Under New York Law a Recourse Provision Bars Most Claims Except for Fraud

April 01, 2025 — Bill Wilson - Construction Law Zone
In Iberdrola Energy Projects v. Oaktree Capital Management L.P., 231 A.D.3d 33, 216 N.Y.S.3d 124, the Appellate Division for the First Department ruled that a nonrecourse provision in a contract barred a plaintiff’s causes of action for tortious interference with contract, unjust enrichment, and statutory violations of a trade practices statute, but not for fraud. This case arose from a contract related to the construction of a power plant in Salem, Massachusetts. A choice-of-law provision dictated that the contract was governed by and construed in accordance with New York law. Defendants created a special-purpose entity (SPE) to serve as the company charged with constructing the new plant. Defendants owned, controlled, and managed the SPE and were the SPE’s majority and controlling equity holders. The majority of the SPE’s board of directors and officers were also defendants’ employees. The SPE retained plaintiff to be the project’s engineering, procurement, and construction contractor. Read the full story...
Reprinted courtesy of Bill Wilson, Robinson & Cole LLP
Mr. Wilson may be contacted at wwilson@rc.com