Fraud Claims Dismissed Where Offering Plan Directed Sophisticated Purchasers to Ground Lease Containing Allegedly Concealed Terms

Posted: August 26, 2026 / Written by: Thomas A. Kissane / Categories Fraud/Misrepresentation, Breach of Contract

Fraud Claims Dismissed Where Offering Plan Directed Sophisticated Purchasers to Ground Lease Containing Allegedly Concealed Terms

On April 1, 2026, Justice Robert R. Reed of the New York County Commercial Division dismissed fraud claims by cooperative shareholders who alleged that an offering plan misrepresented the formula governing increases in the cooperative’s ground rent. The case is 269 W. 87th St. Apt. Corp. v QSB 267 Prop. Co., LLC, Index No. 655615/2024.

The Court held that plaintiffs could not adequately plead justifiable reliance because the offering plan expressly directed purchasers to the ground lease containing the operative rent provisions.

The offering plan represented that annual ground rent increases would be based on CPI growth, subject to a 2% floor and 5% cap, which was consistent with the 5% annual base rent cap/escalation underlying plaintiffs’ complaint. The Court explained: “This was an arms-length transaction by sophisticated parties who, with the exercise of ordinary intelligence and due diligence, could make no plausible claim of justifiable reliance on any representation by the other.” Slip op., p. 10. The Court also held that the fraud claims failed CPLR 3016(b) because the complaint did not sufficiently identify the alleged misrepresentations, when they were made, or to whom. Id.

The Court dismissed plaintiffs’ remaining claims as well. The breach-of-contract claim failed to identify a contractual provision that defendant Sponsor breached (slip op., pp. 7-8); unjust enrichment failed because plaintiffs did not allege a sufficiently close relationship between plaintiff and e defendant West87/Quadrum to support allegations of reliance or inducement, nor a benefit conferred upon West87/Quadrum (id., p. 8); and the implied-covenant claim duplicated the contract claim (id., p. 9). The fiduciary-duty claim was untimely and failed to allege a fiduciary relationship (slip op., pp. 10-11), while the DCL § 273 claim was untimely and failed to adequately plead creditor standing or fraudulent intent (id., p. 11).

Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning fraud or breach of contract.