On July 12, 2024, Justice Chan of the New York County Commercial Division issued a decision in New Legend Debt by Meitav Dash L.P. v. Sam & Kate Prod., LLC, 2024 NY Slip Op. 32648(U), dismissing a claim for negligent misrepresentation for failure to allege a sufficiently close relationship between the plaintiff and the defendant, explaining:
To state a claim for negligent misrepresentation, a plaintiff must allege (1) the existence of a special or privity·like relationship imposing a duty on the defendant to impart correct information to the plaintiff; (2) that the information was incorrect; and (3) reasonable reliance on the information. In the context of negligent misrepresentation claims brought in commercial matters, a duty to speak with care exists when the relationship of the parties, arising out of contract or otherwise, is such that in morals and good conscience the one has the right to rely upon the other for information. Courts, in turn, impose this duty on those persons who possess unique or specialized expertise, or who are in a special position of confidence and trust with the injured party such that reliance on the negligent misrepresentation is justified.
To fit in within this framework, New Legend alleges that it was induced to lend monies to defendants based on a draft CAMA, dated March 24, 2022, which allegedly listed New Legend ahead of WME in a purported repayment waterfall. New Legend further avers that when its agent, Lejsek, represented New Legend’s understanding that it had priority over WME, none of defendants denied his statement. New Legend then avers that this amounted to a negligent misrepresentation because defendants purportedly had a duty to give New Legend correct information regarding WME’s position. These allegations, however, are insufficient to state a claim for negligent misrepresentation. Specifically, not only does New Legend fail to allege which defendants (if any) made the purported misrepresentation, but also the Complaint is devoid of any allegations establishing either the requisite special or privity like relationship between any of the defendants and New Legend or New Legend’s reasonable reliance on any misrepresentation.
As alleged, New Legend provided loan financing to defendants in connection with the production of a multi-million-dollar motion picture. This movie production required the review and approval numerous transactions and agreements that would facilitate the production and delivery of the Film. Thus, even drawing all reasonable inferences in New Legend’s favor, these facts establish that New Legend was providing SKP and Thomasville with the Loan, pursuant to an arm’s length transaction between sophisticated parties. Such circumstances do not, on their own, constitute a special relationship under New York law.
Given that the Complaint alleges an arm’s length transaction, it was incumbent on New Legend to make a showing of special circumstances that could have transformed the parties’ business relationship to a fiduciary one. But beyond baldly asserting that only defendants knew which counterparties SKP and Thomasville had on the Film and what were the terms, New Legend fails to aver any special circumstances that would have converted the parties’ arm’s length dealings into a fiduciary relationship. The dearth of any such special circumstances set forth in the Complaint is fatal to this claim.
(Internal quotations and citations omitted).