On September 10, 2025, Justice Platkin of the Albany County Commercial Division issued a decision in Crane v. WP Strategic Holdings, LLC, 2025 NY Slip Op. 52064(U), holding that a fraud claim against an alleged fiduciary failed for lack of reasonable reliance, explaining:
Plaintiffs further allege that they, along with Kletter, were elected as directors of CSPNA at a meeting held immediately after the Closing. Even accepting the truth of this highly-implausible and unsupported assertion, fellow directors of a corporation do not owe fiduciary duties to one another.
But even if plaintiffs were owed fiduciary duties as shareholders or directors, their claim of fraudulent inducement fails for lack of justifiable reliance. Parties claiming fraud cannot establish reasonable reliance where, as here, they have the means to discover the true nature of the transaction by the exercise of ordinary intelligence, and fail to make use of those means.
Plaintiffs are sophisticated businesspeople who were represented by their own separate counsel at pertinent times, including during arm’s-length negotiations with defendants’ counsel over the terms of the Release. A sophisticated principal is able to release its fiduciary from claims — at least where, as here, the fiduciary relationship is no longer one of unquestioning trust — so long as the principal understands that the fiduciary is acting in its own interest and the release is knowingly entered into.
In this regard, Kletter allegedly promised to document that each Plaintiff was the owner of 10% of CSPNA’s stock. Notwithstanding numerous requests by plaintiffs, defendants refused to issue the promised] stock certificates and documentation to Plaintiffs.
Then, more than two (2) months after the Closing, defendants abruptly changed their position regarding plaintiffs’ involvement. Despite prior promises to the contrary, defendants explicitly refused to grant plaintiffs an ownership interest in CSPNA, and they also put plaintiffs on notice that the parties’ short- and long-term goals were no longer aligned. In fact, defendants’ suspicious and unresponsive nature after the March 14, 2024, Zoom Meeting, led one of plaintiffs’ advisors to recommend that they accept defendants’ settlement proposal because he believed that Kletter was being untruthful.
Despite all of these red flags, settlement negotiations conducted at arm’s length through separate counsel, and a proposed Release that recognized WP’s right to sell CSPNA shares at any time without accounting to plaintiffs, plaintiffs made no inquiry concerning the value of their claimed interest in CSPNA or the reasons for defendants’ abrupt change in position. Plaintiffs did not inquire about the status of CSPNA’s business, the prospects for a sale of CSPNA’s stock, or the value of their claimed 20% ownership interest.
Instead, plaintiffs knowingly and voluntarily executed the Release based on their belief that the $660,000 they would receive from defendants was relatively close to the market value of the interest they claimed in CSPNA. In so doing, plaintiffs disregarded overt conduct on the part of defendants clearly evincing a breakdown in the relationship and an adversarial posture, including a clear statement that defendants no longer viewed the parties’ interests as being aligned.
Where a principal and fiduciary are sophisticated parties engaged in negotiations to terminate their relationship, the principal cannot blindly trust the fiduciary’s assertions. This is particularly true where the principal has actual knowledge that its fiduciary is not being entirely forthright.
Here, plaintiffs repeatedly and unsuccessfully attempted to hold defendants to their promise of an ownership interest in CSPNA before abandoning their claims and giving an extraordinarily broad release in exchange for payment of $660,000. They cannot now invalidate that release by claiming ignorance of the depth of their alleged fiduciary’s misconduct.
The Court therefore concludes that plaintiffs’ failure to conduct any diligence as to the value of their released claims conclusively defeats the allegation that they reasonably and justifiably relied upon defendants’ silence regarding the non-binding LOI and other information bearing on the value of their claimed interest in CSPNA. The need to use care to reach an independent assessment of the value of CSPNA and the released claims should have been obvious to plaintiffs and their counsel under the circumstances presented in their Complaint and affidavits in opposition to the motion.
(Internal quotations and citations omitted).