The First Department, in a full-fledged opinion by Justice Gische, determined plaintiff, a sophisticated investor, did not state a cause of action for fraud on the part of the company (DuCool) in which plaintiff invested:
Where a cause of action is based in fraud, “the complaint must allege misrepresentation or concealment of a material fact, falsity, scienter on the part of the wrongdoer, justifiable reliance and resulting injury” … . Furthermore, where the plaintiff is a sophisticated party, “if the facts represented are not matters peculiarly within the [defendant'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” … . Circumstances constituting fraud must be set forth in a complaint in detail (CPLR 3016[b]). * * *
Plaintiff is an experienced and sophisticated investor. It did not plead facts to support the justifiable reliance element of fraud … . Plaintiff had total, unfettered access to every aspect of DuCool's company information both before and after its initial investment, even before it held a controlling interest in DuCool. Although learning through the due diligence conducted by its own technology and business consultants that there were frequent technological problems with DuCool products, some of them “severe,” plaintiff proceeded to invest in the company. Thereafter, as the 49% shareholder, plaintiff had the largest percentage ownership of any individual shareholder and it had access to information concerning the operations of the business. There is no factual basis on which to conclude that the alleged fraud involved matters peculiarly within defendants' knowledge, because plaintiff had the means to discover the truth behind any false claims about the condition of the company and whether this was a feasible investment… . MP Cool Invs. Ltd. v Forkosh, 2016 NY Slip Op 04159, 1st Dept 5-31-16
FRAUD (PLAINTIFF, A SOPHISTICATED INVESTOR, DID NOT STATE A CAUSE OF ACTION FOR FRAUD ON THE PART OF THE COMPANY IN WHICH PLAINTIFF INVESTED, PLAINTIFF HAD THE MEANS TO DISCOVER THE TRUTH BEHIND ANY ALLEGED FALSE CLAIMS)/CORPORATION LAW (PLAINTIFF, A SOPHISTICATED INVESTOR, DID NOT STATE A CAUSE OF ACTION FOR FRAUD ON THE PART OF THE COMPANY IN WHICH PLAINTIFF INVESTED, PLAINTIFF HAD THE MEANS TO DISCOVER THE TRUTH BEHIND ANY ALLEGED FALSE CLAIMS)/CORPORATION LAW (PLAINTIFF, A SOPHISTICATED INVESTOR, DID NOT STATE A CAUSE OF ACTION FOR FRAUD ON THE PART OF THE COMPANY IN WHICH PLAINTIFF INVESTED AND PURCHASED A CONTROLLING INTEREST, PLAINTIFF HAD THE MEANS TO DISCOVER THE TRUTH BEHIND ANY ALLEGED FALSE CLAIMS)