Source: http://nyfraudclaims.com/fraud-claims-fail-because-plaintiff-could-not-have-believed-the-alleged-misrepresentation-was-false-and-thus-no-reasonable-reliance/?print=on
Timestamp: 2019-04-19 11:18:20+00:00

Document:
As I summarized in an earlier post, fraud claims can and should be dismissed at the pleadings stage when the element of “reasonable reliance” is shown to be lacking. The Appellate Division, Second Department, recently affirmed that principle in Sammy v. Haupel, 2019 NY Slip Op 02372 (2d Dep’t Decided on March 27, 2019).
The lower court granted the attorney defendants’ motion to dismiss under CPLR 3211(a)(7)(“the pleading fails to state a cause of action”). Plaintiff appealed.
An attorney is liable under Judiciary Law § 487(1) if he or she “[i]s guilty of any deceit or collusion, or consents to any deceit or collusion, with intent to deceive the court or any party.” “A cause of action alleging a violation of Judiciary Law § 487 must be pleaded with specificity” (Betz v Blatt, 160 AD3d 696, 698). “Judiciary Law § 487 focuses on the attorney’s intent to deceive, not the deceit’s success” (id. at 699 [internal quotation marks omitted]).
Here, the plaintiff did not state a cause of action alleging violations of Judiciary Law § 487. The plaintiff failed to set forth “with specificity,” either in her complaint or in her papers opposing the motions, how the defendants knew or should have known that she did not sign the release upon which they relied in asserting affirmative defenses on behalf of their clients in the claim denial action (id. at 698). Even if the plaintiff had sufficiently pleaded this allegation, she “failed to allege sufficient facts to establish that the[ ] defendants intended to deceive the court” or the plaintiff (Klein v Rieff, 135 AD3d 910, 912; see Ticketmaster Corp. v Lidsky, 245 AD2d 142, 143; Thomas v Chamberlain, D’Amanda, Oppenheimer & Greenfield, 115 AD2d 999, 999-1000). The plaintiff’s conclusory allegation that the defendants intended to deceive the court and the plaintiff in relying on the affirmative defense of release in the claim denial action was not sufficient to state a cause of action alleging a violation of Judiciary Law § 487 (see Betz v Blatt, 160 AD3d at 698; Kupersmith v Winged Foot Golf Club, Inc., 38 AD3d 847, 848).
Accordingly, we agree with the Supreme Court’s determination granting those branches of the defendants’ motions which were pursuant to CPLR 3211(a)(7) to dismiss the cause of action alleging violations of Judiciary Law § 487 insofar as asserted against each of them.
“In an action to recover damages for fraud, the plaintiff must prove a misrepresentation or a material omission of fact which was false and known to be false by defendant, made for the purpose of inducing the other party to rely upon it, justifiable reliance of the other party on the misrepresentation or material omission, and injury” (Ginsburg Dev. Cos., LLC v Carbone, 134 AD3d 890, 892 [internal quotation marks omitted]). “To show reliance, a party must demonstrate that [it] was induced to act or refrain from acting to [its] detriment by virtue of the alleged misrepresentation or omission” (id. at 892 [internal quotation marks omitted]). “The plaintiff must show a belief in the truth of the representation and a change of position in reliance on that belief” (Nabatkhorian v Nabatkhorian, 127 AD3d 1043, 1044; see Lazich v Vittoria & Parker, 189 AD2d 753, 754). “In addition, in any action based upon fraud, the circumstances constituting the wrong shall be stated in detail” (Nabatkhorian v Nabatkhorian, 127 AD3d at 1044 [internal quotation marks omitted]).
Here, the plaintiff also failed to state a cause of action alleging fraud. The plaintiff failed to allege facts that would support an inference that asserting affirmative defenses based on the plaintiff’s purported release constituted knowing “misrepresentation or a material omission of fact which was false” (Ginsburg Dev. Cos., LLC v Carbone, 134 AD3d at 892 [internal quotation marks omitted]). The plaintiff also failed to allege facts that would support the element of justifiable reliance (see id.). Given that the plaintiff alleged that she did not sign the release, she could not also [*3]claim to have believed that the affirmative defense of release was true, nor could she claim to have “change[d her] position in reliance on that belief” (Nabatkhorian Nabatkhorian, 127 AD3d at 1044). Moreover, as in Lazich, the alleged statements—the assertion of an affirmative defense—”were undertaken in the course of adversarial proceedings and were fully controverted,” further undermining any claim of reliance by the plaintiff (Lazich v Vittona & Parker, 189 AD2d at 754).
Reasonable reliance is one of the most critical elements of the claim for fraud. It shifts the focus from the wrongdoing, and falsity allegedly perpetrated by the defendant to the prudence and reasonableness of the plaintiff. Even with documented false statements and misrepresentations, the plaintiff has its own obligation to act reasonably and prudently in avoiding harm.

References: v. 
 § 487
 § 487
 § 487
 § 487
 § 487
 § 487