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You Can’t Have A Fraud If You Don’t Have A Communication In Which A False Statement Is Made

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  • Posted on: May 15 2023

By: Jeffrey M. Haber

To plead a fraud cause of action, a plaintiff must allege: (1) a misrepresentation of material fact; (2) falsity; (3) scienter; (4) justifiable reliance; and (5) damages.1 Each element of the claim must be satisfied for the plaintiff to prevail on the cause of action. The failure to satisfy each element will result in dismissal of the claim.

In Hayes v. Martinez, 2023 N.Y. Slip Op. 02587 (1st Dept. May 11, 2023) (here), the Appellate Division, First Department reversed the denial of a summary judgment motion involving a fraud claim because the plaintiff failed to show the making of a misrepresentation and/or an omission on which she relied.

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

Plaintiff, Donna Hayes, alleged that, on July 20, 2016, defendant, Tommy Montalvo (“Montalvo”), with whom she had carried on a romantic relationship, induced her to write a $48,000 check to defendant Ululy Rafael Martinez (“Martinez”), Montalvo’s first cousin, so that Martinez could buy and sell stocks on Montalvo’s behalf. Hayes further alleged that between March 20 and May 1, 2017, Montalvo induced her to give Montalvo $114,000 in cash to buy and renovate Martinez’s vacant three-family property in Waterbury, Connecticut. Plaintiff maintained that the foregoing opportunities were non-existent and intended to scam her out of $162,000.

In her complaint, plaintiff asserted claims against Montalvo and Martinez for common law fraud, conversion, breach of contract, and unjust enrichment. 

On May 7, 2021, Martinez moved for summary judgment and dismissal of all causes of action against him. Martinez argued that he was not involved in Montalvo’s schemes and had no knowledge of them until after plaintiff demanded repayment of the monies she had paid and threatened suit. Martinez further argued that during discovery plaintiff admitted that she had no communications with Martinez regarding either of the two allegedly false investment opportunities that Montalvo presented to her, and that she never even tried to communicate with Martinez regarding those matters. Martinez claimed that plaintiff relied exclusively on the representations Montalvo had made to her regarding the purpose of the funds he allegedly induced her to give to him. Martinez further claimed that he relied solely on his communications with Montalvo regarding the purpose of the $48,000 check that Montalvo caused plaintiff to issue in July 2016, and that he disposed of the funds exactly as Montalvo had directed. Moreover, until plaintiff threatened suit, Martinez claimed that he did not know Montalvo had allegedly induced plaintiff to give him $114,000 in cash under the false pretense of purchasing and renovating Martinez’s property. 

Plaintiff opposed Martinez’s motion and cross-moved for partial summary judgment in her favor as to the unjust enrichment claim. Plaintiff argued that Martinez and Montalvo made affirmative, misrepresentations of material facts, knowing those statements to be false, with the intention that the statements be communicated by Montalvo on Martinez’s behalf, and that plaintiff relied on those statements to her detriment.

The motion court denied Martinez’s motion as to plaintiff’s fraud, conversion, and unjust enrichment claims, and denied the motion in part as to plaintiff’s breach contract claim. Although there was no dispute that plaintiff and Martinez never directly communicated with each other about the allegedly non-existent investment opportunities that Montalvo presented to her, the motion court found issues of fact sufficient to preclude the grant of summary judgment on all of plaintiff’s claims.

Martinez appealed. The First Department modified the motion court’s order to dismiss the causes of action for fraud and breach of contract and to dismiss the cause of action for conversion insofar as plaintiff alleged that Martinez failed to return $48,000 to her, and to dismiss the cause of action for unjust enrichment with respect to the $48,000, and otherwise affirmed.

We discuss the portion of the First Department’s decision concerning plaintiff’s cause of action for fraud.

The Court held that “Martinez was entitled to dismissal of the cause of action for fraud, as he established that he never communicated with Hayes regarding either the $48,000 or the $114,000, and therefore never communicated a false statement to her.”2 In so holding, the Court noted that during discovery, “Plaintiff admitted … that her direct communications with Martinez were limited to matters unrelated to the transactions at issue here.”3 

The Court also found that there were no indirect statements – i.e., statements made “from Montalvo that Montalvo claimed came from Martinez” – which could show the making of a misstatement of fact: “As to whether Martinez indirectly communicated a false statement to plaintiff, she identifies no statement from Montalvo that Montalvo claimed came from Martinez, nor does she even allege facts suggesting that any statements to her were made at Martinez’s request.”4 

Accordingly, the Court held that “plaintiff failed to raise an issue of fact” necessary to defeat defendant’s motion for summary judgment.5


As discussed at the outset of this article, a plaintiff alleging fraud must show that the defendant made a statement on which the plaintiff relied. In the typical case, the defendant makes a false or misleading statement directly to the plaintiff. In Hayes, defendant did not make any statement about the alleged non-existent transactions directly to plaintiff. In the less frequent case, the misrepresentation of fact is made to a third party that relied on the alleged fraudulent statement. In that circumstance, the question is whether the plaintiff can state a fraud cause of action, despite the absence of direct reliance by the plaintiff on the alleged misrepresentation? 

In Pasternack v. Laboratory Corp. of Am. Holdings, 27 N.Y.3d 817 (2016), the New York Court of Appeals held that third-party reliance does not satisfy the reliance element of a fraud claim unless the third party “acted as a conduit to relay the false statement to plaintiff, who then relied on the misrepresentation to his detriment.”6 In other words, the alleged misrepresentation or omission does not need to be made directly to the plaintiff so long as the statement was made with the intent that it be communicated to the plaintiff by a third party and the plaintiff relied on the representation or omission to his or her detriment.

Hayes shows that satisfying rule the articulated in Pasternack can be difficult. As noted, a plaintiff must allege that the misrepresentation was made for the purpose of being communicated to the plaintiff in order to induce his/her reliance thereon or that the misrepresentation was relayed to the plaintiff, who then relied upon it. The failure to allege either will, as Hayes learned, result in dismissal of a fraud cause of action.This Blog examined fraud and third-party reliance here, here.


  1. Pasternack v. Laboratory Corp. of Am. Holdings, 27 N.Y.3d 817, 827 (2016).
  2. Slip Op. at *1.
  3. Id. at *2.
  4. Id. (citing, Pasternack, 27 N.Y.3d at 828).
  5. Id. at *1-*2.
  6. 27 N.Y.3d at 828.

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.

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