First Department Rejects Fraud Claim Predicated on Allegations from Another Action

By: Jeffrey M. Haber

In Delgado v. 27-51 Jackson Ave. LLC, 2026 N.Y. Slip Op. 05593 (1st Dept. Oct. 1, 2026), the Appellate Division, First Department reaffirmed that fraud claims must be based on particularized facts, not suspicion, guilt by association, or allegations from other lawsuits. The Court held that unproven accusations against a plaintiff’s medical providers in separate actions were insufficient to establish that the plaintiff made any misrepresentation, particularly where the plaintiff was neither a defendant nor even referenced in those cases. The Court also rejected efforts to infer fraud from circumstantial associations, such as a shared address with other claimants.

Delgado v. 27-51 Jackson Ave. LLC

Delgado concerned an action arising under New York’s Labor Law involving an alleged construction site accident that later evolved into a dispute that also implicated allegations of fraud.

Plaintiff commenced the action against defendants 27-51 Jackson Ave LLC (“27-51”) and DHC Contracting Inc. (“DHC”) (collectively, the “defendants”), seeking damages for personal injuries allegedly sustained while performing construction-related work at a project site. Plaintiff asserted causes of action for common-law negligence and violations of Labor Law §§ 200, 240(1), and 241(6). According to the complaint, plaintiff was engaged in work protected by the Labor Law when he was injured after either tripping over a hazardous condition at the worksite or falling from an elevation due to defendants’ alleged failure to provide adequate safety devices and protections.

The litigation proceeded in the ordinary course through the exchange of pleadings and the assertion of third-party claims among entities involved in the construction project. Defendants answered the complaint and denied liability. Thereafter, defendants commenced a third-party action against All State 12 General Contracting Corp. (“All State”), asserting claims for contractual indemnification, common law indemnification and contribution, and breach of contract based on an alleged failure to procure and maintain insurance. All State answered and asserted counterclaims against defendants. All State subsequently commenced a second third-party action against Gama Construction Corp. (“Gama”), a subcontractor, asserting indemnification, contribution, and insurance-related claims. As a result, the action expanded beyond plaintiff’s underlying Labor Law claims to include disputes among the various contractors and subcontractors concerning responsibility for any potential liability and the parties’ respective contractual and insurance obligations.

While the action was pending, several separate lawsuits were filed in state and federal courts alleging fraudulent conduct in connection with personal injury litigation and medical treatment. Those actions named various combinations of law firms, attorneys, litigation funding entities, and healthcare providers and generally alleged that certain defendants participated in schemes involving fraudulent or unnecessary medical treatment and diagnoses to support personal injury and workers’ compensation claims.

Against that backdrop, third-party defendant/second third-party plaintiff, All State, sought leave to amend its answer to assert a counterclaim for fraud against plaintiff. The proposed amended pleading alleged that plaintiff fabricated or exaggerated the injuries claimed in the action and caused false information concerning those injuries to be presented in support of his claims. Specifically, the proposed counterclaim alleged that plaintiff caused written documents containing false statements regarding his alleged injuries and treatment to be submitted to the court and provided to defendants during the litigation. Defendants further alleged that they were required to investigate and defend against those allegedly false claims and representations, resulting in substantial litigation expenses and other damages.

In opposition, plaintiff argued that All State’s proposed affirmative defense of fraud and counterclaim were speculative and unparticularized. Plaintiff maintained that All State could not identify any statement that plaintiff made to All State. Plaintiff further argued that All State failed to allege that it detrimentally relied on any such statements.

The motion court agreed with plaintiff and denied the motion, holding that the proposed affirmative defense and counterclaim did “not meet the particularized pleading requirement for fraud.”[1] 

The motion court also held that All State could not base its fraud allegations on unproven allegations from a separate lawsuit, particularly where those allegations did not implicate the plaintiff. As the court explained:

The allegations in the RICO action upon which All State relies are unproven and do not constitute “facts” sufficient to support the proposed amendments. Further, though the RICO allegations are directed to certain of Plaintiffs medical providers; there is nothing in the federal action implicating or involving Plaintiff. The vague and entirely speculative fraud allegations against Plaintiff in All State’s proposed amended pleading are, therefore, rejected.

All State appealed. The First Department unanimously affirmed.

The Court rejected All State’s attempt to bootstrap fraud allegations from unrelated lawsuits to satisfy the falsity element of its fraud claim, emphasizing that unproven accusations against third parties is insufficient to establish that a plaintiff made a false representation: “The existence of other lawsuits alleging fraud against plaintiff’s medical providers, but where fraud is unproven to date, is insufficient to establish that plaintiff made a misrepresentation of fact.”[2] This was “especially true where … plaintiff is neither a defendant nor otherwise referenced in the other lawsuits on which All State relie[d].”[3] 

The Court also rejected All State’s attempt to infer fraud from plaintiff’s association with others, emphasizing that shared addresses and similar connections do not, standing alone, demonstrate that plaintiff’s claims were fraudulent: “that plaintiff shares and has shared an address with many other workers’ compensation claimants and personal injury plaintiffs does not in and of itself establish that plaintiff’s specific claims in this case are fraudulent.”[4]

Takeaway

Delgado underscores a basic principle of fraud litigation: fraud must be pleaded with particularity under CPLR 3016(b), and litigants cannot substitute suspicion, association, or allegations from other lawsuits for well-pleaded facts. Consistent with that principle, the First Department reaffirmed that the falsity element of fraud must be established through allegations directed to the plaintiff’s own conduct, not by reference to accusations lodged against other actors in separate proceedings.

The decision also serves as a reminder that allegations in other lawsuits are just that: allegations. Allegations in other lawsuits do not constitute evidence that a plaintiff’s claims are fraudulent. The Court emphasized that unproven allegations from unrelated litigation cannot be bootstrapped into a new fraud claim, particularly where the plaintiff was neither a defendant nor even mentioned in the other actions.

Closely related to the foregoing principle, Delgado rejects guilt-by-association pleading. The fact that a plaintiff may have been treated by providers who have been accused of misconduct elsewhere, or may have some connection to individuals involved in other claims, does not permit an inference that the plaintiff’s own claims are fraudulent. The Court made clear that a litigant cannot bridge the gap between suspicion and fraud by pointing to associations, relationships, or circumstances that do not specifically tie the plaintiff to wrongdoing.

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Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP.

This article is for informational purposes only and is not intended to be, and should not be, taken as legal advice.

Unless otherwise stated, Freiberger Haber LLP’s articles are based on recently decided published opinions or litigation releases and not on matters handled by the firm.

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[1] Citing, Dashdevs LLC v. Capital Mkts. Placement, Inc., 210 A.D.3d 525. 526 (1st Dept. 2022); CPLR 3016(b).

[2] Slip Op. at *1, citing Anguisaca-Morales v. St. Paul & St. Andrew United Methodist Church, 238 A.D.3d 439, 440 (1st Dept. 2025); Linares v. City of New York, 233 A.D.3d 479, 480 (1st Dept. 2024).

[3] Id., citing Carranza-Rafael v. LRC Constr. LLC, 250 A.D.3d 507, 509 (1st Dept. 2026).

[4] Id., citing Santacruz v. 58 Gerry St. LLC, 246 A.D.3d 600, 600 (1st Dept. 2026).