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By: Jonathan H. Freiberger On numerous occasions, this Blog has addressed issues related to RPAPL 1304. See, e.g., [here] and [here]. By way of brief background as discussed in prior articles, RPAPL 1304 requires that at least ninety days before commencing legal action against a borrower with respect to a “home loan” (as defined in the relevant statutes), a lender must: send written notice to the borrower by certified and regular mail that the loan is in default; provide a list of approved housing agencies that offer free or low-cost counseling; and, advise that legal action may be commenced after ninety days if no action is taken to resolve the matter. One purpose of RPAPL 1304 is to enable defaulted borrowers to “benefit from the information provided in the notice and the 90–day period during which the parties could attempt to work out the default without imminent threat of a foreclosure action, in an effort to further the ultimate goal of reducing the number of foreclosures”. CIT Bank N.A. v. Schiffman, 36 N.Y.3d 550, 555 (2021) (citation and internal quotation marks omitted). The failure of a lender to comply with RPAPL 1304 will result in the dismissal of a foreclosure complaint. See, e.g., U.S. Bank N.A. v. Beymer, 161 A.D.3d 543 (1st Dept. 2018). Indeed, “proper service of the notice containing the statutorily mandated content is a condition precedent to the commencement of a foreclosure action.” U.S. Bank N.A. v. Taormina, 187 A.D.3d 1095, 1096 (2nd Dept. 2020) (citations omitted); see also Nationstar Mortgage, LLC v. Owens, 247 A.D.3d 1204, *3 (2nd Dept. 2026). When failure to comply with RPAPL 1304 is raised as an affirmative defense, the foreclosing lender must demonstrate its compliance with the statute as part of its prima facie case. Bank of America, N.A. v. Wheatly, 158 A.D.3d 736, 737 (2nd Dept. 2018) (citations omitted); see also Wells Fargo Bank, N.A. v. Cascarano, 208 A.D.3d 729, 730 (2nd Dept. 2022). In Wells Fargo Bank, N.A. v. Davidson, 202 A.D.3d 880 (2nd Dep’t 2022), in reversing a judgment of foreclosure and sale and granting summary judgment to the borrowers, the Court stated that “[c]ontrary to the [lender’s] contention, the [borrowers] did not waive their contention that the [lender] failed to comply with RPAPL 1304 as a defense based on noncompliance with RPAPL 1304 may be raised at any time prior to the entry of a judgment of foreclosure and sale.” Davidson, 202 A.D.3d at 882 (citations, internal quotation marks and brackets omitted); see also U.S. Bank Nat. Ass’n v. Zakarin, 208 A.D.3d 1275, 1277 (2nd Dept. 2022). Standing is also an issue often litigated in foreclosure actions.[1] Generally speaking, “[s]tanding involves a determination of whether the party seeking relief has a sufficiently cognizable stake in the outcome so as to cast the dispute in a form traditionally capable of judicial resolution. Graziano,v. County of Albany, 3 N.Y.3d 475, 479 (2004) (citations, internal quotation marks and brackets omitted). Put another way, “[s]tanding to sue requires an interest in the claim at issue in the lawsuit that the law will recognize as a sufficient predicate for determining the issue at the litigant's request.” Caprer v. Nussbaum, 36 A.D.3d 176, 182 (2nd Dept. 2006). The issue of standing is frequently litigated in foreclosure actions because of the frequency with which notes and mortgages are sold, assigned or otherwise transferred. As a result of these transfers, the foreclosing plaintiff frequently does not have the necessary documentation to demonstrate that it is the holder of the note. Thus, litigation often relates to the foreclosing mortgagee’s standing to commence a foreclosure action. Sometimes, however, standing issues relate to the mortgagor’ ability to assert a claim or raise an argument – as is the case in Nationstar Mortgage LLC v. Vassi, the subject of today’s article. As an added bonus, Nationstar also involves RPAPL 1304. For the most part, the facts in Nationstar are routine. The lender commenced a mortgage foreclosure action in 2012. In July of 2017, the motion court issued an order granting lender’s unopposed motion for summary judgment. In January of 2025, the borrower transferred his interest in the subject property to a distressed property buyer (the “Transferee”). After three prior unsuccessful attempts, the lender filed a fourth motion to confirm the referee’s report and for a judgment of foreclosure and sale. In opposition to the lenders motion, the borrower (who no longer owned the subject property) argued that the Lender failed to comply with RPAPL 1304. The borrower also cross-moved for an order tolling interest.[2] In opposition to the borrower’s arguments related to non-compliance with RPAPL 1304, the lender argued that the borrower lacked standing to raise such issues because he no longer owned the subject property. The motion court agreed, noting that, as a result of the transfer, the borrower’s argument was “‘entirely defective’”. On appeal, the First Department held that “the [motion] court erroneously held that [the borrower] was divested of standing to challenge [lender]'s fourth motion and raise the defense of [lender]'s noncompliance with RPAPL 1304. Nevertheless, we affirm on the merits.” As to standing, the Court stated that “[n]otwithstanding [borrower]'s transfer of his interest in the mortgaged property to [the Transferee], [borrower] retained his standing to challenge the judgment of foreclosure and sale because he remains a defendant in the foreclosure action and is potentially liable for a deficiency judgment.” (Footnote omitted.) Indeed, the Court in Nationstar was moved by the following facts: the lender did not waive its right to seek a deficiency judgment under RPAPL 1371 against borrower; the lender sought a deficiency judgment against the borrower in its complaint; the judgment of foreclosure and sale provided for a deficiency judgment; and, because the subject property had not yet been sold, “a deficiency judgment remains a possibility given that a plaintiff has 90 days from the sale of the property to make a motion for a deficiency judgment before losing that right (see RPAPL 1371 [2], [3]).” The Court also noted that it “is well settled that a defendant lacks standing to defend the action where it transfers the mortgaged property to a third party during the foreclosure action and the plaintiff waives its right to a deficiency judgment.” (Citations omitted; emphasis in original.) Further, because the borrower “is subject to a potential deficiency judgment and is a debtor on the underlying mortgage, he has an interest in defending the action notwithstanding that he transferred the mortgaged property to [the Transferee] and as a result, no longer has the right to redeem the property.”[3] While the Court concluded that the borrower has standing to defend the action, it concluded that the borrower’s RPAPL 1304 arguments failed on the merits because the evidence established compliance with the font size and mailing requirements. Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice. [1] This BLOG has written on standing in mortgage foreclosure actions. See, e.g., [here] and [here]. [2] This BLOG has written on the tolling of interest in mortgage foreclosure actions. See, e.g., [here]. [3] This BLOG has previously addressed redemption rights. See, e.g., [here].

By: Jonathan H. Freiberger This Blog has frequently written about numerous different issues regarding residential mortgage foreclosure. One recurring issue relates to the evidentiary proof necessary for the lender to satisfy its prima facie foreclosure case and/or to demonstrate its standing to commence its foreclosure action (when the borrower raises standing as a defense). [Eds. Note: such issues have been discussed in this Blog, inter alia, [here] and [here].] In order to “establish prima facie entitlement to judgment as a matter of law in an action to foreclose a mortgage, a plaintiff must produce the mortgage, the unpaid note, and evidence of default.” M&T Bank v. Barter, 186 A.D.3d 698, 700 (2nd Dep’t 2020) (citations omitted). However, where “a plaintiff’s standing to commence a foreclosure action is placed in issue by the defendant, it is incumbent upon the plaintiff to prove its standing to be entitled to relief.” Wells Fargo Bank, N.A. v. Arias, 121 A.D.3d 973, 973-74 (2nd Dep’t 2014) (citation and internal quotation marks omitted). A lender establishes standing in a foreclosure action “by demonstrating that, when the action was commenced, it was either the holder or the assignee of the underlying note.” U.S. Bank National Association v. Seeley, 177 A.D.3d 933, 935 (2nd Dep’t 2019) (citations omitted). “Either a written assignment of the underlying note or the physical delivery of the note prior to the commencement of the foreclosure action is sufficient to transfer the obligation, and the underlying mortgage passes with the debt as an inseparable incident.” Dyer Trust 2021-1 v. Global World Realty, Inc., 140 A.D.3d 827, 828 (2ND Dep’t 2016) (citations omitted). As the Court of Appeals explained in Aurora Loan Services, LLC. V. Taylor, 25 N.Y.3d 355 (2015): … it is not necessary to have possession of the mortgage at the time the action is commenced. This conclusion follows from the fact that the note, and not the mortgage, is the dispositive instrument that conveys standing to foreclose under New York law. In the current case, the note was transferred to Aurora before the commencement of the foreclosure action—that is what matters. A transfer in full of the obligation automatically transfers the mortgage as well unless the parties agree that the transferor is to retain the mortgage. Any disparity between the holder of the note and the mortgagee of record does not stand as a bar to a foreclosure action because the mortgage is not the dispositive document of title as to the mortgage loan; the holder of the note is deemed the owner of the underlying mortgage loan with standing to foreclose. Aurora, 25 N.Y.3d at 361 - 362 (citations, internal quotation marks and brackets omitted). Whether the lender satisfied the evidentiary requirements of proving standing was one of the issues decided on March 23, 2022, by the Appellate Division, Second Department, in Wells Fargo Bank, N.A. v. Farfan. The borrower in Farfan borrowed $300,000 and secured his repayment obligation with a mortgage on property in Queens County. In 2007, the lender commenced a foreclosure action upon the borrower’s default. In his answer, borrower, among other things, asserted as a defense that the lender lacked standing to foreclose. The lender’s motion for, inter alia, summary judgment on its complaint, striking the borrower’s answer and for an order of reference was granted by supreme court in 2018. A judgment of foreclosure and sale was entered in 2020 (the “Judgment”). On the borrower’s appeal, the Second Department reversed the Judgment and denied the lender’s motion for summary judgment on the complaint, to strike the borrower’s answer and for an order of reference. After discussing the legal issues discussed below, the Court addressed the sufficiency of the lender’s proof of standing and stated: Here, in support of its motion, the [lender] submitted an affidavit of Teri L. Townsend, who averred that, in her position as vice president of loan documentation for the [lender], she had access to and was familiar with the business records related to the mortgage loan at issue. She averred that the records were maintained in the ordinary course of business, and were "made at or near the time of the occurrence of the matters recorded by persons with personal knowledge of the information in the business record, or from information transmitted by persons with personal knowledge." Townsend further averred that, based on her review of the [lender]'s "correspondence with the custodian regarding this loan, LaSalle Bank National Association, as prior custodian, was in possession of the original Note on October 24, 2007, the date the Complaint was filed." However, Townsend failed to specify which entity generated the subject correspondence, and, to the extent the correspondence was not generated by the [lender], failed to state that she was familiar with the record-keeping practices and procedures of the entity that generated the correspondence, or that the correspondence was incorporated into the [lender]’s own records and routinely relied upon by the [lender] in its own business. The Court further found that the lender’s proof would have still been inadequate even if it laid a “proper foundation for the admissibility of the unspecified correspondence she relied on” because “Townsend failed to identify the records upon which she relied in making the statements, and the [lender] failed to submit copies of the records themselves” noting that “[i]t is the business record itself, not the foundational affidavit, that serves as proof of the matter asserted.” (Citations, internal quotation marks and brackets omitted.) Finally (as is relevant to this article), the Court found that the lender failed to establish two additional facts critical to the lender’s standing claim: While the plaintiff's submissions established a chain of assignments of mortgage ending with the plaintiff's alleged predecessor in interest, Norwest Mortgage, Inc., the last assignment in the chain does not indicate that the subject note was assigned together with the subject mortgage. Further, the plaintiff failed to submit evidence to establish that its immediate predecessor by merger, Wells Fargo Home Mortgage, Inc., was formerly known as Norwest Mortgage, Inc., as indicated in the caption on the complaint in this action, or whether Wells Fargo Home Mortgage, Inc., merged with Norwest Mortgage, Inc., as Townsend averred. Thus, the plaintiff also failed to establish its standing as assignee of the note prior to commencement. Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice.

By: Jonathan H. Freiberger In order to prosecute a lawsuit, the plaintiff must have standing to do so. "Standing involves a determination of whether the party seeking relief has a sufficiently cognizable stake in the outcome so as to cast the dispute in a form traditionally capable of judicial resolution." Graziano,v. County of Albany, 3 N.Y.3d 475, 479 (2004) (citations, internal quotation marks and brackets omitted). Put another way, “[s]tanding to sue requires an interest in the claim at issue in the lawsuit that the law will recognize as a sufficient predicate for determining the issue at the litigant's request.” Caprer v. Nussbaum, 36 A.D.3d 176, 182 (2nd Dep’t 2006). Accordingly, the question of whether a plaintiff has standing is “is a threshold determination, resting in part on policy considerations, that a person should be allowed access to the courts to adjudicate the merits of a particular dispute that satisfies the other justiciability criteria.” Caprer, 36 A.D.3d at 182 (Citations omitted). “‘Injury-in-fact has become the touchstone’ and requires ‘an actual legal stake in the matter being adjudicated.’” Big Apple Consulting USA, Inc. v. Belmont Partners, LLC, 20 Misc. 3d 1144(A) (Sup. Ct. Nassau Co. 2008) (quoting Soc. Of Plastics Indus. Inc. v. County of Suffolk, 77 N.Y.2d 761, 772 (1991)). The Carper Court noted that the “Court of Appeals has defined the standard by which standing is measured, explaining that a plaintiff, in order to have standing in a particular dispute, must demonstrate an injury in fact that falls within the relevant zone of interests sought to be protected by law”. Caprer, 36 A.D.3d at 183 (citing Matter of Fritz v. Huntington Hosp., 39 N.Y.2d 339, 346 (1976). The issue of standing is a frequently litigated issue in mortgage foreclosure actions.[1] This is so because of the frequency with which notes and mortgages are sold, assigned or otherwise transferred. As a result of these transfers, the foreclosing plaintiff frequently does not have the necessary documentation to demonstrate that it is the holder of the note. Because of these “paperwork” issues, borrowers frequently raise the standing defense to put foreclosing lenders to their proof on the standing issue. We have previously noted that in order to “establish prima facie entitlement to judgment as a matter of law in an action to foreclose a mortgage, a plaintiff must produce the mortgage, the unpaid note, and evidence of default.” M&T Bank v. Barter, 186 A.D.3d 698, 700 (2nd Dep’t 2020) (citations omitted). However, where “a plaintiff’s standing to commence a foreclosure action is placed in issue by the defendant, it is incumbent upon the plaintiff to prove its standing to be entitled to relief.” Wells Fargo Bank, N.A. v. Arias, 121 A.D.3d 973, 973-74 (2nd Dep’t 2014) (citation and internal quotation marks omitted). A lender establishes standing in a foreclosure action “by demonstrating that, when the action was commenced, it was either the holder or the assignee of the underlying note.” U.S. Bank National Association v. Seeley, 177 A.D.3d 933, 935 (2nd Dep’t 2019) (citations omitted). “Either a written assignment of the underlying note or the physical delivery of the note prior to the commencement of the foreclosure action is sufficient to transfer the obligation, and the underlying mortgage passes with the debt as an inseparable incident.” Dyer Trust 2021-1 v. Global World Realty, Inc., 140 A.D.3d 827, 828 (2nd Dep’t 2016) (citations omitted). While it may seem counterintuitive in the context of a mortgage foreclosure action, the operative document necessary to confer standing is not the mortgage but the promissory note and the “transfer of the full obligation [under the note] automatically transfers the mortgage as well unless the parties agree that the transferor is to retain the mortgage.” Aurora Loan Services, LLC. V. Taylor, 25 N.Y.3d 355, 361-62 (2015).[2] Traditionally, in all actions, the defense of standing was waived if not raised by the defendant in an answer or pre-answer motion to dismiss. See, e.g., Wells Fargo Bank Minnesota, Nat. Ass’n v. Mastropaolo, 42 A.D.3d 239, 242-43 (2nd Dep’t 2007). However, RPAPL 1302-a, which became effective in December of 2019, and changed that rule in the context of certain mortgage foreclosure actions, provides: Notwithstanding the provisions of subdivision (e) of rule thirty-two hundred eleven of the civil practice law and rules, any objection or defense based on the plaintiff's lack of standing in a foreclosure proceeding related to a home loan, as defined in paragraph (a) of subdivision six of section thirteen hundred four of this article, shall not be waived if a defendant fails to raise the objection or defense in a responsive pleading or pre-answer motion to dismiss. A defendant may not raise an objection or defense of lack of standing following a foreclosure sale, however, unless the judgment of foreclosure and sale was issued upon defendant's default. [Hyperlinks added.] On April 17, 2024, the Appellate Division, Second Department, in Citibank, N.A. v. Boyce, addressed the issue of the waiver of a standing defense. The lender in Boyce commenced a foreclosure action and the borrower defaulted. Thereafter, an order of reference was entered. Protracted litigation ensued due to the borrower’s attempt to vacate the default, which included an appeal. The default, however, was not vacated because the borrower failed to demonstrate a reasonable excuse for her default. The borrower interposed similar opposition to the lender’s motion for a judgment of foreclosure and sale, but the opposition was similarly “rejected”. In March of 2020, several months after the effective date of RPAPL 1302-a, the borrower moved pursuant to that statute for a determination of the lender’s standing. Plaintiff opposed the motion on the ground that the borrower failed to vacate her default. The motion court granted the motion to the extent of directing a hearing on the standing issue. The lender then moved for leave to renew its opposition to the borrower’s RPAPL 1302-a motion. The motion court granted the motion and, upon renewal, denied the borrower’s motion. On the borrower’s appeal, the Second Department affirmed finding that RPAPL 1302-a does not apply to defaulting defendants. In so doing the Court stated: “A motion for leave to renew is the appropriate vehicle for seeking relief from a prior order based on a change in the law, including a clarification of decisional law" (Sharan v Christiana Trust, 219 AD3d 1549, 1551 [internal quotation marks omitted]; see CPLR 2221[e][2]). Pursuant to RPAPL 1302-a, which became effective in December 2019, notwithstanding the provisions of CPLR 3211(e), "any objection or defense based on the plaintiff's lack of standing in a foreclosure proceeding related to a home loan . . . shall not be waived if a defendant fails to raise the objection or defense in a responsive pleading or pre-answer motion to dismiss" (see Citimortgage, Inc. v Rogers, 203 AD3d 1125, 1126). However, RPAPL 1302-a does not apply to a defaulting defendant (see U.S. Bank N.A. v Goldberger, 211 AD3d 1077, 1078; Ditech Fin., LLC v Howell, 201 AD3d 786, 788; see also Wells Fargo Bank, N.A. v Davis, 216 AD3d 704, 706). Accordingly, the Supreme Court properly granted the plaintiff's motion for leave to renew and, upon renewal, denied the defendants' motion. [Hyperlinks added.] Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice. [1] Eds. Note: this BLOG has written dozens of articles addressing numerous aspects of residential mortgage foreclosure. At this point, please see the BLOG tile on our website and search for any foreclosure, or other commercial litigation, issues that may be of interest you. [2] Eds. Note: this BLOG has addressed standing issues, including a lender’s required proof when the standing issue is raised, here, here and here.

By: Jonathan H. Freiberger This BLOG has written extensively on a wide variety of issues in the area of mortgage foreclosure.[1] While we have not written about RPAPL 1304 in a while it has been the subject of numerous articles in the past.[2] By way of brief background, and as has been previously discussed, the Second Department has stated that an “RPAPL 1304 notice is a notice pursuant to the Home Equity Theft Prevention Act (Real Property Law § 265-a), the underlying purpose of which is to afford greater protections to homeowners confronted with foreclosure.” Wells Fargo Bank, N.A. v. Yapkowitz, 199 A.D.3d 126, 131 (2nd Dep’t 2021) (some citations and internal quotation marks omitted; hyperlink added). The Yapkowitz Court continued, noting that “RPAPL 1304 requires that at least 90 days before a lender, an assignee, or a mortgage loan servicer commences an action to foreclose the mortgage on a home loan as defined in the statute, such lender, assignee, or mortgage loan servicer must give notice to the borrower.” Id. (citations and internal quotation marks omitted). The failure of the “lender, assignee or mortgage loan servicer” to comply with RPAPL § 1304 will result in the dismissal of a foreclosure complaint (see, e.g., U.S. Bank N.A. v. Beymer, 161 A.D.3d 543, 544 (1st Dep’t 2018)) when the issue is raised by the borrower (see, e.g., One West Bank, FSB v. Rosenberg, 189 A.D.3d 1600, 1602-3 (2nd Dep’t 2020) (citation omitted)). A foreclosing lender must be in “strict compliance” with the requirements of RPAPL 1304. U.S. Bank Nat. Ass’n v. 22-23 Brookhaven, Inc., 219 A.D.3d 657, 664 (2nd Dep’t 2023). Indeed, “proper service of the notice containing the statutorily mandated content is a condition precedent to the commencement of a foreclosure action.” U.S. Bank N.A. v. Taormina, 187 A.D.3d 1095, 1096 (2nd7 Dep’t 2020) (citations omitted). Moreover, lender has the burden of establishing compliance with RPAPL 1304. BAC Home Loans Servicing, L.P. v. Chertov, 165 A.D.3d 1214, 1215 (2nd Dep’t 2018) (citations omitted). In order to demonstrate compliance with requisite mailing of notices, Plaintiff must submit “proof of the actual mailings, such as affidavits of mailing or domestic return receipts with attendant signatures, or proof of a standard office mailing procedure designed to ensure that items are properly addressed and mailed, sworn to by someone with personal knowledge of the procedure.” Wilmington Trust, N.A. v. Meyerhoeffer, 219 A.D.3d 549, 551 (2nd Dep’t 2023) (citations and internal quotation marks omitted); see also Ditech Servicing, LLC v. McFadden, 217 A.D.3d 923, 926 (2nd Dep’t 2023). Further, “[e]vidence of an established and regularly followed office procedure may give rise to a rebuttable presumption that such a notification was mailed to and received by the intended recipient.” Wilmington Trust, 219 A.D.3d. at 552 (citations, internal quotation marks and brackets omitted). “In order for the presumption to arise, the office practice must be geared so as to ensure the likelihood that the notice is always properly addressed and mailed.” Id. (citations, internal quotation marks, ellipses and brackets omitted). In Wilmington Trust, the Court found the affidavit from the servicer’s employee to be insufficient because it “failed to specifically describe the procedures in place designed to ensure that … notices were properly addressed and mailed….” Id. On August 3, 2025, the Appellate Division, Second Department, decided Wilmington Savings Fund Society, FSB v. Blum, a case involving the sufficiency of proof submitted on lender’s motion for summary judgment.[3] The lender in Wilmington Savings commenced an action to foreclose a mortgage and, subsequently, moved for summary judgment. The motion was denied because material issues of fact existed as to whether the lender complied with RPAPL 1304. There were questions as to the sufficiency of the business records submitted by the lender in its effort to establish compliance with RPAPL 1304.[4] In affirming the motion court’s denial of the lender’s motion,[5] the Court stated: Here, the plaintiff relies on a contemporaneous affidavit of mailing of Michael Buscemi, among other things, to demonstrate its compliance with RPAPL 1304. Buscemi averred, in relevant part, that he sent copies of the subject 90-day notice to the defendant at the subject property via certified and first-class mail. However, Buscemi failed to aver to his employer, and the plaintiff failed to demonstrate, that Buscemi was somehow affiliated with the plaintiff's counsel or otherwise authorized to send the 90-day notice on behalf of the plaintiff. The notices were sent in envelopes with a return address in California for the plaintiff. Accordingly, the Supreme Court properly determined that the plaintiff failed to demonstrate, prima facie, its strict compliance with RPAPL 1304. Because the lender failed to meet its burden of demonstrating compliance with RPAPL 1304, as opposed to the borrower demonstrating that the RPAPL 1304 notices were not served or were improperly served, the Court denied the motion for summary judgment, as opposed to dismissing the action. In so doing, the Court noted that “[s]ince the plaintiff failed to satisfy its prima facie burden with respect to its strict compliance with RPAPL 1304, those branches of its motion which were for summary judgment on the complaint insofar as asserted against the defendant and for an order of reference were properly denied regardless of the sufficiency of the defendant's opposition papers.” (Citation omitted.) Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice. [1] This BLOG has 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, issue that may be of interest you. [2] This BLOG has written numerous articles addressing RPAPL 1304. To find such articles, please see the BLOG tile on our website and type “1304” into the “search” bar. [3] Editor’s Note: in the preparation of this article, the records of the underlying action available on the NYSCEF website were reviewed and relied upon. [4] This BLOG has written numerous articles addressing business records as proof in mortgage foreclosure actions. To find such articles, please see the BLOG tile on our website and type “1304 business records” or “foreclosure business records” into the “search” bar. [5] In the order from which the appeal was taken, the motion court noted that “the affidavit of service relating to the RPAPL 1304 Notice is made by “Michael Buscemi” who does not state for whom he is employed, but the affidavit appears to be notarized in Nassau County, however the envelope that the RPAPL 1304 Notice was mailed in bears a return address located in Seal Beach, California.

By: Jonathan H. Freiberger On numerous occasions, this Blog has addressed issues related to RPAPL 1304. [Eds. Note: to view this Blog’s prior articles on RPAPL 1304, kindly type “RPAPL 1304” in the search box of the Blog Tile on Freiberger Haber LLP’s website.] By way of brief background as discussed in prior articles, RPAPL 1304 requires that at least ninety days before commencing legal action against a borrower with respect to a “home loan” (as defined in the relevant statutes), a lender must: send written notice to the borrower by certified and regular mail that the loan is in default; provide a list of approved housing agencies that offer free or low-cost counseling; and, advise that legal action may be commenced after ninety days if no action is taken to resolve the matter. One purpose of RPAPL 1304 is to enable defaulted borrowers to “benefit from the information provided in the notice and the 90–day period during which the parties could attempt to work out the default without imminent threat of a foreclosure action, in an effort to further the ultimate goal of reducing the number of foreclosures”. CIT Bank N.A. v. Schiffman, 36 N.Y.3d 550, 555 (2021) (citation and internal quotation marks omitted). The failure of a lender to comply with RPAPL 1304 will result in the dismissal of a foreclosure complaint. See, e.g., U.S. Bank N.A. v. Beymer, 161 A.D.3d 543 (1st Dep’t 2018). Indeed, “proper service of the notice containing the statutorily mandated content is a condition precedent to the commencement of a foreclosure action.” U.S. Bank N.A. v. Taormina, 187 A.D.3d 1095, 1096 (2nd Dep’t 2020) (citations omitted). When failure to comply with RPAPL 1304 is raised as an affirmative defense, the foreclosing lender must demonstrate its compliance with the statute as part of its prima facie case. Bank of America, N.A. v. Wheatly, 158 A.D.3d 736, 737 (2nd Dep’t 2018) (citations omitted). However, a “defense based on noncompliance with RPAPL 1304 may be raised at any time during the action.” Nationstar Mortgage, LLC v. Matles, 185 A.D.3d 703, 706 (2nd Dep’t 2020) (citations and internal quotation marks omitted). In Wells Fargo Bank, N.A. v. Davidson, 202 A.D.3d 880 (2nd Dep’t 2022), in reversing a judgment of foreclosure and sale and granting summary judgment to the borrowers, the Court stated that “[c]ontrary to the [lender’s] contention, the [borrowers] did not waive their contention that the [lender] failed to comply with RPAPL 1304 as a defense based on noncompliance with RPAPL 1304 may be raised at any time prior to the entry of a judgment of foreclosure and sale.” Davidson, 202 A.D.3d at 882 (citations, internal quotation marks and brackets omitted); see also U.S. Bank Nat. Ass’n v. Zakarin, 208 A.D.3d 1275, 1277 (2nd Dep’t 2022). Because RPAPL 1304 notices must be sent to all “borrowers,” knowing who the “borrowers” are is of critical importance. While one might think that the status of borrower is limited to the person executing the promissory note, such is not always the case. Frequently, real property is jointly owned. If one joint owner of real property borrows money from a lender and jointly owned real property is used to secure that repayment obligation, the lender will almost always require all owners to execute the related mortgage. In such cases, all owners are generally listed as “borrowers” on the mortgage even though they did not borrow money from the lender and, accordingly, have no repayment obligations under the promissory note. Nonetheless, non-obligors under the promissory note are deemed to be “borrowers” for the purposes of RPAPL 1304. See, e.g. HSBC Bank USA v. DiBenedetti, 205 A.D.3d 687, 689 (2nd Dep’t 2022); Deutsche Bank Nat. Trust Co. v. Weininger, 206 A.D.3d 882, 883 (2nd Dep’t 2022). This rule was reinforced on June 20, 2024, by the Second Department in Deutsche Bank Nat’l Trust Co. v. Cincu. Michael Cincu (“Michael”) borrowed money from the plaintiff lender. The loan was secured by a mortgage on property owned by Michael and Edith Cincu (“Edith”). As a result of a default, the lender commenced a foreclosure action. The lender’s subsequent motion for summary judgment was granted and, thereafter, the appointed referee issued a report as to the amounts due. Edith opposed the lender’s motion to confirm the referee’s report and cross-moved for leave to renew her opposition to the lender’s summary judgment motion. The motion court granted the lender’s motion and denied Edith’s cross-motion. Edith appealed. The Second Department reversed finding that the motion court erred in denying Edith’s cross-motion to renew. The Court pointed out that motions to renew “shall be based upon new facts not offered on the prior motion that would change the prior determination or shall demonstrate that there has been a change in the law that would change the prior determination” (CPLR 2221[e][2]). (Additional citation omitted). The Court then stated that clarifications of decisional law are “a sufficient change in the law to support renewal.” (Citations and internal quotation marks omitted.) The Court found that Bank of N.Y. Melon v. Forman, 176 A.D.3d 663 (2nd Dep’t 2019), clarified the law on who is considered a “borrower,” by determining that an individual identified as a “borrower” on the mortgage, although not an obligor on the related promissory, is deemed to be a borrower for RPAPL 1304 notice purposes. Since Forman was decided after the Cincu motion court granted summary judgment to the lender, Edith was entitled to renewal under CPLR 2221. In so holding, the Court stated: Here, although [Edith] did not execute the underlying note, she was identified as a borrower both on the first page of the mortgage agreement and beneath her signature on the mortgage agreement. Though the [lender] contends that a separate provision of the mortgage agreement indicates that [Edith] is not obligated to pay the amounts due under the note, [she] is nonetheless a borrower entitled to notice pursuant to RPAPL 1304. The record is, therefore, sufficient to establish that [Edith] is a borrower for purposes of RPAPL 1304, and it is undisputed that the [lender] failed to serve [Edith] with the requisite RPAPL 1304 notice. [Edith] thus established a change in the law that would change the [motion court’s] prior determination of that branch of the [lender’s] motion which was for summary judgment on the complaint insofar as asserted against [Edith]. The Supreme Court should have denied the [lender’s] motion, inter alia, to confirm the referee's report and for a judgment of foreclosure and sale inasmuch as it was predicated on the July 16, 2019 order granting that branch of the [lender’s] motion which was for summary judgment on the complaint insofar as asserted against [Edith]. Moreover, the court should have awarded summary judgment to [Edith] dismissing the complaint insofar as asserted against her. [Edith] established her prima facie entitlement to judgment as a matter of law since it is undisputed that the [lender] failed to serve [Edith] with the requisite RPAPL 1304 notice and [Edith] submitted an affidavit stating that she did not receive the RPAPL 1304 notice. In opposition, the [lender] failed to raise a triable issue of fact. [Citations omitted.] Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice.

By: Jeffrey M. Haber Under New York law, fraud claims are not duplicative of breach of contract claims when they are based on misrepresentations of present fact collateral to the contract, even if they seek the same damages. Applying that rule, the Appellate Division, First Department held in Metropolitan Partners Group Admin., LLC v. Nerney , 2026 N.Y. Slip Op. 02340 (1st Dept. Apr. 16, 2026), that plaintiff adequately pleaded both fraud and breach of contract claims arising from a $16 million secured loan to Schweizer RSG, LLC. Metropolitan alleged that the individual defendants overstated inventory values to induce the loan, then concealed defaults through accounting manipulation, asset diversion, and obstruction of enforcement efforts. The Court found the breach of contract claims sufficient because defendants allegedly acted in bad faith to interfere with Metropolitan’s rights, and held that the fraud claims, centered on inflated inventory representations, were independent of contractual performance obligations. Accordingly, the Court held that both claims could proceed side‑by‑side at the pleading stage. [1] In 2022, Metropolitan Partners Group Administration, LLC and its affiliated funds (“Metropolitan”) agreed to provide secured financing to Schweizer RSG, LLC (“Schweizer”), a helicopter manufacturer then controlled by its Chairman and CEO. Metropolitan extended a $20 million credit facility, with $16 million funded at closing, based primarily on alleged representations that Schweizer’s inventory, pledged as collateral, was worth more than $56 million. In connection with the loan, defendants provided inventory schedules and valuation materials during due diligence. Metropolitan alleged these materials were materially false. Metropolitan claimed that the inventory lists and valuations presented to Metropolitan to support the loan included non-existent parts. Also, in connection with the loan, the individual defendants executed personal “Validity Guarantees.” These guarantees provided Metropolitan with full recourse if the guarantors acted in bad faith to impair Metropolitan’s rights as a lender, and indemnification for losses arising from fraud, misappropriation, or unauthorized use of collateral. Shortly after the loan was funded in August 2022, Schweizer allegedly began violating financial covenants, including liquidity and EBITDA requirements. Metropolitan alleged that rather than disclose Schweizer’s true financial condition, the individual defendants engaged in a series of accounting manipulations designed to conceal defaults and avoid foreclosure. These included directing accountants to recognize deposits for incomplete helicopter sales as current revenue and recording expected payments long before cash was actually received. Metropolitan further alleged that, while the loan was outstanding, the individual defendants diverted Schweizer funds and assets to a network of affiliated companies controlled by Schweizer’s CEO. According to Metropolitan, Schweizer and the RSG entities shared facilities, personnel, accounting systems, and banking access, enabling the improper transfer of cash and inventory away from Schweizer in violation of the loan documents. Relying on the allegedly false financial information, Metropolitan entered into multiple forbearance agreements in 2023 and 2024, temporarily refraining from exercising its contractual remedies. Eventually, third‑party advisors and appraisers reportedly determined that Schweizer’s inventory values were materially overstated – information that Metropolitan claimed was never disclosed during the forbearance negotiations. In early 2025, Metropolitan claimed that it had uncovered the alleged schemes and commenced litigation. It also exercised its contractual right to appoint a receiver over Schweizer. By that time, Schweizer reportedly lacked cash to meet payroll, had commingled assets with affiliates, and had sold inventory for short‑term liquidity, further impairing Metropolitan’s collateral. Metropolitan asserted claims for breach of contract against the individual defendants, alleging bad-faith interference with its rights under the guarantees. It also asserted fraud claims, contending the loan was induced by false inventory representations and prolonged by intentional financial misstatements designed to delay enforcement. Defendants moved to dismiss. The motion court denied the motion. The First Department unanimously affirmed. The Court held that “Plaintiffs sufficiently stated a cause of action for breach of contract against [the individual defendants] by alleging that those defendants breached valid guaranties that they gave to plaintiffs.” [2]  The Court explained that the allegations were sufficient to state breach of contract claims because, as pleaded, the individual defendants engaged in conduct prohibited by their guaranties. [3] The Court noted that the full‑recourse provisions guaranteed against any bad‑faith acts that hindered or interfered with Metropolitan’s enforcement rights, and that plaintiffs alleged such interference through deliberate obfuscation of Schweizer’s books and records, providing false passwords to delay the receiver’s access to financial systems, and preparing materially inaccurate spreadsheets intended to mislead the lender. [4]  The Court also found that plaintiffs adequately pleaded breaches of the indemnity guarantees by alleging that the individual defendants misappropriated or transferred collateral and willfully disposed of collateral after default. [5]  The Court concluded that these allegations described conduct expressly covered by the guarantees and, therefore, sufficiently supported the breach of contract claims. [6] The Court also held that the “fraud claims against [the individual defendant] and the RSG defendants were also sufficiently particular to satisfy CPLR 3016(b).” [7]  The Court found that the “bulk of plaintiffs’ fraud claims rel[ied] on specific allegations that defendants misrepresented the value of Schweizer’s inventory in February 2022 to induce plaintiffs to make the loan.” [8]   The Court further held that the fraud claims “were not duplicative to the breach of contract claims.” [9] Courts apply the duplication doctrine when a plaintiff alleges a breach of contract claim and a fraud claim that arise from the same facts and circumstances. In that regard, a fraud claim will be deemed duplicative of a contract claim when the fraud claim arises from the same facts, seeks the same damages, and does not allege a breach of any duty collateral to or independent of the parties’ agreements. [10]  Moreover, “[a] fraud-based claim [will be deemed to be] duplicative of a breach of contract claim when the only fraud alleged is that the defendant was not sincere when it promised to perform under the contract.” [11]  Finally, “a plaintiff may maintain a fraud cause of action in the alternative to a breach of contract claim where the ‘fraud cause of action was collateral to the . . . contract . . . regardless of whether the causes of action sought the same damages.’” [12]   The Court held that the fraud claims were not duplicative of the breach of contract claims because they were based on misrepresentations of present facts that were collateral to the parties’ contracts, not on a mere failure to perform contractual obligations. Specifically, the breach of contract claims arose from post‑loan conduct, including bad faith interference with Metropolitan’s enforcement rights and misappropriation of collateral, allegedly violating the guaranties’ full‑recourse and indemnity provisions. By contrast, the fraud claims centered primarily on pre‑closing misrepresentations, particularly allegations that defendants knowingly inflated the value of Schweizer’s inventory in February 2022 to induce Metropolitan to make the loan. Accordingly, the Court concluded that “plaintiffs [would] be permitted to pursue their fraud claims in addition to their breach of contract claims at this early stage of the litigation.” [13] Takeaway Metropolitan Partners  offers a clear illustration of how New York courts distinguish fraud claims from breach of contract claims when both arise out of the same transaction. Although defendants often argue that fraud claims impermissibly duplicate contract claims, the Court emphasized that duplication turns on the duty breached and the conduct alleged, not on whether the claims arise from the same facts or seek similar relief. The breach of contract claims in Metropolitan Partners were rooted in the guarantees themselves. The individual defendants allegedly violated express contractual provisions, particularly the full‑recourse clauses barring bad‑faith interference with enforcement rights and the indemnity clauses covering losses from misappropriation or unauthorized collateral transfers. These claims focused on post‑closing misconduct, including obstructing access to records, misleading a court‑appointed receiver, and diverting assets after default. In other words, the claimed wrongs constituted failures to comply with obligations defendants expressly undertook by contract. The fraud claims rested primarily on alleged misrepresentations of present fact, most notably inflated inventory values, made before the loan closed to induce Metropolitan to extend credit and, later, to delay enforcement. The Court found that statements about existing inventory were not promises of future performance; they were factual assertions external to the contract itself. Because misrepresentations of present fact are collateral to contractual promises, they implicate an independent legal duty and may support a fraud claim notwithstanding the existence of comprehensive contractual agreements ( i.e. , where the parties later reduce their relationship to detailed written agreements). Notably, the Court rejected duplication arguments even though the fraud and contract claims sought similar damages. [14]  Overlapping remedies did not doom the fraud claims because the alleged fraud concerned inducement and concealment, while the contract claims addressed interference with contractual rights and misuse of collateral. As the Court explained, duplication analysis depends on whether the fraud is collateral to the contract, not on whether the same relief is ultimately at stake. _________________________________ Jeffrey M. Haber  is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes only and is not intended to be, and should not be, taken as legal advice. Unless otherwise stated, Freiberger Haber LLP’s articles are based on recently decided published opinions and not on matters handled by the firm. _________________________________ [1] The factual discussion of the case comes from the parties’ briefs on appeal. [2] Slip Op. at *1. [3] Id. [4] Id. [5] Id. [6] Id. [7] Id.  at *2. Under CPLR 3016(b), the circumstances constituting fraud must be stated with sufficient detail “to permit a reasonable inference of the alleged conduct.” Pludeman v. Northern Leasing Sys., Inc. , 10 N.Y.3d 486, 491 (2008) (citation omitted). Conclusory allegations will not suffice. Eurycleia Partners, LP v. Seward & Kissel, LLP , 12 N.Y.3d 553, 559-60 (2009). [8] Id. [9] Id. [10] Havell Capital Enhanced Mun. Income Fund, L.P. v. Citibank, N.A. , 84 A.D.3d 588, 589 (1st Dept. 2011). See also   GoSmile, Inc. v Levine ,  81 A.D.3d 77 , 81 (1st Dept. 2010),  lv. dismissed ,   17 N.Y.3d 782 (2011). [11] Manas v. VMS Assoc., LLC , 53 A.D.3d 451, 453 (1st Dept. 2008); see also Cronos Group Ltd. v. XComIP, LLC , 156 A.D.3d 54, 64-65 (1st Dept. 2017); HSH Nordbank AG v. UBS AG , 95 A.D.3d 185, 206 (1st Dept. 2012); Metropolitan Life Ins. Co. v. Noble Lowndes Intl. , 192 A.D.2d 83, 88 (1st Dept. 1993). [12] Slip Op. at *2 (quoting Scarola Zubatov Schaffzin PLLC v. Dynamic Credit Partners, LLC ,  210 A.D.3d 605 , 607 (1st Dept. 2022) and citing Shear Enters., LLC v. Cohen ,  189 A.D.3d 423 , 424 (1st Dept. 2020)). [13] Slip Op. at *2. [14] In the First Department, it is not uncommon for the Court to dismiss fraud claims as duplicative of contract claims where the damages overlap.

By: Jonathan H. Freiberger The end result of the long and drawn-out mortgage foreclosure process in New York is the foreclosure sale – a public auction at which the foreclosed property is sold to the highest bidder. A question frequently asked by borrowers during the foreclosure process is: “Is there anything I can do to keep my house.” Although there are many answers to that question, the one relevant to todays article is: “You can exercise your equity of redemption.” The United States Supreme Court has stated that: It is also an established doctrine that an equity of redemption is inseparably connected with a mortgage; that is to say, so long as the instrument is one of security, the borrower has in a court of equity a right to redeem the property upon payment of the loan. This right cannot be waived or abandoned by any stipulation of the parties made at the time, even if embodied in the mortgage. This is a doctrine from which a court of equity never deviates. Its maintenance is deemed essential to the protection of the debtor, who, under pressing necessities, will often submit to ruinous conditions, expecting or hoping to be able to repay the loan at its maturity, and thus prevent the conditions from being enforced and the property sacrificed. Peugh v. Davis , 96 U.S. 332, 337 (1877). Relying on, inter alia, Peugh , the New York Court of Appeals has also recognized that the equity of redemption is a protective right that cannot be waived. Hughes v. Harlam , 166 N.Y. 427, 432 (1901). The right to redeem the equity of redemption can be exercised “at any time before an actual sale under a judgment of foreclosure.” Belsid Holding Corp. v. Dahm , 12 A.D.2d 91, 92 (2nd Dept. 1960); see also Deutsche Bank Co. of Ca., N.A. v. DePalo , 38 A.D.3d 490, 490 (2nd Dept. 2007). To exercise the equity of redemption one need only tender the “full sum due”. Wilmington Sav. Fund Society, FSB v. Thomas , 226 A.D.3d 1064, 1067 (2nd Dept. 2024); see also Virkler v. V.S. Virkler & Son, Inc. , 196 A.D.3d 1127, 1129 (4th Dept. 2021). The equity of redemption is extinguished by the foreclosure sale. Deutsche Bank , 38 A.D.3d at 490. This is so even if the referee’s deed has not yet been transferred to the purchaser at the sale. Bank of New York v. Ortiz , 30 A.D.3d 551, 551 (2nd Dept. 2006). Against this backdrop, we discuss Shorehaven Homeowners Assn., Inc. v. Campbell , a case decided on April 14, 2026, by the Appellate Division, First Department. [1] While Shorehaven involves the foreclosure of a homeowner’s association lien, the same principles apply. The plaintiff in Shorehaven, a homeowner’s association, commenced an action to foreclose a lien for, inter alia , unpaid common charges. In 2024, the motion court “issued an order for final judgment of foreclosure and sale and a money judgment in the amount of $40,484.59, together with interest, current common charges, special assessments and late charges.” After the defendant made two payments to the plaintiff, in lieu of bringing the foreclosure to sale pursuant to the judgment of foreclosure, the parties executed an agreement by which the plaintiff agreed to stay proceedings while the defendant made monthly payments for two years to satisfy the remainder of her outstanding obligations. The agreement, however, did not address legal fees and costs, which were otherwise recuperable under the HOA’s bylaws. Further, the HOA Bylaws were not incorporated into the parties’ agreement. While the defendant made an alleged technical default in her payment obligations under the agreement, she was ahead of schedule in her payments and ultimately paid her entire obligation twenty-two months early. Nonetheless, the plaintiff added legal fees and costs to the amounts due under the agreement and resumed the foreclosure process by advertising the sale of the property due to the alleged default. The defendant moved to stay the sale, to obtain a determination that she did not owe attorney’s fees and costs and that her obligations to the plaintiff were satisfied. The motion court found that the defendant did not owe attorney’s fees and costs and directed that the notice of pendency filed by the plaintiff be cancelled. The Plaintiff appealed. The First Department affirmed and concluded that the defendant “effectively cured [her] initial default by paying off the entire sum owed under the agreement nearly two years ahead of schedule.” The Court found that the defendant effectively exercised her right of redemption and stated: The Court of Appeals has made clear that "[t]he equity of redemption, which long predates the RPAPL, allows property owners to redeem their property by tendering the full sum at any point before the property is actually sold at a foreclosure sale . . . An unconditional tender of the full amount due is all that is required (citations omitted)" ( see NYCTL 1999-1 Trust v 573 Jackson Ave. Realty Corp. , 13 NY3d 573, 579 [2009], cert denied 561 US 1006 [2010] [internal citations omitted]), and that is exactly what [the defendant] did. Accordingly, plaintiff's acceptance of the full amount of arrears without objection waived any right to continue the foreclosure sale. [Hyperlink added.]  [2] Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice. [1] Some of the facts recited herein, which are abridged for editorial purposes, were taken from the appellate record available on the Court’s NYSCEF system. [2] The Court also determined that the motion court was within its discretion to disallow the plaintiff’s claim for attorney’s fees and costs.

By: Jonathan H. Freiberger In today’s BLOG we will discuss Tri-Rail Designers & Builders, Inc. v. Concrete Superstructures, Inc. , a case decided on November 12, 2025, by the Appellate Division, Second Department. In Tri-Rail , the Court decided a “question which has not been directly addressed” in the Second Department involving the impact of non-compliance with the Servicemembers Civil Relief Act (f/k/a the Soldiers’ and Sailors’ Civil Relief Act) (the “Act”) on obtaining a default judgment. The plaintiff in Tri-Rail  was a general contractor hired for a construction project that entered into a written contract with a concrete subcontractor. The subcontractor did not complete the project and was sued, along with its president, by the general contractor. The defendants failed to appear, and the general contractor moved for, and was granted, a default judgment. The following year, the defendants moved, pursuant to CPLR 5015(a) , to vacate the default judgment based on the general contractor’s admitted failure to support its motion with a non-military affidavit as to the subcontractor’s president. The subcontractor argued that the general contractor’s omission warranted the requested vacatur. The subcontractor’s president was personally served with process and never claimed to be in the active military. The defendants appealed from the motion court’s denial of the motion. The Second Department affirmed. The Court recognized that to succeed on a motion for leave to enter a default judgment, the plaintiff must demonstrate: “(1) service of process upon the defendant, (2) the failure of the defendant to appear or answer the complaint, and (3) the merits of the plaintiff’s cause of action.” In addition, “a motion for leave to enter a default judgment must be supported by what has been colloquially termed a “non-military affidavit,” which “is derived from federal law” not the CPLR. The Court noted that “the purpose of the Soldiers’ and Sailors’ Civil Relief Act is to prevent default judgments from being entered against members of the armed services in circumstances where they might be unable to appear and defend themselves.” (Citations, internal quotation marks and brackets omitted.) As stated by the Court, non-military affidavits must be based on an investigation and supported by specific facts. Further, the investigation must be conducted after the default, and not simply after the commencement of the action. [1]   In framing the relevant issue on appeal and in articulating its holding, the Court stated: It is clear that a non-military affidavit is counted amongst the proof required for a movant to meet its burden on a motion for leave to enter a default judgment. A movant's failure to provide a non-military affidavit is sufficient to warrant denial of such a motion in the first instance. However, the instant appeal presents a more nuanced question: where a default judgment was improperly entered in the absence of a non-military affidavit, is a defendant entitled to vacatur of the default judgment as of right? We hold that the failure to provide a non-military affidavit does not automatically warrant vacatur of an otherwise validly entered default judgment. [Citations omitted.] In reaching its conclusion, the Court analyzed the statutory text of the Act, which limits the ability to vacate default judgments to applications “made ‘by or on behalf of the servicemember.’” Accordingly, the remedies afforded by the Act are not available to everyone. Thus, the Court held that “a movant's failure to provide a non-military affidavit does not entitle a defendant to vacatur of an otherwise validly entered default judgment as of right. Where, as here, the defaulting party has made no assertion of being on active military duty at the time of his or her default, he or she falls outside of the protection afforded by the Act.” The Court explained that: where, as here, a default judgment was improperly entered, in order to be afforded the protection of the Act, a defendant seeking vacatur must establish as part of their initial burden that this remedy is sought "by or on behalf of the servicemember." To hold otherwise and to grant any defendant the right to challenge a default judgment would permit civilians to take advantage of those protections that were specifically afforded to our servicemembers and would belie the purpose of the Act. What was intended by the legislature as a shield should not be used permissively as a sword. The Court stressed that its holding does not alter a plaintiff’s burden on an application for leave to enter a default judgment. Such a movant is still required to provide a non-military affidavit and the failure to provide one warrants denial of the application. According to the Court, the issue decided was never addressed previously in the Second Department but is consistent with decisions from other New York courts. Simply stated, because the president never purported to be in the active military, the defendants failed to establish that he “is entitled to the protections of the Act and, therefore, the general contractor’s failure to “support its motion with a non-military affidavit was a mere irregularity and does not warrant vacatur of the defendants' default…." Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice. [1] Typically, inquiries are made to the Department of Defense Manpower Data Center , which provides a statement indicating whether an individual is on active military service.

By:  Jeffrey M. Haber In Sire Spirits, LLC v. Beam Suntory, Inc. , 2025 N.Y. Slip Op. 06297 (1st Dept. Nov. 18, 2025), the Appellate Division, First Department affirmed the denial of a motion to amend a complaint seeking damages for “diminution of enterprise value” due to the alleged fraud. Under CPLR 3025(b), leave to amend is freely given unless the amendment is prejudicial or patently meritless. However, New York’s fraud damages rule limits recovery to out-of-pocket losses—the actual pecuniary loss caused by the fraud—not speculative gains or lost profits. As discussed below, Sire’s proposed amendment effectively sought unrealized profits by reframing them as diminished business value, violating the out-of-pocket damages rule. The Court held that such damages were legally insufficient and barred as a matter of law, emphasizing that fraud claims cannot include potential earnings or enterprise valuation. Applicable Rules of The Road Amended Pleadings CPLR 3025(b)  provides, in pertinent part, that “[a] party may amend his [or her] pleading … at any time by leave of court or by stipulation of all parties.” [1]  Importantly, CPLR 3025(b) provides that “[l]eave [to amend] shall be freely given.…” Thus, “unless the proposed amendment would unfairly prejudice or surprise the opposing party, or is palpably insufficient or patently devoid of merit,” the motion for leave to amend should be granted. [2]   Prejudice may be found where “the nonmoving party has been hindered in the preparation of its case or has been prevented from taking some measure in support of its position.” [3]  “Prejudice is more than the mere exposure of the party to greater liability” as “there must be some indication that the party has been hindered in the preparation of the party’s case or has been prevented from taking some measure in support of its position.” [4]  The burden of demonstrating prejudice or surprise “falls upon the party opposing the motion.” [5]  Conclusory statements of prejudice cannot defeat a motion to amend a pleading. [6]   An amendment will not cause surprise when the causes of action alleged in the amended pleading are based on the facts and circumstances already pleaded or already known by the non-moving party. [7]  For this reason, new theories of liability pertaining to the facts and circumstances already in controversy will not bar a motion to amend. [8]   Delay in-and-of-itself is not enough to defeat a motion for leave to amend. For this reason, “[m]ere lateness is not a barrier” to amendment, absent prejudice. [9]  “It must be lateness coupled with significant prejudice to the other side, the very elements of the laches doctrine.” [10]  As the Court of Appeals recognized, “absent prejudice, courts are free to permit amendment even after trial.” [11]  Thus, where a case has not proceeded to meaningful discovery, the amendment of a pleading will not prejudice a defendant. [12]  Moreover, the mere passage of time, without “consequential” prejudice, separate and apart from the delay, is insufficient to defeat a motion for leave to amend. [13]  Even unexcused lateness, without prejudice, will not bar amendment. [14]   “The determination whether to grant leave to amend a pleading is within the court’s discretion, and the exercise of that discretion will not lightly be disturbed.” [15]  Thus, “[a] party opposing leave to amend ‘must overcome a heavy presumption of validity in favor of [permitting amendment].’” [16]   Fraud Damages To allege a cause of action based on fraud, plaintiffs must assert “a misrepresentation or a material omission of fact which was false and known to be false by defendant, made for the purpose of inducing the other party to rely upon it, justifiable reliance of the other party on the misrepresentation or material omission, and injury. [17]  To withstand a motion to dismiss, plaintiffs must satisfy each element of the claim. Generally, plaintiffs are allowed to recover only their out-of-pocket damages – that is, the actual pecuniary loss sustained as the direct result of the alleged fraud. [18]  Under the out-of-pocket damages rule, plaintiffs may recover what they lost because of the fraud, not what they might have gained had there been no fraud. [19]  In other words, plaintiffs cannot recover the profits that would have been realized in the absence of the fraud. For that reason, plaintiffs cannot recover damages for fraud based on the loss of a contractual bargain, “the extent, and, indeed the very existence of which is completely undeterminable and speculative.” [20] To determine whether the plaintiff sustained out-of-pocket losses, courts employ a two-part test. [21]  First, the plaintiff must show the actual value of the consideration it received. [22]  Second, the plaintiff must prove that the defendant’s fraudulent inducement directly caused the plaintiff to agree to deliver consideration that was greater than the value of the received consideration. [23]  The difference between the value of the received consideration and the delivered consideration constitutes the plaintiff’s out-of-pocket damages. [24] Sire Spirits, LLC v. Beam Suntory, Inc. [Eds. Note: The factual background comes from the briefing on appeal.] Sire brought the action in 2023, against defendants for, among other claims, fraud. Initially, Sire sought “all monetary losses” due to the fraud, punitive damages, attorneys’ fees, and costs. The motion court dismissed the requests for punitive damages, attorneys’ fees, and costs with prejudice. The First Department affirmed. [25] As fact discovery was approaching its conclusion, Sire informed defendants, through an expert witness disclosure, that it intended to seek damages for “[l]loss of sales and profits and disruption of business growth.” In response, Defendants Beam Suntory Inc. and Jim Beam Brands Co. (collectively, “Beam”) sought leave to file an early summary judgment motion, explaining that damages based on lost profits, lost opportunities, and the like were not permitted under New York’s “out-of-pocket” damages rule. Looking to avoid unnecessary motion practice, the motion court urged the parties to stipulate that with respect to the fraud claims, Sire was limited to out-of-pocket damages. Thereafter, Sire stipulated that “lost profits” and “lost business opportunities” damages were not available on its fraud claims. Sire moved to amend its complaint. Sire proposed adding two paragraphs to its complaint, alleging that the fraud “fundamentally disrupted” Sire’s business and caused Sire’s business’s value “to be diminished” by “millions of dollars.” Sire also sought to add a request for damages based on the “diminution” of its “enterprise value.” Beam opposed the motion, arguing that damages based on estimates of what revenues Sire might have earned but for the fraud violated New York law – e.g. , damages that plaintiffs alleging fraud cannot recover under the out-of-pocket rule. [26]   The motion court denied the motion, holding, in part: plaintiffs attempt to repackage barred lost profits damages by relabeling it “diminution of value” does not pass muster. Whatever plaintiff calls these damages, they are still based on the potential value the company could have realized absent the defendants’ alleged misconduct. As the court has previously held in this matter, fraud claims are limited to recovery of the actual pecuniary loss. One cannot recover for potential lost earnings on a fraud theory. [27] Sire appealed. The First Department unanimously affirmed. The Court held that “Plaintiffs’ proposed amendment to the prayer for relief in its pleading, which sought recovery based on profits not realized as a result of the alleged fraud, violated the out-of-pocket damages rule.” [28]  The Court explained that “Plaintiffs fail[ed] to explain how expert discovery would have availed them, because the [motion] court ruled as a matter of law based on plaintiffs’ own characterization of their damages.” [29]  “Accordingly,” said the Court, “the proposed amendment was palpably insufficient, and the [motion] court properly denied it.” [30] Takeaway Sire  serves as a reminder to practitioners and litigants that leave to amend may be freely given but within reason. Under CPLR 3025(b), courts generally grant leave to amend pleadings unless the amendment causes unfair prejudice or is palpably insufficient or patently devoid of merit. In Sire , the Court determined that the proposed amendment was patently devoid of merit because Sire could not recover “diminution in value” damages under the out-of-pocket damages rule. _______________________________________ Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice. [1] This Blog examined motions to amend under CPLR 3025(b) on numerous occasions, including: Amended Pleadings Under CPLR 3025(b) ; The Court of Appeals Makes a Ruling on “the Proper Scope of the Trial Court’s Discretion to Grant Leave to Amend a Complaint Under CPLR 3025(b)” ; and Defendant Barred From Adding a Counterclaim for Fraud Because the Claim Was Deemed Patently Devoid of Merit . [2] Cirillo v. Lang , 206 A.D.3d 611, 612 (2d Dept. 2022) (citations omitted). See also Greene v. Esplanade Venture P’ship , 36 N.Y.3d 513, 526 (2021); Matter of Chustckie , 203 A.D.3d 820, 822 (2d Dept. 2022); Toiny, LLC v. Rahim , 214 A.D.3d 1023, 1024 (2d Dept. 2023) (citations omitted). [3] Cirillo , 206 A.D.3d at 612 (citation, internal quotation marks, and brackets omitted). [4] Kimso Apartments, LLC v. Gandhi , 24 N.Y.3d 403, 411 (2014) (citations, internal quotation marks and brackets omitted). [5] Toiny , 214 A.D.3d at 1024 (citation and internal quotation marks omitted); see also   Kimso , 24 N.Y.3d at 411 (citations). [6] See Petion v. New York City Health & Hosps. Corp. , 175 A.D.3d 519, 520 (2d Dept. 2019). [7] See , e.g. , Bamira v. Greenberg , 256 A.D.2d 237, 239 (1st Dept. 1998). [8] See , e.g. , Harding v. Filancia , 144 A.D.2d 538, 540 (2d Dept. 1988); Matter of Smith , 104 A.D.2d 445, 448 (2d Dept. 1984). [9] Edenwald Contr. Co. v. City of New York , 60 N.Y.2d 957, 959 (1983); see also Granieri v. Ryder Truck Rental, Inc. , 112 A.D.2d 189, 190 (2d Dept. 1985); Matter of Chustckie , 203 A.D.3d at 822. [10] Shields v. Darpoh , 207 A.D.3d 586, 587 (2d Dept. 2022) (internal quotation marks and citations omitted). [11] Kimso , 24 N.Y.3d at 411 (citations omitted). [12] Janssen v. Inc. Vill. of Rockville Ctr. , 59 A.D.3d 15, 24 (2d Dept. 2008); see also Seda v. New York City Housing Auth. , 181 A.D.2d 469, 470 (1st Dept. 1992); 558 Seventh Ave Corp. v. Times Sq. Photo, Inc. , No. 653090/2020, 2023 WL 360630, at *1 (Sup. Ct., N.Y. County Jan. 18, 2023). [13] Granieri , 112 A.D.2d at 190. [14] See   Holchendler v. We Transp., Inc. , 292 A.D.2d 568, 569 (2d Dept. 2002); Hilltop Nyack Corp. v. TRMI Holdings Inc. , 275 A.D.2d 440, 441 (2d Dept. 2000). [15] AFBT-II, LLC v. Country Vill. on Mooney Pond, Inc. , 21 A.D.3d 972, 972 (2d Dept. 2005) (citations omitted). [16] McGhee v. Odell , 96 A.D.3d 449, 450 (1st Dept. 2012) (quoting Otis Elevator Co. v. 1166 Ave. of Americas Condo. , 166 A.D.2d 307, 307 (1st Dept. 1990)). [17] Lama Holding Co. v. Smith Barney , 88 N.Y.2d 413, 421 (1996) (citations omitted). [18] This Blog wrote about the out-of-pocket rule on numerous occasions, including: Out-of-pocket Fraud Damages: Proof Required to Determine the Value of Restricted Securities ; Out-Of-Pocket Damages, Intent to Deceive and The Business Judgment Rule ; First Department Affirms Dismissal of Fraud Claim Because Damages Alleged Were Speculative ; and Damages in a Holder Claim Found to Be Too Speculative For Recovery . [19] Connaughton v. Chipotle Mexican Grill, Inc. , 29 N.Y.3d 137, 142-43 (2017) (quoting, Lama, supra ) (internal quotations omitted)). [20] Id . [21] Kumiva Grp., LLC v. Garda USA Inc. , 146 A.D.3d 504, 506 (1st Dept. 2017). [22] Id . [23] Id. [24] Id. [25] Sire Spirits, LLC v. Beam Suntory, Inc. , 227 A.D.3d 630, 632 (1st Dept. 2024). [26] Sapienza v. Becker & Poliakoff , 173 A.D.3d 640 (1st Dept. 2019) (quotation marks and brackets omitted). [27] Connaughton , 29 N.Y.3d at 142-43; see also Rondeau v. Houston , 224 A.D.3d 616, 617 (1st Dept. 2024). [28] Slip Op. at *1. [29] Id. [30] Id.

By: Jonathan H. Freiberger On October 31, 2025, the Supreme Court, Kings County, decided loanDepot.com LLC v. Ortner , a case addressing the meaning of the “taking proceedings” requirement of CPLR 3215(c) . [1]  By way of brief background, when a defendant defaults in appearing in an action, [2]  CPLR 3215(c) requires that the plaintiff act promptly to secure a default judgment. As previously discussed in prior BLOG articles, CPLR 3215(c) provides, in pertinent part, that: If the plaintiff fails to take proceedings for the entry of judgment  within one year after the default, the court shall not enter judgment but shall dismiss the complaint as abandoned, without costs, upon its own initiative or on motion, unless sufficient cause is shown why the complaint should not be dismissed…. (Emphasis added.) Courts have held that the language of CPLR 3215(c) is mandatory in the first instance unless plaintiff demonstrates “sufficient cause” for the failure to timely “take proceedings for the entry of [a default] judgment]”. See, e.g., US Bank v. Onuoha , 162 A.D.3d 1094, 1095 (2 nd  Dep’t 2018); Wells Fargo Bank v. Cafasso , 158 A.D.3d 848, 849 (2 nd Dep’t 2018). A default judgment need not be obtained within one year, as long as proceedings to obtain a default judgment have been initiated. See   Bank of America v. Lucido , 163 A.D.3d 614, 615 (2 nd  Dep’t 2018); see also Bank of America, N.A. v. Bhola , 219 A.D.3d 430, 432 (2 nd  Dep’t 2023); Mort. Electronic Registration Systems, Inc. v. McVicar , 203 A.D.3d 915, 916 – 17 (2 nd Dep’t 2022). Numerous cases have addressed the issue of the meaning of “taking proceedings” and this BLOG has addressed this issue in “ ‘Initiating Proceedings’ Under CPLR 3215(c) Revisited” and “Second Department Finds that Requesting Foreclosure Settlement Conference Satisfies Requirement for ‘Taking Proceedings’ Under CPLR 3215(c)”. In the latter article, we discussed the Second Department’s decision in U.S. Bank N.A. v. Jerriho-Cadogan , 224 A.D.3d 788 (2 nd  Dep’t 2024), in which the Court, following its decision in Citimortgage, Inc v. Zaibak , 188 A.D.3d 982 (2 nd  Dep’t 2020), held that filing a settlement conference RJI satisfied the “taking proceedings” requirement. loanDepot is a mortgage foreclosure action [3]  in which the court was presented with “a question of statutory construction with significant consequences for foreclosure litigation in New York: whether the filing of a request for judicial intervention for purposes of convening a mandatory settlement conference-an act required before a defendant is in default-constitutes the ‘taking of proceedings for the entry of judgment after the default’ within the meaning of CPLR 3215(c).” Disagreeing with the Second Department’s decision in Zaibak and its progeny, the loanDepot court determined it did not. The loanDepot  Court noted that pursuant to “ 22 NYCRR 202.12-a(b)(l) , the Request for Judicial Intervention ("RJI") for a settlement conference must be filed ‘at the same time as proof of service’; and under CPLR 3408(a)(1) , proof of service must be filed within twenty days of service.’” (Emphasis in original.) Thus, the court concluded, that in “every foreclosure action subject to CPLR 3408 settlement conferences … the RJI must be filed before the defendant's time to answer has expired-before a default can occur as a matter of law.” For a variety of reasons (each of which the court found sufficient to warrant a departure from Zaibak ), the court concluded that a settlement conference RJI does not constitute “taking proceedings.” [4] First, the court concluded that Zaibak  conflicted with the legislative and regulatory scheme because of the timing issues previously mentioned. Simply stated, in foreclosure actions settlement conference RJIs, generally, are required to be filed before a default occurs. Accordingly, “ Zaibak inverts CPLR 3215(c) by treating a pre-default filing as compliance with a post-default statutory mandate.” (Emphasis in original.) Thus, CPLR 3215(c) and 3408 cannot be harmonized under Zaibak.  However, “[t]his statutory tension disappears once CPLR 3215(c) is construed the way every Department of the Appellate Division (including the Second Department, save for the aberrant Zaibak line of cases) has already construed it: the phrase ‘take proceedings’ means a motion for judicial relief directed toward the entry of a default judgment, not the ministerial filing of an RJI.” Second, Zaibak  is “irreconcilable” with the express language of CPLR 3125(d)  -- which relates to multi-defendant situations in which a defendant answers and another defendant defaults -- and requires the plaintiff to make “‘an application to the court’ ‘within one year of the default’ before a default can be taken against the nonappearing party.” Thus, the “statutory text leaves no doubt that the Legislature required a judicial application - not a ministerial filing such as an RJI - to qualify as the taking of proceedings.’"  (Internal brackets omitted.) Third, the loanDepot  court noted that the statutory purpose of CPLR 3215 (c), which was drafted decades before the foreclosure conference RJI requirement, was the entry of judgment. The purpose of the settlement conference was loss mitigation. Thus: a settlement-conference RJI cannot constitute "tak[ing] proceedings for the entry of judgment" within the meaning of CPLR 3215(c) for a fundamental threshold reason: when CPLR 3215(c) was enacted in 1962 …, the Legislature had not yet created-nor even contemplated-the mandatory settlement conference procedure codified decades later in 22 NYCRR 202.12-a. A later-adopted court rule cannot possibly retroactively redefine a statutory term (and the intent of the legislature in enacting it) that predates it. The Legislature designed CPLR 3215(c) to require post-default prosecutorial action for the entry of a judgment, not a ministerial administrative filing created years later for a wholly different purpose. Fourth, the ministerial steps involved with the filing of an RJI “do not seek adjudication” and, therefore, “are not ‘proceedings’ for judgment.” The filing of the RJI is “a predicate to negotiation-not adjudication” and CPLR 3215(c), “calls for proceedings for the entry of judgment,” which implicates “the court's authority to determine rights or grant judicial relief.” Fifth, the court noted that of CPLR 3215(c) “reflects a legislative judgment that dormant claims should not be kept alive indefinitely and that plaintiffs bear the responsibility to prosecute their actions diligently,” and provides for mandatory dismissal if violated. “Because the statute's purpose is to compel diligence in prosecuting actions to judgment, with the attendant benefit of clearing court backlogs, its effect necessarily evaporates if courts begin carving out judicial exceptions based on sympathetic facts, administrative filings, or post- default settlement procedures.” Finally, the court spent significant time analyzing why “ Zaibak  and its progeny are not precedentially dispositive under stare decisis  [and concluded that] Zaibak neither raised nor considered the specific questions presented here.” Ultimately, the court concluded that dismissal of the action was mandatory because the plaintiff failed to move for a default judgment within a year of defendant’s default and the filing of an RJI did not satisfy the “taking proceedings” requirement of CPLR 3215. Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice. [1]  This BLOG has written numerous 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. [2]  This BLOG has previously addressed issues related to a defendant’s appearance in an action. See, e.g. , [ here ], [ here ], [ here ] and [ here ]. [3]  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 issue that may be of interest to you. [4]  The loanDepot court provides a thoughtful and detailed analysis of each of the bases of its decision, and we will briefly summarize each one.

By:  Jeffrey M. Haber In today’s article, we explore New York’s heightened pleading standard for defamation per se and defamation by implication. In Armbruster Capital Mgt., Inc. v. Barrett , 2025 N.Y. Slip Op. 06493 (4th Dept. Nov. 21, 2025), defendants sought to amend a counterclaim alleging that emails from plaintiff’s executives implied defendant lacked professional integrity. Initially denied by the motion court, the amendment was later deemed sufficient because defendants provided specific emails satisfying CPLR 3016(a), which requires particular words, time, place, and manner of the alleged defamatory statements. The Appellate Division, Fourth Department, found the emails suggested ethical noncompliance, qualifying as defamation per se, thereby eliminating the need to plead special damages. The Court explained that even if substantially true, the statements conveyed a false impression that defendant resigned solely due to burdensome compliance policies, meeting the rigorous standard for defamation by implication. The Court also held the proposed amendment was not meritless and permitted defendants to add individual parties, concluding the motion court abused its discretion in denying the motion to amend. The dispute in Armbruster  centered on an asset purchase agreement (APA) between plaintiff and Apex Wealth Advisers, LLC, formerly known as Apex Advisers, LLC (Apex), which was owned by defendant Elizabeth Barrett. Plaintiff and defendants entered into the APA whereby defendant sold Apex’s client list to plaintiff for a set price, payable in installments. In connection with the APA, defendant agreed to work part-time for plaintiff for the purpose of providing plaintiff with assistance in retaining Apex’s former clients. However, defendant resigned from plaintiff’s employment after less than a year. Plaintiff commenced the action for breach of a restrictive covenant in the APA, and defendants counterclaimed for, inter alia , defamation, alleging that plaintiff made statements asserting that defendant lacked professional competence or integrity. Plaintiff moved to dismiss the defamation counterclaim pursuant to CPLR 3016(a) and 3211(a)(7). Defendants cross-moved for leave to amend the defamation counterclaim and to add as parties plaintiff’s chief executive officer and president (individual parties), who authored the alleged defamatory statements. The motion court granted the motion and denied the cross-motion. Defendants appealed only from the denial of their cross-motion. A party asserting a claim for defamation must show “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.” [1]   Statements “that tend to injure another in his or her trade, business or profession” constitute defamation per se. [2]   In addition, a plaintiff claiming defamation, must plead the claim with particularity, that is, the plaintiff must “set forth in the complaint the particular words complained of, as required by CPLR 3016 (a), and must state the time, place and manner of the allegedly false statements and to whom such statements were made.” [3]   As an initial matter, the Court rejected plaintiff’s assertion, raised as an alternative basis for affirmance, “that the proposed amended counterclaim failed to comply with CPLR 3016 (a).” [4]  The Court noted that “[i]n support of their cross-motion, defendants submitted the emails that were sent by the individual parties, which contained the alleged defamatory statements.” [5]  “[I]n doing so,” concluded the Court, defendants “met the pleading requirements of CPLR 3016 (a) … as the [motion] court implicitly found. [6] Addressing the cross-motion, the Court “conclude[d] that the [motion] court abused its discretion in denying defendants’ cross-motion”. [7]   The Court found that “Defendants sufficiently alleged that the statements made by the individual parties were false and that they were reasonably susceptible of a defamatory connotation.” [8]  “In determining the sufficiency of a defamation pleading,” noted the Court, “we must consider ‘whether the contested statements are reasonably susceptible of a defamatory connotation’”, [9]  and, in doing so, “we must ‘give the disputed language a fair reading in the context of the publication as a whole.’” [10]   The Court concluded that “the disputed language provide[d] a basis ‘from which the ordinary reader could draw an inference’ … that plaintiff was accusing defendant of failing to adhere to ethical standards in the investment trading industry.” [11]  The Court noted that “the emails were sent to clients of plaintiff who had previously been clients of defendants and advised them that defendant was no longer employed by plaintiff.” [12]  “The emails stated that the investment trading industry was ‘highly regulated,’ that plaintiff had ‘compliance policies’ to protect its clients against ‘conflicts of interest,’ and that defendant found those policies ‘overly burdensome,’ thereby suggesting that defendant failed to adhere to such policies and standards.” [13] The Court further held that the statements constituted defamation per se, such that defendants did not need to allege special damages. [14]  “‘A statement imputing incompetence or dishonesty to the [party] is defamatory per se if there is some reference, direct or indirect, in the words or in the circumstances attending to their utterance, which connects the charge of incompetence or dishonesty to the particular profession or trade engaged in by [the party].’” [15]  The statement “must be more than a general reflection upon [the party’s] character or qualities[;] . . . [it] must reflect on [the party’s] performance or be incompatible with the proper conduct of [their] business.” [16]  The Court found that, as alleged in the proposed amended counterclaim, “the statements conveyed that defendant was unable to conduct her work in a legally compliant and ethical manner and that she lacked professional competence or integrity.” [17] Regarding the merit of the proposed amendment, the Court held that it was not “patently lacking in merit”. [18]  After recounting the substance of the emails exchanged between plaintiff’s chief executive officer and defendant, as well as deposition testimony, the Court found that “defendant’s statements established that [defendant] found the policies burdensome and time-consuming, but they [did] not establish that [defendant] left plaintiff’s employment because of those policies, as stated in the emails by the individual parties.” [19] “Moreover,” said the Court, “even assuming, arguendo, that the statements were substantially true and that defendants are relying on a theory of defamation by implication, we conclude that the proposed amended counterclaim is not patently lacking in merit.” [20]  “Defamation by implication is premised not on direct statements but on false suggestions, impressions and implications arising from otherwise truthful statements.” [21]  “There is a heightened legal standard for a claim of defamation by implication.” [22]  “Under that standard, ‘[t]o survive a motion to dismiss a claim for defamation by implication where the factual statements at issue are substantially true, the [party asserting the defamation claim] must make a rigorous showing that the language of the communication as a whole can be reasonably read both to impart a defamatory inference and to affirmatively suggest that the author intended or endorsed that inference.’” [23]   “The second part of the test is an objective inquiry and asks whether the plain language of the communication itself suggests that an inference was intended or endorsed.” [24] The Court held that defendant “met the heightened pleading standard.” [25] The Court found that the statements at issue did “not tell the whole story and conveyed a false impression that defendant was entirely at fault for the demise of the employment relationship because she found plaintiff’s compliance policies burdensome.” [26]  In context, the Court said that defendant left plaintiff’s employ after an “outburst” by plaintiff’s chief executive officer who “blamed defendant for the departure of a large client, said that he did not trust her and that she would steal all of plaintiff’s clients, and threatened legal action against her.” [27]  “Thus”, concluded the Court, “the statements by the individual parties, even if true, conveyed the false suggestion and impression that the only reason defendant left plaintiff’s employment was because she did not want to comply with policies that were in place to ‘protect[ ]’ the clients.” [28]  The plain language of the statements, therefore, “suggested that the individual parties intended that false suggestion and impression so that the clients would remain with plaintiff.” [29] ________________________ Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice. ________________________ [1] Fika Midwifery PLLC v. Independent Health Assn., Inc. , 208 A.D.3d 1052, 1054 (4th Dept. 2022) (internal quotation marks omitted); see Miserendino v. Cai , 218 A.D.3d 1261, 1262 (4th Dept. 2023); Accadia Site Contr., Inc. v. Skurka , 129 A.D.3d 1453, 1453 (4th Dept. 2015). [2] Fika Midwifery , 208 A.D.3d at 1054 (internal quotation marks omitted). [3] Id.  (internal quotation marks omitted). [4] Slip Op. at *2. [5] Id. [6] Id. , citing Accadia , 129 A.D.3d at 1454; McRedmond v. Sutton Place Rest. & Bar, Inc. , 48 A.D.3d 258, 259 (1st Dept. 2008); Polish Am. Immigration Relief Comm. v. Relax , 172 A.D.2d 374, 374 (1st Dept. 1991). [7] Id. , citing Holst v. Liberatore , 105 A.D.3d 1374, 1374 (4th Dept. 2013); LHR, Inc. v. T-Mobile USA, Inc. , 88 A.D.3d 1301, 1304 (4th Dept. 2011). [8] Id. [9] Id. , quoting Davis v. Boeheim , 24 N.Y.3d 262, 268 (2014); see Bisimwa v. St. John Fisher Coll. , 194 A.D.3d 1467, 1471 (4th Dept. 2021). [10] Id. , quoting Armstrong v. Simon & Schuster , 85 N.Y.2d 373, 380 (1995). [11] Id. , quoting James v. Gannett Co. , 40 N.Y.2d 415, 420 (1976), r’arg denied , 40 N.Y.2d 990 (1976). [12] Id. [13] Id. [14] Id. [15] Miserendino , 218 A.D.3d at 1265. [16] Id. , quoting Golub v. Enquirer/Star Group , 89 N.Y.2d 1074, 1076 (1997). [17] Slip Op. at *2. [18] Id. [19] Id.  at 2- 3. [20] Id.  at *3. [21] Armstrong , 85 N.Y.2d at 380-381; see also Bisimwa , 194 A.D.3d at 1472; Partridge v. State of New York , 173 A.D.3d 86, 90 (3d Dept. 2019). [22] Slip Op. at *3, citing Bisimwa , 194 A.D.3d at 1472). [23] Id. , quoting Bisimwa , 194 A.D.3d at 1472; see also Partridge , 173 A.D.3d at 91-92. [24] Id. , quoting Partridge , 173 A.D.3d at 94 (internal quotation marks omitted). [25] Id. [26] Id. [27] Id. [28] Id. [29] Id.

By: Jeffrey M. Haber On April 14, 2026, the Appellate Division, First Department issued a decision in which it reiterated the limits of fraud claims in the corporate governance context. In Massoumi v. Ganju , 2026 N.Y. Slip Op. 02208 (1st Dept. Apr. 14, 2026), the Court unanimously affirmed summary judgment dismissing fraud claims brought by a former chief executive officer who alleged that his fellow executives and directors misled him in advance of a board meeting that resulted in his removal. Background Facts Plaintiff served as Chief Executive Officer of Zocdoc, Inc., and, like some of the defendants, also held roles within the company’s senior leadership. Defendants included two board members and senior managers, as well as a company employee holding the title “Founder,” though not a board member. In advance of a scheduled board meeting, plaintiff believed the agenda would focus primarily on product development and marketing strategy. In reliance on that understanding, plaintiff and others prepared presentations and conducted dry-run rehearsals for the board meeting consistent with that vision. The meeting did not go as Plaintiff envisioned. Rather than discussing product development and marketing, the board initiated a leadership review, appointed new officers, amended the company’s bylaws, placed plaintiff on administrative leave, and ultimately removed him as chief executive officer. Plaintiff sued, alleging that defendants committed fraud by misleading him prior to the meeting. Plaintiff’s claims were based on three specific incidents: (1) an email from one of the defendants, stating “sounds good” in response to plaintiff’s proposed presentation topics circulated to senior management for the board meeting at issue; (2) a PowerPoint deck labeled “final,” forwarded by another defendant the day before the meeting, along with an agenda; and (3) defendants’ participation in dry-run rehearsals preparing for the meeting as though it would proceed as planned. According to plaintiff, these actions collectively conveyed false assurances that no adverse employment action would occur at the meeting and that the focus would remain on marketing strategy and product development. The First Department’s Decision Under New York law, fraud can be based not only on affirmative misrepresentations, but also on half-truths or misleading partial disclosures. [1]  The Court emphasized that when fraud claims are based on affirmative misrepresentations, as plaintiff alleged, the statements must be untrue and must communicate false information: Although half-truths and misleading partial disclosures can support a fraud claim … , plaintiff casts these three incidents as actionable misrepresentations rather than omissions. For this framing to adequately support his claim, however, the communicative content of these incidents must have been untrue as to the subsequent injurious actions of the board at the meeting. [2]   The Court held that plaintiff failed to meet this standard. [3]  The Court explained that a short email stating “sounds good” was “merely an acknowledgment,” not a factual representation. [4] “Likewise,” said the Court, “an internal document labeled ‘final’ sent in an otherwise contentless email does not, on its own, amount to a promise or warranty.” [5]  Finally, the Court noted that participation in rehearsal meetings, standing alone, did not constitute an actionable misrepresentation, particularly where such participation fell within ordinary employee functions. [6]  Thus, the Court refused to transform routine corporate communications into actionable false representations. Perhaps the most consequential part of the Court’s decision concerned the distinction between the duties owed as a fiduciary and the duty of disclosure. Plaintiff argued that defendants, given their overlapping roles on the board and in management, had an obligation to warn him that his termination was under consideration. The Court rejected that argument, stating that, as directors, defendants’ fiduciary duty ran to the corporation and its shareholders, not to plaintiff personally. [7]  Therefore, defendants “were not required to forewarn plaintiff that his possible termination would occur at the board meeting.” [8] As such, concluded the Court, plaintiff could not “claim that he was justified in concluding that directors would not discharge these duties.” [9]   Takeaway In Massoumi , the Court emphasized that ordinary corporate communications, such as brief email acknowledgments, circulating agendas or presentation materials, and participation in meeting rehearsals, do not, without more, constitute affirmative misrepresentations of fact for purposes of a fraud claim. Similarly, statements such as “sounds good,” internal documents labeled “final,” or participation in preparatory meetings do not, without more, communicate factual assurances about future board decisions. Massoumi shows that courts will not infer misrepresentations of fact from vague, informal, or customary internal corporate exchanges. Massoumi  also shows that where a plaintiff characterizes alleged misconduct as an affirmative misrepresentation, as opposed to an omission or half‑truth, the statement at issue must itself be untrue and must convey false factual information. As discussed, the Court rejected plaintiff’s attempts to reframe neutral or context‑free communications as false merely because the board later acted inconsistently with plaintiff’s expectations. The Court’s decision underscores that internal coordination and preparation for board meetings are ordinary incidents of corporate life and do not imply false representations about the substance or outcome of a board meeting. Accordingly, participation in dry‑run rehearsals or other preparatory meetings, standing alone, did not support a fraud claim, particularly where such participation fell within routine employee or officer responsibilities. Of particular note, the Court rejected the argument that directors and senior officers have a fiduciary obligation to warn an executive that his/her removal was under consideration. In doing so, the Court reaffirmed that directors’ fiduciary duties run to the corporation and its shareholders, not to individual executives whose interests may diverge from the company’s. Finally, because officers and directors must be free to discharge their governance duties, an executive cannot reasonably rely on contentless communications or on silence as assurance that adverse action will not occur. The Court rejected the notion that an executive is justified in assuming that a board would refrain from exercising its authority simply because it had not disclosed its intentions beforehand. _________________________________ Jeffrey M. Haber  is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes only and is not intended to be, and should not be, taken as legal advice. Unless otherwise stated, Freiberger Haber LLP’s articles are based on recently decided published opinions and not on matters handled by the firm. _________________________________ [1] DIRECTV, LLC v. Nexstar Broadcasting, Inc. ,  199 A.D.3d 561 , 562 (1st Dept. 2021). [2] Slip Op. at *1 (citation omitted). [3] Id. [4] Id.  at *2. [5] Id. [6] Id.  (citing Eurycleia Partners, LP v. Seward & Kissel, LLP ,  12 N.Y.3d 553 , 559-562 (2009)). [7] Id.   [8] Id.  (citing Klaassen v. Allegro Dev. Corp. , 106 A.3d 1035, 1043-1044 (Del. 2014); Benihana of Tokyo, Inc. v. Benihana, Inc. , 891 A.2d 150, 191 (Del Ch. 2005), aff’d , 906 A.2d 114 (Del. 2006)). [9] Id.