Commercial Division Blog

Posted: June 2, 2015 / Categories Commercial, Fraud/Misrepresentation, Statute of Limitations/Laches

Action Time-Barred for Failure to Exercise Due Diligence in Investigating Claim

On May 28, 2015, the First Department issued a decision in CIFG Assurance North America, Inc. v. Credit Suisse Securities (USA) LLC, 2015 NY Slip Op. 04558, affirming the dismissal of a fraud claim on statute of limitations grounds.

In CIFG Assurance North America, Inc., the trial court dismissed the plaintiff's fraud claim on statute of limitations grounds. The First Department affirmed, explaining:

As plaintiff concedes, because it filed its complaint more than six years after the CDO closed, the timeliness of its claims depends on whether it discovered the fraud or could with reasonable diligence have discovered it more than two years before the filing of the complaint on November 15, 2013. Where the circumstances are such as to suggest to a person of ordinary intelligence the probability that he has been defrauded, a duty of inquiry arises, and if he omits that inquiry when it would have developed the truth, and shuts his eyes to the facts which call for investigation, knowledge of the fraud will be imputed to him.

Plaintiff has failed to meet its burden of establishing that even with the exercise of reasonable diligence, it could not have discovered the basis for its claims prior to November 15, 2011. Plaintiff was put on notice of defendant's fraud and scienter as early as 2008, but certainly by 2010, based on certain reports, made public, indicating the alleged actions that form the basis of plaintiff's claims. In addition, plaintiff was put on notice of defendant's alleged fraudulent activities by other lawsuits commenced prior to November 2011. Because plaintiff possessed information suggesting the probability that it had been defrauded, and failed to conduct an inquiry at that time, knowledge of the fraud is imputed.

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