayer, Bank Defendants and members of Bayer’s board of directors. Board of Directors or Supervisory Board (collectively, the “Individual Defendants”). The plaintiffs alleged causes of action for breach of fiduciary duty under Section 117 of the German Stock Corporations Act (“GSCA”), aiding and abetting the alleged breaches of fiduciary duty, and conspiracy civilian in connection with the Moonshot transaction. In response, Bayer, the bank defendants and the individual defendants each filed three separate motions to dismiss, seeking to dismiss the complaint on several grounds, including lack of personal jurisdiction, unconventional forum, and lack of standing under German law.

First of allon the question of forum not conveniens, the individual defendants and the bank defendants argued that Germany was a more appropriate forum for this lawsuit based on the fact that (a) the plaintiffs were pursuing claims under German law, not New York law ; (b) the decisions leading to the alleged breaches of fiduciary duty took place in Germany; and (c) all of the Individual Defendants resided in Europe. In opposition, the plaintiffs claimed that New York courts frequently adjudicate shareholder derivatives suits involving foreign corporations and foreign laws, and that pre-trial court proceedings in Germany “would create impossible evidentiary barriers before discovery and expose plaintiffs to a mandatory transfer of costs”. In its decision, the Court considered that even if the commercial chamber was able to deal with this case, Germany was a more appropriate forum because it “has a significant interest in adjudicating a dispute involving a former and important German company, and the activities and judgments of individual directors all located in Germany and operating under German law.

Second, on the issue of personal jurisdiction, the individual defendants argued that meager allegations that Bayer engaged advisers, such as banks and law firms, with New York offices to help complete the transaction Moonshot did not constitute the business transaction under CPLR § 302(a)(1). In support of their claim, the individual defendants relied on the fact that the plaintiffs did not allege (a) that members of the board of directors or board of supervisors made a business decision in New York; and (b) that Bayer has employees or offices in New York. In opposition, plaintiffs argued that jurisdiction is appropriate here based on the fact that the heart of the lawsuit surrounds Bayer and the individual defendants’ decision to engage New York law firms and banking institutions to help due diligence and closing of the Moonshot transaction. The Court rejected plaintiffs’ arguments and dismissed the claim against individual defendants for lack of personal jurisdiction, finding that hiring New York-based attorneys and arranging funding through new institutions -yorkaises was too tenuous a link with New York.

Thirdthe Court found that the plaintiffs did not have standing under Section 148 of the GSCA to bring this lawsuit against Bayer, because the plaintiffs did not allege that “they hold a sufficient number of actions to assert their rights, that they have asked the company to take legal action, or that they have sought permission from a German court to assert their claims.


the Haussmann is a useful decision for foreign defendants who are forced to defend a trial in New York where they have no connection to the state. Further, this dismissal should serve as a cautionary tale for plaintiffs who rely on a party’s use of legal counsel and financial institutions as grounds for personal jurisdiction where the defendant has no other contact or presence at New York.

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