Sunday, July 17, 2005

New York's Long Arm Falls Short Over E-mail

Longtime TFM fan, Sean Selk of Palm Beach County, Florida, submits an interesting tale from New York regarding using e-mails to purchase legal services "site-unseen" and the requirements of "sufficient contacts" for New York courts to exercise jurisdiction under that state's long-arm statute.

Late last week, a Manhattan Supreme Court ruled that e-mails and telephone correspondence between a law firm and its South Korean client failed to rise to the level of "sufficient contacts" in the State of New York. The Manhattan firm of Chadbourne & Parke sued its client in New York court over its failure to pay fees to the firm. The South Korean client and the firm never actually met in person and conducted all business over the Internet and telephone. This fact seemed to impress the Court the most, as the client never even once travelled to New York to meet with its firm, despite copious legal services performed on its behalf in New York and elsewhere by the firm.

The track record of American companies trying to sue Chinese and Taiwanese defendants in Asian courts is dismal. Asian firms enjoy a tremendous advantage from bias over the "home field advantage". Furthermore, Chinese and Korean courts in particular, have long suffered from the perception that "rule of law" is more an entrepreneurial endeavor than the pursuit of justice. So, it is no wonder that Chadborne & Parke sought personal jurisdiction for the court in New York as purusing remedies abroad would be both tedious and a waste of time.

E-mail is also one of many electronic tools which have helped to make the legal profession more agile, effective and timely. Furthermore, it has empowered small and solo practitioners to proficiently serve clients in regions far outside of their own local, parochial neighborhoods. It goes without saying that the American Bar Association, among others, has spent great amounts of time and money promoting such tools in the practice of law as well as legitimizing electronic means of signature transmission in order to usher in a new era of transactions over the Internet.

Given that foreign clients are more likely to stiff U.S. lawyers and other professionals for their fees (as well as expenses), will the New York court's ruling make practitioners in New York and elsewhere think twice before taking foreign clients they will only meet over the Internet?

Have you or your firm ever worked for a client that you have never met?


Anonymous Anonymous said...

It is important to remember that the key to the case was that the legal work, while physically being undertaken in New York, was not to be "performed" in New York. If the legal work would have been for litigation in NY or corporate work for a NY corp. the outcome would have been different.

As a learning tool, the case suggests that as your practice becomes more and more "digital" and "global" that it is important to remember the simple lessons from civ pro when it comes to your own business. I wonder if there was a written contract for legal representation and if it contained a clause which stated that in a dispute over legal fees that NY would be the proper forum?

Blogger Unknown Attorney said...

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Blogger Unknown Attorney said...

Anon. Interesting point. The article does seem to suggest that C&P should have sought another jurisdiction from which to pursue Remote (such as Delaware). However, given the same set of e-mail/telephonic circumstances: what if the work done on behalf of Remote didn't involve actually going to court, or mediation or anything else outside of the firm's four walls? What if C&P was only hired to advise Remote on a contractual issue involving a customer in another country?

I am not sure about the choice of forum clause issue. Most retainer agreements that I have seen from large, national law firms do not include them. However, the DC Bar is more prescriptive than most as to what things must and cannot be included in a retainer agreement. I will check on this.

Anonymous Anonymous said...

This is why doctors and dentists make you pay upfront! Once the tooth is pulled, you can't put it back in.

I always have a forum/jurisdiction clause in my retainer agreements. It just makes sense.

Big firms likely don't have the clauses in the retainer agreements because they likely don't have non-paying clients as frequently as small firms or solo practitioners.


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