Fraud Notes: Timeliness in Fraud Litigation – Discovery Rule Saves Some Claims, Bars Others

By: Jeffrey M. Haber

In today’s Fraud Notes, we examine two recent appellate court decisions that highlight the role statutes of limitations play in fraud-based claims. Specifically, we explore how New York courts evaluate timeliness under CPLR 213(8), including the six-year limitations period and the two-year discovery rule, as well as the three-year limitations period governing General Business Law § 349 claims. Through Yakobson v. IGAL Ocean, LLC, 2026 N.Y. Slip Op. 03994 (2d Dept. June 24, 2026), and Shen v. Ferncliff Cemetery Association, 2026 N.Y. Slip Op. 04002 (2d Dept. June 24, 2026), the Appellate Division, Second Department, offers important insight on when fraud claims may survive dismissal on timeliness grounds, and when they will be barred as a matter of law, underscoring the fact-intensive nature of the discovery rule and the challenges plaintiffs face in falling within applicable limitations periods.

Applicable Principles

On a motion pursuant to CPLR 3211(a)(5) to dismiss a complaint as untimely, a defendant must establish, prima facie, that the time in which to commence the action has expired.[1] If the defendant meets this initial burden, “[t]he burden . . . shifts to the plaintiff to raise a question of fact as to whether the statute of limitations has been tolled or is otherwise inapplicable, or whether the plaintiff actually commenced the action within the applicable limitations period.”[2]  “As a general principle, the statute of limitations begins to run when a cause of action accrues, that is, when all of the facts necessary to the cause of action have occurred so that the party would be entitled to obtain relief in court.”[3] 

“A fraud-based action must be commenced within six years of the fraud or within two years from the time the plaintiff discovered the fraud or could with reasonable diligence have discovered it, whichever is later.”[4] “The inquiry as to whether a plaintiff could, with reasonable diligence, have discovered the fraud turns on whether the plaintiff was possessed of knowledge of facts from which the fraud could be reasonably inferred.”[5] “Generally, knowledge of the fraudulent act is required and mere suspicion will not constitute a sufficient substitute.  Where it does not conclusively appear that a plaintiff had knowledge of facts from which the fraud could reasonably be inferred, a [fraud-based cause of action] should not be dismissed on motion and the question should be left to the trier of the facts.”[6] “Ordinarily, an inquiry into when a plaintiff should have discovered an alleged fraud presents a mixed question of law and fact.”[7]

A cause of action alleging a violation of General Business Law § 349 is governed by a three-year statute of limitations.[8] 

Yakobson v. IGAL Ocean, LLC

On October 21, 2010, a personal injury judgment in the principal amount of $83,788.25 was entered in Supreme Court, Kings County, in favor of plaintiff and against defendant IGAL Ocean, LLC (“Judgment”). At the time, IGAL was uninsured but owned two properties in Brooklyn, N.Y. (collectively, the “Properties”).

By deeds dated March 28, 2017, IGAL conveyed the Properties to defendant 2029 Ocean Ave., LLC for no consideration, allegedly leaving IGAL insolvent.

On October 16, 2023, plaintiff commenced the action, inter alia, to set aside the conveyances of the properties.  In the first cause of action, plaintiff alleged that the conveyances were void and ineffective pursuant to CPLR 5203(a).  In the fifth cause of action, plaintiff alleged that the conveyances should be set aside as fraudulent conveyances under Debtor and Creditor Law former § 276. In the sixth cause of action, plaintiff sought an award of attorneys’ fees under Debtor and Creditor Law former § 276-a. Subsequently, plaintiff moved for a preliminary injunction enjoining defendants from selling or transferring any ownership interest in the properties, including as condominium units, while the action was pending. Defendants opposed the motion and moved, inter alia, pursuant to CPLR 3211(a)(5) to dismiss the first, fifth, and sixth causes of action as time barred. 

The motion court granted those portions of defendants’ motion and denied, as academic, plaintiff’s motion. On appeal, the Second Department found issues of fact concerning the discovery rule and, therefore, modified the motion court’s order.

The Court found that “defendants demonstrated that the allegedly fraudulent conveyances occurred more than six years prior to the commencement of th[e] action and, thus, met their initial burden of establishing, prima facie, that the time in which to interpose the fifth and sixth causes of action expired prior to the commencement of th[e] action.”[9] 

“Nonetheless,” said the Court, “the plaintiff raised a question of fact as to whether she possessed knowledge of facts from which the fraud could have been discovered with reasonable diligence within two years prior to the commencement of this action.”[10] 

“Accordingly,” the Court concluded that the motion court “should have denied those branches of the defendants’ motion which were pursuant to CPLR 3211(a)(5) to dismiss the fifth and sixth causes of action as time-barred.”[11] 

Shen v. Ferncliff Cemetery Association

In August of 2013, plaintiff purchased a grave, including a concrete liner and lid, for his brother’s remains. Decedent’s remains were interred on November 30, 2013. Plaintiff alleged that he discovered a water leakage problem and reported it to defendant in December 2013. Plaintiff further alleged that defendant examined the burial box in which the decedent’s remains were to be interred without adhering to established guidelines and that at the time plaintiff purchased the grave, defendant failed to provide plaintiff with certain product information concerning the grave which would have enabled plaintiff to make an informed decision, opting for a sealed vault in addition to the wooden burial box.

In September 2023, plaintiff commenced the action against defendant, alleging, among other things, that defendant violated General Business Law § 349 with respect to the interment of his brother’s remains at defendant’s cemetery. In November 2023, defendant moved pursuant to CPLR 3211(a) to dismiss the complaint on the ground, inter alia, that the action was time-barred. By order dated March 5, 2024, the motion court granted the motion. The Second Department affirmed.

The Court held that plaintiff’s claim sounding fraud was time barred. The Court explained that “to the extent that the plaintiff asserted a cause of action sounding in fraud, that cause of action accrued, at the latest, in December 2013, which is the date when the plaintiff alleged that he became aware of an alleged groundwater intrusion issue that he contended the defendant had concealed.”[12] “Since the action was commenced more than six years later in September 2023,” concluded the Court, “the defendant established that any cause of action sounding in fraud was time-barred.”[13]

Takeaway

The key takeaway from these decisions is that timeliness in fraud-based litigation is often dispositive, but rarely straightforward. Under CPLR 213(8), a fraud claim must be brought within six years of accrual or within two years from when the plaintiff discovered, or with reasonable diligence could have discovered, the fraud, whichever is later. Courts strictly apply this framework, but the inquiry frequently turns on fact-intensive questions about what the plaintiff knew or should have known and when.

As illustrated in Yakobson v. IGAL Ocean, LLC, even where the alleged fraudulent conduct occurred outside the six-year period, dismissal is not automatic. Once a defendant meets its prima facie burden of showing that the claim is untimely, the burden shifts to the plaintiff to raise a question of fact as to whether the discovery rule applies. Importantly, the Second Department reiterated that the discovery rule hinges on whether the plaintiff possessed knowledge of facts from which the fraud could reasonably be inferred, not mere suspicion. Where such knowledge is not conclusively established, the issue is generally left to the trier of fact, making dismissal at the pleading stage inappropriate. Thus, Yakobson underscores that plaintiffs may survive a statute of limitations challenge by demonstrating a factual dispute as to when the fraud could have been discovered with reasonable diligence.

By contrast, Shen v. Ferncliff Cemetery Association demonstrates the limits of the discovery rule. There, plaintiff’s own allegations established that he was aware of the operative facts underlying the alleged fraud as early as 2013, yet he did not commence the action until a decade later. In those circumstances, the Second Department had little difficulty concluding that the fraud claim was time-barred. The decision highlights that once a plaintiff has knowledge of facts sufficient to put them on notice of the alleged wrongdoing, the limitations period will begin to run, even if the plaintiff later develops additional evidence or a fuller understanding of the claim.

Together, these cases emphasize two practical points. First, the viability of fraud-based claims can turn on a nuanced, fact-driven analysis of the plaintiff’s knowledge and diligence, making early dismissal difficult when the record is undeveloped. Second, plaintiffs cannot rely on vague assertions of delayed discovery to revive otherwise stale claims; courts will look closely at the pleadings to determine whether the plaintiff was on inquiry notice more than two years before suit was filed.

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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. ___________________________________

[1] See Barbetta v. Facchini, 236 A.D.3d 623, 625 (2d Dept. 2025).

[2] Id. (internal quotation marks omitted); see Cruz v. Guaba, 226 A.D.3d 964, 965 (2d Dept. 2024).

[3] Okafor v. Okafor Bldg. Corp., 239 A.D.3d 875, 878 (2d Dept. 2025) (internal quotation marks omitted).

[4] Vilsack v. Meyer, 96 A.D.3d 827, 828 (2d Dept. 2012) (alteration and internal quotation marks omitted; see CPLR 213(8); Weinberg Real Estate Affiliates, LLC v. Weinberg, 231 A.D.3d 775, 777 (2d Dept. 2024).

[5] Lipszyc v. Lipszyc, 221 A.D.3d 992, 994 (2d Dept. 2023) (internal quotation marks omitted); see Sargiss v. Magarelli, 12 N.Y.3d 527, 532 (2009).

[6] Sargiss, 12 N.Y.3d at 532 (citation and internal quotation marks omitted); see Lipszyc, 221 A.D.3d at 994.

[7] Vilsack, 96 A.D.3d at 828; see House of Spices (India), Inc. v. SMJ Servs., Inc., 103 A.D.3d 848, 849 (2d Dept. 2013).

[8] See CPLR 214(2); Williams-Guillaume v. Bank of Am., N.A., 130 A.D.3d 1016, 1017 (2d Dept. 2015).

[9] Yakobson, Slip Op. at *2.

[10] Id., citing Sargiss, 12 N.Y.3d at 532; Lipszyc, 221 A.D.3d at 994; Cammarato v. 16 Admiral Perry Plaza, LLC, 216 A.D.3d 903, 905 (2d Dept. 2023).

[11] Id., citing Three C, LLC v. City Settlement Serv., Inc., 241 A.D.3d 739,740 (2d Dept. 2025); Lipszyc, 221 A.D.3d at 994.

[12] Shen, Slip Op. at 1-2, citing Mostafa v. Pension Solutions, LLC, 221 A.D.3d 997, 998-999 (2d Dept. 2023).

[13] Id. at *2, citing Williams-Guillaume, 130 A.D.3d at 1017.