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By:  Jeffrey M. Haber In Cantor Fitzgerald & Co. v. PEI Global Partners Holdings LLC , 2026 N.Y. Slip Op. 00080 (1st Dept. Jan. 13, 2026), the Appellate Division, First Department, affirmed the dismissal of a complaint under CPLR 3211(a)(5) based on res judicata. The plaintiff, an investment bank, sued PEI Global Partners Holdings LLC for tortious interference, unfair competition, and unjust enrichment, alleging the same facts previously raised in consolidated FINRA arbitrations against former employees and their newly acquired broker-dealer. Although defendant was not a party to the prior arbitration, the Court found privity because the former employees wholly owned the defendant and the broker-dealer, shared a common purpose, and were represented by the same counsel. Applying a flexible privity analysis, the Court held that functional representation existed, giving the defendant a “vicarious day in court.” Thus, the prior arbitration award barred the subsequent action under res judicata. Under the doctrine, a party may not litigate a claim where a judgment on the merits exists from a prior action between the same parties involving the same subject matter. The doctrine applies not only to claims actually litigated but also to claims that could have been raised in the prior litigation. The rationale underlying the doctrine is that a party who has been given a full and fair opportunity to litigate a claim should not be allowed to do so again. New York has adopted a transactional approach in deciding res judicata issues. Under this approach, once a claim is brought to a final conclusion, all other claims arising out of the same transaction or series of transactions are barred, even if based upon different theories or if seeking a different remedy. “Res judicata is designed to provide finality in the resolution of disputes to assure that parties may not be vexed by further litigation.” “The policy against relitigation of adjudicated disputes is strong enough generally to bar a second action even where further investigation of the law or facts indicates that the controversy has been erroneously decided, whether due to oversight by the parties or error by the courts.” As the Court of Appeals noted, “ onsiderations of judicial economy as well as fairness to the parties mandate, at some point, an end to litigation.” The doctrine of res judicata applies to prior arbitration proceedings, as well as prior determinations by state appellate and federal courts. In New York, the Civil Practice Law and Rules (“CPLR”) specifically recognizes res judicata as a basis for dismissal. Res judicata is also an affirmative defense under the CPLR. Pursuant to CPLR 3211(a)(5), a party may seek dismissal of a cause of action based upon the doctrine of res judicata. To prevail, the moving party must show: “(1) a final judgment on the merits, (2) identity or privity of parties, and (3) identity of claims in the two actions.” To establish privity with regard to non-parties, as in Cantor Fitzgerald , “the connection between the parties must be such that the interests of the nonparty can be said to have been represented in the prior proceeding.” Although relationship alone is not sufficient to support preclusion, “ includes those who are successors to a property interest, those who control an action although not formal parties to it, and those whose interests are represented by a party to the action.” The party asserting the conclusive effect of a prior judgment has the burden to establish it. In Cantor Fitzgerald , plaintiff brought an action against defendant seeking, inter alia , damages for tortious interference with prospective business relations. Defendant moved, pre-answer, to dismiss the complaint in its entirety on the grounds that, among other things, the claim was barred by the doctrine of res judicata based on a prior consolidated FINRA arbitration. In early September 2021, non-parties Kevin Phillips, John Bills, Schuyler Fabian, and Adil Sener (collectively, the “PEI Bankers”) resigned from their employment with plaintiff, an investment banking firm, and together founded defendant, PEI Global Partners Holdings LLC, which they controlled and in which they collectively held 100% of the equity. On November 5, 2021, plaintiff commenced separate arbitrations before FINRA against each of the PEI Bankers. On February 10, 2022, plaintiff commenced a fifth FINRA arbitration against PEI Global Partners LLC (“PEI Broker-Dealer”), a FINRA-licensed broker-dealer that was wholly owned by the defendant. These five arbitrations were administratively consolidated and constitute the “Prior Proceeding.” Defendant was not a party to the Prior Proceeding. There was no dispute that it could not be involuntarily made a party to the arbitrations as it was not a FINRA member and had no agreement consenting to FINRA’s jurisdiction.  In the Prior Proceeding, plaintiff alleged that the PEI Bankers devised a scheme to leave plaintiff’s employ and form a competing firm, taking with them plaintiff’s employees and its existing and prospective clients. Plaintiff alleged, inter alia , that the PEI Bankers and PEI Broker-Dealer accomplished this scheme by, among other things: (i) soliciting and/or enticing plaintiff’s existing and/or prospective clients, in breach of the non-solicitation and non-compete provisions of the PEI Bankers’ employment agreements; (ii) directing and inducing other of the plaintiff’s employees to breach their own employment agreements by soliciting clients on the PEI Bankers’ behalf, transferring pending work from plaintiff to the PEI Bankers, and resigning from plaintiff’s employ to join the PEI Bankers’ competing business; and (iii) stealing plaintiff’s proprietary work product to engage and service plaintiff’s clients. Plaintiff’s claims against the PEI Bankers in the Prior Proceeding included claims against each individual for breach of the non-solicitation provisions in their employment agreements and breach of forgivable loan agreements they executed with plaintiff, claims against PEI Bankers Phillips and Bills for breach of their employment agreements by competing with plaintiff through PEI Broker-Dealer, a claim against Phillips alone for tortious interference with the plaintiff’s employee contracts and a claim against each PEI Banker for tortious interference with prospective business relations and contracts based on purportedly tortious conduct undertaken by them through the defendant herein. Plaintiff’s claims against PEI Broker-Dealer in the Prior Proceeding were for unfair competition, aiding and abetting breach of fiduciary duty, tortious interference with plaintiff’s employee contracts, tortious interference with prospective business prospects, and unjust enrichment.  The FINRA arbitration panel issued its award on October 30, 2023, finding each of the PEI Bankers liable to plaintiff in the exact amount of the unforgiven balance owed on their respective forgivable loan agreements. As to the remainder of the claims against the PEI Bankers, the panel expressly denied “ ny and all claims for relief not specifically addressed herein.” The panel also denied plaintiff’s claim against the PEI Broker-Dealer and the PEI Bankers’ counterclaim for declaratory relief, i.e. , a declaration that the plaintiff breached the agreements and constructively terminated the PEI Bankers, was denied.   Plaintiff commenced the action on March 8, 2024, against defendant, PEI Global Partners Holdings LLC, asserting four causes of action: (1) tortious interference with prospective business relations, (2) tortious interference with contractual relations, (3) unfair competition, and (4) unjust enrichment, pleading the same facts previously alleged in the Prior Proceeding regarding the PEI Bankers’ purported scheme to steal plaintiff’s business. Plaintiff alleged that defendant, through the PEI Bankers and PEI Broker-Dealer, solicited plaintiff’s existing and prospective clients, induced plaintiff’s clients and employees to breach their contracts with plaintiff, and stole plaintiff’s proprietary work product. Defendant moved to dismiss the complaint. The motion court granted the motion. The motion court held that, based upon defendant’s submissions, “including the pleadings in the Prior Proceeding, and the FINRA panel’s final arbitration award,” defendant “demonstrated that there was a final judgment on the merits, there identity or privity of parties, and identity of claims in the two actions.” The motion court explained that a “ omparison of the complaint with the pleadings in the Prior Proceeding reveal that the Prior Proceeding involved the same claims and underlying facts” that were alleged in the action. Looking at whether there was privity between plaintiff and defendant (a non-party to the Prior Proceeding), the motion court concluded that there was privity: “while the defendant was not a party to the Prior Proceeding, it is in privity with both the Broker-Dealer, which it wholly owns, and the PEI Bankers, which wholly own the PEI Broker-Dealer.” “Thus,” concluded the motion court, “defendant was in privity with PEI Banker and PEI Broker-Dealer so as to have had “functional representation” in the Prior Proceeding.” Plaintiff appealed and the First Department affirmed. The Court found that the “individual bankers who were respondents in the arbitration defendant’s principals and hold 100% of its equity.” “Moreover,” said the Court, “all arbitration respondents, including the entity respondent, were aligned with defendant by common purpose and were represented by the same counsel in the arbitration as defendant is here.” Accordingly, the Court held that the motion court “properly dismissed the complaint on the ground of res judicata because defendant was in privity with the arbitration respondents.” Takeaway As discussed, the First Department affirmed dismissal of plaintiff’s complaint under CPLR 3211(a)(5) based on res judicata. Plaintiff sued PEI Global for tortious interference and related claims, alleging facts previously raised in a consolidated FINRA arbitration against former employees and their broker-dealer. Although PEI Global was not a party to the prior arbitration, the court found privity because the former employees wholly owned PEI Global and the broker-dealer, shared a common purpose, and used the same counsel. Applying New York’s transactional approach and flexible privity analysis, the Court held that functional representation existed, giving PEI Global a “vicarious day in court.” Thus, the prior arbitration award barred the subsequent action. Cantor Fitzgerald highlights three important principles. First, courts apply a flexible privity analysis, recognizing functional representation when ownership, common purpose, and shared counsel exist. Second, New York’s transactional approach to res judicata bars all claims arising from the same transaction once a final judgment is reached, regardless of differing legal theories or remedies. Finally, arbitration awards have a preclusive effect, meaning entities with functional representation in arbitration may be bound by its outcome even if not formally involved. __________________________________ 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. Previously, this Blog has examined the doctrine of res judicata ( here , here , here , and  here ). Simmons v. Trans Express Inc. , 37 N.Y.3d 107, 111 (2021) (internal quotation marks omitted); see also Watts v. Swiss Bank Corp. , 27 N.Y.2d 270, 277 (1970); Gregg v. Lan Zhen Chen , 220 A.D.3d 697, 698 (2d Dept. 2023); Bayer v. City of New York , 115 A.D.3d 897, 898 (2d Dept. 2014). Jacobson Dev. Group, LLC v. Grossman , 198 A.D.3d 956, 959 (2d Dept. 2021) (internal quotation marks omitted); Gregg , 220 A.D.3d at 698. See O’Connell v. Corcoran , 1 N.Y.3d 179, 184-185 (2003); Gramatan Home Invs. Corp. v. Lopez , 46 N.Y.2d 481, 485 (1979)). Matter of Reilly v. Reid , 45 N.Y.2d 24 (1978). O’Brien v. City of Syracuse , 54 N.Y.2d 353, 357 (1981) (citation omitted). See Matter of Reilly , 45 N.Y.2d at 28 (citations omitted). Id. (citations omitted). Id. Mahler v. Campagna , 60 A.D.3d 1009 (2d Dept. 2009); see also Rembrandt Ind. v. Hodges Intl. , 38 N.Y.2d 502, 504 (1976); Lopez v. Parke Rose Mgt. Sys. , 138 A.D.2d 575, 577 (2d Dept. 1988) Milone v. City University of New York , 153 A.D.3d 807, 808-809 (2d Dept. 2017); see also Emmons v. Broome County , 180 A.D.3d 1213 (3d Dept. 2020). See CPLR § 3211(a)(5). See CPLR § 3018(b). See Ciafone v. City of New York , 227 A.D.3d 946, 946 (2d Dept. 2024). Paramount Pictures Corp. v. Allianz Risk Transfer AG , 31 N.Y.3d 64, 73 (2018) (citing cases). “The identity requirement is a ‘linchpin of res judicata.’” Gulf LNG Energy, LLC v. Eni S.p.A. , 232 A.D.3d 183, 190 (1st Dept. 2024),  lv denied , 44 N.Y.3d 902 (2025). Green v. Santa Fe Indus. , 70 N.Y.2d 244, 253 (1987); see also D’Arata v. New York Cent. Mut. Fire Ins. Co. , 76 N.Y.2d 659, 664 (1990). Watts v. Swiss Bank Corp. , 27 N.Y.2d 270, 277 (1970). Id. at 275. Slip Op. at *1. Id. Id. (citing Green,  70 N.Y.2d at 253).

By:  Jeffrey M. Haber As a general matter, when a contract fails to conform to the agreement between the parties due to the mutual mistake of the parties, however induced, or of the mistake of one party and fraud of the other, a court will reform the contract to make it conform to the actual agreement between the parties. The mutual mistake must be material ( i.e. , it must involve a “fundamental assumption” of the contract). However, it does not mean that the mistake would have caused the parties not to enter into the contract had they known of it. Rather, a material mistake is one which “vitally” affects a fact or facts on the basis of which the parties contracted. Reformation is an equitable form of relief. The purpose of reformation is not to “alleviat a hard or oppressive bargain, but rather to restate the intended terms of an agreement when the writing that memorializes that agreement is at variance with the intent of both parties.” The burden is high to obtain contract reformation. The party demanding it “‘must establish his right to such relief by clear, positive and convincing evidence.’” Therefore, the party seeking reformation must “show in no uncertain terms, not only that mistake or fraud exists, but exactly what was really agreed upon between the parties.” Only by satisfying this burden can the party seeking reformation “overcome the heavy presumption” that the contract embodies the parties’ true intent. In Romano v. Kelly , 2026 N.Y. Slip Op. 00042 (3d Dept. Jan. 8, 2026), the Appellate Division, Third Department, affirmed Supreme Court’s order partially reforming the parties’ settlement agreement to eliminate references limiting the conveyance of the subject property to the “second floor,” holding that plaintiff clearly and convincingly established a mutual mistake ( i.e. , a scrivener’s error) and that the parties’ true intent was to transfer sole ownership of the entire property to the plaintiff. Plaintiff and defendant were unmarried partners for more than 25 years. Over the course of their relationship, plaintiff and defendant resided together, possessed joint funds and accounts, and maintained common real property. Specifically, the parties acquired four parcels of real property during their relationship, utilizing one parcel as a residence and the other three as rental properties. As relevant to the appeal, in 2013, the parties bought a piece of real property located in the City of Watervliet, Albany County (the “Watervliet property”). The Watervliet property was a duplex with a first and second floor unit and, unlike the other three parcels, was titled in both parties’ names. In 2022, the parties separated, and plaintiff brought an action against defendant seeking, among other things, partition of the various pieces of real property, including the Watervliet property. The parties ultimately settled and signed a settlement agreement authored by plaintiff’s counsel in December 2023. The primary dispute in the appeal arose from the terms of the settlement agreement; specifically, with respect to the extent of the parties’ ownership of the Watervliet property. The express terms of the settlement agreement purportedly provided plaintiff with, in pertinent part, the “exclusive use and occupancy” of the second-floor unit of the Watervliet property. The agreement further required defendant to sign a warranty deed that conveyed “all of his right, title and interest in and to” the second floor of the Watervliet property and that he would “relinquish any future rental payments, pro-rate any current or due rent as of signing . . . and turn over to any security deposit for the property.” However, plaintiff claimed that the parties had intended to convey the entire Watervliet property and that inclusion of the second-floor reference, where she was residing after the separation and at the time of the settlement agreement, was the product of a scrivener’s error. Plaintiff learned of the error after defendant collected rents from the tenant located in the first-floor unit of the Watervliet property for the first two months of 2024. Plaintiff contacted defendant through counsel, disputing defendant’s right to do so and asserting that an addendum to the settlement agreement was necessary to reflect the parties’ true intent that she be the sole owner of the entire Watervliet property. Defendant refused that request and proposed that plaintiff pay him further monies for the remainder of the property. Plaintiff then moved, by order to show cause, for reformation of the settlement agreement and further sought counsel fees in connection with the order. Defendant opposed plaintiff’s order to show cause and cross-moved for enforcement of the settlement agreement, asserting that plaintiff had violated a provision in the agreement requiring her to deposit $20,000 in a 529 educational savings account for the parties’ children. Defendant also sought an award of counsel fees pursuant to a clause in the agreement allowing for such fees in the event of a party’s default or breach. Supreme Court partially granted plaintiff’s motion and, in relevant part, reformed the agreement, eliminating the reference to the “2nd floor” of the Watervliet property in the settlement agreement. The court also partially granted defendant’s cross-motion ordering plaintiff to fully fund the educational account. However, the court denied both parties’ requests for counsel fees. Defendant appealed. The Third Department affirmed. The Court held that the language of the settlement agreement belied defendant’s contention that the parties intended defendant to have the second floor as reflected by the references to the second floor throughout the agreement and that he would not have surrendered the entire property “without any consideration.” The Court found “that defendant’s assertions flatly contradicted by the language of the agreement itself.” “As to the numerous references to the second floor,” said the Court, “the context of those references within the first few mentions of the Watervliet property is revealing.” “Specifically, the first reference, which identifie plaintiff’s current address, omit the appropriate reference to the second floor.” “More importantly,” noted the Court, “the second reference mistakenly state that the parties were the joint owners of only the second floor of the Watervliet property, which indicative that the prevailing use of the second-floor qualifier in error.” The Court also looked at “the manner of conveyance provided in the settlement agreement, which”, it said, “further controvert defendant’s suggestion of the parties’ intent to only convey the second floor.” The Court explained that the “agreement specifically provided that defendant would provide a warranty deed, as well as any other documents necessary, that effectuated a transfer of ‘sole ownership.’” According to defendant, “this language should be disregarded as the transfer of the first floor of the Watervliet property could be accomplished by executing a warranty deed that established a ‘Tenants in Common’ arrangement.” The Court held that “ egardless of whether such an arrangement was feasible, the implication that it was intended by the parties not supported by the record when one considers that there is no mention of it anywhere in the agreement; to the contrary, as noted by Supreme Court, it is directly controverted by the aforementioned ‘sole ownership’ language with respect to the contemplated transfer.” The Court also held that “the language in the settlement agreement concerning obligation to remove any encumbrances on the Watervliet property” belied his contentions. The Court found, as did Supreme Court, that “Defendant agreed to satisfy any liens or mortgages on the property … would provide no benefit to defendant if he were maintaining ownership of the first floor.” Moreover, said the Court, “the agreement indicate that defendant would ‘relinquish any future rental payments, pro-rate any current or due rent’ as of the date of signing ‘and turn over to any security deposit for the property.’” “That language,” said the Court, was “particularly notable inasmuch as plaintiff did not reside in the property pursuant to a rental agreement, rendering that provision meaningless if the parties solely intended to transfer the second floor.” Regarding defendant’s contention that he “would not have transferred the Watervliet property without consideration,” the Court noted that “the parties elected to proceed without the benefit of any property valuations and, as noted by Supreme Court, defendant agreed to execute the appropriate affidavit for a no-consideration transfer.” “Finally, and perhaps most significant,” concluded the Court, “the settlement agreement purport to articulate the parties’ rights to the four properties that they collectively amassed during their relationship, and defendant fail to provide any reasonable explanation as to why the parties would omit any reference to the first floor of the Watervliet property as part of their intent to transfer sole ownership of that floor to defendant.” “To the contrary,” explained the Court, “there no indication that defendant would receive sole ownership in the first floor of the Watervliet property by virtue of any language in the agreement when, prior to the agreement, he only possessed a joint ownership interest, which would remain the case if the language in the agreement were to remain unchanged.” “Rather,” said the Court, “in order to effectuate defendant’s suggested intent, it would require some action on the part of plaintiff with respect to her remaining interest in the first floor and, as is the case with defendant’s proposal for a tenancy in common, that not contemplated by any language contained within the four corners of the document, nor indicated in any other proof.” In conclusion, the Court held that “defendant’s suggestion that the references to the second floor were intentional belied by the context of the agreement, and the record provide ample support for Supreme Court’s determination that plaintiff clearly and convincingly established the need for reformation of the agreement.” Takeaway Romano underscores both the power and limits of contract reformation under New York law, and serves as a reminder that courts will correct drafting errors—but only when the proof is clear and convincing. Reformation remains an equitable remedy, available not to rescue a party from a bad deal, but to ensure that a written agreement accurately reflects the agreement the parties actually made. Romano illustrates that mutual mistake does not require proof that the parties would have refused to contract had the error been known. Instead, the mistake must concern a material and fundamental assumption underlying the agreement. In Romano , the alleged error – a scrivener’s error limiting a real‑property conveyance to a single floor rather than the entire parcel – went to the heart of the settlement, making it the type of mistake that could justify equitable relief when clearly established. Critically, the Third Department reaffirmed that the burden on a party seeking reformation is exceptionally high. The movant must prove, by clear, positive, and convincing evidence, not only that a mistake occurred but exactly what the parties had actually agreed upon. The “heavy presumption” that a signed writing reflects the parties’ true intent remains firmly in place, and reformation is only appropriate when that presumption is overcome with compelling proof. What makes Romano notable is that plaintiff succeeded largely through the four corners of the agreement itself, not through extrinsic testimony or post-agreement explanations. The Court relied heavily on the terms of the settlement agreement – such as references implying joint ownership of only a “second floor,” the requirement that defendant deliver a warranty deed conveying “sole ownership,” and provisions addressing liens, rents, and security deposits that made no practical sense unless the entire property was being transferred. Romano therefore reinforces the principle that a court may find clear and convincing proof of mutual mistake from the text and structure of the agreement alone, when the document contradicts the interpretation urged by the resisting party. The Court also rejected a common argument in reformation cases advanced by the resisting party: the party would never have agreed to the transaction “without consideration.” The Court’s decision confirms that courts will look to what the parties actually did and agreed to do, not what one party later claims would have been economically irrational. In Romano , the fact that the parties knowingly proceeded without formal valuations and contemplated a no‑consideration conveyance undermined that objection to reformation. Finally, Romano reinforces the point that reformation is fundamentally about intent. The Court was unpersuaded by defendant’s post‑settlement conduct ( e.g. , collecting rent) or bargaining positions taken after the mistake was uncovered. Once the record established that the written agreement failed to express the mutual intent at the time of contracting, equity required that it be corrected, regardless of the strategic advantage one party sought to extract afterward. ______________________________ 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. Janowitz v. 25-30 120th St. , 75 A.D.2d 203, 214 (2d Dept. 1980). Id. (quoting 13 Williston, Contracts <3d ed> , § 1544). See also True v. True , 63 A.D.3d 1145, 1147 (2d Dept. 2009). Id. Id. (citing 13 Williston, Contracts <3d ed> , § 1544, at 96). In prior articles, this Blog examined cases involving the reformation of contracts: Reformation of Contracts ; Contract Reformation: Mutual Mistake or A Scrivener’s Error ; and First Department Reminds Practitioners that “proofreading is an essential, indispensable tool in the drafting of contracts.” George Backer Mgt. Corp. v. Acme Quilting Co. , 46 N.Y.2d 211, 219 (1978). Schultz v. 400 Coop. Corp. , 292 A.D.2d 16, 19 (1st Dept. 2002) (quoting, Amend v. Hurley , 293 N.Y. 587, 595 (1944)). See also Sunnyview Farm, LLC v. Levy Leverage, LLC , 223 A.D.3d 955, 960 (3d Dept. 2024). Id. See also Hilgreen v. Pollard Excavating, Inc. ,  210 A.D.3d 1344, 1347 (3d Dept. 2022); Hilgreen v. Pollard Excavating, Inc. , 193 A.D.3d 1134, 1137 (3d Dept 2021),  appeal dismissed , 37 N.Y.3d 1002 (2021);  Tompkins Fin. Corp. v. John M. Floyd & Assoc., Inc. , 144 A.D.3d 1252, 1256 (3d Dept. 2016).  Id. Slip Op. at *3. Id. Id. Id. Id. Id. Id. Id. Id. Id. Id. Id. Id. at *3-*4. Id. at *4. Id. Id. Id. (citations omitted).

By: Jonathan H. Freiberger In today’s BLOG article, we again discuss summary judgment in lieu of complaint pursuant to CPLR 3213 , which provides, in relevant part: When an action is based upon an instrument for the payment of money only or upon any judgment, the plaintiff may serve with the summons a notice of motion for summary judgment and the supporting papers in lieu of a complaint. The summons served with such motion papers shall require the defendant to submit answering papers on the motion within the time provided in the notice of motion…. If the motion is denied, the moving and answering papers shall be deemed the complaint and answer, respectively, unless the court orders otherwise…. CPLR 3213 is a procedural device that “is intended to provide a speedy and effective means of securing a judgment on claims presumptively meritorious. In the actions to which it applies, a formal complaint is superfluous, and even the delay incident upon waiting for an answer and then moving for summary judgment is needless.” Interman Industrial Products, LTD v. R.S.M. Electron Power, Inc . , 37 N.Y.2d 151, 154 (1975) (citation and internal quotation marks omitted); see also Counsel Financial II LLC v. Bortnick , 214 A.D.3d 1388, 1390 (4 th Dep’t 2023). As provided for in the statute, the procedural device is available when the suit is upon “an instrument for the payment of money only….” Kitchen Winners NY, Inc. v. Triptow , 226 A.D.3d 989, 990-91 (2 nd Dep’t 2024) (citations and internal quotation marks omitted). “Under the stringent requirement that the action be based upon an instrument for the payment of money only, a document comes within CPLR 3213 if a prima facie case would be made out by the instrument and a failure to make the payments called for by its terms.” Counsel Financial II LLC v. Bortnick , 214 A.D.3d 1388, 1390 (4 th Dep’t 2023) (citations and internal quotation marks omitted). Conversely, an instrument does not qualify if outside proof is needed, other than “simple proof of nonpayment or a mere de minimis deviation from the face of the document.” Kitchen Winners, 226 A.D.3d at 991 (citations, internal quotation marks and brackets omitted). For example, a guaranty generally qualifies for treatment under CPLR 3213 as an instrument for the payment of money only. See, e.g., Pearl River Campus, LLC v. ReadyScrip , LLC , 240 A.D.3d 610, 611 (2 nd Dep’t 2025); Museum Building Holdings, LLC v. Schreiber , 236 A.D.3d 526, 527 (1 st Dep’t 2025). In Pearl River , which involved a guaranty of a lease agreement, the Court found that CPRL 3213 relief was unavailable because “a determination of the defendant's obligations to the plaintiff under the guaranty requires review of outside proof that goes well beyond a mere de minimis deviation from the face of the guaranty.” Pearl River . 240 A.D.3d at 611-12 (citation and internal quotation marks omitted). The Pearl River Court noted that “to determine the existence and amount of the underlying debt asserted by the plaintiff, the Supreme Court would have been required to examine material outside the lease agreement and make calculations that were not shown by the plaintiff in the affidavit of its operations manager or supporting documents.” Id . at 612. Against this backdrop, we discuss NGS Med. Mgt. LLC v. Kornitzer , a case decided on December 3, 2025, by the Supreme Court of the State of New York, Kings County. The defendants in NGS are members of an entity that owns medical imaging practices (the “Imaging Business”). The defendants’ Imaging Business purchased an existing imaging practice owned by the plaintiff (the “Subject Business”). The Subject Business consisted of two interrelated parts: (1) an imaging office; and (2) a management services company. The sale was reflected in an asset purchase agreement. The sale transaction also involved entering into a lease agreement for the space from which the Subject Business operated. The landlord was an entity owned by one of the principals of the plaintiff. Part of the purchase price for the Subject Business was paid by a promissory note by which the defendants promised to pay the plaintiff $500,000.00. Upon the defendants’ alleged default, the plaintiff commenced an action to enforce the note by moving for summary judgment in lieu of complaint. In opposition to the motion, the defendants argued, inter alia , that the note and asset purchase agreement were “inextricably intertwined” and that the note was delivered as part of the consideration for the purchase of the Subject Business, which, due to alleged fraud, left the Subject Business without value. The court denied the plaintiff’s motion and converted the matter to a plenary action. While the court found that the plaintiff met its prima facie burden “by demonstrating the existence of the note, executed and delivered by the defendants, containing an unequivocal and unconditional obligation to repay, and the failure by defendants to pay in accordance with the terms of the note (citations omitted), the defendants “raised issues of fact as to whether they had valid defenses to the note, including failure of consideration” (citations omitted). The court stated that while “generally the breach of a related contract cannot defeat a motion for summary judgment on an instrument for money only, that rule does not apply where the contract and instrument are intertwined.” (Citation and internal quotation marks omitted.) As explained by the court, “where the note and the contract are inextricably intertwined as part of the same transaction, a breach of the related contract may create a defense to payment on the note.” (Citation and internal quotation marks omitted.) Thus, the court found that: Here, the note was executed and delivered contemporaneously with the and represented partial consideration for the integrated business purchased by defendants. The specifically referred to the note, and a copy of the note was attached thereto. Further and significantly, the note did not include any waiver of the right to an offset for counterclaims. Thus, defendants' defense on the was sufficiently intertwined with plaintiff's action to recover on the note. In addition, the court found that the defendants stated a valid defense of fraud in the inducement, which, if proved, could result in an inability to enforce the note. Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice. This BLOG has written numerous of articles addressing summary judgment in lieu of complaint pursuant to CPLR 3213. To find such articles, please see the BLOG tile on our website and type “CPLR 3213” into the “search” box. Some of the background facts discussed herein was obtained from the underlying court records available on the NYSCEF system.

By:  Jeffrey M. Haber This Blog has written about Ponzi schemes on numerous occasions. A Ponzi scheme is a type of investment fraud where returns to earlier investors are paid using investment capital from new or existing investors, rather than from legitimate profits earned through the enterprise’s business activities. Ponzi schemes persist by exploiting trust, promising high returns with little risk, and using money from new or existing investors to pay “profits” to earlier ones. In today’s article, we examine an enforcement action brought by the SEC against David J. Bradford (“Defendant B”) and Gerardo L. Linarducci (“Defendant L” and together with Defendant B, the “Defendants”). The SEC brought the action Defendant B, the former Chief Operating Officer of Drive Planning, LLC (“Drive Planning”), and Defendant L, the former Managing Partner of Drive Planning and head of its Indiana branch office, for their roles in an alleged $300 million Ponzi scheme related to Drive Planning’s “Real Estate Acceleration Loans” program. The SEC previously obtained a preliminary injunction, asset freeze, and other emergency relief pursuant to an emergency action against Drive Planning and its founder and CEO, Russell Todd Burkhalter, in connection with the alleged scheme. Without admitting or denying the allegations in the complaint, Defendant B consented to the entry of a final judgment, subject to court approval. According to the SEC, from 2020 through at least June 2024, Burkhalter ran a Ponzi scheme through Drive Planning, selling unregistered securities in the form of “Real Estate Acceleration Loans” (“REAL”), which Burkhalter described in promotional materials as a “bridge loan opportunity promising 10% in 3 months.”  Defendants allegedly encouraged people to tap their savings, their IRAs, and even lines of credit, to invest in REAL. According to the SEC, as of early May 2024, the alleged scheme was receiving applications for over one million dollars every day, driven by an organization of more than 100 sales agents.   According to the SEC, Defendants and the sales agents they trained falsely told REAL investors that Drive Planning pooled REAL investments and loaned that money out to property developers and/or used it to enter joint ventures with property developers, thereby earning the profits necessary to pay returns to REAL investors.   In fact, said the SEC, Drive Planning did not have a legitimate profitable enterprise capable of generating the sums necessary to pay the promised 10 percent returns every three months.  Instead, the SEC alleged that, “in classic Ponzi fashion, Burkhalter used money from new investors to pay the supposed ‘returns’ to existing investors and to maintain a luxurious lifestyle.” As of August 2024, when the SEC obtained emergency relief from the Court to stop the alleged fraud, over 2,000 investors had invested more than $300 million in the alleged scheme. According to the SEC, each Defendant played a crucial role in perpetrating the alleged Ponzi scheme. Each Defendant served as a senior executive in Drive Planning’s Indiana branch office, along with Burkhalter. In furtherance of the alleged Ponzi scheme, among other things, Defendants solicited investors in REAL; managed teams of sales agents who sold the investment; appeared in videos and social media posts promoting Drive Planning’s business; and conducted training sessions for agents to boost investments in REAL. In connection with their sales of REAL, Defendants allegedly told investors, among other things, that the promised 10% rate of return was guaranteed; investors held an interest in underlying collateral as part of their investment; Drive Planning partnered with real estate developers in profit-sharing agreements; and profits from those partnerships funded the promised return to REAL investors. According to the SEC, these representations were false. The SEC claimed that Defendants allegedly knew they were false or were, at least, severely reckless in making the statements. The SEC alleged that, in truth, Drive Planning did not generate significant profits from real estate deals. Instead, said the SEC, the company used most of the investor funds to pay fictitious returns to other investors, support Burkhalter’s extravagant lifestyle, and pay millions of dollars in compensation to Defendants and the sales agents they oversaw. According to the SEC’s complaint , each Defendant played an integral role in fueling the alleged REAL fraud. The SEC alleged that Drive Planning’s records showed that (a) Defendant B sold more than $35 million in REAL investments and his sales team sold more than $100 million, and (b) Defendant L sold more than $13 million in REAL investments and his sales team sold more than $30 million. The SEC said that Defendants received millions of dollars in compensation for selling REAL investments. Between 2020 and 2024, Drive Planning paid Defendant B approximately $26 million in total compensation. Between 2022 and 2024, Drive Planning paid Defendant L $7.5 million in total compensation. By engaging in the conduct described in the complaint , the SEC alleged that Defendants violated Sections 5(a), 5(c), 17(a)(l), 17(a)(2), and 17(a)(3) of the Securities Act of 1933 (“Securities Act”) <15 u.s.c. §§ 77e(a), 77e(c), 77q(a)(l), 77q(a)(2), and 77q(a)(3)> ; Sections l0(b) and 15(a) of the Securities Exchange Act of 1934 (“Exchange Act”) <15 u.s.c. §§ 78j(b), 78o(a)> ; and Rules 10b-5(a), (b), and (c) thereunder <17 c.f.r. §§ 240.10b-5(a), (b), and (c)> . The SEC also alleged that Defendant L aided and abetted Burkhalter’s and Drive Planning’s alleged violations of Section 17(a) of the Securities Act <15 u.s.c. § 77q(a)> , Section l0(b) of the Exchange Act <15 u.s.c. § 78j(b)> , and Rules 10b-5(a), (b), and (c) thereunder <17 c.f.r. § 240.10b-5(a), (b), and (c)> . The SEC seeks permanent injunctions, disgorgement with prejudgment interest, and civil penalties against Defendants. Without admitting or denying the allegations in the complaint, Defendant B consented to the entry of a final judgment, subject to court approval, in which he agreed to be permanently enjoined from violating the charged provisions of the federal securities law and from participating in the issuance, purchase, offer, or sale of any security, except for purchases or sales in his personal accounts, and agreed that that court will order him to pay disgorgement with prejudgment interest and a civil penalty in an amount to be determined by the court upon motion by the SEC. A copy of the litigation release announcing the filing of the complaint can be found here . _______________________________ Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice. To find such articles, please visit the Blog tile on our website and search for “Ponzi schemes” or any SEC enforcement action issue that may be of interest to you.

By:  Jeffrey M. Haber It is well settled that a “valid release constitutes a complete bar to an action on a claim which is the subject of the release.” “ release that, by its terms, extinguishes liability on any and all claims arising in connection with specified matters is deemed to encompass claims of fraud relating to those matters, even if the release does not specifically refer to fraud and was not granted in settlement of an actually asserted fraud claim.” A party may move to dismiss a pleading, pursuant to CPLR Rule 3211(a)(5), where the language of a release clearly and unambiguously covers the subject matter of the action. In that case, “the signing of a release is a ‘jural act’ binding on the parties.” However, a release may be invalidated for any of “the traditional bases for setting aside written agreements, namely, duress, illegality, fraud, or mutual mistake.” Although a defendant has the initial burden of establishing that it has been released from any claims, a signed release “shifts the burden of going forward . . . to the to show that there has been fraud, duress or some other fact which will be sufficient to void the release.” When fraud is the basis of the motion, the party seeking to invalidate a release must “establish the basic elements of fraud, namely a representation of material fact, the falsity of that representation, knowledge by the party who made the representation that it was false when made, justifiable reliance by the plaintiff, and resulting injury.” The mere nondisclosure of potential future transactions (which had not been finalized) or financial upside is not sufficient. “ party that releases a fraud claim may later challenge that release as fraudulently induced only if it can identify a separate fraud from the subject of the release.” As the Court of Appeals observed, “ ere this not the case, no party could ever settle a fraud claim with any finality.” In Crane v. WP Strategic Holdings, LLC , 2025 N.Y Slip Op. 52064(U) (Sup. Ct., Albany County Sept. 10, 2025), the court dismissed a complaint, holding the action was barred by a broad, unconditional release the parties signed after arm’s-length negotiations with independent counsel. As discussed below, the release expressly covered all claims, known or unknown, including those related to ownership and future sales. Plaintiff failed to demonstrate that the alleged nondisclosure of a pending sale constituted a separate fraud sufficient to undo the enforceability of the release. In February 2024, plaintiffs entered into discussions with the managing member of WP Strategic Holdings, LLC (“WP”) to partner together for the purchase of a Delaware corporation known as Crane Special Papers North America, Inc. (“CSPNA”). Plaintiffs each contributed $300,000 towards the acquisition, with the funds deposited into an escrow account maintained by the parties’ transactional counsel. In exchange for their contribution of capital, each plaintiff would receive 10% of CSPNA’s stock. On March 14, 2024, the parties closed the transaction (“Closing”). During the Closing, WP allegedly informed plaintiffs that, to facilitate the expeditious purchase of CSPNA’s stock, the stock purchase agreement memorializing the transaction would show WP as the purchaser of the stock. Defendants allegedly represented that the parties would later document the fact that each plaintiff was the 10% owner of CSPNA’s stock. Plaintiffs alleged that, in reliance on the statements and representations defendants made during the Closing, plaintiffs authorized the release of the $600,000 held in escrow for the purchase of the CSPNA shares. Plaintiffs alleged that, a few days later, in response to an inquiry from counsel regarding the allocation of the CSPNA shares, WP’s managing member acknowledged in writing that plaintiffs’ investment resulted in a 20% ownership interest in CSPNA. Notwithstanding, said plaintiffs, defendants failed to deliver their stock certificates. Plaintiffs alleged that unbeknownst to them, on March 6, 2024, and prior to the Closing, WP was negotiating with Perfect Cube LLC d/b/a Decree Company of Raleigh, North Carolina (“Decree”) to sell CSPNA to Decree for approximately $9,750,000.” On May 17, 2024, Decree and WP executed a letter of intent (“LOI”) for the transaction. After signing the LOI, defendants allegedly changed their position with respect to plaintiffs’ ownership interests in CSPNA. On May 28, 2024, after plaintiffs inquired about the lack of documentation, defendant allegedly informed plaintiffs that the parties “had different views on, among other things, their ownership interests in and that their short- and long-term goals were no longer aligned.” WP offered to return the $600,000 in capital contributed by plaintiffs, together with an additional $60,000 “to address any inconvenience.” Plaintiffs agreed to defendant’s proposal because the amount offered was allegedly close to the amount they had been led to believe was the value of CSPNA ( e.g. , $3 million). However, defendants allegedly did not inform plaintiffs that WP had already entered into the LOI on May 17, 2024, to sell the stock of CSPNA for $9,750,000. Plaintiffs maintained that they would have been entitled to $975,000 of that amount as 10% shareholders. On June 3, 2024, WP presented plaintiffs with a proposed Agreement and Mutual Release (the “Release”), which defendants allegedly insisted plaintiffs sign as a condition of receiving $330,000 each. Plaintiffs shared the proposed Release with their counsel. After several rounds of revisions, plaintiffs, WP, CSPNA, and WP’s managing member signed the Release. As a result, each plaintiff received $330,000. The Release provided that plaintiffs would release, among others, WP’s managing member, CSPNA, and WP, “jointly and severally, from any and all claims, rights, causes of action, suits, debts, dues, units, shares, stock, interests, sums of money, . . . , and all liability and obligations for the same, in law or in equity, whether contingent or fixed, known or unknown, . . . that ever had, now have, or hereafter . . . may have . . . by reason of any matter, cause or thing, from the beginning of the world until the date of this .” Plaintiffs affirmatively represented that they “entered into th of their own free will and accord, received independent legal counsel and review of th , and they not been promised any additional future consideration with respect to the transactions contemplated by th .” Plaintiffs further acknowledged the unconditional nature of the Release and expressly recognized the prospect that WP “could sell the CSPNA Shares at any time in the future” without accounting to plaintiffs for the profits. About one month later, on July 3, 2024, Decree acquired CSPNA through a merger for a purchase price of $9,750,000. In January 2025, Decree’s principal supplied plaintiffs with documents showing that WP’s managing member had been negotiating the sale of CSPNA to Decree in March 2024. Plaintiffs commenced the action on March 26, 2025, alleging that defendants breached their agreement “to issue stock certificates and documentation . . . to evidence collective 20% ownership of the stock . . . , as previously agreed upon , because they were actively negotiating and preparing to sell the stock” to Decree. Plaintiffs further alleged that defendants failed to inform them that defendants “had been negotiating with Decree . . . or that had entered into the .” “Plaintiffs alleged that defendants violated their fiduciary duties to plaintiffs by deliberately withholding information regarding the LOI. Plaintiffs sought to set aside the Release as the product of fraud, arguing that they would not have signed the Release if they had known that defendants “negotiated a sale of for <$9.75 million> .” Plaintiffs also sought to recover 20% of the $9.75 million paid by Decree for CSPNA, together with interest and punitive damages, under theories sounding in fraud, breach of fiduciary duty, unjust enrichment, constructive trust, and breach of contract. Defendants moved to dismiss the complaint under CPLR 3211 (a) (1), (5) and (7), arguing that all of plaintiffs’ causes of action were foreclosed by the clear and unambiguous language of the Release, which was negotiated and signed by commercial parties represented by counsel. The motion court granted the motion. The motion court held that “defendants demonstrated,  prima facie , that plaintiffs’ claims barred by the Release.” The motion court explained that “following the parties’ inability to agree on the terms by which plaintiffs would acquire an interest in CSPNA, plaintiffs ‘knowingly and voluntarily’ released defendants from any liabilities or obligations, ‘whether contingent or fixed, known or unknown,’ for ‘shares, stock, interests sums of money.’” “Thus,” said the motion court, “the Release encompasse unknown fraud claims, thereby precluding a claim of fraudulent inducement ‘unless the release was itself induced by a separate fraud.’” The motion court found that “ o such separate fraud ha been identified.” “The claim of fraudulent inducement” said the motion court, was “based on defendants’ alleged fiduciary concealment of information concerning the LOI and the potential sale of CSPNA to Decree…, but this just an extension of plaintiffs’ over-arching complaint: that defendants refused to accord them the rights and privileges attendant to an ownership interest in CSPNA, notwithstanding express promises of the same.” “In essence,” concluded the motion court, plaintiffs were “‘asking to be relieved of the release on the ground that they did not realize the true value of the claims they were giving up.’” The motion court further held that even if plaintiffs had adequately identified a separate fraud, their claim that they were fraudulently induced to sign the release would still fail. The motion court found that plaintiffs failed to allege justifiable reliance on the alleged fraud. The motion court explained that plaintiffs were “sophisticated businesspeople who were represented by their own separate counsel at pertinent times …, including during arm’s-length negotiations with defendants’ counsel over the terms of the Release.” The motion court said that plaintiffs were on notice that the parties’ “short- and long-term goals were no longer aligned.” “In fact,” noted the motion court, “defendants’ suspicious and ‘unresponsive nature after the March 14, 2024, Zoom Meeting,’ led one of plaintiffs’ advisors to recommend that they accept defendants’ settlement proposal because he believed that “ being untruthful.” The motion court concluded that “ espite all of the[ ] red flags, settlement negotiations conducted at arm’s length through separate counsel, and a proposed Release that recognized WP’s right to sell CSPNA shares ‘at any time’ without accounting to plaintiffs…, plaintiffs made no inquiry concerning the value of their claimed interest in CSPNA or the reasons for defendants’ ‘abrupt[]’ change in position.” “Plaintiffs did not inquire about the status of CSPNA’s business, the prospects for a sale of CSPNA’s stock, or the value of their claimed 20% ownership interest,” said the motion court. “Instead,” noted the motion court, “plaintiffs ‘knowingly and voluntarily’ executed the Release based on their ‘belief’ that the $660,000 they would receive from defendants was ‘relatively close’ to the market value of the interest they claimed in CSPNA. In so doing, plaintiffs disregarded overt conduct on the part of defendants clearly evincing a breakdown in the relationship and an adversarial posture, including a clear statement that defendants no longer viewed the parties’ interests as being aligned.” Accordingly, the motion court dismissed the complaint, concluding that plaintiffs failed “to conduct any diligence as to the value of their released claims,” thereby “conclusively defeat the allegation that they reasonably and justifiably relied upon defendants’ silence regarding the non-binding LOI and other information bearing on the value of their claimed interest in CSPNA.” Takeaway Crane reinforces critical principles with regard to the enforceability of releases. First, courts will enforce broad releases, including the release of known and unknown fraud claims, when the release is clear and unambiguous. Second, to void a release, a party must show a separate fraud, not just nondisclosure of facts tied to the released dispute. Finally, when trying to negate the force and effect of a release based on fraud, the party opposing the motion must demonstrate the elements of a fraud claim, including the exercise of justifiable reliance. __________________________ 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. Centro Empresarial Cempresa S.A. v AmÉrica MÓvil, S.A.B. de C.V. , 17 N.Y.3d 269, 276 (2011); Global Mins. & Metals Corp. v. Holme , 35 A.D.3d 93, 98 (1st Dept. 2006). Centro Empresarial Cempresa S.A. v. América Móvil, S.A.B. de C.V. , 76 A.D.3d 310, 319 (1st Dept. 2010), aff’d , 17 N.Y.3d 269, 276 (2011). Centro , 17 N.Y.3d at 276; Luxury Travel Coach v. 4020 Assoc., Inc. , 241 A.D.2d 443, 443 (2d Dept. 1997). Booth v. 3669 Delaware , 92 N.Y.2d 934, 935 (1998), quoting Mangini v. McClurg , 24 N.Y.2d 556, 563 (1969). Centro , 17 N.Y.3d at 276. Id. , quoting Fleming v. Ponziani , 24 N.Y.2d 105, 111 (1969). Id. , quoting Global Mins. , 35 A.D.3d at 98. Chadha v. Wahedna , 206 A.D.3d 523, 524 (1st Dept. 2022). Centro , 17 N.Y.3d at 276, citing Centro , 76 A.D.3d at 318; see also Bellefonte Re Ins. Co. v. Argonaut Ins. Co. , 757 F.2.d 523, 527-528 (2d Cir. 1985); Avnet, Inc. v. Deloitte Consulting LLP , 187 A.D.3d 430, 431 (1st Dept. 2020). Id. Over the years, this Blog has examined numerous cases involving the enforceability of releases. Among the articles examining releases are: Releases and Fraudulent Inducement , General Release That Was Entered Because of Defendant’s Fraudulent Misrepresentations Held Not To Be Enforceable , and Release in Settlement Agreement Bars Class Action To Recover Damages For Certain Rent Overcharges . The factual discussion comes from the motion court’s decision and the allegations in plaintiffs’ complaint. Plaintiffs appealed the motion court’s order. Slip Op. at *4. Id. Id. , quoting Centro , 17 N.Y.3d at 277. Id. Id. (record citations omitted). Id. , quoting Centro , 17 N.Y.3d at 277 (internal quotation marks omitted). Id. at *5. Id. Id. (record citations omitted). Id. at *6. Id. Id. (record citation omitted). Id. (citations and footnote omitted). Id. (record citation omitted). Id. at *7 (footnote omitted).

By: Jonathan H. Freiberger This BLOG has previously addressed the issue of a defendant’s appearance in an action – both formal and informal. In that regard, we have noted that it makes sense that a “plaintiff appears in an action merely by bringing it.” Deutsche Bank Nat. Trust Co. v. Hall , 185 A.D.3d 1006 (2 nd Dep’t 2020) (citation and internal quotation marks omitted). Once served with process, a defendant must appear in an action to avoid a default. Section 320(a) of New York’s Civil Practice Law and Rules (the “CPLR”), which sets forth, inter alia, the manner in which a defendant can appear in an action, provides that “ he defendant appears by serving an answer or a notice of appearance, or by making a motion which has the effect of extending the time to answer.” An appearance pursuant to CPLR §320(a) is a formal appearance in the action. New York courts also recognize “informal appearances.” To constitute an informal appearance, a defendant must have engaged in “meaningful participation in the merits of the case.” Kurlander v. Willie , 45 A.D.3d 1006, 1007 (3 rd Dep’t 2007) (citation omitted). An appearance, whether formal or informal, can have a significant impact on litigation. Among other things, an appearance could: preclude the entry of a default judgment by plaintiff; operate to preclude a defendant from interposing a defense of lack personal jurisdiction; and, preclude a defendant from having a complaint dismissed pursuant to CPLR 3215(c) v based on a plaintiff’s failure to seek a default judgment within a year of default. Depending on the circumstances, a plaintiff or a defendant may argue that a defendant has “informally appeared” in an action. Some residential mortgage foreclosure actions are subject to mandatory settlement conferences. See, e.g., CPLR 3408(a)(1) and 22 NYCRR 202.12-a(b)(l) . However, a defendant’s participation in settlement conferences does not constitute either a formal or an informal appearance because the defendant does “not actively litigate the action before the Supreme Court or participate in the action on the merits.” Wells Fargo Bank, N.A. v. Martinez , 181 A.D.3d 470, 471 (1 st Dep’t 2020) (citations, internal quotation marks and brackets omitted); see also US Bank Nat. Ass’n v. Kail , 189 A.D.3d 1652, 1654-55 (2 nd Dep’t 2020) (same, relying on Martinez ); PennyMac Corp. v. Weinberg , 203 A.D.3d 1061, 1063 (2 nd Dep’t 2022). Against this backdrop, we discuss HSBC Bank USA, N.A. v. Saris , a case decided on December 24, 2025 by the Appellate Division, Second Department. According to the Court, the “issue on appeal, an issue of first impression for this Court, is whether a party’s attendance at a mandatory settlement conference pursuant to CPLR 3408 constitutes an appearance by a party for the purposes of CPLR 3215(g) , which provides, among other things, that a party who has appeared in an action is entitled to at least five days' notice of an application for leave to enter a default judgment.” The facts of HSBC Bank are simple. In 2014, the lender commenced a foreclosure action and a mandatory settlement conference attended by the borrower was conducted thereafter. The borrower, however, neither filed a notice of appearance, interposed an answer nor made any motion operating to extend the defendant’s time to answer. The lender’s unopposed motion for a default judgment was granted. A judgment of foreclosure and sale was subsequently entered, and the subject property was sold to the lender at public auction after the borrower’s motion to stay the sale was denied by the motion court. The motion court also denied the borrower’s subsequent motion pursuant to CPLR 5015(a) (1) and (4) to vacate the motion court’s prior orders resulting in the default judgment and the sale of the subject property. The borrower appeals. The Second Department affirmed. Specifically, as to CPLR 5015(a)(4), the Court noted that any defendant that has appeared in an action is entitled to at least five days’ notice of an application for leave to enter a default judgment pursuant to CPLR 3215(g)(1) . The Court further stated that “the failure to provide a defendant who has appeared in an action with the notice required by CPLR 3215(g)(1), like the failure to provide proper notice of other kinds of motions, is a jurisdictional defect that deprives the court of the authority to entertain a motion for leave to enter a default judgment." (Citations, internal quotation marks and brackets omitted.) The Court rejected the borrower’s argument under CPLR 5015(a)(4) that the lender’s failure to provide at least five days’ notice of its application for a default judgment because his appearance at the mandatory settlement conference constituted an appearance was a jurisdictional defect. In this regard, the Court stated that “neither the plain language of CPLR 3215(g)(1) nor its legislative history supports the defendants' contention that attendance at a mandatory settlement conference pursuant to CPLR 3408 constitutes an appearance in an action for the purpose of the notice requirements of CPLR 3215(g)(1).” The Court explained that while the term “appear” or “appearance” is not defined in CPLR 3215, there is also nothing that indicates that those terms should be treated differently than they are elsewhere in the CPLR. The Court also noted that there “appears to be no prior case law from this Court, our sister courts, or the Court of Appeals defining what constitutes an appearance for the purpose of triggering the five-day notice requirement of CPLR 3215.” The Court did note that it has routinely held that attendance at a mandatory settlement conference "does not constitute active litigation of the action or participation in the action on the merits." (Citation and internal quotation marks omitted.) Thus, the Court stated: Accordingly, this Court's own case law interpreting the meaning and scope of the word appear under subdivision (c) of CPLR 3215, together with similar determinations by our sister courts, informs our view that the word appear for the purpose of triggering the notice requirement under subdivision (g) of CPLR 3215 should be defined by the scope of the word as determined by decisional law relating to subdivision (c) of CPLR 3215. Concomitantly, our determination that attendance at a mandatory settlement conference pursuant to CPLR 3408, alone does not constitute an appearance in the action is wholly consistent with this Court's case law on the related issue of personal jurisdiction. A defendant does not waive the defense of lack of personal jurisdiction merely by attending a mandatory settlement conference. Thus, the Court held that the borrower’s attendance at the mandatory settlement conference did not constitute an appearance that triggered the five days’ notice provision of CPLR 3215()(1) and, therefore, the motion court’s rejection of the borrower’s arguments was proper. Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice. This BLOG has written numerous of articles addressing CPLR 3215(c). To find such articles, please see the BLOG tile on our website and type “CPLR 3215(c)” into the “search” box. This BLOG has written numerous of articles addressing formal and informal appearances. To find such articles, please see the BLOG tile on our website and type “informal appearance” or “CPLR 320(a)” into the “search” box. This BLOG has written dozens of articles addressing numerous aspects of residential mortgage foreclosure. To find such articles, please see the BLOG tile on our website and search for any foreclosure, or other commercial litigation, topics that may be of interest you. CPLR 5015(a)(1) and (a)(4) permit a court to vacate a judgment based on excusable default and lack of jurisdiction, respectively. The Court also rejected the borrower’s excusable default argument under CPLR 5015(a)(1), because the borrower’s claim of incapacitation was unsupported by medical or other evidence.

By: Jeffrey M. Haber New York has a unique mechanism—summary judgment in lieu of complaint—that allows a party to recover money upon the default of an instrument for the payment of money only. Under this mechanism, which is found in CPLR 3213, a party must make the motion for summary judgment before filing a complaint. The purpose of CPLR 3213 “is to provide an accelerated procedure where liability for a certain sum is clearly established by the instrument itself.” In such a circumstance, CPLR 3213 can be used when “a formal complaint is superfluous and … the delay incident upon waiting for an answer and then moving for summary judgment is needless.” “The prototypical example of an instrument within the ambit of is of course a negotiable instrument for the payment of money – an unconditional promise to pay a sum certain, signed by the maker and due on demand or at a definite time.” Generally, CPLR 3213 is used to enforce “some variety of commercial paper in which the party to be charged has formally and explicitly acknowledged an indebtedness,” so that “a prima facie case would be made out by the instrument and a failure to make the payments called for by its terms.” A promissory note may qualify as such an instrument, so long as the plaintiff submits proof of the existence of the note and of the defendant’s failure to make payment. Such proof must be in admissible form sufficient to establish the absence of any material, triable issues of fact. While CPLR 3213 provides an accelerated method to recover sums due under an instrument for the payment of money only or a judgment, some plaintiffs do not always avail themselves of the device. Main St. Merchant Servs. Inc. v Victorian Rest. & Tavern, LLC , 2025 N.Y. Slip Op. 34664(U) (Sup. Ct., Kings County Dec. 04, 2025), is an example of such a situation. Main Street Merchant arose out of a contractual dispute between the parties, pursuant to two Purchase and Sale of Future Receivables Agreements (“Agreement l” and “Agreement 2,” respectively, and collectively the “Agreements”). On March 19, 2024, pursuant to Agreement 1, plaintiff agreed to buy all rights of the Company Defendants’ future receivables. The future receivables covered by Agreement 1 had a face value of $94,430. The purchase amount for those receivables was $71,000. On June 27, 2024, pursuant to Agreement 2, plaintiff agreed to buy all rights of the Company Defendants' future receivables. The future receivables covered by Agreement 2 had a face value of $58,758. The purchase amount for those receivables was $42,000. Under both Agreement 1 and Agreement 2, August R. Cipully a/k/a August Cipully (“Guarantor”) agreed to guarantee any and all amounts owed to plaintiff from the Company Defendants. On September 30, 2024, plaintiff filed its complaint, asserting causes of action for breach of contract, breach of the personal guarantee, and unjust enrichment. Plaintiff further asserted that it was entitled to its attorney’s fees in pursuing collection of the amounts owed. On October 28, 2024, defendants answered the complaint. On November 14, 2024, plaintiff moved for summary judgment pursuant to CPLR 3212. In support of its motion, plaintiff argued that it remitted the purchase price for the future receivables to defendants as agreed upon and fully complied with its obligations and duties under the Agreements. Plaintiff stated that while defendants initially met their obligations under Agreement 1, on September 9, 2024, and September 16, 2024, defendants violated the terms of Agreement 1. Plaintiff further stated that while defendants initially met their obligations under Agreement 2, on August 1, 2024, and September 5, 2024, defendants violated the terms of Agreement 2. Under both Agreements, plaintiff alleged that defendants interfered with plaintiff’s right or ability to collect the Initial Daily Installments set forth in the Agreements by allowing plaintiff to receive four (4) or more rejected ACH transactions by defendants’ bank. In opposition, defendants argued the following: (1) plaintiff failed to lay a foundation for records purportedly reflecting defendants’ payment history and default, (2) plaintiff failed to offer evidence to prove its performance ( i.e. , that any amount was actually paid); (3) plaintiff failed to address the fundamental issue regarding what, if any, of the monies in the account from which plaintiff had been drafting remittances constituted actionable “business sales receivables” vis-a-vis the contract; ( 4) plaintiff failed to present evidence to support the allegation that plaintiff is entitled to the default fee; and (5) plaintiff failed to distinguish between the breach of contract claim and the unjust enrichment claim. The motion court granted plaintiff’s motion. The motion court found that plaintiff “met its initial burden and prima facie entitlement to summary judgment by submitting copies of the executed Agreements, proof that laintiff performed, and proof that efendants failed to perform resulting in laintiff’s damages.” The motion court also found that the affidavit submitted by plaintiff’s Director of Risk Management constituted further evidence supporting plaintiff’s motion. The motion court explained that the affidavit was based upon personal knowledge and demonstrated that the Director of Risk Management had “access to laintiff’s business records, which kept and maintained in the ordinary course of regularly conducted business activity, including the business records for, and relating to, the efendants.” These records included “the executed Agreements, proof of funding, and the remittance history.” “Because Plaintiff met its initial prima facie burden, by producing the executed Agreements, proof of funding, and proof of efendants’ default under the terms of the Agreements,” said the motion court, “the burden shifted to, and it became incumbent upon efendants to make an ‘evidentiary showing that there exist genuine, triable issues of fact.’” The motion court held that defendants “failed to raise a triable issue of fact relative to both laintiff’s and efendants’ alleged performance of their respective obligations under the Agreements.” Regarding the default fee, which the parties provided for as liquidated damages in the Agreements, the motion court held that “the default fees neither unconscionable, nor contrary to public policy and therefore enforceable.” Takeaway CPLR 3213 provides an expedited procedure for the recovery of money based on an “instrument for the payment of money only,” such as promissory notes or unconditional guarantees. Instead of filing a complaint, the plaintiff serves a summons and a motion for summary judgment together, allowing the court to decide the case quickly when liability is clear from the instrument itself. This mechanism avoids the delays of pleadings and answers, making it attractive for straightforward monetary claims. However, CPLR 3213 comes with strict service requirements. The combined summons and motion must be served in the same manner as a summons. The return date must comply with CPLR 320(a), giving defendants the same time to appear as if served with a complaint—usually 20 or 30 days depending on the method of service. These service requirements can be challenging when defendants are out of state, evasive, or corporate entities with unclear registered agents. Any defect in service can invalidate the motion entirely, creating significant risk. For this reason, plaintiffs often choose CPLR 3212 after filing a complaint, which provides more flexibility and time to cure service issues without jeopardizing the case. Main St. Merchant Servs. Inc. v. Victorian Rest. & Tavern, LLC illustrates this dynamic. In Main St. Merchant , plaintiff filed a complaint and later moved for summary judgment under CPLR 3212. The motion court granted the motion, finding that plaintiff met its prima facie burden by submitting executed agreements, proof of funding, and evidence of defendants’ default. Defendants failed to raise any triable issues of fact, and the motion court upheld the enforceability of the default fee as liquidated damages. This outcome underscores that while CPLR 3213 offers an accelerated process, CPLR 3212 can be a safer route when service or anticipated defenses pose challenges. ________________________________________ 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. G.O.V. Jewelry, Inc. v. United Parcel Serv. , 181 A.D.2d 517, 517 (1st Dept. 1992). Interman Indus. Products, Ltd. v. R.S.M. Electron Power, Inc. , 37 N.Y.2d 151, 154 (1975) (citations and internal quotation marks omitted). Weissman , 88 N.Y.2d at 443-44 (citations, internal quotation marks and footnote omitted). Interman Indus. Prods., Ltd. ,37 N.Y.2d at 154-155 (1975). “An unconditional guaranty is an instrument for the payment of money only within the meaning of CPLR 3213.” Cooperatieve Centrale Raiffeisen Boerenleenbank, B.A. v. Navarro , 25 N.Y.3d 485, 492 (2015). See Bonds Fin’l, Inc. v. Kestrel Techs., LLC , 48 A.D.3d 230 (1st Dept. 2008); Seaman-Andwall Corp. v. Wright Machine Corp. , 31 A.D.2d 136 (1st Dept. 1968). See CPLR § 3212(b); Jacobsen v. New York City Health & Hosps. Corp. , 22 N.Y.3d 824 (2014); Alvarez v. Prospect Hosp. , 68 N.Y.2d 320 (1986); Zuckerman v. City of New York , 49 N.Y.2d 557 (1980). The Company Defendants are: Victorian Restaurant and Tavern, LLC, The Waverly Restaurant, LLC, K.T. Baxter’s, LLC. Slip Op. at *3. Id. Id. (citation omitted). Id. Id.

By: Jeffrey M. Haber In New York, foreign business entities – e.g. , corporations, limited liability companies, and partnerships authorized to do business in another jurisdiction or country – are required to register to do business with the Secretary of State. The failure to receive such authority deprives the foreign entity of the ability to affirmatively access the courts of New York and subjects any action commenced by the foreign entity to dismissal. The purpose of the registration requirement is to regulate foreign companies that are conducting business within New York State so that they are not doing business under more advantageous terms than “those allowed a corporation of this State.” When applying BCL § 1312(a), the subject of today’s article, the relevant inquiry is whether the foreign entity is “doing business” in the State. The test of doing business in New York for the purpose of BCL § 1312(a) “is not the same as that for jurisdictional purposes.” “Both raise constitutional questions, but the latter involves the due process clause while the former involves the interstate commerce clause.” In construing statutes which license foreign corporations to do business within New York State, the courts try to avoid any interference by the State with interstate commerce. Whether a company is “doing business” in New York “depends upon the particular facts of each case with inquiry into the type of business activities being conducted.” Moreover, “whether was doing business in New York” is determined by looking “at the time the action was commenced.” Notably, “not all business activity engaged in by a foreign corporation constitutes doing business in New York.” A foreign corporation is permitted to transact “some kinds of business within the state without procuring a certificate” authorizing it to conduct business in New York. In order for a foreign corporation to be doing business in New York within the context of BCL § 1312, “the intrastate activity of the foreign corporation be permanent, continuous, and regular.” The entity’s activities cannot be “merely casual or occasional.…” New York courts consider a number of factors, both quantitative and qualitative, when considering the entity’s activity in the State. Among the factors the courts consider are: (a) whether the entity maintains a physical presence or has employees located within the State; (b) the frequency and regularity of activities within the State; and (c) the volume and nature of the activities within the State. Merely entering into a single contract, engaging in an isolated piece of business, or engaging in an occasional undertaking will not suffice to invoke application of BCL § 1312. Similarly, “the solicitation of business and facilitation of the sale and delivery of merchandise incidental to business in interstate and/or international commerce is typically not the type of activity that constitutes doing business in the state within the contemplation of section 1312 (a).” However, regularly and continuously entering the State to solicit, complete and manage sales to customers in New York may constitute doing business in the State. The party seeking dismissal under BCL § 1312(a) must show that the business activities within the State were so systematic and regular as to manifest continuity of activity. Absent sufficient evidence to establish that a plaintiff is doing business in the State, “the presumption is that the plaintiff is doing business in its State of incorporation … and not in New York.” Finally, if the foreign business entity is found to have been continuously and regularly conducting business in the State, the courts often refrain from dismissing the action. Instead, the courts conditionally grant the dismissal motion and provide the plaintiff with a reasonable time period to cure its deficiency under BCL § 1320. In Forethought Life Ins. Co. v. 1442, LLC , 2025 N.Y. Slip Op. 07285 (2d Dept. Dec. 24, 2025), the Appellate Division, Second Department considered the foregoing principles in affirming the denial of a motion to dismiss on BCL § 1312(a) grounds. Forethought Life was commenced by Forethought Life Insurance Company on September 12, 2022, an Indiana corporation, to foreclose upon a mortgage Extension and Modification Agreement and associated loan documents executed by defendant Rochel Miriam Kassirer, as the sole member of 1442 LLC, on February 5, 2020. On May 22, 2023, defendants moved to dismiss the complaint pursuant to CPLR 3211(a)(3), arguing that plaintiff lacked legal capacity to sue. Plaintiff opposed the motion on several grounds, most notably that plaintiff was authorized to do business in New York pursuant to Section 590(1)(e) of the Banking Law. Plaintiff argued that it was registered with DFS and that such registration authorized it to service mortgage loans in the State of New York. The motion court denied the motion. The motion court found that plaintiff was “registered with DFS as an ‘exempt mortgage loan servicer.’” That filing, said the motion court, “allow Plaintiff to service loans within the state.” Accordingly, concluded the motion court, plaintiff “appear authorized to do business in New York.” Defendants appealed.   The Appellate Division, Second Department, unanimously affirmed, focusing on the requirement that the intrastate activity of the foreign corporation be permanent, continuous, and regular, rather than whether registration with the DFS sufficed to satisfy the BCL. The Court found that “ he defendants failed to establish, prima facie, that the plaintiff ‘conducted continuous activities in New York essential to its corporate business.’” “Therefore,” held the Court, “the presumption that the plaintiff does business not in New York but in its State of incorporation has not been overcome.” Takeaway Under BCL § 1312(a), a foreign corporation must register to do business in New York if its activities in the state are permanent, continuous, and regular. If it fails to register, it lacks capacity to sue in New York courts. However, the burden is on the defendant to prove that the plaintiff’s business activities in New York are so systematic and regular as to constitute “doing business” under the statute. Occasional or incidental activities, or activities related to interstate commerce, do not meet this threshold. If the defendant cannot show continuous and essential intrastate activity, the presumption remains that the plaintiff conducts business in its state of incorporation, not New York. In Forethought Life , the Court held that defendants failed to overcome this presumption. Registration with the DFS as an exempt mortgage loan servicer, by itself, did not demonstrate continuous business activity in New York. Therefore, plaintiff retained capacity to sue. _________________________________ 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. See , e.g. , BCL § 1312(a). This Blog examined BCL § 1312(a) in numerous articles, including: Foreign Corporation Not Engaged in Continuous and Systemic Business in New York Not Barred Under BCL § 1312(a) From Bringing Action , Failure to Demonstrate that Foreign Company Had Engaged in Systemic and Regular Activity in New York Results in Denial of Dismissal Motion Under BCL § 1312(a) , Fraud and The Alleged Failure to Register Under BCL § 1312(a) , and Dismissal of Complaint With Prejudice Due To Violation of BCL § 1312 Modified To Allow Unregistered Foreign Corporation To Register With The State . The legal discussion that appears in this article is reprinted from the foregoing articles. See United Envtl. Techniques, Inc. v. State Dept. of Health , 88 N.Y.2d 824, 825 (1996). Von Arx, A.G. v. Breitenstein , 52 A.D.2d 1049, 1050 (4th Dept. 1976); see also Central Care Solutions, LLC v. Grand Great Neck, LLC , 219 AD3d 1482, 1485 (2d Dept. 2023); National Lighting Co. v. Bridge Metal Indus., LLC , 601 F. Supp. 2d 556, 566 (S.D.N.Y. 2009) (additional citation omitted). Great White Whale Adver., Inc. v. First Festival Prods. , 81 A.D.2d 704, 706 (3d Dept. 1981). Id. Id. (citations omitted). Id. Remsen Partners, Ltd. v. Southern Mgmt. Corp. , No. 01 Civ. 4427, 2004 WL 2210254, at *3 (S.D.N.Y. 2004) (citation and internal quotation marks omitted) (alteration in original). Netherlands Shipmortgage Corp. v. Madias , 717 F.2d 731, 735-36 (2d Cir. 1983). Globaltex Group, Ltd. v. Trends Sportswear, Ltd. , No. 09-CV-235, 2009 WL 1270002, at *3 (E.D.N.Y. May 6, 2009) (quoting Int’l Fuel & Iron v. Donner Steel , 242 N.Y. 224, 229 (1926)). Manney v. Intergroove Tontrager Vertriebs GMBH , No. 10 Civ. 4493, 2011 WL 6026507, at *8 (E.D.N.Y. Nov. 30, 2011) (quoting Netherlands Shipmortgage , 717 F.2d at 736) (alteration in original)). United Arab Shipping Co. (S.A.G.) v. Al-Hashim , 176 A.D.2d 569, 570 (1st Dept. 1991); see also Maro Leather Co. v Aerolineas Argentinas , 161 Misc. 2d 920, 923 (Sup. Ct., App. Term 1st Dept. 1994); Schwarz Supply Source v. Redi Bag USA, LLC , 64 A.D.3d 696, 696-97 (2d Dept. 2009). Netherlands Shipmortgage , 717 F.2d at 738. Uribe v. Merchants Bank of New York , 266 A.D.2d 21, 21 (1st Dept. 1999). G.P. Exports v. Tribeca Design , 147 A.D.3d 655, 656 (1st Dept. 2017). United Arab Shipping , 176 A.D.2d at 570. Netherlands Shipmortgage , 717 F.2d at 738; Von Arx , 52 A.D.2d at 1049; Airline Exch., Inc. v. Bag , 266 A.D.2d 414, 415 (2d Dept. 1999); 8430985 Canada Inc. v. United Realty Advisors LP , 148 A.D.3d 428 (1st Dept. 2017). Digital Ctr., S.L. v. Apple Indus., Inc. , 94 A.D.3d 571, 572 (1st Dept. 2012) (citation omitted). Highfill, Inc. v. Bruce & Iris, Inc. , 50 A.D.3d 742, 744 (2d Dept. 2008). JPMorgan Chase Bank, N.A. v. Didato , 185 A.D.3d 801, 802-803 (2d Dept. 2020); Maro Leather , 161 Misc. 2d at 923. Cadle Co. v. Hoffman , 237 A.D.2d 555 (2d Dept. 1997); JPMorgan Chase , 185 A.D.3d at 803; Airline Exch. , 266 A.D.2d at 415. Tri-Term. Corp. v. CITC Indus., Inc. , 78 A.D.2d 609 (1st Dept. 1980). E.g. , Showcase Limousine, Inc. v. Carey , 269 A.D.2d 133, 134 (1st Dept. 2000), mod in part , 273 A.D.2d 20 (1st Dept. 2000); Uribe , 266 A.D.2d at 22 (noting that the failure of the plaintiff to register with the State may be cured prior to the resolution of the action); Credit Suisse Int’l v. URBI, Desarrollos Urbanos, S.A.B. de C.V. , 41 Misc. 3d 601, 604 (Sup. Ct., N.Y. County 2013) (ordering plaintiff to comply with BCL § 1312 within 60 days or face dismissal of its complaint). Section 590(2)(b)(1) of the Banking Law prohibits corporations (and others) from engaging in the business of servicing mortgage loans unless they have first registered with DFS or, if an organization is an “exempt organization,” as defined in Section 590(1)(e) of the Banking Law. Plaintiff maintained that it was an exempt organization under the Banking Law. Slip Op. at *1 (citing JPMorgan Chase , 185 A.D.3d at 803 (alteration and internal quotation marks omitted)). Id. (citing id. ; Construction Specialties v. Hartford Ins. Co. , 97 A.D.2d 808, 808 (2d Dept. 1983)).

By:  Jeffrey M. Haber In today’s article, we examine Epstein v. Cantor , 2025 N.Y. Slip Op. 06989 (2d Dept. Dec. 17, 2025) ( Epstein I ), and Epstein v. Cantor , 2025 N.Y. Slip Op. 06990 (Dec. 17, 2025) ( Epstein II ) (collectively, Epstein ), related cases involving, among other things, New York’s partnership law. Epstein centered on whether Cantor, Epstein & Mazzola, LLP (CEM) was a partnership and whether Epstein was a partner in the firm. Cantor argued that Epstein lacked partnership status, seeking dismissal of, inter alia, fiduciary-related claims. The Appellate Division, Second Department, held that a 1995 written agreement between Cantor and Epstein expressly formed a partnership and governed their relationship, confirming Epstein’s partner status. Consequently, Epstein’s claims for breach of fiduciary duty, violation of Partnership Law § 20(3), and an accounting against Cantor survived dismissal. In contrast, a 2013 agreement rendered Mazzola a W-2 employee with no equity interest, refuting allegations that he was a partner. Thus, the fiduciary claims against Mazzola and the related Boyd defendants were dismissed. Epstein v. Cantor Epstein arose from the dissolution of a law firm. In 1995, plaintiff and defendant Robert I. Cantor (“Cantor”) entered into an agreement to form a partnership that would ultimately become Cantor, Epstein & Mazzola, LLP (“CEM”), upon the addition of defendant Bryan J. Mazzola (“Mazzola”). Pursuant to an agreement dated January 1, 2013, entered into by, among others, Epstein, Cantor, and Mazzola, as of that date, Mazzola became a W-2 salaried employee of CEM, with no equity interest in the firm. In 2015, Cantor informed Epstein, Mazzola, and Gary Ehrlich (“Ehrlich”), a senior attorney working at CEM at the time, that he had decided to leave CEM. This led to negotiations between Cantor, Epstein, Mazzola, and Ehrlich about the future of CEM and the terms of a potential buyout of Cantor’s interest. Mazzola and Ehrlich proposed to purchase the equity in the firm in return for a payout to Cantor and Epstein. Epstein allegedly rejected the offer, and thereafter, Mazzola and Ehrlich determined that they would leave CEM. In June 2016, letters purportedly from CEM were sent to certain clients stating that Mazzola, Ehrlich, and two other attorneys were leaving CEM to join a new firm and that CEM had no objection to those attorneys contacting the clients to solicit their continued representation of them. In 2019, Epstein, individually and as a partner of CEM, commenced the action against Cantor and defendant Robert I. Cantor, PLLC (hereinafter, together, the “Cantor defendants”), and Mazzola and defendants W. Todd Boyd, Boyd Richards Parker Colonelli, P.L., and Boyd Richards NY, LLC (collectively, the “Boyd defendants”), alleging, inter alia , that Cantor, without Epstein’s consent, formed his own firm and transferred almost all of CEM’s clients, which were based in large part upon the client base and relationships that Epstein had accumulated over many years, to the law firms of Boyd Richards Parker Colonelli, P.L. and Boyd Richards NY, LLC (hereinafter, together, the “Boyd firms”), with the help of Boyd and Mazzola. Epstein asserted causes of action alleging breach of contract against Cantor (first cause of action), breach of fiduciary duty against Cantor and Mazzola (second cause of action), violation of Partnership Law § 20(3) against Cantor and Mazzola (third cause of action), an accounting against Cantor (fourth cause of action), conversion against Cantor (fifth cause of action), violation of the faithless servant doctrine against Mazzola (sixth cause of action), unjust enrichment against Mazzola (seventh cause of action), corporate raiding against the Boyd defendants (eighth cause of action), aiding and abetting Cantor’s breach of fiduciary duty against the Boyd defendants (ninth cause of action), unfair competition against the Boyd firms (tenth cause of action), and tortious interference with contract against the Boyd defendants (eleventh cause of action). The Cantor defendants moved pursuant to CPLR 3211(a) to dismiss the second, third, and fourth causes of action, arguing, inter alia , that the CEM agreement demonstrated that CEM was not a partnership and Epstein was never a partner in CEM, and thus, there was no fiduciary relationship and Epstein was not owed fiduciary duties. The Boyd defendants moved pursuant to CPLR 3211(a) to dismiss the amended complaint for the same reasons, among others, as argued by the Cantor defendants. In an order dated December 11, 2020, the Supreme Court, among other things, granted the motions of the Cantor defendants and the Boyd defendants. Epstein appealed. Thereafter, plaintiff moved for leave to reargue and renew his opposition to defendants’ separate motions. In an order dated August 19, 2022, Supreme Court, among other things, denied the Cantor defendants’ motion pursuant to CPLR 3211(a) to dismiss the second, third, and fourth causes of action as against them and adhered to the determination granting the Boyd defendants’ motion pursuant to CPLR 3211(a) to dismiss the amended complaint insofar as against them. Supreme Court also denied Epstein’s motion for leave to renew his opposition to the Boyd defendants’ motion. Epstein appealed, and the Cantor defendants cross-appealed. The Appellate Division, Second Department, affirmed. “A partnership is an association of two or more persons to carry on as co-owners a business for profit.” The governing law of partnerships in New York is the Partnership Law of 1919, which enacted into law the original Uniform Partnership Act. It is well established, however, that “ he Partnership Law’s provisions are, for the most part, default requirements that come into play in the absence of an agreement.” Thus, when there is an agreement “establishing a partnership, the partners can chart their own course.” Stated differently, “where the agreement clearly sets forth the terms between the partners, it is the agreement that governs.” “In the absence of prohibitory provisions of the statutes or of rules of the common law relating to partnerships, or considerations of public policy, the partners of either a general or limited partnership, as between themselves, may include in the partnership articles any agreement they wish concerning the sharing of profits and losses, priorities of distribution on winding up of the partnership affairs and other matters. If complete, as between the partners, the agreement so made controls.” However, “ hen there is no written partnership agreement between the parties, the court must determine whether a partnership in fact existed from the conduct, intention, and relationship between the parties.” Based upon the foregoing principles, the Court held that CEM was a partnership and that Epstein was a partner thereof. The Court noted that there was no dispute that there was a written agreement between Cantor and Epstein that was executed in 1995, “which provided that the agreement was entered into to ‘form the partnership’ that would become .” The Court observed that the “agreement also provided the terms of that partnership and that the agreement was the complete agreement of the parties.” “Thus,” concluded the Court, “pursuant to the plain language of the agreement between Cantor and Epstein, which ‘govern ’ their relationship, CEM was a partnership and Epstein was a partner thereof.”   “As such,” said the Court, “the agreement did not utterly refute Epstein’s factual allegations that he was a partner of CEM or conclusively establish a defense as a matter of law to the second and third causes of action, alleging breach of fiduciary duty and a violation of Partnership Law § 20(3), respectively, insofar as asserted against Cantor, and the fourth cause of action, for an accounting.” “Accordingly,” concluded the Court, “the Supreme Court, upon reargument, properly, in effect, denied the Cantor defendants’ motion pursuant to CPLR 3211(a) to dismiss the second, third, and fourth causes of action insofar as asserted against them.” The Court also held that “Supreme Court properly granted the Boyd defendants’ motion pursuant to CPLR 3211(a) to dismiss the amended complaint” as against them. The Court found that the “Boyd defendants established their entitlement to dismissal of the second and third causes of action, alleging breach of fiduciary duty and a violation of Partnership Law § 20(3), respectively,” as against “Mazzola pursuant to CPLR 3211(a)(1).” The Court noted that in support of the motion, “[t[he Boyd defendants submitted, inter alia, the agreement dated January 1, 2013, between, among others, Cantor, Epstein, and Mazzola, which rendered a 2007 partnership agreement between Cantor and Mazzola null and void and provided that Mazzola, as of January 1, 2013, was solely a W-2 salaried employee of CEM, with no equity interest in CEM.” “Thus,” said the Court, “the January 1, 2013 agreement utterly refuted Epstein’s allegations that Mazzola was a partner of CEM.” Accordingly, concluded the Court, “the Supreme Court properly granted dismissal of the second and third causes of action” “as asserted against Mazzola.” The Court affirmed the dismissal of the claims asserted against the Boyd defendants for violation of the faithless servant doctrine and unjust enrichment against Mazzola, corporate raiding, aiding and abetting Cantor’s breach of fiduciary duty, and tortious interference with contract against the Boyd defendants, and unfair competition against the Boyd firms because the claims “either failed to plead the requisite elements for such causes of action or were based on bare allegations that were merely conclusory and lacked factual specificity, which rendered them insufficient to survive a motion to dismiss.” Takeaway While New York’s Partnership Law provides certain default provisions where there is no partnership agreement or the agreement is silent, a partnership agreement that clearly sets forth the terms between the partners will govern the partnership and the partners’ relationship. Thus, as in Epstein , courts will enforce the terms of a partnership agreement over default statutory provisions when the agreement is clear and unambiguous. Epstein also highlights the principle that partners owe duties of loyalty and care. Actions like diverting clients or assets without consent can trigger claims for breach of fiduciary duty and violations of Partnership Law § 20(3). Section 20(3) of the Partnership Law outlines specific actions a partner  cannot  take without the other partners’ authorization, preventing them from binding the partnership to major decisions that would stop the ordinary business, such as assigning all property for creditors, selling goodwill, confessing judgments, or submitting claims to arbitration, protecting the partnership from unilateral, business-ending moves.  ___________________________ 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. Partnership Law § 10(1). Congel v. Malfitano , 31 N.Y.3d 272, 287 (2018). Ederer v. Gursky , 9 N.Y.3d 514, 526 (2007). Congel , 31 N.Y.3d at 287-288. Zohar v. LaRock , 185 A.D.3d 987, 991 (2d Dept. 2020);  see Congel , 31 N.Y.3d at 279. Lanier v. Bowdoin , 282 N.Y. 32, 38 (1939);  see Congel , 31 N.Y.3d at 287-288. Saibou v. Alidu , 187 A.D.3d 810, 811(2d Dept. 2020); see Delidimitropoulos v. Karantinidis , 186 A.D.3d 1489, 1490 (2d Dept. 2020). Cantor II , at *2-*3. Id. at *2. Id. Id. at *2-*3 (citations omitted). Under CPLR § 3211(a)(1), dismissal is warranted where “the documentary evidence utterly refutes plaintiff’s factual allegations, conclusively establishing a defense as a matter of law.” Goshen v. Mut. Life Ins. Co. of New York , 98 N.Y.2d 314, 326 (2002); Leon v. Martinez , 84 N.Y.2d 83, 88 (1994) . “To constitute documentary evidence, the evidence must be ‘unambiguous, authentic, and undeniable” ( Phillips v. Taco Bell Corp. , 152 A.D.3d 806, 807 (2d Dept. 2017) (quoting Granada Condo. III Ass’n v. Palomino , 78 A.D.3d 996, 997 (2d Dept. 2010)), “such as judicial records and documents reflecting out-of-court transactions such as mortgages, deeds, contracts, and any other papers, the contents of which are essentially undeniable.” Id. See also Yan Ping Xu v. Van Zwienen , 212 A.D.3d 872, 874 (2d Dept. 2023). Cantor II at *3 (citations omitted Id. Id. Id. Id. Id. Id. (citing Cassese v. SVJ Joralemon LLC , 168 A.D.3d 667, 669 (2d Dept. 2019)). Id. (citation omitted).

By: Jonathan H. Freiberger In a previous BLOG article, “ Real Property Owners and Contractors Should be Aware of the Trust Fund Provisions of New York’s Lien Law ,” we discussed Article 3-A of New York’s Lien Law, much of which is reiterated here. Article 3-A of New York’s Lien Law establishes a system of trusts to ensure that certain individuals or entities that contributed services, labor, and/or materials to a construction project for the improvement of real property are paid for their efforts.  See, e.g., Aspro Mech. Contracting, Inc. v. Fleet Bank, N.A. , 1 N.Y.3d 324, 328 (2004); Chase Lincoln First Bank N.A. v. New York State Elec. & Gas Corp. , 182 A.D.2d 906 (3 rd Dep’t 1992); Park East Const’n Corp. v. Uliano , 233 A.D.3d 888, 889 (2 nd Dep’t 2024). The Lien Law generally recognizes two types of trusts.  Lien Law § 71 ;  see also Dick’s Concrete Co. Inc. v. K. Hovnanian at Monroe II, Inc. , 20 Misc.3d 1145(A) (Sup. Ct. Orange Co. 2008). The first is the Owner Trust, of which the owner is the trustee.  The assets of the Owner Trust “shall be held and applied to the cost of improvement.”  Lien Law §71(1).   Claimants under an Owner’s Trust include contractors, subcontractors, architects, engineers, surveyors, laborers, and materialmen.  Lien Law §71(3)(a).   In general, the assets of an Owner Trust consist of funds received by an owner for the improvement of real property.  Most frequently, trust assets in this category consist of construction loan proceeds.  Lien Law § 70(5). Second is the Contractor/Subcontractor Trust, of which the contractor or subcontractor is the trustee.  The assets of the Contractor/Subcontractor Trust must be used for the payment of certain obligations resulting from the improvement of real property. (Lien Law § 71(2).)  Most frequently, trust assets in this category consist of the payments received by the contractor from the owner (in the case of a contractor trust) or received by a subcontractor from a contractor (in the case of a subcontractor trust) pursuant to the subject construction contract. Lien Law § 70(5). Any funds that are deemed to be trust fund assets under the Lien Law can only be disbursed to appropriate trust fund beneficiaries pursuant to the trust fund provisions of the Lien Law.  DiMarco Constructors, LLC v. Top Capital of New York Brockport, LLC , 193 A.D.3d 1375, 1376 (4 th Dep’t 2021) (citations omitted). A typical scenario illustrating the need for the protections afforded by the trust fund provisions of the Lien Law is where a contractor receives payment from an owner on a current project, but uses those funds to pay a subcontractor on a prior project.  Although this happens routinely, such payments are prohibited under the Lien Law and could result in the contractor’s failure to pay proper trust fund beneficiaries working on the current project.  The law is clear that the assets of a Lien Law trust fund can only be used for Lien Law purposes–namely, the payment of the costs of improvement. Lien Law § 71.  Any other use of trust funds is deemed a “diversion of trust funds” pursuant to Lien Law § 72 .  See, e.g., Aspro Mech. , 1 N.Y.3d at 329. “Diversions” may result in civil and/or criminal penalties against a trustee responsible for the diversion. Lien Law § 77 ; Lien Law § 79-a (1) . A contractor that pays itself before paying all trust fund beneficiaries is likely to be deemed to have committed a trust fund diversion.  In this regard, pursuant to the Lien Law “… very such trust shall commence at the time when any asset thereof comes into existence, whether or not there shall be at that time any beneficiary of the trust.”  (Lien Law § 70(3).)  This language makes plain that any money paid by an owner to the contractor must be held in trust for trust fund beneficiaries even if, at the time of such payment, the contractor has not yet incurred any liability to any subcontractors on, or materials suppliers to, the project. However, under some circumstances, an owner, as trustee, can use trust funds to reimburse itself to the extent that such reimbursement is for the “cost of improvements.” Fentron Architectural Metals Corp. v. Solow , 101 Misc2d 393, 396 (Sup. Ct. N.Y. Co. 1979); Lien Law § 2(5) . Under the Lien Law, while a trustee is not required to maintain separate bank accounts for each project and is entitled to commingle trust fund assets with its other funds, it must keep detailed books and records setting forth specific items relating to trust funds received and disbursed. Lien Law § 75 ;  Fentron , 101 Misc2d at 396. The failure of a trustee to maintain the detailed records required by § 75 of the Lien Law constitutes presumptive evidence that the trustee “has applied or consented to the application of trust funds actually received by him…for the payment of money for purposes other than a purpose of the trust as specified in <§71 of the lien law> .” Lien Law § 75(4); see also Medco Plumbing, Inc. v. Sparrow Const. Corp. , 22 A.D.3d 647, 648 (2 nd Dep’t 2005). L.C. Whitford Co., Inc. v. Babcock & Wilcox Solar Energy, Inc. , a case decided on December 18, 2025, by the Appellate Division, Third Department, found that settlement funds from the resolution of disputes between a general contractor and an owner were lien law trust funds. The defendant in L.C. Whitford was a general contractor (“GC”) to owner with respect to “the construction of multiple solar photovoltaic electric power facilities” (the “Project”). The plaintiff was a subcontractor on the Project that was not fully paid by GC and, accordingly, filed liens against the Project. The Project resulted in numerous disputes between the GC and owner. The disputes were resolved through a settlement by which the owner agreed to pay the GC a sum of money and the GC agreed to indemnify the owner against subcontractor liens (which included plaintiff’s lien). The GC provided notice that it was going to use the proceeds of the settlement with the owner to “reimburse itself for the payment of the costs of the improvements that it advanced and paid to subcontractors, suppliers and laborers” on the Project. In response, the plaintiff/subcontractor commenced the action (under Lien Law § 77 ) to enforce the lien law trust “contending that 's proposal to reimburse itself would be an improper diversion of trust assets.” The motion court granted the motion of plaintiff/subcontractor for an injunction prohibiting the GC from disbursing the settlement funds. The Third Department affirmed on the GC’s appeal and stated: Article 3-A of the Lien Law impresses with a trust any funds paid or payable to a contractor under or in connection with a contract for an improvement of real property. Given this statutory definition, we readily conclude that the settlement funds at issue constitute trust funds under Lien Law article 3-A ( see Lien Law § 70 <1> , <6> ). The Court of Appeals has repeatedly recognized that the primary purpose of Lien Law article 3-A is to ensure that those who have directly expended labor and materials to improve real property at the direction of the owner or a general contractor receive payment for the work actually performed. With respect to a contractor's trust, the parties entitled to a beneficial status are expressly enumerated in Lien Law § 71 (2) (a)-(f). Pursuant to Lien Law § 71 (2) (a), " he trust assets of which a contractor is trustee shall be held and applied for enumerated expenditures arising out of the improvement of real property,"                             including "payment of claims of subcontractors, architects, engineers, surveyors, laborers and materialmen" (Lien Law § 71 <2> ). The language is mandatory and does not include the "cost of improvement," which is a term specifically defined to address an owner's costs (Lien Law § 2 <5> ; see Lien §§ 70 <5> ; 71 <1> . The Court also noted that while an owner trustee may reimburse itself for certain “costs of improvement,” contractor trustees may not. In this regard, the Court stated: As noted above, informed plaintiff[] that it intended to reimburse itself for "the costs of the improvements." While a trustee owner may have authority to do so, the Lien Law accords no such authority for a contractor trustee. To the contrary, a contractor-trustee holds the trust assets in a fiduciary capacity akin to that of the trustee of an express trust and thus, does not have a sufficient beneficial interest in the moneys, due or to become due from the owner under the contract, to give him a property right in them, except insofar as there is a balance remaining after all subcontractors and other statutory beneficiaries have been paid. Consistent with these fiduciary obligations, the contractor is statutorily prohibited from applying trust assets to his personal debts to the detriment of valid trust claims. In short, has no authority to reimburse itself with the settlement funds for moneys advanced on the project and doing so would be a breach of its fiduciary duties as a trustee. As such, Supreme Court duly exercised its discretion by enjoining from utilizing the funds pending further court approval ( see Lien Law § 77 <3> ). 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. It should be noted that there was a written dissent in which one Justice concurred.

By:  Jeffrey M. Haber In today’s article, we examine defamation per se under New York law, which allows recovery for defamation without proving special damages when the alleged statement falls into four categories: accusing someone of a serious crime, harming their trade or profession, imputing a loathsome disease, or alleging unchastity. In Couteller v. Mamakos , 2025 N.Y. Slip Op. 06965 (1st Dept. Dec. 16, 2025), a building superintendent sued a resident for falsely accusing him of sexual assault and harassment, disseminating the false claims to the police, the board of managers, and residents. The Appellate Division, First Department, found the statements defamatory per se, as they charged a serious crime and injured plaintiff’s profession. Since plaintiff proved malice, plaintiff could not find the protection of the qualified privilege that her statements otherwise would have enjoyed. A Brief Primer on The Law of Defamation The elements of a defamation claim are “a false statement, published without privilege or authorization to a third party, constituting fault as judged by, at a minimum, a negligence standard, and it must either cause special harm or constitute defamation per se.” The two forms of defamation are libel and slander. Since only facts can be proven false, statements purporting to assert facts about the plaintiff are the proper subject of a defamation claim. When pleading a claim of defamation, “ he complaint … must allege the time, place and manner of the false statement and specify to whom it was made.” The complaint must also set forth “the particular words complained of.” The language at issue cannot amount to “expressions of opinion” or ‘“loose, figurative or hyperbolic statements.’” In deciding whether a statement is defamatory, a court “must consider the content of the communication as a whole, as well as its tone and apparent purpose and in particular should look to the over-all context in which the assertions were made and determine on that basis whether the reasonable reader would have believed that the challenged statements were conveying facts about the [] plaintiff.” Under New York law, a claim alleging defamation is not sustainable if special damages are not pleaded. Special damages must be “fully and accurately identified ‘with sufficient particularity to identify actual losses.’” To set forth a cause of action in defamation per se, plaintiff need not plead special damages, but the statement must be “more than a general reflection upon character or qualities.” Rather, the statement must fall within one of four distinct exceptions: the statement (a) charged the plaintiff with a serious crime; (b) tends to injure the plaintiff in his or her trade, business, or profession; (c) claims the plaintiff has a loathsome disease; or (d) imputes unchastity to a woman. The statement claimed to be defamatory cannot be privileged. There are two types of privilege relevant to a defamation claim: absolute and qualified. “Absolute privilege … entirely immunizes an individual from liability in a defamation action [] regardless of the declarant’s motives.” It is “generally reserved for communications made by ‘individuals participating in a public function, such as judicial, legislative, or executive proceedings.’” “The absolute protection afforded such individuals is designed to ensure that their own personal interests—especially fear of a civil action, whether successful or otherwise—do not have an adverse impact upon the discharge of their public function.” “On the other hand, a statement is subject to a qualified privilege when it ‘is fairly made by a person in the discharge of some public or private duty, legal or moral, or in the conduct of his own affairs, in a matter where his interest is concerned.’” Circumstances in which a qualified privilege may apply include statements made in self-defense or to protect the safety of others, statements by an employer to a former employee’s prospective employer, communications made by an individual to a law enforcement officer, communications made to persons who share a common interest in the subject matter, and reports of official proceedings. “When subject to this form of conditional privilege, statements are protected if they were not made with ‘spite or ill will’ or ‘reckless disregard of whether false or not’ … , i.e. , malice.” The plaintiff bears the burden of proving the speaker acted with malice. “Whether allegedly defamatory statements are subject to an absolute or a qualified privilege depend on the occasion and the position or status of the speaker …, a complex assessment that must take into account the specific character of the proceeding in which the communication is made.” “In judicial proceedings<,> the protected participants include the Judge, the jurors, the attorneys, the parties and the witnesses,” who are granted the protection of absolute privilege “for the benefit of the public, to promote the administration of justice, and only incidentally for the protection of the participants.” “The immunity does not attach solely because the speaker is a Judge, attorney, party or a witness, but because the statements are … spoken in office.” Thus, for example, “statements made by counsel and parties in the course of ‘judicial proceedings’ are privileged as long as such statements ‘are material and pertinent to the questions involved … irrespective of the motive’ with which they are made.” The Court of Appeals has nonetheless “reiterated that s a matter of policy, the courts confine absolute privilege to a very few situations.” With the foregoing primer in mind, we examine Couteller v. Mamakos . Couteller v. Mamakos Plaintiff, a resident superintendent at a building located in New York City (the “Building”), brought an action against defendant, the owner of an apartment in the Building, alleging that defendant defamed him by falsely stating, repeatedly, that he had sexually assaulted her. Specifically, plaintiff claimed that on August 23, 2017, after he reported defendant’s violation of a cease-and-desist order to the New York City Police Department, defendant informed the officers that she wished to file a complaint against plaintiff for sexual harassment and sexual assault. No complaint was filed. On October 24, 2017, during a meeting of the Building’s board of managers, defendant stated that plaintiff had threatened to shut off her water unless she performed “sexual favors.” Thereafter, defendant distributed a flyer to every apartment in the Building, stating that plaintiff sexually attacked and assaulted her. In his complaint, plaintiff sought (1) a declaratory judgment determining that defendant’s conduct was defamatory, (2) an injunction permanently restraining defendant from engaging in such conduct, and (3) an award of compensatory damages accounting for harm to his professional and personal reputation, and emotional distress, as well punitive damages, costs, and reasonable attorney’s fees. Following a failure to appear at a scheduled conference in December 2021, among other defaults, the motion court issued an order striking defendant’s answer and setting the matter down for an inquest. After additional related motion practice, the motion court conducted an inquest on April 25, 2024. At the inquest, the motion court found that plaintiff credibly testified as to the events set forth in the complaint and that defendant’s statements caused him great anxiety about the security of his job and his relationship with the Building’s tenants. Defendant also appeared at the inquest and argued that plaintiff should not receive any damages because plaintiff had, in fact, sexually accosted her in her apartment.   The motion court held that plaintiff established that defendant falsely stated that plaintiff sexually assaulted her and widely disseminated that misstatement, both orally and in writing, to hundreds of individuals, with at least a negligent regard for the truth. Though no special harm was established, said the motion court, defendant’s false claim that plaintiff sexually assaulted her—a serious crime—constituted defamation per se. At the conclusion of the inquest, the motion court awarded plaintiff $230,000, plus statutory interest and $6,080 in attorneys’ fees. On appeal, the Appellate Division, First Department, unanimously affirmed. The Court held that the motion “court properly concluded that plaintiff established a prima facie case of defamation per se at the inquest.”   The Court found that “Defendant’s statements fell within two of the categories of defamation per se” – charging plaintiff with a serious crime, and injuring him in his trade, business, or profession. The Court elaborated, stating that “Defendant’s accusations that plaintiff sexually assaulted her charged him with a serious crime, and her statements that plaintiff sexually harassed her and attempted to coerce sexual favors from her in exchange for his assistance with construction work tend to injure him in his trade, business, or profession.” Thus, said the Court, plaintiff was not required to prove special damages. In that regard, noted the Court, “Plaintiff, as the resident manager and live-in superintendent of the building where defendant owned a condominium unit, explained that accusations of sexual assault and sexual harassment could ‘destroy’ his reputation, and he would ‘never be able to get another job in the field.’” Regarding the application of the qualified privilege, the Court reaffirmed that the privilege attached to statements made to the police reporting a crime, and to the members of the board of managers of the Building. Notwithstanding, the Court held that “plaintiff sufficiently demonstrated that defendant published the statements accusing him of sexual assault and sexual harassment with common-law malice. Plaintiff established defendant’s ‘one and only cause for the publication’ of the defamatory statements was ‘spite or ill will.’” The Court explained that plaintiff “established that defendant’s statements were part of a pattern of retaliation intended to harm his reputation and cause his termination” and “proved defendant widely disseminated the defamatory statements to the police, plaintiff’s employers, professional colleagues, and every resident of the building, after he called the police to enforce the court order barring her from altering her apartment without permission.” Takeaway Couteller underscores the principle that under New York law, defamation requires a false, unprivileged statement published to a third party, causing harm or qualifying as defamation per se. Defamation per se applies when statements accuse someone of a serious crime, harm their profession, allege a loathsome disease, or impute unchastity to a woman. Unlike ordinary defamation, special damages need not be proven. Privileges—absolute ( e.g. , judicial proceedings) and qualified ( e.g. , crime reports)—can shield a defendant from liability unless malice is shown. In Couteller , defendant was found to have falsely accused plaintiff of sexual assault and harassment, spreading the claims to the police, the board of managers, and residents. The Court found these statements to constitute defamation per se, as they charged a serious crime and damaged his profession. Malice defeated any privilege. As a result, plaintiff was awarded $230,000, plus interest and fees, and the First Department affirmed. ______________________________ 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. Circulation Assocs., Inc. v. State , 26 A.D.2d 33, 38 (1st Dept. 1966); Salvatore v. Kumar , 45 A.D.3d 560, 563 (2d Dept. 2007). Ava v. NYP Holdings, Inc. , 64 A.D.3d 407, 411 (1st Dept. 2009). Davis v. Boeheim , 24 N.Y.3d 262, 268 (2014). Dillon v. City of New York , 261 A.D.2d 34, 38 (1st Dept. 1999). Wolberg v. IAI N. Am., Inc. , 161 A.D.3d 468, 470 (1st Dept. 2018) (quoting Dillon , 261 A.D.2d at 38). Mann v. Abel , 10 N.Y.3d 271, 276 (2008) (internal quotation marks omitted). See Liberman v. Gelstein , 80 N.Y.2d 429 (1992); L.W.C. Agency, Inc. v. St. Paul Fire & Marine Ins. Co. , 125 A.D.2d 371 (2d Dept. 1986). Special damages are the quantifiable financial losses that a plaintiff has suffered due to the defendant’s actions. Carter v. Waks , 57 Misc. 3d 1208(A) (Sup. Ct., Queens County 2017) (citing Cammarata v. Cammarata , 61 A.D.3d 912, 915 (2d Dept. 2009)); see also Epifani v. Johnson , 65 A.D.3d 224 (2d Dept. 2009). Clemente v. Impastato , 274 A.D.2d 771 (3d Dept. 2000) (citation omitted). Liberman , 80 N.Y.2d at 435. Stega v. New York Downtown Hosp. , 31 N.Y.3d 661, 669 (2018). Id. (quoting, Toker v. Pollak , 44 N.Y.2d 211, 219 (1978)). Stega , 31 N.Y.3d at 669; Rosenberg v. MetLife, Inc. , 8 N.Y.3d 359, 365 (2007); Toker , 44 N.Y.2d at 219. Id. at 669-670 (quoting, Toker , 44 N.Y.2d at 219). Toker , 44 N.Y.2d at 219-220. Liberman , 80 N.Y.2d at 437. Stega, at 670 (quoting, Liberman , 80 N.Y.2d at 437-438). Id. Id. Park Knoll Assoc. v. Schmidt , 59 N.Y.2d 205, 209 (1983). Id. at 210. Wiener v. Weintraub , 22 N.Y.2d 330, 331 (1968) (quoting, Marsh v. Ellsworth , 50 N.Y. 309, 311 (1872)); see also Stega , 31 N.Y.3d at 669. Stega , 31 N.Y.3d at 670. On numerous occasions, this Blog has examined cases involving defamation, defamation per se, and the absolute or qualified privileges. Among the articles we have written are the following: Court Denies Motion to Dismiss Defamation Claim, Explaining the Difference Between an Expression of Fact and Opinion ; Relying on Respondeat Superior Theory, Fourth Department Holds Complaint States A Cause of Action for Defamation Against Employer Based on Employee’s Facebook Posts ; There is No Absolute Privilege to Defame Another in Court Papers ; Pleading With Particularity: Defamation Causes of Action ; and Defamation Per Se and Defamation by Implication: Meeting the Heightened Pleading Standard . Slip Op. at *1 (citing Taylor v. Brooke Towers LLC , 73 A.D.3d 535, 535 (1st Dept. 2010);  see also Dillon , 261 A.D.2d at 38)). Id. Id. (citing Thomas H. v. Paul B. , 18 N.Y.3d 580, 584-585 (2012)). Id. (citing Herlihy v. Metropolitan Museum of Art , 214 A.D.2d 250, 261 (1st Dept. 1995)). Id. (citing Liberman , 80 N.Y.2d at 435). Id. Id. (citing Sagaille v. Carrega , 194 A.D.3d 92, 96 (1st Dept. 2021),  lv. denied , 37 N.Y.3d 909 (2021)). Id. (citing Harpaz v. Dunn , 203 A.D.3d 601, 602 (1st Dept. 2022)). Id. (quoting Liberman , 80 N.Y.2d at 439 (internal quotation marks omitted), and citing  Pezhman v. City of New York , 29 A.D.3d 164, 168-169 (1st Dept. 2006)). Id.

By:  Jeffrey M. Haber In any contract dispute, “it is necessary to consider the language in the contract, for that is what controls the parties’ rights and responsibilities.” For this reason, New York courts “are guided by the standard rules of contractual interpretation, which provide that ‘a written agreement that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms.’”   In applying these rules of construction, “courts may not by construction add or excise terms, nor distort the meaning of those used and thereby make a new contract for the parties under the guise of interpreting the writing.” With the foregoing rules in mind, we examine Stevens v. Audthan, LLC , 2025 N.Y. Slip Op. 06922 (1st Dept. Dec. 11, 2025), and Greenland Asset Mgt. Corp. v. MicroCloud Hologram, Inc. , 2025 N.Y. Slip Op. 06901 (1st Dept. Dec. 11, 2025). Stevens v. Audthan, LLC Stevens concerned the alleged breach of a temporary relocation agreement (TRA). Plaintiff and his long-time roommate were the rent-regulated tenants of a single room occupancy unit (SRO) in Manhattan. Defendants entered into separate TRAs with plaintiff and his roommate to house them in temporary relocation apartments during the pendency of a construction and renovation project. The TRAs contemplated that each tenant would have the option to return to the building once construction was complete, at which time they would have separate units. However, the construction work was never completed. Pursuant to plaintiff’s TRA, defendants offered him the option of remaining in his temporary relocation apartment or returning to his original SRO. Plaintiff sent a lengthy response, electing to move back into his original SRO together with his long-time roommate. Much litigation ensued, including a plenary action in which plaintiff claimed that defendants had breached their TRA by requiring that he share his original unit with a co-tenant. The motion court granted defendants’ motion for summary judgment dismissing plaintiff’s claim that defendants breached the TRA with him. The Appellate Division, First Department, affirmed the motion court’s order. The Court held that the TRA was clear and unambiguous concerning plaintiff’s options. Looking at the TRA, the Court found that Paragraph 8(f) “clearly state that if defendant Clinton Housing Development Company Inc. (CHDC) cease to be the managing agent of the construction project, plaintiff ha the option of returning to the original SRO unit he resided in prior to the temporary relocation or remaining in the apartment to which he was relocated.” “It says nothing about residing in the unit alone,” said the Court. The Court explained that “when CHDC did cease to be managing agent, plaintiff notified CHDC that he opted to return to the original SRO with his former roommate. Plaintiff provided no credible evidence that he was deceived or coerced into signing the TRA, which contained a merger clause providing that the signed contract comprised the entire agreement between the parties.” The Court also held that “plaintiff judicially estopped from insisting in this action that he entitled to return to the original unit without his roommate.” The Court noted that the “doctrine of judicial estoppel” precluded plaintiff from taking a contrary position to the one that he took in a related action. “Plaintiff and his roommate, in an illegal lockout proceeding against the property owner, took the position that they both had the right to possession of the original unit, and the Civil Court agreed. Plaintiff cannot now take the position that it only he who was entitled to take possession as the sole tenant merely because his interests have changed”, said the Court. Greenland Asset Mgt. Corp. v. MicroCloud Hologram, Inc. Greenland arose out of a merger between a special-purpose acquisition company (SPAC) and a private company. The acquisition of a private company by a SPAC allows the private company to be publicly traded and to access the funds raised by the SPAC’s initial public offering. A SPAC’s sponsor is usually compensated through discounted SPAC shares received before the SPAC’s IPO. Those shares generally have value only if the SPAC transaction is finalized, meaning that the private company is acquired. Additionally, those shares cannot be sold unless and until the SPAC, or its successor in interest following the transaction, either registers the shares with the Securities Exchange Commission (SEC) by successfully filing a registration statement (Registration Route) or removes the restrictive legend on the shares pursuant to 17 C.F.R § 230.44, otherwise known as SEC Rule 144 (Rule 144 Route). Plaintiff sponsored the SPAC Golden Path Acquisition Corporation (Golden Path) to raise funds through an IPO for the purpose of merging with or acquiring the targeted private company. On September 10, 2021, Golden Path entered into a merger agreement with “MC Hologram Inc.” The parties closed on the agreement to merge on September 16, 2022, and Golden Path simultaneously changed its name to its current form, MicroCloud Hologram, Inc. On June 21, 2021, before Golden Path’s IPO occurred, plaintiff and Golden Path entered into two agreements. One was a private-placement purchase agreement through which plaintiff acquired 248,000 private-placement units. The second was a registration-rights agreement (RRA). As a result, plaintiff owns 1,735,050 MicroCloud shares, consisting of 1,437,500 founder shares and 297,500 shares obtained through the private-placement transaction and redeemed private warrants upon consummation of the merger. MicroCloud, however, did not make any of plaintiff’s shares saleable through either the Registration Route or the Rule 144 Route. All of plaintiff’s shares remained restricted securities. In response to MicroCloud’s inaction in registering the shares, plaintiff sued MicroCloud, asserting four claims for relief: breach of contract, breach of implied contract, breach of the implied covenant of good faith and fair dealing, and conversion. MicroCloud moved to dismiss all four claims. The motion court denied the motion with regard to the causes of action for breach of contract (the first cause of action) and breach of the implied covenant of good faith and fair dealing (the third cause of action). The Appellate Division, First Department, unanimously affirmed. The Court held that “ laintiff stated a cause of action for breach of contract by alleging that defendant failed, among other things, to file a registration statement with the Securities and Exchange Commission, despite plaintiff’s multiple written demands that it do so under the terms of the parties’ contract.” The Court held that “the contract sufficiently provided objective criteria by which to measure defendant’s performance of its obligation.” The Court found that the terms of the agreement were clear and unambiguous about defendant’s obligation to prepare and file the registration statement: Under the terms of the contract, once plaintiff submitted a demand for registration, defendant was required to use its “best efforts” to prepare and file a registration statement with the SEC “as expeditiously as possible,” to cause the registration statement to become effective, and to keep it effective until defendant sold its securities. The contract’s definitions, in turn, expressly refer to the filing of registration statements, amendments, and supplements in compliance with the Securities Act and SEC regulations, therefore incorporating the Act and the regulations into the contract’s terms and providing objective standards for judging the adequacy of defendant’s efforts. Similarly, the requirement to file “as expeditiously as possible” is modified by a proviso allowing defendant to “defer any Demand Registration for up to thirty (30) days,” thus providing additional guidance as to the timing of defendant’s obligation to file a registration statement. The Court also held that plaintiff “stated a cause of action for breach of the implied covenant of good faith and fair dealing by alleging that defendant denied its requests because its principal sought to sell his own shares on the open market without having to compete with plaintiff.” The implied covenant of good faith and fair dealing “embraces a pledge that neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract.” The covenant is breached when a party acts in a manner that deprives the other party of the benefits of the contract. Id. The Court noted that even if “defendant had some discretion under the contract to refuse plaintiff’s request as unreasonable, it did not warrant dismissal because “‘even an explicitly discretionary contract right may not be exercised in bad faith so as to frustrate the other party’s right to the benefit under the agreement.’” The Court “reject defendant’s contention that it possessed the sole discretion to decide whether to remove a restrictive legend on the securities, as the contract stated that defendant ‘shall’ take action to enable plaintiff to sell its shares under the Securities Act.” The Court also rejected the notion that “plaintiff’s action foreclosed by the SEC’s comment that ‘the removal of a legend is a matter solely in the discretion of the issuer of the securities’ under Rule 144.” The Court noted that the “SEC also recognizes that ‘ isputes about the removal of legends are governed by state law or contractual agreements’, and the parties’ contract require defendant to remove any obstacles to plaintiff’s selling of its shares on the market, including by removing restrictive legends.” Takeaway In New York, courts enforce contracts based on their written terms. If an agreement is clear and complete, the courts will apply its plain meaning—without adding, removing, or rewriting provisions. This means that the written terms of the parties’ agreement control the rights and obligations of the parties. Both Stevens v. Audthan, LLC and Greenland Asset Mgt. Corp. v. MicroCloud Hologram, Inc. stand for this foundation principle of contract interpretation. _________________________________ 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. See Beinstein v. Navani , 131 A.D.3d 401, 405 (1st Dept. 2015).  Greenfield v. Philles Records , 98 N.Y.2d 562, 569 (2002). Vermont Teddy Bear Co. v. 538 Madison Realty Co. , 1 N.Y.3d 470, 475 (2004) (internal quotation marks omitted). Stevens , Slip Op. at *1. Id. Id. Id. Id. Id. (citing Baje Realty Corp. v. Cutler , 32 A.D.3d 307, 310 (1st Dept. 2006) (the doctrine of judicial estoppel precludes a party who assumed a certain position in a prior proceeding, and who secured a judgment in his or her favor, from assuming a contrary position in another action simply because his or her interests have changed) (citations omitted)). Id. Greenland , Slip Op. at *1. Id. “ nder New York law, a best efforts’ clause imposes an obligation to act with good faith in light of one’s own capabilities,” and apply “such efforts as are reasonable in the light of that party’s ability and the means at its disposal and of the other party’s justifiable expectations.” Ashokan Water Servs., Inc. v. New Start, LLC , 11 Misc. 3d 686, 692(Civ. Ct., Kings County 2006) (internal quotation marks omitted). “ best efforts clause permits parties a degree of discretion in the selection of a plan of action and allows them to rely on their good faith business judgment as to the ‘best way’ to achieve the desired result.” In re CHATEAUGAY Corp. , 186 B.R. 561 (Bankr. S.D.N.Y. 1995) (citing Western Geophysical Co. of Am., Inc. v. Bolt Assocs., Inc. , 584 F.2d 1164, 1171 (2d Cir. 1978)). See also Bloor v. Falstaff Brewing Corp. , 601 F.2d at 614-15 (2d Cir. 1979) (party may demonstrate “best efforts” were made by proving “there was nothing significant it could have done” to meet its obligations “that would not have been financially disastrous.”). “Best efforts” require “greater care and diligence” than the “ordinary care and diligence” to which the promisor would otherwise be bound to exercise. See Allen v. Williamsburgh Sav. Bank , 69 N.Y. 314, 322 (1877). In a commercial contract, a commercial reasonable effort clause sets a lower bar than a best efforts clause. So, if a party fails to meet the commercial reasonable effort standards, it will fail to meet the best-efforts clause. Id. (citation omitted). Id. 511 W. 232nd Owners Corp. v. Jennifer Realty Co. , 98 N.Y.2d 144, 153 (2002) (citation and internal quotation marks omitted). Id. (quoting Legend Autorama, Ltd. v. Audi of Am., Inc. , 100 A.D.3d 714, 716 (2d Dept. 2012) (quoting Richbell Info. Servs. v. Jupiter Partners , 309 A.D.2d 288, 302 (1st Dept. 2003)). Id. Id. (citation omitted). Id. (citation omitted). This Blog has written numerous articles in which the courts made clear that the words in a contract are to be enforced so long as they are clear and unambiguous. Some of those articles include: Contracts that Say What They Mean, Mean What They Say ; Contracts That Say What They Mean, Mean What They Say Redux ; Contract Interpretation: Words Have Meaning ; Giving Two Contract Provisions Their Intended Meaning ; and Written Agreements That are Clear and Unambiguous Must Be Enforced According To The Plain Meaning of Their Terms .