On March 4, 2026, the Second Department issued a decision in Michael Gangi Plumbing & Heating Contrs., Inc. v. World Bus. Lenders, 2026 NY Slip Op. 01194, holding that a fraud claim cannot be based on a misrepresentation that the plaintiff could with due diligence have determined was false, explaining:
An essential element of any fraud [claim] is that there must be reasonable reliance, to a party’s detriment, upon the representations made by the defendant against whom the fraud claim has been asserted. A party cannot claim reliance on a misrepresentation when he or she could have discovered the truth with due diligence.
Here, the second cause of action failed to allege facts from which it may be inferred that Theisen reasonably relied on a purported representation from a notary at the Bay Ridge mortgage closing that, in accordance with a HUD-1 statement, there would be no prepayment penalty associated with the Bay Ridge loan. The Bay Ridge mortgage agreement that Theisen signed indicated that, contrary to the above, there was in fact a prepayment penalty associated with the loan. Thus, the notary’s alleged misrepresentation pertained to facts that Theisen could have and should have verified with her own due diligence. Thus, the Supreme Court properly granted that branch of the defendants’ motion which was pursuant to CPLR 3211(a)(7) to dismiss the second cause of action.
(Internal quotations and citations omitted).