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Posted: October 17, 2020

Court Rejects Allegation That Venue was Proper When Alleged Fraud Took Place Elsewhere

On October 9, 2020, the Fourth Department issued a decision in Harvard Steel Sales, LLC v. Bain, 2020 NY Slip Op. 05635, holding venue in a fraud case was not proper in Eire County when no party resided in Erie County and the alleged fraudulent statements were not made in Erie County, explaining:

The decision whether to grant a change of venue is committed to the sound discretion of the trial court, and will not be disturbed absent a clear abuse of discretion. Three grounds are available for a change of venue: (1) the county designated for that purpose is not a proper county; (2) there is reason to believe that an impartial trial cannot be had in the proper county; or (3) the convenience of material witnesses and the ends of justice will be promoted by the change. To effect a change of venue pursuant to CPLR 510(1), a defendant must show both that the plaintiff’s choice of venue is improper and that its choice of venue is proper. Venue is proper in the first instance in a county where one of the parties resides, a county where a substantial part of the events or omissions giving rise to the claim occurred, or, if none of the parties resides in the state, any county designated by the plaintiff.

Here, New York County is indisputably a proper county based upon defendant’s residence therein. Because none of the parties resides in Erie County, the sole question before the trial court was whether a substantial part of the events or omissions giving rise to the claim occurred in Erie County. We note that plaintiff did not cross-move to retain venue in Erie County pursuant to CPLR 510(3), and thus its averments and arguments related to the convenience of material witnesses are irrelevant.

The legislature only recently added a provision to CPLR 503(a) that allows venue based on the location of the events underlying the claim, but the Federal Rules of Civil Procedure contain an identical provision, doubtless the model for the amended language in CPLR 503(a). In determining whether venue is proper under that provision, the Second Circuit applies a two-part inquiry. First, the court must identify the nature of the claims and the acts or omissions that the plaintiff alleges give rise to those claims. Second, the court must determine whether a substantial part of those acts or omissions occurred in the district where suit was filed, that is, whether significant events or omissions material to those claims have occurred in the district in question. In a fraud claim, the act giving rise to the claim is the alleged making of the fraudulent statement. Consistent with that, federal courts have found venue to be proper based upon where the defendant allegedly made the fraudulent statements.

The question thus becomes whether defendant made fraudulent statements in Erie County that materially contributed to plaintiff’s decision to enter into the agreement. Defendant showed in the first instance that the critical misrepresentations attributed to him on November 7, 2012 were actually made in Cleveland, Ohio—a fact that plaintiff does not dispute. Plaintiff, in opposition, failed to show that material, fraudulent statements were made in Erie County. Plaintiff’s affidavit does not attribute specific false statements to defendant, other than that defendant misrepresented that Galvstar could consistently produce prime quality galvanized steel from its Buffalo facility. That averment is ambiguous, however. The Buffalo facility may refer to the place where defendant was when he made the allegedly false statements or to the place where the steel was to be produced. Without unambiguous allegations of specific false statements made by defendant in Erie County that contributed to plaintiff’s decision to enter into the agreement, we cannot conclude that the court abused its discretion in granting defendant’s motion to change the place of trial to New York County.

(Internal quotations and citations omitted).

New York procedural law dictates which county an action can be brought in. The rules are flexible, as this decision shows, but it is possible to run afoul of them and have a lawsuit transferred to a county you did not want to be in. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client face a situation where you are unsure where in New York an action may properly be brought.

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Posted in Commercial, Venue
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