Commercial Division Blog

Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: May 28, 2014

Unilateral Mistake Insufficient to Justifiy Reformation of Deed Without Clear and Convincing Evidence of Fraud

On May 22, 2014, the Third Department issued a decision in Timber Rattlesnake, LLC v. Devine, 2014 NY Slip Op. 03718, affirming the refusal to reform a deed.

In Timber Rattlesnake, the plaintiff was the assignee of a contract to purchase real estate. After the plaintiff discovered that “the deed contained a restrictive covenant that had not been referenced in the contract of sale, [the plaintiff] requested that decedent correct the deed. Decedent refused and plaintiff commenced this action seeking, among other things, reformation of the deed.” The trial court (Supreme Court, Sullivan County) held that the plaintiff had not established grounds for reformation of the deed. The Third Department affirmed, explaining:

A party seeking reformation must establish, by clear and convincing evidence, that the writing in question was executed under mutual mistake or unilateral mistake coupled with fraud. The burden is on the proponent of reformation to establish, by clear and convincing evidence, that the relief is warranted.

Here, it is undisputed that the deed’s restrictive covenant was not set forth in the contract of sale and [the plaintiffs assignor] testified that he first became aware of it when he received the deed after the closing. Thus, plaintiff established the existence of a unilateral mistake regarding whether the restrictive covenant was intended to be included as a condition of the sale. Nonetheless, plaintiff’s proof fell short of establishing fraud on decedent’s part, which requires a misrepresentation that is false and that the defendant knows is false, made to induce the other party to rely on it, justifiable reliance on the misrepresentation by the other party, and injury. Decedent’s attorney testified that he believed the parties had intended to include the restrictive covenant in the deed and that he added it to the proposed deed after he realized that it had been omitted therefrom. Prior to the closing, decedent’s attorney had his legal assistant send the deed containing the restrictive covenant to the title insurance company by facsimile and contact plaintiff’s attorney regarding the deed. Although some negative inferences could be drawn from the fact that decedent and his representatives failed to ensure that plaintiff’s attorney was actually informed of the addition to the deed before the closing, other credible evidence suggested that decedent’s counsel made efforts to so inform plaintiff. The attorney who appeared for decedent at the closing further provided the deed to plaintiff’s attorney at the closing. Notably, the restrictive covenant language is clearly evident on the face of the executed deed and would easily have been discovered with even a cursory examination. Decedent’s attorney testified that he had no intention of deceiving plaintiff. Under these circumstances, plaintiff failed to establish that decedent intended to induce its reliance on any misrepresentation.

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

Posted: May 27, 2014

Sale of Realty Company’s Office Building Was Not in the Due Course Because it Was Not in Business of Selling Property

On May 22, 2014, the First Department issued a decision in Theatre District Realty Corp. v. Appleby, 2014 NY Slip Op. 03749, holding that a realty company’s sale of its office building was not in the due course because the company was not in the business of selling property.

In Theatre District Realty Corp., the First Department reversed a summary judgment declaring “that the sale of” a corporation’s building “does not require the consent of a super-majority of its shareholders pursuant to Business Corporation Law (BCL) § 909(a),” and instead declared “that the sale of the building requires the consent of a super-majority of the shareholders pursuant to BCL § 909(a).” The reason for the reversal was that

BCL § 909(a) governs the disposition of all or substantially all of a corporation’s assets, if not made in the usual or regular course of the business actually conducted by such corporation. Since plaintiff has never been engaged in the business of selling real estate, the sale of its building would not be made in the regular course of the business it actually conducts.

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

Posted: May 26, 2014

Merger Clause Prevents Fraud Claim Based on Alleged Pre-Contract Promises

On May 16, 2014, Justice Kornreich of the New York County Commercial Division issued a decision in Antares Real Estate Services III, LLC v. 100 WP Property–DOF II, LLC, 2014 NY Slip Op. 31312(U), dismissing claims regarding alleged pre-contract promises based on a contract’s merger clause.

In Antares Real Estate Services III, the plaintiff sued the defendants for a “promote” payment in connection with the plaintiff’s property management services. The defendants moved to dismiss, arguing that the oral agreement to pay the promote alleged in the complaint was unenforceable due to the merger clause in the parties’ written agreement (the “PMLA”).  The court agreed, explaining:

Moreover, [the plaintiff’s] fraud claims are little more than an attempt to enforce the alleged oral agreements preceding the PMLA. The express terms of the PMLA do not guarantee [the plaintiff] a promote, prohibit not-for-cause termination, or guarantee the use of office space even if [the plaintiff] is terminated (terms allegedly promised orally). [The plaintiff’s] attempt to enforce its prior contract or collateral agreement is barred by the merger clause that states “this Agreement continues the entire agreement between” the parties – this attempt cannot succeed when repackaged as a fraud claim. It is well settled that where a contract contains a merger clause, a court is obliged to require full application of the parol evidence rule in order to bar the introduction of extrinsic evidence to vary or contradict the terms of the writing. If [the plaintiff] has a fraud claim in this case, merger clauses would be meaningless because every merger clause could be vitiated by a claim that, as [the plaintiff] alleges here, a prior oral agreement was in place that contradicts the terms of the written contract.

It should be noted that [the plaintiff] conflates the concept of merger clauses and warranty waivers. It is well settled that broad waivers generally disclaiming reliance on all of the parties pre-contract representations do not immunize specific instances of fraud. Only specific, itemized waivers disclaiming reliance on particular representations are valid. But waivers of representations are not the same – either conceptually or under the law – as written statements declaring that the written contract is the only enforceable agreement between the parties. Warranty waivers concern facts relied upon when entering into a contract; a merger clause disclaims the existence of other agreements. The rule requiring specificity of warranty waivers does not logically apply to merger clauses since a defendant has no way of knowing what purported oral agreement a plaintiff will allege existed of in subsequent litigation. If a specificity rule applied to merger clauses, merger clauses would be worthless.

Merger clauses are an essential tool for procuring certainty in complex commercial transactions. They prevent parties from being blindsided in litigation by attempts to change the terms of the deal with fraud claims or the pleading of collateral agreements. Allowing claims based on collateral agreements or fraud notwithstanding a merger clause compromises the integrity of commercial dealings and foments intolerable uncertainty into New York’s economy.

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

Merger clauses are ubiquitous in complex commercial transactions. As this decision shows, they may be boilerplate, but they nonetheless play an important role in creating certainty in a transaction.

Posted: May 25, 2014

Forum Selection Clause Enforceable Absent Fraud or Overreaching

On May 13, 2014, Justice Sherwood of the New York County Commercial Division issued a decision in U.S. Corrugated, Inc. v. Scott, 2014 NY Slip Op. 31287(U), refusing to dismiss an action for lack of jurisdiction where the defendant agreed to the non-exclusive jurisdiction of the New York courts.

In U.S. Corrugated, the defendant guaranteed payment to the plaintiff in a guaranty that included the following venue provision:

Guarantor hereby irrevocably submits to the non-exclusive jurisdiction of the courts located in the State of New York . . . and hereby irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of venue of any such suit . . . and any claim that any such suit . . . has been brought in an inconvenient forum.

Once suit was brought, the defendant moved to dismiss for lack of personal jurisdiction, arguing that the forum selection clause was unenforceable because the clause was the only connection between the guaranty and New York. The defendant also argued that the fact that the clause provided only “non-exclusive jurisdiction” meant that the court could rule that Ohio—where the contract was to be performed—was the more appropriate forum.

The court rejected the defendant’s arguments and denied the motion, explaining:  In New York, a forum selection clause generally operates “as a waiver by the parties based on personal jurisdiction, improper venue, or forum non conveniens.” Forum selection clauses can only be set aside if “a party demonstrates that the enforcement of such would be unreasonable or unjust or that the clause is invalid because of fraud or overreaching, such that a trial in the contractual forum would be so gravely difficult and inconvenient that the challenging party would, for all practical purposes, be deprived of his or her day in court.” (Emphasis added).

Here, the defendant did not allege fraud or overreaching, merely that “it would be inconvenient to litigate in New York, which [did] not amount to a denial of his day in court.”

The court distinguished the present case from cases where it was held that, although a forum selection clause was valid, under the doctrine of forum non conveniens the case should be litigated elsewhere, because the defense of forum non conveniens was explicitly waived by the Guaranty. The court also held that the fact that the clause provided for non-exclusive jurisdiction was irrelevant.

Posted: May 23, 2014

Organization State Law Determines Whether Derivative Action Plaintiff is Entitled to Discovery on Demand Refusal

On May 22, 2014, the First Department issued a decision in Lerner v. Prince, 2014 NY Slip Op. 03763, holding in a derivative action, the law of the state of organization, not the forum state, determines whether the plaintiff is entitled to discovery on the basis for the refusal of its demand.

In Lerner, the nominal-defendant corporation’s directors denied the plaintiff’s demand that it sue its “senior management, including present and former . . . officers and directors, for alleged mismanagement of the company’s subprime assets.” The plaintiff amended his complaint to add “causes of action including breach of fiduciary duty and aiding and abetting breaches of fiduciary duty” against the board and “also alleged that defendants had wasted corporate assets by causing” the corporation” to expend millions of dollars in an investigation that was allegedly a sham.”

The defendants moved to dismiss. The plaintiff then sought pre-answer discovery on the refusal of his demand. The trial court denied the plaintiff’s motion to compel and granted the defendants’ motion to dismiss. The First Department affirmed. It explained that the trial court properly denied the plaintiff pre-answer discovery, explaining:

Because New York is the forum state, New York’s choice-of-law principles determine whether a particular issue — in this case, the availability of discovery — is substantive or procedural. Under New York choice-of-law rules, matters of procedure are governed by the law of the forum. On the other hand, New York choice-of-law rules provide that substantive issues such as issues of corporate governance, including the threshold demand issue, are governed by the law of the state in which the corporation is chartered — here, Delaware.

We find that plaintiff’s right to discovery in this demand-refused case is a substantive question, rather than a procedural one, and therefore is governed by Delaware law. Although New York courts have applied the law of the forum when deciding matters, such as discovery, affecting the conduct of the litigation, that this case is a purported derivative action places it into a different context. The demand requirement is based on the bedrock principle of Delaware law that a corporation’s directors, and not its shareholders, manage the corporation’s business. Thus, the Delaware law on discovery is an integral part of the legal framework governing derivative proceedings; indeed, it is inextricably intertwined with the decision to act or decline to act on a shareholder demand. Were Delaware law to permit discovery in a demand-refused derivative action, it would essentially obviate the directors’ authority to decide, under the business judgment rule, whether litigation was in the corporation’s best interests — the very reason underlying the demand requirement. The decision whether to permit discovery once directors have refused a demand is therefore a substantive question, going directly to the basis of the purported derivative suit.

Under Delaware law, plaintiffs in a derivative suit are not entitled to discovery to assist their compliance with the particularized pleading requirement of Delaware Chancery Court Rule 23.1 in a case of demand refusal.

. . .

We also note that, even assuming for the sake of argument that New York law applies, plaintiff would not be entitled to discovery in this demand-refused case. Courts applying New York law in demand-refused cases presume that a board of directors’ decision was the exercise of valid business judgment. Therefore, where, as here, a complaint fails to set forth allegations overcoming the presumption that the board’s decision resulted from that valid judgment, courts will properly deny a plaintiff’s discovery request. Indeed, the purpose of discovery is to find out additional facts about a well-pleaded claim, not to find out whether such a claim exists.

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

This decision illustrates the additional level of complexity to which litigators must be sensitive in derivative actions.

Posted: May 22, 2014

Broker Entitled to Commission When it has Direct and Proximate Link to the Transaction

On May 20, 2014, the First Department issued a decision in SPRE Realty, Ltd. v. Dienst, 2014 NY Slip Op. 03642, clarifying “the standard by which a broker may be found to have been the ‘procuring cause’ of a real estate transaction.”

In SPRE Realty, the plaintiff real estate broker sued the defendants alleging breach of implied contract and unjust enrichment because the defendants refused to pay a buyer’s broker commission. The trial court denied the defendants’ motion to dismiss. The First Department affirmed, explaining:

In this appeal, we must determine whether plaintiff broker has alleged facts sufficient to establish its entitlement to a commission on the sale of real estate, where it expended significant effort locating an apartment for buyers who abandoned the transaction and purchased another apartment in the same building 18 months later. In addition, we take this opportunity to clarify the standard by which a broker may be found to have been the “procuring cause” of a real estate transaction.

. . .

In the absence of an agreement to the contrary, a real estate broker will be deemed to have earned his commission when he or she; produces a buyer who is ready, willing and able to purchase at the terms set by the seller. A broker does not earn a commission merely by calling the property to the attention of the buyer. But this does not mean that the broker must have been the dominant force in the conduct of the ensuing negotiations or in the completion of the sale. Rather, the broker must be the procuring cause of the transaction, meaning that there must be a direct and proximate link, as distinguished from one that is indirect and remote, between the introduction by the broker and the consummation of the transaction.

The Departments of the Appellate Division, this Court being no exception, have applied varying language in elaborating on that standard. For example, the three other Departments have stated that if a broker does not participate in the negotiations, he must at least show that he created an amicable atmosphere in which negotiations went forward or that he generated a chain of circumstances which proximately led to the sale.

Although this Department has cited, and even quoted from, cases that have used the phrase “amicable atmosphere,” we have not gone so far as to adopt that specific standard. However, this Court has suggested that a broker can be the procuring cause if he or she brought the parties together in an amicable frame of mind, with an attitude toward each other and toward the transaction in hand which permits their working out the terms of their agreement. The use of th[is] language . . . appears to be an aberration in this Department, though, because we have more frequently and recently applied the “direct and proximate link” test.

The Court of Appeals has not sanctioned the “amicable atmosphere” or “amicable frame of mind” language. It has, however, affirmed without opinion a finding that a broker was the procuring cause where it generated a chain of circumstances which proximately led to a lease transaction. In any event, the Court has stated that however variable the judicial terminology employed to express the requirement that the broker must be the procuring cause, it has long been recognized that there must be a direct and proximate link, as distinguished from one that is indirect and remote, between the bare introduction and the consummation.

We regard the “amicable atmosphere” and “amicable frame of mind” standards as somewhat broader and more amorphous than the requirement of a “direct and proximate link,” or even a requirement that the broker “generated a chain of circumstances which proximately led” to a transaction’s consummation. Although courts have attempted to harmonize the continued use of the “amicable” phrases discussed above with Court of Appeals precedent articulating the “direct and proximate link” standard, the former phrases are not precise enough terms by which to determine whether a broker is the procuring cause of a transaction. Reliance on the creation of an “amicable atmosphere in which negotiations went forward” seems to ignore the proximity element of the “direct and proximate link” test. Furthermore, we think that this continued deviation from the standard set forth by the Court of Appeals . . . has led to some confusion. Yet litigants, and the bar, deserve a greater level of certainty.

Therefore, in order to reduce the confusion that has arisen from the more nebulous terminology heretofore employed by the Departments of the Appellate Division, we reiterate that the “direct and proximate link” standard . . . governs determinations of circumstances under which a broker constitutes a procuring cause within the First Department. This standard requires something beyond a broker’s mere creation of an “amicable atmosphere” or an “amicable frame of mind” that might have led to the ultimate transaction. At the same time, a broker need not negotiate the transaction’s final terms or be present at the closing.

(Internal quotations and citations omitted) (emphasis added).  The First Department went on to agree with the trial court that the plaintiff had adequately met the “direct and proximate link” standard.

This decision provides useful clarity–although no bright-line rule–on what a broker must do to be entitled to a commission.

Posted: May 21, 2014

Insurance Policy’s Criminal Acts Exclusion Applies To Claims Arising From Criminal Acts of Employee Of Which The Company Is Unaware

On May 8, 2014, Justice Ramos of the New York County Commercial Division issued a decision in Aptuit, LLC v. Columbia Casualty Co., 2014 NY Slip Op. 31250(U), holding that the criminal acts exclusion to a pharmaceutical company’s professional liability policy applied to claims arising from criminal acts of an employee of the company, rejecting the insured’s arguments that the exclusion did not apply because the employee acted outside the scope of his authority and the company was unaware of his misconduct.

The insured, Aptuit, was sued by certain of its clients for providing fabricated pre-clinical trial data created by Aptuit’s employee. Aptuit’s professional liability carrier assumed the defense of the claims, but reserved the right to disclaim coverage under the policy’s criminal acts exclusion, which provided:

Coverage does not apply to any professional liability based on or arising out of a dishonest, fraudulent, criminal or malicious act by any Insured. The Company shall provide the Insured with a defense of such claim unless or until the dishonest, fraudulent, criminal or malicious act has been determined by any trial verdict, court ruling, regulatory ruling or legal admission, whether appealed or not. Such defense will not waive any of its rights under this Policy.

(Emphasis in original.) The policy defined “Insured” to include employees of the Company, but only with respect to “professional services” rendered on Aptuit’s behalf, which was in turn defined as “those services performed by Aptuit or by any other insured on behalf of Aptuit for a fee [or other remuneration] [] includ[ing] pre-clinical research and other professional services for the pharmaceutical/biotechnology industry.”

Aptuit’s employee was criminally prosecuted and convicted in Scotland of “altering pre-clinical data designed to support applications to perform clinical trials.” Prior to the conviction, Aptuit filed suit against the insurer seeking a declaratory judgment compelling the insurance company to defend and indemnify it against the customer lawsuits. Finding the policy “clear and unambiguous,” the court rejected Aptuit’s argument that the employee “is not deemed an Insured [and therefore his actions do not trigger the criminal acts exclusion] because by committing criminal actions [he] was acting outside the scope of his employment, and thus was not rendering professional services on behalf of Aptuit”:

[T]his Court fails to find in the definitions of “Insured” and “Professional Services,” or within any other provision in the Policy, language specifying or inferring that criminal conduct does not constitute professional services or/and is outside the scope of employment. . . .

[I]f Aptuit’s contention is true then any criminal conduct committed by an “insured” would never be deemed a “professional service.” Such an interpretation would forego the need for the Criminal Acts Exclusion since hypothetically all criminal conduct could be deemed out of the realm of  “professional services” and scope of employment. This is an unreasonable interpretation and likely not to be the intention of the parties at the time of contracting.

The court likewise rejected Aptuit’s argument that “the parties did not intend the scope of the Criminal Acts Exclusion to exclude coverage for the criminal acts of [an employee] without the actual knowledge of the criminal acts by Aptuit.” Again, the policy contained no language so limiting the exclusion, and the court declined to “infer ambiguity from such silence.” Justice Ramos did find a question of fact as to whether certain customer claims fell outside the exclusion because they “resulted from factual errors rather than exclusively [from the employee’s] fraudulent conduct.” He therefore denied the insurer’s motion for summary judgment and ordered a deposition on the factual issues.

This decision illustrates that the axiom that exclusionary clauses in insurance policies are narrowly construed in favor of coverage has its limits. To escape the exclusion, there must be a reasonable interpretation, grounded in the language of the policy, under which coverage is allowed.

Posted: May 20, 2014

Fraudulent Inducement Claim Not Duplicative When Based on Misrepresentations of Present Facts Collateral to Contract

On May 13, 2014, the First Department issued a decision in Shugrue v. Stahl, 2014 NY Slip Op. 03460, holding that a fraudulent inducement claim was not duplicative of a breach of contract claim.

In Shugrue, the First Department reversed the trial court’s dismissal of a fraudulent inducement claim, explaining:

Plaintiffs’ fraudulent inducement claim was not duplicative of their claim for breach of contract, since it was based on misrepresentations of then present facts that were collateral to the contract, and involved a breach of duty distinct from, or in addition to, the breach of contract. Indeed, the complaint alleged that . . . the chief executive officer and sole shareholder of the corporate defendants, misrepresented to plaintiffs that defendants had obtained all of the required permits and approvals and had completed the construction plans for their home renovation project, which induced plaintiffs to enter into the construction contract with defendants in October 2012.

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

This decision gives a roadmap to pleading a fraudulent inducement claim that can be made in tandem with a breach of contract claim and survive a motion to dismiss.

Posted: May 19, 2014

Best Efforts Clause Enforceable if Criteria Can be Inferred From Circumstances

On May 13, 2014, Justice Demarest of the Kings County Commercial Division issued a decision in Board of Managers of the Chocolate Factory Condominium v. Chocolate Partners, LLC, 2014 NY Slip Op. 50754(U), refusing to dismiss a breach of contract claim because the best efforts clause upon which it relied did not contain guidelines for those efforts.

In Board of Managers of the Chocolate Factory Condominium, the plaintiff sued the defendants in connection with a condominium conversion. The defendants moved to dismiss. One ground for dismissal was that the “best efforts” clause in the offering plan was unenforceable. The court disagreed, explaining:

Defendants, in seeking dismissal of the Board’s first cause of action for Breach of Contract, point to the fact that the contractual provision in the Offering Plan upon which it is predicated requires that the Sponsor use its “best efforts” to obtain the J-51 benefits. They rely upon Strauss Paper Co. v RSA Exec. Search (260 AD2d 570, 571 [2d Dept 1999]), in which the Appellate Division, Second Department, held that where a clause in an agreement expressly provides that a party must use its best efforts, it is essential that the agreement also contain clear guidelines against which to measure such efforts in order for such clause to be enforced. Defendants argue that the Offering Plan does not contain any such guidelines against which to measure whether it used “best efforts” to obtain the J-51 tax benefits, and that this clause is, therefore, unenforceable.

Defendants’ argument, however, must be rejected. Initially, it is noted that, as recently observed in Cruz v FXDirectDealer, LLC (720 F3d 115, 124 [2d Cir 2013]), the New York Court of Appeals has not endorsed the requirement that the contract must contain clear guidelines before a best efforts clause can be enforced. Rather, numerous courts, including the New York Court of Appeals and the Second Department, have applied an express best efforts provision without articulated objective criteria. Noting that the cited cases appeared to conflict with the holding in Strauss Paper Co. (260 AD2d at 571) and other cases regarding the requirement for clear guidelines, Judge Battaglia observed that the cases can be reconciled by recognizing that there is no a priori rule precluding enforcement of a best efforts obligation even in the absence of articulated criteria, and that the obligation will be enforced where sufficient content may otherwise be read into it against which the promisor’s performance may be measured. This court concurs that the law does not require that best efforts criteria be defined by the contract. If external standards or circumstances impart a reasonable degree of certainty to the meaning of the phrase best efforts, the clause can be enforced.

While defendants rely upon language in the recent case of DirecTV Latin Am., LLC v RCTV Intl. Corp., 38 Misc 3d 1212[A] [Sup Ct, NY County 2013], affd 115 AD3d 539 [1st Dept 2014]) that for a promise to exert best efforts to be enforceable, there must be clear guidelines against which such efforts can be evaluated, such reliance is misplaced as the issue there was not best efforts, per se, but whether an enforceable agreement had been reached. Indeed, in affirming the dismissal of counterclaims in that case, the Appellate Division, First Department, found that the memorandum at issue lacked the definiteness as to material terms required in order to be a legally enforceable contract.

Under New York law, a best efforts clause imposes an obligation to act with good faith in light of one’s own capabilities, and apply such efforts as are reasonable in the light of that party’s ability and the means at its disposal and of the other party’s justifiable expectations. Best efforts can only be defined contextually. Thus, the court finds that a best efforts provision may be enforced even in the absence of contractually articulated criteria where the contractual language and the circumstances permit an inference as to the applicable criteria for performance.

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

This decision illustrates the fine line transactional counsel must walk.  A too-well-defined best efforts clause defeats the purpose by limiting the scope of those efforts to specific items listed in the contract, eliminating flexibility; a too-broad definition will not be enforced.

Posted: May 18, 2014

Reports Can Be Basis for Fraud Claim Despite Disclaimers When Facts Peculiarly within Defendant’s Knowledge

On May 13, 2014, the First Department issued a decision in Forty Central Park South, Inc. v. Anza, 2014 NY Slip Op. 03453, holding that disclaimers in performance reports that induced the plaintiffs to make further investments did not immunize the defendant from a fraud claim.

In Forty Central Park South, the trial court granted the defendant’s motion to dismiss the fraud claim against it. The First Department reversed, explaining:

Plaintiffs allege that in the monthly reports, generated after the Operating Agreement was entered into, defendant misrepresented that the business venture had been profitable and that plaintiffs had been earning positive returns on their investment; that defendant in fact did not invest the funds as promised; and that they relied on the monthly reports in continuing their investment in the company. These allegations state a cause of action for fraud. The disclaimers set forth in each monthly report do not preclude a finding of justifiable reliance since the alleged misrepresentations in the reports concerned facts peculiarly within defendant’s knowledge.

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