All States Construction, Inc et al v. Gorman et al

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF NEW YORK
ALL STATES CONSTRUCTION, INC. and ALL STATES
EMULSION, LLC,
Plaintiffs,
-against- 	1:25-CV-156 (LEK/CBF)
PAUL ANTHONY GORMAN, et al.
Defendants.
MEMORANDUM-DECISION AND ORDER
I. 	INTRODUCTION
On February 3, 2025, Plaintiffs All States Construction, Inc. and All States Emulsions
LLC (“Plaintiffs” or “All States”) commenced this action against Defendants Paul Anthony
Gorman, Albert Mark Gorman, The Cady Co. Inc., Gorman Asphalt, LTD., Mohawk Asphalt
Emulsions, Inc., Gorman Terminals LLC, and the Gorman Group, LLC (“Defendants”), for
breach of contract and fraudulent inducement. Dkt. No. 1 (“Complaint”). On April 11, 2025,
Plaintiffs filed an Amended Complaint against the Gorman Defendants, adding a fourth claim,
that the Defendants had failed to perform a contractual term that had been added through a
modification. Dkt. No. 25 (“Amended Complaint”).
On April 29, 2025, Defendants filed a Motion to Dismiss. Dkt No. 33 (“Motion”). On
June 20, 2025, Plaintiffs filed a Response in Opposition, Dkt. No. 41 (“Response”), and on July
11, 2025, Defendants replied. Dkt No. 44 (“Reply”).
For the reasons stated below, the Court partially grants and partially denies Defendants’
Motion to Dismiss.
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II. 	BACKGROUND
The following facts are set forth as alleged in the Amended Complaint. The Court
assumes the Parties familiarity with the terms of the Asset Purchase Agreement (“APA”). Dkt.
No. 34-2 (“Asset Purchase Agreement”).1
Plaintiff All States “is part of a 60+ year old family business . . . [involved in] the
production of asphalt emulsions and the operation of asphalt distribution terminals.” Am. Compl.
¶ 3. At the times relevant to this lawsuit, the Gorman Group “comprised a family of companies
based in and around the Albany, New York area.” Id. ¶ 18. “The Gorman Group’s operations
included one of the largest deep-water asphalt and rail facility terminal on the East Coast. . . an
asphalt emulsion-manufacturing plant, transportation facilities, and payment preservation
services.” Id. Defendants “Tony Gorman and Mark Gorman held a controlling interest in the
Gorman Group as the principal shareholders, members, and/or equity holders.” Id. ¶ 19.
During the time period preceding the signing of the APA, “All States, the Gorman Group,
Peckham, and Bitumar, had. . . overlapping operations that made them competitors in the
heavily-contested liquid asphalt market in the northeast United States.” Id. ¶ 20.
A. February 2024 Transaction
“In or around 2022 or 2023, Tony Gorman and Mark Gorman sought to sell substantially
all of the Gorman Group’s assets. All States, Peckham, Bitumar, among others were solicited . . .
as potential purchasers.” Id. ¶ 25. “All States, Peckham, and Bitumar, were invited to make
1 The Court is permitted to consider the terms of the APA as Plaintiffs heavily relied
upon its terms in crafting their Complaint. See generally Compl.; see also Revitalizing Auto
Communities Env’t Response Tr. v. Nat’l Grid USA, 92 F.4th 415, 436 (2d Cir. 2024) (noting
that at a court can consider a document if the “complaint ‘relies heavily upon its terms and
effect,’ rendering the document ‘integral’ to the complaint.’”) (quoting Mangiafico v.
Blumenthal, 471 F.3d 391, 398 (2d Cir. 2006)).
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offers [at that time] to acquire some or all of Gorman’s assets.” Id. ¶ 26. “All States was the
successful initial bidder, and entered into an exclusivity period . . . to reach a deal to acquire the
entirety of the Gorman Group.” Id. ¶ 27. All States failed to reach a deal with the Gorman Group,
and accordingly, the Gorman Group “reached out to other prospective bidders in mid-to late
2023.” Id. ¶¶ 27.
In 2023, “All States and Peckham. . . agreed to an arrangement whereby the two would
collectively purchase the Gorman Group’s assets.” Id. ¶ 28. “FMI Corp. (‘FMI’) served as the
Gorman Group’s authorized agent for the purposes of negotiating purchase terms with
prospective buyers.” Id. ¶ 29. FMI had “actual and apparent authority to represent Defendants
and communicate on their behalf to All States and Peckham with respect to all matters
concerning the scope of the transaction, value and composition of the related assets, and price
and terms of the sale of the Gorman Group assets.” Id. ¶ 30.
“On November 21, 2023, Peckham (on behalf of itself and All States) signed a letter of
intent (the ‘LOI’) with the Gorman Group (as seller), under which Peckham and All States . . .
expressed their intention to purchase collectively 100% of the Gorman Group’s assets for $81
Million.” Id. ¶ 31. The LOI included a confidentiality agreement. Id. ¶¶ 31–32.
“A material feature of the proposed transaction was the availability, for lease, of
additional tank storage capacity in a neighboring facility owned by an unaffiliated third-party
Apex Oil Company (‘Apex’). This corporate opportunity had previously been pursued by
Gorman executives who made clear the opportunity would be transferred to the buyer of the
Terminal upon closing.” Id. ¶ 33.
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“Under the LOI, the Gorman Group agreed that for a defined period beginning on
November 21, 2023, it would not enter into any new discussions and would discontinue any
existing discussions . . . relating to a ‘competing’ transaction.” Id. ¶ 34.
“Peckham and All States proceeded to negotiate and enter into separate, parallel asset
purchase agreements (‘APA’) with the Defendants.” Id. ¶ 35. The APAs were “sign and close
transactions. . . [such that] the closing occurred on the day the APA was executed, on or about
February 2, 2024.” Id. ¶ 35.
“Together, Peckham, and All States acquired all of Gorman’s assets, good will, and
corporate opportunities.” Id. ¶ 38.
B. Cenex Tanks
At the Port of Rensselaer water asphalt terminal facility, “[a] third-party known as CHS,
Inc./Cenex (‘Cenex’) owns additional storage tanks on the property sitting adjacent to the
Gorman Group’s tanks.” Id. ¶ 40–43. “[P]rior to the Closing Date. . . the Cenex tanks were not
being used for liquid asphalt, were not configured for use with liquid asphalt, and were
unleased.” Id. ¶ 44.
“[P]rior to the sale of Gorman Groups’ assets . . . [Defendants] considered leasing [the
Cenex tanks] and . . . making the necessary financial investments to reconfigure them for use
with liquid asphalt.” Id. ¶ 45. “[T]he Gorman Group never finalized the lease terms with Cenex
but advised both All States and Peckham that the Cenex tanks were an open opportunity.” Id. ¶
52.
“Both before and after execution of the LOI, Defendants represented that the Cenex tanks
would be available for lease post-closing.” Id. ¶ 59. “FMI, on behalf of Defendants, repeatedly
touted both the availability of the Cenex tanks and the ability to preclude the introduction of new
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competition at the Port of Rensselaer by leasing the Cenex Tanks as a ‘value add’ growth
opportunity related to the Gorman Group’s assets.” Id. ¶ 63.
These representations “cause[d] All States to ascribe significantly more value to—and
ultimately to pay more for—the Gorman Group’s assets than All States would have otherwise.”
Id. ¶ 64. However, “Defendants knew, prior to the Closing Date, that Bitumar had taken steps to
lease or acquire the Cenex tanks.” Id. ¶ 70.
“On March 1, 2024 . . . Bitumar publicly announced that it was entering the asphalt
market through its ‘new location’ in Port Rensselaer, New York.” Id. ¶ 72. The announcement
also noted that “three members of the Gorman Group’s management team including Edward
House, Ben Scarcella, and Kimberly Wilson, would lead Bitumar’s sales team in the new
location.” Id. These three individuals “were in direct communication with Bitumar’s senior
leadership concerning their employment at Bitumar’s planned new location” prior to the closing
date. Id. ¶ 74–75. “Tony Gorman and Mark Gorman also knew that Cenex was planning to lease
the Cenex tanks to Bitumar.” Id. ¶ 81–82.
C. Drum Removal
“On January 30, 2024, All State representatives conducted a pre-closing inventory at the
Mohawk Asphalt Emulsions facility. . . . During that inventory, the All States representatives
observed the presence of a large quantity of drums, totes, and related materials that Gorman had
kept in the Northern Storage area of the property (‘Mohawk Drums’) that were not among the
assets All States intended to purchase.” Id. ¶ 101.
“Tony Gorman agreed on behalf of Defendants to arrange and be responsible for the cost
of removing the Mohawk Drums. Mr. Gorman confirmed that obligation via text message with
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All States.” Id. ¶ 102. “On May 9, 2024, Defendants’ legal counsel for the transaction re-
confirmed Defendants’ agreement to pay for the removal of the Mohawk Drums.” Id. ¶ 103.
Defendants only paid for the removal of some of the Mohawk Drums, and Plaintiffs were
thus “required to engage [a contractor] to complete the removal of the Mohawk Drums at a total
cost of $230,018.40.” Id. ¶¶ 104–106.
III. 	LEGAL STANDARD
To survive a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), a
“complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that
is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007)). A court must accept as true the factual allegations
contained in a complaint and draw all inferences in favor of a plaintiff. See Allaire Corp.
v.Okumus, 433 F.3d 248, 249–50 (2d Cir. 2006). A complaint may be dismissed pursuant to Rule
12(b)(6) only where it appears that there are not “enough facts to state a claim to relief that is
plausible on its face.” Twombly, 550 U.S. at 570. Plausibility requires “enough fact[s] to raise a
reasonable expectation that discovery will reveal evidence of [the alleged misconduct].” Id. at
556.
The plausibility standard “asks for more than a sheer possibility that a defendant has
acted unlawfully.” Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 556). The Supreme Court
has stated that “the pleading standard Rule 8 announces does not require ‘detailed factual
allegations,’ but it demands more than an unadorned, the-defendant-unlawfully-harmed-me
accusation.” Id. (citing Twombly, 550 U.S. at 555). “[W]here the well-pleaded facts do not
permit the court to infer more than the mere possibility of misconduct,” the pleader has not
demonstrated that she is entitled to relief and the action is subject to dismissal. Id. at 679.
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IV. 	DISCUSSION
Defendants in support of their Motion make three principal arguments: (1) Defendants
did not breach the Material Adverse Effect provisions of the contract; 2 (2) Defendants did not
fraudulently induce Plaintiffs to enter into the contract; and (3) Defendants did not agree to
modify the contract. Mot. at 15–32. The Court will address these arguments below.
A. Material Adverse Effect
Defendants first argue that they did not breach the APA’s Material Adverse Effect
(“MAE”) provisions, by failing to disclose the entrance of Bitumar into the northeast liquid
asphalt market. Mot. at 19–23. They make three points to support this argument: (1) that the
APAs Merger Clause limits the scope of the MAE provisions to events that were not foreseeable
at the time of the transaction; (2) Plaintiffs were required to perform due diligence in order to
succeed in their breach of warranty claims; and (3) the MAE provisions were limited to events
related to the conduct of the purchased business. Id.;Reply at 6–8.
2 The Court acknowledges Defendants’ argument that the Merger Clause forecloses the Court’s
consideration of Plaintiffs’ breach of contract claims. Mot. at 15–18. However, as Plaintiffs
claims involve the alleged breach of express warranties, and a Merger Clause does not bar claims
involving express warranties the Court will continue to assess Plaintiffs’ claims. See Merrill
Lynch & Co. Inc. v. Allegheny Energy, Inc., 500 F.3d 171, 185 (2d Cir. 2007) (noting that an
express warranty is “part and parcel of the contract containing it and an action for its breach is
grounded in contract.”); Morgan Stanley High Yield Securities Inc. v. Seven Circles Gaming
Corp., 269 F. Supp. 2d 206, 213 (“[T]he parol evidence rule. . . bar[s] the introduction of
evidence pertaining to terms in a prior oral agreement that would vary the terms of a written
contract.”); Wayland Inv. Fund, LLC v. Millenium Seacarriers, Inc., 111 F. Supp. 2d 450, 454
(S.D.N.Y. 2000) (noting that the parol evidence rule applies to integrated contracts, such as those
containing merger clauses).
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1. 	Merger Clause
First, Defendants argue that they did not breach the APA’s MAE provisions, because the
MAE provisions are limited in scope by the parties’ express disclamation of reliance on extra-
contractual representations in Section 8.06 (“Merger Clause”). Reply at 8. The Court disagrees.
“MAE provisions are ‘a common feature of many contracts and are subject to the same
rules of interpretation as any other contract provision.’” Newmont Mining Corp. v. AngloGold
Ashanti Ltd., 612 F. Supp. 3d 223, 245 (S.D.N.Y. 2020) (quoting In re Lyondell Chem. Co., 567
B.R. 55, 122 (Bankr. S.D.N.Y. 2017), aff'd, 585 B.R. 41 (S.D.N.Y. 2018). Thus, an MAE
provision “must be analyzed in the context of the [APA] as a whole and construed in accordance
with the parties’ intent. “Newmont Mining Corp., 612 F. Supp. 3d at 246.
In cases where a buyer has expressly disclaimed reliance on any extra-contractual
representations, courts in New York and in this Circuit have narrowly construed the scope of
MAE provisions. Id. (citing In re Lyondell Chemical Co., 567 B.R. at 123; in re JC’s East, Inc.,
No. 95 Civ. 1870 (MGC), 1995 WL 555765, at *3 (S.D.N.Y. Sept. 19, 1995), aff’d, 84 F.3d 527
(2d Cir. 1996); In re IBP, Inc. S'holders Litig., 789 A.2d 14, 68 (Del. Ch. 2001)). MAE
provisions in these cases are limited in scope to events “that were outside the contemplation of
the parties at the time of the transaction,” and were “outside [the buyer’s] control.” In re JC's
East, Inc., 1995 WL 555765, at *3; see also Newmont Mining Corp., 612 F. Supp. 3d at 246; In
re Lyondell Chemical Co., 567 B.R. at 123.
In Section 8.06, the parties expressly disclaimed reliance on any representations,
warranties, conditions, understandings, or agreements unless contained within the four corners of
the contract. See APA § 8.06. Therefore, the scope of the MAE provision is limited in this case
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to events that were both outside the contemplation of the parties when they entered into the
agreement and outside of the buyer’s control. See in re JC’s East, Inc., 1995 WL 555765, at *3.
Plaintiffs alleged in their Complaint that “[a]t the time the APA was executed in February
2024, Defendants knew or had reason to believe that Bitumar was entering the regional liquid
asphalt market and planned to lease or acquire the Cenex Tanks located next to Gorman’s
terminal.” Am. Compl. ¶ 57. The entrance of a competitor into the regional local asphalt market
is definitionally an event that is outside of the control of the buyer. Further, none of the
allegations contained in Plaintiffs’ Amended Complaint support the conclusion that the entrance
of Bitumar was contemplated when the parties entered into the agreement. See generally Am.
Therefore, the Court does not find that Section 8.06 forecloses Plaintiffs’ arguments that
Defendants’ failure to disclose the entrance of Bitumar breached the APA’s MAE provisions.
Accordingly, the Court will continue to assess Defendants other arguments relating to the MAE
provisions.
2. 	Material Adverse Effect and Due Diligence
Defendants’ second argument regarding the breach of the APA’s MAE provisions, is that
Plaintiffs were required to engage in due diligence and were not permitted to rely on the express
warranties contained in the contract. Mot. at 24–28. The Court disagrees.
Under New York Law,
“[a] warranty is an assurance by one party to a contract of the existence of a fact upon
which the other party may rely. It is intended precisely to relieve the promisee of any
duty to ascertain the fact for himself; it amounts to a promise to indemnify the promisee
for any loss if the fact warranted proves untrue.” Metro. Coal Co. v. Howard, 155 F.2d
780, 784 (2d Cir. 1946).
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Accordingly, the Court finds this argument unavailing, and will continue to assess
Defendants’ arguments that the text of the MAE provisions forecloses Plaintiffs’ preferred
interpretation of the APA.
3. 	Material Adverse Effect Provisions
Finally, Defendants argue that they didn’t breach the MAE provisions of the APA,
because those provisions are limited to events related to the Business itself. Mot. 19–28. The
Court disagrees for the reasons stated below.
In New York, “the initial interpretation of a contract is a matter of law for the Court to
decide.” Alexander & Alexander Servs., Inc. v. These Certain Underwriters at Lloyd's, London,
England, 136 F.3d 82, 85 (2d Cir. 1998) (quoting K. Bell & Assoc., Inc. v. Lloyd's Underwriters,
97 F.3d 632, 637 (2d Cir.1996)). “If the court finds that the contract is not ambiguous it should
assign the plain and ordinary meaning to each term and interpret the contract without the aid of
extrinsic evidence.” Id.
In New York, a successful “breach of express warranty claim[] requires (i) a material
statement amounting to a warranty; (ii) the buyers reliance on this warranty as a basis for the
contract with his immediate seller; (iii) the breach of this warranty; and (iv) injury to the buyer
caused by the breach.” Avola v. Louisiana-Pac. Corp., 991 F. Supp. 2d 381, 391 (E.D.N.Y.
2013) (citing CBS Inc. v. Ziff- Davis Pub. Co., 553 N.E.2d 997, 1000–01 (N.Y. 1990) (emphasis
in original)). “[I]f the seller is not the source of the buyer’s knowledge . . . if it is merely
‘common knowledge’ that the facts warranted are false, or the buyer has been informed of the
falsity of the facts by some third party, the buyer may prevail in his claim for breach of
warranty.” Rogath v. Siebenmann, 129 F.3d 261, 265 (2d Cir. 1997).
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Here, Defendants argue that they did not breach Sections 4.06 or 4.25 of the APA when
they failed to disclose that the Cenex Tanks were no longer available, and that a potential
competitor was entering the market. Mot. at 19–23.
Starting with Section 4.06, the APA states in relevant part that: “[s]ince the Balance
Sheet Date . . . there has not been any (a) event, occurrence or development that has had, or
could reasonably be expected to have, individually or in the aggregate, a Material Adverse
effect.” Asset Purchase Agreement § 4.06. A “Material Adverse Effect” is further defined as
“any event, occurrence, fact, condition or change that is, or could reasonably be expected to
become materially adverse . . . to the value of the Purchased Asset.” Id. Art. I.
Defendants cherry-pick language from the preamble to Section 4.06 that states that
“[s]ince the Balance Sheet Date, the Business has been conducted in the ordinary course of
business.” Asset Purchase Agreement § 4.06; Mot. at 19–23. They suggest that this language
means that all of the representations that follow are limited to the Business itself, and not any
extrinsic events or actions of third parties. See Mot. at 19–23. Plaintiffs counter arguing that a
“Material Adverse Effect”, by its very terms, includes the entry of a competitor into the northeast
asphalt market. Resp. 13–15.
The Court agrees with Plaintiffs. The plain text of Section 4.06, when read in conjunction
with the APA’s definition of a material adverse effect, unambiguously goes beyond the
operations of the business. Indeed, Section 4.06 expressly refers an “event, occurrence, or
development” which clearly encompasses the acts of a third party that have a material adverse
effect on the value of the purchased asset. See Asset Purchase Agreement § 4.06; Occurrence,
M ERRIAM-WEBSTER , https://www.merriam-webster.com/dictionary/occurrence (last visited Mar.
31, 2026). Thus, Plaintiffs’ allegations that Defendants violated the APA when they failed to
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disclose the fact that a new competitor was entering the market for the first time, plausibly states
a claim, and dismissal is not warranted.
Next, Section 4.25 states in relevant part that “[t]here is no fact known to any Seller
regarding any Seller or the Business . . . that materially adversely effects or threatens either the
Business, the Purchased Assets, or the prospects, financial condition, or results of operations of
the Business that has not been set forth in this Agreement or a related Schedule.” Asset Purchase
Agreement § 4.25. Defendants once again urge the Court to focus on the word “Business” to the
exclusion of other terms and phrases contained in Section 4.25. Mot. at 7, 19–23. Plaintiffs in
response argue that Defendants failed to disclose the unavailability of the Cenex Tanks and
Bitumar’s entrance into the market, both of which allegedly materially affected the value of the
Purchased Assets. Resp. at 15–16.3
The Court agrees with Plaintiffs. The plain text of Section 4.25, when read in conjunction
with the definition of material adverse effect, for substantially the same reasons as discussed
above, unambiguously applies to extrinsic events that negatively impact the value of the
purchased assets. The Court therefore finds that Plaintiffs have plausibly stated a claim when
they alleged that Defendants failed to disclose the situation regarding Bitumar’s entrance into the
market and the leasing of the Cenex Tanks.
Accordingly, the Court denies Defendants’ Motion to Dismiss regarding Plaintiffs’
Claims that they breached Sections 4.25 and 4.06.
3 The Court acknowledges that Defendants’ in their briefing have argued that Plaintiffs
were aware of the unavailability of the tanks as well as the potential that Bitumar was looking at
entering into the Northeast Asphalt market. Mot. at 26–27. However, at this early stage of the
case, the Court is required to take Plaintiffs’ plausible factual allegations as true. Iqbal, 556 U.S.
at 678.
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B. Fraud in the Inducement
Defendants also argue that they did not fraudulently induce Plaintiffs to enter into the
agreement. Mot. 28–32. The Court agrees for the reasons stated below.
“Under New York Law, a claim for fraud in the inducement requires: (1) a
misrepresentation or omission of material fact; (2) which the defendant knew to be false; (3)
which the defendant made with the intention of inducing reliance; (4) upon which the plaintiff
reasonably relied; and (5) which caused injury to the plaintiff. ” Alpha Cap. Anstalt v. Oxysure
Sys., Inc., 252 F. Supp. 3d 332, 339 (S.D.N.Y. 2017) (quoting Palatkevich v. Choupak, 152
F.Supp.3d 201, 222–23 (S.D.N.Y. 2016)).
The “parole evidence rule [generally] bars the consideration of extrinsic evidence of the
meaning of a complete agreement, if the terms of the agreement, considered in isolation, are
clear and unambiguous.” Wayland Inv. Fund, LLC v. Millenium Seacarriers, Inc., 111 F. Supp.
2d 450, 454 (S.D.N.Y. 2000) (Citing W.W.W. Assocs., Inc. v. Giancontieri, 566 N.E.2d 639, 642
(N.Y. 1990). However, “New York. . . permits the use of parol evidence to prove a claim of
fraud in the inducement, even where the written contract contains an integration, or merger
clause.” Wall v. CSX Transp., Inc., 471 F.3d 410, 416 (2d Cir. 2006). This limited exception does
not apply in cases where the merger clause “specifically addresses the very conduct complained
of in the fraud allegation.” Icebox-Scoops v. Finanz St. Honore, B.V., 676 F. Supp. 2d 100, 111–
12 (E.D.N.Y. 2009).
Moreover, in the context of agreements negotiated between sophisticated parties, courts
in New York commonly find that a merger clause, even a general one, prohibits the use of parole
evidence. See Emergent Cap. Inv. Mgmt., LLC v. Stonepath Grp., Inc., 165 F. Supp. 2d 615, 622
(S.D.N.Y. 2001) (noting that a “fraud claim will not stand where [a general merger clause] was
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included in a multimillion dollar transaction that was executed following negotiations between
sophisticated business people and a fraud defense is inconsistent with other specific recitals in
the contract.”).
“The integration clause, the entire contract, and the sophistication and knowledge of the
parties must be considered in order to assess the reasonableness of a party’s reliance.” Emergent
Capital Investment Mgmt, LLC, 165 F. Supp. 2d at 622–23. (citing Harso Corp. v. Segui, 91
F.3d 337, 345 (2d Cir. 1996)). Further, “[i]n evaluating justifiable reliance, the plaintiff’s
sophistication and expertise is a principle consideration . . . [and] the sophisticated investor . . .
must show that he or she has made an independent inquiry into all available information.” Id.
(collecting cases).
Also, in the context of reasonable reliance, New York courts fail to find that plaintiffs
who were sophisticated parties that participated in an arms-length transaction reasonably relied
on a misrepresentation when they did not exercise their due diligence. Schlaifer Nance & Co. v.
Est. of Warhol, 119 F.3d 91, 98 (2d Cir. 1997). Indeed, the Second Circuit in Schlaifer noted that
where “the parties involved. . . are not widows or orphans [but are] ‘sophisticated businessmen
engaged in major transactions [who] enjoy access to critical information but fail to take
advantage of the access, New York courts are particularly disinclined to entertain claims of
justifiable reliance.’” Id. (citing Grumman Allied Indus., Inc. v. Rohr Indus., Inc., 748 F.2d 729,
737 (2d Cir. 1984)).
Even when a sophisticated party fails to exercise due diligence, Courts will still find
fraudulent inducement, in extraordinary circumstances, when the “Special Facts doctrine”
applies. Under the Special Facts doctrine, “a duty to disclose arises where one party’s superior
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knowledge of essential facts renders a transaction without disclosure inherently unfair.” P.T.
Bank Cent. Asia v. ABN AMRO Bank N.V., 301 A.D. 2d 373, 378 (1st Dep’t 2003).
Plaintiffs claim they were fraudulently induced to enter into the contract when
“Defendants authorized agent, FMI, repeatedly touted both the availability of the Cenex Tanks,
and the ability to preclude the introduction of new competition at the Port of Rensselaer by
leasing the Cenex Tanks as a ‘value add’ growth opportunity.” Resp. at 18; Am. Compl. ¶ 63.
Defendants counter, arguing that that the Court should dismiss Plaintiffs’ fraudulent inducement
claims because (1) the Merger Clause prohibits the introduction of parol evidence; and (2) in the
alternative, that Plaintiffs did not reasonably rely on any misrepresentations. Reply at 8–13. The
Court agrees with Defendants on both accounts.
Starting with the Merger Clause, Section 8.06 of the APA provides in relevant part that
“[t]his agreement and the Ancillary Documents constitute the sole and entire agreement of the
parties to this Agreement with respect to the subject matter contained herein and therein and
supersede all prior and contemporaneous understandings and agreements, both written and oral,
with respect to such subject matter.” Asset Purchase Agreement § 8.06. Generally speaking,
Section 8.06 acts to exclude the introduction of any Parol evidence and does not speak to the
specific misrepresentation at issue in Plaintiffs’ fraudulent inducement claim. See id.
However, as both parties are sophisticated and counseled and were involved in
painstaking negotiations over the representations contained in the APA, the Court finds that the
Merger Clause, in this instance, although indeed general, is sufficient to bar the introduction of
extrinsic evidence in the context of a fraudulent inducement claim.
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Moreover, even if the Merger clause did not bar the introduction of parol evidence, the
Court finds that Plaintiff did not reasonably rely4 on the alleged misrepresentation as they failed
to perform meaningful due diligence. As mentioned, supra, in order for a sophisticated party to
successfully plead a fraudulent inducement claim, they need to have alleged that they made “an
independent inquiry into all available information.” See Emergent Capital Investment Mgmt,
LLC, 165 F. Supp. 2d at 623.
Here, Plaintiffs have failed to do so. Despite being sophisticated commercial parties who
performed months of due diligence, Plaintiffs, in their telling, took Defendants’ representations
about the availability of the Cenex tanks at face value. Resp. 16–18, 19–22. Despite being in
communication with Cenex and Defendants themselves, Plaintiffs did no independent research
into the alleged misrepresentation. Id.
Plaintiffs make two arguments in support of their “reasonable reliance” on FMIs
representations: (1) that their confidentiality agreement precluded any independent research; and
(2) that Defendants were in possession of ‘special facts’ making the application of the contract
against Plaintiffs unfair as a matter of law. Resp. at 20–22. The Court finds both arguments to be
without merit.
Starting with the confidentiality agreement, the Court is not persuaded that the agreement
precluded the Plaintiffs from engaging in meaningful due diligence. The Court understands the
agreement to only relate to the contents of the Letter of Intent, and to indeed not prohibit
4 As the Parties do not discuss the accuracy of FMI’s alleged misrepresentation regarding
the Cenex Tanks, nor the Defendants’ knowledge of its veracity, the Court will continue its
assessment of Plaintiffs’ fraudulent inducement claim with the fourth element: reasonable
reliance.
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Defendants from discussing the availability of the Cenex tanks with Cenex. See Dkt. No. 34, Ex.
A at 4–5.
Next, the Court finds that the ‘special facts’ doctrine is inapplicable here. The special
facts doctrine only applies in cases where the misrepresentation was based off of information that
was peculiarly within the knowledge of the defendants, and that could not have been discovered
by the Plaintiffs. See P.T. Bank Central Asia, 301 A.D.2d at 378. This is not the case here.
Plaintiffs in the Amended Complaint failed to plausibly allege that the unavailability of
the Cenex Tanks and the entrance of Bitumar into the relevant market were undiscoverable by
Plaintiffs. See generally Am. Compl; Resp. Indeed, Plaintiffs allegations suggest that they were
aware of Bitumar’s intention to enter the northeast asphalt market, and that Defendants had been
unable to finalize a lease with Cenex. See Am. Compl. ¶¶ 25, 45–52.
Accordingly, for the reasons stated above, the Court grants Defendants Motion to
Dismiss regarding Plaintiffs fraudulent inducements claims.
C. Contract Modification
Defendants’ final argument is that they did not breach the contract by failing to remove
the Mohawk barrels because the APA was not modified. Reply at 14–15. The Court agrees for
the reasons stated below.
It is axiomatic that “[m]odification by definition must come after a contract has been
executed; otherwise there is nothing to modify.” Alston v. Dollar Rent a Car Sys., Inc., No. 96
CIV. 7531 (JSM), 1998 WL 531828, at *3 (S.D.N.Y. Aug. 24, 1998). Indeed, a “modification is
an agreement to abridge or amend an enforceable contractual duty under an existing agreement.”
Ludwig v. NYNEX Serv. Co., a wholly owned subsidiary of NYNEX Corp., 838 F. Supp. 769, 797
(S.D.N.Y. 1993) (emphasis added).
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Under New York Law, “[c]ontract modification requires proof of each element requisite
to the formation of a contract, including ‘a manifestation of mutual assent sufficiently definite to
assure that the parties are truly in agreement with respect to all material terms.” Kaplan v. Old
Mut. PLC, 526 F. App’x 70, 73 (2d Cir. 2013) (quoting Express Indus. & Terminal Corp. v. N.Y.
State Dep’t of Transp., 715 N.E.2d 1050, 1053 (N.Y. 1999)).
In New York, “[s]ufficient definiteness as to material terms is required . . . to ‘assure that
courts will not impose contractual obligations when the parties did not intend’ to enter into a
binding agreement.” Urquizo v. Cmty. Loan Servicing LLC, No. 24-CV-00909 (NCM) (JAM),
2025 WL 1093073, at *7 (E.D.N.Y. Apr. 11, 2025) (citing Kolchins v. Evolution Markets, Inc.,
31 N.Y.3d 100, 106, 96 N.E.3d 784 (2018)). Further, “[i]f an agreement is not reasonably certain
in its material terms, there can be no legally enforceable contract,” or modification. See Cobble
Hill Nursing Home, Inc. v. Henry & Warren Corp., 74 N.Y.2d 475, 548 N.E.2d 203, 206 (1989).
Here, Plaintiffs suggest that the APA was modified and produced two writings as
evidence: a February 1st text-message, and a May 19th e-mail. Resp. at 26–27. Neither
communication either alone or in combination is sufficient to modify the terms of the APA.
In Plaintiffs’ telling, “on January 20, 2024, three days before the Parties executed the
APA, All States. . . discovered a large quantity of drums, totes, and related materials that were
not among the Purchased Assets.” Resp. at 9. (“Mohawk Drums”). Tony Gorman allegedly
“agreed on Defendants behalf to pay for the Mohawk Drums to be removed.” Id. He sent a text
message on February 1st, 2024 confirming that the drums had been removed. Id. see also Resp.
at 73. And, on May 9, 2024, All States’s Counsel emailed Defendants’ Counsel to confirm the
modification, writing that “Tony confirmed he did agree to pay these.” Id. at 73.
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Starting with the text message, the Court agrees with Defendants that it cannot support a
finding that the APA was modified. As was discussed in detail above, in order for a court to find
that a contract to be modified, there must be a contract. See Alston, 1998 WL 531828, at *3.
Here, Tony Gorman sent the text-message allegedly confirming his oral agreement on February
1st, 2024, the day before the parties signed the APA. See Resp. at 72. At the point the text
message was sent, as well as the point at which any verbal agreement was made, the parties had
not mutually assented and did not have a contract. See Am. Compl. ¶ 73. Therefore, the February
1st, 2024 text message does not support a finding that the APA was modified.
Second, the May e-mail does not provide sufficient terms to demonstrate that the parties
had a “manifestation of mutual assent sufficiently definite to assure that the parties are truly in
agreement with respect to all material terms.” Kaplan, 526 F. App’x at 72. The May e-mail,
standing alone, does not include any material terms at all. See generally Resp. at 73. In it Tony
Gorman’s Counsel only states that “Tony confirmed he did agree to pay these.” Resp. at 73. The
e-mail only provides support for the fact that some agreement may have been reached but does
not meet the requisite elements for contract modification in New York State.
Accordingly, for the reasons stated above, the Court grants Defendants’ Motion to
Dismiss on Plaintiffs’ Claims that they breached the contract by failing to remove the Mohawk
barrels.
V. 	CONCLUSION
Accordingly, it is hereby:
ORDERED, that Defendants’ Motion to Dismiss, Dkt. No. 33, is GRANTED in part and
DENIED in part and it is further;
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ORDERED, that Defendants’ Motion to Dismiss on Plaintiffs’ claims of false
representation and failure to disclose is DENIED, and it is further,
ORDERED, that Defendants’ Motion to Dismiss on Plaintiffs’ claims of fraud in the
inducement and failure to perform, is GRANTED, and it is further,
ORDERED, that the Clerk serve a copy of this Memorandum-Decision and Order on all
parties in accordance with the Local Rules.
IT IS SO ORDERED.
DATED: 	March 31, 2026
Albany, New York
LAWRENCE E. KAHN
United States District Judge
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