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By:  Jeffrey M. Haber In today’s article, we revisit some familiar principles concerning claims of fraudulent inducement. We will also examine the impact of a contractual exculpatory clause on the viability of a fraud claim, as well as the impact of contractual provision that negates the basis for a fraud claim. Our examination of these issues and principles is centered on MREF REIT Lender 2 LLC v. FPG Maiden Holdings LLC , 2024 N.Y. Slip Op. 06161 (1st Dept. Dec. 10, 2024) ( here ), a case recently decided by the Appellate Division, First Department. MREF REIT concerned a mezzanine loan (“Mezzanine Loan”) by plaintiff MREF REIT Lender 2 LLC (“Mezzanine Lender”) to FPG Maiden Holdings, LLC (“FPG Holdings” or the “Mezzanine Borrower”) in connection with the debt refinancing of the One Seaport luxury residential development in Lower Manhattan (“One Seaport” or the “Building”). The loan was initially made pursuant to the Seaport Mezzanine Loan Agreement, dated September 24, 2018 (the “Mezzanine Loan Agreement” or the “Original Agreement”). Thereafter, the Mezzanine Lender sued the FPG Holdings, FPG Maiden Lane, LLC (“Senior Borrower”), the developer of One Seaport, Fortis Property Group, LLC (“FPG”), an entity affiliated with the Senior Borrower, and Joel Kestenbaum (“Kestenbaum”) who executed certain guaranties in connection with the Mezzanine Loan (collectively, the “FPG Defendants”), claiming that it was fraudulently induced into entering into the Original Agreement. Among other things, the Mezzanine Lender alleged that these defendants misrepresented and concealed material facts relating to the Building, including that the Building was leaning several inches past vertical, which ultimately resulted in (a) the encroachment of the Building on adjoining parcels, and (b) the inability to install a glass curtain wall on the exterior of the concrete superstructure. The Mezzanine Lender alleged that those misrepresentations and omissions constituted fraud as well as a breach of the representations and warranties in the Mezzanine Loan Agreement. To finance the project, an FPG affiliate, entered into a debt financing arrangement with a syndicate of investors (“Senior Lenders”) led by defendant Bank Leumi USA (“BLUSA”), which contemplated the phased funding of up to $120 million, secured by a mortgage encumbering One Seaport (the “Senior Loan”). Plaintiffs maintained that BLUSA knew of the structural issues at One Seaport through its role as Administrative Agent, made its own misrepresentations, and aided and abetted the FPG Defendants’ fraud for the purpose of inducing plaintiff to fund the Mezzanine Loan. By January 2020, the One Seaport project was significantly delayed and over budget, which plaintiffs attributed, in large part, to the structural issues that had not been disclosed at the inception of the Mezzanine Loan. To address the issue, the parties concluded that a debt restructuring was necessary. To move forward with any restructuring, BLUSA allegedly demanded that the FPG Defendants contribute $20 million in additional equity to the project. The Mezzanine Lender maintained that since the FPG Defendants did not have the funds, the FPG Defendants convinced it to have an affiliate, Amity Lender (“Amity”), refinance another loan BLUSA had made to FPG-affiliated entities in connection with a different project in a different borough of New York City. Plaintiffs agreed to the arrangement based on alleged promises by the Senior Lenders that they (a) would not enforce the temporary certificate of occupancy deadlines set forth in any amended loan documents, and (b) would continue to fund the senior loan going forward. Both of these representations were alleged to be central to the Mezzanine Lender and the Amity Lender moving forward with the restructuring. Plaintiffs contended that both of the foregoing representations were knowingly false when made. Allegedly unaware of the claimed fraud , Amity funded a $40 million loan to various borrowers affiliated with FPG (the “Amity Loan”). The proceeds of the Amity Loan were used to repay over $20 million to BLUSA’s affiliate and to fund the FPG Defendants’ additional equity contribution to One Seaport, significantly de-risking the Senior Lenders. According to plaintiffs, the Senior Lenders never again funded the One Seaport senior loan. Instead, the Senior Lenders delayed funding advances under the senior loan and called a default based on the Senior Borrower’s alleged failure to meet the deadlines that BLUSA promised would not be enforced. Further, said plaintiff, one of the most senior executives at BLUSA admitted that the restructuring had been a sham and that the Senior Lenders never intended to fund the Senior Loan, irrespective of what the amended loan documents provided. In 2022, plaintiffs sued the FPG Defendants and the Senior Lenders to recoup the losses they claimed to have sustained as a result of defendants’ misconduct, alleging claims for, among other things, fraud, breach of contract , enforcement of guaranties, aiding and abetting fraud, and unjust enrichment. On January 31, 2023, all defendants moved to dismiss the complaint. In August 2023, the motion court issued its decision and order denying in part and granting in part defendants’ motions. In particular, the motion court denied the FPG Defendants’ motion to dismiss plaintiffs’ contract, fraud and guaranty claims and denied the Senior Lenders’ motion to dismiss plaintiff’s contract claim and unjust enrichment claim. However, the motion court dismissed plaintiffs’ fraud-based claims against BLUSA . All parties appealed. The First Department modified the motion court’s order to: (a) dismiss the cause of action as against defendants FPG, the Senior Borrower, and Kestenbaum for fraudulent inducement of the Original Agreement (the first cause of action); (b) dismiss the cause of action against BLUSA for breach of the intercreditor agreement (the “ICA”) (the seventh cause of action), but only to the limited extent that the cause of action related to an express or implicit obligation to continue funding the senior loans; (c) reinstate the cause of action for aiding and abetting fraud (the fourth cause of action) as against BLUSA; and (d) dismiss the cause of action for unjust enrichment (the tenth cause of action) as against all the Senior Lender Defendants, and otherwise affirmed the order. Claims Against the Borrower Defendants The Court held that the motion court properly allowed the cause of action against the Mezzanine Borrower for breach of the representations and warranties in the Mezzanine Loan Agreement (the second cause of action) to proceed. The Court noted that there was no dispute that the statements ( i.e. , representations and warranties that the building did not encroach upon adjoining land, and that there was no default or event that would give rise to a default under the Senior Loan Documents) in the Mezzanine Loan Agreement were false at the time that they were made, and that the Mezzanine Borrower knew them to be false.” The Court found the Mezzanine Borrower’s argument that “the language of the amendments constituted a waiver of the Mezzanine Borrower's prior breaches, and the amendments generally precluded the Mezzanine Lender from claiming that the original Mezzanine Loan Agreement was breached” to be unavailing and unpersuasive. The Court explained that there were ambiguities regarding the scope of the amendments to the Original Agreement, which precluded resolution of the issue on a motion to dismiss. The Court also held that the motion court “properly allowed the cause of action for fraudulent inducement against the Mezzanine Borrower to proceed (the first cause of action).” “However,” said the Court, “based on the exculpatory clause, the court should have dismissed the claim with respect to the other borrower defendants — that is, FPG, the Senior Borrower, and Kestenbaum — as the exculpatory clause in the Mezzanine Loan Agreement unambiguously preclude the Mezzanine Lender from pursuing remedies from any of the Borrower Defendants other than the Mezzanine Borrower.” The Court further held that the fraudulent inducement claim against the Mezzanine Borrower was properly sustained as it identified the who, what, when, where and how of the alleged fraud. The Court found that the claim was “largely based on numerous extra-contractual representations made by the Mezzanine Borrower’s CEO during due diligence to purportedly induce the Mezzanine Loan.” Thus, concluded the Court, “the Mezzanine Borrower credibly claim that it not understand the basis for the fraud claim.” [Eds. Note: in prior articles, we examined the necessity of pleading the “who, what, when and how” of the alleged fraud. See , e.g. , here , here , and here . As explained in those articles, pleading such information comports with the requirement that the plaintiff plead fraud with particularity. 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.” ] Regarding the justifiable reliance element of the claim , the Court held that “the extent and adequacy of plaintiff’s due diligence present a factual issue that could not be resolved on the pleadings, particularly since the complaint allege that the facts misrepresented by the Borrower Defendants were peculiarly within their knowledge.” [Eds. Note: in prior articles, we discussed the justifiable reliance element of a fraud claim and, in particular the special facts doctrine. See , e.g. , here , here , here , and here . “Under the special facts doctrine, a duty to disclose arises where one party’s superior knowledge of essential facts renders a transaction without disclosure inherently unfair.” The party invoking the doctrine must demonstrate that “the material fact was information peculiarly within knowledge of ,” and “the information was not such that could have been discovered by through the exercise of ordinary intelligence.” ] Finally, the Court held that there was no duplication between plaintiffs’ breach of contract claim and fraud claims: “Because a warranty in an agreement is a ‘statement of present fact … a fraud claim can be based on breach of contractual warranties notwithstanding the existence of a breach of contract claim.’” “For these same reasons,” noted the Court, the motion court “properly allowed the cause of action for breach of the recourse guaranty agreement against defendant Kestenbaum (third cause of action) to go forward.” Claims against the Senior Lender Defendants The Court held that the motion court “improperly dismissed the cause of action for aiding and abetting the fraudulent inducement of the Mezzanine Loan Agreement against BLUSA.” The Court found that plaintiffs sufficiently alleged that “(1) the Borrower Defendants defrauded the Mezzanine Lender into entering the Mezzanine Loan ( i.e. , the underlying fraud); (2) BLUSA provided substantial assistance to the underlying fraud through the misrepresentations in the ICA that there were no structural issues with the Building; and (3) BLUSA concealed and failed to disclose the existence of the structural issues at One Seaport when BLUSA knew that Mezzanine Lender was unaware of them.” Thus, said the Court, plaintiffs “sufficiently pleaded the elements of an underlying fraud against the Borrower Defendants (for the same reasons as explained above), as well as substantial assistance and actual knowledge.” [Eds. Note: we previously examined a claim for aiding and abetting a fraud, here . To plead a claim of aiding and abetting fraud, the complaint must allege: “(1) the existence of an underlying fraud; (2) knowledge of this fraud on the part of the aider and abettor; and (3) substantial assistance by the aider and abettor in achievement of the fraud.”  Although actual knowledge of the fraud may be averred generally, to plead “substantial assistance”, plaintiffs must allege that the defendant (1) affirmatively assisted, helped conceal, or by virtue of failing to act when required to do so enabled the fraud to proceed, and (2) the defendant’s actions as an aider/abettor proximately caused the harm on which the primary liability is predicated.   Knowledge can be averred through circumstantial evidence. ] The Court noted that the motion court incorrectly added the justifiable reliance element of a fraud claim to the elements of an aiding and abetting claim: “Supreme Court’s only articulated bases for dismissal of the fraud claims, all of which were plainly targeted at the justifiable reliance element of a standard fraud claim, do not pertain to an aiding and abetting claim.” “There is no requirement to plead or to prove justifiable reliance in connection with an aiding and abetting claim, so long as there is an underlying cause of action for fraud against another party,” said the Court. “However,” the Court held that the motion court “properly dismissed the cause of action for fraudulent inducement of the ICA against BLUSA (the fifth cause of action).” The Court noted that “the purpose of the ICA was to ‘reconcile the priority of the liens granted by the borrower to the parties,’ not to create independent funding obligations.” Plaintiffs contention that BLUSA’s affirmative misrepresentations and material omissions fraudulently induced the Mezzanine Lender to enter into the ICA and, as a result, to extend the $66 million Mezzanine Loan to the Borrowers in September 2018, was without merit, observed the Court. “Thus,” concluded the Court, “even assuming that the Mezzanine Lender was wrongly induced into entering the ICA, it would not have directly resulted in the Mezzanine Lender extending the Mezzanine Loan.” Finally, the Court held that the motion court “properly dismissed the Amity Lender’s cause of action for the fraudulent inducement of the Amity Loan (the sixth cause of action).” The Court explained that Amity failed to satisfy the justifiable reliance element of the claim because the alleged fraud was “‘negated by the terms of a contract executed by the allegedly defrauded party.’” The Court explained that “ hile the Amity Lender contend that it would not have loaned money to the Borrower Defendants if it had known that BLUSA would enforce project deadlines and decline to fund, Mezzanine Lender signed a written agreement — the Second Amended Intercreditor Agreement — which expressly consented to the deadlines set forth in the Senior Loan Documents.” Therefore, the Court concluded that the terms of the ICA negated any fraud. See,="See," e.g. ,="e.g.," here,=">here," and="and" >here.=">here."> The Court also noted that the “cause of action also subject to dismissal because it fail to allege any affirmative representation by BLUSA that was made directly to plaintiffs regarding an alleged promise not to enforce the project deadlines.” ____________________________________ 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. Id. at *2. Id. Id. (citing Jefpaul Garage Corp. v. Presbyterian Hosp. in City of N.Y. , 61 N.Y.2d 442, 446, 448 (1984)). Id. Id. Plaintiffs argued that the exculpatory clause violated public policy. Kalisch-Jarcho, Inc. v. City of N.Y. , 58 N.Y.2d 377, 384-85 (1983); see also Gross v. Sweet , 49 N.Y.2d 102, 106 (1979) (agreements that “purport to grant exemption for liability for willful or grossly negligent acts” are “wholly void”). In response, defendants argued that the clause did not limit or restrain the Mezzanine Lender from pursuing any claim against the counterparty to the Original Agreement, which it had done. Instead, said defendants, the provision limited the Mezzanine Lender’s ability to pursue claims against certain non-parties to the contract rather than provide blanket immunity for intentional wrongdoing. Id. Id. (noting, plaintiffs “sufficiently pleaded the source of the misrepresentations, the content of the misrepresentations, the context in which the misrepresentations were made, and the entity to whom the misrepresentations were made” and citing Epiphany Cnty. Nursery Sch. v. Levey , 171 A.D.3d 1, 9 (1st Dept. 2019)). Id. (citing MBIA Ins. Corp. v. Countrywide Home Loans, Inc. , 87 A.D.3d 287, 295 (1st Dept. 2011)). Pludeman v. Northern Leasing Sys., Inc. , 10 N.Y.3d 486, 491 (2008) (citation omitted).   Slip Op. at *2-*3 (citing China Dev. Indus. Bank v. Morgan Stanley & Co. , 86 AD3d 435, 436 (1st Dept. 2011); TIAA Glob. Invs., LLC v. One Astoria Square LLC , 127 A.D.3d 75, 89 (1st Dept. 2015)). Swersky v. Dreyer & Traub , 219 A.D.2d 321, 327 (1st Dept. 1996) (internal quotation marks and citations omitted), rearg denied , 232 A.D.2d 968 (1st Dept. 1996), appeal withdrawn , 89 N.Y.2d 983 (1997). Jana L. v. West 129th St. Realty Corp. , 22 A.D.3d 274, 278 (1st Dept. 2005) (internal quotation marks and citation omitted). Slip Op. at *3 (quoting First Bank of Ams. v. Motor Car Funding, Inc. , 257 A.D.2d 287, 292 (1st Dept. 1999)). Id. Id. at *4. Id. Id. (citing William Doyle Galleries, Inc. v. Stettner , 167 A.D.3d 501, 505 (1st Dept. 2018)). Stanfield Offshore Leveraged Assets, Ltd. v. Metro. Life Ins. Co. , 64 A.D.3d 472, 476 (1st Dept. 2009). Id. Houbigant, Inc. v. Deloitte & Touche , 303 A.D.2d 92, 98- 99 (1st Dept. 2003).   Slip Op at *4 (citing William Doyle Galleries , 167 A.D.3d at 505). Id. Id. Id. at *5 (citing Steinway Capital Mgt. II L.P. v. Ironshore Specialty Ins. Co. , 126 A.D.3d 522, 522 (1st Dept. 2015)). Id. at *4-*5. Id. at *5. Id. Id. (quoting FPG Maiden Lane, LLC v. Bank Leumi USA , 211 A.D.3d 528, 529 (1st Dept. 2022)); see also Perrotti v. Becker, Glynn, Melamed & Muffly LLP , 82 A.D.3d 495, 498-499 (1st Dept. 2011). Id. Id. Id.

By:  Jeffrey M. Haber In Valkyrie AI LLC v. PriceWaterhouseCoopers LLP , 2024 N.Y. Slip Op. 06141 (1st Dept. Dec. 5, 2024) ( here ), the Appellate Division, First Department affirmed an order involving claims for unfair competition, tortious interference with contract and tortious interference with prospective business relations. As discussed below, the Court found that plaintiff stated a claim for unfair competition and tortious interference with contract against PwC but failed to do so with regard to its claim against all defendants for tortious interference with prospective business relations. A Primer on the Law Unfair Competition The essence of an unfair competition cause of action based upon the misappropriation of confidential information “is not just that the defendant has ‘reap where it has not sown,’ but that it has done so in an unethical way and thereby unfairly neutralized a commercial advantage that the plaintiff achieved through ‘honest labor.’” To state a claim, a plaintiff “must show that the defendant[] misappropriated labors, skills, expenditures or goodwill and displayed some element of bad faith in doing so.” Where a plaintiff alleges unfair competition based on a theory of trade secret misappropriation, the allegations supporting the claim must also describe the “(1) acts or omissions by defendant[] that proximately caused a misappropriation, and (2) the property or benefit misappropriated.” In other words, the plaintiff must precisely identify the trade secrets it alleges the defendant misappropriated. Therefore, a complaint that does not allege the existence of a trade secret and only alleges “general categories of ‘confidential information’” alleged to be misappropriated will be dismissed. Further, the trade secret at issue must be “more than a collection of broad concepts” and cannot be readily available to the public. Whether information constitutes a trade secret is generally a question of fact. Tortious Interference with Contract To plead a claim for tortious interference with contract, a plaintiff must allege: “the existence of a valid contract between the plaintiff and a third party, defendant’s knowledge of that contract, defendant’s intentional procurement of the third-party’s breach of the contract without justification, actual breach of the contract, and damages resulting therefrom.” Malice and ill will are not affirmative elements of a tortious interference with contract claim and need not have been pleaded to avoid dismissal. Tortious Interference with Prospective Business Relations To state a claim for tortious interference with prospective business relations, a plaintiff must allege (1) business relations with a third party, (2) the defendant’s interference with those business relations, (3) the defendant acted for the sole purpose of harming plaintiff or used wrongful means, and (4) injury to the business relationship. For this cause of action, it must be affirmatively alleged that the defendant’s conduct was motivated solely by malice or to inflict injury by unlawful means going beyond mere self-interest or other economic considerations. Valkyrie AI LLC v. PriceWaterhouseCoopers LLP Valkyrie AI LLC d/b/a Reclassify AI (“Reclassify”) is a startup company that provides technology consulting services to organizations that are seeking to develop in-house artificial intelligence capabilities and tools and designs and implements semantic technologies for business enterprises. Soon after its launch, Reclassify entered a contract with Morgan Stanley to apply semantic AI across the investment bank’s information and data network. Reclassify retained Pierluigi Miraglia (“Miraglia”) as an independent contractor to perform work for Morgan Stanley. Miraglia was an employee of Sagence, Inc. (“Sagence”), a consulting firm based in Chicago. Sagence and Reclassify entered a subcontractor agreement regarding Miraglia’s work for Morgan Stanley on August 22, 2022. On October 19, 2022, Sagence agreed to work on an additional project for Morgan Stanley on behalf of Reclassify, with Miraglia remaining as Reclassify’s day-to-day representative at Morgan Stanley. According to Reclassify, Sagence had no semantic AI offerings, though Miraglia had prior professional experience in semantic AI. As a result, Reclassify trained Miraglia, sharing Reclassify’s AI methods and procedures with him. In that connection, Miraglia and Sagence agreed to be bound by a non-competition agreement, a non-disclosure agreement, and a non-solicitation agreement (collectively, the “restrictive agreements”). A few months later, PricewaterhouseCoopers LLP (“PwC”) acquired Sagence. It was agreed that that the Morgan Stanley project that Reclassify had created would continue without interruption for Morgan Stanley, with Miraglia remaining as PwC’s representative at Morgan Stanley. As such, Miraglia continued to do the same job he had been doing for months on the same project that Morgan Stanley had hired Reclassify to do. On November 10, 2022, Sagence informed Reclassify that Sagence was ending its subcontractor agreement with Reclassify. Reclassify filed its original complaint on June 6, 2023, and an amended complaint about one month later. Reclassify asserted claims for: unfair competition (first cause of action), breach of contract (second cause of action against Sagence and Miraglia), fraudulent inducement (third cause of action against Sagence and Miraglia), tortious interference with contract (fourth cause of action against PwC), tortious interference with prospective business relations (fifth cause of action), breach of fiduciary duty (sixth cause of action against Miraglia), aiding and abetting the breach of fiduciary duty (seventh cause of action against Sagence and PwC), misappropriation of trade secrets (eighth cause of action against Sagence and PwC), inevitable disclosure (ninth cause of action against Sagence and PwC), and permanent injunctive relief (tenth cause of action). All defendants moved to dismiss the amended complaint. The motion court held a hearing on the motions on January 3, 2024, and issued a decision and order: (a) denying Sagence and Miraglia’s motion with respect to Reclassify’s first and second causes of action for unfair competition and breach of contract , but granting it as to all other causes of action, including the fifth cause of action for tortious interference with prospective business relations; and (b) granting PwC’s motion with respect to Reclassify’s third, fifth, sixth, seventh, eighth, ninth, and tenth causes of action, but denying PwC’s motion with respect to Reclassify’s first and second causes of action for unfair competition and tortious interference with contract. All parties appealed. The Appellate Division, First Department unanimously affirmed. The Court held that the motion court “properly found that … Reclassify … sufficiently alleged an unfair competition cause of action based on the misappropriation of its trade secrets against PWC.” The Court found “PWC’s arguments that Reclassify failed to state such a claim because it purportedly did not allege that defendants Sagence, Inc. and Pierluigi Miraglia shared plaintiff’s trade secrets with PWC — or that PWC used any such trade secrets in its business —” to be unavailing. The Court said that Reclassify’s allegations that “Miraglia took off his proverbial Reclassify hat and put on a PWC hat,” and that PWC and Sagence “pocketed Reclassify’s know-how, trade secrets, and methods, then took over Reclassify’s” project with  Morgan Stanley “and ran it without interruption with Miraglia in the same spot” sufficient to state a cause of action. The Court also found Reclassify’s allegation “that PWC was ‘no mere bystander,’ and that it openly admitted to acquiring Sagence for the specific purpose of obtaining its ‘AI-based value transformation roadmaps’” sufficient to support the unfair competition claim.  “Thus,” concluded the Court, “contrary to PWC’s argument, one need not make a ‘presumption’ that Sagence shared the trade secrets with PWC based on these allegations.” The Court also held that Reclassify “sufficiently alleged bad faith in support of the unfair competition claim.” Noting that “ ad faith can be shown through acts of ‘fraud, deception, or an abuse of a fiduciary or confidential relationship’, the Court found that Reclassify adequately alleged bad faith: “ n the days leading up to closing the acquisition, PWC allegedly strategized with Sagence about how to placate Reclassify with respect to the Morgan Stanley business, suggesting a ‘joint business relationship’ with Reclassify or possibly making a cash payment to Reclassify, although these proposed solutions did not come to fruition. PWC’s alleged actions were plainly deceptive.” The Court rejected “PWC’s argument that the unfair competition claim should have been dismissed because Reclassify failed to properly allege or describe the ‘trade secret’ that PWC allegedly misappropriated.” The Court found that the record supported Reclassify’s allegation that its AI services were novel and secret and therefore, sufficed “to satisfy this element of a misappropriation of trade secrets claim.” The Court also held that the motion court “properly denied PWC’s motion to dismiss the claim that PWC had tortiously interfered with Reclassify’s restrictive agreements with Sagence and Miraglia.” The Court said that the amended “complaint allege that the acquisition was driven by PWC’s desire to acquire Reclassify’s semantic AI trade secrets and its lucrative Morgan Stanley contract, and to put itself in the shoes of Reclassify with respect to the LCD Innovation Project” ( i.e. , the code name for the project with Morgan Stanley). The Court explained that “PWC performed due diligence leading up to the acquisition and thus knew about the restrictive agreements,” which it did not contest. The Court further held that the motion court properly dismissed the tortious interference with prospective business relations claim because Reclassify failed to identify a prospective business relationship. “The mere fact that Reclassify had a current contractual relationship with Morgan Stanley was not sufficient to establish the prospect of a future contract with Morgan Stanley,” said the Court. Finally, the Court held that the tortious interference with prospective business relations claim was duplicative of the unfair competition claim. The Court explained that both claims were “premised on the same allegations that, among other things, Sagence misappropriated Reclassify’s semantic AI capabilities, which afforded Reclassify a competitive advantage, and which belonged exclusively to Reclassify as a function of having developed those capabilities for itself.” “As the acts complained of in both causes of action ‘completely overlap,’” said the Court, the motion “court properly dismissed the tortious interference with prospective business relations cause of action as duplicative.” ____________________________________ 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. E.J. Brooks Co. v. Cambridge Sec. Seals , 31 N.Y.3d 441, 460 (2018) (quoting International News Serv. v. Associated Press , 248 U.S. 215, 236, 239-240 (1918)). Abe’s Rooms, Inc. v. Space Hunters, Inc. , 38 A.D.3d 690, 692 (2d Dept. 2007); see also Ahead Realty LLC v. India House, Inc. , 92 A.D.3d 424, 425 (1st Dept. 2012) (citation omitted). Com. Data Servers., Inc. v. Int’l Bus. Machs. Corp. , 166 F. Supp. 2d 891, 894 (S.D.N.Y. 2001) (citing Data Broad. Corp. v. Tele-Comm’cns, Inc. , No. 92-cv-4840 (JFK), 1992 WL 350624, at *3 n.4 (S.D.N.Y. Nov. 19, 1992)); see also Ferring B.V. v. Allergan, Inc. , 4 F. Supp. 3d 612, 629-30 (S.D.N.Y. 2014). See Schroeder v. Cohen , 169 A.D.3d 412, 412–13 (1st Dept. 2019); see also Subject Matter and Specificity of Trade Secrets, 4F N.Y. Prac., Com. Litig. in New York State Courts § 132:6 (5th ed.). Elsevier Inc. v. Dr. Evidence, LLC , No. 17-cv-5540 (KBF), 2018 WL 557906, at *6 (S.D.N.Y. Jan. 23, 2018) (emphasis in original) (citing Next Commc’ns, Inc. v. Viber Media, Inc. , No. 16 14-CV-8190 (RJS), 2016 WL 1275659, at *4 (S.D.N.Y. Mar. 30, 2016) (internal citations omitted)). Schroeder v. Pinterest, Inc. , 133 A.D.3d 12, 29 (1st Dept. 2015). Id. at 28. Lama Holding Co. v. Smith Barney Inc. , 88 N.Y.2d 413, 424 (1996) (citations omitted). See , e.g. , Shared Commc’ns Servs. of ESR, Inc. v. Goldman Sachs & Co. , 23 A.D.3d 162, 163 (1st Dept. 2005). See Thome v. Alexander & Louis Calder Found. , 70 A.D.3d 88, 108 (1st Dept. 2009), lv. denied , 15 N.Y.3d 703 (2010). See Shared Commc’ns , 23 A.D.3d at 163. Sagence and Miraglia stipulated to the withdrawal of their appeal. Slip Op. at *1. Id. Id. Id. Id. Id. Schroeder v. Pinterest, Inc. , 133 A.D.3d 12, 30 (1st Dept. 2015). Slip Op. at *1. Id. Slip Op. at *2. Id. Id. Id. Id. at *3. Id. (citing Nicosia v. Board of Mgrs. of the Weber House Condominium , 77 A.D.3d 455, 457 (1st Dept. 2010)). Id. Id. Id. (quoting EVEMeta, LLC v. Siemens Convergence Creators Corp. , 176 A.D.3d 612, 613 (1st Dept. 2019)).

By: Jonathan H. Freiberger Today’s BLOG article concerns CPLR 306-b . As previously explained in prior articles, actions or proceedings (collectively, “Actions”) are commenced by filing the initiatory papers with the appropriate county clerk. CPLR 304(a) . Once the Action is commenced, the plaintiff is required to serve the initiatory papers on the defendant, and generally such service must occur within 120 days after the Action is commenced. CPLR 306-b. “If service is not made upon a defendant within the time provided in this section, the court, upon motion, shall dismiss the action without prejudice as to that defendant, or upon good cause shown or in the interest of justice, extend the time for service.” Id. The Leader Court made clear that, under CPLR 306-b, “good cause” and “the interest of justice” are “two separate standards by which to measure an application for an extension of time to serve” a defendant if service is not made within 120 days of the commencement of an Action. Leader , 97 N.Y.2d at 104. In this regard, the Leader Court recognized that because “good cause” and “the interest of justice” are “stated separately, joined by the word ‘or’ hey cannot be defined by the same criteria; otherwise, one would have been sufficient.” Id . (citation omitted). “To establish good cause, a plaintiff must demonstrate reasonable diligence in attempting service.” Bumpus v. New York City Tr. Auth. , 66 A.D.3d 26, 31 (2 nd Dep’t 2009) (citing Leader ); see also Wilmington Savings Fund Society, FSB v. James , 174 A.D.3d 835, 837 (2 nd Dep’t 2019)). “Good cause will not exist where a plaintiff fails to make any effort at service or fails to make at least a reasonably diligent effort at service.” Bumpus , 66 A.D.3d at 31 (citations omitted). Where “good cause” is not established, “courts must consider the ‘interest of justice’ standard of CPLR 306-b.” Bumpus , 66 A.D.3d at 32 (citations omitted); see also Wilmington , 174 A.D.3d at 837. Under the “interest of justice” standard, a court must analyze “the factual setting of the case and a balancing of the competing interests presented by the parties.” Gjurashaj v. ABM Industry Groups, LLC , 213 A.D.3d 479, 480 (1 st Dep’t 2023) ( citing Leader , internal quotation marks omitted); see also Wells Fargo Bank v. Barrella , 166 A.D.3d 711, 713 (2 nd Dep’t 2018). In addition, while no single factor “is determinative,” courts may consider factors such as “diligence, or lack thereof, along with any other relevant factor in making its determination, including expiration of the statute of limitations, the meritorious nature of the cause of action, the length of delay in service, the promptness of a plaintiff's request for the extension of time, and prejudice to defendant.” Id . The Appellate Division, Second Department, addressed CPLR 306-b on November 27, 2024, in HSBC Bank USA, N.A. v. Labin , a residential mortgage foreclosure action in which the Court reversed the grant of a lender’s motion to extend the time to serve process on the borrower pursuant to CPLR 306-b because the lender failed to demonstrate that its service efforts were reasonably diligent or that the motion should be granted in “the interest of justice.” The lender in Labin commenced its foreclosure action in 2013 and claimed to have served the borrower at the mortgaged premises and “at an adjacent premises.” Almost six years later, the lender moved for a default judgment after the borrower failed to appear in the action. One month later, the borrower moved to dismiss the complaint for lack of personal jurisdiction pursuant to CPLR 3211(a)(8) . Before deciding either motion, the motion court referred the issue of proper service of process to a special referee to “hear and report.” In August 2019, the referee “issued a report finding that the plaintiff had failed to properly effectuate service.” The following month, the lender moved pursuant to CPLR 306-b to extend the time to serve the borrower. In August of 2022, the motion court denied the borrower’s motion to dismiss and granted the lender’s motion to extend pursuant to CPLR 306-b. On the borrower’s appeal, the Second Department reversed. First, the Court found that “good cause” was lacking because the lender did not “demonstrate reasonable diligence in attempting to effect service" and, therefore, it was not entitled to an extension for good cause.” (Citations and internal quotation marks omitted.) In this regard, the Court stated: By the time the moved for an extension of time, the Supreme Court had already determined that the presented sufficient evidence to warrant a hearing on the validity of service of process, and the special referee had already found that service was improper. The also failed to show that it had made any efforts to locate the and confirm her place of residence, such as by submitting evidence of records searches. Since the did not demonstrate that its failure to properly effectuate service within the 120-day period following the commencement of this action was due to circumstances beyond its control, it was not entitled to an extension for good cause. (Citations, internal quotation marks, ellipses, and brackets omitted.) Nor did the lender convince the Court that the extension should be granted under the “broader” interest of justice standard, which is “more flexible accommodates late service that might be due to mistake, confusion, or oversight, so long as there is no prejudice to the defendant.” (Citation and internal quotation marks omitted.) When utilizing the “interest of justice” standard, “the court must carefully analyze the factual setting of the case and a balancing of the competing interests presented by the parties.” (Citation omitted.) In determining that the “interests of justice” would not be furthered by granting the lender’s motion, the Court stated: Here, the was on notice in December 2018 that service upon the defendant allegedly was defective when the moved to dismiss the complaint for lack of personal jurisdiction . The nonetheless waited nearly 10 months thereafter to move for an extension of time to serve the . Moreover, the 's motion was made more than two months after the hearing before the special referee concluded, even though the evidence at the hearing demonstrated that the had been residing in Canada for decades. Although the statute of limitations had already expired by the time the moved for an extension of time, the failed to demonstrate that it diligently prosecuted this action. Moreover, the submitted no evidence that the had actual notice of the action against her within the 120-day service period. Further, the failed to rebut the inference of substantial prejudice to the that arose from the protracted delay in obtaining such notice. (Citations, internal quotation marks, ellipses, and brackets omitted.) Thus, the Court determined that the motion court acted “improvidently” in granting the lender’s CPLR 306-b motion. Further, to the extent that the borrower was not properly served with process and the lender did not establish entitlement to an extension under CPLR 306-b, the borrower’s motion to dismiss the complaint for lack of personal jurisdiction pursuant to CPLR 3211(a)(8) should have been granted. 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 previously addressed CPLR 306-b. See, e.g., < here =">here"> , < here =">here"> , < here =">here"> , < here =">here"> and < here =">here"> . The history and import of CPLR 306-b, as discussed in prior BLOGS, is explained by the Court of Appeals in Leader v. Maroney, Ponzini & Spencer , 97 N.Y.2d 95, 101 (2001).  This BLOG has previously addressed CPLR 304. See, e.g., < here =">here"> and < here =">here"> .

By: Jeffrey M. Haber It has been some time since we have examined cherry-picking – a practice that can be an effective way to generate returns as well as a practice that is fraudulent and violative of the federal securities laws. Therefore, today, we examine SEC v. Leech , Case 1:24-cv-09017 (S.D.N.Y. Nov. 25, 2024), a case involving the former co-chief investment officer of an investment adviser, who has been charged with running a more than $600 million cherry-picking scheme in which he allegedly favored some clients’ accounts over others when allocating trades. here)=">here)" and="and" is="is" reprinted="reprinted" as="as" primer="primer" for="for" our="our" readers="readers" practice.="practice."> Cherry picking is the process of selecting securities to invest in by mirroring the trading of other investors (both individual and institutions) who are successful over a long period of time. In other words, cherry-pickers base their trading around the techniques and strategies of other investors. Anyone can implement a cherry-picking strategy. Indeed, cherry-picking is used by both professional and retail investors alike. Cherry picking can be an effective way to generate returns. It can also be helpful for people who are relatively new to investing – i.e. , investors who are unfamiliar with the process of stock selection and investment research. Cherry picking can also be used by investment advisers in a fraudulent way. Under this scenario, an investment adviser will allocate winning trades to his/her personal account or to a favored client(s) at the expense of other clients. Typically, an investment adviser trades in securities through an omnibus trading account . An omnibus trading account allows an investment adviser to buy and sell securities on behalf of multiple clients simultaneously, without identifying to the broker in advance the specific accounts for which a trade is intended. For example, if an adviser separately purchases the same security for several clients on the same day, the adviser might obtain different prices on each transaction as a result of normal market fluctuation. Rather than placing individual orders in each client account, the adviser can place an aggregated order, or “block trade,” in the omnibus account and subsequently allocate the trade among multiple accounts using an average price. When used properly, an adviser will fairly and equitably allocate the block trade among client accounts, ensuring that no account receives preferential treatment over another. The fraudulent act of cherry-picking involves an investment adviser selecting specific profitable or unprofitable trades and allocating them in a manner of their choosing. For example, the investment adviser might allocate the profitable trades to his/her personal account or to certain clients in order to give them preferential treatment. Conversely, trades that incur losses might be allocated to the accounts of less preferred clients of the investment adviser. When used fraudulently, cherry-picking violates the securities laws. Over the past several years, the Securities and Exchange Commission (“SEC” or the “Commission”) has been vigilant in cracking down on investment advisors who engage in fraudulent cherry-picking. [Eds. Note: in a prior article ( here ), we discussed some of the SEC’s enforcement actions against investment advisers who were charged with cherry-picking. ] Cherry-picking can occur in all types of investment vehicles. We examine a few of them below, as they are relevant to the enforcement action discussed herein. Mutual Funds A mutual fund is a type of SEC-registered investment company that pools money from many investors and invests the money in some combination of stocks, bonds, short-term money-market instruments, and/or other assets. The securities and other assets owned by a mutual fund are known collectively as the fund’s portfolio. A mutual fund’s portfolio is managed by an SEC-registered investment adviser. A mutual fund’s investment adviser owes a fiduciary duty to its client, i.e. , the fund. Each mutual fund share represents an investor’s proportionate ownership of the mutual fund’s portfolio and of the income and capital gains the portfolio generates. Investors in mutual funds buy their shares from, and sell or redeem their shares to, the mutual funds themselves. Mutual fund shares are typically purchased from the fund directly or through investment professionals, such as brokers. Private Funds A private fund is another type of entity that pools money from multiple investors and invests the money in various securities and other assets. Private funds may rely on one of the exemptions from the definition of investment company set forth in Section 3 of the Investment Company Act. Private funds are not registered with the Commission. They are not subject to the Investment Company Act and its associated regulations, which are applicable to mutual funds and other registered investment companies. However, private funds and their advisers are subject to the same prohibitions against fraud as other market participants. Additionally, all investment advisers, including advisers to mutual funds and private funds, owe a fiduciary duty to the funds that they manage. Separately Managed Accounts A separately managed account (“SMA”) is a portfolio that includes securities or other assets managed by an investment adviser on behalf of an advisory client. Unlike pooled investment vehicles, wherein investors own a share of the fund, the investor in an SMA directly owns the securities or other assets in the portfolio, which is managed by the adviser. SEC v. Leech On November 25, 2024, the SEC announced ( here ) that it filed fraud charges against the former co-chief investment officer of Western Asset Management Company LLC (“Western Asset”), for engaging in a multi-year cherry-picking scheme wherein he allocated favorable trades to certain portfolios, while allocating unfavorable trades to other portfolios. In its complaint ( here ), the SEC alleged that from at least January 2021 through October 2023 (the “Relevant Period”), defendant placed trades with brokers and then routinely waited until later in the trading day to allocate the trades among clients in the portfolios he managed. According to the complaint, defendant’s delay between placing and allocating trades gave him the opportunity to observe price movements, and then disproportionally allocate trades at a first-day gain to favored portfolios and trades at a first-day loss to disfavored portfolios. As alleged, defendant allocated hundreds of millions of dollars of net first-day gains to favored portfolios, which also benefited defendant personally, and a similar amount of net first-day losses to disfavored portfolios. Commenting on the alleged scheme, Sanjay Wadhwa, Acting Director of the SEC’s Division of Enforcement said: “The scale and duration of ’s allegedly fraudulent conduct amounts to a shocking betrayal of his fiduciary obligations to his clients, who paid dearly for his transgressions. Investment advisers are at all times obliged to perform their functions, including trade allocations, in a manner that puts their clients’ interests first. As alleged, abdicated that all-important duty for years.” “This alleged behavior is an egregious abuse of power,” said Andrew Dean, Co-Chief of the Division of Enforcement’s Asset Management Unit. “By hand-picking trades and sending them to portfolios he favored, allegedly stood to profit personally and professionally.” The SEC filed its complaint in the United States District Court for the Southern District of New York. The SEC charged defendant with violating antifraud and other provisions of the federal securities laws. The SEC seeks permanent and conduct-based injunctions, an officer-and-director bar, disgorgement, prejudgment interest, civil penalties, and other relief. In a parallel action, the U.S. Attorney’s Office for the Southern District of New York announced the filing of charges against defendant ( here ). In that regard, defendant was charged with one count of investment adviser fraud and one count of securities fraud; one count of commodity trading adviser fraud and one count commodities fraud; and one count of making false statements to the SEC. __________________________________ 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. In addition to the article mentioned above, we previously examined the illegal practice of cherry-picking here . The Section 3(c)(1) exemption is available to funds that are (i) beneficially owned by not more than 100 persons and (ii) not making nor intending to make a public offering. The Section 3(c)(7) exemption is available to funds that are (i) owned exclusively by “qualified purchasers” and (ii) not making nor intending to make a public offering. There is no limit to the number of qualified purchasers under this exemption. According to the SEC, during the Relevant Period, Western Asset employed multiple investment strategies for its portfolios, including (a) the Western Asset Macro Opportunities strategy (“Macro Opps”); (b) the Western Asset US Core strategy (“Core”); and (c) the Western Asset US Core Plus strategy (“Core Plus”) (collectively, the “Strategies”). The portfolio clients within the Strategies included mutual funds and other registered investment companies (“Registered Funds”), private funds, and other investment funds (collectively with the Registered Funds and private funds, the “Funds”), as well as SMAs. Favored Portfolios ( i.e. , portfolios to which first-day gains were allocated) primarily included portfolios in the Macro Opps strategy, whereas Disfavored Portfolios ( i.e. , portfolio to which first-day losses were allocated) primarily included portfolios in the Core and Core Plus strategies, said the SEC. According to the SEC, defendant personally benefitted from the fraudulent scheme by allocating $19 million from his deferred compensation plan into the Macro Opps strategy. Defendant also benefited in terms of his compensation ( i.e. , bonus), which was tied to the Western Asset’s allegedly inflated management fees. See U.S. v. Leech , No. 24-cr-00658 (S.D.N.Y.). The indictment and the description of the indictment set forth in the release constitute only allegations, which the DOJ is required to prove at trial.

By: Jeffrey M. Haber In Farage v. Associated Ins. Mgt. Corp. , 2024 N.Y. Slip Op. 05875 (Nov. 26, 2024) ( here ), the New York Court of Appeals examined the enforceability of an insurance contract’s two-year suit limitation period. In a 4-3 decision, written by Judge Madeline Singas, the Court held that the contract provision in the parties’ insurance agreement shortening the statute of limitations barred plaintiff from receiving payment for the restoration of her property that the fire had damaged. On August 4, 2014, plaintiff’s multi-unit apartment building in Staten Island, NY was damaged in a fire. At the time, plaintiff had an insurance policy in effect with defendant Tower Insurance Company of New York. The policy provided, in relevant part, that an insured “may not bring a legal action against” the insurer under the policy unless: “a. here ha been full compliance with all of the terms of this insurance”; and “b. he action brought within 2 years after the date on which the direct physical loss or damage occurred.” Another portion of the policy provided: “We will not pay on a replacement cost basis for any loss or damage: ‘(i) Until the lost or damaged property is actually repaired or replaced’; and ‘(ii) Unless the repairs or replacement are made as soon as reasonably possible after the loss or damage.’” In July 2020, restoration of the property was completed, and plaintiff submitted an itemized invoice to her insurance carrier. On September 1, 2020, the carrier denied plaintiff’s claim. On August 4, 2020—six years after the fire, and four years after the expiration of the contractual limitation period—plaintiff commenced an action, seeking the full replacement value of the property and coverage for lost business income and other damaged personal property. Plaintiff asserted causes of action against defendants Tower Insurance Company of New York, Tower Risk Management Corporation, Tower Group, Inc., Tower Group Companies, Castlepoint Insurance Company, AmTrust Financial Services, and AmTrust North America, Inc. (“Tower/AmTrust defendants”) for breach of contract and breach of the covenant of good faith and fair dealing. Plaintiff alleged that “as a direct result of Tower/AmTrust’s bad faith conduct … restoration work was delayed for years.” Specifically, plaintiff asserted that “ iven the massive structural damage wrought by the fire, the restoration of property would have been multi-year process under even the best of circumstances. Yet the bad faith conduct of Tower/AmTrust delayed the process even longer.” Further, alleged plaintiff, “because of Tower/AmTrust’s misconduct, it was not possible for to complete the restoration of the property until July 2020.” Plaintiff gave three examples of Tower/AmTrust's alleged misconduct. First, Tower/AmTrust refused to pay vendors’ invoices for initial remedial work, such as boarding windows and removing debris, which resulted in “liens on the property” and “prevented from obtaining much needed financing for the seven-figure restoration costs.” Second, Tower/AmTrust “assigned a succession of claims adjusters, none of whom would take responsibility for the claims handling process” resulting “in months of delay and setting back the restoration process.” Finally, according to plaintiff, the Tower/AmTrust defendants “forbade from even beginning the remediation until the property was inspected by the insurer’s expert, but delayed in sending the so-called expert, who in fact had no understanding of the engineering challenges posed by the structural damage.” The Tower/AmTrust defendants moved to dismiss the action pursuant to CPLR 3211 (a) (1) and (7), asserting that the insurance policy’s two-year suit limitation provision barred the action. Plaintiff opposed the motion, arguing that the suit limitation provision was unreasonable and unenforceable under Executive Plaza, LLC v. Peerless Ins. Co. , 22 N.Y.3d 511 (2014). Plaintiff asserted two additional facts—that the fire was a four-alarm fire and that the property damage was “caused both by the fire and the water used by the fire department to extinguish it”—but otherwise relied on the factual allegations in her complaint. Supreme Court granted the Tower/AmTrust defendants’ motion to dismiss the complaint in its entirety and denied the broker defendants’ and plaintiff's motions as moot. As pertinent here, the motion court held that the policy’s suit limitation provision “bar plaintiff’s claims.” The motion court rejected plaintiff’s argument that the provision was unenforceable under Executive Plaza because plaintiff “failed to demonstrate sufficiently that she attempted to repair the Property within … two years” and she “did nothing to protect her rights as the suit limitation expired.” The Appellate Division, First Department affirmed the order dismissing the complaint. The First Department held that the Tower/AmTrust defendants conclusively established that the suit limitation provision barred the action, and Executive Plaza did not apply because plaintiff “failed to allege that she reasonably attempted to repair the property within the two-year limitations period but was unable to do so.” The Court granted plaintiff leave to appeal and affirmed the First Department’s order. As an initial matter, the Court examined the standard of review for a motion to dismiss under CPLR 3211(a) (1) and (7). Under CPLR 3211(a) (1), which played an outsized role in the Court’s decision, the Court emphasized that “ uch a motion ‘may be appropriately granted only where the documentary evidence utterly refutes plaintiff’s factual allegations, conclusively establishing a defense as a matter of law.’” “Unambiguous contracts that can ‘be interpreted only in one manner’ may be the basis for a dismissal pursuant to CPLR 3211 (a) (1)”, said the Court. Next, the Court turned to the law governing suit limitation provisions. “Suit limitation provisions that specify a ‘reasonable’ period, shorter than the statute of limitations, within which an action must be commenced are generally enforceable,” said the Court. In that regard, the Court has held that “‘there is nothing inherently unreasonable about a two-year period of limitation’ in a case involving the same provisions at issue here: a two-year suit limitation provision and a condition precedent to the suit requiring complete replacement of the damaged property.’” “Nevertheless,” said the Court, “the ‘period of time within which an action must be brought … should be fair and reasonable, in view of the circumstances of each particular case.’” In Executive Plaza , the plaintiff alleged “that it acted reasonably to replace the damaged building, but was not able to do so” within the two-year limitation period, detailing several steps taken within that period to restore the property. Answering a certified question from the United States Court of Appeals for the Second Circuit, the Court held that a suit limitation provision in an insurance policy is unreasonable where the policy requires total replacement before an action may be commenced but the damaged “property cannot reasonably be replaced within” the limitation period. Accordingly, a plaintiff seeking to nullify a suit limitation provision under Executive Plaza must demonstrate that the damaged property could not reasonably be replaced within the limitation period. Against the foregoing principles, the Court held that “the Tower/AmTrust defendants met their burden of establishing, by reference to the contract’s two-year suit limitation provision, that the action was time-barred because plaintiff did not commence it within two years of the fire, utterly refuting plaintiff’s factual allegations.” The Court found that “ othing in plaintiff’s response raised any issue as to whether the provision should bar her claims.” The Court further found plaintiff’s allegation that “ iven the massive structural damage wrought by the fire, the restoration of property would have been multi-year process under even the best of circumstances” to be conclusory and, therefore, not supportive of her allegation that the provision was unreasonable: Here, plaintiff failed to allege actions that she took to complete the repairs within two years; she did not provide any details regarding the extent of the damage, other than that the damage was “massive” and the fire set off four alarms, or why complete restoration within two years was an impossibility. This bare-bones allegation stands in stark contrast to the plaintiff’s factual assertions in Executive Plaza . There, the plaintiff pleaded the specific remedial actions taken to restore the property, including retaining an architect and construction company, submitting a variance application, and seeking and obtaining building permits, which were not issued until 20 months after the property damage. Most importantly, that plaintiff provided that these remedial actions were taken within the limitation period. All of this information is notably absent from plaintiff's pleadings and motion response here. The Court rejected plaintiff’s “attribution of the lengthy restoration” to the conduct of the Tower/AmTrust defendants because it lacked specificity “as to whether the property could be reasonably restored within two years.” “Plaintiff’s allegation that ‘because of Tower/AmTrust’s misconduct, it was not possible for to complete the restoration of the property until July 2020’ patently conclusory,” said the Court. The Court explained that plaintiff offered “no factual specificity as to the length of the resultant delay except for one allegation that the assignment of ‘a succession of claims adjusters … result in months of delay.’” As such, concluded the Court, “plaintiff failed to sufficiently allege that Tower/AmTrust’s conduct made it impossible for her to reasonably complete restoration within two years of the fire.” Moreover, said the Court, plaintiff’s failure to “assert that she informed the Tower/AmTrust defendants at the expiration of the limitation period that the repairs could not be completed within the term specified in the contract, further undermin her claim that she could not do so.” The Court noted that in Executive Plaza , the plaintiff had filed an action prior to the expiration of the limitation provision, and before the restoration had been completed, detailing the efforts taken to restore the property. By doing so, the plaintiff demonstrated that it was diligently, but unsuccessfully, working to satisfy the condition precedent. By contrast, although plaintiff alleged that she “promptly submitted’ a claim to the Tower/AmTrust defendants after the fire and otherwise suggested that she was in contact with them during some of the restoration process, she failed to allege “when any of this contact allegedly occurred or what information she relayed to defendants regarding the circumstances giving rise to the impossibility of timely restoration.” The Court concluded that “ ecause plaintiff did not raise a question of fact as to the enforceability of the limitation provision, the Tower/AmTrust defendant’s motion to dismiss the complaint in its entirety pursuant to CPLR 3211 (a) (1) was property granted.” Accordingly, the Court affirmed the First Department’s order. Judge Jenny Rivera, writing for the dissent, in which Chief Judge Rowan D. Wilson and Judge Caitlin J. Halligan concurred, held that the insurance policy at issue did not utterly refute “any contention that plaintiff’s property could not reasonably be replaced within the two-year contractual limitation period.” Judge Rivera found that plaintiff’s allegations of obstructive conduct by the Tower/AmTrust defendants was sufficient to survive a motion to dismiss. Judge Rivera found that the complaint “put defendants on notice that intended to prove that her property could never have reasonably been replaced in less than two years and that Tower/Amtrust defendants’ conduct delayed replacement beyond that period.” Moreover, said Judge Rivera, “by alleging that she ‘promptly’ began the process of replacing the property, and then describing what steps she took, plaintiff indicated how she intended to substantiate those claims.” As a result, “ ad plaintiff met her ultimate burden,” said Judge Rivera, a court would be bound by Executive Plaza to hold that the two-year contractual limitation period was unreasonable and unenforceable. Having concluded that the Tower/Amtrust defendants did not meet their burden, Judge Rivera turned to the majority decision. First, the dissent took issue with the majority’s holding that plaintiff’s allegations were conclusory: Plaintiff’s allegation here is based on facts—massive structural damage due to fire—rather than on a legal proposition, doctrine or theory. Plaintiff never invoked the limitation provision in her complaint, let alone argue that it was unreasonable. Indeed, plaintiff never mentioned the “reasonableness” standard at all. Instead, it was defendants who invoked the limitations provision in their motions to dismiss. Second, the dissent claimed the majority ignored the principle that on a motion to dismiss, the courts must “‘accord plaintiff[ ] the benefit of every possible favorable inference.’” Applying this standard to the majority’s finding that the complaint failed to detail the extent of the damage or explain why complete restoration could not be completed within two years, the dissent argued that “a favorable inference” could be drawn “that a four-alarm fire in a three-story building caused significant damage. “That inference,” said Judge Rivera, was “supported by plaintiff’s allegation that the harm caused by this ‘catastrophic’ event ‘included structural damage caused both by the fire and the water used by the fire department to extinguish it.’” Judge Rivera added: “Of course, plaintiff would still have to establish that ‘complete restoration within two years was,’ reasonably speaking, ‘an impossibility.’” “But at the pleading stage,” said the dissent, plaintiff “need only assert a viable claim, not prove it.” Third, the dissent took issue with the majority’s finding that plaintiff failed to plead that she undertook “specific remedial actions” “within the limitation period”. Yet, when according every favorable inference to plaintiff, that is exactly what plaintiff had alleged, said Judge Rivera: that “she ‘promptly’ submitted an insurance claim for the property damage to the Tower/AmTrust defendants; that those defendants ‘forbade Ms. Farage from even beginning the remediation until the property was inspected by the insurer’s expert,’ but ‘delayed’ the inspection; and that the Tower/AmTrust defendants refused to pay vendors, prompting the vendors to ‘place[ ] liens on the property.’” “When construed liberally and holistically, as our pleading standard requires,” concluded Judge Rivera, “these allegations portray plaintiff as acting dutifully to fulfill her contractual obligations in a timely manner.” The dissent also claimed that the majority’s finding that plaintiff’s allegation concerning the delay in restoration to be conclusory was beside the point: “under Executive Plaza , what matters is only whether the property could reasonably have been restored within the limitation period.” “On a motion to dismiss,” said the dissent, “we must accept factual allegation that defendants’ conduct caused delay, not her conclusion that it legally constituted misconduct or bad faith. And if the restoration would have been a ‘multi-year process’ no matter what, as plaintiff alleged, then even ‘months of delay’ would have prevented plaintiff from completing the restoration within two years.” _________________________________________ 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. 210 A.D.3d 470 (1st Dept. 2022). Id. at 471. Slip Op. at *2 (quoting Goshen v. Mutual Life Ins. Co. of New York , 98 N.Y.2d 314, 326 (2002) (citation omitted)). Id. (quoting Goldman v. Metropolitan Life Ins. Co. , 5 N.Y.3d 561, 571 (2005)). Id. Id. (quoting John J. Kassner & Co. v. City of New York , 46 N.Y.2d 544, 551 (1979), and citing CPLR 201). Id. (quoting Executive Plaza , 22 N.Y.3d at 518). Id. (quoting id. at 519 (quoting Continental Leather Co. v. Liverpool, Brazil & Riv. Plate Steam Nav. Co. , 259 N.Y. 621, 622-623 (1932) (Crane, J., dissenting)). Id. (citing Goshen , 98 N.Y.2d at 326). Id. Id. at *2-*3 (citing Executive Plaza, LLC v. Peerless Ins. Co. , 717 F.3d 114, 115-116 (2d Cir. 2013); Executive Plaza, LLC v. Peerless Ins. Co. , 2012 WL 910086, *1, 2012 US Dist. LEXIS 36174, *3 (E.D.N.Y., Mar. 13, 2012)). Id. at *3. Id. Id. Id. Id. Id. Id. The majority was quick to note that it was not “suggest that a plaintiff seeking to defeat a suit limitation provision need file a premature action, but had plaintiff here informed the insurer of the relevant circumstances during the limitation period and detailed that communication in her motion papers, she would have provided support to her claim that the suit limitation provision was unreasonable under these circumstances.” Id. Id. Id. Id. Id. Id. Id. Id. at *4. Id. (quoting Leon , 84 N.Y.2d at 87). Id. Id. Id. Id. (citation and footnote omitted). Id. Id. Id. Id. Id.

“The doctrine of equitable estoppel prevents a party from denying her own expressed or implied admission which has in good faith been accepted and acted upon by another.” “The purpose of equitable estoppel is to preclude a person from asserting a right after having led another to form the reasonable belief that the right would not be asserted, and loss or prejudice to the other would result if the right were asserted.” Stated differently, the purpose of the doctrine “is to prevent someone from enforcing rights that would work injustice on the person against whom enforcement is sought and who, while justifiably relying on the opposing party's actions, has been misled into a detrimental change of position.” “The law imposes the doctrine as a matter of fairness.” “The burden is upon the party pleading an estoppel to establish it.” “In order for estoppel to exist, three elements are necessary: (1) Conduct which amounts to a false representation or concealment of material facts, or, at least, which is calculated to convey the impression that the facts are otherwise than and inconsistent with, those which the party subsequently seeks to assert; (2) intention, or at least expectation, that such conduct will be acted upon by the other party; (3) and, in some situations, knowledge, actual or constructive, of the real facts.” “The party asserting estoppel must show with respect to himself: (1) lack of knowledge of the true facts; (2) reliance upon the conduct of the party estopped; and (3) a prejudicial change in his position.” In Xiaoyan Lu v. Sagewood SFF III LLC , 2024 N.Y. Slip Op. 05895 (1st Dept. Nov. 26, 2024) ( here ), the Appellate Division, First Department addressed the doctrine of equitable estoppel in a case involving a group of investors seeking to recover funds that were allegedly misapplied or misappropriated. Background/The Complaint Each of the plaintiffs invested $200,000 in defendant Sagewood KTII, LLC (“Fund II”). Fund II invested money in real estate to renovate and flip the properties for a profit. Plaintiffs made these investments in June 2017 pursuant to subscription agreements. Plaintiffs wired their contributions to Fund II by November 2017. In the spring or early summer of 2018, plaintiffs approached Wu with their concerns about the lack of information they were receiving about their investments in Fund II. Wu responded by presenting them with a pitch book about Fund III which detailed an investment opportunity focused around acquiring, renovating, and selling real estate. She informed plaintiffs that they could join Fund III and their capital contributions could be satisfied by rolling over the $200,000.00 they had already invested in Fund II. She also met with three of the plaintiffs on August 4, 2018, and described the benefits of doing so. On August 6, 2018, Wu sent plaintiffs documents prepared by Fund III and Sagewood, including the Fund III operating agreement. The agreement provided, inter alia , for dissolution of Fund III no later than August 1, 2020, subject to a one-year extension at the sole discretion of KT, the managing member. Plaintiffs made no changes to the operating agreement and promptly executed and returned the documents in early August 2018. Shortly thereafter, plaintiffs all received a “Net Capital Demand Notice” from Sagewood on behalf of Fund III asking for a capital contribution of $50,000. However, on September 13, 2018, Wu informed them that they would not have to worry about funding Fund III because they were “all 100% rollover”. Wu also advised plaintiffs that they would continue to receive similar demands as they were sent out by email uniformly to all investors. Consequently, plaintiffs received a second demand for $50,000 from Fund III on October 25, 2018, as well as an email from a senior sales specialist from an entity called Sagewood Equity LLC, which attached the notice but stated that it was for informational purposes only as “the draw will be rolled over from Fund II.” Plaintiffs received a demand for $100,000 on March 6, 2019, with a similar disclaimer, and the letter also stated that their unpaid capital contribution was $0. Plaintiffs received quarterly reports for Fund III starting in the third quarter of 2018, in emails addressed to them as “investors” in Fund III. The reports provided information regarding the properties purchased with Fund III capital and the status of the renovation and sale process. The first quarter 2019 report listed the capital received as $10 million, and the balance minus expenses as approximately $7 million. On August 20, 2019, plaintiffs received an invitation to a Fund III “investor portal” which promised access to communications about their investments and fund documents. Through that portal, on September 30, 2019, plaintiffs received statements of assets and liabilities and statements of operations. In September 2019, plaintiffs received through the portal a notice of “Distribution of Unused Capital and Preferred Returns.” Each plaintiff was to receive from Fund III a net distribution consisting of $23,454.79 - $20,000.00 of which was categorized as a partial return of their capital contribution while the remaining $3,454.79 was categorized as a distribution, both from Fund III. Plaintiffs thereafter received physical bank checks for the distributions. Plaintiffs also received a Capital Account Statement for Fund III as of September 30, 2019. A footnote next to the line item “Contributions” stated that “ our original commitments to the Fund include $200,000 of committed capital due as equity rollover from Sagewood KTII, LLC (“Fund II”).” Additionally, plaintiffs were sent K-1 statements for 2018 reflecting their capital contributions of $100,000 each to Fund III. On November 30, 2019, however, Wu claimed for the first time that plaintiffs had no interest in Fund III. She stated that they were investors in Fund II only and that Fund II had lost all of its funds. In that connection, plaintiff alleged that Fund II was suing Tse for breach of contract and conversion for failing to perform various real estate-related services. In December 2019, Wu further advised plaintiffs that the distributions made to them from Fund III had been made in error. Wu later changed her position and claimed that plaintiffs were in fact investors in Fund III but were each required to fund their subscriptions with $200,000.00. On December 19, 2019, plaintiffs received a formal demand for the payment of their capital contribution, with the notice identifying Wu as “partner” of Sagewood. Wu asserted that plaintiffs violated the Fund III operating agreement and subscription agreements due to their failure to pay. Thereafter, plaintiffs retained counsel and served a books and records demand upon both Fund II and Fund III, seeking detailed financial information including records reflecting the receipt and expenditure of plaintiffs’ capital contributions. Fund II provided partial records that did not contain information about the contributions, and Fund III refused to respond at all. Plaintiffs brought action, alleging eleven causes of action sounding in contract and tort. Defendants counterclaimed. Following discovery, the parties moved for summary judgment. The motion court granted plaintiffs’ motion (1) on their first cause of action for declaratory judgment, deeming plaintiffs to have membership interest in Fund III; and (2) dismissing defendants’ counterclaim for breach of contract , and otherwise denied the motion. The motion court granted defendants’ motion for summary judgment in so far as dismissing plaintiffs’ claim for breach of contract and otherwise denied the motion. The First Department’s Ruling On appeal, the First Department unanimously affirmed. The Court held that “ laintiffs established equitable estoppel by showing defendants’ admitted concealment of the fact that plaintiffs’ investments had been embezzled by the co-manager of Sagewood KT II LLC (Fund II).” The Court also held that plaintiffs satisfied the doctrine due to” defendants’ repeated and varied statements and actions confirming that their investment was rolled over into defendant Sagewood SFF III LLC (Fund III), despite there not being any money to roll over.” The Court further held that plaintiffs satisfied the elements of the doctrine by “establish that they did not take any action to recover the embezzled funds because of defendants’ concealment and subsequent affirmative statements that plaintiffs’ funds were actually invested into Fund III.” here=">here" and="and" >here.=">here."> Takeaway The purpose of equitable estoppel is to preclude a person from asserting a right when he or she has led another to form the reasonable belief that the right would not be asserted, and loss or prejudice to the other would result if the right were asserted. The doctrine requires the court to first look at the elements of representation, reliance, and detriment. The party raising equitable estoppel issues has the initial burden to establish a prima facie case sufficient to support that claim. If these are shown, the burden then shifts to the opposing party to demonstrate why estoppel should not be applied. In Xiaoyan Lu , the evidence showed that defendants concealed the fact that plaintiffs’ investments had been embezzled by KT, the co-manager of Fund II, and that defendants repeatedly told plaintiffs that their investments were rolled over into Fund III, despite there not being any money to roll over. The Court found that based upon the foregoing evidence, plaintiffs established detriment/prejudice in that they refrained from taking any action to recover the embezzled funds. Such evidence was enough for plaintiffs to satisfy the elements of the equitable estoppel doctrine. __________________________________________ 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. Gillin v. Patterson , No. 104543/93, 1994 WL 16857347 (Sup. Ct., N.Y. County Aug. 25, 1994). Matter of Shondel J. v. Mark D. , 7 N.Y.3d 320, 326 (2006). Id. (citing Nassau Trust Co. v. Montrose Concrete Prods. Corp. , 56 N.Y.2d 175, 184 (1982)). Id. Wetzlar v. Wood , 143 A.D. 311, 317 (1st Dept. 1911). BWA Corp. v. Alltrans Express U.S.A., Inc. , 112 A.D.2d 850, 853 (1st Dept. 1985). Id. (internal quotation marks and citation omitted). Defendant KT Sagewood LLC (“KT”) is the managing member of Fund II. Defendant Jingying Wu (“Wu”) is a member of Fund II, and together with non-party Kenneth Tse (“Tse”) executed the operating agreements on behalf of both KT and Fund II. Wu is also a member of Sagewood SFF III LLC (“Fund III”), of which defendant Sagewood Management LLC (“Sagewood”) is the managing member. Additionally, Wu is an agent of KT and Sagewood. Slip Op. at *1. Id. Id. Sharon GG v. Duane HH. , 63 N.Y.2d 859 (1984); Edward WW v. Diana XX , 79 A.D.3d 1181 (3d Dept., 2010).

By: Jeffrey M. Haber The Bank Secrecy Act (“BSA”) and implementing regulations promulgated by the U.S. Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) require that broker-dealers file a suspicious activity report (SAR”) with FinCEN to report a transaction (or a pattern of transactions of which the transaction is a part) conducted or attempted by, at, or through the broker-dealer involving or aggregating to at least $5,000 that the broker-dealer knows, suspects, or has reason to suspect: (1) involves funds derived from illegal activity or is intended or conducted to disguise funds derived from illegal activities; (2) is designed to evade any requirement of the BSA; (3) has no business or apparent lawful purpose or is not the sort in which the particular customer would normally be expected to engage, and the broker-dealer knows of no reasonable explanation of the transaction after examining the available facts, including the background and possible purpose of the transaction; or (4) involves use of the broker-dealer to facilitate criminal activity. Broker-dealers are required to file a SAR no later than thirty (30) calendar days after the date of the initial detection of facts that may constitute a basis for filing a SAR under the SAR Rule. In cases where the broker-dealer cannot identify a suspect on the date of initial detection, it must file the SAR within sixty (60) calendar days of the initial detection of facts that may constitute a basis for filing a SAR. FinCEN’s instructions for filing SARs require that the SAR narrative contain “a clear, complete, and concise description of the activity, including what was unusual or irregular that caused suspicion” and to “include any other information necessary to explain the nature and circumstances of the suspicious activity.” As noted by FinCEN, to be effective tools and fulfill their intended purpose, SAR narratives must generally “identify the five essential elements of information—who? what? when? where? and why?—of the suspicious activity being reported” and must include a “summary of the ‘red flags’ and suspicious patterns of activity that initiated the SAR.” Thus, when a SAR is filed “it must include information about each of the Five Essential Elements of the suspicious activity.” When a SAR “lack basic information regarding the Five Essential Elements … SAR s deficient as a matter of law.” Rule 17a-8 promulgated by the Securities and Exchange Commission (“SEC” or Commission”) under Section 17(a) of the Securities Exchange Act of 1934 (“Exchange Act”) requires broker-dealers registered with the Commission to comply with the reporting, recordkeeping, and record retention requirements of Chapter X of Title 31 of the Code of Federal Regulation, which contains the SAR Rule and other requirements. Failing to file complete and sufficient SAR narratives as required by the SAR Rule is a violation of Section 17(a) of the Exchange Act and Rule 17a-8 thereunder. here,=">here," and="and" >here.=">here."> On November 22, the SEC announced ( here ) that broker-dealers Webull Financial LLC, Lightspeed Financial Services Group LLC, and Paulson Investment Company, LLC agreed to settle charges that they filed with law enforcement SARs that failed to include important, required information. The three broker-dealers agreed to pay $275,000 combined in civil penalties to settle the SEC’s charges . According to the SEC orders, each of the three broker-dealers filed multiple deficient SARs over a four-year period beginning in 2018 ( here , here , and here ). Commenting on the enforcement actions and settlements, Jason Burt, Director of the SEC’s Denver Regional Office, stated: “Suspicious activity reports play a vital role in keeping our markets safe, and the failure of broker-dealers to include necessary information to explain suspicious transactions deprives law enforcement and regulatory agencies of valuable and timely intelligence, undermining the very purpose of the SARs. Today’s cases reinforce the importance of complying with the applicable regulations and guidance surrounding the filing of SARs.” The SEC’s orders found that the broker-dealers violated Section 17(a) of the Exchange Act and Rule 17a-8 thereunder. Without admitting or denying the findings, the firms agreed to be censured, cease and desist from violating the charged provisions, and pay civil penalties totaling $275,000. Further, Webull Financial LLC and Paulson Investment Company, LLC agreed to undertake a review of their anti-money-laundering programs by compliance consultants. According to the SEC, the resolutions with each firm reflect their cooperation after being contacted by Commission staff, as well as certain remedial measures taken by Lightspeed. _________________________________ 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. 31 C.F.R. § 1023.320(a)(2) (the “SAR Rule”). 31 C.F.R. § 1023.320(b)(3). Id. FinCEN Suspicious Activity Report Electronic Filing Requirements (October 2012 and August 2021). FinCEN Guidance on Preparing a Complete and Sufficient Suspicious Activity Report Narrative (November 2003). See SEC v. Alpine Sec. Corp. , 308 F. Supp. 3d 775, 791, 804 (S.D.N.Y. 2018), aff’d , 982 F.3d 68 (2d Cir. 2020), cert. denied , Alpine Sec. Corp. v. SEC , 142 S. Ct. 461 (2021). Id. at 800. See Alpine Sec. Corp. , 308 F. Supp. 3d at 798-807.

By: Jeffrey M. Haber In litigation, parties often dispute the content and meaning of documents that form the basis of their dispute. Too many times a litigant will say that they “have a copy” of a document that is material and necessary to their claim or defense. But, the question is whether that document is the “best evidence” available. “The ‘oft-mentioned and much misunderstood’ best evidence rule simply requires the production of an original writing where its contents are in dispute and sought to be proven.” “At its genesis, the rule was primarily designed to guard against ‘mistakes in copying or transcribing the original writing.’” “Given the technological advancements in copying, in modern day practice the rule serves mainly to protect against fraud, perjury and ‘inaccuracies … which derive from faulty memory.’” “ econdary evidence of the contents of an unproduced original may be admitted upon threshold factual findings by the trial court that the proponent of the substitute has sufficiently explained the unavailability of the primary evidence and has not procured its loss or destruction in bad faith.” The party seeking to admit secondary evidence ( e.g. , a copy) due to loss must show that he/she undertook “a diligent search in the location where the document was last known to have been kept, and the testimony of the person who last had custody of the original.” “The more important the document is to the resolution of the ultimate issue in the case, the stricter the requirement of establishing its loss.” “Once a sufficient foundation for admission is presented, the secondary evidence is ‘subject to an attack by the opposing party not as to admissibility but to the weight to be given the evidence, with final determination left to the trier of fact.’” In Deutsch v. Deutsch , 2024 N.Y. Slip Op. 05786 (2d Dept. Nov. 20, 2024) ( here ), the Appellate Division, Second Department considered an appeal involving the denial of plaintiff’s motion to enforce a postnuptial agreement between the parties. As discussed below, the Court affirmed, finding that plaintiff failed to present the best evidence of the parties’ agreement. The parties were married on September 10, 1998. In December 2018, plaintiff commenced the action for a divorce and ancillary relief. Thereafter, plaintiff moved to enforce a postnuptial agreement she alleged she and defendant entered into in August 2000. Plaintiff attested, inter alia , that defendant stole and destroyed the original postnuptial agreement, and she submitted a purported copy of the postnuptial agreement, which was unsigned and undated. Defendant opposed the motion, contending, among other things, that he did not steal or destroy the original postnuptial agreement and that the purported copy of the postnuptial agreement was not an accurate portrayal of the original. In an order entered on December 15, 2020, the Supreme Court denied plaintiff’s motion. Plaintiff appealed. The Second Department affirmed. The Court held that the motion court “properly denied the plaintiff’s motion to enforce the postnuptial agreement between the parties.” The Court found that “even though the plaintiff sufficiently explained the unavailability of the original postnuptial agreement …, she failed to meet her heavy burden of establishing that the proffered copy was a reliable and accurate portrayal of the original.…” The Court noted that “ lthough the plaintiff’s former counsel attested that he retained a final, unsigned digital copy of the postnuptial agreement, which was purportedly identical to the original postnuptial agreement signed by the parties, the digital copy contained grammatical errors and different fonts throughout the document.” The Court concluded that “ ince the defendant contended that the copy submitted by the plaintiff was not an accurate portrayal of the original … the plaintiff failed to establish her heavy burden of showing that the proffered copy was reliable and accurate.” ____________________________________________ 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. Schozer v. Wm. Penn Life Ins. Co. , 84 N.Y.2d 639, 643-44 (1994) (quoting Sirico v. Cotto , 67 Misc. 2d 636, 637 (Civ. Ct., N.Y.C. Sept. 7, 1971); and citing Trombley v. Seligman , 191 N.Y. 400 (1908); 57 N.Y. Jur 2d, Evidence and Witnesses, § 247, at 496)). Id. (quoting Fisch, N.Y. Evid. § 81, at 50 (2d ed)). Id. See also Mutlu v. Mutlu , 177 A.D.3d 979 (2d Dept. 2019). Id. at 644 (citations omitted); see also Amica Mut. Ins. Co. v. Kingston Oil Supply Corp. , 134 A.D.3d 750, 752 (2d Dept. 2015); Stathis v. Estate of Karas , 130 A.D.3d 1008, 1010 (2d Dept. 2015); Kliamovich v. Kliamovich , 85 A.D.3d 867, 869 (2d Dept. 2011). Id. (citations omitted); see also Amica Mut. Ins. , 134 A.D.3d at 752. The proponent of the secondary evidence “has the heavy burden of establishing, preliminarily to the court’s satisfaction, that it is a reliable and accurate portrayal of the original. Thus, as a threshold matter, the trial court must be satisfied that the proffered evidence is authentic and correctly reflects the contents of the original before ruling on its admissibility.” Schozer , 84 N.Y.2d at 645 (internal quotation marks omitted). Id. See also Amica Mut. Ins. , 134 A.D.3d at 752. Id. at 646 (quoting United States v. Gerhart , 538 F.2d 807, 809 (8th Cir. 1976)). Slip Op. at *1. Id. (citations omitted). Id. Id.

By: Jeffrey M. Haber One of the many changes that the Covid 19 pandemic brought to the workplace was remote employment for employees and consultants alike. When consultants from a different state perform services for a business or entity, questions arise, for dispute resolution purposes, about whether the court can exercise personal jurisdiction over them. In Applied Healthcare Research Mgt. v. Ibrahim , 2024 N.Y. Slip Op. 05734 (4th Dept. Nov. 15, 2024) ( here ), the Appellate Division, Fourth Department addressed such a situation. As discussed below, the Court found that although the consultant was domiciled in a different state, she had entered New York for jurisdictional purposes . Applied Healthcare involved a breach of contract action. Plaintiff, a New York corporation, commenced the action seeking damages arising from defendant’s alleged breach of the parties’ consulting agreement and from allegedly defamatory letters defendant sent to two of plaintiff’s clients. Defendant, an individual residing in Texas, moved to dismiss the complaint pursuant to CPLR 3211 (a) (8) on the ground that the motion court lacked personal jurisdiction over her or, in the alternative, pursuant to CPLR 3211 (a) (7) on the ground that the complaint failed to state a claim. The motion court denied the motion, and defendant appealed. On appeal, the Fourth Department modified the order by granting the motion in part and dismissing the first, third, and fourth causes of action, and as modified affirmed the order. Pursuant to New York’s long-arm statute, “a court may exercise personal jurisdiction over any non-domiciliary … who in person or through an agent … transacts any business within the state.” Jurisdiction can attach on the basis of one transaction, even if the defendant never enters the state, “‘so long as the defendant’s activities were purposeful and there is a substantial relationship between the transaction and the claim asserted.’” Purposeful activities are those by which a defendant, “through volitional acts, ‘avails itself of the privilege of conducting activities within , thus invoking the benefits and protections of its laws.’” Such acts may be contrasted with “random, fortuitous, or attenuated contacts, … the unilateral activity of another party or a third person.” Applying the foregoing principles, and viewing the facts and circumstances in their “totality”, the Court concluded “that defendant had the requisite “‘minimum contacts’ with state to warrant the exercise of long-arm jurisdiction pursuant to CPLR 302 (a) (1)” and ‘that the exercise of jurisdiction … comport with due process.’” The Court explained that “the parties’ contract called for defendant to provide data models for plaintiff’s clients. Although defendant never physically entered New York as part of her relationship with plaintiff, she purposefully entered into a months-long contract with plaintiff that required her to project herself into New York to retrieve digital files from plaintiff’s New York-based server, including software, proprietary data, and examples of prior work.” Moreover, said the Court, the parties’ contract explicitly required defendant “to project herself into New York and transmit files to and from plaintiff’s server.” Thus, concluded the Court, “Defendant was thereby enabled to transact business within the state, ‘without physically entering the state…,’ by means of ‘the knowing and repeated transmission of computer files over the nternet’ to and from New York.” Further, noted the Court, jurisdiction was proper under CPLR 302 (a) (3) because “plaintiff allege that defendant breached the contract by failing to deliver to plaintiff the data models she created.” “Whether the provision of those data models considered ‘goods’ or ‘services,’” said the Court, “defendant’s failure to deliver them to New York constitute a basis for personal jurisdiction.” ___________________________________ 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. CPLR 302 (a) (1). Deutsche Bank Sec., Inc. v. Montana Bd. of Invs. , 7 N.Y.3d 65, 71 (2006) (quoting Kreutter v. McFadden Oil Corp. , 71 N.Y.2d 460, 467 (1988))., cert. denied , 549 U.S. 1095 (2006); see also Fischbarg v. Doucet , 9 N.Y.3d 375, 380 (2007). Fischbarg , 9 N.Y.3d at 380 (quoting McKee Elec. Co. v. Rauland-Borg Corp. , 20 N.Y.2d 377, 382 (1967)); see Cellino & Barnes, P.C. v. Martin, Lister & Alvarez, PLLC , 117 A.D.3d 1459, 1461 (4th Dept. 2014), lv. dismissed , 24 N.Y.3d 928 (2014). Burger King Corp. v. Rudzewicz , 471 U.S. 462, 475 (1985) (internal quotation marks omitted); see generally LaMarca v. Pak-Mor Mfg. Co. , 95 N.Y.2d 210, 216-217 (2000). See Sager v. City of Buffalo , 151 A.D.3d 1908, 1909 (4th Dept. 2017); Atwal v. Atwal , 24 A.D.3d 1297, 1298 (4th Dept. 2005). Slip Op. at *2 (quoting Cellino & Barnes , 117 A.D.3d at 1461, and citing generally LaMarca , 95 N.Y.2d at 216). Id. at *1. Id. The provision of the agreement highlighted by the Court provided: “ ll communication will be through email server, phone and intranet.” Id. at *1-*2. Id. at *2 (quoting Deutsche Bank Sec. , 7 N.Y.3d at 71). Id. (quoting Best Van Lines, Inc. v. Walker , 490 F.3d 239, 251 (2d Cir. 2007) (internal quotation marks omitted), and citing Centrifugal Force, Inc. v. Softnet Communication, Inc. , 2009 WL 1059647, *5 (S.D.N.Y. Apr. 17, 2009); Grimaldi v. Guinn , 72 A.D.3d 37, 51-52 (2d Dept. 2010)). Pursuant to CPLR 302 (a) (3), “New York courts may … exercise jurisdiction over a nondomiciliary who contracts outside State to supply goods or services in New York even if the goods are never shipped or the services are never supplied in New York, so long as the cause of action … arose out of that contract.” Alan Lupton Assoc. v. Northeast Plastics , 105 A.D.2d 3, 6 (4th Dept. 1984);  see generally Island Wholesale Wood Supplies v. Blanchard Indus. , 101 A.D.2d 878, 880 (2d Dept. 1984). Id. (citing LHR ,  Inc. v. T-Mobile USA ,  Inc. , 88 A.D.3d 1301, 1302 (4th Dept. 2011);  Courtroom Tel. Network v. Focus Media , 264 A.D.2d 351, 353 (1st Dept. 1999)).

By: Jonathan H. Freiberger This BLOG has written frequently about the substance and scope of general releases. As noted in prior BLOG articles, in New York, “a valid release constitutes a complete bar to an action on a claim which is the subject of the release.” Global Minerals & Metals Corp. v. Holme , 35 A.D.3d 93, 98 (1 st Dep’t 2006) (citation omitted). If “the language of a release is clear and unambiguous, the signing of a release is a ‘jural act’ binding on the parties.” Booth v. 3669 Delaware, Inc. , 92 N.Y.2d 934, 935 (1998) ( quoting Mangini v. McClurg , 24 N.Y.2d 556, 563 (1969)). See also Centro Empresarial Cempresa S.A. v AmÉrica MÓvil, S.A.B. de C.V. , 17 N.Y.3d 269, 276 (2011). For this reason, “ release should never be converted into a starting point for … litigation except under circumstances and under rules which would render any other result a grave injustice.” Centro , 17 N.Y.3d at 276 ( quoting Mangini , 24 N.Y.2d at 563). Today’s article is about Grove Realty Enterprises, Inc. v. Budde Agency, Inc. , decided by the Appellate Division, Second Department on November 13, 2024. Grove is a case that the defendant apparently could not get dismissed even if Engelbert Humperdinck was present at the oral arguments in a tuxedo singing “Please Release Me Let Me Go”. The Plaintiff in Grove owned a hotel (appropriately enough) on Fire Island that was destroyed by fire. The Defendant, Budde, is an insurance brokerage firm that procured for Grove a commercial property insurance policy issued by Arch Specialty Insurance Company, a non-party. Arch issued a “Partial Release” and then a “Final Policy Holder Release” after payments were made to Grove under the policy. Both releases contain similar language relevant to the issues raised by this article. Thus, the “Partial Release,” the exact language of which is extremely important here, provides (as quoted by the Court) that: Grove “forever discharge the said RELEASEE , their parent companies, affiliates, managers, principals, employees, third-party administrators, adjusters, agents, brokers, experts, servants, brokers and legal representatives, of and from all manner of actions …, whether sounding in contract, quasi-contract or tort, in law or in equity, which RELEASOR now has against said RELEASEE or which they ever had, or which their affiliates, predecessors, successors or assigns hereafter can, shall or may have, under policy or insurance number ESP0038969-04 (“the Policy”) issued by RELEASOR to RELEASEE , by reason of any matter arising out of and/or related to any and all alleged loss or damage on or about March 27, 2015, to the Real Property and Business Personal Property owned by RELEASOR located at Main Walk, Cherry Grove, New York 11782 (“the Loss” and “the Premises”). It is specifically understood and agreed that this Release applies to . . . any tort, bad faith, extra-contractual, breach of implied covenant of good faith and fair dealing and attorney fee claims, arising out and/or related to the Loss, and encompasses a full and final settlement of all claims and potential claims of any type against ARCH arising out of and/or related to the Loss, excluding GROVE’S Business Income with Extra Expense claim to ARCH, which is not released herein and is in the process of adjustment with all rights reserved by GROVE and ARCH” (emphasis omitted). After resolving matters with Arch, Grove sued Budde for breaching their contract by failing to procure adequate insurance coverage. Budde’s motion for summary judgment, predicated on its affirmative defense of release, was denied by the motion court. On Budde’s appeal, the Second Department affirmed. First, the Court generally discussed the law on releases. In addition to the law discussed below, the Court noted that releases are contracts and their “construction is governed by contract law.” (Citations omitted.) The Court also stated that a contract that “is clear, complete and subject to only one reasonable interpretation must be enforced according to the plain meaning of the language chosen by the contracting parties” and that an “agreement is ambiguous when the agreement on its face is reasonably susceptible of more than one interpretation.” (Citations and internal quotation marks omitted.) The Court then held that the subject releases were ambiguous and required resolution by a trier of fact. In so doing, the Court stated: Here, the Supreme Court properly determined that the releases were ambiguous and that therefore "the resolution of the ambiguity is for the trier of fact" ( Arnell Constr. Corp. v New York City Sch. Constr. Auth. , 144 AD3d at 716 ; see Nappy v Nappy , 40 AD3d at 826). Both releases provided that Grove was discharging Arch and other entities, including brokers, but simultaneously provided that the release was only from actions "which RELEASOR now has against said RELEASEE , or which they ever had, or which their affiliates, predecessors, successors or assigns hereafter can, shall or may have" against Arch. Furthermore, although the releases indicated that they applied to actions sounding in "contract, quasi-contract or tort," they simultaneously limited their applicability to claims under the specific policy that Arch issued to Grove, which would preclude actions sounding in tort. Takeaway Releases are important legal documents that are designed to insure future peace among adversarial parties. Accordingly, great care should be taken in the drafting of releases in order for the parties’ intent to be unambiguous and unassailable. 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. See, e.g. , < here =">here"> , < here =">here"> , < here =">here"> , < here =">here"> , < here =">here"> , < here =">here"> , < here =">here"> , < here =">here"> and < here =">here"> . Eds. Note: this BLOG has written numerous articles addressing issues related to contract interpretation . To find BLOG articles related to this issue, visit the “ BLOG ” tile on our website and enter “contract interpretation” in the “search” box.

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

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