On February 21, 2025, Justice Patel of the New York County Commercial Division issued a decision in ADP, Inc. v. E. Armada Inc., 2025 NY Slip Op. 30607(U), dismissing a fraud claim for failure adequately to allege reasonable reliance, explaining:
Plaintiff did not reasonably rely on any material representations or omissions by Defendants. To survive a motion to dismiss, plaintiff must show not only that he actually relied on the misrepresentations, but also that such reliance was reasonable. Where a party has the means to discover the true nature of the transaction by the exercise of ordinary intelligence, and fails to make use of those means, he cannot claim justifiable reliance on defendant’s misrepresentations. Plaintiff argues that: (1) the issue was not that the clients had been previously referred, but that the clients were referred by the New Jersey Defendants and were not owned by the New York Defendants; and (2) Defendants evaded detection of their plot by contacting ADP’s New York representatives rather than Wheaton. However, the Amended Complaint evidences that Plaintiff maintained a database of parties previously referred by the New Jersey Defendants. Had Plaintiff searched its own database, Plaintiff would have determined that the referred clients were owned and previously referred by the New Jersey Defendants, negating Plaintiff’s argument. Further, as Defendants argue, had the familial relationships between the parties been material, Plaintiff still failed to question the New York Defendants as to such connections. Thus, even if Plaintiff relied on the omissions or misrepresentations of Defendants, such reliance would be unreasonable as the exercise of ordinary diligence would manifest the falsity of the misrepresentations.
(Internal quotations and citations omitted).