Opinion
January 29, 1991
Appeal from the Supreme Court, New York County.
The individual plaintiffs, desirous of purchasing the assets of Diamond East Laboratories, Inc., conducted a due-diligence investigation of the company, during the course of which they met in April 1986 with representatives of defendant, which was Diamond East's largest customer, to assure that this account would be continued following the acquisition. Apparently satisfied that the business relationship would continue unchanged, the individual plaintiffs then closed on the deal with the corporate plaintiff as purchaser, but, shortly thereafter, defendant announced that the account was being terminated. Plaintiffs brought this action for fraudulent and negligent misrepresentation.
Before a duty can be imposed to use reasonable care in imparting correct information, an allegation of negligent misrepresentation must be based on a "special relationship" between the parties (Pappas v Harrow Stores, 140 A.D.2d 501, 504), there being no liability simply for words negligently spoken (Coolite Corp. v American Cyanamid Co., 52 A.D.2d 486, 488). The bond so established must be the functional equivalent of contractual privity (Ossining Union Free School Dist. v Anderson LaRocca Anderson, 73 N.Y.2d 417). A casual connection, such as the solitary dinner meeting here, is insufficient to establish that special relationship (cf., Blair Communications v Reliance Capital Group, 157 A.D.2d 490; Accusystems, Inc. v Honeywell Information Sys., 580 F. Supp. 474). Inasmuch as the IAS court was required to accept all allegations in the complaint as true, and draw all inferences in plaintiffs' favor, for purposes of considering viability of the claim on this dismissal motion (Sanitoy, Inc. v Shapiro, 705 F. Supp. 152, 155), the court in applying that standard had authority to evaluate the sufficiency of the alleged special relationship, as a matter of law (Mallis v Bankers Trust Co., 615 F.2d 68, 81, n 12, cert denied 449 U.S. 1123).
In an action for fraud, recovery is limited to actual pecuniary loss, i.e., out-of-pocket losses and consequential damages; loss of future profits is noncompensable as a matter of law (see, Orbit Holding Corp. v Anthony Hotel Corp., 121 A.D.2d 311, 315). The profits that plaintiffs allege to have lost were more than merely incidental to the return on their investment (cf., Cayuga Harvester v Allis-Chalmers Corp., 95 A.D.2d 5), but were actually a benefit of the bargain, and thus noncompensable in fraud. Plaintiffs even used the word "profits" on several occasions in their amended complaint. Insofar as they sought recovery for lost profits, those claims should have been partially dismissed (Zivian v McNulty, 136 A.D.2d 547).
Concur — Rosenberger, J.P., Ellerin, Wallach, Smith and Rubin, JJ.