Fraud. To the untrained eye it seems so common and so simple. But for a number of reasons it’s a very difficult claim to prove and often inapplicable and easily dismissed. Here we go through some basics about alleging fraud in New York courts.
Pleading Fraud: “The elements of a cause of action sounding in fraud are a material misrepresentation of an existing fact, made with knowledge of the falsity, an intent to induce reliance thereon, justifiable reliance upon the misrepresentation, and damages” (Orchid Constr. Corp. v. Gottbetter, 89 AD3d 708, 710-711 [2d Dept 2011]). Indeed, CPLR 3016 (b) requires that “the circumstances of the fraud must be stated in detail, including specific dates and items” Id.
The key to any fraud claim is making very specific claims about the material misrepresentations (what was said or written, when it was said, etc), why those false statements were material, and why it was justifiable that you relied on those misrepresentations at that time.
The hardest part in my view tends to be proving the “intent to induce reliance”. Proving intent is what makes a fraud claim an expensive claim to bring in a lawsuit.
There are also numerous well established reasons a fraud claim will not succeed. Fraud won’t succeed if it’s based on the same facts that support your breach of contract claim:
Fromowitz v. W. Park Assoc., Inc., 106 AD3d 950, 951 [2d Dept 2013]): Holding that “[w]here a claim to recover damages for fraud is premised upon an alleged breach of contractual duties, and the allegations with respect to the purported fraud do not concern representations which are collateral or extraneous to the terms of the parties’ agreement, a cause of action sounding in fraud does not lie”.
Clark-Fitzpatrick, Inc. v. Long Island Rail Road Co., 70 N.Y.2d 382, 389, 521 N.Y.S.2d 653, 656 (1987): It has long been the rule in New York that “a simple breach of contract is not to be considered a tort unless a legal duty independent of the contract itself has been violated.”
Sanyo Elec., Inc. v. Pinros & Gar Corp., 174 A.D.2d 452, 453, 571 N.Y.S.2d 237, 238 (1st Dep’t 1991): Holding that “A cause of action for fraud is legally insufficient if, as here, the only fraud charged relates to a breach of contract.”
Before you get caught up in a fraud claim, make sure you have the right facts in place, otherwise you’re spinning your wheels and wasting your time.
