“Special Facts Doctrine” as Applied to Fraud Allegations Explained

In an action stemming from the alleged breach of an Asset Purchase Agreement (APA), the First Department explained the applicability of the “special facts doctrine” to the related fraud allegations. There was a defense verdict. The issue was raised on appeal by the plaintiffs because the trial judge refused to instruct the jury on the special facts doctrine, an error the First Department deemed harmless. The court offered a clear description of the doctrine:

… [P]laintiffs claimed that defendants had a duty to disclose certain documents concerning alleged adverse contract information. The “special facts” doctrine holds that “absent a fiduciary relationship between parties, there is nonetheless a duty to disclose when one party’s superior knowledge of essential facts renders a transaction without disclosure inherently unfair” … . As a threshold matter, the doctrine requires satisfaction of a two-prong test: that the material fact was information peculiarly within the knowledge of one party and that the information was not such that could have been discovered by the other party through the exercise of ordinary intelligence … . Greenman-Pedersen, Inc. v Berryman & Henigar, Inc., 2015 NY Slip Op 06091, 1st Dept 7-14-15