First Department Finds LLC Agreement Unambiguously Excluded Affiliates From Enforcement Rights

A nonsignatory’s right to enforce a contract turns on the contracting parties’ intent, and the best evidence of that intent is the language of the agreement itself. Where an agreement expressly disclaims third-party beneficiary rights, a nonsignatory ordinarily cannot enforce the contract merely because the agreement identifies the nonsignatory or contemplates that the nonsignatory will receive a benefit.

The Appellate Division, First Department recently applied those principles to an LLC agreement that expressly identified plaintiff as an “affiliate” and provided for an acquisition fee for services plaintiff allegedly performed, but separately limited contractual rights to the LLC’s members and their successors and assigns. In Berko & Assoc. LLC v. B. Jaffe Real Estate JV LLC, 2026 N.Y. Slip Op. 06239 (1st Dept. Oct. 27, 2026), the Court held that the agreement’s no-third-party-beneficiary provision controlled. Thus, plaintiff’s status as an “affiliate” did not give it standing to enforce the acquisition fee provision.

Berko & Assoc. LLC v. B. Jaffe Real Estate JV LLC

The dispute arose from the acquisition and development of three Manhattan properties located at 72 Warren Street, 74 Warren Street, and 84-88 West Broadway. Defendants and nonparties Astor Tribeca Common Equity LLC and Astor Tribeca Preferred Equity LLC entered into a limited liability company agreement (the “LLC Agreement”) governing the venture.

Although plaintiff was not a signatory to the LLC Agreement, the Agreement specifically identified plaintiff as an “affiliate” of Astor Tribeca Common Equity LLC and Astor Tribeca Preferred Equity LLC. Plaintiff served as a consultant and asset manager in connection with the project, providing services relating to the acquisition broker, debt financing, and equity investment. Plaintiff alleged that, under Section 4.9(b) of the LLC Agreement, it was entitled to a $720,000 acquisition fee for those services.

According to plaintiff, defendants paid only a portion of that fee, leaving $172,500 outstanding.

The LLC Agreement contained an express limitation on who could enforce it. Section 13.14 provided that the Agreement was entered into “for the exclusive benefit of” B. Jaffe Real Estate JV LLC, its “Members, and their successors and assigns.” It further stated that the LLC Agreement was “expressly not intended for the benefit of any creditor” of B. Jaffe “or any other Person,” and that no “creditor or third party shall have any rights under this Agreement.” The LLC Agreement defined a “Member” to include each party to the agreement, together with each person subsequently admitted as a member of B. Jaffe.

The LLC Agreement separately addressed “affiliates.” Section 13.9 contemplated the possibility of disputes “among the members or their affiliates” concerning the LLC Agreement and subjected such disputes to the agreement’s jury-waiver provision. Thus, although the LLC Agreement expressly defined plaintiff as an affiliate and expressly referred to affiliates elsewhere, it did not include affiliates among the persons granted enforcement rights under Section 13.14.

Plaintiff commenced the action asserting claims for breach of contract and quantum meruit, seeking to recover the unpaid portion of the acquisition fee. Defendants answered, asserting five affirmative defenses and two counterclaims for tortious interference. The parties thereafter cross-moved for summary judgment.

The motion court granted plaintiff summary judgment on its breach of contract claim, concluding that plaintiff was entitled to recover the unpaid acquisition fee under the LLC Agreement. The motion court also dismissed defendants’ affirmative defenses and counterclaims. Because it concluded that the LLC Agreement governed plaintiff’s entitlement to the fee, the motion court dismissed plaintiff’s alternative claim for quantum meruit. Defendants appealed.

The First Department’s Decision

The First Department modified the motion court’s order, holding that defendants had established their entitlement to summary judgment on their affirmative defense that plaintiff lacked standing to enforce the LLC Agreement’s acquisition fee provision.

The Court focused on Section 13.14, observing that it expressly barred third-party enforcement by providing that the LLC Agreement was “for the exclusive benefit of” B. Jaffe, its Members, and their successors and assigns and that “no . . . creditor or third party shall have any rights under this Agreement.”[1] Because plaintiff was a nonsignatory, the Court held that this “no-third-party beneficiary clause bars plaintiff . . . from seeking to enforce its terms.”[2]

The Court rejected plaintiff’s argument that Section 13.9’s reference to disputes involving “members or their affiliates” created an ambiguity concerning plaintiff’s status as a third-party beneficiary.[3] The Court emphasized that whether a contract is ambiguous presents a question of law and that, “when parties set down their agreement in a clear, complete document, their writing should be enforced according to its terms.”[4]

Applying those principles, the Court found the parties’ intent unambiguous.[5] Although the LLC Agreement defined plaintiff as an “affiliate” of at least one member, the Court explained, “it does not state that an affiliate has enforcement rights under the contract.”[6] Instead, Section 13.9’s reference to affiliates “merely reflects that the parties anticipated that affiliates might become involved in disputes related to the LLC Agreement and, in those circumstances, would be subject to the jury waiver.”[7]

The Court found significant the LLC Agreement’s selective use of the term “affiliate.” Because the LLC Agreement both defined “affiliate” and expressly referred to “affiliates” in Section 13.9, the Court reasoned that this “underscores that the parties knew how to grant ‘affiliates’ enforcement rights in Section 13.14 had they intended to do so.”[8] Their decision not to include affiliates in Section 13.14, said the Court, was therefore “clear and unambiguous.”[9] “Accordingly,” concluded the Court, “plaintiff's breach of contract cause of action should [have] be[en] dismissed because plaintiff lack[ed] standing to sue to enforce the LLC Agreement’s acquisition fee provision.”[10]

Finally, because plaintiff could not enforce the LLC Agreement, the Court reinstated the quantum meruit cause of action.[11] It declined, however, to award plaintiff summary judgment on that claim because factual issues remained concerning, among other things, “the reasonable value of the services rendered.”[12]

Takeaway

Berko underscores that a nonsignatory’s right to enforce a contract ultimately depends on the contracting parties’ intent as expressed in the agreement itself. It is not enough that the nonsignatory is specifically identified in the contract, performs services contemplated by the contract, or stands to receive a benefit under one of its provisions. Where the agreement expressly identifies those entitled to its benefits and separately disclaims rights in third parties, that language may foreclose enforcement by a nonsignatory notwithstanding the benefit the agreement appears to confer.

Equally important is the Court’s treatment of the LLC Agreement as a whole. The fact that the parties defined “affiliate” and expressly referred to “affiliates” in the jury waiver provision did not support plaintiff’s claim to enforcement rights. To the contrary, it reinforced the Court’s conclusion that the omission of affiliates from Section 13.14 was deliberate. As the Court explained, the parties knew how to refer to affiliates when they intended to do so. Their failure to include affiliates among those granted rights under Section 13.14 therefore supported the conclusion that plaintiff had no contractual right to enforce the acquisition fee provision.

Berko also illustrates the distinction between having no right to enforce a contract and having no right to recover at all. Once the Court concluded that plaintiff lacked standing to enforce the LLC Agreement, the existence of that agreement no longer justified dismissal of plaintiff’s alternative quantum meruit claim. The Court therefore reinstated that claim, although it declined to grant plaintiff summary judgment because factual issues remained concerning the reasonable value of the services rendered.

Taken together, Berko provides a useful lesson: a contractual provision contemplating a benefit to a nonsignatory does not necessarily confer a right to enforce that benefit. The First Department’s analysis demonstrates that the distinction turns on the agreement as a whole and, in particular, on whether the parties expressed an intent to confer enforcement rights on the nonsignatory. The express identification of an affiliate, consultant, manager, or other nonsignatory may not be enough where another provision limits enforcement rights and excludes third parties. And where an agreement demonstrates that the parties knew how to identify a particular class when they intended to include it, the omission of that class from the provision governing enforcement may be significant.

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Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP.

This article is for informational purposes only and is not intended to be, and should not be, taken as legal advice.

Unless otherwise stated, Freiberger Haber LLP’s articles are based on recently decided published opinions or litigation releases and not on matters handled by the firm.

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[1] Slip Op. at *2.

[2] Id., citing FGP 1, LLC v. Dubrovsky, 197 A.D.3d 441, 443 (1st Dept. 2021); see also 767 Third Ave. LLC v. Orix Capital Mkts, LLC, 26 A.D.3d 216, 218 (1st Dept. 2006), lv. Denied, 8 N.Y.3d 803 (2007) (“The best evidence of the intent to bestow a benefit upon a third party is the language of the contract itself . . ., and here, a provision of the agreement expressly negates enforcement by third parties”); Mendel v. Henry Phipps Plaza W., Inc., 16 A.D.3d 112, 113 (1st Dept. 2005), aff’d, 6 N.Y.3d 783 (2006).

[3] Id.

[4] Id., quoting Bailey v. Fish & Neave, 8 N.Y.3d 523, 528 (2007) (internal quotation marks omitted).

[5] Id.

[6] Id.

[7] Id.

[8] Id. at *3.

[9] Id., citing Quadrant Structured Prods. Co. v. Vertin, 23 N.Y.3d 549, 560 (2014).

[10] Id.

[11] Id.

[12] Id., citing Fulbright & Jaworski, LLP v. Carucci, 63 A.D.3d 487, 489 (1st Dept. 2009).