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Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: February 11, 2018

Plaintiff Cannot Withstand Summary Judgment By Showing Question of Fact on One Element of Fraud Claim if it Fails on Another Element

On January 22, 2018, Justice Sherwood of the New York County Commercial Division issued a decision in xLon Beauty, LLC v. Day, 2018 NY Slip Op. 30142(U), holding that a plaintiff could not withstand summary judgment dismissing its fraud claim by showing that there was a question of fact regarding one element of the claim when the defendant had shown that there was no question of fact regarding another element, explaining:

Defendant maintains that there was never any representation made, but as described above, this remains a contested issue of fact as both Weinberg and Garfinkel now offer affidavits that contradict Defendant’s claims . According to Weinberg, the statement was made to induce Plaintiff to enter into the 3% Agreement. That agreement was replaced by the 7% Agreement as to which there is no claim of either fraud or fraudulent inducement. Moreover, Defendant has made a prima facie showing that the purported representation (i.e. that Defendant would use her business connections to promote the product) was not false. . . .

Rather than address the element of falsity, Plaintiff focuses instead on the element of scienter and argues that whether this representation was “knowingly false or intended to deceive” is exclusively in Day’s knowledge. However, by failing to rebut Defendant’s showing as to to the underlying falsity of the representation, an essential element to of Plaintiffs fraudulent inducement claim, Plaintiff fails to rebut Defendant’s prima facie showing of entitlement to summary judgment.

Plaintiff also argues that summary judgment should be denied on the basis that certain facts relevant to the complaint are solely within Defendant’s control, Defendant has not yet been deposed, and Defendant has not fully complied with Plaintiffs discovery requests – namely, requests for admissions, and document requests relating to her efforts to “sabotage or otherwise harm the business of Xlon.” However, as none of Plaintiffs bases for further discovery bear on the issues that are dispositive to this motion, Plaintiff’s claimed need for further discovery cannot alter the result on this motion. Accordingly, Defendant’s motion to dismiss the fraudulent inducement claims is GRANTED and the amended complaint is DISMISSED in its entirety.

(Internal citations omitted).

Commercial litigation frequently involves fraud-based claims. Such claims have special pleading requirements or rules, and they all must be met. Thus, as this decision shows, failure to establish one element of a fraud claim defeats the claim, even if there is evidence supporting other elements of the claim. 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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