On January 25, 2026, Justice Masley of the New York County Commercial Division issued a decision in Psalms Creative, LLC v. Beacon Inv. Holdings LLC, 2026 NY Slip Op. 30295(U), holding that a fraud claim based on an alleged misrepresentation of contractual compliance failed because it was duplicative of a breach of contract claim, but that a fraud claim alleging misrepresentations made to induce a party to enter into a contract survived, explaining:
Beacon alleges that PCLLC made misrepresentations, as well as material omissions in the Ovadia Profit Reports regarding investment performance. PCLLC allegedly also made misrepresentations about the documentation and recordkeeping of Safra and EFG. PCLLC would calculate and request fees based on the total profits reported in the Ovadia Profit Reports, and Beacon would rely on those representations when making payments to PCLLC. Beacon was injured by overpaying PCLLC based on exaggerated net profits in the Ovadia Profit Reports. Again, Beacon’s factual allegations are sufficient at this stage of litigation to satisfy the heightened pleading standard under CPLR 3016(b).
Nevertheless, a fraud-based cause of action is duplicative of a breach of contract claim when the only fraud alleged is that the defendant was not sincere when it promised to perform under the contract. By contrast, a cause of action for fraud may be maintained where a plaintiff pleads a breach of duty separate from, or in addition to, a breach of the contract. Here, Beacon alleges two fraud claims against PCLLC: one for fraudulent inducement into contract, and a second for falsely reporting profits and losses to inflate commission. In the sixth counter claim, Beacon alleges that PLLC agreed that the latter would accurately and honestly report to Counterclaim-Plaintiffs all of Counterclaim Defendants’ trading activity, including all net profits realized by Counterclaim Defendants’ trading activity. The second claim is duplicative of Beacon’s breach of contract claim, and must, therefore, be dismissed.
Meanwhile, Beacon’s claim against PCLLC for fraudulent inducement to enter the contract survives. Beacon’s factual allegations that PCLLC misrepresented Ovadia’s trading skills and qualification to induce Beacon to retain PCLLC as its investment advisor and consequently suffered injury, satisfies the pleading requirement. Moreover, the claim for fraudulent inducement differs from the breach of contract claim because it precedes the existence of the contract and involves a separate breach of duty than those imposed by the contract. Since the claim is collateral to the contract, a separate cause of action for fraud in the inducement may be maintained in addition the breach of contract claim. Accordingly, PCLLC’s motion to dismiss Beacon’s fraud claim is denied as to the fraudulent inducement claim.
(Internal quotations and citations omitted).