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Under New York law, reasonable reliance is an essential element of fraudulent inducement. Generally, where a plaintiff has in the plainest language announced and stipulated that it is not relying on any representations as to the very matter as to which it now claims it was defrauded, the disclaimer destroys the allegations in the plaintiff's complaint that the agreement was executed in reliance upon these contrary oral representations. An exception to this rule provides that when the facts at issue are peculiarly within the misrepresenting party's knowledge, even a specific disclaimer will not defeat a claim of reasonable reliance. The "peculiar-knowledge" exception is meant to address circumstances where a party would face high costs in determining the truth or falsity of an oral representation and does not apply where a party could have insisted that the written contract terms reflect any oral undertaking on a deal-breaking issue.
Plaintiff movie participants sued defendants, film companies and others, alleging fraud, unjust enrichment, and infliction of emotional distress based on purported oral misrepresentations about the nature of the film. According to the plaintiffs, the defendants misrepresented the movie as a documentary about a foreign reporter or dignitary from a former Soviet bloc country and his experiences in the United States to be broadcast on Belarus television. The district court dismissed the complaints pursuant to Fed. R. Civ. P. 12(b)(6) based on a standard consent agreement. The plaintiff participants appealed, arguing that, to the extent the Agreements were limited to a "documentary-style film," ambiguity as to the meaning of that term precluded the district court from relying on the release provision of the Agreements to dismiss their complaints.
Under the circumstances, did the district court err in dismissing the plaintiffs’ complaints?
The appellate court affirmed the district court's judgment, holding that the suits were barred by a provision of their signed standard consent agreements disclaiming reliance on any promises or statements made by anyone about the nature of the movie or the identity of any other participants or persons involved in the movie. The appellate court rejected the participants' argument that ambiguity as to the meaning of the term "documentary-style film" precluded the district court from relying on the release provision of the agreements because no reasonable trier of fact could find that the movie was not a documentary-style film. The appellate court rejected the participants' argument that the district court erred in finding their fraudulent inducement claims barred by the agreements' release provisions because, inter alia, the "peculiar-knowledge" exception to the rule holding parties to the terms of written releases was inapplicable.