You are here: / Fraud
, ,

MATTER REMITTED FOR CONSIDERATION OF EXPERT EVIDENCE ABOUT WHICH ECUADORIAN STATUTE IS MOST CLOSELY ANALOGOUS TO NEW YORK’S FRAUDULENT-CONVEYANCE CRITERIA FOR PURPOSES OF NEW YORK’S BORROWING STATUTE; HERE THE ACTION ACCRUED IN ECUADOR; THE SHORTER OF THE APPLICABLE ECUADORIAN AND NEW YORK STATUTES OF LIMITATIONS WILL APPLY (FIRST DEPT).

The Frist Department, reversing Supreme Court and remitting the matter for consideration of the expert evidence, determined Supreme Court may have applied the wrong Ecuadorian statute in the analysis of the statute of limitations under the borrowing statute:

Under CPLR 202, New York’s “borrowing statute,” where a nonresident plaintiff sues on causes of action that accrued outside of New York, the claims must be timely under the limitations period of both New York and the jurisdiction where the action accrued … . In effect, the shorter of the two states’ statutes of limitations controls the timeliness of the action … . …

If the foreign state does not have causes of action directly analogous to the New York causes of action, the limitations period of the foreign causes of action that are most closely analogous to the New York claims are to be applied … . …

In performing the foregoing analysis, the motion court found applicable Ecuador’s default statute, which has a 10-year statute of limitations, and thereby found plaintiff’s claims timely filed, despite the expert testimony establishing that Ecuador’s default statute is not directly applicable to plaintiff’s fraudulent conveyance claims and not the Ecuadorian cause of action most closely analogous to the New York causes of action. Andes Petroleum Ecuador Ltd. v Occidental Petroleum Co., 2023 NY Slip Op 00481, First Dept 2-2-23

Practice Point: Here the fraudulent conveyance action accrued in Ecuador. Under the borrowing statute the shorter of the New York and Ecuadorian statutes of limitations applies. Where, as here, there is no foreign statute exactly analogous to the New York cause of action, expert evidence about which foreign statute is most analogous should be considered.

 

, , ,

NEW YORK HAS JURISDICTION OVER OUT-OF-STATE DEFENDANT JUUL LABS, THE MANUFACTURER OF ELECTRONIC CIGARETTES, AND TWO CORPORATE OFFICERS IN AN ACTION ALLEGING DECEPTIVE BUSINESS PRACTICES, FRAUD AND PUBLIC NUISANCE (FIRST DEPT). ​

The First Department determined New York had jurisdiction over the defendant JUUL, the manufacture of electronic cigarettes, and two corporate officers involved JUUL’s marketing campaign in New York. The complaint alleged “causes of action pursuant to General Business Law §§ 349 and 350, for deceptive acts and practices and for false advertising, respectively; pursuant to Executive Law § 63(12), for repeated and persistent fraud and illegal conduct in violation of General Business Law §§ 349 and 350 and section 5 of the Federal Trade Commission Act (15 USC § 45); and, for public nuisance.”:

… [T]he People submitted internal emails and reports demonstrating … that defendants traveled to New York City for investment meetings … ; that defendants personally attended JUUL’s launch party in New York City …, JUUL also sought to arrange in-person meetings between defendants and both “New York targets” and broadcast media organizations; and, that defendants and JUUL considered the New York City launch to have been a success.

… [D]efendants were involved in marketing strategy, which included … months of events in New York; identifying New York as the target of JUUL’s northeastern U.S. marketing efforts, at and after launch; advertising on billboards in Times Square; hosting in-store product samplings at New York vape shops and social events; and escalating marketing efforts in the New York City metropolitan area post-launch. After New York proved to be a substantial market for JUUL’s product, defendants went so far as to describe the efforts as “NYC takeover” and to declare that New York City users should be “the focus of [JUUL’s] branding/marketing.”

This evidence establishes that defendants conducted sufficient in-person activities within New York State related to the People’s claims against them in this action, and sufficiently supports the exercise of specific personal jurisdiction over them pursuant to CPLR 302(a)(1) … . People v JUUL Labs, Inc., 2023 NY Slip Op 00040, First Dept 1-5-22

Practice Point: Here New York demonstrated it had personal jurisdiction over the out-of-state manufacturer of electronic cigarettes and two corporate officers involved in marketing the cigarettes in New York. The complaint alleged deceptive business practices, fraud and public nuisance.

 

, ,

ALTHOUGH THE BREACH OF CONTRACT CAUSES OF ACTION WERE PROPERLY DISMISSED BECAUSE THE CONTRACT WAS NOT AMBIGUOUS AND PAROL EVIDENCE THEREFORE WAS NOT ADMISSIBLE; THE FRAUDULENT INDUCEMENT CAUSE OF ACTION, FOR WHICH PAROL EVIDENCE IS ADMISSIBLE, SHOULD NOT HAVE BEEN DISMISSED (SECOND DEPT).

The Second Department, reversing (modifying) Supreme Court, determined the fraudulent inducement cause of action should not have been dismissed as duplicative of the breach of contract causes of action, which were properly dismissed because the contract was not ambiguous and parol evidence was therefore not admissible:

Supreme Court erred in granting that branch of the defendants’ motion which was for summary judgment dismissing the cause of action to recover damages for fraudulent inducement. The fraudulent inducement cause of action is not duplicative of the breach of contract cause of action, as the fraudulent inducement cause of action is not based upon promised performance of an obligation of the defendants under the pledge agreement, and the plaintiffs sought separate and distinct damages for each cause of action … . Furthermore, the use of parol evidence is not precluded to establish the fraudulent inducement cause of action … . Goodale v Central Suffolk Hosp., 2022 NY Slip Op 06691, Second Dept 11-23-22

Practice Point: Here the fraudulent inducement cause of action was not duplicative of the dismissed breach of contract causes of action. Because the contract was not ambiguous, parol evidence was not admissible for the breach of contract causes of action. But parol evidence may be admitted in the fraudulent inducement action. The fraudulent inducement cause of action was not based on the performance of the contract and alleged separate and distinct damages.

 

,

IN AN ACTION ALLEGING FRAUDULENT INDUCEMENT, WHETHER THE PLAINTIFF REASONABLY RELIED ON THE ALLEGED MISREPRESENTATION IS USUALLY A QUESTION OF FACT WHICH CANNOT BE RESOLVED IN A MOTION TO DISMISS FOR FAILURE TO STATE A CAUSE OF ACTION (SECOND DEPT).

The Second Department, reversing (modifying) Supreme Court, determined the complaint stated a cause of action for fraudulent inducement. Plaintiff radiologist alleged defendant induced him to open a radiology practice which, plaintiff said, already had a patient-referral system in place. Plaintiff alleged that, after expending funds to open the practice, he learned he would have to pay for the referrals and he shut the practice down. The appellate court held that whether plaintiff reasonably relied on the alleged misrepresentation usually is a question of fact for the jury:

Regarding reasonable reliance on a misrepresentation of a material fact, the “plaintiff is expected to exercise ordinary diligence and may not claim to have reasonably relied on a defendant’s representations [or silence] where he [or she] has means available to him [or her] of knowing, by the exercise of ordinary intelligence, the truth or the real quality of the subject of the representation” … .

The “question of what constitutes reasonable reliance is always nettlesome because it is so fact-intensive” …  The resolution of the issue of whether a plaintiff reasonably relied on a defendant’s misrepresentation in support of a cause of action alleging fraud in the inducement is ordinarily relegated to the finder of fact … . … [P]laintiffs adequately stated a cause of action to recover damages for fraudulent inducement insofar as the determination of the reasonableness of [plaintiff-radiologist’s] reliance on [defendant’s] alleged misrepresentations concerning, among other things, the source of the … patient referrals itself entailed a question of fact not appropriate for summary disposition as a matter of law. Feldman v Byrne, 2022 NY Slip Op 06113, Second Dept 11-2-22

Practice Point: In an action for fraudulent inducement, whether the plaintiff’s reliance on the alleged misrepresentation was reasonable is a difficult issue which usually raises a question of fact for the jury and therefore cannot be summarily resolved in a motion to dismiss for failure to state a cause of action.

 

,

THE COMPLAINT DID NOT STATE A CAUSE OF ACTION FOR FRAUDULENT INDUCEMENT BECAUSE IT DID NOT ADEQUATELY ALLEGE “OUT OF POCKET” DAMAGES (FIRST DEPT).

The First Department, reversing Supreme Court, determined the complaint did not state a cause of action for fraudulent inducement because it did not allege “out of pocket” damages:

… [T]he complaint fails to plead a cause of action for fraudulent inducement because it does not adequately allege that plaintiff suffered any ascertainable out-of-pocket pecuniary damages resulting from the alleged fraud … . Although plaintiff alleges unspecified reputational damages and lost revenue or profits, these allegations are not sufficient to sustain a cause of action based on fraud … . Similarly, plaintiff fails to allege that it paid any particular amount to acquire the G&P law practice or name, alleging only the value of G&P’s practice when plaintiff acquired it; this allegation is insufficient to measure plaintiff’s damages … . Furthermore, although plaintiff states that G&P “carried undisclosed liabilities,” it does not elaborate on what those might be…. . CKR Law LLP v Dipaolo, 2022 NY Slip Op 05587, First Dept 10-6-22

Practice Point: A complaint alleging fraudulent inducement does not state a cause of action unless it adequately alleges “out of pocket” damages.

 

,

THE FRAUD CAUSES OF ACTION SHOULD HAVE BEEN DISMISSED BECAUSE “OUT OF POCKET” DAMAGES WERE NOT DEMONSTRATED (FIRST DEPT).

The First Department, reversing Supreme Court, determined the fraud causes of action should have been dismissed because plaintiffs failed to demonstrate “out of pocket” damages:

Defendants are entitled to summary judgment because plaintiffs failed to show the “out of pocket” damages required for a fraud claim (see e.g. Kumiva Group, LLC v Garda USA Inc., 146 AD3d 504, 506 [1st Dept 2017]). Plaintiffs failed to submit evidence of the value of the … stock they received … . Danco Enters., LLC v Livexlive Media, Inc., 2022 NY Slip Op 05589, First Dept 10-5-22

Practice Point: Here the fraud causes of action were dismissed because plaintiffs did not demonstrate “out of pocket” damages. Decisions relied upon by the plaintiffs concerning exceptions to the “out-of-pocket” damages rule were deemed inapplicable.

 

, , , , ,

THE COMPLAINT STATED CAUSES OF ACTION FOR BREACH OF FIDUCIARY DUTY, FRAUD, CONSTRUCTIVE FRAUD AND MUTUAL MISTAKE; PLAINTIFFS-PHYSICIANS ALLEGED THE FORMS THE EMPLOYER REQUIRED THEM TO SIGN CONSENTING TO THE DISTRIBUTION (TO THE EMPLOYER) OF THE PROCEEDS OF THE DEMUTUALIZATION OF THE MEDICAL MALPRACTICE INSURER WERE INVALID (FIRST DEPT).

The Frist Department, reversing (modifying) Supreme Court, determined the complaint by physicians against their employer/malpractice-insurance-policy-administrator stated causes of action for breach of fiduciary duty, fraud and mutual mistake. The dispute centers on whether the physicians or the employer which paid the malpractice insurance premiums are/is entitled to the proceeds when the insurer (MLMIC) demutualized. The employer had the physicians sign forms consenting to distributing the proceeds to the employer. The physicians allege the consent forms are invalid:

Plaintiffs allege that the forms by which they authorized MLMIC to distribute their demutualization proceeds to defendant are invalid because defendant obtained them in breach of its fiduciary duty, by fraud, or due to mutual mistake. If these forms are invalid, then the demutualization proceeds belong to plaintiffs … .

Transactions between a fiduciary and beneficiary are voidable if the fiduciary acts in its own interest and does not fully disclose all material facts … . Defendant is alleged not only to have withheld the policyholder information statement from plaintiffs, but to have significantly misrepresented their contents for its own gain. These allegations, which are not conclusively refuted by the documentary evidence, are sufficient to survive a motion to dismiss.

Fraud is another basis for rescinding the consent forms … . Plaintiffs also properly allege constructive fraud, because they were owed a fiduciary duty by defendant and so were “warranted to . . . relax the care and vigilance they would ordinarily exercise in the circumstances” … . …

Mutual mistake “may not be invoked by a party to avoid the consequences of its own negligence” … . For the purposes of this motion to dismiss, however, it cannot be said as a matter of law that plaintiffs were negligent … . Cordaro v AdvantageCare Physicians, P.C., 2022 NY Slip Op 05267, First Dept 9-27-22

Practice Point: The complaint adequately alleged the employer, which also served at the medical malpractice insurance policy administrator, breached a fiduciary duty owed to the plaintiffs-physicians by requiring them to consent to the distribution (to the employer) of the proceeds of the demutualization of the medical malpractice insurance carrier. The complaint also sufficiently alleged fraud, constructive fraud and mutual-mistake causes of action.

 

, ,

PLAINTIFFS ALLEGED THEY WERE OVERWHELMED BY THE DOCUMENTS THEY SIGNED AND DID NOT REALIZE THE DOCUMENTS TRANSFERRED THEIR PROPERTY TO DEFENDANT; THOSE ALLEGATIONS DID NOT SUPPORT SUMMARY JUDGMENT IN PLAINTIFFS’ FAVOR ON THEIR FRAUDULENT INDUCEMENT, UNJUST ENRICHMENT AND QUIET TITLE CAUSES OF ACTION (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiffs’ motion for summary judgment on their actions for fraudulent inducement, unjust enrichment and to quiet title should not have been granted. Plaintiffs alleged the were overwhelmed by the number of documents to sign and did not realize they documents transferred the property to the defendant:

… [T]he plaintiffs … each averred that the defendant misled them into believing that they were signing documents to arrange a short sale of the property when, in fact, they executed documents that transferred the property to the defendant. One of the documents … was the deed to the property that the plaintiffs signed. The plaintiffs do not aver in their affidavits or in the complaint that they failed to read the documents they signed or that they were illiterate, blind, or did not read English, nor do they allege that they expressed any difficulty in understanding what they were signing … . Instead, the plaintiffs contend that they were “overwhelmed by the paperwork” but do not allege any facts that would suggest that they were prevented from reading the documents prior to signing them or that they were forced to sign … . Holder v Folsom PL Realty, Inc., 2022 NY Slip Op 03890, Second Dept 6-15-22

Practice Point: Here the plaintiffs alleged they signed documents without realizing what they were agreeing to. Those allegations did not support summary judgment on their fraudulent inducement, unjust enrichment and quiet title causes of action. The plaintiffs did not allege they were prevented from reading the documents, or they could not understand the documents.

 

, ,

AFTER THE FORECLOSURE SALE BUT BEFORE THE CLOSING, THE MORTGAGOR STARTED AN ACTION ALLEGING FRAUD IN THE FORECLOSURE PROCEEDINGS; THE FRAUD ACTION DID NOT RENDER THE TITLE UNMARKETABLE SUCH THAT THE PURCHASER COULD SET ASIDE THE FORECLOSURE SALE AND HAVE THE DOWN PAYMENT RETURNED (SECOND DEPT).

The Second Department determined the fact that the mortgagor, after the foreclosure sale but before the closing, started an action alleging fraud in the foreclosure proceeding did not render the title to the property unmarketable. Therefore the purchaser at the foreclosure auction did not have right to set aside the foreclosure sale and have the down payment returned:

“A marketable title is a title free from reasonable doubt, but not from every doubt” … . “[S]omething more than a mere assertion of a right is essential to create an unmarketable or doubtful title” … . Here, contrary to the purchaser’s contention, the mortgagor’s action did not render title unmarketable. Therefore, the Supreme Court properly denied those branches of the purchaser’s motion which were to set aside the foreclosure sale and to direct the plaintiff to return the down payment. DiTech Fin., LLC v Steplight, 2022 NY Slip Op 03710, Second Dept 6-8-22

Practice Point: The title to the property sold at the foreclosure auction was not rendered unmarketable by a subsequent action brought by the mortgagor alleging fraud in the foreclosure proceedings. Therefore the purchaser’s motion to set aside the foreclosure sale and return the down payment was properly denied.

 

,

THE ACCUSATORY INSTRUMENT CHARGING THE DEFENDANT WITH “FRAUDULENT ACCOSTING” WAS FACIALLY SUFFICIENT; IT WAS ENOUGH TO ALLEGE THAT DEFENDANT SPOKE FIRST TO PERSONS PASSING AROUND HIM ON THE SIDEWALK ASKING FOR DONATIONS FOR THE HOMELESS; THERE WAS NO NEED TO ALLEGE DEFENDANT WAS AGGRESSIVE OR PERSISTENT OR TARGETED AN INDIVIDUAL (CT APP).

The Court of Appeals, in a full-fledged opinion by Judge Garcia, over an extensive three-judge dissent, determined the accusatory instrument charging defendant with “fraudulent accosting” was facially sufficient. Defendant set up a couple of milk crates as a table in the sidewalk and asked people for donations to the homeless as they walked around the table. Defendant unsuccessfully argued the term “accost” required an element of aggressiveness or persistence directed toward an individual:

A person is guilty of fraudulent accosting when he or she “accosts a person in a public space with intent to defraud him of money or other property by means of a trick, swindle or confidence game” (Penal Law § 165.30 [1]). * * *

During the relevant period in 1952, when the legislature created the offense of fraudulent accosting … contemporary dictionaries defined “accost” to mean either to “approach,” to “speak to first,” or to “address” … .No dictionary cited from the relevant time period limits the term to an aggressive or persistent physical approach … . People v Mitchell, 2022 NY Slip Op 03360, Ct App 5-24-22

Practice Point: Here, to determine the meaning of the word “accost” as used in the “fraudulent accosting” statute, the Court of Appeals referred only to definitions of the word in dictionaries extant in 1952, when the statute was enacted. and ignored more recent definitions.

 

Categories

Sign Up for the Mailing List to Be Notified When the Site Is Updated.

Copyright © 2023 New York Appellate Digest, LLC
Site by CurlyHost | Privacy Policy