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January 8, 2026 | By Patrick T. McCloskey
“Where the language of a release ‘is clear and unambiguous,’ the signing of a release is ‘a jural act’ binding on the parties.”1
The two plaintiffs in Crane v. WP Strategic Holdings, LLC, a recent New York Commercial Division decision, learned this rule the hard way.
Background
Each plaintiff funded $300,000 in escrow for a 10% equity interest in a prospective acquisition target. The principal defendant, an LLC, funded the remaining 80% of the $3,000,000 acquisition price. The $600,000 comprising the plaintiffs’ contributed capital was released from escrow upon the closing of the acquisition, but the LLC’s managing member informed the plaintiffs their 20% ownership in the acquisition target (10% each) would be documented later.
Unbeknownst to the plaintiffs, before closing the LLC and its managing member started negotiating a letter of intent (LOI) to flip the acquisition target to a new buyer. The LLC signed the LOI two months after buying the acquisition target. Still unaware of the LOI, the plaintiffs followed up and asked about their stock certificates for the acquisition target. In response, the LLC’s managing member stated their goals were no longer aligned and offered to return each plaintiff’s $300,000 with an additional $30,000 “to address any inconvenience.” Both plaintiffs took the money and signed a comprehensive release that was unconditional and covered known and unknown claims. Importantly, the recitals in the release referred to the settlement of a dispute over the terms upon which plaintiffs’ would own a percentage interest in the acquisition target.
About one month after the release was signed, the flip sale contemplated by the LOI was completed. The LLC defendant sold the acquisition target for $9,750,000. The plaintiffs learned about the sale and the LOI for the first time roughly six months after they signed the release. Instead of getting $975,000 as a 10% participant in the flip sale, each plaintiff was left with the $330,000 paid in connection with the release.
The plaintiffs sued for fraud, breach of fiduciary duty, unjust enrichment and breach of contract. The defendant LLC and its principals moved to dismiss and raised a single defense: all claims were foreclosed by the release.2 The plaintiffs opposed the motion on the grounds the release was procured by fraud.
The release
The quote in the first sentence above was paramount in the court’s decision:
Plaintiffs confirmed that the Release was given ‘unconditionally,’ and [LLC] could sell its [shares in the acquisition target] ‘at any time’ without liability. ‘Despite this possibility,’ Plaintiffs executed the Release ‘of their own free will and accord, have received independent legal counsel and . . . have not been promised any additional future consideration.’
The Court concludes that defendants have demonstrated, prima facie, that plaintiffs’ claims are barred by the Release, thereby shifting the burden to plaintiffs to demonstrate its invalidity.
In this regard, the Court clarified “a signed release ‘shifts the burden . . . to the [plaintiff] to show that there has been fraud, duress or some other fact which will be sufficient to void the release.’”3
The alleged fraud
In claiming the release was procured by fraud, the plaintiffs argued “defendants had a duty to disclose to [them] the information about the [flip sale], including the LOI, because they were in a fiduciary relationship with Plaintiffs . . . and also pursuant to the special facts doctrine.4
In its analysis, the Court conveyed two legal principles related to releases of fraud claims. First, a release of “any and all claims” in connection with specified matters is deemed to include claims of fraud relating to those matters, even if the release does not specifically reference fraud as a released claim.5 Second, where a release covers unknown fraud claims, invalidating it based on fraudulent inducement requires that the release itself be the product of a separate fraud.6 The Court found no separate fraud because it ruled the omission of the prospective flip sale “was just an extension of plaintiffs’ over-arching complaint,” which the Court characterized as a dispute over their ownership interest in the acquisition target. This conclusion seems debatable7 because the plaintiffs argued the fraud was the concealment of the existence of the LOI for the flip sale, not the dispute about the stock certificate documentation for the acquisition target.
The Court went further and rejected the plaintiffs’ fraud argument for two other reasons. It determined the plaintiffs’ fiduciary duty argument (i.e., that plaintiffs were entitled to disclosure of the LOI and the flip sale by virtue of being minority stockholders) was “conclusively refuted” by the release language referencing the dispute over their ownership.8 The Court also concluded the plaintiffs failed to satisfy their burden on justifiable reliance because they had the means to discover the facts about the LOI and the flip sale, but they failed to conduct any due diligence about the value of the released claims before signing the release.9
Lessons
The principal lesson in Crane is to exercise extreme caution before signing a release. As the case makes clear, the failure to conduct due diligence to obtain information about facts underlying a released claim will negate an argument that the release was procured by fraud.
Just as important, however, is to document transactions thoroughly. The root cause of the plaintiffs’ predicament was payment of $600,000 into escrow without a written agreement from the defendant LLC documenting that plaintiffs would be entitled to 20% of the acquisition target at closing. Instead of insisting they receive their stock certificates at closing, the plaintiffs acquiesced to lip service that their interests would be “documented later.” Had there been a written agreement from the LLC on the 20%, the LLC and its principal would not have had the plaintiffs over a barrel at the time the release was signed. Even without a written agreement on the 20%, had the plaintiffs insisted on getting their stock certificates at closing, their argument on fraudulent inducement may have prevented dismissal. Instead, the Court dwelled on the lack of documentation on the ownership interest and the plaintiffs’ acknowledgement in the release that there was settlement of a dispute on the issue.
Finally, the failure to include fraud as an express exception to the released claims put the plaintiffs in a position where they needed to prove a “separate fraud” to invalidate the release. While the Court rejected the fraud argument on other grounds (lack of a fiduciary relationship and lack of justifiable reliance), expressly preserving fraud claims in a release will provide an easier path to challenge it without having to prove a “separate fraud.”
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This post is for general informational purposes only and does not constitute legal advice. No one should rely on the information in this blog post without seeking appropriate legal, accounting, tax or other appropriate advice from an attorney, accountant or other professional properly licensed in the applicable jurisdiction(s).
1 Crane v. WP Strategic Holdings, LLC, 2025 Slip Op. 52064(U) (Sup. Ct. Albany County) (September 10, 2025) citing Booth v. 3669 Delaware, 92 NY2d 934, 935 (1998) quoting Mangini v. McClurg, 24 NY2d 556, 563 (1969).
2 As conveyed by the Court, “CPLR 3211(a)(5) authorizes dismissal where the movant establishes ‘that a cause of action may not be maintained because of [a] . . . release.”
3 Citing Centro Centro Empresarial Cempresa S.A. v. America Movil, S.A.B. de C.V., 76 AD3d 310, 318-319 (1st Dept 2010), aff’d 17 NY3d 269 (2011), citing Centro Empresarial Cempresa S.A. v. America Movil, S.A.B. de C.V., 544 F Supp 2d 178, 192 (SDNY 2008).
4 Importantly, the plaintiffs did not allege fraud based on a false statement. Rather, they alleged fraud based on an omission: the failure of the defendants to disclose the LOI for the flip sale.
5 Citing Centro Empresarial at 318-319.
6 Citing Centro Empresarial 17 NY3d (2011) at 277.
7 The Court’s rationale was “[i]n essence, plaintiffs ‘are asking to be relieved of the release on the ground they did not realize the true value of the claims they were giving up.’” Citing Centro Empresarial at 277, Pappas v. Tzolis, 20 NY3d 288, 233-234 (2012), Avnet, Inc. v. Deloitte Consulting LLP, 187 AD3d 430, 431 (1st Dept 2020).
8 Citing the decision of the Court of Appeals in Centro Empresarial, the Court ruled that even assuming the defendants owed fiduciary duties to the plaintiffs, a principal cannot blindly trust the fiduciary (or reasonably rely on the fiduciary without making additional inquiry) during an adversarial negotiation between sophisticated parties. 17 NY3d (2011) at 279.
9 While the Court did not recite an analysis of the so-called special facts doctrine, the reasoning supporting its conclusion on the lack of justifiable reliance effectively mooted any challenge of the release on that basis. In a footnote, the Court noted “[t]he ‘special facts’ doctrine similarly requires plaintiff to establish that the information ‘was not such that could have been discovered by [plaintiff] through the exercise of ordinary intelligence.” Quoting Jana L. West v. West 129th St. Realty Corp., 22 AD3d 274, 278 (1st Dept 2008).
