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Fraud Action Based Upon Statements of Opinion Properly Pled/Negligent Misrepresentation Not Properly Pled–No Allegation of Privity or Privity-Like Relationship

In an action stemming from defendant-investment-ratings-agency’s high rating of worthless residential-mortgage-backed securities, the Fourth Department determined the complaint properly pled a fraud cause of action, even though based upon statements of opinion. The court further determined the negligent misrepresentation cause of action was deficient in that privity or a privity-like relationship was not alleged:

Although statements of opinion generally are not actionable in a fraud cause of action …, defendant correctly recognizes that statements of opinion may nevertheless be actionable as fraud if the plaintiff can plead and prove that the holder of the opinion did not subjectively believe the opinion at the time it was made and made the statement with the intent to deceive … . As one court has explained, a fraud claim based on an expression of opinion “is actionable in an appropriate case not because the opinion is objectively’ wrong. Rather, in an appropriate case it is actionable because the speaker either did not in fact hold the opinion stated or because the speaker subjectively was aware that there was no reasonable basis for it . . . In the first instance, the speaker will have lied as to his or her subjective mental state. In the second, he or she implicitly would have represented that there was a reasonable basis for the statement of opinion, knowing that the implicit representation was false” … . Here, we agree with defendant that its credit ratings were statements of opinion, not fact … , but we conclude that plaintiff adequately pleaded that defendant did not believe its opinions when it issued the ratings. Plaintiff set forth in detail the reasons why defendant was aware that the ratings were inflated, including its allegation that defendant failed to follow its own policies and procedures in determining the ratings. * * *

To establish a claim for negligent misrepresentation based on the allegedly inaccurate credit ratings, plaintiff must allege that “(1) the [defendant] must have been aware that the [ratings] were to be used for a particular purpose or purposes; (2) in the furtherance of which a known party . . . was intended to rely; and (3) there must have been some conduct on the part of the [defendant] linking [it] to that party . . . , which evinces the [defendant’s] understanding of that party[‘s] . . . reliance” … . “The indicia, while distinct, are interrelated and collectively require a third party claiming harm to demonstrate a relationship or bond with the once-removed [defendant] sufficiently approaching privity’ based on some conduct on the part of the [defendant]’ ” … .

The complaints here failed to plead that a special or privity-like relationship existed between plaintiff and defendant … . M&T Bank Corp. v McGraw-Hill Cos., Inc., 2015 NY Slip Op 02372, 4th Dept 3-20-15

 

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