Written Conflict Disclosures in an Engagement Letter Defeat Fraud Reliance Despite Earlier “No Conflict” Assurances; NDA Breach Requires Specific Identification of Misused Confidential Information

1. Introduction

Case: KSFB Mgt., LLC v Goldman Sachs & Co., LLC, 2026 NY Slip Op 02064 (App Div, 1st Dept Apr. 7, 2026).
Parties: Plaintiff KSFB Management, LLC (a business management firm for high-net-worth individuals) sued Goldman Sachs & Co., LLC and Goldman banker Patrick Fels (among others; Focus later discontinued).
Dispute Context: Plaintiff alleged it was induced—via a nondisclosure agreement (NDA) and later an engagement letter—to continue supporting Focus’s subsidiary NKSFB while Goldman allegedly pursued (and concealed) a competing transaction: a sale of Focus and NKSFB to Clayton Dubilier & Rice LLC (CD&R) that excluded plaintiff. Plaintiff claimed defendants used plaintiff’s confidential information to advance the CD&R negotiations and used an engagement letter’s disclaimers to limit liability.

Key Issues: (i) What must be pleaded to state an NDA-based confidentiality breach; (ii) whether an implied covenant claim can be used to impose deal-exclusivity or conflict-free advisory duties not stated in the NDA; (iii) whether earlier oral “no conflict” assurances can support fraud when a later engagement letter expressly discloses conflicts and disclaims conflict-based claims; and (iv) whether the “peculiar knowledge” exception can salvage reliance in that setting.

2. Summary of the Opinion

The First Department unanimously affirmed dismissal (CPLR 3211[a][7]) of three claims against Goldman and Fels:

  • Breach of contract (NDA): dismissed because plaintiff pleaded confidentiality misuse only in vague, conclusory terms and failed to identify what “Confidential Information” was allegedly disclosed or misused; additionally, plaintiff’s “data room access” theory misread the NDA.
  • Breach of the implied covenant of good faith and fair dealing: dismissed because plaintiff did not plausibly show the NDA (explicitly or implicitly) required Goldman to avoid conflicts or to commit to a joint sale strategy.
  • Fraud: dismissed for lack of justifiable reliance; any reliance on oral “no conflict” assurances months earlier was unreasonable as a matter of law given the later engagement letter’s explicit conflict disclosures and disclaimers—especially for a sophisticated party. The “peculiar knowledge” exception did not apply.

3. Analysis

3.1. Precedents Cited

Pleading standards for NDA confidentiality misuse

  • Art Capital Group, LLC v Carlyle Inv. Mgt. LLC, 151 AD3d 604 (1st Dept 2017) and Parker Waichman LLP v Squier, Knapp & Dean Communications, Inc., 138 AD3d 570 (1st Dept 2016): The court relied on these cases for the principle that a confidentiality-breach claim must identify, non-conclusorily, the confidential information at issue and the nature of the improper disclosure/use. Mere labels—“they disclosed confidential information”—do not cross the pleading threshold.
  • Skillgames, LLC v Brody, 1 AD3d 247 (1st Dept 2003): Cited for the rule that courts need not accept conclusory allegations “upon information and belief,” particularly where the pleading lacks concrete facts supporting the inference of disclosure.

Contract interpretation: reading provisions in context

  • Beal Sav. Bank v Sommer, 8 NY3d 318 (2007): Anchored the court’s holistic reading of the NDA. The “data room access” language in paragraph 8 was interpreted in light of the NDA’s overall function—facilitating sharing of Focus’s and plaintiff’s confidential information with Goldman—not granting plaintiff access to a separate repository used for Focus’s dealings with a third party like CD&R.

Implied covenant: limits on using it to add unbargained-for duties

  • Cordero v Transamerica Annuity Serv. Corp., 39 NY3d 399 (2023) and Singh v City of New York, 40 NY3d 138 (2023): The court invoked the “heavy burden” for implied covenant claims and the principle that the implied covenant cannot be used to impose substantive obligations beyond what the contract’s text and structure support. Here, the NDA was a vehicle for discussions and information exchange—not a commitment by Goldman to pursue (or prioritize) a joint KSFB/NKSFB sale or to avoid conflicts.

Fraud reliance defeated by express written disclosures and disclaimers

  • HSH Nordbank AG v UBS AG, 95 AD3d 185 (1st Dept 2012): Central to the holding on reliance. As in HSH, alleged extracontractual assurances about “alignment of interests” could not support fraud where the governing writing expressly disclosed conflicts and disclaimed claims based on them.
  • Societe Nationale D'Exploitation Industrielle des Tabacs et Allumettes v Salomon Bros. Intl., 249 AD2d 232 (1st Dept 1998), lv denied 95 NY2d 762 (2000): Reinforced the proposition that a fraud claim fails where alleged oral representations are contradicted by subsequent written agreements (here, the engagement letter).

Peculiar knowledge exception narrowly applied to sophisticated parties

  • Skyview Cap., LLC v Conduent Bus. Servs., LLC, 239 AD3d 426 (1st Dept 2025) and MBIA Ins. Corp. v Merrill Lynch, 81 AD3d 419 (1st Dept 2011): These cases supported rejecting the “peculiar knowledge” argument where the plaintiff could have inquired or investigated and, importantly, where the writing itself provided notice of the risk at issue. The engagement letter’s conflict disclosures undermined any claim that the relevant information was uniquely inaccessible.

3.2. Legal Reasoning

(A) NDA breach: specificity and materiality problems

The court treated the NDA claim as failing at the most basic level: plaintiff did not identify what confidential information (as defined by the NDA) was disclosed or misused. The allegation that Goldman “shared confidential information” with CD&R remained conclusory and, critically, unclear as to ownership—whether the purportedly shared information belonged to plaintiff or Focus. That ambiguity mattered because the NDA’s protections attach to “Confidential Information of another party,” and the pleading did not connect the dots between (1) a defined category of plaintiff information, (2) an act of disclosure or use, and (3) the prohibited purpose.

The court also emphasized the pleaded context: plaintiff was not involved in the CD&R negotiations, and the complaint did not explain why plaintiff’s confidential information would have been material to the acquisition of Focus and NKSFB. While materiality is not always a formal element of a confidentiality-breach claim, the court used the lack of a plausible narrative—why would plaintiff’s information be shared and matter?—to underscore how speculative the allegations were.

(B) NDA “data room access” clause: integrated-reading approach

Plaintiff tried to ground breach in paragraph 8’s language that each “Disclosing Party” would be granted access to an electronic data room used to share Confidential Information “with” Goldman. Applying Beal Sav. Bank v Sommer, the court read that clause as addressing the mechanism by which Focus and KSFB would share their information with Goldman—not as a promise that Goldman (or Focus) would provide plaintiff access to a separate data room used to share Focus’s information with CD&R. The opinion thus treats the clause as functional and inward-facing (facilitating inbound disclosures to Goldman), rather than outward-facing (opening third-party deal rooms).

(C) Implied covenant: no backdoor conflict-free advisory commitment

The implied covenant claim attempted to convert the NDA’s “discussions” framework into a substantive obligation: that Goldman would not take actions creating conflicts with the contemplated joint transaction. The court rejected that reframing. The NDA stated the parties “have an interest in entering into discussions” and that Goldman may “advise and assist” with respect to a “possible strategic transaction” involving NKSFB—language consistent with exploratory talks and information sharing, not exclusivity or a duty to refrain from representing others.

Under Cordero v Transamerica Annuity Serv. Corp. and Singh v City of New York, the implied covenant cannot be used to import a deal-protection regime the parties did not contract for, particularly where the text does not suggest an intent to restrict the recipient’s other engagements.

(D) Fraud: reliance foreclosed by later engagement letter disclosures

The fraud theory centered on a September 16, 2022 call where Fels allegedly assured plaintiff there was no and would be no conflict in Goldman acting for both sides. But four months later the parties signed an engagement letter explicitly stating: (i) conflicts “may arise” from serving both Focus and KSFB; (ii) their interests “may not always be aligned”; and (iii) the arrangement “will not give rise to any claim of conflict of interest against Goldman.”

Following HSH Nordbank AG v UBS AG and Societe Nationale D'Exploitation Industrielle des Tabacs et Allumettes v Salomon Bros. Intl., the court held that reliance on prior oral assurances was unreasonable as a matter of law when contradicted by unambiguous written terms. The court additionally stressed plaintiff’s sophistication; in that posture, the engagement letter’s conflict disclosures were dispositive against justifiable reliance.

(E) Peculiar knowledge exception: not a substitute for reading the deal paper

Plaintiff argued that defendants uniquely knew the “truth” about their intentions and conflicts. The court rejected this under Skyview Cap., LLC v Conduent Bus. Servs., LLC and MBIA Ins. Corp. v Merrill Lynch: plaintiff did not identify any undisclosed information uniquely in defendants’ possession that could not have been probed through inquiry or diligence, and the engagement letter itself warned of potential conflicts that could “impact the transaction.” Where the writing flags the very risk allegedly concealed, “peculiar knowledge” has little room to operate.

3.3. Impact

  • Confidentiality claims will be screened early for specificity: Plaintiffs alleging NDA misuse in complex deal settings must plead the “what” (the confidential information), the “whose” (which party’s information), and the “how” (disclosure/use and prohibited purpose) with enough factual detail to avoid being characterized as speculative or “information and belief” conclusory pleading.
  • Engagement letters with conflict disclosures are powerful reliance-defeating instruments: The decision reinforces that explicit conflict provisions and disclaimers—particularly with sophisticated parties—can preclude fraud claims based on earlier oral “no conflict” or “aligned interests” assurances.
  • Implied covenant cannot manufacture exclusivity or loyalty duties absent textual support: Parties who want conflict-free advisory commitments (or exclusivity) must bargain for them; NDAs and “discussion” documents will not readily be read to impose those constraints.
  • Peculiar knowledge is narrowed where risk is disclosed: Where the operative writing warns of conflicts and misalignment, plaintiffs face an uphill battle claiming the critical facts were uniquely inaccessible.

4. Complex Concepts Simplified

CPLR 3211(a)(7)
A motion to dismiss for “failure to state a cause of action.” The court assumes well-pleaded facts are true, but it need not accept conclusory assertions or speculation.
Implied covenant of good faith and fair dealing
An implied promise that neither party will do anything to destroy the other’s right to receive the contract’s benefits. It cannot be used to add major obligations the parties did not agree to in the contract.
Justifiable reliance (fraud)
Even if a statement is false, a fraud claim requires that the plaintiff reasonably relied on it. Reliance is often deemed unjustifiable when the written contract directly contradicts the alleged oral statement—especially between sophisticated entities.
Peculiar knowledge exception
A limited doctrine allowing reliance on a representation when the truth is uniquely within the defendant’s knowledge and cannot be discovered by reasonable diligence. It typically fails when the plaintiff could have asked, investigated, or the contract disclosed the relevant risk.
Holistic contract interpretation
Courts read a contract “as a whole,” interpreting each clause in context rather than in isolation, to avoid giving a provision an unintended or commercially irrational meaning.

5. Conclusion

KSFB Mgt., LLC v Goldman Sachs & Co., LLC tightens two practical guardrails in New York commercial litigation. First, NDA-based confidentiality claims must be pleaded with concrete detail about the specific information and its misuse; generalized accusations of disclosure will not survive. Second, and more broadly, when a later engagement letter expressly discloses potential conflicts and disclaims conflict-based claims, sophisticated parties cannot plausibly plead justifiable reliance on earlier oral “no conflict” assurances. The opinion thus reinforces New York’s preference for enforcing negotiated risk allocations in deal papers and for dismissing fraud and implied covenant theories that attempt to circumvent them.