New York State is one of those jurisdictions with virtually no restrictions on intermediate interlocutory appeals from the lower courts. As a result, the New York Appellate Divisions are understaffed and overworked. And as a consequence of that, the Appellate Divisions (principally now the First and Second Departments) have resorted to rendering decisions that provide scant, if any, analysis of the facts of the cases and issues that come before them. So, I am now frequently seeing decisions that are really nothing more than a series of string cites to well-recognized legal principles—accompanied by only flat, conclusory determinations.
The recent case law is, therefore, often not very informative or instructive in applying existing legal doctrine to new and unchartered factual scenarios. Nevertheless, there were quite a lot of fraud-related decisions during the month of March 2025, so, as I continue to comb through all recent decisions involving fraud claims and issues, this post provides a thumbnail of the latest decisions rendered by our Appellate Divisions in March and an inventory of the up-to-date soundbites of recognized legal principles. There is one thing for sure—fraud claims are ubiquitous as ever.
- Lack of CPLR 3016(b) Particularity, Contract Breach not Fraud, No Aiding and Abetting Claim Without Underlying Fraud Claim
Cedar Capital Mgt. Group Inc v Lillie, 2025 NY Slip Op 01569 (1st Dep’t Decided Mar. 18, 2025):
Soundbites and Cites:
Supreme Court also properly dismissed the fraud-based claims against all defendants. The sparse allegations of material misrepresentations, which are focused on a characterization of the purported investments being a “scam” rather than a legitimate investment opportunity, were not sufficiently particular to allege fraud (CPLR 3016[b]; see Orange Orch. Props. LLC v Gentry Unlimited, Inc., 191 AD3d 609, 609 [1st Dept 2012]). In addition, the allegations underlying the fraud causes of action state only that defendants made general promises to meet payment obligations. Thus, the fraud claims allege nothing more than an insincere promise to perform under a contract (see e.g. Springut Law PC v Rates Tech. Inc.,157 AD3d 645, 646 [1st Dept 2018]; ID Beauty S.A.S. v Coty Inc. Headquarters, 164 AD3d 1186, 1186 [1st Dept 2018]). Indeed, the fraud claims seek damages identical to those recoverable for breach of contract (see e.g. Cronos Group Ltd. v XComIP, [*2]LLC, 156 AD3d 54, 63-64 [1st Dept 2017]).
Given the plaintiffs’ failure to properly allege a cause of action for the underlying fraud, Supreme Court properly dismissed the conspiracy to commit fraud and aiding and abetting fraud claims (see e.g. Abacus Fed. Sav. Bank. v Lim, 75 AD3d 472, 474 [1st Dept 2010]; Simon v FrancInvest, S.A., 192 AD3d 565, 569 [1st Dept 2021]). The unjust enrichment claim was also properly dismissed because neither party disputes that there are several contracts governing the underlying subject matter (see Allenby LLC v Credit Suisse, AG, 134 AD3d 577, 579 [1st Dept 2015]).
- Lack of CPLR 3016(b) Particularity, Contract Breach not Fraud
Essential Home Remodeling, Inc. v Rossin, 2025 NY Slip Op 01314 (1st Dep’t Decided Mar. 11, 2025):
Soundbites and Cites:
Defendant’s counterclaim for fraud, deceit, and misrepresentation was not pleaded with the particularity required under CPLR 3016(b), as it makes only general and conclusory allegations that plaintiff entered into a contract while lacking the intent to perform it (see New York Univ. v Continental Ins. Co., 87 NY2d 308, 318 [1995]; Cronos Group Ltd. v XComIP, LLC, 156 AD3d 54, 61 [1st Dept 2017]). Defendant alleges that plaintiff “falsely represented” that it would “competently” perform its services “within 12-15 working weeks.” Defendant pleads no specific facts from which it may be reasonably inferred that plaintiff did not intend to abide by the specified timeline “at the time the promissory representation was made” (Cronos Group Ltd., 156 AD3d at 71; see Barlow v Skroupa, 221 AD3d 482, 483 [1st Dept 2023]).
The fraud counterclaim is also deficient because the same allegations underlie both the breach of contract and fraud causes of action (see Matter of Soames v 2LS Consulting Eng’g, D.P.C., 187 AD3d 490, 491 [1st Dept 2020]). The only fraud alleged is that plaintiff falsely represented that it would complete the renovations on the timeline set forth in the contract, and a breach of contract claim cannot be converted into one for fraud merely by alleging that defendant did not intend to fulfill the contract (see Non-Linear Trading Co. v Braddis Assoc., Inc., 243 AD2d 107, 118 [1st Dept 1998]; see also Cronos Group Ltd., 156 AD3d at 620). In addition, the fraud counterclaim seeks the same damages as the breach of contract claim, apart from an unelaborated request for punitive damages in connection with the fraud claim (see Mosaic Caribe, Ltd. v AllSettled Group, Inc., 117 AD3d 421, 422-423 [1st Dept 2014]; see also MBIA Ins. Corp. v Credit Suisse Sec. [USA] LLC, 165 AD3d 108, 114 [1st Dept 2018]).
- Statute of Limitations Discovery Rule, Release Challenged
Gormley v Marist Bros. of the Schs., Province of the United States of Am., 2025 NY Slip Op 01612 (2d Dep’t Decided Mar.19, 2025):
Soundbites and Cites:
“On a motion to dismiss a cause of action pursuant to CPLR 3211(a)(5) on the ground that it is barred by the statute of limitations, a defendant bears the initial burden of establishing, prima facie, that the time in which to sue has expired” (Cruz v Guaba, 226 AD3d 964, 965 [internal quotation marks omitted]). “If the defendant satisfies this burden, the burden shifts to the plaintiff to raise a question of fact as to whether the statute of limitations was tolled or otherwise inapplicable, or whether the plaintiff actually commenced the action within the applicable limitations period” (Islandcap, LLC v Cohen, 230 AD3d 660, 661 [internal quotation marks omitted]).
“Generally, a valid release constitutes a complete bar to an action on a claim which is the subject of the release” (Centro Empresarial Cempresa S.A. v América Móvil, S.A.B. de C.V., 17 NY3d 269, 276 [internal quotation marks omitted]). “A release may be invalidated, however, for any of the traditional bases for setting aside written agreements, [including] fraud,” among other grounds (Applewhite v 112 Liberty Assoc., LLC, 233 AD3d 834, 834 [internal quotation marks omitted]). “A fraud-based action must be commenced within six years of the fraud or within two years from the time the plaintiff discovered the fraud or could with reasonable diligence have discovered it, whichever is later” (Vilsack v Meyer, 96 AD3d 827, 828 [alteration and internal quotation marks omitted]; see CPLR 203[g]; 213[8]). “The inquiry as to whether a plaintiff could, with reasonable diligence, have discovered the fraud turns on whether the plaintiff was possessed of knowledge of facts from which the fraud could be reasonably inferred” (Lipszyc v Lipszyc, 221 AD3d 992, 994 [internal quotation marks omitted]). “Generally, knowledge of the fraudulent act is required and mere suspicion will not constitute a sufficient substitute. Where it does not conclusively appear that a plaintiff had knowledge of facts from which the fraud could reasonably be inferred, a [fraud-based cause of action] should not be dismissed on motion and the question should be left to the trier of facts” (Sargiss v Magarelli, 12 NY3d 527, 532 [citation and internal quotation marks omitted]). “Ordinarily, an inquiry into when a plaintiff should have discovered an alleged fraud presents a mixed question of law and fact” (Vilsack v Meyer, 96 AD3d at 828; see House of Spices [India], Inc. v SMJ Servs., Inc., 103 AD3d 848, 849).
Here, the defendant failed to establish that the causes of action to set aside or rescind the releases on the ground of fraud were time-barred pursuant to CPLR 3211(a)(5) (see Lipszyc v Lipszyc, 221 AD3d at 994; Vilsack v Meyer, 96 AD3d at 829). “[T]here was no indication in the [amended complaint] or in the papers submitted by the defendant[ ] on [its] motion as to when the plaintiff became aware” of the alleged fraudulent conduct (Oggioni v Oggioni, 46 AD3d 646, 649). In any event, the plaintiff, in affidavits submitted in opposition to the motion, indicated that he learned of certain facts underlying the fraud-based causes of action in early 2021 (see Ferdico v Pabone, 125 AD3d 718, 719). The defendant failed to demonstrate that the plaintiff, by exercising reasonable diligence, could have discovered those facts at some point prior to the two-year period immediately preceding the commencement of this action (see Sargiss v Magarelli, 12 NY3d at 532; Lipszyc v Lipszyc, 221 AD3d at 994). Accordingly, the defendant was not entitled to dismissal of the fraud-based causes of action as time-barred.
- Statute of Limitations Discovery Rule, Estoppel, No Conspiracy Claim Where no Fraud Claim
Harbinger Capital Partners II, LP v Apollo Global Mgt., LLC, 2025 NY Slip Op 01573 (1st Dep’t Decided Mar. 18, 2025):
Soundbites and Cites:
The motion court properly dismissed plaintiffs’ causes of action for fraud, negligent misrepresentation, breach of fiduciary duty, aiding and abetting breach of fiduciary duty, breach of contract, and unjust enrichment as time-barred. The claims were not asserted within six years of their accrual between 2004 and 2010 when plaintiffs acquired the Apollo Funds’ interest in Sky Terra. Nor were they asserted within two years of the time when plaintiffs could with reasonable diligence have discovered the alleged misconduct (see generally CPLR 213[8]; Aozora Bank, Ltd. v Credit Suisse Group, 144 AD3d 437, 438-439 [1st Dept 2016]).
The Apollo defendants demonstrated prima facie that plaintiffs were on inquiry notice of the fraud claims by late 2011, which was more than two years before plaintiffs commenced this action. Plaintiffs also did not meet their burden of showing that, even if they had exercised reasonable diligence, they could not have discovered the basis for their claims within two years of the emails between Good and Falcone (see e.g. Epiphany Community Nursery School v Levey, 171 AD3d 1, 7 [1st Dept 2019]; Aozora, 144 AD3d at 438). Plaintiffs concede that they discovered the paper file at the USPTO within approximately one-half year of LightSquared’s settlement[*2]. However, they offer no real “explanation why [they] could not have performed that investigation earlier” (Aozora, 144 AD3d at 440; see also Aozora Bank, Ltd. v Deutsche Bank Sec. Inc., 137 AD3d 685, 690 [1st Dept 2016]; cf. Sargiss v Magarelli, 12 NY3d 527, 532 [2009]).
Similarly, the second and fourth causes of action were properly dismissed. A “claim for conspiracy to commit fraud . . . is not an independent cause of action in New York” (Boesky v Levine, 193 AD3d 403, 405 [1st Dept 2021]; see also Troy-McKoy v Mount Sinai Beth Israel, 182 AD3d 524, 525 [1st Dept 2020], lv denied 35 NY3d 914 [2020], cert denied __ US __, 141 S Ct 2527 [2021]).
Equitable estoppel does not save plaintiffs’ contract and unjust enrichment claims. “Courts . . . have the power to apply the extraordinary remedy of equitable estoppel only where it would be unjust to permit a defendant to assert a statute of limitations defense” (MBI Intl. Holdings Inc. v Barclays Bank PLC, 151 AD3d 108, 116-117 [1st Dept 2017] [internal quotation marks omitted], lv denied 29 NY3d 919 [2017]).
“Where the same alleged wrongdoing that underlies plaintiffs’ equitable estoppel argument is also the basis of their tort claims, equitable estoppel will not lie” (Sabourin v Chodos, 194 AD3d 660, 662 [1st Dept 2021]). Plaintiffs contend that defendants are estopped from asserting the statute of limitations because “Apollo-controlled MSV made numerous filings with the FCC denying that the GPS Defect posed any problem to its planned ATC Network” and “Management concealed the test results.” However, that is the same wrongdoing that underlies plaintiffs’ tort claims.
“Good emphatically reassured [plaintiffs] that no fraud had occurred.” However, “[a] mere denial of wrongdoing . . . is not sufficient to create an estoppel” (Ponterio v Kaye, 25 AD3d 865, 868 [3d Dept 2006], lv denied 6 NY3d 714 [2006]). Finally (on this point), plaintiffs do not argue that CCTV and Singh — as opposed to the Apollo defendants — induced them by fraud to refrain from filing a timely unjust enrichment claim.
- No Conspiracy Claim without Underlying Fraud Claim, Judiciary Law 487
Mohammad v Rehman, 2025 NY Slip Op 01622 (2d Dep’t Decided Mar. 19, 2025):
Soundbites and Cites:
“A plaintiff asserting a cause of action alleging fraud must plead all of the following [*2]elements: (1) a material misrepresentation or a material omission of fact which was false and which the defendant knew to be false, (2) made for the purpose of inducing the plaintiff to rely upon it, (3) the plaintiff’s justifiable reliance on the misrepresentation or material omission, and (4) injury” (Franklin D. Nastasi Trust v Bloomberg, L.P., 224 AD3d 804, 808 [internal quotation marks omitted]; see Nabatkhorian v Nabatkhorian, 127 AD3d 1043, 1043-1044). “A claim rooted in fraud must be pleaded with the requisite particularity under CPLR 3016(b)” (Eurycleia Partners, LP v Seward & Kissel, LLP, 12 NY3d 553, 559). Here, even when liberally construing the allegations in the third-party complaint in the light most favorable to the defendants, the third-party complaint failed to state a cause of action to recover damages for fraud against Delgrosso. The third-party complaint failed to sufficiently allege that the defendants justifiably relied on the alleged misrepresentations and omissions by Delgrosso (see Franklin D. Nastasi Trust v Bloomberg, L.P., 224 AD3d at 808; Avery v WJM Dev. Corp., 197 AD3d 1141, 1144). Accordingly, the Supreme Court properly granted that branch of Delgrosso’s motion which was pursuant to CPLR 3211(a)(7) to dismiss the cause of action in the third-party complaint alleging fraud insofar as asserted against him.
“New York does not recognize civil conspiracy to commit a tort as an independent cause of action” (McSpedon v Levine, 158 AD3d 618, 621; see Alexander & Alexander of N.Y. v Fritzen, 68 NY2d 968, 969). “However, a plaintiff may plead the existence of a conspiracy in order to connect the actions of the individual defendants with an actionable, underlying tort, and establish that those actions were part of a common scheme” (McSpedon v Levine, 158 AD3d at 621; see Alexander & Alexander of N.Y. v Fritzen, 68 NY2d at 969). “In order to properly plead a cause of action to recover damages for civil conspiracy, the plaintiff must allege a cognizable tort, coupled with an agreement between the conspirators regarding the tort, and an overt action in furtherance of the agreement” (Perez v Lopez, 97 AD3d 558, 560; see McSpedon v Levine, 158 AD3d at 621).
Since the third-party complaint failed to connect the actions of Delgrosso to a cognizable cause of action to recover damages for fraud, the Supreme Court properly granted that branch of Delgrosso’s motion which was pursuant to CPLR 3211(a)(7) to dismiss the cause of action in the third-party complaint alleging civil conspiracy insofar as asserted against him (see Clevenger v Yuzek, 222 AD3d at 936).
“Under Judiciary Law § 487(1), an attorney who ‘[i]s guilty of any deceit or collusion, or consents to any deceit or collusion, with intent to deceive the court or any party’ is liable to the injured party for treble damages” (Altman v DiPreta, 204 AD3d 965, 968). “Relief pursuant to Judiciary Law § 487 is not lightly given, and requires a showing of egregious conduct or a chronic and extreme pattern of behavior on the part of the . . . attorney[ ]” (Kaufman v Moritt Hock & Hamroff, LLP, 192 AD3d 1092, 1093 [citation and internal quotation marks omitted]). Here, even when liberally construing the allegations in the third-party complaint in the light most favorable to the defendants, the allegations do not rise to the level of “egregious conduct or a chronic and extreme pattern of behavior” on the part of Delgrosso (id. [internal quotation marks omitted]). Therefore, the Supreme Court properly granted that branch of Delgrosso’s motion which was pursuant to CPLR 3211(a)(7) to dismiss the cause of action in the third-party complaint alleging a violation of Judiciary Law § 487.
- Rescinding Title Insurance Policy Based Upon Application Misrepresentations
53 Spencer Realty, LLC v Fidelity Natl. Title Ins. Co., 2025 NY Slip Op 01336 (2d Dep’t Decided Mar. 12, 2025):
Soundbites and Cites:
To recover damages for fraudulent inducement, a plaintiff must prove “(1) a misrepresentation or an omission of material fact which was false and known to be false by the defendant, (2) the misrepresentation was made for the purpose of inducing the plaintiff to rely upon it, (3) justifiable reliance of the plaintiff on the misrepresentation or material omission, and (4) injury” (CANBE Props., LLC v Curatola, 227 AD3d 654, 656 [internal quotation marks omitted]; see Israel v Progressive Cas. Ins. Co., 222 AD3d 733, 734).
“[T]o establish its right to rescind an insurance policy, an insurer must demonstrate that the insured made a material misrepresentation. A misrepresentation is material if the insurer would not have issued the policy had it known the facts misrepresented” (Friedman v Otsego Mut. Fire Ins. Co., 179 AD3d 1023, 1024-1025 [internal quotation marks omitted]; see Nabatov v Union Mut. Fire Ins. Co., 203 AD3d 1052, 1054).
Here, the plaintiff does not dispute Fidelity’s contentions that misrepresentations were made in the plaintiff’s insurance application and that such misrepresentations were material. The plaintiff contends only that the misrepresentations were made by Kellner and cannot be attributed to the plaintiff. However, an “agent’s fraud can be imputed to the corporation, and a corporation will be deemed to have ratified the agent’s acts,” where “it retains the benefit of those acts for corporate purposes” (Zanoni v 855 Holding CO., 96 AD2d 860, 861, affd 62 NY2d 963). Indeed, “one cannot retain the product of the misrepresentations and at the same time repudiate the agency and methods which brought it into being” (La Belle Hgts., Inc. v Stone, 227 App Div 65, 66; see Green v des Garets, 210 NY 79, 81). Here, the plaintiff can be deemed to have ratified Kellner’s actions by accepting title to the property that Kellner purportedly purchased on its behalf and thereafter submitting a claim under the policy that Kellner procured (see Zanoni v 855 Holding Co., 96 AD2d at 861).
- Unilateral Mistake By Fraud
Barker v Gervera, 2025 NY Slip Op 01453 (4th Dep’t Decided Mar. 14, 2025):
Soundbites and Cites:
With respect to the claim based on a mutual mistake or unilateral mistake with fraud, “[i]t is the general rule that where a written instrument fails to conform to the agreement between the parties in consequence of the mutual mistake of the parties however induced, or of the mistake of one party and fraud of the other, a court will reform the instrument so as to make it conform to the actual agreement between the parties” (Janowitz Bros. Venture v 25-30 120th St. Queens Corp., 75 AD2d 203, 214 [2d Dept 1980]; see Iskalo Elec. Tower LLC v Stantec Consulting Servs., Inc., 219 AD3d 1157, 1160 [4th Dept 2023]; EGW Temporaries, Inc. v RLI Ins. Co., 83 AD3d 1481, 1481 [4th Dept 2011]).
We reject plaintiff’s contention that he stated a valid claim for mutual mistake. Plaintiff alleged that the Gervera defendants tricked or deceived him into transferring a property allegedly valued at over $750,000 for a price of $250,000, and there is no contention in the amended complaints that the Gervera defendants operated under any mistake (see Chimart Assoc. v Paul, 66 NY2d 570, 573 [1986]; EGW Temporaries, Inc., 83 AD3d at 1481-1482; see generally Pickard v Campbell, 207 AD3d 1105, 1107-1108 [4th Dept 2022], lv denied 39 NY3d 910 [2023]). That claim was thus properly dismissed.
We reach a different conclusion with respect to the claim that there was a unilateral mistake with fraud. Initially, we note that “[a] bare claim of unilateral mistake by [a] plaintiff, unsupported by legally sufficient allegations of fraud on the part of defendants, does not state a cause of action for reformation” (Barclay Arms v Barclay Arms Assoc., 74 NY2d 644, 646 [1989]; see Portnoy v Allstate Indem. Co., 82 AD3d 1196, 1198 [2d Dept 2011]; 1225 Realty Owner LLC v Mocal Enters., Inc., 66 AD3d 602, 602 [1st Dept 2009]). The allegations “must overcome the presumption that the written instrument correctly set forth the true intentions of the parties” (Town of German Flats v Aetna Cas. & Sur. Co., 174 AD2d 1003, 1004 [4th Dept 1991], lv denied 78 NY2d 860 [1991]). The issue therefore distills to whether plaintiff made “legally sufficient allegations of fraud on the part of defendants” (Barclay Arms, 74 NY2d at 646). “Where a cause of action or defense is based upon misrepresentation, fraud, mistake, wilful default, breach of trust or undue influence, the circumstances constituting the wrong shall be stated in detail” (CPLR 3016 [b]; see Pludeman v Northern Leasing Sys., Inc., 10 NY3d 486, 491 [2008]).
” ‘The elements of a cause of action for fraud require a material misrepresentation of a fact, knowledge of its falsity, an intent to induce reliance, justifiable reliance by the plaintiff[,] and damages’ ” (Carlson v American Intl. Group, Inc., 30 NY3d 288, 310 [2017], quoting Eurycleia Partners, LP v Seward & Kissel, LLP, 12 NY3d 553, 559 [2009]; see Lama Holding Co. v Smith Barney, 88 NY2d 413, 421 [1996]; Northland E., LLC v J.R. Militello Realty, Inc., 163 AD3d 1401, 1404 [4th Dept 2018]). Here, we conclude that plaintiff made legally sufficient allegations not only of a unilateral mistake but also of all the elements of a cause of action for fraud with respect to the Gervera defendants (see generally CPLR 3016 [b]; Northland E., LLC, 163 AD3d at 1404). We therefore reinstate the unilateral mistake with fraud claim.
- Fraud Claim Dismissed—No Reasonable Reliance
Imperium Blue Acquisition Partners, LLC v Marathon Asset Mgt., L.P. , 2025 NY Slip Op 01317 (1st Dep’t Decided Mar. 11, 2025):
Soundbites and Cites:
Plaintiffs did not, as a matter of law, adequately allege the reasonable reliance element required to state causes of action for fraud and promissory estoppel. The relevant terms of the parties’ term sheet, including those allowing defendants to require all normal and customary due diligence items, including “survey” reports, directly contradicted the alleged prior oral promises defendants made that they would use best efforts to close the financing by a certain date by expediting and streamlining the due diligence process (see Braddock v Braddock, 60 AD3d 84, 91 [1st Dept 2009]; Sanyo Elec. v Pinros & Gar Corp., 174 AD2d 452, 453 [1st Dept 1991]).
Nor could plaintiffs properly state their claims based on allegations of reasonable reliance on the promises or assurances defendants allegedly made after the signing of the term sheet and during the due diligence period, as those alleged promises were made during the exclusivity period when plaintiffs were not entitled to work with other lenders. Plaintiffs could not have been induced by defendants’ assurances to continue to “tender a performance which [was] required as a part of a preexisting contractual obligation” (Megaris Furs v Gimbel Bros., 172 AD2d 209, 212 [1st Dept 1991]; see also Iberdrola Energy Projects v Oaktree Capital Mgt. L.P., 231 AD3d 33, 44 [1st Dept 2024]).
Goldberg v KOSL Bldg. Group, LLC, 2025 NY Slip Op 01790 (2d Dep’t Decided Mar. 26, 2025):
Soundbites and Cites:
Here, the Supreme Court properly granted that branch of the defendants’ motion which was pursuant to CPLR 3211(a)(7) to dismiss the second cause of action, alleging fraud, insofar as asserted against them. “[A]n essential element of any fraud [claim] is that there must be reasonable reliance, to a party’s detriment, upon the representations made by the defendant against whom the fraud claimed has been asserted” (Nabatkhorian v Nabatkhorian, 127 AD3d 1043, 1044 [internal quotation marks omitted]; see Avery v WJM Dev. Corp., 197 AD3d 1141, 1144). “A party cannot claim reliance on a misrepresentation when he or she could have discovered the truth with due diligence” (KNK Enters., Inc. v Harriman Enters., Inc., 33 AD3d 872; see Avery v WJM Dev. Corp., 197 AD3d at 1144). Here, affording the amended complaint a liberal construction and accepting the allegations in the amended complaint as true, the plaintiffs failed to allege reasonable reliance upon the defendants’ alleged misrepresentations, which pertained to facts the plaintiffs could have verified with due diligence (see Avery v WJM Dev. Corp., 197 AD3d at 1144).
Since a cause of action alleging aiding and abetting fraud cannot lie without the underlying fraud having been sufficiently pleaded, the Supreme Court properly granted that branch of the defendants’ motion which was pursuant to CPLR 3211(a)(7) to dismiss the third cause of action, alleging aiding and abetting fraud, insofar as asserted against them (see Nabatkhorian v Nabatkhorian, 127 AD3d at 1044).
- Arbitration Challenged for Fraud
Mouli v Stern, 2025 NY Slip Op 01872 (1st Dep’t Decided Mar. 27, 2025):
Soundbites and Cites:
Supreme Court properly granted defendant’s motion to compel arbitration and for a stay of this action, as the parties delegated issues of arbitrability to the arbitrator. The parties’ assignment agreement contains a broad arbitration provision incorporating the rules of the American Arbitration Association and expressly providing that the threshold issue of arbitrability with respect to the repayment of funds at issue would be decided by the arbitrator. Where, as here, the parties “explicitly incorporate rules that empower the arbitrator to decide issues of arbitrability, the incorporation serves as clear and unmistakable evidence of the parties’ intent to delegate such issues to an arbitrator” (Contec Corp. v Remote Solution, Co., Ltd., 398 F3d 205, 208 [2d Cir 2005]; see Schindler v Cellco Partnership, 200 AD3d 505, 505-506 [1st Dept 2021]). Indeed, where the relevant contract (here, the assignment agreement) “delegates the arbitrability question to an arbitrator,” the court “possesses no power to decide the arbitrability issue,”‘ even when “the court thinks that the argument that the arbitration agreement applies to a particular dispute is wholly groundless” (Henry Schein, Inc. v Archer & White Sales, Inc., 586 US 63, 68-69 [2019]; see Matter of Weinrott [Carp], 32 NY2d 190, 196 [1973] [“A broad arbitration agreement reflects a general desire by the parties to have all issues decided speedily and finally by the arbitrators.”]).
Because the threshold issue on appeal is who should decide the issue of arbitrability, plaintiff’s contentions regarding the merits—both as to arbitrability and the parties’ substantive dispute—thus miss the mark. Under the correct procedure, courts will “perform the initial screening process designed to determine in general terms whether the parties have agreed that the subject matter under dispute should be submitted to arbitration” (Matter of Nationwide Gen. Ins. Co. v Investors Ins. Co. of Am., 37 NY2d 91, 96 [1975]). Once it appears that there is a “reasonable relationship between the subject matter of the dispute and the general subject matter of the underlying contract, the court’s inquiry is ended” (id.). Supreme Court properly conducted this initial screening process, leaving the threshold question of arbitrability to the arbitrator.
Furthermore, as plaintiff concedes, he entered the assignment agreement to recover the funds that were owed to him under a separate guaranty. Accordingly, plaintiff’s arguments that the assignment agreement existed entirely independently from the guaranty agreement and that these agreements were not “inextricably interwoven” are unavailing (cf. Rinaolo v Berke, 188 AD2d 297, 297 [1st Dept 1992]).
Plaintiff also argues that the assignment agreement was fraudulently [*2]induced, and that he should not be bound by the arbitration provision contained within it. However, agreements to arbitrate are severable from the overall contract in which they appear (see Wu v Uber Tech., Inc., — NY3d —, 2024 NY Slip Op 05869, *7 [2024]; see also Coinbase, Inc. v Suski, 602 US 143, 150-151 [2024]). A party trying to avoid an arbitration clause must therefore show that the arbitration clause itself, not the overall agreement, was procured through fraud or is otherwise unenforceable (see Wu, 2024 NY Slip Op 05869, *7; see also Rent-A-Center, W., Inc. v Jackson , 561 US 63, 70-72 [2010]). As plaintiff’s assertions of fraudulent inducement relate to the assignment agreement’s other substantive provisions rather than the arbitration clause itself, Supreme Court properly declined to address this issue (see e.g. Matter of Weinrott [Carp], 32 NY2d at 197-199).