“We make premium widgets with the highest quality metals.” Assume for the moment, the widgets are made from alloys that are prone to imperfections. Also assume that the speaker sincerely believed the statement to be true, notwithstanding the instances of imperfections. Is this statement an actionable fraud? In Matter of Sundial Growers, Inc. Sec. Litig. , 2021 N.Y. Slip Op. 01014 (1st Dept.Feb. 16, 2021) ( here ), the Court considered this question and, as discussed below, he

In mid-December 2020, the Securities and Exchange Commission (“SEC” or “Commission”) issued an investor alert (here), warning of “Investment Scam Complaints on the Rise.” In the alert, the SEC urged investors to be on the lookout for investment scams, such as Ponzi schemes, fake CD scams, bogus stock promotions, and community-based financial scams. The SEC said that during the COVID-19 pandemic it had experienced a significant uptick in tips, complaints, and referrals involvi

On January 19, 2021, the Appellate Division, First Department issued three decisions involving claims of fraud. See United Natural Foods, Inc. v. Goldman Sachs Grp. , 2021 N.Y. Slip Op. 00276 (1st Dept. Jan. 19, 2021) ( here ); KS Trade LLC v. International Gemological Inst., Inc. , 2021 N.Y. Slip Op. 00259 (1st Dept. Jan. 19, 2021) ( here ); and Itria Ventures LLC v. Provident Bank , 2021 N.Y. Slip Op. 00257 (1st Dept. Jan. 19, 2021) ( here ). Although these cases involved d

It has long been held that “promissory statements as to what will be done in the future are not actionable.” Adams v. Clark , 239 N.Y. 403, 410 (1925). However, when the promissory statement is “made with a preconceived and undisclosed intention of not performing it,” it becomes an actionable misrepresentation of existing fact. Sabo v. Delman , 3 N.Y.2d 155 (1957). The foregoing principles have been examined by this Blog numerous times ( e.g. , here and here ). In today’s ar

When a person claims fraud, he/she typically claims that the alleged wrongdoer made an affirmative misrepresentation of fact. Fraud does not, however, always concern an affirmative statement. Sometimes a person can perpetrate a fraud through the omission of a material fact. For this reason, when alleging fraud, a plaintiff may allege that the defendant made “a misrepresentation or a material omission of fact which was false and known to be false.” Mandarin Trading Ltd. v. Wil

A “recurring question” courts in New York grapple with is whether the facts alleged in a complaint give rise to sustainable claims for both breach of contract and fraudulent inducement. Cronos Grp. v. XComIP, LLC , 156 A.D.3d 54, 56 (1st Dept. 2017). Readers of this Blog know that a fraud claim, which “ar from the same facts , s identical damages and d not allege a breach of any duty collateral to or independent of the parties’ agreements<,> is subject to dismissal as red

To plead a claim for fraud in the inducement or fraudulent concealment, a plaintiff must allege facts to support the claim that it justifiably relied on the alleged misrepresentations. A sophisticated party, like the plaintiff in MBF Clearing Corp. v. JPMorgan Chase Bank, N.A. , 2020 N.Y. Slip Op. 07504 (1st Dept. Dec. 15, 2020) ( here ), must allege that it exercised due diligence and took affirmative steps “to protect itself against deception.” DDJ Mgt., LLC v. Rhone Group

In New York, foreign entities – that is, corporations, limited liability companies and partnerships authorized to do business in another jurisdiction or country – are required to register to business with the Secretary of State. See BCL § 1312(a). The failure to receive such authority deprives the foreign entity of the ability to affirmatively access the courts of New York and subjects any action commenced by the foreign entity to dismissal. See United Envtl. Techniques, Inc

Hang on Sloopy was a hit song in the mid-1960s. Years later, the band that performed and recorded the song – the McCoys – claimed that they were cheated out of substantial sums of money due to fraud. That claim, however, was time-barred, held the Court in Derringer v F.G.G. Prods. Inc. , 2020 N.Y. Slip Op. 33854(U) (Sup. Ct., N.Y. County Nov. 18, 2020) ( here ). Fraud claims must be commenced within “the greater of six years from the date the cause of action accrued or two ye

Sometimes, a case involves facts and circumstances that, on their face, lead a court to determine that a fraud was committed. Such was the case in First Franklin Fin. Corp. v. Merchant , 2020 N.Y. Slip Op. 06852 (1st Dept. Nov. 19, 2020) ( here ). In First Franklin , a judgment debtor transferred property subject to a foreclosure sale to a company that he had formed all on the same day. Such facts and circumstances, said the lower court, represented “badges of fraud” under f

Disputes between an insured and insurer occur all the time. These disputes often concern whether the policy covers a certain event. Sometimes, as in AB Oil Servs., Ltd. v. TCE Ins. Servs., Inc. , 2020 N.Y. Slip Op. 06232 (2d Dept. Nov. 4, 2020) ( here ), the dispute concerns the alleged failure to satisfy a specific request for coverage not already provided in one’s policy. Other times, the dispute concerns alleged fraud and negligent misrepresentation ( i.e. , breach of a du

Readers of this Blog know that, as a general matter, New York courts will not permit a fraud-based claim ( i.e. , fraudulent inducement) to survive a motion to dismiss when the claim arises from a breach of contract. Indeed, courts routinely dismiss a fraud claim where “ he existence of a valid and enforceable written contract govern a particular subject matter” and the recovery sought arises out of the same facts and circumstances. Clark-Fitzpatrick v. Long Is. , 70 N.Y.2d

In order for the conduct of business to proceed in an orderly fashion, folks need to be confident that, in general, the contracts that they enter into, particularly when “the parties set down their agreements in a clear, complete document” will “be enforced according to terms”. 159 MP Corp. v. Redbridge Bedford, LLC , 33 N.Y.3d 353, 358 (2019) (citations and internal quotation marks omitted). This is consistent with the notion that “ n New York, agreements negotiated at ar

A Ponzi scheme is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors. Ponzi scheme organizers often solicit new investors by promising to invest funds in opportunities claimed to generate high returns with little or no risk. With little or no legitimate earnings, Ponzi schemes require a constant flow of money from new investors to continue. Ponzi schemes inevitably collapse, most often when it becom

Conducting business with family, friends, or neighbors can be a rewarding endeavor. But, like any relationship, it can also be painful, both emotionally and economically. When the latter occurs, lawsuits can follow. The same is true with romantic relationships, especially when the health and well-being of a party to the relationship is at issue. In today’s Fraud Notes, we examine two “relationship” cases. In Salimi v. Raffaelle , 2020 N.Y. Slip Op. 32749(U) (Sup. Ct., N.Y. C

Over the past several months, this Blog has examined cases in which plaintiffs brought contract claims and fraud claims in the same action ( here , here and here ). As discussed in those posts, the courts dismissed the cases because the plaintiffs failed to allege an independent basis upon which the claims could stand side-by-side. Similarly, this Blog has examined cases involving veil piercing and the Statute of Fraud. As to the former, the courts dismissed the actions bec

It is not uncommon for plaintiffs to assert breach of contract and fraud in the same action. It is also not uncommon for the fraud claim to be dismissed as duplicative of the contract claim. Indeed, the reporters are brimming with cases in which the fraud claim is dismissed because it is nothing more than a breach of contract claim dressed up in the language of fraud. The cases we examine today, East Coast Int’l Tire Group, Inc. v. New York Tire Factory, Inc. , 2020 N.Y. Slip

We have often written about the justifiable reliance element of a fraud claim ( e.g. , here , here , here , here , and here ). Though the outcome of the issue is typically fact dependent, dismissals nevertheless occur because the plaintiff cannot demonstrate that reliance was reasonable or justified. Such was the case (for the most part) in Carmen E. Maestro Family Trust v. 449 Washington LLC , 2020 N.Y. Slip Op. 32054(U) (Sup. Ct., Kings County June 22, 2020) ( here ), the s

It is well settled that a plaintiff may not “dress up a breach-of-contract claim as a fraud claim.” Cohen v. Koenig , 25 F.3d 1168, 1173 (2d Cir. 1994) (internal quotation marks omitted). In prior posts, we referred to this principle as the duplication of claims doctrine ( here , here and here ). In order for a tort claim to be actionable, there must be “a legal duty independent of the contract” that “has been violated.” Clark-Fitzpatrick, Inc. v. Long Is. R.R. Co. , 70 N.Y

Just recently, we wrote about the importance of pleading fraud with particularity ( here ). As readers of this Blog know, when fraud is alleged, the plaintiff must plead the claim with particularity. Under CPLR § 3016 (b), the circumstances constituting fraud must be stated with sufficient detail “to permit a reasonable inference of the alleged conduct.” Pludeman v. Northern Leasing Sys., Inc. , 10 N.Y.3d 486, 491 (2008) (citation omitted). To satisfy the particularity requi