Vladeck, Waldman, Elias, & Engelhard, P.C. v. Paramount Leasehold, L.P., Index No. 653416/2011, 3/4/2015 (Bransten, J.)

Fraudulent Inducement

By Christopher Arcitio | Staff Writer

Plaintiff is Defendant’s tenant of forty years. Defendant owns commercial property located at 1501 Broadway, New York. On January 1, 2010, the parties executed an Assignment of Lease to renew the tenancy, allowing Plaintiff to renovate the premises. Defendant agreed to reimburse Plaintiff for up to $266,000 in renovations. Unbeknownst to Plaintiff, Defendant previously considered converting the premises from office space to a hotel or combining the premises with the New York Times Building to form a hotel. When the parties executed the lease, Defendant did not relay this conversion plan to Plaintiff. After the execution of the lease, Plaintiff informed Defendant of the proposed improvement plans. Defendant then disclosed its hotel conversion plan to Plaintiff and advised Plaintiff not to proceed with its improvement plans. As a result, Plaintiff ended its renovation plans. Plaintiff subsequently commenced this action claiming fraudulent inducement. Defendant counterclaimed for breach of contract and sought attorneys’ fees. Defendant moved for summary judgment to dismiss Plaintiff’s cause of action.

In determining Defendant had a duty to disclose, the court found the parties’ long contractual relationship demonstrated a special relationship between the parties. Additionally, Plaintiff’s argument that the hotel conversion plan was outside the scope of Plaintiff’s duty to exercise ordinary intelligence, pursuant to the lease agreement, satisfied the special facts doctrine. The court left the issue of whether Plaintiff’s duty to exercise ordinary intelligence covered the hotel conversion plan to the trier of fact. Further, the court determined the hotel conversion plan was material to Plaintiff’s renovation plans because the hotel conversion plan may have influenced Plaintiff’s decision to renew the lease. The court determined there was an issue of fact as to whether Plaintiff relied on Defendant’s omission. Moreover, Plaintiff was induced into relying on Defendant upon renewing the lease with the promise of future renovation plans. In addressing the fourth element of justifiable reliance, the court considered Plaintiff’s argument under the special facts doctrine as sufficient to raise an issue of fact. Lastly, the court recognized that Plaintiff had pled damages because Plaintiff would not have renewed the lease if Plaintiff was made aware of the hotel conversion plan. The court dismissed Defendant’s argument that Plaintiff suffered no damages because the hotel conversion plan did not occur, and, determined Plaintiff raised issues of fact as to damages. Thus, the court dismissed Defendant’s motion for summary judgment.

Vladeck, Waldman, Elias, & Engelhard, P.C. v. Paramount Leasehold, L.P., Index No. 653416/2011, 3/4/2015 (Bransten, J.).

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