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Current Developments in the Commercial Divisions of the
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Posted: April 22, 2015

No Claim for Negligent Misrepresentation Without Special Relationship

On April 14, 2015, the First Department issued a decision in J.P. Morgan Securities Inc. v. Ader, 2015 NY Slip Op. 03071, affirming the dismissal of a claim for negligent misrepresentation.

In J.P. Morgan Securities, the defendants asserted a counterclaim for negligent misrepresentation. The trial court granted the plaintiff’s motion for summary judgment dismissing that counterclaim. The First Department affirmed, explaining:

A claim for negligent misrepresentation requires the plaintiff to demonstrate (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. In commercial cases a duty to speak with care exists when the relationship of the parties, arising out of contract or otherwise, is such than in morals and good conscience the one has the right to rely upon the other for information. Reliance on the statements must be justifiable, and not all representations made by a seller of goods or a provider of services will give rise to a duty to speak with care. Rather, liability for negligent misrepresentation has been imposed only on those persons who possess unique or specialized expertise, or who are in a special position of confidence and trust with the injured party such that reliance on the negligent misrepresentation is justified. In order to impose tort liability in a commercial case, there must be some identifiable source of a special duty of care.

In this context we have held that such a special duty will be found if the record supports a relationship so close as to approach that of privity. Generally, however, an arm’s-length business relationship between sophisticated parties will not give rise to a confidential or fiduciary relationship that would support a cause of action for negligent misrepresentation.

The evidence on the record before us, which includes allegations of plaintiff’s superior knowledge of the hedge fund business and its past dealings with defendant Ader, who had worked for plaintiff’s predecessor in interest for some years, is not sufficient to establish a special relationship that would justify defendants’ reliance on plaintiff’s alleged misrepresentations.

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

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