On February 28, 2014, Justice Scarpulla of the New York County Commercial Division issued a decision in Goldberg v. HSBC Securities (USA), Inc., 2014 NY Slip Op. 30481(U), examining the elements of a claim of aiding and abetting undue influence.
In Goldberg, the executor of an estate brought claims related to alleged undue influence over the decedent, including a claim for aiding and abetting undue influence against two defendants. In deciding the motion to dismiss brought by those defendants, the court considered whether such a tort existed and, if so, what its elements were, explaining:
No authoritative New York case concludes that there exists in New York a cause of action for aiding and abetting undue influence. Plaintiff relies on Medeiros v. John Alden Life Ins. Co., 1990 U.S. Dist. LEXIS 10393, 1990 WL 115606 (S.D.N.Y. 1990) for the proposition that one may be held liable for aiding and abetting another’s undue influence. On a motion for summary judgment, the court in Medeiros found that “[u]nder New York law, however, a person may be liable for aiding and abetting the tortious act of another where plaintiff demonstrates: (1) that the principal/third party violated the law or engaged in tortious conduct; (2) that the defendant knew or should have known that the violation or conduct was occurring; and (3) that defendant’s conduct gave substantial assistance or encouragement to the principal to engage in the violation or tortious conduct.”
The standard articulated by the court in Medeiros is essentially that for aiding and abetting fraud. Critical to a claim for aiding and abetting fraud is that the plaintiff plead “substantial assistance.” In addition, aiding and abetting fraud must be pleaded with the specificity sufficient to satisfy CPLR 3016 (b). Substantial assistance exists where (1) a defendant affirmatively assists, helps conceal, or by virtue of failing to act when required to do so enables the fraud to proceed, and (2) the actions of the aider/abettor proximately caused the harm on which the primary liability is predicated.
(Internal quotations and citations omitted). The court went on to find that the plaintiff had failed “to allege substantial assistance with sufficient particularity to satisfy CPLR 3016(b).”