It’s a common story, albeit with some variations:

A promotes the “next best thing” to B, offering B the opportunity to invest and get in on the ground floor of a great investment vehicle.  After getting B’s hard-earned money, A stops returning B’s calls.

Against that backdrop, many plaintiffs in B’s shoes try to recoup their investment, claiming that A breached his fiduciary duty, and defrauded him.

But is such a claim viable under New York law?

While there is a potentially valid cause of action for fraudulent inducement under New York law, in truth, it really isn’t that easy to prove.

Here’s why:

New York’s courts have set forth a 4-part requirement for a fraudulent inducement claim to succeed:

  1. The misrepresentation was false – or known to be false;
  2. The misrepresentation was made for the specific purpose of inducing the plaintiff to rely upon it;
  3. The plaintiff was justified in relying on the defendant’s misrepresentation. [Parenthetically, this is often the hardest of the 4 elements to prove, as noted in the related article referenced to the right]; and,
  4. Plaintiff sustained an injury as a direct result of his reliance on the defendant’s misrepresentation


Jonathan Cooper
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Non-Compete, Trade Secret, Unfair Competition and School Negligence Lawyer