On January 10, 2024, Justice Crane of the New York County Commercial Division issued a decision in YS GM Marfin II LLC v. Four Wood Capital Advisors, LLC, 2024 NY Slip Op. 30166(U), holding that a negligent misrepresentation claim was adequately alleged against an investment manager even though the manager was not a fiduciary, explaining:
A cause of action alleging negligent misrepresentation requires the plaintiff to demonstrate: (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. Further liability for negligent misrepresentation has been imposed only 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.
Defendants argue that, like the lack of a fiduciary relationship, there was no special relationship between the parties sufficient to support a negligent misrepresentation claim.
However, whether such a special relationship’ exists in the commercial context is highly fact specific and is not generally amenable to summary disposition.
Here, defendants were the ones supposedly to perform the actual monitoring of the vessels. They therefore were in a superior position to know where those vessels were and plaintiffs relied on representations about the location of the vessels to their detriment. Defendants also allegedly sent plaintiffs fraudulent documentation. Moreover, defendants were supposed to be managing the investments. Plaintiffs relied to their detriment on defendants’ misrepresentations about the status of the collateral and the status of repayments. Plaintiffs made additional loans and refrained from taking action earlier. This is sufficient to state a claim for negligent misrepresentation.
(Internal quotations and citations omitted).