On July 3, 2025, Justice Chan of the New York County Commercial Division issued a decision in Wilburger v. Ava Labs, Inc., 2025 NY Slip Op. 51072(U), refusing to dismiss a fraudulent inducement claim even though the alleged inducement was contradicted by the parties’ contract, explaining:
It is well settled that, to state a claim for fraudulent inducement, a plaintiff must allege (1) a misrepresentation or an omission of material fact which was false and known to be false by the defendant, (2) the misrepresentation was made for the purpose of inducing the plaintiff to rely upon it, (3) justifiable reliance of the plaintiff on the misrepresentation or material omission, and (4) injury. Put differently, a claim for fraudulent inducement requires a showing that a defendant made a false representation for the purpose of inducing another to act on it. These elements of fraud must be pleaded in detail, although this pleading requirement should not be confused with requiring unassailable proof of fraud.
Here, although the Complaint is certainly not a model of clarity, it appears that all of the required elements of a fraudulent inducement claim are present. To start, Wilburger maintains that, after entering into the ICA, Ava Labs agreed to compensate him for the scope, quality, and impact of his services rendered and that it would do so in the amount of 250,000 AVAX tokens. Wilburger then continues that, even though he received 100,000 out of the 250,000 AVAX tokens, he was later presented with two separate agreements—the May 19 Amendment and the Antarctica Agreement—that indicated that he only had a right to purchase and/or option to acquire the remaining 150,000 AVAX tokens that was also contingent on his continuous service on behalf of Ava Labs.
As alleged, Wilburger apparently recognized that the terms of these agreements were at odds with Ava Labs’ unconditional promise to compensate him with the remaining 150,000 AVAX tokens he was owed. Ava Labs, however, repeatedly assured Wilburger that all of his AVAX tokens were already earned and that the May 19 Amendment and Antarctica Agreement were nothing more than mere formalities that had no actual bearing on his earned compensation. Thus, relying on Ava Labs’ assurances, Wilburger executed these two agreements. Eventually Ava Labs terminated Wilburger’s contractual relationship under the ICA and, contrary to its prior representations, used the May 19 Amendment and the Antarctica Agreement as a basis to deny compensating Wilburger with his remaining 150,000 AVAX tokens. Consequently, as alleged, Ava Labs’ repeated assurances proved to be false.
. . .
It is, of course, true that a party is generally not permitted to introduce extrinsic evidence to vary or add to the terms of a contract. The law is, however, also equally clear that where the complaint states a cause of action for fraud, the parol evidence rule is not a bar to showing the fraud unless the agreement between the parties expressly disclaims reliance on the particular misrepresentation underlying the fraud claim. Here, Ava Labs fails to identify any specific disclaimer of reliance on the at-issue alleged misrepresentations made by Ava Labs. For this reason, there is no basis at the pleading stage to conclude that, as a matter of law, it was unreasonable for Wilburger to rely on Ava Labs’ extra-contractual misrepresentations to support his fraudulent inducement claim in connection with his execution of the May 19 Amendment and Antarctica Agreement.
. . .
[T]here is no indication at the pleading stage that the terms of the May 19 Amendment or Antarctica Agreement placed Wilburger on guard to any alleged misrepresentations so as to render his reliance on Ava Labs’ extra-contractual statements unreasonable. To the contrary, as alleged, Wilburger was essentially led to believe that the requirements and conditions set forth the May 19 Amendment and Antarctica Agreement had essentially been satisfied. There is similarly no basis to conclude from the pleadings that Wilburger was a sophisticated party who failed to take advantage of his access to information prior to signing the May 19 Amendment or Antarctica Agreement. Consequently, the facts and holding of Sinclair are entirely distinguishable from, and hence inapplicable to, the case at bar.
(Internal quotations and citations omitted).