## Facts

- Victoria A. Stewart, a New York-admitted attorney working in environmental law at another firm, was recruited by Jackson & Nash.
- A Jackson & Nash partner allegedly stated that the firm had recently secured a large environmental-law client, was establishing an environmental law department, and that Stewart would head that department servicing substantial environmental work.
- Stewart resigned from her prior position in reliance on these statements and began working at Jackson & Nash in November 1988.
- Stewart was assigned primarily to general litigation and was allegedly reassured that environmental work and leadership of the environmental department would soon materialize.
- The promised environmental client and work allegedly never existed; Stewart was later told the firm had not secured such a client and did not really have that type of work.
- Stewart alleged she lost professional opportunities and suffered career harm from spending nearly two years outside her specialty.
- Jackson & Nash discharged Stewart in December 1990.
- Stewart sued for fraudulent inducement and negligent misrepresentation; the district court dismissed both claims under Rule 12(b)(6), and Stewart appealed.

## Issues

1. Whether an at-will employee may state a claim for fraudulent inducement when induced to accept employment by alleged misrepresentations of present fact, with damages asserted independent of termination.
2. Whether a negligent misrepresentation claim in an employment negotiation requires a fiduciary-type or special relationship beyond arm’s-length bargaining.

## Decision

- The Second Circuit affirmed dismissal of the negligent misrepresentation claim.
- The Second Circuit reversed dismissal of the fraudulent inducement claim.
- The case was remanded for further proceedings on fraudulent inducement.

## Legal Principles

- Under New York law, fraudulent inducement requires a material misrepresentation of a presently existing fact, scienter, reasonable reliance, and damages.
- A fraud claim is not barred by the at-will employment doctrine when it targets misrepresentations collateral to employment termination and pleads injuries occurring before and apart from discharge (e.g., loss of prior employment and professional development opportunities).
- Statements alleging the existence of a secured client and an environmental practice-in-formation can constitute representations of present fact, not merely nonactionable future promises, when plausibly alleged to have been false when made.
- Negligent misrepresentation under New York law generally requires a special or fiduciary-type relationship imposing a duty of care in providing information; ordinary arm’s-length employment negotiations do not satisfy this requirement.

## Conclusion

The court allowed Stewart to proceed on fraudulent inducement because she alleged misstatements of present fact that caused pre-termination career harm independent of her at-will discharge, but it rejected negligent misrepresentation absent a special relationship creating a duty to speak with due care.


Stewart v. Jackson & Nash, 976 F.2d 86 (2d Cir. 1992)