Sophisticated Parties, Precise Pleading, Fraud, and the Limits of NDAs in Transactions

By: Jeffrey M. Haber

In KSFB Mgt., LLC v. Goldman Sachs & Co., LLC, 2026 N.Y. Slip Op. 02064 (1st Dept. Apr. 7, 2026), the Appellate Division, First Department, affirmed dismissal of claims alleging breach of contract, breach of the implied covenant of good faith and fair dealing, and fraud. KSFB Mgt., LLC (“KSFB”) claimed that Goldman Sachs & Co., LLC (“Goldman”) and another defendant deceived it into managing a subsidiary while secretly pursuing a competing sale that excluded KSFB, allegedly misusing confidential information shared under a nondisclosure agreement (“NDA”). The Court held that KSFB failed to identify specific confidential information misused, as required to plead breach of the NDA. It further ruled that the NDA did not obligate Goldman to avoid conflicts or prioritize a joint sale. Finally, the Court held that the fraud claims failed because the alleged oral assurances on which the claims were based were contradicted by explicit conflict disclosures in a later engagement letter, making reliance unreasonable as a matter of law.

KSFB Mgt., LLC v. Goldman Sachs & Co., LLC

Plaintiff alleged that Goldman and defendant Focus Financial Partners, LLC (“Focus”), who entered a stipulation of discontinuance after the appeal was filed, engaged in a months-long scheme to deceive plaintiff, a business management firm providing services for high-net-worth individuals, into continuing to manage Focus’s non-party subsidiary, NKSFB, LLC (“NKSFB”), while Goldman assisted Focus to pursue a combined sale of NKSFB and KSFB. Plaintiff alleged that unbeknownst to it, Goldman and defendant Patrick Fels (“Fels”) were simultaneously advising Focus in a competing transaction to sell Focus and NKSFB to Clayton Dubilier & Rice LLC (“CD&R”), which excluded plaintiff. According to the complaint, defendants used the expectation of a joint sale of NKSFB and KSFB to induce plaintiff to provide confidential information under the NDA.

Under Paragraph 2 of the NDA, Goldman agreed to “keep the Confidential Information confidential,” and therefore, it would not, “without prior written consent of [Focus and KSFB], (i) use, for itself or on behalf of any other person, any portion of the Confidential Information for any purpose other than the Purpose, or (ii) disclose any portion of the Confidential Information to any person, other than . . . in connection with the Purpose.” “Confidential Information,” in turn, was defined in Paragraph 1 of the NDA as “all oral, written or digital information furnished by or on behalf of [Focus or KSFB] to [Goldman]” in connection with the joint NKSFB sale, “whether furnished before or after the date hereof.” Such information included “the identity of [Focus or KSFB] and/or the identity of the [NKSFB] or any other affiliate . . . and/or the fact that [Focus or KSFB] or its affiliates may be considering a possible strategic transaction.” It further encompassed “material provided directly by [NKSFB] or any other affiliate, agent or representative of [Focus or KSFB].” This definition of “Confidential Information,” however, did not include information that “was known by [Goldman]” at the time of disclosure by either Focus or KSFB.

In addition to the foregoing, Paragraph 8 of the NDA provided that Focus and KSFB would “be granted access to any electronic dataroom or other file sharing platform used to share Confidential Information” with Goldman. To avoid any doubt, the NDA went on to provide that “any Confidential Information of another party received or accessed by a party, whether provided by [Goldman, Focus, or KSFB], contained in a data room or otherwise, [would] be used by such party only for the purposes of a mutually agreeable strategic transaction assisted by [Goldman] and any such sharing or disclosure by a party [would] not constitute a license to use or any transfer of ownership or other rights with respect to such Confidential Information or any waiver or grant of use of such Confidential Information for any other purpose.”

According to plaintiff, defendants allegedly used the confidential information in their negotiations with CD&R. To minimize Goldman’s legal exposure for this alleged scheme, defendants allegedly convinced plaintiff to sign an engagement letter, which included several disclaimers of liability.

KSFB commenced the action on February 8, 2024, asserting claims for (i) breach of the NDA against Focus and Goldman (Count I); (ii) breach of the covenant of good faith and fair dealing against Focus and Goldman (Count IV); (iii) fraudulent concealment, misrepresentation, and inducement against all defendants, as well as declaratory judgment regarding the enforceability of the allegedly fraudulently induced engagement letter (Counts VI, VII, & IX — the fraud-based claims); (iv) breach of fiduciary duty against Goldman and aiding and abetting breach of fiduciary duty against Focus, Patrick Fels, and another defendant (Counts II & III); (v) tortious interference with prospective economic advantage (Count V); and (vi) unjust enrichment.

Goldman and Fels moved to dismiss the first, fourth, and sixth causes of action pursuant to CPLR 3211(a)(7). The motion court granted the motion. The First Department unanimously affirmed.

The Court held that the “motion court properly dismissed the first cause of action alleging that defendants breached (i) paragraph 2 of the NDA and (ii) a section of paragraph 8.”[1] The Court found that “[p]laintiff made only vague and conclusory statements that defendants disclosed confidential information, as defined in the NDA, and failed to identify what confidential information was allegedly misused.”[2] The Court explained that “[p]laintiff allege[d] that Goldman shared confidential information with nonparty CD&R to assist them in negotiations to acquire defendant Focus and NKSFB. [However,] Plaintiff was not involved in those negotiations, and its confidential information would not have been material to those discussions. [For this reason,] … plaintiff’s complaint suffers from the absence of any allegations about whether the confidential information that was allegedly disclosed belonged to plaintiff or Focus.”[3] “We need not accept as true plaintiff’s conclusory allegations, made upon information and belief,” said the Court, “that Goldman disclosed plaintiff’s confidential information to CD&R.”[4] 

The Court also held that the motion court “correctly dismissed the contract claim based on allegations that Goldman breached that portion of paragraph 8.”[5] The Court noted that the “purpose of the NDA was to allow Goldman to receive confidential information from Focus and plaintiff.”[6] “Thus,” explained the Court, “paragraph 8 should be read to refer to the dataroom or platform used to share Focus’ and plaintiff’s confidential information with Goldman, not a separate dataroom or platform set up to share Focus’ confidential information with CD&R.”[7] 

Moreover, the Court held that the “motion court providently dismissed the breach of the implied covenant of good faith and fair dealing claim[,]”[8] “[i]mplicit in all contracts.”[9] Pursuant to the implied covenant, “neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract.”[10] Yet, “the covenant of good faith and fair dealing … cannot be construed so broadly as effectively to nullify other express terms of a contract, or to create independent contractual rights.”[11] Nor can one party invoke the duty of good faith to imply obligations inconsistent with the terms of the contractual relationship.[12] Ultimately, “‘a party who asserts the existence of an implied-in-fact covenant bears a heavy burden’ to ‘prove not merely that it would have been better or more sensible to include such a covenant, but rather that the particular unexpressed promise sought to be enforced is in fact implicit in the agreement viewed as a whole.’”[13]

The Court held that “plaintiff did not meet its ‘heavy burden’ to show that defendants agreed in the NDA to forego, explicitly or implicitly, any action that would create a conflict with the proposed sale of plaintiff and NKSFB.”[14]  The Court noted that the “NDA provide[d] that the parties thereto (Focus, plaintiff, and Goldman) had “an interest in entering into discussions wherein [ea]ch Disclosing Party may share information with Recipient [Goldman] . . . for the purpose of pursuing a possible relationship between Recipient and the Disclosing Parties in which Recipient may advise and assist with respect to a possible strategic transaction involving” NKSFB.”[15] “The NDA itself was not an agreement in which Goldman committed itself to helping Focus and plaintiff sell KSFB and NKSFB,” said the Court.[16]

The Court further held that the “motion court … properly dismissed the sixth cause of action alleging fraud because plaintiff failed to satisfy the element of justifiable reliance.”[17] 

To state a claim for fraud, a complaint must allege a representation or omission of a material fact, falsity, scienter, reliance, and damages.[18] Similarly, a claim premised on fraudulent inducement requires “specific statement[s] made by defendants (or by anyone else) that would have fraudulently induced the contract.”[19] Stated differently, to state a claim for fraudulent inducement, a plaintiff must allege “(1) a misrepresentation or an omission of material fact which was false and known to be false by the defendant, (2) the misrepresentation was made for the purpose of inducing the plaintiff to rely upon it, (3) justifiable reliance of the plaintiff on the misrepresentation or material omission, and (4) injury.”[20] 

Plaintiff alleged that on a September 16, 2022 phone call, Fels “repeatedly assured [plaintiff] that there was no, and would be no conflict” in Goldman acting as an investment banker for both Focus and plaintiff.[21] “Any alleged reliance on these oral statements,” said the Court, was “irreconcilable with the engagement letter which the parties signed four months later.”[22] The Court explained that “[i]n the engagement letter, the parties unambiguously agreed that ‘potential conflicts of interest, or a perception thereof, may arise as a result of [Goldman] rendering services to both [Focus and KSFB] simultaneously,’ that KSFB’s and Focus’ ‘interests may not always be aligned,’ and that the arrangement ‘will not give rise to any claim of conflict of interest against Goldman.’”[23] “On the September call,” said the Court, “Fels also stated that Focus and Goldman were ‘committed to the same goal’ as KSFB.”[24] The Court concluded that “[t]his allegation fail[ed] to state a claim for fraud for the same reasons.”[25]

Moreover, noted the Court, “[t]he engagement letter explicitly stated that the parties only contemplated a ‘possible sale of all or a portion of [NKSFB] . . . and/or [KSFB]’ [and] … disclosed that Goldman ‘may currently be providing and may in the future provide’ other ‘services that could impact the transaction contemplated.’”[26] “In light of these written disclaimers,” concluded the Court, “it was unreasonable as a matter of law for plaintiff, a sophisticated party, to rely on Goldman’s oral representations made months earlier during the September call.”[27]

Finally, the Court rejected “[p]aintiff’s argument that the motion court failed to apply the peculiar knowledge exception to the fraud claims,” stating that the argument “lack[ed] merit.”[28] The Court found that “[p]laintiff fail[ed] to articulate any undisclosed information that was uniquely in defendants’ possession.”[29]  This was especially so, said the Court, because “the engagement letter notified plaintiff concerning potential ‘conflicts of interest’ that may exist between Focus and plaintiff that could ‘impact the [NSKFB/KSFB] transaction.’”[30]

Takeaway

KSFB underscores the courts’ insistence on precision, restraint, and contractual fidelity when sophisticated parties litigate deal‑related disputes. The Court’s decision illustrates that allegations of breach and fraud must be grounded in concrete facts, not suspicion or hindsight. Plaintiffs claiming misuse of confidential information under an NDA must identify what information was shared, who owned it, and how it was improperly used; vague assertions that confidential information “must have been disclosed” will not suffice.

The decision also reinforces that courts will not rewrite agreements to impose obligations that the parties did not expressly bargain for. An NDA designed to facilitate information sharing does not, without more, restrict a financial advisor from pursuing other transactions. Finally, the ruling reaffirms that sophisticated parties cannot reasonably rely on prior oral assurances when subsequent written agreements explicitly disclose the information allegedly misstated or omitted. As KSFB demonstrated, written disclaimers remain a powerful shield against fraud claims.

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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 and not on matters handled by the firm.

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[1] Slip Op. at *1.

[2] Id. (citing Art Capital Group, LLC v. Carlyle Inv. Mgt. LLC, 151 A.D.3d 604, 605 (1st Dept. 2017); see also Parker Waichman LLP v. Squier, Knapp & Dean Communications, Inc., 138 A.D.3d 570, 570-571 (1st Dept. 2016)).

[3] Id.

[4] Id. (citing Skillgames, LLC v. Brody, 1 A.D.3d 247, 250 (1st Dept. 2003)).

[5] Id. at *2.

[6] Id.

[7] Id. (citing Beal Sav. Bank v. Sommer, 8 N.Y.3d 318, 324 (2007)).

[8] Id.

[9] Atlas El. Corp. v. United El. Group, Inc., 77 A.D.3d 859, 861 (2d Dept. 2010)).

[10] Id.

[11] Fesseha v. TD Waterhouse Inv. Servs., Inc., 305 A.D.2d 268, 268 (1st Dept. 2003)).

[12] Gottwald v. Sebert, 193 A.D.3d 573, 582 (1st Dept. 2021); Sheth v. NY Life Ins. Co., 273 A.D.2d 72, 73 (1st Dept. 2000)).

[13] Singh v. City of New York, 40 N.Y.3d 138, 146 (2023) (quoting Rowe v. Great Atl. & Pac. Tea Co., 46 N.Y.2d 62, 69 (1978)).

[14] Slip Op. at *2 (citing Cordero v. Transamerica Annuity Serv. Corp., 39 N.Y.3d 399, 410 (2023) (internal quotation marks omitted)); see also Singh, 40 N.Y.3d at 146.

[15] Id.

[16] Id.

[17] Id. at *3.

[18] See Albert Apt. Corp. v. Corbo Co., 182 A.D.2d 500, 500 (1st Dept. 1992).

[19] See EVUNP Holdings LLC v. Frydman, 225 A.D.3d 469, 469 (1st Dept. 2024).

[20] See CANBE Props., LLC v. Curatola, 227 A.D.3d 654, 656 (2d Dept. 2024).

[21] Slip Op. at *3.

[22] Id. (citing HSH Nordbank AG v. UBS AG, 95 A.D.3d 185, 204-206 (1st Dept. 2012) (dismissing fraud claim based on “extracontractual representations” concerning “alignment of interests” where contract “expressly disclosed the potential for conflicts of interests . . . and provided that HSH would have no claim against UBS arising from such conduct”); Societe Nationale D’Exploitation Industrielle des Tabacs et Allumettes v Salomon Bros. Intl., 249 A.D.2d 232, 233 (1st Dept. 1998), lv. denied, 95 N.Y.2d 762 (2000) (dismissing fraud claim because alleged oral representations were contradicted by letter confirmation agreements)).

[23] Id.

[24] Id.

[25] Id.

[26] Id.

[27] Id.

[28] Id. at *4.

[29] Id. (orig’l emphasis) (citing Skyview Cap., LLC v. Conduent Bus. Servs., LLC, 239 A.D.3d 426, 428 (1st Dept. 2025) (finding that “plans were not peculiarly within [the defendants’] knowledge” because the plaintiff “could have inquired” about them]; MBIA Ins. Corp. v. Merrill Lynch, 81 A.D.3d 419, 419 (1st Dept. 2011) (declining to apply the peculiar knowledge exception because the plaintiff was a sophisticated business entity that could have obtained the truth about the defendants’ allegedly fraudulent representations through investigation)).

[30] Id.