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Commercial Division Blog

Current Developments in the Commercial Divisions of the
New York State Courts
Posted: February 14, 2015

No Reasonable Reliance Without Due Diligence

On February 3, 2015, Justice Kornreich of the New York County Commercial Division issued a decision in Bioenergy Life Science, Inc. v. Ribocor, Inc., 2015 NY Slip Op. 30166(U), dismissing a claim for fraud for failure to show due diligence.

In Bioenergy Life Science, the court dismissed plaintiff’s fraud claim for, among other reasons, a failure to show reasonable reliance, explaining:

Where the fraud could have been discovered with reasonable due diligence, a plaintiff cannot claim reasonable reliance. Plaintiff did not plead that it could not have conducted due diligence that would have revealed the non-disclosed patents. Plaintiff, therefore, has not pleaded the element of reasonable reliance.

(Internal citations omitted) (emphasis added). This decision illustrates the importance of due diligence in commercial transactions. And the importance of pleading it if it was done.

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