Calzaturificio Giuseppe Garbuio v. Dartmouth Outdoor Sports, 435 F. Supp. 1209 (1977)

Facts

  • Calzaturificio Giuseppe Garbuio S.A.S. (CGG), an Italian manufacturer of ski boots, entered a distributorship contract with Dartmouth Outdoor Sports, Inc., a New Hampshire corporation, for Dartmouth to distribute CGG’s products in the United States.
  • CGG claimed Dartmouth owed about $72,854.24 for goods sold and delivered under the distributorship arrangement.
  • The contract stated that New York law would govern disputes and that the contract would be “deemed to have been made” in New York.
  • The agreement, however, was not actually made in New York.
  • Dartmouth was not subject to in personam jurisdiction in New York on the record presented.
  • CGG tried to proceed on a quasi in rem theory by attaching, in New York, a debt (funds) allegedly owed to Dartmouth by Dartmouth’s successor as CGG’s distributor.
  • Dartmouth moved to vacate the attachment, arguing that New York Business Corporation Law (BCL) § 1314(b) barred the action because it was a suit between foreign business entities and did not fit any statutory exception.

Issues

  1. Must a federal court sitting in diversity apply New York’s “door-closing” statute, BCL § 1314(b), to determine whether an action between foreign business entities may be maintained in New York?
  2. If BCL § 1314(b) applies, did CGG’s contract claim against Dartmouth fit within any of the statute’s exceptions permitting suit in New York?
  3. Can a contractual clause stating the contract is “deemed made” in New York satisfy BCL § 1314(b) when the contract was not, in fact, made in New York?
  4. Does a New York choice-of-law clause (without a forum-selection clause) supply the New York connection required to avoid dismissal under BCL § 1314(b)?
  5. If the action is barred under BCL § 1314(b), must the court vacate a quasi in rem attachment obtained to bring the defendant’s property within the court’s reach?

Decision

  • The court (MacMahon, J.) applied BCL § 1314(b) in this diversity action as a state-law limitation on whether the suit could be maintained in New York.
  • The court held the case did not fall within BCL § 1314(b)’s exceptions permitting one foreign business entity to sue another in New York, because the required New York connection was absent.
  • The court rejected CGG’s reliance on the clause providing that the contract would be “deemed to have been made” in New York, holding that such wording could not change the actual place of contracting for purposes of satisfying the statute.
  • The court held the New York choice-of-law clause did not create the statutory New York nexus, because it addressed only which substantive law would govern and did not select New York as the forum or otherwise supply the connection required by BCL § 1314(b).
  • Because the underlying action was not maintainable in New York under BCL § 1314(b), the court granted Dartmouth’s motion and vacated the attachment; the suit could not proceed in New York on a quasi in rem basis.

Legal Principles

  • New York BCL § 1314(b) restricts when a foreign business entity may sue another foreign corporation in New York; if no statutory exception applies, the action is not maintainable in New York.
  • A federal court sitting in diversity applies BCL § 1314(b) under Erie principles when New York law supplies the rule of decision on maintainability.
  • Contract language “deeming” an agreement made in New York cannot supply a statutory prerequisite when the contract was actually made elsewhere; factual reality controls for BCL § 1314(b) purposes.
  • A choice-of-law clause selecting New York law is not a forum-selection clause and, standing alone, does not establish the New York connection needed to satisfy BCL § 1314(b).
  • When BCL § 1314(b) bars the underlying action, a quasi in rem attachment used to support the case in New York must be vacated because the attachment cannot sustain a non-maintainable action.

Conclusion

In Calzaturificio Giuseppe Garbuio v. Dartmouth Outdoor Sports, the Southern District of New York held that BCL § 1314(b) barred CGG’s diversity contract suit against Dartmouth because both parties were foreign entities and no statutory exception applied; neither the contract’s New York choice-of-law clause nor its “deemed made in New York” recital supplied the required New York connection, so the court vacated the quasi in rem attachment and prevented the action from proceeding in New York.