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which allegedly enabled Shao Gan Hua (“Shao”), a non-party, to embezzle AAXT Investment’s proceeds, less purchasing all of Kamick’s outstanding stock over approximately two years for a total purchase price of less

Holdings, LLC (“XpresSpa Holdings”) was an airport spa business in which Kainz held an equity interest of less Decision The Court found that Kainz’s fraud claims were deficient for two reasons: he failed to plead loss causation and he failed to demonstrate justifiable reliance.

. § 78j(b), a Section 11 plaintiff need not demonstrate “scienter, reliance, or loss causation.” Nevertheless, a defendant in a Section 11 action will not be liable if it can prove “negative loss causation To sustain this defense, a defendant must establish that “the risk that caused the losses was not within omissions,” or that “the subject of the misstatements and omissions was not the cause of the actual loss causation as a “heavy burden.”

the accrual of interest during these time periods is not, as reasoned by the court, penalizing for losing

If the Note was lost, destroyed or stolen, the answer is provided by section 3-804 of New York’s Uniform Commercial Code, which provides that “ he owner of an instrument which is lost, whether by destruction Plaintiff’s summons and complaint contained a lost note affidavit and a copy of the original note. In so doing, the Court recognized that UCC 3-804 is an appropriate vehicle to prove ownership of a lost , destroyed or stolen note if the “holder” “prove ownership of the notes, the circumstances of the loss

consequential damages arising out of performance under this agreement, including without limitation, loss These provisions “represent[] the parties’ Agreement on the allocation of the risk of economic loss in loss of business, or other financial loss resulting from breach/non-performance). certainty that the damages have been caused by the breach, (2) the extent of the loss is capable of Notably, if a new business is seeking to recover for the loss of future profits, the courts impose “a

Recording a mortgage puts the world on notice of the mortgagee’s interest in the real property that is the subject of the mortgage.  “New York has a ‘race-notice’ recording statutory scheme whereby the mortgage recorded first by a mortgagee without notice of any other mortgages will maintain priority over such other mortgages.”  Alliance Funding Co. v. Taboada , 39 A.D.3d 784 (2 nd Dept. 2007).  Section 291 of New York’s Real Property Law , which governs the recording of conveyances in real property, provides: A conveyance of real property, within the state, on being duly acknowledged ... may be recorded in the office of the clerk of the county where such real property is situated, and such county clerk shall, upon the request of any party, on tender of the lawful fees therefor, record the same in his said office. Every such conveyance not so recorded is void as against any person who subsequently purchases or acquires by exchange or contracts to purchase or acquire by exchange, the same real property or any portion thereof, or acquires by assignment the rent to accrue therefrom as provided in section two hundred ninety-four-a of the real property law, in good faith and for a valuable consideration, from the same vendor or assignor, his distributees or devisees, and whose conveyance, contract or assignment is first duly recorded, and is void as against the lien upon the same real property or any portion thereof arising from payments made upon the execution of or pursuant to the terms of a contract with the same vendor, his distributees or devisees, if such contract is made in good faith and is first duly recorded. Notwithstanding the foregoing, any increase in the principal balance of a mortgage lien by virtue of the addition thereto of unpaid interest in accordance with the terms of the mortgage shall retain the priority of the original mortgage lien as so increased provided that any such mortgage instrument sets forth its terms of repayment. The preferred status of a good faith purchaser for value “cannot be maintained by a purchaser with either notice or knowledge of a prior interest or equity in the property, or one with knowledge of facts that would lead a reasonably prudent purchaser to make inquiries concerning such.”  Chen v. Geranium Development Corp ., 243 A.D.2d 708, 709 (2 nd Dep’t 1997) (citations omitted).  In Chen , plaintiff contracted with the owner to purchase real property.  Plaintiff’s deposit was returned and the contract was cancelled after a dispute arose between the parties.  Thereafter, plaintiff, Chen, commenced an action to foreclose its contract-vendee’s lien in which the court entered a judgment of foreclosure and sale (the “Judgment”) directing the sale of the subject property.  The property was purchased by Fandy Corp., who moved to intervene in the action to vacate the Judgment that permitted the sale of the property now owned by it.  Fandy’s deeds were recorded prior to any recorded interest by Chen.  In denying Fandy the relief it sought, the Court found that Fandy had “actual knowledge of the prior contracts” that Chen entered into with the owner of the property but Fandy “merely accepted, without any proof or inquiry, independent or otherwise, a bare representation prior to their closing that the contracts had been cancelled.”  Chen , 243 A.D.2d at 709.  Thus, the court found that Fandy was not a good faith purchaser for value and its recording of its deed did not prime Chen’s interest in the property. In Emigrant Bank v. Drimmer , 171 A.D.3d 1132 (2 nd Dep’t 2019), the Court also determined whether a party was a good faith purchaser.  In 1999, Drimmer purchased property and obtained a mortgage from lender, which, for some reason, was not recorded until 2006.  However, in 2002 Drimmer sold the property to Sternberg, whose title report did not reveal lender’s yet unrecorded mortgage.  Following the sale to Sternberg, Drimmer continued to make monthly mortgage payments to lender, which included real estate tax escrows.  In 2007, lender learned of Drimmer’s sale to Sternberg and, as a result, accelerated the debt and stopped accepting Drimmer’s monthly payments.  Lender commenced action to “impose its mortgage on the premises, to foreclose the mortgage, and for a judgment declaring that its mortgage is a valid lien against the premises.”  The motion court granted Sternberg’s motion for summary judgment; finding that he was a “good faith purchaser for value … and took the property free of the subject mortgage.” The Second Department reversed.  The Emigrant Court explained what is necessary to be deemed a good faith purchaser as follows: The status of good faith purchaser for value cannot be maintained by a purchaser with either notice or knowledge of a prior interest or equity in the property, or one with knowledge of facts that would lead a reasonably prudent purchaser to make inquiries concerning such  The intended purchaser must be presumed to have investigated the title, and to have examined every deed or instrument properly recorded, and to have known every fact disclosed or to which an inquiry suggested by the record would have led.  If the purchaser fails to use due diligence in examining the title, he or she is chargeable, as a matter of law, with notice of the facts which a proper inquiry would have disclosed" Emigrant , 171 A.D.3d at 1134 (citations and internal quotation marks omitted).  The Court found that Sternberg established his prima facie entitlement to judgment by submitting evidence that he purchased the property “for valuable consideration, without prior notice of mortgage, and without knowledge of facts that would lead a reasonably prudent purchaser to make such an inquiry, and that he recorded his deed prior to the recording of mortgage.”  Emigrant , 171 A.D.3d at 1134 (citations omitted).  Nonetheless, the Court found triable issues of fact precluding summary judgment based on evidence that lender paid real estate taxes on the property before and after Sternberg’s purchase, which might have provided Sternberg with “actual knowledge of the mortgage prior to his purchase and whether due diligence in examining the tax records for the property would have placed him on inquiry notice of the mortgage prior to his purchase.”  Emigrant , 171 A.D.3d at 1134 (citations omitted). Related issues were recently addressed in Bank of America v. Giwa (Sup. Ct. New York Co. December 13, 2019).  The defendant in Giwa was one of the first individuals to purchase a new unit in a recently converted condominium.  Prior to the conversion, the entire building had a single tax lot designation.  “However, because a condominium is real property, each unit gets its own block and lot designation when the new condos are created. In the condominium declaration, the individual units were assigned individual lots and defendant's condominium was designated Block 2041 Lot 1307.”  At the time defendant purchased his unit, he obtained a mortgage from lender and, thereafter, obtained a loan modification from lender increasing the principal balance of the loan.  The original mortgage and the documents relating to the subsequent loan modification were mistakenly recorded against the prior lot number relating to the entire building before conversion, instead of the lot number related to defendant’s individual, post-conversion, unit. Giwa defaulted on the loan and lender commenced foreclosure proceedings.  The record was clear that lender realized its mistake but took no steps to correct them with the County Clerk; as it would have been permitted to do under New York County Law § 919(j).  In the meantime, Giwa failed to pay his condominium charges and his unit was sold at a Sheriff’s sale (the “Sale”) to pay the judgment.  The purchaser at the Sale (the “Purchaser”) recorded the deed against the correct parcel. The Giwa Court found that Purchaser was a “bona fide purchaser for value and it takes title to the property free and clear of lender’s mortgage because of improper recording.”  The Court was not moved by lender’s argument that at the time the mortgage was executed “the new condo lots had been designated but had not yet been formed by the city.”  Lender was not “absolved” of its “responsibility to ensure its mortgage was recorded against the correct lot in the intervening time since the mortgage was executed.”  The Court found that lender had numerous opportunities, but failed, to correct its mistake over a rather long period of time.  Thus, the Court found that “ he simple fact is that plaintiff had many chances to correct its mistake in the past twelve years but did nothing to put anyone on notice that it claimed an interest in this condominium unit.  Had plaintiff taken any action, this situation could have been avoided.”  The Court determined that Purchaser was entitled to rely on its title search, which failed to disclose the existence of lender’s mortgage recorded improperly on the wrong unit.  The Court also found that Purchaser was not “on inquiry notice that there was a possible mortgage recorded on the property because the deed was not recorded on tax lot.” In denying lender’s motion for summary judgment and granting Purchaser’s motion for summary judgment, the Court expressed its concerns with lender’s position and stated: An extremely cautious purchaser might have considered looking at the Base Lot. But that type of purchaser might also do searches on the neighbors' condo units or on the surrounding buildings. The fact is that attempts to blame for not discovering < lender's > lender's> mistake. Apparently, did not realize this mistake for nearly a decade. and yet it claims should have somehow realized it.  (Emphasis in original.)

In today’s commercial world, businesses claiming breach of an agreement often seek lost profits resulting There are two types of damages recoverable as lost profits: (1) lost profits that are general damages ; and (2) lost profits that are consequential or special damages. certainty that the damages have been caused by the breach, (2) the extent of the loss is capable of Notably, if a new business is seeking to recover for the loss of future profits, the courts impose “a

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 L.L.C. , 15 N.Y.3d 147, 154 (2010). This means, for example, that a sophisticated party must employ whatever “means of verification were available at the time” of the alleged misrepresentations. VisionChina Media, Inc. v. Shareholder Representative Servs., LLC , 109 A.D.3d 49, 57 (1st Dept. 2013) (citation omitted). One way to do so is by obtaining a prophylactic provision in a contract or other writing or exercising due diligence to make an additional inquiry into the truth of the representation. ACA Fin. Guar. Corp. v. Goldman, Sachs & Co. , 25 N.Y.3d 1043, 1045 (2015); DDJ , 15 N.Y.3d at 154 (holding that in contract negotiations between sophisticated parties, justifiable reliance element sufficiently alleged where plaintiff “has gone to the trouble” of insisting on warranties in the written agreement that certain facts were true). Thus, a sophisticated party cannot “argue justifiable reliance on defendants’ misrepresentation or omission where had the means available to ascertain the status of the ” at issue and did not avail itself of those means. ACA Fin. Guar. , 25 N.Y.3d at 1044; HSH Nordbank AG v. UBS AG , 95 A.D.3d 185, 194-195 (1st Dept. 2012). here=">here" and="and" >here,=">here," for="for" example.="example."> MBF Clearing involved a “self-styled ‘long-established and well-regarded’ commodities futures commission merchant” that claimed, among other things, the defendants fraudulently induced it to invest its customer segregated assets in defendant’s J.P. Morgan U.S. Government Money Market Fund (“USG Fund”).  In particular, plaintiff, MBF Clearing Corp. (“MBF”), alleged that the defendants, JPMorgan Chase Bank N.A (“JPMC Bank”), J.P. Morgan Investment Management Inc. and Kevin T. Murphy (“Murphy”), an employee of JPMC Bank, and a futures commission merchant, fraudulently induced MBF to invest its customer segregated assets by opening a new segregated customer account (“Account x2069”) and invest those assets in the USG Fund. It also alleged that defendants fraudulently changed the title of Account x2069 to remove “commodity customer segregated bank account” in violation of the Federal Commodity Exchange Act and rules and regulations of the United States Commodities Futures Trading Commission.  MBF filed its first complaint on September 16, 2014. Thereafter, MBF filed two more complaints, an amended complaint and a second amended complaint (“SAC”). In the SAC, MBF alleged claims for fraudulent inducement to invest in USG Fund and open Account x2069, fraudulent misrepresentation as to the USG Fund, fraudulent misrepresentation as to Account x2069, fraud in changing the name on Account x2069, fraudulent concealment as to Account x2069, negligent misrepresentation as the USG Fund, negligent misrepresentation as to Account x2069, aiding and abetting in fraud, deceptive conduct, and contribution and indemnity. On January 28, 2016, the motion court dismissed the SAC without prejudice. As to the fraud-based claims and negligence claims involving both Account x2069 and the USG Fund, the motion court dismissed them because MBF failed to allege justifiable reliance. The motion court found that the investment in the USG Fund ran afoul of applicable rules and that MBF did not do its due diligence in making the investment, noting that it simply relied on the documents sent in connection with opening the account (that is, “in terms of setting up the account and opening the account ... there an acknowledgement ... by ... the CFO as well as the principles of plaintiff saying they read all the prospectus related to that opening of the account”). On August 2, 2016, MBF filed a motion to amend the complaint and caption, which was denied by the motion court. MBF then filed a motion to reargue the motion court’s decision denying the amendment. The motion to reargue was granted and the Third Amended Complaint (“TAC”) was deemed served and the caption amended. The TAC omitted all claims as to the USG Fund and focused on Account x2069. As before, MBF alleged several fraud-based claims involving Account x2069, negligent misrepresentation claims involving Account x2069, aiding and abetting, and contribution and indemnity.  The motion court dismissed the TAC on law of the case grounds. “The ‘law of the case’ doctrine is a rule of practice which provides that once an issue is judicially determined, either directly or by implication, it is not to be reconsidered by Judges or courts of co-ordinate jurisdiction in the course of the same litigation.” Holloway v. Cha Cha Laundry, Inc. , 97 A.D.2d 385, 386 (1st Dept. 1983) (citations omitted). The motion court concluded that the claims brought in the TAC were virtually identical to those dismissed in the SAC.  MBF appealed.  The Appellate Division, First Department unanimously affirmed. After concluding that the motion court correctly dismissed the action under the law of the case doctrine, the Court, undertaking its own “sufficiency review” of the claims, determined that plaintiff failed to state a cause of action for which relief could be granted. Slip Op. at *1. With regard to the fraudulent inducement claims, the Court held that the claims “failed” because plaintiff did “not allege justifiable reliance on the alleged misrepresentations.” Id. (citing ACA Fin. Guar. , 25 N.Y.3d at 1045; HSH Nordbank AG , 95 A.D.3d at 194-195). The Court found that plaintiff was a sophisticated party that “could readily have determined for itself whether the representations were false by exercising reasonable due diligence.” Id. As a self-styled “long-established and well-regarded” commodities future commission merchant, required by the Commodities Futures Trading Commission (CFTC) to hold its customers’ assets in customer segregated accounts, plaintiff is presumably familiar with the requirements related to such accounts. Plaintiff could have made inquiries when defendants represented to it that there was no need for a “customer segregation acknowledgment letter” for Account x2069 because it would be linked to, and a sub-account of, plaintiff’s existing Account X0253 for which a segregation letter had been obtained. However, rather than take simple measures to ensure its compliance with CFTC regulations, plaintiff relied on the representations that the segregation letter for Account X0253 would cover Account X2069. Id. (citations omitted). Takeaway MBF Clearing is another example of a court dismissing a fraud claim because the plaintiff failed to avail himself/herself/itself of the means to discover the truth or falsity of the representations and omissions made by the alleged wrongdoer. Although the determination of whether reliance is justified is a fact sensitive one, the courts are clear that failing to conduct any investigation, as in MBF Clearing , into the veracity of a representation or omission when the aggrieved party has the ability to do so, suffices to dismiss a fraud claim. This is especially so when the plaintiff, like MBF, is a sophisticated party.  After all, the rationale for requiring sophisticated parties to “show they used due diligence and took affirmative steps to protect themselves from misrepresentations” ( VisionChina Media , 109 A.D.3d at 57) comports with the public policy behind the rule: it rids the courts “of cases in which the claim of reliance is likely to be hypocritical.” Ambac Assurance Corp. v. Countrywide Home Loans, Inc. , 31 N.Y.3d 569, 580 (2018). As Judge Read explained in her dissenting opinion in ACA Financial Guaranty : Our venerable rule requiring that the reliance necessary to establish fraud must be justifiable is designed to make sure that the courts “reject[] the claims of plaintiffs who have been so lax in protecting themselves that they cannot fairly ask for the law’s protection” and “may truly be said to have willingly assumed the business risk that the facts may not be as represented.” ACA Fin. Guar. , 25 N.Y.3d at 1051.

Luce ( here ), the Seventh Circuit overruled its longstanding precedent for alleging causation in cases common-law fraud principles required the application of proximate, rather than but-for, causation. First National Bank of Cicero ) concerning the standard for causation in FCA cases. At common law, a fraudulent misrepresentation is the legal cause of a monetary loss “only if the loss Circuits), which had adopted proximate causation as the standard for proving causation.

The effects of affinity fraud extend beyond financial loss. twenty percent share of trading profits, but would not earn profits in years when the Fund incurred losses a one‑year investment period, they could request redemption of their investment, net of profits or losses According to the complaint, DDS suffered substantial trading losses in January 2021, including losses Promised transparency and redemptions never materialized, and communication with investors diminished as losses

himself in the amount of approximately $170,000.00 in net profits while causing his advisory clients to lose alleged the SEC, defendant was able to take quick profits from large price movements (or avoid large losses prices fluctuate throughout the day, an investment advisor can determine if the trade is a profit or loss Armed with such information, an unscrupulous advisor will cherry pick winning or losing trades and allocate A dollar-weighted win or loss rate takes into consideration the amount of the investment.