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Current Developments in the Commercial Divisions of the
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Posted: May 31, 2016

Fraud Claims Relying on Unnamed Third-Party’s Report of Alleged Overheard Conversation Dismissed

On May 26, 2016, the First Department issued a decision in Manda Intl. Corp. v. Yager, 2016 NY Slip Op. 04091, ordering the dismissal of fraud claims supported only by unattributed overheard hearsay, explaining:

The allegations that Guida plotted with third-party defendants Angelo Corrao and Frank Basile to defraud defendant/third-party plaintiff Stephen Yager, and that she altered the books and records, and diverted funds, of plaintiff-contractor Manda International Corp., are asserted upon information and belief. The only source of this alleged information is found in paragraph 77 of the third-party complaint, which provides that “another former Manda employee” told Yager that he overheard Corrao, Guida and Basile discussing ways to defraud him. However, the allegations do not include the name of the employee, or details of when or where the overheard conversation took place, or when the unnamed former employee conveyed this information to Yager. Thus, the allegations of fraud against Guida are lacking in sufficient detail and do not meet the heightened pleading standard under CPLR 3016(b).

(Internal quotations and citations omitted).

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