THE RELEASE DID NOT APPLY TO THE ALLEGATIONS OF FRAUD IN THE INDUCEMENT AND THERE WAS A QUESTION OF FACT WHETHER PLAINTIFFS JUSTIFIABLY RELIED ON THE ALLEGED MISREPRESENTATIONS; THE FRAUD IN THE INDUCEMENT CAUSE OF ACTION SHOULD NOT HAVE BEEN DISMISSED (FOURTH DEPT).

The Fourth Department, reversing (modifying) Supreme Court, determine plaintiffs’ action for fraud in the inducement should not have been dismissed. The release did not require dismissal and there was a question of fact whether plaintiffs justifiably relied on the alleged misrepresentations:

… [D]efendants failed to meet their initial burden of establishing, as a matter of law, that the release barred plaintiffs’ claims that they were fraudulently induced to enter the liquidation agreement by misrepresentations that defendants made in violation of their obligations thereunder … . …

… [D]efendants’ own submissions establish that plaintiffs “made a significant effort to protect themselves against the possibility of false financial statements: they obtained representations and warranties to the effect that nothing in the financials was materially misleading”… , i.e., that [defendant] had no material liabilities beyond those disclosed in the financial statements and no circumstances existed that could reasonably be expected to result in such a material obligation. Thus, “[i]f plaintiffs can prove the allegations in the complaint, whether they were justified in relying on the warranties they received is a question to be resolved by the trier of fact” … . Dillon v Peak Envtl., LLC, 2020 NY Slip Op 05332, Fourth Dept 10-2-20