By: Jeffrey M. Haber Negligent misrepresentation and fraudulent inducement are, to some extent, cut from the same cloth. Both causes of action involve false statements. Often, though not always, the failure to satisfy the elements of one of the claims will result in the failure to satisfy the elements of the other. In Borovina v. ACAP Fund GP, LLC , 2023 N.Y. Slip Op. 05115 (2d Dept. Oct. 11, 2023) (here), the Appellate Division, Second Department affirmed the dismissal of a

By: Jeffrey M. Haber In Gold v. Rothfeld , 2023 N.Y. Slip Op. 05006 (2d Dept. Oct. 4, 2023) ( here ), the Appellate Division, Second Department affirmed the dismissal of a fraud complaint on two grounds: collateral estoppel and failure to plead fraud with particularity. We examine the decision and the principles underpinning the holding below. The Requirement To Plead Fraud With Particularity To state a claim for fraud, a plaintiff must allege “a misrepresentation or a materi

As readers of this Blog know, one of the elements of a fraudulent inducement claim is “justifiable reliance.”

By: Jeffrey M. Haber A suspicious activity report (“SAR”) is a document that financial institutions, broker-dealers, and those associated with their business, must file with the U.S. Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) whenever money laundering or fraud is suspected. In May 2021, this Blog wrote about an enforcement action the Securities and Exchange Commission (“SEC”) brought against a broker-dealer for failing to file SARs in connection wit

By: Jeffrey M. Haber On August 23, 2023, the Appellate Division, Second Department issued two decisions that briefly touched upon fraud causes of action: Hershman v. Bank of N.Y. Mellon , 2023 N.Y. Slip Op. 04369 (2d Dept. Aug. 22, 2023) ( here ), and Hillary Dev., LLC v. Security Title Guar. Corp. of Baltimore , 2023 N.Y. Slip Op. 04370 (2d Dept. Aug. 23, 2023) ( here ). In Hershman , the Court affirmed the dismissal of a fraud claim for failure to state a claim, and in Hill

By: Jeffrey M. Haber In Merchant Factors Corp. v. Crush Apparel & Accessories Inc. , 2023 N.Y. Slip Op. 50755(U) (Sup. Ct., N.Y. County July 21, 2023) ( here ), plaintiff, Merchant Factors Corp., a factoring and commercial financing services provider, brought suit against defendant Crush Apparel & Accessories Inc. (“Crush Apparel”), among others, 1 to recover for an allegedly fraudulent scheme to steal and divert millions of dollars in goods, services, and real property that

By: Jeffrey M. Haber In the merger and acquisition world it is common to form a special purpose acquisition company (“SPAC”). A SPAC is a company with no underlying business operations that is formed to raise capital through an initial public offering (“IPO”) for the purpose of using the proceeds to acquire an unidentified private operating company at a later date but within a specified period of time (typically two years). A SPAC is also known as a blank check company ( i.e.

By: Jeffrey M. Haber In 1990, Congress created the EB-5 Immigrant Investor Visa Program (“EB-5 Program”) to stimulate the U.S. economy through job creation and capital investment by foreign investors. The EB-5 Program offers foreign investors and members of their family an opportunity to obtain permanent residence in the United States ( i.e. , obtain a green card) and provides a source of financing for developers to use in, among other things, construction and business projec

By: Jeffrey M. Haber On October 8, 1971, ABC aired an episode of The Brady Bunch, titled “The Wheeler-Dealer”. In the episode, Greg gets his driver’s license and wants to buy a car of his own. He gets snookered by a friend into buying a lemon for $100. When Greg complains to Mike about how he was conned into the deal, Mike expresses little sympathy and instead gives Greg a lesson on salesmen and the caveat emptor doctrine. The common law doctrine of caveat emptor is a well-ac

By: Jeffrey M. Haber Under the law, the perpetration of a fraud can be the great equalizer between winning and losing a case. For example, a court may relieve a party from the effects of a judgment against it upon, among other things, proof that the judgment was the result of the fraud, misrepresentation, or misconduct by an adverse party. Similarly, a court may exercise its inherent power over its judgments to relieve a party from a judgment obtained through, among other th

By: Jeffrey M. Haber On many occasions, we have written about Ponzi schemes that have been the subject of enforcement actions brought by, and/or settlements with, the Securities and Exchange Commission (“SEC” or the “Commission”). E.g ., here , here , here , and here . It never ceases to amaze us how often people try to run a Ponzi scheme and do so by exploiting the trust and friendship that exist in groups of people who have something in common, such as a religious group, an

By: Jeffrey M. Haber A “short sale” is the sale of a security that the seller does not own or any sale that is consummated by the delivery of a security borrowed by, or for the account of, the seller. In order to deliver the security to the purchaser, the short seller will borrow the security, typically from a broker-dealer or an institutional investor. The short seller later closes out the position by purchasing equivalent securities on the open market, or by using an equiva

By: Jeffrey M. Haber The doctrine of collateral estoppel prevents a party from relitigating an issue that was “raised, necessarily decided and material in the first action,” provided the party had a full and fair opportunity to litigate the issue. 1 Collateral estoppel is an equitable defense “grounded in the facts and realities of a particular litigation, rather than rigid rules.” 2 The proponent of collateral estoppel has the burden of demonstrating “the identicality and

By: Jeffrey M. Haber A common theme in commercial litigation is the assertion of a breach of contract claim and a fraudulent inducement claim. Where both claims are asserted, more times than not, the fraud claim is dismissed under the duplication of claims doctrine – a principle of law that stands for the proposition that a fraud claim cannot stand side-by-side with a breach of contract claim when there is “a valid and enforceable written contract govern a particular subje

Query: does the recipient of an assignment via a contract or a note automatically have the right to assert tort claims, including fraud claims, arising from that contract or note? In SureFire Dividend Capture, LP v. Industrial & Commercial Bank of China Financial Services LLC , 2023 N.Y. Slip Op. 02841 (1st Dept. May 25, 2023) ( here ), the Appellate Division, First Department answered the question in the negative. The reason, as one would expect, depends on the language used

By: Jeffrey M. Haber This Blog has previously written about the benefits of forming a corporation or a limited liability corporation and the perils of ignoring the corporate formalities that are attendant thereto ( see , e.g. , here , here , here , here , and here ). In today’s article, we examine the alleged use of the corporate entity to commit a wrong on another and the court’s unwillingness to pierce the corporate veil to hold the owner personally liable for that wrongful

By: Jeffrey M. Haber To plead a fraud cause of action, a plaintiff must allege: (1) a misrepresentation of material fact; (2) falsity; (3) scienter; (4) justifiable reliance; and (5) damages. 1 Each element of the claim must be satisfied for the plaintiff to prevail on the cause of action. The failure to satisfy each element will result in dismissal of the claim. In Hayes v. Martinez , 2023 N.Y. Slip Op. 02587 (1st Dept. May 11, 2023) ( here ), the Appellate Division, First

By: Jeffrey M. Haber Taxes. Everyone hates paying them. As one might expect, taxpayers often look for any opportunity to minimize their tax obligation. When securities are involved, especially in taxable accounts, a taxpayer may look to his or her broker or investment adviser to develop strategies that will mitigate the tax impact of their investments. An investment adviser may, for example, replace a security with an unrealized loss with another security to capture the tax

By: Jeffrey M. Haber In Lucky of 195 Madison St. Roofing & Contracting Inc. v. Creif, 109 LLC , 2023 N.Y. Slip Op. 02065 (1st Dept. Apr. 20, 2023) ( here ), the Appellate Division, First Department was asked to consider whether a legal opinion issued in connection with a mortgage transaction was fraudulent. As discussed below, the First Department affirmed the holding of the motion court, which found that the legal opinion in question was, for pleading purposes, fraudulent. A

By: Jeffrey M. Haber As we have noted previously, the financial exploitation of seniors is a significant problem ( e.g. , here , here , here , here , and here ). As the incidence of financial exploitation and abuse increases, so do the costs to its victims. An oft-cited study by the MetLife Mature Market Institute, the National Committee for the Prevention of Elder Abuse, and the Center for Gerontology at Virginia Polytechnic Institute and State University, titled “Brok