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

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

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

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

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

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

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

By: Jonathan Freiberger It makes sense that a “plaintiff appears merely by bringing it.” Deutsche Bank Nat. Trust Co. v. Hall, 185 A.D.3d 1006 (citation and internal quotation marks omitted). Once served with process, a defendant must appear in an action to avoid a default. Section 320(a) of New York’s Civil Practice Law and Rules (the “CPLR”), which sets forth, inter alia, the manner in which a defendant can appear in an action provides that “[t]he defendant appears by serving an answer or a notice of appearance, or by making a motion which has the effect of extending the time to answer.” An appearance pursuant to CPLR §320(a) is a formal appearance in the action. As will be discussed herein, New York courts also recognize “informal appearances.” An appearance, whether formal or informal, can have a significant impact on litigation. Among other things, an appearance could: preclude the entry of a default judgment by plaintiff; operate to preclude a defendant from interposing a defense of lack personal jurisdiction; and, preclude a defendant from having a complaint dismissed pursuant to CPLR 3215(c) based on a plaintiff’s failure to seek a default judgment within a year of default. [This BLOG has addressed CPLR 3215(c) [HERE].] Depending on the circumstances, a plaintiff or a defendant may argue that a defendant has “informally appeared” in an action. To constitute an informal appearance, a defendant must have engaged in “meaningful participation in the merits of the case.” Kurlander v. Willie, 45 A.D.3d 1006, 1007 (3rd Dep’t 2007) (citation omitted). The plaintiff in Kurlander commenced a mortgage foreclosure action and served defendant with process. In response, defendant visited the office of plaintiff’s counsel, paid the principal balance due on the loan and received a receipt marked “paid in full.” Thereafter, counsel wrote several letters to defendant advising that interest was still due and, if not paid, the foreclosure action would proceed. An answer was never filed and a judgment of foreclosure and sale was obtained on default. The denial of defendant’s motion to vacate the default was affirmed. The Third Department was “unpersuaded” by defendant’s argument that the “payment of the unpaid principal balance constituted an ‘informal appearance’ in the action such that he was entitled to notice of all subsequent proceedings.” Kurlander, 45 A.D.3d at 1007. In Wells Fargo Bank, N.A. v. Martinez, 181 A.D.3d 470 (1st Dep’t 2020), also a foreclosure action, defendant sought dismissal of the complaint as abandoned pursuant to CPLR 3215(c) because plaintiff failed to move for a default judgment within a year of defendant’s default. In opposition to defendant’s motion, plaintiff unsuccessfully argued that defendant waived his right to a CPLR 3215(c) dismissal to the extent that defendant’s participation in a foreclosure settlement conference constituted an informal appearance in the litigation. The Court held that “[a]lthough a party may waive it [sic] rights under CPLR 3215(c) by serving an answer or taking any other steps which may be viewed as a formal or informal appearance, defendant’s participation in settlement conferences did not constitute either a formal or an informal appearance since he did not actively litigate the action before the Supreme Court or participate in the action on the merits.” Martinez, 181 A.D.3d at 470 (citations, internal quotation marks and brackets omitted). See also, HSBC Bank USA, Nat. Assoc. v. Grella, 145 A.D.3d 669, 671 (2nd Dep’t 2016) (holding that a motion for leave to serve an untimely answer pursuant to CPLR 3012(d) does not constitute an informal appearance.) Similarly, the Second Department in Whiteside v. Manfredi, 132 A.D.3d 851 (2015), rebuffed plaintiff’s attempt to argue that defendant’s motion to dismiss pursuant to CPLR 3215(c) should be denied due to defendant’s “informal appearance” in the action. The plaintiff in Whiteside commenced a wrongful death action in 2006. Defendant hospital’s counsel wrote to plaintiff’s counsel shortly thereafter forwarding a “Notice of Bankruptcy” and advising that the hospital was in bankruptcy and that an automatic stay was in effect. The hospital emerged from bankruptcy in 2007 and two years later moved to dismiss the action as against it pursuant to CPLR 3215(c). The motion court denied the motion. In reversing the motion court, the Second Department held that “[c]ontrary to the Supreme Court’s determination, the letter [from counsel] and the accompanying notice of bankruptcy did not constitute an informal appearance by the hospital.” Whiteside, 132 A.D.3d at 852. The motion court in HSBC Bank USA, Nat. Assoc. v. Assouline, 177 A.D.3d 603 (2nd Dep’t 2019), denied defendant’s motion to vacate a judgment of foreclosure and sale based on lack of personal jurisdiction due to improper service of process. The Second Department reversed. In Assouline, the defendant was able to rebut the presumption of proper service raised by the process server’s affidavit. The Court rejected plaintiff’s attempt to argue that the defendant waived the personal jurisdiction defense by making an informal appearance to the extent that: defendant communicated with plaintiff’s attorney to discuss a loan modification; and, defendant’s attorney contacted plaintiff’s servicer to discuss a settlement “prior to litigation” – suggesting that defendant’s counsel was unaware of the pending litigation. The matter was remitted to supreme court to determine, inter alia, whether defendant was properly served. The Second Department in City of Newburgh v. 96 Broadway LLC, 72 A.D.3d 632 (2010), reversed the trial court’s grant of plaintiff’s motion for a default judgment because subsequent to the commencement of the action “the defendants twice appeared in court, filed a petition to remove the action to federal district court, entered into a stipulation with the plaintiff, and opposed the plaintiff’s motion to hold them in contempt [by which] acts, the defendants appeared in the action and, thus, should not have been deemed in default.” Newburgh, 72 A.D.3d at 632 (citations omitted). Hall was a mortgage foreclosure action in which the motion court granted plaintiff’s motion for a default judgment and denied defendant’s cross-motion to dismiss the complaint on numerous grounds. The Second Department affirmed and found that in its motion for a default judgment against defendant, plaintiff demonstrated that defendant was properly served with process, failed to appear or answer and it was entitled to foreclose on the subject mortgage. Hall at 2. The Court concluded that defendant informally appeared in the action but found unavailing, his argument that his “informal appearance” precluded a default finding and that “even if an ‘informal appearance’ is made after the expiration of the time to answer or move specified in CPLR 320(a) judgment by default is precluded.” Hall at 2 (some internal quotation marks, brackets and ellipses omitted). Addressing the issue of “informal appearances,” the Hall Court stated: It is true that “[i]n addition to the formal appearances listed in CPLR 320(a), the law continues to recognize the so-called ‘informal’ appearance” (Siegel & Connors, N.Y. Prac § 112). “It comes about when the defendant, although not having taken any of the steps that would officially constitute an appearance under CPLR 320(a), nevertheless participates in the case in some way relating to the merits” (id.). Although “an informal’ appearance can prevent a finding that the defendant is in default, thereby precluding entry of a default judgment” (Vincent C. Alexander, Practice Commentaries, McKinney’s Cons Laws of NY, CPLR C320:4), this is only true when the participation constituting the informal’ appearance occurred within the time limitations imposed for making a formal appearance. Indeed, even service of a formal “notice of appearance will not protect the defendant from entry of a default judgment if, after service of the complaint, the defendant does not timely make a CPLR 3211 motion or serve an answer” (Vincent C. Alexander, Practice Commentaries, McKinney’s Cons Laws of NY, CPLR C320:1). Accordingly, an informal’ appearance, without more, does not somehow absolve a defendant from complying with the time restrictions imposed by CPLR 320(a) which govern the service of an answer or the making of a motion pursuant to CPLR 3211. Contrary to Hall’s contention, this Court has never held otherwise; to do so would effectively eliminate any need for compliance with the time limitations imposed by CPLR 320(a), and render those statutory provisions meaningless for all practical purposes. Hall at *2-3 (some citations omitted). Because the Hall defendant’s informal appearance was made after the expiration of his time to appear or answer, he was found to be in default. Accordingly, defendant’s substantive defenses were deemed waived. As to the waiver of the defense of lack of personal jurisdiction, the Hall Court stated that: Hall himself argues … he engaged in significant activity after his statutory time to answer had expired, which amounted to an informal appearance. This activity was sufficient to warrant a finding that Hall had acknowledged the jurisdiction of the court without preserving his objection based on improper service. Hall at 3 (citations omitted). Similarly, the Court found defendant to have waived the defenses of lack of standing, lack of compliance with RPAPL §1304 and res judicata because “where the plaintiff has demonstrated, prima facie, that a defendant is in default because he or she “failed to appear” within the meaning of CPLR 3215(a), that defendant is generally precluded from raising any nonjurisdictional defense without first rebutting the prima facie showing of default.” Hall at 3 (citations omitted, emphasis in original).

By: Jeffrey M. Haber In closely held family businesses, trust often substitutes for formalities. This phenomenon was on display in Homapour v. 3M Props., LLC, 2026 N.Y. Slip Op. 04371 (1st Dept. July 9, 2026), where the formality of “read-before-you-sign” was tested. The dispute centered on allegations that a managing member repeatedly presented family members with signature pages detached from amended LLC operating agreements while assuring them that “nothing had changed.” Although signatories generally are bound by documents they sign, the Appellate Division, First Department recognized that a different analysis should apply when the signer places trust in a fiduciary. Because the managing member allegedly owed duties of loyalty and candor to the minority members, the Court concluded that questions of justifiable reliance, one of the elements of a fraudulent inducement claim, could not be resolved as a matter of law and instead warranted further consideration by the finder of fact. Background Homapour arose from a long-running and contentious family dispute involving a vast portfolio of New York City real estate holdings worth hundreds of millions of dollars. The dispute centered on a network of family-owned limited liability companies that own residential and commercial properties throughout Manhattan. After years of litigation, many of the parties sought summary judgment on several claims alleging self-dealing, fiduciary misconduct, fraud, and professional wrongdoing. Plaintiff, along with her sister and father, held minority ownership interests in numerous family real estate entities. Her brother served as the managing member of many of those companies and exercised significant control over their operations and finances. According to plaintiff, the brother treated company funds as a personal bank account, using LLC assets to pay for a wide range of personal expenses, and expenses associated with personal relationships. According to plaintiff, during a family meeting in November 2014 family, the brother acknowledged using company funds for personal expenditures. One year later, she filed suit, asserting both individual and derivative claims on behalf of the family entities. Relevant to today’s article, plaintiff sued her brother for fraud. Plaintiff alleged that her brother induced her to sign amended operating agreements by falsely assuring her that the revisions were insignificant, when in fact they materially expanded his authority. According to plaintiff, the amendments permitted the brother to compensate himself, reduced managerial liability, and restricted the remedies available to minority members. Plaintiff claimed that defendant presented only signature pages and discouraged substantive review of the documents, leading her to believe that the amendments were merely administrative or estate-planning related. The Lower Court Ruling Addressing the motions for summary judgment, the motion court found the evidentiary record insufficient to sustain plaintiff’s fraud claim. While New York law recognizes that a party may sometimes rely on representations made by a person occupying a position of trust or confidence, the motion court concluded that plaintiff failed to provide evidence that defendant misrepresented the contents of the agreements plaintiff signed. The motion court noted that plaintiff admitted she generally did not read the operating agreements before signing them. Although she testified that family practice often involved presenting only signature pages, she was unable to recall specific misstatements concerning most of the challenged agreements. With respect to the December 2012 signing ceremony at which several important amendments were executed, for example, plaintiff testified that there was essentially no discussion regarding the documents and that nothing about them was explained to her. As a result, the motion court held that plaintiff could not establish the element of justifiable reliance necessary to prove fraud. The motion court, therefore, concluded that plaintiff failed to create a triable issue of fact sufficient to defeat summary judgment. The First Department Decision On appeal, the First Department modified the order. The Court held that the fraud cause of action should not have been dismissed.[1] The Court explained that plaintiff “attested that [defendant] fraudulently induced her to sign the unilaterally amended Family LLC operating agreements by, among other things, presenting ‘just a signature page’ with no accompanying document.”[2] The Court noted that plaintiff “averred that ‘[w]henever I inquired about what I was asked to sign, [defendant’]s response was always that “nothing is changed” and that he just needed my signature and that I was never given the full document to review.’”[3] Additional testimony from the father, said the Court, showed that “the operating agreements were ‘created or amended to incorporate significantly favorable terms for [defendant],’ that [the father] never agreed to these changes and that [the father] was never provided with the entire document.”[4] Although “a person is bound by the terms of an instrument he or she signs, and may not claim to have justifiably relied on false representations concerning the contents of a document that he or she failed to read without valid excuse,” explained the Court,[5] “[g]iven the fiduciary relationship between [plaintiff] and [defendant], there [was] a question of fact as to whether [plaintiff] justifiably relied on [defendant’]s misrepresentations as to the agreements she signed.”[6] In other words, whether the “read-before-you-sign” rule “applie[d] to bar plaintiff’s fraud claim against [defendant] [could not] be determined as a matter of law because [defendant] had fiduciary obligations to [plaintiffs] as the managing member of several limited liability companies of which they were nonmanaging members.”[7] Takeaway The First Department’s treatment of plaintiff’s fraud claim highlights an exception to the “read-before-you-sign” rule. While courts generally presume that a person who signs a document without reading it is bound by its terms, that principle is not absolute. Where the person seeking the signature owes fiduciary duties to the signer, the question of whether reliance on oral representations was justified may become one for the factfinder rather than a matter that can be resolved on summary judgment. The decision also highlights the risks that arise in family-owned businesses. Family members often rely on personal trust and informal practices rather than the safeguards commonly employed in arm’s-length commercial transactions. When family relationships overlap with fiduciary responsibilities, courts may recognize that reliance on a relative’s representations can be fundamentally different from reliance in an ordinary business deal. __________________________________ Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes only and is not intended to be, and should not be, taken as legal advice. Unless otherwise stated, Freiberger Haber LLP’s articles are based on recently decided published opinions or litigation releases and not on matters handled by the firm. ___________________________________ [1] Slip Op. at *1. [2] Id. [3] Id. (internal quotations modified). [4] Id. [5] Id. at *2, quoting Tsai Chung Chao v. Chao, 161 A.D.3d 564, 565 (1st Dept. 2018). [6] Id. [7] Id.

By: Jonathan H. Freiberger As discussed previously in this BLOG, and most recently in “You Can’t Always Waive Bye-Bye to Statutes of Limitations,” statutes of limitation govern the time in which a cause of action must be interposed after accrual. Article 2 of the CPLR addresses statute of limitations issues in New York. Section 201 of the CPLR provides that “[a]n action … must be commenced within the time specified in this article unless a different time is prescribed by law or a shorter time is prescribed by written agreement. No court shall extend the time limited by law for the commencement of an action.” Prior to the enactment of the statutes of limitation “there was no fixed time for the bringing of an action [and p]ersonal actions were merely confined to the joint lifetimes of the parties.” Flanagan v. Mount Eden General Hospital, 24 N.Y.2d 427, 429) (1969). “The Statute of Limitations was enacted to afford protection to defendants against defending stale claims after a reasonable period of time had elapsed during which a person of ordinary diligence would bring an action. The statutes embody an important policy of giving repose to human affairs.” Flanagan, 24 N.Y.2d at 429 (citation omitted). Generally, statutes of limitation “begin[] to accrue when a cause of action accrues or, in other words, when all of the facts necessary to the cause of action have occurred so that the party would be entitled to obtain relief in court.” QK Healthcare, Inc. v. InSource, Inc., 108 A.D.3d 56, 66 (2d Dept. 2013) (citations and internal quotation marks omitted); see also North Shore Cent. School Dist. v. Glen Cove School District, 236 A.D.3d 806, 811 (2d Dept. 2025). As relevant to today’s article, both breach of contract and breach of the implied covenant of good faith and fair dealing causes of action are governed by a six-year statute of limitations and each accrues at the time of the respective breaches. See, e.g., New York Bus Operators Compensation Trust v. American Home Assurance Co., 241 A.D.3d 563, 566-67 (2d Dept. 2025) (as to breach of contract); Frydman v. Endurance American Ins. Co., 253 A.D.3d 848, 850 (2d Dept. 2025) (as to good faith and fair dealing). While there are several ways in which a limitations period can be tolled, today’s article relates solely to the continuing wrong doctrine (the “Doctrine”), an exception to the general rule that limitations periods begin to run from the date of accrual of a cause of action. This BLOG has previously addressed the continuing wrong doctrine. See, e.g., “Continuing Wrong Doctrine Found Not Applicable to Toll the Limitations Period for Fraud and Other Causes of Action.” The Doctrine “is an exception to the general rule that the statute of limitations runs from the time of the breach though no damage occurs until later” and “may only be predicated on continuing unlawful acts and not on the continuing effects of earlier unlawful conduct.” Henry v. Bank of America, 147 A.D.3d 599, 601 (1st Dept. 2017) (citations and internal quotation marks omitted). The Doctrine is applied in contract actions “when the contract imposes a continuing duty on the breaching party.” Id. (Citations omitted.) These issues were addressed in Coyle v. JPMorgan Chase Bank, N.A., a case decided on July 8, 2026, by the Appellate Division, Second Department. The plaintiff in Coyle borrowed money from the lender and secured the repayment obligations with a mortgage on real property. The lender declared a default in 2014, which the borrower claims was in error. In 2015 and 2018, the borrower received notices from the lender that the loan was in default, that it was advancing funds for taxes, that escrows were going to increase and/or warning that it intended to commence foreclosure proceedings. The lender refused to accept installment payments from the borrower. In 2018, the lender commenced a mortgage foreclosure action (the “First Foreclosure Action”). Subsequently, the lender recognized its error in declaring the default and undertook corrective measures. The Court, in 2020, ultimately discontinued the First Foreclosure Action. Later in 2020, the lender commenced a new foreclosure action based on new alleged defaults that occurred earlier that year (the “Second Foreclosure Action”). During the pendency of the Second Foreclosure Action, the borrower commenced an action against the lender for breach of contract and breach of the implied covenant of good faith and fair dealing predicated on the erroneous default declaration from 2014 (the “Contract Action”). The lender moved to dismiss the Contract Action on, inter alia, statute of limitation grounds as the asserted causes of action accrued in 2014 -- more than six years prior to the commencement of the Contract Action. In opposition to the lender’s prima facie case that the applicable limitations period expired, the borrower argued that the limitations period was tolled by virtue of the application of the continuing wrong doctrine. The motion court granted the lender’s motion and the borrower appealed. In affirming the motion court’s rejection of the borrower’s continuing wrong doctrine argument, the Court stated: Contrary to the [borrower]'s contention, the untimeliness of the breach of contract and breach of the implied covenant of good faith and fair dealing causes of action is not cured by tolling under the continuing wrong doctrine. The continuing wrong doctrine is usually employed where there is a series of continuing wrongs and serves to toll the running of a period of limitations to the date of the commission of the last wrongful act. The doctrine allows only tolling predicated on continuing unlawful acts and not on the continuing effects of earlier unlawful conduct. The distinction is between a single wrong that has continuing effects and a series of independent, distinct wrongs. Here, the [borrower]'s allegations amount to a single wrong that has continuing effects. 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 Jonathan H. Freiberger The tedious task of compiling hard copies of exhibits to annex to motion papers in supreme court litigation practice was ameliorated in 2014 when the CPLR was amended to permit litigants, in e-filed cases, to simply refer in their briefs and affirmations to docket numbers on the e-filing system. Thus, CPLR 2214(c) provides: Each party shall furnish to the court all papers served by that party. The moving party shall furnish all other papers not already in the possession of the court necessary to the consideration of the questions involved. Except when the rules of the court provide otherwise, in an e-filed action, a party that files papers in connection with a motion need not include copies of papers that were filed previously electronically with the court, but may make reference to them, giving the docket numbers on the e-filing system. … Only papers served in accordance with the provisions of this rule shall be read in support of, or in opposition to, the motion, unless the court for good cause shall otherwise direct. However, litigants should not be so quick to rely on CPLR 2214(c) in appellate practice. Among other things, CPLR 5526 requires that the “record on appeal from an interlocutory judgment or any order shall consist of the notice of appeal, the judgment or order appealed from, the transcript, if any, the papers and other exhibits upon which the judgment or order was founded and any opinions in the case.” See also CPLR 5528. “‘Pursuant to CPLR 5526 it is the obligation of the appellant to assemble a proper record on appeal, and the record must contain all of the relevant papers that were before the Supreme Court.’” Fitzpatrick v. CSS Industries, Inc., 236 A.D.3d 863 (2nd Dep’t 2025) (quoting Fitzpatrick v. Affairs & Banquets Floral Servs., Inc., 227 A.D.3d 954 (2nd Dep’t 2024). When necessary papers are omitted from an appellate record, an appeal will be dismissed because such omissions will “render[] meaningful review of the [lower] court’s order virtually impossible.” Fitzpatrick, 236 A.D.3d at 863. That appellate records must be reproduced in hard copy form is also made plain by the New York Codes, Rules and Regulations (“NYCRR”). See 22 NYCRR §§ 1250.5, 1250.6, 1250.7. On April 30, 2025, the Appellate Division, Second Department, in Sterling Trust Limited v. Stern, dismissed an appeal because the appellant, relying on references to e-filed documents, neglected to include in the record on appeal copies of all documents necessary for the Appellate Division to consider the appeal. The Court, in rejecting the incomplete record, stated: Here, the plaintiff properly placed the pleadings and the underlying summary judgment motion papers before the Supreme Court in this electronically filed action by referencing them in the plaintiff's attorney affirmation in support of the motion, in effect, for leave to renew and giving the docket numbers on the e-filing system (see CPLR 2214[c]; Nationstar Mtge., LLC v Bailey, 175 AD3d 697, 698). However, the plaintiff failed to reproduce the pleadings and underlying motion papers in the record on appeal (see 22 NYCRR 1250.5[b]; 1250.6[b]; 1250.7[a]). Without those papers, this Court cannot meaningfully review the Supreme Court's order denying the plaintiff's motion, in effect, for leave to renew its opposition to the defendant's motion for summary judgment dismissing the complaint insofar as asserted against her (see Fitzpatrick v Affairs & Banquets Floral Servs., Inc., 227 AD3d at 955; Eleven Stars, LLC v Central Baptist Church, 206 AD3d at 885). Accordingly, the appeal must be dismissed. [Hyperlinks added.] A review of the briefing, which was available on the NYSCEF system, reveals that this issue was not argued by the parties. Accordingly, it appears that the dismissal was made sua sponte by the Court. TAKEAWAY The current rules generally require that appellate records be reproduced on paper and submitted to the Court in required form and reliance on references to efiled documents is misplaced and could result in the dismissal of an appeal. 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 today’s article, we examine three principles of law that can spell the end of a litigation: disclaimer clauses, merger or integration clauses, and derivative standing. The Merger Clause As a general matter, when parties negotiate an agreement in a clear and unambiguous document, their writing will be enforced according to its terms. Evidence outside the four corners of the document as to what the parties really intended (i.e., parole evidence) is generally inadmissible.[1] Among the reasons for this rule is to give “stability to commercial transactions,” and other types of commercial interactions.[2] As the New York Court of Appeals observed, such a rule can safeguard “against fraudulent claims, perjury, death of witnesses … [and] infirmity of memory.…”[3] Notwithstanding, questions arise about the enforceability of commitments made alongside a commercial transaction. These questions tend to play out in disagreements over the meaning and effect of a contract, where one party attempts to rely on the extra-contractual statements of the other (e.g., in emails, telephone calls, or meetings) to support an argument, claim or defense. One way to address such disputes before they happen is to include a “merger clause” or “integration clause,” in the contract or agreement. A merger clause is a provision in a contract that declares the writing to be the complete and final agreement between the parties. Merger clauses typically are found at the end of a contract or agreement, among the other “boilerplate” provisions, and, as such, are often neglected or ignored during negotiations. Boilerplate merger clauses are given little weight by the courts. However, when the merger clause evidences a negotiation by the parties, courts accord such clauses more weight in determining the parties’ intent. In New York, the courts have required the parties to specify the agreements and matters being merged or integrated into their agreement.[4] Without such specificity, the courts have allowed parole evidence to be used to explain the parties’ intent, especially in cases involving claims of fraudulent inducement.[5] The Disclaimer Clause For a party to disclaim reliance on extra-contractual representations, an agreement must contain language that makes it clear that the parties are not relying on such representations. A party’s disclaimer of reliance cannot preclude a fraudulent inducement claim unless: (1) the disclaimer is specific to the fact alleged to be misrepresented or omitted; and (2) the alleged misrepresentation or omission does not concern facts peculiarly within the knowledge of the non-moving party.[6] “Accordingly, only where a written contract contains a specific disclaimer of responsibility for extraneous representations, that is, a provision that the parties are not bound by or relying upon representations or omissions as to the specific matter, is a plaintiff precluded from later claiming fraud on the ground of a prior misrepresentation as to the specific matter.”[7] There is, however, an exception to the enforceability of an anti-reliance provision – where the defendant has unique or peculiar knowledge of an allegedly misrepresented fact. Under such circumstances, even a specific contractual disclaimer will not defeat a plaintiff’s contention that it reasonably relied on the misrepresentation.[8] Derivative Standing: Direct vs. Derivative A shareholder’s derivative action is a lawsuit “brought in the right of a … corporation to procure a judgment in its favor, by a holder of shares or of voting trust certificates of the corporation or of a beneficial interest in such shares or certificates.”[9] Derivative claims against corporate officers and directors belong to the corporation itself.[10] In considering whether a claim is direct or derivative, courts look to the nature of the wrong and the person or entity to whom the relief should go.[11] Thus, for a shareholder’s injury to be direct it must be independent of any alleged injury to the corporation. The shareholder must demonstrate that the duty breached was owed to the stockholder and that he/she can prevail without showing an injury to the corporation.[12] Derivative claims that are improperly alleged as direct claims will be dismissed for lack of standing.[13] A derivative plaintiff must be a shareholder of the company “at the time of bringing the action,” and at the time of the alleged wrongdoing.[14] “[A] plaintiff who ceases to be a shareholder, whether by reason of a merger or for any other reason, loses standing” to sue derivatively.[15] Accordingly, courts have focused on the plaintiff’s stock ownership during both points in time, and in particular at the time of the alleged misconduct. In New York, the contemporaneous ownership rule is “strictly enforced.”[16] To satisfy the requirement, the plaintiff must have “acquired his or her stock in the corporation before the core of the allegedly wrongful conduct transpired” and continued to own the stock “throughout the course of the activities that constitute the primary basis of the complaint.”[17] “[F]ailure to satisfy the . . . contemporaneous ownership requirement of § 626(b) is such a fundamental lack of capacity that it results in failure to state a cause of action.”[18] For this reason, courts require the plaintiff to plead contemporaneous ownership with particularity rather than through boilerplate assertions.[19] Goldman v. Nerds Broadway Ltd. Liability Co. In Goldman v. Nerds Broadway Ltd. Liability Co., 2022 N.Y. Slip Op. 00721 (1st Dept. Feb. 3, 2022) (here), the foregoing principles were examined by the Appellate Division, First Department. Goldman was brought by investors in a failed Broadway musical production provisionally entitled “Nerds” that was to be based upon “the rivalry between the late Steve Jobs of Apple and Bill Gates of Microsoft.” The musical was cancelled before production or previews began. Plaintiffs alleged that because of defendants’ mismanagement and intentional misrepresentations they lost their investment in the musical production. In or about December 2015, only about $200,000 had been raised towards the costs of staging the production even though at that time production costs were thought to be approximately $7.5 million. Plaintiffs alleged that in early January 2016, defendants decided to enter into a contract with a theatrical organization for over $600,000 despite not having raised sufficient capital to stage the production. Plaintiffs claimed they invested over $600,000 into the production from late January through early March 2016. On March 8, 2016, defendants announced they were not moving forward with the production. Plaintiffs alleged that “the failure of the venture was the foreseeable and inevitable result of the reckless financial commitments Defendants caused the [Nerds] LLC to make without adequate capitalization, contrary to Defendants’ representations of financial health.” Plaintiffs asserted five causes of action. The first cause of action was for breach of contract against defendants Eleven LLC and Halmos LLC, alleging that they “breached the Operating Agreement by failing to render services customary and usually rendered by theatrical producers, devote as much time to the affairs of the LLC as necessary, or perform their duties in good faith and instead performed their duties in a grossly negligent manner and/or through willful misconduct.” The second cause of action against all defendants was for breach of fiduciary duty and the third cause of action was for the same relief purportedly brought on a derivative basis. The fourth cause of action sounded in fraud and misrepresentation. The fifth cause of action sought rescission of the operating agreement. Defendants moved to dismiss the complaint. The motion court held that plaintiffs’ fraud allegations were barred because of a disclaimer clause and a merger clause in the operating agreement governing the parties. According to the motion court, the operating agreement expressly provided that “[e]ach Member represent[ed], warrant[ed], and covenant[ed] that such Member … ha[d] not been induced to enter into th[e] Agreement by any warranties, guarantees, promises, statements or representations, whether express or implied, except those that [were] expressly and specifically set forth [t]herein, and that the Managers [were] not … bound or liable in any manner by any express or implied warranties, guarantees, promises, statements or representations pertaining hereto except as [were] expressly and specifically set forth [t]herein.” Because plaintiffs failed to state a fraud claim, their request for rescission was dismissed. Plaintiffs appealed. The First Department affirmed. The First Department’s Decision The Court held that the disclaimer clause in the operating agreement foreclosed plaintiffs’ request for relief: The court, however, properly dismissed the fraud claims as barred by the disclaimers in the agreement, which included an express representation that plaintiffs’ professionals had examined the financial records of the company. Given that the fraud alleged was a misrepresentation of how much money had been raised and invested, this disclaimer requires dismissal.[20] The Court also held that plaintiffs lacked derivative standing to pursue the claims on behalf of the company: Plaintiff investors’ claims for breach of contract and fiduciary duty are based on defendants’ decision to have the company enter into a contract with the Shubert Organization. Because they allege harm only to the company, and not based on some particular injury or right of the plaintiffs, these claims are derivative. As such, they were properly dismissed for lack of standing, because the transaction complained of occurred before any were members of the company.[21] Finally, the Court held that “[b]ecause plaintiffs’ claims for fraud, breach of contract, and fiduciary duty were properly dismissed, their ‘claim’ for rescission, which is actually a remedy, was also properly dismissed.”[22] Takeaway The rules concerning derivative standing make sense. They are designed to prevent plaintiffs from buying into a lawsuit or commencing a derivative action by simply purchasing shares after the alleged wrong has occurred.[23] Although there are exceptions to the rule (not applicable in Goldman), the law has long required plaintiffs bringing a derivative action to have a stake in the company on whose behalf the action is commenced. After all, if the plaintiff is not a shareholder of the company, then he or she has no right to vindicate the company’s rights and obtain a judgment on its behalf. In Goldman, the Court reinforced this common-sense rule. In Danann Realty, the Court of Appeals noted that “specific disclaimer[s] destroy[] the allegations in the complaint that the [subject] agreement was executed in reliance upon contrary oral representations.”[24] Goldman reiterates this basic principle of law. As the First Department observed, the contractual disclaimer at issue was specific to plaintiffs’ allegations and directly addressed the subject of the alleged misrepresentation. Consequently, the contract provision at issue was specific enough to preclude the fraud claim. ________________________________ Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice. [1] Golden Gate Yacht Club v. Societe Nautique De Geneve, 12 N.Y.3d 248 (2009). [2] W.W.W. Assoc. v Giancontieri, 77 N.Y.2d 157, 162 (1990). [3] Id. [4] See Hobart v. Schuler, 55 N.Y.2d 1023, 1024 (1982) (deeming merger clause to be insufficient to bar parol evidence of fraudulent misrepresentation where clause states “all representations, warranties, understandings and agreements between the parties are set forth in the agreement”); LibertyPointe Bank v. 75 E. 125th St., LLC, 95 A.D.3d 706, 706 (1st Dept. 2012) (concluding that merger clause is insufficient to bar claim for fraudulent inducement where it fails to reference particular misrepresentations allegedly made by former president). [5] Danann Realty Corp. v. Harris, 5 N.Y.2d 317, 320-21 (1959) (holding that fraudulent inducement claim premised upon representations as to building’s operating expenses and expected profits was barred by merger clause that specifically disclaimed plaintiff’s reliance on representations regarding building’s “physical condition, rents, leases, expenses, [and] operation”); Laduzinski v. Alvarez & Marsal Taxand LLC, 132 A.D.3d 164, 169 (1st Dept. 2015) (holding that merger clause was mere boilerplate that was “too general to bar plaintiff’s claim since it makes no reference to the particular misrepresentations allegedly made here by [defendants].”) (internal quotation marks and citation omitted) (alteration in original). [6] Basis Yield Alpha Fund [Master] v. Goldman Sachs Group, Inc., 115 A.D.3d 128, 137 (1st Dept. 2014). See also Danann Realty, 5 N.Y.2d at 323; MBIA Ins. Corp. v. Merrill Lynch, 81 A.D.3d 419 (1st Dept. 2011). [7] Basis Yield, 115 A.D.3d at 137. [8] Danann Realty, 5 N.Y.2d at 322. [9] Marx v. Akers, 88 N.Y.2d 189, 193 (1996) (quoting Business Corporation Law § 626 (a)). [10] Auerbach v. Bennett, 47 N.Y.2d 619, 631 (1979). [11] Yudell v. Gilbert, 99 A.D.3d 108, 114 (1st Dept. 2012). [12] Tooley v. Donaldson, Lufkin & Jenrette, Inc., 845 A2d 1031, 1039 (Del. 2004). [13] Abrams v. Donati, 66 N.Y.2d 951, 953 (1985) (“[a] complaint the allegations of which confuse a shareholder’s derivative and individual rights will, therefore, be dismissed.”) (internal citations omitted). [14] See, e.g., BCL § 626(b); Pessin v. Chris-Craft Indus., 181 A.D.2d 66, 70 (1st Dept. 1992). See also Lewis v. Anderson, 477 A.2d 1040, 1049 (Del. 1984). [15] Lewis, 477 A.2d at1049. [16] Honzawa Holding Co. v. Hiro Enter. USA, 291 A.D.2d 318, 318 (1st Dept. 2002). [17] In re Bank of New York Deriv. Litig., 320 F.3d 291, 298 (2d Cir. 2003). [18] Roy v. Vayntrub, 15 Misc. 3d 1127(A), 2007 NY Slip Op 50868(U) (Sup Ct., Nassau County 2007), at *6 (citing Barr v. Wackman, 36 N.Y.2d 371 (1975)). [19] See, e.g., In re Computer Sciences Corp. Deriv. Litig., 2007 WL 1321715, at *15 (C.D. Cal. Mar. 26, 2007) (“[G]eneral allegation[s] [are] insufficient to allege contemporaneous ownership during the period in which the questioned transactions occurred.”). [20] Slip Op. at *1 (citation omitted). [21] Id. (citations omitted). [22] Id. (citations omitted). [23] See, e.g., Independent Investor Protective League v. Time, Inc., 50 N.Y.2d 259, 263 (1980). [24] 5 N.Y.2d at 320-21.