Public Contract Procured by Fraud Unenforceable and Amounts Paid Recoverable as Damages

On August 25, 2016, Justice Bransten of the New York County Commercial Division issued a decision in Metropolitan Bridge & Scaffolding Corp. v. New York City Housing Authority, 2016 NY Slip Op. 31632(U), holding that the damages arising from procuring a public contract by fraud are all sums paid under it, explaining:

Third-Party Defendants assert that NYCHA has not alleged damages stemming from the alleged fraud since it cannot demonstrate that it might not have accepted Metropolitan as a contractor had the facts not been misrepresented to it. Nevertheless, under New York law, a public contract procured by fraud is unenforceable and the amounts paid under the fraudulently induced contract may be recoverable as damages.

The alleged misrepresentations caused injury to the extent that NYCHA was unable to make an informed decision as to which contractor was in fact the lowest responsible bidder.

Accordingly, NYCHA has alleged damages in connection with its fraudulent inducement claim, and the motion to dismiss this claim is denied.

(Internal quotations and citations omitted).