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Time Equities v. Naeringsbygg 1 Norge III ,A. S

Franzino and Scher has represented many foreign entities in litigation in New York Supreme Court. One of the recurring issues confronting foreign entities is the question of whether an entity incorporated and domiciled in another country is doing business in New York making it amenable to a lawsuit in New York.

In Time Equities v. Naeringsbygg 1 Norge III ,A. S, Index Number 657906/2015, Justice Sherwood of the New York County’s Commercial Division determined that there is no jurisdiction over a Norwegian limited liability company where the allegations in the complaint were strictly breach of contract and did not include any allegations of fraud.

In that case, plaintiffs, a New York corporation and a Swiss corporation, claimed that Naeringsbygg 1 Norge III, A. S., a Norwegian limited liability company (“NBN III”), breached a letter of intent which had allegedly obligated NBN III to sell the membership interests in a New York limited liability company held by its wholly owned New York subsidiary. NBN III had no office, agents or real property in New York but did have a wholly owned subsidiary in New York, defendant Kommersiella Fastigheter in NY 3 Corp., a New York corporation (“KFS”) which held membership interests in a New York limited liability company.

When NBN III made a motion to dismiss the complaint based upon the lack of personal jurisdiction in New York for NBN III and based upon KFS’ failure to execute the letter of intent, plaintiffs opposed this motion claiming that KFS was merely a shell company and the alter ego for NBN III in New York. Based upon this alter ego theory, plaintiffs claimed that NBN III was amenable to this lawsuit in New York.

Justice Sherwood rejected this defense to the lack of personal jurisdiction finding that the complaint was devoid of the necessary allegations of fraud, an integral component for any alter ego claim. Without allegations of fraud directed towards the transactions in the complaint, Justice Sherwood concluded that there was no jurisdiction in New York. According to Justice Sherwood, this did not deprive plaintiffs of a remedy as they could sue NBN III in Norway.
In the above case, Franzino & Scher represented both NBN III and KFS.

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