Commercial Division Blog

Posted: October 12, 2014 / Categories Commercial, Fraud/Misrepresentation

Claim for Conspiracy to Commit Fraud Allowed as Claim for Liability for Fraud on Part of Conspirators

On September 23, 2014, Justice Schmidt of the Kings County Commercial Division issued a decision in Nadelson v. Zakharchenko, 2014 NY Slip Op. 32552(U), declining to dismiss a claim for conspiracy to commit fraud.

In Nadelson, the plaintiffs sued the defendants over an investment in a restaurant. In denying the defendants' motion to dismiss, the court explained its decision not to dismiss a claim for conspiracy to commit fraud:

The third cause of action for conspiracy to commit fraud is an ancillary claim to plaintiffs' first and second causes of action. Essentially the claim is pled as a failsafe to ensure that both defendants' are accountable to plaintiffs for the torts alleged in the first two causes of action, either as the primary tortfeasor or as a conspirator to the underlying tort. Although an independent cause of action for civil conspiracy is not recognized in this State, a plaintiff may plead the existence of a conspiracy in order to connect the actions of the individual defendants with an actionable, underlying tort and establish that those actions were part of a common scheme.

The allegation of conspiracy carries no greater burden, but also no less, than to assert adequately common action for a common purpose by common agreement or understanding among a group, from which common responsibility derives. Therefore, under New York law, in order to properly plead a cause of action to recover damages for civil conspiracy, the plaintiff must allege a cognizable tort, coupled with an agreement between the conspirators regarding the tort, and an overt action in furtherance of the agreement.

Here, plaintiffs' complaint adequately alleges a cause of action sounding in conspiracy to commit fraud. First, as discussed above, plaintiffs' second cause of action alleges a cognizable tort. Second, plaintiffs allege that the defendants acted in concert to sabotage the business with the intention of disregarding their contractual obligations so they could ultimately abscond with plaintiffs' investment. Finally, plaintiffs (within their second cause of action) specify the alleged actions undertaken by defendants in furtherance of defendants' intention not to perform.

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