The federal district court for the Southern District of New York dismissed a developer’s fraudulent inducement claim against New York City Health and Hospitals Corporation and New York City Economic Development Corporation (together, the City) for allegedly falsely representing the finality of design criteria for a flood protection system in connection with a planned building on the East Side of Manhattan. The developer alleged that it relied on statements and omissions by the City in letters, draft contractual provisions, and oral statements that misrepresented that the design criteria in an October 2020 report were final. The court first found that one of the defendants’ alleged misstatements and all but one of the alleged omissions were not pled with sufficient particularity as required under Federal Rule of Civil Procedure 9(b). In its review of the remaining alleged misstatements and omission, the court concluded that the allegations did not establish that the City represented that the October 2020 report was “final and exclusive” and that any such belief the developer might have formed “was clearly contradicted by other statements made by the City.” The court further found that the developer’s reliance on the alleged misrepresentations was unreasonable as a matter of law. In addition to finding that the developer did not establish the elements of fraudulent inducement, the court also found that the developer did not demonstrate a fraudulent misrepresentation that was “collateral or extraneous” to the contract as required by the Second Circuit’s decision in Bridgestone/Firestone v. Recovery Credit Services. The court also dismissed the developer’s claim that the City breached the implied covenant of good faith and fair dealing by demanding the developer abide by new design criteria for the flood protection system. The court denied leave to amend. A declaratory judgment claim remained pending.

Developer's lawsuit alleging that the defendants fraudulently induced the developer into incorporating a floodwall into a planned new commercial life sciences building along the East River in Manhattan.

ARE-East River Science Park, LLC v. New York City Health & Hospitals Corp.

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New York Federal Court Dismissed Claim that New York City Defendants Fraudulently Induced Developer to Commit to Flood Protection System

Filed

United States of America

New York

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New York Federal Court Dismissed Claim that New York City Defendants Fraudulently Induced Developer to Commit to Flood Protection System

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Risk

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Adaptation/resilience

Finance