Fraud Notes: Opinions Based on Flimsy Information Can Be Fraudulent, Privity, and Duplication

• Posted on: Dec 10 2025

By: Jeffrey M. Haber

In today’s Fraud Notes, we examine two cases involving different issues impacting a fraud claim. In RSD857, LLC v. Wright, 2025 N.Y. Slip Op. 06833 (1st Dept. Dec. 09, 2025), we examine the actionability of appraisals. In Olshan Frome Wolosky, LLP v. Kestenbaum, 2025 N.Y. Slip Op. 06816 (Dec. 09, 2025), we examine the duplication doctrine.[1]

RSD857 involved allegations that one of the defendants orchestrated a foreclosure rescue scheme to acquire another defendant’s property through deceptive short sale tactics. Defendant claimed that the other defendant promised to preserve his equity and allow him to remain in his home but induced him to transfer title under false pretenses. A key element of the alleged scheme was an appraisal that allegedly undervalued the property using flawed methodologies that caused defendant and the lender to approve the short sale. On appeal, the First Department held that defendant stated a fraud claim against the appraiser notwithstanding the fact that an appraisal is generally not actionable because it is an opinion as to value.

In Olshan, plaintiff sought payment of unpaid legal fees for representing certain defendants in three commercial actions. The parties formalized their relationship in July 2022 through an engagement agreement, later modified by a July 2023 revised fee agreement after one of the defendants promised to make payment. When defendants failed to comply, Olshan withdrew and sued for breach of contract, fraudulent inducement, and veil piercing. The motion court dismissed all claims against most of the defendants, finding, inter alia, the fraud claim duplicative of the breach of contract claim and the veil-piercing allegations to be insufficient. On appeal, the First Department reinstated the breach of contract claim against one of the defendants, holding that the emails exchanged with respect to the revised fee agreement evidenced a binding modification, but affirmed dismissal of the fraud and veil-piercing claims.

RSD857 v. Wright

RSD857 arose from allegations of a predatory mortgage foreclosure rescue scheme involving multiple defendants. At the center of the controversy is defendant Albert Wright (“Wright”), a homeowner who claimed he was fraudulently induced to transfer title to his property (the “Property”) under the guise of a short sale arrangement designed to save his home from foreclosure.

Wright and his wife, Doreen Green (“Green”), purchased the Property in 1998 for $95,000. Over the years, they refinanced multiple times to fund repairs. In 2006, they obtained a $1.151 million mortgage loan secured by the Property. The loan eventually went into default in April 2011, and by 2017, the mortgagee initiated a foreclosure action against Wright, Green, and others.

In September 2017, defendant Michael Petrokansky (“Petrokansky”) approached Wright on behalf of YKSNAK Holdings LLC (“YKSNAK”), acknowledging the foreclosure and initially offering to purchase the Property outright. Petrokansky later proposed an alternative to the purchase: he would assist Wright in keeping his home through a short sale arrangement.

Thereafter, Petrokansky allegedly assured Wright that he could prevent foreclosure, preserve Wright’s equity, and allow him to remain in the Property.

In February 2018, Wright and Green executed a memorandum of contract to sell the Property to RSD857. Allegedly acting on Petrokansky’s advice, Wright filed for Chapter 13 bankruptcy on March 5, 2018, to halt foreclosure proceedings.

On April 4, 2018, Wright and Green signed a short sale contract to sell the Property to defendant Joby Hcock1131 LLC for $520,000, and on April 9, 2018, they executed a memorandum of option contract with YKSNAK.

In January 2019, Petrokansky arranged for two appraisals of the Property; defendant John Viscusi (“Viscusi”) performed the second. Wright alleged that Viscusi grossly undervalued the Property at $825,000, ignoring its development potential. The appraisal, dated January 18, 2019, was allegedly instrumental in convincing Wright and the mortgagee to approve the short sale. Wright alleged that Viscusi’s appraisal employed unreliable standards and methodologies, misrepresented zoning restrictions, omitted prior sale contracts, and failed to include comparable rentals or land sales. According to Wright’s counterclaims/crossclaims, a forensic review later identified these deficiencies and concluded that the appraisal did not comply with professional standards. In particular, the review showed that Viscusi’s appraisal egregiously undervalued the property by millions of dollars, contained numerous errors, was misleading, and was not credible.

Although Viscusi invoiced Petrokansky, the appraisal stated it was prepared for Wright, indicating that Viscusi knew Wright would rely on it. Wright alleged that this awareness, combined with the appraisal’s flaws, supported his fraud claim against Viscusi.

On October 17, 2019, Wright and Green executed a short sale approval application. Eleven days later, on October 28, 2019, they signed approximately 20 documents intended to resolve the foreclosure and finalize the short sale. Among these documents were a residential contract of sale transferring the property to RSD857 for $850,000 and a deed recorded on November 18, 2019. A property transfer report listed the sale price as $975,000. Wright alleged that RSD857 paid $975,000 to the mortgagee, despite an outstanding balance exceeding $1.7 million. Following this transaction, the court discontinued the foreclosure action and canceled the notice of pendency.

In August 2020, defendant, Spencer Developers Inc. (“Spencer”), applied to demolish the Property and construct a luxury condominium tower. Wright claimed that Petrokansky reneged on promises to allow him to remain in the home and instead sought to eject him.

In his amended answer, Wright asserted eight affirmative defenses and nine counterclaims, including, as relevant to the appeal and this article, fraud against RSD857, Petrokansky, Viscusi, and Cohen. Wright alleged that Petrokansky and his affiliates orchestrated a scheme to strip him of his property under false pretenses, aided by, among other things, Viscusi’s false and misleading appraisal.

Viscusi, among others, moved to dismiss the counterclaims/crossclaims. Regarding the fraud claim asserted against Viscusi, the motion court denied the motion.

Viscusi argued that the fraud claim should be dismissed because an appraisal is a matter of opinion upon which there can be no basis for detrimental reliance. Wright maintained that an appraisal is actionable when it is supported by flimsy and unreliable information.

It is well settled that appraisals are generally not actionable under a theory of fraud or fraudulent inducement because such representations of value are matters of opinion upon which there can be no basis for detrimental reliance.[2]  However, “an opinion, especially an opinion by an expert, may be found to be fraudulent if the grounds supporting it are so flimsy as to lead to the conclusion that there was no genuine belief back of it.”[3]

Furthermore, “an assessment of market value that is based upon misrepresentations concerning existing facts may support a cause of action for fraud”.[4] In such a case, the appraisal is actionable because it is a factual representation—not an opinion.[5] 

Based upon the foregoing principles, the motion held that Wright stated a claim for fraud against Viscusi. The motion court explained that Petrokansky allegedly arranged for Viscusi to prepare an appraisal in which Viscusi significantly undervalued the Property by “using unreliable standards and methodologies, to make the short sale more appealing to the lender and to mislead Mr. Wright”. The motion court pointed to the forensic review appraisal and analysis that was performed, which identified numerous misrepresentations and deficiencies in Viscusi’s appraisal. The motion court explained that according to the forensic review, Viscusi failed to prepare a report in conformity with the Uniform Standards of Professional Appraisal Practice; failed to accurately report publicly available information that Wright and Green had twice contracted to sell the Property before the short sale transaction; accurately report current zoning restrictions; failed to identify the development potential for the site; included a misleading statement with respect to the highest and best use for the Property; and failed to cite any comparable rentals or comparable properties for sale in the appraisal. Additionally, the forensic review found fault with Viscusi’s cost approach because Viscusi failed to include or cite information on comparable land sales in the area.

The motion court also found that Viscusi may have been aware that Wright would rely on the appraisal.[6] The motion court explained that although Viscusi sent the invoice for the appraisal to Petrokansky, the first page of the appraisal stated that it was prepared for Wright.

Given the number of alleged misstatements and deficiencies in the appraisal, together with Viscusi’s acknowledgement that the appraisal had been prepared for Wright, the motion court held that Wright pleaded facts sufficient to state a claim of fraud.[7]

On appeal, the First Department affirmed.

The Court held that the motion court “properly denied Viscusi’s motion to dismiss the counterclaims against him because Wright adequately pleaded a claim for fraud.”[8] The Court found that “Wright’s allegations that Viscusi’s valuation of the [P]roperty at $825,000, and that ‘statements used to support this valuation’ were ‘false and misleading and misrepresented material facts,’ were supported by the forensic analysis performed by [the forensic] appraiser … annexed to Wright’s pleading”.[9] That analysis, said the Court, showed “that Viscusi’s appraisal egregiously undervalued the [P]roperty by millions of dollars, contained numerous errors, was misleading, and [was] not credible.”[10]

“Moreover”, said the Court, “Wright adequately pleaded that Viscusi was aware that his misrepresentations would reasonably be relied upon by Wright”.[11]  The motion explained that “Viscusi’s appraisal explicitly stated that its intended recipient was Wright, and that its intended use was for Wright, as ‘lender/client,’ to evaluate the [P]roperty as to its fair market value.”[12] Under those circumstances, the Court concluded that “Wright sufficiently pleaded that he reasonably relied on Viscusi’s appraisal for this purpose.”[13]

Olshan Frome Wolosky, LLP v. Kestenbaum

Olshan arose from a non-payment of legal fees, in which plaintiff, Olshan Frome Wolosky LLP (“Olshan”), asserted five causes of action against defendants, Fortis Property Group, LLC (“Fortis”), FPG Maiden Lane, LLC (“FPG Maiden Lane”), FPG Maiden Holdings, LLC (“FPG Maiden Holdings”), Joel Kestenbaum, and Louis Kestenbaum (collectively, the “Defendants”): (1) breach of contract; (2) unjust enrichment; (3) quantum merit; (4) fraudulent misrepresentation; and (5) charging lien. Defendants moved to dismiss the complaint in its entirety. The motion court granted in part, and denied in part the motion.

Olshan alleged that the fees owed by defendants stemmed from its representation of defendants in three different ongoing commercial actions in New York County Supreme Court (collectively, the “Actions”). 

Defendants’ retention of Olshan was memorialized in July 2022 through Olshan’s Engagement Letter and accompanying Terms of Engagement (collectively, the “Engagement Agreement”). The Engagement Agreement was signed by Fortis’ General Counsel on behalf of FPG Maiden Lane, formally commencing Olshan’s representation of the Defendants. Olshan continuously provided legal services to Defendants until November 2023.

Olshan alleged that Defendants defaulted on payments multiple times under the payment procedure clause of the Engagement Agreement, but that Olshan had continued representing Defendants because they had promised to pay. The most notable of these promises asserted in the complaint occurred on July 12, 2023, when Fortis’ General Counsel informed Olshan that “Louis [Kestenbaum] ha[d] approved payment of $425k to fully resolve the open invoices from November through April,” and further set out new guidelines regarding how Defendants’ would handle payments from thereon out. Olshan accepted these new terms, thus forming a supplementary agreement between the parties (“Revised Fee Agreement”). When Defendants allegedly did not comply with the new terms, Olshan indicated that it would not continue representing Defendants without full payment for the services previously rendered. The parties formally severed their relationship by stipulating to a substitution of counsel in one of the Actions.

Olshan asserted three causes of action that are relevant to the appeal and this article: (1) breach of contract for failing to pay legal fees (encompassing the alleged Revised Fee Agreement); (2) fraudulent inducement based on the allegation that Louis Kestenbaum never intended to perform the July 2023 payment promises; and (3) an alter ego/veil-piercing claim to hold Louis Kestenbaum personally liable for the debts of the Fortis entities.  

By decision and order dated August 21, 2024, the motion court granted the motion in relevant part. The motion court dismissed the breach of contract cause of action as against Fortis, Louis and Joel Kestenbaum, and FPG Maiden Holdings, LLC, on the grounds of lack of privity. The motion court also dismissed the fraudulent misrepresentation claim for failure to state a claim and because the cause of action was duplicative of the breach of contract cause of action, and held that the complaint be dismissed in its entirety as against Louis Kestenbaum. Olshan appealed the dismissal order, but only with respect to: (1) the breach of contract claim; (2) the fraud claim; and (3) the alter ego/veil-piercing theory against Louis Kestenbaum.

The First Department unanimously modified the order, on the law, to deny the motion to dismiss the first cause of action as against Fortis, and otherwise affirmed.

The Court held that the motion court “should have allowed the cause of action for breach of contract to proceed as against Fortis ….”[14] The Court noted that “[a]lthough a breach of contract cause of action generally cannot be asserted against a nonsignatory to the agreement and Fortis … did not execute the engagement letter, the complaint sufficiently allege[d] that the engagement letter was modified by the later revised fee agreement, which bound Fortis … to the terms of the engagement letter”.[15] The Court found that the “emails between the parties [were] sufficient to demonstrate [the parties’] agreement to modify the engagement letter so that Fortis … would pay the outstanding and ongoing legal fees under the terms of the revised fee agreement”.[16] 

Turning to the fraud cause of action, the Court held that the motion court “properly dismissed the cause of action … as against Louis Kestenbaum”.[17] The Court observed that “in effect”, plaintiff claimed that “Louis Kestenbaum made a promise of payment without the intent to perform that promise”.[18] The Court explained that “[e]ven assuming the truth of this allegation, … Kestenbaum’s alleged statement would not constitute a promise collateral or extraneous to the agreements at issue”.[19] Notably, the Court found that “[p]laintiff also did not allege that it sustained any damages that would not be recoverable under its breach of contract cause of action. Rather, plaintiff merely seeks to recover its legal fees, which it is entitled to under the terms of the agreements should it prevail in this action”.[20] Under such circumstances, the claim was duplicative of the breach of contract claim.

Finally, the Court held that “plaintiff failed to allege sufficient facts that would warrant piercing the corporate veil to hold Louis Kestenbaum personally liable for the legal fees that the Fortis entities allegedly owe to plaintiff.”[21] The Court explained that “[a]lthough Louis Kestenbaum may have dominated some of the Fortis entities, plaintiff failed to allege that he abused the corporate form for the purpose of obtaining legal services without intending to pay for them.”[22] 

Takeaway

RSD857 raises several significant legal implications concerning fraud causes of action.

Generally, appraisals are treated as opinions, not actionable statements of fact. However, the RSD857 court reaffirmed that an appraisal may support a fraud claim when its underlying methodology is so deficient that it suggests no genuine belief in its accuracy. As discussed, Wright alleged that Viscusi’s appraisal undervalued the property by ignoring development potential, misreporting zoning restrictions, and omitting comparable sales. These alleged deficiencies, coupled with forensic findings, allowed the Court to infer fraudulent intent and affirm the denial of the motion to dismiss. RSD857, therefore, underscores that professionals cannot shield themselves behind the “opinion” defense when their work is knowingly misleading or recklessly prepared.

RSD857 also highlights a critical principle concerning reliance: when a person knows that a third party will rely on their work, tort liability may attach for fraudulent preparation. In RSD857, Viscusi’s appraisal explicitly stated it was prepared for Wright, creating a reliance scenario that the Court found actionable.

Olshan raises several significant legal implications concerning breach of contract and fraud causes of action.

Olshan highlights the fact that emails can constitute a binding modification of an agreement. As noted, the First Department held that the July 2023 Revised Fee Agreement—formed through email exchanges—was enforceable against Fortis even though Fortis did not sign the original engagement letter.

Olshan also reaffirms three principles involving fraud claims: fraud claims based on promises without intent to perform are not actionable; promises to perform are not collateral to the contract; and fraud damages that seek the same damages as the contract claim are duplicative.

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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] This Blog has written dozens of articles addressing numerous aspects of fraud claims and fraud claims and breach of contract claims asserted in the same action. To find such articles, please see the Blog tile on our website and search for any fraud, fraudulent inducement,  breach of contract, or other commercial litigation topics that may be of interest to you. As relates to today’s article, type “fraud”, “justifiable reliance”, “fraudulent inducement”, “matters of opinion”, or “duplication” into the “search” box.

[2] Brang v. Stachnik, 235 App. Div. 591, 592 (1932), aff’d, 261 N.Y. 614 (1933); Ellis v. Andrews, 56 N.Y. 83, 85-87 (1874); Stuart v. Tomasino, 148 A.D.2d 370, 371 (1st Dept. 1989).

[3] Ambassador Factors v. Kandel & Co., 215 A.D.2d 305, 308 (1st Dept. 1995) (citation omitted); see also Ultramares Corp. v. Touche, 255 N.Y. 170, 186 (1931).

[4] Flandera v. AFA Am., Inc., 78 A.D.3d 1639, 1640 (4th Dept. 2010).

[5] See Cristallina v. Christie, Manson & Woods Int’l, 117 A.D.2d 284, 294 (1st Dept. 1986); People v. Peckens, 153 N.Y. 576, 591 (1897) (statement “as to value” amounts to an actionable “affirmation of fact” when “made by a person knowing them to be untrue, with an intent to deceive and mislead”); Polish & Slavic Fed. Credit Union v. Saar, 39 Misc. 3d 850, 855 (Sup. Ct., Kings County 2013) (“[T]o the extent that the EMVs [i.e., estimated market values] of the subject properties were extrapolated from misrepresentations of factual data, the appraisal itself may be considered a factual misrepresentation rather than a mere matter of opinion.”). 

[6] See Rodin Props. Shore Mall v. Ullman, 264 A.D.2d 367, 368-369 (1st Dept. 1999) (“[w]hen a professional … has a specific awareness that a third party will rely on his or her advice or opinion, the furnishing of which is for that very purpose, and there is reliance thereon, tort liability will ensue if the professional report or opinion is negligently or fraudulently prepared”).

[7] Houbigant, Inc. v. Deloitte & Touche, 303 A.D.2d 92, 100 (1st Dept. 2003).

[8] Slip Op. at *1.

[9] Id. (citations omitted).

[10] Id.

[11] Id. (citation omitted).

[12] Id.

[13] Id. (citing Remediation Capital Funding LLC v. Noto, 147 A.D.3d 469, 470-471 (1st Dept. 2017)).

[14] Slip Op. at *1.

[15] Id. (citing Lawrence M. Kamhi, M.D., P.C. v. East Coast Paint Mgt., P.C., 177 A.D.3d 726, 727 (2d Dept. 2019)).

[16] Id. (citing Kataman Metals LLC v. Macquarie Futures USA, LLC, 227 A.D.3d 569, 569 (1st Dept. 2024)).

[17] Id.

[18] Id.

[19] Id. (citing Cronos Group Ltd. v XComIP, LLC, 156 A.D.3d 54, 65 (1st Dept. 2017)).

[20] Id. (citing MaÑas v. VMS Assoc., LLC, 53 A.D.3d 451, 454 (1st Dept. 2008)).

[21] Id.

[22] Id. (citations omitted).

Tagged with: Commercial Litigation, Contract Privity, Duplication, Fraud, Fraud and Fraudulent Inducement, Justifiable Reliance, Pierce the Corporate Veil