On April 16, 2015, Justice Ramos of the New York County Commercial Division issued a decision in Phoenix Light SF Ltd. v. Credit Suisse AG, 2015 NY Slip Op. 30658(U), dismissing a claim for negligent misrepresentation.
In Phoenix Light SF Ltd., the plaintiffs brought a variety of claims against the defendants in connection with the sale of “more than $362 million worth of residential mortgage-backed securities.” The defendants moved to dismiss. The court dismissed the plaintiffs’ negligent misrepresentation claim (among others), explaining:
Plaintiffs also fail to state claims for negligence misrepresentation and rescission based on mutual mistake. A claim for negligent misrepresentation must allege (1) the existence of a special or privity-like relationship imposing a duty on the defendant to impart correct information to the plaintiff; (2) that the information was incorrect; and (3) reasonable reliance on the information.
Plaintiffs allege that defendants possessed unique and special knowledge and expertise, which created a duty, because they had exclusive control over the loan files and due diligence reports on the underlying loans and they had superior knowledge of its own underwriting procedures. However, a company’s knowledge of the particulars of its own business is not the type of unique or specialized knowledge that creates a duty. Further, a special relationship does not arise out of an ordinary arm’s length business transaction between two parties. These were ordinary arm’s length business transactions between sophisticated parties and did not create any duty supporting a claim of negligent misrepresentation. Thus, this claim is dismissed.
(Internal quotations and citations omitted) (emphasis added).