Fraudulent Inducement in New York

What Is Fraudulent Inducement?

General Information for Complaints and Motions

“To state a legally cognizable claim of fraudulent inducement based on a misrepresentation or omission, the complaint must allege that the defendant intentionally made a material misrepresentation of fact in order to defraud or mislead the plaintiff, and that the plaintiff reasonably relied on the misrepresentation and suffered damages as a result.” (Gosmile, Inc. v. Levine (2010) 81 A.D.3d 77, 81 Oxbow Calcining USA Inc. v. American Indus. Partners (2012) 96 A.D.3d 646, 650; see also Eurycleia Partners, LP v. Seward & Kissel, LLP (2009) 12 N.Y.3d 553, 559; Connaughton v. Chipotle Mexican Grill, Inc. (2016) 135 A.D.3d 535, 537.)

Additionally, “to recover damages for a tort, such as fraud, in a contract action, plaintiff needs to plead and prove ‘a breach of duty distinct from, or in addition to, the breach of contract.’” (Non-Linear Trading Co. v Braddis Assoc. (1998) 243 AD2d 107, 118.)

Fraudulent Inducement and Future Performance

A claim for fraudulent inducement of contract can be predicated upon an insincere promise of future performance only where the alleged false promise is collateral to the contract the parties executed; if the promise concerned the performance of the contract itself, the fraud claim is subject to dismissal as duplicative of the claim for breach of contract. (HSH Nordbank AG v. UBS AG (2012) 941 N.Y.S.2d 59, 74 citing Havell Capital (2011) 84 A.D.3d 588 at 589, 923 N.Y.S.2d 479 [affirming dismissal of fraud claim that “did not allege a breach of any duty collateral to or independent of the parties' agreements” on the ground that it “was redundant of the contract claim”]; Mañas v. VMS Assoc., LLC (2008) 53 A.D.3d 451, 453–454.)

At-Will Employment and Fraudulent Inducement

“An at-will employee, who has been terminated, can not state a fraudulent inducement claim on the basis of having relied upon the employer's promise not to terminate the contract, or upon any representations of future intentions as to the duration or security of his employment. (Smalley v. Dreyfus Corp. (2008) 10 N.Y.3d 55, 59; Meyercord v. Curry (2007) 38 A.D.3d 315, 832; Hobler v. Hussain (2013) N.Y.S.2d 212.)

“However, where an at-will employee alleges an injury ‘separate and distinct from termination of the [his] employment,’ he may have a cause of action for fraudulent inducement.” (Laduzinski v. Alvarez & Marsal Taxand LLC (2015) 132 A.D.3d 164, 168.)

“The at-will employee must allege not that his employer wrongly fired him, but that ‘[he] would not have taken the job in the first place if the true facts had been revealed to [him].’” (Id., citing Navaretta v. Group Health (1993) 191 A.D.2d 953, 954.)

Calculating Damages

“A plaintiff alleging fraudulent inducement is limited to "out of pocket" damages, which consist solely of the actual pecuniary loss directly caused by the fraudulent inducement.” (Kumiva Grp., LLC v. Garda USA Inc. (2017) 146 A.D.3d 504, 506-07.)

“Out of pocket’ damages are calculated in three steps:

First, the plaintiff must show the actual value of the consideration it received.
Second, the plaintiff must prove that the defendant's fraudulent inducement directly caused the plaintiff to agree to deliver consideration that was greater than the value of the received consideration
Finally, the difference between the value of the received consideration and the delivered consideration constitutes ‘out of pocket’ damages.”

(Id., citing Lama Holding Co. v. Smith Barney (1996) 88 N.Y.2d 413, 421–422.)

The Court’s Decision

Where “the essence of the fraudulent inducement cause of action is that defendants allegedly misrepresented to plaintiffs their intentions with respect to the manner in which they would manage the underlying assets, [and the] plaintiffs allege[d] ... misrepresentation of future intent rather than a misrepresentation of present fact, [...] is not sustainable as a cause of action separate from breach of contract.” (Financial Structures Ltd. v. UBS AG (2010) 77 A.D.3d 417, 419.)

“Critically, ‘[a] false representation does not, without more, give rise to a right of action, either at law or in equity, in favor of the person to whom it is addressed. To give rise, under any circumstances, to a cause of action, either in law or equity, reliance on the false representation must result in injury.... If the fraud causes no loss, then the plaintiff has suffered no damages.” (Connaughton v. Chipotle Mexican Grill, Inc. (2017) 29 N.Y.3d 137, 142 citing Sager v. Friedman (1936) 270 N.Y. 472, 479–481.)

Documents for Fraudulent Inducement in New York

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Stromberg Architectural Precast, Inc. v. The Lalo Group, Inc., Hudson Meridian Construction Group Llc document preview

EXHIBIT(S) - A - TEXAS JUDGMENT DATED MARCH 28, 2024

35 pages

FILED: ULSTER COUNTY CLERK 04/24/2024 05:47 PM INDEX NO. EF2024-1080 NYSCEF DOC. NO. 2 RECEIVED NYSCEF: 04/24/2024 EXHIBIT A FILED: ULSTER COUNTY CLERK 04/24/2024 05:47 PM INDEX NO. EF2024-1080 NYSCEF DOC. NO. 2 RECEIVED NYSCEF: 04/24/2024 CERTIFIED EXEMPLIFIED COPY THE STATE OF TEXAS COUN…

Case Name Stromberg Architectural Precast, Inc. v. The Lalo Group, Inc., Hudson Meri…