Silver Point Capital Fund, L.P. v. Riviera Res., Inc.

• Decision Date: 05 October 2021
• Docket Number: 14294,Index No. 656847/19,Case No. 2021-01669
• Citation: Silver Point Capital Fund, L.P. v. Riviera Res., Inc., 198 A.D.3d 432, 155 N.Y.S.3d 155 (N.Y. App. Div. 2021)
• Parties: SILVER POINT CAPITAL FUND, L.P., et al., Plaintiffs–Appellants, v. RIVIERA RESOURCES, INC., Defendant–Respondent.
• Court: New York Supreme Court — Appellate Division

198 A.D.3d 432

155 N.Y.S.3d 155

SILVER POINT CAPITAL FUND, L.P., et al., Plaintiffs–Appellants,

v.RIVIERA RESOURCES, INC., Defendant–Respondent.

14294

Index No. 656847/19

Case No. 2021-01669

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

ENTERED October 5, 2021

Beys Liston & Mobargha LLP, New York (Joshua D. Liston of counsel), for appellants.

Kirkland & Ellis LLP, New York (Stefan Atkinson of counsel), for respondent.

Webber, J.P., Singh, Scarpulla, Mendez, Rodriguez, JJ.

Order, Supreme Court, New York County (Andrew Borrok, J.), entered November 5, 2020, which granted defendant's motion to dismiss the amended complaint, unanimously affirmed, with costs.

Plaintiffs, former minority shareholders of defendant, claim that defendant fraudulently induced them to sell it all of their shares in the corporation just three weeks before it announced an asset sale of its most valuable properties, after which share prices soared and defendant made a substantial distribution to shareholders.

Plaintiffs’ fraud-based claims are barred by the release in the letter agreement dated August 6, 2019 (Letter Agreement)¹ executed by the parties. Information regarding a planned asset sale and distribution, clearly and unambiguously falls within the scope of this release.

The Letter Agreement sets forth the types of information that were potentially not being disclosed in sufficient detail to enable plaintiffs to make an informed decision as to whether or not to execute the release (see OppenheimerFunds, Inc. v. TD Bank, N.A., 2014 N.Y. Slip Op. 30379[U], *27–28, 2014 WL 514653 [Sup. Ct., N.Y. County 2014 ]; Harborview Master Fund, LP v. LightPath Tech., Inc., 601 F. Supp. 2d 537, 546 [S.D.N.Y.2009] ). Further, defendant did not make any misleading partial disclosures (see generally Basis Yield Alpha Fund [Master] v. Goldman Sachs Group, Inc., 115 A.D.3d 128, 135, 980 N.Y.S.2d 21 [1st Dept. 2014] ).

The "peculiar knowledge" doctrine does not apply; plaintiffs are sophisticated parties that were aware that they were not provided with full information but nonetheless agreed to go forward with a transaction without either demanding access to the omitted information or assurances in the form of representations and warranties (see Centro Empresarial Cempresa S.A. v. Ame´rica Mo´vil, S.A.B. de C.V., 17 N.Y.3d 269, 278–279, 929 N.Y.S.2d 3, 952 N.E.2d 995 [2011] ; Rodas v. Manitaras, 159 A.D.2d 341, 343, 552 N.Y.S.2d 618 [1st Dept. 1990] ; Blink v. Johnson, 2015 N.Y. Slip Op. 32975[U], *23–24, 2015 WL 13777100 [Sup. Ct., Westchester County 2015] ; O.F.I. Imports Inc. v. General Elec. Capital Corp., 2016 WL 5376208, *6, 2016 U.S. Dist LEXIS 131565 [S.D. N.Y. Sept. 26, 2016] ). For the same reason, the special facts doctrine also does not apply (see Greenman–Pedersen, Inc. v. Berryman & Henigar, Inc., 130 A.D.3d 514, 516, 14 N.Y.S.3d 20 [1st Dept. 2015], lv denied 29 N.Y.3d 913, 2017 WL 2744402 [2017] ).

Even if the parties are in a fiduciary relationship, this does not invalidate the release, which was negotiated in the context of an arm's-length business transaction (see Centro, 17 N.Y.3d at 278, 929 N.Y.S.2d 3, 952 N.E.2d 995 ; Kafa Invs., LLC v. 2170–2178 Broadway LLC, 114 A.D.3d 433, 979 N.Y.S.2d 529 [1st Dept. 2014], lv denied 24 N.Y.3d 902, 2014 WL 4454910 [2014] ).

Plaintiffs’ fraudulent inducement claim fails because plaintiffs did not allege a "separate fraud from the subject of the release" and because they could not have justifiably relied on the alleged oral misrepresentation in view of the express no-additional-representations clause in the Letter Agreement (see Avnet, Inc. v. Deloitte Consulting LLP, 187 A.D.3d 430, 431–432, 133 N.Y.S.3d 553 [1st Dept. 2020] ).

Plaintiffs cite no authority for their suggestion that the contractual release at issue is against public policy. It is irrelevant that New York recognizes a criminal offense for false...