On September 26, 2025, Justice Patel of the New York County Commercial Division issued a decision in Leinhardt v. Socure, Inc., 2025 NY Slip Op. 33670(U), holding that a fraud claim survived dismissal for lack of due diligence because of the application of the special facts doctrine, explaining:
To state a claim for fraud, a plaintiff must allege misrepresentation or concealment of a material fact, falsity, scienter, justifiable reliance, and injury. For claims of fraudulent inducement, an essential element is detrimental reliance. For claims of fraudulent concealment, a plaintiff must allege all the foregoing elements of fraud as well as a duty on the part of the defendant to disclose the allegedly material information and failure to do so.
The central issue presented in this case is whether Plaintiff’s claim for fraud falls outside the scope of the release executed in the 2018 Agreement. Generally, a valid release constitutes a complete bar to an action on a claim which is the subject of the release. In fact, a release may encompass unknown claims, including unknown fraud claims, if the parties so intend and the agreement is fairly and knowingly made. However, if the release was obtained under duress, through illegality, fraud or mutual mistake, it may be invalidated, a burden which is borne by the party seeking to set aside the release. And the party seeking to set aside the release may challenge that release as fraudulently induced only if it can identify a separate fraud from the subject of the release. To allow anything less would undermine a party’s ability to settle a fraud claim with finality.
Here, the broad terms of the release encompass fraud claims, both known and unknown, suspected and unsuspected. Plaintiff alleges that the Socure Defendants denied all normal and necessary documents or financial data to reference when he signed the 2018 Agreement. Plaintiff further alleges that he justifiability relied on the false information provided by the Socure Defendants, who controlled the books and records of the Company and was denied access to them. These allegations arise out of, relate to, and are connected to the claims that Plaintiff explicitly released when he signed the 2018 Agreement. Thus, the fraud described by Plaintiff falls squarely within the scope of the release and is an attempt to convert the release into a starting point for litigation, which is impermissible.
When the party to whom a misrepresentation is made has hints of its falsity, a heightened degree of diligence is required of it. It cannot reasonably rely on such representations without making additional inquiry to determine their accuracy. When a party fails to make further inquiry or insert appropriate language in the agreement for its protection, it has willingly assumed the business risk that the facts may not be represented. Plaintiff should have sought to condition the settlement on the truth of the representations made by the Socure Defendants that induced him to enter the settlement.
However, at this early juncture of the case, the special facts doctrine saves Plaintiff’s claim. Absent a
fiduciary duty between the parties, a duty to disclose arises only under the special facts doctrine.
In such case, a duty to disclose arises where one party’s superior knowledge of essential facts renders a transaction without disclosure inherently unfair. That doctrine requires satisfaction of a two-prong test: that the material fact was information peculiarly within the knowledge of one party and that the information was not such that could have been discovered by the other party through the exercise of ordinary intelligence. In other words, if the other party has the means available to him of knowing he must make use of those means, or he will not be heard to complain that he was induced to enter into the transaction by misrepresentation. At a minimum, a party has a duty to inquire.Here, Plaintiff alleged that during the negotiations in 2017, his counsel repeatedly asked for Socure’s Cap Table and corporate valuation, which the Socure Defendants refused to provide, and, as an outsider of the company from 2013 to 2018, he had no basis to value his stock, and he was kept in the dark. Plaintiff has sufficiently alleged that the Socure Defendants refused to provide Plaintiff with Socure’s Cap Table, and Socure’s books and records, despite Plaintiff and his counsel demanding such, and denied Plaintiff access to all corporate books and records. Thereby, dismissal of the fraud claims against the Socure Defendants is not warranted pursuant to CPLR § 3211(a)(5) at this stage.
(Internal quotations and citations omitted).