Commercial Division Blog

Posted: April 19, 2018 / Categories Commercial, Fraud/Misrepresentation

Fraudulent Inducement Claim Against Lawyer Upheld; Client Was Reasonable in Relying on Counsel Rather Than Reading Agreement Closely

On April 10, 2018, the First Department issued a decision in Suttongate Holdings Ltd. v. Laconm Management N.V., 2018 NY Slip Op. 02424, upholding a fraudulent inducement claim against a lawyer, explaining:

The allegations of the complaint state a cause of action for fraudulent inducement. The well settled principle relied on by David that a party claiming fraudulent inducement cannot be said to have justifiably relied on a representation negated by the plain terms of the contract they signed does not apply here, since his alleged assurances and fraud were the very cause of defendants' failure to review the documents carefully. As it was reasonable for defendants to rely on the advice of counsel, we also reject David's arguments premised on the plain language of the agreements that defendants admit they did not read carefully.

(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 sophsticated businessperson's reliance on a false statement must be reasonable. Contact Schlam Stone & Dolan partner John Lundin at if you or a client think you have been defrauded, or if someone has accused you or a client of defrauding them.