Search Results

By:  Jeffrey M. Haber To state a claim for fraud, a plaintiff must allege “a misrepresentation or a material omission of fact which was false and known to be false by defendant, made for the purpose of inducing the other party to rely upon it, justifiable reliance of the other party on the misrepresentation or material omission, and injury.” The claim must pleaded with particularity. Conclusory allegations will not suffice. Neither will allegations based on information and belief. If “sufficient factual allegations of even a single element are lacking,” then the claim must be dismissed. The requirement that a fraud claim be pleaded with particularity can be found in Section 3016(b) of the Civil Practice Law and Rules (“CPLR”). Under CPLR 3016 (b), the circumstances constituting fraud must be stated with sufficient detail “to permit a reasonable inference of the alleged conduct.”   To satisfy the particularity requirement, the plaintiff must allege such facts as the time, place, and content of the defendant’s false representations, as well as the details of the defendant’s fraudulent acts, including when the acts occurred, who engaged in them, and what was obtained as a result. Put another way, the complaint must identify the “who, what, where, when and how” of the alleged fraud. Notwithstanding, in Pludeman v.Northern Leasing Systems, Inc. , the Court of Appeals held that CPLR 3016(b) “should not be so strictly interpreted as to prevent an otherwise valid cause of action in situations where it may be impossible to state in detail the circumstances constituting a fraud.” Therefore, at the pleading stage, a complaint need only “allege the basic facts to establish the elements of the cause of action.” Thus, as noted, a plaintiff will satisfy CPLR 3016(b) when the facts permit a “reasonable inference” of the alleged misconduct. As noted, a plaintiff pleading fraud must identify a misrepresentation or a material omission of fact. The misrepresentation must be a misrepresentation of present fact; it cannot be a misrepresentation of future intent to perform under the contract. Thus, a fraud claim that is premised on a misrepresentation of a prior or existing fact will not be dismissed “as an insincere promise of future performance.” The foregoing principles were considered by the Appellate Division , First Department in Cedar Capital Mgt. Group Inc v. Lillie , 2025 N.Y. Slip Op. 01569 (1st Dept. Mar. 18, 2025) ( here ). Cedar Capital involved allegations of fraud, among others, in connection with the investment of significant sums of money in debentures Plaintiffs alleged that they relied on defendants to purchase debentures in EHG Ltd. and EHG LLC, that plaintiffs wired defendants significant amounts of money in connection with these purchases, that defendants promised plaintiffs monthly returns on their investments, and that plaintiffs only received a fraction of the money to which they were entitled. In addition, plaintiffs alleged that they later settled their disputes with EHG Ltd. and EHG LLC but due to the dissolution of these defendants and several London affiliates of EHG LLC and Gulf Atlantic, plaintiffs only received $130,000 of the millions of dollars that defendants agreed to pay in settlement of the claim. Collectively, plaintiffs sought a minimum of $30,000,000, along with attorneys’ fees , expenses, costs, disbursements, and interest. Plaintiffs commenced the action on November 4, 2020. Certain defendants moved to dismiss the complaint, which the motion court denied. Plaintiffs thereafter moved for leave to amend the complaint, which was granted. The amended complaint (the “complaint”) pleaded 26 causes of action . Relevant to today’s article are the first nine causes of action, which asserted claims for fraud and fraudulent inducement . Defendants moved to dismiss the complaint on various grounds . Regarding the fraud claims , the motion court granted the motion. The motion court held that although the complaint sufficiently alleged fraudulent representations about a trading and investment concept, it nevertheless failed to allege, with sufficient particularity, the specific false representations made by the charged defendants to plaintiffs. Among other deficiencies, the motion court held that plaintiffs engaged in improper group pleading, finding that they credited every alleged false representation made by one defendant to every other defendant, collectively, as their alter ego. Such pleading, said the motion court, failed to satisfy CPLR 3013 and 3016(b). The motion court also held that the fraud claims were based on non-actionable predictions or expectations. In that regard, the motion court noted that the first through seventh causes of action were predicated upon alleged false representations that an investment in EHG Ltd. or EHG LLC would generate high monthly returns, with the First Bucket PPMs projected to yield a 2% monthly return and an estimated 0-6% return on the principal and the Second Bucket PPMs projected to yield a 94% monthly return. However, said the motion court, “ laims based upon defendants’ projections of returns on investment are not actionable because such projections are merely statements of prediction or expectation.” The motion court further held that the representations in the eighth and ninth causes of action – i.e. , plaintiffs would be paid the distributions earned under the First and Second Bucket PPMs to induce them to enter into the Settlement and that defendant falsely represented that payments on the First Bucket and Second Bucket PPMs were forthcoming – were nothing more than insincere promises to perform. Such representations, concluded the motion court, could not support a fraud claim. Finally, the motion court held that the fraud claims were duplicative of the breach of contract claims. “A fraud claim should also be dismissed where it seeks damages identical as those recoverable on a breach of contract claim,” said the motion court. The motion court found that the eighth and ninth causes of action for fraud related to the Settlement sought damages of $25 million, and the twelfth through sixteenth causes of action sought $25 million in damages for a breach of the Settlement. Accordingly, the first through ninth causes of action were dismissed as duplicative of the breach of contract claims. On appeal, the First Department unanimously affirmed. The Court held that the motion court “properly dismissed the fraud-based claims against all defendants.” First, the Court found that plaintiffs failed to satisfy the particularity requirements of CPLR 3016(b): “The sparse allegations of material misrepresentations, which are focused on a characterization of the purported investments being a ‘scam’ rather than a legitimate investment opportunity, were not sufficiently particular to allege fraud.” Second, the Court found that the fraud claims were based on “nothing more than an insincere promise to perform under a contract.” The Court explained that “the allegations underlying the fraud causes of action state only that defendants made general promises to meet payment obligations.” Third, the Court held that the fraud claims duplicated the breach of contract claims because “the fraud claims seek damages identical to those recoverable for breach of contract.” Blog”=">Blog”" tile="tile" on="on" our  website and=">website and" enter="enter" search="search" term="term" most="most" applicable="applicable" your="your" interest="interest" in="in" “search”="“search”" box,="box," e.g. ,="e.g.," “misrepresentation="“misrepresentation" present="present" fact,”="fact,”" “insincere="“insincere" promise,”="promise,”" “group="“group" pleading,”="pleading,”" “duplication.”="“duplication.”"> ___________________________ 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. Lama Holding Co. v. Smith Barney Inc. , 88 N.Y.2d 413, 421 (1996). Eurycleia Partners, LP v. Seward & Kissel, LLP , 12 N.Y.3d 553, 559 (2009). Id. See Facebook, Inc. v. DLA Piper LLP (US) , 134 A.D.3d 610, 615 (1st Dept. 2015) (“Statements made in pleadings upon information and belief are not sufficient to establish the necessary quantum of proof to sustain allegations of fraud.”). RKA Film Fin., LLC v. Kavanaugh , 2018 WL 3973391, at *3 (Sup. Ct., N.Y. County 2018) (quoting Shea v. Hambros PLC , 244 A.D.2d 39, 46 (1st Dept. 1998)). See also Gregor v. Rossi , 120 A.D.3d 447 (1st Dept. 2014). Pludeman v. Northern Leasing Sys., Inc. , 10 N.Y.3d 486, 491 (2008) (citation omitted). Id. at 491 (internal quotation marks and citation omitted). Id. at 492. Id. GoSmile, Inc. v. Levine , 81 A.D.3d 77, 81 (1st Dept. 2010),  lv. dismissed , 17 N.Y.3d 782 (2011).  First Bank v. Motor Car Funding, Inc. , 257 A.D.2d 287, 292 (1st Dept. 1999) (citations omitted); Springut Law PC v. Rates Technology, Inc. , 157 A.D.3d 645, 646 (1st Dept. 2018). Defendants Enterprise Holdings Group Ltd. a/k/a Enterprise Holdings Group, Ltd. (“EHG Ltd.”) and Enterprise Holdings Group LLC (“EHG LLC”). Defendant Gulf Atlantic Traders, LLC (“Gulf Atlantic”). Principia Partners LLC v. Swap Fin. Group , 194 A.D.3d 584, 584 (1st Dept. 2021); Aetna Cas. & Surety Co. v. Merchants Mut. Ins. Co. , 84 A.D.2d 736, 736 (1st Dept. 1981). See Jonas v. National Life Ins. Co. , 147 A.D.3d 610, 612 (1st Dept. 2017) (dismissing a fraud claim where the defendants were “impermissibly lump together”); Barlow v. Skroupa , 76 Misc. 3d 587, 591 (Sup. Ct., N.Y. County 2022), aff’d , 217 A.D.3d 620 (1st Dept. 2023) (citing Principia Partners , 194 A.D.3d at 584); Cortlandt St. Recovery Corp. v. Hellas Telecom., S.A.R.L. , 47 Misc. 3d 544, 572 n.11 (Sup. Ct., N.Y. County 2014), mod. , 142 A.D.3d 833 (1st Dept. 2016), aff’d , 31 N.Y.3d 30 (2018) (conclusory alter ego allegations and group pleading insufficient to plead fraud) . Quoting ESBE Holdings, Inc. v. Vanquish Acquisition Partners, LLC , 50 A.D.3d 397, 398 (1st Dept. 2008); Dorfman Org. v. Greater NY Mut. Ins. Co. , 279 A.D.2d 437, 437 (1st Dept. 2001), lv. dismissed , 96 N.Y.2d 822 (2001) (assertion that a new account would be profitable was nonactionable opinion or puffery ). Cronos Group Ltd. v. XComIP, LLC , 156 A.D.3d 54, 64-65 (1st Dept. 2017) ( fraud claim dismissed where the complaint failed to identify a promise collateral or extraneous to the parties' contract).  Quoting Cronos , 156 A.D.3d at 65, and citing MBIA Ins. Corp. v. Credit Suisse Sec. (USA) LLC , 165 A.D.3d 108, 114 (1st Dept. 2018). Slip Op. at *1. Id. (citing CPLR 3016(b); Orange Orch. Props. LLC v. Gentry Unlimited, Inc. , 191 A.D.3d 609, 609 (1st Dept. 2012)). Id. (citing Springut Law ,157 A.D.3d at 646; ID Beauty S.A.S. v. Coty Inc. Headquarters , 164 A.D.3d 1186, 1186 (1st Dept. 2018)). Id. (citing Cronos , 156 A.D.3d at 63-64).

By: Jeffrey M. Haber In Crawford v. Integrated Asset Mgt. Servs., LLC , 2025 N.Y. Slip Op. 01352 (2d Dept. Mar. 12, 2025) ( here ), the Appellate Division, Second Department reversed the denial of the defendants’ motion to dismiss the plaintiffs’ fraud-based claims, among others, involving a home improvement project in Brooklyn, N.Y., on the grounds of duplication with the plaintiff’s breach of contract claims. Crawford is notable because the Court held that the fraud damages were not distinct from those sought by the breach of contract claim. As noted in previous articles ( e.g. , here ), this focus on overlapping damages is common in the First Department. Crawford was an action for, inter alia , breach of contract, fraud, fraudulent inducement , rescission of contract based upon fraudulent inducement, and negligent misrepresentation arising from a home improvement project in Brooklyn, New York. In August 2018, plaintiffs entered into a contract with defendant, Integrated Asset Management Services, LLC (hereinafter “Integrated”), for a home improvement project (hereinafter, the “project”). As alleged, notwithstanding that plaintiffs paid Integrated and the individual defendant Christopher Lyons, the principal of Integrated, a total of $171,150, defendants allegedly abandoned the project in January 2020, leaving the work mostly unfinished. Regarding the alleged fraud , plaintiffs alleged that their claims were based upon defendants’ misrepresentations about their qualification and expertise in the work and their receipt of monies for work that was never started. Defendants moved to dismiss, claiming that, among other things, the fraud-based claims duplicated plaintiffs’ breach of contract claims. Defendants maintained that both claims concerned the failure of defendants to possess the necessary qualifications for the project and the failure to complete the project in accordance with the contract. The motion court denied the motion with regard to the fraud-based claims. Defendants appealed. On appeal, the Second Department reversed the motion court’s order. The Court held that plaintiffs’ fraud allegations were duplicative of their breach of contract allegations: “None of these causes of action were sufficiently distinct from the claims that the defendants breached the home improvement contract so as to constitute separate causes of action.” Notably, the Court held that the damages sought by both claims were the same: “the alleged misrepresentations did not result in any loss independent of the damages allegedly incurred for breach of contract.” Takeaway As we have often explained in the articles in which we have examined the duplication doctrine, fraud claims that are nothing more than contract claims dressed up in fraud clothing, are subject to dismissal.  E.g. ,  here ,  here ,  here , and  here . Thus, courts will apply the doctrine when a plaintiff alleges a breach of contract claim and a fraud claim that arise from the same facts and circumstances. When that happens, the fraud claim will be deemed duplicative of the contract claim not only because the fraud claim arises from the same facts as the contract claim, but also because the fraud claim seeks the same damages and does not allege a breach of any duty collateral to or independent of the parties’ agreements. Crawford is notable because the Court specifically addressed whether the damages sought by the fraud claim were the same as those sought by the breach of contract claim. In the First Department, the Court has dismissed fraud claims in which the damages sought by the fraud claim are the same as those sought by the breach of contract claim. This is so even where the plaintiff successfully demonstrates that the alleged misrepresentation is collateral to the contract at issue. This Blog wrote about this scenario here ,  here , and  here . In Crawford , although the Court found that the alleged misrepresentations were not collateral to or independent of the contract at issue, it specifically addressed the fact that the claimed fraud damages were not independent of the contract damages. As noted in prior articles, the Second Department has not often examined the duplication of claims through the lens of the damages sought. Perhaps that is why the Court cited a First Department case to make the point.<5> This Blog will continue to examine the duplication of claims doctrine in the two Departments to see if the Second Department starts issuing decisions with more frequency that find duplication because of the overlap of damages, as the First Department has often done. ________________________________ Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice. Slip Op. at *1. Id. at 1 (citing Doukas v. Ballard , 135 A.D.3d 896, 897 (2d Dept. 2016); Church of S. India Malayalam Congregation of Greater N.Y. v. Bryant Installations, Inc. , 85 A.D.3d 706, 707 (2d Dept. 2011); Havell Capital Enhanced Mun. Income Fund, L.P. v. Citibank, N.A. , 84 A.D.3d 588 (2d Dept. 2011); see also Sound Communications, Inc. v. Rack & Roll, Inc. , 88 A.D.3d 523, 524 (1st Dept. 2011)). Havell Capital Enhanced Mun. Income Fund, L.P. v. Citibank, N.A. , 84 A.D.3d 588, 589 (1st Dept. 2011). E.g. , Salamone v. EIP Global Fund LLC , 2021 N.Y. Slip Op. 2372 (1st Dept. 2021). Slip Op. at *1 (citing Sound Communications, supra ).

By: Jonathan H. Freiberger The title for today’s article refers to one of the most played songs by DJs at college parties, and VJs on the fledgling MTV Network, in the very early eighties. My hope in writing today’s article is that all readers of this BLOG in their 50s and early 60s are inspired to call the number 867-5309 and leave voice mail messages about RPAPL 1304 , the subject of today’s article. This BLOG has frequently written about mortgage foreclosure actions, in general, and RPAPL 1304 specifically. By way of brief background as discussed in prior articles, RPAPL 1304 requires that at least ninety days before commencing legal action against a borrower with respect to a “home loan” (as defined in the relevant statutes), a lender must, inter alia : 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 offer free or low-cost counseling; provide a phone number for counseling services (foreshadowing for those playing at home), and, advise that legal action may be commenced after ninety days if no action is taken to resolve the matter. One purpose of RPAPL 1304 is to enable defaulted borrowers to “benefit from the information provided in the notice and the 90–day period during which the parties could attempt to work out the default without imminent threat of a foreclosure action, in an effort to further the ultimate goal of reducing the number of foreclosures”. CIT Bank N.A. v. Schiffman , 36 N.Y.3d 550, 555 (2021) (citation and internal quotation marks omitted). The requisite language to be included within the RPAPL 1304 notice is provided in the statute and, for the most part, merely needs to be cut and pasted into the notice. See RPAPL 1304(1). The failure of a lender to comply with RPAPL 1304 will result in the dismissal of a foreclosure complaint (s ee, e.g., U.S. Bank N.A. v. Beymer , 161 A.D.3d 543 (1 st Dep’t 2018)) when the issue is raised by the borrower ( see, e.g., One West Bank, FSB v. Rosenberg , 189 A.D.3d 1600, 1602-3 (2 nd Dep’t 2020) (citation omitted)). A foreclosing lender must be in “strict compliance” with the requirements of RPAPL 1304 . U.S. Bank Nat. Ass’n v. 22-23 Brookhaven, Inc. , 219 A.D.3d 657, 664 (2 nd Dep’t 2023). Indeed, “proper service of the notice containing the statutorily mandated content is a condition precedent to the commencement of a foreclosure action.” U.S. Bank N.A. v. Taormina , 187 A.D.3d 1095, 1096 (2 nd Dep’t 2020) (citations omitted); see also U.S. Bank Trust, N.A. v. Atedgi , 2025 WL 699619, *2 (2 nd Dep’t March 5, 2025). When failure to comply with RPAPL 1304 is raised as an affirmative defense , the foreclosing lender must demonstrate its compliance with the statute as part of its prima facie case. Bank of America, N.A. v. Wheatly , 158 A.D.3d 736, 737 (2 nd Dep’t 2018) (citations omitted); Pennymac Corp. v. Levy , 207 A.D.3d 735, 736 (2 nd Dep’t 2022). However, a “defense based on noncompliance with RPAPL 1304 may be raised at any time during the action.” Nationstar Mortgage, LLC v. Matles , 185 A.D.3d 703, 706 (2 nd Dep’t 2020) (citations and internal quotation marks omitted). In Wells Fargo Bank, N.A. v. Davidson , 202 A.D.3d 880 (2nd Dep’t 2022), in reversing a judgment of foreclosure and sale and granting summary judgment to the borrowers, the Court stated that “ ontrary to the contention, the did not waive their contention that the failed to comply with RPAPL 1304 as a defense based on noncompliance with RPAPL 1304 may be raised at any time prior to the entry of a judgment of foreclosure and sale.” Davidson , 202 A.D.3d at 882 (citations, internal quotation marks and brackets omitted); see also U.S. Bank Nat. Ass’n v. Zakarin , 208 A.D.3d 1275, 1277 (2 nd Dep’t 2022). These issues were addressed by the Appellate Division, Second Department, on February 26, 2025, in Fed. Nat. Mort. Ass’n v. Williams-Jones . The lender in Williams-Jones commenced a mortgage foreclosure action . The borrower answered the complaint and alleged, inter alia , non-compliance with RPAPL 1304. The lender moved for summary judgment and to strike the borrower’s affirmative defense related to RPAPL 1304. As relevant to this article, the RPAPL 1304 notice annexed to the motion provided: (1) “If you need further information, please call the toll-free helpline at or visit the Department’s website at   ” and (2) “If you need further information, please call the toll-free helpline at or visit the Department’s website at   ”. Both the website address and the phone number in the statutory form at the time the relevant notices were sent were left blank and needed to be “filled in” by the lender (or the lender’s agent). The notices sent in Williams-Jones contained “blanks” as the necessary information was not “filled in.” On this basis, the borrower cross-moved for summary judgment dismissing the complaint for failure to comply with RPAPL 1304. The motion court denied the motion and cross-motion to the extent related to RPAPL 1304. The borrower appealed. The Second Department reversed and dismissed the complaint . In so doing, the Court reiterated that when “an RPAPL 1304 notice fails to reflect information mandated by the statute, the statute will not have been strictly complied with and the notice will not be valid.” (Citation, internal quotation marks and ellipses omitted.) As the Court explained: at the time the RPAPL 1304 notices were purportedly sent to the defendant, the version of RPAPL 1304 in effect required the notice to include the following sentence: “If you need further information, please call the New York State Department of Financial Services’ toll-free helpline at (show number) or visit the Department’s website at (show web address)” ( id. § 1304<1> ; see L 2012, c 155, § 84 ).” Thus, the Court concluded that since “the notices failed to include the telephone number for the Department of Financial Services’ toll-free helpline—a piece of information specifically required by the version of RPAPL 1304 in effect at the time the notices were sent—the notices were facially defective, and the defendant’s motion for summary judgment dismissing the complaint insofar as asserted against her should have been granted.” (Citations 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. This BLOG has written dozens of articles addressing numerous aspects of residential mortgage foreclosure. To find such articles, please see the BLOG tile on our website and search for any foreclosure, or other commercial litigation, issues that may be of interest to you. If you are interested in articles about RPAPL 1304, specifically, type “RPAPL 1304” into the “Search” box. RPAPL 1304 has been amended numerous times since 2008. To confirm compliance, it is important to know which version was in effect at the time that a particular RPAPL 1304 notice was sent.

By: Jeffrey M. Haber In Imperium Blue Acquisition Partners, LLC v. Marathon Asset Mgt., L.P. , 2025 N.Y. Slip Op. 01317 (1st Dept. Mar. 11, 2025) ( here ), the Appellate Division, First Department was asked to consider whether, among other things, plaintiffs satisfied the justifiable reliance element of a fraud claim. As discussed below, the Court held that plaintiffs failed to do so. In Essential Home Remodeling, Inc. v. Rossin , 2025 N.Y. Slip Op. 01314 (1st Dept. Mar. 11, 2025) ( here ), the Appellate Division, First Department was asked to consider whether a fraud counterclaim satisfied the particularity requirements of CPLR 3016(b) and whether the claim duplicated the plaintiff’s breach of contract counterclaim. As discussed below, the Court held that the fraud counterclaim was conclusory, not particular, and duplicated the defendant’s breach of contract counterclaim. website=">website" enter="enter" “fraud”,="“fraud”," “CPLR="“CPLR" 3016(b)”,="3016(b)”," “pleading="“pleading" with="with" particularity”,="particularity”," “justifiable="“justifiable" reliance”,="reliance”," or="or" “duplication”,="“duplication”," any="any" other="other" search="search" term="term" in="in" “search”="“search”" box.="box."> Imperium Blue Acquisition Partners, LLC v. Marathon Asset Mgt., L.P. Essential Home Remodeling involved an agreement by plaintiffs to purchase resort property in South Lake Tahoe, California. To finance the transaction, plaintiffs explored a number of lenders but ultimately chose defendants because the parties had executed similar transactions in the past. Because of that relationship, defendants promised to streamline the closing by re-using paperwork from the parties’ prior deals to forgo survey requirements, as it had done on prior deals. After the parties reached a preliminary financing agreement, plaintiffs entered into the purchase agreement with the sellers, contracting to close the transaction on or before December 6, 2021. That same day, the parties signed a term sheet wherein defendants agreed to exercise best efforts to close the transaction on or before December 6, 2021. Plaintiffs gave defendants the required $75,000 good faith deposit as specified under the terms of the term sheet. Thereafter, defendants requested from plaintiffs the surveys that they had allegedly promised not to require of plaintiffs. According to plaintiffs, defendants continued “piling on surprise requests” that deviated from both defendants’ representations to plaintiffs and the way that they had handled prior deals. Because plaintiffs found such requests to be unreasonable and a departure from defendants’ promises, plaintiffs sought to terminate the transaction. In response, defendants allegedly insisted that they would “do everything in their power to make work for team.” Plaintiffs agreed to continue the transaction as long as defendants honored their word. After the parties agreed to continue the transaction, plaintiffs obtained the surveys allegedly demanded by the defendants at significant effort and expense. According to plaintiffs, defendants advised them that the December 6 closing date would be impossible and proposed a January 22, 2022 closing date. Plaintiffs reminded defendants that a 2022 closing would be impossible because of their purchase agreement with the sellers. Although defendants told plaintiffs that it would be impossible to close, they allegedly told plaintiffs that the draft loan documents “should be out tomorrow.” Plaintiffs maintained that rather than sending the loan agreement draft to them, defendants told them that it would be impossible to close by the end of the year. In response, plaintiffs sought to terminate the transaction for the second time. Defendants insisted that plaintiffs contact the sellers to obtain more time on the deal so that they could close. Plaintiffs contacted the sellers, who agreed to a one-week extension to December 13, but defendants indicated that they still could not commit to that date. Thereafter, plaintiffs demanded a refund of their $75,000 good faith deposit. Defendants countered, offering to return $65,850 on the condition that plaintiffs release defendants from any and all future claims. Plaintiffs refused. After the expiration of the exclusivity period between the parties, plaintiffs sought alternative financing, eventually obtaining a costly bridge loan. Plaintiffs then negotiated with the sellers to push the close date to December 30, 2021, which the sellers agreed to on the condition that plaintiffs make costly concessions. On March 30, 2022, plaintiffs obtained financing from another non-party lender to pay off the  bridge loan. According to plaintiffs, defendants’ delays were intentional and in bad faith. Plaintiffs claimed that defendants were only delaying the transaction because defendants had reached their maximum collateralized loan obligation limit for 2021 and therefore needed to push the closing out to 2022. Plaintiffs alleged that defendants had known all along that they would be unable to close the transaction by 2021 but made false promises to plaintiffs just to secure the transaction in the hopes of persuading plaintiffs to push the closing date out to 2022 when defendants’ loan limit would renew. Plaintiffs brought the action to recover the $75,000 deposit they had paid to defendants for the loan, as well as damages in excess of $3 million that were allegedly caused by defendants’ acts and omissions. In that regard, plaintiffs asserted causes of action for: fraud; breach of good faith obligations; promissory estoppel; and breach of contract. Defendants moved to dismiss the complaint. Defendants argued that plaintiffs’ fraud claim should be dismissed because the parties had signed the term sheet, which stated that it was not a binding agreement. In response, plaintiffs argued that defendants were misreading the complaint because plaintiffs were not basing their causes of action on defendants’ failure to complete the financing pursuant to the term sheet. Instead, plaintiffs argued, defendants’ repeated misrepresentations and omissions that they would “expedite the underwriting process, would reuse former documentation and omit certain conditions to do so, and would use best efforts to meet deadlines it did not have any intention of meeting” formed the basis of their complaint. The motion court held that plaintiffs sufficiently alleged a claim for fraud – namely, defendants made omissions and misrepresentations that induced plaintiffs to initially secure a loan, when defendants were motivated to push the closing past December 2021, which caused plaintiffs injury. The motion court further found that “ hile plaintiffs plead reasonable reliance on defendants’ misrepresentations in a general manner, it was sufficient to withstand a motion to dismiss at this pre-discovery stage.” Moreover, said the motion court, defendants’ alleged motive for pushing out the closing date was that defendants had maximized their loan obligation for the year. Such information, noted the motion court, was within defendants’ knowledge, which plaintiffs were ill-equipped to show at the pre-discovery stage. The motion court also rejected defendants’ argument that the fraud claim duplicated plaintiffs’ breach of contract claim. The motion court reasoned that “if the term sheet is a non-binding contract, … , then it is not possible for the fraud claim to arise out of any contractual duty since there would be no contractual duty.” On appeal, the Appellate Division, First Department unanimously reversed. The Court held that “ laintiffs did not, as a matter of law, adequately allege the reasonable reliance element required to state causes of action for fraud and promissory estoppel.” The Court found that the “relevant terms of the parties’ term sheet, including those allowing defendants to require all normal and customary due diligence items, including ‘survey’ reports, directly contradicted the alleged prior oral promises defendants made that they would use best efforts to close the financing by a certain date by expediting and streamlining the due diligence process.” “Nor could plaintiffs properly state their claims based on allegations of reasonable reliance on the promises or assurances defendants allegedly made after the signing of the term sheet and during the due diligence period,” said the Court, “as those alleged promises were made during the exclusivity period when plaintiffs were not entitled to work with other lenders.” Plaintiffs could not have been induced by defendants’ assurances to continue to ‘tender a performance which required as a part of a preexisting contractual obligation.’” Essential Home Remodeling, Inc. v. Rossin Plaintiff commenced the action seeking damages resulting from defendants’ alleged breach of the parties’ construction contract for failing to fully compensate plaintiff for its labor, materials and services provided in renovating defendant’s residence. Defendant answered the complaint and interposed five (5) counterclaims arising primarily from her allegations that she suffered personal injuries from exposure to carbon monoxide, which defendant attributed to plaintiff’s installation of a gas oven and stove. In defendant’s fifth counterclaim for fraud, defendant alleged the following: Plaintiffs represented to Defendant Rachel Rossin that they were capable of performing the Services outlined in the contract. Based on Plaintiffs’ representations, Defendant Rachel Rossin hired Plaintiffs to perform the services on April 8, 2022. As of January 3, 2023, the Plaintiffs have refused and/or failed to perform all Services. As of January 3, 2023, the Plaintiffs have inadequately performed Services. Plaintiff falsely represented to Defendant that the Services would be completed within 12-15 working weeks, and that the services would be provided competently. Plaintiffs made the false representation above to deceive Defendant. Plaintiffs have taken over 38 working weeks and still have not completed the Services agreed upon in the Contract. The Plaintiffs agree to provide certain services, including but not limited to architectural plans, design plans, permits, and accurate electrical plans, but they failed to do so. Plaintiff relied upon the false representation above when it entered the Contract. The false representations above were material to the Contract and the Defendant’s willingness to enter the Contract. Had Plaintiffs not made the above false representations, the Defendant would not have entered the Contract. Plaintiff moved to dismiss defendant’s fifth counterclaim for failure to state a cause of action and as being duplicative of defendant’s third counterclaim for breach of contract . The motion court denied the motion, holding that the fraud cause of action was “pled with particularity , and alleged that the alleged fraudulent misrepresentations relied upon by the defendant in deciding to enter into the contract with plaintiff.” The motion court also held that the fraud claim was “not duplicative of the breach of contract counterclaim.” On appeal, the Appellate Division, First Department unanimously reversed. The Court held that the fifth counterclaim for fraud “was not pleaded with the particularity required under CPLR 3016(b), as it only general and conclusory allegations that plaintiff entered into a contract while lacking the intent to perform it.” The Court found that “ efendant plead no specific facts from which it may be reasonably inferred that plaintiff did not intend to abide by the specified timeline ‘at the time the promissory representation was made.” The Court also held that the fraud claim duplicated the breach of contract counterclaim: “The fraud counterclaim is also deficient because the same allegations underlie both the breach of contract and fraud causes of action.” The Court explained that “ he only fraud alleged is that plaintiff falsely represented that it would complete the renovations on the timeline set forth in the contract, and a breach of contract claim cannot be converted into one for fraud merely by alleging that defendant did not intend to fulfill the contract.” “In addition,” noted the Court, “the fraud counterclaim seeks the same damages as the breach of contract claim, apart from an unelaborated request for punitive damages in connection with 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. Slip Op. at *1. Id. (citations omitted). Id. Id. (quoting Megaris Furs v. Gimbel Bros. , 172 A.D.2d 209, 212 (1st Dept. 1991), and citing Iberdrola Energy Projects v. Oaktree Capital Mgt. L.P. , 231 A.D.3d 33, 44 (1st Dept. 2024)). Slip Op. at *1(citing New York Univ. v. Continental Ins. Co. , 87 N.Y.2d 308, 318 (1995); Cronos Group Ltd. v. XComIP, LLC , 156 A.D.3d 54, 61 (1st Dept. 2017)). Id. (quoting Cronos , 156 A.D.3d at 71, and citing Barlow v. Skroupa , 221 A.D.3d 482, 483 (1st Dept. 2023)). Id. (citing Matter of Soames v. 2LS Consulting Eng’g, D.P.C. , 187 A.D.3d 490, 491 (1st Dept 2020)). Id. (citing Non-Linear Trading Co. v. Braddis Assoc., Inc. , 243 A.D.2d 107, 118 (1st Dept. 1998), and Cronos , 156 A.D.3d at 620). Id. (citations omitted).

By:  Jeffrey M. Haber Previously, this Blog examined the doctrine of res judicata ( here , here , here and  here ). Under the doctrine, a party may not litigate a claim where a judgment on the merits exists from a prior action between the same parties involving the same subject matter. The doctrine applies not only to claims actually litigated but also to claims that could have been raised in the prior litigation. The rationale underlying the doctrine is that a party who has been given a full and fair opportunity to litigate a claim should not be allowed to do so again. New York has adopted a transactional approach in deciding res judicata issues. Under this approach, once a claim is brought to a final conclusion, all other claims arising out of the same transaction or series of transactions are barred, even if based upon different theories or if seeking a different remedy. “Res judicata is designed to provide finality in the resolution of disputes to assure that parties may not be vexed by further litigation.” “The policy against relitigation of adjudicated disputes is strong enough generally to bar a second action even where further investigation of the law or facts indicates that the controversy has been erroneously decided, whether due to oversight by the parties or error by the courts.” As the Court of Appeals noted, “ onsiderations of judicial economy as well as fairness to the parties mandate, at some point, an end to litigation.” Pursuant to CPLR 3211(a)(5), a party may seek dismissal of a cause of action based upon the doctrine of res judicata. In Sunny v. Hossain , 2025 N.Y. Slip Op. 01251 (2d Dept. Mar. 5, 2025) ( here ), the Appellate Division, Second Department addressed the foregoing issues, finding that the subsequent action before it essentially asserted the same causes of action against the same parties as in the earlier action and, therefore, were barred by the doctrine of res judicata. In September 2013, plaintiffs, Saifus Sayeed Sunny and Shirin Akhter, as husband and wife, purchased a residential property in Ozone Park, N.Y. (hereinafter the subject property). In 2020, Sunny filed a petition for declaratory relief against the defendants, Lakeview Loan Servicing, LLC (hereinafter, Lakeview), and Sardar M. Hossain, among other things, to quiet title to the subject property (hereinafter, the 2020 proceeding). In the 2020 proceeding, Sunny alleged, inter alia , that he acquired ownership of the subject property in 2013, and that a 2019 deed purporting to transfer title to Hossain contained Sunny’s forged signature. Lakeview moved pursuant to CPLR 3211(a) to dismiss the petition insofar as asserted against it on the ground that Sunny failed to comply with the requirements of RPAPL 1515. By order and judgment entered September 15, 2021, the Supreme Court consolidated the petition and Lakeview’s motion to dismiss the petition insofar as asserted against it “for purposes of disposition,” denied the motion, denied the petition, and dismissed the proceeding. The motion court concluded, among other things, that Sunny “fail to demonstrate his entitlement to judgment, as the evidence submitted insufficient to support his allegations of forgery” and that his “signature was acknowledged before a notary.” Sunny did not move for leave to renew or reargue, and he did not appeal from that order and judgment. In May 2022, plaintiffs commenced the action pursuant to RPAPL Article 15 against defendants, again to quiet title to the subject property and to void Hossain’s deed based on an allegedly forged signature. Lakeview moved pursuant to CPLR 3211(a)(5) to dismiss the complaint insofar as asserted against it, contending that the action was barred by the doctrine of res judicata. By order entered April 10, 2023, the Supreme Court granted Lakeview’s motion. Plaintiffs appealed. The Appellate Division, Second Department affirmed. The Court held that the action was barred under the res judicata doctrine. In so holding, the Court noted that “ n the 2020 proceeding, Sunny sought declaratory relief and to quiet title to the subject property as against the defendants in this action.” In the order and judgment entered in that action, said the Court, “the Supreme Court, inter alia , dismissed the proceeding on the merits, concluding, among other things, that the allegations of forgery were wholly conclusory and that the signature on the alleged deed had been acknowledged before a notary.” Because the action before the Court “essentially asserts the same causes of action against the same parties,” concluded the Court, “all causes of action insofar as asserted by Sunny are barred by the doctrine of res judicata.” The Court also held that because Akhter, as a former co-owner of the subject property, was in privity with Sunny, “the causes of action … asserted by Akhter in action also barred by the doctrine of res judicata.” Simmons v. Trans Express Inc. , 37 N.Y.3d 107, 111 (2021) (internal quotation marks omitted); see also Gregg v. Lan Zhen Chen , 220 A.D.3d 697, 698 (2d Dept. 2023). “ es judicata also bars future litigation by those who were in privity with the parties to the prior action.” Bay Shore Family Partners v. Foundation of Jewish Philanthropies of Jewish Fedn. of Greater Fort Lauderdale , 270 A.D.2d 374, 375 (2d Dept. 2000); see also Watts v. Swiss Bank Corp. , 27 N.Y.2d 270, 277 (1970); Bayer v. City of New York , 115 A.D.3d 897, 898 (2d Dept. 2014). Jacobson Dev. Group, LLC v. Grossman , 198 A.D.3d 956, 959 (2d Dept. 2021) (internal quotation marks omitted); Gregg , 220 A.D.3d at 698. S ee O’Connell v. Corcoran , 1 N.Y.3d 179, 184-185 (2003); Gramatan Home Invs. Corp. v. Lopez , 46 N.Y.2d 481, 485 (1979)). Matter of Reilly v. Reid , 45 N.Y.2d 24 (1978). O’Brien v. City of Syracuse , 54 N.Y.2d 353, 357 (1981) (citation omitted). See Matter of Reilly , 45 N.Y.2d at 28 (citations omitted). Id. (citations omitted). Id. See Ciafone v. City of New York , 227 A.D.3d 946, 946 (2d Dept. 2024). Slip Op. at *2. Id. Id. Id. (citing Gregg , 220 A.D.3d at 699).

By: Jonathan H. Freiberger “Just Once,” which is an appropriate title for today’s article, is a James Ingram song from Quincy Jones’ “The Dude” album; an album I have listened to many times throughout, and after, college. Today we will discuss U.S. Bank National Assoc. v. Deblinger , a mortgage foreclosure action that resulted in a decision on February 26, 2025, by the Appellate Division, Second Department. In 2017, the lender commenced an action to foreclose a mortgage after an alleged default by the borrower. The borrower served an answer. Subsequently, the lender filed a supplemental summons and an amended complaint, which did not make any new allegations against the borrower. The lender then filed a second supplemental summons and second amended complaint, which, too, failed to make any new allegations against the borrower. The borrower, who did not serve an answer to either of the amended complaints, opposed the lender’s motion for a default judgment against her and for an order of reference. The motion court granted the lender’s motion and appointed a referee to compute. The Borrower appealed. The Second Department reversed. In so doing, the Court noted that on a motion for a default judgment pursuant to CPLR 3215 , a plaintiff “is required to submit proof of service of the summons and complaint, proof of the facts constituting the claim, and proof of the defendant's default in answering or appearing.” (Citations and internal quotation marks omitted.) See also Knudsen v. Green Machine Landscaping, Inc. , 223 A.D.3d 792, 792-93 (2 nd Dep’t 2024); Bigio v. Gooding , 213 A.D.3d 480, 481 (1 st Dep’t 2023); U.S. Bank Nat. Ass’n v. Wolnerman , 135 A.D.3d 850, 850-51 (2 nd Dep’t 2016). The Court, in finding that the lender failed to meet its burden of proving a default, stated: Here, the failed to meet its burden of demonstrating that the had defaulted in answering or appearing. CPLR 3025(d) states that, " xcept where otherwise prescribed by law or order of the court, there shall be an answer or reply to an amended or supplemental pleading if an answer or reply is required to the pleading being amended or supplemented." Generally, an amended complaint supersedes the original pleading, the defendant's original answer has no effect, and a new responsive pleading is substituted for the original answer. In contrast, a supplemental complaint does not supersede the original pleading and the answer which had already been served at the time the supplemental pleading was interposed remains in effect. Here, insofar as asserted against the , the purported amended complaints merely repeated the same allegations against the that were made in the original complaint and, thus, are properly characterized as supplemental complaints. As the had already answered the allegations asserted, no further answer was required within the meaning of CPLR 3025(d). Thus, the defendant was not in default . 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. This BLOG has written dozens of articles addressing numerous aspects of residential mortgage foreclosure. To find such articles, please see the BLOG tile on our website and search for any foreclosure, or other commercial litigation, issues that may be of interest you. This Blog has written about default judgments in mortgage foreclosure actions. See, e.g., < here =">here"> ,< here =">here"> , < here =">here"> , and < here =">here"> . This BLOG has addressed the necessary proof on a motion for a default judgment < here =">here"> . Apparently, the holding springs from the notion that “the supplemental complaint may be considered as in addition to the original complaint.” Pimsler v. Angert , 1 A.D.2d 783 (2 nd Dep’t 1956); see also Mendrzycki v. Cricchio , 58 A.D.3d 171, 175 (2 nd Dep’t 2008). For some of this BLOG’s younger readers, here is a YouTube link to the song.

By: Jeffrey M. Haber An investment adviser is a fiduciary, and as such is held to the highest standard of conduct and must act in the best interest of his/her client. This means, among other things, that an investment adviser has an affirmative duty of utmost good faith and full and fair disclosure of all material facts. In broad terms, an investment adviser owes its client the duty of care, loyalty, and candor. The duty of care includes, among other things, the duty to provide advice that is suitable and in the best interest of the client. This duty requires an investment adviser to make a reasonable inquiry into his/her client’s financial situation, level of financial sophistication, investment experience, and investment objectives. It also requires the investment adviser to provide personalized advice that is suitable for and in the best interest of the client based on the client’s investment profile. The duty of loyalty requires an investment adviser to put his/her client’s interests first. An investment adviser must not favor his/her own interests over those of a client or unfairly favor one client over another. In seeking to meet this duty, an investment adviser must make full and fair disclosure to his/her clients of all material facts relating to the relationship. Additionally, an investment adviser must seek to avoid conflicts of interest with his/her clients, and, at a minimum, make full and fair disclosure of all material conflicts of interest that could affect the advisory relationship. The disclosure must be clear and detailed enough for a client to make a reasonably informed decision to consent to such practices, strategies, or conflicts or reject them. An adviser disclosing that it “may” have a conflict is not adequate disclosure when the conflict actually exists. In The Matter of One Oak Capital Management, LLC and Michael DeRosa On February 14, 2025, the Securities and Exchange Commission (“SEC”) announced ( here ) that it settled charges against New York-based registered investment adviser One Oak Capital Management LLC (“One Oak”), and a former investment adviser representative, for misconduct related to advisory services provided to their retail clients. According to the SEC, from approximately June 2020 through October 2023, respondents failed to adequately disclose advisory fees to certain clients converting their brokerage accounts at an unaffiliated broker-dealer to advisory accounts at One Oak (the “Converted Accounts”). As a result of these conversions, said the SEC, respondents charged the Converted Accounts advisory fees based on a percentage of assets under management, rather than just brokerage commissions, as they were previously charged by the broker-dealer . Because the Converted Accounts had relatively little trading activity before and after the conversions, said the SEC, the change in fee structure resulted in significantly increased costs for clients, even though those clients generally received no additional services or benefits. Therefore, alleged the SEC, respondents placed their financial interests ahead of the interests of the prospective clients in recommending the conversions. In addition, the SEC alleged that the investments were not suitable for respondents’ clients. The SEC said that respondents did not adequately consider whether, in light of the clients’ investment profiles and the characteristics of the accounts at issue, their recommendation to convert their brokerage accounts to advisory accounts was in their clients’ best interests. According to the SEC, One Oak’s chief compliance officer did not have access to sufficient information about the clients of the Converted Accounts with which to evaluate the suitability of their specific investments, other than the clients’ age, because respondents generally did not obtain information from clients regarding their investment objectives or risk tolerance in writing. For at least the first four months after certain accounts were converted in 2020, claimed the SEC, no one at One Oak other than respondent was able to view the account activity to conduct any review whatsoever. The SEC also alleged that respondent did not fulfill his fiduciary duty of care because he did not conduct meaningful reviews of whether the Converted Accounts were suitable to be advisory accounts. The SEC found that respondents willfully violated the antifraud provisions of Section 206(2) of the Investment Advisers Act of 1940 (“Advisers Act”) and that One Oak also violated the compliance rule provisions of the Advisers Act. Without admitting or denying the SEC’s findings, One Oak consented to an order requiring it to pay a civil penalty of $150,000 and to retain an independent compliance consultant to review certain of its policies and procedures related to its retail business. Without admitting or denying the findings in the order, the former investment adviser agreed to a civil penalty of $75,000 and a nine-month industry suspension. A copy of the SEC’s order instituting administrative and cease-and-desist proceedings can be found here . _________________________________ Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice. SEC v. Capital Gains Research Bureau, Inc. , 375 U.S. 180, 194 (1963). Transamerica Mortgage Advisors, Inc. v. Lewis , 444 U.S. 11, 17 (1979).

By: Jeffrey M. Haber It is well-settled that a plaintiff asserting a derivative claim seeks to recover for injury to the business entity, regardless of whether the entity is a corporation, limited liability company, or partnership. A plaintiff asserting a direct claim seeks redress for injury to himself/herself individually. “The distinction between derivative and direct claims is grounded upon the principle that does not have an individual cause of action that derives from harm done to the but may bring a direct claim when the wrongdoer has breached a duty owed directly to the which is independent of any duty owing to the .” Sometimes, the distinction between the two types of actions is not readily apparent. Direct vs. Derivative Examined As noted, where the wrong complained of is directed against a business entity, the claim belongs to the entity. The entity owner does not have an individual claim, even if the entity owner loses the value of his/her shares/units/interests or incurs personal liability in an attempt to keep the entity solvent. In determining whether a claim is direct or derivative, “a court must look to the nature or the wrong and to whom the relief should go.” Specifically, the court should consider “(1) who suffered the alleged harm (the corporation or the suing stockholders, individually); and (2) who would receive the benefit of any recovery or other remedy (the corporation or the stockholders, individually).” “The pertinent inquiry is whether the thrust of the plaintiff’s action is to vindicate his personal rights as an individual and not as on behalf of the .” The plaintiff must show that the duty allegedly breached was owed to the entity owner, and that he/she can prevail without showing an injury to the business entity. If the individual claim of harm is “confused with or embedded” within the harm to the business entity, then it must be dismissed. [Ed. Note: This Blog has previously written about the difficulties plaintiffs often have distinguishing between direct and derivative claims. ( E.g. , here , here , here , and  here .) ] In today’s article, this Blog looks at Molberg v. Phoenix Cayman Ltd. , 2025 N.Y. Slip Op. 01048 (1st Dept. Feb. 20, 2025) ( here ). In Molberg , the Appellate Division, First Department, unanimously reversed the motion court’s denial of defendants’ motion to dismiss because plaintiff failed to comply with the partnership agreement, which required any effort for the relief sought by the action to be brought on behalf of the partnership. Molberg v. Phoenix Cayman Ltd. Molberg arose from an attempt to remove defendant Phoenix Cayman Ltd. from its position as the General Partner of nominal plaintiff Phoenix Holdco Ltd. (the “Partnership”). In March 2011, fifteen people ( i.e. , limited partners) agreed to invest in the Partnership and entered into a Limited Partnership Agreement with the General Partner (the “LP Agreement”). Pursuant to Section 6.1(d)(i)(B) of the LP Agreement, the General Partner could be “removed with Cause upon the affirmative act of the Supermajority in Interest.” “Cause” was defined to include when the General Partner “has committed a knowing, willful and material breach of th Agreement that is not cured within 30 days after the General Partner’s receipt of a notice from the Partnership with respect to such breach.” On January 23, 2023, a limited partner emailed one of the directors of the Partnership inquiring as to when the audited financials for 2020 and 2021 would be completed and made available. The director responded that the request should be directed through their attorneys, as the limited partner was involved in a separate litigation with the Partnership. This lawsuit had been brought by four of the limited partners based on their dissatisfaction with the Partnership’s management ( see Black v. Phoenix Cayman Ltd. , _A.D.3d_, 2025 N.Y. Slip Op. 00147 (1st Dept. 2025) (the “Black Action”)). Shortly thereafter, another nonparty limited partner followed up on the request and received a similar response. On February 16, 2023, plaintiff, as executor of the estate of her father, a limited partner in the Partnership, circulated the 2020 year-end financials, which had been produced in the Black Action, to the other limited partners and the director. Her communication also stated that “the failure to circulate these financials to the LPs is a breach of the LPA and another dereliction of duty as GP.” On April 28, 2023, Phoenix Cayman received a letter, signed by plaintiff individually in her capacity as executor of her father’s estate. The “Re” line read: “Phoenix Holdco LP — Demand for Audited Financials from Phoenix Cayman Ltd.” The letter stated that she was writing “regarding the books, records, financial statements and other reports of Phoenix Holdco LP.” It also detailed the January 2023 requests for the 2020 and 2021 financials, which were “denied,” and concluded with a “demand” for additional financials for 2022 and the first quarter of 2023. A supermajority of the limited partners voted in favor of removing Phoenix Cayman as General Partner and replacing it with plaintiff Blue Bear Ltd. on June 5, 2023. The General Partner took the position that the resolution was null and void. Later that month, the General Partner provided bank statements and balance sheets for the Partnership for 2021, 2022, and the first quarter of 2023. Thereafter, plaintiffs commenced the action, alleging that the April 28, 2023 letter provided notice of a breach sufficient to trigger the 30-day contractual cure period set forth in the LP Agreement. Defendants moved to dismiss the complaint, arguing that the letter was not sufficient to provide such notice; therefore, there was no basis to remove the General Partner for “Cause.” The motion court denied the motion, holding that “ he documentary evidence not irrefutably preclude plaintiff’s claim” because of “the attendant circumstances,” including “the multiple correspondences from limited partners requesting the financials at issue, the ongoing based on the same set of facts, and the fact that the April 28, 2023 letter was imperative in its demand for the documents and the cited basis for those documents.” The motion court added that the April 28, 2023 letter “also sufficiently identified the existence of a breach of the .” On Appeal, the First Department reversed. The Court held that “ ismissal of th action warranted because the April 28, 2023 letter did not trigger the 30-day cure period under the subject LP Agreement.” The Court observed that “ lthough a limited partner could theoretically send notice on the Partnership’s behalf, that not what happened” in the case. “Rather,” said the Court, “the letter was signed by a single limited partner who did not purport to be acting in anything other than her individual capacity.” The Court explained that “ he letter was written in the first-person singular, no other limited partners were copied or referenced, and there was no language in the letter suggesting that it was being sent ‘derivatively,’ ‘on behalf of,’ or even ‘for the benefit of’ the Partnership.” Since “the letter was not ‘from the Partnership,’ as required by the LP Agreement,” concluded the Court, “there was no basis to remove the General Partner for ‘Cause’ thereunder.” In addition, the Court held that the April 28, 2023 letter “did not provide notice of any breach — of § 8.2 or any other provision of the LP Agreement.” The Court explained that the letter “did not use the words ‘notice,’ ‘breach,’ or ‘cure’ and did not reference the contractual removal provision or definition of ‘Cause.’” The Court concluded that “ lthough the letter cited the General Partner’s obligation to provide financial information under § 8.2 and referenced the January 2023 email correspondence, it best read as a prospective demand for audited financials, and it did not put defendants on a notice that a ‘knowing, willful and material breach’ of the LP Agreement had already occurred and the 30-day cure period was triggered.” Takeaway In one of our prior articles ( here ), we wrote the following about the difficulties distinguishing between a direct and derivative claim: The difference between a direct and derivative claim is not always easy to discern. For many practitioners, even those who devote most of their practice litigating derivative claims , the distinction between the two types of claims can be elusive. Nuance and subtlety often rule the day, leading to confusion and uncertainty. The consequences of such confusion can (and often will) result in dismissal of one’s claims. As shown in Molberg , the language of the LP Agreement was not nuanced or subtle. It was clear and unambiguous . Notice of a breach was to be sent by the Partnership, not by a limited partner in his/her individual capacity. As such, plaintiffs’ complaint was dismissed for failing to comply with the LP Agreement. ___________________________________ 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. Accredited Aides Plus, Inc. v. Program Risk Mgmt., Inc. , 147 A.D.3d 122, 132 (3d Dept. (2017) (citation and internal quotation marks omitted). Yudell v. Gilbert , 99 A.D.3d 108, 113 (1st Dept. 2012). Abrams v. Donati , 66 N.Y.2d 951, 953 (1985); Serino v.  Lipper , 123 A.D.3d 34, 40 (1st Dept. 2014). Tooley v. Donaldson Lufkin & Jenrette, Inc. , 845 A.D.2d 1031, 1038 (Del. 2004). Yudell , 99 A.D.3d at 114 (internal quotation marks and citations omitted); Maldonado v. DiBre , 140 A.D.3d 1501, 1503-1504 (3d Dept. 2016). Maldonado , 140 A.D.3d at 1504 (internal quotation marks and citation omitted). Yudell , 99 A.D.3d at 114. Serino , 123 A.D.3d at 40; Patterson v. Calogero , 150 A.D.3d 1131, 1133 (2d Dept. 2017) (even where individual harm is claimed, if it is confused with or embedded in the harm to the corporation, it cannot stand separately). To find articles related to the difference between direct and derivative claims, visit the “ Blog ” tile on our  website  and enter “direct claim”, “derivative” claim, or any other related search term in the “search” box. Slip Op. at *2. Id. Id. Id. Id. (citing Filmtrucks, Inc. v. Express Indus. & Term. Corp. , 127 A.D.2d 509, 510 (1st Dept. 1987)). Id. Id. Id.

By: Jeffrey M. Haber The question that clients most often ask their attorney is whether they can get back their attorney’s fees if they prevail on their claims. As we have explained in past articles ( e.g. , here , here , here , and here ), attorney’s fees are not generally recoverable in litigation under the “American Rule”. Under the American Rule, “attorney’s fees are incidents of litigation and a prevailing party may not collect them from the loser unless an award is authorized by agreement between the parties, statute or court rule.” Courts will not infer an agreement to award attorney’s fees incurred in litigation between contracting parties unless such intention is “unmistakably clear from the language” used in the writing. In Upfront Megatainment, Inc. v. Thiam , 2025 N.Y. Slip Op. 00932 (1st Dept. Feb. 18, 2025) ( here ), the Appellate Division, First Department, addressed the question whether reasonable attorney’s fees were recoverable pursuant to a confession of judgment that was not filed. As discussed below, the Court answered the question in the negative. Upfront Megatainment arose from the alleged breach of a settlement agreement, dated October 25, 2018, between defendant and plaintiffs (the “Settlement Agreement”), which resolved a 2017 lawsuit between the parties. Under the Settlement Agreement, defendant agreed to make payments to plaintiffs in two ways: (1) a fixed amount payable in four installments, the first on the date on which the Settlement Agreement was signed and thereafter on the 31st day of October for three consecutive years; and (2) a share of defendant’s music revenues from certain legacy works under specified conditions. The Settlement Agreement was intended to provide plaintiffs a mechanism by which they could compel defendant to make installment payments through a confession of judgment. Paragraph 2(c) of the Settlement Agreement authorized plaintiffs to file the confession of judgment to accelerate payment of the unpaid installment balance “plus … reasonable attorney’s fees actually incurred to enforce the judgment.” To underscore this right, the confession of judgment specifically provided the following: “I hereby confess judgment in this Court … plus … reasonable attorney’s fees incurred to enforce the judgment.” Defendant failed to pay the final installment due under the Settlement Agreement in a timely manner. Plaintiffs did not file the confession of judgment to enforce the judgment. Rather, they filed plenary action to recover, among other things, the unpaid installment payment. In a second amended complaint, plaintiffs asserted two causes of action, only the first of which is relevant to the appeal. In plaintiffs’ first cause of action, plaintiffs sought payment from defendant of the attorney’s fees incurred in connection with their effort to recover the final installment payment. Defendant moved to dismiss, arguing that plaintiffs could not recover the sought after attorney’s fees because such fees were recoverable only when “actually incurred to enforce” the “file ” confession of judgment. Defendant maintained that plaintiffs never filed or attempted to enforce the confession of judgment. On December 14, 2022, the motion court denied the motion. Defendant appealed. The First Department unanimously reversed the order. First, the Court held that plaintiffs could not rely on the confession of judgment to recover any attorney’s fees. The Court explained that CPLR 3218, as amended, “prohibit a party from enforcing a confession of judgment against a nonresident of New York State.” Defendant is a nonresident of the State. Moreover, even if the confession of judgment was enforceable, the Court held that it “was not an agreement to pay attorneys’ fees, but at most was merely evidence of an agreement.” Second, the Court held that plaintiffs could not rely on the settlement agreement as the mechanism to recover their attorney’s fees. The Court noted that “ he agreement provided that in the event of a default of any settlement payment, plaintiffs ‘may file a confession of judgment’ for the amount owed, plus interest, costs, ‘and reasonable attorney’s fees actually incurred to enforce the judgment.’” From this language, concluded the Court, “the parties agreed that plaintiffs could receive attorneys’ fees through the filing of the confession of judgment, which plaintiffs did not file.” Moreover, said the Court, “the settlement agreement contemplated that plaintiffs could obtain attorneys’ fees through, and only through, the process of enforcing the confession of judgment. Plaintiffs did not use that process; they brought this plenary action to enforce the settlement agreement.” Thus, concluded the Court, “ bsent any agreement, statute, or rule allowing plaintiffs to collect attorneys’ fees for enforcing the settlement agreement, plaintiffs cannot obtain them.” _______________________________ 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. Sage Sys., Inc. v. Liss , 39 N.Y.3d 27, 30-31 (2022) (quoting Hooper Assoc. v. AGS Computers , 74 N.Y.2d 487, 491 (1989). See also Alyeska Pipeline Service Co. v. Wilderness Soc’y , 421 U.S. 240, 251 (1975); Rossman v. Windermere Owners LLC , 111 A.D.3d 429, 429-430 (1st Dept. 2013) (citing A.G. Ship Maint. Corp. v. Lezak , 69 N.Y.2d 1, 5 (1986)). This Blog examined Sage , here .   See Hooper , 74 N.Y.2d at 492 (“ he court should not infer a party’s intention to waive the benefit of the rule unless the intention to do so is unmistakably clear from the language of the promise.”); see also Mount Vernon City Sch. Dist. v. Nova Cas. Co. , 19 N.Y.3d 28, 39 (2012) (affirming denial of fees because “under a precise reading of the contractual language, the disputed fees are outside the scope of the agreements”); Rossman , 974 N.Y.S.2d at 430 (reversing fee award because agreement’s attorney’s fee provision did not cover the parties’ dispute). Slip Op. at *1. To find articles related to confessions of judgment under CPLR 3218, as amended, visit the “ Blog ” tile on our  website  and enter “confession of judgment” or any other related search term in the “search” box. In 2019, the New York State Legislature amended CPLR 3218. By the amendment, the Legislature eliminated the ability of creditors to file confessions of judgment against non-New York residents. Section 2 of the amendment provides that “ his act shall take effect immediately and apply to judgments by confession entered upon affidavits filed on or after such effective date.” 2019 Sess. Law News of N.Y. Ch. 214 (S. 6395). The amended statute applies to any confession of judgment filed after the 2019 amendment, regardless of when the confession was signed. Id. Id. As set forth in defendant’s brief on appeal, defendant was not a New York resident. At the time the parties settled their disputes in 2018, defendant lived in both Georgia and California. Defendant currently resides in both locations. Id. (citations omitted). Id. Id. Id. Id. Id. (citing Rossman , 111 A.D.3d 429, 429 (1st Dept. 2013)).

By: Jeffrey M. Haber “The elements of a cause of action for fraud require a material misrepresentation of a fact, knowledge of its falsity, an intent to induce reliance, justifiable reliance by plaintiff and damages.  A claim rooted in fraud must be pleaded with the requisite particularity under CPLR 3016(b).” The failure to satisfy each element will result in dismissal of the claim. As this Blog has noted in several articles, many cases involving an alleged fraud often rise and fall on the scienter element of the cause of action. To allege scienter, a plaintiff must allege with particularity that the defendant had an “actual intent to deceive, manipulate, or defraud.” Scienter must be plead with “sufficient detail[]”; “conclusory statement of intent” are insufficient. To succeed, therefore, the plaintiff must allege facts from which there is some “rational basis for inferring that the alleged misrepresentations were knowingly made.” Scienter is a very difficult element to plead. In fact, the scienter element is the hardest to plead because the evidence of intent most often rests solely with the defendant. Because of this difficulty, intent is often inferred from circumstantial evidence. In today’s article, we examine McNaughton v. 5 W. 14 Owners Corp. , 2025 N.Y. Slip Op. 00831 (1st Dept. Feb. 13, 2025) ( here ), a case involving, among other claims, the scienter element of a fraud claim. In McNaughton , plaintiff, a retired attorney, alleged that his prior attorneys engaged in legal malpractice when they failed to warn him that a New York court would lack personal jurisdiction over the defendants in a matter concerning the estate of plaintiff’s late sister and that the action would be dismissed for that reason if he filed it in New York rather than in Massachusetts. In addition to the legal malpractice claim , plaintiff alleged that the former lawyers defrauded him by failing to advise plaintiff before he entered into the retainer agreement with the former lawyers that a New York court could not assert personal jurisdiction over the defendants in the estate matter. The former lawyers moved to dismiss. The motion court granted the motion. Plaintiff appealed. The Appellate Division, First Department, unanimously affirmed. The Court held that the motion court “properly dismissed the cause of action for fraud against” the former lawyers. The Court held that “plaintiff fail to adequately plead scienter, a necessary element of a cause of action for fraud, as against those defendants.” The Court explained that plaintiff “offer no facts that would allow a court to infer that acted deliberately to deceive plaintiff.” “Rather,” said the Court, “the complaint allege , in conclusory terms, that engaged in fraud and fraud in the inducement when he failed to advise plaintiff before he entered into the retainer agreement that the Supreme Court in New York could not assert personal jurisdiction over the defendants in the estate matter.” Since the scienter allegations were conclusory and devoid of any facts, the Court affirmed the dismissal of the fraud causes of action . Takeaway Scienter must be pleaded with particularity . Conclusory allegations, such as those in McNaughton , will not suffice. The plaintiff must allege facts from which there is some “rational basis for inferring that the alleged misrepresentations were knowingly made.” In McNaughton , as discussed above, plaintiff failed to plead any facts to support an inference of scienter. _______________________________ 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. Eurycleia Partners, LP v. Seward & Kissel, LLP , 12 N.Y.3d 553, 559 (2009) (citations omitted). To find articles related to the scienter element of a fraud claim, visit the “ Blog ” tile on our  website  and enter “scienter” or any other related search term in the “search” box. Zutty v. Rye (NOR) , 33 Misc. 3d1226(A), 2011 WL 5962804 at *11 (Sup. Ct., N.Y. Co. Apr. 15, 2011). Zanett Lombardier, Ltd. v. Maslow , 29 A.D.3d 495 (1st Dept. 2006) (citation omitted). Houbigant, Inc. v. Deloitte & Touche LLP , 303 A.D.2d 92, 93 (1st Dept. 2003). Pludeman v. N. Leasing Sys., Inc. , 10 N.Y.3d 486, 488 (2008). Slip Op. at *2 (citing Mandarin Trading Ltd. v. Wildenstein , 16 N.Y.3d 173, 178 (2011); Eurycleia Partners , 12 N.Y.3d at 559 (2009)). Id. (citing Pludeman , 10 N.Y.3d at 492; Eurycleia Partners , 12 N.Y.3d at 559)). Id. Houbigant, Inc. v. Deloitte & Touche LLP , 303 A.D.2d 92, 93 (1st Dep’t 2003).

By: Jonathan H. Freiberger It is axiomatic that a “plaintiff appears merely by bringing it.” Deutsche Bank Nat. Trust Co. v. Hall , 185 A.D.3d 1006, 1007 (2 nd 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 way a defendant can appear in an action, provides that “ 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). An appearance pursuant to CPLR §320(a) is a formal appearance. New York courts, however, 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 (2 nd Dep’t 2024) (citations and internal quotation marks omitted). 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. See, e.g., OneWest Bank, FSB v. Villafana , 231 A.D.3d 845, 847-48 (2 nd Dep’t 2024); Bank of New York , 230 A.D.3d 457, 458-49 (2 nd Dep’t 2024). Depending on the circumstances, a plaintiff or a defendant may argue that an informal appearance has been made in an action. A plaintiff may argue that an informal appearance has been made to obtain jurisdiction over a defendant and a defendant may argue that an informal appearance has been made to avoid a default. On February 5, 2025, the Second Department decided Wells Fargo Bank, N.A. v. Hosseinipour , a mortgage foreclosure action in which the borrower was determined to have waived jurisdictional defenses by informally appearing in the action due to active participation. The lender in Hosseinipour commenced an action to foreclose a mortgage. The borrower failed to appear or answer the complaint. Subsequently, an order of reference and a judgment of foreclosure and sale was issued by the motion court. Thereafter, the borrower opposed a motion to, inter alia , to confirm the order of reference. The borrower, contending that the action should be deemed abandoned, also opposed the lender’s motion to appoint a substitute referee. After a foreclosure sale was scheduled for the subject property, the borrower moved to vacate the order of reference and the judgment of foreclosure and sale for lack of personal jurisdiction . The motion was denied. The Second Department affirmed the motion court’s order. In so doing, the Court recognized that a “defendant may waive the issue of lack of personal jurisdiction by appearing in an action, either formally or informally, without raising the defense of lack of personal jurisdiction in an answer or pre-answer motion to dismiss.” (Citations and internal quotation marks omitted.) Even without a formal appearance, the Court noted that: “a defendant may nevertheless appear in an action where his or her counsel communicates a clear intent to participate;” and “ defendant may appear informally by actively litigating the action before the court.” (Citations and internal quotation marks omitted). The Court also reiterated that when “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). Thus, the Court found that “the defendant waived his objection to personal jurisdiction by opposing the plaintiff’s motions, inter alia, for the appointment of a substitute referee on various grounds allegedly warranting dismissal of the complaint, without also asserting an affirmative objection to jurisdiction.” (Citations 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. This BLOG has written numerous articles relating to formal and informal appearances ( see, e.g ., < here =">here"> , < here =">here"> , < here =">here"> . The introduction to today’s article is based on some of those articles. This BLOG writes frequently about mortgage foreclosure. Settlement conferences are generally required in residential mortgage foreclosure actions. See CPLR 3408 and the foreclosure part rules for the Supreme Court in which a particular action is pending. A “defendant’s participation in settlement conferences 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.” Wells Fargo Bank, N.A. v. Martinez , 181 A.D.3d 470, 471 (1 st Dep’t 2020) (citations, internal quotation marks and brackets omitted); see also US Bank Nat. Ass’n v. Kail , 189 A.D.3d 1652, 1654-55 (2 nd Dep’t 2020); PennyMac Corp. v. Weinberg , 203 A.D.3d 1061, 1063 (2 nd Dep’t 2022). Accordingly, attendance at a “foreclosure settlement conference” “did not waive the defense of lack of personal jurisdiction….” Wells Fargo Bank, N.A. v. Final Touch Interiors, LLC , 112 A.D.3d 813, 814 (2 nd Dep’t 2013) (citations omitted). This BLOG has addressed CPLR 3215(c) numerous times. To find one of our numerous BLOG articles related to CPLR 3215(c), visit the “ Blog ” tile on our website and enter “3215(c)” in the “search” box. This BLOG writes frequently about mortgage foreclosure. To find one of our numerous BLOG articles related to mortgage foreclosure, visit the “ Blog ” tile on our website and enter “mortgage foreclosure,” or any other related search term in the “search” box.

By: Jeffrey M. Haber Now and then a lawyer fails to meet a deadline or otherwise acts untimely.  Several “saving” provisions in the Civil Practice Law and Rules (“CPLR”) are available to assist a lawyer when deadlines are missed. These include: CPLR 2005, CPLR 3012(d), and CPLR 5015(a). The key to applying one or more of these provisions is the reasonableness of the excuse for the delay or default.  In Fox v. Gross , 219 A.D.3d 584, 585-586 (2d Dept. 2023), the Appellate Division, Second Department , discussed the standard that courts should apply when considering what constitutes reasonable excuse: To avoid dismissal of an action for failure to serve a complaint after a demand for the complaint has been made pursuant to CPLR 3012 (b), a plaintiff must demonstrate both a reasonable excuse for the delay in serving the complaint and a potentially meritorious cause of action. The determination of what constitutes a reasonable excuse for a delay in serving a complaint after a demand is made is within the discretion of the court. When exercising its discretion in this regard, a court should consider all relevant factors, including the extent of the delay, the prejudice to the opposing party, and the lack of an intent to abandon the action. There are many cases like Fox that consider the meaning of “reasonable excuse” and/or excusable “law office failure.” Today, we examine one such case . Shapiro v. 151 Baltic St., LLC , 2025 N.Y. Slip Op. 50135(U) (Sup. Ct., Kings County Feb. 6, 2025) ( here ). here.=">here."> Shapiro contained “a unique set of facts” for which the motion court could not “locate authority” having the same or a similar fact pattern. Plaintiffs brought the action by filing a summons with notice in July 2023, alleging harassment and violations of the New York City Administrative Code by Defendants. Plaintiffs alleged that they were the last few remaining tenants in a multi-family residential building in Brooklyn, N.Y. that was undergoing gut renovation. In August 2023, Defendants served a demand for a complaint. Not having received a complaint by the 20-day deadline prescribed in CPLR 3012 (b), Defendants moved for dismissal of Plaintiffs’ claims in September 2024. Plaintiffs cross-moved pursuant to CPLR 3012 (d) to extend their time to serve and file the complaint. Plaintiffs’ counsel claimed law office failure as the reason for Plaintiffs’ default in serving and filing the complaint. Plaintiffs’ counsel maintained that he was consumed with his service as President of the New York State Bar Association and, prior thereto, as President-Elect, in addition to having tried to settle the matter with opposing counsel. Defendants rejected counsel’s position, arguing that counsel’s failure to serve a complaint was not due to inadvertent law office failure, but rather due to counsel’s choice to elevate his bar association activities above his professional responsibilities. The court denied the motion to enter a default judgment. Noting that it “was unable to locate authority regarding the impact of a bar association’s President’s duties on his legal practice in terms of meeting deadlines,” the court held that the “mental stress of exercising one’s responsibilities as President and President-Elect of a large state’s bar association” sufficed to show reasonable excuse for a default. The court reasoned that the situation before it was similar to cases in which “an attorney’s mental health condition ha been accepted as a reasonable excuse for a default.” As such, the Court concluded that “ he mental stress of exercising one’s responsibilities as President and President-Elect of a large state’s bar association is no less an excuse than another attorney’s mental health condition.” The court also found “that other factors weigh in favor of excusing , such as the “unique circumstances” of the case, the “understandably embarrassing” situation plaintiff’s counsel found himself in, and the fact that counsel was a solo practitioner. Moreover, the court held that “there was no intent on the part of Plaintiffs or their counsel to abandon the action, in that there were settlement discussions.” The court found that the delay was neither willful nor prejudicial. Finally, the court took a practical approach to the issue, noting that even if it “were to grant Defendants’ motion to dismiss the complaint, Plaintiffs’ claims could be revived under CPLR 205 (a).” Additionally, noted the court, “ he statute of limitations would not pose a bar” to refiling the complaint. The court explained that “ ecommencing the action would only result in more delay in resolving the underlying dispute — both for the parties and indeed for the Court.” Thus, concluded the court, “ t far preferable that the dispute be resolved on the merits within the instant action.” ___________________________________ Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice. Slip Op. at *1-*2 (citations and internal quotation marks omitted). Id. at *2. Id. at *3. Id. Id. (citation omitted). Id. (citation omitted). Id. (citation omitted). Id. Id. Id. Id. at *3-*4. Id. at *4. Id.