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By:  Jeffrey M. Haber Today, we consider Tahari v. 860 Fifth Ave. Corp. , 2025 N.Y. Slip Op. 05584 (1st Dept. Oct. 9, 2025) ( here ), an apparent case of first impression in the Appellate Division, First Department, involving the suability of a board of directors under New York law.    In New York, “the business of a corporation managed under the direction of its board of directors…” Notwithstanding, a corporation’s board of directors is neither empowered to commence an action in its own capacity nor susceptible to being sued as such. In fact, no provision of New York law describes a corporation’s board as a distinct, suable entity. The Business Corporation Law (“BCL”) makes this point clear, providing that only a corporation can “sue and be sued in all courts and … participate in actions and proceedings, whether judicial, administrative, arbitrative or otherwise, in like cases as natural persons.” Thus, while the individual directors of a corporation may vote for their corporation to commence litigation, it is the corporation that actually serves as the party to that litigation, not the board that voted to institute the action. The BCL underscores this point by identifying the circumstances under which the directors of a corporation in their individual capacity may be subject to suit from its shareholders. Significantly, the BCL does not contain a provision authorizing a corporation’s board of directors to commence suit in its own capacity, separate from the corporation. Nor does the BCL contain any provision permitting suit directly against a board of directors. New York trial courts are in accord, holding that a board of directors is not an entity that may be sued separately from the corporation. In Stromberg v. East Riv. Hous. Corp. , the plaintiffs – owner of shares appurtenant to an apartment in a residential cooperative – sued the corporation, its management company, an individual board member, and the board of directors, in connection with the board’s refusal to consent to the sale of the apartment. Among other motions, the plaintiffs moved for additional time to serve the board with their amended complaint. The motion court denied the relief, holding that, since the board of directors was not a distinct entity, it was not subject to suit. The motion court concluded that, “based on its review of statutory and decisional law, … no basis exists to treat the board of a cooperative corporation as a juridical entity distinct from the cooperative itself.” The motion court explained that it had “found no cases expressly approving—or even expressly discussing—a suit brought against both a co-op and also the co-op’s board as an entity (as opposed to claims against the co-op and some or all of the board’s members).” “At most,” said the motion court, “courts have decided claims brought against co-op boards without considering, or having occasion to consider whether the board was a proper defendant.” The motion court “conclude that a plaintiff claiming to be aggrieved by decisions of a co-op board may not sue the board itself as an entity.” The Stromberg court noted, however, that its conclusion “would not leave a plaintiff in this scenario without means of obtaining redress.” “A plaintiff<,> ” said the motion court, “could sue the co-op directly, seeking to hold it liable for the actions of its board—as plaintiffs are already doing here. A plaintiff could also sue the board members individually, in appropriate cases.” “But a co-op board, as a board, is not amenable to suit<,> ” said the motion court. Courts outside of New York (both federal and state) have reached a similar conclusion as the Stromberg court. In Flarey v. Youngstown Osteopathic Hosp. , highlighted by the First Department in Tahari , held that a board of directors is incapable of owning property and cannot sue in its own name.” The reason, said the Flarey court, is because “a board of directors is the collection of individuals with the ultimate responsibility of making decisions on behalf of the corporation. . . .” After all, noted the court, “a corporation may only act through the acts of its agents, such as its directors, officers, or employees.” For this reason, said the court, “any action of the board of directors is an action of the corporation.” Thus, “ lthough the board of directors is the body with the ultimate responsibility of making decisions on behalf of the corporation,” “the individual members of the board are liable for corporate torts merely by reason of their relation to the corporation.” The Flarey court went on to note:  As a practical matter, it would be nonsensical to hold a board of directors liable as a collective entity. A board of directors may not own property in its own name. Thus, any judgment against it could not be recovered from the collective group. Furthermore, a judgment against the collective entity cannot apply to the individuals as the individuals are only liable if they participated in the tortious conduct. Thus, such a suit would be, for all practical purposes, pointless. Against the foregoing analysis, the First Department decided Tahari . Tahri concerned a long-running dispute between a shareholder of a residential cooperative corporation and the cooperative corporation regarding the shareholder’s combination and renovation of two penthouse apartments. Plaintiff commenced the action in 2018 and asserted a variety of contract and tort causes of action against the cooperative corporation and individual board members in his complaint and amended complaint. In an earlier appeal, Tahari v. 860 Fifth Ave. Corp. , 214 A.D.3d 491 (1st Dept. 2023), the First Department, among other things, dismissed plaintiff’s breach of fiduciary duty causes of action against the cooperative corporation and most of the individual board members for failure to state a cause of action. Thereafter, plaintiff filed a second amended complaint in which he asserted a breach of fiduciary duty cause of action against the board of directors of the cooperative corporation, as distinct from the dismissed breach of fiduciary duty causes of action against the cooperative corporation and the individual board members. Defendants moved to dismiss the cause of action against the board of directors on the ground, among others, that the board was not amenable to suit. In response, plaintiff cross-moved to serve a third amended complaint, naming the current board president as a representative of the board. The motion court denied defendants’ motion to dismiss and granted plaintiff’s cross-motion to amend the complaint to add the board president as a representative of the board of directors. In doing so, the motion court relied on the First Department’s decision in 2023 and held that the board of directors of a cooperative corporation was directly amenable to suit, as opposed to the cooperative corporation and/or individual board members. The First Department unanimously reversed, holding that the motion court “misinterpret our precedent.” In doing so, the Court “clarify that the board of directors of a corporation is not amenable to suit, separate and apart from being sued in its representative capacity for the corporation.” The Court explained that the “motion court’s reliance upon Dau v. 16 Sutton Place Apt. Corp. (205 AD3d 533 <1st dept 2022> ) to find otherwise was misplaced.” In Dau , the plaintiff commenced an action against both a residential cooperative corporation and its board of directors.   The issue in Dau , with respect to the breach of fiduciary duty claims against the board of directors, was whether those claims were sufficiently and timely pled. “Whether the board of directors could be sued separately from the corporation itself was never raised.” “Thus,” said the Court, “ Dau should not be read to hold that a claim for breach of fiduciary duty may be brought directly against a board of directors.” Therefore, “ pplying the Business Corporation Law and consistent with the … cases ,” the Court held that “the residential cooperative board of defendant 860 Fifth Avenue Corporation not an entity with the capacity to sue and be sued separate and apart from the corporation on whose behalf it acts.” Takeaway In Tahari , the First Department held that a board of directors cannot be sued as a collective entity under New York law. The Court grounded its holding on the BCL and case authority from New York lower courts and state and federal courts around the country. Although the Court deemed its decision to be a clarification of its prior jurisprudence, the decision reads more like a case of first impression. Regardless, Tahari makes clear that under the BCL, only corporations—not their boards—may sue or be sued. Individual directors may be sued in their personal capacity for misconduct, but not the board as a whole. ______________________________________ 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. BCL §701 (“ he business of a corporation shall be managed under the direction of its board of directors…”). BCL § 202(a). See BCL § 720(a) (providing that “ n action may be brought against one or more directors or officers of a corporation . . .” for certain types of misconduct); BCL § 719(a) (providing that “Directors of a corporation who vote for or concur in any of the … corporate actions shall be jointly and severally liable to the corporation for the benefit of its creditors or shareholders, to the extent of any injury suffered by such persons respectively, as a result of such action . . .”). Stromberg v. East Riv. Hous. Corp. , 82 Misc. 3d 871, 883-884 (Sup. Ct., N.Y. County 2023) (concluding that “no basis exists to treat the board of a cooperative corporation as a juridical entity distinct from the cooperative itself” following its review of statutory and decisional law); Biales v. 10 E. End Ave. Owners, Inc. , 85 Misc. 3d 1202(A), 2025 N.Y. Slip Op. 50074(U) (Sup. Ct., N.Y. County 2025)). See e.g. Siegler v. Sorrento Therapeutics, Inc. , 2021 WL 3046590, *10 (Fed. Cir. 2021) (noting that “California’s Corporation Code only identifies a corporation or association as entities that may be sued”);  Heslep v. Americans for African Adoptions, Inc. , 890 F. Supp. 2d 671, 678-679 (N.D. W.Va. 2012);  Team Sys. Int’l, LLC v. Haozous , 2015 WL 2131479, *2 (W.D. Okla. May 7, 2015);  Lopez-Rosario v. Programa Seasonal Head Start/Early Head Start de la Diocesis de Mayaguez,  245 F. Supp. 3d 360, 370 (D.P.R. 2017),  aff’d , 847 Fed. Appx. 9 (1st Cir. 2021) (holding that “ board of directors is not a legal entity separate and apart from the corporation it directs . . . and, thus, lacks capacity to be sued”); Flarey v. Youngstown Osteopathic Hosp. , 151 Ohio App. 3d 92, 96, 783 N.E.2d 582, 585 (7th Dist. 2002). Slip Op. at *1. Id. Id. at *2. Dau , 205 A.D.3d at 534. Id. at 535-536. Slip Op. at *2. Id. Id. Consequently, said the Court, “ hile a shareholder cannot assert allegations of breach of fiduciary duty against a board of directors, a shareholder may assert the claim against the individual directors.” Id. (citing Weinreb v. 37 Apts. Corp. , 97 A.D.3d 54, 57 (1st Dept. 2012); Peacock v. Herald Sq. Loft Corp. , 67 A.D.3d 442-443 (1st Dept. 2009)). The Court noted that plaintiff had “originally brought breach of fiduciary duty causes of action against fourteen of the individual board members and the corporation ( see Tahari , 214 AD3d at 492).” Id. The Court made clear that since “ hose causes of action were largely dismissed, … plaintiff not simply replace those parties with ‘the board’ to revive those now dismissed claims.” Id.

By:  Jeffrey M. Haber In today’s Fraud Notes, we examine two cases involving principles familiar to readers of this Blog: the duplication doctrine and the requirement that plaintiffs plead sufficient facts to satisfy each element of a fraud claim. In Emissions Reduction Corp. v. mCloud Tech. (USA) Inc. , 2025 N.Y. Slip Op. 05457 (1st Dept. Oct. 7, 2025) ( here ),  the Appellate Division, First Department affirmed the dismissal of plaintiff’s fraud claim on the grounds of duplication with plaintiff’s breach of contract claims.  Emissions Reduction is notable because the Court held that the alleged fraud damages were not distinct from those sought by the breach of contract claim. As noted in previous articles ( e.g. ,  here ), this focus on overlapping damages is common in the First Department. In Brooklyn Tabernacle v. Thor 180 Livingston, LLC , 2025 N.Y. Slip Op. 05492 (2d Dept. Oct. 8, 2025) ( here ), the Appellate Division, Second Department affirmed the denial of defendants’ motion to dismiss, inter alia , plaintiff’s fraud claim, holding that plaintiff adequately satisfied the elements required to state a cause of action for fraud. Emissions Reduction Corp. v. mCloud Tech. (USA) Inc. Emissions Reduction arose from a $15 million loan by plaintiff to defendant, mCloud Tech. (USA) Inc. (“mCloud”), which plaintiff alleged was made due to fraudulent misrepresentations. As alleged in the amended complaint, on March 11, 2022, one of the individual defendants sent plaintiff a draft press release stating that defendant mCloud Technologies Corp., the parent company of mCloud (Parent), “had signed an agreement to deliver its AssetCare for Connected Buildings solution to manage the energy efficiency of the Vail Buick Dealership in Bedford Hills, New York, the first of 15 planned installations for auto dealerships in New York state to help control rising energy costs in the electric vehicle (“EV”) era” and had “ igned LOIs in place to connect 15 additional dealerships in New York with total expected value of more than $14 million.” Defendant allegedly told plaintiff that mCloud needed $15 million to deploy the first phase of its EV projects at those dealerships. On March 28, 2022, in reliance on the draft press release, plaintiff claimed that it and mCloud executed a note, under which plaintiff loaned mCloud $5 million on or about the March 28 execution date, with the option for mCloud to request additional advances of up to $10 million. Shortly after the first advance, the individual defendants each allegedly represented that mCloud had used $4,926,199 of its $5 million advance from plaintiff to order equipment for EV dealership projects, and that it required the additional $10 million to further support the projects. Plaintiff advanced a further $10 million to mCloud upon those representations. Plaintiff alleged that it subsequently discovered defendants’ representations to be false, and that the funds were used to pay another of mCloud’s lenders, compensate its executives, and inject funds into mCloud’s sister entities, as opposed to the purposes agreed upon in the note. Plaintiff brought suit, asserting claims of fraudulent inducement against the individual defendants, mCloud, and Parent, and a breach of contract claim against mCloud. As relevant here, for each cause of action plaintiff sought the $15 million in principal, together with interest and certain costs associated with drafting and enforcing the note. In its fraud claims, plaintiff sought additional unspecified reputational, valuational, and auditing costs. Defendants moved, inter alia , to dismiss plaintiff’s fraud claims. The motion court granted the motion. The First Department affirmed. The Court held that “Plaintiff’s fraud claims against the individual defendants, … were correctly dismissed by the court below, as they sought damages duplicative of those recoverable on the breach of contract claim against mCloud.” “It has long been the rule that parties may not assert fraud claims seeking damages that are duplicative of those recoverable on a cause of action for breach of contract.” “Where all of the damages are remedied through the contract claim, the fraud claim is duplicative and must be dismissed.” Requesting the same damages for fraud and breach of contract claims is a basis to dismiss the fraud claim as duplicative, including at the pleadings stage. The Court also rejected plaintiff’s argument that its fraud claim included reputational and valuational damages, finding that such allegations were “vague[ ]” and did “not constitute the ascertainable out-of-pocket pecuniary damages required to sustain the fraud claim.” In New York, a plaintiff alleging fraud can recover only the actual pecuniary loss sustained as a result of the misrepresentation or omission, i.e. , the plaintiff’s out-of-pocket damages. The rule prohibits the recovery of lost profits or lost business or investment opportunities, as well as pain and suffering damages that are often sought in other tort actions. Brooklyn Tabernacle v. Thor 180 Livingston, LLC Brooklyn Tabernacle involved the purchase of a condominium unit owned by plaintiff. In March 2015, plaintiff, Brooklyn Tabernacle (hereinafter, the “church”), entered into a sale purchase agreement (hereinafter, the “SPA”) with defendant, Thor 180 Livingston, LLC (hereinafter, “Thor Livingston”), wherein Thor Livingston agreed to purchase a condominium unit owned by the church for $51 million. As part of the transaction, Thor Livingston agreed to obtain all governmental approvals to create, by subdivision, a new condominium unit (hereinafter, the “church unit”), consisting of a subterranean space and a portion of the first floor, and to reconvey the church unit to the church for no consideration within one year following the closing or, if the subdivision was not accomplished within one year, to enter into a long-term ground lease granting the church the same rights and benefits to which it would be entitled as the owner of the church unit. The sale closed in October 2015 (hereinafter, the “2015 closing”). Following the 2015 closing, Thor Livingston allegedly waived its rights to perform shoring and footing work in the basement, and, relying on the waiver, the church expended millions of dollars renovating the church unit. In July 2019, Thor Livingston delivered the deed to the church unit to the church (hereinafter, the “2019 closing”). Simultaneously, the parties executed a separate agreement defining Thor Livingston’s development rights in the condominium building wherein the church unit was located (hereinafter, the “development agreement”). In August 2019, the church commenced the action against, among others, Thor Livingston and defendant, Thor Management Co., LLC (hereinafter together, the “Thor defendants”), inter alia , to recover damages for breach of contract and rescission of the development agreement due to  fraud and duress. The church alleged that, after the 2015 closing, Thor Livingston delayed delivering the deed to the church unit to the church in order to extract concessions and payments that Thor Livingston was not entitled to under the SPA, including, among other things, the execution of the development agreement and the payment of Thor Livingston’s title insurance costs. The Thor defendants moved, inter alia , pursuant to CPLR 3211(a) to dismiss the first, second, and sixth causes of action and so much of the third cause of action alleging fraud. The Thor Defendants maintained that, among other things, plaintiff failed to identify a misrepresentation and, therefore, did not satisfy all the elements of its fraud claim. 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.” If “sufficient factual allegations of even a single element are lacking,” then the claim must be dismissed. The Supreme Court, among other things, denied those branches of the motion. The Thor defendants appealed. The Second Department affirmed. Regarding the fraud claims, the Court held that the motion court “properly denied” the motion. The Court found that “the allegations in the amended complaint were sufficient to allege a material misrepresentation of fact, as the amended complaint alleged that (1), in the SPA, Thor Livingston falsely promised that it would imminently complete the subdivision and thereafter, would immediately reconvey the church unit to the church, (2) that Thor Livingston falsely represented that it waived its rights to perform shoring and footing work in the basement and thereafter, coerced the church into entering the development agreement, and (3) that Thor Livingston demanded certain concessions including, among other things, the payment of its title insurance costs.” Takeaway Fraud claims must be based on damages that are distinct from those recoverable under a breach of contract. Emissions Reduction demonstrates that courts, especially in the First Department, will dismiss fraud claims that merely restate contractual damages. Brooklyn Tabernacle reinforces the principle that to survive dismissal, each element of a fraud cause of action must be alleged. At issue in Brooklyn Tabernacle was the first element—the making of a misrepresentation or omission. _____________________________________ Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice. Slip Op. at *1 (citing MBIA Ins. Corp. v. Credit Suisse Sec. (USA) LLC , 165 A.D.3d 108, 114–15 (1st Dept. 2018) (citing Chowaiki & Co. Fine Art Ltd. v. Lacher , 115 A.D.3d 600, 600-601 (1st Dept. 2014) (dismissing fraud claim seeking duplicative damages even where the plaintiff sufficiently alleged breach of an independent duty owed them independent of the contract)). MBIA Ins. , 165 A.D.3d at 114-115 (citing Mañas v. VMS Assoc., LLC , 53 A.D.3d 451, 454 (1st Dept. 2008)). Id. Mañas , 53 A.D.3d at 454; see also Triad Int’l Corp. v. Cameron Industries, Inc. , 122 A.D.3d 531, 532 (1st Dept. 2014) (affirming dismissal of fraud claim because “plaintiff seeks the same compensatory damages for both claims” and denying leave to amend because plaintiff’s new, “purported fraud damages are actually contract damages”). Id. (citing CKR Law LLP v. DiPaola , 209 A.D.3d 427, 428 (1st Dept. 2022) (unspecified reputational damages and lost revenue or profits are not sufficient to sustain a cause of action based on fraud) (citing Lama Holding Co. v. Smith Barney , 88 N.Y.2d 413, 421 (1996)). Reno v. Bull , 226 N.Y. 546 (1919); see also Continental Cas. Co. v. PricewaterhouseCoopers, LLP , 15 N.Y.3d 264 (2010). The damages recoverable under the out-of-pocket rule are intended to compensate plaintiffs for what they lost because of the fraud, not for what they might have gained. Lama , 88 N.Y.2d at 421; see also Clearview Corp. v. Gherardi , 88 A.D.2d 461, 468 (2d Dept. 1982) (“the defrauded party is entitled solely to recovery of the sum necessary for restoration to the position occupied before the commission of the fraud”) (citations omitted). Foster v. Di Paolo , 236 N.Y. 132, 134 (1923). Williams v. Mann , 143 A.D.3d 813 (2d Dept. 2016). Lama , 88 N.Y.2d at 421. 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). Slip Op. at *2. Id. (citing Vision Accomplished, Inc. v. Lowe Props., LLC , 131 A.D.3d 1163, 1164 (2d Dept. 2015)).

By:  Jeffrey M. Haber As we have noted in prior articles, New York has a “long and strong public policy favoring arbitration”. Indeed, New York “favors and encourages arbitration as a means of conserving the time and resources of the courts and the contracting parties.” “Therefore, New York courts interfere as little as possible with the freedom of consenting parties to submit disputes to arbitration.”   “Nonetheless, ‘ ike contract rights generally, a right to arbitration may be modified, waived or abandoned.’” “Accordingly, a litigant may not compel arbitration when its use of the courts is ‘clearly inconsistent with later claim that the parties were obligated to settle their differences by arbitration.’” “The crucial question ... is what degree of participation by the defendant in the action will create a waiver of a right to stay the action.” “In the absence of unreasonable delay, so long as the defendant’s actions are consistent with an assertion of the right to arbitrate, there is no waiver.” “However, where the defendant’s participation in the lawsuit manifests an affirmative acceptance of the judicial forum, with whatever advantages it may offer in the particular case, his actions are then inconsistent with a later claim that only the arbitral forum is satisfactory.” Further, “ ot every foray into the courthouse effects a waiver of the right to arbitrate.... here urgent need to preserve the status quo requires some immediate action which cannot await the appointment of arbitrators, waiver will not occur.” In Tomaselli v. Malagese , 2025 N.Y. Slip Op. 05399 (4th Dept. Oct. 3, 2025 ( here ), the Appellate Division, Fourth Department, addressed the foregoing principles. Tomaselli stemmed from an arbitration award for nonpayment of services, confirmed after plaintiff commenced an action in Supreme Court on those same issues. Plaintiff commenced the action seeking damages for breach of contract based upon defendants’ alleged failure to pay for architectural services rendered by plaintiff. Although plaintiff subsequently moved to compel arbitration pursuant to the purported contract following nearly two years of litigation, plaintiff withdrew that motion after defendants voluntarily agreed to resolve the dispute by arbitration. Following an arbitration proceeding before an arbitrator selected by the parties, the arbitrator rendered an award in favor of plaintiff. Supreme Court granted plaintiff’s motion to confirm the arbitration award and denied defendants’ cross-motion to vacate the arbitration award. Defendant appealed. The Fourth Department affirmed. Defendants contended that they were entitled to vacatur of the arbitration award on the ground that the arbitrator lacked authority to conduct the arbitration because plaintiff had previously waived the right to arbitrate by commencing the action. The Court held that “defendants waived their challenge to the arbitration award.” The Court explained that “ laintiff’s commencement of the action and participation in the litigation for nearly two years ‘in effect g ve[ defendants] a choice of forums’ by which they could either ‘insist on arbitration or ignore arbitration and litigate.’”   “Defendants,” said the Court, “cannot have things both ways by agreeing to and fully participating in arbitration instead of litigation while thereafter resisting the arbitration award on the ground that very commencement of court action waived .” “Indeed,” explained the Court, “where, as here, a party participates in an arbitration proceeding, without availing of all reasonable judicial remedies, . . . not . . . allowed thereafter to upset the remedy emanating from that alternative dispute resolution forum.” The Court also rejected defendants’ “forum-hedging” strategy, stating: “Defendants made a strategic and knowing decision to proceed with case in the arbitral forum and cannot now seek to cancel the outcome of the very arbitration in which voluntarily and fully participated because allowing such unilateral advantage and forum-hedging would undermine arbitration principles and policies.” Takeaway New York law strongly favors arbitration as a preferred method of dispute resolution. However, this form of dispute resolution is not without limits—it can be waived if a party engages in litigation in a manner inconsistent with arbitration. In Tomaselli , plaintiff initiated a lawsuit and participated in litigation for nearly two years before moving to compel arbitration. Although defendants agreed to arbitrate, they nevertheless attempted to vacate the arbitration award, arguing that plaintiff had waived the right to arbitrate by initially suing. The Court rejected this argument, emphasizing that defendants had voluntarily chosen to arbitrate and fully participated in the process. Their attempt to challenge the award post-arbitration was deemed, among other things, “forum-hedging,” which undermines the integrity of arbitration. The Court’s ruling reinforces the principle that parties cannot exploit both litigation and arbitration forums to gain a strategic advantage. Once a party elects to arbitrate and participates fully, they are bound by the outcome and cannot later claim the process was invalid due to prior litigation conduct. Stated differently, as the Court noted, the party cannot have it both ways. ____________________________ 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. Matter of Smith Barney Shearson v. Sacharow , 91 N.Y.2d 39, 49 (1997); see also Stark v. Molod Spitz DeSantis & Stark ,  P.C. , 9 N.Y.3d 59, 66 (2007). Stark , 9 N.Y.3d at 66. Smith Barney , 91 N.Y.2d at 49-50 (citations and internal quotation marks omitted); Stark , 9 N.Y.3d at 66. Stark , 9 N.Y.3d at 66 (quoting Sherrill v. Grayco Bldrs. , 64 N.Y.2d 261, 272 (1985)). Id. (quoting Flores v Lower E. Side Serv. Ctr., Inc. , 4 N.Y.3d 363, 372 (2005) (citations and internal quotation marks omitted) (assuming arbitration clause in contract applied to dispute, party seeking its benefit did not assert arbitration as defense in answer or move to compel, electing instead to participate in litigation for 16 months through discovery and filing of note of issue)). Stark , 9 N.Y.3d at 66 (quoting De Sapio v. Kohlmeyer , 35 N.Y.2d 402, 405 (1974) (internal quotation marks omitted)); see also Singer v. Jefferies & Co. , 78 N.Y.2d 76, 85 (1991) (under the Federal Arbitration Act, moving to dismiss before moving to compel arbitration “should not be considered a waiver unless the opposing party demonstrates prejudice”). Id. (quoting id. ). Id. at 66-67 (quoting id. ). Id. at 67 (quoting Sherrill , 64 N.Y.2d at 273, citing Preiss/Breismeister Architects v Westin Hotel Co.-Plaza Hotel Div. , 56 N.Y.2d 787, 789 (1982)). The Court noted that defendants raised this argument for the first time on appeal and failed to preserve the argument because they did not raise it in opposition to the motion to confirm or in support of the cross-motion to vacate. Slip Op. at *1. (citations omitted). Nevertheless, as discussed, the Court considered the argument and rejected it. Id. at *2. Id. (citation and internal quotation marks omitted). Id. (citations and internal quotation marks omitted). Id. (citation and internal quotation marks omitted). Id. (citations and internal quotation marks omitted).

By:   Jeffrey M. Haber On September 25, 2025, the Securities and Exchange Commission (“SEC”) announced ( here ) that it charged the co-founders of Retail Ecommerce Ventures LLC (“REV”), and REV’s Chief Operating Officer (collectively, “Defendants”), with conducting a series of fraudulent securities offerings, misusing investor funds, and making Ponzi-like payments to investors. According to the SEC’s  complaint , REV’s primary business was purchasing distressed retail companies with name brand recognition and converting them into e-commerce only businesses, and serving as the holding company and manager of the REV retailer brands.  From approximately April 2020 through November 2022, Defendants raised approximately $112 million from hundreds of investors through fraudulent offerings involving eight REV portfolio companies: Brahms LLC; Dress Barn Online, Inc.; Franklin Mint Online, LLC; Linens ‘N Things Online, Inc.; Modell’s Sporting Goods Online, Inc.; Pier 1 Imports Online, Inc.; RadioShack Online, LLC; and Stein Mart Online, Inc. (collectively, the “REV Retailer Brands”).   In the complaint, the SEC alleged that Defendants sold securities in the form of unsecured notes promising up to 25% annualized returns, as well as equity (membership units) with a monthly preferential dividend as high as 2.083%. The purported purpose of the offerings was to raise capital to acquire the predecessor of and raise additional operating capital for each particular REV Retailer Brand. According to the SEC, the co-founder defendants made material misstatements in connection with these offerings about the success and profitability of REV’s business model and the REV Retailer Brands, as well as the safety of investors’ investments. The SEC further alleged that Defendants transferred at least $5.9 million in investor proceeds directly between portfolio companies, contrary to the written and oral representations made to investors about the use of proceeds; that at least $5.9 million of the returns distributed to investors were, in reality, Ponzi-like payments funded by other investors; and that defendants misappropriated approximately $16.1 million in investor funds for the co-founder defendants’ personal use. The SEC filed its complaint in the U.S. District Court for the Southern District of Florida. The SEC charged the co-founder defendants with violations of Section 17(a) of the Securities Act of 1933 (“Securities Act”) and Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 thereunder. The SEC also charged a company officer with violations of Sections 17(a)(1) and (3) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5(a) and (c) thereunder. Finally, the SEC charged the same defendant with aiding and abetting the co-founder defendants’ violations of Section 17(a)(2) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5(b) thereunder.  The SEC seeks permanent injunctions, civil penalties, and officer-and-director bars as to each defendant. In addition, the SEC seeks disgorgement and prejudgment interest as to the co-founder defendants.   ________________________________ 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. Securities and Exchange Commission v. Lopez, et al. , Case 1:25-cv-24356 (S.D. Fla.).

By:  Jeffrey M. Haber As readers of this Blog know, we have written about many types of fraud over the years, such as affinity fraud, common law fraud, fraud in the inducement, fraudulent concealment, and securities fraud. Another type of fraud concerns fraud in the execution or fraud in the factum. Three years ago, we examined Paredes v. Vorhand , a case involving this legal principle ( here ). Since that time, we have not examined any cases involving fraud in the execution. Today, we do so. In Dodobayeva v. Rubinoff , 2025 N.Y. Slip Op. 05219 (2d Dept. Oct. 1, 2025) ( here ), plaintiff, claiming limited English skills, alleged she was deceived into signing a deed transferring property to her daughter-in-law. The Appellate Division, Second Department, affirmed the dismissal of her claim, ruling that she failed to exercise due diligence, as she neither read nor inquired about the documents. The Court also rejected her reliance on the two-year discovery rule for statute of limitations purposes, finding that she could have discovered the alleged fraud earlier. Fraud In the Factum: A Primer Fraud in the execution, or fraud in the factum, arises where a party did not know the nature or the contents of the document being signed, or the consequences of signing it, and was nonetheless misled into executing it. “However, a party who signs a document without any valid excuse for not having read it is conclusively bound by its terms.” “Moreover, a plaintiff is expected to exercise ordinary diligence and may not claim to have reasonably relied on a defendant’s representations or silence where he or she has means available to him or her of knowing, by the exercise of ordinary intelligence, the truth or the real quality of the subject of the representation.” Thus, the failure to read the document before signing “prevents from establishing justifiable reliance, an essential element of fraud in the execution.” In other words, absent some impairment ( e.g. , “the signer is illiterate, blind, or not a speaker of the language in which the document is written”), a plaintiff cannot justifiably rely on another’s representation that the words used in the document means something other than what they state. Importantly, the signer who claims to have some impairment must be free of negligence. This means that disability by itself does not automatically excuse the signer from making a reasonable effort to learn the contents of the document being signed. “The cases consistently hold that a person” with a disability or an inability to speak and/or read the English language “must make a reasonable effort to have the document read to him.” The Two-Year Discovery Rule: A Primer “A cause of action based upon fraud must be commenced within six years from the time of the fraud, or within two years from the time the fraud was discovered, or with reasonable diligence could have been discovered, whichever is longer.” “‘Where a plaintiff relies upon the two-year discovery exception to the six-year limitations period, the burden of establishing that the fraud could not have been discovered prior to the two-year period before the commencement of the action rests on the plaintiff who seeks the benefit of the exception.’” Although, “‘ rdinarily, an inquiry into when a plaintiff should have discovered an alleged fraud presents a mixed question of law and fact’” “summary dismissal is appropriate where it conclusively appears that the plaintiff has knowledge of facts which should have caused her to inquire and discover the alleged fraud.”  “Thus, although ‘mere suspicion’ will not substitute for knowledge of the fraudulent act”, a plaintiff may not “shut his eyes to facts which call for investigation.” Dodobayeva v. Rubinoff With the foregoing principles in mind, we examine Dodobayeva v. Rubinoff , an action, inter alia , to set aside an allegedly fraudulent conveyance of an interest in real property. Background In February 2020, plaintiff sued her daughter-in-law (“defendant”), and another defendant, inter alia , to set aside a 2013 conveyance of plaintiff’s one-half interest in certain residential real property located in Queens, New York (hereinafter, the “premises”) to defendant. Plaintiff alleged, among other things, that she was fraudulently induced into signing certain documents, including a quitclaim deed, effectuating the conveyance of the premises, in that she believed, at the time that she signed the documentation to convey the premises, that she was executing documents to enable her son, defendant’s spouse, to become an owner of the premises. Plaintiff also alleged that she discovered for the first time in January 2020 that the documents that she signed in 2013 made defendant the sole owner of the premises. Plaintiff further alleged that as a native of Uzbekistan, she possessed “limited skills in the comprehension and use of the English language” at the time of the conveyance. Plaintiff additionally alleged that she executed the documents upon her justifiable reliance on purportedly fraudulent representations made by defendant at the time of the conveyance. Defendant answered the complaint and subsequently cross-moved, inter alia , pursuant to CPLR 3211(a)(5) and (7) to dismiss the cause of action alleging fraud on the grounds that it was time-barred and that plaintiff failed to state a cause of action. Plaintiff opposed. Plaintiff submitted an affidavit in which she stated that she signed the conveyance documents without reading them and that she would not have understood the documents even if she had tried to do so due to her English language limitations. Plaintiff further stated in her affidavit that she never had any conversations with her son about the 2013 conveyance or about the documents she signed until January 2020. In an order dated September 12, 2023, the Supreme Court, among other things, granted defendant’s cross-motion. Plaintiff appealed. The Second Department affirmed. The Second Department’s Decision The Court held that “plaintiff conclusively was presumed to have agreed to the terms of the documents and, accordingly, cannot establish that she lacked knowledge from which she could have discovered the alleged fraud with reasonable diligence.” The Court explained that “plaintiff admitted that she neither read nor inquired about the contents of the documents upon which she relies to establish the fraud before she signed them. Yet, she failed to proffer any valid excuse for her failure to do so.” Therefore, concluded the Court, plaintiff could not demonstrate fraud in the factum. The Court also held that defendant “met her prima facie burden of demonstrating that the cause of action alleging fraud accrued no later than the date of the execution of the quitclaim deed in February 2013.” Therefore, said the Court, the fraud in the execution cause of action was “time-barred” as having been “asserted more than six years later” after execution of the quitclaim deed. The Court also held that plaintiff failed to “establish that the fraud could not have been discovered before the two-year period prior to the commencement of action.” “Accordingly,” the Court held that “the Supreme Court properly granted dismissal of the cause of action alleging fraud … as time-barred.” Takeaway In Dodobayeva , plaintiff claimed that she was misled into signing a quitclaim deed transferring property to her daughter-in-law, believing it was for her son’s benefit. As discussed, plaintiff claimed that, due to language barriers, she did not understand the document. However, in affirming the dismissal of plaintiff’s fraud claim, the Court found that “plaintiff admitted that she neither read nor inquired about the contents of the documents upon which she relie to establish the fraud before she signed them. Yet, she failed to proffer any valid excuse for her failure to do so.” In doing so, the Court emphasized the principle that individuals are presumed to understand documents they sign unless they can show a valid, non-negligent reason—such as illiteracy or language barriers—and that they made reasonable efforts to understand the document before they sign it. In Dodobayeva , the Court also addressed the statute of limitations applicable to fraud causes of action. As discussed, the Court held that plaintiff failed to meet her burden of showing that she brought her claim within two years of discovering the alleged fraud. The Court found that plaintiff did not make any inquiries about the alleged fraud for seven years. Consequently, the Court affirmed the dismissal of plaintiff’s fraud claim as time-barred and unsupported by justifiable reliance. Dodobayeva therefore reinforces the principle that litigants have a duty to inquire into the facts and circumstances of the transactions into which they enter when they possess facts showing that they may be the victims of fraud. ____________________________ 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. Fraud in the execution is different than fraud in the inducement. In the latter, the fraud is based on facts occurring prior or subsequent to the execution of a contract which tend to demonstrate that an agreement, valid on its face and properly executed, is to be limited or avoided. Paredes v. Vorhand , 204 A.D.3d 1468 (4th Dept. 2022). Fleming v. Ponziani , 24 N.Y.2d 105, 111 (1969); Gilbert v. Rothschild , 280 N.Y. 66, 71-72 (1939). Cannariato v. Cannariato , 136 A.D.3d 627, 628 (2d Dept. 2016) (alteration and internal quotation marks omitted). Lapin v. Verner , 238 A.D.3d 1128, 1129-1130 (2d Dept. 2025) (alterations and internal quotation marks omitted); see also Benjamin v. Yeroushalmi , 178 A.D.3d 650, 654 (2d Dept. 2019). Sorenson v. Bridge Capital Corp. , 52 A.D.3d 265, 266 (1st Dept. 2008), lv. dismissed , 12 N.Y.3d 748 (2009). Anderson v. Dinkes & Schwitzer, P.C. , 150 A.D.3d 805, 806 (2d Dept. 2017). Countrywide Home Loans, Inc. v. Gibson , 157 A.D.3d 853, 856 (2d Dept. 2018); see also Ackerman v. Ackerman , 120 A.D.3d 1279, 1280 (2d Dept. 2014); Dasz, Inc. v. Meritocracy Ventures, Ltd. , 108 A.D.3d 1084, 1084-1085 (4th Dept. 2013); Sorenson , 52 A.D.3d at 266. See also Pimpinello v. Swift & Co. , 253 N.Y. 159, 163 (1930) (holding, “ f the signer is illiterate, or blind, or ignorant of the alien language of the writing, and the contents thereof are misread or misrepresented to him by the other party, or even by a stranger, unless the signer be negligent, the writing is void”). Sofio v. Hughes , 162 A.D.2d 518, 520 (2d Dept. 1990). Id. Id. (citing, Albany Med. Center Hosp. v. Armlin , 146 A.D.2d 866, 867 (3d Dept. 1989), and Brian Wallach Agency v. Bank of N.Y. , 75 A.D.2d 878, 879 (2d Dept. 1980)). York v. York , 235 A.D.3d 1032, 1033 (2d Dept. 2025) (internal quotation marks omitted); see also CPLR 203(g); 213(8); Sargiss v. Magarelli , 12 N.Y.3d 527, 532 (2009). York , 235 A.D.3d at 1033 (quoting Cannariato , 136 A.D.3d at 627). Gormley v. Marist Bros. of the Schs., Province of the United States of Am. , 236 A.D.3d 868, 870 (2d Dept. 2025) (quoting Vilsack v. Meyer , 96 A.D.3d 827, 828 (2d Dept. 2012)); see also Trepuk v. Frank , 44 N.Y.2d 723, 724-725 (1978). Cannariato , 136 A.D.3d at 628 (internal quotation marks omitted). Id. (quoting Erbe v. Lincoln Rochester Trust Co. , 3 N.Y.2d 321, 326 (1957)). Saphir Intl., SA v. UBS PaineWebber Inc ., 25 A.D.3d 315, 316 (1st Dept. 2006) (quoting Schmidt v. McKay , 555 F.2d 30, 37 (2d Cir. 1977)); see also Shannon v. Gordon , 249 A.D.2d 291, 292 (2d Dept. 1988). Slip Op. at *1 (citing Cannariato, 136 A.D.3d at 628). Id. Id. Id. Id. Id. Id. Id.

By:  Jeffrey M. Haber In Macklowe Inv. Props. LLC v. MIP 57th Dev. Acquisition LLC , 2025 N.Y. Slip Op. 05192 (1st Dept. Sept. 30, 2025) ( here ), the plaintiff, a real estate brokerage, sued pursuant to a letter agreement for a leasing commission after securing a tenant for defendants’ property. The letter agreement required satisfaction of a condition precedent before payment of the commission: execution of a leasing commission agreement. Plaintiff never fulfilled this condition. The motion court held that without satisfying this requirement, plaintiff’s breach of contract claim had not yet ripened. Plaintiff argued futility and waiver, but the motion court rejected these claims, noting that defendants had offered a draft agreement and never refused to negotiate. The First Department affirmed the motion court’s ruling, emphasizing that the condition precedent was never met and defendants did not act in bad faith to prevent its fulfillment. Thus, no commission was owed. Background Plaintiff, a licensed real estate brokerage office, and defendants entered into a development management agreement and a property management agreement. Defendant, MIP 57th Development Acquisition, LLC (“MIP Acquisition”), is the owner of the retail and garage portions of certain real property located on Park Avenue in New York City. Defendant, MIP Acquisition is also the owner of the adjoining real property located on East 57th Street in New York City, as successor by merger to defendant NY Medical Investors, LLC. Defendant, 432 Park Properties Inc., together with defendants MIP Acquisition and NY Medical, hold an ownership interest in MIP 57th Development Holding, LLC, which owns MIP Acquisition. On April 7, 2017, the parties entered into a letter agreement (the “Agreement”) that, among other things, set forth the terms and conditions under which plaintiff, acting as a real estate broker, would be entitled to a leasing commission in connection with the lease of commercial space at real property owned by MIP Acquisition. Relevant to the Court’s decision, Section 5 of the Agreement contained a condition precedent specifying when plaintiff would be entitled to a commission: “ shall be entitled to receive a standard New York City commission rate with respect to any final lease agreement executed by Phillips … has executed an industry-standard leasing commission agreement in form and substance reasonably satisfactory to pursuant to which shall provide customary representations and warranties and, solely with respect to Phillips ….” On December 7, 2018, an affiliate of Phillips de Pury / Mercury Group, Phillips Auctioneers LLC (“Phillips”), entered into a lease agreement (“Lease”) with MIP Acquisition to lease certain retail space located at the subject property. Pursuant to the Lease, Phillips agreed to pay MIP Acquisition $121,642,500 in rent over the course of a 15-year term. On January 16, 2019, plaintiff sent defendants an invoice for the leasing commission that it calculated at $3,282,622.00. Defendants disagreed with plaintiff’s calculation; thus, no commission was paid. In December 2021, plaintiff brought suit alleging that it was entitled to a leasing commission under the Agreement. In that regard, Plaintiff asserted three causes of action: breach of contract; breach of the implied covenant of good faith and fair dealing; and in the alternative, unjust enrichment. Motion Court’s Decision and Order Both parties filed motions for summary judgment. Plaintiff sought summary judgment as to both liability and damages for its breach of contract cause of action. In support of its motion, plaintiff contended that defendants refused to pay the standard New York City commission rate for the tenant it procured for the property. In opposition and in support of its own motion for summary judgment, defendants contended that plaintiff failed to satisfy the condition precedent in the Agreement, thus plaintiff’s claims were not yet ripe. Both parties relied on Section 5 of the Agreement. During oral argument, plaintiff claimed that providing defendants with the industry-standard leasing commission agreement, as set forth in Section 5 of the Agreement, was futile because defendant argued that plaintiff was not entitled to the amount it sought. The motion court held that it was not futile to comply with the terms of the Agreement and that defendants did not waive their right to the executed leasing commission agreement identified in the underlying agreement. Consequently, the motion court denied plaintiff’s motion and granted defendant’s cross-motion for summary judgment. Plaintiff appealed. The First Department affirmed. The First Department’s Decision The Court held that “ efendants met their prima facie burden of establishing that their obligation to pay plaintiff a commission pursuant to the letter agreement was never triggered and thus that defendants did not breach the agreement.” Noting that “it undisputed that the parties never entered into a leasing commission agreement,” the Court explained that the failure to enter into such an agreement was “a condition precedent to defendants’ obligation to pay plaintiff a commission pursuant to the parties’ April 7, 2017 letter agreement.” The Court also held that “ laintiff failed to raise a triable issue of fact as to whether defendants waived the condition precedent.” “Defendants were not required to repeatedly remind plaintiff of its obligations under the agreement,” said the Court. Finally, the Court rejected plaintiff’s argument that defendants prevented the condition precedent from occurring. Under New York’s prevention doctrine, “ f a promisor himself is the cause of the failure of performance of a condition upon which his own liability depends, he cannot take advantage of the failure.”   The prevention doctrine applies where a party takes steps in bad faith to cause the condition precedent’s failure.   The Court found that “ hile the record indicate that there was disagreement as to the amount of the commission to which plaintiff was entitled, defendants never indicated that they would not enter into ‘an industry-standard leasing commission agreement in form and substance reasonably satisfactory to’ them, as set forth in the letter agreement.” The Court noted that “ efendants offered plaintiff a proposed leasing commission agreement in October 2019, and there no evidence indicating that plaintiff ever countered with another proposed commission agreement, or that defendants declined to enter into a commission agreement or would have done so.” “Thus,” concluded the Court, “plaintiff ha not … raised an issue of fact as to prevention”. Takeaway As shown in Macklowe , courts will not enforce a party’s contractual rights unless all agreed-upon terms have been satisfied, such as conditions precedent. In Macklowe , plaintiff’s right to a commission was contingent upon executing a separate leasing commission agreement. Because that condition never occurred, the obligation to pay never arose. Macklowe also demonstrates that a waiver of rights requires clear intent. A party’s failure to enforce a contractual term does not automatically constitute waiver. In Macklowe , the Court emphasized that waiver must be intentional and clearly demonstrated. Silence or inaction, even over time, is insufficient to establish a waiver. Macklowe further shows that the prevention doctrine is narrowly applied. In Macklowe , plaintiff argued that compliance was futile and that defendants prevented performance. The Court rejected both arguments, stating that futility must be based on clear evidence that performance would have been refused, and prevention requires bad faith conduct. Mere disagreement over payment terms does not meet these requirements. _____________________________________ Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice. Slip Op. at *1. Id. “A condition precedent is an act or event, other than a lapse of time, which, unless the condition is excused, must occur before a duty to perform a promise in the agreement arises.” Oppenheimer & Co. v. Oppenheim, Appel, Dixon & Co. , 86 N.Y.2d 685, 690 (1995) (internal quotation marks omitted). Id. “Contractual rights may be waived if they are knowingly, voluntarily and intentionally abandoned. Such abandonment may be established by affirmative conduct or by failure to act so as to evince an intent not to claim a purported advantage.” Fundamental Portfolio Advisors, Inc. v. Tocqueville Asset Mgt., L.P. , 7 N.Y.3d 96, 104 (2006) (internal quotation marks and citation omitted). “ aiver should not be lightly presumed” and must be based on a clear manifestation of intent to relinquish a contractual protection.” Id. Id . Courts may not infer waiver from “mere silence”. Homapour v. Harounian , 200 A.D.3d 575, 576 (1st Dept 2021) (internal quotation marks omitted). Id. Vector Media, LLC v. Golden Touch Transp. of N.Y., Inc. , 189 A.D.3d 654, 655 (1st Dept. 2020) (internal quotation marks omitted). See Ellenberg Morgan Corp. v. Hard Rock Cafe Assoc. , 116 A.D.2d 266, 271 (1st Dept. 1986). Slip Op. at *1. Id. Id.

By:  Jeffrey M. Haber In CJS Indus. Inc. v. Dolce , 2025 N.Y. Slip Op. 05037 (1st Dept. Sept. 23, 2025 ( here ), plaintiff sued RS Custom Woodworking and its representatives for fraud after winning an arbitration award. Plaintiff alleged that defendants conspired to avoid payment by incorporating a new entity with a similar name between the initial and final arbitration awards. Plaintiff claimed the incorporation was part of a deliberate scheme to mislead and evade enforcement of the arbitration awards. However, both the motion court and the Appellate Division, First Department, found that plaintiff failed to plead fraud with the required particularity in compliance with CPLR 3016(b). The courts held that the complaint lacked factual allegations showing a material misrepresentation, scienter, intent to induce reliance, justifiable reliance, and proximate causation. The only alleged misrepresentation cited was the entry of the new entity in the New York Secretary of State’s database, which showed the new entity was not involved in the original agreement or arbitration. As a result, the fraud claims were dismissed. Background On July 18, 2018, Plaintiff, CJS Industries, Inc., signed a Master Subcontractor Agreement (“Agreement”) with RS Custom Woodworking (“RS”). The Agreement contained an arbitration provision for the resolution of disputes arising between plaintiff and RS. At some point, a dispute arose between the parties. Plaintiff commenced an arbitration against defendants before the American Arbitration Association in accordance with the Agreement (“Arbitration”). Defendants participated in the Arbitration with no objection and asserted counterclaims against plaintiff. On or about September 2, 2020, the arbitrator issued an initial award in plaintiff’s favor. On October 29, 2020, the arbitrator modified the award to increase the total amount due plaintiff. In the interim, on October 5, 2020, defendants incorporated a new entity known as RS Custom Woodworking, Inc. (“RS Inc.”). The incorporation was done between the initial arbitration award and the final award on October 29, 2020. On or about December 22, 2020, plaintiff filed an Article 75 proceeding to confirm the arbitration award. The motion court confirmed the award and entered judgment against RS Inc., the newly formed entity. RS Inc. appealed the decision and order. The First Department reversed and vacated the judgment because it was unable to confirm an award against an entity that did not exist at the time the award was issued. Plaintiff brought suit against defendants, asserting, inter alia , that defendants defrauded it by creating RS Inc. to avoid paying the initial award and subsequently the final award. Defendants moved to, inter alia , dismiss pursuant to CPLR 3211(a)(1), (5), and (7). Plaintiff opposed the motion. Defendants argued that the fraud-based claims should be dismissed because there were no facts supporting the alleged scheme to defraud, and that plaintiff named not only the wrong party in its action to confirm the arbitration award, but also pursued confirmation and judgment against a company that did not exist when the Agreement was made and the arbitration conducted. Plaintiff opposed the motion, contending that the complaint provided factual details establishing the elements of a fraud claim. Plaintiff maintained that the complaint described defendants’ plan to defraud it and to avoid paying the initial award soon after losing the arbitration, that RS Inc. was incorporated between the initial and final arbitration award, that defendants knew there would be confusion between the two entities, that defendants intended for plaintiff to rely on the incorporation at the precise time plaintiff was working to confirm, and defendants induced plaintiff’s reliance on the incorporation as a means to avoid payment. The Motion Court’s Decision The motion court granted the motion to dismiss, holding that the complaint did not allege with factual specificity defendants’ purported improper actions/conduct. The motion court found that, among other things, “ laintiff merely allege in conclusory terms that defendants ‘acted in furtherance of and took steps to effectuate their common plan, agreement and scheme to defraud...’, that the alleged actions by defendants were fraudulent.” The motion court concluded that “ ased on plaintiff’s allegations, the court reasonably infer the fraudulent conduct that allegedly occurred between the various defendants.” Plaintiff appealed. The First Department’s Decision and Order On appeal, the First Department unanimously affirmed. The Court held that “ lthough the complaint out the alleged scheme sufficiently to put the parties on notice of the precise conduct of which they accused, the complaint nonetheless fail to state the elements of a fraud claim.” In New York, the elements of a fraud cause of action are: “<1> a material misrepresentation of a fact, <2> knowledge of its falsity, <3> an intent to induce reliance, <4> justifiable reliance by the plaintiff and damages”.   Additionally, the plaintiff must plead that the fraud was the proximate cause of the claimed losses. The Court found that “ he only misrepresentation to which plaintiff points the entry in the Secretary of State’s database.” “However,” noted the Court, “as defendants point out, that entry lists the date of RS Custom Woodworking, Inc.’s incorporation, October 5, 2020, indicating that it was not the same entity that entered into an agreement with plaintiff in 2018 or participated in an arbitration hearing in August 2020.” The Court also held that “ laintiff’s allegations of scienter … lacking.” The Court reasoned that plaintiff could not show an intent to deceive because “RS Custom Woodworking, Inc. immediately and expressly stated in its answer in the confirmation proceeding that it was not the entity against which the arbitration award had been granted.” Moreover, the Court held that “ ecause plaintiff knew it had sued the wrong party almost immediately, but continued with the confirmation proceeding, it failed to plead proximate or loss causation.” Takeaway CJS Indus. reinforces the principle that fraud claims must be pled with particularity. General allegations or conclusory statements about the elements of a scheme are insufficient. Plaintiffs must clearly articulate each element of fraud—misrepresentation, knowledge of falsity, intent, reliance, and damages—with specific facts. ______________________________ 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. This BLOG has written numerous articles addressing CPLR 3016(b) and the failure to plead fraud with particularity. To find such articles, please see the  BLOG  tile on our  website  and search for “CPLR 3016(b)”, “failure to plead fraud with particularity”, “fraud”, “elements of fraud”, or any other commercial litigation issue that may be of interest you. Slip Op. at *1. Eurycleia Partners, LP v. Seward & Kissel, LLP , 12 N.Y.3d 553, 559 (2009). Ambac Assur. Corp. v. Countrywide Home Loans, Inc. , 151 A.D.3d 83, 86 (1st Dept. 2017). Slip Op. at *1. Id. Id. Id. Id.

By:  Jeffrey M. Haber Under the Federal Arbitration Act (“FAA”) and Article 75 of New York’s Civil Practice Law and Rules (“CPLR”), an action should be dismissed or stayed, and the claims referred to arbitration when they are subject to a broad, mandatory arbitration provision in the parties’ governing agreement. The FAA provides that written agreements to arbitrate are “valid, irrevocable, and enforceable” and “places arbitration agreements ‘upon the same footing as other contracts’”. “The FAA leaves no place for the exercise of discretion by a district court, but instead mandates that district courts shall direct the parties to proceed to arbitration on issues as to which an arbitration agreement has been signed.” Thus, a court “must stay proceedings once it is ‘satisfied that the parties have agreed in writing to arbitrate an issue or issues underlying the district court proceeding.’” In New York, the result is the same under the CPLR. New York has a long and strong public policy favoring arbitration, and any doubts as to whether an issue is arbitrable will be resolved in favor of arbitration. The threshold question in assessing a motion to compel arbitration is whether there is a valid and binding agreement to arbitrate. The court decides that question. If the Court finds that a valid arbitration agreement exists, the next question is whether the dispute comes within the scope of that agreement. The parties can, if they choose, delegate to the arbitrator (rather than the court) the job of making that determination. “Where the parties ‘explicitly incorporate rules that empower an arbitrator to decide issues of arbitrability, the incorporation serves as clear and unmistakable evidence of the parties’ intent to delegate such issues to an arbitrator’”.   Incorporating the rules of the American Arbitration Association, which provide that an arbitrator shall have the power to determine the arbitrability of any claim without any need to refer such matters to a court in the first instance, evidences such intent. Therefore, “ lthough the question of arbitrability is generally an issue for judicial determination, when the parties’ agreement specifically incorporates by reference the AAA rules, which provide that ‘ he tribunal shall have the power to rule on its own jurisdiction, including objections with respect to the existence, scope or validity of the arbitration agreement,’ and employs language referring ‘all disputes’ to arbitration, courts will ‘leave the question of arbitrability to the arbitrators.’” “‘When the parties’ contract delegates the arbitrability question to an arbitrator, a court may not override the contract. In those circumstances, a court possesses no power to decide the arbitrability issue. That is true even if the court thinks that the argument that the arbitration agreement applies to a particular dispute is wholly groundless.’” Moreover, where “it appears that the subject matter of the agreement containing the arbitration clause and the dispute between its signatories are reasonably related,” arbitration should be compelled. Further, “a nonsignatory to an arbitration clause may, in certain situations, compel a signatory to the clause to arbitrate the signatory’s claims against the nonsignatory despite the fact that the signatory and nonsignatory lack an agreement to arbitrate.” For this reason, “ signatory to an arbitration agreement is estopped from avoiding arbitration with a non-signatory when the issues the non-signatory is seeking to resolve in arbitration are intertwined with the agreement that the estopped party has signed.” In Posillico v. Posillico , 2025 N.Y. Slip Op. 33273(U) (Sup. Ct., N.Y. County Sept. 3, 2025) ( here ), the foregoing principles were considered by the motion court in staying the action in favor of arbitration. In Posillico , plaintiff alleged that defendants violated his rights under a shareholder agreement (“Shareholder Agreement”) by removing him for “cause” (within the meaning of the Shareholder Agreement) as an employee and officer of Posillico, Inc. (“Posillico” or the “Company”), “thereby triggering right, under the Shareholder Agreement, to compel him to sell them his shares at a fraction of their true value.” The Shareholder Agreement contained a broad, mandatory arbitration clause, which provided, in pertinent part, that “ ny controversy or claim arising out of or relating to this Agreement or the breach thereof shall be settled by arbitration.” The Shareholder Agreement also provided that any arbitration would be governed by “the rules then obtaining of the American Arbitration Association.” Pursuant to the Shareholder Agreement, defendants commenced an arbitration against plaintiff. The issue before the motion court concerned which of plaintiff’s claims were subject to mandatory arbitration. As an initial matter, the motion court held that there was “plainly a valid agreement to arbitrate (at least among the signatories to the agreement).” Therefore, said the motion court, “it for the arbitrator (not the Court) to determine in the first instance which, if any, of Plaintiff’s claims against Defendants Joseph K. and Michael J. are subject to mandatory arbitration under the agreement.” Having decided that there was a valid agreement to arbitrate, the motion court turned its attention to the question of which claims were arbitrable and against whom such claims could be arbitrated. The motion court framed the issue as follows: However, Plaintiff includes non-signatories to the Shareholder Agreement (Boren and Horton) as Defendants in some of his claims. That raises the question whether there is a valid agreement that binds Plaintiff to arbitrate his claims against those non-signatories . . . . That issue, said the motion court, was “a question for the Court”. The Court found that plaintiff was “estopped from contesting ability to compel arbitration of Plaintiff’s fourth claim for breach of fiduciary duty and fifth claim for conspiracy to breach fiduciary duty,” assuming those claims could be arbitrated by the signatory defendants. The motion court concluded that “ f the arbitrator determines that the relevant claims are arbitrable against , the claims against should be adjudicated in the same arbitration rather than in a separate litigation.” Finally, the motion court stayed the action with respect to the issue of whether plaintiff had standing ( e.g. , whether he was a shareholder) to bring his derivative claims for an accounting and access to the company’s books and records, “because determination of that issue in arbitration dispose of those claims”. The motion court held, therefore, that since it could not “determine … whether all claims in the complaint subject to mandatory arbitration, it proper to stay the action pending a determination of arbitrability rather than dismiss it entirely”. __________________________________ 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. Wu v. Uber Techs., Inc. , 43 N.Y.3d 288, 297 (2024). Badinelli v. Tuxedo Club , 183 F. Supp.3d 450, 453 (S.D.N.Y. 2016) (quoting Jung v. Skadden, Arps, Slate, Meagher & Flom, LLP , 434 F. Supp. 2d 211, 214–15 (S.D.N.Y.2006)) (emphasis in original). See also 9 U.S.C. § 3. Nicosia v. Amazon.com, Inc. , 834 F.3d 220, 229 (2d Cir. 2016) (quoting WorldCrisa Corp. v. Armstrong , 129 F.3d 71, 74 (2d Cir. 1997)); see also CPLR 7503(a); Katz v. Cellco P’ship , 794 F.3d 341, 345 (2d Cir. 2015). CPLR 7501; see also Matter of Smith Barney Shearson v. Sacharow , 91 N.Y.2d 39, 49 (1997); Sisters of Saint John the Baptist v. Phillips R. Geraghty Constructor, Inc. , 67 N.Y.2d 997 (1986); State of New York v. Philip Morris, Inc. , 30 A.D.3d 26 (1st Dept. 2006), aff’d , 8 N.Y.3d 574 (2007). Matter of Belzberg v. Verus Invs. Holdings Inc. , 21 N.Y.3d 626, 630 (2013). Henry Schein, Inc. v. Archer and White Sales, Inc. , 586 U.S. 63, 69 (2019). Zachariou v. Manios , 68 A.D.3d 539, 539 (1st Dept. 2009) (“Whether a dispute is arbitrable is generally an issue for the court to decide unless the parties clearly and unmistakably provide otherwise.”); see also Henry Schein , 586 US at 69 (“ f a valid agreement exists, and if the agreement delegates the arbitrability issue to an arbitrator, a court may not decide the arbitrability issue”]). Fritschler v. Draper Mgt., LLC , 203 A.D.3d 623 (1st Dept. 2022) (quoting Contec Corp. v. Remote Solution, Co. , Ltd., 398 F.3d 205, 208 (2d Cir. 2005)). Id. . See also Life Receivables Tr. v. Goshawk Syndicate 102 at Lloyd’s , 14 N.Y.3d 850, 851 (2010). Life Receivables , 66 A.D.3d 495, 496 (1st Dept. 2009), aff’d , 14 N.Y.3d 850 (2010) (quoting Smith Barney , 91 N.Y.2d at 47). WN Partner, LLC v. Baltimore Orioles Ltd. P’ship , 179 A.D.3d 14, 17 (1st Dept. 2019) (quoting Henry Schein , 586 U.S. at 68). Maresca v. La Certosa , 172 A.D.2d 725, 726 (2d Dept. 1991); see also Ehrlich v. Stein , 143 A.D.2d 908, 910 (2d Dept. 1988) (“If the parties have broadly agreed to settle any dispute arising out of a contract between them by arbitration,” claims having a “reasonable relationship” with the agreement containing the broad arbitration clause are arbitrable). Degraw Const. Grp., Inc. v. McGowan Builders, Inc. , 152 A.D.3d 567, 569–70 (2d Dept. 2017). Contec , 398 F.3d at 209; see also Merrill Lynch Int'l Fin., Inc. v. Donaldson , 27 Misc. 3d 391, 396 (Sup. Ct., N.Y. County 2010); Hoffman v. Finger Lakes Instrumentation, LLC , 7 Misc. 3d 179, 185 (Sup. Ct., Monroe County 2005). Slip Op. at *3. Id. (citing WN Partner , 179 A.D.3d at 17). Id. Id. Id. (citing Contec , 398 F.3d at 209 ( “A signatory to an arbitration agreement is estopped from avoiding arbitration with a non-signatory when the issues the non-signatory is seeking to resolve in arbitration are intertwined with the agreement that the estopped party has signed”), Merrill Lynch , 27 Misc. 3d at 396 (“One circumstance that warrants estoppel is when the signatory to the contract containing an arbitration clause raises allegations of substantially interdependent and concerted conduct by both the non-signatory and the other signatory to the contract”)). Id. at *4. Id. (citing O’Sullivan v. Jacaranda Club , 224 A.D.3d 629, 630 (1st Dept. 2024)). Id. Kanner v. Westchester Med. Grp., P.L.L.C. , 80 Misc. 3d 1201 (A), *12 (Sup. Ct., Bronx County 2023), aff’d , 233 A.D.3d 410 (1st Dept. 2024).

By:  Jeffrey M. Haber In Jefferies LLC v. Blaize Holdings, Inc. , 2025 N.Y. Slip Op. 33272(U) (Sup. Ct., N.Y. County Sept. 3, 2025 ( here ), the New York Supreme Court held that an engagement letter concerning the provision of investment banking services did not qualify as an “instrument for the payment of money only” under CPLR 3213, which allows for expedited summary judgment. The motion court found that the engagement letter imposed mutual obligations and required performance by Jefferies, making it more than a simple financial instrument. In addition, the motion court held that payment under the engagement letter was contingent on the occurrence of a qualifying transaction ( i.e. , a condition precedent), which required extrinsic evidence to determine whether payment was in fact due. Ultimately, the motion court denied Jefferies’ motion for summary judgment, emphasizing that CPLR 3213 applies only when liability is clear and unconditional. A Quick Primer CPLR 3213 is a provision in New York’s Civil Practice Law and Rules (“CPLR”) that allows a plaintiff to seek summary judgment in lieu of a complaint when the case is based on an instrument for the payment of money only, or a judgment from another jurisdiction. It is a powerful procedural tool designed to expedite litigation in cases where the defendant’s liability is clear and based on a straightforward financial obligation. In other words, CPLR 3213 provides quick relief to a plaintiff “on documentary claims so presumptively meritorious that a formal complaint is superfluous, and even the delay incident upon waiting for an answer and then moving for summary judgment is needless”. An “instrument for the payment of money only” is one that “requires the defendant to make a certain payment or payments and nothing else”.   “ he remedy is not available where there are other issues and considerations presented by the writing,” for example “if the liabilities and obligations can only be ascertained by resort to evidence outside the instrument, or if more than simple proof of nonpayment or a de minimis deviation from the face of the document is involved.” Jefferies LLC v. Blaize Holdings, Inc. Background Jefferies arose out of an engagement letter, dated September 9, 2024 (“Engagement Letter”), between plaintiff and defendant Blaze Holdings, Inc., formerly known as Burtech Acquisition Corp. (“Burtech”), pursuant to which defendant retained plaintiff to act as defendant’s “exclusive market advisor” and provide it with “equity capital markets advice and assistance” in connection with a possible acquisition or other business transaction, or series of transactions, with Blaize, Inc.  “Transaction” was defined broadly under the Engagement Letter to include any “business transaction or series of transactions involving all or a material portion of equity or assets, whether directly or indirectly and through any form of transaction. . . .” Under the Engagement Letter, Blaize Holdings agreed to pay Jefferies “a fee of $4.5 million (the “Transaction Fee”); provided, however, that up to $1.0 million of the Transaction Fee be, in Company’s sole discretion, paid to Jefferies in cash no later than the date that 12 months following the date of the closing of a Transaction (such deferred amount, if any, the ‘Deferred Transaction Fee’).” The Engagement Letter also required that Blaize Holdings reimburse Jefferies upon receipt of an invoice for “out-of-pocket expenses (including fees and expenses of its counsel, ancillary expenses and the fees and expenses of any other independent experts retained by Jefferies) incurred by Jefferies and its designated affiliates exclusively in connection with the engagement.”   On January 13, 2025, BurTech completed its merger with Blaize, Inc. Jefferies maintained this transaction constituted a qualifying transaction under the Engagement Letter and triggered Blaize Holdings’ obligation to pay the transaction fee. On February 7, 2025, Jefferies sent Blaize Holdings a letter demanding payment of the $3.5 million Transaction Fee as well as $500,000 in expenses. Jefferies claimed that as of the date of the motion, Jefferies had not received payment from Blaize Holdings.  The Court’s Decision and Order The motion court held that “summary judgment under CPLR 3213 not available because the Engagement Letter not an ‘instrument for the payment of money only.’” The motion court described the Engagement Letter as “a contract for investment banking services” that “impos obligations on both parties.”   The motion court explained that “ hile it involves an obligation to pay money, it not an instrument for the payment of money only.” “Notably,” said the motion court, “Jefferies not cite a single case in which such an engagement letter (or anything similar), … , ha been deemed an instrument within the scope of CPLR 3213.” Looking at the letter, the motion court observed that “the compensation clause itself contain a condition precedent: ‘The Company agrees to pay Jefferies, at the closing of a Transaction, a fee of $4.5 million…. othing in this Agreement shall be construed to obligate the Company to enter into a Transaction or consummate a Transaction.’” The motion court found that “ hether a qualifying capital markets transaction occurs in the future is unresolved within the instrument itself and require reliance on extrinsic evidence, precluding use of CPLR 3213.” Additionally, the motion court agreed with defendant that “some performance” by Jefferies was required as a clear “condition for payment.” “More importantly,” said the motion court, “even assuming there may ultimately not be a triable issue of fact about the parties’ performance, it will in any event require resort to evidence outside the scope of the ‘instrument’ itself.” Finally, the motion court rejected Jefferies’ reliance on Section 11 of the Engagement Letter, which provided that Jefferies could obtain “summary judgment in lieu of complaint” in connection with the Transaction Fee” to satisfy the requirements of the statute. The motion court explained, that “ his section merely recognize Plaintiff’s ability to seek such relief.  It not (and cannot) waive the statutory prerequisites of CPLR 3213.” Accordingly, the motion court denied plaintiff’s motion. Takeaway Jefferies is an example of the limits of CPLR 3213 – i.e. , that not all payment-related contracts qualify for relief under CPLR 3213. As discussed, the motion court held that an investment banking engagement letter—despite containing a payment obligation—was not an “instrument for the payment of money only.” Because the agreement imposed mutual obligations and required performance by Jefferies, it was deemed a service contract rather than a pure financial instrument. The motion court also found that payment was contingent on a qualifying transaction, which could not be determined from the document alone and required extrinsic evidence. Critically, the motion court held that the contractual provision permitting Jefferies to file a motion for summary judgment in lieu of complaint under CPLR 3213 did not override the prerequisites for granting such a motion. In short, Jefferies reinforces the rule that CPLR 3213 is reserved for clear, unconditional payment obligations—not contracts involving performance or contingencies. ___________________________________ 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. This BLOG has written numerous articles addressing CPLR 3213 and motions for summary judgment in lieu of complaint. To find such articles, please see the  BLOG  tile on our  website  and search for “CPLR 3213”, “summary judgment in lieu of complaint”, or any other commercial litigation issue that may be of interest you. Cooperatieve Centrale Raiffeisen-Boerenleenbank, B.A. v. Navarro , 25 N.Y.3d 485, 491-92 (2015). Seaman-Andwall Corp. v. Wright Mach. Corp. , 31 A.D.2d 136, 137 (1st Dept. 1968); Weissman v. Sinorm Deli, Inc. , 88 N.Y.2d 437, 444 (1996). Kerin v. Kaufman , 296 A.D.2d 336, 337 (1st Dept. 2002) (quoting Weissman , 88 N.Y.2d at 444). Slip Op. at *4. Id. Id. Id. Id. Id. Id. at *4-*5. Id. at *5. Id. Id.

By: Jonathan H. Freiberger Today’s article is about Nuruzzaman v. Deutsche Bank Natl. Trust Co. , an action that involves numerous areas of the law about which we frequently write -- mortgage foreclosure, FAPA, RPAPL 1501(4), CPLR 205(a), CPLR 205-A and statutes of limitation . Statute of Limitations in Foreclosure Actions By way of brief background, and as previously written in this BLOG, an action to foreclose a mortgage is governed by a six-year statute of limitations. CPLR 213(4) ; see also Medina v. Bank of New York Mellon Trust Co., N.A . , 240 A.D.3d 879 (2 nd Dep’t 2025); Fed. Nat. Mort. Assoc. v. Schmitt , 172 A.D.3d 1324, 1325 (2 nd Dep’t 2019). When a mortgage is payable in installments, “separate causes of action accrue for each installment that is not paid and the statute of limitations begins to run on the date each installment becomes due.” HSBC Bank USA, N.A. v. Gold , 171 A.D.3d 1029, 1030 (2 nd Dep’t 2019). Most mortgages, however, provide that a mortgagee may accelerate the entire debt in the event of, inter alia , a payment default by a mortgagor. Once the mortgagee’s election to accelerate is properly made, “the borrower’s right and obligation to make monthly installments ceased and all sums become immediately due and payable, and the six-year Statute of Limitations begins to run on the entire mortgage debt.” EMC Mortgage Corp. v. Patella , 279 A.D.2d 604, 605 (2 nd Dep’t 2001) citations and internal quotation marks and brackets omitted); see also Medina , 240 A.D.3d at 881; HSBC , 171 A.D.3d at 1030. RPAPL 1501(4) When a mortgage appears as a lien of record on real property, but the statute of limitations has expired for the mortgagee to commence an action to foreclose the mortgage, RPAPL 1501(4) permits the mortgagor (or any other “person having an estate or interest in the real property”) to commence an action to have the encumbrance removed of record. See, e.g., MTGLQ Investors, L.P. v. Rodgers , 239 A.D.3d 968 (2 nd Dep’t 2025). This statute enables the mortgagor to eliminate the lien of the mortgage without having to wait to impose a statute of limitations defense when the mortgagee commences a foreclosure action, if ever. FAPA The Foreclosure Abuse Prevention Act (“FAPA”), which went into effect in December of 2022, “represents the Legislature’s response to litigation strategies and certain legal principles that distorted the operation of the statute of limitations in foreclosure actions.” Genovese v. Nationstar Mortgage LLC , 223 A.D.3d 37, 41 (1 st Dep’t 2023) (citation omitted). Thus, inter alia , FAPA’s provisions were designed to prevent lenders from circumventing statute of limitations problems in residential mortgage foreclosure actions by the simple expedient of accelerating and deaccelerating loans to restart the running of statutes of limitations. CPLR 205(a) and 205-A Sometimes the applicable statute of limitations expires after the dismissal of a timely commenced action. Generally, such an occurrence should not be a problem because a new action could still be commenced. However, issues may arise when an otherwise timely action is dismissed subsequent to the expiration of the limitations period. Depending on the nature of the dismissal, even in the latter scenario, a plaintiff may be permitted to commence a new action notwithstanding the expiration of the applicable statute of limitations by virtue of the savings provisions of CPLR 205(a) . CPLR 205(a) is a “remedial” statute that “has existed in New York law since at least 1788” and can race[] its roots to seventeenth century England.” Wells Fargo Bank, N.A. v. Eitani , 148 A.D.3d 193, 199 (2 nd Dep’t 2017), appeal dismissed , 29 N.Y.3d 1023 (2017). The purpose of CPLR 205(a) is to “ameliorate the potentially harsh effect of the Statute of Limitations in certain cases in which at least one of the fundamental purposes of the Statute of Limitations has in fact been served, and the defendant has been given timely notice of the claim being asserted by or on behalf of the injured party.” George v. Mt. Sinai Hospital , 47 N.Y.2d 170, 177 (1979). Thus, the statute provides “a second opportunity to the claimant who has failed the first time around because of some error pertaining neither to the claimant’s willingness to prosecute in a timely fashion nor to the merits of the underlying claim.” George , 47 N.Y.2d at 178-79. To address the previously discussed gamesmanship employed by lenders to artificially extend applicable statutes of limitation, FAPA added CPLR 205-A, which limits the ability of lenders to manipulate the statute of limitations in mortgage foreclosure actions. Nuruzzaman v. Deutsche Bank Natl. Trust Co. All of the previously discussed principles are addressed in Nuruzzaman . In October 2010, the lender commenced a foreclosure action against the borrower to foreclose a mortgage (the “First Foreclosure Action”). In 2017, the First Action was dismissed due to the lender’s failure to comply with a scheduling order. The lender’s subsequent motion to vacate the dismissal order was denied and the related appeal was dismissed on October 13, 2020, for failure to perfect. In June 2018, the borrower commenced an action pursuant to RPAPL 1501(4) to cancel and discharge the mortgage due to the expiration of the statute of limitations (the “Instant Action”). In February 2021, the borrower moved for summary judgment and in May 2021, the lender cross-moved for summary judgment dismissing the Complaint. In between the making o the motion and cross-motion, the lender commenced a new foreclosure action in March 2021 (the “Second Foreclosure Action”). In August 2022 the motion court in the Instant Action denied the borrower’s motion for summary judgment under RPAPL 1501(4) and granted the lender’s cross-motion. On the borrower’s appeal, the Second Department reversed. The Court addressed statute of limitations issues in foreclosure actions, and RPAPL 1501(4), along the lines discussed herein. The Court then determined that the borrower satisfied its prima facie burden by establishing that the mortgage debt was accelerated, and the six-year statute of limitations began to run, in October 2010, when the First Foreclosure Action was commenced. Thus, the statute of limitations had expired before the time the Second Foreclosure Action was commenced in 2021. In addressing the lender’s opposition, the Court stated: In opposition, failed to raise a triable issue of fact as to whether the statute of limitations was tolled, otherwise inapplicable, or whether it had actually commenced a new foreclosure action within the applicable limitations period . Initially, correctly contends that prior to the enactment of the , the was timely commenced pursuant to CPLR 205(a), as it was commenced on March 9, 2021, within six months of October 13, 2020, the date that the 2010 action was terminated by this Court's dismissal of 's appeal. However, FAPA, which was enacted while this appeal was pending, replaced the savings provision of CPLR 205(a) with CPLR 205-a in actions upon instruments described in CPLR 213(4). Under CPLR 205-a(a), " f an action upon an instrument described under CPLR 213(4) is timely commenced and is terminated in any manner other than a voluntary discontinuance, a failure to obtain personal jurisdiction over the defendant . . . , for failure to comply with any court scheduling orders . . . , or upon a final judgment upon the merits, the original plaintiff . . . may commence a new action upon the same transaction or occurrence or series of transactions or occurrences within six months following the termination, provided that the new action would have been timely commenced within the applicable limitations period prescribed by law at the time of the commencement of the prior action and that service upon the original defendant is completed within such six-month period." Here, it is undisputed that the Supreme Court directed dismissal of the complaint in the 2010 action based upon 's failure to comply with the terms of a scheduling order. Accordingly, under FAPA, is not entitled to the benefit of the savings provision of CPLR 205(a) or 205-a. J onathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice. This BLOG has written dozens of articles addressing numerous aspects of residential mortgage foreclosure. To find such articles, please see the BLOG tile on our website and search for any foreclosure, or other commercial litigation, issue that may be of interest you. In particular, as relates to today’s article, type “FAPA”, “statute of limitations”, “RPAPL 1501(4)”, “CPLR 205” and/or “CPLR 205-a” into the search box. In previous BLOG articles, we compared CPLR 205(a) with 205-A. See, e.g., < here =">here"> and < here =">here"> .

By:  Jeffrey M. Haber In Celauro v. Celauro , 2025 N.Y. Slip Op. 04870 (Sept. 10, 2025) ( here ), a minority shareholder of a family-owned business alleged that company executives operated an illicit cash business, diverted profits and deprived shareholders of distributions/dividends. Plaintiff relied on dated deposition testimony, documents, and financial statements to support claims of ongoing misconduct. However, the motion court dismissed most of the breach of fiduciary duty claim, finding many of the allegations to be time-barred under the six-year statute of limitations and the surviving claims too speculative. The motion court rejected application of the continuing wrong doctrine and found plaintiff’s evidence—including financial statements and an accountant affidavit—insufficient to infer ongoing unreported cash sales or misappropriation. The Appellate Division, Second Department affirmed, agreeing that the claims were either untimely or lacked factual support to reasonably infer misconduct within the limitations period. Background Celauro is a shareholder derivative litigation brought by plaintiff, Nathan Celauro, a minority shareholder of 4C Foods Corp. (“4C Foods”), a closely held family-owned business that manufactures and distributes food products, pursuant to Business Corporation Law § 626. Plaintiff alleged that defendants, the officers and directors of 4C Foods, have been running 4C Foods as an illicit cash business. Plaintiff alleged that defendants had (a) failed to report income on its tax returns because it was improperly running 4C Foods as a cash business, and (b) hid 4C Foods’ true profits by diverting the company’s hidden profits to its executives, thus depriving 4C Foods’ shareholders, including plaintiff, of dividends/distributions. Plaintiff contended that he observed the alleged improper cash operation as an employee of 4C Foods and that this operation expanded when one of the defendants took over the company as president in 1991. Plaintiff maintained that by 2005, 4C Foods had approximately half a million dollars per year in unreported cash sales. In asserting his claims, plaintiff relied on deposition testimony taken in 2005 and 2006 and handwritten documents relating to such payments. One of the defendants had testified, however, that he stopped 4C Foods’ cash practices in 2005 as the result of a settlement with the IRS. Nevertheless, plaintiff asserted that 4C Foods continued to run a sizable illicit cash business. In support of this assertion, plaintiff submitted deposition testimony from 2011 in which it was conceded that 4C Foods still received some cash payments, but because the amount of such payments was small, defendants kept the cash and wrote a check in that amount to 4C Foods. Plaintiff also pointed to two bills of lading relating to a “Customer A”' from 2010 and 2011 and copies of two checks relating to that customer from one of the defendants, one from 2010 and the other from 2011. Plaintiff also relied on an affirmation involving a valuation and appraisal process (“Appraisal”) relating to 4C Foods and an affidavit concerning 4C Foods’ cash business. Plaintiff alleged that 4C Foods’ income statements from 2017 and 2018 showed that the cash operation and other improper practices continued. Based upon the foregoing, plaintiff brought suit, alleging causes of action for breach of fiduciary duty, conversion, unjust enrichment, and accounting. Defendants moved to dismiss claiming, inter alia , plaintiff’s claims were time barred and otherwise failed to state a claim. The Motion Court’s Decision and Order The motion court held that most of plaintiff’s fiduciary duty claim was barred by the statute of limitations. The motion court found that defendants demonstrated the action was untimely with respect to defendants’ acts occurring more than six years before the September 21, 2020 commencement date of the action. The motion court held that the action was governed by the six-year statute of limitations applicable to actions brought by or on behalf of a corporation against directors, officers or stockholders. The motion court explained that “nearly all of the factual allegations in the complaint relate to purported cash sales that occurred before September 21, 2014.” The motion court rejected plaintiffs’ argument that the continuing wrong doctrine would entitle it to damages beyond six years: “While plaintiff asserts that the statute of limitations is tolled by the continuing wrong doctrine, even if that doctrine applies here, it would not extend plaintiffs entitlement to damages beyond six years prior to the commencement of the action.” Regarding the breach of fiduciary duty claim, the motion court held that plaintiff’s allegations concerning the cash transactions were “conclusory”. The motion court found that plaintiff failed to demonstrate that defendants committed any misconduct or that plaintiff suffered any damages during the limitations period. In that regard, explained the motion court, almost all of the allegations, including those based on documents produced for the Appraisal, were dated before September 21, 2014. The motion court noted that the only allegation suggesting that cash sales occurred after that date was the statement made by the representative of “Customer A”. The motion court concluded that while the statement “may suggest that some cash sales may possibly have occurred during the limitations period, the statement, in and of itself, fail to show, or allow a non-speculative inference, that defendants misappropriated such sales income or otherwise failed to properly include the cash sales in 4C Foods’ income.” “Similarly,” said the motion court, the income statements from 2018 and 2019 were “cryptic” and did not create an inference that “defendants continue to engage in cash sales, or that any such sales not included as income.” In so doing, the motion court rejected plaintiff’s accountant who opined that it was “evident from the extreme fluctuations in the company’s profit, particularly during 2017 and 2018, that the cash operation is ongoing.” “A company with relatively consistent net sales such as 4C does not have yearly swing of its net income to the tune of millions of dollars without some outside influence, such as increased unrecorded cash sales.” “Given the cryptic nature of the financial statements,” said the motion court, “it is hard to see how able to draw any inference from the financial statements, let alone an inference that cash sales a factor in the profit fluctuations.” “Under these circumstances,” concluded the motion court, “the conclusory assertions made in affidavit insufficient to allow an inference that cash sales continued, or, if they have continued, that such sales not properly recorded as income.” (Citations omitted.) The Second Department’s Decision and Order On appeal, the Second Department affirmed. The Court agreed with the motion court’s findings that “allegations of wrongdoing that occurred more than six years before the commencement of action were time-barred.” The Court also agreed that plaintiff failed to state a claim for breach of fiduciary duty, holding: “the allegations of wrongdoing within the limitations period … ‘based on speculation and conjecture and thus, insufficient to permit a reasonable inference of the alleged misconduct.’” __________________________________ 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. This BLOG has written numerous articles addressing claims for a breach of fiduciary duty claim. To find such articles, please see the  BLOG  tile on our  website  and search for “breach of fiduciary duty” or any other commercial litigation issue that may be of interest you. CPLR 213(7); see also Retirement Plan for Gen. Empls. of N. Miami Beach v. McGraw , 158 A.D.3d 494, 496 (1st Dept. 2018); Matter of Skorr v. Skorr Steel Co., Inc. , 29 A.D. 3d 594, 595 (2d Dept. 2006); Toscano v. Toscano , 285 A.D.2d 590, 591 (2d Dept. 2001). Butler v. Gibbons , 173 A.D.2d 352, 353 (1st Dept. 1991); see also Garron v. Bristol House, Inc. , 162 A.D.3d 857, 859 (2d Dept. 2018); Henry v. Bank of Am. , 147 A.D.3d 599, 601-602 (1st Dept. 2017); Rupert v. Tigue , 259 A.D.2d 946, 947 (4th Dept. 1999). Slip Op. at *2 (citations omitted). Id. (quoting Clevenger v. Yuzek , 222 A.D.3d 931, 935 (internal quotation marks omitted)).

By:  Jeffrey M. Haber In New York, as in most jurisdictions, statutes of limitation serve as a cutoff point for initiating legal action. These statutes define the time frame within which a plaintiff must file a lawsuit after a cause of action accrues. Once the limitation period expires, the claim is generally barred, regardless of its merits. The purpose of a statute of limitations is twofold. For plaintiffs, it encourages timely action, preserving evidence and ensuring witness testimony remains reliable. For defendants, it protects them from defending against stale claims long after evidence is no longer preserved and memories have faded. Over all, these statutes promote fairness, efficiency, and certainty in the legal system. In business litigation, parties often encounter statutes of limitation issues involving, inter alia , breach of fiduciary duty and fraud claims. Determining the appropriate limitation period to apply to breach of fiduciary claims often proves to be difficult. There is no single statute of limitations that the courts and the parties can look to. “Rather, the choice of the applicable limitations period depends on the substantive remedy that the plaintiff seeks.” “Where the remedy sought is purely monetary in nature, courts construe the suit as alleging ‘injury to property’ within the meaning of CPLR 214 (4), which has a three-year limitations period.” “Where, however, the relief sought is equitable in nature, the six-year limitations period of CPLR 213 (1) applies.” Moreover, “where an allegation of fraud is essential to a breach of fiduciary duty claim, courts have applied a six-year statute of limitations under CPLR 213 (8).” In considering the appropriate limitations period, the courts are careful not to elevate form over substance. Thus, for example, where a plaintiff uses “the term ‘disgorgement’ instead of other equally applicable terms such as repayment, recoupment, refund, or reimbursement,” it “should not be permitted to distort the nature of the claim so as to expand the applicable limitations period from three years to six.” The initial burden of establishing that the limitations period bars the challenged claim is on the movant. “To meet its burden, the defendant must establish, inter alia , when the plaintiff’s cause of action accrued.” “A breach of fiduciary duty claim accrues when the fiduciary openly repudiates his or her obligation – i.e. , once damages are sustained.” This is so because, “absent either repudiation or removal, the aggrieved part entitled to assume that the fiduciary would perform his or her fiduciary responsibilities.” “Open repudiation requires proof of a repudiation by the fiduciary which is clear and made known to the beneficiaries.” “Where there is any doubt on the record as to the conclusive applicability of a tatute of imitations defense, the motion to dismiss the proceeding should be denied, and the proceeding should go forward.” Under New York law, an action based upon fraud must be commenced within six years of the date the cause of action accrued, or within two years of the time the plaintiff discovered or could have discovered the fraud with reasonable diligence, whichever is greater. The cause of action accrues when “every element of the claim, including injury, can truthfully be alleged”, “even though the injured party may be ignorant of the existence of the wrong or injury.” Determining when accrual occurs is not easy and often contested. So too is the determination of when the plaintiff discovered or could have discovered the fraud. In New York, “plaintiffs will be held to have discovered the fraud when it is established that they were possessed of knowledge of facts from which it could be reasonably inferred, that is, inferred from facts which indicate the alleged fraud.” “ ere suspicion will not constitute a sufficient substitute” for knowledge of the fraud. “Where it does not conclusively appear that a plaintiff had knowledge of facts from which the fraud could reasonably be inferred, a complaint should not be dismissed on motion and the question should be left to the trier of the facts.” Moreover, where the circumstances suggest to a person of ordinary intelligence the probability that s/he has been defrauded, a duty of inquiry arises, and if s/he fails to undertake that inquiry when it would have developed the truth and shuts his/her eyes to the facts which call for investigation, knowledge of the fraud will be imputed to him/her. The test as to when fraud should with reasonable diligence have been discovered is an objective one. Thus, while it is true that New York courts will not grant a motion to dismiss a fraud claim where the plaintiff’s knowledge is disputed, courts will dismiss a fraud claim when the alleged facts establish that a duty of inquiry existed and that an inquiry was not pursued. “The burden of establishing that the fraud could not have been discovered before the two-year period prior to the commencement of the action rests on the plaintiff, who seeks the benefit of the exception.” In Franco v. Farr , 2025 N.Y. Slip Op. 04880 (2d Dept. Sept. 10, 2025) ( here ), the Appellate Division, Second Department, affirmed the dismissal of plaintiffs’ claims for breach of fiduciary duty and fraud on statute of limitations grounds. The Court held that the claims had accrued more than six years before the commencement of the action and that plaintiffs had knowledge of facts which should have caused them to inquire and discover the alleged wrongdoing with reasonable diligence. Background In May 2020, plaintiffs (who are sisters) commenced the action, inter alia , to recover damages for breach of fiduciary duty and fraud, alleging that their other sisters, defendants, wrongfully exercised control over defendant J-L-T-D, Inc. (“JLTD”), a family real estate business, and misappropriated its asset, real property located in Orangeburg, New York to plaintiffs’ detriment. Plaintiffs alleged that they are equal shareholders of JLTD, which was formed in 1989 and acquired the property via a deed dated January 12, 1990. In August 1999, JLTD conveyed title to the property to defendants, allegedly without plaintiffs’ authorization. Plaintiffs alleged that they did not learn of this transfer until September 2018, after probate proceedings were commenced to settle their parents’ estates. Thereafter, defendants moved for summary judgment dismissing the complaint as time-barred, arguing, among other things, that the applicable statute of limitations accrued as of the August 1999 transfer. Plaintiffs opposed defendants’ motion and cross-moved for summary judgment on the ground that they demonstrated, as a matter of law, inter alia , that each sister had an equal ownership interest in JLTD. In an order dated November 10, 2022, the Supreme Court, without addressing defendants’ statute of limitations contentions, granted defendants’ motion on the ground that defendants demonstrated, as a matter of law, that plaintiffs did not have any ownership interest in JLTD and denied plaintiffs’ cross-motion. Plaintiffs appealed. The Second Department affirmed on different grounds. The Court’s Decision The Court held that “defendants demonstrated, prima facie, that the alleged fraudulent transfer of the property in 1999 occurred more than six years prior to the commencement of th action.” The Court noted that, in opposition, “plaintiffs failed to establish that the action was timely commenced under the two-year discovery exception.” The Court explained that “ lthough the plaintiffs alleged that they did not discover the alleged fraud until the probate proceeding in 2018, testified during her deposition that she was denied access to the records for JLTD, and she averred in an affidavit that the defendants defrauded, schemed, and misused property for many years.” “Thus,” concluded the Court, “the plaintiffs had knowledge of facts that should have caused them to inquire and discover the alleged fraud with reasonable diligence.” Accordingly, said the Court, “the plaintiffs failed to meet their burden to establish that they could not have discovered the fraud more than two years prior to commencing this action in 2020.” The Court held that the same accrual analysis applied to the breach of fiduciary duty claim, since the claim was based upon fraud. Takeaway In Franco , the Court made clear that delayed legal action can be fatal to the success of a claim. Even if plaintiffs believe they were wronged, the decision underscores the point that courts expect plaintiffs to act promptly once they have reason to suspect misconduct. The decision also provides guidance on the limits of the discovery rule, which, as noted, allows plaintiffs to bring fraud claims within two years of discovering the wrongdoing. Hints of wrongdoing, such as being denied access to corporate records or noticing irregularities, may be enough to trigger the duty to investigate. Waiting for definitive proof before filing suit may result in dismissal. In short, Franco reinforces the principle that the law favors the diligent, not those who sit on their rights before seeking redress. ________________________________ 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. This BLOG has written numerous articles addressing the statute of limitations for a breach of fiduciary duty claim. To find such articles, please see the  BLOG  tile on our  website  and search for “statute of limitations” or “breach of fiduciary duty” or any other commercial litigation issue that may be of interest you. IDT Corp. v. Morgan Stanley Dean Witter & Co. , 12 N.Y.3d 132, 139 (2009) (citations omitted). Id. ; see also VA Mgt., LP v. Estate of Valvani , 192 A.D.3d 615, 615 (1st Dept. 2021). Id. Id. Access Point Med., LLC v. Mandell , 106 A.D.3d 40, 44 (1st Dept. 2013); see also VA Mgt. , 192 A.D.3d at 615 (stating that “ laintiff’s characterization of that relief as ‘disgorgement’ of compensation does not convert it into a claim for equitable relief to which the six-year statute of limitations would apply”) (citations omitted)). Lebedev v. Blavatnik , 144 A.D.3d 24, 28 (1st Dept. 2016) (internal quotation marks and citations omitted). Id. Id. Importantly, “ o determine timeliness, consider whether plaintiff’s complaint must, as a matter of law, be read to allege damages suffered so early as to render the claim time-barred.” IDT , 12 N.Y.3d at 140. Matter of George , 194 A.D.3d 1290, 1293 (3d Dept. 2021) (internal quotation marks, brackets and citation omitted). Matter of Steinberg , 183 A.D.3d 1067, 1071 (3d Dept. 2020) (internal quotation marks and citations omitted). Matter of Behr , 191 A.D.2d 431, 431 (2d Dept. 1993) (internal citations omitted); see Matter of Steinberg , 183 A.D.3d at 1071. CPLR § 213(8). See also Sargiss v. Magarelli , 12 N.Y.3d 527, 532 (2009); Carbon Capital Mgmt., LLC v. Am. Express Co. , 88 A.D.3d 933, 939 (2d Dept. 2011). Carbon Capital Mgmt. , 88 A.D.3d at 939 (citation and alterations omitted). Schmidt v. Merchants Despatch Transp. Co. , 270 N.Y. 287, 300 (1936). This BLOG has written numerous articles addressing the statute of limitations for a fraud claim. To find such articles, please see the  BLOG  tile on our  website  and search for “statute of limitations” or “fraud” or any other commercial litigation issue that may be of interest you. Erbe v. Lincoln Rochester Trust Co. , 3 N.Y.2d 321, 326 (1957). Id. Trepuk v. Frank , 44 N.Y.2d 723, 725 (1978). Gutkin v. Siegal , 85 A.D.3d 687, 688 (1st Dept. 2011).  Id. (citation and internal quotation marks omitted). See Shalik v. Hewlett Assocs., L.P. , 93 A.D.3d 777, 778 (2d Dept. 2012). Celestin v. Simpson , 153 A.D. 3d 656, 657 (2d Dept. 2017). Slip Op. at *2 (citation omitted). Id. (citation omitted) Id. Id. (citation omitted). Id. (citation omitted). Id. (citations omitted).