Sonera Holding B.V. v. Çukurova Holding A.Ş., No. 12-4280-cv (2d Cir. Apr. 25, 2014) [click for opinion]

Sonera Holding B.V. (“Sonera”), a Dutch holding corporation, brought suit in the Southern District of New York to enforce a final arbitration award against Çukurova Holding A.Ş. (“Çukurova”), the parent company of a large Turkish conglomerate. The parties’ underlying dispute arose out of negotiations for Çukurova’s sale to Sonera of shares in Turkcell Holding A.Ş. (Turkcell Holding”), a Turkish joint stock company that owned a controlling stake in Turkey’s largest mobile phone operator. A Swiss arbitral tribunal found that the parties concluded a share purchase agreement and ordered Çukurova to pay Sonera $932 million in damages for its failure to deliver the shares.

Despite the fact that Çukurova had no operations and owned no property in New York or any of the United States, Sonera asserted – and the district court found – that Çukurova was subject to general jurisdiction in New York based on Çukurova’s own actions and the actions of Çukurova’s affiliates, which, according to Sonera, should be imputed to Çukurova. These actions included (1) negotiations by Çukurova or one of its affiliates (which occurred outside the United States and were ultimately unsuccessful) to sell an interest in a Turkish television broadcaster to two New York-based private equity funds; (2) Çukurova’s sale of American Depository Shares (“ADS”) in Turkcell to an underwriter in London, which subsequently offered the ADS for sale on the New York Stock Exchange; (3) the agreement of Digiturk, a Turkish Çukurova affiliate, to provide digital television content to a U.S.-based company; (4) use of a New York office by two Turkish companies affiliated with Çukurova; and (5) statements on one of Çukurova’s affiliates’ website describing itself as having been “[f]ounded in New York City in 1979” and as Çukurova’s “gateway to the Americas.”

The Second Circuit explained that personal jurisdiction over a foreign defendant in a federal-question case requires a two-step inquiry. First, the court must determine whether the defendant is subject to jurisdiction under the law of the forum state – here, New York. Second, the court considers whether the exercise of personal jurisdiction over the defendant comports with the Due Process Clause of the U.S. Constitution.

Sonera asserted that Çukurova was subject to general jurisdiction in New York pursuant to N.Y. C.P.L.R. 301, which confers jurisdiction where a company has engaged in such a continuous and systematic course of “doing business” in New York that a finding of its “presence” in New York is warranted. Previously, the Second Circuit had interpreted this rule to include an agency theory of jurisdiction that subjects a corporation to general jurisdiction when it relies on a New York representative entity to render services on its behalf that go beyond mere solicitation and are sufficiently important to the foreign entity that the corporation itself would perform equivalent services if no agent were available.

In this case, the appellate court found that the second part of the inquiry, whether the exercise of personal jurisdiction comports with Due Process, foreclosed the exercise of personal jurisdiction, even if Çukurova would be subject to personal jurisdiction under the first prong. Under the Supreme Court’s recent interpretations of International Shoe Co. v. Washington, general jurisdiction exists only when a corporation’s contacts with a state are so continuous and systematic as to render it essentially “at home” in the forum state.

Recently, the Supreme Court has noted that the natural result of the “at home” requirement is that only a limited set of affiliations with a forum will render a defendant amenable to all-purpose jurisdiction there. A corporation that operates in many places can scarcely be found “at home” in all of them. Even though International Shoe’s progeny do not hold that a corporation may be subject to general jurisdiction only in a forum where it is incorporated or has its principal place of business, they do make it clear that a company’s engagement in a substantial, continuous, and systematic course of business is alone insufficient to render it at home in a forum.

The Second Circuit questioned, but did not decide, whether New York’s agency principles and “doing business” test could survive in light of the Supreme Court’s evolving “at home” analysis. In any event, the court found that the four contacts listed by Sonera did not individually or together demonstrate that Çukurova was “at home” in New York.

Finally, the court rejected the suggestion that the parties’ Letter Agreement meant that Çukurova had expressly consented to the forum’s jurisdiction. The Letter Agreement’s standard entry-of-judgment clause explained that, following any arbitration award, a court of the arbitral venue or in any jurisdiction in which the parties’ persons or asset are located would have jurisdiction to enter judgment on that award. It did not speak to personal jurisdiction, and the court refused to interpret it as suggesting Çukurova consented to personal jurisdiction in New York.