On October 16, 2020, Justice Borrok of the New York County Commercial Division issued a decision in Kirschenbaum v. De Baets, 2020 NY Slip Op. 33406(U), holding that conclusory allegations were an insufficient basis for a fraud claim, explaining:
A claim for fraud requires a material misrepresentation of a fact, knowledge of its falsity, an intent to induce reliance, justifiable reliance by the plaintiff, and damages. A claim for fraud is also subject to the heightened pleading standard under CPLR § 3016(b).
Here, Mr. Kirschenbaum alleges that Mr. De Baets knowingly made a false representation that Mr. Kirschenbaum’s portion of the 4% fee from the Aspen Coin raise would be invested in Securitize, when instead, Mr. De Baets converted Mr. Kirschenbaum’s contribution into his own. However, earlier in the Amended Complaint, Mr. Kirschenbaum simply asserts that he and Mr. De Baets contributed equally to Securitize by splitting 4% of the Aspen Coin raise. In light of these contradictory pleadings, Mr. Kirschenbaum fails to plead with particularity facts that permit a reasonable inference of fraudulent misconduct by Mr. De Baets. Nor does Mr. Kirschenbaum allege any facts to show that he reasonably relied on any of Mr. De Baets’ alleged misrepresentations. Rather, Mr. Kirschenbaum only asserts bare and conclusory allegations of fraud, without any supporting details, which cannot satisfy the requirements of CPLR § 3016(b). Accordingly, Mr. Kirschebaum’s first cause of action for fraud as alleged in the Amended Complaint must be dismissed.
(Internal quotations and citations omitted).
Commercial litigation frequently involves fraud-based claims. Such claims have special pleading requirements such as the particularity requirement at issue in this decision. Contact Schlam Stone & Dolan partner John Lundin at email@example.com if you or a client have a question regarding a fraud-based claim.
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