The opinion of the court was delivered by: Motley, District Judge.
Plaintiff Diamantis Giannacopoulos alleges that misrepresentations by
defendant Robert E. Menasche, an officer of defendant Credit Suisse,
induced him to provide financial backing for an ill-fated Nigerian oil
venture. The defendants have moved for summary judgment, arguing that
there is insufficient evidence for the fraud and negligence claims and
that the negligence claims are time-barred. For the below reasons, the
summary judgment motion is granted and the case is dismissed.
I. CASE BACKGROUND
Plaintiff Diamantis Giannacopoulos is a financier residing in Greece.
Defendant Credit Suisse is a bank under the laws of New York and
defendant Robert E. Menasche is a vice-president of Credit Suisse in New
York. The link between the parties is that Mr. Giannacopoulos and Mr.
Menasche each played a role in helping a proposed Nigerian oil venture
procure financial backing. The failure of that venture led to this dispute
about Mr. Menasche's role in Mr. Giannacopoulos's decision to support the
On November 30, 1992, Mr. Menasche assisted Way Refining-Ergis
Intercambio Commercial y Industrial Oil Division ("Way" and "Ergis"), a
joint venture of Way and Ergis, by writing a "letter of introduction" to
potential financial backers of a proposed Way-Ergis oil venture in
Nigeria. The letter read as follows on Mr. Menasche's Credit Suisse
November 30, 1992
To Whom It May Concern:
It is hereby a pleasure to introduce our dear friends
and substantial clients, Way Refining - Ergis
Intercambio Comercial y Industrial Oil Division.
Both companies recently joined together for the
purpose of lifting and processing crude oil for the
Ergis Oil Division is managed by Sheikh Faysal el Azem
and Way Refining by David Fraser. Both have extensive
knowledge in the crude oil industry with excellent
experience of operating their business in a profitable
way in the eight figures and more. We envision this
joint operation with great prosperity for future
liftings and processing of crude oil and we highly
recommend Way - Ergis Oil Division.
The character of the above two gentlemen are without
Very truly yours,
[siguature of "B. Menasche"]
Joint Pre-Trial Order ("JPTO"), Ex. 1. After the proposed Way-Ergis joint
venture fell through in December 1992, Ergis continued to pursue the
Nigerian oil venture without Way. In January 1993, Ergis reached
agreement with two other companies, Interfina Limited ("Interfina") and
Petraco Oil Company Limited ("Petraco"). Interfina brokered the deal in
which Ergis would lift the oil from Nigeria for eventual sale by
Petraco. Later that month, the deal was in jeopardy when Ergis and
Interfina each breached a contractual obligation to issue a $300,000
performance bond. See JPTO at 2-3.
Jonathan Clegg, a British solicitor representing Petraco, enlisted Mr.
Giannacopoulos, whom he knew as a wealthy businessman, to provide the
$300,000 performance bond for Interfina. The bond was in place for the
four weeks ending March 31, 1993. In exchange, Mr. Giannacopoulos
received a $125,000 fee and an Ergis corporate guaranty indemnifying him
for the $300,000 risk. Mr. Giannacopoulos never spoke with any parties to
the venture, nor anyone at Credit Suisse, but reviewed the
Interfina-Petraco contract, the Petraco letter of credit, and various
Ergis documents: a corporate brochure; financial statements for a
one-year period ending in April 1992; documents reflecting Ergis's
efforts to lift the oil from Nigeria; a letter from the Bank of Macau
indicating that Ergis had eight-figure revenue; and the letter of
introduction Mr. Menasche wrote in November 1992. See JPTO at 4-6.
By March 31, 1993, Ergis had failed to perform the initial step of
lifting the oil from Nigeria. For an additional fee of $25,000, Mr.
Giannacopoulos agreed to extend the performance bond into April to allow
Ergis more time. Ergis failed to lift the oil during April, leaving
Interfina unable to perform its end of the deal and leaving Mr.
Giannacopoulos liable for the $300,000 bond guaranteeing Interfina's
performance. Ergis then failed to make good on its corporate guaranty to
indemnify Mr. Giannacopoulos for his $300,000 loss. See JPTO at 6.
After unprofitable European legal proceedings against Ergis, Mr.
Giannacopoulos filed this action against Credit Suisse and Mr. Menasche.
On June 4, 1997, the court dismissed Mr. Giannacopoulos's RICO claims for
failure to allege a pattern of racketeering activity. Because of the
parties' diverse citizenship, the court retains diversity jurisdiction
over the four state law counts: fraudulent misrepresentation (count I);
gross negligence (count II); negligent supervision (count III); and
common law fraud (count IV). Amended Compl. ¶¶ 17-35.
The central claim here is that Mr. Menasche's letter misrepresented the
financial condition of Ergis. Mr. Menasche allegedly received a fee of
$25,000 to write Ergis an unusually positive letter of introduction,
which he knew to be false, so that a financier such as Mr. Giannacopoulos
would support Ergis's Nigerian oil venture in reliance on a Credit Suisse
recommendation. The letter's purported falsehoods include the claims that
Way and Ergis were "dear friends and substantial clients" of Credit
Suisse and were "operating their business in a profitable way in the
eight figures and more." Mr. Giannacopoulos maintains that Credit Suisse
is liable for Mr. Menasche's misdeeds as its corporate officer as well as
for its negligent supervision and training of Mr. Menasche. See JPTO at
II. CONCLUSIONS OF LAW
A. Limitations Period for Negligence Claims (counts II and III)
Mr. Giannacopoulos filed this action on November 29, 1996 and the state
law claims in his amended pleading are deemed to be interposed at the
same time as the claims in his original pleading under N YC.P.L.R. §
203(f). The defendants argue that Mr. Giannacopoulos's claim accrued
when Petraco cashed Mr. Giannacopoulos's performance bond, on or about
May 12, 1993. From that accrual date, the three-year limitations period
for negligence claims, of N.Y.C.P.L.R. § 214(4) would have ended in
May 1996. Mr. Giannacopoulos counters that his claim did not accrue until
January 10, 1994, when it became clear that Ergis would not honor its
corporate guaranty to indemnify him: Ergis failed to lift the oil and, by
April of 1993, the entire oil transaction had failed. The Performance Bond
was cashed, but Ergis, in the spring of 1993, refused to honor its
corporate guaranty to me. I made an attempt to collecting [sic] from
Ergis but, by January of 1994, it became apparent to me that the letter
of introduction was patently false.... It suddenly became quite clear
that I had no hopes of being indemnified by Ergis on the cashed
performance bond without resorting to legal action. Giannacopoulos
Certification ¶ 8. See also JPTO at 6.
In spring 1993, Ergis clearly breached its duty to Mr. Giannacopoulos
if it "refused to honor its corporate guaranty" to him. The claim accrues
from the injury, not from the post-injury point when the injured party
sees "no hopes of being indemnified ... without resorting to legal
action." The claim accrued in spring 1993 and the three-year negligence
limitations period ended in spring 1996, barring Mr. Giannacopoulos's
November 29, 1996 filing.
A later accrual date based on Mr. Giannacopoulos's claim of delayed
discovery of the letter's falsity would not save his negligence claims.
Under N.Y.C.P.L.R. § 203(g), "where the time within which an action
must be commenced is computed from the time when facts were discovered or
... could with reasonable diligence have been discovered, ... the action
must be commenced within two years." By this standard, the latest
possible date of discovery would be in early 1994, on or soon after
January 10, 1994, when Mr. Giannacopoulos admits knowing "that the letter
introduction was patently false." A two-year period from early 1994 would
end in early 1996, leaving Mr. Giannacopoulos's November 29, 1996 filing
If any different § 203(g) accrual date is appropriate, it is an
earlier one. Ergis's extensive troubles in' spring 1993, when it failed
to perform in a multi-party oil venture and refused to honor its
corporate guaranty, could have led a reasonably diligent party to that
venture to notice or discover the disconnect between the collapsing Ergis
of spring 1993 and the profitable Ergis of Mr. Menasche's late 1992
letter. Reasonable diligence could have disclosed the truth about Ergis
soon after these spring 1993 failures. The two-year limitations period
then would end in mid-1995, well before the filing of this action.
Thus, all of Mr. Giannacopoulos's negligence claims are time-barred
under either the § 214(4) negligence limitations period of three
years from injury or the § 203(g) limitations period of two years
from discovery of key facts. The court nevertheless will discuss why
summary judgment is appropriate on the merits against all of the
negligence and fraud claims.
B. Summary Judgment Standards
The basic summary judgment standard is that "[u]ncertainty as to the
true state of any material fact defeats the motion." Gibson v. Am.
Broad. Companies, 892 F.2d 1128, 1132 (2d Cir. 1989). The nonmoving
party's burden is to produce concrete evidence sufficient to establish a
genuine unresolved material issue of material fact. See Celotex Corp. v.
Catrett, 477 U.S. 317, 322-24, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986);
Dister v. Continental Group, Inc., 859 F.2d 1108, 1114 (2d Cir. 1988).
The court then must view the facts in the light most favorable to the
non-movant. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,
475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); Gallo v.
Prudential Residential Servs., Ltd. Partnership, 22 F.3d 1219, 1224 (2d
Cir. 1994). The court neither weighs evidence nor resolves material
factual issues, but only determines whether, after adequate discovery,
any such issues remain unresolved because a reasonable fact finder could
decide for either party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Gibson, 892 F.2d at 1132.
C. Negligent Supervision (count III)
Mr. Giannacopoulos's only evidence of negligent supervision or training
by Credit Suisse is its hiring of Mr. Menasche, who is "a patent liar,"
and then its "allowing the issuance of a letter" on Credit Suisse
letterhead that was as improper as the disputed letter by Mr. Menasche.
Pl.'s Mem. at 23. Even if a fact finder could deem the letter
fraudulent, one act of fraud by a corporate officer, without more, does
not prove a lack of care by the corporation. A lack of direct supervision
here is not negligent because it seems reasonable for a corporation to
allow a vice-president to perform unsupervised such tasks as writing
letters of introduction. Summary judgment is appropriate against Mr.
Giannacopoulos's negligent supervision claim because the evidence is
insufficient to allow a finding that his injury resulted from Credit
Suisse negligence in its supervision or training of Mr. Menasche.
D. Gross Negligence (count II)
In New York, there is no cause of action for negligent
misrepresentation absent a special relationship of trust and confidence
between the parties. Mr. Giannacopoulos counters that he claims not
negligent misrepresentation, but gross negligence and negligent
supervision. He is correct that negligent supervision is a different tort
than negligent misrepresentation. His gross negligence claim, however, to
the extent that it is distinct from his negligent supervision claim,
bases on the alleged misrepresentation by Mr. Menasche. In a
misrepresentation action, gross negligence can allow an inference of
fraudulent intent. See, e.g., Revlon Inc. v. Carson Prods. Co.,
602 F. Supp. 1071 (S.D.N.Y. 1985), affd; 803 F.2d 676 (Fed. Cir.); DiMaio
v. State, 135 Misc.2d 1021, 517 N.Y.S.2d 675 (Cl.Ct. 1987). To the extent
that a gross negligence claim based on misrepresentation is distinct from
a fraud claim, however, it is an allegation of unintentional tortious
misrepresentation subject to the standards for negligent
A negligent misrepresentation plaintiff must prove that the
misrepresentation occurred in a close relationship between plaintiff and
before a party may recover in tort for pecuniary loss
sustained as a result of another's negligent
misrepresentations there must be a showing that there
was either actual privity of contract between the
parties or a relationship so close as to approach that
Prudential Ins. Co. v. Dewey, Ballantine, Bushby, Palmer & Wood, et at.,
80 N.Y.2d 377, 590 N.Y.S.2d 831, 833, 605 N.E.2d 318 (1992). In
contrast, a fraudulent misrepresentation plaintiff need not prove such a
relationship. See Channel Master Corp. v. Aluminium Limited Sales, Inc.,
4 N.Y.2d 403, 176 N.Y.S.2d 259, 263, 151 N.E.2d 833 (1958).
Mr. Giannacopoulos, not in "actual privity of contract" with the
defendants, must prove "a relationship so close as to approach that of
privity." In determining what kinds of relationships are sufficiently
close to create liability for negligent misrepresentations, Prudential
Insurance canvassed "the substantial body of decisional law delineating
the boundaries of liability to parties not in privity," 590 N YS.2d at
834, 605 N.E.2d 318, and held that:
The opinion in Credit Alliance distilled the
principles emerging from the prior case law and
established three critical criteria for imposing
liability: (1) an awareness by the maker of the
statement that it is to be used for a particular
purpose; (2) reliance by a known party 626 (S.D.N.Y.
1999) on the statement in furtherance of that
purpose; (3) some conduct by the maker of the
statement linking it to the relying party and
evidencing its understanding of that reliance.
Id. at 834-35, 605 N.E.2d 318 (citing Credit Alliance Corp., et al. v.
Arthur Andersen & Co., et al., 65 N.Y.2d 536, 493 N.Y.S.2d 435,
483 N.E.2d 110 (1985)).
Mr. Giannacopoulos's claim fails the requirement that a negligent
misrepresentation claimant be linked to the defendant as a "known party"
in "a relationship so close as to approach that of privity." Although
Mr. Menasche did not know Mr. Giannacopoulos, his "to whom it may
concern" letter was targeted at people like Mr. Giannacopoulos: wealthy
financiers willing to risk their money on an oil venture. However, not
all strangers generally qualified to respond to a negligent
misrepresentation can sue based on their reliance on the
Only specific circumstances allow a negligent misrepresentation suit by
a plaintiff who was not directly in privity with the defendant. A
qualifying "relationship so close as to approach that of privity" usually
will feature triangular privity, in which plaintiff and defendant each
were in privity with a third entity, and at least will require that the
plaintiff be part of a group that was reasonably well-defined and known to
the defendant. Illustrating both of these points, White v. Guarente, et
al., 43 N.Y.2d 356, 401 N.Y.S.2d 474, 372 N.E.2d 315 (1977), allowed a
negligent misrepresentation action by individual members of a limited
partnership against accountants who had contracted only with the
partnership itself, not with the individual members. Because the parties
had not contracted with each other directly, it was critical that the
plaintiffs were a specific and known group of beneficiaries to the
contract. "It was clear that the accountants' services were obtained to
benefit the specific members of the partnership, "a known group
of vested rights, marked by a definable limit and made up of certain
components."' Prudential Ins. Co., 590 N.Y.S.2d at 834, 605 N.E.2d 318
(quoting White, 401 N YS.2d at 477, 372 N.E.2d 315).
Mr. Giannacopoulos was not a sufficiently known party, nor in a
sufficiently close relationship, to Mr. Menasche and Credit Suisse for
the court to protect his reliance on any negligent misrepresentations.
Accordingly, summary judgment is appropriate against Mr. Giannacopoulos
on his gross negligence claim based on misrepresentations by Mr.
E. Fraudulent Misrepresentation (count I) & Common Law Fraud (count
"[I]n order to demonstrate fraud, plaintiffs must establish: the
misrepresentation of a material fact; knowledge by the party making the
misrepresentation that it was false when made; justifiable reliance upon
the statement; and damages." Abrahami v. UPC Constr. Co., 224 A.D.2d 231,
638 N.Y.S.2d 11, 13 (1st Dept. 1996) (citations omitted). Fraudulent
misrepresentation and common law fraud are not distinct claims here
because the elements of common law fraud include misrepresentation, which
is at the heart of any fraud claim by Mr. Giannacopoulos. The critical
issue here is whether Mr. Giannacopoulos's reliance on Mr. Menasche's
letter was justifiable in the sense of meriting legal protection.
The defendants argue that any reliance was not justifiable because the
letter was three months old, addressed a different venture, and was too
cursory to be a sufficient basis for reliance. The letter addressed only
the defunct Way-Ergis venture and only Way-Ergis as an entity, the
defendants maintain. In contrast, Mr. Giannacopoulos supported only the
later Ergis-Interfina-Petraco venture and actually backed Interfina, not
Ergis, with the performance bond. Mr. Giannacopoulos could have found
more specific and current information about Ergis's finances, the
defendants argue, but he instead conducted only a cursory inquiry that
did not include an extensive look at current documents.
Mr. Giannacopoulos counters that three months is reasonably current for
a glowing review of a company's general condition, especially because the
letter was an unusually strong recommendation. Under customary European
banking practices, such letters typically vouch for companies only
regarding specific ventures and only based on specific experiences, Mr.
Giannacopoulos asserts. He also maintains that the letter was not limited
to Way-Ergis; rather, it explicitly vouched for Ergis and its principal,
who issued Mr. Giannacopoulos the critical corporate guaranty for the
Interfina bond and who were partners of Interfina necessary to the joint
venture. Mr. Giannacopoulos defends the extent of his broader inquiry
into Ergis, which included a review of documents such as bank records
through April 1992 and a recent brochure.
Mr. Giannacopoulos could prove that the letter was a voucher not just
for Way-Ergis, but for Ergis, on whose profitability Mr. Giannacopoulos
relied in accepting Ergis's corporate guaranty. He also could prove
that, under prevailing financial custom, the letter was an unusually
strong endorsement from a major financial institution. Nevertheless,
reliance on a recommendation, however understandable, is insufficiently
justifiable to merit legal protection.
A party claiming fraudulent inducement to invest in a business must
show that he or she made an independent inquiry into the available
information, especially where the party is a sophisticated businessman
like Mr. Giannacopoulos. See, e.g., Abrahami v. UPC Constr. Co.,
224 A.D.2d 231, 638 N.Y.S.2d 11 (1st Dept. 1996) (holding that
sophisticated investors suing corporation and officers for fraud
unjustifiably relied on financial statements overstating assets because
investors had duty to appraise risks independently).
Even representations by the owner of the business are not enough to
eliminate the duty to examine current financial statements and other
information about the business. See, e.g., Stuart Lipsky, P.C. v. Price,
215 A.D.2d 102, 625 N.Y.S.2d 563, 564 (1st Dept. 1995) (rejecting fraud
action by buyer of law practice claiming misrepresentations of practice's
size and viability because buyer "had the means available to ascertain
the truth [and] nevertheless chose to rely solely upon the alleged oral
representations without any effort to verify that information via
financial statements"); Rudnick v. Glendale Sys., 222 A.D.2d 572,
635 N.Y.S.2d 657, 658 (2d Dept. 1995) (same for fraud claim of bakery
business buyers who "had the means available to them by the exercise of
ordinary intelligence to learn the facts underlying the alleged
misrepresentations and nondisclosures ... [and] will not now be heard to
complain that they were induced to enter into this contract by
misrepresentations" (citations omitted)). The broad rule is that where
parties have access to information that could expose a misrepresentation,
courts will not find their reliance sufficiently justifiable to merit
legal protection. See, e.g., Compania Sud-Americana de Vapores, S.A. v.
IBJ Schroder Bank & Trust, 785 F. Supp. 411, 419 (S.D.N Y 1992); Congress
Financial Corp. v. John Morrell & Co., 790 F. Supp. 459, 471 (S.D.N.Y.
This is not to say that Mr. Giannacopoulos was irrational to have
relied on the apparent fact that Credit Suisse vouched for Ergis. Such
behavior even may have been customary, as Mr. Giannacopoulos maintains.
Custom is not always the legal standard of when the law protects
reliance, however, in part because many customs envision some amount of
risk and unprotected trust. We often rely on those we trust without
question, recognizing that the trust leaves us vulnerable; we often act
on insufficient information to seize fleeting opportunities that are
worth the risk. Trust and risk entail vulnerability, even though they are
customary practices; it is not always the custom to double-check
everybody and everything. The custom of unprotected trust surely exists
in this financial community just as it exists in everyday life. The
standard for legal protection of reliance, however, is higher. Parties
cannot demand judicial protection when they could have protected
themselves with a reasonable inquiry into any misrepresented facts.
The motion of defendants Credit Suisse and Robert E. Menasche for
summary judgment against plaintiff Diamantis Giannacopoulos is granted
because: (1) the negligence claims are time-barred; (2) there is
insufficient evidence to support the negligent supervision claim; (3) the
parties' relationship was insufficient to support a gross negligence claim
of misrepresentation; and (4) the plaintiff investigated any
misrepresented facts insufficiently to prove justifiable reliance.
Summary judgment is granted against all claims and the case is
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