In an April 7 appellate decision that reinforces important protections for deal advisors accused of fraud, Goldman Sachs persuaded the New York Appellate Division, First Judicial Department, to affirm the dismissal of claims targeting its role advising on the abandoned sale of a leading business management firm for celebrities and high‑net-worth individuals. The ruling underscores that courts will enforce contractual provisions and deal documents as written, rather than allowing disappointed parties to turn failed business expectations into fraud claims.
The court also squarely rejected plaintiff’s attempt to assert the “peculiar knowledge” exception, holding that a sophisticated party cannot claim it relied on hidden information if it was on notice of the issue but declined to inquire further.
The lawsuit stemmed from a complex series of transactions. In 2018, business management firm Nigro Karlin Segal Feldstein & Bolno, which was led by legendary Hollywood accountant Mickey Segal, sold the assets of its company to Focus Financial Partners. Those assets became a Focus subsidiary called NKSFB. The principals of Nigro Karlin then formed a separate firm (KSFB) to manage NKSFB in exchange for a fee. NKSFB is the largest business management firm in the country and “one of Hollywood’s most trusted advisers,” according to the Hollywood Reporter.
Four years later, KSFB and Focus considered a joint sale of KSFB and NKSFB, with Goldman Sachs advising both KSFB and Focus. KSFB then learned that Goldman Sachs was already negotiating a $7 billion take-private transaction for Focus’s indirect parent company that did not include KSFB. KSFB broke off the joint sale process and threatened “nuclear war” unless Focus sold NKSFB back to plaintiff at a substantial discount. Focus refused, and KSFB initiated litigation threatening potential nine-figure damages and other relief.
KSFB initially asserted a slew of claims against Goldman Sachs, Focus Financial Partners, and two individuals, including for breach of contract, breach of the implied covenant of good faith and fair dealing, breach of fiduciary duty, fraud, tortious interference and unjust enrichment.
In January 2025, the Commercial Division dismissed KSFB’s complaint in its entirety. KSFB appealed, abandoning most of its claims and seeking to revive only its breach of contract, implied covenant, and fraud claims.
In unanimously affirming, the First Department found KSFB’s breach of contract claim deficient because it “failed to identify what confidential information was allegedly misused,” instead relying on “only vague and conclusory” allegations “made upon information and belief” that the court “need not accept as true.” The court also found that the Commercial Division “providently dismissed” the implied covenant claim, which relied on a plain misreading of the parties’ agreement. Finally, the court affirmed dismissal of KSFB’s fraud claims, finding that KSFB’s “alleged reliance on [purported] oral statements [was] irreconcilable with the engagement letter which the parties signed four months later,” and thus that “it was unreasonable as a matter of law for [KSFB], a sophisticated party, to rely on” the alleged oral representations. The court also squarely rejected KSFB’s attempt to assert the peculiar knowledge exception, finding that KSFB “fail[ed] to articulate any undisclosed information that was uniquely in defendants’ possession” because KSFB had “notic[e]” of the relevant issue and could have inquired further, but declined to do so.
The S&C team representing Goldman Sachs included Robert Giuffra Jr. (who argued the appeal), Jonathan Carter, Alexander Gross and Nikko Price.