Background
Todd Katz, a preferred stockholder of Navios Maritime Holdings, Inc. — a foreign shipping company — brought a breach of contract action in New York Supreme Court, alleging that Navios failed to pay dividends owed on his preferred shares. Navios moved to dismiss for lack of personal jurisdiction under CPLR 3211(a)(8), arguing it had insufficient contacts with New York to be sued here.
The preferred stock was issued pursuant to certificates of designation that required Navios to distribute dividends through a New York-based paying agent, which then forwarded funds to a depository that paid out to preferred stockholders. Navios’s agreements with its depositories required each to maintain facilities in New York City. Navios also contracted with multiple New York-based underwriters to sell the preferred stock. Supreme Court nonetheless granted the motion to dismiss, finding Navios had not engaged in sufficient purposeful activity in New York to confer long-arm jurisdiction under CPLR 302(a)(1). Katz appealed.
The Court’s Holding
The First Department reversed, holding that New York courts have personal jurisdiction over Navios under CPLR 302(a)(1). That provision confers jurisdiction over a non-domiciliary who “transacts any business within the state” when the cause of action arises from that transaction.
The court found that Navios purposefully availed itself of New York by (1) designating a New York entity as the paying agent for dividend distributions; (2) contracting with depositories that were required by agreement to maintain facilities in New York City; and (3) contracting with multiple New York-based underwriters to sell the preferred stock. These were not passive or incidental New York contacts — they were deliberate transactional choices that established a New York nexus for the very contractual machinery through which Navios was supposed to pay its preferred stockholders.
On the nexus requirement, the court confirmed that the New York contacts need not be the sole cause of the breach; it suffices that “at least one element” of the breach of contract claim arises from the New York contacts. Here, the alleged failure to deliver dividends through the New York paying agent and depository directly relates to those New York-based contractual arrangements.
Key Takeaways
- A foreign issuer that designates New York entities as paying agent and depository for preferred-stock dividends, and requires those entities to maintain New York City facilities, transacts business in New York within the meaning of CPLR 302(a)(1).
- Using New York underwriters to sell securities is an additional contact supporting long-arm jurisdiction over a breach of contract claim related to those securities.
- Under CPLR 302(a)(1), the cause of action need not arise solely from New York contacts — it suffices that at least one element of the claim relates to the New York transaction.
- A foreign defendant that routes its investor relations and payment obligations through New York financial infrastructure cannot disclaim New York jurisdiction over disputes arising from those obligations.
Why It Matters
This decision is significant for the New York securities and commercial litigation bar. Foreign public companies that list equity or debt in U.S. markets commonly rely on New York-based paying agents, depositories, and underwriters — often without appreciating that those contractual choices can anchor them in New York courts for claims arising from those securities. This case establishes that when a foreign issuer’s preferred-stock payment mechanism runs through New York infrastructure, and the issuer’s contracts with that infrastructure require New York facilities, New York courts have long-arm jurisdiction over breach claims by investors.
The holding also refines the CPLR 302(a)(1) nexus analysis: plaintiffs do not need to show that every element of their contract claim arose in New York — one element is enough. In the preferred-stock dividend context, the failure to deliver payments through a New York paying agent satisfies that test. Holders of preferred stock in foreign-listed companies whose payment structures run through New York should view this decision as expanding the venues available to them.