The New York Supreme Court in Onondaga County dismissed a breach of contract action brought by Bankers Healthcare Group, LLC (“BHG”) in a recent case holding that the court lacked subject matter jurisdiction under New York law. The decision is a reminder that a New York venue clause alone is not always enough to bring an out-of-state commercial dispute into a New York court. We defend many businesses against BHG lawsuits in New York so this is a decision that may a significant effect moving forward.
BHG alleged that the defendant defaulted on a promissory note tied to a financing agreement. The defendant moved to dismiss, arguing among other things that New York lacked personal jurisdiction, he was improperly served, arbitration was required, and Maryland was the proper venue.
In its decision, the court focused on New York General Obligations Law § 5-1402, which allows New York courts to hear certain commercial disputes involving non-residents only when specific statutory requirements are satisfied. Those requirements include a New York choice-of-law provision, a contract value exceeding $1 million, and an agreement to submit to New York jurisdiction.
Here, the financing agreement failed two of the three key requirements. The contract expressly provided that Florida law governed the agreement, and the total financing amount was only $227,477.88, far below the $1 million threshold. Because the parties did not satisfy the statute, the court found no statutory basis to retain the case.
The court also rejected the idea that a clause naming Onondaga County as the venue which is almost always the case in BHG lawsuits that we encounter, could independently create jurisdiction. New York courts have made clear that forum selection language cannot override the limits imposed by General Obligations Law §§ 5-1401 and 5-1402 when the statutory requirements are not met. In other words, the contract’s venue language could not fix the absence of a New York choice-of-law clause and the missing $1 million value requirement.
The court relied on its earlier ruling in Bankers Healthcare Group, LLC v. Pediatric Assoc., Inc., a nearly identical case in which it held that jurisdiction did not lie in New York Supreme Court under the same statutory framework. That prior decision reinforced the court’s conclusion that BHG’s contract structure did not satisfy New York’s jurisdictional rules.
This decision shows that lenders cannot rely on a New York venue clause alone when drafting lower-value financing agreements with out-of-state borrowers. To litigate in New York under GOL § 5-1402, the contract must meet all statutory elements, including a New York choice-of-law clause and a contract amount above $1 million. When those requirements are missing, a New York court may dismiss the case at the outset for lack of subject matter jurisdiction.
A defendant must also review the practical side of this sort of jurisdictional issue before moving to dismiss. A procedural dismissal of this sort does not mean that the case cannot be refiled in another jurisdiction such as Florida in which the choice of law provision was written for, or another jurisdiction that meets the jurisdictional guidelines.
Dismissing in New York just to have to then defend a second case elsewhere may mean that the defendant has to spend more in legal fees and deal with the substantive issues in another jurisdiction that may have unfavorable case law and or difficult opposing counsel. From our experience in dealing with counsel for BHG in New York, we know that they have been willing to engage in negotiation to settle these matters for favorable terms for the businesses that we have defended, sometimes reducing the total balances by 50%-70% and still agreeing to a long term interest-free payment arrangement.
Risking a potential judgment in the defendant’s home state is more of a liability than hypothetically risking one being entered in New York if the defendant has no connection to New York as it would make judgment enforcement difficult for BHG. Deciding to move to dismiss a BHG matter in New York has to be tailored to a very specific approach based on the individual business being represented for these reasons.