On July 4, 2022, Justice Masley of the New York County Commercial Division issued a decision in PMC Fin. Servs. Group, LLC v. Nations Equip. Fin., LLC, 2022 NY Slip Op. 32097(U), dismissing a fraudulent inducement claim for lack of due diligence, explaining:
Plaintiffs’ fraudulent inducement claim is based upon allegations that NEF and NEFPASS provided materially inaccurate information and intentionally concealed the information so that plaintiffs would rely upon and go forward with the transaction. To state a claim of fraudulent inducement, plaintiffs must show that there was a false representation, made for the purpose of induce another to act on it, and that the party to whom the representation was made justifiably relied on it and was damaged. . . .
At the outset, plaintiffs’ reliance on the special facts doctrine is unavailing. Plaintiffs argue and allege that they were given false statements and information, for example, an inaccurate Credit Report, inaccurate valuations of the equipment, a materially inaccurate Equipment Schedule, and information regarding the financial wellbeing of Falcon. They further argue that NEF, NEFPASS, Carson, and Solar were fully aware of the material inaccuracies contained within those documents to induce plaintiffs to enter into this transaction. According to plaintiffs, they did not have any means available to them to learn these facts but nevertheless defendants had a duty to, and should have, disclosed the underlying facts to plaintiffs.
Three specific elements must be shown to invoke the special facts doctrine: (1) one party must have superior knowledge, (2) that knowledge must not be readily available to the other party, and (3) the party with the knowledge must know that the other party is acting on the basis of mistaken knowledge.
Here, plaintiffs have not alleged any facts from which it could logically be inferred that defendants’ access to the relevant information was superior to the access afforded to plaintiffs. For example, plaintiffs do not allege that they even attempted to pursue information that plaintiffs claim were not discoverable to them. Additionally, there are no allegations that defendants
interfered or prevented in any way plaintiffs’ ability to seek verification of the information. There is no indication that plaintiffs did not have any way of doing their own research or verifying the information presented to them.Defendants also assert that plaintiffs specifically disclaimed reliance. Both parties rely on Danann Realty Corp. v Harris for the proposition that a specific disclaimer destroys the allegations in plaintiff’s amended complaint that the agreement was executed in reliance upon these contrary oral representations. The Court of Appeals distinguished cases generally concerned with factual situations wherein the facts represented were matters peculiarly within the defendant’s knowledge from Danann. Plaintiffs use Danann for that proposition that their case is closer to cases dealing with facts within the defendants’ knowledge. However, as explained above, the special facts doctrine does not apply, and nevertheless, the court finds the disclaimers concerning reliance upon diligence documents specific enough to satisfy the requirements set forth in Danann.
Even if the court concluded to the contrary, the court nevertheless finds that plaintiffs fail to sufficiently allege the necessary element that their reliance was reasonably justified. The common thread underlying defendants’ remaining arguments in support of dismissal, is that plaintiffs did not adequately plead their fraudulent inducement claim. In a cause of action based upon fraud, the circumstances constituting the wrong shall be stated in detail. As a matter of law, a sophisticated plaintiff cannot establish that it entered into an arm’s length transaction in justifiable reliance on alleged misrepresentations if that plaintiff failed to make use of verification that were available to it. The amended complaint alleges that based on industry custom and practice, as well as their own prior direct dealings with NEF and NEFPASS, plaintiffs reasonably and justifiably relied upon the express representations, certifications, agreements, and warranties made by NEF and NEFPASS with respect to the condition and valuation of the Equipment in agreeing to participate in the Lease. And, although plaintiffs allege that defendants intentionally concealed this information so that plaintiffs would rely upon an inaccurate list of equipment and valuation, the amended complaint is devoid of any allegations explaining plaintiffs’ attempts in seeking to verify such information, making such an allegation conclusory. Based on plaintiffs’ allegation that based on industry custom and practice, as well as their own prior direct dealings with defendants, it can be reasonably inferred that plaintiffs did not attempt to seek to verify the information they were given by any means. Without allegations that plaintiffs, being sophisticated parties, attempted to verify the information that it was given, plaintiffs’ fraudulent inducement claims are doomed.
(Internal quotations and citations omitted).