By: Jeffrey M. Haber On August 23, 2023, the Appellate Division, Second Department issued two decisions that briefly touched upon fraud causes of action: Hershman v. Bank of N.Y. Mellon , 2023 N.Y. Slip Op. 04369 (2d Dept. Aug. 22, 2023) ( here ), and Hillary Dev., LLC v. Security Title Guar. Corp. of Baltimore , 2023 N.Y. Slip Op. 04370 (2d Dept. Aug. 23, 2023) ( here ). In Hershman , the Court affirmed the dismissal of a fraud claim for failure to state a claim, and in Hillary , the Court reversed the denial of a motion to dismiss fraud claims in a third-party action for, among other things, failure to allege an omission upon which the third-party plaintiff relied. Hershman v. Bank of N.Y. Mellon   In Hershman , plaintiff brought suit to recover damages for breach of contract and fraud in connection with a note that was secured by a mortgage on real property located in Tarrytown, New York (the “Property”). Plaintiffs executed the note in September 2005, which, as noted, was secured by a mortgage on the Property. In May 2016, the Bank of New York Mellon (“BNYM”), as the mortgagee’s alleged successor-in-interest, commenced an action to foreclose the mortgage (the “foreclosure action”). BNYM alleged, inter alia , that plaintiffs defaulted in making mortgage payments beginning on April 1, 2014. In December 2019, plaintiffs sued BNYM and the Bank of America (together, the “defendants”) to recover damages for breach of contract and fraud. Plaintiffs alleged, among other things, that on October 28, 2013, defendants, for the first time, paid real estate taxes on the Property which were not yet due. Plaintiffs further alleged that, starting on January 1, 2014, defendants unilaterally increased plaintiffs’ monthly mortgage payments to include escrow payments for real estate taxes, which was in breach of an agreement by which plaintiffs were to make no escrow payments if plaintiffs paid the real estate taxes.  Defendants moved, pursuant to CPLR 3211(a), to dismiss the operative complaint.  In an order dated March 10, 2021, the motion court, inter alia , granted those branches of defendants’ motion to dismiss the causes of action alleging breach of contract and fraud.  Plaintiffs appealed. As noted, the Second Department affirmed. The Court held that plaintiffs’ fraud claim duplicated their breach of contract claim: “Here, the allegations which form the basis of the cause of action alleging fraud are the same as those underlying the breach of contract cause of action.” The Court also held that plaintiffs failed to satisfy two of the elements of a fraud claim – a material misrepresentation upon which plaintiff justifiably relied: “Moreover, the plaintiffs failed to allege or provide details of any material misrepresentation made by the defendants or the plaintiffs’ justifiable reliance thereon.” “Accordingly,” concluded the Court, the motion court “properly granted that branch of the defendants’ motion which was pursuant to CPLR 3211(a)(7) to dismiss the cause of action alleging fraud for failure to state a cause of action.” Hillary Developer, LLC v. Security Title Guarantee Corp. of Baltimore Hillary was an action, inter alia , to recover damages for breach of contract. Relevant to today’s article was the fraudulent concealment claim that was asserted by defendant, third-party plaintiff, Naomi Cohen-Tsedek (“Cohen-Tsedek” or “third-party plaintiff”). On November 18, 2014, third-party plaintiff obtained a judgment against Steven Browd (“Browd”) in the amount of $269,145 (the “subject judgment”). The subject judgment was docketed with the County Clerk on the same date. At that time, Browd, also known as “Shraga Browd,” together with his wife, Sheyna Browd (“Sheyna”), owned certain real property located in Queens, New York (the “subject premises”). In 2019, Browd, under the name Shraga Browd, and his wife sold the subject premises to Hillary Developer, LLC (“plaintiff”). The subject judgment was not satisfied from the proceeds of the sale. Subsequently, upon learning that the subject premises had since been sold to a different buyer at a sheriff’s auction to satisfy the subject judgment, plaintiff commenced an action against, among others, Browd, Sheyna, and Cohen-Tsedek, as well as Security Title Guarantee Corporation of Baltimore (“Security Title”), the company which had issued plaintiff a title insurance policy with regard to its purchase of the subject premises. Plaintiff alleged that, at the time it purchased the subject premises, it did not know about the subject judgment. Third-party plaintiff interposed an answer that included, inter alia , third-party causes of action to recover damages for fraudulent concealment and prima facie tort asserted against SSS Settlement Services, LLC (“SSS Settlement”), which had acted as Security Title’s agent with regard to Security Title’s issuance of the title insurance policy. Third-party plaintiff alleged that, among other things, SSS Settlement had concealed the existence of the subject judgment and that Browd was also known as Shraga Browd. SSS Settlement moved, pursuant to CPLR 3211(a), to dismiss the third-party causes of action to recover damages for fraudulent concealment and prima facie tort insofar as asserted against it. Third-party plaintiff opposed the motion. In an order dated March 30, 2021, the motion court denied SSS Settlement’s motion. SSS Settlement appealed. The Second Department reversed. The Court held that third-party plaintiff failed to satisfy two of the elements of her fraudulent concealment claim – a material omission upon which the plaintiff justifiably relied: “Cohen-Tsedek failed to allege, inter alia , any material omission of fact by SSS Settlement or that she relied upon any such material omission.” The Court also held that third-party plaintiff failed to allege that “SSS Settlement owed her a duty to disclose the material information.” “Accordingly,” concluded the Court, the motion court “should have granted SSS Settlement’s motion pursuant to CPLR 3211(a) to dismiss the third-party causes of action to recover damages for fraudulent concealment … insofar as asserted against it.” Footnotes Slip Op. at *1 (citations omitted). To state a claim for fraud, a plaintiff must allege “a representation of material fact, the falsity of that representation, knowledge by the party who made the representation that it was false when made, justifiable reliance by the plaintiff, and resulting injury.” Global Mins. & Metals Corp. v. Holme , 35 A.D.3d 93, 98 (1st Dept. 2006). “Absent any of the elements, plaintiff does not have a prima facie case.” Id. Slip Op. at *1. Id. As discussed in note 2, above, to state a claim for fraud, a plaintiff must allege “a representation of material fact, the falsity of that representation, knowledge by the party who made the representation that it was false when made, justifiable reliance by the plaintiff, and resulting injury.” Global Mins. & Metals , 35 A.D.3d at 98. To sufficiently plead a cause of action to recover damages for fraudulent concealment, a plaintiff must also allege “that the defendant had a duty to disclose the material information.” Bannister v. Agard , 125 A.D.3d 797, 798 (2d Dept. 2015). Slip Op. at *2. Id. Id. 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.

By Jonathan H. Freiberger Generally, folks borrow money to purchase real property.  Such loans are typically secured by a mortgage on the property being purchased.  The mortgage, when filed with the clerk of the county in which the property is located, creates a lien on the property.  Upon full payment of the underlying loan, the borrower expects that a mortgage satisfaction will be filed with the Clerk to release the lien of the mortgage from the property.  Indeed, RPAPL 1921(1) requires that, once a mortgage is paid in full, a lender must “execute and acknowledge before a proper officer, in like manner as to entitle a conveyance to be recorded, a satisfaction of mortgage, and thereupon within thirty days arrange to have the satisfaction of mortgage:  (a) presented for recording to the recording officer of the county where the mortgage is recorded, or (b) if so requested by the mortgagor or the mortgagor's designee, to the mortgagor or the mortgagor's designee.”  Failure of a mortgagee to provide such a satisfaction piece exposes the mortgagee to the financial penalties set forth in the statute.  See RPAPL 1921(1). The Appellate Division, on August 16, 2023, in Green Tree Servicing, LLC v. Ferando , had occasion to address the circumstance where a lender erroneously files a satisfaction of mortgage notwithstanding a balance due on the underlying loan.  The borrowers in Green Tree borrowed $260,000 from the lender and a mortgage securing the borrower’s repayment obligations under the loan was recorded in the office of the clerk of the county in which the property was located.  A few years later, the borrowers borrowed additional funds and delivered a second mortgage to the lender.  On the same day as the second loan, the borrowers entered into a consolidation, extension, and modification agreement (“CEMA”) pursuant to which the first and second mortgages, and the underlying notes, were consolidated into a single lien on the property.  The CEMA, and the consolidated note and mortgage, were duly recorded. Thereafter, however, the lender erroneously executed and recorded a full satisfaction of the first mortgage in the amount of $260,000.  In 2015, some nine years after the filing of the satisfaction, the lender commenced an action by which it sought to cancel and vacate the previously recorded satisfaction.  The motion court granted summary judgment to the lender and cancelled the satisfaction.  On the borrower’s initial appeal, the Second Department reversed “on the ground that the plaintiff failed to submit evidence establishing that the satisfaction of mortgage was erroneously or fraudulently issued.” The lender again moved for summary judgment and submitted evidence that the satisfaction was mistakenly issued and that, at the time the satisfaction was recorded, a significant balance remained due and payable to the lender.  Further, the borrowers continued to make payments on the consolidated loan for several years subsequent to the recording of the recorded mortgage satisfaction.  The motion court again granted the lender’s motion and the borrowers appealed. In affirming the motion court, the Second Department stated: Where, as here, balances of first mortgage loans are increased with second mortgage loans and CEMAs are executed to consolidate the mortgages into single liens, the first notes and mortgages still exist and may be assigned to other lenders. Thus, the mortgage was not extinguished by the borrowers’ execution of the CEMA. A mortgagee may have an erroneous discharge or satisfaction of mortgage set aside where the underlying mortgage debt has not been satisfied and there has not been any detrimental reliance on the erroneous recording.  Here, there are no allegations of detrimental reliance on the satisfaction of mortgage. Further, not contest the admissibility of the business records submitted by the in support of its motion for summary judgment.  Those records established that the mortgage has not been satisfied, that the balance due under the loan remains outstanding, and that the satisfaction of mortgage was erroneously issued. In opposition to the 's prima facie showing, failed to raise a triable issue of fact as to whether the satisfaction of mortgage was erroneously issued.  Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice.

By Jonathan H. Freiberger Specific Performance is an equitable remedy used to compel a party to perform under a contract.  McGinnis v. Cowhey , 24 A.D.3d 629 (2 nd Dep’t 2005).  Specific Performance is frequently used to enforce a party’s rights under real estate contracts.  This Blog has previously discussed specific performance.  See, e.g. , < here =">here"> , < here =">here"> , < here =">here"> and < here =">here"> .    In EMF General Contracting Corp. v. Bisbee , 6 A.D.3d 45 (2004), the First Department set forth the elements of a specific performance claim: The elements of a cause of action for specific performance of a contract are that the plaintiff substantially performed its contractual obligations and was willing and able to perform its remaining obligations, that defendant was able to convey the property, and that there was no adequate remedy at law. *     *     * Generally, the equitable remedy of specific performance is routinely awarded in contract actions involving real property, on the premise that each parcel of real property is unique. EMF , 774 N.Y.S.2d at 44 (citations omitted).   While money damages in an action at law may “afford a full and complete remedy” to make a plaintiff whole in the event of a contractual breach, such is not always the case.  Le Bel v. Donovan , 96 A.D.3d 415 (1 st Dep’t 2012) (citation and internal quotation marks omitted).  Frequently, remedies for breach of contract other than monetary damages are necessary to make a party whole.  Specific performance is an equitable remedy that requires the breaching party to perform under the contract instead of an award of monetary damages.  Accordingly, specific performance “will not be ordered where money damages would be adequate to protect the expectation interests of the injured party,” Sokoloff v. Harriman Estates Development Corp. , 96 N.Y.2d 409, 415 (2001) (citations and internal quotation marks omitted), and is appropriate where “‘the subject matter of the particular contract is unique and has no established market value.’”  BT Triple Crown Merger Co., Inc. v. Citigroup Global Markets Inc. , 19 Misc. 3d 1129, *8 (NOR) (Sup. Ct. N.Y. Co. 2008) (quoting Van Wagner Advert. Corp. v. S&M Enters. , 67 N.Y.2d 186, 193 (1986)).  “The point at which breach of a contract will be redressable by specific performance thus must lie not in any inherent physical uniqueness of the property but instead the uncertainty of valuing it….”  Van Wagner , 67 N.Y.2d at 193.  The Sokoloff Court also stated that: The decision whether or not to award specific performance is one that rests in the sound discretion of the trial court. In determining whether money damages would be an adequate remedy, a trial court must consider, among other factors, the difficulty of proving damages with reasonable certainty and of procuring a suitable substitute performance with a damages award ( see, Restatement of Contracts § 360). Specific performance is an appropriate remedy for a breach of contract concerning goods that “are unique in kind, quality or personal association” where suitable substitutes are unobtainable or unreasonably difficult or inconvenient to procure ( see, id., comment c ). Sokoloff , 96 N.Y.2d at 415. It is generally accepted that “the equitable remedy of specific performance is routinely awarded in contract actions involving real property, on the premise that each parcel of real property is unique.”  Alba v. Kaufman , 27 A.D.3d 816, 818 (3 rd Dep’t 2006) (citations and internal quotation marks omitted).   On July 26, 2023, the Appellate Division, Second Department, decided Herman v. 818 Woodward, LLC , a specific performance case.  In Herman , buyer and seller entered into a contract for the purchase/sale of two parcels of property.  The contract price was $6,100,000, and buyer made a $450,000 down payment upon the execution of the contract.  The contract had an “on or about” sale date of January 10, 2020.  Additionally, the contract provided that if buyer breached the contract and failed to cure after notice of the default, seller could terminate the contract and retain the down payment.  After 60 days, seller set a “time of the essence” closing date and buyer failed to appear.  [Eds. Note: this Blog has discussed “time of the essence” closings < here =">here"> and < here =">here"> .]  Seller sent a notice to cure, but buyer failed to do so. Buyer commenced an action for specific performance.  Seller moved to dismiss the complaint and the motion court “in effect, granted the motion to the extent of directing that a closing take place within 30 days and that failure to close within this time frame would result in dismissal of the complaint.”  Both parties appealed. The Second Department modified the decision of the motion court by granting the motion to dismiss without permitting a closing to occur within 30 days.  Initially, the Court noted that because the motion court considered “evidentiary material without converting the motion to dismiss to one for summary judgment, must … determine whether the proponent of the pleading has a cause of action, as opposed to whether one was stated.”  (Citations omitted.) After stating the elements of a cause of action for specific performance, the Court noted that “there is no significant dispute as to the relevant facts.” On March 13, 2020, seller sent buyer a letter setting an April 13, 2020, closing date and clearly stating that that “time was of the essence that the buyer’s failure to close on April 13, 2020, would constitute a breach and willful default under the contract, which would entitle the to any and all available remedies, including the retention of the down payment as liquidated damages.”  The April 13 closing date was rejected by buyer, who indicated that he would, instead, close on April 20, 2020.  Thereafter, buyer attempted to reject the April 20, 2020, closing, but subsequently agreed to close remotely on that date due to the COVID-19 pandemic.  On April 20, 2020, however, buyer again attempted to reject the April 20 closing due to the pandemic.  Nonetheless, seller appeared with a stenographer at a video conference to conduct the closing at which, after waiting five hours, seller’s representative swore under oath that he was “authorized and prepared to sign the deed and other documents to complete the sale.” Seller sent a notice to cure advising buyer of his default and providing buyer with an opportunity to cure by delivering the balance of the purchase price by May 11, 2020.  On April 27, 2020, buyer sent a letter to seller rejecting the notice to cure and claiming that he was not in default.  In rejecting buyer’s cause of action for specific performance, the Second Department stated: Under the circumstances here, the buyer does not have a cause of action for specific performance. Although time was not made of the essence in the contract, the defendants subsequently provided valid notice that time was of the essence insofar as the notice: (1) gave clear, distinct, and unequivocal notice that time was of the essence, (2) gave the buyer a reasonable time in which to act, and (3) informed the buyer that if he did not perform by the designated date, he would be considered in default. What constitutes a reasonable time for performance depends upon the facts and circumstances of the particular case. Although the determination of reasonableness is usually a question of fact, it may become a question of law where, as here, there is no dispute as to the facts. Contrary to the buyer’s contention, he had a reasonable amount of time to perform, where, among other things, he had approximately 62 days to close from the initial closing date. Because he failed to close after the notice to cure was sent, the defendants were entitled, pursuant to the contract, to terminate the contract and retain the down payment as liquidated damages. Further, the parties’ submissions clearly demonstrate that the buyer did not substantially perform his contractual obligations, and was not ready, willing, and able to perform his remaining obligations. His allegations that he remained ready, willing, and able to close and had fulfilled all of his obligations under the contract are bare legal conclusions, which are not presumed to be true.  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 On numerous occasions, this Blog has examined the attorney-client privilege and the attorney work product doctrine. 1 Today, we take another opportunity to explore the contours of these privileges. The Tension Between Disclosure and The Attorney-Client Privilege The Civil Practice Law and Rules (“CPLR”) directs that there shall be “full disclosure of all matter material and necessary in the prosecution or defense of an action.” 2 Notwithstanding, the CPLR establishes three categories of materials protected from disclosure: privileged matter, which is afforded absolute immunity from discovery; 3 attorney work product, which is also afforded absolute immunity 4 ; and trial preparation material, which is subject to disclosure only on a showing of substantial need and undue hardship in obtaining substantially equivalent material by other means. 5 As the Court of Appeals noted, there exists an obvious tension between the policy favoring full disclosure and the policy permitting parties to withhold relevant information. 6 Consequently, the burden of establishing any right to protection is on the party asserting it; the protection claimed must be narrowly construed; and its application must be consistent with the purposes underlying immunity. 7 The burden cannot be satisfied by conclusory assertions of privilege. Rather, the proponent of the privilege must set forth competent evidence establishing the elements of the privilege. 8 The attorney-client privilege is the oldest among common-law evidentiary privileges. 9 It is intended to foster open and candid dialog between lawyer and client and is deemed essential to effective representation. 10 In order for the privilege to apply, the communication from attorney to client must be made for “the purpose of facilitating the rendition of legal advice or services, in the course of a professional relationship.” 11 The communication itself must be primarily or predominately of legal character. 12 Communications Protected From Disclosure The attorney-client privilege insulates from disclosure a discreet category of communications between attorney, client, and, in some instances, third parties that assist the attorney to formulate and render legal advice. 13 The privilege does not apply merely because a statement was uttered by or to an attorney (or an attorney’s agent). Nor does it attach simply because a statement conveys advice that is legal in nature. 14 The privilege is not limited, however, to communications directly between the client and counsel. It also encompasses communications between attorney and a client’s agent or representative provided that the communications are intended to facilitate the provision of legal services by the attorney to the client. 15 It does not, however, protect communications between a nonlawyer and a client that involve the conveyance of legal advice offered by the nonlawyer, except when the nonlawyer is acting under the supervision or the direction of an attorney. 16 Moreover, the privilege protects from disclosure communications among corporate employees that reflect advice rendered by counsel to the corporation. 17 “A privileged communication should not lose its protection if an executive relays legal advice to another who shares responsibility for the subject matter underlying the consultation.” 18 This follows from the recognition that since the decision-making power of the corporate client may be diffused among several employees, the dissemination of confidential information to such persons does not defeat the privilege. 19 The Attorney Work Product Doctrine The attorney work product doctrine protects those materials prepared by an attorney, acting as an attorney and which contain the attorney’s analysis and trial strategy. 20 The work product of an attorney consists of interviews, statements, memoranda, correspondence, briefs, mental impressions, personal beliefs, and other tangible and intangible things. 21 As with the attorney client privilege, the burden of showing that material is protected under the doctrine is on the party asserting the protection. 22 Conclusory assertions that documents constitute attorney work product or material prepared for litigation will not suffice. 23 In West 87 LP v. Paul Hastings LLP , 2023 N.Y. Slip Op. 50821(U) (Sup. Ct., N.Y. County Aug. 4, 2023) (here), the foregoing principles were considered by the court in ruling on a motion for a protective order to prevent the disclosure of documents and information deemed to be privileged. West 87 LP v. Paul Hastings LLP West 87 involved a claim of legal malpractice. The action was brought by West 87 LP, on its own behalf and as assignee of QSB 267 Property Co. LLC, QSB 267 Holdings LLC, Simon Baron Development LLC and JSMB 267 LLC (“plaintiffs”).  Plaintiffs were a group of limited liability companies that owned or controlled various aspects of a real estate development project located on West 87th Street in New York City. Defendant purportedly represented plaintiffs in the execution of lease agreements for the project. Plaintiffs alleged that defendant failed to properly analyze and draft a rent escalation clause in a ground lease for the development. The parties engaged in discovery, pursuant to which they produced documents that contained communications between defendant and plaintiffs’ nonparty owner-entities Quadrum Global and Simon Baron Development Inc. At issue was certain correspondence between plaintiffs and other entities purportedly employed by plaintiffs for legal representation. Plaintiffs made 87 privilege designations over the communications. Plaintiffs maintained that the communications were protected by the attorney-client privilege, the attorney work product privilege, and the litigation privilege. Defendant challenged 82 of the designations, which involved 32 documents.  The withheld documents fell into five categories of records. The first category involved communications between representatives of nonparty developer Quadrum Global and plaintiff Simon Baron Development. The communications purportedly conveyed information provided by outside legal counsel. The second category of documents related to information obtained from outside legal counsel for the purposes of evaluating legal claims against defendants, and the third and fourth categories pertained to communications regarding the drafting of the malpractice complaint. The fifth and final category of documents reflected discussions regarding prior and anticipated legal advice, and requests for legal advice relevant to the evaluation of claims in the litigation. Plaintiffs moved for a protective order exempting the 32 documents from disclosure.  In seeking protection, plaintiffs conceded that the majority of the disputed documents did not include legal counsel as senders or recipients on the communications. Rather, the senders were businesspersons who, at some point during the communication, referenced legal advice allegedly provided by counsel. Despite not having legal counsel as a participant in a majority of the communications at issue, plaintiffs nonetheless asserted that either the attorney-client privilege, the attorney work product privilege, or the trial preparation privilege applied. The motion court conducted an in-camera review of the documents. In doing so, the motion court found that “a number of documents contain communications made by corporate representatives of plaintiff Simon Baron Development which convey legal instruction or advice.” 24 As such, the motion court concluded that those documents were protected by the attorney client privilege. 25 A number of the withheld documents, however, contained information regarding purported legal advice provided to plaintiffs, but communicated through third-party entities who, plaintiffs admitted, were not attorneys and not parties to the litigation. The motion court held that these documents were privileged under the common interest doctrine. 26 Pursuant to the common interest doctrine, attorney-client communications disclosed to a third party remain privileged if shared with parties of common legal interest in pending or anticipated litigation. 27 The motion court found that the entities referenced in the withheld communications were interrelated, and the communications at issue “were made for the purpose of discussing the pending litigation, strategies for addressing the litigation, or for preparation of relevant materials for the litigation.” 28 As such, the communications between plaintiffs, nonparty entities and non-lawyers were privileged and protected “by virtue of the entities’ common legal interests in the prosecution of th action.” 29 Finally, with respect to plaintiffs’ claim of work product privilege, some of the communications were made for the purpose of preparing materials to assist in anticipated litigation, while a number of documents reflected the production of engagement letters and invoices. As to the latter ( i.e. , retention and engagement letters), the motion court held that such materials were discoverable. 30 The motion court also held that “ mails merely reflecting the production of invoices and engagement letters generated by defendant should not have been withheld.” 31 Footnotes We examined these privileges, for example, here , here , here , here , here , and here . CPLR § 3101(a). CPLR § 3101(b). CPLR § 3101(c). CPLR § 3101(d)(2); see also Spectrum Sys. Intl. Corp. v. Chemical Bank , 78 N.Y.2d 371 (1991). Spectrum Sys. , 78 N.Y.2d at 377. Id. ; Matter of Priest v. Hennessy , 51 N.Y.2d 62, 69 (1980); Matter of Jacqueline F. , 47 N.Y.2d 215 (1979). Delta Fin. Corp. v. Morrison , 15 Misc. 3d 308, 316-17 (Sup. Ct., Nassau County 2007); see also Martino v. Kalbacher , 225 A.D.2d 862 (3d Dept. 1996). 8 Wigmore, Evidence § 2290 (McNaughton rev. 1961). See Matter of Vanderbilt (Rosner—Hickey) , 57 N.Y.2d 66 (1982). Rossi v. Blue Cross & Blue Shield of Greater N.Y. , 73 N.Y.2d 588, 593 (1989). Id. at 594. See United States v. Kovel , 296 F.2d 918, 922 (2d Cir. 1961); see also Westinghouse Elec. Corp. v. Republic of Philippines , 951 F.2d 1414, 1424 (3d Cir. 1991). See HPD Labs., Inc. v. Clorox Co. , 202 F.R.D 410 (D.N.J. 2001). Delta Fin. , 15 Misc. 3d at 316-17 (citations omitted). Id. (citations omitted). Id. (citations omitted). See SCM Corp. v. Xerox Corp. , 70 F.R.D 508, 518 (D. Conn. 1976). Id. (citation omitted). See Weinstein-Korn-Miller , N.Y. Civ. Prac. ¶ 3101.44 (2d ed.); see also Aetna Cas. & Sur. Co. v. Certain Underwriters at Lloyd’s , 263 A.D.2d 367 (1st Dept. 1999). Hickman v. Taylor , 329 U.S. 495 (1947). See generally Koump v. Smith , 25 N.Y.2d 287 (1969). See Salzer v. Farm Family Life Ins. Co. , 280 A.D.2d 844 (3d Dept. 2001); Zimmerman v. Nassau Hosp. , 76 A.D.2d 921 (2d Dept. 1980). Slip Op. at *3 (citing, Delta Fin. , 15 Misc. 3d at 316-17). Id. Id. Ambac v. Countrywide , 27 N.Y.3d 616, 620 (2016). Slip Op. at *3. Id. Id. (citing, In re Nassau Cnty. Grand Jury Subpoena Duces Tecum , 4 N.Y.3d 665, 679 (2005); Matter of Priest , 51 N.Y.2d at 69). Id. 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.

By: Jeffrey M. Haber “The right to a trial by jury is governed by article I (§ 2) of the New York State Constitution,” which provides “that a ‘ rial by jury in all cases in which it has heretofore been guaranteed by constitutional provision shall remain inviolate forever.’” 1 Enacted in 1938, “ his provision, …, is generally interpreted to mean that the guarantee extends to all matters to which the prior Constitution, enacted in 1894, extended the guarantee.” 2 “This includes all matters to which a constitutional right attached at the time of adoption of the first Constitution in 1777, i.e. , matters traditionally triable before a jury in a court of law or to which the right had been extended by statute prior to 1777, as well as any matters as to which a right to trial by jury was created by statute between 1777 and adoption of the 1894 Constitution.” 3 Article I (§ 2) of the New York State Constitution also provides that the right to a jury trial “may be waived by the parties in all civil cases in the manner to be prescribed by law.” Section 4101 of the Civil Practice Law and Rules (“CPLR”) provides that the party may demand a jury trial in cases where: (a) the facts set forth in the action “would permit a judgment for a sum of money only”; (b) the party demanding a jury trial files “an action of ejectment; for dower; for waste; for abatement of and damages for a nuisance”; (c) the demanding party files an action “to recover a chattel; or for determination of a claim to real property under article fifteen of the real property actions and proceedings law”; and (d) the demanding party files “any other action in which party is entitled by the constitution or by express provision of law to a trial by jury.”  Not surprisingly, issues arise with regard to the right to a jury trial when the pleading party asserts both legal and monetary claims. When, as in Pelletier v. Morgan , 2023 N.Y. Slip Op. 04167 (1st Dept. Aug. 3, 2023) ( here ), “the complaint either joins legal and equitable causes of action arising out of the same alleged wrong or seeks both legal and equitable relief, there is a waiver of a plaintiff’s right to a jury trial.” 4 “However, the right to a jury trial is to be determined by the facts alleged in the complaint and not by the prayer for relief.” 5 Indeed, “ he fact that plaintiff is seeking money damages ‘does not, in and of itself, guarantee entitlement to a jury trial.’” 6 Thus, “ here a plaintiff alleges facts upon which monetary damages alone will afford full relief, inclusion of a demand for equitable relief in the complaint’s prayer for relief will not constitute a waiver of the right to a jury trial.” 7 Notably, the party seeking a jury trial cannot reclaim the right by withdrawing equitable claims or requests for equitable relief. “Once the right to a jury trial has been intentionally lost by joining legal and equitable claims, any subsequent dismissal, settlement or withdrawal of the equitable claim(s) will not revive the right to trial by jury.” 8 Against this background, we examine Pelletier v. Morgan . Plaintiff entered into a land contract with defendant Morgan Shedlock LLC and defendant Robert J. Morgan, the managing member of Morgan Shedlock, to purchase two parcels of land in Tompkins County, New York. Under the contract, plaintiff agreed to make certain monthly payments. Plaintiff further agreed that if she defaulted on the payments, Morgan Shedlock could accelerate the debt and then, if plaintiff failed to make full payment, retain her prior payments as rent and commence an eviction proceeding against her.  Plaintiff subsequently defaulted. Rather than proceeding through the eviction process, the parties entered into a termination agreement, waiving any claims arising out of the land contract against the other. In return, plaintiff committed to vacating the premises, which defendants would be entitled to possession at such time. Thereafter, plaintiff commenced the action seeking, among other things, declaratory and injunctive relief, including recission of the termination agreement and damages relating to defendants’ efforts to eject her from the property.  Following service of an amended complaint, defendants served an amended answer and moved for partial summary judgment. The motion court denied the motion, which the Appellate Division, Third Department affirmed. 9 Thereafter, plaintiff filed a note of issue demanding a trial by jury. Defendants moved to strike the note of issue, which was opposed by plaintiff. The motion court granted the motion. Plaintiff appealed. The Third Department affirmed. The Court held that plaintiff “waived her right to a jury trial” because she “joined legal and equitable causes of action arising out of the same transaction — the execution of the termination agreement.”10 In so holding the Court rejected plaintiff’s contention that she could be made whole “solely by a monetary judgment”: “Inasmuch as plaintiff seeks recission of that termination agreement and a declaration that she is the rightful owner of the subject property, contrary to her contention, her relief cannot be obtained solely by a monetary judgment.”11 The Court further rejected plaintiff’s contention that her claims for recission of the termination agreement and a declaration that she was the rightful owner of the subject property were incidental to her claims for monetary damages. 12 “Indeed,” said the Court, “plaintiff acknowledged in two of her causes of action that she did not have an adequate remedy at law.” 13 Takeaway Litigants should be mindful of the possibility of a waiver. Pelletier highlights the ease with which a party can waive a jury trial. This is especially true when, as in Pelletier, the pleading party asserts legal and equitable claims, such as rescission, arising from a single transaction. Footnotes Hudson View Assocs. v. Gooden , 222 A.D.2d 163, 165 (1st Dept. 1996). Id. Id. (citations omitted). Errant Gene Therapeutics, LLC v. Sloan-Kettering Inst. for Cancer Research , 176 A.D.3d 459, 459 (1st Dept. 2019), lv. dismissed , 35 N.Y.3d 1060 (2020); Matter of Briere v. City of Schenectady , 201 A.D.3d 1189, 1190 (3d Dept. 2022); Margesson v. Bank of N.Y. , 291 A.D.2d 694, 698 (3d Dept. 2002). Hebranko v. Bioline Labs., Inc. , 149 A.D.2d 567, 568 (2d Dept. 1989) (citations omitted). Aroch v. 391 Broadway LLC , 203 A.D.3d 642, 642 (1st Dept. 2022) (quoting, Phoenix Garden Rest. v. Chu , 234 A.D.2d 233, 234 (1st Dept. 1996)). Id. (citing, Murphy v. American Home Prods. Corp. , 136 A.D.2d 229, 232 (2d Dept. 1989)). See Anesthesia Assoc. of Mount Kisco, LLP v. Northern Westchester Hosp. Ctr. , 59 A.D.3d 481, 482 (2d Dept. 2009). See 215 A.D.3d 1153 (3d Dept. 2023). Slip Op. at *1. Id. (citations and footnote omitted). Id. at *2 (citations omitted). Id. (citations omitted). 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.

By Jonathan H. Freiberger This Blog has recently written on the issue of contractual limitations of liability.  < Here =">Here"> Proving that timing is everything, Jonathan H. Freiberger, one of Freiberger Haber LLP’s founding members, was interviewed for, and quoted in, an August 1, 2023, article appearing in Hotel News Now, titled: “Is Extreme Tourism Responsible Tourism? Hotels Catering to Adventurous Guests Seek to Limit Liability Exposure.”  Hotel News Now is a vital, daily source of news for hotel decision makers. Hotel News Now is a division of CoStar News and always free to read. Click here to subscribe to HNN’s Daily Update and biweekly EMEA (Europe, Middle East and Africa) e-newsletters. (Link: https://www.costar.com/subscribe-hotel-news-now-newsletters ) The article, which was originally published at Hotel News Now, is reprinted in its entirety with permission from Hotel News Now.   The article was written by Leora Halpern Lanz. Is Extreme Tourism Responsible Tourism? Hotels Catering to Adventurous Guests Seek To Limit Liability Exposure There has been much talk recently about “extreme tourism” — particularly in light of the catastrophic implosion of the OceanGate's Titan vessel, bringing four passengers and the company’s CEO to their tragic, and likely avoidable, deaths. “Extreme tourism,” sometimes called “shock tourism,” can be defined as a form of travel that involves a sense of danger — such as adventure in jungles, deserts, caves, canyons or in today’s times: space and the bottom of the ocean floor. In the case of the Titan submersible, this particularly expensive and very extreme adventure is one that had an element of “look what I can do that others can’t do.” But it also may have had an element of altruism for the passengers aboard — the ability to explore and learn from the newly developed ecosystems at the wreckage site of the Titanic. Was this specific experience intended as an educational eco-tourism opportunity, or did it naturally also attract a status of significance because the passengers were able to afford this? It’s been shared that the high prices of these adventures also help with funding future explorations. By the way, I would not classify all eco-tourism as “extreme tourism.” These terms are not, and should not be, interchangeable. Are these extreme experiences truly eco-educational in nature, though only a select few can afford them? Will the tragedy of the Titan stop other individuals from pursuing extreme thrills or experiences? And will this disaster encourage regulation and policies to better prioritize safety and protect human lives? As USA Today pointed out in a post-event article, OceanGate CEO Stockton Rush had been quoted saying “safety was a pure waste.” His public downplaying of safety, coupled with the exorbitant fees, didn’t stop these individuals from participating in the excursion, one in which the waiver mentions “death” three times on its first page — as reported in MSN.com among other news outlets. Will this June 18 tragedy conclude the existence of OceanGate? It has . To have survived, the company would have needed to prove it values life and would have needed to greatly boost safety measures. It may even have had to change its name.  In the meantime, other high-risk adventures continue. Victor Viscovo, who founded Caladan Oceanic , and was quoted in the Dallas Morning News as not being deterred by the Titan tragedy, charges willing passengers $750,000 to submerge to the Mariana Trench, almost seven miles to the bottom of the Pacific. Space Perspective aims to bring people, by the end of next year, on a ride with a futuristic hot air balloon, up 100,000 feet in the air, for a mere $125,000. As technology improves, and the public awareness of so many of these once-in-a-lifetime experiences continues, and as personal wealth grows, the demand for extreme adventure will only continue. It may pause now in light of the Titan incident, but I imagine this pause will be short as individuals continue to find meaningful, once-in-a-lifetime, activities for their once-in-a-lifetime memories. Hotels Also Provide These Extreme Experiences One of the more renowned extreme hotels is the Icehotel in Sweden. Every winter, since 1989, this hotel situated 200 kilometers north of the Arctic Circle is rebuilt from ice and snow. Artists and sculptors from all over the world assemble to rebuild the hotel annually. Guests sleep on ice beds topped with reindeer skins and the hotel recommends guests only stay one night. Guests enjoying the Skylodge Adventure Suites in Peru can only bring what they can carry 400 meters up a mountain. To arrive in the transparent pods, which have 300-degree views of Sacred Valley, guests must hike and zipline or mountain climb to reach the guestrooms which hang off the side of the visibly perilous mountainside. And the underwater guestroom of the Manta Resort in Zanibar, Tanzania, is anchored among the coral with a submerged bedroom, sea-level living area and elevated stargazing deck. Meals are delivered to the isolated floating hotel room at set times; guests simply enjoy the solitude — for approximately $2,000 per night. Hotels and other operators frequently seek to minimize their exposure to liability by having adventurers acknowledge the risks of participating in extreme experiences by signing waivers. Risk management typically revolves around liability waivers and insurance. The efficacy of a waiver and the availability of insurance may be subject to their “duty of care.” Hotels and operators should be mindful of their obligations to adventurers in order to obtain the maximum benefits of their waivers and/or insurance. “In the event of an injury during extreme activities, hotels and operators should assume that litigation will follow, despite the existence of signed waivers and, accordingly, they should strive to put themselves in the best position to successfully defend against such claims,” said Jonathan Freiberger , founding partner of Freiberger and Haber, LLP, a New York-based law firm that has worked with hotels in New York and Florida. “In many cases, this can be done by utilizing waivers that are drafted to maximize the protections available to the hotel or operator.” “Insurance policies should also be reviewed carefully because general liability policies frequently exclude coverage for grossly negligent, reckless and/or intentional behavior,” he said. Hotels and operators should discuss the intended activities with their brokers and/or the carriers themselves to determine if the intended adventures would be covered and/or what, if any, safety protocols need to be followed to avoid denials of coverage in the event of an accident. Leora Halpern Lanz, ISHC is the assistant dean of academics at Boston University’s School of Hospitality Administration, associate professor of the Practice, and a member of ISHC. The opinions expressed in this column do not necessarily reflect the opinions of Hotel News Now or CoStar Group and its affiliated companies. Bloggers published on this site are given the freedom to express views that may be controversial, but our goal is to provoke thought and constructive discussion within our reader community. Please feel free to contact an editor with any questions or concerns. 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 Defamation is broadly defined as any false statement that harms the reputation of a person, business, or organization. It is a false statement “‘that tends to expose a person to public contempt, hatred, ridicule, aversion or disgrace.’” 1 Defamation includes both libel and slander. Libel generally refers to defamatory statements that are published or broadcast in writing, while slander refers to statements that are verbally made. To state a cause of action for defamation, a plaintiff must allege “a false statement, published without privilege or authorization to a third party, constituting fault as judged by, at a minimum, a negligence standard, and it must either cause special harm or constitute defamation per se.” 2 “Since falsity is a necessary element of a defamation cause of action and only ‘facts’ are capable of being proven false, … only statements alleging facts can properly be the subject of a defamation action.” 3 “A defamatory statement of fact is in contrast to ‘pure opinion’ which … is not actionable because ‘ xpressions of opinion, as opposed to assertions of fact, are deemed privileged and, no matter how offensive, cannot be the subject of an action for defamation.’” 4 “While a pure opinion cannot be the subject of a defamation claim, an opinion that implies that it is based upon facts which justify the opinion but are unknown to those reading or hearing it, … is a mixed opinion and is actionable.” 5 “This requirement that the facts upon which the opinion is based are known ‘ensure that the reader has the opportunity to assess the basis upon which the opinion was reached in order to draw own conclusions concerning its validity.’” 6 “What differentiates an actionable mixed opinion from a privileged, pure opinion is ‘the implication that the speaker knows certain facts, unknown to audience, which support opinion and are detrimental to the person’ being discussed.” 7 “Distinguishing between fact and opinion is a question of law for the courts, to be decided based on ‘what the average person hearing or reading the communication would take it to mean.’” 8 A false statement constitutes defamation per se where, as relevant in Miserendino v. Cai , 2023 N.Y. Slip Op. 04031 (4th Dept. July 28, 2023) ( here ), the statement “charge a person with committing a serious crime or … would tend to cause injury to a person’s profession or business.” 9 “A statement imputing incompetence or dishonesty to the plaintiff is defamatory per se if there is some reference, direct or indirect, in the words or in the circumstances attending their utterance, which<, as in miserendino ,> miserendino,> connects the charge of incompetence or dishonesty to the particular profession or trade engaged in by plaintiff.” 10 “Whether particular statement[ is] considered defamatory per se is a question of law.” 11 As noted above, the statement claimed to be defamatory cannot be privileged. There are two types of privilege relevant to a defamation claim: absolute and qualified.  “Absolute privilege … entirely immunizes an individual from liability in a defamation action [] regardless of the declarant’s motives.” 12 It is “generally reserved for communications made by ‘individuals participating in a public function, such as judicial, legislative, or executive proceedings.’” 13 “The absolute protection afforded such individuals is designed to ensure that their own personal interests—especially fear of a civil action, whether successful or otherwise—do not have an adverse impact upon the discharge of their public function.” 14 “On the other hand, a statement is subject to a qualified privilege when it ‘is fairly made by a person in the discharge of some public or private duty, legal or moral, or in the conduct of his own affairs, in a matter where his interest is concerned.’” 15 Circumstances in which a qualified privilege may apply include statements made in self-defense or to protect the safety of others, statements by an employer to a former employee’s prospective employer, communications made by an individual to a law enforcement officer, 16 communications made to persons who share a common interest in the subject matter, 17 and reports of official proceedings. “When subject to this form of conditional privilege, statements are protected if they were not made with ‘spite or ill will’ or ‘reckless disregard of whether false or not’ … , i.e. , malice.” 18 The plaintiff bears the burden of proving the speaker acted with malice. 19 “Whether allegedly defamatory statements are subject to an absolute or a qualified privilege depend on the occasion and the position or status of the speaker …, a complex assessment that must take into account the specific character of the proceeding in which the communication is made.” 20 “In judicial proceedings<,> the protected participants include the Judge, the jurors, the attorneys, the parties and the witnesses,” who are granted the protection of absolute privilege “for the benefit of the public, to promote the administration of justice, and only incidentally for the protection of the participants.” 21 “The immunity does not attach solely because the speaker is a Judge, attorney, party or a witness, but because the statements are … spoken in office.” 22 Thus, for example, “statements made by counsel and parties in the course of ‘judicial proceedings’ are privileged as long as such statements ‘are material and pertinent to the questions involved … irrespective of the motive’ with which they are made.” 23 The Court of Appeals has nonetheless “reiterated that s a matter of policy, the courts confine absolute privilege to a very few situations.” 24 here.=">here."> Against the foregoing principles, we examine Miserendino v. Cai . Background Plaintiffs, Joy E. Miserendino (“Miserendino”) and her law firm, commenced the action against defendants, John J. Cai (“Cai”) and his cardiology medical practice, seeking damages for alleged defamatory statements that Cai – who had been romantically involved with Miserendino and had also performed work for her law firm – made about Miserendino after their relationship ended.  During their relationship, Miserendino was counsel in a matter pending in the U.S. District Court for the Western District of New York, titled Blake v. United States (“Blake”). Blake was purportedly a high-value lawsuit.  During the Blake litigation, opposing counsel inadvertently disclosed certain documents that were protected and should not have been turned over. Miserendino claimed that she notified opposing counsel of the issue and returned the documents without making use of the information contained in the documents. Since the parties were in a relationship, Miserendino told Cai about receiving and returning the documents from opposing counsel in the Blake action. As the relationship began to sour, Cai claimed that Miserendino owed him a substantial sum of money. To induce Miserendino to repay the money, Cai allegedly threatened to undermine Miserendino’s career and livelihood by defaming her reputation and position in her career, in particular in the Blake action .  In that regard, Cai allegedly put the Blake verdict “on the line” by sending the judge overseeing the case a letter accusing Miserendino of acting illegally and unethically by intentionally using documents that “belong to the defense attorney and U.S. government.” In his letter, Cai stated that Miserendino had “possession” of these documents, stating that the original documents were held in his possession. Cai also stated that Miserendino “used these documents during the trial and the submission of arguments.”  The Court in Blake did not “consider[]” the letter in issuing its decision. Separately, Cai allegedly made defamatory statements about Miserendino to her former law partner with whom Miserendino was in litigation concerning the distribution of fees earned by their prior, co-owned law firm. At a meeting Cai arranged during the pendency of that litigation, Cai allegedly advised the former law partner that Miserendino had dissipated the fee recovered in a case that originated with the co-owned law practice, that Miserendino was hiding money and frequently used a money transfer company to send money elsewhere. Cai stated that Miserendino was “manipulative and ethically ‘sketchy.’” Shortly after the meeting, the former law partner used Cai’s alleged oral statements as the basis for his request in the pending litigation against Miserendino for the appointment of a temporary receiver and for injunctive relief.  Defendants moved for summary judgment. The motion court granted the motion. On appeal, the Fourth Department unanimously reversed. The Fourth Department’s Decision With regard to the statements Cai allegedly made to Miserendino’s former law partner, the Court held that the motion court erred in determining that the statements “constituted pure opinion and were thus not actionable as a matter of law.” 25 The Court found that the statements contained mixed statements of fact and opinion and, therefore, were actionable: We conclude on this record that, “ lthough comments were mixed statements of opinion and fact, the could reasonably infer, in light of working relationship with , that such statements were ‘based upon certain facts known to that are undisclosed to the and are detrimental to .’”< 26 > 26>  With regard to the letter that Cai wrote to the judge in the Blake action, the Court held that the statements in the letter were actionable: Upon “look to the over-all context in which the assertions were made” and “consider the content of the as a whole, as well as its tone and apparent purpose,” which was serious and seemingly designed to alert the federal judge to purported wrongdoing, we conclude that “ ‘the reasonable reader would have believed that the challenged statements were conveying facts about … plaintiff ’ ” …, namely, that plaintiffs actually retained possession of documents containing confidential information that had been inadvertently disclosed by opposing counsel in the federal case and that plaintiffs had used such documents to their advantage during the course of litigating the federal case.< 27 > 27>   Having determined that the statements made to the former law partner and the judge in the Blake action were actionable, the Court concluded that Plaintiff stated a claim for defamation per se. 28 In this regard, the Court explained that the statements were “‘actionable as words that tend to injure another in his or her profession’ inasmuch as the statements ‘more than a general reflection upon character or qualities’ and, instead, ‘reflect on her performance or incompatible with the proper conduct of her business ’ as an attorney operating law practices.” 29 The Court further held that the statements in the letter were not absolutely privileged and there were issues of fact as to whether the statements were protected by a qualified privilege. As to the absolute privilege, the Court found that the absolute privilege did not apply to Cai because he “was not a party, a witness, or an attorney in the federal case.” 30 “ lthough may have performed some work on plaintiffs’ behalf during the course of the federal case,” said the Court, “his professional and personal relationship with Miserendino had ended months before his submission of the letter to the federal judge.” 31 Thus, Cai “had no ‘office’ in the judicial proceedings and therefore … was not entitled to the immunity received by those who did,” concluded the Court. 32 As to the qualified privilege, the Court found that there were issues of fact as to whether Cai’s statements were motivated by malice:  e conclude that plaintiffs’ submissions—including Miserendino’s sworn statement that she had informed Cai prior to his submission of the letter that she had returned any confidential information inadvertently disclosed by opposing counsel in the federal case and text messages in which Cai arguably threatened Miserendino’s career and livelihood by alluding to his ability to jeopardize a potential verdict in the federal case if she did not agree to repay debts he believed she owed—“raised an issue of fact whether statements were motivated solely by malice and thus are not protected by a qualified privilege.”< 33 > 33> Footnotes Davis v. Boeheim , 24 N.Y.3d 262, 268 (2014) (quoting, Thomas H. v. Paul B. , 18 N.Y.3d 580, 584 (2012)). D’Amico v. Correctional Med. Care, Inc. , 120 A.D.3d 956, 962 (4th Dept. 2014). Gross v. New York Times Co. , 82 N.Y.2d 146, 152-153 (1993); see also Davis , 24 N.Y.3d at 268. Davis , 24 N.Y.3d at 269 (quoting, Mann v. Abel , 10 N.Y.3d 271, 276 (2008), cert. denied , 555 U.S. 1170 (2009)). Id. (internal quotation marks omitted). Id. Id. Id. (quoting, Steinhilber v. Alphonse , 68 N.Y.2d 283, 290 (1986)). Geraci v. Probst , 15 N.Y.3d 336, 344 (2010); Liberman v. Gelstein , 80 N.Y.2d 429, 435 (1992). Van Lengen v. Parr , 136 A.D.2d 964, 964 (4th Dept. 1988). Geraci , 15 N.Y.3d at 344. Stega v. New York Downtown Hosp. , 31 N.Y.3d 661, 669 (2018). Id. (quoting, Toker v. Pollak , 44 N.Y.2d 211, 219 (1978)). Stega , 31 N.Y.3d at 669; Rosenberg v. MetLife, Inc. , 8 N.Y.3d 359, 365 (2007); Toker , 44 N.Y.2d at 219. Stega , 31 N.Y.3d at 669-670 (quoting, Toker , 44 N.Y.2d at 219). Toker , 44 N.Y.2d at 219-220. Liberman , 80 N.Y.2d at 437. Id. at 670 (quoting, Liberman , 80 N.Y.2d at 437-438). Id. Id. Park Knoll Assoc. v. Schmidt , 59 N.Y.2d 205, 209 (1983). Id. at 210. Wiener v. Weintraub , 22 N.Y.2d 330, 331 (1968) (quoting, Marsh v. Ellsworth , 50 N.Y. 309, 311 (1872)); see also Stega , 31 N.Y.3d at 669. Stega , 31 N.Y.3d at 670. Slip Op. at *2. Id. (quoting, Zulawski v. Taylor , 63 A.D.3d 1552, 1553 (4th Dept. 2009)). Id. (quoting, ( Brian v. Richardson , 87 N.Y.2d 46, 51 (1995)). Id. Id. (quoting, Golub v. Enquirer/Star Grp., Inc. , 89 N.Y.2d 1074, 1076 (1997) and citing Liberman , 80 N.Y.2d at 436). Id. Id. Id. at *3-*4 (citing, Park Knoll Assoc. , 59 N.Y.2d at 210; Silverman v Clark, 35 A.D.3d 1, 12 (1st Dept. 2006); Garson v. Hendlin , 141 A.D.2d 55, 59 (2d Dept. 1988), lv. denied , 74 N.Y.2d 603 (1989)). Id. at *4 (citations omitted). Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP commercial litigation attorneys . This article is for informational purposes and is not intended to be and should not be taken as legal advice.

By: Jeffrey M. Haber The law can be funny. Not in a comedic way, but in a way that defies expectations about what is needed to bring a cause of action. Sometimes this is manifested in the quantum of evidence needed to bring an action and survive a pre-answer motion to dismiss. Other times, it is manifested in the capacity or standing of the plaintiff to commence the action. In Greco v. Syracuse ASC, LLC , 2023 N.Y. Slip Op. 03987 (4th Dept., July 28, 2023) ( here ), the Appellate Division, Fourth Department addressed the latter scenario in the context of a computer hack; in particular, in connection with the unauthorized access to certain personal information belonging to plaintiff and others, which was stored on defendant’s computer system. The Rules Concerning Standing Standing is a threshold determination, resting in part on policy considerations, that a person should be allowed access to the courts to adjudicate the merits of a particular dispute. 1 Without standing, a person cannot bring a lawsuit. Whether a person seeking relief is a proper party to request an adjudication is an aspect of justiciability which, when challenged, must be considered at the beginning of litigation.  In order to have standing to sue, a plaintiff must allege the existence of an injury-in-fact that ensures that s/he has some concrete interest prosecuting the action. 2 The injury-in-fact requirement necessitates a showing that the party has “an actual legal stake in the matter being adjudicated” 3 and that the party has suffered a cognizable harm that is not “‘tenuous,’ ‘ephemeral,’ or ‘conjectural,’” but is, instead, “sufficiently concrete and particularized to warrant judicial intervention.” 4 Notably, an alleged injury will not confer standing if it is based on speculation about what might occur in the future or what future harm might be incurred. 5 Background Plaintiff, a former patient of defendant, Syracuse ASC d/b/a Special Surgery Center of CNY (“SSC”), alleged that SSC failed to safeguard and protect her confidential information as well as that of class members, including private health information protected under HIPAA and sensitive personal information. Plaintiff alleged that a data breach occurred on March 31, 2021, whereby cybercriminals were able to gain access to approximately 24,891 class members’ sensitive information. Defendant moved to dismiss, claiming, among other things, plaintiff lacked standing to bring the action. Defendant argued that plaintiff failed to offer any facts to support the claim that the potential for misuse of information sufficed to confer standing. Defendant contended that general allegations that individuals whose confidential information had been exposed during a data breach were more likely to experience future identity theft were conclusory and speculative.  The motion court denied the motion. The motion court held that the risk of harm from the cyberattack satisfied the injury-in-fact requirement. The motion court explained that the risk of imminent future harm arising from the theft of plaintiff’s personal and sensitive information by cybercriminals was sufficiently concrete to confer standing on her. 6 Indeed, noted the motion court, “ ourts have found that victims of targeted data breaches have standing based on an imminent risk of threat to seek redress from a defendant<’s> negligence, notably including where the stolen data has not yet been used.” 7 Defendant appealed. The Fourth Department “unanimously reversed.” 8 The Fourth Department’s Decision The Court held, after considering “all relevant circumstances,” that plaintiff failed to allege “an injury-in-fact and thus lack standing.” 9 “ mportantly,” explained the Court, “plaintiff ha not alleged that any of the information purportedly accessed by the unknown third party ha actually been misused.” 10 Similarly, the Court noted that “Plaintiff ha not alleged that her own information ha been misused or that the data of any similarly situated person ha been misused in the over one-year period between the alleged data breach and the issuance of the trial court’s decision.” 11 The absence of such allegations, held the Court, was fatal to the survival of the pleading. Further, the Court noted that, according to the complaint, only health information was accessed by a third-party. 12 The complaint did not, said the Court, “allege that a third party accessed data more readily used for financial crimes such as dates of birth, credit card numbers, or social security numbers.” 13 In sum, the Court found that plaintiff merely expressed “a general concern that certain of health information may have been illegally accessed by a third party”; she did not “allege any direct harm flowing from the breach of defendant’s electronic system.” 14 As a result, the Court concluded that “plaintiff failed to allege an injury-in-fact inasmuch as the potential for future misuse of her data and possible economic harm too ‘conjectural, tenuous hypothesized’ to constitute an interest that sufficiently concrete to confer standing.” 15 Finally, the Court rejected plaintiff’s argument that she “established an injury-in-fact by virtue of the cost of identity protection and other mitigation efforts.” 16 In doing so, the Court “conclude that such mitigation efforts cannot confer standing absent a sufficiently concrete injury-in-fact legitimizing or warranting such efforts.” 17 A plaintiff “‘cannot manufacture standing merely by inflicting harm on themselves based on their fears of hypothetical future harm that is not certainly impending,’” said the Court. 18 Takeaway Greco is an important decision because it represents the first decision of an appellate court in the state system to address standing “in a case brought by an individual whose information was involved in a larger electronic data breach or whose personal data was otherwise involved in the unauthorized access of electronic files stored on a computer system.” 19 In deciding the issue of standing, the Court took great pains to recognize the tension between modern harms and traditional notions of standing, concluding that the law can adapt to the new issues that impact our modern lives:  Although the rise of unauthorized access to secure electronic systems, resulting in third parties obtaining the information stored thereon, is a relatively modern issue, the injury-in-fact requirement recognized in other contexts applies equally here. Thus, the novel issue presented is simply what circumstances, specific to this context, create an injury that is “sufficiently concrete” and non-speculative to constitute an injury-in-fact. 20 The Court’s observation about adaptation makes sense. In a modern society, social, political and economic circumstances change. The risks and harms that people face in their daily lives are many. One risk –identity theft – affects far too many people. Readers of this Blog would be hard-pressed to read a newspaper or magazine and not find an article discussing a data breach or some other cyberattack. Greco shows that the risk of harm resulting from a cyberattack on a third-party that controls one’s personal and sensitive information is not, by itself, sufficient to confer standing to sue the third-party for relief. “ llegations of possible future injury” or even an “objectively reasonable likelihood” of future injury are insufficient to confer standing. 21 The injury must be concrete and particularized to warrant judicial intervention. 22 Greco makes this point clear.  Footnotes Society of Plastics Indus. v. County of Suffolk , 77 N.Y.2d 761 (1991). Matter of Association for a Better Long Is., Inc. v. New York State Dept. of Envtl. Conservation , 23 N.Y.3d 1, 6 (2014); see also Matter of Sheive v. Holley Volunteer Fire Co., Inc. , 170 A.D.3d 1589, 1590 (4th Dept. 2019). This is true for a class representative. See Raske v. Next Mgmt., LLC , 40 Misc. 2d 1240(A) (Sup. Ct., N.Y. County 2013). Society of Plastics Indus. , 77 N.Y.2d at 772; see also Matter of Mental Hygiene Legal Serv. v Daniels , 33 N.Y.3d 44, 50 (2019). Mental Hygiene , 33 N.Y.3d at 50; see also New York State Assn. of Nurse Anesthetists v. Novello , 2 N.Y.3d 207, 211, 214 (2004); Matter of Festa v. Town of Oyster Bay , 210 A.D.3d 678, 679-680 (2d Dept. 2022). Frankel v. J.P. Morgan Chase & Co. , 193 A.D.3d 689, 690 (2d Dept. 2021); Matter of Niagara County v. Power Auth. of State of N.Y. , 82 A.D.3d 1597, 1599 (4th Dept. 2011), lv. dismissed in part & denied in part , 17 N.Y.3d 838 (2011); Matter of Brewster v. Wright , 45 A.D.3d 1369, 1370 (4th Dept. 2007). Citing Galaria v. Nationwide Mutual Ins. Co. , 663 F. Appx. 384 (6th Cir. 2016); Lewert v. PF Chang’s China Bistro , 819 F.3d 963 (7th Cir. 2016). Citing, Galaria , supra . Slip Op. at *1. Id. Id. Id. Id. Id. Id. Id. (citing, Niagara County , 82 A.D.3d at 1599; and Mental Hygiene , 33 N.Y.3d at 50). Id. Id. Id. (quoting, Matter of Practicefirst Data Breach Litig. , 2022 WL 354544 at *4 (W.D.N.Y. 2022)). Id. Id. (citing, Mental Hygiene , 33 N.Y.3d at 50). Clapper v. Amnesty Int’l USA , 568 U.S. 398, 409-10 (2013) (internal quotation marks, alterations, and emphasis omitted). Mental Hygiene , 33 N.Y.3d at 50. 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.

By Jonathan H. Freiberger As discussed in a prior blog article < here =">here"> , a notice of pendency (or lis pendens) is a provisional remedy governed by Article 65 of the CPLR.  The Court of Appeals, in 5303 Realty Corp. v. O & Y Equity Corp. , 64 N.Y.2d 313 (1984), one of the leading cases on the subject, described the a notice of pendency as a: potent shield to protect litigants claiming an interest in real property. The powerful impact that this device has on the alienability of property, when conjoined with the facility with which it may be obtained, calls for its narrow application to only those lawsuits directly affecting title to, or the possession, use or enjoyment of, real property.  5303 Realty , 64 N.Y.2d at 315 – 16.  Indeed, the statute itself provides that a notice of pendency may only be filed where the “judgment demanded would affect the title to, or the possession, use or enjoyment of, real property.”  CPLR 6501. The notice of pendency acts as “constructive notice to all subsequent purchasers or incumbrancers” that an action is pending that may affect title to the property.  5303 Realty , 64 N.Y.2d at 318.  Thus, “ person whose conveyance or incumbrance is recorded after the filing of the notice is bound by all proceedings taken in the action after such filing to the same extent as a party.”  CPLR 6501; 5303 Realty , 64 N.Y.2d at 318. The Court of Appeals in 5303 Realty reversed the Appellate Division, First Department, and cancelled a notice of pendency because the provisional remedy was not appropriate in a “suit to specifically perform a contract for the sale of stock representing a beneficial ownership of real estate.”  5303 Realty , 64 N.Y.2d at 316.  Similarly, a “notice of pendency is improper where the party who has filed it claims no right, title or interest in or to the real estate against which it is filed, and where the suit concerns simply some encroachment or wrong perpetrated by defendants on plaintiff's land.”  Board of Managers of 334 East 54 th Street Condominium v. 336 East 54 Street Assoc. LLC , 198 A.D.3d 560, 561 (1 st Dep’t 2021) (citation and internal quotation marks omitted).  The same Court, in 801-803, LLC v. 805 Ninth Avenue Realty Group, LLC , 188 A.D.3d 478 (1 st Dep’t 2020), affirmed the vacatur of a notice of pendency where “plaintiff claims no interest in defendant's land but merely seeks to prevent defendants from committing a wrongful act against it” because plaintiff merely alleged that “defendants' construction of a six-story building on the property is causing damage to the party wall, the roof, and other parts of its building, and asserts causes of action for, inter alia, nuisance and encroachment.”  801-803, LLC , 188 A.D.3d at 478 (citations omitted).   It has been noted that the “statutory scheme permits a party to effectively retard the alienability of real property without any prior judicial review.”  5303 Realty , 64 N.Y.2d at 320.  Moreover, while CPLR 6514 provides for the cancellation of a notice of pendency in certain circumstances, the “court’s scope of review is circumscribed” and the “likelihood of success on the merits is irrelevant to determining the validity of the notice of pendency.”  5303 Realty , 64 N.Y.2d at 320 (citations omitted).   As to the duration of a notice of pendency, Article 65 provides that: A notice of pendency shall be effective for a period of three years from the date of filing. Before expiration of a period or extended period, the court, upon motion of the plaintiff and upon such notice as it may require, for good cause shown, may grant an extension for a like additional period. An extension order shall be filed, recorded and indexed before expiration of the prior period. CPLR 6513 .  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 .  [Eds. Note: 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”.) These issues were addressed in Strong Island Contracting Corp. v. Padilla , a case decided on July 26, 2023, by the Appellate Division, Second Department.  Strong Island was a mechanic’s lien foreclosure action in which plaintiff filed a notice of pendency.  Shortly before the expiration of the three-year post filing period, plaintiff moved to extend the notice for an additional three-year period.  Prior thereto, however, defendant’s counsel moved to be relieved and, in accordance with said motion, the motion court stayed all proceedings until the motion was decided.  Plaintiff’s motion was granted and the notice of pendency was extended.  Subsequently, the motion court granted counsel’s motion to be relieved and it continued the stay.  “Thereafter, the defendant moved to cancel the notice of pendency pursuant to CPLR 6513 and 6514, in effect, to vacate the order …, and to direct the plaintiff to pay the costs, expenses, and legal fees for making the motion.”  The motion court granted defendant's motion. On plaintiff’s appeal, the Second Department reversed and, in so doing, stated: Pursuant to CPLR 6513, a notice of pendency is valid for three years from the date of filing and may be extended for additional three-year periods upon a showing of good cause. The extension, however, must be requested prior to the expiration of the prior notice. This is an exacting rule; a notice of pendency that has expired without extension is a nullity. A lapsed notice of pendency may not be revived. Here, the plaintiff timely requested and established good cause for extending the notice of pendency by demonstrating that the trial for the instant foreclosure action was delayed by the motion of the defendant's counsel to be relieved and the court closures due to the COVID-19 pandemic. Contrary to the defendant's contention, it was not improper to extend the notice of pendency while all proceedings in this action were stayed. (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.

By: Jeffrey M. Haber In Merchant Factors Corp. v. Crush Apparel & Accessories Inc. , 2023 N.Y. Slip Op. 50755(U) (Sup. Ct., N.Y. County July 21, 2023) ( here ), plaintiff, Merchant Factors Corp., a factoring and commercial financing services provider, brought suit against defendant Crush Apparel & Accessories Inc. (“Crush Apparel”), among others, 1 to recover for an allegedly fraudulent scheme to steal and divert millions of dollars in goods, services, and real property that defendants pledged as collateral, and against which plaintiff made cash advances.  Plaintiff asserted 20 causes of action in its amended complaint, including: (1) replevin; (2) conversion; (3) injunction; (4) accounting; (5) fraudulent misrepresentation; (6) aiding and abetting fraud; and (7) actual and constructive fraudulent conveyances. Defendants moved to dismiss the complaint, pursuant to CPLR § 3211(a)(7), for failure to state a cause of action. As discussed below, the motions were granted in part and denied in part. Below, we examine the motion court’s decision with regard to the replevin and conversion, fraudulent misrepresentation, and fraudulent conveyance causes of action. Background In August 2017, Merchant and Crush Apparel, an importer and distributor of clothing, entered into a factoring agreement, pursuant to which Crush Apparel sold and assigned all of its accounts receivable to Merchant in return for substantial cash advances. Pursuant to the factoring agreement, Crush Apparel gave Merchant a security interest in all of its assets (the “Collateral”). In addition, Crush Apparel expressly represented and warranted that each account receivable generated and assigned to Merchant: (1) “covered a bona fide sales and delivery of merchandise”; (2) “relate to merchandise or services which have been accepted by customers … without dispute”; (3) was “payable in accordance with the terms of related invoice”; and (4) was “absolutely enforceable against customers free and clear of any lien, encumbrance or dispute.” Merchant was also permitted under the factoring agreement to (and did) re-factor accounts receivable assigned by Crush Apparel with The CIT Group/Commercial Services, Inc. (“CIT”). As a result, customer payments on such accounts were required to be remitted directly to CIT. Merchant alleged that from December 2017 through September 2019, more than 2,000 checks totaling over $14.2 million were remitted to CIT drawn on a Crush Apparel bank account, purporting to reflect payments that Crush Apparel received directly from its customers. As an inducement to enter into the factoring agreement, Crush Apparel executed a written inventory supplement to the factoring agreement. Under the inventory agreement, Crush Apparel gave Merchant “a continuing security interest” in its inventory and “all contract rights with respect thereto.” Merchant perfected its security interest by filing a Uniform Commercial Code financing statement with the appropriate authorities. Merchant maintained that the remitted funds did not reflect legitimate, bona fide sales. In that regard, Merchant alleged that Crush Apparel fabricated nearly all of the sales to induce Merchant to advance funds to Crush Apparel. Merchant alleged that it advanced funds to Crush Apparel believing that the invoices were bona fide and collectible accounts receivable under the terms of the factoring agreement. Merchant further alleged that the Kraiem defendants transferred certain property relevant to the factoring agreement for less than fair consideration and in an effort to defraud their creditors, including Merchant. In this regard, the property in Brooklyn, N.Y. (the “Brooklyn Property”) was transferred for $1,500,000 and the property in New Jersey (the “New Jersey Property”) was transferred for $0.00.  The Motion Court’s Decision Replevin and Conversion Defendants sought dismissal of Merchant’s fifth and sixth causes of action for replevin and conversion, arguing that dismissal was appropriate because: (1) plaintiff failed to allege that the Kraiem defendants exercised unauthorized dominion over Merchant’s funds transferred from Crush Apparel’s bank accounts; (2) Merchant could not identify any specific, identifiable funds because those funds were comingled; and (3) Merchant did not demand the return of any specific funds. Merchant countered, arguing that it had a first priority security interest in the Collateral and that defendants were wrongfully retaining possession of the Collateral.  “Conversion is an unauthorized assumption and exercise of the right of ownership over goods belonging to another to the exclusion of the owner’s rights. Money, if specifically identifiable, may be the subject of a conversion action.” 2 “Two key elements of conversion are (1) plaintiff’s possessory right or interest in the property and (2) defendant’s dominion over the property or interference with it, in derogation of plaintiff’s rights.” 3 “To state a cause of action for replevin, a plaintiff must establish a superior possessory right to property in a defendant’s possession.” 4 The objective of replevin is the recovery of property. 5 Where a defendant has acquired property legally, the plaintiff must allege demand for return of the property and refusal by the defendant for both conversion and replevin. 6 The motion court denied the motion as to the replevin and conversion claims. 7 The motion court held that Merchant’s security interest sufficed to show entitlement to immediate possession of the Collateral in the event of a default of the factoring agreement. 8 The motion court found that Crush Apparel and the Kraiem defendants were wrongfully retaining possession of the Collateral, including, but not limited to, Crush Apparel’s inventory. 9 Finally, the motion court held that plaintiff adequately alleged a demand for the collateral, especially in light of the fact that it sought a temporary restraining order and preliminary injunction. 10 Fraudulent Misrepresentation Defendants sought dismissal of Merchant’s tenth cause of action for fraudulent misrepresentation, arguing that dismissal was appropriate because the claim duplicated Merchant’s breach of contract claims. In opposition, Merchant maintained that the fraud claim was pleaded in the alternative and that, even if not permitted to do so, it properly alleged a duty independent of the contract. 11 here,=">here," >here.=">here."> The motion court denied the motion dismiss the fraudulent misrepresentation claim. 12 The motion court held that Merchant’s fraud claim was not duplicative of its breach of contract claims. The motion court found that Merchant did more than “merely allege that defendants entered into agreement with an intention not to perform thereunder, but rather, allege that, after that agreement was entered into, defendants misrepresented or concealed existing facts.” 13 In that regard, said the motion court, plaintiff alleged that defendants “misrepresented or concealed that: (1) the accounts receivable assigned to Merchant were bona fide collectible receivables constituting legitimate sales and deliveries of goods to customers; (2) checks issued to CIT constituted legitimate customer payments; and (3) Crush Apparel was generating more than $7 million in sales.” 14 The motion court also held that plaintiff adequately alleged “that that it relied on invoices submitted by Crush Apparel, and advanced funds to Crush Apparel” in reliance thereon. 15 Fraudulent Conveyance Defendants also sought dismissal of Merchant’s fourteenth through sixteenth causes of action for violations of the Debtor and Creditor Law (“DCL”). 16 With respect to the fourteenth cause of action, alleging a fraudulent transfer of the New Jersey Property, defendants argued that: (1) 108 Crosby was not a proper defendant because it was not a debtor or potential debtor to Merchant; (2) Merchant failed to allege that defendants did not receive adequate consideration for the transfer of the property; (3) the transfer took place before Merchant sent any demand letters; and (4) the buyers of the property were necessary parties to the cause of action.  As for the fifteenth cause of action, alleging a fraudulent transfer of the Brooklyn Property, defendants argued that Merchant failed to allege intent to defraud.  DCL (former) § 276 provides that “ very conveyance made and every obligation incurred with actual intent, as distinguished from intent presumed in law, to hinder, delay or defraud either present or future creditors, is fraudulent as to both present and future creditors.” To state a cause of action under DCL (former) § 276, the plaintiff must comply with CPLR § 3016, and allege that the conveyance was made with “intent to hinder, delay or defraud present or future creditors.” 17 “Due to the difficulty of proving actual intent to hinder, delay, or defraud creditors, the pleader is allowed to rely on ‘badges of fraud’ to support his case, i.e. , circumstances so commonly associated with fraudulent transfers that their presence gives rise to an inference of intent.” 18 These include “a close relationship between the parties to the alleged fraudulent transaction, a questionable transfer not in the usual course of business, inadequacy of the consideration, the transferor’s knowledge of the creditor’s claim and the inability to pay it, and retention of control of the property by the transferor after the conveyance.” 19 The motion court held that 108 Crosby was a potential debtor to Merchant in that it executed a corporate guaranty, in which it: “guarantee the due and full performance by the Principal, in all respects of the Factoring Agreement.” 20 The motion court also held that Merchant sufficiently alleged badges of fraud sufficient to support the DCL (former) § 276 claims. 21 The motion court found that Merchant alleged that Joan and 108 Crosby transferred the New Jersey Property for $1,500,000, at a time when their alleged fraudulent scheme was about to be exposed. That fact sufficed to satisfy the intent element of the claim, said the motion court, rendering the absence of adequate consideration of no moment. 22 The motion court also found that Merchant sufficiently alleged that Erica and Joan transferred the Brooklyn Property to 201 Oakhurst, an entity controlled by the Kraiem defendants, for no consideration. Given plaintiff’s allegations that Erica and Joan were aware of Merchant’s claim and Crush Apparel’s inability to pay it, the motion court held that Merchant satisfied the pleading requirements of the claim. 23 Notwithstanding, the motion court dismissed the fourteenth cause of action because plaintiff failed to include the buyers of the Brooklyn Property as necessary parties. 24 The motion court explained that Merchant could not recover a money judgment against Joan and 108 Crosby for the value of the property that was fraudulently conveyed. 25 The motion court explained that “ either Joan nor 108 Crosby were transferees, and the amended complaint only conclusory allegations that Joan and 108 Crosby benefitted from the fraudulent transfers.” 26 Regarding the sixteenth cause of action, asserting a fraudulent conveyance claim with respect to the Crush Apparel money transfers, the motion court denied the motion. The motion court rejected the argument that the claim was duplicative of the replevin and conversion claims because it sought damages and the delivery of the Collateral pursuant to the factoring agreement and inventory agreement. 27 The motion court held that the sixteenth cause of action also stated a cause of action under DCL (former) § 276, given the allegations that “(1) Victor, Erica, Raphael and/or Joan were authorized signatories on the entities’ bank accounts…; (2) approximately $1.9 million of Merchant’s monies were transferred and/or paid to Victor, Raphael, Erica, Joan, 201 Oakhurst or to pay down the mortgages on the Deal Property and Brooklyn Property…; and (3) defendants sought to hide the transfers by moving money through various accounts….” 28 The foregoing facts, said the motion court, sufficed as “badges of fraud” and, therefore, gave “rise to an inference of intent to defraud Merchant.” 29 With respect to the seventeenth through twentieth causes of action, under DCL (former) §§ 274 and 275, the motion court granted the motion.  To state a cause of action for constructive fraudulent conveyance, the plaintiff must allege lack of “fair consideration” and that one of the following three conditions is satisfied: “(i) the transferor is insolvent or will be rendered insolvent by the transfer in question, DCL § 273; (ii) the transferor is engaged in or is about to engage in a business transaction for which its remaining property constitutes unreasonably small capital, DCL § 274; or (iii) the transferor believes that it will incur debt beyond its ability to pay, DCL § 275.” 30 Fair consideration requires that “the exchange not only be for equivalent value, but also that the conveyance be made in good faith.” 31 Fair consideration exists “when in exchange for such property or obligation, as a fair equivalent therefor, and in good faith, property is conveyed or an antecedent debt is satisfied” or “ hen such property, or obligation is received in good faith to secure a present advance or antecedent debt in an amount not disproportionately small as compared with the value of the property, or obligation obtained.” 32 The motion court found that Merchant only made conclusory allegations that Crush Apparel was insolvent or was rendered insolvent by the transfers, “Crush Apparel was engaged in a business or a transaction or was about to engage in a business or a transaction, for which any property remaining in its hands after the transfer constituted an unreasonably small capital,” and that “ he Crush Apparel Transfers were made for less than fair consideration and with the intent or belief that Crush Apparel would incur debts beyond its ability to pay as said debts matured.” 33 Takeaway There are a number of takeaways from the motion court’s decision. First, there is a distinction to be made between unidentified funds, such as cash, and collateral (comprised of inventory, for example) for which there is a security interest, for purposes of replevin and conversion. As discussed, defendants focused solely on the funds advanced by Merchant ( i.e. , the cash advances) rather than on the alleged unlawful retention of the Collateral upon which Merchant’s claims for replevin and conversion were premised. Moreover, a demand for the return of the property being unlawfully held and the refusal to comply with said demand can come in many different forms. As noted by the motion court, “refusal of a demand need not use the specific word ‘refuse’ so long as it clearly conveys an intent to interfere with the demander’s possession or use of his property.” 34 The allegations in the amended complaint and the proceedings for the TRO and preliminary injunction detailed Merchant’s demands made prior to filing the initial complaint to recover the Collateral – allegations that defendants did not contest. Second, Merchant Factors shows that a plaintiff can avoid dismissal of a fraud claim on duplication grounds when the alleged misstatement or omission is made after the contract is formed. As explained by the motion court, the misrepresentation does not concern performance of the contract, or a future intent to perform, but rather relates to existing facts after the contract was formed. In that situation, a duty independent of, or collateral to, the contract is established. We wrote about this distinction here . In Merchant Factors those misrepresentations concerned the legitimacy of the accounts receivable, customer payments, and Crush Apparel’s revenue.  Third, establishing a fraudulent conveyance under DCL (former) § 276 is, in many respects, no different than establishing fraud. Among other elements, the plaintiff must allege (and prove) intent to defraud. Intent can be shown through circumstantial evidence, or in the DCL context, through badges of fraud. In Merchant Factors , the motion court found that plaintiff sufficiently alleged badges of fraud and/or facts raising an inference of an intent to deceive. Footnotes The other named defendants are: 108 Crosby LLC (“108 Crosby”), Erica Kraiem (“Erica”), Victor Kraiem (“Victor”), 201 Oakhurst Inc. (“201 Oakhurst”), I.L.C.K. Inc. (“ILCK”), Jiangsu Taiwan Enterprise Inc. (“Jiangsu”), and Kids Apparel Club, Inc. (“Kids Apparel”). Peters Griffin Woodward, Inc. v. WCSC, Inc ., 88 A.D.2d 883, 883 (1st Dept. 1982) (citation omitted). Colavito v. New York Organ Donor Network, Inc. , 8 N.Y.3d 43, 50 (2006) (citations omitted). Reif v. Nagy , 175 A.D.3d 107, 120 (1st Dept 2019), lv. dismissed , 35 N.Y.3d 986 (2020). Genger v. Genger , 2016 N.Y. Slip Op. 30602(U), *7 (Sup. Ct., N.Y. County 2016), aff’d , 147 A.D.3d 443 (1st Dept. 2017). Chen v. New Trend Apparel, Inc. , 8 F. Supp. 3d 406, 456 (S.D.N.Y. 2014). Slip Op. at *4. Id. Id. Id. Notably, defendants did not contest that Merchant sufficiently alleged a refusal of its demand. Id. (citing, Swain v. Brown , 135 A.D.3d 629, 631 (1st Dept. 2016). Slip Op. at *6. Id. Id. (citing, Comtronics, Inc. v. Pico Prods., Inc. , 256 A.D.2d 1202, 1203 (4th Dept. 1998), lv. denied , 1999 N.Y. App. Div. LEXIS 3112 (4th Dept. 1999) (fraud claim not duplicative of breach of contract claim where plaintiff alleged fraud after formation of contract); Minnie Rose LLC v. Yu , 169 F. Supp. 3d 504, 520 (S.D.N.Y. 2016) (“Misrepresentations of present facts made post-contract formation are collateral or extraneous to the contract and are actionable in fraud.”)). Id. at *6-*7. Id. at *7. The former DCL was replaced on April 4, 2020, by the New York Uniform Voidable Transactions Act (“NYUVTA”). Under New York’s version of the UVTA, which Governor Cuomo signed into law on December 6, 2019, the State joined the vast majority of jurisdictions to have adopted the UVTA in whole or in part. Thus, as to transfers made and obligations incurred after the effective date ( i.e. , April 4, 2020), New York law will be more aligned with the fraudulent transfer laws of most states in the country, as well as with the federal Bankruptcy Code. We previously examined the NYUVTA, the former DCL and the changes the NYUVTA made to the former DCL ( here ). RTN Networks, LLC v. Telco Grp., Inc. , 126 A.D.3d 477, 478 (1st Dept. 2015). Wall St. Assoc. v. Brodsky , 257 A.D.2d 526, 529 (1st Dept. 1999) (internal quotation marks and citation omitted). Id. Slip Op. at *8. Id. (citations omitted). Id. (citing, In re Sharp Intl. Corp. , 403 F.3d 43, 56 (2d Cir. 2005) (quoting, United States v. McCombs , 30 F.3d 310, 328 (2d Cir .1994)). Id. Id. Id. (citing, Federal Deposit Ins. Corp. v. Porco , 75 N.Y.2d 840, 842 (1990)). Id. (citations omitted). Id. at *8-*9. Id. at *9. Id. (citing, Pen Pak Corp. v. LaSalle Natl. Bank of Chicago , 240 A.D.2d 384, 386 (2d Dept. 1997)). Sharp Intl. , 403 F.3d at 53. Ede v. Ede , 193 A.D.2d 940, 941-942 (3d Dept. 1993). DCL (former) § 272. Id. Swain , 135 A.D.3d at 631.  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.

By: Jeffrey M. Haber In the merger and acquisition world it is common to form a special purpose acquisition company (“SPAC”). A SPAC is a company with no underlying business operations that is formed to raise capital through an initial public offering (“IPO”) for the purpose of using the proceeds to acquire an unidentified private operating company at a later date but within a specified period of time (typically two years). A SPAC is also known as a blank check company (i.e., a publicly traded, developmental stage company that has no established business plan). SPACs have existed for decades. Recently, however, their popularity has been on the rise. “In 2020, 247 SPACs were created with $80 billion invested, and in 2021, there were a record 613 SPAC IPOs. By comparison, only 59 SPACs came to market in 2019.”1 Following its IPO, a SPAC will seek to identify acquisition candidates and attempt to complete a business combination transaction after which the company will continue the operations of the acquired company as a public company. Investors in a SPAC at the IPO stage are, therefore, relying on the management team that formed the SPAC to expend efforts after the IPO to identify and look to acquire or combine with a private operating company. Given that the purpose of a SPAC is to identify and acquire an operating business after conducting its IPO, steps a SPAC has taken in furtherance of a particular acquisition is material to a reasonable investor, who would want to know about the SPAC’s prospects with future acquisition targets. Disclosures made in a SPAC’s IPO – including as it relates to any pre-IPO discussions or negotiations with future acquisition targets or concerning potential business combinations – need to be accurate and cannot be materially false or misleading. In addition, the economic interests of the sponsors and the directors, officers, and affiliates of a SPAC often differ from the economic interests of public shareholders, which may lead to conflicts of interests as they evaluate and decide whether to recommend business combination transactions to shareholders. Clear and accurate disclosure regarding these potential conflicts of interest and the nature of the sponsors’, directors’, officers’ and affiliates’ economic interests in the SPAC is particularly important because these parties are generally responsible for negotiating the SPAC’s post-IPO business combination transaction. The SPAC sponsor2 typically is compensated through its ability to buy the SPAC’s securities at a discount at or around the time of the SPAC’s formation. Sponsors also frequently buy additional securities (usually units or warrants) at the time of the IPO. Unlike securities bought by investors in a SPAC IPO, the securities purchased by a sponsor are not redeemable for cash in the event the SPAC fails to complete a business transaction, and the sponsor’s securities usually have restrictions that prevent resale until after completion of a SPAC’s business combination. here).=">here)." For="For" discussion="discussion" pros="pros" cons="cons" SPAC,="SPAC," see="see" Young,="Young," Julie,="Julie," “Special="“Special" Purpose="Purpose" Company="Company" (SPAC)="(SPAC)" Explained:="Explained:" Examples="Examples" Risks,”="Risks,”" Investopedia.com="Investopedia.com" (Mar.="(Mar." 15,="15," 2023)="2023)"> In the Matter ofDigital World Acquisition Corporation On July 20, 2023, the Securities and Exchange Commission (“SEC”) announced (here) that it settled fraud charges against Digital World Acquisition Corporation (“DWAC”), a special purpose acquisition company, for making material misrepresentations in forms filed with the SEC as part of DWAC’s IPO and proposed merger with Trump Media & Technology Group Corp. (“TMTG”). According to the Order Instituting Cease-and-Desist Proceedings against Digital World Acquisition Corporation (here) (the “Order”), the SEC found that DWAC misled investors and the SEC by failing to disclose that it had formulated a plan to acquire and was pursuing the acquisition of TMTG prior to DWAC’s IPO. As set forth in the Order, DWAC filed an amended Form S-1 in support of its IPO in early September 2021. The Form S-1 stated that neither DWAC nor its officers and directors had any discussions with any potential target companies prior to the IPO. But, as the SEC found, as early as February 2021, an individual who would later become DWAC’s CEO and Board Chairman, and others involved with DWAC, had extensive SPAC merger discussions with TMTG. The SEC found that, while DWAC’s CEO and Chairman initially pursued these discussions with TMTG on behalf of another SPAC, he created a plan in the spring and summer of 2021 to potentially use DWAC to pursue a merger with TMTG and used this plan to solicit certain pre-IPO investors. The SEC also found that DWAC failed to disclose that the CEO had a potential conflict of interest based on an agreement he had signed with TMTG. As a result, said the SEC, DWAC’s amended Form S-1 was materially false and misleading. The SEC’s order further found that, in a later Form S-4 filed with the SEC following the announcement of the proposed merger with TMTG, DWAC mischaracterized and omitted information about the history of its interactions with TMTG. Commenting on the settlement, Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, stated: “DWAC failed to disclose its discussions with TMTG and failed to disclose a material conflict of interest of its CEO and Chairman. In the context of a SPAC – a ‘blank-check’ entity without business operations – these disclosure failures are particularly problematic because investors focus on factors such as the SPAC’s management team and potential merger targets when making financial decisions.” In the Order, the SEC found that DWAC violated the antifraud provisions of the federal securities laws. DWAC agreed to a cease-and-desist order and to pay an $18 million penalty in the event it closes a merger transaction. It also agreed to undertake that, should DWAC file an amended Form S-4, any such Form S-4 will be materially complete and accurate and consistent with the findings in the SEC’s order. In June 2023, federal prosecutors in the U.S. Attorney’s office for the Southern District of New York filed charges against three investors for insider trading related to DWAC’s deal with TMTG. According to the indictment, the investors allegedly made more than $22 million by illegally trading on knowledge that DWAC would purchase TMTG — before it was public knowledge (here). The SEC also filed civil insider trading charges against the three investors (here).3 Also commenting on the settlement, Eric Swider, the Chief Executive Officer of DWAC, stated: “Through steadfast dedication to our shareholders, we tirelessly worked to reach a settlement with the SEC regarding charges against DWAC. This is an important milestone for us, as it clears the path for the SEC to review our expected upcoming filing of the Registration Statement related to our proposed merger with TMTG. Subject to further SEC review of our future filings related to the merger, we are eager to move forward the consummation of the business combination with TMTG and we look forward to TMTG's cooperation in this regard.” Footnotes See Young, Julie, “Special Purpose Acquisition Company (SPAC) Explained: Examples and Risks,” Investopedia.com (Mar. 15, 2023) (here) (citing, Harvard Business Review. “SPACS: What You Need to Know” (here), and Statista, “Number of Special Purpose Acquisition Company (SPACs) IPOs in the United States from 2003 to February 2022” (here). A SPAC sponsor is the entity and/or persons primarily responsible for establishing the SPAC, which is thereafter managed by a board of directors and management. A copy of the SEC’s complaint can be found here. 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.

By Jonathan H. Freiberger In most situations, the contemplated goal of a mortgage foreclosure action is the sale of the subject property at public auction pursuant to a judgment of foreclosure and sale.  Once a sale occurs, however, can it be set aside?  “A court has the inherent power to ensure that a sale conducted pursuant to a judgment of foreclosure is not made an instrument of injustice in the exercise of its equitable powers, has the discretion to set aside a judicial sale where fraud, collusion, mistake, or misconduct casts suspicion on the fairness of the sale.”  Alkaifi v. Celestial Church of Christ Calvary Parish , 24 A.D.3d 476, 477 (2 nd Dep’t 2005) (citations and internal quotation marks omitted).  This is so even if the sale is made to a “good faith purchaser”.  Altshuler Shaham Provident Funds, Ltd. V. GML Tower LLC , 129 A.D.3d 1439, 1442 (4 th Dep’t 2015) (citations omitted).  As the Altshuler court noted, the discretion to set aside a sale “is separate and distinct from any statutory authority” and should be “exercised where … fairness of the sale” is called into question.  Altshuler , 129 A.D.3d at 1442 (citations and internal quotation marks omitted).  Further, sales may be set aside where the “price is so inadequate as to shock the court’s conscience”, but not where the price is “mere inadequate.  Polish National Alliance of Brooklyn, U.S.A. v. White Eagle Hall Co., Inc. , 98 A.D.2d 400, 407 (2 nd Dep’t 1983) (citations omitted). A foreclosure sale was set aside on July 19, 2023, by the Second Department in Golden Bridge, LLC v. Rutland Development Group, Inc. golden have been simplified significantly for the purpose of this discussion.> golden have been simplified significantly for the purpose of this discussion.>  Plaintiff commenced a foreclosure action against borrower with respect to a parcel of property comprising two lots (the “Property”).  The Property was ultimately sold to purchaser at public auction pursuant to a judgment of foreclosure and sale.  At the auction, purchaser paid the required down payment and had thirty days to close.  Between the time of the foreclosure sale and the time to close, a quiet title action was commenced against one of the two lots comprising the Property and against which, the plaintiff in the quiet title action filed a notice of pendency.  The complaint in the quiet title action was dismissed, but a notice of appeal was filed.  Ultimately, the Second Department reversed that order and reinstated the complaint in the quiet title action.   Purchaser appealed two orders.  In the first, the motion court denied purchaser’s motion to set aside the foreclosure sale and to have the referee return to it the down payment and granted lender’s cross-motion to compel a closing.  The second order directed the referee to deliver the down payment to the lender and to direct the re-auction of the Property.  Both orders were reversed and the sale was vacated and the referee was directed to return the down payment to the purchaser.  In so doing, the Second Department stated: Generally, a court has the discretion to set aside a judicial sale where fraud, collusion, mistake, or misconduct casts suspicion on the fairness of the sale. A court may exercise its inherent equitable power over a sale made pursuant to its judgment or decree to ensure that it is not made the instrument of injustice. Marketability of title is concerned with impairments on title to a property, i.e., the right to unencumbered ownership and possession. As a general rule, a purchaser at a foreclosure sale is entitled to a good, marketable title. A purchaser at a judicial sale should not be compelled by the courts to accept a doubtful title, and, if it was bad or doubtful, he or she should, on his or her application, be relieved from completing the purchase. Moreover, the rule that a buyer must protect himself or herself against undisclosed defects does not apply in all strictness to a purchaser at a judicial sale.  A sale of land in the haste and confusion of an auction room is not governed by the strict rules applicable to formal contracts made with deliberation after ample opportunity to investigate and inquire. Here, the continuing quiet title litigation involves allegations that the deed to one of the lots comprising the subject property was procured by forgery. This litigation casts suspicion on the fairness of the sale of the property to , and therefore should not be compelled by the courts to accept a doubtful title.  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.