Fraud: Releases, Anti-Reliance Clauses, and the Special Facts Doctrine

By: Jeffrey M. Haber

In today’s article, we examine the interplay between releases, anti-reliance clauses, and the special facts doctrine under New York law, using the Appellate Division, First Department’s decision in Leinhardt v. Socure, Inc., 2026 N.Y. Slip Op. 03881 (1st Dept. June 18, 2026), as a focal point. The case highlights the courts’ commitment to enforcing contractual provisions that allocate risk in commercial transactions, particularly where sophisticated parties are involved. It addresses a recurring tension in fraud litigation: whether a party who later claims to have been misled can overcome the barriers imposed by a broad release and explicit disclaimers of reliance.

Through its analysis, the Court’s decision demonstrates that New York courts will generally hold parties to the terms of their agreements, even in the face of alleged informational irregularities or post hoc claims of unfairness. The decision underscores that fraud claims that are the subject of a broad release must overcome a material hurdle – namely, the existence of a fraud independent of the released claims, and the presence of justifiable reliance. The decision also underscores the narrow scope of the special facts doctrine in circumstances where a sophisticated party proceeds with known informational gaps. Against this backdrop, Leinhardt serves as an example of the consequences of entering into transactions without securing adequate disclosures or contractual protections.

Leinhardt v. Socure, Inc.

Plaintiff founded Socure, Inc., an identity verification company, in or about February 2011 and initially served as its Chief Executive Officer (CEO). He recruited several individuals, including defendants, to join the company’s management and board. In June 2013, plaintiff resigned as CEO and remained on the board until November 2013, when he was removed. At the time of his resignation, plaintiff executed a settlement agreement pursuant to which he sold a portion of his unvested shares back to the company and retained approximately 1.2 million vested shares, which were represented to constitute roughly 12% of the company.

Plaintiff alleged that, following his resignation and removal from the board, his ownership interest was diluted through subsequent corporate actions. He further alleged that he did not receive access to the company’s capitalization table or valuation information during this period.

In 2017, plaintiff, through counsel, raised potential claims relating to the dilution of his shares and requested information concerning the company’s capitalization and valuation in connection with settlement discussions. Plaintiff alleged that such information was not provided.

On or about February 27, 2018, plaintiff entered into a settlement agreement and a repurchase agreement with the company (2018 Agreement and Repurchase Agreement, respectively, and collectively, the Agreements). Under those agreements, plaintiff sold his remaining shares back to the company and provided a general release of claims, including claims relating to his resignation, board removal, alleged dilution of his shares, and related matters.

Subsequently, the company raised additional capital in funding rounds in 2018 and 2019. In separate litigation commenced in 2022 by a defendant concerning stock options, the parties reached a settlement in 2024 that included a monetary payment. Plaintiff alleged that valuations reflected in those proceedings differed from the valuation used in connection with his 2018 repurchase.

Plaintiff contended that certain corporate documents and information, including an incentive plan and capitalization data, were not disclosed to him during relevant periods. He further alleged that he first became aware of information suggesting potential improprieties in or about 2023, after reviewing publicly available materials and communications with a former board member.

Plaintiff alleged that the 2018 agreements were entered into under circumstances involving incomplete information and disputes regarding valuation and prior corporate actions. Defendants disputed plaintiff’s allegations.

Defendants moved to dismiss, arguing that the 2018 Agreement barred plaintiff’s fraud and duress claims because they were subject to the release. They further argued that plaintiff did not plead a fraud separate from the subject of the release. And, even if a separate fraud was alleged, defendants contended that plaintiff agreed in the Agreements that he was not relying on any extra-contractual representations.

The motion court denied the motion.

The motion court held that plaintiff’s fraud claims were barred by “the broad terms of the release,” which “encompass[ed] fraud claims, both known and unknown, suspected and unsuspected. The motion court found that plaintiff’s fraud allegations arose “out of, relate[d] to, and [were] connected to the claims that Plaintiff explicitly released when he signed the 2018 Agreement.” “Thus,” concluded the motion court, the fraud described by Plaintiff fell “squarely within the scope of the release’ and [was] an attempt to convert the release into a starting point for litigation, which is impermissible.”[1]

Next, the motion court examined whether plaintiff alleged a fraud outside the scope of the release executed in the 2018 Agreement. “Generally, a valid release constitutes a complete bar to an action on a claim which is the subject of the release.”[2] In fact, a “release may encompass unknown claims, including unknown fraud claims, if the parties so intend and the agreement is fairly and knowingly made.”[3] However, if the release was obtained under duress, through illegality, fraud or mutual mistake, it may be invalidated, a burden which is borne by the party seeking to set aside the release.[4] And the party seeking to set aside the release may challenge that release as fraudulently induced only if it can identify a separate fraud from the subject of the release.[5] To allow anything less, observed the motion court, would undermine a party’s ability to settle a fraud claim with finality.[6]

The motion court found that plaintiff “sufficiently alleged that [defendant] refused to provide Plaintiff with Socure’s Cap Table, and Socure’s books and records, despite Plaintiff and his counsel demanding such, and denied Plaintiff access to all corporate books and records.” Because defendants failed to disclose the requested information, plaintiff “had no basis to value his stock,” and therefore “was ‘kept in the dark.’” Under such circumstances, the motion court held that “dismissal of the fraud claims against the [defendants] [was] not warranted pursuant to CPLR § 3211(a)(5) at this stage” of the proceeding.

Having determined that plaintiff identified an alleged fraud outside the scope of the release, the motion court addressed whether defendants had a duty to disclose the information alleged to have been fraudulently omitted. The motion court determined that, under the special facts doctrine, plaintiff alleged that defendants had such a duty: plaintiff had “sufficiently alleged that the [defendants] refused to provide Plaintiff with Socure’s Cap Table, and Socure’s books and records.”

Under the special facts doctrine, a duty to disclose arises where “[o]ne party’s superior knowledge of essential facts renders a transaction without disclosure inherently unfair.”[7] The “doctrine requires satisfaction of a two-prong test: that the material fact was information peculiarly within the knowledge of one party and that the information was not such that could have been discovered by the other party through the exercise of ordinary intelligence.”[8] In other words, if the other party has the means available to him of knowing he must make use of those means, or he will not be heard to complain that he was induced to enter into the transaction by misrepresentation.[9] At a minimum, a party has a duty to inquire.[10]  

On appeal, the First Department unanimously reversed.

The Court held that “Plaintiff's claims [were] barred by the releases he signed and because he failed to allege a fraud separate from the subject of the releases.”[11]

The Court also held that the “special facts, or ‘peculiar knowledge,’ doctrine,” was “inapplicable” because plaintiff was a sophisticated party that was aware that he was not “provided with full information but nonetheless agreed to go forward with [the] transaction without either demanding access to the omitted information or assurances in the form of representations and warranties.”[12] 

The Court further held that plaintiff’s fraud claims failed “for lack of reasonable reliance.”[13]  The Court explained that as an attorney, plaintiff “knew that he had not received all the information he requested, but nevertheless, entered into the 2018 Settlement Agreement and Releases and the Stock Repurchase Agreement.”[14] The Court noted that “[i]n the Repurchase Agreement, he also ‘represented and warranted that he had all the information he needed to decide whether to sell his shares.’”[15] “In addition,” said the Court, “both the 2018 Settlement Agreement and the Repurchase Agreement state[d] that plaintiff was not relying on any extracontractual representations.”[16] Accordingly, under these facts, the Court concluded that plaintiff did not meet the justifiable reliance element of his fraud claims.

Takeaway

Leinhardt illustrates how New York courts treat releases, anti-reliance clauses, and the special facts doctrine in disputes involving alleged fraud.

As discussed, the dispute arose after plaintiff, a company founder, sold his shares back to the company under agreements that included a broad release of claims and explicit anti-reliance language. He later alleged that the company had withheld key financial and capitalization information, resulting in an unfairly low valuation. Although the motion court initially allowed his claims to proceed, the First Department reversed and dismissed them.

First, the Court reaffirmed the effect of a broadly drafted release. A valid release will bar all claims within its scope, including fraud claims, whether known or unknown, if the language reflects that intent. Plaintiff’s allegations were found to arise directly out of matters he had expressly released, making the release a complete defense. The Court’s decision underscores that courts view releases as a mechanism to bring disputes to a final resolution and will not permit parties to use subsequent litigation to revisit settled issues.

Second, the Court emphasized that a plaintiff cannot circumvent a release simply by labeling the claim as fraud. To invalidate a release on grounds of fraudulent inducement, the plaintiff must allege a fraud that is separate and distinct from the subject of the release itself. In Leinhardt, the alleged misconduct – concerning valuation and alleged nondisclosure – was closely tied to the very claims plaintiff had agreed to release. As a result, the Court found no independent fraud that could survive the release.

Third, the decision highlights the importance and enforceability of anti-reliance clauses. The agreements at issue expressly stated that plaintiff was not relying on any extra-contractual representations and that he had all the information necessary to make his decision. The Court treated these provisions as dispositive. In New York, when parties, especially sophisticated ones, disclaim reliance in clear contractual language, courts will enforce that disclaimer and bar fraudulent inducement claims based on alleged extra-contractual statements or omissions.

Closely related to this point, the Court found that plaintiff could not establish the justifiable reliance element of his fraud claim. Fraud claims require a showing that the plaintiff justifiably relied on the alleged misrepresentation or omission. In Leinhardt, plaintiff admitted awareness that he was not being provided with all the requested information but nonetheless chose to proceed with the transactions. Given this knowledge – and the contractual acknowledgment that he had sufficient information (i.e., that he did not rely on extra-contractual statements) – the Court held that any reliance was not reasonable as a matter of law.

Plaintiff’s sophistication further reinforced the outcome. As an attorney represented by counsel, plaintiff was expected to understand the implications of executing a release and agreeing to anti-reliance provisions. The Court treated his sophistication as undermining any claim that he had been misled or unfairly disadvantaged.

Finally, the Court rejected the application of the special facts doctrine. As discussed, that doctrine can impose a duty to disclose when one party has superior knowledge of material facts that are not readily discoverable by the other party. The Court concluded that the doctrine did not apply because plaintiff was aware that he lacked certain information and nevertheless chose to proceed without securing it. He could have insisted on access to the company’s records, demanded representations and warranties, or declined to enter into the agreement. Because plaintiff failed to take those steps, the Court held that the doctrine did not apply.

Taken together, Leinhardt sends a familiar message: New York courts will enforce broad releases and anti-reliance clauses, particularly where sophisticated parties are involved. A party that knowingly enters into an agreement without full information and without contractual safeguards will generally be bound by that decision. Fraud claims that have been released, as in Leinhardt, will not succeed absent an independent wrongdoing and demonstrable, reasonable reliance.

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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. ___________________________________

[1] Citing  Centro Empresarial Cempresa S.A. v. América Móvil, S.A.B de C.V., 17 N.Y.3d 269, 277 (2011).

[2] Centro, 17 N.Y.3d at 276 (internal quotation marks and citations omitted).

[3] Id. (internal quotation marks and citations omitted).

[4] Id.

[5] Id.

[6] Id.

[7] Citing Greenman-Pedersen, Inc. v. Berryman & Henigar, Inc., 130 A.D.3d 514, 516 (1st Dept. 2015) (citations omitted).

[8] Id. (citations omitted).

[9] ACA Fin. Guar. Corp v. Goldman, Sachs & Co., 25 N.Y.3d 1043, 1044 (2015).

[10] Jana L. v. W. 129th St. Realty Corp., 22 A.D.3d 274, 278 (1st Dept. 2005).

[11] Slip Op. at *1, citing Centro, 17 N.Y.3d at 276; Sodhi v. IAC/InterActive Corp., 201 A.D.3d 451, 451 (1st Dept. 2022); Silver Point Capital Fund, L.P. v. Riviera Resources, Inc., 198 A.D.3d 432, 433 (1st Dept. 2021).

[12] Id., quoting Silver Point, 198 A.D.3d at 433 (internal quotation marks omitted), and citing CMB Export Infrastructure Inv. Group 48, LP v. Motcomb Estates, Ltd., 223 A.D.3d 513, 515 (1st Dept. 2024).

[13] Id., citing Centro, 17 N.Y.3d at 278-279; Chadha v. Wahedna, 206 A.D.3d 523, 524 (1st Dept. 2022); Silver Point, 198 A.D.3d at 433.

[14] Id.

[15] Id., quoting Chadha, 206 A.D.3d at 524.

[16] Id. Anti-reliance clauses can preclude fraudulent inducement claims. In order for a party to disclaim reliance on extra-contractual representations, an agreement must contain language that makes it clear that the parties are not relying on such representations. Courts will enforce anti-reliance language that identifies the specific information on which a party has relied and which forecloses reliance on other information. Danann Realty Corp. v. Harris, 5 N.Y.2d 317, 320 (1959) (finding that the plaintiff purchaser of a building could not assert that it was relying on oral representations made by the seller outside of a contract in which the plaintiff had specifically agreed in writing not to rely on such representations). See also Laxer v. Edelman, 75 A.D.3d 584, 585–86 (2d Dept. 2010) (holding a fraudulent inducement claim concerning flooding and mold issues in the building was barred by merger clause that disclaimed reliance on any statements by defendants regarding the condition of premises).