On October 13, 2017, Justice Masley of the New York County Commercial Division issued a decision in City’s 5th Ave. 54th St. LLC v. 685 Fifth Ave. Owner LLC, 2017 NY Slip Op. 32197(U), dismissing a fraud claim because the plaintiff’s reliance on an oral representation that was contradicted by the parties’ term sheet was unreasonable, explaining:
[P]laintiff alleges in the complaint that Seller and the GGP defendants represented that they would provide the $120 million bridge loan to plaintiff on January 9, 2017, and that plaintiff reasonably relied upon this representation and did not pursue other sources of potential financing. Plaintiff also alleges that at the time Defendants made that representation, they knew that it was false because they had no intention of providing any bridge loan; instead, Defendants coordinated and conspired to commit a fraud against plaintiff by intentionally stringing plaintiff along in bad-faith, all while they were actively marketing the Commercial Unit for sale to third-parties.
. . .
The alleged misrepresentation of fact-that the GGP defendants would provide a bridge loan, buttressed by plaintiff’s allegation that it was not advised that a loan was conditioned upon board approval is belied by the documentary evidence. The court is permitted to consider extrinsic evidence on a CPLR 3211 motion, and, where the essential facts have been negated beyond substantial question by the evidentiary matter submitted, a motion to dismiss is properly granted. As the Term Sheets sent to plaintiff by the GGP defendants demonstrate, the bridge loan negotiations were being conducted at arms length, and each of the Term Sheets contained the same disclaimer on the first page explaining, among other things, that the potential loan, if any, shall be subject to the approval by Nimbus’s board of directors and other internal committees. The Term Sheet disclaimers are also clear that the Term Sheets themselves are mere negotiation instruments, not offers or agreements to extend a loan. Thus, plaintiff was aware that any bridge loan agreement was conditioned upon various factors, including board approval, as well as the fact that a loan agreement, if any, could be reached only upon the execution of further loan documentation. Furthermore, the fraud cause of action is not saved by Mr. Gulay’s statement that despite the contents of the Term Sheet, the GGP Defendants and Seller repeatedly told and promised Mr. Gulay — even after the Term Sheet was distributed on January 9, 2017 — that Nimbus would make the bridge loan as originally agreed. Where a term sheet or other preliminary agreement explicitly requires the execution of a further written agreement before any party is contractually bound, it is unreasonable as a matter of law for a party to rely upon the other party’s promises to proceed with the transaction in the absence of that further written agreement. Where, as here, the Term Sheets expressly state that the documents do not constitute any commitment to lend, and that no agreement to lend exists until satisfactory loan documents have been executed, plaintiff’s allegation that it reasonably and detrimentally relied on oral assurances by defendants that they intended to close the financing agreement are conclusively refuted by the documentary evidence.
(Internal quotations and citations omitted).