By: Jonathan H. Freiberger Today’s article addresses 1995 Cam LLC v. West Side Advisors, LLC, a case decided on October 21, 2025, by the New York Court of Appeals. In 1995 Cam, the Court held that the guaranty executed by guarantor was a “good guy” guaranty and, therefore, liability under the subject commercial lease ended with the tenant’s surrender of possession of the premises and not with the landlord’s acceptance of the surrender. By way of background, a “good guy” guaranty is a type of guaranty frequently seen in conjunction with commercial leases. Such guarantees are typically executed by one or more owners of the tenant entity. “Under a standard ‘good guy guaranty,’ the guarantor is obligated to guarantee the lease payments until the tenant vacates and surrenders possession. This guaranty is so named because it is intended to induce the tenant to be a ‘good guy’ and leave the premises without undergoing the expense of eviction or removal of the tenant’s property.” 1995 Cam at Note 1 (citations and internal quotation marks omitted). Thus, the tenant, but not the “good guy” guarantor would be responsible for all rent due under the lease subsequent to the surrender. In 1995 Cam, the landlord and tenant entered into a commercial lease for office space in Manhattan. The initial lease was a standard form Real Estate Board of New York, Inc. (“REBNY”) lease with a rider. The lease was subsequently extended to, inter alia, include a limited personal guaranty from one of tenant’s officers, which was not a standard REBNY limited guaranty. Prior to the end of the lease term, tenant stopped paying rent and, on October 28, 2020, sent a letter to landlord advising of its intent to surrender the premises on November 30, 2020. On or about November 30, 2020, tenant vacated the premises and, after a walkthrough, delivered the keys to the premises to the building superintendent. The landlord commenced an action against tenant and guarantor to recover unpaid rent and expenses accruing both before and after the surrender of the premises. Ultimately, Supreme Court granted summary judgment to landlord. Tenant and guarantor appealed. The First Department affirmed, holding that “because the guaranty requires [tenant]'s surrender ‘pursuant to the terms of the Lease’ [tenant’s] failure to obtain [landlord]'s written acceptance of the surrender of the premises precluded [guarantor’s] avoidance of liability.” (Citations and internal quotation marks omitted.) The Court of Appeals granted leave for guarantor to appeal the judgment against it for post-vacatur damages. The Court framed the question presented as follows: “whether [guarantor]'s liability ends with [tenant]'s surrender of possession, or with [landlord]'s acceptance of surrender.” The Court’s analysis began with a discussion of general principles of contract construction. It noted that “[a] guaranty is subject to the ordinary principles of contract construction.” (Citations and internal quotation marks omitted.) Further, “[i]t is axiomatic that a contract is to be interpreted so as to give effect to the intention of the parties as expressed in the unequivocal language employed.” (Citations and internal quotation marks omitted.) In addition, “[i]n the absence of any ambiguity, we look solely to the language used by the parties to discern the contract's meaning.” (Citations and internal quotation marks omitted.) The Court noted that there was no claim of ambiguity with the lease. Specifically, as to the guaranty, the Court reiterated that such instruments are “to be interpreted in the strictest manner” and that: [i]mportantly, an interpretation that renders language in the guaranty superfluous is a view unsupportable under standard principles of contract interpretation. Accordingly, particular words should be considered, not as if isolated from the context, but in the light of the obligation as a whole and the intention of the parties as manifested thereby. Form should not prevail over substance and a sensible meaning of words should be sought. [Citations, internal quotation marks and brackets omitted.] The Court then quoted the operative provision of the guaranty: Guarantor guarantees that he shall pay to owner when due all Tenant's monetary obligations that have accrued under the terms of the Lease to the date that is the latest date that Tenant and its assigns, licensees and sublessees, if any, and shall have completely vacated and surrendered the Demised Premises to [Landlord] free and clear of any and all subtenants and/or occupants pursuant to the terms of the Lease (which date may be earlier than the stated expiration date in the Lease.) Tenant shall provide [Landlord] with not less than thirty (30) days prior notice of the date that it will be vacating and surrendering free and clear of any and all subtenants and other occupants. [Emphasis supplied; internal quotation marks, ellipses, brackets and footnote (noting that the “freely negotiated” guaranty is not a “standard” REBNY guaranty) omitted.] The Court recognized that while “surrender” is not defined in the guaranty, the REBNY lease contained two relevant provisions. The first (titled “End of Term”) provides that: Upon the expiration or other termination of the term of this Lease, Tenant shall quit and surrender to [Landlord] the Demised Premises, broom clean, in good order and condition, ordinary wear and damages which Tenant is not required to repair as provided elsewhere in this Lease excepted, and Tenant shall remove all its property. The second provision (titled “No Waiver”) provides that: No act or thing done by [Landlord] or [Landlord]'s agents during the term hereby demised shall be deemed an acceptance of a surrender of said premises, and no agreement to accept such surrender shall be valid unless in writing signed by [Landlord]. No employee of [Landlord] or [Landlord]'s agent shall have any power to accept the keys of said premises prior to the termination of the Lease and the delivery of keys to any such agent or employee shall not operate as a termination of the Lease or a surrender of the premises. In its opinion, the Court disagreed with the First Department’s reliance on the “No Waiver” provision to define “surrender”, which required a landlord’s acceptance. Doing so, according to the Court of Appeals, would “render most of the language in the guaranty superfluous.” In particular, the Court stated that the “language in the guaranty after ‘that have accrued under the terms of the Lease’ conditions [guarantor]'s liability on [landlord]'s actions. If [guarantor]'s liability were intended to be fully coterminous with that of [landlord]—that is, a full guaranty—all of the conditional language in the guaranty would be superfluous.” Conversely, the court found that the language in the “End of Term” provision of the REBNY lease would be more appropriately relied upon to define “surrender.” The Court stated: Relatedly, [the “End of Term” provision] of the REBNY Lease requires that at lease end, the tenant deliver the Premises vacant and broom clean. If the guaranty continued until the end of the Lease, there would be no need to reiterate the requirement that the Premises be delivered “completely vacant” in the guaranty. Inclusion of the “completely vacant” requirement in the guaranty becomes meaningful only if the guarantor's liability can end before the Lease ends, so that even when [the “End of Term” provision]'s “vacant and broom clean” requirement is not yet in effect (because the Lease has not ended), the “good guy” guaranty requires the premises be completely vacant at the earlier time as a condition of releasing the guarantor. [Footnote omitted.] The Court further found that because: the Lease does not require that the tenant give any notice to vacate at the end of the lease term; the inclusion of the 30–day notice provision in the guaranty makes sense only if the guaranty can terminate before the end of the lease, leaving the tenant, but not the guarantor, liable for post-surrender rent. Indeed, reading “surrender” in the guaranty to include acceptance would render the 30–day notice an impossibility. If, as [landlord] contends, “surrender” in the guaranty requires its acceptance, the notice requirement would require [tenant] to provide notice 30 days before [landlord] accepts the surrender, which would be both impossible and nonsensical. [Citations omitted.] Finally, the Court noted that the parties could have easily crafted a guaranty that was expressly a “good guy” guaranty without the need for the court to “resort to rules of construction regarding superfluity or canons that aid in determining the parties’ intent.” It should be noted that Justice Singas wrote a lengthy dissenting opinion in which one other justice concurred. 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 As readers of this Blog know, we have written about many types of fraud over the years, such as affinity fraud, common law fraud, fraud in the inducement, fraudulent concealment, and securities fraud. Another type of fraud concerns fraud in the execution or fraud in the factum.[1] Three years ago, we examined Paredes v. Vorhand , a case involving this legal principle (here).[2] Since that time, we have not examined any cases involving fraud in the execution. Today, we do so. In Dodobayeva v. Rubinoff, 2025 N.Y. Slip Op. 05219 (2d Dept. Oct. 1, 2025) (here), plaintiff, claiming limited English skills, alleged she was deceived into signing a deed transferring property to her daughter-in-law. The Appellate Division, Second Department, affirmed the dismissal of her claim, ruling that she failed to exercise due diligence, as she neither read nor inquired about the documents. The Court also rejected her reliance on the two-year discovery rule for statute of limitations purposes, finding that she could have discovered the alleged fraud earlier. Fraud In the Factum: A Primer Fraud in the execution, or fraud in the factum, arises where a party did not know the nature or the contents of the document being signed, or the consequences of signing it, and was nonetheless misled into executing it.[3] “However, a party who signs a document without any valid excuse for not having read it is conclusively bound by its terms.”[4] “Moreover, a plaintiff is expected to exercise ordinary diligence and may not claim to have reasonably relied on a defendant’s representations or silence where he or she has means available to him or her of knowing, by the exercise of ordinary intelligence, the truth or the real quality of the subject of the representation.”[5] Thus, the failure to read the document before signing “prevents [the plaintiff] from establishing justifiable reliance, an essential element of fraud in the execution.”[6] In other words, absent some impairment (e.g., “the signer is illiterate, blind, or not a speaker of the language in which the document is written”),[7] a plaintiff cannot justifiably rely on another’s representation that the words used in the document means something other than what they state.[8] Importantly, the signer who claims to have some impairment must be free of negligence.[9] This means that disability by itself does not automatically excuse the signer from making a reasonable effort to learn the contents of the document being signed.[10] “The cases consistently hold that a person” with a disability or an inability to speak and/or read the English language “must make a reasonable effort to have the document read to him.”[11] The Two-Year Discovery Rule: A Primer “A cause of action based upon fraud must be commenced within six years from the time of the fraud, or within two years from the time the fraud was discovered, or with reasonable diligence could have been discovered, whichever is longer.”[12] “‘Where a plaintiff relies upon the two-year discovery exception to the six-year limitations period, the burden of establishing that the fraud could not have been discovered prior to the two-year period before the commencement of the action rests on the plaintiff who seeks the benefit of the exception.’”[13] Although, “‘[o]rdinarily, an inquiry into when a plaintiff should have discovered an alleged fraud presents a mixed question of law and fact’”[14] “summary dismissal is appropriate where it conclusively appears that the plaintiff has knowledge of facts which should have caused [him or] her to inquire and discover the alleged fraud.”[15] “Thus, although ‘mere suspicion’ will not substitute for knowledge of the fraudulent act”,[16] a plaintiff may not “shut his [or her] eyes to facts which call for investigation.”[17] Dodobayeva v. Rubinoff With the foregoing principles in mind, we examine Dodobayeva v. Rubinoff, an action, inter alia, to set aside an allegedly fraudulent conveyance of an interest in real property. Background In February 2020, plaintiff sued her daughter-in-law (“defendant”), and another defendant, inter alia, to set aside a 2013 conveyance of plaintiff’s one-half interest in certain residential real property located in Queens, New York (hereinafter, the “premises”) to defendant. Plaintiff alleged, among other things, that she was fraudulently induced into signing certain documents, including a quitclaim deed, effectuating the conveyance of the premises, in that she believed, at the time that she signed the documentation to convey the premises, that she was executing documents to enable her son, defendant’s spouse, to become an owner of the premises. Plaintiff also alleged that she discovered for the first time in January 2020 that the documents that she signed in 2013 made defendant the sole owner of the premises. Plaintiff further alleged that as a native of Uzbekistan, she possessed “limited skills in the comprehension and use of the English language” at the time of the conveyance. Plaintiff additionally alleged that she executed the documents upon her justifiable reliance on purportedly fraudulent representations made by defendant at the time of the conveyance. Defendant answered the complaint and subsequently cross-moved, inter alia, pursuant to CPLR 3211(a)(5) and (7) to dismiss the cause of action alleging fraud on the grounds that it was time-barred and that plaintiff failed to state a cause of action. Plaintiff opposed. Plaintiff submitted an affidavit in which she stated that she signed the conveyance documents without reading them and that she would not have understood the documents even if she had tried to do so due to her English language limitations. Plaintiff further stated in her affidavit that she never had any conversations with her son about the 2013 conveyance or about the documents she signed until January 2020. In an order dated September 12, 2023, the Supreme Court, among other things, granted defendant’s cross-motion. Plaintiff appealed. The Second Department affirmed. The Second Department’s Decision The Court held that “plaintiff conclusively was presumed to have agreed to the terms of the documents and, accordingly, cannot establish that she lacked knowledge from which she could have discovered the alleged fraud with reasonable diligence.”[18] The Court explained that “plaintiff admitted that she neither read nor inquired about the contents of the documents upon which she relies to establish the fraud before she signed them. Yet, she failed to proffer any valid excuse for her failure to do so.”[19] Therefore, concluded the Court, plaintiff could not demonstrate fraud in the factum.[20] The Court also held that defendant “met her prima facie burden of demonstrating that the cause of action alleging fraud accrued no later than the date of the execution of the quitclaim deed in February 2013.”[21] Therefore, said the Court, the fraud in the execution cause of action was “time-barred” as having been “asserted more than six years later” after execution of the quitclaim deed.[22] The Court also held that plaintiff failed to “establish that the fraud could not have been discovered before the two-year period prior to the commencement of [the] action.”[23] “Accordingly,” the Court held that “the Supreme Court properly granted dismissal of the cause of action alleging fraud … as time-barred.”[24] Takeaway In Dodobayeva, plaintiff claimed that she was misled into signing a quitclaim deed transferring property to her daughter-in-law, believing it was for her son’s benefit. As discussed, plaintiff claimed that, due to language barriers, she did not understand the document. However, in affirming the dismissal of plaintiff’s fraud claim, the Court found that “plaintiff admitted that she neither read nor inquired about the contents of the documents upon which she relie[d] to establish the fraud before she signed them. Yet, she failed to proffer any valid excuse for her failure to do so.”[25] In doing so, the Court emphasized the principle that individuals are presumed to understand documents they sign unless they can show a valid, non-negligent reason—such as illiteracy or language barriers—and that they made reasonable efforts to understand the document before they sign it. In Dodobayeva, the Court also addressed the statute of limitations applicable to fraud causes of action. As discussed, the Court held that plaintiff failed to meet her burden of showing that she brought her claim within two years of discovering the alleged fraud. The Court found that plaintiff did not make any inquiries about the alleged fraud for seven years. Consequently, the Court affirmed the dismissal of plaintiff’s fraud claim as time-barred and unsupported by justifiable reliance. Dodobayeva therefore reinforces the principle that litigants have a duty to inquire into the facts and circumstances of the transactions into which they enter when they possess facts showing that they may be the victims of fraud. ____________________________ 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] Fraud in the execution is different than fraud in the inducement. In the latter, the fraud is based on facts occurring prior or subsequent to the execution of a contract which tend to demonstrate that an agreement, valid on its face and properly executed, is to be limited or avoided. [2] Paredes v. Vorhand, 204 A.D.3d 1468 (4th Dept. 2022). [3] Fleming v. Ponziani, 24 N.Y.2d 105, 111 (1969); Gilbert v. Rothschild, 280 N.Y. 66, 71-72 (1939). [4] Cannariato v. Cannariato, 136 A.D.3d 627, 628 (2d Dept. 2016) (alteration and internal quotation marks omitted). [5] Lapin v. Verner, 238 A.D.3d 1128, 1129-1130 (2d Dept. 2025) (alterations and internal quotation marks omitted); see also Benjamin v. Yeroushalmi, 178 A.D.3d 650, 654 (2d Dept. 2019). [6] Sorenson v. Bridge Capital Corp., 52 A.D.3d 265, 266 (1st Dept. 2008), lv. dismissed, 12 N.Y.3d 748 (2009). [7] Anderson v. Dinkes & Schwitzer, P.C., 150 A.D.3d 805, 806 (2d Dept. 2017). [8] Countrywide Home Loans, Inc. v. Gibson, 157 A.D.3d 853, 856 (2d Dept. 2018); see also Ackerman v. Ackerman, 120 A.D.3d 1279, 1280 (2d Dept. 2014); Dasz, Inc. v. Meritocracy Ventures, Ltd., 108 A.D.3d 1084, 1084-1085 (4th Dept. 2013); Sorenson, 52 A.D.3d at 266. See also Pimpinello v. Swift & Co., 253 N.Y. 159, 163 (1930) (holding, “[i]f the signer [of a document] is illiterate, or blind, or ignorant of the alien language of the writing, and the contents thereof are misread or misrepresented to him by the other party, or even by a stranger, unless the signer be negligent, the writing is void”). [9] Sofio v. Hughes, 162 A.D.2d 518, 520 (2d Dept. 1990). [10] Id. [11] Id. (citing Albany Med. Center Hosp. v. Armlin, 146 A.D.2d 866, 867 (3d Dept. 1989), and Brian Wallach Agency v. Bank of N.Y., 75 A.D.2d 878, 879 (2d Dept. 1980)). [12] York v. York, 235 A.D.3d 1032, 1033 (2d Dept. 2025) (internal quotation marks omitted); see also CPLR 203(g); 213(8); Sargiss v. Magarelli, 12 N.Y.3d 527, 532 (2009). [13] York, 235 A.D.3d at 1033 (quoting Cannariato, 136 A.D.3d at 627). [14] Gormley v. Marist Bros. of the Schs., Province of the United States of Am., 236 A.D.3d 868, 870 (2d Dept. 2025) (quoting Vilsack v. Meyer, 96 A.D.3d 827, 828 (2d Dept. 2012)); see also Trepuk v. Frank, 44 N.Y.2d 723, 724-725 (1978). [15] Cannariato, 136 A.D.3d at 628 (internal quotation marks omitted). [16] Id. (quoting Erbe v. Lincoln Rochester Trust Co., 3 N.Y.2d 321, 326 (1957)). [17] Saphir Intl., SA v. UBS PaineWebber Inc., 25 A.D.3d 315, 316 (1st Dept. 2006) (quoting Schmidt v. McKay, 555 F.2d 30, 37 (2d Cir. 1977)); see also Shannon v. Gordon, 249 A.D.2d 291, 292 (2d Dept. 1988). [18] Slip Op. at *1 (citing Cannariato, 136 A.D.3d at 628). [19] Id. [20] Id. [21] Id. [22] Id. [23] Id. [24] Id. [25] Id.

By: Jeffrey M. Haber New York’s Limited Liability Company Law § 607 limits the remedies available to a creditor when the judgment debtor is an LLC member, confining recovery to the member’s economic interest and prohibiting any direct interference with LLC property. As demonstrated in Finance Holding Co., LLC v. Farzam, 2026 N.Y. Slip Op 31868(U) (Sup. Ct., N.Y. County Apr. 7, 2026), courts use the statute to protect the separation between the LLC and its members. Finance Holding involved a judgment enforcement action in which the petitioner sought to satisfy a nearly $2 million judgment against an individual LLC member by targeting his interests in two LLCs that owned residential apartment buildings. Through a series of motions, the motion court addressed the permissible scope of relief under LLC Law § 607, rejecting attempts to reach LLC assets or control their operations while permitting remedies directed solely at the debtor‑member’s economic interests. Finance Holding Co., LLC v. Farzam Finance Holding is a judgment-enforcement proceeding that arose as a consequence of petitioner obtaining a judgment against respondent for $1,903,366.57 in a related action. In that action, petitioner was seeking to enforce that judgment against respondent directly. In Finance Holding, petitioner moved to enforce its judgment against respondent’s ownership interests in two LLCs that own residential apartment buildings (“respondent LLCs”). Before the motion court were three motions. The first motion involved an order to show cause brought by petitioner seeking relief directed at respondent’s membership interests in the respondent LLCs. In response (the second motion), respondent filed a motion to dismiss the petition insofar as it sought relief against his wife. Separately, respondent’s wife filed her own motion to dismiss the petition as against her and sought attorney’s fees as a sanction under 22 NYCRR 130‑1.1 (the third motion). The motion court denied respondents’ motions. Respondent’s motion to dismiss was denied because he was not admitted to practice law in New York and, therefore, lacked the authority to appear or seek relief on behalf of another party, including his wife. As to the wife’s motion, petitioner clarified that she had been named in the proceeding solely to provide notice, based on her status as a 50 percent member of the respondent LLCs, and that no substantive relief was being sought against her personally. In light of that representation, the motion court denied the request for dismissal as academic. The motion court also denied the wife’s request for sanctions, finding that adding her to the proceeding for notice purposes did not constitute frivolous or vexatious conduct within the meaning of 22 NYCRR 130‑1.1. With those rulings, the motion court turned to petitioner’s motion on the merits. Petitioner sought a range of relief related to respondent’s interests in the respondent LLCs, including a turnover order, an order charging or garnishing his membership interests, appointment of a receiver over the LLCs, injunctive relief restraining the transfer of membership interests, a declaration establishing priority over other actual or potential creditors, and an award of attorney’s fees. The motion court granted in part and denied in part petitioner’s motion. In so ruling, the motion court determined that the majority of the relief sought by petitioner was unavailable as a matter of law. The motion court focused on the limits placed on a judgment creditor’s ability to pursue relief against assets owned by limited liability companies when the judgment is against an individual member. Respondents argued, and the motion court agreed, that because petitioner’s requested relief against the LLCs derived solely from its judgment against respondent as an LLC member, that relief was subject to Limited Liability Company Law (“LLC Law”) § 607. That statute bars a creditor of an LLC member from “obtain[ing] possession of, or otherwise exercising legal or equitable remedies with respect to, the property of the limited liability company.”[1] In practical terms, LLC Law § 607 protects an LLC’s assets and operations from being disrupted by the creditors of individual members. Applying LLC Law § 607, the motion court concluded that several categories of relief sought by petitioner were barred. Petitioner sought turnover of funds and real property held by the respondent LLCs, garnishment of proceeds from any sale of LLC assets or property, and injunctive relief preventing respondents from selling or otherwise disposing of LLC-held property. The motion court found that each of these requests would improperly allow petitioner, as a creditor of an individual member, to reach or control LLC property directly. Because the statute forecloses that result, the motion court denied the requested relief as statutorily unavailable.[2] The motion court next addressed petitioner’s request for a declaratory judgment establishing that it had priority over all other creditors of respondent in collecting proceeds necessary to satisfy the judgment. The motion court found this request procedurally and substantively deficient. The motion court noted that priority disputes among creditors are ordinarily resolved through proceedings that join adverse claimants, such as those contemplated by CPLR 5239.[3] In Finance Holding, however, petitioner had neither identified nor joined any other creditors whose rights would be affected by the requested declaration.[4] Petitioner also failed to allege that any such competing creditors even existed.[5] Without adverse parties or a concrete dispute over priority, the motion court concluded that there was no justiciable controversy for it to resolve.[6] As a result, the motion court denied that portion of petitioner’s motion.[7] The motion court thereafter addressed petitioner’s request for a turnover order and a charging order with respect to respondent’s membership interests in the LLCs. The motion court noted that under LLC Law § 607, a court has the authority to impose a charging order on respondent’s LLC membership interests.[8] Alternatively, said the motion court, a court could, but was not required to, direct turnover of respondent’s LLC membership interests to petitioner as judgment creditor.[9] “In choosing between these remedies,” the motion court took “into account that directing turnover would have the undesirable effect of making petitioner and [respondent’s wife] involuntary equal partners in the management of the buildings owned by the LLC respondents—over [the wife’s] strong objection.”[10] Additionally, explained the motion court, “petitioner [did] not explain why turnover would be more effective than a charging order for purposes of petitioner’s efforts to collect on its judgment against [respondent].”[11] Therefore, the motion court concluded “that imposing a charging order, rather than directing turnover, [was] the appropriate remedy.”[12] The motion court also denied petitioner’s request for the appointment of a receiver over respondent’s LLC membership interests and over the apartment buildings owned by the respondent LLCs, finding that petitioner failed to demonstrate the “special reason” required to justify such relief.[13] The motion court noted that petitioner did not show it had exhausted other, less intrusive means of enforcing the judgment, such as levying against real property owned by respondent personally.[14] Nor did petitioner explain how a receivership would be more effective in satisfying the judgment than a charging order directed at respondent’s membership interests.[15] The motion court also emphasized that the scope of the proposed receivership was overly broad. Rather than being limited to respondent’s interests in the respondent LLCs, petitioner sought a receiver with authority over the day‑to‑day operation, sale, and management of the apartment buildings owned by the LLCs.[16] The motion court found this particularly problematic, especially given that respondent holds only a 50 percent interest in the respondent LLCs.[17] Petitioner failed to address how appointing a receiver would affect or operate alongside the 50 percent ownership interest of respondent’s wife.[18] In light of these deficiencies, the motion court denied that request. Finally, the motion court rejected petitioner’s request for broad injunctive relief because a judgment creditor may not restrict an LLC’s control over its own assets and petitioner provided no basis for relief against respondent’s non‑debtor wife.[19] However, the motion court granted injunctive relief against respondent, enjoining him and his agents from transferring or disposing of his LLC membership interests and from dissipating any income, distributions, or proceeds payable to him from the LLCs.[20] Takeaway Focusing on LLC Law § 607, Finance Holding underscores the limits New York law places on judgment enforcement when the judgment debtor is an LLC member rather than the LLC itself. The central takeaway of the holding is that Section 607 operates as a statutory shield for LLC property, preventing a member’s creditors from reaching, controlling, or interfering with the assets owned by the LLC. The decision also illustrates that a creditor’s remedies are confined to the debtor‑member’s interest in the LLC. Section 607 bars turnover orders, garnishment, receiverships, and injunctions that would effectively give the creditor control over LLC property or management. As shown in Finance Holding, courts reject attempts to bypass this rule, especially where the requested relief would disrupt the LLC’s affairs or prejudice other members who are not judgment debtors. A related takeaway from the Finance Holding decision is the preference, under Section 607, for charging orders as an enforcement mechanism. A charging order allows a creditor to place a lien on distributions payable to the debtor‑member without altering ownership, governance, or control of the LLC. Finance Holding emphasizes that courts are reluctant to order turnover of membership interests or appoint receivers, where doing so would force non‑consensual business relationships, interfere with management, or go beyond the debtor’s economic rights, especially when the debtor owns less than 100% of the LLC. Overall, the key lesson of Finance Holding is that when a judgment debtor is an LLC member, Section 607 limits enforcement to the judgment debtor’s economic interests only. Courts will enforce those limits rigorously, protecting LLC assets and non‑debtor members from collateral damage while still allowing creditors a defined path to judgment recovery. __________________________________ 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] Slip Op. at *3, quoting LLC Law § 607(b). [2] Id. [3] Id. [4] Id. [5] Id. [6] Id., citing Premier Restorations of N.Y. Corp. v. New York State Dept. of Motor Vehs., 127 A.D.3d 1049, 1049 (2d Dept. 2015) (describing requirements for availability of declaratory-judgment claim). [7] Id. Also, the motion court denied petitioner’s request for an award of attorney’s fees. The motion court explained that attorney’s fees are not recoverable in a turnover proceeding brought under CPLR 5225(b), which was one of the statutory bases relied upon by petitioner. Id., citing Bienstock v. Greycroft Partners, L.P., 128 A.D.3d 459, 459 (1st Dept. 2015). Although petitioner sought additional forms of relief under other statutes, it did not identify any statutory provision authorizing the recovery of attorney’s fees in connection with those remedies. The motion court further emphasized that, absent a contractual or statutory basis, it did not possess inherent authority to award attorney’s fees simply because a party prevailed or incurred expenses. On that basis, petitioner’s application for attorney’s fees was denied in its entirety. [8] A charging order under LLC Law § 607 is a court-ordered lien placed on a debtor-member’s interest in an LLC, requiring the company to pay any distributions – profits or income – directly to the creditor instead of the member until the judgment is satisfied. It is a remedy for creditors to satisfy personal debts from a member’s LLC interest. [9] Slip Op. at *3, citing 79 Madison LLC v. Ebrahimzadeh, 203 A.D.3d 589, 589 (1st Dept. 2022); Sirotkin v. Jordan, LLC, 141 A.D.3d 670, 672 (2d Dept. 2016). [10] Id., citing TBC Funding LLC v. Kenwood Commons, LLC, 2026 N.Y. Slip Op. 26027, at *4 (Sup. Ct., Albany County 2026) (discussing the choice between a turnover order and a charging order). [11] Id. at *4. [12] Id. [13] Id., citing Itria Ventures LLC v. Beaver Street Pizza LLC, 194 A.D.3d 447, 447 (1st Dept. 2021) (internal quotation marks omitted). [14] Id. [15] Id. [16] Id., Hotez 71 Mezz Lender LLC v. Falor, 14 N.Y.3d 303, 418 (2010) (noting that a factor pointing toward granting the plaintiff’s request for the appointment of a receiver is that “plaintiff seeks receivership over defendants’ ownership/ membership interests, not the day-to-day operation of a foreign corporation”). [17] Id. [18] Id. [19] Id. [20] Id.

By: Jeffrey M. Haber Affinity fraud is a form of financial fraud that relies on social connections and trust. It most often occurs within identifiable groups, such as religious congregations, cultural or ethnic communities, professional networks, or social organizations, where members share common values, experiences, or identities. Rather than approaching targets as strangers, those promoting the scheme position themselves as insiders, using familiarity and perceived credibility to create comfort and reduce skepticism. In many cases, affinity fraud begins with what appears to be a legitimate opportunity. The investment or business venture is typically described as low‑risk and reliable, sometimes with returns that appear to be guaranteed. Details may be presented in broad or technical terms that discourage deeper questioning, and potential participants are often reassured that others within the community have already taken part. Because the offer is communicated through trusted channels, such as friends, colleagues, or respected community figures, individuals may rely more on personal trust than independent verification. As participation grows, the scheme often spreads through informal referrals rather than public advertising. Some affinity frauds are later revealed to be Ponzi or pyramid schemes, where returns paid to earlier participants are funded by money from newer ones rather than genuine profits. These structures can persist for extended periods, particularly when community members are reluctant to question or report someone they know personally. In some cases, individuals who promote the opportunity are unaware that they are participating in a fraudulent scheme themselves. The effects of affinity fraud extend beyond financial loss. Because the deception operates within trusted social networks, its discovery can strain relationships and create lasting tension within a community. Individuals may feel embarrassed, conflicted, or hesitant to speak openly about their experience. This dynamic can delay detection and complicate efforts to address the situation once concerns arise. Securities and Exchange Commission v. Robert L. Murray, Jr. On May 4, 2026, the United States District Court for the Northern District of Illinois entered a final judgment as to Robert L. Murray, Jr., a former U.S. Navy chief petty officer, in connection with the SEC’s enforcement action against Murray for allegedly engaging in a fraudulent investment scheme that used Facebook to target U.S. Navy active duty service members, veterans, and reservists.[1] According to the SEC’s complaint, defendant, a retired U.S. Navy Chief, operated an unregistered investment fund and investment advisory business through an entity known as Deep Dive Strategies, LLC (“DDS” or the “Fund”), and raised investor capital through material misrepresentations and omissions. According to the SEC, from approximately September 2020 through January 2022, defendant solicited investments in DDS from individuals throughout the United States, many of whom were active‑duty servicemembers, veterans, or otherwise affiliated with the U.S. Navy. The SEC alleged that defendant used his military background and social media presence within Navy‑affiliated investing communities to establish credibility and attract investors. In total, defendant allegedly raised approximately $354,800 from about 44 investors located in at least 14 states, including investors serving overseas. DDS was organized as a limited liability company in Ohio in September 2020. Defendant was the Fund’s sole managing member, controlled its bank and brokerage accounts, and made all investment decisions. Investors purchased membership interests in the Fund at $5,000 per unit. The SEC said that defendant provided some investors with an operating agreement and disclosure statement, which represented that DDS would pool investor funds and trade in publicly traded securities for the benefit of its members. The offering materials further disclosed that defendant would receive a two percent annual administrative fee and a twenty percent share of trading profits, but would not earn profits in years when the Fund incurred losses. The SEC alleged that both written and oral representations to investors stated that their funds would be used exclusively for securities trading and payment of disclosed Fund expenses. Investors were allegedly told that at the end of the 2021 calendar year, after a one‑year investment period, they could request redemption of their investment, net of profits or losses, and that redemption requests would be honored within fifteen days. According to the SEC, investors exercised no control over investment decisions, which were made solely by defendant, and defendant acted as an investment adviser to the Fund. The SEC alleged that defendant’s representations concerning the use of investor funds were false and misleading. While some Fund assets were initially used to trade securities, defendant allegedly began misappropriating investor funds almost immediately after receiving them. The SEC claimed that defendant transferred substantial amounts of Fund money to his personal bank accounts, withdrew large sums in cash, and used investor funds to pay personal expenses unrelated to Fund operations. The SEC further alleged that defendant’s securities trading activity on behalf of DDS was brief and unsuccessful. According to the complaint, DDS suffered substantial trading losses in January 2021, including losses associated with highly speculative options trading. By late January 2021, nearly all trading capital had been lost, said the SEC. Defendant allegedly made no further trades after January 23, 2021, and withdrew the remaining balance from the Fund’s brokerage account in early February 2021. Despite the cessation of trading activities, the SEC alleged that defendant continued to solicit and accept investor funds through February 2021. These additional funds were not deposited into the brokerage account or used for securities trading but instead were allegedly misappropriated. In total, the SEC claimed that defendant misappropriated approximately $148,000 of investor funds, representing nearly 42 percent of the capital raised, after accounting for permitted administrative fees. The SEC also alleged that defendant failed to provide investors with meaningful accounting information and gradually reduced communication with them beginning in March 2021. When some investors sought redemptions in accordance with the offering materials, defendant allegedly failed to return any funds. Although defendant reportedly told investors in August 2021 that he intended to wind down the Fund and return remaining assets, no such distributions were made. The SEC alleged that defendant never filed a registration statement with respect to the offer and sale of securities in DDS and did not qualify for an exemption from registration. The SEC further alleged that defendant used interstate commerce and the mails to conduct the offering through social media platforms, electronic communications, and bank transfers. Based on the foregoing allegations, the SEC asserted claims for violations of the antifraud provisions of the Securities Act of 1933 (“Securities Act”) and the Securities Exchange Act of 1934 (“Exchange Act”), including Section 10(b) and Rule 10b‑5, as well as violations of Sections 17(a)(1), (2), and (3) of the Securities Act. The SEC also alleged violations of the registration provisions of Sections 5(a) and 5(c) of the Securities Act. In addition, the SEC asserted claims under Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940 (“Investment Advisors Act”), alleging that defendant engaged in fraudulent and deceptive conduct while acting as an investment adviser to a pooled investment vehicle. The final judgment permanently enjoins defendant from violating Sections 5(a), 5(c), and 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act, and orders him to pay disgorgement in the amount of $112,271.71, which is to be deemed satisfied by the order of restitution entered against him in United States v. Murray, No. 22-cr-643 (N.D. Ill.), a parallel criminal matter. Takeaway The SEC’s enforcement action demonstrates how investment fraud can operate within trusted communities. The case shows that affinity fraud is defined not by the investment product, but by how shared identity and trust are used to attract and retain investors. Defendant, a retired U.S. Navy Chief, marketed an unregistered investment fund primarily to Navy servicemembers, veterans, and reservists through military‑focused social media groups. By emphasizing his military background and insider status, he leveraged the trust associated with shared service and rank. That reliance on military identity as a credibility tool is a central characteristic of affinity fraud. The investment was presented as legitimate and structured, complete with offering documents, stated fees, and redemption rights. Investors were told their money would be pooled and used solely for securities trading. In reality, trading activity was brief, highly speculative, and unsuccessful, and a substantial portion of investor funds was diverted to personal use. Promised transparency and redemptions never materialized, and communication with investors diminished as losses mounted. The enforcement action and judgment highlights how affinity fraud often overlaps with traditional securities violations. The conduct alleged included unregistered securities offerings, adviser fraud, material misrepresentations, and misappropriation of funds. Affinity fraud did not replace these violations; it amplified their impact by increasing investor reliance on trust rather than verification. The judgment, which imposed permanent injunctions and disgorgement, reinforces several lessons: shared background is not a substitute for due diligence; centralized control without oversight increases risk; lack of transparency and missed redemptions are serious red flags; and registration status matters. __________________________________ 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] The SEC’s litigation release announcing the entry of judgment was disseminated on May 5, 2026.

By Jonathan H. Freiberger Mechanics’ liens are powerful tools available to, inter alia, contractors, laborers and materialmen when they are not paid for their work in improving real property. As the Court of Appeals noted long ago: The object and purpose of the mechanics' lien law was to protect a person who, with the consent of the owner of real property, enhanced its value by furnishing materials or performing labor in its improvement, by giving him an interest therein to the extent of the value of such material or labor. The filing of the notice of lien is the statutory method prescribed by which the party entitled thereto perfects his inchoate right to that interest. John P. Kane Co. v. Kinney, 174 N.Y. 69, 73 (1903). Section 3 of the Lien Law provides that a “contractor, subcontractor, laborer, materialman … who performs labor or furnishes materials for the improvement of real property with the consent or at the request of the owner thereof …, shall have a lien for the principal and interest, of the value, or the agreed price, of such labor ... due or payable for the benefit of any laborer, or materials upon the real property improved or to be improved and upon such improvement, from the time of filing a notice of such lien as prescribed in this chapter….” Lien Law § 3 “should be liberally construed to secure the purposes for which it was intended, namely the protection of that class of people who perform services or supply the material for the improvement of realty….” Claudio Perfetto, Inc. v. Waste Management of New York, 274 A.D.2d 389, 390 (2d Dept. 2000) (citations omitted). Once filed, a mechanics’ lien is valid for one year “unless within that time an action is commenced to foreclose the lien, and a notice of the pendency of such action … is filed with the county clerk of the county in which the notice of lien is filed” or unless an extension is filed by the lienor. Lien Law § 17 (emphasis added); see also Thomas Bros. Pile Corp. v. Rosenblum, 134 A.D.3d 1020, 1021 (2d Dept. 2015). A lienor only gets one extension by filing. If an action to foreclose the lien is not commenced within the extension period, the lien can only be extended by an order of the court. Aztec Window & Door Mfg., Inc. v. 71 Village Road, LLC, 60 A.D.3d 795, 796 (2d Dept. 2009). Absent an extension, “the lien automatically expires by operation of law, becoming a nullity and requiring its discharge.” Id. (citation omitted). A mechanics’ lien is an encumbrance on real property. Edward Joy Co., Inc. v. McGuire & Bennett, Inc., 199 A.D.2d 1015 (4th Dept. 1993). Thus, the placing of a mechanics’ lien on real property can adversely impact the owner’s rights. For example, the filing of a mechanic s’ lien could be an event of default under a mortgage loan. Similarly, the existence of a mechanic s’ lien could negatively impact the ability of an owner to mortgage or sell the liened property. Thus, the ability to discharge a lien is critical to an owner. Section 19 of the Lien Law offers several ways to discharge a lien.[1] Thus, a lien will be discharged: when the lienor files a satisfaction or release of the lien (Lien Law § 19(1)); if the lienor fails to commence an action to foreclose the lien or extend the lien within a year of filing (Lien Law § 19(2)); by court order vacating the lien for failure to prosecute the lien (Lien Law § 19(3)); by filing with the county clerk a copy of a transcript of a judgment “showing a final determination of the action in favor of the owner of the property against which the lien was claimed (Lien Law § 19(5)); by obtaining a court order summarily discharging the lien because, inter alia, the “character of the labor or materials furnished and for which the lien is claimed” do not support a lien or the lienor failed to comply with section 9[2] of the Lien Law (Lien Law § 19(6)); or, as is relevant to today’s article, by the posting of a bond discharging the lien(Lien Law § 19(4)). Section 19(4) of the lien law provides that “[e]ither before or after the beginning of an action by the owner or contractor executing a bond or undertaking in an amount equal to one hundred ten percent of such lien conditioned for the payment of any judgment which may be rendered against the property for the enforcement of the lien….” The lien attaches to the posted bond in place and instead of the real property. The lienor remains protected and the owner is not constrained by the encumbrance of the lien. Against this backdrop, we discuss Hewitt Builder and Renovations, Inc. v. Farmingville Assoc. Phase 1, LLC, a case decided by the Appellate Division, Second Department, on May 6, 2026.[3] The defendant property owner in Hewitt (“Owner”) entered into a construction contract with the defendant general contractor (the “GC”). The plaintiff subcontractor (the “Sub”) entered into a subcontract with the GC. The Sub alleged that it completed its work under the subcontract but only received partial payment for its work. As a result, on November 29, 2021, the Sub filed a mechanics’ lien against the property. Four months later, in March of 2022, the Sub commenced an action to foreclose its lien, but failed to file a notice of pendency. On December 21, 2022, over a year after the commencement of the action, the Owner obtained a surety bond discharging the lien. The Sub appeals from the motion court’s grant of the defendants’ motion to dismiss the complaint because the lien subject to the foreclosure action lapsed. The Second Department affirmed and stated: Pursuant to Lien Law § 17, a mechanic's lien expires one year after filing unless an extension is filed with the County Clerk or an action is commenced to foreclose the lien and a notice of pendency is filed within that time period. Here, since it is undisputed that the plaintiff failed to file a notice of pendency or move to extend the time to do so within one year after the mechanic's lien was filed, and no extensions of the mechanic's lien were obtained from the court, the mechanic's lien automatically expired by operation of law one year after it was filed. Contrary to the plaintiff's contention, the bond obtained by the defendants did not permit the plaintiff to continue the foreclosure action against the bond rather than the property as the bond was obtained after the lien had automatically expired by operation of law. (Citations and internal quotation marks omitted.) Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice. [1] Section 20 of the Lien Law permits the discharge of a mechanics’ lien by depositing with the “county clerk, in whose office the notice of lien is filed, a sum of money equal to the amount claimed in such notice, with interest to the time of such deposit.” [2] Section 9 of the Lien law sets forth the required contents of a mechanics’ lien. [3] Some of the facts recited herein were obtained from the motion court filings available on the court’s NYSCEF system.

By: Jeffrey M. Haber Under New York’s Limited Liability Company Law (“LLCL”) § 702, a court “may decree dissolution of a limited liability company whenever it is not reasonably practicable to carry on the business in conformity with the articles of organization or operating agreement.” The claim must be brought “[o]n application by or for a member” of the company.[1] In Matter of Bodenchak v. 5178 Holdings LLC, 2025 N.Y. Slip Op. 05875 (1st Dept. Oct. 23, 2025) (here), the Appellate Division, First Department, examined the “by or for” language of LLCL § 702 in affirming the grant of a motion to substitute the estate of a deceased member for the decedent in the proceeding.[2] Bodenchak was brought as a special proceeding in which the original petitioner, Frank Bodenchak (“Frank”), a minority investor in 5178 Holdings LLC (“5178”), sought both direct monetary damages and the judicial dissolution of 5178, a New York Limited Liability Company (“LLC”), pursuant to LLCL § 702. Frank died shortly after commencing suit. His widow, Dawn Bodenchak (“Dawn”), was appointed executor of his estate and moved to substitute as petitioner. Respondents opposed the motion, contending the estate could not maintain the dissolution portion of the proceeding under LLCL § 702. The motion court granted the motion. Respondents appealed. The First Department “unanimously affirmed”. The issue on appeal concerned the request for judicial dissolution of 5178. As to the monetary damages claims, there was no dispute. Under Section 11-3.2(b) of New York’s Estates, Powers & Trusts Law, the personal representative of a decedent’s estate may bring or continue an action “[f]or any injury,” and “[n]o cause of action for injury to person or property is lost because of the death of the person in whose favor the cause of action existed.”[3] Thus, causes of action seeking monetary damages survive a decedent’s death, and the proper party to maintain an action to recover monetary damages is the decedent’s representative. In Bodenchak, the proper party to pursue Frank’s monetary damages claims was Dawn. In addressing the request for dissolution of 5178, the Court looked to the LLCL. Under LLCL § 702, a dissolution action may be brought “[o]n application by or for a member.” The Court held that Dawn satisfied Section 702, stating “Petitioner’s application was made for decedent, a member of respondent 5178 Holdings, as executor of his estate.” Therefore, said the Court, defendants’ attempt to limit the scope of Section 702 to only members was “unavailing”.[4] Under LLCL § 608, the estate of a deceased member “may exercise all of the member’s rights for the purpose of settling his or her estate or administering his or her property,”[5] regardless of whether the estate assumes “member” status.[6] Appellate and trial court cases interpreting LLCL § 608 have consistently made it clear that the statute means what it says.[7] In Bodenchak, the Court held that “Decedent’s right to pursue dissolution passed to his estate upon his death.”[8] This was especially so, since “the dissolution proceeding [was] necessary to settle [Frank’s] estate and distribute the proceeds from the sale of the apartment owned by 5178 Holdings.”[9] Thus, contrary to the respondents’ contention, which the Court held was “also unavailing”, petitioner, as executor of Frank’s estate, had the authority to exercise Frank’s rights in the LLC for the purpose of settling the estate.[10] Takeaway In Bodenchak, the First Department reaffirmed an important point under the LLCL: the right to seek judicial dissolution of an LLC does not vanish upon a member’s death, when the dissolution proceeding is necessary to settle the deceased member’s estate. LLCL § 702 allows dissolution “on application by or for a member,” which the Court made clear includes actions brought by the estate of a deceased member. The Court relied on LLCL § 608, which grants an estate the ability to exercise all of a deceased member’s rights for purposes of settling the estate, even if the estate (or its representative) does not become a member of the LLC. Thus, under LLCL § 608, Frank’s right to seek dissolution passed to his estate upon his death, particularly because the dissolution proceeding was necessary to settle the estate and distribute assets. In short, the Bodenchak confirms that: (a) monetary damage claims survive a member’s death and can be pursued by the estate’s representative; (b) the estate of a deceased LLC member may seek judicial dissolution under LLCL § 702, when dissolution is necessary to settle the deceased member’s estate; and (c) LLCL § 608 empowers estates to exercise a deceased member’s rights for estate administration, regardless of membership status. ______________________________ 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] LLCL § 702. [2] In prior articles, we examined substitution upon the death of a named party. See Death and Litigation, CPLR 1015(a) and the Death of a Party, and Death of a Litigant. We have also examined judicial dissolution of an LLC under LLCL § 702. See LLC Breakups And Judicial Dissolution: The Hurdles Are High, Issues Of Fact Preclude Dismissal Of Claim For Judicial Dissolution Of LLC, Breaking Up Is Hard To Do: Court Denies Motion To Dismiss Action For Dissolution of an LLC, Court Finds that Allegedly Ousted Member of LLC Has Standing to Seek Dissolution, and Court Reinforces the Fact that Judicial Dissolution of an LLC is Not Easy. This Blog has not, however, addressed the issue in Matter of Bodenchak v. 5178 Holdings LLC. [3] Under New York law, “individual beneficiaries . . . ha[ve] no independent right to maintain an independent cause of action for the recovery of estate property, as such a right belong[s] to the personal representative of the decedent’s estate.” See Stallsworth v. Stallsworth, 138 A.D.3d 1102, 1103 (2d Dept. 2016) (citations omitted). [4] Slip Op. at *1. [5] LLCL § 608. [6] Under New York law, the death of a member of a limited liability company does not trigger dissolution of that limited liability company. See LLCL § 701(b). [7] Crabapple Corp. v. Elberg, 53 A.D.3d 434 (1st Dept. 2017); In Matter of Andris v. 1387 Forest Realty, LLC, 213 A.D.3d 923 (2d Dept 2023); see also Pachter v. Winiarski, 2021 WL 1794565 (Sup. Ct., Kings County May 5, 2021); Estate of Judith Lindenberg v. Winiarsky; 2021 WL 1794560 (Sup. Ct., Kings County May 5, 2021). [8] Slip Op. at *1 (citing Crabapple, 53 A.D.3d at 435). [9] Id. (citing Matter of Andris, 213 A.D.3d at 924). [10] Id.

By: Jeffrey M. Haber In New York, when interpreting a contract, the words of the writing must be accorded their fair and reasonable meaning, aiming for a practical interpretation that realizes the reasonable expectations of the parties.[1] The court is required to enforce a written agreement according to the plain meaning of its terms when it is complete, clear, and unambiguous on its face.[2] Although the parties may offer conflicting interpretations of their contract, that does not mean that the contract is ambiguous.[3] In that circumstance, and in general, the court is to apply the meaning intended by the parties, as derived from the language of the contract in question.[4] Thus, “where the intention of the parties may be gathered from the four corners of the instrument, interpretation of the contract is a question of law [i.e., it can be determined by the court] and no trial is necessary to determine the legal effect of the contract.”[5] In Harris v. Dream Volunteers, 2025 N.Y. Slip Op. 33963(U) (Sup. Ct., N.Y. County Oct. 14, 2025), the motion court granted defendant’s motion to dismiss plaintiff’s breach of contract claims on the grounds that the plain meaning of the contract at issue utterly refuted plaintiff’s allegations. Plaintiff commenced the action alleging breach of contract based on two theories: (1) breach of an original agreement dated April 10, 2023, asserting that plaintiff was prematurely terminated in violation of that agreement because the termination took place prior to a deadline to complete certain tasks; and (2) breach of a subsequent implied-in-fact contract, allegedly formed on December 21, 2023, which established a new deadline of October 31, 2024, for completing certain tasks. The original agreement designated plaintiff as an independent contractor providing sales and marketing strategy services to defendant. The agreement specified that “the only consideration due [plaintiff] regarding the subject matter of [the] Agreement” was payment of compensation in the amount of $6,667 per month. Section 8 of the agreement, titled “Termination,” granted defendant the right to “terminate [the] Agreement at any time, with or without cause, upon thirty (30) days’ notice except within the first ninety (90) days of [the] Agreement.” Defendant terminated the agreement on January 17, 2024, effective February 16, 2024. The termination, therefore, occurred well after the initial ninety (90) day period, making defendant’s 30-day notice within the period set forth in Section 8 of the agreement. Based upon the foregoing facts, the motion court found plaintiff’s claims to be “fatally undermined by the clear and unambiguous language contained in the agreement.”[6] Plaintiff’s claim for breach of the original agreement rested on the premise that because the agreement outlined key objectives or tasks with deadlines (e.g., June 30, 2024), defendant was obligated to keep the agreement in effect until those deadlines passed.[7] Pointing to Section 1 and Exhibit A of the agreement, the motion court noted that those sections primarily described plaintiff’s obligations under the agreement, which required her to undertake and complete services on the specified schedule. However, that section, said the motion court, “limit[ed] the defendant’s obligation by explicitly stating that the only consideration due from [defendant] was the monthly payment of $6,667.”[8] Further, explained the motion court, “Section 8 of the Agreement clearly and expressly grant[ed] the defendant the unconditional right to terminate the agreement ‘at any time, with or without cause, upon thirty (30) days’ notice except within the first ninety (90) days.’”[9] “This language,” explained the motion court, “directly contravene[d] the plaintiff’s interpretation of the agreement that setting deadlines for an independent contractor to complete certain tasks somehow create[d] an implied right that the contractor remain[ ] engaged through those dates.”[10] “Given that the contract provide[d] for termination at will after the initial 90-day period,” concluded the motion court, “irrespective of any task or objective deadlines, the claim that the plaintiff’s termination prior to June 30, 2024 was impermissible [was] utterly refuted by the plain and unambiguous language of the agreement.”[11] Finally, the motion court held that “plaintiff’s claim that the deadline to complete the tasks was extended to October 31, 2024 [was] … unavailing.”[12] First, the motion court found that “even if it could be established that the deadline was extended, the plaintiff still could have been terminated at will for the reasons stated” in the decision.[13] Second, explained the motion court, “any claim that the deadline was extended by either an oral or implied-in-fact agreement [was] foreclosed by the clear language of the agreement.”[14] The motion court noted that the amendment clause and integration clause of the agreement foreclosed any argument that an implied-in-fact contract existed: Section 13 of the agreement explicitly states that “[n]o changes or modifications or waivers to this Agreement will be effective unless in writing and signed by both parties.” The agreement also contains an integration clause, which dictates that the Agreement “constitutes the complete and exclusive agreement between the parties concerning its subject matter and supersedes all prior or contemporaneous agreements or understandings, written or oral, concerning the subject matter described herein.” Because the alleged new implied-in-fact contract derived from oral discussions and email communications concerning the existing subject matter (Consultant’s key objectives/deadlines), it violate[d] the plain language of Section 13.[15] Accordingly, the motion court granted defendant’s motion and dismissed the complaint in its entirety. Takeaway Harris underscores the fundamental principle of contract interpretation – i.e., contracts are to be construed pursuant to the parties’ intention.[16] As the Court of Appeals explained a little over three decades ago, “[t]he best evidence of what the parties … intend is what they say in their writing.”[17] When the parties’ writing is clear and unambiguous on its face – that is, the terms are reasonably susceptible to only one meaning – it should be enforced according to the plain meaning of those words. _____________________________ 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] Dreisinger v. Teglasi, 130 A.D.3d 524, 527 (1st Dept. 2015). [2] Greenfield v. Philles Records, 98 N.Y.2d 562, 569 (2002). [3] Bethlehem Steel Co. v. Turner Constr. Co., 2 N.Y.2d 456, 460 (1957). [4] Duane Reade, Inc. v. Cardtronics, LP, 54 A.D.3d 137, 140 (1st Dept. 2008). [5] Bethlehem Steel, 2 N.Y.2d at 460. [6] Slip Op. at *2. [7] Id. [8] Id. [9] Id. [10] Id. [11] Id. [12] Id. [13] Id. [14] Id. [15] Id. at 2-3. [16] This Blog has written about the issues in this case – namely, words have meaning – on numerous occasions. Some of the articles that we have written include: Contract Interpretation: Words Have Meaning; The New York Court of Appeals Reminds Litigants That Words in Contracts Have Meaning; Words Have Meaning; A Contract That Means What It Says; Contracts That Say What They Mean, Mean What They Say Redux; and Contracts that Say What They Mean, Mean What They Say. [17] Slamow v. Del Col, 79 N.Y.2d 1016, 1018 (1992).

By: Jeffrey M. Haber In 2019, New York enacted the Uniform Voidable Transactions Act, which repealed and replaced certain provisions of the Debtor and Creditor Law (“DCL”) relating to fraudulent conveyances,[1] which became effective April 4, 2020.[2]Transfers made after April 4, 2020 are governed by the current version of the DCL.[3] The DCL, as amended, permits creditors to void actual and constructive fraudulent transfers.[4] A creditor may void a debtor’s constructive fraudulent transfers in three situations: first, if the transfers were made without receiving reasonably equivalent value and while the debtor either (i) was engaged in a transaction for which the debtor’s remaining assets were unreasonably small in relation to the transaction or (ii) intended to incur debts beyond its ability to pay;[5] second, if they were made without receiving reasonably equivalent value, and the debtor was insolvent at the time or became so as a result of the transfer,[6] or third, if they were made to an “insider” for an antecedent debt while the debtor was, and the insider had reason to believe the debtor was, insolvent.[7] If the debtor is a corporation, “insider” for purposes of section 274(b) includes: “a person in control of the debtor,” “a relative of a … person in control of the debtor,” and “an affiliate, or an insider of an affiliate as if the affiliate were the debtor.”[8] Voidability of constructive fraudulent transactions “is unrelated to the proof of the debtor’s intent, but turns on objective facts concerning the debtor’s distressed financial condition and the inadequate consideration received.”[9] Constructive fraudulent transfer claims are not subject to heightened pleading rules.[10] A creditor may also void a debtor’s actual fraudulent transfers. DCL § 273(a), as amended, provides, in part, that a transfer made by a debtor is “voidable as to a creditor, whether the creditor’s claim arose before or after the transfer was made … if the debtor made the transfer … (1) with actual intent to hinder, delay or defraud any creditor of the debtor; or (2) without receiving a reasonably equivalent value in exchange for the transfer … and the debtor … (i) was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction; or (ii) intended to incur, or believed or reasonably should have believed that the debtor would incur, debts beyond the debtor's ability to pay as they became due.” In determining actual intent under DCL § 273(a)(1), courts may consider the common law “badges of fraud,” which have been codified to include, among other factors, whether “(1) the transfer or obligation was to an insider; (2) the debtor retained possession or control of the property transferred after the transfer; (3) the transfer or obligation was disclosed or concealed; (4) before the transfer was made or obligation was incurred, the debtor had been sued or threatened with suit; (5) the transfer was of substantially all the debtor's assets; (6) the debtor absconded; (7) the debtor removed or concealed assets; (8) the value of the consideration received by the debtor was reasonably equivalent to the value of the asset transferred or the amount of the obligation incurred; (9) the debtor was insolvent or became insolvent shortly after the transfer was made or the obligation was incurred; (10) the transfer occurred shortly before or shortly after a substantial debt was incurred; and (11) the debtor transferred the essential assets of the business to a lienor that transferred the assets to an insider of the debtor.”[11] Although causes of action under Section 273 of the former DCL were not required to be pleaded with heightened particularity pursuant to CPLR 3016(b),[12] such particularity was required for “actual intent” causes of action arising out of Section 276 of the former DCL.[13] Since the “actual intent” provision of the former DCL was incorporated into the amended DCL (i.e., section 273 (a)(1)), causes of action arising under this subdivision must satisfy the heightened pleading requirements.[14] Thus, allegations of the transfer and badges of fraud made “upon information and belief” are generally insufficient to plead the claim with the requisite particularly of CPLR 3016(b).[15] However, where material facts are within the exclusive knowledge of the party charged with such fraud, the specificity requirement is not to be so strictly interpreted “to dismiss a case at an early stage where any pleading deficiency might be cured later in the proceedings.”[16] Therefore, a pleading based “upon information and belief” can satisfy the CPLR 3016(b) heightened pleading requirement when it is accompanied by a statement of facts “sufficient to permit a reasonable inference of the alleged conduct.”[17] In Neptune Issue Inc. Profit Sharing Plan v. Eliopoulos, 2025 N.Y. Slip Op. 06001 (3d Dept. Oct. 30, 2025 (here), the Appellate Division, Third Department, addressed the foregoing principles. In April 2016, plaintiff commenced an action against defendant Mary Ellen Eliopoulos (“Eliopoulos”) and defendant Estates of Glenburnie LLC (“Glenburnie LLC”), a domestic limited liability company owned by Eliopoulos, seeking to foreclose on a note and mortgage secured by real property located in Essex County, New York. Plaintiff commenced a second mortgage foreclosure action against Eliopoulos and Glenburnie LLC in May 2016, this time relating to real property located in Washington County, New York. While these actions were pending, Eliopoulos and Glenburnie LLC obtained two mortgages with nonparty Mako International, LLC (“Mako”), encumbering several parcels of real property located in the Town of Putnam, Washington County (“Putnam parcels”). In late 2018, plaintiff obtained judgments of foreclosure and sale in both actions and, following the referee sales, moved in each action for a deficiency judgment against Eliopoulos. In February 2019, Eliopoulos and Glenburnie LLC further encumbered the Putnam parcels with a third mortgage from Mako. Before either deficiency judgment could be rendered in plaintiff’s favor, in June 2020, Eliopoulos and Glenburnie LLC conveyed their interests in the Putnam parcels and two parcels commonly known as Lake George Way (collectively, the “subject properties”) to defendant Glenburnie Estates LLC (“GEL”) for $529,000. Eliopoulos’ son is the sole member of GEL. Plaintiff then commenced the action against Eliopoulos, Glenburnie LLC and GEL (collectively, “defendants”) seeking to set aside the conveyance of the subject properties to GEL as a voidable transaction pursuant to DCL §§ 273, 274, and 275. GEL moved, pre-answer, to dismiss the complaint for failure to state a cause of action and based on the documentary evidence. GEL contended that the allegations against defendants based “upon information and belief” were insufficient to state a cause of action with the particularity required under the DCL. GEL further contended that a subsequent proposed sale of the subject properties demonstrated that Eliopoulos and Glenburnie LLC received reasonably equivalent value from GEL in exchange for the transfer. Plaintiff opposed the motion. The motion court entered an order without any written or oral findings, denying the motion to dismiss. GEL appealed. The Court held that the complaint alleged sufficient facts to state causes of action alleging violations of DCL § 273(a)(1) and (a)(2).[18] “Although several key allegations in both causes of action were based ‘upon information and belief,’” noted the Court, it was “satisfied that the accompanying factual statements [were] sufficient to place defendants on notice of the allegations asserted against them.”[19] “Specifically,” said the Court, “each cause of action alleged that Eliopoulos and Glenburnie LLC conveyed the subject properties to her son’s entity, GEL, an insider, at a time when defendants knew they were likely to incur additional debts as a result of plaintiff’s pending actions seeking a deficiency judgment against Eliopoulos.”[20] “These factual statements,” concluded the Court, were “supported by the record, including that defendants [did] not dispute the son’s status as an insider.”[21] The Court also held that these statements satisfied “multiple factors considered to be badges of fraud,” and, therefore, were “sufficiently pleaded.”[22] The Court noted that “[a]lthough … plaintiff’s allegations relating to Eliopoulos and Glenburnie LLC’s ability to repay additional debts likely to be incurred and further that Eliopoulos was insolvent after the transfer to GEL were not supported by factual statements, insolvency [was] presumed” under DCL § 271(b) “where a debtor is ‘generally not paying the debtor’s debts as they become due other than as a result of a bona fide dispute.’”[23] “At the time of the conveyance to GEL,” explained the Court, “plaintiff had already been awarded two judgments of foreclosure and sale against Eliopoulos for her failure to make payments under two separate mortgage notes.”[24] “Further,” said the Court, “considering that the record reveal[ed] Eliopoulos may have ignored an information subpoena relating to her finances as to at least one of the deficiency judgments,” it was “satisfied that such financial information [was] within the knowledge of the parties alleged to have engaged in a fraud and which could be explored during disclosure.”[25] The Court rejected defendants’ contention plaintiff’s allegations were speculative because they were asserted “upon information and belief” and otherwise contrary to the documentary evidence:[26] Eliopoulos and Glenburnie LLC encumbered the Putnam parcels with $475,000 in mortgages from Mako, and then sold the Putnam parcels plus two other parcels — including at least one parcel not subject to a Mako mortgage that had deeded water access to Lake George — to GEL for $529,000. As highlighted by plaintiff, this means two parcels on Lake George — one with deeded lake access — were conveyed for approximately $27,000 each. Then approximately three years later, all four subject properties were sold to a third party for $1,250,000. Although GEL contends that the actual consideration for the June 2020 transaction was above $529,000 and that the subject properties were “unmarketable and worthless” because other potential buyers “would not pay anything, let alone fair market value,” for real property that was subject to multiple lawsuits, this is information within the knowledge of defendants and a “plaintiff may allege upon information and belief that defendants transferred assets for inadequate or no consideration.”[27] “When … recognizing that we are to afford the complaint a liberal construction, presume the alleged facts to be true, and afford plaintiff the benefit of every favorable inference when considering a motion to dismiss for failure to state a cause of action,” said the Court, “we are satisfied that the allegations contained in the complaint set forth a cognizable legal claim under the Debtor and Creditor Law.”[28] Takeaway The Legislature’s adoption of the Uniform Voidable Transactions Act modernized the State’s prior Debtor and Creditor Law, thereby enhancing creditor protections against fraudulent transfers. The revised law distinguishes between actual and constructive fraud, with the latter based on objective financial distress rather than intent. Actual fraud requires heightened pleading standards and is evaluated using codified “badges of fraud.” Neptune illustrates the law’s practical application: a property transfer to an insider during pending foreclosure actions was challenged as voidable. The Court found that even allegations made “upon information and belief” were sufficient when supported by factual context, such as insider status and undervalued consideration. Neptune also affirmed that insolvency can be presumed from missed payments and ignored subpoenas. Neptune reinforces the DCL’s focus on economic realities over formalities, thereby making it a powerful tool for creditors seeking redress for fraudulent transfers. ___________________________ 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 examined the new DCL in an article titled, N.Y. Supreme Court Rules on Alleged Fraudulent Conveyance and the Attempt to Evade Creditors. [2] Uniform Voidable Transactions Act, L 2019, ch. 580, § 2 (eff. Apr. 4, 2020); L&M 353 Franklyn Ave. LLC v. Steinman, 202 A.D.3d 440, 440 (1st Dept. 2022); Van de Walle v Van de Walle, 68 Misc. 3d 1224(A), 2020 N.Y. Slip Op. 051064(U) (Sup. Ct., Nassau County 2020), aff’d, 200 A.D.3d 1095 (2d Dept. 2021). [3] Van de Walle, 68 Misc. 3d 1224(A). [4] DCL §§ 273(a)(1)-(2), 274(a)-(b), 276; see also Tian v. Top Food Trading Inc., No. 22-CV-0345 (EK) (VMS), 2024 WL 1051172, at *9 (E.D.N.Y. Feb. 26, 2024), adopted by 2024 WL 1908910 (May 1, 2024). [5] DCL § 273(a)(2). [6] Id. § 274(a). [7] Id. § 274(b). [8] Id. §§ 270(h)(2)(iii), (vi), (4). [9] 245 E. 19 Realty LLC v. 245 E. 19th St. Parking LLC, 80 Misc. 3d 1206(A), at *6 (Sup. Ct., N.Y. County 2023) (citing James Gadsden & Alan Kolod, Supplementary Practice Commentaries, McKinney’s Debtor and Creditor Law § 273 (2020)), affirmed as modified, 223 A.D.3d 604 (1st Dept. 2024). [10] In re Tops Holding II Corp., 646 B.R. 617, 649 (Bankr. S.D.N.Y. 2022). [11] DCL § 273(b); see also Matter of Schiffman v. Affordable Shoes, 238 A.D.3d 770, 773 (2d Dept. 2025); 245 E. 19 Realty LLC, 223 A.D.3d at 606. [12] See Louis Monteleone Fibres, Ltd. v. Hudson Baylor Brookhaven, LLC, 228 A.D.3d 641, 646 (2d Dept. 2024). [13] See Old Republic Natl. Title Ins. Co. v. 1152 53 Mgt., LLC, 227 A.D. 3d 824, 828 (2d Dept. 2024); Avilon Automotive Group v. Leontiev, 194 A.D.3d 537, 539 (1st Dept. 2021). [14] See generally Drip Capital, Inc. v. JY Imports of NY Inc., ___ F. Supp. 3d ___, ___, 348 F.R.D 536, 547 (E.D.N.Y. 2025). [15] See Avilon Automotive, 194 A.D.3d at 539; Carlyle, LLC v. Quik Park 1633 Garage LLC, 160 A.D.3d 476, 477 (1st Dept. 2018). [16] Pludeman v. Northern Leasing Sys., Inc., 10 N.Y.3d 486, 491-492 (2008); see Paolucci v. Mauro, 74 A.D.3d 1517, 1520-1521 (3d Dept. 2010); see generally CPLR 3211(d). [17] Pludeman, 10 N.Y.3d at 492; see Louis Monteleone Fibres, 228 A.D.3d at 647; Phone Admin. Servs. Inc. v. Verizon N.Y., Inc., 211 A.D.3d 493, 494 (1st Dept. 2022); cf. Carlyle, 160 A.D.3d at 477. [18] Slip Op. at *3. [19] Id. [20] Id. [21] Id. (citing DCL § 270(h)(1)(i); (2)(vi)). [22] Id. (citing 245 E. 19 Realty, 223 A.D.3d at 606; JDI Display Am., Inc. v. Jaco Elecs, Inc., 188 A.D.3d 844, 846 (2d Dept. 2020); DCL § 273(b)). [23] Id. at *4. [24] Id. [25] Id. (citation omitted). [26] Id. [27] Id. (quoting 477 Realty, L.L.C. v. Wing Soho, LLC, 234 A.D.3d 469, 471 (1st Dept. 2025)). [28] Id. (citing Pludeman, 10 N.Y.3d at 493; Paolucci,74 A.D.3d at 1521).

By: Jeffrey M. Haber Today, we examine familiar principles of contract interpretation, as well as the requirements for judicial dissolution of a partnership. The Rules of Contract Interpretation It is well-settled in New York that the “‘fundamental, neutral precept of contract interpretation is that agreements are construed in accord with the parties’ intent[,]’ and ‘[t]he best evidence of what parties to a written agreement intend is what they say in their writing.’”[1] “‘The construction and interpretation of an unambiguous written contract is an issue of law within the province of the court, as is the inquiry of whether the writing is ambiguous in the first instance. If the language is free from ambiguity, its meaning may be determined as a matter of law on the basis of the writing alone without resort to extrinsic evidence.’”[2] “A contract is unambiguous if the language it uses has a definite and precise meaning, unattended by danger of misconception in the purport of the agreement itself, and concerning which there is no reasonable basis for a difference of opinion.”[3] “Ambiguity in a contract arises when the contract, read as a whole, fails to disclose its purpose and the parties’ intent, or where its terms are subject to more than one reasonable interpretation.”[4] “‘[W]here a contract was negotiated between sophisticated, counseled business people negotiating at arm’s length, courts [are] … reluctant to interpret an agreement as impliedly stating something which the parties’ specifically did not include.”[5] The Rules of Judicial Dissolution Involving a Partnership Section 63 of the Partnership Law gives a partner the statutory right to seek court dissolution of a partnership, and provides that a court shall decree the dissolution, on a partner’s application, in various situations. Among the situations set forth in the statute are: the “partner has been guilty of such conduct as tends to affect prejudicially the carrying on of the business,” and the “partner wilfully or persistently commits a breach of the partnership agreement, or otherwise so conducts himself in matters relating to the partnership business that it is not reasonably practicable to carry on the business in partnership with him.”[6] “[J]udicial dissolution of a partnership [is a] rarely invoked remed[y].”[7] The party seeking judicial dissolution of a partnership bears the burden of presenting facts demonstrating that grounds exist under Section 63 of the Partnership Law and that such equitable relief is warranted.[8] If the statutory prerequisites are not met, a claim for judicial dissolution will be denied.[9] With the foregoing rules in mind, we examine Waldorf Invs., L.P. v. Waldorf, 2025 N.Y. Slip Op. 06096 (2d Dept. Nov. 5, 2025). Waldorf centered around an alleged breach of contract involving a life insurance policy. The plaintiff Christopher V. Waldorf, Jr. (“Christopher”) and the defendants Kathleen Waldorf (“Kathleen”), William Waldorf (“William”), and Stephen Waldorf (“Stephen”) are partners in Waldorf Investments, L.P. (the “partnership”). The partnership owns a parcel of real property located in Huntington, New York (the “property”). In 2017, Christopher, in the name of the partnership, and Christopher, individually and derivatively on behalf of the partnership (together, the “plaintiffs”), commenced the action to, inter alia, recover damages for breach of contract and for judicial dissolution of the partnership. Kathleen, William, Stephen, and defendant Waldorf Risk Solutions, LLC (collectively, the “defendants”), subsequently moved for summary judgment dismissing the sixteenth cause of action for breach of contract against William and Stephen and the twenty-first and twenty-second causes of action for judicial dissolution of the partnership. In an order dated March 29, 2022, the Supreme Court granted the motion. Plaintiffs appealed. The Appellate Division, Second Department, affirmed. The Court held that “defendants demonstrated their prima facie entitlement to judgment as a matter of law dismissing the sixteenth cause of action, alleging breach of contract, insofar as asserted against William and Stephen.”[10] The breach of contract cause of action alleged, inter alia, that “William and Stephen breached the certificate of limited partnership by failing to distribute to Christopher his pro rata share of the partnership’s profits in the form of certain fire insurance proceeds and rent payments allegedly owed to the partnership.”[11] In support of their motion, defendants submitted evidence demonstrating, among other things, that the fire insurance proceeds were retained by the partnership to redevelop the property, as permitted under the terms of the certificate of limited partnership.[12] “Additionally,” said the Court, “defendants established, prima facie, that there were no rent payments owed to the partnership that William and Stephen failed to distribute.”[13] The Court also held that defendants “demonstrated their prima facie entitlement to judgment as a matter of law dismissing the twenty-first cause of action, seeking judicial dissolution of the partnership.”[14] The Court found that plaintiffs failed to demonstrate that “it [was] not reasonably practicable to carry on the business [of the partnership] in conformity with the partnership agreement.”[15] The Court explained that the evidence submitted by defendants satisfied “their prima facie burden” of demonstrating that Kathleen, William, and Stephen ha[d] worked to, among other things, redevelop the property, thereby carrying on the partnership’s business.[16] “In opposition,” said the Court, “plaintiffs failed to raise a triable issue of fact.”[17] Takeaway Waldorf explores two foundational legal concepts in New York law: how courts interpret contracts and the circumstances under which a partnership may be judicially dissolved. As to the former, Walforf reaffirms the principle that courts prioritize the written intent of the parties when interpreting contracts, avoiding extrinsic evidence unless the language is ambiguous. Ambiguity arises only when a contract’s terms can reasonably be interpreted in more than one way. As to the latter, Waldorf provides insight into judicial dissolution under Partnership Law § 63, which, among other things, allows a partner to seek dissolution if another partner’s conduct makes continuing the business impractical. In Waldorf, plaintiff alleged breach of contract and sought dissolution. The Court affirmed the dismissal of both claims, finding that defendants acted within the partnership agreement and that the business was being carried out effectively. As discussed, plaintiff failed to present sufficient evidence to justify either claim, reinforcing the high bar for judicial dissolution and the importance of clear contractual language. ________________________________ 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] Donohue v. Cuomo, 38 N.Y.3d 1, 12 (2022), quoting Greenfield v. Philles Records, 98 N.Y.2d 562, 569 (2002). [2] Palombo Group v. Poughkeepsie City Sch. Dist., 125 A.D.3d 620, 621 (2d Dept. 2015), quoting Law Offs. of J. Stewart Moore, P.C. v. Trent, 124 A.D.3d 603, 603 (2d Dept. 2015). [3] Greenfield, 98 N.Y.2d at 569 (alteration and internal quotation marks omitted); see also Donohue, 38 N.Y.3d at 13. [4] Universal Am. Corp. v. National Union Fire Ins. Co. of Pittsburgh, Pa, 25 N.Y.3d 675, 680 (2015) (citation and internal quotation marks omitted). [5] Donohue, 38 N.Y.3d at 12, quoting 2138747 Ontario, Inc. v. Samsung C&T Corp., 31 N.Y.3d 372, 381 (2018). [6] Partnership Law §§ 63(c) and (d). [7] Drucker v. Mige Associates II, 225 A.D.2d 427, 429 (1st Dept. 1996). [8] See Jones v. Jones, 15 Misc. 2d 960, 962 (Sup. Ct., Kings County 1958). [9] See Couch v. Langan, 63 N.Y.2d 987, 989 (1984). [10] Slip Op. at *1. [11] Id. [12] Id. at 1-2, citing Countrywide Home Loans, Inc. v. United Gen. Tit. Ins. Co., 109 A.D.3d 953, 954 (2d Dept. 2013). [13] Id. at *2. [14] Id. [15] Id. (citations omitted). [16] Id. [17] Id.

By: Jonathan H. Freiberger William Cowper, in his Eighteenth-Century poem “The Task,” coined the phrase “Variety’s the very spice of life.” Today, this phrase is used in many contexts; albeit not so frequently when discussing service of process under CPLR 308(4) – the subject of today’s BLOG. In our recent BLOG article: “Primer – Personal Jurisdiction and Service of Process” we explored various process service issues. As discussed therein, 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). 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); 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). CPLR 308 describes several methods that may be employed to effectuate service of process on a natural person. CPLR 308(1) permits the delivery of a summons directly to the defendant. CPLR 308(2) permits service on a person of “suitable age and discretion” at the defendant’s “actual place of business, dwelling place or usual place of abode.” CPLR 308(3) permits service on an agent within the state designated under CPLR 318. When service under CPLR 308(1), (2) and (4) is “impractical,” CPLR 308(5) provides that service of process may be made as directed by the court. As relates to today’s BLOG, pursuant to CPLR 308(4), when “service under paragraphs one and two cannot be made with due diligence, a defendant can be served by “affixing the summons to the door of either the actual place of business, dwelling place or usual place of abode” of the defendant.[2] The due diligence requirements of CPLR 308(4) must be “‘strictly observed because there is a reduced likelihood that a defendant will actually receive the summons when it is served pursuant to CPLR 308(4).’” Ramirez v. Escobar, 228 A.D.3d 791, 792 (2nd Dep’t 2024) (quoting Serraro v. Staropoli, 94 A.D.3d 1083, 1084 (2nd Dep’t 2012)) (citations omitted); see also Coley v. Gonzalez, 170 A.D.3d 1107, 1108 (2nd Dep’t 2019); Niebling v. Pioreck, 222 A.D.3d 873, 875 (2nd Dep’t 2023). “What constitutes due diligence is determined on a case-by-case basis, focusing not on the quantity of the attempts at personal delivery, but on their quality.” McSorley v. Spear, 50 A.D.3d 652, 653 (2nd Dep’t 2008) (citation omitted); see also Faruk v. Dawn, 162 A.D.3d 744, 745 (2nd Dep’t 2018) (same); Ramirez, 228 A.D.3d at 792; PNMAC Mortgage Opportunity Fund Investors, LLC v. Noushad, 240 A.D.3d 720, 722 (2nd Dep’t 2025). As part of the diligence process, a process server must make “genuine inquiries about the defendant’s whereabouts and places of employment.” Faruk, 162 A.D.3d at 745-46; see also Serraro, 94 A.D.3d at 1085. Thus, courts have found lack of diligence where a process server failed to make “inquiries about the defendant’s whereabouts and place of employment.” McSorely, 50 A.D.3d at 654 (citations omitted); see also Niebling, 222 A.D.3d at 875; Sams Distributions, LLC v. Friedman, 235 A.D.3d 1021, 1023 (2nd Dep’t 2025) (quoting Niebling, supra). Finally, service will not be sustained when all attempts are made at times when the defendant will not likely be home or when working or commuting to work. See Serraro, 94 A.D.3d at 1085; McSorely, 50 A.D.3d at 653-54. Conversely, “[t]he due diligence requirement may be met with a few visits on different occasions and at different times to the defendant's residence or place of business when the defendant could reasonably be expected to be found at such location at those times.” Ramirez, 228 A.D.3d at 792 (citations omitted); see also PNMAC, 240 A.D.3d at 772. In Bank of America, N.A. v. Fischer, 220 A.D.3d 722 (2nd Dep’t 2023), the Court found that service of process was not properly effectuated despite numerous attempts at the defendant’s home between December 21 and December 29, notwithstanding a Saturday attempt, because: (1) “the attempts at service occurred at the height of the holiday season, when the defendant may have had reasons not to be home”; (2) the process server was “‘unable to speak to a neighbor regarding the defendant’s whereabouts”; and, (3) defendant disclosed his employer as part of a loan modification process and no attempt was made to serve the defendant at his place of employment. Bank of America, 220 A.D.3d at 724-25 (citation omitted). The Court found that the “totality of the circumstances” compelled the conclusion that service of process was never properly effectuated. Id. at 725. Finding diligence on the process server’s part in PNMAC, the Court stated: Here, the plaintiff submitted an affidavit of due diligence demonstrating that it conducted approximately 50 searches to ascertain the defendant's address and place of employment, one of which, a request to the United States Postal Service for a Change of Address or Boxholder Information Needed for Service of Legal Process for the defendant, resulted in 559 Bristol Street, Brooklyn. Additionally, the process server made three attempts to serve the defendant at that address on different days and different times from September 16, 2020, through September 22, 2020. The Supreme Court properly concluded that, based on these few visits on different occasions and at different times to the defendant's residence or place of business when the defendant could reasonably be expected to be found at such location at those times, in addition to the Internet searches, the due diligence requirement was met. [Citations and internal quotation marks omitted.] These issues were addressed by the Appellate Division, Second Department, on October 29, 2025, in Bank of New York Mellon v. DeFilippo. Bank of New York was a mortgage foreclosure action.[3] The borrower in Bank of New York delivered a promissory note to lender and secured his repayment obligations with a mortgage on real property. In 2008, lender commenced a foreclosure action in which borrower was purportedly served with process pursuant to CPLR 308(4). Borrower failed to appear or answer the complaint. An order of reference was entered in 2010, and a motion to confirm the referee’s report was made in 2019. Later in 2019, lender moved to confirm the report and for a judgment of foreclosure and sale, which motion was granted in 2020. In 2023, borrower moved to vacate the order of reference and the judgment of foreclosure and sale based on lack of service of process. Borrower appeals from the denial of his motion. In reversing the motion court, the Second Department, analyzed the existing case law along the lines set forth herein and concluded that service was improper. In so doing, the Court stated: Here, the process server's prior attempts at service did not demonstrate due diligence. Two out of three of the process server's prior attempts at personal delivery at the defendant's residence occurred during weekday hours when it could reasonably have been expected that the defendant was either working or in transit to or from work. The prior attempts were made on Thursday, April 17, 2008, at 6:15 p.m.; on Saturday, April 19, 2008, at 1:30 p.m.; and on Monday, April 21, 2008, at 8:20 a.m. The Saturday attempt occurred at a time when the defendant may have had reasons not to be home. The process server averred that a neighbor confirmed that the defendant resided at that address, but gave a negative reply when asked if the neighbor was aware of the defendant's normal routine and place of business. Attached to the affidavit of service were the results of a "people at work" search, which revealed a company address for the defendant. Yet the process server made no inquiries about the defendant at that address before resorting to affix and mail service. Under the circumstances, the plaintiff failed to act with due diligence before relying on affix and mail service pursuant to CPLR 308(4). [Citation omitted.] TAKEAWAY When it comes to service pursuant to CPLR 308(4), courts look at, inter alia, the number and temporal variety of attempts to make sure that the defendant was likely home during at least one such attempt. Attempts made at different times of the day, during different weeks, coupled with evidence of inquiries about the defendant’s whereabouts, helps to sustain proper service. 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] CPLR 308(2) and (4) have some additional requirements before service will be deemed complete. [3] 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.

By: Jeffrey M. Haber In today’s article, we examine Hofman v. Braun, 2025 N.Y. Slip Op. 34102(U) (Sup. Ct., N.Y. County Oct. 24, 2025) (here), a case addressing the statute of limitations for a breach of fiduciary duty claim and the continuous wrong doctrine.[1] In Hofman, plaintiffs alleged that defendant, Seymour Braun, their attorney, initially represented them in forming limited liability companies and negotiating a loan, then engaged in actions adverse to their interests—such as foreclosing on escrowed membership interests and transferring property—spanning from 2017 through 2022. Defendants sought dismissal, arguing the claims were time-barred and lacked causation. The motion court held that factual disputes about ongoing representation and adverse acts precluded dismissal, as the continuous wrong doctrine could toll the statute of limitations. Also, the motion court found that plaintiffs stated a claim for fiduciary breach. Plaintiff, Rafael Hofman (“Hofman”), was the former business partner of non-party Yakov Kleiner (“Kleiner”). Beginning in 2000, Hofman and Kleiner received legal services from defendant, Seymour Braun (“Seymour”), through his firm, defendant Braun & Goldberg. In 2013, Seymour helped Hofman and Kleiner purchase seven properties and form seven limited liability companies to own each of the purchased properties. Defendant BCD USA LLC (“BCD USA”) was formed as a holding company for the seven limited liability companies. One of the seven limited liability companies is Defendant, BCD Edgewater LLC (“BCD Edgewater”), which owned a property in Florida. Non-party Moshe Goldshmidt (“Goldshmidt”) was Hofman and Kleiner’s nominee to own the companies because Hoffman and Kleiner lived abroad in Israel. The funds for the property purchases came from Hofman, Kleiner, Israeli investors, and a loan from defendant Lexington Holdings LLC (“Lexington”) (the “Lexington Loan”). Braun & Goldberg allegedly represented Hofman and Kleiner with respect to, among other things, negotiating the Lexington Loan and negotiating a 2015 amendment to the loan. The Lexington Loan required 100% of the membership interests in the limited liability companies to be put in an escrow account managed by Seymour, and upon default, the membership interests would be transferred to Lexington. In 2017, Seymour’s son sued Hofman, Kleiner, and Goldschmidt, claiming he was the true owner of the limited liability companies. Litigation continued through 2019. In 2019, Lexington, through Seymour, foreclosed on the escrow and transferred the membership interests in BCD Edgewater to Lexington. On October 27, 2021, Lexington transferred BCD Edgewater’s property to non-party EL2 Development LLC (“EL2”). In 2021, EL2 started a quiet title action against plaintiffs. In 2022, in connection with the quiet title action, Seymour allegedly admitted in an affidavit that he is Lexington’s manager. Plaintiffs commenced the lawsuit by filing a summons on October 22, 2024, followed by a complaint on December 25, 2024. Plaintiffs alleged breach of fiduciary duty, aiding and abetting a breach of fiduciary duty, fraud, aiding and abetting fraud, and conspiracy to commit fraud and breach of fiduciary duty. Defendants responded with a pre-answer motion to dismiss. The motion court granted in part and denied in part the motion. We examine the court’s decision with respect to the breach of fiduciary duty claim.[2] Defendants proffered two arguments in support of dismissing these claims. First, defendants argued the claims were time-barred, and second, plaintiffs failed to allege proximate cause. As to the first argument, the issue for the motion court turned on the application of the continuing wrong doctrine. Defendants argued that the doctrine was inapplicable because the three-year statute of limitations had run. The motion court found that there were issues of fact as to the application of the continuing wrong doctrine.[3] The motion court explained that “[a]lthough Defendants dispute[d that] Seymour and Braun & Goldberg … represented Plaintiffs,” resolution of that issue could not “be resolved on a pre-answer motion to dismiss.”[4] The motion court noted that there were numerous allegations of continuous wrongs that spanned the period 2017 through 2022, which, if true, would extend the statute of limitations: Defendants allege Seymour and Braun & Goldberg represented them in 2013 to arrange a loan and to structure multiple limited liability companies and represented them again in 2015 to negotiate an amendment to the loan agreement. There are legal invoices sent to Plaintiffs from Seymour and Braun & Goldberg substantiating these allegations …. Moreover, Seymour and Braun & Goldberg continued to serve as escrow agent, and allegedly, his son sued Plaintiffs in 2017 regarding ownership of the limited liability companies formed. Then, allegedly in 2018, Seymour, through Guillermo, sent a demand letter for payment on the loan to Goldschmidt, even though Seymour allegedly knew that Goldschmidt was not speaking with [Plaintiff] and thus [Plaintiff] would not be able to respond. One year later, in 2019, Seymour allegedly transferred the membership interests in escrow to Lexington, and then in 2021, Lexington transferred property held by BCD Edgewater to EL2, a limited liability company allegedly managed by a close associate of Seymour. EL2 then initiated a quiet title action against Plaintiffs based on that transfer, where, in 2022, Seymour allegedly submitted an affidavit in support of EL2 where he purportedly stated he is the manager of Lexington.[5] “Because the Complaint allege[d] acts from 2017 through 2022 perpetrated by Seymour or his alleged agents that were directly adverse to or intended to deceive Plaintiffs,” said the motion court, “there remain issues of fact as to whether the continuous wrong doctrine extends the statute of limitations.”[6] Having found issues of fact as to whether the statute of limitations was tolled, the motion court addressed whether plaintiffs stated a claim for breach of fiduciary duty. The motion court concluded that plaintiffs had done so: “[a]ccepting as true the allegation that Seymour represented Plaintiffs in the negotiation over the loan and in forming the limited liability companies, Seymour’s later alleged actions, which were directly adverse to Plaintiffs and allegedly in furtherance of a goal to obtain ultimately the various purchased properties, give rise to a breach of fiduciary duty claim.”[7] Takeaway In New York, there is no single statute of limitations governing breach of fiduciary duty claims. “Rather, the choice of the applicable limitations period depends on the substantive remedy that the plaintiff seeks.”[8] “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.”[9] “Where, however, the relief sought is equitable in nature, the six-year limitations period of CPLR 213 (1) applies.”[10] 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).”[11] The initial burden of establishing that the limitations period bars the challenged claim is on the movant.[12] “To meet its burden, the defendant must establish, inter alia, when the plaintiff’s cause of action accrued.”[13] “A breach of fiduciary duty claim accrues where the fiduciary openly repudiates his or her obligation – i.e., once damages are sustained.”[14] 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.”[15] “Open repudiation requires proof of a repudiation by the fiduciary which is clear and made known to the beneficiaries.”[16] “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.”[17] As with many rules, there is an exception – the continuing wrong doctrine. Under the doctrine, the statute of limitations is tolled “where there is a series of independent, distinct wrongs rather than a single wrong that has continuing effects.”[18] In Hofman, the motion court found issues of fact regarding whether acts from 2017 through 2022—such as litigation, property transfers, and affidavits—were part of a continuing wrong. As such, the motion court declined to dismiss the breach of fiduciary duty claim at the motion stage. ______________________________ 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] We examined this issue in numerous articles, including: Breach of Fiduciary Duty: Time Bars, Tolling and the Continuing Wrong Doctrine. To find additional articles related to the statute of limitations for breach of fiduciary duty claims, when that claim accrues, and the application of the continuous wrong doctrine, visit the “Blog” tile on our website and enter the search terms “breach of fiduciary duty,” “accrual,” “statute of limitations”, “continuing wrong”, or any other related search term in the “search” box. [2] The motion court dismissed the fraud claim because plaintiffs did not oppose the motion with respect to that claim. Slip Op. at *3, citing Saidin v Negron, 136 A.D.3d 458 (1st Dept. 2016). [3] Slip Op. at *4. [4] Id. [5] Id. (citation to record omitted). [6] Id. at *5, citing CWCapital Cobalt VR Ltd. v. CWCapital Investments LLC, 195 A.D.3d 12, 18 (1st Dept. 2021) (citing Matter of Yin Shin Leung Charitable Found. v. Seng, 177 A.D.3d 463 (1st Dept. 2019)); Ganzi v. Ganzi, 183 A.D.3d 433, 434-35 (1st Dept. 2020). [7] Id., citing Palmeri v. Wilkie Farr & Gallagher LLP, 156 A.D.3d 564, 568 (1st Dept. 2017). [8] IDT Corp. v. Morgan Stanley Dean Witter & Co., 12 N.Y.3d 132, 139 (2009) (citations omitted). [9] Id.; see also VA Mgt., LP v. Estate of Valvani, 192 A.D.3d 615, 615 (1st Dept. 2021). [10] Id. [11] Id. [12] Lebedev v. Blavatnik, 144 A.D.3d 24, 28 (1st Dept. 2016) (internal quotation marks and citations omitted). [13] Id. [14] 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. [15] Matter of George, 194 A.D.3d 1290, 1293 (3d Dept. 2021) (internal quotation marks, brackets, and citation omitted). [16] Matter of Steinberg, 183 A.D.3d 1067, 1071 (3d Dept. 2020) (internal quotation marks and citations omitted). [17] 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. [18] Ganzi, supra.

By: Jeffrey M. Haber In Cortlandt St. Recovery Corp. v. TPG Capital Mgt., L.P., 2026 N.Y. Slip Op. 02775 (1st Dept. May 5, 2026), the Appellate Division, First Department, examined the limits of fraud claims arising from complex private‑equity financing transactions. Cortlandt alleged that two private equity firms used dividend recapitalizations and misleading offering materials to extract value from an acquisition through debt‑funded equity redemptions, ultimately rendering the issuer insolvent. Although the claims centered on alleged misrepresentations in an offering memorandum governing subordinated notes, the First Department dismissed the action in its entirety, holding that the written disclosures, read as a whole, negated any claim of actionable misrepresentation. Cortlandt St. Recovery Corp. v. TPG Capital Mgt., L.P.[1] Cortlandt alleged that in 2005, private equity firms TPG Capital Mgt., L.P (“TPG”) and Apax Partners, L.P. (“Apax”) formed a consortium to acquire TIM Hellas, a Greek telecommunications company that was profitable and nearly debt‑free at the time. To accomplish this acquisition, the consortium created a complex structure of interrelated Luxembourg entities collectively referred to as the Hellas entities, including Hellas II. These entities served as acquisition vehicles and issued preferred equity certificates (“PECs”) and convertible preferred equity certificates (“CPECs”) to their shareholders, including the defendants. Following the acquisition, Cortlandt asserted that the consortium pursued a strategy designed to extract value from the Hellas entities through aggressive leverage, independent of the company’s financial performance. According to Cortlandt, defendants employed dividend recapitalizations – transactions in which new debt is issued not to fund operations or repay existing obligations, but to generate cash distributions to equity holders. By 2006, this approach allegedly left TIM Hellas and the affiliated entities burdened with substantial debt and no longer profitable. In April 2006, Hellas Finance issued €500 million in notes, which Cortlandt described as an initial recapitalization. The proceeds were used to redeem outstanding PECs and CPECs, resulting in approximately €376 million being paid directly to defendants. Afterward, the consortium allegedly sought to sell TIM Hellas but was unable to find a buyer. Faced with these failed efforts, defendants allegedly pursued a second and more extensive recapitalization. On December 21, 2006, Hellas II issued €960 million in euro‑denominated subordinated notes and $275 million in U.S. dollar‑denominated subordinated notes pursuant to an indenture and offering memorandum (“OM”) governed by New York law. On the same day, Hellas I issued more than €200 million in payment‑in‑kind (“PIK”) notes. Collectively, the Hellas entities borrowed approximately €1.5 billion. Clearstream International S.A. (“Clearstream”) and Euroclear Bank SA/NV (“Euroclear”) were the registered holders of the subordinated notes. Cortlandt alleged that the OM contained materially false and misleading statements intended to deceive purchasers of the subordinated notes. Specifically, the OM allegedly represented that the proceeds would be used to repay subordinated shareholder loans and that the subordinated notes would be secured by PECs and CPECs issued by Hellas II. According to Cortlandt, defendants knew these statements were false because they allegedly intended from the outset to use the proceeds to redeem CPECs – equity instruments rather than debt – and to do so immediately after the notes were issued. Cortlandt further contended that the OM stated that CPECs would not be redeemed until more senior debt, including the subordinated notes, had been paid, and that the CPEC terms themselves prohibited redemption if doing so would render Hellas II insolvent. Despite these restrictions, Cortlandt claimed the proceeds of the subordinated and PIK notes were used to redeem CPECs held largely by defendants. Approximately €1.185 billion was allegedly paid to the consortium, of which roughly €946 million was characterized as a dividend. Cortlandt alleged that internal consortium communications demonstrated the transaction was structured to distribute impermissible dividends and that no independent valuation of the CPECs was conducted. According to Cortlandt, the dividend recapitalization effectively caused Hellas II’s insolvency, leaving it unable to service its debt obligations. Hellas II allegedly defaulted on the subordinated notes on October 15, 2009. Cortlandt brought the action as assignee of the beneficial owners of interests in the subordinated notes. Although Cortlandt did not itself own the notes, it claimed valid assignments transferring all rights to pursue related claims. Cortlandt further alleged that its assignors were authorized by registered holders such as Clearstream and Euroclear to bring suit, relying on Euroclear’s operating rules and documentation, including Statements of Account and Certificates of Holding. The action, originally filed in 2011 and recommenced in 2017, asserted claims for fraud and breach of contract arising from alleged misrepresentations and violations of the indenture and offering documents. Defendants moved to dismiss. The motion court granted defendants’ motions to dismiss the amended complaint in its entirety as against defendants David Bonderman and James Coulter and as against all defendants to the extent plaintiff’s claims for fraud and breach of contract sought to recover damages related to the sub notes registered to Clearstream, but denied the motions as to all defendants except Bonderman and Coulter insofar as the claims related to the sub notes registered to Euroclear.[2] On appeal, the Appellate Division, First Department modified the motion court’s order to grant defendants’ motions to dismiss in their entirety. The Court held that “[p]laintiff failed to state a valid fraud claim because it did not allege any actionable misrepresentations.[3] The Court noted that plaintiff alleged that the OM misrepresented that the proceeds of the sub notes would be used to “redeem deeply subordinated shareholder loans from the Sponsors” when defendants always intended to use them to redeem the CPECs.[4] However, the Court found that the terms of the OM addressed the very misrepresentation of which plaintiff complained.[5] In this regard, said the Court, the OM “use[d] the terms ‘deeply subordinated shareholder loans’ and ‘CPECs’ interchangeably — referring to ‘deeply subordinated shareholder loans in the form of convertible preferred equity certificates (‘CPECs’), which are treated as equity in [the] financial statements’ and explain[ed] that ‘[t]o facilitate the redemption of the deeply subordinated shareholder loans from the Sponsors as described in ‘Use of proceeds,’ certain CPECs [would] be valued in a certain way and then redeemed.”[6] The Court also found that plaintiff’s allegation that the OM misrepresented that “the Sub Notes would be secured by the CPECs and [the PECs] issued by [Hellas Telecommunications (Luxembourg) II, S.C.A.]” because defendants “always intended to redeem the CPECs and PECs in order to pay the proceeds of the Sub Notes to themselves” was not supported by the terms of the OM.[7] The Court explained that “the OM did not suggest that the Sub Notes would be secured by all of the CPECs and PECs then in existence — only by a certain percentage of the total CPECs and PECs ‘outstanding at any time.’”[8] Instead, said the Court, “[t]he OM also made clear that at least some CPECs would be redeemed in connection with the subject transaction.”[9] The Court rejected plaintiff’s argument that the OM was misleading because it provided only one option for redemption: “Once the Company does not have any other debt liability to pay or to provide for, with priority to the CPECs, it has the option to redeem CPECs at the greater of par value and market value reduced by 0.5%.”[10] In doing so, the Court reasoned that “[t]his language did not, however, suggest that this was the only circumstance in which CPECs could be redeemed but rather described the redemption parameters in such circumstance.”[11] Takeaway Cortlandt reinforces that fraud claims based on written offering materials rise or fall on the text of those documents as a whole, not on isolated phrases taken out of context. Where an offering memorandum expressly discloses the economic substance of a transaction, a plaintiff cannot plausibly plead misrepresentations by recharacterizing disclosed information as something else or by ignoring explanatory cross‑references within the document. The Court emphasized that sophisticated investors are charged with reading offering documents carefully and holistically. When, as in Cortlandt, an offering memorandum expressly explains that “deeply subordinated shareholder loans” take the form of convertible preferred equity treated as equity in financial statements, allegations that the issuer misrepresented its intended use of proceeds are undermined by the very document on which the plaintiff relies. The ruling also highlights that allegations that a defendant secretly intended to act inconsistently with the offering documents are insufficient where the documents themselves anticipate, describe, or permit the challenged conduct. In Cortlandt, disclosure that some equity would be redeemed, even if substantial, defeated claims premised on the notion that any redemption was concealed or prohibited. Finally, the Court underscored that security representations must be read precisely. Statements that debt will be secured by a percentage of equity outstanding “at any time” do not guarantee that all existing equity will remain in place. A plaintiff cannot transform partial, conditional security disclosures into absolute promises of collateral maintenance. __________________________________ 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 and not on matters handled by the firm. ___________________________________ [1] The facts of the case come from the motion court’s decision. [2] The sub notes refer to the Subordinated Floating Rate Notes due 2015. [3] Slip Op. at *1, citing Eurycleia Partners, LP v. Seward & Kissel, LLP, 12 N.Y.3d 553, 559 (2009). [4] Id. [5] Id. [6] Id. [7] Id. [8] Id. [9] Id. [10] Id. [11] Id.