Clarifying The Elements for Claim of Negligent Misrepresentation

A new decision in the United States District Court for the Southern District of New York raises an interesting nuance in how the courts view and articulate the elements of a cause of action known as “negligent misrepresentation.” The decision was issued by U.S. District Judge J. Pauloetken in the case of DW Properties v. Live Art Market, Inc., 23-CV-7004(JPO) (SDNY April 22, 2024).

Negligent Misrepresentation

The cause of action for actual fraud requires that the person perpetrating the alleged fraud to know that the fact misrepresented is false and to intend to defraud by conveying the false information to another, as clearly articulated by the New York Court of Appeals and widely recognized: “The elements of a fraud cause of action consist of ‘“a misrepresentation or a material omission of fact which was false and known to be false by [the] defendant, made for the purpose of inducing the other party to rely upon it, justifiable reliance of the other party on the misrepresentation or material omission, and injury.”’ Pasternack v. Laboratory Corporation of America Holdings, 27 NY3d 817 (2016), quoting Mandarin Trading Ltd. v. Wildenstein, 16 N.Y.3d 173, 178 (2011).

The courts also recognize a claim for relief where the communicator of the false information conveyed to another does not actually know the information is false but is careless, or negligent, in ascertaining the accuracy of what is being conveyed. That cause of action is generally known as negligent misrepresentation. To dispense with the element of actual knowledge of the falsity, courts require that the communicator have a recognized special relationship with the party receiving the information so as to impose a legal duty to convey truthful information. This has been clearly explained by the Court of Appeals in Mandarin as follows:

Read the full blog here.