Fraud Claim Fails for Lack of Justifiable Reliance

On January 19, 2021, the First Department issued a decision in United Natural Foods, Inc. v. Goldman Sachs Group, 2021 NY Slip Op. 00276, holding that a fraud claim failed for lack of justifiable reliance, explaining:

The fraud claim was properly dismissed because plaintiff did not sufficiently plead justifiable reliance. Plaintiff could have asked follow-up questions regarding what kind of an effect making Supervalu a coborrower would have and on which select accounts, but did not do so. Plaintiff also failed to insist on a final list of investors prior to closing, even though it is undisputed that plaintiff had the contractual right to do so to facilitate exercise of its right to veto investors. Defendants' failure to provide such a list was a red flag that triggered a need to make additional inquiries, including with respect to whether any proposed investors had adverse interests to plaintiff.

(Internal quotations and citations omitted).

Commercial litigation frequently involves fraud-based claims. Such claims have special pleading requirements or rules, including the rule that a sophisticated businessperson's reliance on a false statement must be reasonable. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client think you have been defrauded, or if someone has accused you or a client of defrauding them.