By: Jeffrey M. Haber Summary judgment in lieu of a complaint under CPLR 3213 was central to the decision in Newmark Partners, L.P. v. Singer, 2026 N.Y. Slip Op. 03923 (1st Dept. June 23, 2026), the subject of today’s article, where the Appellate Division, First Department, affirmed the enforcement of a settlement agreement arising from a failed $13 million transaction. Following defendants’ default on an $11 million repayment obligation structured under the agreement, plaintiff obtained expedited judgment based on the agreement’s clear payment terms. The Court held that the agreement qualified as an instrument for the payment of money only, the terms of the agreement warranted entry of summary judgment, and rejected defendants’ fraudulent inducement defense as unsupported, finding no triable issue of fact sufficient to defeat summary judgment. Newmark arose out of a default in a Recission and Settlement Agreement (the “Agreement”), executed by plaintiff, defendants, and certain non-parties. Prior to execution of the Agreement, defendants and the non-parties entered into a Securities Purchase Agreement, dated August 13, 2021, to sell Nightingale Realty, LLC, to plaintiff for $13,000,000 in cash. Plaintiff then filed an action in New York State Court, seeking recission of the transaction. On March 3, 2023, plaintiff, defendants, and the non-parties executed the Agreement, requiring that defendants and the non-parties repay plaintiff $11,000,000 over the course of six installments, concluding on April 30, 2024. Under Section 2.1 of the Agreement, “the Parties agree[d] to rescind the Transaction as follows: at the Rescission Closing (as defined below): (a) the [non-parties] shall pay the initial $5,000,000 installment of the Settlement Amount (as set forth in Section 5.3 below) to Buyer; and (b) the [defendants] shall, subject to the limitations set forth in Section 5.3, pay the remaining Settlement Amounts due after the Rescission Closing Date in accordance with the schedule set forth therein.” Section 5.3(a) of the Agreement required the non-parties to pay the initial $5,000,000 installment, while the remaining $6,000,000 was to be shared between defendants and the non-parties over six installments. Defendants’ obligation was capped at no more than 50% of each installment and, in any event, limited to a maximum aggregate contribution of $3 million. Notably, in Section 5.3(f) of the Agreement, the parties contemplated and agreed that “Section 5.3 constitute[d] an Agreement for the payment of money only. The Sellers and the Principals expressly agree that failure to make payment under this Agreement, as and when due, shall entitle Buyers to enforce the payment obligations under this Agreement pursuant to NY CPLR 3213.” Under Section 5(g) of the Agreement, “Default” was defined as “a breach under the Recission Agreement.” Under Section 8 of the Agreement, remedies for default included the right of the Secured Party “to institute any claim, action, suit, or proceeding seeking specific performance in connection with any of the agreements.” The first two installment payments were remitted under the Agreement, but no further payments were made. Accordingly, on August 1, 2023, plaintiff issued defendants and the non-parties a Notice of Breach, for failure to pay the required $1,250,000 by the mandated date of July 31, 2023. This notice invoked plaintiff’s right to demand payment of the outstanding principal amount owed by defendants. Additional demands for payment were sent on August 1, 2023; November 13, 2023; March 5, 2024; and October 25, 2024. As of the filing of the action, no other payments under the Agreement were made. Plaintiff moved for summary judgment in lieu of complaint. Defendants cross-moved, arguing, among other things, that the Agreement’s merger clause was mere boilerplate and insufficient to bar their claim for fraudulent inducement. Defendants also contended that plaintiff’s knowledge of, involvement in, or willful blindness to defendant’s alleged fraudulent conduct during the negotiation of the Agreement barred their fraudulent inducement claim. Defendants further maintained that the structure of the Agreement supported their position. They asserted that the Agreement primarily imposed obligations on defendant, while plaintiff received no immediate benefit and faced only contingent exposure. In their view, this allocation made defendant’s financial condition and performance material to plaintiff’s decision to enter into the Agreement. As a result, any misrepresentations or omissions concerning those matters induced their consent. The motion court granted plaintiff’s motion for summary judgment in lieu of a complaint and denied defendants’ cross-motion to dismiss. CPLR 3213 provides an expedited procedure for claims based upon “documentary claims so presumptively meritorious that a formal complaint is superfluous, and even the delay incident upon waiting for an answer and then moving for summary judgment is needless.”[1] “When an action is based upon an instrument for the payment of money only . . . the plaintiff may serve with the summons a motion for summary judgment and the supporting papers in lieu of a complaint.”[2] A settlement agreement may qualify as instrument for the payment of money, when the agreement contains an unconditional promise to pay a sum certain, signed by one the parties and due on demand or at a definite time.[3] To establish entitlement to relief under CPLR 3213, a plaintiff must show the existence of an instrument for the payment of money only, along with proof of nonpayment in accordance with its terms.[4] The motion court held that plaintiff satisfied its prima facie burden by submitting: (i) the executed Agreement; (ii) the August 1, 2023 Notice of Breach and subsequent demand letters; (iii) the December 23, 2024 Affidavit of Service to defendant, along with the December 23, 2024 Affidavit of Service to the defendants, affirming that defendants received sufficient notice of the actions brought against them; and (iv) affirmation of defendants’ default and the total amount due on the Agreement. Plaintiff also provided support and calculations for the interest and fees owed. On appeal, the Appellate Division, First Department, unanimously affirmed. The Court held that “[t[he [motion] court … properly held that the … Agreement … [was] an instrument for the payment of money only (CPLR 3213).”[5] The Court found that plaintiff met its “prima facie case for recovery under CPLR 3213 by submitting, among other things, the affirmation of an attorney who had personal knowledge of the sums due, … its October 25, 2024 letter to defendants, setting forth the amounts paid” by the non-parties under the Agreement, “as well as the bankruptcy trustee’s clawback of $1.15 million of that sum.”[6] Notwithstanding, the Court found that the language of the Agreement itself sufficed to warrant the grant of summary judgment in lieu of complaint, independent of whether the Agreement itself was an instrument for the payment of money only under applicable case law:[7] Defendants unambiguously agreed that section 5.3 of the Agreement, the operative section that obligated them to make a settlement payment in certain defined installments, was “an Agreement for the payment of money only" and that "failure to make payment . . . shall entitle [plaintiff] to enforce the payment obligations . . . pursuant to . . . CPLR 3213. Accordingly, we need not determine whether section 5.3 would be considered an instrument for the payment of money only under applicable case law.”[8] The Court also held that defendants “failed to identify any issue that would preclude summary recovery on the instrument.”[9] The Court considered defendants’ “contention that section 4.2 of the Agreement [was] a standard merger clause that [did] not preclude their fraud defense” and determined the argument to be “meritless.”[10] Under section 4.2 of the Agreement, noted the Court, “defendants plainly covenanted that they had ‘not been influenced to any extent whatsoever in [entering into the Agreement] by any other Party or by any other person or entity, except for those representations, statements and promises expressly set forth’ in the Agreement.”[11] “Under Delaware law, which govern[ed] the Agreement,” said the Court, “‘a party cannot promise . . . that it will not rely on promises and representations outside of the agreement and then shirk its own bargain.’”[12] The Court further held that “[a] non-reliance clause such as section 4.2 also bar[red] a claim of fraudulent omission or concealment.”[13] Finally, the Court held that “defendants failed to raise a triable issue of fact as to their fraudulent inducement defense because they did not support the defense with competent evidence.”[14] Takeaway Newmark underscores several core principles of contract enforcement through the Court’s emphasis on Section 5.3 of the Agreement. Though not explicitly stated, the Court reaffirmed the principle that clear and unambiguous contractual terms will be enforced as written. Section 5.3 expressly set forth the parties’ payment obligations, including the total Settlement Payment, the installment structure, and the allocation of responsibility among the obligors. Because these terms were definite and explicit, the Court applied them according to their plain meaning. This clarity supported the grant of summary judgment in lieu of a complaint. Section 5.3 functioned as an instrument for the payment of money only, imposing a concrete obligation to pay a sum certain under a defined schedule. The decision also reflects that settlement agreements, when they contain such unconditional payment obligations, may qualify as instruments for the payment of money only and may therefore be enforced through this expedited procedural mechanism. Once the plaintiff established nonpayment, the agreement itself conclusively demonstrated entitlement to recovery. This conclusiveness could not be overcome by defendants’ fraudulent inducement defense. Although fraud can defeat summary judgment, the Court found that defendants’ allegations were devoid of evidentiary support (i.e., they were either conclusory, unsupported by the record, or insufficiently tied to the specific payment obligation at issue). As a result, the asserted fraud defense was inadequate to transform what was otherwise a straightforward instrument for the payment of money into a fact-bound dispute requiring trial. In these circumstances, where the contract is clear, the obligation to pay is unconditional, and the fraud allegations fail to create a genuine issue of material fact, courts, like the Newmark court, will enforce the agreement as written and grant judgment as a matter of law. __________________________________ 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] Weissman v. Sinorm Deli, 88 N.Y.2d 437, 443 (1996) (internal quotations omitted). [2] CPLR 3213. [3] Insitro, Inc. v. Cellaria, Inc., 2022 N.Y. Slip Op. 30902(U) (Sup. Ct., N.Y. County Mar. 14, 2022). [4] 27 W. 72nd St. Note Buyer LLC v. Terzi, 194 A.D.3d 630, 631 (1st Dept. 2021); Valencia Sportswear, Inc. v. D.S.G. Enterprises, Inc., 237 A.D.2d 171, 171 (1st Dept. 1997). [5] Slip Op. at *1. [6] Id. [7] Id., citing Marjan Intl. Corp. v. Lillian August Designs, Inc., 225 A.D.3d 408, 408 (1st Dept. 2024). [8] Id. (citation omitted). [9] Id. at *2. [10] Id. [11] Id. [12] Id., quoting RAA Mgt., LLC v. Savage Sports Holdings, Inc., 45 A.3d 107, 117 (Del. 2012). [13] Id., citing Prairie Capital III, L.P. v. Double E Holding Corp., 132 A3.d 35, 51-53 (Del. Ch. 2015). [14] Id., citing Woodbridge Vil. Assoc. v. Goren, 188 A.D.2d 293, 293 (1st Dept. 1992); Chemical Bank v. Alco Gems Corp.,151 AD2d 366, 368 (1st Dept. 1989).

By: Jeffrey M. Haber In New York, “a valid release constitutes a complete bar to an action on a claim which is the subject of the release.”[1] If “the language of a release is clear and unambiguous, the signing of a release is a ‘jural act’ binding on the parties.”[2] For this reason, “[a] release should never be converted into a starting point for … litigation except under circumstances and under rules which would render any other result a grave injustice.”[3] In New York, “a release may encompass unknown claims, including unknown fraud claims, if the parties so intend and the agreement is ‘fairly and knowingly made.’”[4] However, if the release was obtained under duress, through illegality, fraud or mutual mistake, it may be invalidated, a burden which is borne by the party seeking to set aside the release.[5] And the party seeking to set aside the release “may later challenge that release as fraudulently induced only if it can identity a separate fraud from the subject of the release.”[6] To allow anything less would undermine a party’s ability to settle a fraud claim with finality.[7] A party that releases a fraud claim may later challenge that release as fraudulently induced only if he/she can identify a separate fraud from the subject of the release.[8] As the Court of Appeals observed, “[w]ere this not the case, no party could ever settle a fraud claim with any finality.”[9] A plaintiff seeking to invalidate a release due to fraudulent inducement must “establish the basic elements of fraud, namely a representation of material fact, the falsity of that representation, knowledge by the party who made the representation that it was false when made, justifiable reliance by the plaintiff, and resulting injury.”[10] In LMM Capital Partners, LLC v. Mill Point Capital, LLC, 2024 N.Y. Slip Op. 00806 (1st Dept. Feb. 15, 2024) (here), the Appellate Division, First Department addressed the foregoing principles. [Eds. Note: the factual discussion comes from the First Department’s decision and order.] In early 2020, plaintiff LMM Capital Partners, LLC (“LMM”), a private equity firm, and defendant Martin Kelly (“Kelly”), the CEO and majority owner of defendant E&M Logistics, Inc. (“E&M”), a leading distributor of food and beverages, began discussing and negotiating plaintiff’s acquisition of E&M. As part of the negotiation process, plaintiff and E&M entered into a Letter of Intent (“LOI”). The LOI provided, among other things, that should E&M elect not to close the transaction for any reason, it would pay a “breakup fee” of $400,000.00 to plaintiff. During negotiations with E&M, plaintiff sought an investment partner with which it could complete the transaction. Plaintiff narrowed its search down to two other private equity firms, nonparty Tenex Capital Management (“Tenex”) and defendant Mill Point Capital LLC (“Mill Point”). During the search, Mill Point and plaintiff entered into a Non-Circumvention Agreement (“NCA”) in which Mill Point agreed to not pursue the acquisition of E&M, for a certain period of time, on its own. Ultimately, plaintiff selected Tenex and moved forward with the transaction. Less than one month later, Kelly told plaintiff’s managing partner, Elisha Aharon (“Aharon”) that Kelly would like to terminate all negotiations with plaintiff and pay the breakup fee. Kelly also informed Aharon that E&M’s two largest vendors, nonparties Nestle and Froneri, would not approve the sale of E&M to any private equity fund. Aharon attempted to dissuade Kelly and asked to speak to someone at Nestle and Froneri to assure them that LMM and Tenex were the right ones for the deal. Kelly declined to arrange such a meeting. A few days later E&M’s attorney sent a Mutual Termination Agreement and Release to Aharon. Both Aharon, on behalf of LMM, and Kelly, on behalf of E&M, executed the release which terminated the LOI and provided that E&M would pay plaintiff a total of $420,000.00. Pursuant to the agreement, plaintiff released: E&M from and against any and all manner of actions, causes of action, … , claims, demands, damages, … , costs, expenses, reasonable attorneys’ fees, … , and liabilities … of whatsoever kind and nature, whether based on tort (including, without limitation, acts of negligence), contract or any other theory of recovery, whether at law or in equity or otherwise, whether known or unknown, liquidated or unliquidated, suspected or unsuspected and whether or not concealed or hidden, which LMM … had, now has, or hereafter may have against the Company … arising out of, relating to, connected with, or incidental to, the Letter of Intent or the transaction contemplated thereby. The Termination Agreement defined “Company Released Parties” as, “(a) the Company’s past, present and future Affiliates (as defined below); (b) the Company’s and the Company’s Affiliates’ predecessors, successors, and assigns; and (c) the directors, officers, members, managers, shareholders, employee stock ownership plan, partners, financing and equity sources, trustees, supervisors, employees, agents, and representatives of each Party included within (a) and (b) immediately above.” Affiliates was defined as “with respect to a Party, an entity which, directly or indirectly, controls, is controlled by, or is under common control with such Party.” Less than two months after signing the Termination Agreement, Aharon learned that Mill Point was pursuing E&M. A mere three months later, E&M and Mill Point announced that Mill Point had acquired E&M for $80 Million, which was six million more than LMM had offered. Soon thereafter, plaintiff commenced the action, alleging breach of the NCA and tortious interference with plaintiff’s business relations against Mill Point; tortious interference with contract and constructive fraud against Kelly and E&M; and fraudulent inducement against Kelly and E&M. Plaintiff also sought a declaration that the Termination Agreement and release were unenforceable. Defendants moved to dismiss the complaint pursuant to CPLR 3211(a)(1), (5), and (7). The motion court granted defendants’ motion, with prejudice. On appeal, the First Department unanimously affirmed. As an initial matter, the Court noted that the case turned on the release in the NCA and whether plaintiff’s claim for fraudulent inducement fell outside the scope of that release. The reason being that if the release was valid, then the claims asserted by plaintiff would be rendered moot. Turning to the release, the Court held that the release was “broad” and “encompassed fraud claims, both known and unknown, suspected and unsuspected, which plaintiff had, now had or hereafter may have.”[11] The Court noted that plaintiff’s allegations – that “E&M and Kelly knowingly falsely stated to LMM that Nestle and Froneri would never enter into a deal with a private equity firm or fund” and that they did so “with an intent to cause LMM to enter into the Termination Agreement under false pretenses and to stop pursuing the E&M deal …” – arose out of, related to, were connected with or incidental to the transaction contemplated by the LOI, and constituted claims that plaintiff explicitly released when it signed the Termination Agreement.[12] Thus, concluded the Court, “the fraud described by plaintiff fell ‘squarely within the scope of the release’ and [was] an attempt to convert the release into a starting point for litigation, which is impermissible.”[13] The Court rejected plaintiff’s argument that it justifiably relied on Kelly and E&M’s misrepresentations when it entered into the Termination Agreement. The Court found that plaintiff “had hints that Kelly’s representation that Nestle and Froneri would not approve of a private equity buyer for E&M were false.”[14] “First,” said the Court, “Kelly had previously informed plaintiff that Nestle and Froneri had approved the deal with plaintiff.”[15] “Second,” noted the Court, “plaintiff knew that Nestle had sold a majority stake in its U.S. ice cream business to a private equity firm in 2019, so it knew that Nestle did not always disapprove of private equity buyers.”[16] “When a party fails to make further inquiry or insert appropriate language in the agreement for its protection, it has willingly assumed the business risk that the facts may not be as represented,” explained the Court.[17] The Court held that “[p]laintiff ‘should have sought to condition the settlement on the truth of the representations by [Kelly/E&M] that induced [plaintiff] to enter the settlement.’”[18] The Court also rejected plaintiff’s reliance on the special facts doctrine.[19] The special facts doctrine “requires satisfaction of a two-prong test: that the material fact was information peculiarly within the knowledge of one party and that the information was not such that could have been discovered by the other party through the exercise of ordinary intelligence.”[20] The Court held that plaintiff “fail[ed] to satisfy that test: the fact that nonparties Nestle and Froneri would actually allow a private equity fund to buy E&M was not peculiarly within the knowledge of E&M and there was nothing stopping plaintiff from contacting Nestle and Froneri directly.”[21] The Court noted that “[p]laintiff’s claims on appeal that Kelly precluded it from having contact information for Nestle and Froneri and that its October 2020 call with a Nestle Vice President was not with a decision maker are not supported by the record.”[22] “In sum,” concluded the Court, “the motion court properly dismissed the fourth through sixth causes of action, which seek to invalidate the release.”[23] Turning to plaintiff’s “even if” arguments – i.e., the release is valid – the Court held that the parties covered by the release included Mill Point, even if plaintiff did not intend to include it.[24] The Court held that the language of the release was “‘unmistakenly clear’” making plaintiff’s intent as to who was being released “‘irrelevant’”.[25] The release included “Company Affiliates”, said the Court, “which was defined as a party or entity that ‘directly or indirectly, controls, is controlled by, or is under common control with such’ Company and Company Affiliates. Upon acquiring E&M, Mill Point was covered by the release as a Company Affiliate.”[26] Finally, the Court rejected “[p]laintiff'’s contention that the release did not cover conduct after its date” because “[t]he release covers any claims that plaintiff ‘hereafter may have.’”[27] __________________________________________ Jeffrey M. Haber 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] Global Minerals & Metals Corp. v. Holme, 35 A.D.3d 93, 98 (1st Dept. 2006). [2] Booth v. 3669 Delaware, Inc., 92 N.Y.2d 934, 935 (1998) (quoting Mangini v. McClurg, 24 N.Y.2d 556, 563 (1969)). See also Centro Empresarial Cempresa S.A. v AmÉrica MÓvil, S.A.B. de C.V., 17 N.Y.3d 269, 276 (2011). [3] Centro, 17 N.Y.3d at 276 (quoting Mangini, 24 N.Y.2d at 563). [4] Centro, 17 N.Y.3d at 276 (quoting Mangini, 24 N.Y.2d at 566-567). [5] Id. [6] Id.; Silver Point Capital Fund, L.P. v. Riviera Resources, Inc., 198 A.D.3d 432, 433 (1st Dept. 2021). [7] Centro, 17 N.Y.3d at 276. [8] Id. (citation omitted). [9] Id. [10] Id. (quoting Global Mins., 35 A.D.3d at 98). [11] Slip op. at *3. [12] Id. [13] Id. [14] Id. “When the party to whom a misrepresentation is made has hints of its falsity, a heightened degree of diligence is required of it. It cannot reasonably rely on such representations without making additional inquiry to determine their accuracy.” Centro, 17 N.Y.3d at 279 (brackets and internal quotation marks omitted). [15] Id. [16] Id. [17] Id. (quoting Global Mins., 35 A.D.3d at 100). [18] Id. at 3-4 (quoting id. at 101). [19] Id. at *4. [20] Id. (quoting Greenman-Pedersen, Inc. v. Berryman & Henigar, Inc., 130 A.D.3d 514, 516 (1st Dept. 2015), lv. denied, 29 N.Y.3d 913 (2017) (internal quotation marks omitted). [21] Id. [22] Id. (citation omitted). [23] Id. [24] Id. [25] Id. (quoting Matter of Schaefer, 18 N.Y.2d 314, 317 (1966)). [26] Id. [27] Id.

By: Jeffrey M. Haber In today’s article, we examine the interplay between releases, anti-reliance clauses, and the special facts doctrine under New York law, using the Appellate Division, First Department’s decision in Leinhardt v. Socure, Inc., 2026 N.Y. Slip Op. 03881 (1st Dept. June 18, 2026), as a focal point. The case highlights the courts’ commitment to enforcing contractual provisions that allocate risk in commercial transactions, particularly where sophisticated parties are involved. It addresses a recurring tension in fraud litigation: whether a party who later claims to have been misled can overcome the barriers imposed by a broad release and explicit disclaimers of reliance. Through its analysis, the Court’s decision demonstrates that New York courts will generally hold parties to the terms of their agreements, even in the face of alleged informational irregularities or post hoc claims of unfairness. The decision underscores that fraud claims that are the subject of a broad release must overcome a material hurdle – namely, the existence of a fraud independent of the released claims, and the presence of justifiable reliance. The decision also underscores the narrow scope of the special facts doctrine in circumstances where a sophisticated party proceeds with known informational gaps. Against this backdrop, Leinhardt serves as an example of the consequences of entering into transactions without securing adequate disclosures or contractual protections. Leinhardt v. Socure, Inc. Plaintiff founded Socure, Inc., an identity verification company, in or about February 2011 and initially served as its Chief Executive Officer (CEO). He recruited several individuals, including defendants, to join the company’s management and board. In June 2013, plaintiff resigned as CEO and remained on the board until November 2013, when he was removed. At the time of his resignation, plaintiff executed a settlement agreement pursuant to which he sold a portion of his unvested shares back to the company and retained approximately 1.2 million vested shares, which were represented to constitute roughly 12% of the company. Plaintiff alleged that, following his resignation and removal from the board, his ownership interest was diluted through subsequent corporate actions. He further alleged that he did not receive access to the company’s capitalization table or valuation information during this period. In 2017, plaintiff, through counsel, raised potential claims relating to the dilution of his shares and requested information concerning the company’s capitalization and valuation in connection with settlement discussions. Plaintiff alleged that such information was not provided. On or about February 27, 2018, plaintiff entered into a settlement agreement and a repurchase agreement with the company (2018 Agreement and Repurchase Agreement, respectively, and collectively, the Agreements). Under those agreements, plaintiff sold his remaining shares back to the company and provided a general release of claims, including claims relating to his resignation, board removal, alleged dilution of his shares, and related matters. Subsequently, the company raised additional capital in funding rounds in 2018 and 2019. In separate litigation commenced in 2022 by a defendant concerning stock options, the parties reached a settlement in 2024 that included a monetary payment. Plaintiff alleged that valuations reflected in those proceedings differed from the valuation used in connection with his 2018 repurchase. Plaintiff contended that certain corporate documents and information, including an incentive plan and capitalization data, were not disclosed to him during relevant periods. He further alleged that he first became aware of information suggesting potential improprieties in or about 2023, after reviewing publicly available materials and communications with a former board member. Plaintiff alleged that the 2018 agreements were entered into under circumstances involving incomplete information and disputes regarding valuation and prior corporate actions. Defendants disputed plaintiff’s allegations. Defendants moved to dismiss, arguing that the 2018 Agreement barred plaintiff’s fraud and duress claims because they were subject to the release. They further argued that plaintiff did not plead a fraud separate from the subject of the release. And, even if a separate fraud was alleged, defendants contended that plaintiff agreed in the Agreements that he was not relying on any extra-contractual representations. The motion court denied the motion. The motion court held that plaintiff’s fraud claims were barred by “the broad terms of the release,” which “encompass[ed] fraud claims, both known and unknown, suspected and unsuspected. The motion court found that plaintiff’s fraud allegations arose “out of, relate[d] to, and [were] connected to the claims that Plaintiff explicitly released when he signed the 2018 Agreement.” “Thus,” concluded the motion court, the fraud described by Plaintiff fell “squarely within the scope of the release’ and [was] an attempt to convert the release into a starting point for litigation, which is impermissible.”[1] Next, the motion court examined whether plaintiff alleged a fraud outside the scope of the release executed in the 2018 Agreement. “Generally, a valid release constitutes a complete bar to an action on a claim which is the subject of the release.”[2] In fact, a “release may encompass unknown claims, including unknown fraud claims, if the parties so intend and the agreement is fairly and knowingly made.”[3] However, if the release was obtained under duress, through illegality, fraud or mutual mistake, it may be invalidated, a burden which is borne by the party seeking to set aside the release.[4] And the party seeking to set aside the release may challenge that release as fraudulently induced only if it can identify a separate fraud from the subject of the release.[5] To allow anything less, observed the motion court, would undermine a party’s ability to settle a fraud claim with finality.[6] The motion court found that plaintiff “sufficiently alleged that [defendant] refused to provide Plaintiff with Socure’s Cap Table, and Socure’s books and records, despite Plaintiff and his counsel demanding such, and denied Plaintiff access to all corporate books and records.” Because defendants failed to disclose the requested information, plaintiff “had no basis to value his stock,” and therefore “was ‘kept in the dark.’” Under such circumstances, the motion court held that “dismissal of the fraud claims against the [defendants] [was] not warranted pursuant to CPLR § 3211(a)(5) at this stage” of the proceeding. Having determined that plaintiff identified an alleged fraud outside the scope of the release, the motion court addressed whether defendants had a duty to disclose the information alleged to have been fraudulently omitted. The motion court determined that, under the special facts doctrine, plaintiff alleged that defendants had such a duty: plaintiff had “sufficiently alleged that the [defendants] refused to provide Plaintiff with Socure’s Cap Table, and Socure’s books and records.” Under the special facts doctrine, a duty to disclose arises where “[o]ne party’s superior knowledge of essential facts renders a transaction without disclosure inherently unfair.”[7] The “doctrine requires satisfaction of a two-prong test: that the material fact was information peculiarly within the knowledge of one party and that the information was not such that could have been discovered by the other party through the exercise of ordinary intelligence.”[8] In other words, if the other party has the means available to him of knowing he must make use of those means, or he will not be heard to complain that he was induced to enter into the transaction by misrepresentation.[9] At a minimum, a party has a duty to inquire.[10] On appeal, the First Department unanimously reversed. The Court held that “Plaintiff's claims [were] barred by the releases he signed and because he failed to allege a fraud separate from the subject of the releases.”[11] The Court also held that the “special facts, or ‘peculiar knowledge,’ doctrine,” was “inapplicable” because plaintiff was a sophisticated party that was aware that he was not “provided with full information but nonetheless agreed to go forward with [the] transaction without either demanding access to the omitted information or assurances in the form of representations and warranties.”[12] The Court further held that plaintiff’s fraud claims failed “for lack of reasonable reliance.”[13] The Court explained that as an attorney, plaintiff “knew that he had not received all the information he requested, but nevertheless, entered into the 2018 Settlement Agreement and Releases and the Stock Repurchase Agreement.”[14] The Court noted that “[i]n the Repurchase Agreement, he also ‘represented and warranted that he had all the information he needed to decide whether to sell his shares.’”[15] “In addition,” said the Court, “both the 2018 Settlement Agreement and the Repurchase Agreement state[d] that plaintiff was not relying on any extracontractual representations.”[16] Accordingly, under these facts, the Court concluded that plaintiff did not meet the justifiable reliance element of his fraud claims. Takeaway Leinhardt illustrates how New York courts treat releases, anti-reliance clauses, and the special facts doctrine in disputes involving alleged fraud. As discussed, the dispute arose after plaintiff, a company founder, sold his shares back to the company under agreements that included a broad release of claims and explicit anti-reliance language. He later alleged that the company had withheld key financial and capitalization information, resulting in an unfairly low valuation. Although the motion court initially allowed his claims to proceed, the First Department reversed and dismissed them. First, the Court reaffirmed the effect of a broadly drafted release. A valid release will bar all claims within its scope, including fraud claims, whether known or unknown, if the language reflects that intent. Plaintiff’s allegations were found to arise directly out of matters he had expressly released, making the release a complete defense. The Court’s decision underscores that courts view releases as a mechanism to bring disputes to a final resolution and will not permit parties to use subsequent litigation to revisit settled issues. Second, the Court emphasized that a plaintiff cannot circumvent a release simply by labeling the claim as fraud. To invalidate a release on grounds of fraudulent inducement, the plaintiff must allege a fraud that is separate and distinct from the subject of the release itself. In Leinhardt, the alleged misconduct – concerning valuation and alleged nondisclosure – was closely tied to the very claims plaintiff had agreed to release. As a result, the Court found no independent fraud that could survive the release. Third, the decision highlights the importance and enforceability of anti-reliance clauses. The agreements at issue expressly stated that plaintiff was not relying on any extra-contractual representations and that he had all the information necessary to make his decision. The Court treated these provisions as dispositive. In New York, when parties, especially sophisticated ones, disclaim reliance in clear contractual language, courts will enforce that disclaimer and bar fraudulent inducement claims based on alleged extra-contractual statements or omissions. Closely related to this point, the Court found that plaintiff could not establish the justifiable reliance element of his fraud claim. Fraud claims require a showing that the plaintiff justifiably relied on the alleged misrepresentation or omission. In Leinhardt, plaintiff admitted awareness that he was not being provided with all the requested information but nonetheless chose to proceed with the transactions. Given this knowledge – and the contractual acknowledgment that he had sufficient information (i.e., that he did not rely on extra-contractual statements) – the Court held that any reliance was not reasonable as a matter of law. Plaintiff’s sophistication further reinforced the outcome. As an attorney represented by counsel, plaintiff was expected to understand the implications of executing a release and agreeing to anti-reliance provisions. The Court treated his sophistication as undermining any claim that he had been misled or unfairly disadvantaged. Finally, the Court rejected the application of the special facts doctrine. As discussed, that doctrine can impose a duty to disclose when one party has superior knowledge of material facts that are not readily discoverable by the other party. The Court concluded that the doctrine did not apply because plaintiff was aware that he lacked certain information and nevertheless chose to proceed without securing it. He could have insisted on access to the company’s records, demanded representations and warranties, or declined to enter into the agreement. Because plaintiff failed to take those steps, the Court held that the doctrine did not apply. Taken together, Leinhardt sends a familiar message: New York courts will enforce broad releases and anti-reliance clauses, particularly where sophisticated parties are involved. A party that knowingly enters into an agreement without full information and without contractual safeguards will generally be bound by that decision. Fraud claims that have been released, as in Leinhardt, will not succeed absent an independent wrongdoing and demonstrable, reasonable reliance. __________________________________ 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] Citing Centro Empresarial Cempresa S.A. v. América Móvil, S.A.B de C.V., 17 N.Y.3d 269, 277 (2011). [2] Centro, 17 N.Y.3d at 276 (internal quotation marks and citations omitted). [3] Id. (internal quotation marks and citations omitted). [4] Id. [5] Id. [6] Id. [7] Citing Greenman-Pedersen, Inc. v. Berryman & Henigar, Inc., 130 A.D.3d 514, 516 (1st Dept. 2015) (citations omitted). [8] Id. (citations omitted). [9] ACA Fin. Guar. Corp v. Goldman, Sachs & Co., 25 N.Y.3d 1043, 1044 (2015). [10] Jana L. v. W. 129th St. Realty Corp., 22 A.D.3d 274, 278 (1st Dept. 2005). [11] Slip Op. at *1, citing Centro, 17 N.Y.3d at 276; Sodhi v. IAC/InterActive Corp., 201 A.D.3d 451, 451 (1st Dept. 2022); Silver Point Capital Fund, L.P. v. Riviera Resources, Inc., 198 A.D.3d 432, 433 (1st Dept. 2021). [12] Id., quoting Silver Point, 198 A.D.3d at 433 (internal quotation marks omitted), and citing CMB Export Infrastructure Inv. Group 48, LP v. Motcomb Estates, Ltd., 223 A.D.3d 513, 515 (1st Dept. 2024). [13] Id., citing Centro, 17 N.Y.3d at 278-279; Chadha v. Wahedna, 206 A.D.3d 523, 524 (1st Dept. 2022); Silver Point, 198 A.D.3d at 433. [14] Id. [15] Id., quoting Chadha, 206 A.D.3d at 524. [16] Id. Anti-reliance clauses can preclude fraudulent inducement claims. In order for a party to disclaim reliance on extra-contractual representations, an agreement must contain language that makes it clear that the parties are not relying on such representations. Courts will enforce anti-reliance language that identifies the specific information on which a party has relied and which forecloses reliance on other information. Danann Realty Corp. v. Harris, 5 N.Y.2d 317, 320 (1959) (finding that the plaintiff purchaser of a building could not assert that it was relying on oral representations made by the seller outside of a contract in which the plaintiff had specifically agreed in writing not to rely on such representations). See also Laxer v. Edelman, 75 A.D.3d 584, 585–86 (2d Dept. 2010) (holding a fraudulent inducement claim concerning flooding and mold issues in the building was barred by merger clause that disclaimed reliance on any statements by defendants regarding the condition of premises).

By: Jonathan Freiberger As discussed previously in this BLOG, in general, statutes of limitation govern the time in which a cause of action must be interposed after accrual. Article 2 of the CPLR addresses statute of limitations issues in New York. Section 201 of the CPLR provides that “[a]n action … must be commenced within the time specified in this article unless a different time is prescribed by law or a shorter time is prescribed by written agreement. No court shall extend the time limited by law for the commencement of an action.” Prior to the enactment of the statutes of limitation, “there was no fixed time for the bringing of an action [and p]ersonal actions were merely confined to the joint lifetimes of the parties.” Flanagan v. Mount Eden General Hospital, 24 N.Y.2d 427, 429 (1969). “The Statute of Limitations was enacted to afford protection to defendants against defending stale claims after a reasonable period of time had elapsed during which a person of ordinary diligence would bring an action. The statutes embody an important policy of giving repose to human affairs.” Flanagan, 24 N.Y.2d at 429 (citation omitted). It has been stated that “the primary purpose of Statutes of Limitation is to relieve defendants of the necessity of investigating and preparing a defense where the action is commenced against them after the expiration of the statutory period because the law presumes that by that time evidence has been lost, memories have faded and witnesses have disappeared.” Connell v. Hayden, 83 A.D.2d 30, 41 (2nd Dep’t 1981). The Connell Court further stated that: These policies [upon which Statutes of Limitation are based] are briefly reviewed in Note: Federal Rule of Civil Procedure 15(c): Relation Back of Amendments (57 Minnesota L.Rev. 83, 84–85), as follows: “First, the primary purpose of the statute is to compel the exercise of a right of action within a reasonable time so that a defendant will have a fair opportunity to prepare an adequate defense. Otherwise, the belated institution of an action might prejudice defendant’s preparation of evidence. Such prejudice would commonly result, for example, where critical evidence is lost or where the facts have been obscured by the passage of time or faulty memories. The death or removal from the jurisdiction of witnesses is a further problem. Second, the statute relieves the defendant from the otherwise endless psychological fear of litigation based upon events in the distant past. Third, it frees the judicial system from stale claims which make resolution of fact issues both difficult and arbitrary. Fourth, the courts are relieved of the additional caseload which would result if old causes of action were permitted, thus promoting efficient judicial administration. Finally, a limitations period avoids the disruptive effect of unsettled claims upon commercial intercourse. For example, creditors may more accurately determine a person’s financial status if his former outstanding debts have been extinguished by the running of the statute of limitations.” Connell, 83 A.D.2d at 40 – 41. “Although the Statute of Limitations is generally viewed as a personal defense to afford protection to defendants against defending stale claims, it also expresses a societal interest or public policy of giving repose to human affairs.” John J. Kassner & Co., Inc. v. City of New York, 46 N.Y.2d 544, 550 (1979) (citations and internal quotation marks omitted). While parties may agree to adjust a limitations period to a “shorter, but reasonable period to commence an action,” the power to “extend the Statute of Limitations is … more restricted.” Id. at 550-51. “The public policy represented by the statute of limitations becomes pertinent where the contract not to plead the statute is in form or effect a contract to extend the period as provided by statute Or [sic] to postpone the time from which the period of limitation is to be computed.” Id. at 551 (citation omitted). The validity of agreements to extend a limitations period “depends initially on the time at which it was made and where “the agreement to “waive” or extend the Statute of Limitations is made at the inception of liability it is unenforceable because a party cannot in advance, make a valid promise that a statute founded in public policy shall be inoperative.” Id. (citations and internal quotation marks omitted). An action to foreclose a mortgage is governed by a six-year statute of limitations. CPLR 213(4). See also Fed. Nat. Mort. Assoc. v. Schmitt, 172 A.D.3d 1324, 1325 (2d Dept. 2019); FV-1, Inc. v. Palaguachi, 234 A.D.3d 818, 820 (2d Dept. 2025). When a mortgage is payable in installments, “separate causes of action accrue for each installment that is not paid and the statute of limitations begins to run on the date each installment becomes due.” HSBC Bank USA, N.A. v. Gold, 171 A.D.3d 1029, 1030 (2d Dept. 2019); Fv-1, 234 A.D.3d at 820. Most mortgages, however, provide that a mortgagee may accelerate the entire debt in the event of, inter alia, a payment default by a mortgagor. Thus, “the terms of the mortgage may contain an acceleration clause that gives the lender the option to demand due the entire balance of principal and interest upon the occurrence of certain events delineated in the mortgage.” Bank of New York Mellon v. Dieudonne, 171 A.D.3d 34, 37 (2d Dept. 2019) (citations and internal quotation marks omitted). Once the mortgagee’s election to accelerate is properly made, “the borrower’s right and obligation to make monthly installments ceased and all sums become immediately due and payable.” EMC Mortgage Corp. v. Patella, 279 A.D.2d 604 (2d Dept. 2001) (citation, internal quotation marks and brackets omitted). The statute of limitations begins to run anew on the entire debt upon acceleration. HSBC, 171 A.D.3d at 1030 (citations omitted); Deutsche Bank Nat. Trust Co. v. Cahn, 2026 WL 1316040 (2d Dept. 2026); see also Fv-1, 234 A.D.3d at 820. Against this backdrop, we discuss Rouge v. U.S. Bank Trust N. A.,[1] a mortgage foreclosure action decided by the Appellate Division, First Department, on June 16, 2026. The lender in Rogue commenced a foreclosure action in 2011 after the borrower’s payment default. A default judgment was issued against the borrower after she failed to appear in the action. The action was dismissed in 2020 for lack of personal jurisdiction after a traverse hearing. In 2022, the borrower commenced an action under RPAPL 1501(4) to discharge the subject mortgage because any action on the note would be time-barred. RPAPL 1501(4), which permits a borrower to discharge a mortgage of record upon the expiration of the applicable limitations period, has been the subject of prior BLOG articles. See, e.g., “Second Department Cancels and Discharges of Record a Mortgage Pursuant to RPAPL 1501(4)” and “Get Rid of a Stale Mortgage by Bringing an Action Under RPAPL 1501(4)”. The Borrower’s motion for summary judgment was granted by the motion court and the lender appealed. Among other things, on its appeal the lender argued that the motion court should have denied the borrower’s motion for summary judgment because she waived defenses in the operative loan document. Thus, as noted in the record on appeal, the agreement provided that the borrower “has no right of set-off or counterclaim, or any defense to the obligations of the Consolidated Note or the Consolidated Mortgage.” (Citation to the record and brackets omitted.) In rejecting this argument, and relying on John J. Lassner & Co., supra, the Court stated that “[c]ontrary to [the lender]'s contention, [the borrower] did not waive the ability to assert the statute of limitations under RPAPL 1501(4). The waiver of the defense in the consolidation extension and modification agreement was made at the inception of liability and is therefore invalid.” 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] Some of the facts set forth herein were obtained from the appellate record available on the Court’s NYSCEF website.

By Jonathan H. Freiberger As explained in our Blog entitled “Get Rid of a Stale Mortgage By Bringing an Action Under RPAPL 1501(4),” mortgages on real property are typically delivered as security for the repayment of an obligation evidenced by a promissory note. A mortgage is an encumbrance on real property. Removing the encumbrance, if given the opportunity, makes sense. In situations where a mortgage appears as a lien of record on real property, but the statute of limitations has expired for the mortgagee to commence an action to foreclose the mortgage, RPAPL 1501(4) permits the mortgagor (or any other “person having an estate or interest in the real property”) to commence an action to have the encumbrance removed of record. RPAPL 1501(4) provides: Where the period allowed by the applicable statute of limitation for the commencement of an action to foreclose a mortgage, or to enforce a vendor’s lien, has expired, any person having an estate or interest in the real property subject to such encumbrance may maintain an action against any other person or persons, known or unknown, including one under disability as hereinafter specified, to secure the cancellation and discharge of record of such encumbrance, and to adjudge the estate or interest of the plaintiff in such real property to be free therefrom; provided, however, that no such action shall be maintainable in any case where the mortgagee, holder of the vendor’s lien, or the successor of either of them shall be in possession of the affected real property at the time of the commencement of the action. In any action brought under this section it shall be immaterial whether the debt upon which the mortgage or lien was based has, or has not, been paid; and also whether the mortgage in question was, or was not, given to secure a part of the purchase price. Thus, a mortgagor need not wait for the mortgagee to commence foreclosure proceedings, and defend by asserting a statute of limitations defense, to have the lien of the mortgage extinguished of record. “[A]n action upon a bond or note, the payment of which is secured by a mortgage upon real property, or upon a bond or note and mortgage so secured, or upon a mortgage of real property, or any interest therein” is subject to a six-year statute of limitations. See CPLR 213(4). In mortgage foreclosure actions, the statute of limitations begins to run from each unpaid installment, from the time that the mortgagee is entitled to receive full payment or the time the debt is accelerated. See Bank of New York Mellon v. Celestin, 164 A.D.3d 733 (2nd Dep’t 2018). “The law is well settled that, even if a mortgage is payable in installments, once a mortgage debt is accelerated, the entire amount is due and the Statute of Limitations begins to run on the entire debt…[because]…once a mortgage debt is accelerated, the borrowers’ right and obligation to make monthly installments ceased and all sums become immediately due and payable, and the six-year Statute of Limitations begins to run on the entire mortgage debt.” EMC Mortgage Corp. v. Patella, 279 A.d.2d 604 (2nd Dep’t 2001) (citations, internal quotation marks and internal brackets omitted.) As the Court of Appeals noted, “acceleration is, therefore, a significant event for statute of limitations purposes….” Freedom Mortgage v. Engel, 37 N.Y.3d 1, 22 (2021). [Eds. Note: this Blog has discussed Engel [here] and [here] and general concepts of acceleration [here].] As a corollary, the concept of deacceleration became just as significant an issue because deacceleration would stop the statute of limitations clock running on the prior acceleration. In Engel, the Court in discussing deacceleration and in “[a]dopting a clear rule that will be easily understood by the parties and can be consistently applied by the courts, [held] that where the maturity of the debt has been validly accelerated by commencement of a foreclosure action, the noteholder’s voluntary withdrawal of that action revokes the election to accelerate, absent the noteholder’s contemporaneous statement to the contrary.” Engel, 37 N.Y.3d at 19. The interplay between statute of limitations, acceleration and RPAPL 1501(4) was addressed by the Appellate Division, Second Department, on April 26, 2023, in Bush N Stuy v. Bayview Loan Servicing, LLC. Borrower in Bush N Stuy executed a mortgage in 2006. A foreclosure action was commenced in 2009 upon borrower’s default. [Eds. Note: the recited facts have been simplified for editorial purposes.] This action was abandoned upon borrower entering into a home affordable modification trial period plan agreement. Lender commenced a second foreclosure action in 2012 in which lender moved for a default judgment and borrower cross-moved to dismiss the action as abandoned pursuant to CPLR 3215(c). [Eds. Note: this Blog has discussed CPLR 3215(c) [here], [here], [here], and [here].] Borrower’s cross-motion was granted. In 2016, borrower commenced an action pursuant to RPAPL 1501(4) to cancel and discharge the mortgage of record and subsequently moved for summary judgment. Lender cross-moved for summary judgment. Borrower’s motion was granted, lender’s cross-motion was denied and the mortgage was cancelled and discharged of record. Lender appealed. The Second Department affirmed. The Court explained the relevant law as follows: Pursuant to RPAPL 1501(4), a person having an estate or interest in real property subject to a mortgage may maintain an action to secure the cancellation and discharge of the encumbrance, and to adjudge the estate or interest free of it, if the applicable statute of limitations for commencing a foreclosure action has expired (see Ditmid Holdings, LLC v JPMorgan Chase Bank, N.A., 180 AD3d 1002, 1003). An action to foreclose a mortgage is subject to a six-year statute of limitations (see CPLR 213[4]). "'[E]ven if the mortgage is payable in installments, once a mortgage debt is accelerated, the entire amount is due and the Statute of Limitations begins to run on the entire debt'" (Bank of N.Y. Mellon Corp. v Alvarado, 189 AD3d 1149, 1150, quoting Deutsche Bank Natl. Trust Co. v Adrian, 157 AD3d 934, 935 [internal quotation marks omitted]). "It is well-settled that the filing of a verified foreclosure complaint may evince an election to accelerate" (Freedom Mtge. Corp. v Engel, 37 NY3d 1, 25). Lenders may revoke the acceleration of full mortgage loan balances, so long as the revocation is accomplished by an affirmative act occurring within six years of the earlier acceleration (see Deutsche Bank Natl. Trust Co. v Adrian, 157 AD3d at 935; MSMJ Realty, LLC v DLJ Mtge. Capital, Inc., 157 AD3d 885, 887). The Court found that borrower met the burden of demonstrating entitlement to relief under RPAPL 1501(4) and stated: Here, in support of its motion for summary judgment on the complaint, [borrower] established that the filing of the complaint in the 2009 action in December 2009 accelerated the mortgage debt so as to start the running of the six-year statute of limitations period, and that the commencement of a new action to foreclose the mortgage would be time-barred (see Persaud v U.S. Bank N.A., 197 AD3d 1120, 1122; 128 Skillman St. 4A, LLC v Nationstar Mtge., LLC, 193 AD3d 1025, 1027). In opposition, [lender] failed to raise a triable issue of fact as to whether the acceleration of the debt was revoked. 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.

By: Jonathan Freiberger Typically, a mortgage on real property is delivered to stand as security for the repayment of an obligation evidenced by a promissory note. A mortgage is an encumbrance on real property. If there is an opportunity to remove such an encumbrance, it makes sense to do so. For example, when a home mortgage is fully paid, a homeowner typically sees to it that a satisfaction of mortgage is obtained from the lender and promptly recorded. In situations where a mortgage appears as a lien of record on real property, but the statute of limitations has expired for the mortgagee to commence an action to foreclose the mortgage, RPAPL 1501(4) permits the mortgagor (or any other “person having an estate or interest in the real property”) to commence an action to have the encumbrance removed of record. RPAPL 1501(4) provides: Where the period allowed by the applicable statute of limitation for the commencement of an action to foreclose a mortgage, or to enforce a vendor's lien, has expired, any person having an estate or interest in the real property subject to such encumbrance may maintain an action against any other person or persons, known or unknown, including one under disability as hereinafter specified, to secure the cancellation and discharge of record of such encumbrance, and to adjudge the estate or interest of the plaintiff in such real property to be free therefrom; provided, however, that no such action shall be maintainable in any case where the mortgagee, holder of the vendor's lien, or the successor of either of them shall be in possession of the affected real property at the time of the commencement of the action. In any action brought under this section it shall be immaterial whether the debt upon which the mortgage or lien was based has, or has not, been paid; and also whether the mortgage in question was, or was not, given to secure a part of the purchase price. Thus, a mortgagor need not wait for the mortgagee to commence foreclosure proceedings and defend by asserting a statute of limitations defense to have the lien of the mortgage extinguished of record. “[A]n action upon a bond or note, the payment of which is secured by a mortgage upon real property, or upon a bond or note and mortgage so secured, or upon a mortgage of real property, or any interest therein” is subject to a six-year statute of limitations. See CPLR 213(4). In mortgage foreclosure actions, the statute of limitations begins to run from each unpaid installment, from the time that the mortgagee is entitled to receive full payment or the time the debt is accelerated. See Bank of New York Mellon v. Celestin, 164 A.D.3d 733 (2nd Dep’t 2018). “The law is well settled that, even if a mortgage is payable in installments, once a mortgage debt is accelerated, the entire amount is due and the Statute of Limitations begins to run on the entire debt…[because]…once a mortgage debt is accelerated, the borrowers' right and obligation to make monthly installments ceased and all sums become immediately due and payable, and the six-year Statute of Limitations begins to run on the entire mortgage debt.” EMC Mortgage Corp. v. Patella, 279 A.d.2d at 604 (2nd Dep’t 2001) (citations, internal quotation marks and internal brackets omitted.) In 21st Mortgage Corp. v. Nweke (2nd Dep’t October 3, 2018), the Court decided issues related to RPAPL 1501(4). There, lender commenced an action to foreclose a mortgage obtained in 1999. A foreclosure action was commenced in April of 2006 after defendant defaulted but was discontinued after a traverse hearing determination that defendant was not properly served with process. A second foreclosure action commenced in 2007, was discontinued in January of 2013 by order of the court on lender’s motion. In September of 2014, plaintiff (a subsequent assignee of the original lender) commenced an action to foreclose the mortgage. The defendant borrower answered the complaint, asserted several affirmative defenses (including a statute of limitations defense) and counterclaims (among others, to cancel and discharge the mortgage pursuant to RPAPL 1501(4)). Thereafter, plaintiff moved for summary judgment. In response, defendant borrower cross-moved for summary judgment dismissing the complaint on statute of limitations grounds as well on her counterclaim pursuant to RPAPL 1501(4). Among other things, supreme court denied plaintiff’s motion for summary judgment, granted defendant borrower’s motion for summary judgment on statute of limitation grounds and, sua sponte, imposed an equitable mortgage, in plaintiff’s favor, on the subject property. In reversing supreme court, the Second Department held that defendant borrower “established her prima facie entitlement to judgment as a matter of law on her counterclaim pursuant to RPAPL 1501(4) to cancel and discharge the mortgage by demonstrating that more than six years had passed since the mortgage was accelerated and therefore this foreclosure action was time-barred.” Further, the Court vacated that portion of supreme court’s order imposing an equitable mortgage on the property because “plaintiff never requested this relief, and the defendant was not afforded any notice nor an opportunity to be heard on this issue which amounted to a denial of the defendant’s due process rights.” Further, the Court recognized that the doctrine of equitable mortgage does not apply “where a legal written mortgage existed” and, thus, was not applicable to the case being decided. 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.

By: Jeffrey M. Haber Pursuant to CPLR 3213, a plaintiff may commence an action “based upon an instrument for the payment of money only or upon any judgment” by filing a summons and motion for summary judgment in lieu of complaint.[1] The statute “provide[s] a speedy and effective means” for resolving “presumptively meritorious” claims.[2] The standard to prevail on a CPLR 3213 motion is the same as that on a CPLR 3212 motion: accelerated judgment will be awarded “if, upon all the papers and proof submitted, the cause of action ... shall be established sufficiently to warrant the court as a matter of law in directing judgment” for the plaintiff.[3] However, “where the instrument requires something in addition to defendant’s explicit promise to pay a sum of money, CPLR 3213 is unavailable.”[4] In addition, a CPLR 3213 motion may be defeated where the defendant offers “evidentiary proof sufficient to raise a triable issue of fact”.[5] CPLR 3213 can be used to enforce the terms of a settlement, even when the settlement is set forth in a term sheet, memorandum of understanding, or the like. “Term sheets”, “letters of intent”, “memoranda of understanding” and “agreements in principle” may constitute an enforceable agreement if the writing includes all the essential terms of an agreement.[6] This is so even if “the parties intended to negotiate a ‘fuller agreement’”.[7] Thus, if the informal writing contains the necessary elements of an enforceable contract, e.g., an offer, acceptance, consideration, mutual assent and intent to be bound, courts will enforce the writing as if it was a formal, written agreement.[8] However, a term sheet, letter of intent or a memorandum of understanding will be rendered ineffective where material terms are left for future negotiation, or the writing expressly reserves the right not to be bound until a more formal agreement is signed.[9] In Tangtiwatanapaibul v. Tom & Toon Inc., 2025 N.Y. Slip Op. 33139(U) (Sup. Ct., New York County Aug. 20, 2025) (here), the court held that a settlement term sheet qualified as an “instrument for the payment of money only” under CPLR 3213, thereby enabling plaintiffs to seek accelerated judgment for the amount due by defendants. In so holding, the motion court found the payment terms in the term sheet explicit and unconditional, rejecting defendants’ claims that extrinsic evidence was needed to determine whether payment was due under the term sheet. Background Tangtiwatanapaibul was an action to enforce and recover upon a term sheet memorializing the terms of the settlement of plaintiffs’ federal and state fair wage claims brought against the Corporate Defendants and the Individual Defendants in the United States District Court for the Southern District of New York. On June 26, 2019, during a settlement conference with Magistrate Judge Parker, the parties entered into a written “Settlement Agreement Term Sheet” (“the Term Sheet”), pursuant to which the Corporate and Individual Defendants agreed to pay Plaintiffs the sum of $72,000, inclusive of attorney’s fees and costs, in “equal mo. installments of $3,000 over 24 mo. commencing within 10 days of court approval of settlement,” with a 10-day notice and cure period in the event of a default in any payment, after which continued default would entitle plaintiffs to “2x remaining amount due.” The Term Sheet also provided that: the Corporate and Individual Defendants would give a confession of judgment; the Corporate and Individual Defendants did not admit liability; plaintiffs would give defendants a general release of all claims raised in the lawsuit; and plaintiffs’ attorney would prepare a detailed settlement agreement. The Term Sheet expressly stated that it was a “binding agreement” as of the “effective date”. The parties also agreed that Magistrate Judge Parker would retain jurisdiction to approve the settlement and dismiss the case. Although more formal written settlement agreements were prepared and exchanged between June 2019 and October 2020, one was not fully executed by the parties. Notwithstanding, the Corporate and Individual Defendants paid plaintiffs $2,000. They stopped making payments as of September 29, 2020. By order dated October 13, 2020, Magistrate Judge Parker approved the settlement reflected in the Term Sheet and dismissed the action without retaining jurisdiction to enforce the settlement. Plaintiffs moved for clarification of the October 13, 2020 Order and separately appealed therefrom. By opinion and order dated August 24, 2021, Magistrate Judge Parker clarified her prior findings that, inter alia, the Term Sheet “contained all of the material terms of the agreement and explicitly set forth that those terms were binding as of that date [June 26, 2019]” and that “to the extent Plaintiffs seek to enforce the settlement they reached, they may do so in state court.” By Summary Order dated December 12, 2022, the United States Court of Appeals for the Second Circuit affirmed the Magistrate Judge’s approval of the Term Sheet as an “enforceable contract,” binding as to its material terms, and to be enforced in state court. On December 1, 2024, and pursuant to CPLR 3213, Plaintiffs commenced the action for an accelerated judgment of $140,000, plus interest, in their favor and against the Corporate and Individual Defendants, based upon the terms of the Term Sheet. The Corporate and Individual Defendants opposed the motion on the ground that the Term Sheet was neither a judgment nor an instrument for the payment of money only, as contemplated by the statute. They also argued that there were issues of fact “as to how much [was] owed” under the agreement and whether the amount of the settlement should be reduced in proportion to the number of plaintiffs that did not sign the “agreements.” Defendants contended that, at best, plaintiffs had a breach of contract action requiring extrinsic evidence on its material terms. The Motion Court’s Decision The motion court held that plaintiffs established prima facie that the Term Sheet constituted an instrument for the payment of money only in that it clearly and unequivocally contained the Corporate and Individual Defendants’ “explicit promise” to pay plaintiffs the sum of $72,000 in equal monthly installments of $3,000 per month, for 24 months, commencing within 10 days of the Court’s approval of the settlement.[10] The motion court found that there was no ambiguity in the payment term or in the 10-day notice and cure provision, which sets forth a penalty on default in the sum of two times the remaining amount due.[11] These terms, said the motion court, were unconditional and not contingent upon any other act or fact.[12] The motion court concluded that the payment and default provisions were material terms of the “binding agreement” that the parties entered into on June 26, 2019.[13] Thus, said the motion court, the Term Sheet was “‘an instrument for the payment of money only’ upon which issuance of accelerated judgment [was] appropriate.”[14] The motion court also held that plaintiffs “established that the Corporate and Individual Defendants defaulted in making [the] payments” under the Term Sheet “by submitting the affirmation of their attorney, to whom the settlement payments were to be tendered, attesting to non-payment apart from the initial $2,000 paid prior to September 2020 and that the remaining amount due [was] $70,000.”[15] The motion court noted that the Term Sheet did “not provide specifics as to the 10-day default notice requirement; how it [was] to be made, or what it [was] to contain.”[16] However, explained the motion court, “Plaintiffs’ federal motion practice in October 2020 and their service of the instant CPLR § 3213 motion in December 2024, which set forth the details of Defendants’ default under the Term Sheet and gave them more than a 10-day opportunity to cure, constitute[d] sufficient notice of default under the Term Sheet.”[17] The motion court held that the Corporate and Individual Defendants failed to offer evidentiary proof sufficient to raise a question of fact.[18] The motion court rejected defendants’ argument that “extrinsic evidence” was needed to assess their payment obligations.[19] The motion court concluded the “Term Sheet [was] crystal clear that Defendants [were] to pay Plaintiffs the sum of $72,000, on a 24-month payment plan of $3,000 per month.”[20] Finally, the motion court rejected defendants’ attempt to add terms to the Term Sheet in an effort to avoid summary judgment: The division or disbursement of such payment across the Plaintiffs is not a material term of the agreement– indeed, it is not even mentioned in the Term Sheet. Nor is there need for any extrinsic evidence on whether the absence of a more formal and detailed settlement agreement violated a material term of the Term Sheet: it does not[,] and so the federal appellate and trial courts have definitely found. The Second Circuit, which has the last word on the issue, explicitly found that the Term Sheet contains the parties’ agreement as to material terms, that such agreement is binding, that the [parties] partially performed their agreement, and the Term Sheet constitutes an enforceable contract to be enforced in this court. Nothing more is needed for this Court to determine that the Term Sheet contains Defendants’ explicit and unconditional promise to pay a sum certain over a stated period and that they failed to do so, entitling Plaintiffs to entry of judgment.[21] Accordingly, the motion court granted plaintiffs’ motion. Takeaway The implications of Tangtiwatanapaibul are significant for both litigants and practitioners dealing with settlement agreements in New York. The case affirms that informal documents like term sheets or memorandums of understanding can be enforceable instruments for the payment of money under CPLR 3213, provided they contain all the salient terms of the parties’ agreement and contain clear, unconditional promises to pay a sum certain. In Tangtiwatanapaibul, the motion court emphasized that the absence of a formal, signed agreement did not invalidate the settlement because the essential terms of the settlement were present and the parties intended to be bound by their term sheet. For litigants, Tangtiwatanapaibul shows that: (a) plaintiffs have an important tool in CPLR 3213 for the enforcement of a settlement without the need for a full breach of contract action, if all the material terms of their agreement are present; and (b) defendants will be responsible for complying with the terms of their settlement—even if the terms are in a term sheet—and that the failure to pay could result in accelerated judgment under CPLR 3213. For practitioners, Tangtiwatanapaibul underscores the importance of drafting term sheets with precision and clarity. Including explicit payment terms and language that indicates the agreement is binding can make the difference between lengthy litigation and a quick resolution. ______________________________ Jeffrey M. Haber 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] CPLR 3213. [2] Banco Popular N. Am. v. Victory Taxi Mgmt. Inc., 1 N.Y.3d 381, 383 (2004) (citing Interman Indus. Prods. v. R.S.M. Electron Power, 37 N.Y.2d 151, 154 (1975)). [3] Banco Popular, 1 N.Y.3d at 383. [4] Weissman v. Sinorm Deli, Inc., 88 N.Y.2d 437, 444 (1996) (“The instrument does not qualify if outside proof is needed, other than simple proof of nonpayment or a similar de minimis deviation from the face of the document”). [5] Banco Popular, 1 N.Y.3d at 383. [6] Sullivan v. Ruvoldt, 16 Civ. 583, 2017 WL 1157150 at *6 (S.D.N.Y. Mar. 27, 2017). [7] Conopco, Inc. v. Wathne Ltd., 190 A.D.2d 587, 588 (1st Dept. 1993) [8] Stonehill Capital Mgt. LLC v. Bank of the W., 28 N.Y.3d 439, 451-454 (2016). [9] Bed Bath & Beyond Inc. v. IBEX Constr., LLC, 52 A.D.3d 413, 414 (1st Dept. 2008); Emigrant Bank v. UBS Real Estate Sec., Inc., 49 A.D.3d 382, 383-384 (1st Dept. 2008). [10] Slip Op. at 2-3. [11] Id. at *3. [12] Id. [13] Id. [14] Id. (citing LFR Collections LLC v. Tammy Tran Att’ys at L., 238 A.D.3d 490 (1st Dept. 2025) (settlement agreement constituted an instrument for the payment of money only; agreement provided “that defendants owed $7,900,000 as of October 12, 2012; that the maturity date was October 12th, 2017, the fifth anniversary date of the settlement agreement; that the interest rate was 0% a year for the first 18 months and then 5% a year thereafter, without compounding interest; and that upon default, interest was to accrue at the rate of 12% per annum.”); J.D. Structures, Inc. v. Waldbaum, 282 A.D.2d 434, 436 (2d Dept. 2001) (“The appellant established that the respondents failed to make the payments required by the settlement agreement, which is an instrument for the payment of money only. Accordingly, it is appropriate in this case to grant summary judgment pursuant to CPLR 3213”)). [15] Id. (citing LFR Collections, 238 A.D.3d at 490 (“On its motion, plaintiff submitted the settlement agreement, the amount due, and an affirmation of LFR’s general counsel, who swore to the loan history under penalty of perjury and stated that he was familiar with the facts”)). [16] Id. [17] Id. (citations omitted). [18] Id. [19] Id. [20] Id. [21] Id. at 3-4 (citations omitted).

By: Jonathan H. Freiberger Obtaining personal jurisdiction[1] over a defendant is a critical aspect of litigation. There are two components of personal jurisdiction, which the New York Court of Appeals has succinctly described as follows: One component involves service of process, which implicates due process requirements of notice and opportunity to be heard. Typically, a defendant who is otherwise subject to a court's jurisdiction, may seek dismissal based on the claim that service was not properly effectuated. The other component of personal jurisdiction involves the power, or reach, of a court over a party, so as to enforce judicial decrees. This consideration—the jurisdictional basis—is independent of service of process. Service of process cannot by itself vest a court with jurisdiction over a non-domiciliary served outside New York State, however flawless that service may be. To satisfy the jurisdictional basis there must be a constitutionally adequate connection between the defendant, the State and the action. Keane v. Kamin, 94 N.Y.2d 263, 265 (1999) (citations omitted). Today’s article addresses the service of process component. The law is clear that a “court lacks personal jurisdiction over a defendant who is not properly served with process.” Everbank v. Kelly, 203 A.D.3d 138, 142 (2nd Dep’t 2022) (citations omitted); see also Castillo-Florez v. Charlecius, 220 A.D.3d 1, 2 (2nd Dep’t 2023); Flatow v. Goddess Sanctuary & Spa Corp., 233 A.D.3d 656, 657 (2nd Dep’t 2024). Proper service of process is important because it implicates an individual’s constitutional rights and, accordingly, “[w]hen it is determined that process was ineffective, all subsequent proceedings are rendered null and void as to that party. Everbank, 203 A.D.3d at 143 (citations omitted); see also Federal Nat. Mort. Ass’n v. Smith, 219 A.D.3d 938, 940, 941-42 (2nd Dep’t 2023); Flatow, 233 A.D.3d at 257. “A defendant's eventual awareness of pending litigation will not affect the absence of jurisdiction over him or her where service of process is not effectuated in compliance with CPLR 308.” Nationstar Mort. LLC v. Molyaev, 235 A.D.3d 648, 649 (2nd Dep’t 2025) (citations and internal quotation marks omitted); see also Raschel v. Rish, 69 N.Y.2d 694, 697 (1986). “Service of process upon a natural person must be made in strict compliance with the methods of service set forth in CPLR 308.” Federal Nat. Mort. Ass’n, 219 A.D.3d at 941-42 (citations, internal quotation marks and brackets omitted; hyperlink added); see also Castillo-Florez, 220 A.D.3d at 2; Flatow, 233 A.D.3d at 257. “Typically, a defendant who is otherwise subject to a court’s jurisdiction, may seek dismissal based on the claim that service was not properly effectuated.” Keane, 94 N.Y.2d at 265 (citations omitted). A “process server’s affidavit of service gives rise to a presumption of proper service.” Deutsche Bank National Trust Co. v. Stolzberg, 165 A.D.3d 624, 625 (2nd Dep’t 2018) (citations and internal quotation marks omitted). A “sworn denial containing a detailed and specific contradiction of the allegations in the process server’s affidavit will defeat the presumption of proper service.” Id. (citations, internal quotation marks and brackets omitted); see also U.S. Bank N.A. v. Henry, 232 A.D.3d 667, 669 (2nd Dep’t 2024). However, “[b]are and unsubstantiated denials are insufficient to rebut the presumption.” Stolzberg, 165 A.D.3d at 625 (citations and internal quotation marks omitted); see also U.S. Bank Trust, N.A. v. Lane, 2025 WL 2326755 (2nd Dep’t August 13, 2025). For example, the Court, in Castillo-Florez, held that the defendant’s sworn affidavit “in which he, inter alia, denied receipt of service, denied residing at the [service] address at the time service allegedly was made, and set forth the location of his address at the time of service,” was sufficient to rebut the presumption of service and require a hearing. Castillo-Florez, 220 A.D.3d at 14-15 (citations omitted). Sufficiently rebutting the presumption of proper service afforded to the process server’s affidavit, entitles a defendant to a traverse hearing to determine whether service of process was properly effectuated. Nationstar Mort. LLC v. Molyaev, 235 A.D.3d 648, 650 (2nd Dep’t 2025); Lane, supra; Stolzberg, 165 A.D.3d at 626. On September 10, 2025, the Appellate Division, Second Department, decided Bank of New York Trust Co., N.A. v. Herbin, an action in which the propriety of service of process on the defendant was decided. The plaintiff in Herbin is a lender that commenced a mortgage foreclosure action.[2] Upon the borrower’s default, the lender was awarded summary judgment and, thereafter, a judgment of foreclosure and sale. The subject property was sold at auction. The borrower subsequently moved “pursuant to CPLR 5015(a) to vacate the order of reference and the judgment of foreclosure and sale, pursuant to CPLR 3211(a)(8) to dismiss the complaint insofar as asserted against him for lack of personal jurisdiction, and to set aside the deeds that transferred the property after the sale.” (Hyperlinks added.) The motion court denied the motion. On the borrower’s appeal, the Second Department reversed. After addressing many of the issues discussed, supra, and concluding that the borrower was entitled to a traverse hearing to determine if service of process was ever properly effectuated, the Court stated: Here, the defendant demonstrated his entitlement to a hearing on the issue of service through his affidavit and evidentiary submissions. The defendant averred that he has never lived at the address where he was purportedly served on February 28, 2008, and that he lived at a different address, 1222 35th Avenue in Long Island City, from 2004 through February 2008. He submitted proof of his residence at 1222 35th Avenue. Further, he submitted proof that the process server who allegedly served the defendant on February 28, 2008, swore that he served another individual in South Ozone Park at the exact same time. The defendant also submitted evidence that, in 2016, this particular process server's application to renew his license as an individual process server was denied by the New York City Department of Consumer Affairs on the basis that he had falsified affidavits of service. Since the defendant's submissions rebutted the presumption of proper service established by the process server's affidavit, the Supreme Court should have directed a hearing to determine whether personal jurisdiction was acquired over the defendant. [Citations omitted.] What makes Herbin more interesting than many other service of process cases is the Court’s consideration of the New York City Department of Consumer Affairs’ failure to renew the process server’s license. Perhaps a new angle to approach cases of this type. 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 written dozens of articles addressing numerous aspects of personal jurisdiction and service of process. To find such articles, please see the BLOG tile on our website and search for “jurisdiction” or “service of Process” or any other commercial litigation issue that may be of interest to you. [2] This BLOG has written dozens of articles addressing numerous aspects of residential mortgage foreclosure. To find such articles, please see the BLOG tile on our website and search for any foreclosure, or other commercial litigation, issue that may be of interest to you.

By: Jeffrey M. Haber In New York, as in most jurisdictions, statutes of limitation serve as a cutoff point for initiating legal action. These statutes define the time frame within which a plaintiff must file a lawsuit after a cause of action accrues. Once the limitation period expires, the claim is generally barred, regardless of its merits. The purpose of a statute of limitations is twofold. For plaintiffs, it encourages timely action, preserving evidence and ensuring witness testimony remains reliable. For defendants, it protects them from defending against stale claims long after evidence is no longer preserved and memories have faded. Overall, these statutes promote fairness, efficiency, and certainty in the legal system. In business litigation, parties often encounter statutes of limitation issues involving, inter alia, breach of fiduciary duty and fraud claims. Determining the appropriate limitation period to apply to breach of fiduciary claims often proves to be difficult.[1] There is no single statute of limitations that the courts and the parties can look to. “Rather, the choice of the applicable limitations period depends on the substantive remedy that the plaintiff seeks.”[2] “Where the remedy sought is purely monetary in nature, courts construe the suit as alleging ‘injury to property’ within the meaning of CPLR 214 (4), which has a three-year limitations period.”[3] “Where, however, the relief sought is equitable in nature, the six-year limitations period of CPLR 213 (1) applies.”[4] Moreover, “where an allegation of fraud is essential to a breach of fiduciary duty claim, courts have applied a six-year statute of limitations under CPLR 213 (8).”[5] In considering the appropriate limitations period, the courts are careful not to elevate form over substance. Thus, for example, where a plaintiff uses “the term ‘disgorgement’ instead of other equally applicable terms such as repayment, recoupment, refund, or reimbursement,” it “should not be permitted to distort the nature of the claim so as to expand the applicable limitations period from three years to six.”[6] The initial burden of establishing that the limitations period bars the challenged claim is on the movant.[7] “To meet its burden, the defendant must establish, inter alia, when the plaintiff’s cause of action accrued.”[8] “A breach of fiduciary duty claim accrues when the fiduciary openly repudiates his or her obligation – i.e., once damages are sustained.”[9] This is so because, “absent either repudiation or removal, the aggrieved part[y] [is] entitled to assume that the fiduciary would perform his or her fiduciary responsibilities.”[10] “Open repudiation requires proof of a repudiation by the fiduciary which is clear and made known to the beneficiaries.”[11] “Where there is any doubt on the record as to the conclusive applicability of a [s]tatute of [l]imitations defense, the motion to dismiss the proceeding should be denied, and the proceeding should go forward.”[12] Under New York law, an action based upon fraud must be commenced within six years of the date the cause of action accrued, or within two years of the time the plaintiff discovered or could have discovered the fraud with reasonable diligence, whichever is greater.[13] The cause of action accrues when “every element of the claim, including injury, can truthfully be alleged”,[14] “even though the injured party may be ignorant of the existence of the wrong or injury.”[15] Determining when accrual occurs is not easy and often contested. So too is the determination of when the plaintiff discovered or could have discovered the fraud.[16] In New York, “plaintiffs will be held to have discovered the fraud when it is established that they were possessed of knowledge of facts from which it could be reasonably inferred, that is, inferred from facts which indicate the alleged fraud.”[17] “[M]ere suspicion will not constitute a sufficient substitute” for knowledge of the fraud.[18] “Where it does not conclusively appear that a plaintiff had knowledge of facts from which the fraud could reasonably be inferred, a complaint should not be dismissed on motion and the question should be left to the trier of the facts.”[19] Moreover, where the circumstances suggest to a person of ordinary intelligence the probability that s/he has been defrauded, a duty of inquiry arises, and if s/he fails to undertake that inquiry when it would have developed the truth and shuts his/her eyes to the facts which call for investigation, knowledge of the fraud will be imputed to him/her.[20] The test as to when fraud should with reasonable diligence have been discovered is an objective one.[21] Thus, while it is true that New York courts will not grant a motion to dismiss a fraud claim where the plaintiff’s knowledge is disputed, courts will dismiss a fraud claim when the alleged facts establish that a duty of inquiry existed and that an inquiry was not pursued.[22] “The burden of establishing that the fraud could not have been discovered before the two-year period prior to the commencement of the action rests on the plaintiff, who seeks the benefit of the exception.”[23] In Franco v. Farr, 2025 N.Y. Slip Op. 04880 (2d Dept. Sept. 10, 2025) (here), the Appellate Division, Second Department, affirmed the dismissal of plaintiffs’ claims for breach of fiduciary duty and fraud on statute of limitations grounds. The Court held that the claims had accrued more than six years before the commencement of the action and that plaintiffs had knowledge of facts which should have caused them to inquire and discover the alleged wrongdoing with reasonable diligence. Background In May 2020, plaintiffs (who are sisters) commenced the action, inter alia, to recover damages for breach of fiduciary duty and fraud, alleging that their other sisters, defendants, wrongfully exercised control over defendant J-L-T-D, Inc. (“JLTD”), a family real estate business, and misappropriated its asset, real property located in Orangeburg, New York to plaintiffs’ detriment. Plaintiffs alleged that they are equal shareholders of JLTD, which was formed in 1989 and acquired the property via a deed dated January 12, 1990. In August 1999, JLTD conveyed title to the property to defendants, allegedly without plaintiffs’ authorization. Plaintiffs alleged that they did not learn of this transfer until September 2018, after probate proceedings were commenced to settle their parents’ estates. Thereafter, defendants moved for summary judgment dismissing the complaint as time-barred, arguing, among other things, that the applicable statute of limitations accrued as of the August 1999 transfer. Plaintiffs opposed defendants’ motion and cross-moved for summary judgment on the ground that they demonstrated, as a matter of law, inter alia, that each sister had an equal ownership interest in JLTD. In an order dated November 10, 2022, the Supreme Court, without addressing defendants’ statute of limitations contentions, granted defendants’ motion on the ground that defendants demonstrated, as a matter of law, that plaintiffs did not have any ownership interest in JLTD and denied plaintiffs’ cross-motion. Plaintiffs appealed. The Second Department affirmed on different grounds. The Court’s Decision The Court held that “defendants demonstrated, prima facie, that the alleged fraudulent transfer of the property in 1999 occurred more than six years prior to the commencement of th[e] action.”[24] The Court noted that, in opposition, “plaintiffs failed to establish that the action was timely commenced under the two-year discovery exception.”[25] The Court explained that “[a]lthough the plaintiffs alleged that they did not discover the alleged fraud until the probate proceeding in 2018, [one of the plaintiffs] testified during her deposition that she was denied access to the records for JLTD, and she averred in an affidavit that the defendants defrauded, schemed, and misused property for many years.”[26] “Thus,” concluded the Court, “the plaintiffs had knowledge of facts that should have caused them to inquire and discover the alleged fraud with reasonable diligence.”[27] Accordingly, said the Court, “the plaintiffs failed to meet their burden to establish that they could not have discovered the fraud more than two years prior to commencing this action in 2020.”[28] The Court held that the same accrual analysis applied to the breach of fiduciary duty claim, since the claim was based upon fraud.[29] Takeaway In Franco, the Court made clear that delayed legal action can be fatal to the success of a claim. Even if plaintiffs believe they were wronged, the decision underscores the point that courts expect plaintiffs to act promptly once they have reason to suspect misconduct. The decision also provides guidance on the limits of the discovery rule, which, as noted, allows plaintiffs to bring fraud claims within two years of discovering the wrongdoing. Hints of wrongdoing, such as being denied access to corporate records or noticing irregularities, may be enough to trigger the duty to investigate. Waiting for definitive proof before filing suit may result in dismissal. In short, Franco reinforces the principle that the law favors the diligent, not those who sit on their rights before seeking redress. ________________________________ Jeffrey M. Haber 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 written numerous articles addressing the statute of limitations for a breach of fiduciary duty claim. To find such articles, please see the BLOG tile on our website and search for “statute of limitations” or “breach of fiduciary duty” or any other commercial litigation issue that may be of interest to you. [2] IDT Corp. v. Morgan Stanley Dean Witter & Co., 12 N.Y.3d 132, 139 (2009) (citations omitted). [3] Id.; see also VA Mgt., LP v. Estate of Valvani, 192 A.D.3d 615, 615 (1st Dept. 2021). [4] Id. [5] Id. [6] Access Point Med., LLC v. Mandell, 106 A.D.3d 40, 44 (1st Dept. 2013); see also VA Mgt., 192 A.D.3d at 615 (stating that “[p]laintiff’s characterization of that relief as ‘disgorgement’ of [the defendant’s] compensation does not convert it into a claim for equitable relief to which the six-year statute of limitations would apply”) (citations omitted)). [7] Lebedev v. Blavatnik, 144 A.D.3d 24, 28 (1st Dept. 2016) (internal quotation marks and citations omitted). [8] Id. [9] Id. Importantly, “[t]o determine timeliness, [the court] consider[s] whether [the] plaintiff’s complaint must, as a matter of law, be read to allege damages suffered so early as to render the claim time-barred.” IDT, 12 N.Y.3d at 140. [10] Matter of George, 194 A.D.3d 1290, 1293 (3d Dept. 2021) (internal quotation marks, brackets and citation omitted). [11] Matter of Steinberg, 183 A.D.3d 1067, 1071 (3d Dept. 2020) (internal quotation marks and citations omitted). [12] Matter of Behr, 191 A.D.2d 431, 431 (2d Dept. 1993) (internal citations omitted); see Matter of Steinberg, 183 A.D.3d at 1071. [13] CPLR § 213(8). See also Sargiss v. Magarelli, 12 N.Y.3d 527, 532 (2009); Carbon Capital Mgmt., LLC v. Am. Express Co., 88 A.D.3d 933, 939 (2d Dept. 2011). [14] Carbon Capital Mgmt., 88 A.D.3d at 939 (citation and alterations omitted). [15] Schmidt v. Merchants Despatch Transp. Co., 270 N.Y. 287, 300 (1936). [16] This BLOG has written numerous articles addressing the statute of limitations for a fraud claim. To find such articles, please see the BLOG tile on our website and search for “statute of limitations” or “fraud” or any other commercial litigation issue that may be of interest to you. [17] Erbe v. Lincoln Rochester Trust Co., 3 N.Y.2d 321, 326 (1957). [18] Id. [19] Trepuk v. Frank, 44 N.Y.2d 723, 725 (1978). [20] Gutkin v. Siegal, 85 A.D.3d 687, 688 (1st Dept. 2011). [21] Id. (citation and internal quotation marks omitted). [22] See Shalik v. Hewlett Assocs., L.P., 93 A.D.3d 777, 778 (2d Dept. 2012). [23] Celestin v. Simpson, 153 A.D. 3d 656, 657 (2d Dept. 2017). [24] Slip Op. at *2 (citation omitted). [25] Id. (citation omitted) [26] Id. [27] Id. (citation omitted). [28] Id. (citation omitted). [29] Id. (citations omitted).

By: Jeffrey M. Haber In Celauro v. Celauro, 2025 N.Y. Slip Op. 04870 (Sept. 10, 2025) (here), a minority shareholder of a family-owned business alleged that company executives operated an illicit cash business, diverted profits and deprived shareholders of distributions/dividends. Plaintiff relied on dated deposition testimony, documents, and financial statements to support claims of ongoing misconduct. However, the motion court dismissed most of the breach of fiduciary duty claim,[1] finding many of the allegations to be time-barred under the six-year statute of limitations and the surviving claims too speculative. The motion court rejected application of the continuing wrong doctrine and found plaintiff’s evidence—including financial statements and an accountant affidavit—insufficient to infer ongoing unreported cash sales or misappropriation. The Appellate Division, Second Department, affirmed, agreeing that the claims were either untimely or lacked factual support to reasonably infer misconduct within the limitations period. Background Celauro is a shareholder derivative litigation brought by plaintiff, Nathan Celauro, a minority shareholder of 4C Foods Corp. (“4C Foods”), a closely held family-owned business that manufactures and distributes food products, pursuant to Business Corporation Law § 626. Plaintiff alleged that defendants, the officers and directors of 4C Foods, have been running 4C Foods as an illicit cash business. Plaintiff alleged that defendants had (a) failed to report income on its tax returns because it was improperly running 4C Foods as a cash business, and (b) hid 4C Foods’ true profits by diverting the company’s hidden profits to its executives, thus depriving 4C Foods’ shareholders, including plaintiff, of dividends/distributions. Plaintiff contended that he observed the alleged improper cash operation as an employee of 4C Foods and that this operation expanded when one of the defendants took over the company as president in 1991. Plaintiff maintained that by 2005, 4C Foods had approximately half a million dollars per year in unreported cash sales. In asserting his claims, plaintiff relied on deposition testimony taken in 2005 and 2006 and handwritten documents relating to such payments. One of the defendants had testified, however, that he stopped 4C Foods’ cash practices in 2005 as the result of a settlement with the IRS. Nevertheless, plaintiff asserted that 4C Foods continued to run a sizable illicit cash business. In support of this assertion, plaintiff submitted deposition testimony from 2011 in which it was conceded that 4C Foods still received some cash payments, but because the amount of such payments was small, defendants kept the cash and wrote a check in that amount to 4C Foods. Plaintiff also pointed to two bills of lading relating to a “Customer A”' from 2010 and 2011 and copies of two checks relating to that customer from one of the defendants, one from 2010 and the other from 2011. Plaintiff also relied on an affirmation involving a valuation and appraisal process (“Appraisal”) relating to 4C Foods and an affidavit concerning 4C Foods’ cash business. Plaintiff alleged that 4C Foods’ income statements from 2017 and 2018 showed that the cash operation and other improper practices continued. Based upon the foregoing, plaintiff brought suit, alleging causes of action for breach of fiduciary duty, conversion, unjust enrichment, and accounting. Defendants moved to dismiss claiming, inter alia, plaintiff’s claims were time barred and otherwise failed to state a claim. The Motion Court’s Decision and Order The motion court held that most of plaintiff’s fiduciary duty claim was barred by the statute of limitations. The motion court found that defendants demonstrated the action was untimely with respect to defendants’ acts occurring more than six years before the September 21, 2020 commencement date of the action. The motion court held that the action was governed by the six-year statute of limitations applicable to actions brought by or on behalf of a corporation against directors, officers or stockholders.[2] The motion court explained that “nearly all of the factual allegations in the complaint relate to purported cash sales that occurred before September 21, 2014.” The motion court rejected plaintiffs’ argument that the continuing wrong doctrine would entitle it to damages beyond six years: “While plaintiff asserts that the statute of limitations is tolled by the continuing wrong doctrine, even if that doctrine applies here, it would not extend plaintiffs entitlement to damages beyond six years prior to the commencement of the action.”[3] Regarding the breach of fiduciary duty claim, the motion court held that plaintiff’s allegations concerning the cash transactions were “conclusory”. The motion court found that plaintiff failed to demonstrate that defendants committed any misconduct or that plaintiff suffered any damages during the limitations period. In that regard, explained the motion court, almost all of the allegations, including those based on documents produced for the Appraisal, were dated before September 21, 2014. The motion court noted that the only allegation suggesting that cash sales occurred after that date was the statement made by the representative of “Customer A”. The motion court concluded that while the statement “may suggest that some cash sales may possibly have occurred during the limitations period, the statement, in and of itself, fail[ed] to show, or allow a non-speculative inference, that defendants misappropriated such sales income or otherwise failed to properly include the cash sales in 4C Foods’ income.” “Similarly,” said the motion court, the income statements from 2018 and 2019 were “cryptic” and did not create an inference that “defendants continue[d] to engage in cash sales, or that any such sales [were] not included as income.” In so doing, the motion court rejected plaintiff’s accountant who opined that it was “evident from the extreme fluctuations in the company’s profit, particularly during 2017 and 2018, that the cash operation is ongoing.” “A company with relatively consistent net sales such as 4C [Foods] does not have yearly swing of its net income to the tune of millions of dollars without some outside influence, such as increased unrecorded cash sales.” “Given the cryptic nature of the financial statements,” said the motion court, “it is hard to see how [the accountant was] able to draw any inference from the financial statements, let alone an inference that cash sales [were] a factor in the profit fluctuations.” “Under these circumstances,” concluded the motion court, “the conclusory assertions made in [the accountant’s] affidavit [were] insufficient to allow an inference that cash sales [had] continued, or, if they have continued, that such sales [were] not properly recorded as income.” (Citations omitted.) The Second Department’s Decision and Order On appeal, the Second Department affirmed. The Court agreed with the motion court’s findings that “allegations of wrongdoing that occurred more than six years before the commencement of [the] action were time-barred.”[4] The Court also agreed that plaintiff failed to state a claim for breach of fiduciary duty, holding: “the allegations of wrongdoing within the limitations period [were] … ‘based on speculation and conjecture and thus, [were] insufficient to permit a reasonable inference of the alleged misconduct.’”[5] __________________________________ Jeffrey M. Haber 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 written numerous articles addressing claims for a breach of fiduciary duty claim. To find such articles, please see the BLOG tile on our website and search for “breach of fiduciary duty” or any other commercial litigation issue that may be of interest to you. [2] CPLR 213(7); see also Retirement Plan for Gen. Empls. of N. Miami Beach v. McGraw, 158 A.D.3d 494, 496 (1st Dept. 2018); Matter of Skorr v. Skorr Steel Co., Inc., 29 A.D. 3d 594, 595 (2d Dept. 2006); Toscano v. Toscano, 285 A.D.2d 590, 591 (2d Dept. 2001). [3] Butler v. Gibbons, 173 A.D.2d 352, 353 (1st Dept. 1991); see also Garron v. Bristol House, Inc., 162 A.D.3d 857, 859 (2d Dept. 2018); Henry v. Bank of Am., 147 A.D.3d 599, 601-602 (1st Dept. 2017); Rupert v. Tigue, 259 A.D.2d 946, 947 (4th Dept. 1999). [4] Slip Op. at *2 (citations omitted). [5] Id. (quoting Clevenger v. Yuzek, 222 A.D.3d 931, 935 (internal quotation marks omitted)).

By Jonathan H. Freiberger Today’s article is about Nuruzzaman v. Deutsche Bank Natl. Trust Co., an action that involves numerous areas of the law about which we frequently write -- mortgage foreclosure, FAPA, RPAPL 1501(4), CPLR 205(a), CPLR 205-A and statutes of limitation[1]. Statute of Limitations in Foreclosure Actions By way of brief background, and as previously written in this BLOG, an action to foreclose a mortgage is governed by a six-year statute of limitations. CPLR 213(4); see also Medina v. Bank of New York Mellon Trust Co., N.A., 240 A.D.3d 879 (2nd Dep’t 2025); Fed. Nat. Mort. Assoc. v. Schmitt, 172 A.D.3d 1324, 1325 (2nd Dep’t 2019). When a mortgage is payable in installments, “separate causes of action accrue for each installment that is not paid and the statute of limitations begins to run on the date each installment becomes due.” HSBC Bank USA, N.A. v. Gold, 171 A.D.3d 1029, 1030 (2nd Dep’t 2019). Most mortgages, however, provide that a mortgagee may accelerate the entire debt in the event of, inter alia, a payment default by a mortgagor. Once the mortgagee’s election to accelerate is properly made, “the borrower’s right and obligation to make monthly installments ceased and all sums become immediately due and payable, and the six-year Statute of Limitations begins to run on the entire mortgage debt.” EMC Mortgage Corp. v. Patella, 279 A.D.2d 604, 605 (2nd Dep’t 2001) citations and internal quotation marks and brackets omitted); see also Medina, 240 A.D.3d at 881; HSBC, 171 A.D.3d at 1030. RPAPL 1501(4) When a mortgage appears as a lien of record on real property, but the statute of limitations has expired for the mortgagee to commence an action to foreclose the mortgage, RPAPL 1501(4) permits the mortgagor (or any other “person having an estate or interest in the real property”) to commence an action to have the encumbrance removed of record. See, e.g., MTGLQ Investors, L.P. v. Rodgers, 239 A.D.3d 968 (2nd Dep’t 2025). This statute enables the mortgagor to eliminate the lien of the mortgage without having to wait to impose a statute of limitations defense when the mortgagee commences a foreclosure action, if ever. FAPA The Foreclosure Abuse Prevention Act (“FAPA”), which went into effect in December of 2022, “represents the Legislature’s response to litigation strategies and certain legal principles that distorted the operation of the statute of limitations in foreclosure actions.” Genovese v. Nationstar Mortgage LLC, 223 A.D.3d 37, 41 (1st Dep’t 2023) (citation omitted). Thus, inter alia, FAPA’s provisions were designed to prevent lenders from circumventing statute of limitations problems in residential mortgage foreclosure actions by the simple expedient of accelerating and deaccelerating loans to restart the running of statutes of limitations. CPLR 205(a) and 205-A Sometimes the applicable statute of limitations expires after the dismissal of a timely commenced action. Generally, such an occurrence should not be a problem because a new action could still be commenced. However, issues may arise when an otherwise timely action is dismissed subsequent to the expiration of the limitations period. Depending on the nature of the dismissal, even in the latter scenario, a plaintiff may be permitted to commence a new action notwithstanding the expiration of the applicable statute of limitations by virtue of the savings provisions of CPLR 205(a). CPLR 205(a) is a “remedial” statute that “has existed in New York law since at least 1788” and can [t]race[] its roots to seventeenth century England.” Wells Fargo Bank, N.A. v. Eitani, 148 A.D.3d 193, 199 (2nd Dep’t 2017), appeal dismissed, 29 N.Y.3d 1023 (2017). The purpose of CPLR 205(a) is to “ameliorate the potentially harsh effect of the Statute of Limitations in certain cases in which at least one of the fundamental purposes of the Statute of Limitations has in fact been served, and the defendant has been given timely notice of the claim being asserted by or on behalf of the injured party.” George v. Mt. Sinai Hospital, 47 N.Y.2d 170, 177 (1979). Thus, the statute provides “a second opportunity to the claimant who has failed the first time around because of some error pertaining neither to the claimant’s willingness to prosecute in a timely fashion nor to the merits of the underlying claim.” George, 47 N.Y.2d at 178-79. To address the previously discussed gamesmanship employed by lenders to artificially extend applicable statutes of limitation, FAPA added CPLR 205-A, which limits the ability of lenders to manipulate the statute of limitations in mortgage foreclosure actions.[2] Nuruzzaman v. Deutsche Bank Natl. Trust Co. All of the previously discussed principles are addressed in Nuruzzaman. In October 2010, the lender commenced a foreclosure action against the borrower to foreclose a mortgage (the “First Foreclosure Action”). In 2017, the First Action was dismissed due to the lender’s failure to comply with a scheduling order. The lender’s subsequent motion to vacate the dismissal order was denied and the related appeal was dismissed on October 13, 2020, for failure to perfect. In June 2018, the borrower commenced an action pursuant to RPAPL 1501(4) to cancel and discharge the mortgage due to the expiration of the statute of limitations (the “Instant Action”). In February 2021, the borrower moved for summary judgment and in May 2021, the lender cross-moved for summary judgment dismissing the Complaint. In between the making o the motion and cross-motion, the lender commenced a new foreclosure action in March 2021 (the “Second Foreclosure Action”). In August 2022 the motion court in the Instant Action denied the borrower’s motion for summary judgment under RPAPL 1501(4) and granted the lender’s cross-motion. On the borrower’s appeal, the Second Department reversed. The Court addressed statute of limitations issues in foreclosure actions, and RPAPL 1501(4), along the lines discussed herein. The Court then determined that the borrower satisfied its prima facie burden by establishing that the mortgage debt was accelerated, and the six-year statute of limitations began to run, in October 2010, when the First Foreclosure Action was commenced. Thus, the statute of limitations had expired before the time the Second Foreclosure Action was commenced in 2021. In addressing the lender’s opposition, the Court stated: In opposition, [the lender] failed to raise a triable issue of fact as to whether the statute of limitations was tolled, otherwise inapplicable, or whether it had actually commenced a new foreclosure action within the applicable limitations period. Initially, [the lender] correctly contends that prior to the enactment of the [FAPA], the [Second Foreclosure Action] was timely commenced pursuant to CPLR 205(a), as it was commenced on March 9, 2021, within six months of October 13, 2020, the date that the 2010 action was terminated by this Court's dismissal of [the lender]'s appeal. However, FAPA, which was enacted while this appeal was pending, replaced the savings provision of CPLR 205(a) with CPLR 205-a in actions upon instruments described in CPLR 213(4). Under CPLR 205-a(a), "[i]f an action upon an instrument described under CPLR 213(4) is timely commenced and is terminated in any manner other than a voluntary discontinuance, a failure to obtain personal jurisdiction over the defendant . . . , for failure to comply with any court scheduling orders . . . , or upon a final judgment upon the merits, the original plaintiff . . . may commence a new action upon the same transaction or occurrence or series of transactions or occurrences within six months following the termination, provided that the new action would have been timely commenced within the applicable limitations period prescribed by law at the time of the commencement of the prior action and that service upon the original defendant is completed within such six-month period." [Emphasis in original.] Here, it is undisputed that the Supreme Court directed dismissal of the complaint in the 2010 action based upon [the lender]'s failure to comply with the terms of a scheduling order. Accordingly, under FAPA, [the lender] is not entitled to the benefit of the savings provision of CPLR 205(a) or 205-a. [Citations, internal quotation marks and brackets 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 written dozens of articles addressing numerous aspects of residential mortgage foreclosure. To find such articles, please see the BLOG tile on our website and search for any foreclosure, or other commercial litigation, issue that may be of interest you. In particular, as relates to today’s article, type “FAPA”, “statute of limitations”, “RPAPL 1501(4)”, “CPLR 205” and/or “CPLR 205-a” into the search box. [2] In previous BLOG articles, we compared CPLR 205(a) with 205-A. See, e.g., [here] and [here].

By: Jeffrey M. Haber In Jefferies LLC v. Blaize Holdings, Inc., 2025 N.Y. Slip Op. 33272(U) (Sup. Ct., N.Y. County Sept. 3, 2025 (here), the New York Supreme Court held that an engagement letter concerning the provision of investment banking services did not qualify as an “instrument for the payment of money only” under CPLR 3213, which allows for expedited summary judgment. The motion court found that the engagement letter imposed mutual obligations and required performance by Jefferies, making it more than a simple financial instrument. In addition, the motion court held that payment under the engagement letter was contingent on the occurrence of a qualifying transaction (i.e., a condition precedent), which required extrinsic evidence to determine whether payment was in fact due. Ultimately, the motion court denied Jefferies’ motion for summary judgment, emphasizing that CPLR 3213 applies only when liability is clear and unconditional. A Quick Primer CPLR 3213 is a provision in New York’s Civil Practice Law and Rules (“CPLR”) that allows a plaintiff to seek summary judgment in lieu of a complaint when the case is based on an instrument for the payment of money only, or a judgment from another jurisdiction.[1] It is a powerful procedural tool designed to expedite litigation in cases where the defendant’s liability is clear and based on a straightforward financial obligation. In other words, CPLR 3213 provides quick relief to a plaintiff “on documentary claims so presumptively meritorious that a formal complaint is superfluous, and even the delay incident upon waiting for an answer and then moving for summary judgment is needless”.[2] An “instrument for the payment of money only” is one that “requires the defendant to make a certain payment or payments and nothing else”.[3] “[T]he remedy is not available where there are other issues and considerations presented by the writing,” for example “if the liabilities and obligations can only be ascertained by resort to evidence outside the instrument, or if more than simple proof of nonpayment or a de minimis deviation from the face of the document is involved.”[4] Jefferies LLC v. Blaize Holdings, Inc. Background Jefferies arose out of an engagement letter, dated September 9, 2024 (“Engagement Letter”), between plaintiff and defendant Blaze Holdings, Inc., formerly known as Burtech Acquisition Corp. (“Burtech”), pursuant to which defendant retained plaintiff to act as defendant’s “exclusive market advisor” and provide it with “equity capital markets advice and assistance” in connection with a possible acquisition or other business transaction, or series of transactions, with Blaize, Inc. “Transaction” was defined broadly under the Engagement Letter to include any “business transaction or series of transactions involving all or a material portion of [Blaize, Inc.’s] equity or assets, whether directly or indirectly and through any form of transaction. . . .” Under the Engagement Letter, Blaize Holdings agreed to pay Jefferies “a fee of $4.5 million (the “Transaction Fee”); provided, however, that up to $1.0 million of the Transaction Fee [could] be, in [the] Company’s sole discretion, paid to Jefferies in cash no later than the date that [was] 12 months following the date of the closing of a Transaction (such deferred amount, if any, the ‘Deferred Transaction Fee’).” The Engagement Letter also required that Blaize Holdings reimburse Jefferies upon receipt of an invoice for “out-of-pocket expenses (including fees and expenses of its counsel, ancillary expenses and the fees and expenses of any other independent experts retained by Jefferies) incurred by Jefferies and its designated affiliates exclusively in connection with the engagement.” On January 13, 2025, BurTech completed its merger with Blaize, Inc. Jefferies maintained this transaction constituted a qualifying transaction under the Engagement Letter and triggered Blaize Holdings’ obligation to pay the transaction fee. On February 7, 2025, Jefferies sent Blaize Holdings a letter demanding payment of the $3.5 million Transaction Fee as well as $500,000 in expenses. Jefferies claimed that as of the date of the motion, Jefferies had not received payment from Blaize Holdings. The Court’s Decision and Order The motion court held that “summary judgment under CPLR 3213 [was] not available because the Engagement Letter [was] not an ‘instrument for the payment of money only.’”[5] The motion court described the Engagement Letter as “a contract for investment banking services” that “impos[ed] obligations on both parties.”[6] The motion court explained that “[w]hile it involves an obligation to pay money, it [was] not an instrument for the payment of money only.”[7] “Notably,” said the motion court, “Jefferies [did] not cite a single case in which such an engagement letter (or anything similar), … , ha[d] been deemed an instrument within the scope of CPLR 3213.”[8] Looking at the letter, the motion court observed that “the compensation clause itself contain[ed] a condition precedent: ‘The Company agrees to pay Jefferies, at the closing of a Transaction, a fee of $4.5 million…. [N]othing in this Agreement shall be construed to obligate the Company to enter into a Transaction or consummate a Transaction.’”[9] The motion court found that “[w]hether a qualifying capital markets transaction occurs in the future is unresolved within the instrument itself and require[d] reliance on extrinsic evidence, precluding use of CPLR 3213.”[10] Additionally, the motion court agreed with defendant that “some performance” by Jefferies was required as a clear “condition for payment.”[11] “More importantly,” said the motion court, “even assuming there may ultimately not be a triable issue of fact about the parties’ performance, it will in any event require resort to evidence outside the scope of the ‘instrument’ itself.”[12] Finally, the motion court rejected Jefferies’ reliance on Section 11 of the Engagement Letter, which provided that Jefferies could obtain “summary judgment in lieu of complaint” in connection with the Transaction Fee” to satisfy the requirements of the statute.[13] The motion court explained, that “[t]his section merely recognize[d] Plaintiff’s ability to seek such relief. It [did] not (and cannot) waive the statutory prerequisites of CPLR 3213.”[14] Accordingly, the motion court denied plaintiff’s motion. Takeaway Jefferies is an example of the limits of CPLR 3213 – i.e., that not all payment-related contracts qualify for relief under CPLR 3213. As discussed, the motion court held that an investment banking engagement letter—despite containing a payment obligation—was not an “instrument for the payment of money only.” Because the agreement imposed mutual obligations and required performance by Jefferies, it was deemed a service contract rather than a pure financial instrument. The motion court also found that payment was contingent on a qualifying transaction, which could not be determined from the document alone and required extrinsic evidence. Critically, the motion court held that the contractual provision permitting Jefferies to file a motion for summary judgment in lieu of complaint under CPLR 3213 did not override the prerequisites for granting such a motion. In short, Jefferies reinforces the rule that CPLR 3213 is reserved for clear, unconditional payment obligations—not contracts involving performance or contingencies. ___________________________________ Jeffrey M. Haber 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 written numerous articles addressing CPLR 3213 and motions for summary judgment in lieu of complaint. To find such articles, please see the BLOG tile on our website and search for “CPLR 3213”, “summary judgment in lieu of complaint”, or any other commercial litigation issue that may be of interest to you. [2] Cooperatieve Centrale Raiffeisen-Boerenleenbank, B.A. v. Navarro, 25 N.Y.3d 485, 491-92 (2015). [3] Seaman-Andwall Corp. v. Wright Mach. Corp., 31 A.D.2d 136, 137 (1st Dept. 1968); Weissman v. Sinorm Deli, Inc., 88 N.Y.2d 437, 444 (1996). [4] Kerin v. Kaufman, 296 A.D.2d 336, 337 (1st Dept. 2002) (quoting Weissman, 88 N.Y.2d at 444). [5] Slip Op. at *4. [6] Id. [7] Id. [8] Id. [9] Id. [10] Id. [11] Id. at 4-5. [12] Id. at *5. [13] Id. [14] Id.