LaBelle Creole Intern., S.A., v. Attorney General, 10 N.Y.2d 192, 219 N.Y.S.2d 1 (1961)

Simet, Donald P.

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Buffalo Law Review Volume 11 Number 1 Article 26 10-1-1961 Civil Procedure—Service of Subpoena Upon Foreign Corporation Upheld Donald P. Simet Follow this and additional works at: https://digitalcommons.law.buffalo.edu/buffalolawreview  Part of the Civil Procedure Commons Recommended Citation Donald P. Simet, Civil Procedure—Service of Subpoena Upon Foreign Corporation Upheld, 11 Buff. L. Rev. 92 (1961). Available at: https://digitalcommons.law.buffalo.edu/buffalolawreview/vol11/iss1/26 This The Court of Appeals Term is brought to you for free and open access by the Law Journals at Digital Commons @ University at Buffalo School of Law. It has been accepted for inclusion in Buffalo Law Review by an authorized editor of Digital Commons @ University at Buffalo School of Law. For more information, please contact lawscholar@buffalo.edu. BUFFALO LAW REVIEWin such cases where it tries unsuccessfully to implead and vouch in a thirdparty. The Appellate Division and the Court of Appeals suggested that theplaintiff could have protected itself by inserting a clause in the insurancecontract giving the plaintiff the right to compel the insured to institute a thirdparty action.M. A. L.SERVICE OF SUBPOENA UPON FOREIGN CORPORATION UPHELDThe first question considered by the Court of Appeals in the case of La.Belle Creole Inter., S.A. v. Attorney-General27 was whether a subpoena ducestecum, served upon the petitioner-corporation, was unconstitutionally vagueand indefinite because it failed to show what matters were under investigationby the Attorney General of New York State, or in what manner the documentsrequested by the Attorney General were relevant and material to suchinvestigation. The petitioner-corporation's business consisted of the sale andshipment of duty-free, imported liquor to citizens of the state. The AttorneyGeneral, acting pursuant to his powers under the Executive Law to enjoinrepeatedly fraudulent or illegal acts committed in the conduct of business withinthe state,28 attempted to use the subpoena to command the production of thepetitioner's corporate records for the past ten months at an inquiry into thepossibly fraudulent or illegal acts being committed in the course of petitioner'sbusiness. The petitioner brought a proceeding to vacate the subpoena ducestecum.The subpoena duces tecum has long been a useful investigative tool in thehands of law enforcement officials and, more recently, in the hands ofadministrative bodies.29 No question as to a violation of constitutional rightsagainst self-incrimination and unlawful search and seizure now remains inNew York when the subpoena is used for law enforcement purposes.30 One ofthe more usual grounds for attack of the subpoena has been that it is tooburdensome and oppressive, but generally the courts have been quite liberalin upholding the validity of the subpoena, even though the production of ratherextensive records has been requested by law enforcement officials.31 Theparticular problem raised by the petitioner in the present case is that thesubpoena on its face failed to inform him of the purpose and subject matterof the investigation, and the relevance the requested documents had to suchinvestigation.The Court in the present case admitted that the more preferable practicewould have been for the Attorney General to show on the face of the subpoenathe relevancy of the documents to an inquiry which the Attorney General was27. 10 N.Y.2d 192, 219 N.Y.S.2d 1 (1961).28. N.Y. Executive Law § 63 (12).29. 1 Davis, Administrative Law § 3.04 (1st ed. 1958).30. Dunham v. Ottinger, 243 N.Y. 423, 154 N.E. 289 (1926).31. See, e.g., Manning v. Valente, 297 N.Y. 681, 77 N.E.2d 3 (1947); In re EdgeHo Holding Corp., 256 N.Y. 374, 176 N.E. 537 (1931).92COURT OF APPEALS, 1960 TERMempowered to make. However, the Court held that the subpoena was notrendered invalid by a failure to do so, since a proper inquiry could be made intothe petitioner's business to determine whether repeated illegal acts existed(which were capable of enjoinment under Section 63 of the Executive Law)32in the conduct of petitioner's business, which was subject to regulation underthe Alcoholic Beverage Control Law, and for which inquiry petitioner's recordswere pertinent. The Court stated that it would be sufficient for the AttorneyGeneral to show upon a preliminary motion that the records bore a reasonablerelation to the investigation.The Court's decision is in accord with the broader purpose of furtheringthe investigative process of law enforcement officials. Otherwise, as the Courtobserves, "Investigation will be paralyzed if arguments as to materiality orrelevance, however appropriate at the hearing, are to be transferred upon adoubtful showing to the stage of a preliminary contest as to the obligation ofthe writ."'33 Thus, it seems that any concern over the disadvantage suffered bythe petitioner by virtue of being compelled to answer to a technically imperfectsubpoena is legitimately sublimated to the broader public purpose to be achieved.The second question considered by the Court was whether the petitioner, aforeign corporation, was doing business within New York State, and, therefore,could be subject to service of the subpoena. The petitioner-corporation's onlyrepresentative within the state was a New York State Corporation whichadvertised the petitioner's duty-free liquor service, and which, upon request,supplied order kits to prospective customers for use in ordering liquor from thepetitioner when they were traveling abroad.In civil suits the New York rule is that a foreign corporation will beconsidered to be doing business within the state if the corporation's conductextends beyond mere solicitation of business within the state to other businessactivity, such as conducting the financial affairs of the corporation within thestate.34 However, where the corporation merely has an agent who solicitsbusiness for it as well as for other companies, the corporation will not beconsidered to be doing business within the state.35 The United States SupremeCourt has defined the permissible limits of service on a foreign corporation assomething less than solicitation of business within the state. An insurancecompany that had not solicited insurance business within the state of Californiabecame amenable to service by simply maintaining an insurance contract witha resident of the state, where a California statute provided that such acts wereequivalent to appointment of the Commissioner of Insurance as an agent uponwhom service could be made.36 A different basis upon which a foreign32. Supra note 28.33. Matter of Edge Ho Holding Corp., supra note 31 at 381, 176 N.E. at 539.34. Elish v. St. Louis Southwestern Railway Company, 305 N.Y. 267, 112 N.E.2d842 (1953).35. Miller v. Surf Property, Inc., 4 N.Y.2d 475, 151 N.E.2d 874 (1958).36. McGee v. International Life Insurance Co., 355 U.S. 220 (1957).93BUFFALO LAW REVIEWcorporation may be held to be amenable to service lies in the case of actsviolating state statutes which are punishable by criminal sanction or may beenjoined.3 7In the present case the Court of Appeals held that the petitioner-corporationwas amenable to service of a subpoena on two grounds. First, there wasevidence of at least solicitation within the state by the petitioner, which takentogether with evidence of other business conduct possibly brought out in theinquiry, may have established that petitioner was in fact doing business withinthe state, which would have made the petitioner subject to service. Secondly,the corporation may have been violating the Alcoholic Beverage Control Law,a misdemeanor, which activity could have been enjoined under Section 63 ofthe Executive Law, so that petitioner's possible violation of a state statuterendered it amenable to service.The Court seems to place emphasis on the second ground in concludingthat the petitioner was amenable to service, for the Court states:Be that as it may, though, even if the petitioner's contacts within thisState were deemed to be less than necessary to justify the maintenanceof a civil suit, it is our view that it still would be amenable to thesubpoena ....ssThus the Court seems to be more concerned with upholding the power of theAttorney General to enjoin commission of illegal acts by bringing foreigncorporations within the jurisdiction of the courts than with any abrogation ofthe civil rule (which requires more than mere solicitation of business within thestate) by which a corporation is made subject to service. It seems fair to saythat the present case provides no authority for service of process on foreigncorporations for purposes of a civil suit, especially where it cannot be foundthat the foreign corporation is doing business within New York State underthe currently applied solicitation-plus formula.D.P.S.DEATH ON THE HIGH SEAS ACT HELD TO CONFER CONCURRENT JURISDICTIONAn interesting sequel to Kilberg v. Northeast Airlines, Inc.30 is presented inLedet v. United Aircraft Corporation,40 also decided this term. In this case,the wrongful death occurred on the high seas. The Federal Death on the HighSeas Act, enacted in 1920, provides that in the event of a wrongful deathoccurring at sea beyond the territorial limits of any state or territory of theUnited States, "the personal representative of the decedent may maintain asuit for damages in the district courts of the United States, in admiralty .... 14137. Cf. Travelers Health Ass'n v. Commonwealth of Virginia, 339 U.S. 643 (1950);United States v. Morton Salt Co., 338 U.S. 632 (1950).38. Supra note 27 at 198, 219 N.Y.S.2d at 6.39. 9 N.Y.2d 34, 211 N.Y.S.2d 133 (1961), noted p. 96 infra.40. 10 N.Y.2d 258, 219 N.Y.S.2d 245 (1961). This decision was received too close toprinting time to permit more thorough analysis. A more extensive discussion is planned forthe next issue.41. 46 U.S.C. § 761 (1958).

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Civil Procedure—Service of Subpoena Upon Foreign Corporation Upheld

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Civil Procedure—Service of Subpoena Upon Foreign Corporation Upheld

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