A claim for fraud requires “a material misrepresentation of a fact, knowledge of its falsity, an intent to induce reliance, justifiable reliance by the plaintiff and damages.”[1] In First Trinity Life Ins. Co. v. Advance Funding LLC, 2025 N.Y. Slip Op. 03133 (1st Dept. May 22, 2025) (here), discussed below, knowledge of falsity (i.e., scienter) and reliance were the elements at issue.
First Trinity concerned the assignment of lottery winnings. A former defendant won a New York State Lottery game in April 2008 that had a minimum prize of $2 million. In August 2016, the former defendant entered into an agreement with defendant Advance Funding, LLC (“AF”) in which he agreed to assign 32 months of prize payments totaling over $800,000 in exchange for a lump sum payment of $465,000. AF then assigned its right to the money to plaintiff in exchange for a payment in excess of $500,000. Plaintiff alleged that although AF represented that the former defendant had been paid in full by AF (and even included a wire transfer), the former defendant never received what he was owed and, therefore, plaintiff paid AF but did not receive any lottery payments.
In connection with the assignment to AF, the former defendant filed a petition in Schenectady, New York to approve the transfer. However, the former defendant later moved to strike the assignment and disavow an affidavit he signed in which he agreed to the transaction. He later withdrew the order to show cause in exchange for an increased lump sum payment.
Thereafter, the former defendant brought an application seeking to stop any more payments by the state’s Lottery Commission because AF allegedly did not make the additional payments promised to him in the settlement.
Defendant moved for summary judgment dismissing the action on the grounds that she was without knowledge of the circumstances underlying the action. Defendant claimed that, as a favor to her boss, she assisted his brother’s company, defendant AF, to broker structured settlements for various winners (such as lottery winners) with large institutional funders, such as plaintiff.
Defendant claimed that when she was reviewing documents to close AF’s transaction with plaintiff, she was provided with a wire transfer that plaintiff alleged to be fraudulent. This wire transfer showed that the former defendant was paid $335,000. Defendant claimed that she had no reason to doubt the authenticity of that document.
According to defendant, she was employed by Northeastern Capital Funding LLC (“Northeastern”) from May 2006 until June 2017 and never had any ownership interest in that entity. She emphasized that her job responsibilities included contacting funding entities to inform them of transactions between Northeastern and winners/settlement recipients. Defendant argued that she never had interactions with winners or structured settlement recipients. Defendant provided similar services for AF.
Plaintiff maintained that defendant helped to facilitate hundreds of transactions for AF and Northeastern. It insisted that in each transaction it entered into with AF and Northeastern, its sole contact person was defendant and that she held herself out as a senior officer for AF. Plaintiff further alleged that for the transaction at issue—the purchase from AF of the former defendant’s lottery winnings for $552,000—it was defendant who provided the closing binder and other documents to plaintiff. Plaintiff claimed that it relied upon those documents and other representations from defendant when executing the transaction.
Plaintiff alleged that the wire transfer was fraudulent, that the former defendant never received the money he was owed by AF, and that plaintiff did not receive the stream of lottery payments for which it paid $552,000. Plaintiff claimed that bank statements showed that defendant received significant payments from Majestic Funding LLC (“Majestic”), an LLC owned by the same principals that owned AF and Northeastern, despite the fact that she never worked for Majestic. Plaintiff contended that defendant was a key point person at AF and was not a mere low-level employee.
Defendant argued that plaintiff did not show that she knew the wire confirmations were fake and that the agreement between AF and plaintiff was an arm’s length transaction, thereby vitiating plaintiff’s reliance on her statements. Defendant also argued that she could not be held personally liable for AF’s alleged fraud.
Defendant moved for summary judgment, claiming, inter alia, that the court lacked personal jurisdiction over her and that plaintiff failed to demonstrate that she perpetrated a fraud on it.[2] The motion court denied the motion.
First, the motion court held it that it possessed jurisdiction over defendant. The motion court noted that “[t]here [was] no dispute that this case involves a New York resident … who won a lottery in New York and a transaction between AF and [the former defendant] about those lottery winnings in New York (including a litigation in New York to approve the transaction between AF and [the former defendant).” The motion court found that defendant “signed her emails with a signature block that indicated that she was the director of the legal department for AF and included an address on Wall Street.” Under such circumstances, the motion court concluded that defendant could not “claim surprise that she [was] subject to a lawsuit in New York about a New York lottery winner when she worked for a company that did business out of a New York office and represented to others that she did business out of that New York office.” “Simply put,” concluded the motion court, “there [were] numerous contacts to satisfy New York’s long-arm statute, even despite [defendant’s] claim that she never lived in New York.”
Second, the motion court found that issues of fact precluded the grant of summary judgment, noting that “a jury could conclude that [defendant] was part of the [alleged] fraudulent scheme as she was the main contact person involved on behalf of AF,” while at the same time believing “[defendant’s] account … that she was not a part of the alleged fraud.”
The motion court found “multiple issues of fact” concerning defendant’s knowledge of the false wire transfer and her intent to induce reliance. Among other things, the motion court noted that defendant provided AF with a closing binder of transaction documents, which included, inter alia, identification documents for the former defendant, including his photo ID and W-9 form, affidavits by both AF and the former defendant indicating that the assignment was fully authorized, as well as the court documents approving the assignment. Most critically, said the motion court, plaintiff requested, and defendant provided, confirmation that the former defendant had been paid what he was due. According to plaintiff, defendant provided the sought after proof of funding and payment.
The motion also found that there was an issue of fact regarding defendant’s personal liability for the alleged fraudulent scheme. Defendant maintained that she was a low-level employee even though she signed her emails with the signature line “Director, Legal Dept.”, which is an officer position. “That raises an issue about her role with AF and that she might be considered a corporate officer,” said the motion court. Under New York law, noted the motion court, “a corporate officer who participates in the commission of a tort may be held individually liable, regardless of whether the officer acted on behalf of the corporation in the course of official duties and regardless of whether the corporate veil is pierced.”[3]
Defendant appealed. The Appellate Division, First Department affirmed the portions of the motion court’s order involving personal jurisdiction and fraud.
The Court held that the motion court “properly found that it had personal jurisdiction over [defendant] under New York’s long-arm statute, as the second amended complaint allege[d] that she engaged in purposeful actions directed at New York and that her actions substantially related to plaintiff’s claims.”[4] The Court explained that, “[a]lthough an employee ‘acting on behalf of his employer does not create jurisdiction upon the employee individually’…, the record support[ed] a finding that [defendant] was acting in her individual capacity as part of the fraudulent scheme, and not simply conducting business on behalf of defendant Advance Funding, LLC.”[5] The Court noted that “[i]f it is true, as plaintiff allege[d], that [defendant] knowingly sent a fake wire transfer to plaintiff in an effort to fraudulently induce the underlying transaction, she would not have been conducting legitimate business on behalf of the corporation.”[6]
Further, said the Court, “the transaction at issue was specifically tied to New York.”[7] The Court found that defendant “allegedly consented to and benefitted from that transaction, and it [was] uncontested that she was paid for the services she undertook on behalf of Advance Funding.”
The Court also held that the motion court “properly denied [defendant’s] motion with respect to the fraud cause of action.”[8] “At a minimum,” said the Court, “there are factual issues surrounding whether [defendant] made a material misrepresentation of fact with knowledge as to its falsity, and whether plaintiff relied on the representation and on the allegedly fraudulent wire transfer documentation.”[9] The Court noted that in her motion, defendant merely raised issues of credibility which were more properly resolved by the jury:
With respect to the underlying transaction, plaintiff requested confirmation that the lottery winner had been paid in full by Advance Funding. In response, [defendant] provided a copy of a check that was issued to the winner and a purported wire transfer in the amount of $335,000, which was later discovered to be a fraud. [Defendant] also represented that the winner had been fully paid, and in fact that he had been overfunded by $10,000. Although [defendant] asserts that she had no idea that the wire transfer was fraudulent, this assertion merely raises an issue of fact as to [defendant’s] credibility that cannot be properly resolved on the summary judgment motion.[10]
The Court also found that there were “some factual issues regarding whether plaintiff’s reliance on the fraudulent wire transfer was reasonable.”[11] The Court noted that defendant “provided Trinity with a closing binder containing more than 20 documents,” which “Trinity reviewed …, asked questions [about], and … requested written confirmation from Advance Funding regarding the accuracy of its representations.”[12] In response to plaintiff’s inquiries, defendant “provided Trinity with the fraudulent wire transfer and her own assurances that the lottery winner had actually been paid more than he was owed.”[13] The Court concluded that plaintiff “was entitled to rely on [those] representations.”[14]
[1] Eurycleia Partners, LP v. Seward & Kissel, LLP, 12 N.Y.3d 553, 559 (2009); Braddock v. Braddock, 60 A.D.3d 84 (1st Dept.), appeal withdrawn 12 N.Y.3d 780 (2009).
[2] This Blog has examined cases involving fraud and personal jurisdiction on numerous occasions. To find articles related to these topic, visit the “Blog” tile on our website and enter “personal jurisdiction”, “fraud”, “fraudulent inducement” and any of the elements of a fraud claim in the “search” box.
[3] Am. Exp. Travel Related Services Co., Inc. v. N. Atl. Resources, Inc., 261 A.D.2d 310, 311 (1st Dept. 1999).
[4] Slip Op. at *1 (citing, CPLR 302(a)(1); Deutsche Bank Sec., Inc. v. Montana Bd. of Invs., 7 N.Y.3d 65, 71 (2006)).
[5] Id. (quoting Laufer v. Ostrow, 55 N.Y.2d 305, 313 (1982); and citing Grosso v. Cy Twombly Found., — A.D.3d —, 2025 N.Y. Slip Op. 02007, *1 (1st Dept. 2025)).
[6] Id.
[7] Id.
[8] Id.
[9] Id. (citing, Eurycleia, 12 N.Y.3d at 559 (2009).
[10] Id.
[11] Id.
[12] Id. at *1-*2.
[13] Id.
[14] Id. (citing, DDJ Mgmt., LLC v. Rhone Group LLC, 15 N.Y.3d 147, 156 (2010)).
