Duplication, Sophistication and Disclaimers . . . Oh my!

• Posted on: Jun 4 2025

By: Jeffrey M. Haber

In Skyview Capital, LLC v. Conduent Business Servs., LLC, 2025 N.Y. Slip Op. 03291 (1st Dept. June 03, 2025) (here), the Appellate Division, First Department addressed various issues concerning fraud causes of action with which readers of this Blog are familiar: the duplication doctrine, justifiable reliance and disclaimer clauses.[1]

As discussed below, Skyview Capital arose from defendant’s sale to plaintiff of certain assets, namely, customer care call centers and customer care contracts, called “Liberty.”

[Eds. Note: the factual discussion below comes from the parties’ briefing on appeal.]

In April 2018, Conduent Business Services, LLC (“Conduent”) announced that it intended to divest its “Liberty Business,” a business handling contracts for delivering customer support services through call centers (the “Business”).

On July 21, 2018, Conduent and its financial advisor, UBS, gave Skyview Capital, LLC (“Skyview”), an investment firm specializing in acquiring, or “carv[ing] out,” “underperforming businesses” from large corporations, a management presentation (“July MP”) containing an overview of the Business, including its operations, clients, and financial projections. Among other things, and relevant to the Court’s decision, the July MP disclaimed Conduent’s “obligation to provide the recipient with access to additional information, to update th[e] Presentation or such additional information or to correct any inaccuracies herein or therein.”  According to Skyview, Conduent told Skyview during the presentation that one of its clients—Sprint—planned to “repatriate” 150 jobs to the U.S. and, specifically, to Liberty.

On August 3, 2018, Skyview issued a letter of interest valuing the business at $60 million, only to withdraw from the process two weeks later because it lacked sufficient time to undertake appropriate due diligence.

In September 2018, Conduent shared a management presentation (“September MP”) with Skyview that contained, inter alia, an updated forecast. Conduent also gave Skyview access to a Virtual Data Room (“VDR”) containing thousands of documents detailing material operational, financial, and legal aspects of the Business. Among the documents were monthly rosters tallying “in-scope” Liberty employees, including recruiters (“Rosters”). The Rosters included information about employee positions and assignments and reflected reductions in headcount. In addition, Conduent’s 2017 and 2018 SEC filings publicly disclosed that it routinely implemented reductions in force (“RIF”) across its workforce.

From September 24 to 26, 2018, Skyview met with Conduent and UBS, after which the parties executed an Equity Securities and Asset Purchase Agreement (“Initial APA”) for Skyview to purchase the Business. The Initial APA provided for a deferred closing, and the parties ultimately executed an amended APA and closed four months later, on February 1, 2019 (“Closing”).

On February 1, the parties executed an Amended and Restated Equity Securities and Asset Purchase Agreement (“APA”) and closed the transaction.  Skyview agreed to pay $7.5 million at Closing and issued three promissory notes for (1) $5 million due in February 2020 (plus interest), (2) $12.5 million due in August 2020 (plus interest), and (3) $3,125,142—the amount of cash transferred to Skyview at Closing—due in August 2020 (plus interest) (collectively, the “Notes”). After certain working capital-related adjustments, Conduent paid Skyview $6,239,403 at Closing.

The final APA contained extensive business-related representations and warranties, all of which were carried forward from the Initial APA. Among others, Skyview represented and warranted that “other than the representations and warranties specifically contained in [the APA] or any Ancillary Document, there are no representations or warranties of Seller … with respect to the Business, [and] … Buyer … specifically disclaims that it is relying upon or has relied upon any such other representations or warranties that may have been made ….”  Skyview also “acknowledge[d] that it … ha[s] conducted [its] own independent review and analysis of and, based thereon, ha[s] formed an independent judgment concerning, the Business ….”

According to Conduent, post-closing, Skyview struggled to finance the business. The $5 million Note came due in February 2020. Skyview defaulted, triggering cross-defaults under the other Notes. Conduent alleged that Skyview had not made any payment under the Notes, resulting in an outstanding principal balance of $20,625,142, with interest accruing at 8.5% under the Note’s late-payment rate.

Skyview filed the action on February 3, 2020, alleging that Conduent breached the APA and misrepresented and omitted material information about Liberty during the diligence process, including (a) internal forecasts, (b) Sprint’s repatriation reversal, and (c) the RIF.  Conduent filed a motion to dismiss the complaint on March 19, 2020, which was denied on May 25, 2021.

On August 20, 2020, Conduent answered the complaint and asserted counterclaims against Skyview for failing to meet its payment obligations under certain transaction-related agreements. Thereafter, the parties engaged in extensive discovery.

On July 24, 2023, Conduent moved for summary judgment on Skyview’s claims and in favor of Conduent’s counterclaims. That same day, Skyview moved for partial summary judgment on its “ordinary course contract” claim. The motion court heard oral argument on December 5, 2023.  Two days later, the motion court issued a decision and order (1) dismissing Skyview’s advertising-based fraud theory, (2) denying Conduent’s motion as to Skyview’s claims in all other respects, (3) granting Skyview summary judgment as to its ordinary course contract claim, and (4) granting Conduent summary judgment as to its counterclaims for monies due for Conduent’s post-Closing transition services. Conduent filed notices of appeal on January 5, 2024. Skyview filed a notice of appeal on January 23, 2024 and cross-appealed on January 25, 2024.

The Appellate Division, First Department unanimously modified the motion court’s order, on the law, to grant Conduent’s motion for summary judgment dismissing Skyview’s fraud claim and request for punitive damages and declaring that the setoff limit under the promissory notes was $5 million, deny Conduent’s motion as to its third counterclaim and remand for a hearing on that claim, deny Skyview’s motion for partial summary judgment, and otherwise affirmed.

The Court held that Skyview’s “fraud claims based on Conduent’s failure to disclose reductions in force (RIFs) of recruiters and nonparty Sprint’s change of plan concerning repatriating 150 jobs [were] duplicative of its contract claims.[2] Under New York law, a fraud claim will be deemed duplicative of a contract claim when the fraud claim arises from the same facts, seeks the same damages and does not allege a breach of any duty collateral to or independent of the parties’ agreements.[3]

The Court also held that “Skyview’s fraud claim asserting that Conduent should have disclosed the Q3 reforecast, while not duplicative of the contract claims, should have been dismissed.”[4] The Q3 2018 reforecast was an internal forecast that Conduent prepared internally. Conduent allegedly did not disclose the Q3 reforecast, which included estimated revenue that was materially lower for 2018, 2019, and 2020, compared to the figures disclosed in the July MP. The Court noted that the July MP that was sent to Skyview from Conduent’s investment banker, “said that Conduent had no duty to update it.”[5] “In addition,” said the Court, “both the initial asset purchase agreement (initial APA) and amended asset purchase agreement (APA) state[d] [that] Skyview ‘ha[d] made its own evaluation of the adequacy and accuracy of all estimates, projections, [and] forecasts furnished’ to it.”[6] The Court concluded that those “disclaimers [were] specific enough to bar Skyview’s fraud claim.”[7]

In New York, a party’s disclaimer of reliance cannot preclude a fraudulent inducement claim unless: (1) the disclaimer is specific to the fact alleged to be misrepresented or omitted; and (2) the alleged misrepresentation or omission does not concern facts peculiarly within the knowledge of the non-moving party.[8] “Accordingly, only where a written contract contains a specific disclaimer of responsibility for extraneous representations, that is, a provision that the parties are not bound by or relying upon representations or omissions as to the specific matter, is a plaintiff precluded from later claiming fraud on the ground of a prior misrepresentation as to the specific matter.”[9]

The Court further held that because Skyview is a sophisticated party, it could not show justifiable reliance on misrepresentations.[10]

One of the more “nettlesome” elements of a fraud claim is justifiable reliance.[11] Whether a plaintiff justifiably relied on a misrepresentation or omission is a fact-intensive inquiry.[12] For this reason, the courts look to whether the plaintiff had the “means available to him for discovering, ‘by the exercise of ordinary intelligence,’ the true nature of a transaction he is about to enter into” and whether he made “use of those means”.[13] If the plaintiff does not do so, “he will not be heard to complain that he was induced to enter into the transaction by misrepresentations.”[14] After all, a plaintiff cannot claim justifiable reliance on a misrepresentation when he or she could have discovered the truth with reasonable diligence.[15]

Sophisticated parties have a heightened duty to use the means available to them to verify the truth of the information upon which they rely and to use their sophistication to conduct due diligence.[16] A sophisticated plaintiff cannot establish justifiable reliance on an alleged misrepresentation if the plaintiff failed to make use of the means of verification that were available to him.[17] Thus, to sustain a claim of fraud, sophisticated parties must have discharged their own affirmative duty to exercise ordinary intelligence and conduct an independent appraisal of the risks they are assuming.[18]

The Court found that Skyview “failed to make use of the means of verification that were available to it.”[19] The Court noted that “[u]nder the initial APA, Skyview had access to Conduent’s books and records from September 28, 2018 until February 1, 2019.”[20] The Court explained that with such access, “[i]t could have tested the prediction of $461 million in revenue for 2018 against such books and records,” but did not.[21] “Furthermore,” said the Court, “on October 16, 2018, Conduent sent Skyview a forecast of $439.4 million for 2018, which [was] much lower than the $461 million forecast (and also lower than the Q3 reforecast of $446 million).”[22]

“In light of the dismissal of Skyview’s fraud claim,” the Court held that Conduent was “entitled to partial summary judgment on its first and second counterclaims to the extent of declaring that the maximum Skyview [could] set off against its liability on the promissory notes [was] $5 million (the limit set forth in the APA).”[23]

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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 find articles related to the duplication doctrine, justifiable reliance and disclaimer clauses, visit the “Blog” tile on our website and enter the search terms desired (e.g., justifiable reliance, disclaimer clauses, duplication) or any other related search term in the “search” box

[2] Slip Op. at *1 (citation omitted).

[3] Havell Capital Enhanced Mun. Income Fund, L.P. v. Citibank, N.A., 84 A.D.3d 588, 589 (1st Dept. 2011).

[4] Slip Op. at *1.

[5] Id.

[6] Id.

[7] Id. (citing HSH Nordbank AG v. UBS AG, 95 A.D.3d 185, 201 (1st Dept. 2012), and Permasteelisa, S.p.A. v. Lincolnshire Mgt., Inc., 16 A.D.3d 352, 352 (1st Dept. 2005)).

[8] Basis Yield Alpha Fund [Master] v. Goldman Sachs Group, Inc., 115 A.D.3d 128, 137 (1st Dept. 2014). See also Danann Realty Corp. v. Harris, 5 N.Y.2d 317, 323 (1959); MBIA Ins. Corp. v. Merrill Lynch, 81 A.D.3d 419 (1st Dept. 2011).

[9] Basis Yield, 115 A.D.3d at 137.

[10] Slip Op. at *1 (quoting Ventur Group, LLC v. Finnerty, 68 A.D.3d 638, 639 (1st Dept. 2009) (internal quotation marks omitted), and citing Global Mins. & Metals Corp. v. Holme, 35 A.D.3d 93, 100 (1st Dept. 2006), lv. denied 8 N.Y.3d 804 (2007)).

[11] DDJ Mgt., LLC v. Rhone Group L.L.C., 15 N.Y.3d 147, 155 (2010) (internal quotation marks omitted).

[12] Id.

[13] 88 Blue Corp. v. Reiss Plaza Assoc., 183 A.D.2d 662, 664 (1st Dept. 1992) (internal citations omitted).

[14] Id. (internal quotation marks omitted).

[15] KNK Enters. Inc. v. Harriman Enters., Inc., 33 A.D.3d 872 (2d Dept. 2006).

[16] McGuire Children, LLC v. Huntress, 24 Misc. 3d 1202[A], at *12 (Sup. Ct., Erie County), aff’d, 83A.D.3d 1418 (4th Dept. 2011).

[17] Id.

[18] Id.

[19] Slip Op. at *1.

[20] Id.

[21] Id.

[22] Id.

[23] Id. at *2.