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Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: June 7, 2021

Allegations of Plaintiff’s Due Diligence Sufficient to Establish its Reasonable Reliance Necessary to State Fraud Claim

On May 27, 2021, the First Department issued a decision in Bullen v. CohnReznick, LLP, 2021 NY Slip Op. 03369, holding that allegations of the plaintiff’s due diligence were sufficient to establish that the plaintiff’s reliance on the defendant’s misrepresentations was reasonable, explaining:

Plaintiffs also sufficiently alleged the element of reasonable reliance. They allegedly took reasonable steps to protect themselves against deception by having their advisor examine available financial information to ascertain the true nature of the investment fund’s asset valuation, including contacting defendant about the results of its audits, which were matters peculiarly within the defendant’s knowledge. Moreover, reasonable reliance is not generally a question to be resolved as a matter of law on a motion to dismiss. The same is true for the aiding and abetting fraud claim, to the extent that it may require a showing of reasonable reliance.

(Internal quotations and citations omitted).

Commercial litigation frequently involves fraud-based claims. Such claims have special pleading requirements or rules, including the rule that a sophisticated businessperson’s reliance on a false statement must be reasonable. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client think you have been defrauded, or if someone has accused you or a client of defrauding them.

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