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holding that a party's reliance was unreasonable "in light of the fact that . . . [the plaintiff] was a sophisticated party, represented by counsel"
Summary of this case from Abbey v. 3F Therapeutics, Inc.Opinion
No. 09-0545-cv.
November 25, 2009.
Appeal from an order and judgment of the United States District Court for the Southern District of New York (Kenneth M. Karas, Judge).
UPON CONSIDERATION WHEREOF, IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that the judgment of the District Court is AFFIRMED.
Courtland L. Reichman (Natasha H. Moffitt and Sarah Jorgensen, on the brief), King Spalding LLP, Atlanta, GA, for Plaintiff-Appellant,
Jonathan C. Solish (Glenn J. Plattner and Michael G. Biggers, on the brief), Bryan Cave LLP, Santa Monica, CA and New York, NY, for Defendants-Appellees.
PRESENT: AMALYA L. KEARSE, JOSÉ A. CABRANES and CHESTER J. STRAUB, Circuit Judges.
SUMMARY ORDER
Plaintiff-appellant Century Pacific, Inc. ("plaintiff or "Century Pacific") appeals from an order of the District Court dated October 16, 2007 granting summary judgment in favor of defendants, Hilton Hotels Corporation, Doubletree Corporation, and Red Lion Hotels, Inc. (jointly, "defendants"). To the extent pertinent to this appeal, plaintiff asserted claims under New York law for (1) common law fraud, (2) negligent misrepresentation, and (3) fraudulent omission. The District Court granted summary judgment upon concluding, inter alia, that plaintiff could not show, by clear and convincing evidence, that defendants had the requisite intent to defraud and that plaintiff could not show that its reliance on defendants' purported misrepresentations was reasonable. Century Pac, Inc. v. Hilton Hotels Corp., 528 F.Supp.2d 206, 227-28, 230 (S.D.N.Y. 2007). On appeal, plaintiff primarily argues that the District Court erred in the following respects: (1) by misapplying New York law in holding that plaintiffs reliance on defendants' misrepresentations was unreasonable, (2) by finding insufficient evidence of fraudulent intent, and (3) by striking certain evidence presented in opposition to defendants' motion for summary judgment. We assume the parties' familiarity with the remaining factual and procedural history of the case.
Plaintiff also asks us to reconsider our decision in Merrill Lynch Co., Inc. v. Allegheny-Energy, Inc., 500 F.3d 171 (2d Cir. 2007), which held that jury trial waivers are enforceable absent fraud going to the waiver provision itself. In light of our affirmance of the District Court's dismissal of all of plaintiff's claims, we need not consider its objection to the District Court's order granting defendants' motion to strike its jury demand because it is moot.
We affirm the judgment of the District Court for substantially the reasons stated in its thorough and careful Opinion and Order dated October 16, 2007. Century Pac, 528 F.Supp.2d 206. We elaborate on our approval of the District Court's analysis with respect to plaintiffs assertion of "reasonable reliance" on defendants' alleged misrepresentations only because it is an essential element of all of plaintiffs claims and the sole basis for the District Court's dismissal of plaintiffs claims for negligent misrepresentation and fraudulent omission.
In describing the element of "reasonable reliance," the District Court explained that it was required to "look to `the entire context of the transaction, including factors such as its complexity and magnitude, the sophistication of the parties, and the content of any agreements between them.'" Id. at 229 (quoting Emergent Capital Inv. Mgmt, LLC v. Stonepath Group, Inc., 343 F.3d 189, 195 (2d Cir. 2003)). The District Court concluded that Century Pacific's reliance on defendants' alleged oral representation that they had no present intention to sell the Red Lion brand was unreasonable in light of the fact that (1) Century Pacific was a sophisticated party, represented by counsel, (2) it was aware that the agreement at issue granted defendants the right to sell the Red Lion brand, and (3) it attempted to remove the right to sell from the contract but was only partially successful. See id. at 230 ("Century understood the risk of a Red Lion sale, it bargained for certain protections against [it], and it reached its own decision to bet that Hilton's interests in the future of the Red Lion brand would be beneficial to it.").
The District Court's misattribution of this quotation to Lazard Freres Co. v. Protective Life Ins. Co., 108 F.3d 1531 (2d Cir. 1997), in no way undermines its analysis.
Plaintiff argues that in reaching this conclusion the District Court improperly expanded New York law on reasonable reliance. We disagree, and we note that in Lazard Freres Co. v. Protective Life Ins. Co., 108 F.3d 1531 (2d Cir. 1997), we applied New York law and reached a similar conclusion. Id. at 1543 n. 11 (relying on Shepherd v. Whispering Pines, Inc., 188 A.D.2d 786, 591 N.Y.S.2d 246, 249 (3d Dep't 1992), Curran, Cooney, Penney, Inc. v. Young Koomans, Inc., 183 A.D.2d 742, 583 N.Y.S.2d 478, 479 (2d Dep't 1992), and Rodas v. Manitaras, 159 A.D.2d 341, 552 N.Y.S.2d 618, 620 (1st Dep't 1990)). In Lazard Freres, we held that a sophisticated party could not show reasonable reliance notwithstanding the fact that the contract contained no specific disclaimer of reliance on oral representations, id. at 1542 ("No such contractual disclaimer is present in the instant case."), and the fact that the alleged misrepresentation concerned a matter "peculiarly within" the other party's knowledge, id. ("Protective did not, therefore, have access to the relevant information."). We explained that
"[w]here, as here, a party has been put on notice of the existence of material facts which have not been documented and he nevertheless proceeds with a transaction without securing the available documentation or inserting appropriate language in the agreement for his protection, he may truly be said to have willingly assumed the business risk that the facts may not be as represented." . . . We believe that the failure to insert such language into the contract — by itself — renders reliance on the misrepresentation unreasonable as a matter of law.
Id. at 1543 (emphasis in original) (quoting Rodas, 552 N.Y.S.2d at 620).
Although Lazard Freres concerned alleged misrepresentations about the contents of a document that the buyer knew existed but was hot permitted to review, we believe its reasoning applies with equal force to the issue of defendants' intent in this case. Much like the document in Lazard Freres, defendants' intent with respect to the future of Red Lion was a valuable piece of information peculiarly within the knowledge of defendants. Nevertheless, plaintiff was concerned about the possibility of a sale and, as in Lazard Freres, capable of protecting itself through the terms of the contract. Plaintiff could have insisted that defendants forfeit their right to sell entirely — a concession that it attempted, but ultimately failed, to secure — or inserted language further protecting itself from a sale in the near future. As a sophisticated party confronted with the known risk of a sale, plaintiffs "failure to insert [protective language] into the contract — by itself — renders reliance on the misrepresentation unreasonable as a matter of law." See id.
Accordingly, we find no error in the District Court's determination that plaintiff cannot show that it reasonably relied on defendants' alleged misrepresentations.
CONCLUSION
We have considered all of plaintiffs arguments and find them to be without merit. For the foregoing reasons, the order of the District Court is AFFIRMED.