Emanuel Urquhart & Sullivan, LLP, New York (Sanford I.
Weisburst of counsel), for appellants.
Skadden, Arps, Slate, Meagher & Flom LLP, New York (Scott
D. Musoff of counsel), for respondent.
Sweeny, J.P., Andrias, Manzanet-Daniels, Gische, Webber, JJ.
Supreme Court, New York County (Saliann Scarpulla, J.),
entered April 28, 2016, which, insofar as appealed from as
limited by the briefs, granted defendant's motion to
dismiss the fraud-based and unjust enrichment claims,
unanimously affirmed, without costs.
action arises from the sale of a business by plaintiffs to a
special purpose vehicle part-owned by defendant. Plaintiffs
claim that defendant fraudulently induced them to sell the
business for the deflated purchase price of $190 million by
concealing the true identity of the buyer, a competitor
fraud-based claims (including fraud, conspiracy to defraud,
fraud in the inducement, negligent misrepresentation, and
aiding and abetting fraud) were properly dismissed because
the damages sought were impermissibly speculative. Damages
for fraud are calculated according to the
"out-of-pocket" rule and must reflect "the
actual pecuniary loss sustained as the direct result of the
wrong" (Lama Holding Co. v Smith Barney, 88
N.Y.2d 413, 421 ). Damages may only properly compensate
plaintiffs for "what they lost because of the fraud,
not... for what they might have gained, " and
"there can be no recovery of profits which would have
been realized in the absence of fraud" (id.).
Here, plaintiffs seek to recover the profits they might have
gained had the true identity of the buyer been revealed. But
there is no way of knowing what purchase price would have
been agreed upon had the buyer's identity been known. Nor
is there any suggestion that the agreed price was unfair, as
it was voluntarily accepted by plaintiffs, who had their own
financial advisors, as the result of a competitive bidding
process and was $20 million higher than the next highest bid.
fraud-based claims also fail because their reliance on the
alleged misrepresentations was not reasonable. Plaintiffs did
not press defendant for a contractual warranty regarding the
purchaser's identity, or even for direct answers to their
questions on this subject, despite their awareness of
defendant's close relationship with their competitor and
suspicions regarding its involvement. "[W]hen the party
to whom a misrepresentation is made has hints of its falsity,
a heightened degree of diligence is required" and
"[i]t cannot reasonably rely on such representations
without making additional inquiry to determine their
accuracy" (Global Mins. & Metals Corp. v
Holme, 35 A.D.3d 93, 100 [1st Dept 2006], lv
denied 8 N.Y.3d 804');">8 N.Y.3d 804 ). Where, as here, "a
party fails to make further inquiry or insert appropriate
language in the agreement for its protection, it has
willingly assumed the business risk that the facts may not be
as represented" (id.).
unjust enrichment claim was also properly dismissed. To
successfully plead unjust enrichment, "[a] plaintiff
must allege that (1) the other party was enriched, (2) at
that party's expense, and (3) that it is against equity
and good conscience to permit the other party to retain what
is sought to be recovered'" (Philips Intl.
Invs., LLC v Pektor, 117 A.D.3d 1, 7 [1st Dept 2014]).
Here, the second element is not satisfied. Plaintiffs claim
that defendant was unjustly enriched by a $25 million fee
received from the competitor for its assistance in
facilitating the purchase. Although there is no
black-and-white rule that the payment complained of must have
been made by the plaintiff itself (see e.g. County of
Nassau v Expedia, Inc., 120 A.D.3d 1178, 1179-1180 [2d
Dept 2014]; Harper-Lawrence, Inc. v Intershoe, Inc.,
270 A.D.2d 8, 11-12 [1st Dept 2000]; Restatement 3d of
Restitution & Unjust Enrichment, § 48),
plaintiffs' claimed entitlement to the fee is too
speculative to support their allegation that defendant was
enriched "at [their] expense" (Philips at
unjust enrichment claim is also foreclosed by the existence
of a valid and enforceable written contract governing the
subject matter - i.e., the Share Purchase Agreement (see
Maor v Blu Sand Intl. Inc., 143 A.D.3d 579, 579 [1st
Dept 2016]). This is true even though defendant is a
third-party nonsignatory to the agreement (see id.;
Kordower-Zetlin v Home Depot U.S.A., Inc., 134
A.D.3d 556, 557-558 [1st Dept 2015]).
we dismiss this case, we need not reach the parties'
arguments regarding the appropriateness of plaintiffs'
requests for punitive damages and attorneys' ...