On January 4, 2024, the First Department issued a decision in Chan v. Havemeyer Holdings LLC, 2024 NY Slip Op. 00020, illustrating the implications of fiduciary obligations on a fraud claim, explaining:
Section 4 of the subscription agreements provides that a subscriber has been furnished with and has read Havemeyer’s Amended and Restated Operating Agreement and the exhibits thereto (Offering Materials), and that the subscriber has not relied on any other materials or representations. Because TC Havemeyer owed the Individual Plaintiffs a fiduciary duty, defendants cannot rely on section 4 insofar as the Individual Plaintiffs are concerned. Supreme Court therefore properly declined to dismiss the fifth cause of action with respect to the Individual Plaintiffs, who are the only plaintiffs alleging breach of fiduciary duty against TC Havemeyer.
By contrast, TC Havemeyer did not owe a fiduciary duty to plaintiff Yuca Capital Partners LP, which, unlike the Individual Plaintiffs, was not a preexisting investor. Because the plain language of section 4 says Yuca is relying solely on the Offering Materials, as a matter of law, Yuca could not have relied on defendant Nicholas Silvers’ statement that the refinancing was already done. Rather, Yuca should have exercised a heightened degree of diligence after receiving conflicting statements. Yuca’s claims for fraud and rescission based upon fraud therefore fail.
. . .
With respect to justifiable reliance, the beneficiaries of a fiduciary relationship, such as the Individual Plaintiffs, are entitled to rely on their fiduciary’s representations and its complete, undivided loyalty. They are not required to perform independent inquiries to reasonably rely on their fiduciary’s representations.
(Internal citations omitted).