One Way to Prove a Fraudulent Concealment Claim Under NY Law – Even in the Face of a Disclaimer June 4, 2010

In my earlier blog post “Why Fraudulent Concealment Claims Are So Tough to Win in New York,” I pointed out that one of the challenges of these claims is posed by contractual language that the purchaser signs stating that they didn’t rely on any representations by the seller. As a New York trial court recently noted,

“Where sophisticated businessmen engaged in major transactions enjoy access to critical information but fail to take advantage of that access, New York courts are particularly disinclined to entertain claims of justifiable reliance.” Grumman Allied Industries, Inc. v. Rohr Industries, Inc., supra at 737. Stated differently, “‘[a]s a matter of law, a sophisticated plaintiff cannot establish that it entered into an arm’s length transaction in justifiable reliance on alleged misrepresentations if that plaintiff failed to make use of the means of verification that were available to it.’ (UST Private Equity Invs. Fund v. Salomon Smith Barney, 288 AD2d 87, 88…[2001]).”

But what if the information that was concealed was within the unique knowledge of the seller?

In that case, the claim may not be D.O.A. after all; in legal terms, this is called the “peculiar knowledge” exception, which applies “not only where the facts allegedly misrepresented literally were within the exclusive knowledge of the defendant, but also where the truth theoretically might have been discovered, though only with extraordinary effort or great difficulty.” DIMON Inc. v. Folium, Inc., 48 F.Supp. 2d 359, 368 (SDNY 1999). See also, JPMorgan Chase Bank v. Winnick, 350 F.Supp. 2d 393 (SDNY 2004).

Jonathan Cooper is a New York Business Litigation and New York Commercial Litigation Lawyer with a focus on New York breach of contract and New York business fraud claims before the Nassau, Queens, Brooklyn, Bronx, Westchester and Suffolk County courts of New York State. For more information, feel free to contact his Long Island office at 516-791-5700.

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