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Current Developments in the Commercial Divisions of the
New York State Courts
Posted: March 11, 2018

Commercial Negligence Claims Dismissed Because Defendant Had No Duty to Plaintiff

On February 14, 2018, Justice Ostrager of the New York County Commercial Division issued a decision in Lantau Holdings Ltd. v. General Pacific Group Ltd., 2018 NY Slip Op. 30291(U), dismissing a negligence claim relating to a commercial transaction, explaining:

A claim for gross negligence requires plaintiff to demonstrate, inter alia, the existence of a duty of care owed by defendant to plaintiff. Here, SVK had no duty to Lantau independent of the contractual duties stated in the Control Agreements.

The negligent misrepresentation claim is dismissed for similar reasons. Under New York law, the threshold element of a negligent misrepresentation claim is that the defendant had a duty as a result of a special relationship to give correct information. Here, Lantau has failed to allege that SVK had a duty, as a result of a special relationship, that goes beyond the explicit terms of the Control Agreements. Lantau and SVK are two sophisticated commercial entities who negotiated arms length Control Agreements that provide that the duties the parties owe to one another. Further, based on evidence submitted in SVK’s Supplemental Briefing, it appears Lantau itself was aware of the lock-up restrictions on the shares before it completed the transaction with GPG. For Lantau to claim that it reasonably relied on SVK’s representations that the shares were unrestricted, when Lantau itself had knowledge that the shares were subject to a lock-up restriction, seems misleading at best. In any event, the documentary evidence submitted is not necessary for the Court to conclude that Lantau has failed to state a claim for negligent misrepresentation.

(Internal citations omitted).

Commercial disputes often concern contracts. However, disputes relating to commercial transactions also can give rise to tort claims, such as fraud, breach of fiduciary duty, tortious interference and, as here, negligence or gross negligence. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client face a situation where you have been injured in a commercial transaction but the injury did not involve a breach of a contract.

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