On April 6, 2026, Justice Patel of the New York County Commercial Division issued a decision in JLJ Capital LLC v. Churchill Real Estate Holdings LLC, 2026 NY Slip Op. 31389(U), holding that a fraud claim can be based on a false representation of the ability to perform a contract, explaining:
To state a claim for fraud, a plaintiff must allege a misrepresentation or a material omission of fact which was false and known to be false by defendant, made for the purpose of inducing the other party to rely upon it, justifiable reliance of the other party on the misrepresentation or material omission, and injury. A claim rooted in fraud must be pleaded with the requisite particularity under CPLR § 3016(b).
Plaintiff alleges that Defendant misrepresented (1) that Plaintiff was a 20% participant in the Loan; (2) that Defendant had the ability to transfer Plaintiff 20% of the Loan; and (3) that Defendant would retain a 2.5% interest in the Loan. A claim for fraudulent inducement of contract can be predicated upon an insincere promise of future performance only where the alleged false promise is collateral to the contract the parties executed; if the promise concerned the performance of the contract itself, the fraud claim is subject to dismissal as duplicative of the claim for breach of contract. Moreover, New York courts have held that a misrepresentation with respect to a party’s present financial condition or current ability to perform, made in order to induce a party to enter into a contract, will support a claim of fraudulent inducement.
Here, Plaintiff’s allegation that Defendant misrepresented that Plaintiff was a 20% Participant in the Loan, specifically includes for example, Section 2.1 of the Participation Agreement represented that, ‘effective as of the Acquisition Date, in consideration of payment of the Participation Consideration Amount, Churchill hereby assigns, conveys and transfers to Participant the Participation Interest. Plaintiff further alleges that Exhibit B to the Participation Agreement contained a signed Certification by Maheshwari that hereby acknowledges JLJ as holder of the Participant’s Participation Interest, thus also representing that Churchill would—and did—immediately become a 20% Participant in the Loan. Moreover, with respect to Plaintiff’s allegation that Defendant misrepresented that it would maintain at least a 2.5% interest in the Loan, the Amended Complaint specifically states “through Section 7.2(c) of the Participation Agreement, Churchill necessarily represented that, following JLJ’s Participation, Churchill would retain some skin in the game—i.e., a minimum 2.5% interest in the Loan otherwise JLJ’s tag along rights would be illusory.” While Plaintiff further alleges specific conversations between Maheshwari and Podolsky, said conversations merely reiterate the precise terms of the Participation Agreement.
Although Plaintiff attempts to fashion these allegations as extracontractual misrepresentations, the Amended Complaint clearly alleges a breach of Sections 2.1 and 7.2(c) of the Participation Agreement, and not a claim for fraud.
Accordingly, the Court grants Defendant’s Motion to Dismiss with respect to the allegations concerning Defendant’s fraudulent misrepresentations that Plaintiff was a 20% Participant in the Loan and that Defendant would maintain a 2.5% interest in the Loan.
Plaintiff further alleges that Defendant misrepresented that it had the ability to transfer 20% of the Loan to Plaintiff. The Court observes that said allegations resemble the claim that Defendant did not intend to perform under Sections 2.1 and 7.2(c) of the Participation Agreement. However, New York courts have held that an allegation with respect to the misrepresentation of ability to perform constitutes a misrepresentation of present fact, not of future intent, and therefore these allegations support a non-duplicative fraudulent inducement claim.
(Internal quotations and citations omitted).