By: Jeffrey M. Haber Affinity fraud is a type of investment fraud. In this form of fraud, the person committing the fraud preys upon members of an identifiable group, such as a religious or ethnic community, the elderly, or a professional group. The promoter of an affinity fraud frequently is – or pretends to be – a member or a good friend of the group. The fraudster often enlists respected members of the community or religious leaders from within the group to disseminate information about the scheme by convincing them that a fraudulent investment is legitimate and in their best interests. Many times, those leaders become unwitting victims of the fraudster’s scam. Affinity fraud exploits the trust and friendship that exist in group of people who have something in common. Because of the tight-knit structure of many groups, it can be difficult for regulators or law enforcement officials to detect an affinity fraud. Victims often fail to notify authorities or pursue their legal remedies and instead try to work things out within the group. This is particularly true where the fraudsters have used respected community or religious leaders to convince others to join the investment. Many affinity scams involve Ponzi schemes or pyramid schemes, where new investor money is used to make payments to earlier investors to give the illusion that the investment is successful. New investors are induced to invest in the scheme and existing investors are lulled into believing their investments are profitable. Unfortunately, as is often the case, the promoter of the scheme steals the investor’s money for personal use. Both types of schemes depend on an unending supply of new investors – when the inevitable occurs, and the supply of new money stops, the scheme collapses, and investors lose most or all of their money. On October 16, 2023, the Securities and Exchange Commission (“SEC”) announced ( here ) that it obtained a temporary restraining order, asset freeze, and other emergency relief to stop an ongoing fraud targeting the Indian American community that raised nearly $130 million since April 2021.  According to the SEC, defendants 1 raised more than $89 million from more than 350 investors for investments in purported venture capital funds that the Founders managed through Nanban Ventures and more than $39 million from 10 investors that invested directly in the three other entities controlled by the Founders. The SEC alleged that the Founders overstated the profitability of the investments and paid investors at least $17.8 million in fictitious profits that were actually payments pursuant to their Ponzi scheme. The SEC further alleged that defendants misrepresented Krishnan’s expertise and success using his “GK Strategies” options trading method. According to the SEC, Krishnan claimed in a YouTube video that he achieved returns of “more than a hundred percent,” and Nanban Ventures claimed in its venture capital funds’ private placement memorandums that Krishnan would manage the funds to generate returns that would “consistently overperform the S&P 500 Index.” The SEC maintained that the actual trading returns using GK Strategies were, with limited exceptions, lower than the returns of the S&P 500 index, lower than the percentage returns that Krishnan claimed in YouTube videos, and negative on numerous occasions. Commenting on the complaint, Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, stated: “We allege that the defendants engaged in a large-scale affinity fraud that targeted hundreds of investors, largely from the DFW-area Indian American community. Through allegedly false promises of unrealistic returns and lies about the success of their investing strategies, the defendants raised nearly $130 million from investors. But in classic Ponzi fashion, the complaint alleges, the defendants used investor money to make fake profit distribution payments, while allegedly siphoning off millions in investors’ funds for themselves. We urge all investors to confirm the credentials of supposed investment professionals and to view investments that advertise outsized returns skeptically.” In addition to the foregoing, the SEC alleged that Nanban Ventures and the Founders violated their fiduciary duties as investment advisers by causing the venture capital funds to invest more than $70 million into companies the Founders controlled. According to the SEC’s complaint, the Founders commingled that money with more than $39 million from at least 10 other investors and then used the commingled funds to, among other things, make Ponzi payments and pay themselves at least $6 million. Commenting on the affinity fraud aspect of the allegations, Eric Werner, Director of the SEC’s Fort Worth Regional Office, stated: “As we allege in our complaint, the defendants used the ‘Nanban’ branding, a word that means ‘friend,’ when raising nearly $130 million from investors of mostly Indian descent. However, the defendants have been the furthest thing from ‘friends’ to their investors, raising money and paying false returns on a foundation of lies.” The SEC charged all defendants with violating the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The SEC also charged the Founders and Nanban Ventures with violating the antifraud provisions of Section 206 of the Investment Advisers Act of 1940 and Rule 206(4)-8 promulgated thereunder. The SEC seeks permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest, and civil penalties from all defendants. The SEC also seeks an order prohibiting the Founders from acting as officers or directors of a public company. As copy of the SEC’s complaint can be found here . Footnote The SEC named as defendants Nanban Ventures LLC (“Naban Ventures”), its three founders Gopala Krishnan (“Krishnan”), Manivannan Shanmugam, and Sakthivel Palani Gounder (collectively, the “Founders”), and three other entities that the Founders control. 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.

By: Jeffrey M. Haber Negligent misrepresentation and fraudulent inducement are, to some extent, cut from the same cloth. Both causes of action involve false statements. Often, though not always, the failure to satisfy the elements of one of the claims will result in the failure to satisfy the elements of the other.  In Borovina v. ACAP Fund GP, LLC , 2023 N.Y. Slip Op. 05115 (2d Dept. Oct. 11, 2023) (here), the Appellate Division, Second Department affirmed the dismissal of a fraud claim on the ground that it mirrored the plaintiff’s negligent misrepresentation claim and was otherwise conclusory and violative of CPLR 3016(b). “A claim for negligent misrepresentation requires the plaintiff to demonstrate (1) the existence of a special or privity-like relationship imposing a duty on the defendant to impart correct information to the plaintiff; (2) that the information was incorrect; and (3) reasonable reliance on the information.” 1 “‘ iability for negligent misrepresentation has been imposed only on those persons who possess unique or specialized expertise, or who are in a special position of confidence and trust with the injured party such that reliance on the negligent misrepresentation is justified.’” 2 Notably, the relationship “requires a closer degree of trust than an ordinary business relationship.” 3 For this reason, arm’s-length transactions between sophisticated parties do not give rise to privity. 4 A claim for fraudulent inducement requires the plaintiff to demonstrate that the defendant made a misrepresentation or omission of a material existing fact, which was false and known to be false by the defendant when made, for the purpose of inducing the plaintiff’s reliance thereon; that the plaintiff justifiably relied on such misrepresentation or omission; and that the plaintiff was injured thereby. 5 Borovina v. ACAP Fund GP, LLC According to the complaint, in January 2021, plaintiff registered with defendant The Loan Source, Inc. (“TLS”), and received access to the TLS online portal for the purposes of obtaining services to submit an application for a loan through the Payroll Protection Program (“PPP”). Plaintiff alleged that TLS and defendant ACAP Fund GP, LLC (“ACAP”), conducted business together as “ACAP + The Loan Source Team.” After plaintiff uploaded all documentation to the TLS online portal, TLS sent plaintiff a notice that there was an error or mismatch in the reporting of plaintiff’s social security and tax identification numbers with documentation previously submitted by plaintiff in support of a prior PPP loan application. In response, plaintiff provided TLS documentation to fix the error. TLS informed plaintiff that it had received the additional documentation and that his PPP loan application “should be all set.”  Thereafter, plaintiff continued to receive error notices regarding his social security and tax identification numbers. TLS advised him to disregard those notices as they were “out of date.”  Subsequently, in April 2021, TLS informed plaintiff that it was unable to obtain approval of his PPP loan application and that it could no longer provide PPP-related services to him. Plaintiff commenced the action to recover damages for negligent misrepresentation and fraud against ACAP, TLS, and defendant Sterling National Bank. ACAP and TLS moved to dismiss the complaint, pursuant to CPLR 3211(a)(7), insofar as asserted against them.  In an order dated October 19, 2021, the motion court, inter alia , granted the motion, finding that plaintiff failed to plead negligent misrepresentation and fraud with particularity. Plaintiff appealed. As noted, the Second Department affirmed the dismissal of the complaint. The Court held that plaintiff did not demonstrate the existence of a special relationship with TLS and ACAP. Noting that a special relationship does not arise from an arm’s-length business transaction, the Court found that plaintiff failed to allege facts sufficient to “support an inference that a special relationship was created or existed between the plaintiff and ACAP or TLS.” 6 “Further,” held the Court, “the Supreme Court properly granted that branch of the motion of ACAP and TLS … to dismiss the cause of action sounding in fraud insofar as asserted against them.” 7 The Court found that the fraud allegations “were merely a recitation of the negligent misrepresentation cause of action.” 8 In addition, said the Court, plaintiff failed to plead the claim with particularity, alleging in a “conclusory” way “that the defendants’ representations ‘were so reckless and wanton as to constitute fraud.’” 9 Footnotes J.A.O. Acquisition Corp. v. Stavitsky , 8 N.Y.3d 144, 148 (2007); see also Mandarin Trading Ltd. v. Wildenstein , 16 N.Y.3d 173, 180 (2011). Fresh Direct, LLC v. Blue Martini Software, Inc. , 7 A.D.3d 487, 489 (2d Dept. 2004) (quoting Kimmell v. Schaefer , 89 N.Y.2d 257, 263 (1996). Fleet Bank v. Pine Knoll Corp. , 290 A.D.2d 792, 795 (3d Dept. 2002) (internal quotation marks and citation omitted). See Greenberg, Trager & Herbst v. HSBC Bank USA , 17 N.Y.3d 565, 579 (2011). Lama Holding Co. v. Smith Barney , 88 N.Y.2d 413, 421 (1996); see also New York Univ. v. Continental Ins. Co. , 87 N.Y.2d 308, 318 (1995). Slip Op. at *2 (citations omitted). Id. Id. Id. (citations omitted). 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.

By Jonathan H. Freiberger As previously noted in this Blog, there are two “components and constitutional predicates of personal jurisdiction.”  Keane v. Kamin , 94 N.Y.2d 263, 265 (1999). “One component involves service of process, which implicates due process requirements of notice and opportunity to be heard.”  Id. (citations omitted). Even though a defendant may be subject to the jurisdiction of the Court, dismissal may be sought “based on the claim that service was not properly effectuated.”  Id. (citations omitted).  “The other component of personal jurisdiction involves the power, or reach, of a court over a party, so as to enforce judicial decrees.”  Id. (citations omitted).  This requires a “constitutionally adequate connection between the defendant, the State and the action” ( Id. (citations omitted)) and is beyond the scope of this article.  [Personal jurisdiction and service of process have been discussed, inter alia , < here =">here"> , < here =">here"> , < here =">here"> , < here =">here"> and < here =">here"> .] The CPLR provides numerous methods for the service of process on, inter alia , individuals, business entities and governmental entities.  See CPLR §§ 307 to 318.  CPLR 308 addresses service of process on individuals.  The failure to serve process in “strict compliance” with the “statutory methods,” “leaves the court without personal jurisdiction over the defendant, and all subsequent proceedings are thereby rendered null and void.”  Nationstar Mortgage, LLC v. Gayle , 191 A.D.3d 1002 (2 nd Dep’t 2021) (citations omitted).  Accordingly, proper service of process, and proof thereof, is of the utmost importance.  In order to serve process on an individual, for example, process servers and attorneys need to know, inter alia , the defendant’s “dwelling place or usual place of abode” to serve by substituted service under CPLR 308(2) or (4).  Accordingly, public records such as DMV records are frequently used to locate potential defendants.  Vehicle and Traffic Law § 505(5) requires licensees to notify the DMV of changes of address within ten days of such change.  Similarly, Vehicle and Traffic Law 401(3) requires the same thing for vehicle registrations.  What happens, however, if a licensee or registrant fails to update an address with the DMV, and a process server relies on the erroneous information to serve process?  The law in this regard was inconsistent within and amongst the Appellate Division Departments.  The Second Department, however, recently clarified the law (in the Second Department at least). On September 13, 2023, the Appellate Division, Second Department, addressed this important issue in Castillo-Florez v. Charlecius .   The plaintiff in Castillo-Florez was hit by a bus owned by the MTA and operated by the individual defendant.  Plaintiff commenced a personal injury lawsuit.  The individual defendant was served with process upon a person of suitable age and discretion at an address indicated in the individual defendant’s DMV records.  When the individual defendant failed to appear, the plaintiff moved for a default judgment.  In support of the motion, the plaintiff submitted the process server’s affidavit which contained copies of the relevant DMV records showing the outdated address.  The individual defendant opposed the motion and argued that he did not default because he was never served with process and that the presumption of service arising from the process server’s affidavit was rebutted by the individual defendant’s “affidavit, in which he denied receipt of service and denied residing at the at the time service allegedly was made.”   The motion court granted the plaintiff’s motion holding that “while may not have resided at the as of June 2019, service upon him at that address was nevertheless permissible because had failed to update his mailing address with the DMV as required by VTL § 505(5). Additionally, the court determined that 's failure to update his address with the DMV precluded a challenge to the diligence of the process server in ascertaining 's correct address.”  The individual defendant appealed, and the Second Department reversed. As stated by the Castillo-Florez Court, the “principal question presented on this appeal is whether an individual defendant's failure to fulfill the statutory obligation to timely notify the New York State Department of Motor Vehicles … of a change of address, standing alone, estops that defendant from contesting service of the summons and complaint made at his or her former address.”  In answering the question in the negative, the Court held that “while there are circumstances where a defendant may be estopped from contesting service of process based in part on the failure to update his or her address with the DMV, such as where the defendant engages in a deliberate attempt to avoid service, the mere failure to update one's address with the DMV, standing alone, does not automatically warrant application of the estoppel doctrine.” In reaching its decision, the Castillo-Florez Court surveyed the varied case law on this issue.  The Court noted that estoppel may be employed to “preclude a defendant 'from challenging the location and propriety of service of process if that defendant has engaged in affirmative conduct which misleads a party into serving process at an incorrect address’” (c iting Hudson Val. Bank, N.A. v. Eagle Trading , 208 A.D.3d 648, 650 (2 nd Dep’t 2022), quoting Everbank v. Kelly , 203 A.D.3d 138, 145 (2 nd Dep’t 2022)).  [Eds. Note: this Blog discussed Everbank < here =">here"> .]   As an integral part of its analysis, the Court discussed Feinstein v. Bergner , 48 N.Y.2d 234 (1979), a motor vehicle accident case.  There the defendant provided an address at the scene of an accident and was served with process at that location 30 months later.  The defendant, however, moved 10 months after the accident.  The Court of Appeals failed to sustain service and declined to apply estoppel because the plaintiff “failed to demonstrate that engaged in conduct which was calculated to prevent them from learning of his new address.” (Internal quotation marks omitted, brackets in original.)   The Second Department then noted that it has applied estoppel inconsistently over the years.  It has done so in motor vehicle accident cases solely because the defendant failed to timely notify the DMV of an address change.  In other cases, the Court noted, a defendant’s address was not updated with the DMV and “the defendant had also engaged in affirmative conduct that court viewed as a deliberate attempt to avoid notice of the action, making estoppel appropriate.”  The Court also noted that it “has, at times, declined to apply estoppel where there was no evidence that the defendants had engaged in any conduct which could be viewed as a deliberate attempt to avoid service.”  The Court also analyzed similar cases from other Departments. The Second Department then recognized that: certain of this Court's jurisprudence in this area drifted from the original intent of Feinstein . Although Feinstein did not focus on Vehicle and Traffic Law § 505(5), nothing in that decision suggests that an individual defendant's failure to timely update his or her address with the DMV, standing alone, mandates precluding a defendant from challenging service made at a former address. Rather, as discussed, the Court of Appeals declined to apply estoppel because the plaintiffs had failed to demonstrate that the defendant engaged in conduct calculated to prevent them from learning of his new address ( see Feinstein v Bergner , 48 NY2d at 241). We find that the failure to update one's address, by itself, should not equate with affirmative or deliberate conduct designed to avoid service, even when coupled with a defendant's direct involvement in an accident.   The Second Department then held “that the mere failure to update one's address with the DMV, standing alone, does not automatically equate with a deliberate attempt to avoid service and warrant estopping a defendant from challenging the propriety of service at a former address o the extent our prior decisions, including those previously cited herein, conflict with this principle, they should no longer be followed for that proposition .”  (Emphasis supplied.) As to the specific facts of Castillo-Florez, the Court found that the individual defendant did nothing to prevent the plaintiff “from learning his new address”.  Nor was there any basis to conclude that the individual defendant “neglected to update his address with the DMV as part of a deliberate attempt to avoid service”.  Finally, while the process server’s affidavit of service was prima facie evidence of proper service, the individual defendant “sufficiently rebutted the presumption of proper service n opposition to the plaintiff's motion, a detailed, sworn affidavit from was submitted, in which he, inter alia , denied receipt of service, denied residing at the at the time service allegedly was made, and set forth the location of his address at the time of service”.  Thus, the Court determined that under the circumstances, “a hearing to determine whether was properly served pursuant to CPLR 308(2) was required.” 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 In Gold v. Rothfeld , 2023 N.Y. Slip Op. 05006 (2d Dept. Oct. 4, 2023) ( here ), the Appellate Division, Second Department affirmed the dismissal of a fraud complaint on two grounds: collateral estoppel and failure to plead fraud with particularity. We examine the decision and the principles underpinning the holding below. The Requirement To Plead Fraud With Particularity To state a claim for fraud, a plaintiff must allege “a misrepresentation or a material omission of fact which was false and known to be false by defendant, made for the purpose of inducing the other party to rely upon it, justifiable reliance of the other party on the misrepresentation or material omission, and injury.” The claim must be pleaded with particularity. Conclusory allegations will not suffice. Neither will allegations based on information and belief. If “sufficient factual allegations of even a single element are lacking,” then the claim must be dismissed. The requirement that a fraud claim be pleaded with particularity can be found in Section 3016(b) of the Civil Practice Law and Rules (“CPLR”). Under CPLR § 3016 (b), the circumstances constituting fraud must be stated with sufficient detail “to permit a reasonable inference of the alleged conduct.”   To satisfy the particularity requirement, the plaintiff must allege such facts as the time, place, and content of the defendant’s false representations, as well as the details of the defendant’s fraudulent acts, including when the acts occurred, who engaged in them, and what was obtained as a result. Put another way, the complaint must identify the “who, what, where, when and how” of the alleged fraud. Notwithstanding, in Pludeman v.Northern Leasing Systems, Inc. , the Court of Appeals held that CPLR § 3016(b) “should not be so strictly interpreted as to prevent an otherwise valid cause of action in situations where it may be impossible to state in detail the circumstances constituting a fraud.” Therefore, at the pleading stage, a complaint need only “allege the basic facts to establish the elements of the cause of action.” Thus, as noted, a plaintiff will satisfy CPLR 3016(b) when the facts permit a “reasonable inference” of the alleged misconduct. Collateral Estoppel The doctrine of collateral estoppel prevents a party from relitigating an issue that was “raised, necessarily decided and material in the first action,” provided the party had a full and fair opportunity to litigate the issue. The doctrine applies when: “(1) the issues in both proceedings are identical, (2) the issue in the prior proceeding was actually litigated and decided, (3) there was a full and fair opportunity to litigate in the prior proceeding, and (4) the issue previously litigated was necessary to support a valid and final judgment on the merits.” Collateral estoppel “is a doctrine intended to reduce litigation and conserve the resources of the court and litigants and it is based upon the general notion that it is not fair to permit a party to relitigate an issue that has already been decided against it.” The doctrine is an equitable defense “grounded in the facts and realities of a particular litigation, rather than rigid rules.” The proponent of collateral estoppel has the burden of demonstrating “the identicality and decisiveness of the issue,” while the opponent has the burden of establishing “the absence of a full and fair opportunity to litigate the issue in prior action or proceeding.” In New York, the CPLR specifically recognizes collateral estoppel as a basis for dismissal. It is also an affirmative defense under the CPLR. Gold v. Rothfeld In Gold , plaintiff brought an action for damages against defendant, claiming fraud and conspiracy to commit fraud. In particular, plaintiff claimed damages in connection with certain alleged improprieties in, among other things, the preparation of certain estate planning instruments for his mother, Grace K. Gold, and father, Eugene Gold, the administration of their estates, and communications with him regarding the foregoing. Background On November 8, 2011, Grace died, survived by Eugene and their three children (plaintiff, Cheryl Gold and Amy Gold Kaufman). Under Grace’s last will and testament, dated February 4, 2011, Eugene was appointed executor of the estate. Among other things, Grace created a trust in her will that provided income to Eugene during his lifetime, and which was to terminate (and did terminate) upon Eugene’s death. Grace’s will also provided, in pertinent part, that Eugene had a limited power of appointment over the corpus of the trust exercisable in favor of one or more of Grace’s descendants. On November 15, 2011, plaintiff signed a waiver and consent to the probate of Grace’s will. Eugene died on November 8, 2013, leaving a last will and testament and codicils for which Cheryl was the nominated executor. With respect to the trust, Eugene’s will provided, among other things, that $2 million was to be distributed to Cheryl and Amy each, with the balance to be distributed to Eugene’s descendants per stirpes. Eugene’s will also contained an in terrorem clause. After Cheryl sought to probate Eugene’s will, plaintiff sought to rescind his previously filed waiver and consent with respect to Grace’s will and moved to stay the probate of Eugene’s will, based on his assertion, inter alia , that Grace lacked capacity at the time she executed her will and that her will was the product of undue influence. In a decision dated July 31, 2014, the Surrogate’s Court determined, in pertinent part, that plaintiff failed to show that Grace lacked capacity at the time she executed her will or that she was subject to undue influence. Thereafter, plaintiff petitioned the Surrogate’s Court for, inter alia , letters of limited administration with respect to Grace’s estate, based upon his assertions that Grace lacked capacity and was subject to undue influence at the time she executed the subject trust and a settlement agreement with the Internal Revenue Service. Cheryl and Amy moved, inter alia , for summary judgment dismissing the amended petition. The Surrogate’s Court granted the the branch of the motion to dismiss the amended petition and denied plaintiff’s demand for an order compelling an accounting without prejudice to renewal at a later date. On November 10, 2017, plaintiff commenced the action in Supreme Court. Defendant moved to dismiss the complaint with prejudice. That motion was withdrawn after plaintiff filed an amended complaint. In the amended, plaintiff alleged, in sum and substance, that defendant made material representations that were false regarding Eugene’s intention to exercise certain powers of appointment under Grace’s will, and the impact that would occur to plaintiff’s rights by executing the waiver and consent for probate; false and misleading testimony offered by defendant during his examination in the probate proceeding of Eugene’s will; knowing and willful participation in false and misleading statements and submissions made by co-counsel to the Surrogate’s Court in order to induce the court to amend the probate decree; knowingly false material representations to deceive plaintiff; reliance by plaintiff to his detriment on defendant’s advice regarding the non-exercise of certain powers of appointment, the impact of executing the waiver and consent prepared by the defendant; reliance on defendant’s representations as an officer of the court, who was required to refrain from engaging with plaintiff and, instead, advise him to retain independent counsel; the prohibition on ex parte communications with the Surrogate’s Court and the prohibition on obtaining substantive relief without providing the plaintiff with notice and an opportunity to be heard; damages plaintiff sustained because of the waiver of plaintiff’s right to conduct examinations in the estate of Grace; and by increased and unnecessary legal fees related to the foregoing. Defendant filed a new motion to dismiss pursuant to CPLR § 3211(a)(1), CPLR § 3211(a)(5) and CPLR § 3211(a)(7). Among other things, defendant argued that the allegations in the amended complaint concerned acts that were previously decided by the Surrogate’s Court and therefore barred by the doctrine of collateral estoppel and the cause of action for fraud was not sufficiently pleaded with specificity. The Motion Court’s Decision and Order The motion court held that the action was barred by the doctrine of collateral estoppel “because this action essentially no different from the plaintiff’s prior attempts to vacate his waiver and consent in the Surrogate’s Court.” “Distilled to its essence,” said the motion court, “the complaint amounts to nothing more than a rehashing of the same theory of fraudulent misrepresentations and conspiracy which was explicitly considered and rejected by the Surrogate’s Court as well as the Second Department.” The motion court held that “plaintiff failed to show that he did not have a full and fair opportunity at the Surrogate Court proceedings or subsequently at the Appellate Division to litigate the matters alleged herein.” Accordingly, the motion court concluded that the fraud claim was barred on collateral estoppel grounds. The motion court also held that plaintiff failed to state a fraud cause of action. The motion court explained that plaintiff failed to plead any of the elements of the claim, stating “plaintiff has not identified any specific instances of misconduct or any misrepresentation by the defendant.…” The motion court also explained that plaintiff “failed to properly plead the elements of misrepresentation of a material fact and justifiable reliance with specificity.” Moreover, said the motion court, “plaintiff has not, and cannot plead identifiable, actionable damages.” Plaintiff appealed. As noted, the Second Department affirmed. The Second Department’s Decision As to the dismissal on collateral estoppel grounds, the Court held that the motion court “properly concluded that so much of the fraud cause of action as was predicated upon allegations that the defendant made misrepresentations to induce the plaintiff to sign a waiver and consent to the probate of Grace’s will and concerning Grace’s personal property was barred by the doctrine of collateral estoppel.” The Court explained that “ hose allegations were raised by the plaintiff in a petition he filed in the Surrogate’s Court, seeking to rescind the waiver and consent, and, after a full and fair opportunity to litigate, were necessarily decided against him in a 2014 order of that court granting dismissal of the petition.” Regarding the dismissal of the fraud claim for failing to state a claim, the Court held that the motion court properly granted the motion. The Court explained that the “amended complaint … failed to sufficiently allege recoverable, nonspeculative damages with respect to the allegations that the defendant made certain misrepresentations regarding the plaintiff’s inheritance in November 2011.” The Court also explained that plaintiff “failed to sufficiently set forth the alleged misrepresentations made, and justifiable reliance thereon, concerning the defendant’s purported participation in a fraudulent scheme in September 2016. Takeaway In a prior article, we quoted Stephen King as saying “the truth is in the details. No matter how you see the world …, the truth is in the details.” ( Here .) We said that the “quote fairly sums up the pleading requirement that all plaintiffs must satisfy when alleging a fraud.” The reason: courts require plaintiffs to provide sufficient details of the alleged misconduct to support a reasonable inference that the allegations of fraud are true. For this reason, conclusory allegations will not suffice. Plaintiffs must describe the “who, what, when, where, and how” of the fraud, or “the first paragraph of any newspaper story.”   In the absence of such detail, as in  Gold , even under the reasonable inference standard of the CPLR, plaintiff could not maintain a fraud claim. As discussed above, the collateral estoppel doctrine will preclude a party from relitigating an issue that has been previously decided against him/her in a prior proceeding where he/she had a full and fair opportunity to litigate such issue. In Gold , both the motion court and the Second Department found that plaintiff’s amended complaint was simply a reiteration of the same theory that was litigated, considered, and rejected by the Surrogate’s Court and the Second Department. Since plaintiff had a full and fair opportunity to be heard in those proceedings, the courts dismissed the action on collateral estoppel grounds. ________________________________ Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice. Lama Holding Co. v. Smith Barney Inc. , 88 N.Y.2d 413, 421 (1996). Eurycleia Partners, LP v. Seward & Kissel, LLP , 12 N.Y.3d 553, 559 (2009). Id. See Facebook, Inc. v. DLA Piper LLP (US) , 134 A.D.3d 610, 615 (1st Dept. 2015) (“Statements made in pleadings upon information and belief are not sufficient to establish the necessary quantum of proof to sustain allegations of fraud.”). RKA Film Fin., LLC v. Kavanaugh , 2018 WL 3973391, at *3 (Sup. Ct., N.Y. County 2018) (quoting Shea v. Hambros PLC , 244 A.D.2d 39, 46 (1st Dept. 1998)). See also Gregor v. Rossi , 120 A.D.3d 447 (1st Dept. 2014). Pludeman v. Northern Leasing Sys., Inc. , 10 N.Y.3d 486, 491 (2008) (citation omitted). Id. at 491 (internal quotation marks and citation omitted). Id. at 492. Id. E.g. , Parker v. Blauvelt Volunteer Fire Co. , 93 N.Y.2d 343, 349 (1999). Conason v. Megan Holding, LLC , 25 N.Y.3d 1, 17 (2015) (internal quotation marks omitted). Kaufman v. Eli Lilly & Co. , 65 N.Y.2d 449, 455 (1985) Buechel v. Bain , 97 N.Y.2d 295, 303 (2001). Ryan v. New York Tel. Co. , 62 N.Y.2d 494, 501 (1984). See CPLR § 3211(a)(5). See CPLR § 3018(b). An in terrorem clause is a provision in a will that prohibits a beneficiary from disputing any provisions of a will. People use such clauses to discourage challenges to a will and avoid long probate proceedings. Under an in terrorem clause, a beneficiary’s interest or inheritance under the will is revoked if the beneficiary violates the clause. Most states enforce in terrorem clauses, though they are disfavored and subject to strict construction, such that they do not grant or hold absolute authority over the distribution of the testator’s interests. Many states limit the enforceability of in terrorem clauses to ensure beneficiaries can challenge fraudulent conduct or other conduct against public policy. In New York, for example, courts have held that in terrorem clauses that attempt to preclude a beneficiary from questioning the eligibility or conduct of a fiduciary are not enforceable as against public policy and the intentions of the testator. For a more in-depth discussion of in terrorem clauses, see here (from where the foregoing discussion is taken). Citations omitted. See Matter of Gold , 170 A.D.3d 1174 (2d Dept. 2014). Citation omitted. Citations omitted. Slip Op. at *1. Id. (citations omitted). Id. Id. Id. (citations omitted). United States ex rel. Lubsy v. Rolls-Royce Corp. , 570 F.3d 849, 853 (7th Cir. 2009) (internal quotation marks omitted).

By Jonathan H. Freiberger This Blog frequently addresses complex substantive and procedural issues.  Today, however, we return to basics.  In New York, an “action is commenced by the filing of a summons and complaint or a summons with notice in accordance with rule twenty-one hundred two ” of the CPLR.  CPLR 304(a) .  “Filing” means “the delivery of the summons with notice summons and complaint … to the clerk of the court in the county in which the action … is brought ….”  CPLR 304(c).  The filing of a summons is necessary to invoke the jurisdiction of the court.  Wesco Ins. Co. v. Vinson , 137 A.D.3d 1114, 1115 (2 nd Dep’t 2016); Ghiazza v. Anchorage Mirina, Inc. , 210 A.D.3d 1328, 1329 (3 rd Dep’t 2022).  “The failure to file the papers required to commence an action constitutes a nonwaivable, jurisdictional defect, and such a defect is not subject to correction under CPLR 2001.”  Ghiazza , 210 A.D.3d at 1329 (citations and internal quotation marks omitted). The CPLR also provides that a court can dismiss an action, without prejudice, if, inter alia , a summons and complaint are not served on the defendant within 120 days “of the commencement of the action.”  CPLR 306-b .  Similarly, a notice of pendency is “effective only if, within thirty days after filing, a summons is served upon the defendant or first publication of the summons against the defendant is made pursuant to an order and publication is subsequently completed.”  CPLR 6512 .  Also, a notice of pendency is subject to “mandatory cancellation” if “service of a summons has not been completed within the time limited by section 6512….”  CPLR 6514 . The failure of the plaintiff to file a summons was an issue decided on October 4, 2023, by the Appellate Division, Second Department, in Park Premium Enterprises v. Norben Lofts, LLC .   The plaintiff in Park was a general contractor hired by the defendant to convert a commercial building into residential apartments.  The plaintiff alleged that it performed under the parties’ contract but was never paid.  The plaintiff filed a mechanic’s lien against the property and, subsequently, filed a complaint and a notice of pendency.  [This blog has discussed mechanic’s liens < here =">here"> , < here =">here"> , < here =">here"> and < here =">here"> and notices of pendency < here =">here"> and < here =">here"> .] The defendant moved to, inter alia , dismiss the complaint pursuant to CPLR 3211(a) due to the plaintiff’s failure to file a summons, and to vacate the notice of pendency for failure to comply with CPLR 6511 and 6512.  The Plaintiff filed a summons seven months after filing its complaint and over one month after the defendant filed its motion to dismiss.  The plaintiff opposed the motion by arguing, inter alia , that the Governor’s COVID related executive orders tolled the time in which the plaintiff had to commence the action.  The motion court granted the defendant’s motion and the plaintiff appealed. The Second Department affirmed, holding that the supreme court was without jurisdiction, and the action was a “nullity,” due to the plaintiff’s failure to file a summons.  The Court rejected plaintiff's COVID related arguments.  Thus, the Court held that: The contention of that the time in which to commence an action was tolled by a series of executive orders issued by Governor Andrew Cuomo is misplaced, as no time period is at issue. Rather, in order to commence an action, was required to file a summons and complaint, and the failure to do so warranted dismissal of the complaint.  The Court also rejected the plaintiff’s argument that “the failure to file a summons should have been disregarded pursuant to CPLR 2001 ,” which allows a court, under certain circumstances, to permit the correction of “a mistake, omission, defect or irregularity including … mistake in the filing process.”  In so doing, the Court stated: The contention of that the failure to file a summons should have been disregarded pursuant to CPLR 2001 is improperly raised for the first time on appeal, and, in any event, without merit, as the complete failure to file the initial papers necessary to institute an action is not the type of error that falls within the court's discretion to correct under CPLR 2001. The contention of that it filed a summons after submitting its opposition to the subject motion is based upon matter outside of the record on appeal and is not properly before this Court.  Finally, the Court canceled the notice of pendency due to the dismissal of the action pursuant to CPLR 6514(a). 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 We have often written about the SEC’s whistleblower program and, in particular, the success of the program with respect to detecting and preventing violations of the federal securities laws. The success of the program depends, in large part, on the ability of would-be whistleblowers to have the freedom to report wrongdoing without fear of reprisal. Taking steps to impede an employee or former employee from sharing information with the SEC impairs this free flow of information to the Commission. To ensure the freedom to communicate, the SEC has cracked down on companies that use severance agreements and other types of employment contracts to silence and discourage employees from reporting wrongdoing to the Commission. 1 In 2010, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) to combat illegal and fraudulent conduct on Wall Street and promote compliance with the federal securities and commodities laws.  The Dodd-Frank Act contains whistleblower provisions that authorize the Commission to pay substantial cash rewards to whistleblowers that voluntarily provide the SEC with information about securities fraud and other violations of the securities laws, including the Foreign Corrupt Practices Act.  To fulfill the purpose of the Dodd-Frank Act, the Commission adopted Rule 21F-17, 2  which provides in relevant part: (a) No person may take any action to impede an individual from communicating directly with the Commission staff about a possible securities law violation, including enforcing, or threatening to enforce, a confidentiality agreement . . . with respect to such communications. Rule 21F-17 applies to any policy or procedure, or agreement, such as confidentiality, severance, and non-disclosure agreements, that may impede an employee or former employee from providing information to the SEC about a securities law violation.  Despite being effective for more than 12 years, many companies have ignored the mandate of Rule 21F-17. In this regard, they have used severance agreements and other types of employment contracts to silence and discourage employees from reporting violations of the securities laws to the Commission. That was the case in the Matter of D. E. Shaw & Co, L.P. , Securities Exchange Act of 1934, Release No. 98641 (Sept. 29, 2023). Matter of D. E. Shaw & Co, L.P. On September 29, 2023, the SEC announced ( here ) that it settled charges against New York-based registered investment adviser D. E. Shaw & Co., L.P. (“DESCO”) for impeding whistleblowing by requiring employees to sign agreements prohibiting the disclosure of confidential corporate information to third parties, without an exception for potential SEC whistleblowers, and by requiring departing employees to sign releases affirming that they had not filed any complaints with any government agency in order for the employees to receive deferred compensation. DESCO agreed to pay $10 million to settle the SEC’s charges . The SEC found ( here ) that, from at least 2011 through 2019, DESCO required new employees to sign agreements that prohibited them from disclosing confidential information to anyone outside the company unless authorized by DESCO or required by law or court order. Confidential information was broadly defined to include any information gained in the course of employment that could reasonably be expected to be damaging to DESCO if disclosed to third parties. In addition, according to the SEC, from at least 2011 through 2023, DESCO required approximately 400 of its departing employees to sign releases affirming that they had not filed any complaints with any governmental agency, department, or official in order for them to receive deferred compensation and other benefits sometimes worth millions of dollars. According to the SEC, in 2017, DESCO circulated a firm-wide email notifying employees that they were not prohibited from communicating with regulators regarding possible violations of law and that notice to DESCO was not required. However, said the SEC, DESCO did not include similar whistleblower protection language in its employment agreements until 2019 and in its releases until 2023—after the SEC’s investigation commenced. “Entities employing confidentiality, separation, employment and other related agreements should take careful notice of today’s enforcement action,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. “The Commission takes seriously the enforcement of whistleblower protections and those drafting or using these types of agreements should take equally serious their obligations to ensure that they don’t impede whistleblowers from contacting the Commission.” “Protected by federal law, whistleblowers play a significant role in uncovering fraud and other illegality in the securities markets, particularly with respect to registered entities regulated by the Commission,” said Sheldon L. Pollock, Associate Director of the SEC’s New York Regional Office. “The SEC remains committed to ensuring their unfettered ability to provide information to further our investigations.” In its cease-and-desist order ( here ), the SEC found that DESCO violated Rule 21F-17(a) of the Securities Exchange Act of 1934. Without admitting or denying the SEC’s findings, DESCO agreed to be censured, cease and desist from violating the whistleblower protection rule, and pay a $10 million civil penalty. Footnotes In April 2015, the SEC brought the first enforcement action for a violation of the whistleblower protection rule based on a company’s use of a restrictive confidentiality agreement. See In the Matter of KBR, Inc. , Exchange Act Release No. 74619 (Apr. 1, 2015). This Blog wrote about that enforcement action here . Since 2015, the SEC has instituted nearly 20 additional enforcement actions charging violations of the rule. This Blog has examined some of those enforcement actions here , here ,  here ,  here , and  here . Rule 21F-17 became effective on August 12, 2011. 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.

By: Jeffrey M. Haber In New York, foreign entities – that is, corporations, limited liability companies and partnerships authorized to do business in another jurisdiction or country – are required to register to business with the Secretary of State. 1 The failure to receive such authority deprives the foreign entity of the ability to affirmatively access the courts of New York and subjects any action commenced by the foreign entity to dismissal. 2 The purpose of the registration requirement is to regulate foreign companies that are conducting business within New York State so that they are not doing business under more advantageous terms than “those allowed a corporation of this State.” 3 When applying BCL § 1312(a), the subject of today’s article, the relevant inquiry is whether the foreign entity is “doing business” in the State. The test of doing business in New York for the purpose of BCL § 1312(a) “is not the same as that for jurisdictional purposes.” 4 “Both raise constitutional questions, but the latter involves the due process clause while the former involves the interstate commerce clause.” 5 In construing statutes that license foreign corporations to do business within New York State, the courts try to avoid any interference by the State with interstate commerce. 6 Whether a company is “doing business” in New York “depends upon the particular facts of each case with inquiry into the type of business activities being conducted.” 7 Moreover, “whether was doing business in New York” is determined by looking “at the time the action was commenced.” 8 Notably, “not all business activity engaged in by a foreign corporation constitutes doing business in New York.” 9 A foreign corporation is permitted to transact “some kinds of business within the state without procuring a certificate” authorizing it to conduct business in New York. 10 In order for a foreign corporation to be doing business in New York within the context of BCL § 1312, “the intrastate activity of the foreign corporation be permanent, continuous, and regular.” 11 The entity’s activities cannot be “merely casual or occasional.…” 12 New York courts consider a number of factors, both quantitative and qualitative, when considering the entity’s activity in the State. 13 Among the factors the courts consider are: (a) whether the entity maintains a physical presence or has employees located within the State; 14 (b) the frequency and regularity of activities within the State; 15 and (c) the volume and nature of the activities within the State. 16 Merely entering into a single contract, engaging in an isolated piece of business, or engaging in an occasional undertaking will not suffice to invoke application of BCL § 1312. 17 Similarly, “the solicitation of business and facilitation of the sale and delivery of merchandise incidental to business in interstate and/or international commerce is typically not the type of activity that constitutes doing business in the state within the contemplation of section 1312 (a).” 18 However, regularly and continuously entering the State to solicit, complete and manage sales to customers in New York may constitute doing business in the State. 19 The party seeking dismissal under BCL § 1312(a) must show that the business activities within the State were so systematic and regular as to manifest continuity of activity. 20 Absent sufficient evidence to establish that a plaintiff is doing business in the State, “the presumption is that the plaintiff is doing business in its State of incorporation … and not in New York.” 21 Finally, if the foreign business entity is found to have been continuously and regularly conducting business in the State, the courts often refrain from dismissing the action. 22 Instead, the courts conditionally grant the dismissal motion and provide the plaintiff with a reasonable time period to cure its deficiency under BCL § 1320. 23 In Central Care Solutions, LLC v. Grand Great Neck, LLC , 2023 N.Y. Slip Op. 04749 (2d Dept. Sept. 27, 2023) ( here ), the Appellate Division, Second Department considered the foregoing principles in modifying the dismissal of a complaint with prejudice on BCL § 1312(a) grounds. Central Care Solutions is an action to recover damages for, inter alia , breach of contract. The action was commenced in January 2020 by Clean-Tex Services, Inc. (“Clean-Tex”) and two other plaintiffs.  In March 2020, defendants moved to dismiss the amended complaint insofar as asserted by Clean-Tex on the ground that, inter alia , Clean-Tex lacked the capacity to sue pursuant to BCL § 1312(a), as it was a foreign corporation doing business in New York without registering to do so. Clean-Tex opposed the motion.  On November 2, 2020, the motion court granted the motion with respect to Clean-Tex, directing that Clean-Tex take all necessary actions to obtain authorization to conduct business in New York within six months or else the amended complaint insofar as asserted by Clean-Tex would be dismissed with prejudice upon defendants’ submission of a proposed order of dismissal. Clean-Tex did not obtain authorization to conduct business in New York by the court-ordered deadline of April 29, 2021. However, on April 23, 2021, Clean-Tex submitted an affirmation to the motion court, with notice to defendants, acknowledging that it had not yet obtained the authorization and explaining its efforts so far. In this affirmation, without a notice of motion, Clean-Tex requested a 90-day extension to comply with the motion court’s November 2, 2020 order. On April 30, 2021, one day after the court-ordered deadline, defendants submitted a proposed order and argued that the amended complaint insofar as asserted by Clean-Tex should be dismissed with prejudice. In response, Clean-Tex once again requested an extension to comply with the order and argued that dismissal with prejudice would be a disproportionate and drastic remedy. On May 17, 2021, the motion court entered judgment dismissing the amended complaint insofar as asserted by Clean-Tex with prejudice. On June 8, 2021, 40 days past the court-ordered deadline, Clean-Tex obtained its authorization to conduct business in New York. As noted, on appeal, the Second Department modified the judgment to make the dismissal without prejudice. In a terse opinion, after briefly discussing the purpose of BCL § 1312(a), and noting “the clear preference for disposition of cases on the merits,” 24 the Court held that, “ nder all of the circumstances present here, … the Supreme Court … improvidently exercised its discretion in” dismissing the amended complaint as asserted by Clean-Tex “with prejudice”. 25 Footnotes See , e.g. , BCL § 1312(a). See United Envtl. Techniques, Inc. v. State Dept. of Health , 88 N.Y.2d 824, 825 (1996) (finding that foreign corporation was not registered to do business in New York and therefore lacked capacity to sue). Von Arx, A.G. v. Breitenstein , 52 A.D.2d 1049, 1050 (4th Dept. 1976); see also National Lighting Co. v. Bridge Metal Indus., LLC , 601 F. Supp. 2d 556, 566 (S.D.N.Y. 2009) (additional citation omitted). Great White Whale Adver., Inc. v. First Festival Prods. , 81 A.D.2d 704, 706 (3d Dept. 1981). Id. Id. (citations omitted). Id. Remsen Partners, Ltd. v. Southern Mgmt. Corp. , No. 01 Civ. 4427, 2004 WL 2210254, at *3 (S.D.N.Y. 2004) (citation and internal quotation marks omitted) (alteration in original). Netherlands Shipmortgage Corp. v. Madias , 717 F.2d 731, 735-36 (2d Cir. 1983). Globaltex Group, Ltd. v. Trends Sportswear, Ltd. , No. 09-CV-235, 2009 WL 1270002, at *3 (E.D.N.Y. May 6, 2009) (quoting Int’l Fuel & Iron v. Donner Steel , 242 N.Y. 224, 229 (1926)). Manney v. Intergroove Tontrager Vertriebs GMBH , No. 10 Civ. 4493, 2011 WL 6026507, at *8 (E.D.N.Y. Nov. 30, 2011) (quoting Netherlands Shipmortgage , 717 F.2d at 736) (alteration in original). United Arab Shipping Co. (S.A.G.) v. Al-Hashim , 176 A.D.2d 569, 570 (1st Dept. 1991); see also Maro Leather Co. v Aerolineas Argentinas , 161 Misc. 2d 920, 923 (Sup. Ct., App. Term 1st Dept. 1994) (“where a corporation’s activities within New York are merely incidental to its business in interstate and international commerce, BCL § 1312(a) is not applicable.”); Schwarz Supply Source v. Redi Bag USA, LLC , 64 A.D.3d 696, 696-97 (2d Dept. 2009) (same); Paper Mfrs. Co. v. Ris Paper Co., Inc. , 86 Misc. 2d 95, 98 (Civ. Ct., N.Y. Cty. 1976) (noting that if a “foreign corporation is engaged in local business on more than an isolated or accidental basis, it must comply with the statute” and obtain authorization before bringing suit). Netherlands Shipmortgage , 717 F.2d at 738. Uribe v. Merchants Bank of New York , 266 A.D.2d 21, 21 (1st Dept. 1999) (Plaintiff was not doing business where it maintained no office or telephone listing, owned no real property and had no employees in the State). G.P. Exports v. Tribeca Design , 147 A.D.3d 655, 656 (1st Dept. 2017) (a single business transaction within the State did not warrant the application of BCL § 1312(a)). United Arab Shipping , 176 A.D.2d at 570 (Plaintiff was doing business within the State where its New York office employed approximately 17 full-time employees, actively solicited business, conducted sales activities, negotiated and executed contracts, and generated substantial in-state revenue). Netherlands Shipmortgage , 717 F.2d at 738; Von Arx , 52 A.D.2d at 1049; Airline Exch., Inc. v. Bag , 266 A.D.2d 414, 415 (2d Dept. 1999) (having a bank account, occasionally using an office in the State, and engaging in three transactions in the State, did not support a finding that the business activity was so systematic and regular and essential to its corporate activities as to constitute doing business in New York); 8430985 Canada Inc. v. United Realty Advisors LP , 148 A.D.3d 428 (1st Dept. 2017) (an investment vehicle not subject to the registration requirements of BCL § 1312(a)). Digital Ctr., S.L. v. Apple Indus., Inc. , 94 A.D.3d 571, 572 (1st Dept. 2012) (citation omitted). Highfill, Inc. v. Bruce & Iris, Inc. , 50 A.D.3d 742, 744 (2d Dept. 2008) (corporation was doing business where its regional vice president regularly sent employees to New York to manage “special sales,” and made approximately $6,600,000 in New York sales over several years). JPMorgan Chase Bank, N.A. v. Didato , 185 A.D.3d 801, 802-803 (2d Dept. 2020); Maro Leather , 161 Misc. 2d at 923. Cadle Co. v. Hoffman , 237 A.D.2d 555 (2d Dept. 1997); JPMorgan Chase , 185 A.D.3d at 803; Airline Exch. , 266 A.D.2d at 415. Tri-Term. Corp. v. CITC Indus., Inc. , 78 A.D.2d 609 (1st Dept. 1980). E.g. , Showcase Limousine, Inc. v. Carey , 269 A.D.2d 133, 134 (1st Dept. 2000), mod in part , 273 A.D.2d 20 (1st Dept. 2000); Uribe , 266 A.D.2d at 22 (noting that the failure of the plaintiff to register with the State may be cured prior to the resolution of the action); Credit Suisse Int’l v. URBI, Desarrollos Urbanos, S.A.B. de C.V. , 41 Misc. 3d 601, 604 (Sup. Ct., N.Y. County 2013) (ordering plaintiff to comply with BCL § 1312 within 60 days or face dismissal of its complaint). Slip Op. at *1 (citations omitted). Id. (citations omitted). 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.

By: Jeffrey M. Haber “The doctrine of forum non conveniens permits a US court to decline to exercise its judicial jurisdiction if the court would be a seriously inconvenient forum and if an adequate alternative forum exists.” 1 The doctrine presupposes at least two forums in which the defendant is amenable to process; the doctrine furnishes criteria for choice between them. 2 “The forum non conveniens determination is committed to the sound discretion of the trial court. It may be reversed only when there has been a clear abuse of discretion.” 3 Under CPLR § 327, which codified the common law doctrine of forum non conveniens , a court may dismiss an action where “in the interest of substantial justice the action should be heard in another forum.” “The doctrine is based upon justice, fairness and convenience . . . and the burden is on the party challenging the forum to demonstrate that the action would be best adjudicated elsewhere.” 4 Among the factors to be considered are the residence of the parties, the location of the transaction giving rise to the cause of action, the applicability of the laws of another state or country, the location of the witnesses and any pending discovery, the burden on the New York courts, the potential hardship to the defendant, and the unavailability of an alternative forum where the plaintiff may bring suit. 5 “No one factor is controlling,” since the doctrine is flexible in application and “based on the facts and circumstances of each case.” 6 In Brandwein v. Hartig , 2023 N.Y. Slip Op. 04711 (1st Dept. Sept. 26, 2023) ( here ), the Appellate Division, First Department applied the foregoing principles in affirming the dismissal of an action involving Israeli defendants. Brandwein v. Hartig Background Brandwein concerned alleged financial wrongdoing by defendants. Plaintiffs are New York residents, who claimed to be the “Personal Representatives” of the Estate of Zehava Greenberg (“Greenberg” or “Decedent”). At the time of her death in Israel in December 2019, Greenberg was an Israeli citizen, who resided in Jerusalem for several years.  Defendant Michael Hartig (“Defendant”) is the nephew of the Decedent and of Sheldon Greenberg (“Sheldon”), who predeceased the Decedent in Israel. He died in September 2019. Hartig resides in Pennsylvania, though plaintiffs maintained that he was a New York resident. Defendant Koatz is an attorney residing in New York. Plaintiffs alleged that while Sheldon was alive, Defendant manipulated him to use marital assets to purchase an apartment in Jerusalem, without Decedent’s permission, allegedly in violation of Israeli law. According to Plaintiffs, following the purchase of the apartment by Sheldon, Defendant put the apartment in his name. Thereafter, Sheldon and Decedent moved into the Jerusalem apartment.  Plaintiffs claimed that after the purchase of the apartment, while Sheldon was still alive, Defendants allegedly created a fake power of attorney from Decedent to Defendant in order to steal Decedent’s money.  Plaintiffs also alleged that, beginning in August 2019, Defendant improperly obtained funds from a joint bank account maintained by Sheldon and the Decedent, as well as an account in Sheldon’s name. The accounts were maintained by a bank in New York. According to Plaintiffs, Defendant obtained control of the marital bank account and Sheldon’s bank account, while they were both alive, and purportedly stole money from them. Plaintiffs initially filed a complaint against Defendants in the Southern District of New York on October 16, 2020. Among other things, Plaintiffs alleged causes of action for fraud, financial abuse, theft, conversion, and unjust enrichment. Plaintiffs later withdrew the federal action.  Thereafter, Plaintiffs filed an action in state court, asserting similar allegations and causes of action. Defendants moved to dismiss the complaint, pursuant to CPLR §§ 3211(a)(1)(2)(3) and (7) and CPLR § 327(a). On July 12, 2022, the motion court granted defendants’ motion on the grounds that New York was an inconvenient forum for the action.  The First Department’s Decision As noted, the First Department affirmed the motion court’s order, dismissing the action on forum non-conveniens grounds. The Court noted that “ ost of the factors considered by New York courts in deciding whether to retain jurisdiction – the burden on the New York court, the potential hardship on the defendant, the unavailability of an alternative forum in which the plaintiff may bring suit, and whether the transaction out of which the cause of action arose occurred primarily in a foreign jurisdiction — favor a finding that Israel ha a greater stake in, and the proper forum for, th action.” 7 The Court explained that “ ost of the relevant actions occurred in Israel while the decedent and defendant Hartig resided there, the relevant medical records and other documents are written in Hebrew and located in Israel, and the decedent’s heirs almost entirely reside in Israel, as do most of the witnesses and the decedent’s guardian.” 8 As such, concluded the Court, “New York’s retention of jurisdiction would impose a heavy, undue burden upon the court, requiring translation of the Hebrew documents into English and nuanced application of Israeli tort and inheritance law. 9 The Court also noted that because “defendants have consented to Israel’s jurisdiction,” they “would suffer no significant hardship from litigating there.” 10 Finally, the Court rejected plaintiffs’ argument that because they and the bank, as well as some witnesses, were located in New York, New York was the most convenient forum. 11 “The deposition of the New York witnesses and production of the New York Community Bank records,” said the Court, “can be conducted via the internet.” 12 Takeaway The forum non conveniens doctrine permits a court to dismiss an action when “in the interest of substantial justice the action should be heard in another forum.” CPLR § 327(a). It is based upon “justice, fairness and convenience”, 13 in which the party challenging the forum bears the burden of demonstrating that the action would be better adjudicated in a different forum. It is a flexible doctrine that is based upon the facts and circumstances of each case. Only “when it plainly appears that New York is an inconvenient forum and that another is available which will best serve the ends of justice and the convenience of the parties” should a case be dismissed on forum non conveniens grounds. 14 As shown in Brandwein , defendants were able to satisfy the burden reflected in the principles discussed above. here=">here" and="and" >here.=">here."> Footnotes U.S. Department of State, The Doctrine of Forum Non Conveniens in the United States (1997-2001) ( here ) (quoting Gary B. Born & David Westin, International Civil Litigation in United States Courts 275 (2d ed. 1994)). Id. (citing Gulf Oil Corp. v. Gilbert , 330 U.S. 501, 506-507 (1947)). Id. (quoting Piper Aircraft Co. v. Reyno , 454 U.S. 235, 257 (1981)). Grizzle v. Hertz Corp. , 305 A.D.2d 311, 312 (1st Dept. 2003) (citations and internal quotation marks omitted); Islamic Republic of Iran v. Pahlavi , 62 N.Y.2d 474, 479 (1984), cert . denied , 469 U.S. 1108 (1985). Grizzle , 305 A.D.2d at 312; Pahlavi , 62 N.Y.2d at 479; Daly v. Metro. Life Ins. Co. , 4 Misc. 3d 887, 894 (Sup. Ct., N.Y. County 2004). Pahlavi , 62 N.Y.2d at 479. Slip Op. at *1 (citing Pahlavi , 62 N.Y.2d at 479). Id. Id. (citing Estate of Kainer v. UBS AG , 175 A.D.3d 403, 405 (1st Dept. 2019), aff’d , 37 N.Y.3d 460 (2021) (applicability of foreign law is an important factor in forum non conveniens analysis weighing in favor of dismissal)). Id. Id. Id. Pahlavi , 62 N.Y.2d at 479. Silver v. Great Am. Ins. Co. , 29 N.Y.2d 356, 361 (1972). 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.

By Jonathan H. Freiberger Most often a lawsuit begins with the filing of a summons and complaint or summons with notice.  CPLR 304 .  Once the lawsuit is commenced, the plaintiff is required to serve the defendant(s) with process – the event by which the court obtains personal jurisdiction over the defendant(s).  [This Blog has written about service of process, see, e.g. , < here =">here"> , < here =">here"> , < here =">here"> and < here =">here"> .]  There are numerous ways in which service of process may be effectuated on a natural person ( CPLR 308 ) and the CPLR also provides for service of process on, inter alia , different types of business and governmental entities (CPLR 307 (State), 308, 309 (infant, incompetent or conservatee), 310 (partnership), 310-a (limited partnership), 311 (corporation or governmental subdivision), 311-a (limited liability company) and 312 (court, board or commission). Once service of process is effectuated, the defendant has a certain amount of time to appear in the action depending on the manner in which service is made.  A defendant can appear by making a formal appearance, which can be done by “serving an answer or a notice of appearance, or by making a motion which has the effect of extending the time to answer.”  CPLR 320 .  Defendants can also make informal appearances, which can have serious implications in litigation.  [This Blog has written about informal appearances, see, e.g., < here =">here"> and < here =">here"> .] If a defendant is served with process, but fails to appear, a plaintiff can seek judgment by default against the non-appearing defendant.  CPLR 3215 .  If plaintiff’s claim is “for a sum certain or for a sum which can by computation be made certain,” a plaintiff can seek a default judgment from the Clerk of the Court if the application is made within 1 year of the default.  See CPLR 3215(a).  A clerk’s judgment requires no inquest.  A “sum certain” in the context of CPLR 3215 “contemplates a situation in which, once liability has been established, there can be no dispute as to the amount due, as in actions on money judgments and negotiable instruments.”  Reynolds Securities, Inc. v. Underwriters Bank & Trust Co. , 44 N.Y.2d 568, 573 (1978); see also Freeport Plaza Realty, LLC v. Freeport Moon, Inc. , 205 A.D.3d 685, 687 (2 nd Dep’t 2022).  Thus, if extrinsic evidence is necessary to calculate damages, a clerk’s judgment is unavailable.  Id.   If the plaintiff does not take proceedings for the entry of default within a year, the court “must” dismiss the action against the non-appearing defendant unless “sufficient cause” is shown for the failure to do so.  CPLR 3215(c); see also U.S. Bank, N.A. v. Onuoha , 162 A.D.3d 1094, 1095 -96.  [This Blog has written about CPLR 3215(c), see, e.g., < here =">here"> , < here =">here"> , < here =">here"> and < here =">here"> .]   The vacatur of a clerk’s judgment is the subject of today’s article.  There are numerous grounds upon which a judgment may be vacated.  See, e.g. , CPLR 5015 .  [This Blog has written about CPLR 5015, see, e.g., < here =">here"> , < here =">here"> and < here =">here"> .]  In order to “vacate a judgment, including a clerk’s judgment, entered upon default in appearing and answering the complaint must demonstrate a reasonable excuse for its delay in appearing and answering, and a meritorious defense to the action.”  Verde Elec. Corp.v. Federal Ins. Co. , 50 A.D.3d 672, 672-73 (2 nd Dep’t 2008); see also Barnett v. Diamond Finance Co., Inc. , 202 A.D.3d 651(2 nd Dep’t 2022).   In Fidelity Nat. Title Ins. Co. v. Valtech Research, Inc. , 73 A.D.3d 686 (2 nd Dep’t 2010), a negligence action, the plaintiff obtained a clerk’s judgment.  The Court found, among other things, that the defendant was not permitted to vacate the default under CPLR 5015 because it “failed to establish a reasonable excuse for that default.”  Id . at 687.  However, the Court also found that plaintiff was not seeking a “sum certain” and, therefore, the clerk lacked authority to enter judgment in Plaintiff's favor.  Id.  Thus, the Court remitted the matter “for an inquest and the entry thereafter of an appropriate judgment.” Id . On September 13, 2023, the Appellate Division, Second Department, decided Pizzarotti, LLC v. Cabgram Developer, LLC , a case involving the vacatur of a clerk’s judgment.  The plaintiff in Pizzarotti obtained a clerk’s judgment exceeding $2,300,000 based on the defendant’s failure to appear or answer the complaint.  The defendant’s motion to vacate the judgment was granted and the plaintiff appealed.  The Second Department in affirming the motion court’s order and noting the short length of the default, stated: Although the general rule is that in order to vacate a default, a party must demonstrate a reasonable excuse for the default and a potentially meritorious defense ( see CPLR 5015 <1> ), the sufficiency of an excuse is not as significant where the default is only a short period. Here, the less than seven-week delay between when the defendant's time to answer expired and when the defendant moved to vacate the clerk's judgment is brief, and there is no evidence that the defendant's default was intentional or part of a pattern of neglect. Moreover, in light of the lack of prejudice to the plaintiff resulting from the defendant's short delay in appearing and seeking to answer the complaint, the existence of a potentially meritorious defense, and the strong public policy favoring resolution of cases on the merits, the Supreme Court providently exercised its discretion in granting the defendant's motion to vacate the clerk's judgment entered upon its default.  Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP commercial litigation attorneys. This article is for informational purposes and is not intended to be and should not be taken as legal advice.

By: Jeffrey M. Haber A question about the application of law sometimes arises when a statute is amended, or the Legislature enacts a new statute that governs a particular issue. In this regard, the question concerns whether the new law or amendment should be applied retroactively or prospectively. There are “two axioms of statutory interpretation” that are relevant in determining whether a statute or amendment should be given retroactive effect. 1 “Amendments are presumed to have prospective application unless the Legislature’s preference for retroactivity is explicitly stated or clearly indicated.” 2 However, “remedial legislation should be given retroactive effect in order to effectuate its beneficial purpose.” 3 “Remedial statutes are those designed to correct imperfections in prior law, by generally giving relief to the aggrieved party.” 4 Courts also consider a statute or amendment to be remedial where: the Legislature has conveyed a sense of urgency; the statute was designed to rewrite an unintended judicial interpretation; and the enactment itself reaffirms a legislative judgment about what the law in question should be. 5 While the foregoing principles serve as guides, a court must discern the legislative intent either from the particular words used or from the nature of the legislation. 6 In Pacheco v. P.V.E. Co., LLC , 2023 N.Y. Slip Op. 23279 (Sup. Ct., Kings County Sept. 6, 2023) ( here ), the court was asked to determine whether the Justice for Injured Workers Act (N.Y. Work. Comp. § 118-a) (the “Act”), enacted on December 30, 2022, should be applied retroactively or prospectively. As discussed below, the court held that the Act should be applied retroactively. Pacheco is an action to recover damages for personal injuries. Defendants/third-party plaintiffs/third third-party plaintiffs P.V.E. CO., LLC, P.V.E. II CO., LLC, and 70 NARDOZZI LLC (“PVE/Nardozzi”) moved pursuant to CPLR § 3025 (b) and (c) for leave to amend its verified answer to assert a proposed affirmative defense of collateral estoppel. Plaintiff cross-moved for the imposition of costs and sanctions against PVE/Nardozzi for interposing a frivolous motion. Plaintiff commenced the action against PVE/Nardozzi and Suffolk Construction Company, Inc., alleging that he sustained injuries as a result of an accident that occurred at a construction site located in New Rochelle, New York. On or about March 17, 2021, PVE/Nardozzi filed its answer to the complaint. Subsequently, the parties received a Notice of Decision from the Workers’ Compensation Board (the “Board decision”), in which, inter alia , the Workers’ Compensation Board determined that treatment for plaintiff’s neck injury had not been established and disallowed the neck injury claim. PVE/Nardozzi moved for leave to amend its answer to assert a proposed affirmative defense of collateral estoppel based upon the Board decision. In opposition, plaintiff argued that the Act, which was enacted on December 30, 2022, warranted the denial of PVE/Nardozzi’s motion. Under Work. Comp. § 118-a, “no finding or decision by the workers’ compensation board, judge or other arbiter shall be given collateral estoppel effect in any other action or proceeding arising out of the same occurrence, other than the determination of the existence of an employer employee relationship.” Plaintiff moved for costs and sanctions against defendants for refusing to withdraw the motion and for willfully interposing a frivolous motion. PVE/Nardozzi opposed the cross-motion, arguing that Work. Comp. § 118-a was not applicable as it should be applied prospectively to actions filed post-enactment. The court denied both motions. In denying the motion to amend, the court observed that, although there was “no express directive” in Work. Comp. § 118-a instructing that it should be applied retroactively, “it clear that is a remedial law intended to ‘correct recent court decisions that granted preclusive effect to decisions of the Workers’ Compensation Board (WCB), barring injured workers from seeking justice through the courts because of an administrative decision of the WCB.’” 7 The court explained that the “legislative history, specifically the sponsor memorandum, highlight that administrative hearings before a Worker’s Compensation Law Judge sacrifice basic procedures and evidentiary rules of trials to swiftly decide the claims and that NY WORK COMP § 118-a ‘needed to ensure that findings from cursory Worker’s Compensation Board hearings not prevent workers from exercising their constitutional right to a jury trial.’” 8 Apart from the legislative history, the court noted that “the statute took effect immediately,” thereby evincing “a sense of urgency.” 9 The court also noted that “retroactive application not result in unfairness or impair substantive rights.” 10 The court explained that “retroactive application not increase liability but rather provide plaintiff with an opportunity to exercise his right to a fair trial.” 11 “These factors together,” concluded the court, “weigh in favor of the finding that the remedial purpose of NY WORK COMP § 118-a should be effectuated through retroactive application.” 12 Takeaway In determining whether a statute should be given retroactive effect, the New York Court of Appeals has identified two competing axioms of statutory interpretation. On the one hand, new statutes and amendments are presumed to have prospective application unless the Legislature states a preference for retroactivity that is explicitly stated or clearly indicated. On the other hand, remedial legislation or statutes governing procedural matters should be applied retroactively, unless such application would “impair vested rights or bestow additional rights.” 13 Courts must discern the Legislature’s intent, first by looking to the language of the statute and, if necessary, considering legislative history and other guides, such as those discussed above. In Pacheco , the court examined a number of the factors discussed above, including legislative history, whether retroactive application would result in unfairness or impair substantive rights, and whether there was a sense of urgency in passing the legislation, to conclude that Work. Comp. § 118-a should be applied retroactively. Footnotes Matter of Gleason (Michael Vee, Ltd.) , 96 N.Y.2d 117, 122 (2001); see also Nelson v. HSBC Bank USA , 87 A.D.3d 995, 997 (2d Dept. 2011). Id. ; see also Majewski v. Broadalbin-Perth Cent. School Dist. , 91 N.Y.2d 577, 584 (1998); Matter of OnBank & Trust Co. , 90 N.Y.2d 725, 730 (1997); People v. Duggins , 192 A.D.3d 191 (3d Dept. 2021). Matter of Gleason , 96 N.Y.2d at 122; Majewski , 91 N.Y.2d at 584; Matter of OnBank & Trust Co. , 90 N.Y.2d at 730. Nelson , 87 A.D.3d at 998 (internal quotation marks omitted). E.g. , Matter of OnBank & Trust Co. , 90 N.Y.2d at 730. See Matter of Regina Metro. Co., LLC v. New York State Div. of Hous. & Community Renewal , 35 N.Y.3d 332, 370 (2020); Matter of OnBank & Trust Co. , 90 N.Y.2d at 730. Slip Op. at *3 (quoting 2021 N.Y. Senate Bill S9149). Id. (quoting id. ). Id. (quoting Matter of Gleason , 96 N.Y.2d at 122). Id. Id. Id. See Matter of City of New York (Long Is. Sound Realty Co.) , 160 A.D.2d 696, 697 (2d Dept. 1990). 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.

By: Jeffrey M. Haber “Cherry-picking” is a practice of fraudulently allocating profitable trades to favored accounts at the expense of other advisory clients.  here.=">here."> On September 14, 2023, the Securities and Exchange Commission (“SEC”) announced ( here ) that it settled fraud charges against GlennCap LLC (“GlennCap”), a Connecticut-based investment advisory firm, and its owner, Jonathan Vincent Glenn (“Glenn”), for engaging in a cherry-picking scheme whereby they allocated profitable securities trades to favored accounts, including GlennCap’s own accounts and client accounts that paid GlennCap a higher percentage of positive returns in fees, while allocating a disproportionate amount of unprofitable trades to disfavored clients. Under the settlement, respondents agreed to disgorge $2,743,616, plus prejudgment interest of $251,357. Glenn agreed to pay a civil money penalty of $500,000. According to the SEC, between at least January 2020 and March 2022, Glenn, who was also an investment adviser of GlennCap, engaged in block trading, which allowed him to pool funds from multiple clients’ accounts into trades, and then, after seeing whether a position increased or decreased in value, he allocated the more profitable trades to accounts that he favored. The SEC noted that the probability that the favored accounts received the more profitable trades by chance was statistically nearly zero. The SEC found that respondents received at least $2.7 million in profits from the cherry-picking scheme. The SEC found that the scheme, which was perpetrated in two phases, came to a stop in March 2022, when the broker-dealer that was executing respondents’ trades notified respondents that, due to concerns about respondents’ trading, the broker-dealer was terminating GlennCap’s access to the omnibus account that respondents were using and ending its relationship with GlennCap altogether in 90 days. Thereafter, said the SEC, Glenn asked GlennCap’s clients to move their accounts to another broker-dealer. That brokerage firm, noted the SEC, prohibited investment advisers from using omnibus trading accounts. As a result, said the SEC, respondents could no longer cherry-pick profitable trades. Further, the SEC found that Glenn made false and misleading statements regarding GlennCap’s trading practices in documents it provided to clients and prospective clients. Commenting on the settlement, Andrew Dean, Co-Chief of the SEC Enforcement Division’s Asset Management Unit, said: “Glenn allocated millions of dollars from profitable trades to accounts benefitting himself while unloading unprofitable trades on GlennCap’s clients.” In an effort to warn other brokers and investment advisors about the SEC’s ability to detect cherry-picking schemes, Dean stated: “The SEC has the means to identify investment advisers that abuse their position through cherry-picking, as Glenn and GlennCap did. We use these methods to ensure investor trust in our markets.”In the cease and desist order ( here ), the SEC found that Glenn and GlennCap violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, Section 17(a) of the Securities Act of 1933, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. Respondents consented to the entry of the cease-and-desist order, without admitting or denying the SEC’s findings, and, as noted, the payment of more than $3 million in civil penalties, disgorgement, and prejudgment interest. Glenn also consented to an industry and officer bar, which prohibits him from associating with any investment advisor, broker-dealer, transfer agent, municipal securities dealer, municipal advisor, or nationally recognized statistical rating organization, as well as from acting as an officer, director, manager, advisor, underwriter or depositor of any such entity. 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.

By Jonathan H. Freiberger Sometimes someone receives a valuable benefit from your efforts and refuses to compensate you.  If the “benefit” was the result of a contractual relationship, a lawsuit for the breach of that contract would be viable.  What happens, however, where there is no contract on which to bring a claim?  There are several theories of liability sounding in “quasi-contract” that may offer you relief for your efforts.  While today’s post will focus on the quasi-contract claim of unjust enrichment, there are others. By way of background, a quasi-contract “is not really a contract at all, but rather a legal obligation imposed in order to prevent a party’s unjust enrichment.”  Clark-Fitzpatrick, Inc. v. Long Island Rail Road Co. , 70 N.Y.2d 382, 388 (1987) (citations omitted).  The New York Court of Appeals has explained that: uasi contracts are not contracts at all, although they give rise to obligations more akin to those stemming from contract than from tort. The contract is a mere fiction, a form imposed in order to adapt the case to a given remedy.  Briefly stated, a quasi-contractual obligation is one imposed by law where there has been no agreement or expression of assent, by word or act, on the part of either party involved. The law creates it, regardless of the intention of the parties, to assure a just and equitable result. Clark-Fitzpatrick , 70 N.Y.2d at 388-89 (citation, internal quotation marks and ellipses omitted; emphasis in original).  For these reasons, a quasi-contract claim, such as unjust enrichment, will ordinarily be dismissed when “the relationship between the parties defined by a valid written contract, which detailed the applicable terms and conditions” of the parties’ relationship.  Fortune Limousine Service, Inc. v. Nextel Communications , 35 A.D.3d 350, 353 (1 st Dep’t 2006); see also, The Fifth and Fifty-Fifth Residence Club Assoc., Inc. v. Vistana Signature Experiences, Inc. , 217 A.D.3d 564, 566 (1 st Dep’t 2023).  Conversely, the “theory of unjust enrichment lies as a quasi-contract claim and contemplates an obligation imposed by equity to prevent injustice, in the absence of an actual agreement between the parties.”  Nasca v. Greene , 216 A.D.3d 648, 650 (2 nd Dep’t 2023) (citation and internal quotation marks omitted). However, in Sebastian Holdings, Inc. v. Deutsche Bank AG , 78 A.D.3d 446 (1 st Dep’t 2010), the Court sustained an unjust enrichment claim on a motion to dismiss because the “claim for unjust enrichment does not depend on the existence of valid and enforceable written contracts between the parties, but rather arises from facts wholly independent of any contract upon which the plaintiff sues herefore, it cannot be said at this early stage of the proceedings that these claims are duplicative of the breach-of-contract claims, and the rule of Clark-Fitzpatrick … does not apply.” The elements of a claim for unjust enrichment are “(1) the defendant was enriched, (2) at the plaintiff’s expense, and (3) that it is against equity and good conscience to permit the defendant to retain what is sought to be recovered.”  GFRE, Inc. v. U.S. Bank, N.A. , 130 A.D.3d 569, 570 (2 nd Dep’t 2015) (citation and internal quotation marks omitted); see also, Paramount Film Distr. v. State of New York , 30 N.Y.2d 415, 421 (1972) (“The essential inquiry in any action for unjust enrichment … is whether it is against equity and good conscience to permit the defendant to retain what is sought to be recovered.”)   A claim for unjust enrichment was sustained on September 13, 2023, by the Appellate Division, Second Department, in Bedford-Carp Construction, Inc. v. Brooklyn Union Gas .    The plaintiff in Bedford-Carp was a construction contractor that entered into a contract with a New York City agency to “install a box storm sewer” in Brooklyn.  During performance of the contract, plaintiff discovered 45,000 tons of contaminated soil.  The site of the work was near Brooklyn Union Gas’ facility.  The parties contract provides that plaintiff “shall not seek additional compensation from gas companies except as specifically set forth its contract” and  anticipated that there may be interference from existing and abandoned gas lines. Plaintiff’s bid was to reflect same.  In addition, the contract indicates that Brooklyn Union Gas may be responsible to the City for contamination it caused.   When contamination was found and verified, the City was notified and, in turn, contacted Brooklyn Union Gas and requested that it undertake remediation efforts.  Defendant declined.  In order to maintain the progress of the project, plaintiff undertook the remediation effort.  Subsequently, plaintiff sued Brooklyn Union Gas – alleging causes of action sounding in breach of contract, declaratory judgment (that defendant, Brooklyn Union Gas must compensate plaintiff for remediation costs) and unjust enrichment.  Plaintiff appealed the motion court’s dismissal of each cause of action in response to defendant’s motion to dismiss. The Second Department sustained the dismissal as to the breach of contract and declaratory judgment cause of action because “there was no contractual relationship or privity between the plaintiff and the defendant.”  The Court, however, held that the unjust enrichment claim should not have been dismissed and, in so doing, stated: However, the Supreme Court erred in granting that branch of the defendant's motion which was to dismiss the third cause of action, alleging unjust enrichment. Unjust enrichment lies as a quasi-contract claim and contemplates an obligation imposed by equity to prevent injustice, in the absence of an actual agreement between the parties. To recover under a theory of unjust enrichment, a litigant must show that (1) the other party was enriched, (2) at that party's expense, and (3) that it is against equity and good conscience to permit the other party to retain what is sought to be recovered.  The essential inquiry in any action for unjust enrichment is whether it is against equity and good conscience to permit the defendant to retain what is sought to be recovered. Although privity is not required for an unjust enrichment claim, a claim will not be supported if the connection between the parties is too attenuated. Here, affording the complaint a liberal construction, we find that it sufficiently alleged that the defendant was unjustly enriched, at the plaintiff's expense, by the plaintiff's remediation of the contaminated soil, and that it would be against equity and good conscience to permit the defendant to retain what was sought to be recovered. Moreover, we find that the Supreme Court erred in determining, in effect, that the connection between the parties was too attenuated to support a claim for unjust enrichment.  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.