SHELBY TOY STORE INC v. SHELBY EVOLUTION LLC (2026)

RPCK Rastegar Panchal LLP, New York (Jeremy Saks of counsel), for appellants.

The Dweck Law Firm, LLP, New York (Rourke T. Feinberg of counsel), for respondent.

Order, Supreme Court, Bronx County (Fidel E. Gomez, J.), entered October 16, 2025, which, to the extent appealed from as limited by the briefs, denied the motion of defendants Shelby Evolution, LLC, Yves C. Saurel, and Anthony L. Valente to dismiss plaintiff's second cause of action for fraudulent misrepresentation, unanimously reversed, on the law, without costs, the motion granted, and the cause of action dismissed.

Supreme Court dismissed all of plaintiff's fraudulent representation claims except those based upon defendants' alleged statements that they were sufficiently capitalized to close on the asset purchase the parties had negotiated.  This claim was similarly insufficient and should have been dismissed because plaintiff impermissibly used group pleading (see Jonas v. National Life Ins. Co., 147 AD3d 610, 612 [1st Dept 2017] ), and failed to plead the other elements of the claim with specificity (see CPLR 3016[b];  INTL FCStone Mkts., LLC v. Corrib Oil Co. Ltd., 172 AD3d 492, 493 [1st Dept 2019] ).

To the extent that plaintiff alleges that it was induced to negotiate the agreement, such damages are not cognizable in fraud, which requires out-of-pocket damages (see Lama Holding Co. v. Smith Barney, 88 N.Y.2d 413, 421 [1996] ).  The claim is in any event duplicative of the breach of contract claim (see Globalx, Inc. v. Hogwarts Capital, LLC, 226 AD3d 535, 536 [1st Dept 2024] ).

Plaintiff cannot argue for the sufficiency of the other allegations dismissed below because there is no cross-appeal, In any event, those allegations are also defective because plaintiff failed to sufficiently plead that misrepresentations made to a third party were relayed to plaintiff, who then relied upon them (see Robles v. Patel, 165 AD3d 858, 860 [2d Dept 2018] ).