78 S. Ct. at 199. Here, the Court does not perceive that New York has any interest in this case whatsoever, let alone the "manifest interest" present in McGee. First, SPI did not solicit Slapshot's business in New York; in fact, it was plaintiff's Florida office which solicited defendant's business in Georgia. Second, SPI accepted the offer in Georgia. Third, the plaintiff's payment was wired from plaintiff's Florida office to defendant's Georgia bank account. Fourth, the alleged failure to fulfill the terms of the contract occurred outside New York.
"So far as [this Court is] aware, no court has extended § 302[a] to reach a nondomiciliary who never entered New York, who was solicited outside of New York to [deliver equipment] outside of New York, who [delivered] outside of New York such [equipment] as was delivered, and who is alleged to have neglected to [deliver adequate equipment] outside of New York." Mayes v. Leipziger 674 F.2d at 185. The Court finds that under these circumstances, the New York courts would not exercise jurisdiction solely on the basis that the Georgia defendant attempted to resolve its dispute with the plaintiff by communicating with the company via telephone, letter and facsimile.
C. Plaintiff's Request for Additional Discovery on the Issue of Jurisdiction Under CPLR § 302(a)(3): Tortious Conduct Outside New York Causing Injury to Plaintiff Within New York
Plaintiff requests that in the event this Court finds that the defendant did not "transact business" within the State of New York as defined by CPLR § 302(a)(1), the parties be afforded the opportunity to engage in limited discovery on the issue whether the defendant is "doing business" in New York and, hence, is subject to jurisdiction under CPLR § 302(a)(3). That section confers jurisdiction over non-domiciliaries who commit a "tortious act" outside New York, causing injury to persons or property within New York, provided that the tortfeasor either: (1) regularly does or solicits business, engages in persistent conduct, or derives substantial revenue from goods used or consumed or services rendered, in the State; or (2) expects or should reasonably expect the tortious act to have consequences in New York and derives substantial revenue from interstate or international commerce. In support of its application for an order permitting limited discovery on the issue whether defendant is "doing business" in New York under the statute, the plaintiff simply points to the affirmation of Polly Miller, SPI's Secretary, which indicates that "SPI does occasionally ship packaging machinery into the State of New York . . . between one and four times per year." (Affirmation of Polly Miller, P 9). The plaintiff's application suffers from several fatal flaws.
The plaintiff ignores the fact that CPLR § 302(a)(3) contains two threshold requirements that must be met before the Court should even concern itself with the issue whether defendant is "doing business" in New York. Specifically, the statute requires a demonstration that (1) the defendant committed a "tortious act" outside New York; and (2) the "tortious act" caused injury to persons or property within New York. In the absence of any briefing on the issue by either party, the Court, in the interests of judicial economy, will nevertheless consider whether the plaintiff has made a threshold showing of the jurisdictional significance of its contentions so as to warrant an order compelling limited discovery on the issue of the defendant's "doing business" in New York.
Addressing the first prong of CPLR § 302(a)(3), the Court must decide whether the plaintiff properly has alleged that the defendant committed a "tortious act" outside New York. A breach of contract does not constitute a tortious act under CPLR § 302(a)(3). See Amigo Foods Corp. v. Marine Midland Bank-New York, 39 N.Y.2d 391, 396, 384 N.Y.S.2d 124, 127, 348 N.E.2d 581 (1976). "By merely alleging a tortious act, [a plaintiff] may not convert a simple breach of contract case into a tort for jurisdictional purposes." Kulas v. Adachi, 1997 U.S. Dist. LEXIS 6868, No. 96 CV 6674 (MBM), 1997 WL 256957, at *8 (S.D.N.Y. May 16, 1997)(quoting Electro Magnetic (S) Ltd. v. Sea Cargo Int'l. Inc., 1991 U.S. Dist. LEXIS 10980, No. 90 CV 6335, 1991 WL 156371, at *2 (S.D.N.Y. August 7, 1991). Therefore, the Court must ascertain whether the plaintiff has properly alleged tort claims of fraud and loss of goodwill.
The plaintiff asserts that SPI breached the contract by delivering machinery that did meet the agreed-upon specifications. The plaintiff also alleges that SPI defrauded Slapshot by representing to plaintiff that the machinery was in good working condition, had new electrical wiring inside of it and was equipped with the necessary filling equipment when, in fact, the defendant "knew" that the machinery had no filling equipment, and contained wiring that was "antiquated by industry standards" (Compl. PP 40-47). According to the complaint, the plaintiff, "in reliance on the representations of defendant, was induced to pay to defendant the sum of $ 31,800 for said equipment." (Compl. PP 40-47). The plaintiff further asserts that because of SPI's delivery of inadequate machinery, Slapshot has not been able to produce any alcoholic beverages from August of 1995 until the present and, therefore, has been unable to fulfill any of its contractual obligations to its customers. Thus, the plaintiff alleges, "as a result of defendant's actions, plaintiff's reputation and good will have been permanently damaged" (Compl. PP 48-54).
The Court cannot accept plaintiff's contention that SPI committed a tortious act within the State of New York by making fraudulent misrepresentations in order to induce plaintiff to enter into the contract and thus is subject to jurisdiction under CPLR section 302(a)(3). "The essence of the alleged misstatements is that [SPI] would satisfactorily perform the contract. Thus, plaintiff is merely attempting to transform a breach of contract into a tort for jurisdictional purposes. Such characterizations are not a basis to ground jurisdiction under New York's long arm statute." Trafalgar Capital Corp. v. Oil Producers Equipment Corp., 555 F. Supp. 305 (S.D.N.Y. 1983); see also Sudul v. Computer Outsourcing Servs., 868 F. Supp. 59, 61-62 (S.D.N.Y. 1994)(citations omitted)("Mere allegations of breach of contract do not give rise to claim for fraud or fraudulent inducement."); Rolls-Royce Motor Cars, Inc. v. Schudroff, 929 F. Supp. 117, 123 (S.D.N.Y. 1996). The Court agrees with Judge Weinstein's observation that:
Accepting plaintiff's theory would have the effect of an unwarranted and unintended extension of "long arm" jurisdiction to almost any contract action where plaintiff was a New York domiciliary. Whether or not the reach would be unconstitutional, it would be contrary to legislative design as revealed in CPLR § 302.
Stanat Mfg. Co. v. Imperial Metal Finishing Co., 325 F. Supp. 794, 796 (E.D.N.Y. 1971).
Equally untenable is plaintiff's position -- to the extent its position is even fleshed out -- that its loss of "good will" constitutes a cognizable tort action. Again, to the extent that the plaintiff is alleging that SPI's failure to deliver the goods specified in the contract caused damage to Slapshot's reputation, it is obvious that the gravamen of plaintiff's claim is breach of the sales contract. For the aforementioned reasons, this Court cannot retain jurisdiction over plaintiff's putative tort claims under section 302(a)(3).
Even if this Court were to conclude that plaintiff's claims for fraud and loss of good will were sounding in tort, it nevertheless would decline to exercise jurisdiction over SPI because the defendant's alleged activities did not "cause an injury to plaintiff within the State of New York," as is required under CPLR § 302(a)(3). To assert jurisdiction under 302(a)(3), "the injury within the state must be 'direct, and not remote or consequential.'" Interface Biomedical Laboratories Corp. v. Axiom Medical, Inc., 600 F. Supp. 731, 738 (E.D.N.Y. 1985)(quoting Faherty v. Fender, 572 F. Supp. 142, 149 [S.D.N.Y. 1983]). Thus, the New York State Court of Appeals has held that "residence or domicile of the injured party within the State is not sufficient predicate for jurisdiction, which must be based upon a more direct injury within the State and a closer expectation of consequences within the State than the indirect financial loss resulting from the fact that the injured party resides or is domiciled there." Fantis Foods, Inc. v. Standard Importing Co., 49 N.Y.2d 317, 326, 425 N.Y.S.2d 783, 787, 402 N.E.2d 122, 126 (1980). Judge Glasser has noted that in commercial tort actions, the courts have "uniformly held that the mere fact that the plaintiff resides in New York and therefore ultimately experiences a financial loss there is not a sufficient basis for jurisdiction under § 302(a)(3). (citations omitted). In all of these cases, the courts held that the place of injury was where the defendant conducted the alleged improper sale of goods or services or wrongfully manufactured the goods." Interface Biomedical Laboratories Corp. v. Axiom Medical, Inc., 600 F. Supp. at 738. In this case, the sale of allegedly defective equipment took place between a Georgia Company and a Florida Company and involved the delivery of machinery from North Carolina to Wisconsin. The injury therefore, if any, occurred outside this State. The Court concludes that it cannot assert jurisdiction over SPI under CPLR § 302(a)(3).
Finally, "while the general rule in this Circuit favors limited discovery which may ultimately establish the truth of plaintiff's contentions or may provide a further factual basis for jurisdiction, plaintiff has failed to make a threshold showing of jurisdictional significance of its contentions or any suggestion that defendant is in possession of further facts which may resolve the jurisdictional issue." Continental Field Service Corp. v. ITEC International, 894 F. Supp. 151, 152 n. 2 (S.D.N.Y. 1995)(citations omitted). The Court is not persuaded --especially in the absence of any argument on the subject by the plaintiff -- that discovery would aid the plaintiff is establishing facts that would convince the Court to exercise jurisdiction under CPLR § 302(a)(3). Plaintiff requests discovery solely on the issue of SPI's conduct which amounts to "doing business" in New York. However, the issue is irrelevant, given plaintiff's failure to allege that SPI committed a "tortious act" outside New York which caused injuries to Slapshot in New York.
For the reasons set forth above, the defendant's motion to dismiss the complaint for lack of personal jurisdiction over the defendant is granted, and the plaintiff's application for an order directing further discovery is denied.
The complaint is dismissed and the Clerk is directed to close this case.
Dated: Uniondale, New York
October 14, 1997
Hon. Arthur D. Spatt
United States District Judge
© 1992-2004 VersusLaw Inc.