Commercial Division Blog
Fraud Claim Dismissed for Lack of Reasonable Reliance
On April 28, 2017, Justice Scarpulla of the New York County Commercial Division issued a decision in MDW Funding LLC v. Darden Media Group, LLC, 2017 NY Slip Op. 30878(U), dismissing a fraud claim for failure to show reasonable reliance, explaining:
Plaintiffs' fraud claim against Watson fails under New York law for lack of reasonable reliance. New York courts hold that reasonable reliance is a condition which cannot be met where, as here, a party has the means to discover the true nature of the transaction by exercise of ordinary intelligence, and fails to make use of those means. Weinberg, as a sophisticated businessman, explicitly requested to see a Merrill Lynch statement or a screenshot of the account as of today to confirm the assets in the account before advancing the loan proceeds. Nevertheless, Weinberg advanced the funds before receiving any confirmation that the assets were actually in the Merrill Lynch account. Had Weinberg followed through with his initial due diligence, Watson's alleged misrepresentations would have been revealed as untrue as it in fact was later that very same day.
(Internal quotations and citations omitted).