Corporate officers are now easier targets to speculative fraud claims under the New York Court of Appeals' decision in Pludeman v. Northern Leasing Systems, Inc., 10 N.Y.3d 486, 890 N.E.2d 184 (2008). No longer can a corporate officer automatically take cover within the heighted pleading requirements imposed upon plaintiffs under CPLR § 3016(b). According to the Pludeman decision, so long as the alleged fraud is sufficiently large in scale all that is required of a plaintiff to state a claim against an individual corporate officer is that he or she is a corporate officer — no particular knowledge or involvement need be alleged.
Pludeman involved a number of small business owners from various states who brought suit against a business equipment leasing company and its top management for fraud. Plaintiffs claimed that sales representatives had presented them with what appeared to be a one-page contract on a clipboard, thereby concealing three other pages containing onerous terms below. The only particularity provided relative to the individual defendants was their corporate titles, some of whom did not even have any apparent connection with the sales and leasing functions of the company.
The Court of Appeals held that "the very nature of the scheme, as alleged, gives rise to the reasonable inference — rebuttable though it may later prove to be — that the officers, as individuals and in the key positions they held, knew of and/or were involved in the fraud." Id. 10 N.Y.3d at 493. This "res ipsa loquitur" approach to pleading sufficiency against corporate officers could undermine CPLR 3016(b) and provide an incentive to plaintiffs to name all corporate officers in sight for the purpose of harassment and/or to increase settlement leverage.
Heath J. Szymczak, Esq.