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Commercial Division Blog

Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: January 10, 2020

Fraud Claim Dismissed; Plaintiff’s Reliance on Alleged Misrepresentations was Unreasonable Due to Plaintiff’s Failure to Exercise Due Diligence

On December 26, 2019, the First Department issued a decision in Unique Goals Intl., Ltd. v. Finskiy, 2019 NY Slip Op. 09381, affirming the dismissal of a fraud claim because the plaintiff’s reliance on the alleged representations was unreasonable, explaining:

We affirm the dismissal of the fraud cause of action on the ground that the complaint fails to plead the element of justifiable reliance. Here, the financially sophisticated investors do not allege that they conducted due diligence to verify defendants’ representations about White Tiger’s financial condition and gold reserves, or even sought to do so, even though they were aware that White Tiger was experiencing financial difficulties. Accordingly, the complaint fails to state a legally sufficient cause of action for fraud.

(Internal citations omitted).

Commercial litigation frequently involves fraud-based claims. Such claims have special pleading requirements or rules, including the rule that a sophisticated businessperson’s reliance on a false statement must be reasonable. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client think you have been defrauded, or if someone has accused you or a client of defrauding them.

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