Court Affirms Denial of Motion to Dismiss Aiding and Abetting a Fraud Claim, Finding All Elements Adequately Pleaded

• Posted on: Feb 2 2026

By: Jeffrey M. Haber

Liability for aiding and abetting a fraud is distinct from liability for committing the underlying fraud itself. This theory of liability recognizes that a defendant may substantially contribute to fraudulent misconduct without personally making any misrepresentation/omission or directly deceiving the plaintiff. Thus, instead of requiring proof that the defendant was the maker of a false statement or omission, an aiding‑and‑abetting theory turns on whether the defendant had actual knowledge of the primary wrongdoing and provided substantial assistance that helped bring about the fraudulent result.[1]

Actual knowledge is a demanding standard: it requires awareness of the underlying fraud itself, not merely suspicion, negligence, or a failure to inquire. While such knowledge may be inferred from circumstantial evidence,[2] it cannot rest on generalized allegations of wrongdoing or the mere fact that a defendant was involved in the events surrounding the fraud.

Similarly, “substantial assistance” requires more than peripheral involvement or routine professional services. It encompasses conduct that affirmatively furthers or enables the fraud to succeed,[3] such as facilitating transactions integral to the scheme, helping to conceal or disguise the misconduct, or failing to act when a duty to do so exists and the omission effectively allows the fraud to proceed.

The doctrine also incorporates a proximate‑cause component: the assistance must be sufficiently connected to the plaintiff’s harm to render the defendant’s participation meaningful rather than incidental.

Taken together, these elements ensure that aiding‑and‑abetting liability attaches only when a defendant knowingly participates in and plays a substantial role in the accomplishment of the underlying fraud. A defendant may therefore be held liable even if they were not the originator of the fraudulent statements or omissions and did not interact directly with the plaintiff, so long as their informed actions, or deliberate inaction, helped the primary wrongdoer carry out the fraudulent scheme.

The foregoing principles were considered by the Appellate Division, Second Department, in Chin v. Pacific 10, LLC, 2026 N.Y. Slip Op. 00343 (2d Dept. Jan. 28, 2026), in which the Court addressed whether allegations concerning a defendant’s role in concealing structural defects and submitting incomplete or misleading filings to municipal authorities were sufficient to state a claim for aiding and abetting fraud.

Chin arose from plaintiffs’ 2018 purchase of a Brooklyn townhouse from defendant Pacific 10, LLC (“Pacific 10”). Pacific 10 is allegedly owned by defendant Frank Tehrani (“Frank”). Prior to the closing of the purchase transaction, the townhouse underwent substantial renovation. In connection with the renovations, Frank’s brother, defendant Bahram Tehrani (“Bahram”), doing business as BTE Design Services, through his business, made certain filings with the New York City Department of Buildings (“DOB”). Plaintiffs alleged that in 2019, during an extensive renovation of an adjacent property, they discovered structural deficiencies in the subject property concealed within the walls, including the removal of a load-bearing wall without sufficient reinforcement on the affected lot line walls.

Plaintiffs commenced the action against Pacific 10, Frank, and Bahram, inter alia, to recover damages for fraud. Relevant to the appeal, plaintiffs alleged that Bahram conducted a gut renovation of the property. It further alleged that, acting in conjunction with the other defendants, Bahram omitted certain information, including all structural work, from his submissions to the DOB, and Bahram submitted false, misleading, or purposefully incomplete certifications to the DOB in order to obtain a final certificate of occupancy without a proper inspection and to intentionally conceal the true condition of the property from plaintiffs. Plaintiffs alleged that Bahram aided and abetted the other defendants in defrauding them.

Bahram moved to dismiss the complaint pursuant to CPLR 3211(a)(1) and (7) or, in the alternative, for summary judgment dismissing the complaint as against him. The motion court denied the motion. Bahram appealed. The Second Department affirmed.

The Court held that, as to the first element of the claim, plaintiffs “sufficiently alleged an underlying fraud to actively conceal structural deficiencies and damage in the renovations from the plaintiffs, which were not readily discoverable by the plaintiffs in fulfilling their responsibilities imposed by the doctrine of caveat emptor.”[4] 

The Court further held that plaintiffs “sufficiently alleged Bahram’s knowledge of and substantial assistance in achievement of the fraud.”[5] The Court explained that, according to plaintiffs, Bahram, among other things, “submit[ed] misleading, purposefully incomplete, or false documents with the DOB, as one of the steps to conceal the structurally defective work from the plaintiffs.”[6] Such allegations were sufficient to withstand the motion to dismiss and, alternatively, the motion for summary judgment.[7]

Takeaway

In Chin, the Court concluded that the complaint sufficiently alleged each element of an aiding and abetting fraud cause of action. Although the Court did not dissect the claim in detail, the Court’s factual recitation makes clear why the cause of action survived dismissal. As noted, the complaint alleged an underlying fraud – the deliberate concealment of serious structural defects in the townhouse sold to plaintiffs. It further alleged that the defendant responsible for the DOB submissions knowingly omitted all structural work from the filings associated with the renovation, conduct from which actual knowledge could reasonably be inferred given his role and proximity to the construction activity. And it described how his submission of allegedly false, misleading, or intentionally incomplete certifications to the DOB facilitated the issuance of a certificate of occupancy and concealed the property’s true condition, thereby substantially assisting the fraudulent scheme by enabling the sale to proceed without disclosure. Taken together, these allegations plausibly portrayed defendant as providing affirmative and substantial assistance that allowed the fraud to succeed while masking the defects from both the DOB and plaintiffs.

The Court’s decision, therefore, reinforces several important principles.

First, a defendant may substantially assist a fraud even without interacting with the plaintiffs, negotiating the transaction, or making direct misrepresentations. By allegedly submitting misleading regulatory filings that represented the property as structurally sound, defendant supplied the mechanism through which the fraud was carried out.

Second, material omissions and concealment can constitute substantial assistance. As noted, plaintiffs alleged that the DOB filings excluded all structural work, thereby obscuring the defects. The Court implicitly recognized that such concealment could advance the alleged fraud by preventing detection and securing the regulatory approvals necessary for the transaction.

Third, although not expressly discussed, the allegations logically linked defendant’s alleged conduct to plaintiffs’ harm: by helping secure a certificate of occupancy and concealing structural defects, defendant’s participation was a substantial factor in leading plaintiffs to purchase the townhouse.

More broadly, Chin underscores the practical reach of aiding‑and‑abetting liability under New York law. The doctrine is sufficiently flexible to capture the role of participants whose conduct materially contributes to the execution of a fraud. It confirms that a defendant need not have made direct misrepresentations to the plaintiff; that actual knowledge may be inferred from circumstantial evidence, including the nature and proximity of the defendant’s role; and that incomplete or misleading filings with regulatory authorities can constitute substantial assistance when they conceal wrongdoing or enable a fraudulent transaction to proceed.

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Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice.

[1] “To plead a cause of action to recover damages for aiding and abetting fraud, the complaint must allege the existence of an underlying fraud, knowledge of the fraud by the aider and abettor, and substantial assistance by the aider and abettor in the achievement of the fraud.” Winkler v. Battery Trading, Inc., 89 AD3d 1016, 1017 (2d Dept. 2011); see Schiano v. Harsanyi, 230 A.D.3d 820, 821 (2d Dept. 2024).

[2] See Houbigant, Inc. v. Deloitte & Touche, 303 A.D.2d 92, 98- 99 (1st Dept. 2003); DaPuzzo v. Reznick Fedder & Silverman, 14 A.D.3d 302, 303 (1st Dept. 2005).

[3] To plead substantial assistance, plaintiffs must allege that the defendant (1) affirmatively assisted, helped conceal, or by virtue of failing to act when required to do so enabled the fraud to proceed, and (2) the defendant’s actions as an aider/abettor proximately caused the harm on which the primary liability is predicated. Stanfield Offshore Leveraged Assets, Ltd. v. Metro. Life Ins. Co., 64 A.D.3d 472, 476 (1st Dept. 2009).

[4] Slip Op. at *2, citing Razdolskaya v. Lyubarsky, 160 A.D.3d 994, 996-997 (2d Dept. 2018); Schooley v. Mannion, 241 A.D.2d 677, 678 (3d Dept. 1997). This Blog wrote about the caveat emptor doctrine on many occasions, including: Fraudulent Concealment and the Caveat Emptor Doctrine; Publicly Available Information, Justifiable Reliance and The Caveat Emptor Doctrine; and Caveat Emptor, Disclaimer Clauses and Buying Property “As Is”.

[5] Id.

[6] Id.

[7] Id.

Tagged with: Actual Knowledge, Aiding And Abetting, Commercial Litigation, Fraud, Substantial Assistance