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By: Jonathan H. Freiberger Sometimes a party makes a mistake in the course of litigating its case. Absent prejudice to the other party, the Court is free to disregard the mistake and proceed as if the mistake never occurred. CPLR 2001 provides, in relevant part that: At any stage of an action, including the filing of a summons with notice, summons and complaint or petition to commence an action, the court may permit a mistake, omission, defect or irregularity, including the failure to purchase or acquire an index number or other mistake in the filing process, to be corrected, upon such terms as may be just, or, if a substantial right of a party is not prejudiced, the mistake, omission, defect or irregularity shall be disregarded provided that any applicable fees shall be paid. In Smith v. Maines Paper & Food Service, Inc., 2026 WL 1579767 (2d Dept. June 3, 2026), a personal injury matter, the defendants opposed plaintiffs’ motion for summary judgment on the issue of liability by submitting three unsworn expert reports and one unsworn expert report. Plaintiffs, in its reply, argued that the submissions were not in evidentiary form and, therefore, inadmissible. Thereafter, the motion court requested that plaintiffs submit a statement of material facts, which plaintiffs neglected to serve with their summary judgment motion.[1] Defendants submitted a counterstatement of material facts that included sworn expert affidavits in which, inter alia, the substance of the previously unsworn expert report was reaffirmed. The motion court accepted the affirmations and denied plaintiffs’ summary judgment motion. In affirming the motion court’s decision, relying on CPLR 2001, the Second Department recognized that the submissions made by defendants with their counterstatement of material facts “cured the defects contained in the defendants' opposition papers, and the plaintiffs suffered no prejudice, as they had an opportunity to address the opinions of the defendants' expert witnesses in their reply papers.” In Henriquez v. New York City Housing Authority, 249 A.D..3d 414 (1st Dept. 2026), the motion court denied defendant’s motion to strike claims in a bill of particulars because, contrary to the requirements of CPLR 2214(a), the defendant’s notice of motion indicated it was seeking relief pursuant to CPLR 3211. The First Department, relying on CPLR 2001, modified the order and stated that the motion court, “should have disregarded this technical deficiency because the notice of motion and affirmation made clear that it sought to strike claims in the bills of particulars that were not alleged in the notice of claim.” Id. at 415 (citations omitted). The plaintiff in Williams v. MTA Bus Co., 224 A.D.3d 467 (1st Dept. 2024), sought relief under CPLR 2001 after it failed to comply with the mailing requirements of CPLR 308(2). Although the motion court granted plaintiff’s motion for a default judgment, the First Department reversed and stated that plaintiff’s “failure to comply with CPLR 308(2)’s mailing requirement was not a mere technical infirmity that may be overlooked by the court pursuant to CPLR 2001” because it is a jurisdictional defect that “greatly increases the likelihood that a defendant will not receive the pleadings and have an opportunity to answer.” Id. at 469 (citation and internal quotation marks omitted; hyperlink added); see also Nicholas v. Martuscello, 245 A.D.3d 1055, 1058-59 (3d Dept. 2026) (quoting Park Premium Enterprises, Inc. v. Norben Lofts, LLC, 220 A.D.3d 661, 662 (2d Dept. 2023)) (“the complete failure to file the initial papers necessary to institute an action is not the type of error that falls within the court's discretion to correct under CPLR 2001”). Against this backdrop, we discuss AB International Investments, LLC v. GFE NY, LLC, a case decided by the Appellate Division, Second Department, on July 22, 2026. AB International was a breach of contract action in which the plaintiff filed an amended complaint. One of the defendants moved to dismiss the amended complaint but neglected to attach a copy of the amended complaint to the motion and omitted the names of two defendants from the caption on the notice of motion.[2] The motion court, in its order, denied the motion to dismiss solely because of the defendant’s omissions. The defendant appealed. The Second Department modified the order on appeal because the motion court “improperly denied the defendants’ motion solely on the procedural grounds that the defendants failed to annex the amended complaint to their initial moving papers and made certain omissions in the caption contained in the defendants’ notice of motion, which the parties did not raise or litigate.” In so holding, the Court stated: CPLR 2001 permits a court, at any stage of an action, to disregard a party's mistake, omission, defect, or irregularity if a substantial right of a party is not prejudiced. Here, not only was the amended complaint electronically filed and available to the court and the parties, but the amended complaint was submitted by the plaintiff in opposition to the motion and by the defendants in reply, and the plaintiff did not assert that it was prejudiced by the defendants' omission. Moreover, to the extent the variation between the caption appearing on the defendants' notice of motion and the amended complaint constituted a defect in form (see CPLR 2101[c], [f]; 2214[a] ), the plaintiff did not assert that it was prejudiced by the variation. Under such circumstances, the court should have determined the defendants' motion on the merits. [Citations omitted; hyperlinks added.] Because the parties briefed the merits of the appeal before the motion court and on appeal, the Second Department addressed the merits of defendant’s motion and dismissed several causes of action in the amended complaint. Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice. [1] This occurred prior to the repeal of 22 NYCRR 202.8-g, which permitted a motion court to require a statement of material facts with a motion for summary judgment. [2] Some of the facts recited herein were obtained from the court files available on the NYSCEF system.

By Jeffrey M. Haber In Universal Health Services, Inc. v. United States ex rel. Escobar, the U.S. Supreme Court unanimously confirmed that the false certification theory “can be a basis for liability” under “some circumstances.” (See blog post here.) Those circumstances are: (1) the defendant does not merely request payment, but also makes specific representations about the goods or services provided; and (2) the defendant’s failure to disclose noncompliance with material statutory, regulatory, or contractual requirements makes those representations misleading. As to the second circumstance, the Court held that a misrepresentation about legal compliance does not become “material” simply because the government expressly labeled the legal requirement as a “condition of payment,” or because the government could choose to withhold payment if it knew about the noncompliance. “What matters is not the label the Government attaches to a requirement, but whether the defendant knowingly violated a requirement that the defendant knows is material to the Government’s payment decision.” Earlier this month, the Seventh Circuit considered the knowledge aspect of the second condition identified by the Supreme Court. In United States ex rel. Sheet Metal Workers Int’l Assoc. v. Horning Investments, LLC, No. 15-1004 (7th Cir. July 7, 2016), the Seventh Circuit affirmed the dismissal of a False Claims Act complaint, finding that the relator failed to prove with sufficient evidence that the defendants knew they were submitting a false claim to the government in violation of a statute that, according to the court, was ambiguous in meaning. Sheet Metal Workers involved a construction project for the U.S. Department of Veterans Affairs. The defendant, Horning Investments doing business as Horning Roofing & Sheet Metal, LLC (“Horning”), was hired as a sub‐contractor for the project; its workers were represented by Local 20 of the Sheet Metal Workers International Association (the “Union”). The Union contended that Horning was paying its workers less than the amount required under the Davis‐Bacon Act, which requires contractors who perform construction projects for the federal government to pay their workers the “prevailing wage” for pay and fringe benefits. The Union claimed that Horning improperly deducted a flat $5.00 per hour contribution from member paychecks, which was to be paid into an insurance benefit trust. The Union argued that Horning deducted the money regardless of whether the employee was eligible for any benefits and without tying the deduction to the actual monetary value of the benefit each employee received. The Union sued under the False Claims Act rather than under the Davis‐Bacon Act, claiming that the payroll reports and applications for payment submitted to the federal government violated the False Claim Act. The Seventh Circuit (by Chief Judge Diane Wood, writing for herself and Judge Frank Easterbrook) affirmed the district court’s summary judgment dismissal because there was insufficient evidence that Horning acted with the requisite knowledge that the claims it submitted were false. First, the court addressed the Union’s contention that Horning never tried to determine whether each employee received the equivalent of $5.00 per hour in fringe benefits, holding that nothing in the Davis-Bacon Act and relevant regulations required employers to tailor fringe benefit contributions to the benefits each employee actually received. Consequently, “the fact that Torres and Moore failed to do so tells us nothing about whether they knew that their certifications of Horning’s compliance with the Act were false.” Second, the court addressed the Union’s contention that some employees from whose checks the deductions were made were not yet eligible to receive fringe benefits. In rejecting this argument, the court observed that there was nothing in the Department of Labor field operations handbook stating that the Davis‐Bacon Act permits an employer to count contributions to an insurance plan for employees who are not yet eligible for coverage when the plan itself requires the employer to make that contribution during the waiting period. In the absence of government clarity and a record supporting a contractual obligation to make contributions during the waiting period, the court held that “there is enough ambiguity about this matter that we cannot infer that Horning either knew or must have known that it was violating the Davis‐Bacon Act.” The Court concluded: “Horning may, or may not, have violated the Davis‐Bacon Act. But the Union did not bring a claim under that statute. Instead, it sued under the False Claims Act, which requires proof that the defendant knowingly submitted a false claim to the government for payment. The Union did not present enough evidence to survive summary judgment on that issue, and so we AFFIRM the judgment of the district court.” Judge Richard Posner dissented, finding that “an experienced contractor on Davis-Bacon Act projects” like Horning “must have known about the statute’s requirements.” If Horning did not know, “it must have been because they closed their eyes to those requirements — a good example of ostrich behavior, itself a good example of deliberate indifference within the meaning of the False Claims Act.” Judge Posner further found that there was “uncontroverted evidence” showing that a number of employees had the $5.00 per hour deduction “credited to the trust” even though “they didn’t participate in the benefits program” and therefore “never benefited from the $5 that was an ostensible part of their compensation.” According to Judge Posner, the record showed that “[N]o one in management attempted to match the $5 deductions to each employee’s eligibility to receive benefits ….” He also found evidence in the record showing that “at least $54,000” of the wage deductions “was diverted to the company’s owner and to a relative of the general manager, neither of whom … was entitled to receive” the funds. “This is further evidence that Horning knowingly made false statements in claiming that the $5 of ‘fringe benefits’ it took out of each worker’s hourly salary went to ‘appropriate programs for the benefit of such employees,’ that is, by buying insurance for the employee.” Quoting Escobar, Judge Posner concluded that “[W]hen ‘a defendant makes representations in submitting a claim but omits its violations of statutory, regulatory, or contractual requirements, those omissions can be a basis for liability if they render the defendant’s representations misleading with respect to the goods or services provided.’ That’s this case.” Judge Posner would have remanded the case to the district court “[T]o understand the full scope and gravity of Horning’s conduct.” TAKEAWAY: The majority opinion suggests that when a statute is ambiguous in meaning, relators will have a difficult time proving that the defendant knowingly submitted a false claim in violation of that law. The dissent, on the other hand, takes a different view, suggesting that differing interpretations of a statute should not overshadow clear requirements applicable to the alleged false statement. In Sheet Metal Workers, the certification found to be false provided, in relevant part, that “no deductions have been made either directly or indirectly from the full wages earned by any person, other than permissible deductions.” The Davis-Bacon Act “permits an employer to count contributions to an insurance plan for employees not yet eligible for coverage only if the plan requires the employer to make those contributions during the employee’s waiting period—that is, after the employee has been hired but before he is eligible for benefits.” The evidence showed that a number of employees had $5.00 per hour deducted from their pay for a longer period than their waiting period without any corresponding benefit. Thus, “Because he wasn’t receiving the $5 an hour either in cash or in insurance during that two‐month period, he was receiving less than the Davis‐Bacon Act entitled him to.” This blog believes that the dissent’s analysis is consistent with the Supreme Court’s approach in Escobar. This article was written by Jeffrey M. Haber, a partner at Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice.

By: Jeffrey M. Haber What are the elements of a sound business succession plan? In June, the Securities and Exchange Commission (“SEC”) proposed a rule that would require registered investment advisers to adopt formal business continuity and transition plans in the event of business disruptions whether from natural disasters, cyber attacks or the death of key people, particularly the firm's owner. The succession plans should enable a firm to continue meeting its fiduciary obligations to clients by establishing risk management plans related to business continuity. While many firms have already implemented continuity plans in the wake of catastrophic events like Super Storm Sandy, the proposed rule emphasizes transition planning, particularly for smaller firms in the event of a top adviser's sudden death. In particular, investment advisers need to create "what if" scenarios that can allow for the seamless transition of client data and investments. The Compliance Burden Some observers believe the compliance costs related to the proposed rule should be manageable, ranging from $30,000 to $70,000 depending on the size of the firm. The challenge, however, will be the administrative details in establishing systems that will allow for retention and transition of data, possibly involving off-site back-up locations. In addition, an investment advisory firm should have an organizational chart in place so that an outsider can ascertain who the key players are, what they do, and who is next in line. If the proposed rule is adopted, the SEC estimates a firm will need to dedicate as much as 250 hours of staff time to establish a continuity plan. The proposed rule was reportedly prompted by the SEC's concern with protecting investors from a wide range of threats, including cyber attacks, information security issues, and natural disasters. Moreover, as investment advisers age, succession planning becomes critical. Lastly, industry observers note that SEC chairwoman Mary Jo White will soon be stepping aside, and addressing business continuity and transition planning has been on her checklist. If and when the rule will be adopted remains unclear. That being said, it is essential for any business, not just investment advisory firms, to have a well designed business succession plan in place. An experienced business law attorney can help your firm design a continuity and transition plan. This article was written by Jeffrey M. Haber, a partner at Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice.

By: Jeffrey M. Haber After a merger, which agreement controls when both companies have pre-existing contracts with a common third party? In May 2016, Stamford-based Charter Communications Inc. (“Charter”) completed its acquisition of Time Warner Cable (“TWC”), making it the second largest cable provider behind Comcast Corporation. At the time of the acquisition, TWC was the larger of the two companies. As such, TWC was able to negotiate more favorable rates and terms on carriage agreements with programmers than the then-smaller Charter. One programmer, common to both TWC and Charter, was Univision Communications Inc. ("Univision"), the nation’s largest Spanish language broadcaster. Univision’s contract with TWC does not expire until June 2022, and provides for licensing fees at a much cheaper rate than the Charter agreement. Univision’s contract with Charter was set to expire on June 30, 2016. Beginning in March 2016, Univision tried to renegotiate its agreement with Charter. Those efforts were rebuffed by Charter, which claimed that the TWC agreement governed the payment of licensing fees through June 2022. Univision contends that Charter is acting in bad faith by "resorting to transparently constructed, pretextual arguments ... to unilaterally impose license fees that are dramatically below current market license fees." In support, Univision relies on a provision in its contract with Charter which provides that in the event Charter acquires a company with a pre-existing Univision carriage agreement, the licensing fee rates of the acquired company may only remain in effect until the expiration of the calendar year when the acquisition occurred -- which in this case would be December 2016. Univision claims the provision was expressly designed to address and avoid the kind of licensing fee dispute that has now come to pass. Univision also maintains that Charter's position is contradictory to public statements that Charter executives made to secure approval of the acquisition -- namely that it would be Charter, not TWC, management who would control the operations of the combined company after the acquisition. According to Univision, these statements formed the basis upon which "the Federal Communications Commission, the U.S. Department of Justice, the New York State Public Service Commission, and the California Public Utilities Commission each approved the Acquisition." Univision filed suit against Charter in New York Supreme Court (Univision Communications Inc. v. Charter Communications, Inc., Index No. 653568/2016) this month for breach of contract related to the licensing fees dispute. For more on how New York courts determine which of several competing agreements controls a dispute, see our discussion in Contract Ambiguity Defeats Dismissal of Declaratory Judgment Claim and Written Agreements That Are Clear and Unambiguous Must Be Enforced According to the Plain Meaning of Their Terms. Freiberger Haber LLP is a New York City based law firm experienced in business law and complex business litigation. The firm handles all aspects of business transactions, including contract negotiations and preparation, asset purchase agreements, mergers, and acquisitions, and litigation that arises from such transactions. Contact the firm today at (212) 209-1005 or online here. This article was written by Jeffrey M. Haber, a partner at Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice.

By: Jeffrey M. Haber In Benowski v. Track Dr., LLC, 2026 NY Slip Op. 04466 (3d Dept. July 16, 2026), the Appellate Division, Third Department, affirmed summary judgment dismissing a contractor’s claim for unpaid retainage and other compensation arising from a commercial renovation project. Although the parties never executed a formal written construction contract, the Court enforced a January 2020 release under which the contractor acknowledged that $233,797.23 constituted the “entire unpaid balance” due and waived all claims relating to the project. The Court held that defendants established the validity of the release through documentary and testimonial evidence, and that plaintiff’s inability to recall signing the document, coupled with his alleged misunderstanding of its scope, was insufficient to create a triable issue of fact. As explained below, the decision underscores New York’s strong policy favoring enforcement of clear and unambiguous releases. The Law “Generally, a valid release constitutes a complete bar to an action on a claim which is the subject of the release. If the language of a release is clear and unambiguous, the signing of a release is a jural act binding on the parties.”[1] “Nevertheless, a release must be fairly and knowingly made and thus, like any other contract, may be set aside on the basis of fraud or mutual mistake.”[2] The defendant bears the initial burden to demonstrate that there has been a signed release, after which the burden shifts to the plaintiff to demonstrate “that there has been fraud, duress or some other fact which will be sufficient to void the release.”[3] Benowski v. Track Dr., LLC Benowski involved an electrical contractor engaged in the business of installing and maintaining electrical systems in residential and commercial properties. In 2019, plaintiff began installing electrical systems at a renovated commercial property located in Broome County, New York that is jointly owned by defendants Track Drive, LLC and PSM Limited Partnership. Due to plaintiff’s longstanding business relationship with Track Drive’s owners, no formal written agreement was executed to memorialize the scope of the work or the terms of the project. However, plaintiff provided Track Drive’s owners with a written project proposal at the outset of the project that detailed the nature of the work and the expected total price, which amounted to approximately $1.14 million. Although not specifically delineated in the project proposal, the amount listed therein also reflected a 10% retainer fee plaintiff expected to be paid at the end of the work. Over the course of the project, plaintiff submitted invoices and payment applications to Track Drive’s representatives, which underwent an approval process. After the project encountered several delays, one of Track Drive’s owners purportedly asked plaintiff to forgo his retainer fee as a way of compensating one of the defendants, which was leasing space at the project site. On January 7, 2020, after plaintiff had been paid approximately $800,000 for his work, he signed a written release in which he agreed to waive all claims pertaining to the project upon the receipt of an additional $233,797.23, which was listed as the “entire unpaid balance” due and owing to plaintiff and which did not include the 10% retainer fee. The release contained both plaintiff’s signature and printed name, as well as a signature by a witness. On the same date as the release, defendants paid plaintiff’s company the agreed-upon amount of $233,797.23. In May 2021, plaintiff commenced the action seeking to recoup $140,738.47 from defendants, which included the 10% retainer fee plus an additional sum of money he claimed was owed for his work. In January 2022, the motion court denied defendants’ pre-answer motion to dismiss the complaint. Following joinder of issue and discovery, defendants moved for, among other things, summary judgment dismissing the complaint based upon the January 2020 release. Plaintiff opposed the motion and cross-moved for partial summary judgment dismissing defendants’ affirmative defense of waiver and release, arguing that he did not sign the release, it was not fairly and knowingly made, and it pertained only to the release of liens against defendants’ property and not claims against defendants for money owed under the project. The motion court granted defendants’ motion for summary judgment, denied plaintiff’s cross-motion, and dismissed the complaint, finding that the clear and unambiguous language of the release barred plaintiff’s claims and that plaintiff failed to establish a genuine issue of material fact as to whether he signed the release and whether it was fairly and knowingly made. Plaintiff appealed. The Appellate Division, Third Department, affirmed. The Court held that “[o]n this record, defendants satisfied their prima facie burden on their summary judgment motion by proffering evidence that plaintiff signed a broad and unambiguous release waiving his right to bring any claims against defendants pertaining to the project upon his receipt of the additional amount listed therein (which did not include the 10% retainer fee), that he was paid that sum of money and that he was witnessed signing the document.”[4] The Court’s conclusion was grounded in a record that, in its view, established each element necessary to enforce the January 2020 release. That record included deposition testimony, paid invoices relating to the project, payment applications submitted by plaintiff during the course of the work, plaintiff’s interrogatory responses, and the January 2020 release itself. Defendants supplemented the documentary evidence with sworn testimony from one of Track Drive’s owners, who testified that during a January 7, 2020, meeting plaintiff agreed to waive the retainage because of delays in completing the project and signed the January 2020 release memorializing that agreement. Defendants also offered deposition testimony from the individual responsible for project billing, who signed the release as a witness and testified that she personally observed plaintiff execute the document. Based upon the submitted evidence, the Court concluded that defendants satisfied their burden, so that the burden shifted to plaintiff to demonstrate the existence of a triable issue of fact in opposition. The Court concluded that plaintiff failed to satisfy his burden: On this record, even viewing the evidence in the light most favorable to plaintiff, we conclude that he did not raise a triable issue of fact sufficient to defeat defendants’ prima facie showing of entitlement to judgment as a matter of law dismissing the complaint. Plaintiff’s contention that the January 2020 final release is a release of liens against defendants’ property and not a release of claims against defendants to recover money for work performed under the project is flatly contradicted by the plain and unambiguous language of the document, which listed $233,797.23 as the “entire unpaid balance” owed to plaintiff and stated that receipt of such amount would “constitute payment in full and [would] fully satisfy any and all liens, claims, and demands which the [c]ontractor may have or assert against the [o]wner in connection with said contract or project” (emphasis added). Plaintiff also did not come forward with sufficient admissible proof to raise a genuine issue of fact as to whether he signed the final release, as “[s]omething more than a bald assertion of forgery is required to create an issue of fact contesting the authenticity of a signature” and, notably, plaintiff did not deny having signed the document but merely confirmed that he could not recall doing so.[5] The Court also held that it was “unpersuaded by plaintiff’s argument that there [were] questions of fact as to whether the January 2020 final release was ‘fairly and knowingly made.’”[6] That argument was based on personal injury cases “in which an injured party signed a broad release waiving the ability to recover damages from an accident or employment discrimination cases “where a plaintiff signed a release purporting to preclude additional employment discrimination claims that were unknown at the time the release was signed.”[7] Addressing plaintiff’s argument that there was a misunderstanding as to the scope of the January 2020 release and whether it precluded his ability to recover the additional 10% retainer fee, the Court held that “plaintiff’s own unilateral mistake about the scope of the January 2020 release [was] an insufficient ground to set it aside.”[8] Based upon the evidence plaintiff submitted, the Court concluded that “plaintiff fell short of raising a triable issue of fact as to whether the release was fairly and knowingly made.”[9] Takeaway One of the principal takeaways from Benowski is that New York courts will enforce a clear and unambiguous release according to its terms, even in the absence of a formal written contract governing the underlying project. Once defendants established the existence of a signed release, payment of the stated consideration, and plaintiff’s execution of the document, the burden shifted to plaintiff to present admissible evidence sufficient to invalidate the release. Benowski also highlights the difficulty of defeating a release through a claim of forgery or lack of recollection. Plaintiff did not deny signing the release; rather, he testified that the signature could be his and that he did not remember signing it. The Third Department held that such testimony was insufficient to create a triable issue of fact, particularly where witness testimony and expert analysis supported the authenticity of the signature. The decision further demonstrates that courts focus on the objective language of a release, not a party’s subjective understanding of it. Plaintiff argued that the January 2020 document released only lien rights and not his claim for unpaid retainage. The Court rejected that position, holding that the release’s broad language expressly waived not only liens but also all claims and demands arising from the project. Finally, the case illustrates the narrow circumstances under which a release may be set aside as not having been "fairly and knowingly made." Although releases may be invalidated based on fraud, duress, or mutual mistake, plaintiff’s contention amounted at most to a unilateral misunderstanding of the release’s effect, which was insufficient to avoid its enforcement. __________________________________ 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] Centro Empresarial Cempresa S.A. v. AmÉrica MÓvil, S.A.B. de C.V., 17 N.Y.3d 269, 276 (2011) (internal quotation marks and citations omitted); see Salewski v. Music, 150 A.D.3d 1353, 1353-1354 (3d Dept. 2017). [2] Ford v. Phillips, 121 A.D.3d 1232, 1234-1235 (3d Dept. 2014) (internal quotation marks and citations omitted). [3] Centro, 17 N.Y.3d at 276 (internal quotation marks and citation omitted); see Cames v. Craig, 181 A.D.3d 851, 852 (2d Dept. 2020). [4] Slip at *3 (citing M.M. v. Church of Our Lady of the Annunciation, 203 A.D.3d 1277, 1278 (3d Dept. 2022), lv. denied, 38 N.Y.3d 911 (2022); Ivasyuk v. Raglan, 197 A.D.3d 635, 637 (2d Dept. 2021). [5] Id. at 3-4. [6] Id. at *4. [7] Id. at *4 (citations omitted). [8] Id. (citing Church of Our Lady of the Annunciation, 203 A.D.3d at 1279-1280; Matter of Walter, 180 A.D.3d 1201, 1204-1205 (3d Dept. 2020); Ford v. Phillips, 121 A.D.3d 1232, 1235 (3d Dept. 2014)). [9] Id. at *5 (citations omitted).

By: Jeffrey M. Haber This blog will address many aspects of arbitration, including the pros and cons of this alternative dispute resolution mechanism. This installment will look at the difficulties the losing party has challenging the arbitral award. For related discussion, see Vacating an Arbitration Award is an Uphill Battle and Arbitration Award Partially Vacated Because Decision Was Found To Be “Irrational”. Arbitration is a voluntary form of dispute resolution. It is less formal than a court and conducted by an impartial person or persons selected by the parties. Unless the parties agree to the contrary, the arbitrator is not bound to follow the law. Instead, he/she may base the decision on business custom and practice, technical knowledge, or broad notions of equity and justice. Because arbitration is a contractually agreed upon method of dispute resolution, the parties can agree whether the award will be final and binding. Parties can agree to arbitration in a number of ways. Often, they include an arbitration clause in their agreements or transaction documents. These clauses mandate the resolution of disputes in an arbitral forum, such as the American Arbitration Association or FINRA. Other times, parties agree to arbitrate after a dispute has arisen. Once an award is issued, the losing party can appeal it (i.e., move to vacate the award) in court. However, because arbitration is less formal than court and contractually based, the grounds upon which a court will vacate an award are limited. Generally, a court will vacate an arbitral award for the following reasons: the arbitrator violated the arbitration agreement; the arbitrator was not independent; the award was obtained by corruption, fraud or undue means; and the arbitrator exceeded his/her powers – that is, the arbitrator ruled on matters that the parties did not consent to be heard in the arbitration agreement. Making a mistake in fact or law is not sufficient to vacate an award. An arbitrator’s decision will be upheld, unless it is completely irrational or constitutes a manifest disregard of the law. As the U.S. Supreme Court noted, “‘as long as an honest arbitrator is even arguably construing or applying the contract and acting within the scope of his authority,’ the fact that ‘a court is convinced [he] committed serious error does not suffice to overturn [his] decision.’” E. Associated Coal Corp. v. United Mine Workers of Am., Dist. 17, 531 U.S. 57, 62 (2000) (citations omitted). In New York, CPLR § 7511(b) sets forth the grounds upon which a court can vacate an arbitral award. Under federal law, Section 10 of the Federal Arbitration Act governs the grounds upon which a court can vacate an award. Under CPLR 7511, an arbitral award may be vacated: if the rights of a party were prejudiced by “(1) corruption, fraud, or misconduct in procuring the award, (2) partiality of a supposedly neutral arbitrator, (3) the arbitrator exceeding his powers [i.e., violates a strong public policy, is irrational or clearly exceeds a specifically enumerated limitation on his/her power] so that no final and definite award was made, or (4) failure to follow procedures provided by CPLR article 75.” Matra Bldg. Corp. v Kucker, 2 A.D.3d 732 (2d Dep’t 2003). Case law makes it clear that New York courts apply these four grounds narrowly, declining more times than not to vacate arbitral awards. E.g., Matter of Mercury Cas. Co. v Healthmakers Med. Group, P.C., 67 A.D.3d 1017, 1017 (2d Dep’t 2009). On June 29, 2016, the Appellate Division, Second Department added another decision to the long list of cases showing the difficulties faced when trying to vacate an arbitral award. See Structure Tek Construction, Inc. v. Waterville Holdings, LLC, 2016 NY Slip Op. 05140. StructureTek was an action, inter alia, to foreclose a mechanic’s lien in which the plaintiff sought to confirm an arbitral award in its favor. The plaintiff was hired by the defendant Waterville Holdings, LLC, d/b/a Smuggler Jacks Restaurant, as a contractor in connection with the construction of a restaurant located on property owned by another defendant, Noel Cannon. Sometime thereafter, the plaintiff and the defendants became involved in a dispute about the construction of the restaurant. The plaintiff filed a mechanic’s lien against the property. After the plaintiff commenced the action, the plaintiff and the defendants agreed to resolve the dispute through arbitration. After a hearing, the arbitrator issued an award in favor of the plaintiff for $254,735.29. The plaintiff sought to confirm the award pursuant to CPLR 7510, and the defendants moved to vacate the award pursuant to CPLR 7511. The Supreme Court, Nassau County granted the petition and denied the motion to vacate the award. The defendants appealed. The Second Department affirmed. In affirming the ruling, the Second Department underscored the difficulty parties to arbitration have in vacating an arbitral award: Judicial review of arbitration awards is extremely limited. A party seeking to overturn an arbitration award on one or more grounds set forth in CPLR 7511(b)(1) bears a heavy burden to demonstrate that vacatur is appropriate by clear and convincing evidence. An arbitrator may do justice as he or she sees it, applying his or her own sense of law and equity to the facts as he or she finds them to be and making an award reflecting the spirit rather than the letter of the agreement. An arbitrator’s award should not be vacated for errors of law and fact committed by the arbitrator and the courts should not assume the role of overseers to mold the award to conform to their sense of justice. (Internal quotations and citations omitted.) Against the foregoing, the Second Department found that the record “[did] not reflect” any evidence “that the arbitrator made an award that was irrational, or that the award violated a strong public policy or clearly exceeded a specifically enumerated limitation on the arbitrator’s power.” (Internal quotations and citations omitted.) Takeaway: Arbitration can be a very effective forum for the resolution of disputes. It is a less formal and less costly alternative to resolve disputes. However, as StructureTek shows, it is very difficult to vacate an arbitral award. For this reason, parties that agree to arbitrate their disputes should do so with their eyes wide open. They should understand that there are disadvantages to arbitration, including the difficulties overturning an award. In short, the parties should expect to live with the outcome of the arbitration, even if it is unjust or erroneous, or both. This article was written by Jeffrey M. Haber, a partner at Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice.

By: Jeffrey M. Haber What are the ramifications of the new fiduciary rule? Earlier this year, the Department of Labor unveiled a new fiduciary standard regulation that will require financial advisors who provide investment recommendations for retirement accounts to meet a fiduciary standard by putting clients’ interests before their own (discussed here). The Obama administration claims the new standard will protect retirement investors and save them $17 billion in advisory fees. Now, a consortium of Wall Street and business lobbyists are fighting back saying that the new standard is "deliberately unworkable." A lawsuit was filed in Dallas federal court in late June by the U.S. Chamber of Commerce, the Securities Industry and Financial Markets Association and the Insured Retirement Institute alleging that the Labor Department does not have jurisdiction to create a new fiduciary rule. According to the lawsuit, only the Securities and Exchange Commission has the jurisdiction to do so. The lawsuit comes as no surprise since financial firms have been battling with the Labor Department since it first started crafting this rule 6 years ago. The parties to the suit said in a statement that their action was an effort "to prevent the Labor Department from exceeding the authority that was assigned to it by Congress." While the goal of the new fiduciary rule is to eliminate incentives for brokers to steer clients into retirement products with higher fees and commissions, some observers argue that the new standard will hurt smaller investors when their accounts are dropped by firms seeking to avoid additional compliance costs. "The rule will shackle Main Street financial advisers with extensive new requirements and constant liability, forcing them to limit the options and guidance they provide to retirement savers," the group said. In addition to this legal action, the National Association for Fixed Annuities has filed a separate suit seeking to block the new measures. They contend the Labor Department changed course by including fixed annuities in its definition of applicable retirement investments and the new rule will force firms to stop offering these products. Meanwhile, Congressional lawmakers have floated legislation to block the rule from becoming effective, but it is sure to be vetoed by the president if it makes it to his desk. Whether or not these lawsuits will prevail remains to be seen, however, given the tenor of the times in the wake of the financial crisis and the public's lack of trust in Wall Street, the era of enhanced regulatory oversight by federal authorities is likely to continue. While establishing and implementing compliance programs can be costly, the costs of litigation and a regulatory enforcement action may turn out to be far steeper. By engaging the services of an experienced attorney, securities firms can be proactive in adhering to the pending fiduciary rule that is slated to become effective in 2017, and retirees can be assured that their financial advisors are acting in their best interests when recommending retirement products. This article was written by Jeffrey M. Haber, a partner at Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice.

By Jeffrey M. Haber What are the consequences of submitting inaccurate trade data to the SEC and FINRA? Investment banks and securities firms are well aware of their responsibilities to adhere to the rules promulgated by the Securities Exchange Commission ("SEC") and the Financial Industry Regulatory Authority ("FINRA") regarding trade data, also referred to as "blue sheets." The federal securities laws and FINRA rules require firms to provide blue sheet information to FINRA and other regulators electronically upon request. This data provides regulators with detailed information about securities transactions, including the security, trade date, price, share quantity, customer name, and whether it was a buy, sale or short sale. Regulators use blue sheet information to ferret out fraudulent activity, market manipulation and insider trading. Last month, FINRA fined Deutsche Bank Securities Inc., an indirect wholly-owned subsidiary of Deutsche Bank AG ("Deutsche Bank"), $6 million for failing to provide complete and accurate trade data in a timely manner when requested by FINRA and the SEC. In addition to the fine, Deutsche Bank must retain an independent consultant to review all of the firm's policies, systems, procedures and training related to its blue sheets, and to implement any changes that may be necessary to improve its trade data submissions. Deutsche Bank allegedly submitted thousands of inaccurate and late blue sheets to the SEC and FINRA over a seven-year period. While Deutsche Bank neither admitted nor denied any wrongdoing - as is often the case in these settlements, the fine is the largest imposed by FINRA in connection with trade sheet lapses. "Incomplete and inaccurate blue sheet data compromises our ability to identify individuals engaging in insider trading schemes and other fraudulent activity," Cameron Funkhouser, the executive vice president and head of FINRA’s Office of Fraud Detection and Market Intelligence, said in a statement. FINRA alleged that Deutsche Bank submitted thousands of inaccurate blue sheets between 2008 and 2015 and misreported over a million transactions. The inaccuracies ranged from incorrect broker codes and missing trading party identifications to duplicated, omitted or incorrectly reported transactions. Moreover, 40 percent of the blue sheets that Deutsche Bank submitted between January and August 2014 were late. The inaccuracies were said to be caused by systems failures, programming errors, and Deutsche Bank's failure to implement required enhancements. The firm also allegedly failed to adequately supervise its blue sheets system, and did not implement an audit system to ensure the trade date was accurate. "Firms must invest the resources necessary to ensure that they are providing complete and accurate blue sheet data whenever requested — without exception," said Funkhouser. The takeaway is that blue sheet submissions appear to be the subject of enhanced regulatory scrutiny as this fine comes in the wake of a $2.95 fine FINRA imposed on Macquarie Capital (USA) late last year. The best way to avoid a regulatory enforcement action is by implementing sound compliance policies and procedures with the help of an experienced attorney. This article was written by Jeffrey M. Haber, a partner at Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice.

By Jeffrey M. Haber In today’s digital world, it is not uncommon for individuals and businesses to memorialize the terms of their oral agreements through email. But are such agreements enforceable? The answer depends on a couple of factors, including whether there is a writing that memorializes the material terms of the agreement. Oral agreements that cannot be performed within one year of the agreement must be in writing. This broad rule, contained in the statute of frauds, is intended to “prevent a party from being held responsible, by oral, and perhaps false, testimony, for a contract that the party claims never to have made.” 73 Am. Jur. 2d Statute of Frauds § 403 (cited by William J. Jenack Estate Appraisers and Auctioneers, Inc. v. Rabizadeh, 22 N.Y.3d 470, 476 (2013)). In New York, the statute of frauds is codified in New York in General Obligations Law § 5-701(a)(1). Since oral contracts that cannot be performed within one year must be in writing, litigants have asked the courts to decide whether an email or other electronic media can satisfy the writing requirement of the statute of frauds. In 2004, the Supreme Court, Kings County held that a party’s “act of typing his name” at the bottom of an email demonstrated his/her “intention to authenticate” for purposes GOL § 5-701(a). Rosenfeld v. Zerneck, 4 Misc. 3d 193, 776 N.Y.S. 458 (Sup. Ct., Kings County 2004). In 2010, the Appellate Division, First Department ratified Rosenfeld, holding that “any uncertainty that existed in 1994 as to whether the record of an electronic communication satisfied the statute of frauds under New York state law has long since been resolved.” Naldi v. Grunberg, 80 A.D. 3d 1, 13 (1st Dep’t 2010). See also GOL § 5-703 (providing that “written text produced by … electronic signals…shall constitute a writing and any symbol executed or adopted by a party… to authenticate a writing shall constitute a signing.”). Given the recognition of email as a writing for purposes of the statute of frauds, the question for the courts is whether the email communications contain the content required to form a contract? See Naldi, 80 A.D.3d at 13 (quoting Nimmer, Law of Computer Technology § 13:12). Recently, the First Department addressed this question in Josephberg v. Crede Capital Group, LLC, 2016 NY Slip Op. 05086 (1st Dep’t June 28, 2016). Josephberg involved a $4.8 million breach of contract action arising from the alleged wrongful termination of the plaintiff, a former salesman at the defendant Crede Capital Group LLC (“Crede”), and the failure to pay commissions to the plaintiff for securing deals while employed at the defendant’s predecessor, Socius Capital Group, LLC, (“Socius”). The plaintiff claimed that the defendants failed to pay him a 15 percent commission on profits earned on deals generated by him with Cell Therapeutics Inc., Xcite Energy Ltd. and others, in violation of his oral agreement with Socius. Josephberg was never provided with, and did not sign, a written employment agreement. The defendants moved to dismiss the complaint on several grounds, including that Josephberg’s contract claims were barred by the statute of frauds. The lower court dismissed the plaintiff's breach of contract causes of action. The First Department reversed, holding that the emails relied upon by Josephberg to evidence the terms of his employment agreement satisfied the statute of frauds: Plaintiff alleges that defendant Socius orally agreed to provide him with 15% of the profits generated by financing transactions originated by him. The emails to which he points, authored by defendants Wachs and Peizer, equal partners in Socius, confirm the material elements of this alleged agreement and therefore satisfy the requirements of the statute of frauds (see Morris Cohon & Co. v Russell, 23 NY2d 569, 574-575 [1969]; see also General Obligations Law § 5-701[a][10]). Takeaways: The admonition that parties to an agreement should “put it writing” remains sound. Preferably, the agreement should be memorialized in a formal contract negotiated and drafted by counsel. However, as Josephberg teaches, electronic communications that confirm the existence of a contract by containing the material terms of the agreement can also suffice. There is one other admonition worth noting. Agreement by email can be risky. The reason: during negotiations, a party can inadvertently enter into an agreement. For this reason, parties often include language in their emails that expressly disclaims an enforceable contract until a formal, written agreement is prepared and executed. Of course, retaining counsel to negotiate and draft a written contract from the outset is the clearest way to avoid an inadvertent agreement. This article was written by Jeffrey M. Haber, a partner at Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice.

By Jeffrey M. Haber On June 22, 2016, the Department of Justice (“DOJ”) filed a Notice of Supplemental Authority in U.S. ex rel. Westrick v. Second Chance Body Armor, et al., No. 04-0280 (D.D.C.), a case brought under the False Claims Act (“FCA”) against contractors who manufactured and sold bullet proof vests. The purpose of the filing was to notify the court of the U.S. Supreme Court’s unanimous decision in Universal Health Services, Inc. v. United States ex rel. Escobar, 579 U.S. ___, slip op. No. 15-7 (June 16, 2016) (discussed here), and to explain its impact on the court’s dismissal of the government’s fraud-in-the-inducement claim. In Westrick, the government alleged that the bullet proof vests that the defendants manufactured and sold to the government degraded without warning and did not maintain the same level of bullet-resisting efficacy during the five-year warranty period. See United States ex rel. Westrick v. Second Chance Body Armor, Inc., 685 F. Supp. 2d 129, 132 (D.D.C. 2010); United States v. Toyobo Co., Ltd., 811 F. Supp. 2d 37, 41-42 (D.D.C. 2011). The government claimed that the defendants, Second Chance Body Armor, Inc., Toyobo Co., Ltd. and Toyobo America, Inc., and certain individuals, knew that the vests were unable to maintain their bullet-resisting efficacy during the five-year warranty period, did not inform the government or other buyers about this degradation, and intentionally placed false information into the market suggesting that there was no degradation. See Second Chance, 685 F. Supp. 2d at 132; Toyobo, 811 F. Supp. 2d at 41-43. On motions for summary judgment, the district court dismissed some of the government’s fraud-in-the-inducement claims on the ground that the government did not present evidence that the withholding of data caused the government to purchase the vests (i.e., the data was a condition of payment). U.S. ex rel. Westrick v. Second Chance Body Armor, Inc., 128 F. Supp. 3d 1, 19 (2015). Prior to Escobar (and its adoption of the implied certification theory of liability in which half-truths are actionable), courts “employed a fraud-in-the-inducement theory to establish liability under the [FCA] for each claim submitted to the Government under a contract which was procured by fraud, even in the absence of evidence that the claims were fraudulent in themselves.” Id. (citation omitted). To prevail under this theory, the government had to “show that the false statements upon which [it] relied … caused [the government] to award the contract at the rate that it did.” E.g., United States ex rel. Thomas v. Siemens AG, 991 F. Supp. 2d 540, 569 (E.D. Pa. 2014) (citing United States ex rel. Marcus v. Hess, 317 U.S. 537, 543-44 (1943)). The government moved for reconsideration of the dismissal, and filed the supplemental authority to underscore the point that after Escobar the defendants “had a legal duty to disclose” their knowledge that the degradation of the bullet-proof vests sold to the government “contradicted [their] misrepresentations about the superiority” of those vests, and that the condition of payment analysis the court employed was no longer valid. In Escobar, the Supreme Court rejected arguments that the FCA only prohibits fraud that is “expressly designated” as a “condition of payment.” The DOJ’s Notice of Supplemental Authority in Westrick is the first public statement by the DOJ concerning the application of Escobar to the facts in a pending case under the FCA. This article was written by Jeffrey M. Haber, a partner at Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice.

By: Jonathan H. Freiberger This BLOG has previously addressed formal and informal appearances. As explained, it is axiomatic that a “plaintiff appears [in an action] merely by bringing it.” Deutsche Bank Nat. Trust Co. v. Hall, 185 A.D.3d 1006, 1007 (2nd Dep’t 2020) (citation and internal quotation marks omitted). Once served with process, a defendant must appear in an action to avoid a default. CPLR 320(a), which sets forth, inter alia, the various ways a defendant can formally appear in an action, provides that “[t]he defendant appears by serving an answer or a notice of appearance, or by making a motion which has the effect of extending the time to answer.” See also Deutsche Bank, 185 A.D.3d at 1007-8 (describing the ways in which a defendant appears and the pitfalls of failing to do so). New York courts also recognize “informal appearances.” An informal appearance occurs “by actively litigating the action before the court.” Bank of New York Mellon v. Taylor, 230 A.D.3d 457, 458 (2nd Dep’t 2024) (citations and internal quotation marks omitted); see also Bharath v. Sitaram, 246 A.D.3d 859, 861 (2d Dept. 2026).[1] Service of a notice of motion pursuant to CPLR 3211(a) or (b), when made prior to the time that the responsive pleading was otherwise due to be served, extends the defendant’s time to serve an answer until ten days after service of notice of entry of the order deciding the motion. CPLR 3211(f); U.S. Bank National Assoc. v. Gilchrest, 172 A.D.3d 1424, 1426 2d Dept. 2019). As to notices of appearance, it has been noted that they are simple documents that notif[y] the plaintiff that a defendant is appearing in the action” and “[are] the response[s] generally reserved for the situation in which the plaintiff’s process consisted of a summons with notice as authorized by CPLR 305(b).” Deutsche Bank, 185 A.D.3d at 1008 (citation and internal quotation marks omitted; hyperlink added). Notwithstanding the filing of a notice of appearance, a defendant must still timely respond to the complaint by filing an answer or making a motion pursuant to CPLR 3211(a) or (b) in order to avoid default in answering. Deutsche Bank, 185 A.D.3d at 1008; 21st Mortgage Corp. v. Raghu, 197 A.D.3d 1212, 1215 (2d Dept. 2021). These issues were addressed by the Appellate Division, Second Department, on July 15, 2026, in 55-57 Hester Grocery, Inc. v. Queens Metro Stop, Inc., a breach of contract action. The plaintiff in 55-57 filed its action and the defendant subsequently filed a notice of appearance. However, the defendant never filed an answer to the complaint. Almost two years after the defendant filed its notice of appearance, the plaintiff moved for leave to enter a default judgment. Over the defendant’s opposition, the motion court granted the motion. Thereafter, the defendant moved pursuant to CPLR 5015 to vacate the default, which motion was denied by the motion court. The Defendant appealed. The Second Department affirmed. The Court stated that “[a]lthough a defendant ‘appears’ within the meaning of CPLR 320(a) by merely serving a notice of appearance, service of a notice of appearance does not absolve a defendant from complying with the time restrictions imposed by CPLR 320(a) which govern the service of an answer or the making of a motion pursuant to CPLR 3211.” (Citations and internal quotation marks omitted.) The Court rejected the defendant’s claim that its formal and informal appearance were sufficient to vacate the default and stated that the “filing of a notice of appearance and opposition to the plaintiff’s prior motions did not cure the defendants’ default.” (Citations omitted.) The Court also found that the defendant’s motion pursuant to CPLR 5015 was properly denied. The Court noted that to succeed on its motion, the defendant was required to “provide a reasonable excuse for the default and demonstrate a potentially meritorious defense to the action.” (Citations omitted.) The Court held that while “law office failure” can be a “reasonable excuse,” “conclusory, undetailed and uncorroborated claim of law office failure does not amount to a reasonable excuse.” (Citations and internal quotation marks omitted.) Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice. [1] This BLOG has discussed informal appearances on numerous occasions. See, e.g., “Informal Appearances,” “The Pitfalls of the Informal Appearances and the Benefit of the Corporate Veil,” “The Second Department Holds, as a matter of First Impression that a Party’s Attendance at a Mandatory Settlement Conference Pursuant to CPLR 3408 Does Not Constitutes an Appearance for the Purposes of CPLR 3215(g)” and “Execution of Two Stipulations Proves Fatal to Defendant’s Motion for Relief Under CPLR 317”.

By: Jonathan H. Freiberger This Blog has previously discussed informal appearances in an article aptly titled: “Informal Appearances,” from which the introductory information related to informal appearances is taken. Informal Appearances It makes sense that a “plaintiff appears in an action merely by bringing it.” Deutsche Bank Nat. Trust Co. v. Hall, 185 N.Y.S.3d 1006, 1007 (2nd Dep’t 2020) (citation and internal quotation marks omitted). Once served with process, a defendant must appear in an action to avoid a default. Section 320(a) of New York’s Civil Practice Law and Rules (the “CPLR”), which sets forth, inter alia, the way a defendant can appear in an action, provides that “[t]he defendant appears by serving an answer or a notice of appearance, or by making a motion which has the effect of extending the time to answer.” An appearance pursuant to CPLR §320(a) is a formal appearance in the action. New York courts also recognize “informal appearances.” An appearance, whether formal or informal, can have a significant impact on litigation. Among other things, an appearance could: preclude the entry of a default judgment by plaintiff; operate to preclude a defendant from interposing a defense of lack personal jurisdiction; and, preclude a defendant from having a complaint dismissed pursuant to CPLR 3215(c) based on a plaintiff’s failure to seek a default judgment within a year of default. Depending on the circumstances, a plaintiff or a defendant may argue that a defendant has “informally appeared” in an action. To constitute an informal appearance, a defendant must have engaged in “meaningful participation in the merits of the case.” Kurlander v. Willie, 45 A.D.3d 1006, 1007 (3rd Dep’t 2007) (citation omitted). See also Deutsche Bank, 185 N.Y.S.3d at 1009. Corporate Veil One of the reasons why individuals form corporations and limited liability companies is to shield themselves from personal liability as a consequence of their business dealings. “The general rule, of course, is that a corporation exists independently of its owners, who are not personally liable for its obligations, and that individuals may incorporate for the express purpose of limiting their liability.” Town-Line Car Wash, Inc. v. Don’s Kleen Machine Kar Wash, Inc., 169 A.D.3d 1084, 1085 (2nd Dep’t 2019) (citations and internal quotation marks omitted); see also E. Hampton Union Free School Dist. v Sandpebble Builders, Inc., 66 A.D.3d 122 (2d Dep’t 2009), aff’d, 16 N.Y.3d 775 (2011). However, the corporate veil may be pierced in certain circumstances. The East Hampton Court recognized the “exception to [the] general rule, permitting, in certain circumstances, the imposition of personal liability on owners for the obligations of their corporation.” East Hampton, 66 A.D.3d at 126 (citations omitted). “A plaintiff seeking to pierce the corporate veil must demonstrate that a court in equity should intervene because the owners of the corporation exercised complete domination over it in the transaction at issue and, in doing so, abused the privilege of doing business in the corporate form, thereby perpetrating a wrong that resulted in injury to the plaintiff”. Id. Travelon, Inc. v. Maekitan Against this backdrop, we can discuss Travelon, Inc. v. Maekitan, a case decided on April 5, 2023, by the Appellate Division, Second Department, and in which the Court addresses informal appearances and corporate veil issues. [Eds. Note: the facts herein are edited for ease of discussion.] Plaintiff commenced a breach of contract action against, inter alia, Individual and Corporation. Thereafter, plaintiff moved for a default judgment (for failure to respond to the complaint) against Individual and Corporation and: [in] support of the motion, the plaintiff[] did not submit any affidavits of service of process upon [Individual] or [Corporation]. Instead, the plaintiff[] contended that an affidavit from [Individual] [(the “Affidavit”)]…, which was submitted by [Affiliated Corporation] in opposition to the plaintiff’s prior motion for a preliminary injunction, constituted an informal appearance on behalf of both [Individual] and [Corporation], that [Individual] and [Corporation] had submitted to personal jurisdiction of the Supreme Court despite not having been served with process, that their time to file an answer had passed, and therefore, the court could enter a default judgment against them. Affiliated Corporation’s counsel opposed the default judgment motion by submitting an affidavit in which he argued that he was only retained by, and appeared for, Affiliated Corporation and that “[Affiliated Corporation] opposes the motion for default judgments against [Corporation] and [Individual] because the motion, based entirely upon [Affiliated Corporation]’s filings in this proceeding, incorrectly charges that [Affiliated Corporation]’s participation constitutes an informal appearance on behalf of [Corporation] and/or [Individual].” Plaintiff appealed the denial of its motion for leave to enter a default judgment against [Corporation] and [Individual]. On appeal the Second Department modified supreme court’s order granting that portion of plaintiff’s motion seeking a default judgment against Corporation. The Court recognized that “[o]n a motion for leave to enter a default judgment against a defendant based on the failure to answer or appear, a plaintiff must submit proof of service of the summons and complaint, proof of the facts constituting the cause of action, and proof of the defendant’s default.” (Citations and internal quotation marks omitted; emphasis added.) Plaintiff, however, did not submit an affidavit of service of the summons and complaint on [Individual] and [Corporation], nor did [Individual] or [Corporation] make a formal appearance in the action pursuant to CPLR 320(a). The Court then discussed informal appearances; noting that “[w]hen a defendant participates in a lawsuit on the merits, he or she indicates an intention to submit to the court’s jurisdiction over the action, and by appearing informally in this manner, the defendant confers in personam jurisdiction on the court.” (Citations and internal quotation marks omitted.) Also, “[a]n appearance of the defendant is equivalent to personal service of the summons…, unless an objection to jurisdiction under CPLR 3211(a)(8) is asserted by motion or in the answer as provided in rule 3211 (CPLR 320[b])”. (Internal quotation marks and brackets omitted; hyperlink added.) Although it is an “infrequent thing,” informal appearances may occur “even when the defendant is not served with process, where an individual defendant affirmatively states that he or she is only acting in his or her capacity as an officer of a corporate defendant, and where a party opposes a motion for a preliminary injunction. (Citations omitted.) As to the Individual, the Court found that the Affidavit (submitted in opposition to the preliminary injunction motion) made clear that he was speaking in a representative capacity, on behalf of Corporation and Affiliated Corporation, and not in an individual one. Recognizing the corporate veil cloaked the Individual with immunity from personal liability, the Court determined that, on the record presented, the Individual did not “participat[] on the merits in his individual capacity” by submitting the Affidavit on behalf of Corporation and Affiliated Corporation. Accordingly, supreme court properly denied that portion of plaintiff’s motion seeking a default judgment against the Individual. Conversely, the Court determined that the Affidavit constituted an informal appearance on behalf of Corporation. In the Affidavit, Individual indicated he was the CEO of both Corporation and Affiliated Corporation. Further, in the Affidavit, Individual collectively defined the Corporation and Affiliated Corporation and made other averments and stated facts involving Corporation. “Thus, even though counsel for [Affiliated Corporation] repeatedly denied that he was ever retained to represent [Corporation] in this action, the Affidavit advanced contentions that might constitute either affirmative defenses or counterclaims on behalf of [Corporation]. Thus, as to the Corporation, the Court held: Since the [A]ffidavit constituted an informal appearance on behalf of [Corporation], and since [Corporation] failed to serve and file an answer within 20 days of its informal appearance (see CPLR 320[a], [b]) or move pursuant to CPLR 3211(a)(8) to dismiss the complaint insofar as asserted against it on the ground that the Supreme Court did not have personal jurisdiction over it (see id. § 320[b]), the court should have granted that branch of the plaintiffs’ motion which was for leave to enter a default judgment against [Corporation]. Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice.