MBIA Ins. Corp. v. Merrill Lynch

• Decision Date: 01 February 2011
• Citation: MBIA Ins. Corp. v. Merrill Lynch, 916 N.Y.S.2d 54, 81 A.D.3d 419 (N.Y. App. Div. 2011)
• Parties: MBIA INSURANCE CORPORATION, et al., Plaintiffs-Appellants-Respondents, v. MERRILL LYNCH, et al., Defendants, Merrill Lynch International, Defendant-Respondent-Appellant.
• Court: New York Supreme Court — Appellate Division

916 N.Y.S.2d 54

81 A.D.3d 419

MBIA INSURANCE CORPORATION, et al., Plaintiffs-Appellants-Respondents,

v. MERRILL LYNCH, et al., Defendants,Merrill Lynch International, Defendant-Respondent-Appellant.

Supreme Court, Appellate Division, First Department, New York.

Feb. 1, 2011.

Quinn Emanuel Urquhart & Sullivan, LLP, New York (Philippe Z. Selendy of counsel), for appellants-respondents.

Skadden, Arps, Slate, Meagher & Flom LLP, New York (Scott D. Musoff of counsel), for respondent-appellant.

ANDRIAS, J.P., SWEENY, MOSKOWITZ, DeGRASSE, ABDUS-SALAAM, JJ.

[916 N.Y.S.2d 55, 81 A.D.3d 419]

Order, Supreme Court, New York County (Bernard J. Fried, J.), entered April 9, 2010, which, to the extent appealed from, granted defendant Merrill Lynch International's motion to dismiss the complaint except as to the fourth cause of action, unanimously modified, on the law, to dismiss the fourth cause of action, and otherwise affirmed, without costs. The Clerk is directed to enter judgment dismissing the complaint in its entirety.

Plaintiffs' fraud-related claims failed to state a cause of action in light of the specific disclaimers in the contracts, executed following negotiations between the parties, all sophisticated business entities, providing that plaintiff Lacrosse would not rely on defendants' advice, that it had the capacity to evaluate the transactions, and that it understood and accepted the risks ( see Capital Z Fin. Servs. Fund II, L.P. v. Health Net, Inc., 43 A.D.3d 100, 111, 840 N.Y.S.2d 16 [2007]; UST Private Equity Invs. Fund v. Salomon Smith Barney, 288 A.D.2d 87, 733 N.Y.S.2d 385 [2001] ). Given their level of sophistication and the undisputed fact that the information was not exclusively in defendants' possession, plaintiffs' contention that it would have been impractical to conduct the investigation necessary to discern the truth of defendants' allegedly fraudulent representations does not satisfy the requirements of the peculiar knowledge exception ( see Steinhardt Group v. Citicorp, 272 A.D.2d 255, 257, 708 N.Y.S.2d 91 [2000] ).

The cause of action for breach of the implied covenant of goodfaith and fair dealing cannot be maintained because it is premised on the same conduct that underlies the breach of contract cause of action and is "intrinsically tied to the damages allegedly resulting from a breach of the contract" ( see Hawthorne Group v. RRE Ventures, 7 A.D.3d 320, 323, 776 N.Y.S.2d 273 [2004] [internal quotation marks and citation omitted] ).

The...