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Article 3-A of New York’s Lien Law establishes a system of trusts to ensure that certain individuals or entities that contributed services, labor and/or materials to a construction project for the improvement of real property are paid for their efforts.  This post is designed to generally familiarize owners and contractors with some of the trust fund provisions of the lien law. The Lien Law generally recognizes two types of trusts.  ( Lien Law §71 .)  The first is the Owner Trust, of which the owner is the trustee.  The assets of the Owner Trust “shall be held and applied to the cost of improvement.”  (Lien Law §71(1).)   Claimants under an Owner’s Trust include contractors, subcontractors, architects, engineers, surveyors, laborers and materialmen.  (Lien Law §71(3)(a).)   In general, the assets of an Owner Trust consist of funds received by an owner for the improvement of real property.  Most frequently, trust assets in this category consist of construction loan proceeds.  ( Lien Law §70(5).) Second is the Contractor/Subcontractor Trust, of which the contractor or subcontractor is the trustee.  The assets of the Contractor/Subcontractor Trust must be used for the payment of certain obligations resulting from the improvement of real property such as: the claims of subcontractors, architects, engineers, surveyors, laborers and materialmen; payroll taxes; sales taxes; unemployment insurance; benefits and wage supplements; surety bond premiums and insurance premiums related to the project. (Lien Law § 71(2).)  Most frequently, trust assets in this category consist of the payments received by the contractor from the owner (in the case of a contractor trust) or received by a subcontractor from a contractor (in the case of a subcontractor trust) pursuant to the subject construction contract. (Lien Law § 70(5).) Any funds that are deemed to be trust fund assets under the Lien Law can only be disbursed to appropriate trust fund beneficiaries pursuant to the trust fund provisions of the Lien Law.  A typical scenario illustrating the need for the protections afforded by the trust fund provisions of the Lien Law is where a contractor receives payment from an owner on a present project but the contractor uses the funds to pay a subcontractor on a prior project.  Although this happens routinely, such payments are prohibited under the Lien Law and could result in the contractor’s failure to pay proper trust fund beneficiaries working on the current project.  An unpaid subcontractor can use the trust fund diversion as leverage against the diverting contractor.  The contractor likely diverted trust funds on the earlier project or else there would have been sufficient funds available to pay all trust fund beneficiaries on the prior project without resort to diversions on the current project. Under the Lien Law, a contractor that pays itself before paying all trust fund beneficiaries is likely to be deemed to have committed trust fund diversions.  In this regard, pursuant to the Lien Law “… very such trust shall commence at the time when any asset thereof comes into existence, whether or not there shall be at that time any beneficiary of the trust.”  (Lien Law § 70(3).)  This language makes plain that any money paid by an owner to the contractor must be held in trust for trust fund beneficiaries even if at the time of such payment, the contractor has not yet incurred any liability to any subcontractors on or materials suppliers to the project. Under the Lien Law, while a trustee is not required to maintain separate bank accounts for each project and is entitled to commingle trust fund assets with its other funds, it must keep detailed books and records setting forth specific items relating to trust funds received and disbursed. ( Lien Law §75 .) The law is clear that the assets of a Lien Law trust fund can only be used for Lien Law purposes--namely the payment of the costs of improvement. (Lien Law §71.)  Any other use of trust funds is deemed a “diversion of trust funds” pursuant to Lien Law §72 .  “Diversions” may result in civil and/or criminal penalties against a trustee responsible for the diversion. The failure of a trustee to maintain the detailed records required by §75 of the Lien Law constitutes presumptive evidence that the trustee “has applied or consented to the application of trust funds actually received by him…for the payment of money for purposes other than a purpose of the trust as specified in <§71 of the lien law> .” (Lien Law §75(4).) Pursuant to Lien Law §79-a , trust fund diversions also implicate the penal law and could subject the responsible party to a criminal charge of larceny. Thus, the Lien Law provides, in pertinent part: 79-a Misappropriation of funds of trust Any trustee of a trust arising under this article, and any officer, director or agent of such trustee, who applies or consents to the application of trust funds received by the trustee as money or an instrument for the payment of money for any purpose other than the trust purposes of that trust, as defined in section seventy-one , is guilty of larceny and punishable as provided in the penal law if (a)  such funds were received by the trustee as owner, as the term “owner” is used in article three-a of this chapter, and they were so applied prior to the payment of all trust claims as defined in such article three-a, arising at any time…. There is, however, an exception to the criminal penalties contemplated by the Lien Law in situations in which trust assets are used to repay advances made by, among others, a trustee if those advances were used for trust fund purposes. Thus, §79-a(2) of the Lien Law provides: Notwithstanding subdivision one of this section, if the application of trust funds for a purpose other than the trust purposes of the trust is a repayment to another person of advances made by such other person to the trustee or on his behalf as trustee and the advances so repaid were actually applied for the purposes of the trust as stated in section seventy-one , or if the trustee has made advances of his personal funds for trust purposes and the amount of trust funds applied for a purpose other than the trust purposes of the trust does not exceed the amount of advances of personal funds of the trustee actually applied for the purposes of the trust, such application or consent thereto shall be deemed justifiable and the trustee, or officer, director or agent of the trustee, shall not be deemed guilty of larceny by reason of such application or by reason of his consent thereto. There is, however, no similar exception to the civil penalties that may be imposed for trust fund diversions.  Thus, even in the absence of any improper motives on the part of a trustee and/or any of its officers, directors, agents and the like, the innocuous act of the repayment of advances used for trust purposes, could give rise to civil penalties under the lien law. Pursuant to Lien Law §76 , a trust fund beneficiary is entitled to review the books and records required to be maintained by a trustee and/or to demand a verified statement as to the entries on said books and records so that a determination can be made as to whether trust fund “diversions” exist. Thus, §76 (4) of the Lien Law provides, in pertinent part: …after service of a request for a verified statement, the trustee shall serve upon the beneficiary named in the request a statement, subscribed by the trustee or an officer thereof and verified on his own knowledge, setting forth the entries with respect to the trust contained in the books or records kept by the trustee pursuant to <§ 75 of the lien law> and the names and addresses of the person or persons who, on behalf of or as officer, director or agent of the trustee, made or consented to the making of the payments shown in such statement. TAKEAWAY Any owner receiving construction loan proceeds and any contractor or subcontractor receiving payments from an owner or contractor, as the case may be, should be aware of the trust fund provisions of New York’s Lien Law.  Trustees should keep appropriate and statutorily compliant records so that allegations of trust fund diversions can easily be refuted.  Moreover, maintaining such records enables the trustee to avoid the presumption of a diversion imposed by Lien Law §75(4) for failing to maintain proper books and records as discussed above. Future articles will address each of these issues in more detail.

New York, NY ( Law Firm Newswire ) October 10, 2017 -  Freiberger Haber LLP is pleased to announce that co-founding partner, Jeffrey M. Haber, has been named by Super Lawyers Magazine® to be among the top lawyers in the New York metropolitan area for the sixth consecutive year. Mr. Haber was recognized for his work in business litigation. As part of his history of professional achievements, he was also recognized as a Super Lawyer in 2008-2010 and 2012-2016. Super Lawyers Magazine® is an affiliate of Thomson Reuters. The publication recognizes attorneys who have distinguished themselves by both a high degree of professional achievement and by peer recognition. Each year, no more than 5 percent of lawyers are recognized as Super Lawyers by the magazine. The annual selection involves a survey of lawyers, independent research evaluation of candidates, and peer reviews within each practice area. The magazine publishes its lists nationwide, as well as in leading city and regional magazines and newspapers across the country. A description of the selection process can be found on the Super Lawyers  website . About Freiberger Haber LLP Located in New York City and Melville, Long Island, Freiberger Haber LLP is dedicated to representing corporations, small businesses, partnerships and individuals in a broad range of complex business, construction and commercial litigation matters. Founded by Jonathan H. Freiberger and Jeffrey M. Haber, Freiberger Haber leverages more than 50 years of combined experience to deliver sophisticated and creative representation to its clients. The firm’s approach is results oriented and client-centric, providing clients with the sophisticated counsel expected from larger firms with the flexibility and agility of a small firm. ATTORNEY ADVERTISING. © 2017 Freiberger Haber LLP. The law firm responsible for this advertisement is Freiberger Haber LLP, 105 Maxess Road, Suite S124, Melville, New York 11747, (631) 574-4454. Prior results do not guarantee or predict a similar outcome with respect to any future matter. Contact: Jeffrey M. Haber Freiberger Haber LLP Melville Office (Main Office): 105 Maxess Road, Suite S124 Melville, New York 11747 Tel: (631) 574-4454 Fax: (631) 390-6944 New York Office: 708 Third Avenue, 5th Floor New York, N.Y. 10017 Tel: (212) 209-1005 Fax: (212) 209-7101 Email:  info@fhnylaw.com

Contracts are often at the heart of business and commercial disputes. Not all contract disputes result in litigation. A well-drafted contract can often prevent or resolve a dispute before the parties run to court. But, when the parties cannot resolve their differences, and resort to litigation, it is important to understand the rules governing the breach of contract claim. As a general matter, to allege a breach of contract, a plaintiff must plead (and prove) the following: (1) the existence of an enforceable agreement; (2) performance by plaintiff; (3) the defendant breached the agreement; and, (4) the plaintiff sustained damages as a direct result of the defendant’s breach. JP Morgan Chase v. J.H. Elec. of N.Y., Inc. , 69 A.D.3d 802, 803 (2d Dept. 2010). The failure to satisfy each of the foregoing elements is fatal to a breach of contract claim. Perhaps the most difficult element to satisfy is the first one – the existence of an enforceable agreement. Putting aside the issue of enforceability ( e.g. , some agreements are unenforceable under the Statute of Fraud (discussed here , here and here ), while other agreements are void as against public policy), a plaintiff must identify the specific terms of the agreement upon which the claim is based. M&T Bank Corp. v. Gemstone CDO VII, Ltd. , 68 A.D.3d 1747, 1750-51 (4th Dept. 2009). After all, if the plaintiff cannot identify the terms of the agreement alleged to have been breached, s/he cannot prove that the defendant breached the agreement. Recently, Anna Barrett (“Barrett”) ran into this problem in a lawsuit that she brought against TD Ameritrade Holding Corporation (“TD Ameritrade”), among others. Barrett v. Grenda , 2017 NY Slip Op. 07031 (4th Dept. Oct. 6, 2017) Barrett commenced her action against the defendants for conduct relating to her investment in a private fund established by Walter Grenda, Timothy Dembski, and Reliance Financial Advisors, LLC (collectively, the “Reliance Defendants”) and TD Ameritrade. Barrett sought damages as a result of the defendants’ fraud, negligence, breach of contract, breach of fiduciary duty, and violation of General Business Law § 349. Barrett’s claims arose from investments made in April 2011 in the Prestige Wealth Management Fund (the “Prestige Fund”), a fund that was established by the Reliance Defendants in November 2010. Barrett made her investment in the Prestige Fund through TD Ameritrade, and claimed, among other things, that TD Ameritrade breached its agreement (an IRA Application and Client Agreement) with her by failing to supervise the Reliance Financial Defendants. TD Ameritrade moved to dismiss. Regarding the contract claim, TD Ameritrade argued that Barrett failed to plead the formation of a contract from which a breach could arise – that is, she failed to identify any of the terms of the agreement claimed to have been breached: “Plaintiff has failed to state a claim for breach of contract, because Plaintiff has failed to identify any provision in any contract between her and TD Ameritrade by which it agreed ‘to provide prudent professional financial advice,’ or to ‘supervise’ her account or her investment advisors.” Concluding that the motion was “premature” in the absence of discovery, the motion court denied it without reviewing TD Ameritrade’s substantive contentions. The Fourth Department reversed, concluding that the motion court erred in denying the motion. In doing so, the Court agreed with TD Ameritrade, finding that Barrett “failed to identify the particular contractual provision that was breached.” The Court went further, noting that “the documentary evidence submitted by the TD Ameritrade defendants, i.e. , the IRA Application and Client Agreement, conclusively refutes plaintiff’s allegation that the TD Ameritrade defendants owed any such contractual obligations to her.” A copy of the decision can be found here . Takeaway To form a contract, there must be: (1) at least two parties with legal capacity to enter the contract; (2) mutual assent to the terms of an agreement; and (3) consideration. Furia v. Furia , 116 A.D.2d 694, 695 (2d Dept. 1986). In claiming a breach of contract ( i.e. , enforcing or attempting to enforce a contract), the first step for the plaintiff is to plead the existence of a valid contract. In that regard, the plaintiff must identify the specific terms of the contract that the defendant is alleged to have breached. General allegations that the contract has been breached will not suffice. Kraus v. Visa Int’l Service Assoc. , 304 A.D.2d 408 (1st Dept. 2003). Barrett learned this lesson the hard way.

Many contracts require that a party procure an “Additional Insured” endorsement to their commercial general liability (and similar) insurance policies.  Generally, the purpose of an “Additional Insured” endorsement is to provide insurance coverage to individuals or entities other than the purchaser of the policy.  For example, many commercial lease agreements require not only that a tenant procure insurance to cover a variety of risks, but that the landlord be named as an additional insured.  If the landlord is named as a defendant in a lawsuit as a result of an accident, or the landlord suffers a loss as a result of a casualty such as fire or flood at the leased premises, the landlord can make a direct claim to the tenant’s insurance carrier for defense and/or indemnification. Like commercial leases, construction contracts typically contain an “Additional Insured” endorsement requirement.  Construction contract scenarios can frequently be more complicated than a typical bipartite lease.  For example, a construction contract between an owner and a contractor may require that the contractor obtain an “Additional Insured” endorsement naming as additional insureds numerous different types of individual or entities such as architects, construction managers, owner’s representatives, project engineers, lenders, local municipalities and the like. The comfort obtained from an “Additional Insured” endorsement can quickly turn to anxiety when the carrier denies coverage.  Such was the case in Gilbane Building Co./TDX Construction Corp. v. St. Paul Fire and Marine Insurance Company , 143 A.D.3d 146, 38 N.Y.S.3d 1 (1st Dep’t 2016).  The plaintiff in Gilbane , entered into a written contract with the Dormitory Authority of the State of New York (the “DASNY”) to provide construction management (“CM”) services in conjunction with a construction project at the Bellevue Hospital Campus.  The CM contract between Gilbane and DASNY required that any contractor hired by DASNY name Gilbane as an additional insured under that contractor’s liability policy. Thereafter, Samson Construction Company (“Samson” or “GC”) entered into a written contract with DASNY to “…perform services as the prime contractor for all foundation and excavation work on the project[]”  ( Gilbane , 143 A.D.3d at 148, 38 N.Y.S.3d at 3)  and in which Samson agreed that an endorsement to its general liability policy would name as additional insureds: Dormitory Authority of the State of New York, The State of New York, the Construction Manager (if applicable) and other entities specified on the sample Certificate of Insurance provided by the Owner. ( Gilbane , 143 A.D.3d at 148, 38 N.Y.S.3d at 3.)  The sample Certificate of Insurance specifically named Gilbane, among others, as additional insureds. The policy obtained from defendant Liberty Insurance Underwriters contained an “Additional Insured—By Written Contract” clause, which provided: WHO IS AN INSURED (Section II) is amended to include as an insured any person or organization with whom you have agreed to add as an additional insured by written contract but only with respect to liability arising out of your operations or premises owned by or rented to you. ( Gilbane , 143 A.D.3d at 149, 38 N.Y.S.3d at 3.) Samson’s work on the project allegedly caused damage to neighboring property resulting in litigation in which Gilbane, among others, was named as a defendant.  After Gilbane’s request to Liberty for a defense and indemnification was denied, it commenced an action “… seeking a declaration that Liberty is obligated to provide with coverage.”  ( Gilbane , 143 A.D.3d at 150, 38 N.Y.S.3d at 4.)  The First Department described the ruling in the court below as follows: Supreme Court denied Liberty’s motion, holding that plaintiffs qualified as additional insureds under the policy.  The court found that the policy “requires only a written contract to which Samson is a party” and that this requirement was met by Samson’s written contract with DASNY, which obligated Samson to procure insurance naming as additional insured “the Construction Manager (if applicable)” and that was undisputedly the construction manager. ( Gilbane , 143 A.D.3d at 150, 38 N.Y.S.3d at 4.) The First Department disagreed.  In reversing the supreme court, the First Department reiterated that: an insurance policy is a contract between the insured and the insurer and must be interpreted according to the rules of contract interpretation; and, the extent of coverage is controlled by the terms of the policy “and not the terms of the underlying trade contract that required the named insured to purchase coverage.”  ( Gilbane , 143 A.D.3d at 151, 38 N.Y.S.3d at 5 (quoting Bovis Lend Lease LMB, Inc. v. Great Am. Ins. Co., 53 A.D.3d 140, 145, 855 N.Y.S.2d 459 (1 st Dep’t 2008).) The Appellate Court found that the language of the “Additional Insured—By Written Contract” clause in Samson’s policy with Liberty was clear and unambiguous and “…requires that the named insured execute a contract with the party seeking coverage as an additional insured.”  ( Gilbane , 143 A.D.3d at 151, 38 N.Y.S.3d at 5.)  Because Samson never entered into a written contract with Gilbane, “…Samson’s agreement in its contract with DASNY to procure coverage for is insufficient to afford coverage as an additional insured under the Liberty policy.”  ( Gilbane , 143 A.D.3d at 152, 38 N.Y.S.3d at 5.) Gilbane was left without the coverage to which it was entitled in its agreement with DASNY.  All Gilbane may be left with, however, is a possible breach of contract claim against DASNY and/or a third-party beneficiary claim against Samson for failing to procure the required insurance set forth in Samson’s prime contract with DASNY. The Second Department, relying on Gilbane came to a similar result in Harco Construction, LLC. v. First Mercury Insurance Company , 148 A.D.3d 870, 49 N.Y.S.3d 495 (2017), when interpreting a similar, but not identical, endorsement. TAKEAWAY There are many different “Additional Insured” endorsements/clauses that typically appear in insurance policies.  Gilbane and Harco make plain that courts in the First and Second Department will continue to construe such provisions as written – when clear and unambiguous. Those seeking the benefits of an “Additional Insured” endorsement such as the one at issue in Gilbane (that requires privity of contract with the policy purchaser) must make sure that they have a written agreement with policy purchaser to provide such coverage.  This may be as simple as having the individual or entity seeking additional insured status execute the prime contract solely for compliance with the additional insured provisions therein.

This Blog has previously written about the financial exploitation of America’s seniors. ( Here , here , here and here .) As noted in these prior posts, unscrupulous investment professionals (such as, stockbrokers, financial advisors and insurance brokers) often exploit the fact that many elder and disabled investors are not market savvy and financially sophisticated or are trusting of those in a position of knowledge and authority. They prey on the fact that senior and vulnerable investors are often hesitant to admit they do not understand what is being presented to them. On September 29, 2017, the Securities and Exchange Commission (“SEC”) announced that it had charged a former broker, his company, and his business partner for preying on retirees and other investors in an alleged real estate investment scheme in which the defendants used high-pressure sales tactics to steal $6 million from their victims. In its complaint , the SEC alleged that Leonard Vincent Lombardo (“Lombardo”) operated the scheme over a four-year period at his Long Island-based company, The Leonard Vincent Group (“TLVG”), with assistance from its CFO Brian Hudlin (“Hudlin”). As noted in the SEC compliant, Lombardo has a long history of preying on investors: he previously worked at several brokerage firms, including Stratton Oakmont, the former pump-and-dump brokerage firm that was at the center of the “Wolf of Wall Street,” and has been barred from the brokerage industry by the Financial Industry Regulatory Authority for multiple violations, including fraud and unauthorized trading in customer accounts. According to the SEC, more than 100 investors were defrauded with false claims that their money would be invested in distressed real estate. Some were told that their investments had increased by more than 50 percent in a matter of months when in fact there were no actual earnings on their investments.  Lombardo allegedly invested only a small fraction of investor money in real estate and used the bulk of it for separate business ventures into the e-cigarette industry and personal expenses, such as car payments on his BMW and Mercedes, marina fees on his boat, and visits to tanning salons. “As alleged in our complaint, retirees entrusted their money to TVLG believing they were investing in high-return real estate investments, not electronic cigarettes or trips to the tanning salon,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office.  “This is another case involving a fraudster trying to look the part of a wealthy financial advisor while doing nothing more than trying to separate people from their hard-earned money.” “Investors should be suspicious anytime they are guaranteed high investment returns,” said Lori J. Schock, Director of the SEC’s Office of Investor Education and Advocacy.  “High investment returns typically involve high risk, and cannot be guaranteed.” TLVG, Lombardo, and Hudlin agreed to settlements that are subject to court approval.  TLVG and Lombardo agreed to pay disgorgement of $5,878,729.41.  Earlier this year, Lombardo pled guilty in a parallel criminal case brought by the U.S. Attorney’s Office for the Eastern District of New York.  Without admitting or denying the SEC’s allegations, Hudlin agreed to pay a $40,000 penalty. Takeaway Financial exploitation of senior and vulnerable adults remains an all too common fact of life. Enforcement efforts, such as the action discussed in this article, should help. At the end of the day, however, vigilance by investors and those trusted persons charged with overseeing their assets and property is the best way to help detect and stop financial exploitation before it results in financial ruin. As Director Schock noted: “Investors should be suspicious anytime they are guaranteed high investment returns.” After all, there are no guarantees when it comes to investing.

Securities Litigation 101: Commencing and Contesting a Federal Securities Class Action Panelist: Jeffrey M. Haber A motion to dismiss often proves a decisive event in resolving a federal securities class action, raising the stakes both for defeating or winning the motion.  A premier faculty of experienced members of the plaintiff and defense bar will present an overview of the legal issues and strategic considerations that inform the filing of a securities class action and lead plaintiff selection process, the drafting of a securities complaint and the briefing of a motion to dismiss.  The panel will address the fundamentals of a securities claim, existing precedent and evolving theories, as seen from both sides of the bar.  The panel will also offer practical suggestions to increase each side’s chance of success.  The presentation will be particularly useful for litigators who are beginning a securities litigation practice as well as seasoned litigators returning to the practice who would like to refresh their knowledge. When : 6:00 pm – 8:00 pm Wednesday, October 4, 2017 Where : New York City Bar 42 West 44th St New York, NY 10036 For additional information or to register for the seminar or the live webcast, click here . ATTORNEY ADVERTISING. © 2017 Freiberger Haber LLP. The law firm responsible for this advertisement is Freiberger Haber LLP, 105 Maxess Road, Suite S124, Melville, N.Y. 11747, (631) 574-4454; 708 Third Avenue, 5th Floor, New York, New York 10017, (212) 209-1005. Prior results do not guarantee or predict a similar outcome with respect to any future matter. Contact: Freiberger Haber LLP Melville Office (Main Office) : 105 Maxess Road, Suite S124 Melville, N.Y. 11747 Tel: (631) 574-4454   New York Office : 708 Third Avenue, 5th Floor New York, N.Y. 10017 Tel: (212) 209-1005 Fax: (212) 209-7101 Email: info@fhnylaw.com

In the wake of the hack of personal consumer information from Equifax Inc.’s computers, congressional lawmakers have asked the Securities and Exchange Commission ("SEC") to investigate whether company executives violated insider trading laws. The cyber breach involved the theft of 143 million Americans’ personal data --including Social Security numbers, driver’s license records and birth dates. Equifax is one of the main credit bureaus that compiles data to form credit histories that banks rely on to issue loans. It has been reported that three executives of the company sold shares in an aggregate amount of $1.8 million days after the security breach was discovered on July 29. Equifax did not publicly disclose the hack until 6 weeks later, however. The company has “apologized” for the security breach, but has repeatedly claimed the executives were unaware of the breach at the time they sold their shares. Equifax has offered consumers the option of “locking” their credit information for free and to sign up for a credit monitoring service. In order to do so, consumers were required to waive their right to join a class action lawsuit that was filed in connection with the hack.  However, Equifax has since said that it is no longer enforcing the waiver, stating that it has updated its policy to provide that: "enrolling in the free credit file monitoring and identity theft protection products that we are offering as part of this cybersecurity incident does not prohibit consumers from taking legal action." Class Action Lawsuits Consumer Class Actions On September 11, 2017, USA Today reported that more than 20 consumer class actions had been filed against Equifax, adding that “additional cases are likely to come.” Among other things, the actions allege that Equifax negligently failed to protect customer information and willfully and/or negligently delayed notifying the public of the breach. The lawsuits also refer to earlier, smaller data breaches the company sustained in 2013, 2016, and earlier this year. According to one of the lawsuits, Equifax “knew and should have known of the inadequacy of its own data security.” Securities Class Actions Along with the consumer class actions, investors have filed securities class actions against Equifax and certain for its officers -- namely, the company’s Chairman and CEO, Richard F. Smith ("Smith"), and its CFO, John W. Gamble, Jr. ("Gamble"). According to a press release issued on September 11 by the plaintiff's attorneys, the defendants issued materially false or misleading statements or failed to disclose that “(1) the Company failed to maintain adequate measures to protect its data system; (2) the Company failed to maintain adequate monitoring systems to detect security breaches; (3) the Company failed to maintain proper security systems, controls and monitoring systems in place; and (4) as a result of the foregoing the Company’s financial statements were materially false and misleading at all relevant times.” The complaint ( here ) was filed in the United States District Court for the Northern District of Georgia on behalf of all persons who purchased Equifax shares between February 25, 2016 and September 7, 2017 (the "Class Period"). The plaintiff specifically references the insider trading by Gamble and other company executives. The complaint also references a variety of alleged statements by the company during the Class Period relating to the quality of its data protection and security measures. As a result of the disclosure of the data breach, the complaint alleges that the company’s shares fell nearly 17%. Lawmakers’ Letter On September 12, letters signed by thirty-six U.S. Senators were sent to the SEC and the Federal Trade Commission seeking a probe of the stock sales by Equifax insiders -- namely, Gamble; the President of U.S. Information Solutions Joseph Loughran; and the President of Workforce Solutions Rodolfo Ploder. The bipartisan request highlights the degree of public outrage over the company’s handling of the cyber breach and the subsequent insider sales. “We request that you conduct a thorough examination of any unusual trading, including any atypical options trading, for violations of insider trading law ... and that you spare no effort in your investigations," the senators wrote in the letter. The Takeaway The insider trading allegations make the securities class action lawsuit more problematic for the defendants. Although Equifax has maintained that the selling executives were not aware of the breach when they traded and the sales themselves were relatively small, representing only a small portion of the sellers’ holdings, the timing of the sales is suspicious.  As noted, the trading took place after the breach had been discovered but before the breach was publicly disclosed. Courts look at the timing of the sales, in addition to the amount of the sales versus the insider’s total holdings, to determine if the sales are unusual or suspicious. None of the sales were made pursuant to scheduled 10b5-1 trading plans. Complicating the issue for the insiders are recent reports that Equifax was the victim of a separate security breach in March of this year. Equifax has not publicly disclosed the March breach. According to Bloomberg , in early March, “Equifax began notifying a small number of outsiders and banking customers that it had suffered a breach and was bringing in a security firm to help investigate.” According to the article, “the hackers entered the company’s computer banks the second time through a flaw in the company’s web software that was known in March but not patched until the later activity was detected in July.”  Gamble sold 14,000 shares on May 23, for proceeds of $1.91 million, more than twice the size of his Aug. 1 sale of 6,500 shares for $946,374. The securities class action plaintiffs and regulators will no doubt find this transaction and its timing worth investigating. The securities class action will be interesting to follow, in addition to the various regulatory and congressional investigations. In the past, securities class action and shareholder derivative plaintiffs have not fared well after bringing actions following the disclosure of data breaches. Time will tell what happens in this case. But, given the regulatory and congressional scrutiny of the breach and the insider trading, the outcome of this securities class action may be different than the previous data breach class actions involving other companies. Stay tuned.

It is widely known that there is a residential foreclosure crisis throughout the country and New York State is no exception. The New York State Legislature responded by promulgating a series of rules designed to protect residential homeowners.  These rules, however, place additional burdens on foreclosing lenders and courts throughout New York State have demonstrated little sympathy for foreclosing lenders that fail to follow these rules. For example, section 1303 of the Real Property Actions and Proceedings Law (“RPAPL”) requires that, under certain circumstances relating to residential property, a foreclosing mortgagee must send statutory notice to the mortgagor and tenants advising them, among other things, that they are in danger of losing their home and how to avoid foreclosure rescue scams. Similarly, RPAPL 1304 requires that at least ninety days prior to commencing legal action against a borrower with respect to a “home loan” (as defined in the relevant statutes (a “Home Loan”)), a lender must: send written notice to the borrower by certified and regular mail that the loan is in default; provide a list of approved housing agencies that provide free or low-cost counseling; and, advise that legal action may be commenced after ninety days if no action is taken to resolve the matter. In residential foreclosure actions involving a Home Loan, CPLR 3012-b requires that the complaint be accompanied by a certification signed by the foreclosing lender’s counsel that the underlying facts and documents have been reviewed, that based on such review there is a reasonable basis for the commencement of the action and that the foreclosing lender is the proper party plaintiff to the action. The Appellate Division, Second Department, in M&T Bank v. Joseph , 152 A.D.3d 579, 58 N.Y.S.3d 150 (2017), reminds all foreclosing lenders with respect to certain residential mortgages, that the rules established to protect homeowners are to be followed.  In M&T , the Bank loaned the defendant approximately $425,000 and secured the loan with a mortgage on defendant’s residential real property.  The defendant defaulted under the loan in June of 2010 and M&T commenced its action in December of that year.  After the defendant answered and the parties attended a mandatory settlement conference, M&T moved for, and was granted, summary judgment. On defendant’s appeal, the Second Department reversed the supreme court and, in so doing, reiterated that M&T was required to prove its strict compliance with RPAPL 1304 by tendering sufficient evidence in admissible form.  The Appellate Court was unmoved with the “unsubstantiated and conclusory” statement from a bank officer that “a 90-day default letter was sent in accordance with [] RPAPL 1304” as urged by M&T in the papers supporting its motion for summary judgment. Instead, in order to prove compliance, the Second Department required “an affidavit of service or proof of mailing from the post office evincing that it properly served the defendant pursuant to RPAPL 1304.” Significantly, the Second Department found that since M&T failed to meet its burden of proof that the requirements of RPAPL 1304 were satisfied, the motion for summary judgment should have been denied “regardless of the sufficiency of the defendant’s opposition papers.” TAKEAWAY The failure to follow the residential foreclosure rules can have significant consequences.  In M&T , the Second Department’s reversal of the supreme court’s grant of summary judgment came seven years after the action was commenced.  Substantial interest and legal fees likely accrued during the lengthy pendency of the action to the point where the equity in the real property may have been insufficient to make the bank whole.  Moreover, to the extent that the bank was otherwise entitled to recover its reasonable legal fees under the note and mortgage, the court might not consider “reasonable”, those fees related to litigating the insufficiency of M&T’s compliance with RPAPL 1304.

On September 7, 2017, the Securities and Exchange Commission ("SEC") announced that State Street Corp. agreed to pay more than $35 million to settle charges that it fraudulently charged secret markups for transition management services and separately omitted material information about the operation of its platform for trading U.S. Treasury securities.   Hidden Transition Management Fees The SEC charged State Street with defrauding six institutional investors by charging hidden markups for trades of U.S. Treasuries on its electronic platform. The scheme, which reportedly began in 2010, revolved around the highly competitive transition management business. State Street overcharged institutional investors that were changing fund managers of investment strategies for its services. According to the SEC, Ross McClellan, an executive vice president of State Street, oversaw the scheme that targeted large deals for markups because the overcharges would not draw attention. The scheme first targeted a sovereign wealth fund in the Middle East in 2010. The bank offered to rework its $6 billion portfolio without charging a commission. In reality, State Street booked $2.7 million (9 basis points) in markups that were disguised as  a “bid  offer spread.” McClellan directed two U.K.-based State Street traders to take the undisclosed markups, but one of the traders was picked up on a recorded line telling a colleague no one would notice, calling it a “rounding error.” Similar schemes saw the bank cheat an Irish government agency of $4.5 million and a U.K. postal company of $3 million in undisclosed transition management charges. “Agreeing to a fee arrangement and then secretly tucking in hidden, unauthorized markups is fraudulent mistreatment of customers,” said Paul G. Levenson, Director of the SEC’s Boston Regional Office that investigated the overcharges. In a statement, State Street said that the settlement concluded all governmental investigations related to the overcharging. “We deeply regret that our clients were impacted and that a small number of our employees failed to meet our expectations,” State Street said. “The impacted clients were fully reimbursed, and over the past several years we have taken significant steps to strengthen our controls for our transition management business, and more broadly to enhance our compliance program, culture and operating environment.” The settlement comes on the heels of a deferred prosecution agreement the bank previously entered into with the Department of Justice in January to resolve criminal charges that it engaged in the scheme that is the subject of the settlement with the SEC. ( Here .) State Street agreed to pay a penalty of $32.3 million to settle the criminal charges and offered to pay the same amount to the SEC as a penalty to resolve the civil charges. A copy of the SEC's order can be found here . Failure to Make Material Disclosures The SEC also charged the bank with failing to make material disclosures relative to “GovEx,” the bank’s electronic trading platform for U.S. Treasuries. The bank described the platform (known as the Last Look platform) as fair and transparent but gave special treatment to certain subscribers by allowing them to reject matches to quotes they had submitted.  “Firms that run trading platforms cannot mislead subscribers about their order handling operations,” said Kathryn A. Pyszka, Associate Director of the SEC’s Chicago Regional Office that investigated the GovEx-related disclosure failures. A copy of the SEC's order can be found here .

On September 5, 2017, Judge Lorna G. Schofield of the United States District Court for the Southern District of New York certified a class of Deutsche Bank employees who had filed an action under the Employee Retirement Income Security Act (“ERISA”), alleging self-dealing in the company’s retirement plan – the Deutsche Bank Matched Savings Plan (the “Plan”).  In particular, the Plaintiffs alleged that Deutsche Bank and the other defendants violated their fiduciary duties by loading the Plan with expensive funds that earned fees for the bank. The class includes between 22,000 and 32,000 current and former participants in the Plan. What is a Class Action? A class action is a type of lawsuit in which one or more persons bring an action on behalf of a group of persons, referred to as the “class.” Under federal law, the Federal Rules of Civil Procedure govern class actions. While the subject matter of class actions can vary widely, certain factors must be present for a court to certify an action as a class action: the issues in dispute are common to all members of the class; the issues predominate over all others, and the members of the class are so numerous as to make it impracticable to bring them all before the court. Moreno v. Deutsche Bank Americas Holding Corp. The plaintiffs claimed that as of 2009, the Plan had approximately $1.9 billion in assets and offered participants 22 “designated investment alternatives,” 10 of which were “proprietary Deutsche Bank mutual funds.” The gravamen of the complaint concerned Defendants’ inclusion of proprietary mutual funds among the Plan’s offerings. According to the Plaintiffs, “Deutsche Bank earned millions of dollars in investment management fees by retaining in the plan.” The complaint alleged that the Plan included three proprietary index funds that charged excessive fees in relation to other comparable index funds. The complaint also alleged that the Plan included actively managed proprietary funds in which Deutsche Bank charged management fees two to five times higher than “other actively managed funds in the same style,” and that such funds “consistently underperformed as measured by benchmark indices.” Plaintiffs further alleged that Deutsche Bank failed to include the least expensive share class for each of its offered proprietary funds and failed to rationally control recordkeeping costs. The Court found that these allegations satisfied the commonality element of Rule 23(a). Noting that “numerous courts have found commonality where plaintiffs challenge a 401(k) plan’s retention of investment products, including proprietary funds, alleging excessive fees,” the Court held that “numerous questions,” such as “whether each Defendant was a fiduciary” and whether Defendants were conflicted or acting imprudently would “generate common answers apt to drive the resolution of Defendants’ liability.” (Citation and internal quotation marks omitted.) Judge Schofield rejected the Defendants’ argument that the Plaintiffs could not show commonality because none of the alleged breaches affected all class members, holding that “ ommonality … does not mean that all issues must be identical as to each member.” The Defendants argued that “12,000 class members never invested in a single proprietary fund at any point during the relevant period.” The Defendants also argued that resolving this action involved “a massive series of individualized analyses that turn on when and in which funds each participant invested.” Again, the Court rejected the argument, holding that Defendants “misapprehends Plaintiffs’ claims, which are brought on behalf of the Plan. Liability is determined based on Defendants’ not Plaintiffs’ decisions.” As to the typicality and adequacy of representation elements, the Court found that the Plaintiffs satisfied both requirements. First, the Court found that “each class member’s claim arises from the same course of events and each class member makes similar legal arguments to prove the defendant’s liability.” (Citations omitted.) For example, the Plaintiff’s “claims arise from the same course of events – their participation in the Plan” and involve “similar legal arguments to prove liability – that Defendants mismanaged the Plan in violation of ERISA and continue to do so today.” Such allegations, held the Court, are “sufficient to show typicality.” Second, the Court found that the Plaintiffs were adequate representatives of the class because they and the class “share an interest in remedying any alleged mismanagement of the Plan in violation of ERISA,” “d not appear to have interests antagonistic to other class members,” and retained competent counsel to represent the interests of the class. The Court found “unpersuasive” the Defendants’ argument that the Plaintiffs were not adequate class representatives because they did not understand the case, noting that the claims “involve technical financial decisions affecting billions of dollars in assets and Plan fiduciaries’ compliance with the requirements of ERISA.” “It is understandable,” therefore, “that Plaintiffs, who are not lawyers or investment professionals, may have had difficulty answering questions about the claims.” Finally, the Court found that the Plaintiffs satisfied Rule 23(b)(1)(B), which permits class certification if prosecuting separate actions by or against individual class members would create a risk of adjudications with respect to individual class members that, as a practical matter, would be dispositive of the interests of the other members not parties to the individual adjudications or would substantially impair or impede their ability to protect their interests. Noting that a breach of fiduciary duty is a classic example of a Rule 23(b)(1)(B) case, and that the “the structure of ERISA favors the principles enumerated under Rule 23(b)(1)(B),” the Court found that the Plaintiffs satisfied the rule: the “Defendants’ alleged conduct was uniform with respect to each participant,” and that adjudicating Plaintiffs’ claims … would dispose of the interests of the other participants or substantially impair or impede their ability to protect their interests.” The Court went on to say that “Plaintiffs allege Defendants’ conduct affected members of a class of thousands similarly as each were exposed to the same investment options and seek to restore losses to the Plan’s assets, which are comprised of the individual accounts that allegedly paid excessive fees,” and remove “Defendants as fiduciaries,” in addition to “other equitable relief.” “Such relief, if ordered,” held the Court, “would as a practical matter dispose of the interests of non-party participants.” Notably, the Court ruled that although there was split over whether class certification under Rule 23(b)(1) for breach of fiduciary duty under ERISA is appropriate in the wake of recent Supreme Court decisions, the majority of courts “have held that it is.” Plaintiffs do not assert harms based on Defendants’ misconduct that is specific to his or her individual account. Rather, named Plaintiffs – whose collective participation in the Plan covers the entire class period – challenge Defendants’ process for selecting and retaining the investment options presented to all Plan participants. Adjudicating their claims challenging Defendants’ management of the Plan as a whole would necessarily affect the resolution of any concurrent or future actions by other Plan participants. The Court further found that although Rule 23(b)(2) does not permit the combination of “individualized awards of monetary damages,” the same is not true with regard to Rule 23(b)(1)(B), which is the rule under which the Plaintiffs were proceeding: “Plaintiffs’ class claims under Rule 23(b)(1) are derivative in nature, not individualized.… Any monetary relief will be paid to the Plan … and the Plan fiduciaries would be responsible for allocating the recovery among participants.” (Citations and internal quotation marks omitted.) A copy of the Court's opinion and order can be found here. Other 401(k) Class Action Lawsuits This ruling follows more than two dozen proposed class actions in the past three years against financial firms challenging in-house investment products in employees’ 401(k) plans. Firms targeted by proposed class actions include JP Morgan Chase Bank,  Charles Schwab, and Morgan Stanley, among others. The overarching issue in these lawsuits is that the firms violated their fiduciary duties under ERISA by packing their 401(k) plans with in-house funds that earn high fees, rather than providing participants less expensive options available through other investments. The Takeaway Although it remains to be seen whether the class will prevail in its claims against Deutsche Bank, Moreno is important because of the Court's analysis of Rule 23(b)(1), in particular, its adoption of the majority rule that Rule 23(b)(1) is an appropriate vehicle for resolution of breach of fiduciary duty claims under ERISA. The fact there is a split among the district courts makes the issue ripe for review by the Circuit Courts of Appeal, and possibly the United States Supreme Court. This Blog will continue to follow the issue as it develops.

It has long been the policy in New York to favor and encourage arbitration as a means of expediting the resolution of disputes and conserving judicial resources. Rio Algom Inc. v. Sammi Steel Co., Ltd. , 168 A.D.2d 250, 251 (1st Dept. 1990). For this reason, when parties have chosen arbitration as their forum for dispute resolution, they are precluded “from using the courts as a vehicle to protract litigation.” Matter of Weinrott (Carp) , 32 N.Y.2d 190, 199 (1973). Notwithstanding, there are times when parties choose not to invoke their arbitration clause. For example, if a defendant believes that the plaintiff’s claims are without merit, it may prefer to have a court rule on a motion to dismiss, rather than an arbitrator who is not bound by a court’s procedural and substantive rules. If a party ignores the arbitration provision, and runs to court, does that party waive its right to arbitration? In Primer Constr. Corp. v. Empire City Subway Co., Ltd. , 2017 NY Slip Op. 31909(U) (Sup. Ct. N.Y. County Sept. 6, 2017), Justice Bransten of the Supreme Court, New York County, Commercial Division, answered the question, yes. Primer Construction Corp. v. Empire City Subway Co., Ltd. Background The case arose from an agreement between Primer Construction Corp. (“Primer”), a general contractor that provides capital municipal work for New York City and its agencies, Verizon-New York, Inc., d/b/a Verizon Communications (“Verizon”), a private utility company that owns and/or operates surface and subsurface utility facilities within New York City, Empire City Subway Company, Ltd. (“Empire City”), a wholly-owned subsidiary of Verizon, and the New York City Department of Design and Construction (“DDC”). Pursuant to the agreement, the defendants agreed to cooperate with and compensate contractors, such as the plaintiff, working on DDC projects involving the defendants’ utility facilities. In June 2014, Primer entered into an agreement with the DDC for the construction of a culvert ( e.g. , a tunnel that allows water to flow under a road) in Queens, New York. The project, however, interfered with an underground network of utility lines owned by the defendants, requiring Primer to move, protect, or secure those facilities. In October 2014, Primer and the defendants entered into an agreement pursuant to which Primer would place the utility lines above the culverts (the “Interference Agreement”). The Interference Agreement contained a binding arbitration clause, which stated that “ ny and all disputes arising out of this Agreement or a breach thereof shall be submitted to arbitration ….” The agreement also contained a binding written modification clause, which stated that the agreement “shall not be modified or rescinded, except by a writing signed by a duly authorized representative of both parties.” Soon after work began, Primer found that the interference work could not be completed as originally agreed. Primer alerted the defendants to the problem, but the defendants refused to provide alternative methods for project completion. Nevertheless, Primer continued to perform the work as set forth in the Interference Agreement. Primer claimed that the defendants owed it $1.3 million for the work it performed. Primer filed the action in May 2015, and an amended complaint in November 2016, asserting three causes of action against the defendants: (1) fraudulent misrepresentation/fraudulent inducement; (2) breach of contract; and (3) quantum meruit. The defendants moved to dismiss. The Court’s Ruling Before ruling on the motion to dismiss, the Court addressed the question of whether it had subject matter jurisdiction to hear the dispute in light the arbitration provision in the Interference Agreement. The Court held that the parties had waived the arbitration requirement in the Interference Agreement. The Court found that Primer waived the right to arbitrate “by choosing to litigate the dispute in” court and the Defendants “waived the right” to arbitrate “by participating in the instant litigation.” Thus by “choos to take the course of litigation,” the parties had “waived the right to submit the question to arbitration.” Matter of City of Yonkers v. Cassidy , 44 N.Y.2d 784, 785 (1978). The Court also found that even if the parties had not manifested their “acceptance of the judicial form” by participating in the lawsuit ( Stark v. Molod Spitz DeSantis & Stark, P.C. , 9 N.Y.3d 59, 66 (2007)), they had orally waived the arbitration provision in the Interference Agreement. The Court held that such waiver was enforceable notwithstanding the “written modification provision at issue.” Taylor v. Blaylock & Partners, LP. , 240 A.D.2d 289, 290 (1st Dept. 1997). As a result, the Court concluded that it had subject matter jurisdiction to hear the matter. Takeaway Arbitration is an alternative way to resolve a dispute without going to court. It can be binding, in which the arbitrator issues a decision that can be enforced by the courts, or non-binding, in which the arbitrator issues an advisory opinion that the parties can accept or reject. Before the parties can arbitrate their dispute, they must have agreed to do so. However, like any contract, the parties to an arbitration agreement can modify, waive or abandon the right to arbitrate. They can choose to litigate in court or they can agree to waive the agreement to arbitrate. And, they can waive the agreement orally even if the contract requires modification only in writing. Primer exemplifies these principles.

It’s an unfortunate fact of life that victims of natural disasters, such as Hurricanes Harvey and Irma, and those who try to help them, often become the targets of fraud. As the floodwaters recede and the clean-up effort begins, officials have sounded the alarm, warning victims and volunteers about this threat. On September 4, 2017, Corey Amundson (“Amundson”), the Acting United States Attorney for the Middle District of Louisiana and head of the National Center for Disaster Fraud, highlighted the concern in an interview with NPR ( here ). According to Amundson, “it starts with charity fraud, contractor fraud, emergency assistance fraud” and “evolves into program fraud” as the federal government provides financial assistance to those in need. Amundson said that these types of fraud fall into two categories: (i) impersonations – individuals impersonating FEMA inspectors, insurance inspectors and National Flood Insurance Program inspectors, and (ii) false submissions – individuals filing claims on property they do not own or with social security numbers that belong to someone else. Amundson also noted the use of technology to defraud hurricane victims, citing identity fraud and false web domains that sound like disaster relief organizations that in reality are not as common examples. Amundson offered the following advice to the victims of natural disasters and volunteers who are trying to help them: Do not respond to emails soliciting donations and do not open any email attachments or links. Avoid charitable organizations whose names sound familiar “but are just slightly off.” Only work with and donate money to known and trusted charities, and only work directly with them, not with people claiming to be working on their behalf. Bullying or intimidation is a red flag for fraud. While all fraud cannot be prevented, Amundson advised people to use their “gut feelings” and “common sense,” to protect themselves from fraud. After all, as Amundson noted, “if something feels off, it probably is.” On September 13, 2017, the Financial Industry Regulatory Authority (“FINRA”) issued a fraud alert about the risk of financial fraud in the wake of hurricanes Harvey and Irma ( here ). Echoing some of the things Amundson noted, FINRA warned that hurricane victims should not “be surprised” if they “receive unsolicited  phone calls , emails and texts, including from  messaging apps , about investments that exploit a variety of hurricane-related opportunities.” FINRA noted that “stocks or  crowdfunding investments  associated with clean-up, rebuilding and breakthroughs in science and technology that purport to address current and future flood-related issues” are common forms of financial fraud. FINRA cautioned against responding to unsolicited communications that, among other things, promise “swift and exponential growth”; mention “contracts or affiliations with federal government agencies or large, well-known companies”; use facts from respected news sources “to bolster claims” of stock increases; and use pressure tactics to secure immediate investment, such as “You must act now!” FINRA offered the following advice to victims of natural disasters to “avoid potential scams”: Investigate before investing. “Never rely solely on information you receive in an unsolicited email, text message or cold call from a smooth talking “analyst” or “account executive” promoting a stock.” “Use  FINRA BrokerCheck ®  to check registration status and additional information on investment professionals and firms.” Find out the identity of the sender. “Many companies and individuals that tout stock are corporate insiders or are paid to promote the stock. Look for statements (usually found in the fine print) that indicate cash payments or the receipt of stock for disseminating a report on the company.” Find out where the stock trades. “ Most unsolicited stock recommendations involve stocks that can’t meet the listing requirements of The Nasdaq Stock Market, the New York Stock Exchange or other U.S. stock exchanges. Instead, these stocks tend to be quoted on an over-the-counter (OTC) quotation platform like the OTC Bulletin Board (OTCBB) or the OTC Link Alternative Trading System (ATS) operated by OTC Markets Group, Inc.” “Companies that list their stocks on registered exchanges must meet minimum listing standards. For example, they must have minimum amounts of net assets and minimum numbers of shareholders. In contrast, companies quoted on the OTCBB or OTC Link generally do not have to meet any minimum listing standards (although companies quoted on the OTCBB, OTC Link’s OTCQX and OTCQB marketplaces are subject to some initial and ongoing requirements).” Read a company’s SEC filings. “ Most public companies file reports with the SEC. Check the SEC’s EDGAR database  to find out whether the company files with the SEC. Read the reports and verify any information you have heard about the company.” Takeaway Victims of natural disasters have enough to worry about. They should not have to worry about being victimized by fraudsters. Yet, they do. As FINRA noted in its alert, “fraud routinely follows on the heels of disaster.” Hurricanes Harvey and Irma “are no exception.” While it may not be possible to prevent all types of fraud, Amundson and FINRA offer sound advice for the targets of fraud to protect themselves: use common sense, ask questions and be vigilant. By doing so, hurricane victims can protect themselves from being victimized again.