Fraud Claim Dismissed, and Plaintiffs Sanctioned, When Contemporaneous Communications Showed Plaintiffs Did Not Rely on Alleged Misrepresentation

Posted: May 30, 2025 / Written by: Jeffrey M. Eilender, Thomas A. Kissane, Samuel L. Butt, Joshua Wurtzel, Channing J. Turner / Categories Fraud/Misrepresentation, Sanctions

Fraud Claim Dismissed, and Plaintiffs Sanctioned, When Contemporaneous Communications Showed Plaintiffs Did Not Rely on Alleged Misrepresentation

On April 25, 2025, Justice Joel M. Cohen of the New York County Commercial Division issued a decision in Landau v. DGital Media LLC, Index No. 654067/2019, granting summary judgment dismissing plaintiffs' fraud claim and awarding attorneys' fees and costs against plaintiffs, because plaintiffs' own contemporaneous communications showed that they did not rely on defendants' alleged misrepresentation, holding:

Here, Defendants provide numerous examples of Plaintiffs’ awareness of the facts underlying the fraud claim well before the buyout, as well as Plaintiffs’ statements to the contrary in this litigation (NYSCEF 95 at 14-15). The contemporaneous record makes clear that Plaintiff made a tactical decision not to raise the question of Crossover’s ownership or “fraud,” and to instead create a litigation record for future use. And then, despite agreeing to a release of claims that waived all claims other than fraud, he nevertheless pursued a fraud claim despite unmistakable awareness that he was not misled by the purportedly fraudulent statements upon which this case rests. Thus, the claim was frivolous.

As this case shows, a plaintiff may not assert a fraud claim based on an alleged misrepresentation if the plaintiff knew that the alleged misrepresentation was untrue. And even worse for plaintiffs here, the court held that their contemporaneous knowledge of the falsity of the alleged misrepresentation, combined with their stated efforts to create a litigation record, was enough to warrant an award of attorneys' fees to defendants. Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning reliance on an allegedly fraudulent misrepresentation.