Negligent-Misrepresentation Claim Dismissed For Failure to Plead Special or Privity-Like Relationship

On June 6, 2023, Justice Robert R. Reed of the New York County Commercial Division issued a decision in dMY Sponsor, LLC v. Glatt, 2023 NY Slip Op 50547(U), dismissing a negligent-misrepresentation counterclaim on the ground that allegations that the parties had known each other for decades and that the counterclaim defendant was a trusted friend of the counterclaim plaintiff's father were insufficient to give rise to a "special or privity-like relationship imposing a duty on the [counterclaim] defendant to impart correct information to the [counterclaim] plaintiff," explaining:

To state a cause of action for negligent misrepresentation, the plaintiff must allege: "'(1) the existence of a special or privity-like relationship imposing a duty on the defendant to impart correct information to the plaintiff; (2) that the information was incorrect; and (3) reasonable [*14] reliance on the information'" (Mandarin Trading Ltd., 16 NY3d at 180, quoting J.A.O. Acquisition Corp. v Stavitsky, 8 NY3d 144, 148, 863 N.E.2d 585, 831 N.Y.S.2d 364 [2007], rearg denied 8 N.Y.3d 939, 866 N.E.2d 1043, 834 N.Y.S.2d 714 [2007]). In addition, "liability for negligent misrepresentation has been imposed only on those persons who possess unique or specialized expertise, or who are in a special position of confidence and trust with the injured party such that reliance on the negligent misrepresentation is justified" (Kimmell v Schaefer, 89 NY2d 257, 263, 675 N.E.2d 450, 652 N.Y.S.2d 715 [1996]). New York courts take a cautious approach in determining whether a relationship sufficient to support a negligent misrepresentation exists (Sykes v RFD Third Ave. 1 Assoc., LLC, 67 AD3d 162, 165, 884 N.Y.S.2d 745 [1st Dept 2009], affd 15 NY3d 370, 938 N.E.2d 325, 912 N.Y.S.2d 172 [2010]).

While the question of whether a special relationship exists is generally a question of fact (Kimmell, 89 NY2d at 264), where the claimant's allegations, accepted as true and given every reasonable inference, fail to plead the existence of a special relationship, a negligent misrepresentation claim is subject to pre-answer dismissal (Mandarin Trading Ltd., 16 NY3d at 181).

Even accepting the allegations as true, counterclaimants fail to allege a special or privity-like relationship imposing a duty on the part of counterclaim defendants to impart correct information to Glatt (see Chai-Chen v Metropolitan Life Ins. Co., 190 AD3d 635, 636, 141 N.Y.S.3d 41 [1st Dept 2021] [friendship with former coworker did not create "the existence of a special relationship or heightened duty"]). Indeed, counterclaimants merely allege that "a special relationship [*15] existed between Mr. You and Mr. Glatt," "Mr. You and Mr. Glatt had known each other for decades," "Mr. You and Mr. Glatt's father had worked together as contemporaries years prior," and that "Mr. Glatt viewed Mr. You as a trusted friend of his father and a mentor with years of experience, which view was bolstered by the years that Mr. Glatt worked directly with Mr. You on various projects" (NYSCEF Doc No. 127 ¶¶ 25-27, 123).

To state a claim for negligent misrepresentation, the plaintiff must allege that there was a "special or privity-like relationship" between plaintiff and defendant. While the presence of this relationship is often an issue of fact, as this case shows, a long-standing relationship of the parties, without more, is insufficient as a matter of law. Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning claims for negligent misrepresentation.