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Had a seller made a fraudulent representation that it had vines to sell when it in fact had none, and had buyers made payment from their domicile in New York for non-existent vines, it would have been obvious that the buyers had sustained injury in New York. The situation is no different because the condition of the vines rather than their existence was misrepresented. One immediate and direct "injury" the seller's alleged tortious misrepresentations caused to the buyers was the loss of the money paid by them for the diseased vines. That injury was immediately felt in New York where the buyers were domiciled and doing business, where they were located when they received the misrepresentations, and where the vines were to be shipped. Thus, the United States District Court for the Eastern District of New York obtained personal jurisdiction over the seller pursuant to N.Y. C.P.L.R. 302(a)(3).
The plaintiff buyers, Long Island Vineyards, Inc., was a New York corporation. Plaintiff ordered wine grapevines from the seller in California. When the vines did not produce grapes that were adequate to make wine, the buyers brought an action against the seller alleging fraud, contract, and torts claims. Asserting diversity, the seller removed the action to the district court and filed a motion to dismiss. The District Court of New York ordered the case dismissed for lack of personal jurisdiction.
Did the District Court of New York have personal jurisdiction over the seller?
The court noted that under N.Y. C.P.L.R. 302(a)(3), personal jurisdiction over the seller required the commission of a tortious act outside of New York that the seller should have expected to cause an injury to the buyers in New York and from which the seller received substantial revenue. The seller contended that the buyers could not convert a contract claim into a tortious act by applying the fraud label. However, the court found that the allegations that the seller knowingly made false statements about the condition of the vines was a claim in tort and that the buyers had suffered an injury in New York where their money was extracted as a result of the seller's misrepresentations. Reversing the dismissal, the court held that the district court had personal jurisdiction over the seller.