Fraud Claim Dismissed for Failing to Plead Scienter With Particularity

On December 12, 2017, the First Department issued a decision in Fried v. Lehman Brothers Real Estate Associates III, L.P., 2017 NY Slip Op. 08638, affirming the dismissal of a fraud claim for failure adequately to plead scienter with particularity, explaining:

The first and second causes of action, alleging fraudulent misrepresentation and gross negligence in misrepresentation, failed to satisfy the pleading requirements of CPLR 3016(b). The allegations of scienter here were not pleaded with the requisite particularity, but are conclusory, and scienter may not reasonably be inferred from the circumstantial evidence relied on by plaintiffs.

(Internal citations omitted).

Commercial litigation frequently involves fraud-based claims. Such claims have special pleading requirements such as the particularity requirement at issue in this decision. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have a question regarding a fraud-based claim.