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By: Jonathan H. Freiberger Obtaining personal jurisdiction over a defendant is a critical aspect of litigation. There are two components of personal jurisdiction, which the New York Court of Appeals has succinctly described as follows: One component involves service of process, which implicates due process requirements of notice and opportunity to be heard. Typically, a defendant who is otherwise subject to a court's jurisdiction, may seek dismissal based on the claim that service was not properly effectuated. The other component of personal jurisdiction involves the power, or reach, of a court over a party, so as to enforce judicial decrees. This consideration—the jurisdictional basis—is independent of service of process. Service of process cannot by itself vest a court with jurisdiction over a non-domiciliary served outside New York State, however flawless that service may be. To satisfy the jurisdictional basis there must be a constitutionally adequate connection between the defendant, the State and the action. Keane v. Kamin , 94 N.Y.2d 263, 265 (1999) (citations omitted). Today’s article addresses the service of process component. The law is clear that a “court lacks personal jurisdiction over a defendant who is not properly served with process.” Everbank v. Kelly , 203 A.D.3d 138, 142 (2 nd Dep’t 2022) (citations omitted); see also Castillo-Florez v. Charlecius , 220 A.D.3d 1, 2 (2 nd Dep’t 2023); Flatow v. Goddess Sanctuary & Spa Corp . , 233 A.D.3d 656, 657 (2 nd Dep’t 2024). Proper service of process is important because it implicates an individual’s constitutional rights and, accordingly, “ hen it is determined that process was ineffective, all subsequent proceedings are rendered null and void as to that party. Everbank , 203 A.D.3d at 143 (citations omitted); see also Federal Nat. Mort. Ass’n v. Smith , 219 A.D.3d 938, 940, 941-42 (2 nd Dep’t 2023); Flatow, 233 A.D.3d at 257. “A defendant's eventual awareness of pending litigation will not affect the absence of jurisdiction over him or her where service of process is not effectuated in compliance with CPLR 308.” Nationstar Mort. LLC v. Molyaev , 235 A.D.3d 648, 649 (2 nd Dep’t 2025) (citations and internal quotation marks omitted); see also Raschel v. Rish , 69 N.Y.2d 694, 697 (1986). “Service of process upon a natural person must be made in strict compliance with the methods of service set forth in CPLR 308 .” Federal Nat. Mort. Ass’n, 219 A.D.3d at 941-42 (citations, internal quotation marks and brackets omitted; hyperlink added); see also Castillo-Florez , 220 A.D.3d at 2; Flatow , 233 A.D.3d at 257. “Typically, a defendant who is otherwise subject to a court’s jurisdiction, may seek dismissal based on the claim that service was not properly effectuated.” Keane , 94 N.Y.2d at 265 (citations omitted). A “process server’s affidavit of service gives rise to a presumption of proper service.” Deutsche Bank National Trust Co. v. Stolzberg , 165 A.D.3d 624, 625 (2 nd Dep’t 2018) (citations and internal quotation marks omitted). A “sworn denial containing a detailed and specific contradiction of the allegations in the process server’s affidavit will defeat the presumption of proper service.” Id . (citations, internal quotation marks and brackets omitted); see also U.S. Bank N.A. v. Henry , 232 A.D.3d 667, 669 (2 nd Dep’t 2024). However, “ are and unsubstantiated denials are insufficient to rebut the presumption.” Stolzberg , 165 A.D.3d at 625 (citations and internal quotation marks omitted); see also U.S. Bank Trust, N.A. v. Lane , 2025 WL 2326755 (2 nd Dep’t August 13, 2025). For example, the Court, in Castillo-Florez , held that the defendant’s sworn affidavit “in which he, inter alia , denied receipt of service, denied residing at the address at the time service allegedly was made, and set forth the location of his address at the time of service,” was sufficient to rebut the presumption of service and require a hearing. Castillo-Florez , 220 A.D.3d at 14-15 (citations omitted). Sufficiently rebutting the presumption of proper service afforded to the process server’s affidavit, entitles a defendant to a traverse hearing to determine whether service of process was properly effectuated. Nationstar Mort. LLC v. Molyaev , 235 A.D.3d 648, 650 (2 nd Dep’t 2025); Lane , supra; Stolzberg, 165 A.D.3d at 626. On September 10, 2025, the Appellate Division, Second Department, decided Bank of New York Trust Co., N.A.  v. Herbin , an action in which the propriety of service of process on the defendant was decided. The plaintiff in Herbin is a lender that commenced a mortgage foreclosure action. Upon the borrower’s default, the lender was awarded summary judgment and, thereafter, a judgment of foreclosure and sale. The subject property was sold at auction. The borrower subsequently moved “pursuant to CPLR 5015(a) to vacate the order of reference and the judgment of foreclosure and sale, pursuant to CPLR 3211(a)(8) to dismiss the complaint insofar as asserted against him for lack of personal jurisdiction, and to set aside the deeds that transferred the property after the sale.” (Hyperlinks added.) The motion court denied the motion. On the borrower’s appeal, the Second Department reversed. After addressing many of the issues discussed, supra , and concluding that the borrower was entitled to a traverse hearing to determine if service of process was ever properly effectuated, the Court stated: Here, the defendant demonstrated his entitlement to a hearing on the issue of service through his affidavit and evidentiary submissions. The defendant averred that he has never lived at the address where he was purportedly served on February 28, 2008, and that he lived at a different address, 1222 35th Avenue in Long Island City, from 2004 through February 2008. He submitted proof of his residence at 1222 35th Avenue. Further, he submitted proof that the process server who allegedly served the defendant on February 28, 2008, swore that he served another individual in South Ozone Park at the exact same time. The defendant also submitted evidence that, in 2016, this particular process server's application to renew his license as an individual process server was denied by the New York City Department of Consumer Affairs on the basis that he had falsified affidavits of service. Since the defendant's submissions rebutted the presumption of proper service established by the process server's affidavit, the Supreme Court should have directed a hearing to determine whether personal jurisdiction was acquired over the defendant. What makes Herbin more interesting than many other service of process cases is the Court’s consideration of the New York City Department of Consumer Affairs’ failure to renew the process server’s license. Perhaps a new angle to approach cases of this type. Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice. This BLOG has written dozens of articles addressing numerous aspects of personal jurisdiction and service of process. To find such articles, please see the BLOG tile on our website and search for “jurisdiction” or “service of Process” or any other commercial litigation issue that may be of interest you. 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.

By: Jeffrey M. Haber Pursuant to CPLR 3213, a plaintiff may commence an action “based upon an instrument for the payment of money only or upon any judgment” by filing a summons and motion for summary judgment in lieu of complaint. The statute “provide a speedy and effective means” for resolving “presumptively meritorious” claims. The standard to prevail on a CPLR 3213 motion is the same as that on a CPLR 3212 motion: accelerated judgment will be awarded “if, upon all the papers and proof submitted, the cause of action ... shall be established sufficiently to warrant the court as a matter of law in directing judgment” for the plaintiff. However, “where the instrument requires something in addition to defendant’s explicit promise to pay a sum of money, CPLR 3213 is unavailable”. In addition, a CPLR 3213 motion may be defeated where the defendant offers “evidentiary proof sufficient to raise a triable issue of fact”. CPLR 3213 can be used to enforce the terms of a settlement, even when the settlement is set forth in a term sheet, memorandum of understanding, or the like. “Term sheets”, “letters of intent”, “memoranda of understanding” and “agreements in principle” may constitute an enforceable agreement if the writing includes all the essential terms of an agreement. This is so even if “the parties intended to negotiate a ‘fuller agreement’”. Thus, if the informal writing contains the necessary elements of an enforceable contract, e.g. , an offer, acceptance, consideration, mutual assent and intent to be bound, courts will enforce the writing as if it was a formal, written agreement. However, a term sheet, letter of intent or a memorandum of understanding will be rendered ineffective where material terms are left for future negotiation, or the writing expressly reserves the right not to be bound until a more formal agreement is signed. In Tangtiwatanapaibul v. Tom & Toon Inc. , 2025 N.Y. Slip Op. 33139(U) (Sup. Ct., New York County Aug. 20, 2025) ( here ), the court held that a settlement term sheet qualified as an “instrument for the payment of money only” under CPLR 3213, thereby enabling plaintiffs to seek accelerated judgment for the amount due by defendants. In so holding, the motion court found the payment terms in the term sheet explicit and unconditional, rejecting defendants’ claims that extrinsic evidence was needed to determine whether payment was due under the term sheet.  Background Tangtiwatanapaibul was an action to enforce and recover upon a term sheet memorializing the terms of the settlement of plaintiffs’ federal and state fair wage claims brought against the Corporate Defendants and the Individual Defendants in the United States District Court for the Southern District of New York. On June 26, 2019, during a settlement conference with Magistrate Judge Parker, the parties entered into a written “Settlement Agreement Term Sheet” (“the Term Sheet”), pursuant to which the Corporate and Individual Defendants agreed to pay Plaintiffs the sum of $72,000, inclusive of attorney’s fees and costs, in “equal mo. installments of $3,000 over 24 mo. commencing within 10 days of court approval of settlement,” with a 10-day notice and cure period in the event of a default in any payment, after which continued default would entitle plaintiffs to “2x remaining amount due.” The Term Sheet also provided that: the Corporate and Individual Defendants would give a confession of judgment; the Corporate and Individual Defendants did not admit liability; plaintiffs would give defendants a general release of all claims raised in the lawsuit; and plaintiffs’ attorney would prepare a detailed settlement agreement. The Term Sheet expressly stated that it was a “binding agreement” as of the “effective date”. The parties also agreed that Magistrate Judge Parker would retain jurisdiction to approve the settlement and dismiss the case. Although more formal written settlement agreements were prepared and exchanged between June 2019 and October 2020, one was not fully executed by the parties. Notwithstanding, the Corporate and Individual Defendants paid plaintiffs $2,000. They stopped making payments as of September 29, 2020. By order dated October 13, 2020, Magistrate Judge Parker approved the settlement reflected in the Term Sheet and dismissed the action without retaining jurisdiction to enforce the settlement. Plaintiffs moved for clarification of the October 13, 2020 Order and separately appealed therefrom. By opinion and order dated August 24, 2021, Magistrate Judge Parker clarified her prior findings that, inter alia , the Term Sheet “contained all of the material terms of the agreement and explicitly set forth that those terms were binding as of that date ” and that “to the extent Plaintiffs seek to enforce the settlement they reached, they may do so in state court.” By Summary Order dated December 12, 2022, the United States Court of Appeals for the Second Circuit affirmed the Magistrate Judge’s approval of the Term Sheet as an “enforceable contract,” binding as to its material terms, and to be enforced in state court. On December 1, 2024, and pursuant to CPLR 3213, Plaintiffs commenced the action for an accelerated judgment of $140,000, plus interest, in their favor and against the Corporate and Individual Defendants, based upon the terms of the Term Sheet. The Corporate and Individual Defendants opposed the motion on the ground that the Term Sheet was neither a judgment nor an instrument for the payment of money only, as contemplated by the statute. They also argued that there were issues of fact “as to how much owed” under the agreement and whether the amount of the settlement should be reduced in proportion to the number of plaintiffs that did not sign the “agreements.” Defendants contended that, at best, plaintiffs had a breach of contract action requiring extrinsic evidence on its material terms. The Motion Court’s Decision The motion court held that plaintiffs established prima facie that the Term Sheet constituted an instrument for the payment of money only in that it clearly and unequivocally contained the Corporate and Individual Defendants’ “explicit promise” to pay plaintiffs the sum of $72,000 in equal monthly installments of $3,000 per month, for 24 months, commencing within 10 days of the Court’s approval of the settlement. The motion court found that there was no ambiguity in the payment term or in the 10-day notice and cure provision, which sets forth a penalty on default in the sum of two times the remaining amount due. These terms, said the motion court, were unconditional and not contingent upon any other act or fact. The motion court concluded that the payment and default provisions were material terms of the “binding agreement” that the parties entered into on June 26, 2019. Thus, said the motion court, the Term Sheet was “‘an instrument for the payment of money only’ upon which issuance of accelerated judgment appropriate.” The motion court also held that plaintiffs “established that the Corporate and Individual Defendants defaulted in making payments” under the Term Sheet “by submitting the affirmation of their attorney, to whom the settlement payments were to be tendered, attesting to non-payment apart from the initial $2,000 paid prior to September 2020 and that the remaining amount due $70,000.” The motion court noted that the Term Sheet did “not provide specifics as to the 10-day default notice requirement; how it to be made, or what it to contain.” However, explained the motion court, “Plaintiffs’ federal motion practice in October 2020 and their service of the instant CPLR § 3213 motion in December 2024, which set forth the details of Defendants’ default under the Term Sheet and gave them more than a 10-day opportunity to cure, constitute sufficient notice of default under the Term Sheet.” The motion court held that the Corporate and Individual Defendants failed to offer evidentiary proof sufficient to raise a question of fact. The motion court rejected defendants’ argument that “extrinsic evidence” was needed to assess their payment obligations. The motion court concluded the “Term Sheet crystal clear that Defendants to pay Plaintiffs the sum of $72,000, on a 24-month payment plan of $3,000 per month.” Finally, the motion court rejected defendants’ attempt to add terms to the Term Sheet in an effort to avoid summary judgment: The division or disbursement of such payment across the Plaintiffs is not a material term of the agreement– indeed, it is not even mentioned in the Term Sheet. Nor is there need for any extrinsic evidence on whether the absence of a more formal and detailed settlement agreement violated a material term of the Term Sheet: it does not<,> and so the federal appellate and trial courts have definitely found. The Second Circuit, which has the last word on the issue, explicitly found that the Term Sheet contains the parties’ agreement as to material terms, that such agreement is binding, that the partially performed their agreement, and the Term Sheet constitutes an enforceable contract to be enforced in this court. Nothing more is needed for this Court to determine that the Term Sheet contains Defendants’ explicit and unconditional promise to pay a sum certain over a stated period and that they failed to do so, entitling Plaintiffs to entry of judgment. Accordingly, the motion court granted plaintiffs’ motion. Takeaway The implications of Tangtiwatanapaibul are significant for both litigants and practitioners. The case affirms that informal documents like term sheets or memorandums of understanding can be enforceable instruments for the payment of money under CPLR 3213, provided they contain all the salient terms of the parties’ agreement and contain clear, unconditional promises to pay a sum certain. In Tangtiwatanapaibul, the motion court emphasized that the absence of a formal, signed agreement did not invalidate the settlement because the essential terms of the settlement were present and the parties intended to be bound by their term sheet. For litigants, Tangtiwatanapaibul shows that: (a) plaintiffs have an important tool in CPLR 3213 for the enforcement of a settlement without the need for a full breach of contract action, if all the material terms of their agreement are present; and (b) defendants will be responsible for complying with the terms of their settlement—even if the terms are in a term sheet—and that the failure to pay could result in accelerated judgment under CPLR 3213. For practitioners, Tangtiwatanapaibul underscores the importance of drafting term sheets with precision and clarity. Including explicit payment terms and language that indicates the agreement is binding can make the difference between lengthy litigation and a quick resolution. ______________________________ Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice. CPLR 3213. Banco Popular N. Am. v. Victory Taxi Mgmt. Inc. , 1 N.Y.3d 381, 383 (2004) (citing Interman Indus. Prods. v. R.S.M. Electron Power , 37 N.Y.2d 151, 154 (1975)). Banco Popular , 1 N.Y.3d at 383. Weissman v. Sinorm Deli, Inc. , 88 N.Y.2d 437, 444 (1996) (“The instrument does not qualify if outside proof is needed, other than simple proof of nonpayment or a similar de minimis deviation from the face of the document”). Banco Popular , 1 N.Y.3d at 383. Sullivan v. Ruvoldt , 16 Civ. 583, 2017 WL 1157150 at *6 (S.D.N.Y. Mar. 27, 2017). Conopco, Inc. v. Wathne Ltd. , 190 A.D.2d 587, 588 (1st Dept. 1993) Stonehill Capital Mgt. LLC v. Bank of the W. , 28 N.Y.3d 439, 451-454 (2016). Bed Bath & Beyond Inc. v. IBEX Constr., LLC , 52 A.D.3d 413, 414 (1st Dept. 2008); Emigrant Bank v. UBS Real Estate Sec., Inc. , 49 A.D.3d 382, 383-384 (1st Dept. 2008). Slip Op. at *2-*3. Id. at *3. Id. Id. Id. (citing LFR Collections LLC v. Tammy Tran Att’ys at L. , 238 A.D.3d 490 (1st Dept. 2025) (settlement agreement constituted an instrument for the payment of money only; agreement provided “that defendants owed $7,900,000 as of October 12, 2012; that the maturity date was October 12th, 2017, the fifth anniversary date of the settlement agreement; that the interest rate was 0% a year for the first 18 months and then 5% a year thereafter, without compounding interest; and that upon default, interest was to accrue at the rate of 12% per annum.”); J.D. Structures, Inc. v. Waldbaum , 282 A.D.2d 434, 436 (2d Dept. 2001) (“The appellant established that the respondents failed to make the payments required by the settlement agreement, which is an instrument for the payment of money only. Accordingly, it is appropriate in this case to grant summary judgment pursuant to CPLR 3213”)). Id. (citing LFR Collections , 238 A.D.3d at 490 (“On its motion, plaintiff submitted the settlement agreement, the amount due, and an affirmation of LFR’s general counsel, who swore to the loan history under penalty of perjury and stated that he was familiar with the facts”)). Id. Id. (citations omitted). Id. Id. Id. Id. at *3-*4 (citations omitted).

By:  Jeffrey M. Haber Ponzi schemes and affinity fraud frequently overlap because both exploit trust and social interactions to operate effectively. A Ponzi scheme relies on a continuous stream of new investors to pay returns to earlier participants, creating the illusion of a profitable enterprise. To maintain the flow of funds, fraudsters often target affinity groups—close-knit communities connected by shared identity, such as religious organizations, cultural associations, or professional circles. These groups provide an environment where trust is already established, making it easier for Ponzi scheme promoters to recruit participants quickly. When an investment opportunity is endorsed by someone familiar, skepticism tends to diminish. This sense of security often discourages individuals from conducting independent research or due diligence, as they assume that a trusted member’s involvement and/or endorsement of the investment opportunity guarantees legitimacy. In other words, social proof becomes a powerful tool for deception. Ponzi schemes and affinity fraud also thrive in settings where doubts can be suppressed. If concerns arise, the promoter can dismiss them as misunderstandings or pressure the group to maintain harmony, discouraging dissent. Victims themselves may avoid reporting the fraud out of fear of damaging the group’s reputation or relationships within it. Finally, affinity fraud capitalizes on emotional bonds. People feel a sense of loyalty and belonging, which makes them more inclined to invest and less likely to question warning signs and red flags. This emotional leverage, combined with the urgency and trust that Ponzi schemes exploit, creates an ideal environment for fraud to flourish. On September 8, 2025, the Securities and Exchange Commission (“SEC”) announced ( here ) that it filed charges against Arsalan A. Rawjani (“Defendant”) and the business enterprise he operated, Trade with Ayasa, LLC (“TWA”), which operated through various corporate forms, for allegedly conducing an affinity fraud and Ponzi scheme centered in the North Texas Ismaili Muslim community, where Defendant was an active member and community leader. According to the SEC, since at least 2021, Defendants perpetrated an investment fraud and Ponzi scheme targeting members of the Ismaili Muslim community in Texas, among other victims. Touting himself as an experienced and skilled options trader and investor, Defendant allegedly represented to investors and potential investors that he operated a successful pooled-investment program that offered guaranteed monthly dividend payments as well as principal protection that would be paid from Defendant’s options trading and asset management. The SEC alleged that Defendant claimed to have raised approximately $18 million from investors between 2021 and 2024.  Although Defendant represented to these investors that his successful options trading enabled him to pay a fixed, monthly return of (usually) three to five percent of principal (i.e., a 60-percent annual return), he actually paid most “returns” by using new investor money and derived insignificant or no profits from his touted options-trading expertise, alleged the SEC.  Additionally, said the SEC, Defendant diverted millions of dollars of investors’ money to himself, his spouse, and others through undisclosed withdrawals, commissions, and loans, all of which contributed to the collapse of his Ponzi scheme and millions of dollars of investor losses.  To carry out the Ponzi scheme and recruit new investors to support it, the SEC alleged that Defendant directly and through TWA made numerous false and misleading statements to investors, including promising that his clients’ investments would be used for his profitable options trading and that investors’ principal was guaranteed from his trading profits and other secure investments. For example, said the SEC, Defendant claimed he would use investors’ funds in his trading program, but he sent only approximately $1 million of investor funds from TWA’s primary bank account to a broker dealer for trading in the options market. Thereafter, claimed the SEC, Defendant transferred back to the bank account less than $166,000 in presumed trading profits and thus had no meaningful trading revenues to pay the millions of dollars promised to investors. Defendant also claimed that a large reserve was maintained to pay dividends and offered his personal “guarantee” to some investors, said the SEC, despite maintaining neither reserves nor personal assets sufficient to repay the millions of dollars raised from investors. The SEC alleged that by late-2023, Defendant’s “lackluster or losing trades” and his inability to attract new investors caused his Ponzi scheme to collapse, resulting in Defendant ceasing to make promised dividend payments. Nevertheless, said the SEC, even after he was unable to make divided payments to earlier investors, Defendant continued to solicit new investors using the same promises and guarantees of monthly payments and principal protection. According to the SEC, bank records showed that Defendant raised more than $2 million from investors between in or about December 2023 and June 2024, during the period he was unable to make promised payments to earlier investors. The SEC filed its complaint ( here ) in federal district court in Dallas, Texas. The SEC charged Defendants with violating the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint further charged Defendants with violating the registration provisions of Sections 5(a) and 5(c) of the Securities Act of 1933. The SEC seeks injunctive relief, disgorgement plus pre-judgment interest on a joint and several basis, and civil penalties. _____________________________ 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 scores of articles addressing SEC enforcement actions and the settlement of enforcement actions involving Ponzi schemes and affinity frauds. To find such articles, please visit the  Blog  tile on our  website  and search for “Ponzi schemes”, “Affinity Fraud” or any SEC enforcement action issue that may be of interest to you.

By:  Jeffrey M. Haber In BLDG 44 Developers LLC v. Pace Companies N.Y., LLC , 2025 N.Y. Slip Op 32881(U) (Sup. Ct., N.Y. County July 25, 2025) ( here ), BLDG 44 Developers LLC sued Pace Companies New York, LLC for breach of contract, seeking approximately $16 million in consequential damages related to delays in a construction project on E. 44th Street, New York, N.Y. BLDG, the project owner, was a third-party beneficiary to a subcontract between Pace and Noble Construction Group, which was later replaced by a joint venture. The subcontract required Pace to perform HVAC work and included indemnification provisions for damages caused by delays. Pace moved for partial summary judgment to dismiss BLDG’s claim for consequential damages. The motion court granted the motion, finding that the subcontract did not explicitly provide for consequential damages, such as lost rents or revenues. The motion court noted that while the subcontract mentioned indemnification for damages, it did not specify consequential damages, and the inclusion of liquidated damages suggested intentional exclusion of other types of damages. The court emphasized that consequential damages must be foreseeable and contemplated by the parties at the time of contracting. The motion court held that BLDG failed to present evidence that such damages were discussed or anticipated during negotiations. The motion court also rejected BLDG’s reliance on industry standards and external documents, stating that the clear and unambiguous language of the subcontract governed. Consequently, the motion court ruled that the absence of express language regarding consequential damages barred BLDG’s claim, and granted Pace’s motion for partial summary judgment, dismissing the consequential damages claim. Background BLDG owns a 43-story mixed-use building located on E. 44th Street, New York, N.Y. (the “Building”). On May 29, 2015, BLDG and former third-party defendant Noble Construction Group, LLC (“Noble”) entered into an agreement (“Prime Agreement”) in which Noble was to serve as the general construction manager on the construction of the Building (the “Project”) in exchange for $175,982,009. On February 1, 2016, Noble and defendant entered into a subcontract in which defendant was to perform heating, ventilation, and air conditioning trade work for the Project in exchange for $12,200,000 (“Subcontract”).  Section 7.2 (e) of the Subcontract provided, in pertinent part, that if there were delays in the progress of the work on the Project or a failure to coordinate with other contractors by defendant then BLDG was entitled to recover its damages (including liquidated damages if applicable) in connection with such delays. On June 1, 2016, BLDG and Noble amended the Prime Agreement (“Amendment No. 2”), replacing Noble with Noble/Suffolk, a joint venture LLC (“JV”). In Amendment No. 2, BLDG and JV agreed to “waive Claims against each other for consequential damages arising out of or relating to the Agreement except as set forth in the last sentence of this Item No. 2.” The waiver provision explained that “ his mutual waiver include , without limitation, damages incurred by for losses of use, income (including, but not limited to rental income), profit, financing, business and reputation, and for loss of management or employee productivity or of the services of such persons.” “Notwithstanding the foregoing,” the parties agreed that the JV would “be liable for consequential damages arising out of Agreement to the extent caused by its breach or negligence or the breach or negligence of anyone for whom responsible in an aggregate amount not to exceed fifty percent (50%) of ’s Fee as set forth in the most updated schedule of values.” On August 23, 2018, JV provided defendant with a delay notice regarding the Project after the JV received a notice of delay from BLDG regarding defendant’s work (“Delay Notice”). The Delay Notice stated that BLDG would “be seeking reimbursement for damages and consequential damages resulting from such delay”.  On January 16, 2020, BLDG commenced the action against defendant as a third-party beneficiary alleging that defendant breached the Subcontract.  Defendant moved for partial summary judgment seeking to exclude $16 million in consequential damages from any potential award in BLDG’s favor. The Motion Court’s Decision BLDG argued that defendant explicitly agreed to indemnify BLDG for consequential damages incurred resulting from defendant’s delay. Specifically, BLDG argued that the language in Section 7.2(e) of the Subcontract included consequential damages. Under New York law, “ n claims for breach of contract, a party’s recovery is ordinarily limited to general damages which are the natural and probable consequence of the breach; any additional recovery must be premised upon a showing that the unusual or extraordinary damages sought were within the contemplation of the parties as the probable result of a breach at the time of or prior to contracting.”   A party may seek consequential damages if they were foreseeable and contemplated by the contracting parties at the time the contract was made. Applying the foregoing principles, the motion court held that “the evidence fail to demonstrate that consequential damages of lost rents and revenues were contemplated by the parties to the Subcontract.” The motion court found that “the plain language of the Subcontract, itself, not specifically provide for indemnification of consequential damages.” “Consequential damages in a breach of contract case are not allowable where the contract contains no provision or language indicating that recovery of consequential damages was within the contemplation of the parties<,> ” said the motion court. The motion court noted that the “terms of the Subcontract not suggest that consequential damages would be covered.” Moreover, noted the motion court, “BLDG ha not identified … any other term in the Subcontract that would support such damages.” “Absent a contractual provision providing for such coverage,” said the motion court, “in order ‘ o determine whether consequential damages were reasonably contemplated by the parties, courts must look to the nature, purpose and particular circumstances of the contract known by the parties . . . as well as what liability the defendant fairly may be supposed to have assumed consciously, or to have warranted the plaintiff reasonably to suppose that it assumed, when the contract was made.” Thus, explained the motion court, “the question is whether and Noble reasonably foresaw or contemplated being held liable for BLDG’s consequential damages of lost rents and revenues … due to ’s alleged delays at the time they entered the Subcontract.”   The motion court held that “ here no evidence of such contemplation.”   “For example,” said the motion court, “there no evidence that establishe , or at a minimum raise an issue of fact, that the issue of liability for lost revenue and rents was contemplated by the parties at the time of contract negotiations.” Finally, the motion court rejected BLDG’s attempt to use extrinsic evidence to support its claim for consequential damages. BLDG argued that consequential damages are common in the construction industry and that the motion court could take judicial notice of the American Institute of Architects form agreement, which includes a provision waiving consequential damages. The motion court explained that there was “no need to turn to extrinsic evidence” because Amendment No. 2 was clear and unambiguous.   In that regard, the motion court found that “the agreement itself suggest the omission was purposeful. Amendment No. 2 to the Prime Agreement contain a provision limiting JV’s liability for consequential damages. If the parties intended to include consequential damages as part of the Subcontract, they would have specifically so stated.”   The motion court concluded that “ he best and only evidence that the court has the Subcontract itself, which no mention of consequential damages, unlike liquidated damages, which are specifically referenced.” Accordingly, the motion court granted defendant’s motion for summary judgment and dismissed any claim for consequential damages. Takeaway As discussed, consequential damages are recoverable only if they were foreseeable and contemplated by both parties at the time they entered the contract. Courts look to the language in the parties’ contract to make that determination. Thus, as shown in BLDG , even if a party believes consequential damages are implied or customary, courts will rely on the language of the agreement if it is clear and unambiguous. In BLDG , the motion court determined that the agreements at issue were clear and unambiguous. Lending support to that finding was the presence of a liquidated damages clause in the Subcontract, which suggested to the motion court that the parties intentionally excluded other types of damages, such as consequential damages, as recoverable damages. Therefore, based upon the evidence presented, the motion court determined dismissed BLDG's request for consequential damages. ____________________________________ 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. Brody Truck Rental, Inc. v. Country Wide Ins. Co. , 277 A.D.2d 125, 125-126 (1st Dept. 2000) (internal quotation marks and citations omitted), lv. dismissed , 96 N.Y.2d 854 (2001).  Bi-Economy Mkt., Inc. v. Harleysville Ins. Co. of N.Y. , 10 N.Y.3d 187, 192-193 (2008).  Slip Op. at *5. Id. Id. at *6 (quoting BSF W. 175th St. Holding LLC v. New Founders Constr. LLC , 2022 N.Y.L.J. LEXIS 191, *9-10 (Sup. Ct., N.Y. County 2022)) (internal citations and quotation marks omitted). Id. Id. Id. (quoting Bi-Economy Mkt. , 10 N.Y.3d at 193 (internal quotation marks and citation omitted)). Id. Id. Id. at *6-*7 (citing Ashland Mgt. v. Janien , 82 N.Y.2d 395, 405 (1993) (finding that “the issue of future earnings was not only contemplated but also fully debated and analyzed by sophisticated business professionals at the time of these extended contract negotiations”); Awards.com v Kinko’s, Inc. , 42 A.D.3d 178, 183 (1st Dept. 2007) (finding that “ he agreement fails to reflect that the parties contemplated lost profits as a potential basis for damages in the event of a breach. Nor, even if admissible, is there any extrinsic evidence that lost profits were within the parties’ contemplation”)). Id. at *7. Id. Id. Id. (citations omitted). Id. at *8. This BLOG has written numerous articles addressing consequential damages. To find such articles, please click on the  BLOG  tile on our  website  and type “consequential damages” into the “search” bar, or any other commercial litigation or contract-related issue that may be of interest to you.

By:  Jeffrey M. Haber In Finkelstein v. U.S. Bank, N.A. , 2025 N.Y. Slip Op 32882(U) (Sup. Ct., July 30, 2025) ( here ), plaintiff alleged that he was underpaid on his investment in a residential mortgage-backed securities (“RMBS”) trust due to the improper exercise of termination rights by the trust’s servicers. Plaintiff claimed they excluded deferred principal and interest balances from the termination price, repackaged the remaining loans, and profited from new trusts. The servicers argued that the governing agreement – the Pooling and Servicing Agreement (“PSA”) – barred the action because it included a “no action” clause requiring certificate holders, such as plaintiff, to first demand that the trustee (“Trustee”) take action before suing. Plaintiff argued that demand was futile due to conflicts of interest, citing a “web of business dealings” and industry entanglements. The motion court, relying on Commerzbank AG v. U.S. Bank, N.A. , found plaintiff’s allegations too vague and conclusory. The motion court noted that owning equity or providing services to servicers did not inherently create a conflict sufficient to excuse the no-action clause. The motion court also rejected plaintiff’s claims that the Trustee’s role in other trusts or its acquisition of servicer roles implied a conflict. Further, the court reaffirmed that the no-action clause survived the termination of the trust. Consequently, the motion court granted defendants’ motions to dismiss the second amended complaint. Governing Principles A no-action clause is a contractual provision commonly found in trust indentures and pooling and servicing agreements. They are most often found in the context of securities and structured finance. The primary purpose of a no-action clause is to limit the ability of individual investors or certificate holders to bring legal action related to the trust or agreement unless certain procedural requirements are met. There are a number of key features of a no-action clause, including: Pre-suit Requirements: Typically, a no-action clause requires the investor or certificate holder (a) provide written notice of default to the trustee; (b) request the trustee to take action; (c) offer reasonable indemnity to the trustee; and (d) wait a specified period ( e.g. , 60 days) for the trustee to act. Majority Support: Often, a no-action clause requires that a certain percentage ( e.g. , 25% or 50%) of the holders must support the action before it can proceed. A no-action clause is designed to (a) prevent frivolous or duplicative lawsuits by minority holders; (b) centralize enforcement of the indenture documents and pooling and servicing agreements through the trustee; and (c) protect the integrity and efficiency of trust administration. One way to avoid a no-action clause is to demonstrate that the trustee is so conflicted that it could not be expected to bring suit. In that circumstance, any demand on the trustee would be futile because in effect, the certificate holder or beneficiary would be asking the trustee to sue itself. Recently, the Court of Appeals for the Second Circuit addressed the issue of demand futility in the context of alleged conflicts of interest. In Commerzbank AG v. US. Bank, N.A. , nine of the trusts at issue required notice to the trustee and the trust administrator ( i.e. , the party that was allegedly at fault). One provided for notice to the trust administrator, but the trust administrator was also a breaching servicer. Six other trusts required notice to the securities administrator, two of whom were breaching servicers, and one was a trustee accused of similar wrongdoing in other cases. The Second Circuit remanded to the district court to examine the relationships, cautioning that: (1) “some deal parties may be directly implicated in the wrongdoing such that it would be futile to demand that these parties bring claims involving their own misconduct”; while (2) “ ther deal parties may not be directly involved in the misconduct but could labor under other conflicts of interest, for example, close relationships with the breaching entities, such that requiring pre-suit demands would be futile and cause unnecessary delay since it would be improbable that they would take any action.” In doing so, the Second Circuit instructed “courts determining whether a No Action Clause requires pre-suit demands on other deal parties” to “consider whether such requirements would entail potential conflicts of interest on the demanded party, and if so, whether the nature and extent of the conflicts would indicate that these parties would be sufficiently unlikely to bring claims if asked to do so, such that the demand would be futile.” Upon remand, the district court excused demand for two sets of trusts. In the first, the demand party was both the trustee and the trust administrator. However, the trust administrator was Citibank, who was an alleged breaching party and also the custodian. Plus, its affiliate was an alleged breaching sponsor. In the second set of trusts, the demand party was the securities administrator, who likewise was implicated in the wrongdoing, because it had a duty to act to enforce the obligations of the mortgage loan purchase agreement for loans that were missing information. Finkelstein v. U.S. Bank, N.A. Plaintiff claimed he was underpaid on his investment because the defendant servicers allegedly exercised termination rights improperly. Specifically, Plaintiff claimed that the servicers should have included unpaid deferred principal and interest balances in the termination price. Instead, according to plaintiff, the servicers exercised their “call rights” (to purchase the Trust’s assets) without including the deferred payments in the valuation. Then, they repackaged the remaining loans into new trusts and sold them to new investors at a profit for themselves. Plaintiff brought suit. However, the PSA governing the Trust at issue had a no-action clause. Under Section 11.03 of the PSA, entitled “Limitation of Rights of Certificate Holders”, certificate holders were not allowed to bring suit unless they first demanded that the Trustee take action. To avoid the no-action clause, plaintiff alleged a purported “web of business dealings” that pervaded the industry such that the Trustee was too conflicted to bring suit. Therefore, according to plaintiff, demand on the Trustee would be futile. The motion court rejected plaintiff’s argument. The motion court held that the allegations alleged by plaintiff were “insufficient to show a conflict of interest on the part of .” The motion court found “ laintiffs allegations concerning the so called ‘web of business dealings’ … too conclusory to set aside the no action clause.” For example, said the motion court, plaintiff failed to allege any facts showing that the “web of business dealings” would cause the Trustee not to bring suit if a demand were made by plaintiff. The motion court also said that plaintiff failed to allege any facts showing that the Trustee was affiliated with large banks that provided banking services to other businesses and related to “repurchase rights holders” under the PSAs. In addition, the motion court found that plaintiff failed to allege any facts showing that the Trustee’s acquisition of Bank of America’s trust business included the servicers under the PSA. Further, the motion court said that plaintiff failed to allege facts showing a conflict of interest because it owned equity and debt in Wells Fargo, one of the alleged breaching parties. Finally, the motion court rejected plaintiff’s allegation that the Trustee became the trustee for some of the new resecuritization trusts and, therefore, was a participant in the alleged scheme. “Plaintiff does not allege which ones or even that some of the deferred principal loans from the trust at issue here wound up in a new trust,” said the motion court. The motion court found “ laintiffs’ allegations that the Trustee participated in a scheme to terminate the trusts to secure roles as trustee for resecuritized trusts vague and conclusory” and “certainly not excuse failure to comply with the no action clause.” The motion court concluded that “the hope of new business would swallow whole the no-action clause if that were a sufficient basis to excuse it.” In conclusion, the motion court held: plaintiff does not plead any facts to show a conflict such that it would be asking the Trustee to sue itself. There are no allegations showing: (1) the Trustee’s involvement in terminating the trusts, (2) the Trustee's obligation to ensure the correct calculation of the Termination Price, (3) the Trustee’s receipt of any “windfall” from the Termination Price, (4) the Trustee’s alleged dual role as servicers in other actions, (5) lawsuits against the Trustees in their alleged capacity as servicers, or (6) how the Trustees knew the Termination Price had been calculated incorrectly but refused to take action because of their conflicts of interest. Without more, the no action clause stands. _________________________________________ 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. Deer Park Rd. Mgmt. Co., LP v. Nationstar Mortg., LLC , 233 A.D.3d 564, 565 (1st Dept. 2024). 100 F4th 362 (2d Cir.), cert. denied , 145 S. Ct. 279 (2024). Id. at 375. Id. Id. Commerzbank AG v. US. Bank, N.A. , 2024 WL 5089017, at *4 (S.D.N.Y. Dec. 12, 2024). Id. at *6-7. Slip Op. at *3. Id. Id. at *4. Id. Id. Id. at *5. Id. at *5. Id. Id. (citing Rimrock High Income v. Avanti , 157 A.D. 3d 543 (1st Dept. 2018).

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

By:  Jeffrey M. Haber On occasion, we examine procedural matters that have an impact on the substantive rights of the parties. In Richardson v. Beal , 2025 N.Y. Slip Op. 32804(U) (Sup. Ct., N.Y. County July 24, 2025) ( here ), the procedural matter at issue concerned the date on which a filing is deemed to be filed. As discussed below, the date on which a filing is deemed filed might surprise you. Overview In  Richardson v. Beal , plaintiffs sought a default judgment against defendant, alleging that he failed to respond to their complaint in a timely manner. Plaintiffs served the summons and complaint on defendant in September 2023, with service deemed complete by October 12, 2023. Defendant did not file an answer by the November 12, 2023 deadline. Although he attempted to file a motion to dismiss in October, it was rejected by the clerk’s office due to procedural errors and not refiled until December 21, 2023. The motion court determined that the December filing was the only valid response, and thus defendant had defaulted in November 2023. Under CPLR 3215(c), plaintiffs were required to seek a default judgment within one year of the default. Their motion, filed in January 2025, exceeded this deadline. The motion court held that plaintiffs failed to provide a reasonable excuse for the delay or demonstrate a meritorious cause of action, both of which are required to excuse late filings under CPLR 3215(c). Consequently, the motion court denied plaintiffs’ motion and granted defendant’s cross-motion to dismiss the complaint, ruling the case was abandoned under CPLR  3215(c). Factual Background Plaintiffs brought the underlying action on August 23, 2023. According to the affidavit of service, on September 16, 2023, plaintiffs served the summons and complaint on defendant by means other than personal service. Proof of service was filed with the Clerk of the Court on October 2, 2023. Pursuant to CPLR 308(4), service was complete ten (10) days after such filing, on October 12, 2023. The time to answer the complaint expired on November 12, 2023. Defendant failed to file an answer within thirty (30) days after service was complete as required under CPLR 3012(c). According to NYSCEF, defendant, acting pro se , attempted to file, albeit late, a notice of motion on October 30, 2023. The Clerk rejected the filing and deleted the document from NYSCEF and returned the motion to defendant. On December 21, 2023, Defendant refiled the motion to dismiss the complaint, alleging improper service in a single sentence without any further explanation. The notice of motion was notarized and dated December 21, 2023. The motion was successfully filed. On January 29, 2024, the Court denied defendant’s motion for failure to provide an explanation for how service was improper. The Motion Court’s Decision On January 29, 2025, plaintiffs moved, pursuant to CPLR 3215, for a default judgment. Defendant, through his attorney, opposed the motion and cross-moved to dismiss the complaint pursuant to CPLR 3215(c). CLPR 3215(a) permits a plaintiff to seek a default judgment against a defendant who has failed to respond to a pleading. Pursuant to CLPR 3215(f), a defendant may extend their time to serve a pleading responsive to a complaint by serving a “a notice of motion … extends the time to serve the pleading until ten days after service of notice of entry of the order.” However, the defendant must complete service of the notice of motion before “service of the responsive pleading is required”. If the defendant does not move before service of the responsive pleading is required, the plaintiff must move for the entry of a default judgment within “one year after the default.” If the plaintiff fails to take such timely proceedings, CLPR 3215(c) provides that “the court shall not enter judgment but shall dismiss the complaint as abandoned, without costs, upon its own initiative, or on motion, unless sufficient cause is shown why the complaint should not be dismissed.” The one-year time limit for seeking a default judgment begins to run at the time of a defendant’s default. If a plaintiff fails to seek a default judgment within the one-year window, then they must “set forth a viable excuse for the delay and demonstrate a meritorious cause of action”, or dismissal of the underlying action is mandatory. In seeking the motion for a default judgment, plaintiffs argued that the notice of motion was filed in October, when according to NYSCEF, the notice of motion was filed and then rejected and returned. Defendant opposed the motion on the grounds that it was untimely. Defendant maintained that the motion to dismiss was not successfully filed until December, and, therefore, it did not extend the time for plaintiffs to move for a default judgment. The issue before the motion court was “whether an unsuccessful attempt at filing is considered a response to the complaint, or whether Defendant did not respond to the complaint until his notice of motion was successfully filed and accepted by the Clerk.” The motion court held “that Defendant’s notice of motion was filed in December, not October.” The motion court noted that there were a number of “ mportant factors” that supported its decision, including “the fact that the notice of motion … notarized and dated in December, and … that whatever document that was attempted to be filed in October was not available on NYSCEF during the gap between October and December.” The motion court explained that the “only response by Defendant to the complaint was clearly dated and filed in December, and it was this response that the Plaintiffs and the Court responded to when deciding the motion to dismiss.” The motion court also found support in the NYSCEF confirmation notice for the notice of motion that was filed in December. According to the confirmation notice, the “NYSCEF website ha received an electronic filing on 12/21/2023 04:44 PM” and advised that the recipient should “keep notice as a confirmation of this filing.” The comments on NYSCEF concerning the filing on October 30, 2023, said the motion court, confirmed that the notice of motion was filed but that it was rejected because of a “‘missing or incorrect return date and no place of return.’” Based upon the foregoing, the motion found that “the Clerk rejected the first attempt at filing the notice of the motion to dismiss for a failure to comport with local rules. This mean that the purported filing on October 30, 2023, was not “deemed filed” in accordance with CPLR  2102(b). Therefore, concluded the motion court, defendant “defaulted in November of 2023 by failing to respond to the complaint, and therefore the present motion was not brought within the statutory one-year period after a default.” The motion court also held that plaintiffs failed to provide a reasonable excuse for their failure to timely seek a default judgment. The motion court explained that “ n their papers and at oral argument on the motion, Plaintiffs insist that the present motion timely and that this “render it unnecessary to establish a reasonable excuse for delay.” “Because Plaintiffs failed to proffer a reasonable excuse for the delay,” concluded the motion court, it was bound by CPLR 3215(c) to grant the cross-motion to dismiss the complaint. Takeaway There are a number of lessons that can be learned from the motion court’s decision in Richardson . First, timeliness is critical when seeking a default judgment. Under CPLR  3215(c), plaintiffs must seek a default judgment within one year of the defendant’s default. As shown in Richardson , the failure to do so—without a valid excuse—will result in a mandatory dismissal of the complaint as abandoned. Second, filings must comply with court rules to be considered filed. Defendant’s initial attempt to file his motion to dismiss in October 2023 was rejected by the Clerk due to procedural errors. Under CPLR 2102(b), the filing did not count as a valid filing because it did not meet the filing standards necessary to be “deemed filed.” Finally, plaintiffs bear the burden of justifying any delay in meeting the one-year deadline. As explained by the motion court in Richardson , a plaintiff can excuse the failure to file a default judgment motion within one year of the default by providing a reasonable excuse for the delay and showing that the underlying claim is meritorious. As shown in Richardson , the plaintiff must meet both 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. NYSCEF stands for the New York State Courts Electronic Filing System. It is a system that allows for the electronic filing and serving of legal documents in various New York State courts. This includes the Surrogate’s Court, Supreme Court, and the Court of Claims ( here ). NYSCEF enables attorneys and other authorized users to file documents, manage cases, and access court information electronically.  CPLR 3211(e). CLPR 3215(c). Id. CPLR 3215(c); see also IMP Plumbing & Heating Corp., v. 317 E. 34th St., LLC , 89 A.D.3d 593, 594 (1st Dept. 2011); PM OK Assocs. v. Britz , 256 A.D.2d 151, 152 (1st Dept. 1998) (holding that “a complaint shall not be dismissed as abandoned, pursuant to CPLR 3215(c), unless a plaintiff has failed to take proceedings for entry of a default judgment against the defendant within one year after the default”). Hoppenfeld v. Hoppenfeld , 220 A.D.2d 302, 303 (1st Dept. 1995). Slip Op. at *3 (orig’l emphasis). Id. Id. at *3-*4. Id. at *4. Id. Id. Under CPLR 2102(b), “ paper filed in accordance with the rules of the chief administrator or any local rule or practice established by the court shall be deemed filed.” Slip Op. at *4. Id. Id. Id. at *4-*5.

By:  Jeffrey M. Haber In Southgate Owners Corp. v. Esposito , 2025 N.Y. Slip Op. 32750(U) (Sup. Ct., N.Y. County July 24, 2025) ( here ), plaintiff sued defendant, a shareholder in its cooperative building, seeking a declaratory judgment that 80 additional shares had been properly allocated to her unit following a 1996 expansion of her unit into terrace space. Plaintiff claimed that defendant refused to accept the allocation and pay her pro rata share of expenses and sought a declaratory judgment to that effect. Defendant moved to dismiss the complaint as time-barred under CPLR 213, which imposes a six-year statute of limitations on declaratory judgment actions. The motion court found that the cause of action accrued no later than 2014, when defendant definitively refused the proposed allocation after repeated requests from plaintiff’s board. The motion court rejected plaintiff’s argument that the claim accrued only in 2024, especially since the official notice of allocation was sent after the complaint was filed. The motion court also noted that retroactive charges from 1996 were impermissible under the proprietary lease, which allowed charges from the date of issuance. Since defendant successfully defended the claim, the motion court awarded her attorneys’ fees under the proprietary lease and Real Property Law. Background Plaintiff owns the cooperative building located at 424 East 52nd Street. When the building became a co-op in 1987, each apartment was issued a number of shares relative to its size and location. In that regard, the corporation’s bylaws required the board of directors (the “Board”) to allocate shares to apartments based on a “reasonable relationship to the portion of the fair market value of equity.” Under the original offering plan, 460 shares were allocated to defendant’s unit. In 1996, defendant made changes to the apartment, expanding the interior into the terrace space. No extra shares were allocated to defendant at that time. In 2011-2012, the corporation’s President asked defendant twice if she would voluntarily accept the allocation of additional shares. Defendant rejected the requests. In 2014, plaintiff’s then-attorney considered bringing an action against defendant but did not do so, admitting that the statute of limitations had run on the Board’s ability to bring an action against defendant regarding an additional share allocation. Counsel hoped that defendant would be willing to meet with the Board on the matter. No meeting apparently happened. In 2022, plaintiff’s then-attorney wrote a letter to defendant informing her that “shares are to be allocated to this additional space”, but no official allocation was made at that time. On April 19, 2024, plaintiff initiated the action. According to the complaint, the Board had allocated extra shares to defendant “as of” 1996 at the completion of the expansion. Plaintiff also alleged “upon information and belief” that defendant refused to accept the allocation and pay her pro rata share of co-operative expenses. Three days after plaintiff filed the complaint, the Board sent a letter to defendant, stating that her account had been allocated extra shares and that her account was being charged for the extra shares retroactively to 1996. Plaintiff asserted a single cause of action, seeking a declaratory judgment that plaintiff had properly allocated 80 additional shares to defendant “as of January 1, 1996” and that defendant was liable for the full pro rata share of the additional expenses together with interest dating from 1996. Defendant timely answered the complaint and asserted two counterclaims, one for attorneys’ fees pursuant to the proprietary lease and one seeking to annul the decision that allocated 80 additional shares. Defendant moved for summary judgment, seeking to dismiss the complaint as time-barred and to receive reimbursement of her attorneys’ fees. Plaintiff opposed, and cross-moved for summary judgment in its favor. The motion court granted defendant’s motion and denied plaintiff’s cross-motion. The Court's Decision Declaratory judgments are governed by a six-year statute of limitations under CPLR 213. A claim for declaratory relief accrues “when there is a bona fide, justiciable controversy between the parties.” Such a controversy occurs when “a plaintiff receives direct, definitive notice that the defendant is repudiating his or her rights.” Plaintiff argued that its cause of action did not accrue until 2024. The motion court rejected the argument, holding that “the complaint was time-barred, for multiple reasons.” First, said the motion court, “according to Plaintiff’s own complaint, the shares were allocated ‘as of’ 1996 and seeking charges from that date.” The motion court noted that “according to the terms of the Proprietary Lease, a shareholder only be obligated to pay rent based off an additional allocation of shares ‘from and after the date of issuance.’” Thus, concluded the motion court, “ o the extent that Plaintiff alleges that the additional shares were not issued until 2024, by the terms of the Proprietary Lease they are not permitted to attempt to retroactively apply charges before the date of issuance.” Second, said the motion court, plaintiff’s claim for declaratory relief accrued in 2014, “if not earlier.” The motion court pointed to the “undisputed” fact that “from 2011 to 2014, multiple members of the Board, operating under the belief that any cause of action was time<-> barred, repeatedly attempted to get Defendant to voluntarily accept the additional shares and that she refused.” The motion court noted that “Plaintiff attempted to allocate shares to Defendant by at least 2014, and Defendant definitively refused to accept such a proposed allocation.” “It is at that time, if not earlier,” concluded the motion court, “that Plaintiff’s cause of action accrued.” Thus, the motion court concluded that plaintiff’s claim was time-barred in 2024. The motion court rejected plaintiff’s argument that defendant “did not definitively repudiate the allocation until 2024.” The motion court noted that plaintiff did not send the letter notice to defendant “first stating that additional shares had been allocated to her account until after filing the complaint (where aver that Defendant had refused to accept the allocation).” “By Plaintiff’s own complaint and records,” concluded the motion court, “ efendant made what Plaintiff considers to be a definitive repudiation worthy of judicial intervention at some time prior to the official notification of the share allocation.” Finally, the motion court held that because defendant was successful in her defense to the complaint, under the terms of the proprietary lease and the Real Property Law, she was entitled to collect attorneys’ fees. Takeaway The motion court’s decision in  Southgate Owners  serves as a reminder of the critical importance of timely legal action and adherence to contractual frameworks. The motion court’s dismissal of plaintiff’s declaratory judgment claim under CPLR 213 reinforces the principle that accrual begins to run not when a party chooses to act, but when a justiciable controversy arises—in Southgate Owners , no later than 2014, when defendant rejected the proposed share allocation. As discussed, plaintiff’s records and prior counsel’s acknowledgment of the limitations issue were pivotal in establishing the timeline for accrual of the claim. Southgate Owners also serves as a good reminder that the parties should check any agreements between them to see if the agreement governs their dispute. As noted, the language in the proprietary lease prohibiting retroactive charges prior to the date of issuance was a dispositive fact relied upon by the motion court. Finally, the decision highlights the financial and strategic risks of pursuing stale claims, particularly when internal communications and prior legal assessments acknowledge those risks. In Southgate Owners , plaintiff’s delay in formalizing the share allocation and initiating legal proceedings resulted not only in dismissal of its claim but also an award of attorneys’ fees to defendant. ______________________________________ 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. Trump Vil. Section 4, Inc. v. Young , 217 A.D.3d 711, 714 (2d Dept. 2023). Id. Slip Op. at *4. Id. Id. Id. Id. Id. Id. Id. Id. Id. at *5. Id. Id. Id.

By: Jonathan H. Freiberger Folks buy insurance to minimize loss in the event of occurrences that may cause injury to individuals or property. I would venture to say that most of the time, insureds do not read their policies and do not know the precise coverages they have purchased. While sometimes insurance is purchased directly from a carrier, many insureds rely on insurance agents or brokers to, inter alia , procure insurance for them. What happens, however, when a casualty occurs and the insured finds out that the desired coverage was not procured by the broker? This question is a fertile source of litigation, and today’s article addresses some of the issues relevant to the answer. “Insurance agents have a common-law duty to obtain requested coverage for their clients within a reasonable time or inform the client of the inability to do so: however, they have no continuing duty to advise, guide or direct a client to obtain additional coverage.” American Bldg. Supply Corp. v. Petrocelli Group, Inc. , 19 N.Y.3d 730, 735 (2012) (citation, internal quotation, internal quotation marks and brackets omitted). This is because the “insurance agent-insured relationship is not a generally recognized professional relationship in which continuing obligations to advise might exist but, rather, is an ordinary commercial relationship which does not usually give rise to a duty to provide such ongoing guidance.” Marcellus Energy Services LLC v. Tompkins Insurance Agencies, Inc. , 238 A.D.3d 1366, 1368 (3 rd Dep’t 2025). “An insurance broker may be held liable under theories of breach of contract or negligence for failing to procure insurance upon a showing by the insured that the agent or broker failed to discharge the duties imposed by the agreement to obtain insurance, either by proof that it breached the agreement or because it failed to exercise due care in the transaction.” DaSilva v. Champ Construction Corp . , 186 A.D.3d 425 (2 nd Dep’t 2020) (citations omitted). To establish that an insurance broker breached its contract or was negligence, “a plaintiff must establish that a specific request was made to the broker for the coverage that was not provided in the policy.” Gibraltar Contracting, Inc. v. P.F. Northeast Brokerage, Inc. , 189 A.D.3d 432 (1 st Dep’t 2020) (emphasis supplied) (citation omitted). “A general request for coverage will not satisfy the requirement of a specific request for a certain type of coverage.” Hoffend & Sons, Inc. v. Rose & Kiernan, Inc. , 7 N.Y.3d 152, 158 (2006). In Ewart v. Allstate Ins. Co ., 221 A.D.3d 968 (2 nd Dep’t 2023), an insurance agent was awarded summary judgment dismissing a complaint sounding in breach of contract and negligence by “establish , prima facie, that communicated multiple quotes to the and that the failure to respond demonstrated a lack of initiative or personal indifference that resulted in a failure to obtain coverage.” Id . at 969 (citations and internal quotation marks omitted). In American Bldg ., the Court rejected the broker’s claim that the plaintiff should be barred from recovery because it received a copy of the policy, did not read it, and did not complain about its contents. Nonetheless, the Court held that, notwithstanding the absence of specific requested coverages, failure to read the policy should not foreclose plaintiff from suit. American Bldg ., 19 N.Y.3d at 736. The Court noted that: “ hile it is certainly the better practice for an insured to read its policy, an insured should have a right to look to the expertise of its broker with respect to insurance matters he failure to read the policy, at most, may give rise to a defense of comparative negligence but should not bar, altogether, an action against a broker.” Id . at 736-77 In addition to common-law theories of recovery, liability against a broker may be found “where a special relationship develops between the broker and client.” Voss v. Netherlands Ins. Co. , 22 N.Y.3d 728 (2014). If such a special relationship is found, liability against a broker may exist “even in the absence of a specific request, for failing to advise or direct the client to obtain additional coverage.” Id . at 735 (citations omitted). Thus, in certain “situations may arise in which insurance agents, through their conduct or by express or implied contract with customers and clients, may assume or acquire duties in addition to those fixed at common law” and that the question of whether such additional responsibilities should be “given legal effect is governed by the particular relationship between the parties and is best determined on a case-by-case basis.” Id. (citation and internal quotation marks omitted). “ n additional duty of advisement” may arise in special circumstances where, for example, “(1) the agent receives compensation for consultation apart from payment of the premiums; (2) there was some interaction regarding a question of coverage, with the insured relying on the expertise of the agent; or (3) there is a course of dealing over an extended period of time which would have put objectively reasonable insurance agents on notice that their advice was being sought and specially relied on.” Murphy v. Kuhn , 90 N.Y.2d 266, 272 (1997) (citations omitted); see also Voss , 22 N.Y.3d at 735 (relying on Murphy ). The Court of Appeals recognized that expanding the scope of liability for insurance agents and brokers was not advisable because, in addition to “opening the flood gates” to litigation, “ nsurance agents or brokers are not personal financial counselors and risk managers, approaching guarantor status nsureds are in a better position to know their personal assets and abilities to protect themselves more so than general insurance agents or brokers, unless the latter are informed and asked to advise and act.” Id . at 273 (citations omitted). On August 13, 2025, the Appellate Division, Second Department, decided SPA Castle, Inc. v. Choice Agency Corp. , a case addressing some of the issues discussed herein. In SPA , Plaintiffs commenced an action against a broker for breach of contract because, according to the plaintiff, the broker failed to procure “appropriate insurance coverage.” The trial court denied the broker’s motion for summary judgment, and it appealed. The Second Department, finding that the plaintiff never made a specific request for insurance, reversed and stated: Here, the defendant established its prima facie entitlement to judgment as a matter of law dismissing the complaint insofar as asserted against it by submitting, inter alia, transcripts of the deposition testimony of the plaintiffs' CEO and president and the defendant's vice president of operations, which demonstrated that the plaintiffs did not make a specific request for a particular kind of insurance coverage that the defendant failed to procure. The plaintiffs' CEO and president testified, among other things, that he did not remember discussing specific risks that the plaintiffs were seeking to insure against, but that the plaintiffs needed general liability insurance. The defendant's vice president of operations testified that the plaintiffs' application was for general liability insurance, which the record reflects is the kind of insurance the defendant procured for the plaintiffs. In opposition, the plaintiffs failed to raise a triable issue of fact. Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice.

By:  Jeffrey M. Haber In today’s fraud notes, we examine two cases: K.M. v. Ursuline School of New Rochelle , 2025 N.Y. Slip Op. 04643 (2d Dept. Aug. 13, 2025) ( here ), and Three C, LLC v. City Settlement Serv., Inc. , 2025 N.Y. Slip Op. 04678 (Aug. 13, 2025) ( here ). Ursuline involved the failure to satisfy the elements of a 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.” The claim must pleaded with particularity. Conclusory allegations will not suffice. Neither will allegations based on information and belief. If “sufficient factual allegations of even a single element are lacking,” then the claim must be dismissed. The requirement that a fraud claim be pleaded with particularity can be found in Section 3016(b) of the Civil Practice Law and Rules (“CPLR”). Under CPLR 3016 (b), the circumstances constituting fraud must be stated with sufficient detail “to permit a reasonable inference of the alleged conduct.”   To satisfy the particularity requirement, the plaintiff must allege such facts as the time, place, and content of the defendant’s false representations, as well as the details of the defendant’s fraudulent acts, including when the acts occurred, who engaged in them, and what was obtained as a result. Put another way, the complaint must identify the “who, what, where, when and how” of the alleged fraud. As noted, a plaintiff pleading fraud must identify a misrepresentation or a material omission of fact. The misrepresentation must be a misrepresentation of present fact; it cannot be a misrepresentation of future intent to perform under the contract. The failure to plead a misrepresentation or omission will result in dismissal of the claim. Three C involved the statute of limitations applicable to a claim of fraud. Under New York law, “a fraud-based action must be commenced within six years of the fraud or within two years from the time the plaintiff discovered the fraud or could with reasonable diligence have discovered it, whichever is later” “The inquiry as to whether a plaintiff could, with reasonable diligence, have discovered the fraud turns on whether the plaintiff was ‘possessed of knowledge of facts from which could be reasonably inferred.’” “Generally, knowledge of the fraudulent act is required and mere suspicion will not constitute a sufficient substitute.” “‘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.’” Three C, LLC v. City Settlement Service, Inc. Three C involved a dispute between two brothers. Defendant had performed private investigation work for the defendant attorneys. Through his work, defendant learned of an investment opportunity to purchase the inventory of Warwick Winthrop Silver, an entity owned by a client of one of the attorney defendants. In connection with the opportunity, defendant approached plaintiff for a loan to purchase the inventory (primarily silver). On or about March 20, 2010, plaintiff, Three C LLC (“Three C”), and defendant, City Settlement Service Inc. (“City Settlement”) executed a promissory note (the “Note”) under which City Settlement was to repay $275,000 to Three C. The balance and interest on the Note was due September 20, 2010. The Note stated that it was “secured by a UCC Filing against certain inventory owned by City Settlement Services, Inc.” Defendant allegedly represented to plaintiff that the silver would be sold by September 2020 for double the purchase price and that the short-term note would be paid. Defendants also told plaintiff that the UCC Filing referenced in the Note had been filed with the necessary authorities. In July of 2010, plaintiffs provided defendants the $275,000 for the purchase of the silver. According to plaintiffs, defendants failed to make payment by the required September 20, 2010 due date under the Note. In 2011, defendant made intermittent payments to plaintiff toward the balance due under the Note. Those payments totaled $120,000.00. The remaining balance due under the Note remained unpaid.  On or about July 8, 2016, plaintiffs commenced the action. Defendant moved to dismiss the Complaint. Supreme Court granted the motion as to five of the six causes of action asserted in the Complaint, with the sixth cause of action severed for a separate proceeding. In 2020, plaintiff took defendant’s deposition, which, according to plaintiff, revealed additional facts warranting the filing of an amended complaint; namely, the purchase price for the silver was allegedly only $145,000, and not the $275,000 originally represented. Plaintiff alleged that he learned that defendant formed In Season Décor Corp. (“In Season”) to control the silver and deposit funds from sales of the silver. Defendant also allegedly paid himself from In Season’s bank account despite there being an outstanding balance on the Note. Deposition testimony from other defendants allegedly confirmed the foregoing. With the information learned from discovery, plaintiffs filed an amended complaint on May 12, 2021 that re-inserted defendant as a named defendant and added In Season Décor Corp. as an additional party. The Amended Complaint included allegations that the purchase price for the silver was only $145,000, and that defendant improperly transferred the silver to In Season Décor Corp. from which he sold the silver and paid himself and one of the other defendants from the proceeds. Defendants moved to dismiss the amended complaint, asserting, among other things, that the claims asserted in the amended complaint were time-barred under CPLR 3211(a)(5). Supreme Court dismissed all claims, but the fraud causes of action. Regarding the statute of limitations, Supreme Court held that there were issues of fact as to whether the two-year discovery rule applied, noting “the scheme to defraud only discovered during deposition testimony on January 30, 2020 and the Amended Complaint was filed on May 12, 2021, within the two (2) years of Statute of Limitations.” Defendants appealed. The Appellate Division, Second Department affirmed. The Court held that “Supreme Court properly denied those branches of the defendants’ separate motions which were pursuant to CPLR 3211(a)(5) to dismiss the fraud causes of action insofar as asserted against each of them as time-barred.” The Court explained that “ he facts presented … did not conclusively demonstrate, as a matter of law, that the alleged fraudulent conduct could have been discovered earlier in the exercise of reasonable diligence.” K.M. v. Ursuline School of New Rochelle Defendant, Ursuline School of New Rochelle (“Ursuline”), operates an all-girls private school in New Rochelle. Plaintiff (the “mother”) enrolled her daughter (the “student”) at Ursuline in September 2020. In January 2022, the student was expelled from Ursuline for engaging in an off-campus physical altercation in May 2021. Subsequently, the mother, as guardian for the student, commenced the action against Ursuline, asserting causes of action to recover damages for breach of contract, fraud, and breach of the implied covenant of good faith and fair dealing. Among other things, the mother alleged that Ursuline breached its obligations under a student-parent handbook that was distributed in September 2020 (the “Handbook”) by expelling the student for the off-campus incident. The mother also alleged that Ursuline engaged in fraud by inducing her to enroll the student at Ursuline and that Ursuline breached the implied covenant of good faith and fair dealing by conducting an unfair investigatory process. Regarding the fraud claim, the mother alleged that Ursuline misrepresented in its student/parent handbook its intention to: (i) perform its obligations in accordance with the teachings of Jesus Christ; (ii) allow students to learn from their mistakes; and (iii) nurture students’ emotional well-being. In support of her claim, the mother cited to two excerpts from the Handbook. Plaintiff alleged that she relied on the statements in the Handbook when she apologized to the school for her involvement in the altercation. Ursuline moved pursuant to CPLR 3211(a)(1) and (7) to dismiss the amended complaint. In an order dated June 30, 2022, Supreme Court granted Ursuline’s motion. Regarding the fraud claim, the court held that “the Amended Complaint not meet the heightened standard of particularity required to sustain a cause of action sounding in fraud.” “Simply alleging that Ursuline not lived up to the standard of the teachings of Jesus Christ,” said the court, “does not satisfy the particularity requirement for a fraud claim.” The court also held that “upon a close reading of the Amended complaint, the court unable to make out any allegations which even suggest that Ursuline knowingly made any misrepresentation.” “In essence,” said the court, “Plaintiff argue that Ursuline breached the terms of the Handbook by expelling her.” Noting that a plaintiff alleging fraud, “must prove a misrepresentation or a material omission of fact which was false and known to be false by defendant,” the court found that “ he Amended complaint simply does not make out a knowing misrepresentation by Ursuline.” The court further held that the mother failed to plead justifiable reliance. The court explained that the “ he portion of the Handbook which reads “ ooted in the truth and values of the teachings of Jesus Christ an aspirational statement regarding the school’s Christian ethos.” The provision was not, held the court, “a catch-all provision totally negating disciplinary procedures.” “Nor,” said the court, was it “reasonable to rely on the excerpt which reads “ chool is a place to learn and we often learn from making mistakes after being afforded opportunities to correct mistakes.” “These two excerpts,” concluded the court, were “general expressions of Ursuline’s overall philosophy and not render inoperative the specific disciplinary provisions of the Handbook.” “At best,” said the court, they were “statements indicating that Ursuline ha discretion in how it dealt with disciplinary issues.” Finally, the court held that the fraud claim duplicated the mother’s breach of contract claim. In that regard, the court noted that the fraud claim was based on Ursuline’s breach of contract “by not following the provisions of the Handbook.” The mother appealed. The Appellate Division, Second Department affirmed. The Court held that “the Supreme Court properly granted Ursuline’s motion pursuant to CPLR 3211(a) to dismiss the amended complaint.” Focusing on the particularity requirement under CPLR 3016(b) and the first element of a fraud claim ( i.e. , a false statement), the Court held that “the mother’s bare and conclusory allegations failed to identify any specific misrepresentation of material present fact made by Ursuline.” Takeaway The implications of Ursuline and Three C reflect two important aspects of fraud litigation: how fraud must be pleaded and when it can be pursued. In Ursuline , the Court emphasized the particularity pleading requirements for fraud. The plaintiff’s reliance on broad, aspirational statements from a school handbook was insufficient. The Court made clear that fraud must be based on a false statement, not “bare and conclusory” allegations. Ursuline , therefore, serves as a cautionary reminder: plaintiffs must articulate fraud claims with particularity, detailing the “who, what, where, when, and how” of the alleged fraud, and must plead all elements of the claim. Otherwise, the claim risks dismissal at the outset. Three C emphasized another aspect of pleading a fraud claim: application of the discovery rule. The Court affirmed the viability of the fraud claim under the two-year discovery rule, finding that there were issues of fact as to whether plaintiffs could have reasonably discovered the fraud absent the deposition that revealed key facts about the alleged fraudulent scheme. Three C underscores the point that the discovery of new evidence, which was not previously extant, may suffice to trigger the two-year discovery rule under CPLR 213(8). It also highlights the importance of discovery in uncovering hidden misconduct and reviving claims that might otherwise be time-barred. ____________________________________ 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 elements of a fraud claim, including the failure to articulate a false and misleading statement and omission. To find such articles, please visit the  Blog  tile on our  website  and search for “misrepresentations”, or “failure to plead a misrepresentation”, or any other issue that may be of interest to you. Lama Holding Co. v. Smith Barney Inc. , 88 N.Y.2d 413, 421 (1996). Eurycleia Partners, LP v. Seward & Kissel, LLP , 12 N.Y.3d 553, 559 (2009). Id. See Facebook, Inc. v. DLA Piper LLP (US) , 134 A.D.3d 610, 615 (1st Dept. 2015) (“Statements made in pleadings upon information and belief are not sufficient to establish the necessary quantum of proof to sustain allegations of fraud.”). RKA Film Fin., LLC v. Kavanaugh , 2018 WL 3973391, at *3 (Sup. Ct., N.Y. County 2018) (quoting Shea v. Hambros PLC , 244 A.D.2d 39, 46 (1st Dept. 1998)). See also Gregor v. Rossi , 120 A.D.3d 447 (1st Dept. 2014). Pludeman v. Northern Leasing Sys., Inc. , 10 N.Y.3d 486, 491 (2008) (citation omitted). GoSmile, Inc. v. Levine , 81 A.D.3d 77, 81 (1st Dept. 2010),  lv. dismissed , 17 N.Y.3d 782 (2011).  This Blog has written numerous articles addressing the statute of limitations for fraud, including the discovery rule under CPLR 213(8). To find such articles, please visit the  Blog  tile on our  website  and search for “statute of limitations”, “discovery rule”, or “CPLR 213(8)”, or any other issue that may be of interest to you. Vilsack v. Meyer , 96 A.D.3d 827, 828 (internal quotation marks omitted); see CPLR 213(8). Sargiss v. Magarelli , 12 N.Y.3d 527, 532 (quoting Erbe v. Lincoln Rochester Trust Co. , 3 N.Y.2d 321, 326 (1957)). Id. (internal quotation marks omitted). Id. (quoting Trepuk v. Frank , 44 N.Y.2d 723, 725 (1978)). The factual background for Three C comes from the briefs on appeal and the decision and order appealed from. Three C , Slip Op. at *2. Id. (citations omitted). Lama , 88 N.Y.2d at 421. Ursuline , Slip Op. at *3. Id. (citations omitted).

By:  Jeffrey M. Haber On August 1, 2025, the Securities and Exchange Commission (“SEC”) announced ( here ) that it charged a Wisconsin resident and three limited liability companies that he owns and controls – Investors Capital LLC, Global Investors Capital LLC, and High Income Performance Partners LLC (collectively, the “Entity Defendants”) – with perpetrating a real estate-related offering fraud. According to the SEC’s complaint ( here ), from approximately May 2020 through at least January 2024 (the "Relevant Time Period"), Defendants allegedly solicited investors by promising to purchase, fix, and flip real estate for profit. Defendants collectively raised at least $1.9 million from at least 30 investors throughout the United States, including at least nine investors in Wisconsin. Many of the investors were members of the Nigerian-American community. According to the SEC, defendant misused the money raised by spending at least 80% of it on himself and his other ventures, and not on the promised real estate transactions. The SEC alleged that defendant held himself out as an “Incredibly Successful Entrepreneur” who amassed a multi-million dollar real estate portfolio after emigrating from Africa to Wisconsin in 2016 “with just $4,700,” to become a “notable and sought after millionaire investor” who serves as a speaker, life coach, mentor, consultant, and philanthropist. Defendant allegedly made these and similar representations on his website, on social media sites, during presentations to potential investors, and during financial coaching seminars. According to the SEC, defendant’s story was misleading. Defendant allegedly had sufficient assets when he emigrated to the United States to support himself and his family without needing to work. Likewise, said the SEC, defendant’s claims on his website in 2024 that he owned “real estate assets currently valued at over $23 million,” were also untrue. According to public records searches, noted the SEC, during the Relevant Time Period, defendant and the entities he controlled –  including defendants Investors Capital, Global Investors Capital, and High Income Performance Partners (together, the “Entity Defendants,”) – owned only 11 properties with a collective value of approximately $1 million. The SEC alleged that defendant enticed investors with promises of lucrative returns on investments (or “ROI”) in one year or less. Defendants allegedly promised different investors a variety of different ROI, typically in the range of 10% to 30%, but at times higher. The SEC alleged that defendants usually promised to make a payment to investors within three to 12 months consisting of the ROI and the return of their principal investment. According to the SEC, defendants usually entered into written investment agreements with investors making their first investment. The SEC claimed that the agreements typically stated that the relevant Entity Defendant would provide services, including purchasing, fixing, and flipping properties, on behalf of investors and “acquir investment property that befits the investment fund.” Defendants allegedly told investors that profits would be generated through defendant’s investment of their funds in either a specific property or in unspecified real estate to be purchased, renovated, and sold. Some investors, said the SEC, subsequently entered into verbal agreements with defendant and one or more of the Entity Defendants for additional real estate investments, subject to terms similar to the terms of their initial investments. Regardless of whether the investment agreements were written or verbal, defendant allegedly told investors that the money they invested was to be used for real estate development projects with repayment of their investment principal and ROI by a specified time. Despite these core representations and promises, claimed the SEC, defendants spent only a small fraction (less than one-fifth) of the investors’ money on purchasing or renovating real estate. Instead, alleged the SEC, defendant commingled investor funds in his personal bank accounts and accounts for the Entity Defendants and his other businesses, and often used the investors’ funds for other purposes, including paying his personal living expenses, buying jewelry and automobiles, and paying for travel and entertainment. Although the written investment agreements identified at least l0 specific properties that defendants were going to purchase, fix, and flip, the SEC alleged that public records showed that during the Relevant Time Period, seven of those 10 properties were never owned by defendants and, of the three properties that were acquired by defendant or a company he controlled, two were subject to foreclosure proceedings. According to the SEC, Defendants have not paid most investors as promised in the written and verbal investment agreements. The SEC alleged that investors who contacted defendant seeking repayment of their investment principal and ROI when their investment period ended were met with a series of excuses and delays. In addition, maintained the SEC, several of the investors sued defendant and/or the Entity Defendants when the defendants failed to meet their payment obligations. Despite these lawsuits, said the SEC, defendants continued to solicit funds for additional “successful investments” without disclosing that defendants had not repaid prior investors. The SEC alleged that, based on the foregoing conduct, defendants violated the federal securities laws, namely Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule l0b-5 promulgated thereunder. Accordingly, the SEC seeks a judgment against defendants that: (a) imposes permanent injunctive relief, including prohibiting defendant from offering or selling securities; (b) orders disgorgement of ill-gotten gains, plus prejudgment interest; and (c) imposes civil monetary penalties. The SEC filed the action ( SEC v. Nantomah , Case No. 2:25-cv-01130) in the United States District Court for the Eastern District of Wisconsin. Takeaway Nantomah reflects an ongoing effort by the SEC to target affinity fraud. Affinity fraud is a deceptive investment scheme that preys on trust and close relationships within specific communities or social groups. These groups often share a common identity, such as religious affiliation, ethnicity, profession, or membership in a social organization. The promoter of the fraud either belongs to the group or uses a trusted insider to promote the scam, making it more believable and harder to detect. Victims of affinity fraud are often persuaded to invest in fraudulent ventures with promises of high returns and minimal risk. Because the offer comes from someone they trust—or appears to—individuals may forego due diligence and even encourage others in the group to invest, amplifying the damage. Affinity fraud and real estate scams often intersect in ways that make these schemes particularly damaging and difficult to detect.  Real estate is an attractive vehicle for fraud because it typically involves large sums of money and complex transactions that can be difficult for the average investor to fully understand. Fraudsters use this complexity to their advantage, presenting fake or exaggerated investment opportunities that appear legitimate. They may promise high returns from flipping houses, investing in commercial developments, or participating in exclusive property deals. These offers are often framed as opportunities to build wealth within the community or support shared values, making them emotionally compelling. One case of an alleged real estate affinity fraud involved a Miami-based developer who allegedly orchestrated a $135 million Ponzi scheme targeting the South Florida Cuban exile community. The developer allegedly used his cultural ties and community standing to gain trust, convincing over 400 investors to fund real estate projects that either didn’t exist or were grossly misrepresented. Another case in California saw an alleged promoter targeting the Filipino-American community with promises of high returns from legal funding tied to real estate. The alleged scam operated as a Ponzi scheme, using new investors’ money to pay earlier ones, while the fraudster lived lavishly off the proceeds. The SEC and other regulators have warned that affinity real estate scams often involve fake deeds, inflated property values, or nonexistent developments, and they urge investors to verify all claims independently—even when the opportunity comes from someone within their group. ________________________________________ 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 examined enforcement actions and the settlement of enforcement actions involving affinity fraud on numerous occasions. To find these articles, visit the “ BLOG ” tile on our  website  and enter “affinity fraud” in the “search” box.

By: Jonathan H. Freiberger In today’s BLOG, we will address the enforcement of foreign judgments (i.e., judgments obtained outside the State of New York) in New York. Simply stated, armed with a money judgment, a judgment creditor can employ numerous available procedures to assist in the collection of the outstanding judgment debt. Article 52 of the CPLR (Enforcement of Money Judgments) provides for many enforcement options. Judgments obtained in New York can be enforced immediately. What happens, however, when a litigant obtains a judgment in another state, but would like to enforce it in New York because the judgment debtor has real property, personal property or bank accounts in New York? The United States Constitution provides that “Full Faith and Credit shall be given in each State to the public Acts, Records, and judicial Proceedings of every other State.” U.S.Const., Art. IV, § 1 . The “Full Faith and Credit Clause” “requires each State to recognize and give effect to valid judgments rendered by the courts of its sister States. It serves to alter the status of the several states as independent foreign sovereignties, each free to ignore obligations created under the laws or by the judicial proceedings of the others, and to make them integral parts of a single nation.” V.L. v. E.L. , 577 U.S. 404, 406-07 (2016) (citations and internal quotation marks omitted). Thus, a “final judgment in one State, if rendered by a court with adjudicatory authority over the subject matter and persons governed by the judgment, qualifies for recognition throughout the land” even if a sister state “disagrees with the reasoning underlying the judgment or deems it to be wrong on the merits.” Id . at 407. However, states are “not required … to afford full faith and credit to a judgment rendered by a court that did not have jurisdiction over the subject matter or the relevant parties.” Id . (citation and internal quotation marks omitted). While foreign judgments are entitled to full faith and credit in New York, they must first be “domesticated” in New York before they are enforceable. The CPLR provides two methods for domestication. The first method is contained in Article 54 of the CPLR , which codified the Uniform Enforcement of Foreign Judgments Act. Under CPLR 5402(a) , to recognize a foreign judgment, a judgment creditor must: (1) obtain an authenticated copy of the foreign judgment and, within 90 days of authentication, file it in the office of any county clerk of New York State; and (2) file an affidavit, stating (i) that the judgment was not obtained by default in appearance or by confession of judgment, (ii) that the judgment is unsatisfied in whole or in part, (iii) that the amount remaining on the judgment is unpaid, (iv) that enforcement of the judgment has not been stayed, and (v) setting forth the name and last known address of the judgment debtor. If the judgment creditor complies with the requirements of CPLR 5402(a), CPLR 5402(b) permits the foreign judgment to be treated “in the same manner as a judgment of the supreme court of this state.” Therefore, a foreign judgment that is filed in accordance with the requirements of CPLR § 5402 will have the same legal effect as a judgment entered in New York and will be “subject to the same procedures, defenses, and proceedings for reopening, vacating or staying” a New York judgment. CPLR 5402(b). Since CPLR § 5402(a) specifically excludes judgments obtained by default, a foreign judgment creditor must commence a plenary action or move for summary judgment in lieu of complaint to domesticate the foreign judgment. CPLR 5406 ; Madjar v. Rosa , 83 A.D.3d 1011, 1012-13 (1 st Dep’t 2011) (citations omitted). Against this backdrop, today’s article addresses Cadlerock Joint Venture, L.P. v. Simms , an opinion rendered on August 6, 2025, by the Appellate Division, Second Department. The abridged and simplified facts of Cadlerock follow. The plaintiff in Cadlerock was a judgment creditor who obtained a money judgment, by default, in North Carolina. Because the judgment was obtained by default, it could not be domesticated by the procedures found in CPLR 5402(a) . Accordingly, in 2023, the judgment creditor commenced an action by moving for summary judgment in lieu of complaint pursuant to CPLR 3213 to domesticate, in New York, its North Carolina judgment. The judgment debtor opposed the motion by arguing that there was no personal jurisdiction over him in New York and, therefore, the motion must be denied. The judgment creditor opposed the cross-motion by arguing that “lack of personal jurisdiction in New York was not a cognizable defense to an action seeking to domesticate a judgment from another state.” The motion court, in granting the cross-motion and denying the motion for summary judgment in lieu of complaint, held that New York lacked personal jurisdiction over the judgment debtor. On the judgment creditor’s appeal, the Second Department reversed and answered in the negative, the question presented on appeal – “whether New York must possess personal jurisdiction over the defendant in order for the plaintiff to obtain such recognition and potential enforcement of the judgment in New York.” After discussing full faith and credit and CPLR Article 54, the Court explained the issue of personal jurisdiction. Among other things, the Court reiterated that the “Due Process Clause of the Fourteenth Amendment limits the power of a state court to render a valid personal judgment against a nonresident defendant protects an individual’s liberty interest in not being subject to the binding judgments of a forum with which he has established no meaningful contacts, ties, or relations.” (Citations and internal quotation marks omitted.) The Court also noted that a “judgment rendered in violation of due process is void in the rendering State and is not entitled to full faith and credit elsewhere. Due process requires that the defendant be given adequate notice of the suit, and be subject to the personal jurisdiction of the court.” (Citation and internal quotation marks omitted.) There could be no dispute that while “New York would lack jurisdiction to pass upon the merits of the controversy underlying the 2017 North Carolina judgment<, the judgment creditor> is not asking the New York courts to consider the merits of the underlying action, only to recognize the judgment entered by the North Carolina court so as to make it enforceable in New York.” The Court then held “that New York need not possess personal jurisdiction over the defendant judgment debtor in order to recognize and domesticate a judgment entitled to full faith and credit.” “Accordingly, the Supreme Court should have granted the plaintiff’s motion for summary judgment in lieu of complaint and denied that branch of the defendant’s cross-motion which was pursuant to CPLR 3211(a)(8) to dismiss the action for lack of personal jurisdiction.” Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice. This BLOG has previously addressed the recognition of foreign judgments (s ee, e.g., < here =">here"> , < here =">here"> and < here =">here"> ) and some of the introductory points of this article have been adapted from prior articles. The second method, which is found in Article 53 of the CPLR and relates to the domestication of judgments obtained in foreign countries, is beyond the scope of today’s article. This BLOG has addressed CPLR 3213 numerous times. To find our numerous BLOG articles related to CPLR 3213, visit the “ BLOG ” tile on our website and enter “3213” in the “search” box. This BLOG has addressed personal jurisdiction numerous times. To find our numerous BLOG articles related to Personal jurisdiction, visit the “ BLOG ” tile on our website and enter “personal jurisdiction” in the “search” box.