It has long been the law in New York that a party’s disclaimer of reliance on extra-contractual representations and omissions will not preclude a fraudulent inducement claim unless: (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. Basis Yield Alpha Fund v. Goldman Sachs Group, Inc. , 115 A.D.3d 128, 137 (1st Dept

In the past, this Blog has examined cases in which the plaintiff brings a breach of contract claim and fraud claim in the same proceeding. < e.g. , here,=">here</a>," and="and" >here.=">here</a>."> e.g.,> Those cases show that where the two claims arise from the same facts and circumstances and seek the same relief, the fraud claim will be dismissed as duplicative of the contract claim. Indeed, as this Blog has explained previously, New York courts will not permit a fraud c

Concealment of material information and market manipulation. Both forms of improper conduct were on display in Securities and Exchange Commission v. Airborne Wireless Network , 21-cv-01772 (S.D.N.Y.) ( here ), a case we examine below. The Importance of The Disclosure of Information Disclosure of information has long been a mission of the Securities and Exchange Commission (“SEC” or the “Commission”). As noted on the SEC’s website: “ he laws and rules that govern the securiti

“You can’t have fraud if you disclose it,” said the motion court in Ibarrondo v. Evans , 2020 N.Y. Slip Op 30051(U) (Sup. Ct., N.Y. County Jan. 6, 2020) ( here ), aff’d , 2021 N.Y. Slip Op. 01200 (1st Dept. Feb. 25, 2021) ( here ). Yet, without alleging any new facts detailing how the alleged fraud was not disclosed, the plaintiff in Ibarrondo sought to amend her complaint to reallege the cause of action. In today’s article, we examine Ibarrondo . Ibarrondo involved a dispu

As the title of this article suggests, there are times in litigation where the facts simply do not support a claim or defense advanced by one or more of the parties. That was the case in Alston v. Golfo , 2021 N.Y. Slip Op. 30471(U) (Sup. Ct., N.Y. County Feb. 17, 2021) ( here ). Alston was commenced by a labor union welfare fund (the “Fund”) in July 2018 against one of its enrollees, Salvatore Golfo (“Salvatore”), and his former wife, defendant Denise Golfo (“Denise”), for

“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 invol

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