On January 10, 2024, Justice Masley of the New York County Commercial Division issued a decision in Success Academy Charter Schs., Inc. v. Liberty Sq. Realty Corp., 2024 NY Slip Op. 30129(U), holding that a fraudulent inducement claim fails for lack of reasonable reliance, explaining:
To state a claim for fraudulent inducement, there must be a knowing misrepresentation of material present fact, which is intended to deceive another party and induce that party to act on it, resulting in injury. To be viable, a fraudulent inducement claim must demonstrate justifiable reliance on the false representation. The question of what constitutes reasonable or justifiable reliance is not generally a question to be resolved as a matter of law on a motion to dismiss. However, if a sophisticated party failed to make use of the means of verification available to it to verify the alleged misrepresentations, it cannot as a matter of law establish that it entered an arm’s length transaction in justifiable reliance on these alleged misrepresentations. In the absence of any allegations that a party attempted to verify the representations by which it was allegedly misled during the negotiation of the contract, the claim for fraudulent inducement fails to adequately allege justifiable reliance as a matter of law. Further, if the facts represented are not peculiarly within the plaintiff’s knowledge, and the plaintiff has the means available to it of knowing, by the exercise of ordinary intelligence, the truth or the real quality of the subject of the representation, the plaintiff must make use of those means, or it will not be heard to complain that it was induced to enter into the transaction by misrepresentations.
Tourneau squarely applies to this case. Success is a sophisticated entity and had the means to verify the representations by which it was allegedly misled during the negotiation of the Lease. Nowhere in the SAC does Success allege that it made any effort, either by accessing publicly available documents or requesting Liberty to disclose its financials, tax returns, bank statements, or other financial documentation to verify Weinstein’s statements about Liberty’s financial condition. In the absence these allegations, Success’s claim for fraudulent inducement fails to adequately allege justifiable reliance as a matter of law and is dismissed.
(Internal quotations and citations omitted).