Pleading Fraud with Particularity, Statute of Limitations and Breach of Contract

• Posted on: Sep 30 2024

By: Jeffrey M. Haber

In Rabinowitz v. Clarke, 2024 N.Y. Slip Op. 04627 ( st Dept. Sept. 26, 2024) (here), the Appellate Division, First Department addressed legal principles and causes of action that are familiar to readers of this Blog: fraud, the particularity requirement of CPLR 3016(b), the statute of limitations applicable to fraud claims, breach of contract and the duplication doctrine. We examine Rabinowitz below.

Rabinowitz arose from plaintiff providing defendant with $60,000.00 on October 5, 2016, in furtherance of a real estate investment for the benefit of both parties. However, instead of using the $60,000.00 for the agreed upon purpose, plaintiff alleged that defendant used the money for his own personal use. Plaintiff sought the return of the $60,000.00, plus interest and other related expenses as a result of defendant’s alleged breach of contract and fraud.

Plaintiff filed the summons and verified complaint on June 4, 2021. Plaintiff moved for an order striking defendant’s affirmative defenses; and defendant cross-moved for an order to dismiss the complaint pursuant to CPLR 3211 (a) (5), and (a) (7), and CPLR 3016 (b).

In the cross-motion, defendant argued that the complaint should be dismissed on the grounds that the applicable statute of limitations barred the action, the complaint failed to state a cause of action, the fraud claim was not pleaded with the requisite particularity, and that plaintiff’s claim for unjust enrichment was duplicative of plaintiff’s breach of contract claim.

Defendant alleged that plaintiff’s breach of contract claim was conclusory and omitted the terms of the alleged agreement. Defendant maintained that the complaint was not clear as to the terms of any contract between the parties, particularly with respect to the $60,000.00 payment. Thus, without identifying the terms of the agreement between the parties, defendant maintained that there could be no claim for breach of contract. Without such a claim, said defendant, plaintiff could not take advantage of the six-year statute of limitations.

Plaintiff countered by alleging that there was an agreement between the parties pursuant to which defendant provided $60,000.00, thereby establishing defendant’s performance thereunder. Plaintiff claimed that defendant breached the agreement by not using the $60,000.00 to purchase real estate and by not returning the money to plaintiff.

Without much discussion, the motion court held that plaintiff stated a claim for breach of contract.[1][2] As such, the motion court held that the claim was timely brought.

Regarding the fraud claim, defendant argued that plaintiff failed to plead fraud with particularity as required under CPLR 3016(b).[3] Defendant maintained that plaintiff provided no details about the nature of the alleged fraud, or how and why plaintiff was misled by it. According to defendant, plaintiff’s fraud allegations were conclusory and insufficient to support the claim.

Plaintiff argued that defendant tricked him into paying $60,000.00 by misrepresenting that defendant would invest the money in real estate. Plaintiff maintained that the complaint identified the who, what, when and how of the alleged fraud. Plaintiff also alleged that he relied on the misrepresentations and gave $60,000.00 to defendant in reliance on the alleged misrepresentations. Plaintiff maintained that the complaint and the documents submitted in opposition to the motion sufficed to satisfy CPLR 3016(b).

Plaintiff further argued that since he stated a claim for fraud, the action (which was commenced in June 2021) was timely brought.

The motion court agreed with plaintiff and denied the cross-motion.

On appeal, the First Department unanimously affirmed the motion court’s order.

The Court held that plaintiff’s fraud allegations were not conclusory “[e]ven if the complaint lack[ed] clarity in describing “the substance of the misrepresentations.”[4]

Plaintiff adequately alleged fraud so as to invoke the six-year limitation period under CPLR 213(8). Affording plaintiff the benefit of every possible favorable inference, the complaint alleges that, on October 5, 2016, plaintiff gave defendant $60,000 in furtherance of a real estate investment that defendant led plaintiff to believe was to be a valid transaction for the parties’ mutual benefit. These allegations adequately identify, in nonconclusory fashion, “who made the misrepresentations” and “when the misrepresentations were made” …. Even if the complaint lacks clarity in describing “the substance of the misrepresentations” …, plaintiff alleges that defendant tricked into paying $60,000 by misrepresenting that defendant would invest the money in real estate.[5]

Therefore, said the Court, the foregoing allegations “sufficiently “inform[ed]” defendant “with respect to the incidents complained of.”[6]

The Court also held that plaintiff “adequately alleged breach of contract so as to invoke the six-year limitation period under CPLR 213(2).”[7] The Court explained that “plaintiff alleged that the parties agreed to form a partnership to purchase real estate in September 2016; that defendant was ‘given the sum of $60,000.00 on October 5, 2016,’ ‘under the guise of purchasing and renovating real property’; that plaintiff gave the money to defendant ‘in furtherance of the parties’ agreement to act as partners, to purchase and renovate real property’; and that defendant breached the agreement by using the money for himself rather than to purchase and renovate real property, causing a loss of $60,000 to plaintiff.”[8] “These allegations,” concluded the Court, “sufficiently set forth facts constituting the basic elements of a breach of contract claim.”[9]

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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] In opposition to the motion, plaintiff submitted a photograph of a $60,000.00 check from plaintiff to defendant and a partnership agreement signed by the parties. Defendant did not dispute the authenticity of those documents. Therefore, said the motion court, “the complaint, as supplemented by the documents that plaintiff submitted in opposition to defendant’s contained sufficient allegations to state a cause of action” for breach of contract.

The motion court also noted that the partnership agreement included an arbitration clause. Since neither party sought to enforce it, the motion court declined to sua sponte do so. P.S. Fin., LLC v. Eureka Woodworks, Inc., 214 A.D.3d 1, 10-11 (2d Dept. 2023); Sabr Chems. Group v. Northeast Chems., 192 A.D.3d 647, 648 (1st Dept. 2021).

[2] Because plaintiff submitted the partnership agreement in opposition to the motion, the motion court held that plaintiff’s claim of unjust enrichment was duplicative of his claim of breach of contract. See Cooper, Bamundo, Hecht & Longworth, LLP v. Kuczinski, 14 A.D.3d 644, 645 (2d Dept. 2005); Shear Enters., LLC v. Cohen, 189 A.D.3d 423, 424 (2d Dept. 2020). As such, the motion court dismissed plaintiff’s unjust enrichment claim.

[3] Under CPLR 3016(b), the circumstances constituting fraud must be stated with sufficient detail “to permit a reasonable inference of the alleged conduct.” Pludeman v. Northern Leasing Sys., Inc., 10 N.Y.3d 486, 491 (2008) (citation omitted). Conclusory allegations will not suffice. Eurycleia Partners, LP v. Seward & Kissel, LLP, 12 N.Y.3d 553, 559-60 (2009).

[4] Slip Op. at *1 (citing INTL FCStone Mkts., LLC v. Corrib Oil Co. Ltd., 172 A.D.3d 492, 493 (1st Dept. 2019)).

[5] Id. (citation omitted).

[6] Id. (quoting Pludeman, 10 N.Y.3d at 491).

[7] Id.

[8] Id.

[9] Id. (citing Morris v. 702 E. Fifth St. HDFC, 46 A.D.3d 478, 479 (1st Dept. 2007)).