On October 19, 2010, the New York Court of Appeals issued a decision affirming the Appellate Division's ruling in Sykes v. RFD Third Avenue 1 Associates. For a discussion of the argument at the New York Court of Appeals, see WALB dated September 17, 2010. The court reaffirmed that, under the doctrine of near privity, a plaintiff cannot make out a negligent misrepresentation claim "where the complaint does not allege that the misrepresentations were made with knowledge that plaintiffs would rely on them." In order to make this allegation, the plaintiff must establish that it was a "known party" to the defendant at the time the defendant made the challenged representations.
In Sykes, the plaintiffs were purchasers of a condominium developed by the defendant, an engineering company. They challenged alleged misrepresentations in an offering plan for the condominiums and claimed they were a known party because the defendant knew that potential purchasers would be relying on the offering plan in making their purchase decisions. The court rejected this argument. It found that even if it were true that the defendant knew that some potential purchasers might be relying on the plan, there was no indication at the time the plan was issued that these specific plaintiffs would be potential purchasers. Specifically, the defendant did not have the means of "knowing of plaintiffs' existence when it made the statements for which it is being sued." This decision reaffirms the narrow scope of plaintiffs who are eligible to bring negligent misrepresentation claims under New York law and holds that even if a plaintiff is among a broadly defined class of recipients, the plaintiff cannot be a "known party" unless the defendant had specific knowledge of that plaintiff at the time the statement was made. Opinion.