On September 18, 2023, Justice Masley of the New York County Commercial Division issued a decision in Schupak v. Arozamena, 2023 NY Slip Op. 33235(U), holding that a no oral representations clause barred a fraudulent inducement claim, explaining:
Plaintiffs allege that Arozamena fraudulently induced Donald to enter into the Settlement Agreement by representing that he and Andrew reached an agreement on the material terms of their deal, ultimately memorialized in the EIAs. They further allege that Arozamena represented to Andrew that the EIAs would be countersigned by Arozamena with the intent that Donald and Andrew would rely on those representations. Defendants assert the Settlement Agreement’s release, merger, and no additional representation” provisions bar this claim.
Generally, a valid release constitutes a complete bar to an action on a claim which is the subject of the release. However, a release may be voided for any traditional bases for setting aside written agreements including fraud. . . . Although a defendant has the initial burden of establishing that it has been released from any claims, a signed release shifts the burden of going forward to the plaintiff to show that there has been fraud, duress or some other fact which will be sufficient to void the release. A party that releases a fraud claim may later challenge that release as fraudulently induced only if it can identify a separate fraud from the subject of the release.
Even assuming that plaintiffs sufficiently allege a separate fraud, plaintiffs cannot establish the element of justifiable reliance. In order to set aside a release on such grounds, a plaintiff must establish the basic elements of fraud, namely a representation of material fact, the falsity of that representation, knowledge by the party who made the representation that it was false when made, justifiable reliance by the plaintiff, and resulting injury. Here, the Settlement Agreement contains not only a merger clause, but also a no additional representations clause, which provides that no party has made or relied upon any representations or promises in connection with the subject matter of this Agreement which are not specifically set forth herein. All representations and promises made by any Party to another, whether orally or in writing, are understood to be merged in this Agreement. Given
(Internal quotations and citations omitted).
the language of this clause, which was negotiated by these sophisticated parties represented by counsel, plaintiffs could not have reasonably relied on any oral representation that the deal between Arozamena and Andrew was finalized prior to entering into the Settlement Agreement.