that it cannot be characterized in law as fraudulent.
I think that the amended complaint sufficiently pleads an action for fraud, which "requires proof of a representation of fact which is false and known to be false when made, which is offered to deceive another and with the intention to induce the other to act or refrain from acting, and proof of reliance upon the representation which causes injury." Chase Manhattan Bank, N.A. v. Perla, 65 A.D.2d 207, 411 N.Y.S.2d 66, 68 (4th Dept. 1978).
Plaintiffs at bar sufficiently allege these elements. The amended complaint alleges that a Western Dairy representative falsely told plaintiffs that there was no New Zealand cheese then available for delivery when in fact he knew that there was. It is hard to imagine why the Western Dairy representative lied to plaintiffs' representative unless he intended to deceive plaintiff. The deceiver's intention was apparently to persuade plaintiffs to accept a later delivery of cheese. Plaintiffs relied upon Western Dairy's disclaimer of present cheese availability and, confronted with their own economic necessities, agreed to accept delivery at a later time, thereby subjecting themselves to market volatility which in fact caused them monetary loss. If (accepting the accuracy of plaintiffs' allegations as I must) the Western Dairy representative had told plaintiffs' representative the truth in early January 1993 -- that defendants had plenty of cheese available but had decided not to fill plaintiffs' order -- plaintiffs could have sought administrative relief, or declaratory or injunctive relief from a court in the form of an order to show cause.
I conclude that the amended complaint alleges conduct on the part of defendants which, if proved, would constitute fraud as a matter of law.
Rule 9(b) provides: "In all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity. Malice, intent, knowledge, and other condition of mind of a person may be averred generally." Rule 9(b) must be read together with Rule 8(a) which requires only a "short and plain statement" of the claims for relief." Ouaknine v. MacFarlane, 897 F.2d 75, 79 (2d Cir. 1990); DiVittorio v. Equidyne Extractive Industries, Inc., 822 F.2d 1242, 1247 (2d Cir. 1987). On a motion to dismiss, the court assumes the truth of plaintiff's factual allegations, Ouaknine at 78, reads the complaint generously, and draws all inferences in favor of the pleader. Cosmas v. Hassett, 886 F.2d 8, 11 (2d Cir. 1989); Yoder v. Orthomolecular Nutrition Institute, Inc., 751 F.2d 555, 562 (2d Cir. 1985). But Rule 9(b) must be enforced so as to accomplish its three goals: (1) providing a defendant fair notice of plaintiff's claim, to enable preparation of his defense; (2) protecting a defendant from harm to his reputation or goodwill; and (3) reducing the number of strike suits. O'Brien v. National Property Analysts Partners, 936 F.2d 674, 676 (2d Cir. 1991); DiVittorio at 1247.
To satisfy the particularity requirement of Rule 9(b), a complaint must adequately specify the statements it claims were false or misleading, give particulars as to the respect in which plaintiff contends the statements were fraudulent, state when and where the statements were made, and identify those responsible for the statements. Cosmas at 11. Where multiple defendants are asked to respond to allegations of fraud, the complaint should inform each defendant of the nature of his alleged participation in the fraud. DiVittorio at 1247. However, no specific connection between fraudulent representations or omissions need be pleaded as to defendants who are insiders or affiliates personally participating in the statements at issue. DiVittorio at 1247 (offering memorandum); Luce v. Edelstein, 802 F.2d 49, 55 (2d Cir. 1986) (same).
A complaint may adequately identify the statements alleged to be misrepresentations and properly indicate when, where and by whom they were made, yet still fail Rule 9(b) scrutiny if the complaint does not allege circumstances giving rise to a strong inference that defendant knew the statements to be false, Wexner v. First Manhattan Co., 902 F.2d 169, 173 (2d Cir. 1990), and intended to defraud plaintiff, Ouaknine at 80; Beck v. Manufacturers Hanover Trust Co., 820 F.2d 46, 50 (2d Cir. 1987), cert. denied, 484 U.S. 1005, 98 L. Ed. 2d 650, 108 S. Ct. 698 (1988).
Knowledge is a state of mind. So is intent to defraud, or "scienter." While Rule 9(b) permits conditions of mind to be averred generally, the rule also requires that allegations of scienter be supported by facts giving rise to a "strong inference" of fraudulent intent. Ouaknine at 80; Beck at 50; Connecticut National Bank v. Fluor Corp., 808 F.2d 957, 962 (2d Cir. 1987).
Knowledge of falsity cannot be alleged in conclusory terms. Plaintiff must be able to allege particulars regarding a defendant's awareness or discovery of the facts upon which plaintiff relies for the claim of fraud. O'Brien at 677.
Allegations supporting an inference of fraudulent intent frequently include defendant's statement that a fact exists or an event will come to pass coupled with allegations that the fact did not exist or the event did not occur, and circumstances indicating that the statement was false when made. See, e.g., Luce at 56 (alleged misrepresentation in offering memorandum that general partners would make an initial capital contribution of $ 385,000 and guarantee a $ 4.5 million construction loan accompanied by allegations that general partners contributed only $ 80,000 and did not guarantee the loan); DiVittorio at 1248 (offering memorandum's statement that proceeds of offering would be expended as quickly as possible accompanied by allegation that proceeds were never so applied, and estimate that property contained approximately 9,260,000 tons of coal accompanied by allegation that mines did not contain nearly that much). See Ouaknine at 81 for a comparable analysis.
To satisfy the scienter requirement, a plaintiff need not allege facts which show a defendant had a motive for committing fraud, so long as plaintiff adequately identifies circumstances indicating "conscious behavior" by the defendant from which an intent to defraud may fairly be inferred. Cosmas at 13. However, where a particular defendant's motive to defraud is not apparent, the strength of the circumstantial allegations must be correspondingly greater. Beck at 50.
Allegations may be based on information and belief when facts are peculiarly within the opposing party's knowledge. Luce at 54 n 1.; DiVittorio at 1247-48. However, that exception to Rule 9(b)'s general requirement of particularized pleading does not constitute a license to base claims of fraud on speculation or conclusory allegations. Where pleading is permitted on information and belief, a complaint must adduce specific facts supporting a strong inference of fraud or it will not satisfy a relaxed pleading standard. Wexner at 172.
Applying these principles to the case at bar, I conclude that the amended complaint complies with the requirements of Rule 9(b). While plaintiffs do not identify the allegedly mendacious Western Dairy employee by name, the identity of the representative speaking with plaintiffs' Mr. Persily is peculiarly within Western Dairy's knowledge. The circumstances giving rise to an inference of fraudulent intent are sufficiently pleaded in P 27 of the amended complaint, which alleges:
Further investigation revealed to Trugman and Trio that Western had itself taken delivery of huge shipments of cheese from NZDB for its own account during the very periods for which Western had falsely represented that no cheese was available. Upon information and belief, even after Western took delivery of its cheese, there was still cheese available to fulfill Trugman's and Trio's orders for early 1993 arrival.