By: Jeffrey M. Haber In Singh v. T-Mobile , 2024 N.Y. Slip Op. 05554 (2d Dept. Nov. 13, 2024) ( here ), the Appellate Division, Second Department affirmed the dismissal of an action for, among other things, breach of contract, breach of the covenant of good faith and fair dealing, and unjust enrichment. As discussed below, the Court did so on the basis of familiar principles of contract and quasi-contract law . In April 2018, plaintiff Cellray, Inc. (“Cellray”) entered into a contract with defendant iMobile PRP, LLC (“iMobile”) to sell Sprint wireless services at four different store locations, including one located in Port Jefferson Station, New York (the “management agreement”). Pursuant to an amendment to the management agreement, iMobile was permitted to terminate the management agreement upon Sprint’s merger with another entity, if directed to do so by the merged entity. In 2020, Sprint merged with defendant T-Mobile. Shortly thereafter, T-Mobile directed iMobile to terminate the management agreement with Cellray with respect to each of the four stores. In June 2021, plaintiffs commenced the action to, inter alia , recover damages for breach of contract against iMobile and defendants Sarab Lamba and Chetan Krishna, as managing officers of iMobile. Plaintiffs alleged, among other things, that iMobile, Lamba, and Krishna breached the management agreement by failing to compensate plaintiffs upon the termination of the management agreement. Thereafter, plaintiffs amended the complaint, adding causes of action against T-Mobile and a cause of action to void the amendment to the management agreement on the ground of unconscionability. Defendants moved to dismiss the amended complaint pursuant to CPLR 3211(a) (failure to state a claim). Plaintiffs opposed the motion and cross-moved for leave to serve a second amended complaint to specify additional damages. In an order dated May 5, 2022, the Supreme Court granted defendants' motion and denied plaintiffs' cross-motion. On July 13, 2022, the motion court entered an order and judgment granting defendants’ motion, denying plaintiffs’ cross-motion, and dismissing the amended complaint. Plaintiffs appealed. The Second Department affirmed. The Court held that the motion court “properly granted that branch of the defendants’ motion … to dismiss the cause of action alleging breach of contract insofar as asserted against T-Mobile, Lamba, and Krishna,” because none of those defendants were parties to the management agreement. Under New York law, “ iability for breach of contract does not lie absent proof of a contractual relationship or privity between the parties.” Thus, “ ne cannot be held liable under a contract to which he or she is not a party.” Further, the Court held that the motion court “properly granted that branch of the defendants’ motion … to dismiss that cause of action insofar as asserted against iMobile.”  The Court found that “defendants’ submission of the management agreement and the amendment thereto utterly refuted the plaintiffs’ allegations that iMobile was obligated to compensate the plaintiffs for termination of the management agreement upon Sprint’s merger with T-Mobile and that closure of the store in Port Jefferson Station constituted a breach of the management agreement.” In addition, the Court held that the motion court “properly granted that branch of the defendants’ motion … to dismiss the cause of action alleging breach of the implied covenant of good faith and fair dealing.” “In New York, all contracts imply a covenant of good faith and fair dealing in the course of performance.” “‘Encompassed within the implied obligation of each promisor to exercise good faith are any promises which a reasonable person in the position of the promisee would be justified in understanding were included.’” Thus, “the covenant is breached where one party to a contract seeks to prevent its performance by, or to withhold its benefits from, the other.” “However, no obligation may be implied that would be inconsistent with other terms of the contractual relationship.” Based upon the foregoing principles, the Court held that “plaintiffs failed to sufficiently allege that the defendants’ conduct prevented the plaintiffs from performing their obligations under the management agreement or deprived them of the right to receive benefits from that agreement.” The Court also held that the motion “properly granted that branch of the defendants’ motion … to dismiss the cause of action alleging unjust enrichment.” Under New York law, “ he existence of a valid and enforceable written contract governing a particular subject matter ordinarily precludes recovery in quasi contract for events arising out of the same subject matter.” The Court found that the “unjust enrichment cause of action out of the same subject matter as the cause of action alleging breach of contract , and thus, the plaintiffs recover on an unjust enrichment theory.” Moreover, said the Court, “the plaintiffs failed to sufficiently allege that the defendants were enriched or otherwise received a benefit at the plaintiffs’ expense.” Finally, the Court held that the motion court properly dismissed plaintiffs’ fraud and conspiracy to defraud claims. The Court found that plaintiffs “failed to sufficiently allege that they sustained an actual pecuniary loss as a result of the alleged fraudulent conduct.” Under New York law, “ amages for a cause of action sounding in fraud are limited to the actual pecuniary loss sustained as the direct result of the wrong or what is known as the out-of-pocket rule.” Moreover, the Court dismissed the conspiracy to defraud claim because “conspiracy to defraud is not recognized in New York as an independent cause of action.” _____________________________________ 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. Slip Op. at *1 (citing Arroyo v. Central Islip UFSD , 173 A.D.3d 814, 816 (2d Dept. 2019); Victory State Bank v. EMBA Hylan, LLC , 169 A.D.3d 963, 965 (2d Dept. 2019)). Hamlet at Willow Cr. Dev. Co., LLC v. Northeast Land Dev. Corp. , 64 A.D.3d 85, 104 (2d Dept. 2009). Victory State Bank , 169. A.D.3d at 965. Slip Op. at *1 (citing First Korean Church of N.Y. v. 35 Ave & Parsons, LLC , 221 A.D.3d 971, 972-973 (2d Dept. 2023). Under CPLR 3211(a)(1), a party can move to dismiss a pleading on the ground that the action is barred by documentary evidence. It “may be granted only where the documentary evidence utterly refutes the plaintiff’s factual allegations, thereby conclusively establishing a defense as a matter of law.” Global World Realty, Inc. v. Zubli , 219 A.D.3d 1495, 1497 (2d Dept. 2023) (internal quotation marks omitted). This Blog examined motions to dismiss under CPLR 3211(a)(1), for example, here . Id. 511 W. 232nd Owners Corp. v. Jennifer Realty Co. , 98 N.Y.2d 144, 153 (2002). Singh v. City of New York , 189 A.D.3d 1697, 1700 (2d Dept. 2020) (quoting Dalton v. Educational Testing Serv. , 87 N.Y.2d 384, 389 (1995)). Michaan v. Gazebo Hort., Inc. , 117 A.D.3d 692, 693 (2d Dept. (2014) (internal quotation marks omitted). 1357 Tarrytown Rd. Auto, LLC v. Granite Props., LLC , 142 A.D.3d 976, 977 (2d Dept. 2016); see also 106 N. Broadway, LLC v. Lawrence , 189 A.D.3d 733, 739 (2d Dept. 2020). Slip Op at *2 (citations omitted). Id. Barker v. Time Warner Cable, Inc. , 83 A.D.3d 750, 752 (2d Dept. 2011) (internal quotation marks omitted); see also Federico v. Brancato , 144 A.D.3d 965, 967 (2d Dept. 2016). This Blog examined cases involving claims of unjust enrichment, for example, here , here , and here . Slip Op. at *2 (citations omitted). Id. (citing Pierce Coach Line, Inc. v. Port Wash. Union Free Sch. Dist. , 213 A.D.3d 959, 961 (2d Dept. 2023); Dee v. Rakower , 112 A.D.3d 204, 213-214 (2d Dept. 2013)). Id. Id. Kramer v. Meridian Capital Group, LLC, 201 A.D.3d 909, 911 (2d Dept. 2022) (internal quotation marks omitted). Id. (citation omitted).

By: Jeffrey M. Haber On November 8, 2024, the Securities and Exchange Commission (“SEC” or “Commission”) announced (here) that it settled charges against Invesco Advisers, Inc., which operates Invesco mutual funds and has approximately $746 billion in assets under management, for making misleading statements about the percentage of company-wide assets under management (“AUM”) that integrated environmental, social, and governance (“ESG”) factors in investment decisions. According to the SEC, the Atlanta-based registered investment adviser agreed to pay a $17.5 million civil penalty to settle the charges. According to the SEC’s order (here), from 2020 to 2022, Invesco told clients and represented in marketing materials that between 70 and 94 percent of its parent company’s assets under management were “ESG integrated.” However, said the SEC, those figures included a substantial amount of assets that were held in passive ETFs (including the Invesco QQQ Trust, the firm’s largest ETF that tracked Nasdaq’s 100 largest non-financial companies and Invesco S&P 500 Equal Weight ETF) that did not consider ESG factors in investment decisions. The SEC also found that Invesco failed to adopt and implement written policies and procedures reasonably designed to prevent violations of the Investment Advisers Act of 1940 and the rules promulgated thereunder. Specifically, said the SEC, notwithstanding Invesco making representations to clients and prospective clients regarding the percentage of firmwide AUM that was ESG integrated, Invesco never adopted a written policy that defined “ESG integration,” even though that was a term it used in public-facing documents. “As such,” explained the SEC, “Invesco lacked policies and procedures to ensure AUM was appropriately classified on an aggregated level as ESG integrated and to confirm that the basis for including AUM within the bucket of ESG integrated assets, including the AUM held in passive ETFs, was correct.” As a result, concluded the SEC, “Invesco overstated the percentage of firmwide AUM that was ESG integrated to clients and prospective clients.” Commenting on the charges and settlement, Sanjay Wadhwa, Acting Director of the SEC’s Division of Enforcement, stated: “As stated in the order, Invesco saw commercial value in claiming that a high percentage of company-wide assets were ESG integrated. But saying it doesn’t make it so. Companies should be straightforward with their clients and investors rather than seeking to capitalize on investing trends and buzzwords.” The order charged Invesco with willfully violating the Investment Advisers Act of 1940. Without admitting or denying the SEC’s findings, Invesco agreed to cease and desist from violations of the charged provisions, be censured, and pay the aforementioned $17.5 million civil penalty. Last month, the SEC settled another enforcement action involving charges of greenwashing. On October 21, 2024, the SEC announced (here) that it settled charges against WisdomTree Asset Management for failing to follow its own investment criteria for three now-defunct ETFs that were marketed under the banner of ESG. According to the SEC’s order (here), from March 2020 until November 2022, WisdomTree represented in prospectuses for three ESG-marketed exchange-traded funds, and to the board of trustees overseeing the funds, that the funds would not invest in companies involved in certain products or activities, including fossil fuels and tobacco. However, according to the SEC, the ESG-marketed funds invested in companies that were involved in fossil fuels and tobacco, including coal mining and transportation, natural gas extraction and distribution, and retail sales of tobacco products. According to the SEC, WisdomTree used data from third-party vendors that did not screen out all companies involved in fossil fuel and tobacco-related activities. The SEC further found that WisdomTree did not have any policies and procedures regarding the screening process to exclude such companies. WisdomTree consented to the entry of the SEC’s order finding that it violated the antifraud provisions of the Investment Advisers Act of 1940 and the Investment Company Act of 1940, and the compliance rule in the Investment Advisers Act. Without admitting or denying the SEC’s findings, WisdomTree agreed to a cease-and-desist order and censure and to pay a $4 million civil penalty. Takeaway The SEC has increased its scrutiny of “greenwashing” claims. These claims – i.e., statements about the company’s sustainability practices and commitments to the environment – are aimed at consumers who are interested in climate change and environmental protection. The enforcement actions discussed above show that the SEC will not tolerate vague, unverified, and unsubstantiated representations about a company’s or advisor’s sustainability practices and commitments to the environment. ______________________________ 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. The SEC defines greenwashing as “the act of exaggerating the extent to which products or services take into account environmental and sustainability factors.” See Investor.gov, Greenwashing (here). According to the SEC Alert, “unds and advisers that engage in greenwashing may exaggerate or overstate the environmental and sustainability practices or factors considered in their investment products or services, while labeling and marketing themselves in a manner that makes it difficult for investors to distinguish them from funds and advisers that are truly using environmental and sustainability strategies.” Id. As noted by the SEC, “ther entities or industry professionals may also engage in greenwashing. For example, companies may exaggerate or overstate the environmental and sustainability aspects of their products or services or make unsupported claims about taking environmental or sustainability actions.” Id.

Freiberger Haber LLP is pleased to announce that co-founding partners, Jonathan H. Freiberger and Jeffrey M. Haber, have been named by Super Lawyers Magazine® to be among the top lawyers in the New York metropolitan area. This is Mr. Freiberger’s fifth, and Mr. Haber’s thirteenth, consecutive year of selection. Both Messrs. Freiberger and Haber were recognized for their work in business litigation . Super Lawyers Magazine® is an affiliate of Thomson Reuters. It recognizes attorneys who have distinguished themselves by both a high degree of professional achievement and by peer recognition. Each year no more than 5 percent of lawyers are recognized as Super Lawyers by the magazine. The annual selection involves a survey of lawyers, independent research evaluation of candidates, and peer reviews within each practice area. The magazine publishes its lists nationwide, as well as in leading city and regional magazines and newspapers across the country. A description of the selection process can be found on the Super Lawyers website. About Freiberger Haber LLP Located in New York City and Melville, Long Island, Freiberger Haber LLP is dedicated to representing corporations, small businesses, partnerships, and individuals in a broad range of complex business, securities, construction, real estate, and commercial litigation matters. Founded by Jonathan H. Freiberger and Jeffrey M. Haber, Freiberger Haber applies more than 60 years of combined experience to deliver sophisticated and creative representation to its clients. The firm’s approach is results-oriented and client-centric, providing clients with the sophisticated counsel expected from larger firms with the flexibility and agility of a small firm. ATTORNEY ADVERTISING. © 2024 Freiberger Haber LLP. The law firm responsible for this advertisement is Freiberger Haber LLP, 425 Broadhollow Road, Suite 417, Melville, New York 11747, (631) 282-8985. Prior results do not guarantee or predict a similar outcome with respect to any future matter. Contact Jeffrey M. Haber or Jonathan H. Freiberger Freiberger Haber LLP

By: Jeffrey M. Haber Under New York law, written agreements are construed in accordance with the parties’ intent. “The best evidence of what parties to a written agreement intend is what they say in their writing.” As such, “a written agreement that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms.” “Courts may not ‘by construction add or excise terms, nor distort the meaning of those used and thereby make a new contract for the parties under the guise of interpreting the writing.’” “‘Whether an agreement is ambiguous is a question of law for the courts … Ambiguity is determined by looking within the four corners of the document, not to outside sources.’” “The entire contract must be reviewed and ‘ articular 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.’” “Where the language chosen by the parties has ‘a definite and precise meaning,’ there is no ambiguity.” Evidence outside the four corners of the agreement – parol evidence – is admissible only if a court finds an ambiguity in the contract. As a general rule, extrinsic evidence is inadmissible to alter or add a provision to a written agreement. This rule gives “stability to commercial transactions by safeguarding against fraudulent claims, perjury, death of witnesses … infirmity of memory … the fear that the jury will improperly evaluate the extrinsic evidence.” Further, when a contract contains a merger clause, a court must fully apply “the parol evidence rule in order to bar the introduction of extrinsic evidence to vary or contradict the terms of the writing.” The foregoing rules of contract interpretation were examined in Formato v. Formato , 2024 N.Y. Slip Op. 05330 (2d Dept. Oct. 30, 2024) ( here ), and Weinstein v. Wallace , 2024 N.Y. Slip Op. 05367 (2d Dept. Oct. 30, 2024) ( here ). Formato v. Formato Formato was an action for, inter alia , declaratory and injunctive relief involving real property in Brooklyn, New York. The parties, who are brothers, together with their mother, Florence Formato (“Florence”), entered into a contract that settled the parties’ respective interests in two pieces of real property – 273A Nassau Avenue (“273A”) and 275A Nassau Avenue (“275A”) – that Florence owned. The contract provided for defendants to receive lump sum payments from the proceeds of the sale of 273A. Florence further agreed to transfer title to 275A to plaintiff and defendants but provided in paragraph 4 of the contract that, in consideration of defendants’ receipt of the sale proceeds from 273A, defendants “agree that at such time as sells the real property located at 275A Nassau Avenue . . . , they shall not assert any claim to the proceeds of the sale.” Subsequently, when defendants refused to cooperate with plaintiff in his attempt to sell 275A, plaintiff commenced the action seeking, inter alia , a judgment declaring that plaintiff was entitled to sell 275A and retain the proceeds of the sale and an injunction requiring defendants to execute the necessary documents to effectuate such a sale. After joinder of issue, plaintiff moved for summary judgment on the amended complaint. By order dated February 3, 2023, the motion court granted plaintiff’s motion. Defendants appealed. The Appellate Division, Second Department affirmed. The Court found that “plaintiff demonstrated, prima facie, that the parties’ contract clearly and unambiguously provided him with a unilateral right to sell 275A and to retain the proceeds from that sale.” The Court rejected defendants’ interpretation of the contract, finding that it “would render paragraph 4 thereof meaningless.” By contrast, the Court found that “plaintiff’s interpretation of that paragraph ‘affords a fair meaning to all of the language employed by the parties in the contract and leaves no provision without force and effect.’” Accordingly, the Court held that the motion court “properly granted that branch of … plaintiff’s motion which was for summary judgment on the cause of action for a judgment declaring that … plaintiff entitled to sell 275A and retain the entire proceeds of that sale.” Weinstein v. Wallace Weinstein was an action for, inter alia , a judgment declaring that plaintiff was the sole voting member and the manager of Weinstein Family Services of New York, LLC (“WFS LLC”). WFS LLC was formed for the purpose of owning real property to be used in the funeral services business. WFS LLC was managed by plaintiff’s brother, H. Seymour Weinstein (“Seymour”). By 2009, plaintiff and Seymour each owned a 50% membership interest in WFS LLC after purchasing their siblings’ membership interests. In 2012, Seymour died. Thereafter, plaintiff commenced the action for, inter alia , a judgment declaring that, upon the death of Seymour, he became the sole voting member and the manager of WFS LLC. Defendants moved for summary judgment dismissing the amended complaint and declaring that plaintiff was not the sole voting member or the manager of WFS LLC. In an order dated October 13, 2022, the motion court denied defendants’ motion and, upon searching the record, awarded plaintiff summary judgment declaring that he was the sole voting member and the manager of WFS LLC. Defendants appealed. The Appellate Division, Second Department reversed the order . The Court found that defendants demonstrated their prima facie entitlement to judgment as a matter of law dismissing the amended complaint and declaring that plaintiff was not the sole voting member or the manager of WFS LLC. The Court noted that “Section 8.1(d) of the WFS LLC operating agreement unambiguously provide that a deceased member’s estate shall have all of the rights of a member for the purpose of settling or managing its estate, which would include a member’s voting rights. “Thus,” concluded the Court, “pursuant to the operating agreement, upon Seymour’s death, his estate became a voting member of WFS LLC for the purpose of settling or managing the estate.” Further, said the Court, “plaintiff did not become the manager of WFS LLC upon Seymour’s death, as section 5.1(c) of the operating agreement require a successor or replacement manager to be elected by a vote of the members.” “Accordingly,” held the Court, the motion court “should have granted the defendants’ motion for summary judgment dismissing the amended complaint and declaring that the plaintiff not the sole voting member or the manager of WFS LLC.” ______________________________________ 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. Greenfield v. Philles Records , 98 N.Y2d 562, 569 (2002) (internal quotation marks and citation omitted). Id. This Blog has frequently written about cases in which the courts have underscored the point that words in a contract have meaning. See , e.g. , here , here , here , here and here . Riverside S. Planning Corp. v. CRP/Extell Riverside, L.P. , 13 N.Y.3d 398, 404 (2009) (quoting Reiss v. Financial Performance Corp. , 97 N.Y.2d 195, 199 (2001)). Id. at 404 (quoting Kass v. Kass , 91 N.Y.2d 554, 566 (1998)). Id. at 404 (quoting Atwater & Co. v. Panama R.R. Co. , 246 N.Y. 519, 524 (1927)). Id. at 404 (quoting Greenfield , 98 N.Y.2d at 569). W.W.W. Assoc. v. Giancontieri , 77 N.Y.2d 157, 162 (1990) (internal quotation marks and citation omitted). Matter of Primex Intl. Corp. v. Wal-Mart Stores , 89 N.Y.2d 594, 599 (1997). This Blog has written about the merger clause on numerous occasions. See , e.g. , here , here , here , here , and here . This Blog has examined the rules of contract interpretation on numerous occasions. See , e.g. , here , here , here , and here . Slip Op. at *2 (citing Liptis Pharms. USA, Inc. v. Liptis for Pharms. & Med. Prods., SAE , 228 A.D.3d 927, 929 (2d Dept. 20204); Gristede’s Operating Corp. v. Scarsdale Shopping Ctr. Assoc., LLC , 176 A.D.3d 1185, 1188 (2d Dept. 2019)). Slip Op. at *2. Id. (quoting Hooper Assoc. v. AGS Computers , 74 N.Y.2d 487, 493 (1989), and citing Med Mac Realty Co. v. Lerner , 154 A.D.2d 656, 659 (2d Dept. 1989)). Id. Slip Op. at *2. Id. (citing Limited Liability Company Law § 608; Matter of Andris v. 1376 Forest Realty, LLC , 213 A.D.3d 923, 924 (2d Dept. 2023); and Crabapple Corp. v. Elberg , 153 A.D.3d 434, 435 (1st Dept. 2017)). Id. Id. Id.

By: Jonathan H. Freiberger As readers of this BLOG know, we frequently write about issues relating to mortgage foreclosure. We have also written numerous articles relating to the recently enacted FAPA. See, e.g., < here =">here"> , < here =">here"> , < here =">here"> , < here =">here"> and < here =">here"> . Today’s BLOG article relates to Wells Fargo Bank, N.A. v. Edwards , a case decided by the Appellate Division, Second Department, on October 30, 2024, and in which it determined, inter alia , that defenses based on Banking Law § 6-l are personal to the borrower and cannot be asserted by “strangers to the note”. The borrower in Edwards borrowed $250,000 and secured his repayment obligations with a mortgage on his home. The lender commenced two actions before commencing the action that is the subject of this article (the “Third Action”). The borrower died prior to the commencement of the Third Action but, nonetheless, was named as a defendant therein. During the pendency of the Third Action, however, the motion court granted leave to add the borrower’s wife (the “Wife”) as a defendant as a result of the borrower’s death. The Wife was served with a supplemental summons and the amended complaint. In her answer, the Wife, inter alia , asserted an affirmative defense based on the lender’s failure to comply with Banking Law § 6-l and an affirmative defense and counterclaim based on the expiration of the applicable statute of limitations. The motion court granted the lender’s first motion for summary judgment on the amended complaint, dismissing the statute of limitations and Banking Law 6-l defenses and, inter alia , the statute of limitations counterclaim. On the resulting earlier appeal, the Second Department reversed the order. Two and one-half years later, the lender made a similar summary judgment motion that was also granted by the motion court and the Wife, once again, appealed. The Second Department “modified” the motion court’s order by “deleting the provisions thereof granting those branches of the 's motion which were for summary judgment on the amended complaint insofar as asserted against the and dismissing 's … affirmative defense and first counterclaim , and for an order of reference. The Court sustained the dismissal of the defense based on Banking Law § 6-l. RPAPL § 1302(b) provides that “ t shall be a defense to an action to foreclose a mortgage that the terms of the home loan or the actions of the lender violate any provision of section six-l or six-m of the banking law or section thirteen hundred four of this article, for loans governed by these provisions.” Banking Law § 6-l was promulgated to address abuses of predatory “high cost home loans”. The Court held that the lender “correctly contend that the lacked standing to assert a defense based on lack of compliance with Banking Law § 6-l. Thus, the Court stated: That statute was enacted for the benefit and protection of borrowers ( see id. § 6-l<1> …. Thus, failure to comply with Banking Law § 6-l is a personal defense that could not be raised by the defendant, who is a stranger to the note and mortgage. In light of the foregoing, established, prima facie, that Banking Law § 6-l is inapplicable under the circumstances presented, and the failed to raise a triable issue of fact in opposition. Accordingly, the properly granted that branch of 's motion which was for summary judgment dismissing the 's fifth affirmative defense, alleging failure to comply with Banking Law § 6-l. The Court also addressed the lender’s motion as related to the Wife’s statute of limitations defense and counterclaim. The lender argued that because it moved to discontinue an earlier action prior to the expiration of the statute of limitations its acceleration of the underlying debt was revoked. The Court disagreed and, finding that the Foreclosure Abuse Prevention Act (“FAPA”) was inconsistent with such a position, stated: The Foreclosure Abuse Prevention Act (L 2022, ch 821 ; hereinafter FAPA) amended CPLR 3217, which governs the voluntary discontinuance of an action, to provide that " n any action on an instrument described under , the voluntary discontinuance of such action, whether on motion, order, stipulation or by notice, shall not, in form or effect, waive, postpone, cancel, toll, extend, revive or reset the limitations period to commence an action and to interpose a claim, unless expressly prescribed by statute". Thus, applying FAPA, the voluntary discontinuance of did not serve to reset the statute of limitations. The lender also challenged the constitutionality of FAPA. Because the motion court did not address this issue, the Court remitted the matter for consideration of this issue. 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. Eds. Note: this BLOG has written numerous articles addressing all aspects of residential mortgage foreclosure. To find BLOG articles related to mortgage foreclosure, visit the “ Blog ” tile on our website and enter “mortgage foreclosure” (or any related topic of interest) in the “search” box. Eds. Note: the facts of Edwards as recited herein are simplified for editorial purposes. Similarly, Courts have concluded that defenses under RPAPL 1304 are personal to the borrower/mortgagor. See, e.g., HSBC Bank USA, N.A. v. Tigani , 185 A.D.3d 796, 799 (2 nd Dep’t 2020); US Bank, N.A. v. Orlando , 226 A.D.3d 946, 947 (2 nd Dep’t 2024). Eds. Note: this BLOG has written numerous articles addressing RPAPL 1304 issues in foreclosure actions. To find BLOG articles related to this issue, visit the “ BLOG ” tile on our website and enter “RPAPL 1304” in the “search” box. Eds. Note: this BLOG has written numerous articles addressing statutes of limitation issues in mortgage foreclosure actions. To find BLOG articles related to this issue, visit the “ BLOG ” tile on our website and enter “statute of limitations” in the “search” box. Eds. Note: this BLOG has written numerous articles addressing FAPA. See, e.g., < here =">here"> , < here =">here"> , < here =">here"> , < here =">here"> and < here =">here"> . In a recent article, this BLOG discussed the Third Department’s holding that FAPA’s retroactive application does not violate a lender’s due process rights < here =">here"> .

By: Jeffrey M. Haber In Emirates Islamic Bank PJSC v. NeoPharma LLC , 2024 N.Y. Slip Op. 51461(U) (Sup. Ct., N.Y. County Oct. 4, 2024) ( here ), Justice Gerald Lebovits addressed an interesting question concerning personal jurisdiction against them that caught our eye. The jurisdictional issue in Emirates Islamic Bank concerned whether personal jurisdiction over the defendants was necessary in order to enforce a foreign-country judgment through a CPLR 3213 motion. To exercise personal jurisdiction over a defendant, two components of such jurisdiction have to be met: (1) service of process on the defendant, which implicates the due process requirements of notice and opportunity to be heard; and (2) the exercise of the court’s power over the person, i.e. , the power, or reach, of a court over a party, so as to enforce judicial decrees. As discussed below, Justice Lebovits held that the first component was not satisfied in Emirates Islamic Bank . Emirates Islamic Bank concerned a motion for summary judgment in lieu of complaint brought by plaintiff, Emirates Islamic Bank PJSC, to enforce a foreign-country judgment entered against defendants. The court denied the motion, and dismissed the action for lack of personal jurisdiction, because plaintiff set a return date that was one day earlier than defendants’ earliest possible deadline to appear and respond under CPLR 320(a). Plaintiff moved for leave to reargue the decision and order, arguing that the court overlooked post- Bhanti  precedent of the Appellate Division, Second Department, undermining the court’s reliance on that case in dismissing the action. The court agreed that granting leave to reargue was warranted to consider the implications of the more recent case authority on which plaintiff relied. On reargument, the court adhered to its original decision. As an initial matter, the court addressed plaintiff’s argument that the court misapprehended the law concerning the exercise of personal jurisdiction over a defendant to enforce a foreign-country judgment through a CPLR 3213 motion. The court held that it did not do so. In so holding, the court noted that “personal jurisdiction has  two  constitutionally required components.” One component involves service of process, which implicates due process requirements of notice and opportunity to be heard. The other component “involves the power, or reach, of a court over a party, so as to enforce judicial decrees.” The court noted that the foregoing components are distinct: Service of process on a defendant cannot alone grant the court adjudicatory authority over a defendant where it is lacking, “however flawless that service may be.” And improper service on a defendant deprives the court of personal jurisdiction, even if the court could otherwise properly exercise its authority over that defendant. “Crucially,” said the court, “the principle that a court need not have personal jurisdiction over defendants for judgment-enforcement purposes relates to the issue of a court’s reach over a party—whether plaintiff must provide a basis ‘to justify defendant’s being subject to the New York court's  power .’” The court agreed with plaintiff “that absent assertion of ‘colorable, nonfrivolous ground for denying the judgment recognition’—which ha not occurred —it need not satisfy  that  element of personal jurisdiction.” “But,” explained the court, “enjoying this additional leeway does not free plaintiff from the service-based element of personal jurisdiction, to afford defendant adequate notice and opportunity to be heard on the judgment-enforcement issue.” For that reason, said the court, the Second Department “has held that even absent the need to inquire further into whether a sufficient basis exists to give recognition to an out-of-state judgment, a plaintiff moving under CPLR 3213 still must properly serve defendants with the summons and motion papers.” Based upon the foregoing, the court concluded that it “properly considered on the prior motion whether plaintiff had given defendants sufficient notice of its judgment-enforcement motion” and that the court’s previous conclusion that notice was insufficient was correct. The court next turned its attention to plaintiffs’ argument that post- Bhanti decisions required a finding that the court had jurisdiction over defendants. Plaintiff looked at, among other cases, the Second Department’s decision in  Blue Lagoon, LLC v. Reisman , 214 A.D.3d 938 (2d Dept 2023), in advancing its argument. In Blue Lagoon , the plaintiff set an initial return date that was too early, given the timing of personal service on the defendants relative to when the motion was filed. The return date was, however, adjourned three times, pushing the return date until well after the defendant’s CPLR 320 deadline to appear and respond. Additionally, after the third adjournment, the plaintiff filed an amended notice of motion expressly setting the last of the three adjourned dates as the motion return date. The Second Department held that given the adjournments, and the filing of an amended notice of motion, “plaintiff’s failure to provide an adequate return date on its  original  notice of motion was not a fatal defect” depriving the court of personal jurisdiction. The court found that “ he facts of  Blue Lagoon … materially different from those present here,” noting that the “original motion return date was not adjourned” and the plaintiff did not “amend its original notice of motion to set a later return date.” “In short,” concluded the court, “this court sees no basis to depart from its prior conclusion that  Bhanti  supplies the procedural rule governing this case. And under that rule, this court lacks personal jurisdiction as a result of plaintiff’s short service.” Finally, the court rejected plaintiff’s fairness argument, finding that plaintiff had the ability to protect itself but did not do so: Plaintiff contends, in essence, that a dismissal due to short service would be unfair because plaintiff acted diligently to serve uncooperative overseas defendants [] and could not reasonably have predicted when setting the return date that service would take as long as it did. But, as noted above, it was clear well in advance of the return date that serving defendants would be difficult—as shown by plaintiff’s (successful) motion for leave to employ alternate means of service … Plaintiff could have (whether then or later on) protected itself against potential notice problems by amending its notice of motion to extend the return date. Plaintiff did not do so. _______________________________ 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. Under CPLR 3213, a plaintiff may seek summary judgment in lieu of a complaint “ hen action is based upon an instrument for the payment of money only.” See HSBC Bank USA v. Community Parking Inc. , 108 A.D.3d 487 (1st Dept. 2013). The purpose of the statute “is to provide an accelerated procedure where liability for a certain sum is clearly established by the instrument itself.” G.O.V. Jewelry, Inc. v. United Parcel Serv. , 181 A.D.2d 517, 517 (1st Dept. 1992). This Blog has written about this procedural tool on numerous occasions. E.g. , here , here , here , and here . Slip Op. at *1 (citing Bhanti v. Jha , 140 A.D.3d 685, 686 (2d Dept. 2016)). This Blog wrote about the timing issues associated with bringing a motion for summary judgment in lieu of complaint, here . Id. Id. at *2 (orig’l emphasis) (citing Keane v. Kamin , 94 N.Y.2d 263 (1999)). Id. (quoting Keane , 94 N.Y.2d at 265). Id. (quoting Miller v. 21st Century Fox Am., Inc. , 180 A.D.3d 608,608 (1st Dept. 2020)). Id. (quoting Emaar Rak F.Z.E. v. Rak Tourism Inv. F.Z.C. , 177 A.D.3d 538, 539 (1st Dept. 2019)) (orig’l emphasis). Id. (quoting id. ). Id. Id. (citing TCA Global Credit Master Fund, L.P. v. Puresafe Water Sys., Inc. , 151 A.D.3d 1098, 1100 (2d Dept. 2017)). Id. This Blog analyzed Blue Lagoon , here . Id. (quoting Blue Lagoon , 214 A.D.3d at 942) (emphasis added). Slip Op. at *3. The court also distinguished plaintiff’s reliance on Article 78 cases. In those cases, which predated Bhanti , the courts held that the failure to afford a respondent the statutorily mandated time to respond to the petition was a mere irregularity, rather than a jurisdictional defect. Id. (discussing Matter of Tennessee Gas Pipeline Co. v. Town of Chatham Bd. of Assessors , 213 A.D.2d 103, 106 (3d Dept. 1995)). Id. (footnote omitted). Id. at *4 (citation to record omitted).

By: Jonathan H. Freiberger Today’s BLOG article relates to Reverse Mortgage Solutions, Inc. v. Miglucci , a mortgage foreclosure action decided by the Appellate Division, Third Department, on October 17, 2024. The Court in Miglucci determined that the accrual date of a cause of action for the foreclosure of a reverse mortgage generally accrues upon the death of the borrower. In 2008, the Miglucci borrower borrowed money from the lender and secured her repayment obligations with a reverse mortgage on real property. “The terms of the mortgage provided, as relevant here, that the ‘lender may require immediate payment in full of all outstanding principal and accrued interest if a borrower dies and the property is not the principal residence of at least one surviving borrower.’" (Internal ellipses and brackets omitted.) The borrower died in 2010, and the property passed to her children. An action was commenced by the lender in 2016 to collect the unpaid balance due. The defendants defaulted and the lender moved for a default judgment and an order of reference. The defendants’ subsequent motion for leave to file a late answer was granted and the lender’s motion for a default judgment was denied. In their answer, the defendants asserted, inter alia , a statute of limitations defense. The lender then moved for summary judgment (and for reargument of its default judgment motion) and the defendants cross-moved for summary judgment and to quiet title pursuant to RPAPL § 1501(4) . Determining that the lender’s action was barred by the six-year statute of limitations, the motion court granted the defendants’ cross-motion and denied the lender’s motions. On the lender’s appeal, the Third Department affirmed. The Court concluded that the date of the borrower’s death in 2010, was the accrual date of the lender’s claim. Thus, the Court noted that “as we have previously held, a cause of action seeking a payment of money pursuant to a contract accrues "when the party making the claim possesses a legal right to demand payment, not when it actually made the demand". (Citations, internal quotation marks and ellipses and brackets omitted.) Since the borrower’s death occurred in February of 2010 and the foreclosure action was commenced in November of 2016, the action was time-barred. The lender argued, unsuccessfully, that, based on the “permissive” language in the mortgage that the lender “may” accelerate if the borrower dies, the statute of limitations did not begin to run until the action was commenced. This argument was flatly rejected by the Third Department . The Court also rejected the “policy considerations” raised by the lender to support its argument, concluding that such considerations “do not outweigh the fact that the reading of the parties' agreement advanced by plaintiff would permit the indefinite extension of the statute of limitations subject only to plaintiff's discretion.” (Citations omitted.) The Court further noted that “it has long been the public policy of this State to forbid parties from agreeing to extend the limitations period prior to accrual.” (Citations omitted.) The Court also rejected the lender’s argument that “periodically checking with its borrowers in order to determine whether said conditions have occurred would impose an excessive hardship.” Among other things, the Court found the “policy arguments” rang “hollow” when one considers its specialization in providing the type of mortgage at issue, the clientele that the product is marketed to, and the fact that the relevant grounds for acceleration of the remaining balance owed on the reverse mortgage were limited to the death of the borrower and the sale or transfer of the property.” (Citation and footnote omitted.) Finally, the Court, in rejecting the lender’s argument that “it is not subject to the statute of limitations as it shares ‘the same interests and goals’ as HUD,” stated: Even accepting that statement as true, it is an insufficient premise to bestow the protection of immunity from the statute of limitations, as the record is otherwise devoid of any proof establishing that plaintiff is the assignee of HUD or that HUD had the right to foreclose on the mortgage. Plaintiff therefore failed to demonstrate the applicability of an exception to the statute of limitations. 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. Eds. Note: this BLOG has written numerous articles addressing all aspects of residential mortgage foreclosure. To find BLOG articles related to foreclosure, visit the “ BLOG ” tile on our website and enter “foreclosure” (or any related topic of interest) in the “search” box. Eds. Note: this BLOG has written numerous articles addressing statutes of limitation issues in foreclosure actions. To find BLOG articles related to this issue, visit the “ BLOG ” tile on our website and enter “statute of limitations” in the “search” box. Eds. Note: this BLOG has written numerous articles addressing actions to quiet title pursuant to RPAPL § 1501(4). To find BLOG articles related to this issue, visit the “ BLOG ” tile on our website and enter “1501(4)” in the “search” box. This holding is consistent with the body of case law holding that the statute of limitations on a promissory note payable on demand begins to run at the time of its execution because that is when the right to demand payment accrues. See, e.g. , Elia v. Perla , 150 A.D.3d 962, 964-65 (2 nd Dep’t 2017); Avon Development Enterprises Corp. v. Samnick , 286 A.d.2d 581, 582 (1 st Dep’t 2001).

By: Jonathan H. Freiberger As readers of this BLOG know, we frequently write about issues relating to mortgage foreclosure. We have also written numerous articles relating to the recently enacted FAPA. See, e.g., < here =">here"> , < here =">here"> , < here =">here"> and < here =">here"> . Today’s BLOG article relates to U.S. Bank National Association v. Lynch , a case decided by the Appellate Division, Third Department, on October 24, 2024, and in which it determined that the retroactive application of FAPA does not violate a lender’s due process rights. In 2006, the defendant borrower in Lynch borrowed money from the lender and secured her repayment obligations with a mortgage on real property. The lender commenced a foreclosure action in 2008 after an alleged default by the borrower. The lender’s summary judgment motion was granted in 2011, but the case was “marked off” the calendar as inactive after the lender failed to file an order granting the motion. A second foreclosure was commenced by the lender in 2015. The Borrower defaulted in appearing. In 2017, a judgment of foreclosure and sale was issued in 2017. In 2019, before the lender took steps to enforce the judgment of foreclosure and sale, the borrower moved to vacate her default. The motion court granted the motion. Thereafter, the lender moved for summary judgment and the borrower cross-moved for summary judgment, arguing that the lender’s second action was time-barred. Finding that the lender accelerated the loan in 2008 when it commenced the first action and failed to subsequently de-accelerate, the motion court held that the second action was time-barred. In 2022, the lender moved to restore the first action to the calendar, which motion was granted over the borrower’s opposition. The motion court specifically rejected the borrower’s argument that FAPA mandated the dismissal of the first action as time-barred. The borrower appealed. The borrower argued to the Third Department that the motion court erred in failing to apply FAPA. Conversely, the lender argued that retroactive application of FAPA would violate its due process rights. Among other things, FAPA amended RPAPL 1301 to add subparagraph 4, which provides that “ f an action to foreclose a mortgage or recover any part of the mortgage debt is adjudicated to be barred by the applicable statute of limitations , any other action seeking to foreclose the mortgage or recover any part of the same mortgage debt shall also be barred by the statute of limitations.” The Court then noted that while legislative amendments should generally be applied prospectively, “remedial legislation should be given retroactive effect in order to effectuate its beneficial purpose.” (Citations and internal quotation marks omitted.) In this regard, the Court stated that: However, classifying a statute as 'remedial' does not automatically overcome the strong presumption of prospectivity. Rather, in determining whether a legislative amendment should be given retroactive effect, courts must consider whether the Legislature has made a specific pronouncement about retroactive effect or conveyed a sense of urgency; whether the statute was designed to rewrite an unintended judicial interpretation; and whether the enactment itself reaffirms a legislative judgment about what the law in question should be. The Legislature enacted FAPA to clarify existing law to ensure that statutes of limitations provide finality. In exercising its legislative judgment, the Legislature set forth the process available to noteholders to foreclose a mortgage, including the manner in which the statute of limitations may be tolled or restarted, while also ensuring that homeowners are not overburdened by having to defend multiple actions ad infinitum. Further, the Legislature clearly set forth that FAPA "shall take effect immediately and shall apply to all actions commenced on an instrument described under in which a final judgment of foreclosure and sale has not been enforced" For the foregoing reasons, we find that FAPA should be applied retroactively to effect its beneficial purpose. <(citations, internal quotation marks and brackets omitted.)> The Court went on to discuss that, in light of the Court of Appeals’ decision in in Freedom Mtge. Corp. v Engel , 37 N.Y.3d 1 (2021), there was an “urgent need to correct judicial interpretation with unintended consequences which allowed noteholders to unilaterally ‘manipulate statutes of limitations to their advantage’ and to the detriment of homeowners.” (Citation omitted.) In rejecting the lender’s position that its due process rights would be violated if FAPA was applied retroactively, the Court explained: Next, we turn to plaintiff's contention that a retroactive application of FAPA would violate its due process right to recover on the mortgage debt. To comport with the requirements of due process, retroactive application of a newly enacted provision must be supported by a legitimate legislative purpose furthered by rational means. This standard is not exacting, and the challenged legislation will survive so long as it is rationally related to any conceivable legitimate State purpose . Here, the Legislature rejected case law that would allow noteholders to abuse the foreclosure process by manipulating and extending the statute of limitations to the detriment of homeowners and it acted to overrule such case law. To prevent unintended results, the Legislature enacted FAPA to clarify the judicial process through which noteholders could recover on a mortgage debt, while also protecting homeowners from having to defend multiple foreclosure actions for lengths of time that far exceed the applicable statutes of limitations. As such clarifications are rationally related to the legitimate legislative purpose of providing a mechanism for parties to resolve their disputes with finality, we find that retroactive application of FAPA to foreclosure actions where a final judgment has not been enforced does not violate plaintiff's due process rights. Ultimately, the Court found that the loan was accelerated by the lender when it commenced the first foreclosure action and that it was not de-accelerated. Therefore, the six-year statute of limitations on the accelerated loan expired prior to the commencement of the second foreclosure action. Additionally, because the first and second foreclosure actions both “sought ‘to foreclose the same mortgage debt,’ such adjudication also renders the 2008 action ‘barred by the statute of limitations’” (RPAPL 1301 <4> ). (Some citations and internal ellipses omitted.) Accordingly, the Court held that the motion court “should have denied plaintiff's motion to restore the 2008 action to the calendar”. 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. Eds. Note: this BLOG has written numerous articles addressing all aspects of residential mortgage foreclosure. To find BLOG articles related to mortgage foreclosure, visit the “ Blog ” tile on our website and enter “foreclosure” (or any related topic of interest) in the “search” box. Eds. Note: On December 19, 2023, the Appellate Division, First Department, in Genovese v. Nationstar Mortgage LLC , 223 A.D.3d 37 (2023), held that FAPA is to be applied retroactively. However, the First Department could not consider the lender’s “constitutional challenges to the retroactive application of FAPA under the Contract and Due Process Clauses of the Federal Constitution because, as plaintiff notes in her reply brief, defendant has not notified the Attorney General of those challenges ( see CPLR 1012 ).” Genovese , 223 A.D.3d at 45. This Blog wrote about Genovese < here =">here"> . Eds. Note: this BLOG has written numerous articles addressing issues in foreclosure actions related to the interrelationship between the statute of limitations, acceleration and de-acceleration. To find BLOG articles related to these issues, visit the “ Blog ” tile on our website and enter “statute of limitations,” “acceleration” and/or “de-acceleration” in the “search” box. This BLOG has previously written about Engel . See, e.g. , < here =">here"> and < here =">here"> .

By: Jeffrey M. Haber Statutes of limitations limit the time within which a defendant can be held liable for any type of alleged wrongdoing. Plaintiffs who do not pursue their rights within the limitations period will find the courthouse doors closed to their claims. For this reason, whether the statute of limitations has run is an important issue to consider before commencing an action. Important to this consideration is ascertaining when the claim sought to be asserted accrued. In cases involving a claim for breach of fiduciary duty – one of the claims asserted in Hammer v. Heller , 2024 N.Y. Slip Op 33658(U) (Sup. Ct., N.Y. County Oct. 15, 2024) ( here ) – accrual occurs as soon as “the claim becomes enforceable — when all elements of the tort can be truthfully alleged in a complaint.” “Given that damage stemming from the misconduct is an essential element of a breach of fiduciary duty claim, the claim is not enforceable, and thus does not accrue until damages are sustained.” e.g.,="(e.g.," here=">here" and="and" >here).=">here)." also="also" about="about" accrual="accrual" claims,="claims," including="including" claims="claims" duty,="duty," e.g. ,="e.g.," >here,=">here," >here.=">here."> In cases involving a request for declaratory relief, also sought in Hammer , the claim accrues “when there is a bona fide, justiciable controversy between the parties.” “A dispute matures into a justiciable controversy when a plaintiff receives direct, definitive notice that the defendant is repudiating his or her rights.” Hammer v. Heller Hammer involved a dispute among three siblings concerning their rights and interests in three family general partnerships. The dispute before the motion court concerned the parties’ interests in Langfan. At the time of Langfan’s formation, each sibling owned a 33% interest in the partnership. In or around February 2011, Dayna, without allegedly informing Robin, directed Langfan’s accountant, Seymour Kahan, to remove Robin as a partner of the partnership. Kahan allegedly followed Dayna’s instructions based on her representation that Robin consented to the change. Kahan consequently filed Langfan’s 2010 income tax return to indicate that only Dayna and Mark were owners of Langfan. Robin’s Schedule K-1 was, in turn, also amended to reflect her partnership interest being reduced from 33.333% to 0 %, while both Mark and Dayna’s shares increased to 50%. In the years that followed, Langfan’s tax returns continued to list only Mark and Dayna as owners of the partnership. Plaintiffs alleged that defendant never informed Robin about her purported removal as a partner from Langfan, nor did defendant obtain Robin’s consent or otherwise document Robin’s removal as a partner. Instead, in 2022, Mark notified Robin, after his discussions with Dayna following the death of William, that he learned that Robin had been removed from the Langfan partnership. The next year, in the middle of 2023, Mark reviewed Langfan’s tax return history, discovered that Robin no longer appeared in those tax filings, and informed Robin of his findings. Dayna later confirmed to Robin that she had removed Robin from the Langfan partnership. According to Robin, Dayna represented in an email that she removed Robin from the Langfan partnership so that Dayna’s family could obtain a more advantageous health insurance plan. Plaintiffs characterized Dayna’s conduct as a fraud on Robin. Defendant moved to dismiss two causes of action asserted by plaintiffs – declaratory judgment and breach of fiduciary duty – as being time-barred. Defendant contended that the declaratory judgment cause of action (concerning Robin’s removal as a partner) accrued in or around 2011 and, therefore, was barred under CPLR 213(1). Defendants also contended that the breach of fiduciary duty claim was barred because the claim accrued in or around 2011. Defendant maintained that the statute of limitations for the claim was three years. As discussed below, the motion court granted in part and denied in part the motion. In New York, there is “no general period of limitation for a declaratory judgment action.” “ o determine the appropriate limitations period for a declaratory judgment action, it is necessary to examine the substance of action to identify the relationship out of which the claim arises and the relief sought.” If the court finds the action can be resolved through a form of proceeding for which a specific limitation period is statutorily provided, then the statute of limitation for that proceeding will be applied. If no other form of proceeding exists for resolving the claim, then the six-year limitations period in CPLR 213(1), the catch-all provision, applies. In Hammer , the parties did not dispute that plaintiffs’ declaratory relief claim was subject to a six-year statute of limitations period. Instead, the parties disputed when the claim accrued. As noted, “ n action for declaratory relief accrues when there is a bona fide, justiciable controversy between the parties.” “A dispute matures into a justiciable controversy when a plaintiff receives direct, definitive notice that the defendant is repudiating his or her rights.” The motion court found that the claim accrued in 2022, not in 2011. The motion court explained that although the alleged removal of Robin from the Langfan partnership occurred in or around February 2011, it was not until 2022 that she had “direct, definitive notice” of Defendant’s purported repudiation of her partnership rights. The motion court also found that plaintiff had “sufficiently established … that, although actions occurred in 2011, a justifiable controversy only crystalized in 2022 when informed Mark that Robin was not a partner of Langfan.” Therefore, said the motion court, plaintiff’s “declaratory judgment appear to be within CPRL 213(l)’s six-year limitations period.” However, the motion court dismissed the breach of fiduciary duty cause of action, holding that the claim accrued in 2011. In New York, a cause of action for breach of fiduciary duty is subject to a three-year statute of limitations when “the remedy sought is purely monetary in nature.” When a fiduciary duty claim is primarily “based on allegations of actual fraud,” the six-year/two-year from discovery limitations period set forth in CPLR 213(8) applies. However, where the fraud allegations are only incidental to the fiduciary duty claim, courts will not apply the fraud statute of limitations. In Hammer , plaintiffs alleged that defendant breached her fiduciary duties by unilaterally removing Robin as a partner from Langfan and, in turn, causing Langfan to file federal income tax returns that listed only Mark and defendant as co-owners of the partnership. Plaintiffs sought monetary damages for the alleged breach “in an amount not less than 33% of the total valuation of Langfan.” “Given these allegations,” concluded the motion court, “the statute of limitations on plaintiffs’ plainly began to run in 2011 and expired in 2014, i.e., well before th action was filed in 2023.” The motion court rejected plaintiffs’ argument that their breach of fiduciary duty claim was based on defendant’s alleged fraud, which Robin claimed not to have discovered until 2022, thereby bringing the breach of fiduciary duty claim within the two-year discovery rule in CPLR 213(8). In doing so, the motion court found the allegations to be “bald and conclusory characterizations,” which “plaintiffs not explain in any detail how, if at all, conduct was fraudulent.” “ t any rate,” said the motion court, “plaintiffs’ conclusory assertions fail to establish that purported fraudulent conduct was anything more than incidental to the primary conduct underlying their fiduciary duty claim: alleged unwarranted removal of Robin from the Langfan partnership.” Accordingly, the motion court dismissed the breach of fiduciary duty claim as time-barred. ________________________________ 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. IDT Corp. v. Morgan Stanley Dean Witter & Co. , 12 N.Y.3d 132, 140 (2009). Grika v. McGraw , 55 Misc. 3d 1207(a) (Sup. Ct., N.Y. County 2016), aff’d sub nom. , L.A. Grika on behalf of McGraw , 161 A.D.3d 450 (1st Dept. 2018); see also IDT , 12 N.Y.3d at 140 (“date of damages is measured from when the plaintiff first suffered loss”). Trump Vill. Section 4, Inc. v. Young , 217 A.D.3d 711, 714 (2d Dept. 2023). Zwarycz v. Marnia Constr., Inc. , 102 A.D.3d 774, 776 (2d Dept. 2013). The siblings are: plaintiffs Robin Langfan Hammer (“Robin”) and Mark Langfan (“Mark”) and defendant Dayna Langfan Heller (“Dayna”). The first partnership is Abnet Realty Company (“Abnet”), a commercial real estate business founded by William K. Langfan (“William”), the siblings’ father. Abnet is governed by a First Amended General Partnership Agreement, dated February 10, 2004. Its two general partners are currently RMD Associates (“RMD”), Abnet’s Managing Partner, and Mark, as Trustee of non-party William K. Langfan Revocable Trust. The second partnership is RMD, which is an oral partnership owned in equal thirds by plaintiffs and defendant. RMD was formed in 1990 to perpetually hold a 50% general partnership interest in Abnet. The third partnership is Langfan Company (“Langfan”), an oral partnership formed in 1990 for the purpose of paying salaries and administering healthcare benefits for nonfamily and family employees managing Abnet’s various real properties, as well as paying for incidental office-related expenses. Vigilant Ins. Co. of Am. v. Housing Auth. of City of El Paso, Tex ., 87 N.Y.2d 36, 40·41 (1995) (internal quotation marks and citations omitted);  Rosenthal v. City of N.Y. , 283 A.D.2d 156, 157-158 (1st Dept. 2001) (internal quotation marks and citation omitted); see also Gress v. Brown , 20 N.Y.3d 957, 959 (2012). See Solnick v. Whalen , 49 N.Y.2d 224, 229-30 (1980). Id. at 230; s ee also Saratoga Cnty. Chamber of Com. v. Pataki , 100 N.Y.2d 801, 815 (2003). Trump Vill. , 217 A.D.3d at 714. Zwarycz , 102 A.D.3d at 776. Slip Op. at *5. Id. Id. Id. at *6. IDT , 12 N.Y.3d at 139; Romanoff v. Romanoff , 148 A.D.3d 614, 616 (1st Dept. 2017). Wimbledon Fin. Master Fund, Ltd v. Hallac , 192 A.D.3d 617, 618 (1st Dept. 2021). Romanoff , 148 A.D.3d at 616. Slip Op. at *6. Id. Id. Id. Id. (citing CPLR 3016(b)). Id. Id.

By: Jeffrey M. Haber In today’s post, we examine Student Loan Solutions, LLC v. Colon , 2024 N.Y. Slip Op. 05125 (2d Dept. Oct. 16, 2024) ( here ), a case involving the collection of student loan debt and the statute of limitations applicable to such collection efforts when the plaintiff is a nonresident suing on a cause of action accruing outside New York. As noted, Student Loan Solutions involved the collection of student loan debt. In 2007, defendants entered into a private loan credit agreement (the “loan agreement”) with Bank of America, N.A. (“Bank of America”), pursuant to which defendants borrowed $38,000 to be repaid with interest in monthly installments over a period of 20 years after an initial period of deferment. The loan agreement provided that if defendants failed to make any monthly payment when due, Bank of America had “the right to give notice that the whole outstanding principal balance, accrued interest, and all other amounts payable to … due and payable at once.” In 2017, plaintiff purchased Bank of America’s interest in the loan agreement. On June 4, 2019, plaintiff commenced the action to recover the outstanding amount owed under the loan agreement, alleging that defendants were in default of the loan agreement by failing to make payments when due. Defendants served an answer in which they asserted, as an affirmative defense, that the statute of limitations had run prior to the commencement of the action. Plaintiff moved for summary judgment on the complaint, and defendants cross-moved for summary judgment dismissing the complaint, arguing that it was time-barred. In an order dated December 10, 2020, the motion court denied plaintiff’s motion and granted defendants’ cross-motion. Plaintiff appealed. The Appellate Division, Second Department affirmed, holding that the action was time barred. When a loan is payable in installments, as in Student Loan Solutions , there are separate causes of action for each installment accrued. The statute of limitations begins to run on the date each installment becomes due and is defaulted upon, unless the debt is accelerated. Once a debt is validly accelerated in accordance with the terms of the contract, the entire amount is due, and the statute of limitations begins to run on the entire debt. To accelerate a loan payable in installments, “ borrower … must be provided with notice of the lender’s decision to exercise an option to accelerate the maturity of a loan, and such notice must be clear and unequivocal.” “ o constitute such clear and unequivocal acceleration of a debt, the notice must demand an immediate payment of the entire outstanding loan and not refer to acceleration only as a future event.” The Court found that defendants had “established, prima facie, that the statute of limitations began to run on the cause of action on September 11, 2013.” The Court pointed to a September 11, 2013 letter from Bank of America’s attorney in which the attorney “informed the defendants that had been retained to collect the ‘total amount’ in connection with the defendants’ ‘delinquent’ debt,” and “that the defendants … should send ‘the balance in full’ or contact ‘with respect to a full resolution.’” The Court held that “this letter constituted an affirmative action clearly and unequivocally evidencing Bank of America’s intention to accelerate the debt, as the letter demanded immediate payment of the entire outstanding loan and did not refer to acceleration of the loan as a future event.” The Court also held that defendants “established, prima facie, that action was time-barred under the applicable statute of limitations.” “When a nonresident sues on a cause of action accruing outside New York, CPLR 202 requires the cause of action to be timely under the limitation periods of both New York and the jurisdiction where the cause of action accrued.” “‘ cause of action accrues at the time and in the place of the injury.’” A cause of action alleging a purely economic injury usually accrues in the state in which the plaintiff resides and sustains the economic impact of the loss. In Student Loan Solutions , the parties agreed that Bank of America was headquartered and injured in North Carolina. Thus, said the Court, “since the cause of action accrued in 2013 when Bank of America held the loan agreement, North Carolina’s three-year statute of limitations for breach of contract actions applie to this action.” “As the plaintiff did not commence action to collect the debt until June 4, 2019, more than three years after the cause of action accrued,” the Court found that “defendants met their prima facie burden of demonstrating that this action was time-barred.” Takeaway “‘A defendant who seeks dismissal of a complaint on the ground that it is barred by the statute of limitations bears the initial burden of proving, prima facie, that the time in which to commence an action has expired. The burden then shifts to the plaintiff to present evidence raising a triable issue of fact as to whether the action falls within an exception to the statute of limitations’ or whether the statute of limitations has been tolled.’” In Student Loan Solutions , defendants met their burden; plaintiff was unable to raise a triable issue of fact that the statute of limitations had not run. Student Loan Solutions reaffirms the principle that when a nonresident sues on a cause of action accruing outside New York, it must be timely under the limitation periods of both New York and the jurisdiction where the cause of action accrued. As the Court of Appeals observed, “ his prevents nonresidents from shopping in New York for a favorable Statute of Limitations.” In Student Loan Solutions , the statute of limitations had run as the limitations period for breach of contract under North Carolina law – the “state in which the plaintiff reside and sustain the economic impact of the loss” – was three years. Plaintiff commenced the action in 2019, more than three years after Bank of America accelerated the loan.    __________________________________ 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. Morrison v. Zaglool , 88 A.D.3d 856, 858 (2d Dept. 2011); Sce v. Ach , 56 A.D.3d 457, 458 (2d Dept. 2008). Nationstar Mtge., LLC v. Weisblum , 143 A.D.3d 866, 867 (2d Dept. 2016); Wells Fargo Bank, N.A. v. Burke , 94 A.D.3d 980, 983 (2d Dept. 2012); EMC Mtge. Corp. v. Patella , 279 A.D.2d 604, 605 (2d Dept. 2001). Bank of N.Y. Mellon v. Dieudonne , 171 A.D.3d 34, 38 (2d Dept. 2019) (citations and internal quotation marks omitted); see also Wells Fargo Bank, N.A. , 94 A.D.3d at 983. Sansone v. North Shore Invs. Realty Group, LLC , 218 A.D.3d 698, 700 (2d Dept. 2023); see also Freedom Mtge. Corp. v. Engel , 37 N.Y.3d 1, 27 (2021). Slip Op. at *2. Id. Id. (citations omitted). Id. Global Fin. Corp. v. Triarc Corp. , 93 N.Y.2d 525, 528 (1990); see also CPLR 202; Grynberg v. Giffen , 119 A.D.3d 526, 527 (2d Dept. 2014). Deutsche Bank Natl. Trust Co. v. Barclays Bank PLC , 34 N.Y.3d 327, 338 (2019) (quoting Global Fin. , 93 N.Y.2d at 529). Global Fin. , 93 N.Y.2d at 528. Slip Op. at *2. Id. (citations omitted). Id. Cammarato v. 16 Admiral Perry Plaza, LLC , 216 A.D.3d 903, 904 (2d Dept. 2023) (quoting Osborn v. DeChiara , 165 A.D.3d 1270, 1271 (2d Dept.2018)); see also Tantleff v. Kestenbaum & Mark , 131 A.D.3d 955, 958 (2d Dept. 2015). Global Fin. , 93 N.Y.2d at 528. See also CPLR 202 (“An action based upon a cause of action accruing without the state cannot be commenced after the expiration of the time limited by the laws of either the state or the place without the state where the cause of action accrued, except that where the cause of action accrued in favor of a resident of the state the time limited by the laws of the state shall apply.”). Global Fin. , 93 N.Y.2d at 528 (citation omitted). Slip Op. at *2.

By: Jonathan H. Freiberger A notice of pendency (or lis pendens ) is a provisional remedy available to litigants seeking a judgment that affects title to real property. 5303 Realty Corp. v. O&Y Equity Corp. , 64 N.Y.2d 313 (1984). The purpose of a notice of pendency is to put defendants and the world on notice of the full scope of the rights claimed by plaintiffs to defendants’ real property. Sjogren v. Land Assoc., LLC , 223 A.D.3d 963, 965 (3 rd Dep’t 2024). Notices of pendency are governed by Article 65 of the CPLR. This BLOG has previously discussed notices of pendency in a variety of different contexts. See, e.g ., < here =">here"> , < here =">here"> , < here =">here"> and < here =">here"> . Among others, the filing of notices of pendency is typical in mortgage foreclosure actions and actions for specific performance of real estate contracts. Conversely, in an action for the return of a downpayment related to the sale of real property, the contract vendee was not entitled to a notice of pendency because the complaint sought only money damages and, accordingly, any resulting judgment would not “affect the title to, or the possession, use or enjoyment of, real property.” Mallek v. Felmine , 227 A.D.3d 977, 978 (2 nd Dep’t 2024). Because the “ability to file a notice of pendency is a privilege that can be lost if abused,” once lost a successive notice of pendency may not be filed after the initial notice is cancelled. In re Sakow , 97 N.Y.2d 436, 441 – 42 (2002) (citations omitted). Moreover, an application to extend a notice of pendency must be made “prior to the expiration of the prior notice” and an expired notice, without extension is a “nullity”. Sakow , 97 N.Y.2d at 442 (citations omitted). The “no second chance” rule applies whether the notice expires or is cancelled. Id . An exception to the “no second chance” rule is found in CPLR 6516 , which permits successive notices of pendency in mortgage foreclosure actions because RPAPL 1331 requires that a notice of pendency must be filed “at least twenty days before a final judgment directing a sale is rendered”. On October 16, 2024, the Appellate Division, Second Department, decided Underhill Venture, LLC v. Sarang , in which the Court addressed an interesting issue – whether a party to a contract can waive the right to file a notice of pendency. The parties in Underhill entered into a contract pursuant to which the plaintiff was to build a house on certain property and sell the land and the house to the defendant. After an alleged payment default, the plaintiff commenced an action against the defendant “to declare the contract null and void and to retain the defendants' down payment.” The defendants interposed counterclaims for damages and filed a notice of pendency. The plaintiff, inter alia , moved to cancel the notice of pendency and the motion court denied the motion. Using rules of contract interpretation , the Second Department reversed because the parties’ contract expressly prohibited the filing of notices of pendency. In so doing, the Court stated: Turning to the merits, with respect to the order dated September 21, 2023, the Supreme Court erred in denying that branch of the plaintiff's motion which was to cancel the notice of pendency ( see CPLR 6501 ; Matter of Sakow , 97 NY2d 436, 441). Here, the parties agreed in a rider to the contract that "the right to file a Lis Pendens in any action is hereby waived irrevocably." " hen parties set down their agreement in a clear, complete document, their writing should . . . be enforced according to its terms," and " n the absence of any ambiguity, we look solely to the language used by the parties to discern the contract's meaning" ( Vermont Teddy Bear Co. v 538 Madison Realty Co. , 1 NY3d 470, 475 ). 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. Eds. Note: this BLOG has written numerous articles addressing all aspects of residential mortgage foreclosure. To find BLOG articles related to foreclosure, visit the “ Blog ” tile on our website and enter “foreclosure” (or any related topic of interest) in the “search” box. Eds. Note: this BLOG has written numerous articles addressing specific performance of real estate contracts . To find BLOG articles related to specific performance of real estate contracts, visit the “ Blog ” tile on our website and enter “specific performance” in the “search” box. Eds. Note: this BLOG has addressed the issue of successive notices of pendency in mortgage foreclosure actions < here =">here"> and < here =">here"> . Eds. Note: this BLOG has written numerous articles addressing contract interpretation . To find BLOG articles related to contract interpretation, visit the “ Blog ” tile on our website and enter “contract interpretation” (or any related topic of interest) in the “search” box.

By: Jeffrey M. Haber Artificial intelligence (“AI”) is everywhere. A person cannot watch television, listen to a podcast or read a newspaper without hearing about AI. As a new and emerging technology, AI is exciting. Its applications and capabilities are endless. But, in the wrong hands, AI can be dangerous. Recently, the Securities and Exchange Commission (“SEC”) issued an Investor Alert about AI and the risk of fraud (the “Alert”) (here). The SEC, along with the North American Securities Administrators Association, and the Financial Industry Regulatory Authority, issued the Alert to “make investors aware of the increase of investment frauds involving the purported use of artificial intelligence (AI) and other emerging technologies.” As noted in the Alert, “ndividual investors should know that bad actors are using the growing popularity and complexity of AI to lure victims into scams.” In the Alert, the SEC identified “a few things to look out for to help keep money safe from frauds.” Some of the AI and AI-related fraud includes: Unregistered/Unlicensed Investment Platforms Claiming to Use AI First and foremost, investors should remember that federal, provincial, and state securities laws generally require securities firms, professionals, exchanges, and other investment platforms to be registered. A promoter’s lack of registration status should be taken as a prompt to do additional investigation before you invest any money. Numerous unregistered and unlicensed online investment platforms, as well as unlicensed and unregistered individuals and firms, are promoting AI trading systems that make unrealistic claims like, “Our proprietary AI trading system can’t lose!” or “Use AI to Pick Guaranteed Stock Winners!” In reality, these scammers are running investment schemes that seek to leverage the popularity of AI. Investing in Companies Involved in AI While rapid technological change can create investment opportunities, bad actors often use the hype around new technological developments, like AI or crypto assets, to lure investors into schemes. These bad actors might use catchy AI-related buzzwords and make claims that their companies or business strategies guarantee huge gains. Red flags of these types of scams include high-pressure sales tactics by unregistered individuals, promises of quick profits, or claims of guaranteed returns with little or no risk. AI-Enabled Technology Used to Scam Investors, Including “Deepfake” Video and Audio Fraudsters can use AI technology to clone voices, alter images, and even create fake videos to spread false or misleading information. AI technology might be used to impersonate a family member or friend, with the intent to convince an investor to transfer money or securities out of an investment account. For example, some scam artists are using AI-generated audio — also known as “deepfake” audio — to try to lure older investors into thinking a grandchild is in financial distress and need of money. Scammers might use deepfake videos to imitate the CEO of a company announcing false news in an attempt to manipulate the price of a stock, or might use AI technology to produce realistic looking websites or marketing materials to promote fake investments or fraudulent schemes. In addition, we regularly see bad actors impersonating SEC staff and other government officials. In addition to identifying the foregoing, the Alert provided a number of steps for investors to use to protect themselves from unscrupulous advisors, promoters and fraudsters seeking to lure investors into scams relating to, or using, AI. On October 10, 2024, the SEC announced (here) charges against Rimar Capital USA, Inc. (“Rimar USA”), Rimar Capital, LLC (“Rimar LLC”), and certain of their officers and directors (collectively, the “respondents”) for making false and misleading statements about Rimar LLC’s purported use of artificial intelligence to perform automated trading for client accounts and numerous other material misrepresentations. As noted in the SEC’s press release, respondents agreed to settle the SEC’s charges and pay $310,000 in total civil penalties. According to the SEC, the individual respondents raised nearly $4 million from 45 investors for the development of Rimar LLC, an investment adviser that was falsely described as having an AI-driven platform for trading securities. The SEC found that the Rimar entities and the individual respondents also made misrepresentations about Rimar LLC’s assets under management and its investment returns. In addition, the SEC found that Rimar LLC and one of the individual respondents obtained advisory clients using the misleading statements and that the same individual respondent improperly used company funds for personal expenses. “Through entities he controlled, lured investors and clients with multiple fabrications, including with buzzwords about the latest AI technology,” said Andrew Dean, Co-Chief of the SEC’s Asset Management Unit. “As AI becomes more popular in the investing space, we will continue to be vigilant and pursue those who lie about their firms’ technological capabilities and engage in ‘AI washing’.” Without admitting or denying the SEC’s findings, respondents consented to the entry of an order (here) finding antifraud violations and to cease and desist from violating the charged provisions. The officer respondent consented to pay disgorgement and prejudgment interest totaling $213,611, to pay a $250,000 civil penalty, and to be subject to an investment company prohibition and associational bar with the right to reapply in five years. The director respondent agreed to pay a $60,000 civil penalty. Rimar LLC consented to be censured. _______________________________ 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. Investor Alert: Artificial Intelligence (AI) and Investment Fraud: Investor Alert, SEC.gov (Jan. 25, 2024).