Fraud Claim Dismissed for Failure to Allege Who Made Misrepresentation and Where, When and How it was Made

On March 12, 2019, Justice Sherwood of the New York County Commercial Division issued a decision in Q Semiconductor Inc. v. GlobalFoundries U.S. 2 LLC, 2019 NY Slip Op. 30603(U), dismissing a fraud claim for failure to plead it with particularity, explaining:

CPLR 3016 provides that where a cause of action or defense is based upon misrepresentation, fraud, mistake, willful default, breach of trust or undue influence, the circumstances constituting the wrong shall be stated in detail. Plaintiff states only generally that the representations about the maturity of the manufacturing process were made in August of 2016 by GF2. While plaintiff names two individuals with whom it had discussions about the process to be used for manufacturing, it does not claim either of those individuals made representations as to the EDMOS Process's maturity.

In Eastman Kodak Co. v Roopak Enterprises, Ltd, the First Department noted that dismissal was required for failure to plead the fraud allegations with sufficient particularity because the defendant alleged neither the time not the place of the purported misrepresentations nor which employee of the plaintiff purportedly made them.

Here, the allegations of the fraudulent representation are similarly vague. The person making the representation, where, how, and when are not alleged, only that GF2 made representations about the maturity of the Process. It is not specifically alleged that the representations were made in August of 2016, but instead that Q approached GF2 and began discussions at about that time. The fact that Q does business in California does not make an allegation that the representation was made in any particular place, and the fact that the Agreement was signed in Laguna Hills, CA, is irrelevant to the details of when and how the misrepresentations were made. Accordingly, this claim shall be dismissed for failure to state a claim with sufficient specificity, as required by CPLR 3016.

(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 jlundin@schlamstone.com if you or a client have a question regarding a fraud-based claim.