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Current Developments in the Commercial Divisions of the
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Posted: January 2, 2017

If Party Has No Way of Discovering Problem, Specific Disclaimer May Not Bar Claim

On December 20, 2016, Justice Ostrager of the New York County Commercial Division issued a decision in LibertyView Credit Opportunities Fund v. Banc of America Credit Products, Inc., 2016 NY Slip Op. 32507(U), holding that if a party has no way of discovering a material fact relating to a transaction, even a specific disclaimer may not bar a fraud claim, explaining:

[C]ase law establishes that Where a party has no knowledge of a latent condition and no way of discovering the existence of that condition in the exercise of reasonable diligence then he may overcome a specific disclaimer clause and introduce parol evidence of fraudulent inducement. Here, LibertyView caused BACP to execute a confidentiality agreement that, for all intents and purposes, precluded BACP from communicating with the Administrator of the LBIE Estate. If, as is alleged, LibertyView had peculiar knowledge of the date from which statutory interest would run, excusing LibertyView’s non-disclosure of information that had a value in excess of 100 million pounds would be contrary to New York law providing that non-recourse disclaimers are ineffectual against willful misconduct or fraudulent concealment, particular where one party has peculiar knowledge of material information. Accordingly, BACP is entitled to establish through discovery that bases exist for overcoming the disclaimers from LibertyView that BACP, as a sophisticated investor, freely and voluntarily accepted. But, at the pleading stage, BACP’s seemingly credible allegations defeat LibertyView’s motion to dismiss the fraudulent concealment counterclaim.

(Internal quotations and citations omitted) (emphasis added).

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