By: Jeffrey M. Haber Under New York law, an action based upon fraud must be commenced within six years of the date the cause of action accrued, or within two years of the time the plaintiff discovered or could have discovered the fraud with reasonable diligence, whichever is greater. 1 The cause of action accrues when “every element of the claim, including injury, can truthfully be alleged”, 2 “even though the injured party may be ignorant of the existence of the wrong or i

By: Jeffrey M. Haber A recurring theme in fraud jurisprudence is the dismissal of fraud claims that duplicate breach of contract claims. As we have noted, a fraud claim will not survive a dismissal motion when there is “a valid and enforceable written contract govern a particular subject matter” and the recovery sought arises out of the same facts and circumstances. 1 There are exceptions to this rule, such as where “a legal duty independent of the contract itself has been

By: Jeffrey M. Haber A common theme in commercial litigation is the assertion of a breach of contract claim and a fraudulent inducement claim. As readers of this Blog know, where both claims are asserted, more times than not, the fraud claim is dismissed under the duplication of claims doctrine. Stated simply, the doctrine provides 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 pa

By: Jeffrey M. Haber When someone speaks of a dispute resolution clause, lawyers most likely think the speaker is referring to an arbitration clause. But, as discussed in Innovative Concepts & Design, LLC v. AL Infinity, LLC , 2022 N.Y. Slip Op. 01122 (1st Dept. Feb. 22, 2022) ( here ), a dispute resolution clause can be something completely different. It can place dispute resolution in the hands of one of the parties to a contract. Such clauses are binding and enforced by th

By: Jeffrey M. Haber It is not uncommon for parties in commercial transactions to include in their contracts a provision that limits the types of damages recoverable in the event of a breach. Typically, these provisions include a limitation on the recovery of lost profits. An example of such a provision can be found in the agreement before the court in Rising Sun Constr. L.L.C. v. CabGram Dev. LLC , 2022 N.Y. Slip Op. 00989 (1st Dept. Feb. 15, 2022) ( here ). In New York, and

By: Jeffrey M. Haber Under New York law, an action based upon fraud must be commenced within six years of the date the cause of action accrued, or within two years of the time, the plaintiff discovered or could have discovered the fraud with reasonable diligence, whichever is greater. 1 The cause of action accrues when “every element of the claim, including injury, can truthfully be alleged”, 2 “even though the injured party may be ignorant of the existence of the wrong or

By: Jeffrey M. Haber On April 4, 2020, the New York Uniform Voidable Transactions Act (“NYUVTA”) became effective, replacing Article 10, Sections 270-281 of the Debtor and Creditor Law (“DCL”), the State’s almost century-old fraudulent conveyance law. This Blog previously examined the NYUVTA, the DCL and the changes the NYUVTA made to the DCL ( here ). Since the NYUVTA applies to cases filed on or after April 4, 2020, there remain many cases under the former DCL that are be

By: Jeffrey M. Haber To plead a cause of action for fraud or fraud in the inducement, a plaintiff must allege facts to support the claim that he or she justifiably relied on the alleged misrepresentation(s). As we have noted in prior articles, the justifiable reliance element of a fraud claim is often the most challenging one to satisfy. To demonstrate justifiable reliance, a plaintiff must allege (and prove) that he or she relied upon the misrepresentation to his or her detr

By: Jeffrey M. Haber As readers know, we write about cases involving fraud. The articles we write almost always concern the specific elements of the claim, such as scienter and justifiable reliance. Rarely have we examined defenses to a claim of fraud. Today, we do so – we examine the doctrines of ratification and estoppel. As a general matter, “ atification is the act of knowingly giving sanction or affirmance to an act that would otherwise be unauthorized and not binding.”

By: Jeffrey M. Haber Yesterday, the Appellate Division, First Department decided three cases involving claims for fraudulent inducement. We examine each of these cases below. Artemus USA LLC v. Leila Taghinia-Milani Inc. Artemus involved artwork that was consigned by Artemus USA LLC (“Artemus”) to defendants pursuant to a consignment agreement (“Agreement”). Plaintiffs alleged that the artwork was damaged while consigned to the Defendants. In their opposition to plaintiffs

By: Jeffrey M. Haber Last April, this Blog wrote about Sodhi v. IAC/InterActiveCorp , 2021 N.Y. Slip Op. 31220(U) (Sup. Ct., N.Y. County Apr. 8, 2021) ( here ), an action to recover money claimed to be improperly withheld by IAC/Interacticecorp (“IAC”). The primary issue in the Sodhi was whether the releases in a settlement letter covered the claims asserted in the action. The motion court held that the releases were broad and covered plaintiffs’ claim to the money alleged

By: Jeffrey M. Haber To allege a cause of action based on fraud, plaintiffs must assert “a misrepresentation or a material omission of fact which was false and known to be false by defendant, made for the purpose of inducing the other party to rely upon it, justifiable reliance of the other party on the misrepresentation or material omission, and injury. 1 To withstand a motion to dismiss, plaintiffs must satisfy each element of the claim. One of the most difficult elements

By: Jeffrey M. Haber As readers of this Blog know, one of the elements of a fraud claim is reliance. In the typical case, the defendant makes a false or misleading statement directly to the plaintiff, which the plaintiff claims to rely on. In the less frequent case, the misrepresentation of fact is made to a third party that relied on the alleged fraudulent statement. The question is whether, in that circumstance, a plaintiff can state a fraud cause of action, despite the abs

By Jeffrey M. Haber As readers of this Blog know, to recover damages for fraud, a plaintiff must allege “a misrepresentation or a material omission of fact which was false and known to be false by defendant, made for the purpose of inducing the other party to rely upon it, justifiable reliance of the other party on the misrepresentation or material omission, and injury.” [1] When a plaintiff contends that he or she was fraudulently induced to take some action, such as enter

By: Jeffrey M. Haber In past articles, we have discussed the necessity of pleading the “who”, “what”, “when” and “how” of an alleged fraud. See , e.g. , here . In many respects, the requirement to plead the “who”, “what”, “where”, and “how” of an alleged fraud, primarily relates to the first element of the claim – falsity. 1 In this regard, a plaintiff alleging fraud must allege the time, place, and content of the defendant’s false representations, as well as the details of

By: Jeffrey M. Haber This Blog has written numerous articles about Ponzi schemes and the enforcement proceedings that resulted from them. See, e.g., here, here, here, here, and here. In a Ponzi scheme, the operator creates an investment program in which “profits” are paid to earlier investors with money taken from later investors. The “profits” are, therefore, fictitious instead of returns on investment. Ultimately, Ponzi schemes collapse under their own weight, taking invest

By: Jeffrey M. Haber In prior articles, we discussed the impact a disclaimer clause in a contract can have on a fraud claim. See , e,g. , here . Namely, a disclaimer clause can preclude a fraud claim when (1) the disclaimer is specific to the fact alleged to be misrepresented or omitted; and (2) the alleged misrepresentation or omission does not concern facts peculiarly within the knowledge of the non-moving party. 1 Disclaimer clauses often are worded as “no reliance” claus

By: Jeffrey M. Haber This Blog has written numerous articles about Ponzi schemes and the enforcement proceedings that resulted from them. See, e.g., here, here, here and here. In a Ponzi scheme, the operator creates an investment program in which “profits” are paid to earlier investors with money taken from later investors. The “profits” are, therefore, fictitious instead of returns on investment. Ultimately, Ponzi schemes collapse under their own weight, taking investors, ma

To state a claim for fraud, a plaintiff must satisfy each element of the claim; namely, “a material misrepresentation of fact, knowledge of its falsity, an intent to induce reliance, justifiable reliance by the plaintiff and damages.”

By Jeffrey M. Haber An investment adviser is a fiduciary, and as such is held to the highest standard of conduct and must act in the best interest of his/her client.1 This means, among other things, that an investment adviser has an affirmative duty of utmost good faith and full and fair disclosure of all material facts.2 An investment adviser’s fiduciary duties are made enforceable under Section 206 of the Investment Advisers Act of 1940 – the Act’s anti-fraud provisions.3 T