Importantly, an omission or “concealment of facts supports a cause of action for fraud only if the non-disclosing party has a duty to disclose.” Remington Rand Corp. v. Amsterdam-Rotterdam Bank, N.V., 68 F.3d 1478, 1483 (2d Cir. 1995) (citations and footnote omitted). “Such a duty ordinarily arises where the parties are in a fiduciary or other relationship signifying a heightened level of trust.” Id. (citations omitted). “In the absence of a fiduciary relationship, a duty to disclose may arise if: (1) one party makes a partial or ambiguous statement that requires additional disclosure to avoid misleading the other party, … ; or (2) ‘one party possesses superior knowledge, not readily available to the other, and knows that the other is acting on the basis of mistaken knowledge.’ …” Id. at 1484 (internal citation and quotation omitted). “In either case, a disclosure duty ripens only when it becomes apparent to the non-disclosing party that another party is operating under a mistaken perception of a material fact.” Id. (citation omitted).Applying the facts to this law, the Court found that the special circumstances for a fraud claim did not exist there. No Fiduciary Relationship As to whether a fiduciary relationship between plaintiff and Pioneer existed, the Court relied upon case law that a bank does not have a fiduciary relationship with its depositor customers:
“‘[T]he relationship between a bank and its depositor is one of debtor and creditor[.]’” Greenberg, Trager & Herbst, LLP v. HSBC Bank USA, 17 N.Y.3d 565, 578 (2011) (quoting Brigham v. McCabe, 20 N.Y.2d 525, 530 (1967)); (citing Solicitor for Affairs of His Majesty’s Treasury v. Bankers Trust Co., 304 N.Y. 282, 291 (1952)). “It is well established that absent specific contractual language or circumstances to the contrary, the ordinary relationship between a creditor and debtor does not rise to the level of imposing a fiduciary duty upon the creditor.” Gorham-Dimaggio v. Countrywide Home Loans, Inc., 592 F. Supp. 2d 283, 294 (N.D.N.Y. 2008) (citations omitted). Thus, “the bank-depositor agreement standing alone creates no fiduciary relationship between the parties.” Tevdorachvili v. Chase Manhattan Bank, 103 F. Supp. 2d 632, 640 (E.D.N.Y. 2000) (citing Aaron Ferer & Sons Ltd. v. Chase Manhattan Bank, 731 F.2d 112, 122 (2d Cir. 1984) (holding that under New York law the “usual relationship” of bank and depositor is based on contractual principles, and involves no fiduciary duty from bank to depositor)).The Court found fault with the amended complaint because it merely alleged that Defendant “Pioneer had a confidential and fiduciary relationship with [Plaintiff] by virtue of its receipt and holding of [Plaintiff]’s [funds]. … Plaintiff did not allege any specific contractual language or circumstances that would indicate the parties intended to impose a fiduciary duty upon Defendant Pioneer. Nor did it cite to any cases showing that a bank’s holding tax trust funds creates a fiduciary relationship with the depositor.” No “Special Facts” The Court then found that the “special facts” doctrine did not apply either. Elaborating upon its earlier citations, the Court observed:
“To establish ‘superior knowledge’, [the] plaintiff must prove that the material fact was information peculiarly within the knowledge of the defendant, and that the information was not such that could have been discovered by the plaintiff through the ‘exercise of ordinary intelligence[.]’” Id. (quoting Jana L. [v. West 129th Street Realty Corp.], 22 A.D.3d [274,] 277, 802 N.Y.S.2d 132 [(1st Dep’t 2005)] (citations omitted)). “Where there is no fiduciary relationship that would impose a duty to disclose, a party’s mere silence without some act which deceived the other party cannot constitute a concealment that is actionable as fraud.” Id. at 366-67 (citation omitted).The Court held plaintiff to a rather strict standard in ruling that plaintiff could have discovered that Pioneer had frozen the funds in the escrow account before or during the six-day window period. The Court accepted Pioneer’s argument that plaintiff did not allege in its amended complaint that the omitted information could not have been discovered by the exercise of ordinary intelligence. The Court also observed that plaintiff did not allege that it made any inquiries to determine whether the account was operating normally or if outgoing payments had been frozen. The Court then speculated somewhat in concluding that plaintiff could have independently discovered the bank funds were frozen during the six-day period because plaintiff admitted that it found out on its own about the frozen account later: “It’s unclear how, exactly, Plaintiff learned on its own about the frozen account. It could have received notice from the tax collecting authorities, from its clients, or it could have discovered this information on its own after Defendant Mann, Plaintiff’s 51% shareholder, resigned from his officer positions [in related companies].” The Court then concluded: “No matter how Plaintiff discovered that its outgoing payments through the [subject] account were frozen, it was clearly able to discover it using ordinary intelligence. Because Plaintiff has not satisfied this prong of the special facts doctrine, the Court finds that it does not apply to create a duty on the part of Defendant Pioneer to disclose information about the frozen account. Commentary As I have commented in the past, since the cause of action for fraud involves serious allegations and gives rise to substantial remedies, a plaintiff seeking to allege a claim for fraud has strict burdens. See,e.g., “What Do Fraud and Spiderman Have in Common? With Great Power Comes Great Responsibilities”. As shown in the Pioneer decision, where information is not provided, as opposed to where material affirmative factual misrepresentations are made, special circumstances must be present in order to give rise to a fraud claim. Those include the existence of a fiduciary relationship under which a legal duty arises to disclose information or where a party has unique knowledge of information or where statements are made that are incomplete or misleading, in which case a duty arises to correct or explain them.