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Business Fraud in NY: Fraudulent Concealment

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New York City has a long history and well-developed body of law in the world of business torts. Among the most common of these torts is fraud. Throughout the course of business, fraud may come about via contract disputes, the purchase and sale of goods, securities transactions, and other business dealings and transactions.[1] Claims of fraud may take several forms, but in this article, we will discuss fraudulent concealment. What is fraudulent concealment? Fraudulent concealment is defined as when a one party deliberately hides information that is critical to the other’s decision to invest, buy, sell, or contract with another party.[2]

The elements of fraudulent concealment are similar to that of common law fraud in New York. In New York the elements of fraudulent concealment are:

  1. “a relationship between… parties that create a duty to disclose,
  2. knowledge of the material facts by the party bound to disclose,
  3. scienter,
  4. [justifiable] reliance, and
  5. damage.”[3]

Generally speaking, a relationship between parties is created when there is some sort of contractual, confidential, or fiduciary duty that exists between the two. However, there are some cases in New York where such contractual relationships do not exist, but disclosure of some material facts is required under the law. This is known as the “special facts” doctrine, and in New York it is relevant “where one party's superior knowledge of essential facts renders a transaction without disclosure inherently unfair.”[4] For example, in the aforementioned cited case, P.T. Bank Cent. Asia v. ABN AMRO Bank N.V, the plaintiffs attempted to show that although the defendant was not a party to a transaction, they had information and knowledge that a party to the transaction had overstated an appraisal value that was necessary to the transaction.[5] If it could be proven before the court that the concealment of this information was material information that would have significantly altered the transaction, then a plaintiff may have a claim against the defendant for fraudulent concealment under the “special facts” doctrine.

Despite there being a duty to disclose in many cases, the element of justifiable reliance must be met even if a party chooses to conceal material information or facts from a plaintiff. This means that in order to recover damages in a case for fraudulent concealment, a plaintiff must have been justified in relying on the omission of information. A plaintiff could not be found to have justifiably relied on this lack of information if he failed to find this information, if it was a matter of public record, or could have been found by exercising a standard care of due diligence.[6] For example, if a plaintiff could have easily researched a stock price of a company it is looking to invest in, but for some reason a company/defendant is exaggerating such price during a meeting, then the defendant should not be held liable for fraudulent concealment, as such facts are easily verifiable.

It is important that you are aware of the legal hurdles and dangers that may await your business. For help navigating business torts, contracts, and prospective dealings, contact KI Legal by calling (212) 404-8644 or emailing so our experienced team of attorneys can help protect your business and their interests.

This information is the most up to date news available as of the date posted. Please be advised that any information posted on the KI Legal Blog or Social Channels is being supplied for informational purposes only and is subject to change at any time. For more information, and clarity surrounding your individual organization or current situation, contact a member of the KI Legal team.


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[1] Omid H. Nasab, 2022 in New York Business Litigation 469–489, 469 (2022).

[2] Id.

[3] Aetna Cas. & Sur. Co. v. Aniero Concrete Co., 404 F.3d 566, 582 (2d Cir. 2005).

[4] P.T. Bank Cent. Asia v. ABN AMRO Bank N.V., 301 A.D.2d 373, 378, 754 N.Y.S.2d 245, 252 (2003).

[5] See id.

[6] See Nat'l Union Fire Ins. Co. of Pittsburgh, P.A. v. Red Apple Grp., Inc., 273 A.D.2d 140, 141, 710 N.Y.S.2d 48, 49 (2000).