## Facts

- A New York vineyard operator and its president purchased wine grape vines from a California nursery after receiving representations that the vines were healthy, disease-free, and suitable for commercial wine production.
- The nursery shipped the vines from California to the plaintiffs’ vineyard in New York.
- Plaintiffs alleged the representations were knowingly false and that the delivered vines were diseased and incapable of producing adequate fruit for plaintiffs’ commercial purposes.
- Plaintiffs asserted claims for fraud, breach of contract, breach of express warranty, breach of implied warranties, and negligent performance of the contract.
- The case was filed in New York state court, removed to federal court on diversity grounds, and dismissed by the district court for lack of personal jurisdiction over the California defendant.

## Issues

1. Whether New York’s long-arm statute, CPLR § 302(a)(3), permitted personal jurisdiction over an out-of-state seller for alleged fraudulent misrepresentations made outside New York that led to shipment of defective goods into New York.
2. Whether the alleged “injury to person or property within the state” occurred in New York (where plaintiffs’ business and property were located) or outside the state (where the goods were produced and statements originated).

## Decision

- The Second Circuit reversed the dismissal and remanded.
- The court held that the fraud claim alleged a tortious act committed outside New York causing injury to person or property within New York under CPLR § 302(a)(3).
- The court found the defendant should reasonably have expected consequences in New York because it directed representations to New York purchasers and shipped the vines to New York for use there.
- The court concluded the statutory requirement that the defendant derive substantial revenue from interstate commerce was satisfied by the defendant’s out-of-state commercial sales and shipments, including into New York.

## Legal Principles

- Under CPLR § 302(a)(3), New York may exercise jurisdiction over a nondomiciliary who commits a tort outside the state that causes in-state injury, where the defendant should reasonably expect in-state consequences and derives substantial revenue from interstate or international commerce.
- Fraudulent misrepresentations made outside New York and directed to New York residents can constitute a qualifying out-of-state tort for § 302(a)(3) purposes.
- For § 302(a)(3), the situs of injury may be New York when the direct and immediate result of the misrepresentation is economic loss in New York and harm to New York-based business property, even if the misrepresentation originated elsewhere.
- Purposeful commercial dealings with New York residents, including directing representations into New York and shipping goods into New York, can supply sufficient contacts to satisfy due process when the asserted claim arises from those acts.

## Conclusion

The court held that New York’s long-arm statute permitted personal jurisdiction over an out-of-state nursery on a fraud theory where the defendant allegedly made intentional misrepresentations to New York buyers, shipped diseased vines into New York, and thereby caused direct economic and property injury in New York, warranting reversal of the jurisdictional dismissal and remand for further proceedings.


Hargrave v. Oki Nursery, Inc., 636 F.2d 897 (2d Cir. 1980)