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In order for the conduct of business to proceed in an orderly fashion, folks need to be confident that, in general, the contracts that they enter into, particularly when “the parties set down their agreements in a clear, complete document” will “be enforced according to terms”.  159 MP Corp. v. Redbridge Bedford, LLC , 33 N.Y.3d 353, 358 (2019) (citations and internal quotation marks omitted).  This is consistent with the notion that “ n New York, agreements negotiated at arm’s length by sophisticated, counseled parties are generally enforced according to their plain language pursuant to our strong public policy favoring freedom of contract.”  159 MP Corp ., 33 N.Y.3d at 356.  Rules regarding the certainty of contracts have “special import in the context of real property transactions, where commercial certainty is a paramount concern….”  159 MP Corp ., 33 N.Y.3d at 360 (citation omitted). One of the several exceptions to the general rule regarding the strict enforcement of contracts is reformation, a cause of action by which a party seeks to alter the terms of a written contract based on “mutual mistake or fraud.”  Chimart Assoc. v. Paul , 66 N.Y.2d 570, 573 (1986).  As the Chimart Court stated: In the proper circumstances, mutual mistake or fraud may furnish the basis for reforming a written agreement. Indeed, the concepts are closely related. In a case of mutual mistake, the parties have reached an oral agreement and, unknown to either, the signed writing does not express that agreement  In a case of fraud, the parties have reached agreement and, unknown to one party but known to the other (who has misled the first), the subsequent writing does not properly express that agreement. Chimart , 66 N.Y.2d at 573 (citations omitted).  “Reformation is not granted for the purpose of alleviating a hard or oppressive bargain, but rather to restate the intended terms of an agreement when the writing that memorializes that agreement is at variance with the intent of both parties.”  George Baker Management Corp. v. Acme Quilting Co., Inc. , 46 N.Y.2d 211, 219 (1978) (citations omitted).  The equitable “doctrine” of reformation was necessary “because an action at law afforded no real relief against an instrument secured by fraud or as a result of mutual mistake.”  George Baker , 46 N.Y.2d at 219 (citations omitted). In order to overcome the presumption of the enforceability of a contract as written, “proof of mutual mistake must be of the highest order, and must show clearly and beyond doubt that there has been a mutual mistake and must show with equal clarity and certainty the exact and precise form and import that the instrument ought to be made to assume, in order that it may express and effectuate what was really intended by the parties.”  Asset Management & Capital Co., Inc. v. Nugent , 85 A.D. 3d 947, 948 (2 nd Dep’t 2011) (citations, internal quotation marks, brackets and ellipses omitted).  Put another way, the party seeking reformation “has to show in no uncertain terms, not only that mistake or fraud exists, but exactly what was really agreed upon between the parties.”  George Baker , 46 N.Y.2d at 219 (citations omitted).  On October 14, 2020, the Appellate Division, Second Department, decided Investors Savings Bank v. Cover , a mortgage foreclosure action.  The mortgagors in Investors executed a promissory note and mortgage on certain real property, which was described in the mortgage in two different ways – by lot and block number on a filed map and by a metes and bounds description.  Plaintiff, lender, asserted two causes of action.  The first cause of action sounded in mortgage foreclosure and the second sought to reform the mortgage “to correct an alleged error in the metes and bounds description of the property.”  Supreme court granted lender’s motion for summary judgment and appointed a referee to compute.  The borrowers appealed.   On appeal, the Second Department found that plaintiff was entitled to summary judgment on foreclosure cause of action in the complaint.  The Court, however, dismissed the reformation cause of action as time-barred.  The Court held that a “cause of action seeking reformation of an instrument on the ground of mistake is governed by the six-year statute of limitations pursuant to CPLR 213(6) , which begins to run on the date the mistake was made.  (Citation omitted; hyperlink added.)  Since the mortgage with the erroneous metes and bounds description was executed in 2008, more than six years prior to the commencement of the action, it was time-barred.  The Court also found that the lender, “does not claim that the cause of action was commenced within two years of discovery of the alleged error and, therefore, was timely under CPLR 203(g)(1) ” (citations omitted; hyperlink added), which provides: Time computed from actual or imputed discovery of facts.  Except as provided in article two of the uniform commercial code or in section two hundred fourteen-a of this chapter, where the time within which an action must be commenced is computed from the time when facts were discovered or from the time when facts could with reasonable diligence have been discovered, or from either of such times, the action must be commenced within two years after such actual or imputed discovery or within the period otherwise provided, computed from the time the cause of action accrued, whichever is longer.

Attorneys are often asked whether an agreement that is not formally reduced to writing or not in writing at all is enforceable. Most will say that the answer depends on the surrounding facts and circumstances.  Since the question often arises in the context of a contract dispute, it is helpful to examine the legal principles that guide the determination of contract enforceability. The elements of a cause of action for breach of contract are (1) the formation of an agreement, (2) performance of the agreement by one party, (3) breach by the other party, and (4) damages. E.g. , Furia v. Furia , 116 A.D.2d 694 (2d Dept. 1986). All the elements must be pleaded to avoid dismissal. See Bonamii v. Straight Arrow Publs. , 133 A.D.2d 585 (1st Dept. 1987).  With regard to the first element of a breach of contract claim ( i.e. , the formation of a contract), the plaintiff must establish an offer, acceptance of the offer, consideration, mutual assent and an intent to be bound. 22 N.Y. Jur. 2d, Contracts Section 9.  “An offer is the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it.” Restatement (Second) of Contracts § 24. Acceptance of an offer is effective if it clearly, unambiguously and unequivocally complies with the terms of the offer. King v. King , 208 A.D.2d 1143, 1143-1144 (3d Dept. 1994) (citing 21 N.Y. Jur. 2d, Contracts § 53 at 470 (1982), and 2 Williston on Contracts § 6:10 at 68 (4th ed. 1990)).  “ o constitute consideration, a performance or a return promise must be bargained for.” See Restatement (Second) of Contracts §71. Thus, the plaintiff must demonstrate some performance or a return promise that was bargained for by the defendant’s promise to fulfill the terms of the agreement. Kolchins v. Evolution Markets, Inc. , 128 A.D.3d 47, 59-60 (1st Dept. 2015). Mutual assent requires an agreement as to the essential terms and conditions of the agreement, and intent to be bound requires that such assent be sufficiently definite to assure that the parties are truly in agreement with respect to all material terms. Joseph Martin, Jr., Delicatessen v. Schumacher , 52 N.Y.2d 105, 109 (1981); Matter of Express Indus. & Term. Corp. v. New York State Dept. of Transp. , 93 N.Y.2d 584, 589 (1999). A “mere agreement to agree, in which a material term is left for future negotiations, is unenforceable.” Joseph Martin, Jr., Delicatessen , 52 N.Y.2d at 109. If the alleged contract “is not reasonably certain in its material terms, there can be no legally enforceable contract.” Edelman v. Poster , 72 A.D.3d 182, 184 (1st Dept. 2010).  In addition, under the doctrine of definiteness, the court must be able to determine what, in fact, the parties agreed to in order to enforce a contract. Matter of 166 Mamaroneck Ave. Corp. v. 151 E. Post Rd. Corp. , 78 N.Y.2d 88, 91 (1991); Korff v. Corbett , 18 A.D.3d 248, 250 (1st Dept. 2005) (agreement language indicated meeting of minds, refers to consideration, specifies amount clearly agreed to). Application of the doctrine has not been applied rigidly. As the Court of Appeals noted, “ ontracting parties are often imprecise in their use of language, which is, after all, fluid and often susceptible to different and equally plausible interpretations. Imperfect expression does not necessarily indicate that the parties to an agreement did not intend to form a binding contract. A strict application of the definiteness doctrine could actually defeat the underlying expectations of the contracting parties.” Matter of 166 Mamaroneck Ave. Corp. , 78 N.Y.2d at 91 (citation omitted). Thus, “where it is clear from the language of an agreement that the parties intended to be bound and there exists an objective method for supplying a missing term, the court should endeavor to hold the parties to their bargain.” Id. (citing 1 Williston, Contracts § 46, at 152-153 (3d ed)). “Striking down a contract as indefinite and in essence meaningless ‘is at best a last resort.’” Id. (quoting Cohen & Son v. Lurie Woolen Co. , 232 N.Y. 112, 114)). Finally, where the agreement is not in writing, the agreement must satisfy the statute of frauds. In New York, the statute of frauds is found in General Obligations Law § 5-701 through 5-705. These provisions require a signed writing for certain types of agreements, including, but not limited to: (1) agreements that by their terms are “not to be performed within one year from the making thereof”; (2) the conveyance of real property; (3) contracts for the payment of finder’s fees; (4) agreements for “goods sold at public auction”; (5) contracts to pay compensation for services rendered in negotiating a business opportunity; and (6) modifications to written agreements which state that they cannot be changed orally. Notably, “ artial performance of an alleged oral contract will be deemed sufficient to take such contract out of the statute of frauds only if it can be demonstrated that the acts constituting partial performance are unequivocally referable to said contract.” Bowers v. Hurley , 134 A.D.3d 1191, 1193 (3d Dept. 2015) (citations and quotation marks omitted). On October 13, 2020, the Appellate Division, First Department issued two decisions that addressed one or more of the foregoing principles. Weisenfeld v. Iskander , 2020 N.Y. Slip Op. 05710 (1st Dept. Oct. 13, 2020), and Streit v. Bombart , 2020 N.Y. Slip Op. 05706 (1st Dept. Oct. 13, 2020). Weisenfeld v. Iskander Weisenfeld claimed that during the course of a dinner meeting, her father, Kenneth Stark (“Stark”), an attorney (now deceased), entered into an agreement with defendants Iskander and Bishay, his clients, whereby Stark was promised the right to receive 20% of all income, profits, and gains earned by the general partner of a real estate partnership that he was going to create for his client, defendant Iskay Limited Partnership (“Iskay”). The promise was evidenced by handwritten notes the three initialed. The Notes had two sections. The upper section outlined partnership financial and other business terms (the proposed payment waterfall) relating to Iskay. The lower section, appearing below a  line drawn in the middle of the page, had the subject heading “Mngmt” (management), and consisted of three separately numbered items: (1) “6 % of rents collected-1/6 to me,” referring to rental income the as yet unidentified general partner would be receiving for managing and operating the buildings; (2) “10% of construction ... $10,000 ... ,” referring to additional monies sought by Stark that he would bill the partnership, in the guise of legal fees, in the event there was other than “CPC” (Community Preservation Corp.) construction activity undertaken and supervised by the partnership management; and (3) “20% of GP inc to me”. There was no definition for the term “inc” or “20% of GP inc” in the notes. Stark, Iskander, and Bishay initialed the notes on March 22, 1994.  The Notes did not refer to any consideration or other promise by Stark for the benefit of Iskander, Bishay, or the “GP.” They did not include the words “agree” or “agreement”, and there was no proof that the original copy of the notes were ever delivered to Iskander or Bishay. Weisenfeld claimed, based on conversations that she says she had with her father, that the consideration provided by Stark consisted of his agreement to help find investors to provide the equity necessary to buy the properties contemplated. There was no written documentation of such a promise. Weisenfeld also asserted that the words “20% of GP inc to me” meant that she was entitled to 20% of the taxable income realized by the general partner, over all the years involved.  The motion court found that the notes did not indicate a present intent to be bound. The court explained that there was nothing in the notes “to show the parties agreed to the material terms, including the identity of the party or parties to be bound.” The court further noted that the notes were “too vague to ascertain what was promised” and, therefore, the alleged agreement “fail for lack of definiteness.” The First Department affirmed, holding the notes were too indefinite to create an enforceable agreement. Slip Op. at *1 (“At issue are the terms of the handwritten notes taken at the initial meeting, plaintiff claiming that one of the provisions therein, under the heading ‘Mgmt’ and stating ‘20% of G P inc to me,’ entitled Stark, and later his assignees, to 20% of the proceeds of the sale of the buildings to which the general partner would be entitled. The handwritten notes at issue are too indefinite to enforce as sought by plaintiff.”) (citing Glanzer v. Keilin & Bloom , 281 A.D.2d 371, 372 (1st Dept. 2001)). The Court also found that “ he alleged agreement … fail for a lack of consideration.” Slip Op. at *1 (quoting ACE Fire Underwriters Ins. Co. v. ITT Indus., Inc. , 84 A.D.3d 688, 689 (1st Dept. 2011)). The Court explained that “Plaintiff’s claim that her father told her that he would help locate other investors as part of the agreement inadmissible hearsay.…” Since “she offer no other admissible evidence to support her assertions,” she could not demonstrate the exchange of consideration. Id. (citing Candela v. City of New York , 8 AD3d 45, 47 (1st Dept. 2004)). Streit v. Bombart In Streit , plaintiff sought a declaration that an enforceable oral agreement existed with nonparty Louis Bombart (“Bombart”) pursuant to which plaintiff would acquire Bombart’s 75% interest in Tiny Fiesta LLC (“Tiny Fiesta”), which allegedly owned and managed an apartment building in the Bronx, New York. In exchange, plaintiff allegedly agreed, among other things, to refinance or buy out the mortgage on the property, which was held by defendant Madison Realty Capital Advisors, LLC (“Madison”).  Plaintiff alleged that, pursuant to the oral agreement, he spent five months attempting to work out a deal with Madison for the refinancing or buyout of the mortgage, only to be told, in October 2015, that Madison had decided not to enter into any deal with plaintiff and to deal instead with Bombart, who held the other 25% interest in Tiny Fiesta.  During the next few months, plaintiff tried to get Bombart to memorialize in writing the terms of their alleged oral agreement, which, the complaint alleged, required plaintiff, in exchange for Bombart’s 75% interest, to pay $8 million in addition to paying off the mortgage and liens on the property. Bombart died in June 2016 without signing the agreement. In probate proceedings in Florida, Bombart’s interest was treated as part of his estate, and was sold, with the court’s approval, to Jonathan Bombart. The First Department held that the “complaint and supporting materials fail to allege the existence of an enforceable oral agreement, because the terms of the agreement not definite.” Slip Op. at *1 (citation omitted). The Court explained that the “consideration owed to described inconsistently, and the arrangement between plaintiff and described in emails among plaintiff, and Madison in different ways, including a partnership to own and manage the property.” Id. Moreover, said the Court, the agreement was uneneforceable because it violated the statute of frauds: “In any event, as the complaint makes clear that Tiny Fiesta’s only significant asset was the real property and income generated from it, pursuant to the statute of frauds, the agreement between plaintiff and was required to be in writing.” Slip Op. at *1 (citing General Obligations Law § 5-703 (1); Bergman v. Krausz , 19 A.D.3d 186 (1st Dept. 2005); Pritsker v. Kazan , 132 A.D.2d 507 (1st Dept. 1987)). The Court also rejected plaintiff’s “reliance on the doctrine of part performance in an attempt to evade the statute of frauds.” Id . (citation omitted). The Court found that plaintiff failed to allege any “conduct on his part that was unequivocally referable to the alleged oral agreement, i.e. , conduct that was ‘permitted or induced by , such as possession of the premises, payment of rent or significant improvements to the premises.’” Id. ( Yenom Corp. v. 155 Wooster St. Inc., 33 A.D.3d 67, 72 (1st Dept. 2006)). Instead, observed the Court, “ e allege only that he engaged in months of fruitless negotiations with Madison and placed an unspecified amount of money in escrow to fund legal costs.” Id. Takeaway Although the definiteness doctrine is not to be rigidly applied, Weisenfeld and Streit show that courts do not give too much flexibility lest it renders the doctrine meaningless. There must be a showing indicating the parties intended to enter into an agreement and be bound by its terms. See , e.g. , Joseph Martin, Jr., Delicatessen , 52 N.Y.2d at 110 (stating that there are two ways in which the requirement of definiteness can be satisfied in the absence of an explicit contract term: (1) an agreement could contain “a methodology for determining the within the four corners of the writing (such as notes, emails and texts); or (2) an agreement could “invite[] recourse to an objective extrinsic event, condition or standard on which the amount was made to depend.”). In addition, both Weisenfeld and Streit show the consequences of not establishing the exchange of consideration. To do so, these cases show that the allegations and/or proof must be consistent and admissible.

As we have noted, the financial exploitation of seniors is a significant problem ( e.g. , here , here , here , here , and here ). For many regulators, it is a top priority. here.=">here."> FINRA is one such regulator. To help combat the financial exploitation of seniors, FINRA enacted Rule 2165 (“Financial Exploitation of Specified Adults”) ( here ). Among other things, the rule permits a member firm to place a temporary hold on the disbursement of funds or securities from the account of a senior or vulnerable adult customer when the member reasonably believes that financial exploitation may be, is likely to be, or is occurring. here=">here" and="and" >here.=">here."> In August 2019, FINRA commenced an assessment of the effectiveness and efficiency of the rules and administrative processes that were intended to protect senior investors from financial exploitation. According to FINRA, the assessment indicated that FINRA’s efforts to protect seniors have been helpful and effective, but those efforts could be improved. Accordingly, the review suggested some additional tools, guidance and rule changes that could be used to enhance the fight against the financial exploitation of seniors. Based on the feedback FINRA received during the review, the regulatory agency is proposing amendments to Rule 2165 to extend the hold period and to allow temporary holds on securities transactions ( here ). As noted, Rule 2165 permits a member firm to place a temporary hold on a disbursement of funds or securities from the account of a “specified adult” customer when the firm reasonably believes that financial exploitation of that adult has occurred, is occurring, has been attempted or will be attempted.  According to FINRA, temporary holds on disbursements have played a critical role in providing member firms a way to respond to suspicions of financial exploitation before the customer loses money. FINRA’s review found Rule 2165 to be an effective tool in the fight against financial exploitation. However, it also found that an extension of the hold period and the placement of temporary holds on transactions would be appropriate and beneficial. The proposed changes to Rule 2165 will provide member firms with an additional 30 business days to hold the disbursement of funds if the member firm reports suspicious activity to a state agency or a court of competent jurisdiction. Currently, the rule provides that the hold period may be terminated or extended by a state agency or a court of competent jurisdiction. In FINRA’s review, respondents indicated that the current hold period was insufficient to investigate whether a senior customer was the victim of financial exploitation. Approximately 53 percent of respondents participating in the review stated that they had been unable to resolve a matter within the 25-business day period. Approximately 35 percent indicated that it took on average 26-50 days to resolve the matter and approximately 59 percent of respondents indicated that it took on average 51-100 days to resolve the matter.  In addition to the foregoing, the proposed amendments will allow member firms to place a hold on securities transactions when there is a reasonable belief that the customer is being financially exploited. Currently, the rule does not apply to transactions in securities, though it does allow member firms to stop funds or securities from leaving a customer’s account. Nevertheless, some member firms have included in their customer agreements the ability to place holds on transactions in securities, as well as disbursements of funds or securities, when financial exploitation is suspected. Approximately 25 percent of respondents indicated that their customer agreements currently permit placing temporary holds on transactions when financial exploitation is suspected. FINRA also explained that the proposed changes to the rule would enable greater collaboration and interaction with authorities or regulators on a local, state or national level. Interestingly, FINRA declined to extend Rule 2165 to situations where a firm has a reasonable belief that the customer has an impairment, such as diminished capacity, that renders the individual unable to protect his or her own interests, even though there is no evidence of financial exploitation. FINRA explained that such a situation was beyond the purview of rulemaking: “ ather than rulemaking, FINRA is summarizing the information obtained about member firms’ procedures and practices in this area in this Notice to assist other member firms and investors.” Instead, FINRA identified a number of red flags that indicate diminished capacity or cognitive decline. Notably, some member firms indicated that their customer agreements provide that the firm may place a temporary hold on transactions in securities or disbursements of funds or securities when the firm suspects a customer is suffering from cognitive decline or diminished capacity. Finally, FINRA noted that it considered various alternatives to the proposed rule amendments. First, FINRA considered proposing different hold period extensions, ranging from no extension to an extension of up to 75 business days. FINRA also considered not extending Rule 2165 to transactions, but rather keeping the temporary hold option only for disbursements. Ultimately, FINRA settled on the proposed amendments because they struck “an appropriate balance between regulatory burden, investor protection and investor choice.” Anyone wishing to submit comments to the proposed amendments must do so by December 4, 2020.

“Pursuant to the doctrine of respondeat superior, an employer can be held vicariously liable for torts committed by an employee acting within the scope of employment.”  Horvath v. L&B Gardens, Inc. , 89 A.D.3d 803 (2 nd Dep’t 2011) (citations omitted).  “An act is considered to be within the scope of employment if it is performed while the employee is engaged generally in the business of his employer, or if his act may be reasonably said to be necessary or incidental to such employment.”  Holmes v. Gary Goldberg & Co., Inc. , 40 A.D.3d 1033, 1034 (2 nd Dep’t 2007) (citations and internal quotation marks omitted).  “While … vicarious liability does not arise from acts that are committed for the employee's personal motives unrelated to the furtherance of the employer's business, those acts which the employer could reasonably have foreseen are within the scope of the employment and thus give rise to liability under the doctrine of respondeat superior, even where those acts constitute an intentional tort or a crime.”  Id (citations omitted).  Liability may occur “when the “employee acts negligently or intentionally, so long as the tortious conduct is generally foreseeable and a natural incident of the employment.”  Judith M. v. Sisters of Hope Charity Hosp. , 93 N.Y.2d 932, 933 (1999) (citations omitted).  Where an “employee for purposes of his own departs from the line of his duty so that for the time being his acts constitute an abandonment of his service, the master is not liable.”  Judith M. , 93 N.Y.2d at 933 (citations and internal quotation marks omitted). While the doctrine of respondeat superior was originally applied narrowly, the scope of its application has expanded due to “social policy” because, inter alia , “the escalation of employee-produced injury, concern that the average innocent victim, when relegated to the pursuit of his claim against the employee, most often will face a defendant too impecunious to meet the claim, and that modern economic devices, such as cost accounting and insurance coverage, permit most employers to spread the impact of such costs.”  Riviello v. Waldron , 47 N.Y.2d 297 (1979) (citations omitted).   An analysis of the particular facts and circumstances of a case are important to the application of the respondeat superior doctrine because “while clearly intended to cover an act undertaken at the explicit direction of the employer, hardly a debatable proposition, it also encompasses the far more elastic idea of liability for any act which can fairly and reasonably be deemed to be an ordinary and natural incident or attribute of that act.  Riviello , 47 N.Y.2d at 303 (citation and internal quotation marks omitted). On October 2, 2020, the Appellate Division, Fourth Department, decided Votsis v. ADP, LLC. The facts, which the Court accepted as true for the purpose of deciding the motion to dismiss pursuant to CPLR 3211(a)(7), set forth herein were alleged in the complaint and summarized by the Court.  The corporate defendant in Votsis was ADP, LLC, the payroll service company.  ADP’s district manager (“Employee”) solicited plaintiffs, restaurant and its owner, to purchase ADP’s payroll services.  Plaintiff provided Employee with business and financial records to enable ADP to prepare a price quote.  For reasons not fully explained in the Votsis decision, a few days after Employee solicited plaintiff restaurant’s business, he posted the following on the restaurant’s Facebook page (which quote was taken from the amended complaint as found in the record on appeal (available on the e-courts website)): Stay away from this place. There are possible multiple health code violations and department of labor violations, possible money laundering and fraud - They use old and expired ingredients and treat their employees like animals and don't pay them for the hours they work.  An Employee is about to be evicted from their home because of the lack of wages paid. Multiple complaints have been filed with the DOL and Department of Health. Elizabeth Votsis is the owner and has been previously charged with fraud.  Do not support this business and force them out of the East Rochester community. All of the few "positive" reviews on Google, FB and Yelp are fake and created by the owners. The negative reviews are on point with the failure of this establishment." <(the “statements”)> Plaintiff sued Employee and ADP for damages resulting from the Statements.  Four causes of action were asserted against ADP:  defamation (under the theory of respondeat superior); intentional infliction of emotional distress; breach of fiduciary duty; and, negligent supervision, hiring, retention and training.  Supreme court dismissed all causes of action that were asserted against ADP.  Plaintiff appealed.   The Fourth Department modified supreme court’s order by reinstating the defamation cause of action against ADP on a respondeat superior theory.  In finding that plaintiff’s complaint adequately plead a defamation cause of action against ADP, the Fourth Department stated: … plaintiffs’ amended complaint explicitly alleged that “Polit was acting within the scope of his employment as a district manager employed by … ADP when he published the defamatory statements against plaintiffs.” Assuming, arguendo, that this assertion alone is too conclusory to state a cause of action against ADP premised on respondeat superior liability, we conclude that plaintiffs sufficiently pleaded the existence of respondeat superior liability through other allegations, including, among other things, that Polit visited Crave for the sole purpose of soliciting plaintiffs to enter into a payroll service agreement with ADP, that Polit represented himself as ADP’s district manager and requested Crave’s business and payroll records in order to provide Crave with a quote for ADP’s services, that the post was based on Polit’s review of those records, that ADP encouraged Polit to use social media in connection with his sales work, that Polit published the post during regular business hours, and that ADP was aware of Polit’s use of Facebook and authorized his conduct. Furthermore, we conclude that, with respect to ADP, plaintiffs sufficiently alleged the other necessary elements of their first cause of action (see generally Rinaldi v Holt, Rinehart & Winston, 42 NY2d 369, 379 <1977> , rearg denied 42 NY2d 1015 <1977> , cert denied 434 US 969 <1977> ; D’Amico v Correctional Med. Care, Inc., 120 AD3d 956, 962 <4th dept 2014> ; Zetes v Stephens, 108 AD3d 1014, 1018-1019 <4th dept 2013> ).  Votsis (some citations and internal quotation marks and brackets). TAKEAWAY Employers should be mindful of potential responsibility for the acts of their employees under the theory of respondeat superior.  Employees should be careful about what they post to social media and how such posts may impact their employers and their jobs.

Arbitration is an alternative form of dispute resolution where the parties voluntarily agree that a neutral, private person will resolve any legal disputes between them, instead of a judge or jury in a court of law. Rent-A-Ctr., W, Inc. v. Jackson , 561 U.S. 63, 67 (2010) (noting that “arbitration is a matter of contract”); Matter of Long Is. Power Auth. Hurricane Sandy Litig. , 165 A.D.3d 1138, 1141 (2d Dept. 2018). In business and commercial transactions, arbitration is the preferred means of resolving disputes. It is encouraged and recognized as the public policy of the State of New York. Matter of Smith Barney Shearson v. Sacharow , 91 N.Y.2d 39, 49 (1997) (citations and quotation marks omitted); Stark v. Molod Spitz DeSantis & Stark, P.C. , 9 N.Y.3d 59, 66 (2007) (internal citation omitted). For this reason, “New York courts interfere as little as possible with the freedom of consenting parties to submit disputes to arbitration.” Stark , 9 N.Y.3d at 66 (internal quotation marks and citation omitted). Since arbitration is a “creature of contract” ( Louis Dreyfus Negoce S.A. v. Blystad Shipping & Trading Inc. , 252 F.3d 218, 224 (2d Cir. 2001)), only signatories to a contract containing an arbitration agreement can be compelled to arbitrate. TBA Global, LLC v. Fidus Partners, LLC , 132 A.D.3d 195, 202 (1st Dept. 2015). Consequently, “a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.” AT&T Techs., Inc. v. Communications Workers of Am. , 475 U.S. 643, 648 (1986) (quoting Steelworkers v. Warrior & Gulf Nav. Co. , 363 U.S. 574, 582 (1960)). For this reason, “a party will not be compelled to arbitrate and, thereby, to surrender the right to resort to the courts, absent evidence which affirmatively establishes that the parties expressly agreed to arbitrate their disputes. The agreement must be clear, explicit and unequivocal and must not depend upon implication or subtlety.” Waldron v. Goddess , 61 N.Y.2d 181, 183-84 (1984); see also Matter of Trump (Refco Props ., 194 A.D.2d 70, 74 (1st Dept. 1993).  In determining whether to compel arbitration, Courts consider three threshold questions: (i) whether the parties made a valid agreement to arbitrate, (ii) whether, if such an agreement was made, it has been complied with, and (iii) whether the claim sought to be arbitrated would be barred by a limitation of time had it been asserted in a court of the State. Matter of Rockland County , 51 N.Y.2d 1, 6-7 (1980). The second inquiry includes the question of whether there has been compliance with any condition precedent. Id. at 7.  Not surprisingly, whether the parties are bound by an arbitration agreement and whether they agreed to submit their dispute to arbitration are hotly contested questions.  Today, we examine Cenni v. Cenni , 2020 N.Y. Slip Op. 33221(U) (Sup. Ct., N.Y. County Sept. 30, 2020) ( here ), a case in which the Court was asked to decide whether a claim for equitable relief fell within the scope of the parties’ agreement to arbitrate. As discussed below, the Court held that such claims were included within the agreement to arbitrate. Adrian Cenni (“ACenni”) brought suit seeking a declaration that he is the managing member of the Atrium Companies, a group of limited liability companies and one corporation, each of which is governed by an Amended and Restated Operating Agreement. ACenni co-owns the Atrium Companies with Rebecca L. Cenni (“RCenni”), his former spouse. All operating agreements contained an arbitration provision mandating arbitration of all claims “arising ... with respect to” the agreements. In pertinent part, each operating agreement provided: “Any claim, controversy or dispute arising between the parties with respect to this Agreement (a ‘Dispute’), to the maximum extent allowed by applicable law, shall be submitted to and finally resolved by, binding arbitration .... Notwithstanding any other provision of this Section, any Dispute in which a party seeks equitable relief may be brought in any court having jurisdiction.”   In 2016, the parties had a dispute concerning the enforceability of a management contract ACenni had entered into on behalf of the Atrium Companies. In a 2017 arbitration of that dispute, RCenni alleged that ACenni attempted to bind the Atrium Companies in unauthorized service agreements with his wholly owned U.S. Virgin Islands company. The arbitrator ruled in RCenni’s favor, finding that ACenni did not have the authority to enter into the subject service agreements. On March 21, 2018, the arbitrator issued a final award, holding that, among other things, ACenni lacked “authority to make or enter into any contract, agreement or other arrangement with a counterparty in which he ha a direct or indirect ownership interest without the approval of ”; ACenni was properly “removed as the Atrium Companies’ ‘President – Operations’”; and ACenni had no authority to run the Atrium Companies’ day-to-day operations. On November 15, 2018, the arbitration award was confirmed and later affirmed on appeal. Cenni v. Cenni , 180 A.D.3d 509 (1st Dept. 2020). ACenni brought the action against RCenni and the Atrium Companies seeking, inter alia , a declaratory judgment and injunctive relief against all defendants in connection with his rights as a managing member of the Atrium Companies.  RCenni moved to compel arbitration, arguing that the arbitration clause in the operating agreements mandated arbitration of those claims.  In response, ACenni argued that he was primarily seeking equitable relief to establish his rights, duties, and responsibilities in the Atrium Companies. He argued that money damages would not be an adequate remedy to address those issues, his ability to obtain information about the companies, his ability to participate in the management of the companies, and his ability to vote and have a voice over company business. Therefore, argued ACenni, the clause in the arbitration agreement permitting the parties to bring a claim for equitable relief in court controlled.  The Court agreed with RCenni, noting that “the dispute involve the application of a provision of the operating agreement” and, therefore, fell within the “broad” scope of the arbitration provision. Slip Op. at *7-*8.   The Court rejected ACenni’s argument that the last sentence of the arbitration provision – “ otwithstanding any other provision of this Section, any Dispute in which a party seeks equitable relief may be brought in any court having jurisdiction” – was “a carve out of, or an exception to, the arbitration clause in the Operating Agreements.” Id. at *8. Relying on the Court’s prior decision in which the same argument was asserted and rejected and Baldwin Tech. Co., Inc. v. Printers’ Serv. Inc. , 2016 WL 354914, 2016 U.S. Dist. LEXIS 10086 (S.D.N.Y. Jan. 27, 2016), the Court held that the clause was not an exception or carve out to arbitration: Here, the parties are signatories to an agreement with a broad arbitration provision, requiring the parties to submit any controversy under the operating agreement to arbitration. ACenni’s claims for the restoration of his managerial duties require an interpretation of the terms of that operating agreement. The provision permitting the parties to bring a claim for equitable relief in the courts does not undermine this mechanism under the operating agreement in any way. That provision does not prohibit the parties from arbitrating claims for equitable relief, but, instead, permits the parties to bring such claims in a court of law. It does not function as an exception. Slip Op. at *9. In the prior action, ACenni “offered th same argument … to oppose the confirmation of the March 21, 2018 final award.” Id. at *8. In the Court’s decision confirming that award, it “found” the “argument” to be “meritless.” Id. The Court explained that “the use of the word ‘may’ in the provision provide the parties with a choice ‘to pursue equitable relief in court or in arbitration; it not, as incorrectly assert , a “carve out” and it not deprive the AAA of jurisdiction to arbitrate any dispute as mandated’ by the broad language of the clause.” Id. (citation to record omitted). In Baldwin Tech. , the court held that “where a contract has both a broad arbitration clause and a clause permitting the parties to seek injunctive relief before a court, courts … have construed the latter clauses as permitting the parties to seek ‘injunctive relief … in aid of arbitration, rather than … transforming arbitrable claims into nonarbitrable ones depending on the form of relief prayed.’” Baldwin Tech. , 2016 WL 354914, at *4, 2016 U.S. Dist. LEXIS 10086, at *9, n. 4.   Accordingly, the Court granted the motion to compel arbitration of the claims asserted in the complaint, concluding that such a result was consistent with the intent of the parties as reflected in their agreement to arbitrate: It would not be consistent with the parties' intentions as set forth in their broad agreement to arbitrate, or with the case law in New York, favoring arbitration, if this court were to deny arbitration on the ground that ACenni is seeking a directive to be restored to his managerial responsibilities. It is plain from the circumstances of this case that arbitration is the most fit and appropriate tribunal to determine what role, responsibilities and duties ACenni is entitled to under the operating agreement. Slip Op. at *9 (citing Sutphin Retail One, LLC v. Sutphin Airtrain Realty, LLC , 143 A.D.3d 972, 974 (2d Dept. 2016) (“Therefore, the appropriate inquiry is whether the dispute is governed by the arbitration agreement and not whether the arbitrator has the authority to award the specific relief sought by the plaintiff in the complaint”)). Takeaway In Cenni , the parties were signatories to an agreement with a broad arbitration provision, requiring them to submit any controversy under the operating agreement to arbitration. Slip Op. at *9. Significantly, both agreed that the arbitration provision represented “a valid agreement” to arbitrate. Slip Op. at *7. As such, the issue before the Court was whether the dispute fell within the scope of that agreement. Applying traditional rules of contract interpretation ( e.g. , Landmark Ventures, Inc. v. H5 Tech., Inc. , 152 A.D.3d 657, 658 (2d Dept. 2017); W.W.W. Assoc. v. Giancontieri , 77 N.Y.2d 157, 162 (1990)), the Court held that the dispute was arbitrable.  Cenni is also notable for its reliance on Baldwin Tech. In Baldwin Tech. , as noted, the court held that an arbitration agreement that provides the parties with the right to obtain an injunction or other equitable relief in a court of law does not transform arbitrable claims into nonarbitrable ones. Such a provision “is merely declaratory of existing legal rights.” Erving v. Virginia Squires Basketball Club , 468 F.2d 1064, 1067 (2d Cir. 1972). To hold otherwise, concluded the Baldwin Tech. court, would be inimical to accepted principles of contract construction and the strong public policy in favor of arbitration. Remy Amerique, Inc. v. Touzet Distribution, S.A.R.L. , 816 F. Supp. 213, 218 (S.D.N.Y. 1993); see also WMT Inv’rs, LLC v. Visionwall Corp. , 2010 WL 2720607, at *4 (S.D.N.Y. June 28, 2010) (“ f there is a reading of the various agreements that permits the arbitration clause to govern, the Court will choose it.”).

Under New York law, a party commences a civil action by filing a summons and complaint. Generally speaking, these documents set forth the claims that are being asserted against the defendant(s). Typically, though not required in all instances, the plaintiff will verify the complaint. “A verification is a statement under oath that the pleading is true to the knowledge of the deponent .…” CPLR § 3020 (a). The verification makes the pleading sworn and, therefore, is the equivalent of an affidavit and may be used for the same purposes. CPLR § 105(u) (“A ‘verified pleading’ may be utilized as an affidavit whenever the latter is required”). Once a pleading is verified, all pleadings thereafter must be verified. A complaint can be verified by the plaintiff or by counsel. CPLR § 3020 (d). However, when the pleading is verified by counsel pursuant to CPLR 3020 (d) (3), and not by someone with personal knowledge of the facts, the pleading is insufficient for evidentiary purposes. See McKenna v. Solomon , 255 A.D.2d 496 (2d Dept. 1998); Peterson v. Scandurra Trucking Co. , 226 A.D.2d 691, 692 (2d Dept. 1996). The reason: the affirmation of an attorney which does not contain evidentiary facts from one having personal knowledge is insufficient to establish the merits of a claim. See Zuckerman v. City of New York , 49 N.Y.2d 557, 563 (1980). The impact of a verified pleading on a motion for summary judgment was recently considered by the court in Marinelli v. RPZL, LLC , 2020 N.Y. Slip Op. 33185(U) (Sup. Ct., N.Y. County Sept. 23, 2020) (here). There, the Court denied a motion for summary judgment on the grounds that, inter alia , the verified complaint, which served as an affidavit, conflicted with defendants’ affidavits such that issues of fact were raised and could not be resolved.  Marinelli arose from an investment by plaintiff, Gina Marinelli (“Marinelli”), in defendant, RPZL, LLC (“RPZL”), a company that provides hair extensions and hair styling services. Defendants Lisa Richards (“Richards”) and Monica Thornton (“Thornton”) own RPZL. According to plaintiff, Richards and Thornton approached Marinelli about investing in RPZL. Plaintiff alleged that Richards and Thornton made material misrepresentations about the company’s technology and their plans to open locations across the nation: to wit, (i) RPZL had original patent, pending technology on a machine and process that could bond hair extensions to hair without damaging the hair, (ii) had secured a natural hair source that could provide RPZL with inexpensive and high-quality natural hair, and (iii) was raising additional capital to open up new store locations nation-wide. Plaintiff further alleged that Richards and Thornton promised her a paid role in the company and a spot on RPZL’s advisory board in exchange for her investing $100,000. On December 4, 2014, plaintiff made a $100,000 investment in RPZL pursuant to which the parties signed a promissory note for that amount with a maturity date of December 4, 2017. The next day, the parties entered a side letter agreement that provided: (i) plaintiff would have the sole discretion as to whether the promissory note would convert to an equity interest or become due in full at maturity, (ii) plaintiff would act as a consultant for RPZL, (iii) plaintiff would have a position on RPZL’s advisory board, and (iv) in exchange for her role as a consultant, the principal would be increased by 15% to $115,000 and plaintiff would receive compensation in the form of a 15% payment of the principal amount on each anniversary of the promissory note until the time of its conversion. Plaintiff claimed that she never received any payments despite performing work for RPZL. On December 5, 2017, plaintiff elected to call for the repayment of the promissory note. No payment was made, even after multiple demands. Thereafter, plaintiff filed suit. In her complaint, plaintiff alleged four causes of action. The first cause of action, asserted against RPZL, claimed breach of contract under the promissory note. The second cause of action, asserted against all defendants, alleged fraudulent misrepresentation based upon, inter alia , defendants’ claims regarding RPZL’s patent-pending technology and natural hair source. The third cause of action, asserted against RPZL, claimed a violation of Labor Law § 198(1-a) based upon RPZL’s failure to pay plaintiff’s salary. The fourth cause of action, asserted against all defendants, claimed unjust enrichment based upon RPZL’s failure to pay plaintiff any salary or wages.  Defendants answered the complaint, offering general denials and affirmative defenses, including that plaintiff was not employed by RPZL. Discovery was conducted and the note of issue was filed on November 15, 2019. Defendants moved for partial summary judgment dismissing the second, third, and fourth causes of action. The Court denied the motion. On a motion for summary judgment, the moving party must make a prima facie showing that it is entitled to judgment as a matter of law by submitting evidentiary proof in admissible form sufficient to establish the absence of any material, triable issues of fact. See CPLR § 3212(b); Jacobsen v. New York City Health & Hosps. Corp. , 22 N.Y.3d 824 (2014); Alvarez v. Prospect Hosp. , 68 N.Y.2d 320 (1986); Zuckerman , supra . Once the movant meets this burden, it becomes incumbent upon the party opposing the motion to come forward with proof in admissible form to raise a triable issue of fact. See Alvarez , supra ; Zuckerman , supra . However, if the movant fails to meet this burden and establish its claim or defense sufficiently to warrant a court directing judgment in its favor as a matter of law ( see id. ; O’Halloran v. City of New York , 78 A.D.3d 536 (1st Dept. 2010)), the motion must be denied regardless of the sufficiency of the opposing papers. See Winegrad v. New York Univ. Medical Center , 64 N.Y.2d 851 (1985). This is because “summary judgment is a drastic remedy, the procedural equivalent of a trial. It should not be granted if there is any doubt about the issue.” Bronx-Lebanon Hosp. Ctr. v. Mount Eden Ctr. , 161 A.D.2d at 480 (1st Dept. 1990) (quoting Nesbitt v. Nimmich , 34 A.D.2d 958, 959 (2d Dept. 1970)). In support of their motion, defendants submitted, inter alia , the affidavits of the individual defendants, who both averred that plaintiff was aware that (i) RPZL did not have an advisory board in place at the time she entered into the promissory note, but rather hoped to create one, (ii) that there was not any patent-pending technology on a machine and process that could bond hair extensions to hair without damaging the hair, but that RPZL was contracting with a third-party to try and develop this kind of technology, and (iii) RPZL directly manufactured its own hair extensions, and therefore was not seeking any outside hair sources. Richards further averred that plaintiff was never an employee or consultant for RPZL, and therefore no W-2 or 1099 forms were ever issued to her. On the fraudulent inducement claim, the Court held that because the individual defendants’ affidavits conflicted with the verified allegations in the complaint, summary judgment was inappropriate: The defendants contend that the affidavits of Lisa Richards and Monica Thornton demonstrate that the plaintiff was aware that RPZL did not have an advisory board, patent-pending technology, or an outside hair source, and that the defendants never made any representations otherwise. However, in opposition, the plaintiff argues that these affidavits merely offer conclusory denials of her allegations, and thus only create a triable issue of fact as to whether Richards and Thornton made the alleged misrepresentations to the plaintiff. As it is well settled that a verified pleading is the equivalent of a responsive affidavit for the purposes of a motion for summary judgment, ( see Travis v Allstate Ins. Co. , 280 AD2d 394 <1st dept. 2001> ; CPLR 105 ) and a triable issue of fact cannot be resolved on conflicting affidavits, the portion of the defendant’s motion seeking summary judgment on the second cause of action is denied. See Brunetti v Musallam , 11 AD3d 280 (1st Dept. 2004). Slip Op. at *3. As to the Labor Law claims, the Court found that the individual defendants’ affidavits conflicted with, inter alia , the verified complaint necessitating denial of the motion: The defendants contend that they are entitled to dismissal of this claim as the affidavits of Lisa Richards and Monica Thornton demonstrate that the plaintiff was never an employee of RPZL. The affidavits aver that the plaintiff was not hired as an employee of RPZL and never received a W-2 or 1099 from the company. However, the plaintiff alleges in both her verified complaint and her affidavit in opposition to the instant motion, that she reported to Richards and Thornton daily, five days a week, from December 2014 to June 2015, and on a weekly basis thereafter. She further claims that she aided the company on legal matters, brand marketing, sourcing clients, creating promotions, performing market research, and assisting with onboarding employees. The plaintiff also submits a number of email chains where either Richards or Thornton discuss with the plaintiff her work for RPZL. These submissions raise a triable issue of fact as to the defendants exercised a sufficient degree of control over the plaintiff, such that she is an employee under the Labor Law. Id. at *4 (citation omitted). Takeaway When making a motion for summary judgment, the moving party must make a prima facie showing that it is entitled to judgment as a matter of law. It can do so by submitting evidentiary proof in admissible form sufficient to establish the absence of any material, triable issues of fact. Such proof includes an affidavit of a party or someone with knowledge of the facts and circumstances relevant to the claims and defenses, authenticated documentary proof, or by a pleading verified by the party to the action that sufficiently details the facts and the basis for the relief sought. In Marinelli , plaintiff’s verified complaint constituted such proof.

Whistleblowers often risk career and reputation to report fraud or other illegal conduct. In 2010, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) to, among other things, promote compliance with the federal securities laws. The Dodd-Frank Act contains whistleblower provisions that authorize the Securities and Exchange Commission (“SEC” or “Commission”) to pay cash rewards to whistleblowers who voluntarily provide the SEC with timely and credible information about securities fraud and other violations of the securities laws, including the Foreign Corrupt Practices Act. The Dodd-Frank Act enables the SEC to pay an award to any individual, or group of individuals, who provide “original information” about a violation of the federal securities laws. Both U.S. citizens and foreign nationals may file whistleblower claims and receive a reward. To be “original”, the information must be unknown to the SEC and derived from the whistleblower’s independent knowledge or analysis. Whistleblowers who provide “original information” that the SEC uses in furtherance of an enforcement action can recover a reward of between 10% – 30% of the total amount of money collected by the SEC when the monetary sanctions exceed $1 million.  As set forth in the Dodd-Frank Act, the SEC protects the confidentiality of whistleblowers and does not disclose information that could reveal a whistleblower’s identity. here )=">here)" and="and" SEC’s="SEC’s" >here).=">here).">  On September 30, 2020, the SEC announced that it awarded almost $5 million to four whistleblowers who submitted tips under the SEC’s whistleblower program. Each of the whistleblowers provided material information that alerted the Commission to the alleged violation of the securities laws and resulted in successful enforcement action . For the fiscal year, the SEC made 39 individual awards of approximately $175 million to whistleblowers under the program, more than in any prior fiscal year.  In the first order ( here ), the SEC awarded a whistleblower nearly $2.9 million for alerting the Commission to hard-to-detect violations.  According to the SEC, the whistleblower provided critical information and supporting evidence that conserved the agency’s time and resources. In the second order ( here ), the SEC awarded a whistleblower, a former company insider, more than $1.7 million. According to the SEC, the whistleblower provided extensive and ongoing assistance to the SEC’s investigative team over the course of the investigation. In the third order ( here ), the SEC awarded two whistleblowers nearly $400,000 for jointly providing a tip and giving continuing assistance during the course of the investigation, including meeting with staff and providing detailed information that helped them understand key documents and identify witnesses. According to the SEC, the whistleblowers also internally reported their concerns and suffered personal hardships as a result of the reporting. “Today marks the end of a record-setting year for the whistleblower program. We’ve made significant strides to further streamline and accelerate the evaluation of claims under the rules, substantially increasing the rate at which whistleblower claims are evaluated and awards are issued,” said Stephanie Avakian, Director of the Division of Enforcement. “We remain committed to rewarding the valuable contributions of whistleblowers in a timely and efficient manner.” “The awards issued in the last month demonstrate the variety and breadth of tips received from whistleblowers,” added Jane Norberg, Chief of the SEC’s Office of the Whistleblower.  “Award recipients in the last month include company outsiders who provided independent analysis, international whistleblowers who shone a light on hard to detect overseas conduct, and company insiders who provided critical information and substantial assistance that helped the Commission better protect investors and the marketplace. And today, the four individuals awarded each provided the tip that sparked the opening of the case.” The SEC has awarded almost $562 million to 106 individuals since issuing its first award in 2012. All whistleblower awards are paid from an investor protection fund established by Congress that is financed entirely through monetary sanctions paid to the SEC by securities law violators. Under the program, no money is taken or withheld from investors harmed by the violations of law to pay whistleblower awards.

In looking at the causes of action asserted in Kocak v. Dargin , 2020 N.Y. Slip Op. 33121(U) (Sup. Ct., N.Y. County Sept. 23, 2020) ( here ), one could walk away with the impression that the claims are disparate and lacking cohesion – breach of fiduciary, fraudulent transfers and corporate dissolution. However, when the facts and evidence in Kocak are considered, a common theme emerges: the alleged actions taken by the majority shareholder of the corporation oppressed the rights of the minority. Each of those actions, according to the Court, supported summary judgment on each of the aforesaid claims.   Kocak v. Dargin Background Kocak concerned a restaurant, known as Sahara’s Turkish Cuisine (“Sahara’s”), which plaintiff purchased in 2001. Beginning in 2007, plaintiff operated the restaurant through Baba’s Restaurant Inc. (“Baba’s”), an entity of which plaintiff was the sole owner. Plaintiff’s brother managed the restaurant.  In 2012, plaintiff agreed to sell 75% of his shares in Baba’s to defendant for $281,250.00, to be paid in installments, in accordance with the terms of a Stock Transfer Agreement. On the same day, the parties also entered into an employment agreement whereby plaintiff agreed to be an employee of Baba’s and to provide services as the Marketing and Business Development Manager in return for a net monthly salary of $2,500.00. Both the Stock Transfer Agreement and the employment agreement contained merger clauses providing that the agreements represented the parties’ entire understanding with respect to the subject matter contained therein and could be modified, amended or terminated only by a written instrument executed by the parties or their respective successors or assigns.  Following execution of the Stock Transfer Agreement, defendant assumed responsibility for operating Sahara’s on behalf of Baba’s, assumed the role of manager, was made a cosignatory (along with plaintiff) of the bank account that served as Baba’s operating account, and was added as a signatory to the lease that Baba’s had with its landlord, Daniela Sarraf (“Sarraf”).  Thereafter, a First Amendment of Lease, dated February 8, 2012 was entered into between Baba’s and Sarraf. Both plaintiff and defendant signed the Lease Amendment on behalf of Baba’s. Under the Lease Amendment, the lease term was extended for ten years, until December 31, 2021.  In 2014, defendant formed Munzur LLC (“Munzur”), which he co-owned with his sister, Feliz Dargin.  On or about September 14, 2014, a Lease Agreement was entered into between Sarraf as landlord and Munzur as tenant, for the New York City location where the restaurant opereated. Feliz Dargin signed the Lease Agreement on behalf of Munzur. In 2015, defendant opened a bank account in the name of Munzur, to serve as the operating account for the restaurant. Plaintiff was not made a signatory to the Munzur account. Defendant began depositing revenues and other monies from the operations of the restaurant into the Munzur account. In or around September or October, 2015, defendant ceased making such deposits into Baba’s bank account. In or around September or October 2015, defendant began operating Sahara’s entirely through Munzur and paid distributions from Munzur to himself and Feliz Dargin beginning in 2016.  In 2017, defendant formed Rojava LLC (“Rojava”), of which he was the sole owner. Thereafter, defendant amended the lease, and bank accounts to the exclusion of plaintiff. Following execution of the Stock Transfer Agreement in 2012, plaintiff had not been paid any distribution from the profits of the restaurant (whether operated through Baba’s, Munzur, or Rojava). Plaintiff filed the action on April 18, 2016, alleging causes of action for: 1) breach of fiducuary duty; 2) fraudulent conveyance pursuant to DCL § 274; 3) fraudulent conveyance pursuant to DCL § 276; and 4) violations of New York Labor Law § 191. Issue was joined by the service of an Answer, dated June 20, 2016, containing counterclaims: 1) alleging unjust enrichment; and 2) seeking a declaratory judgment that plaintiff was no longer an owner of the subject property.  By order, dated February 3, 2017, plaintiff added Baba’s as a party defendant. Plaintiff filed a Note of Issue on January 10, 2020, and thereafter filed a motion for partial summary judgment on the issue of liability on his first, second and third causes of action and seeking statutory dissolution pursuant to BCL § 1104-a.  On August 21, 2020, defendants cross-moved for summary judgment on their counterclaims and dismissal of plaintiff’s complaint. The Court’s Decision Breach of Fiduciary Duty The Court held that plaintiff established a breach of fiduciary.  “ he elements of a cause of action to recover damages for breach of fiduciary duty are (1) the existence of a fiduciary relationship, (2) misconduct by the defendant, and (3) damages directly caused by the defendant’s misconduct.” Palmetto Partners, L.P. v. AJW Qualified Partners, LLC , 83 A.D.3d 804, 807 (2d Dept. 2011). In a close corporation, the majority shareholders owe a fiduciary duty to the minority shareholders. O’Neill v. Warburg, Pincus & Co. , 39 A.D.3d 281, 282 (1st Dept. 2007); Gjuraj v. Uplift Elevator Corp. , 110 A.D.3d 540, 541 (1st Dept. 2013).  The Court found that following the execution of the Stock Transfer Agreement, defendant, as Baba’s majority shareholder, owed plaintiff fiduciary duties. Slip Op. at *4. The Court explained that the evidence demonstrated that defendant breached his fiduciary duty to plaintiff: it undisputed that defendants transferred the assets of Baba’s to Munzur, LLC and subsequently to Rojava, LLC without paying any consideration to plaintiff, removed all funds from the Baba’s bank account to bank accounts controlled by Dargin and his family and ceased all distributions to plaintiff.  Slip Op. at *4-*5. “As such,” concluded the Court, “plaintiff has established a prima facie entitlement to summary judgment on his Breach of Fiduciary Duties claim.” Id. at *5. Debtor & Creditor Law Claims The Court held that plaintiff established entitlement to summary judgment on his DCL claims. Purusant to Debtor and Creditor Law § 273, “every conveyance made and every obligation incurred by a person who is or will be thereby rendered insolvent is fraudulent as to creditors without regard to his actual intent if the conveyance is made or the obligation is incurred without a fair consideration.” “When a transfer is made without fair consideration, a presumption of insolvency and fraudulent transfer arises, and the burden shifts to the transferee to rebut that presumption.” Battlefield Freedom Wash, LLC v. Song Yan Zhuo , 148 A.D.3d 969, 971 (2d Dept. 2017).  Pursuant to DCL § 276 “every conveyance made and every obligation incurred with actual intent, as distinguished from intent presumed in law, to hinder, delay, or defraud either present or future creditors, is fraudulent as to both present and future creditors.” To demonstrate a violation of DCL § 276, a plaintiff may “rely on ‘badges of fraud.’” Wall Street Assocs. v. Brodsky , 257 A.D.2d 526, 529 (1st Dept. 1999). Badges of fraud include a “close relationship between the parties to the alleged fraudulent transaction; a questionable transfer not in the usual course of business; inadequacy of the consideration; the transferor’s knowledge of the creditor’s claim and the inability to pay it; and retention of control of the property by the transferor after the conveyance.” Id. at 529.  The Court found that defendant had transferred all of Baba’s assets to entities controlled by him and his family without consideration, with full knowledge that plaintiff had claims against Baba’s for 25% of its assets and compensation arising from plaintiff’s employment contract. As a result, plaintiff “established a prima facie entitlement to summary judgment on his DCL claims.…” Slip Op. at *5.  Involuntary Dissolution Business Corporation Law § 1104-a permits involuntary dissolution of a corporation when the controlling shareholders are found guilty of “oppressive action” toward the minority. Oppression arises when “those in control” of the corporation “have acted in such a manner as to defeat those expectations of the minority stockholders which formed the basis of participation in the venture.” In re Kemp & Beatley, Inc. , 64 N.Y.2d 63, 74 (1984). Situations where the petitioner is “frozen out” or “squeezed out” are precisely the type of oppressive situations” that BCL § 1104-a is designed to address. In re Wiedy’s Furniture Clearance Center Co. , 108 A.D.2d 81, 84 (3d Dep’t 1985); In re Rambusch , 143 A.D.2d 605, 606 (1st Dept. 1988); In re Dissolution of Pickwick Realty , 246 A.D.2d 863, 866 (3d Dept. 1998) (finding that the lower court’s ordering of dissolution following its consideration of, inter alia , the “shareholders’ attempt at voiding petitioner’s shares” was “proper in the totality of these circumstances and fully necessary to protect petitioner’s interest”).  The Court found that defendant’s actions frustrated plaintiff’s “reasonable expectations of remaining a shareholder of the entity operating the restaurant and to share in the profits of the business.” Slip Op. at *6. The Court explained that the record showed that defendant “diverted the property and assets of Baba’s Restaurant within the meaning of BCL § 1104-a(a)(2).” Id. (“It is undisputed that Dargin transferred, assigned, or otherwise diverted, for no consideration, all the assets of Baba’s and that he denies that Kocak has any ownership of the disputed shares.”). As such, the Court concluded that plaintiff satisfied BCL § 1104- a(a)(2). Id. (citing Matter of Verdeschi , 63 A.D.3d 1084, 1085 (2d Dept. 2009). Accordingly, the Court granted summary judgment on this claim.

“A promissory note is a financial instrument that contains a written promise by one party (the note’s issuer or maker) to pay another party (the note’s payee) a definite sum of money, either on demand or at a specified future date. See Investopedia, Adam Barone, Apr. 20, 2020 ( here ). “A promissory note typically contains all the terms pertaining to the indebtedness, such as the principal amount, interest rate, maturity date, date and place of issuance, and issuer's signature.” Id. “When an action is based upon an instrument for the payment of money only ... the plaintiff may serve with the summons a notice of motion for summary judgment and the supporting papers in lieu of a complaint. A note qualifies as such an instrument for this purpose, provided the plaintiff can establish a prima facie case via proof of the note and a failure to make the payments called for by its terms. It does not qualify if outside proof is needed, other than simple proof of nonpayment or a similarly de minimis deviation from the face of the document.” Bonds Fin., Inc. v. Kestrel Tech., LLC , 48 A.D.3d 230, 231 (1st Dept. 2008) (internal quotations and citations omitted). See also Weissman v. Sinorm Deli , 88 N.Y.2d 437 (1996). In Firmenich Inc. v. TPR Holdings LLC , 2020 N.Y. Slip Op. 33087(U) (Sup. Ct., N.Y. County Sept. 18, 2020) ( here ), plaintiff filed a motion for summary judgment in lieu of complaint in connection with the failure by defendant to make payments under a promissory note executed as part of a settlement between the parties. The Court (Justice Arlene P. Bluth) granted the motion. Plaintiff claimed that in February 2016, the parties settled a dispute, pursuant to which defendant delivered a promissory note for $1,450,000, plus interest in plaintiff’s favor. The note required defendant to pay plaintiff according to a schedule set forth therein. Plaintiff claimed that there were numerous issues with defendant’s payments, culminating with defendant ceasing to make payments after March 2019. Plaintiff sent defendant a notice of default dated July 31, 2019 after defendant failed to make the April, May, June and July 2019 payments. Plaintiff asserted that under the terms of the note, it could commence the action after a default and appropriate notice to defendant. Plaintiff alleged that defendant owed plaintiff $320,175.00 under the terms of the note.  In opposition, defendant claimed that the note referenced the settlement agreement between the parties and that agreement imposed obligations on plaintiff, which rendered the use of summary judgment in lieu of complaint inapplicable. It claimed that plaintiff had to establish other elements besides simply nonpayment before it could recover. In addition, defendant claimed that the emergence of the COVID-19 pandemic had rendered performance under the settlement agreement objectively impossible and frustrated the purpose of the agreement: “the cataclysmic shutdown of commerce arising from the COVID-19 emergency (which was entirely unforeseeable and unforeseen) rendered the performance of the supply obligations of the parties under the Settlement Agreement objectively impossible.” Slip Op. at *2 (citation to the record omitted). In granting the motion, the Court found that the note was “an instrument for the payment of money only ( i.e. the payment of $1,450,000 in certain installments)” and did not impose any “obligations on plaintiff except for the requirement that plaintiff provide written notice to defendant if there was a default.” Slip Op. at *3. That requirement, said the Court, “only required plaintiff to comply with a procedure to collect the money; it d not remove the note from the auspices of CPLR 3213.” Id. The Court rejected defendants’ argument that “reference to the settlement agreement” imposed an obligation on plaintiff to perform, stating that such reference “was … besides the point.” Id. The Court explained that the settlement agreement merely “memorialized that the dispute … was being resolved for $1.45 million and that defendant was to pay that amount.” Id. Thus, concluded the Court, “ here no issue of fact regarding whether th case involve an instrument for the payment of money only.” Notably, observed the Court, “defendant not dispute that it failed to make payments or that plaintiff failed to abide by the notice provisions contained in the note.” Id. The Court also rejected “defendant’s claims about impossibility and frustration of purpose,” saying that they were “patently absurd.” Slip Op. at *3, *4. The Court noted that the non-payments “started in April 2019. The pandemic did not start causing business disruption in the United States until 2020.” Id. at *3. The Court found it to be “patently absurd” to use the pandemic as a defense, saying that such as defense was “disingenuous[ ]”, especially since the “default … occurred last year.” Id. at *4. The Court admonished defendant for using the pandemic as “a catch-all defense”. Id. Accordingly, the Court granted the motion and directed the clerk to enter judgment in favor of plaintiff and against defendant in the amount of $320,175.00, plus interest, from March 24, 2019 until the entry of judgment and then at the statutory rate. Takeaway CPLR § 3213 provides that a plaintiff may file a motion for summary judgment in lieu of a complaint “ hen action is based upon an instrument for the payment of money only ....” here=">here" and="and" >here.=">here."> The provision “was enacted to provide quick relief on documentary claims so presumptively meritorious that a formal complaint is superfluous, and even the delay incident upon waiting for an answer and then moving for summary judgment is needless.” Cooperatieve Centrale Raiffeisen-Boerenleenbank, B.A. v. Navarro , 25 N.Y.3d 485, 491-92 (2015) (internal quotation marks and citation omitted).  “To establish prima facie entitlement to summary judgment in lieu of complaint, a plaintiff must show,” as in Firmenich , “the existence of a promissory note executed by the defendant containing an unequivocal and unconditional obligation to repay and the failure of the defendant to pay in accordance with the note’s terms.” Zyskind v. FaceCake Mktg. Techs., Inc. , 101 A.D.3d 550, 551 (1st Dep’t 2012). “Once the plaintiff submits evidence establishing these elements, the burden shifts to the defendant to submit evidence establishing the existence of a triable issue with respect to a bona fide defense.” Id. As the Court in Firmenich explained, reliance on the COVID-19 pandemic, which occurred in 2020, months after defendant’s default, was not a bona fide defense.   Although there will likely be many cases exploring how the pandemic might affect disputes over contracts and promissory notes, this is not such a case. In fact, it is patently absurd that defendant would disingenuously cite to a pandemic that has caused so much harm around the world as a defense to a default that occurred last year. The pandemic is not a catch-all defense to disputes that began last year. Slip Op. at *3-*4.

After being served with a summons and complaint in a lawsuit, a defendant generally appears and serves an answer or makes a motion seeking to dismiss some or all of the complaint.  Defendant’s formal appearance in an action is governed by CPLR 320 .  This Blog has addressed formal and informal appearances < HERE =">HERE"> . If a defendant fails to appear in an action, among other things, a plaintiff can seek from the Court, a default judgment pursuant to CPLR 3215 .  If plaintiff’s claim is “for a sum certain or for a sum which can by computation be made certain,” a plaintiff can seek a default judgment from the Clerk of the Court if the application is made within 1 year of the default.  See CPLR 3215(a).  This BLOG has addressed issues surrounding a plaintiff’s failure to seek a default judgment within 1 year of default (CPLR 3215(c) < HERE =">HERE"> . In the event that a plaintiff obtains a default judgment, there are several methods that may be employed by a defendant to vacate same.  This BLOG has previously addressed some of those methods.  < HERE =">HERE"> .  Pursuant to CPLR 5015 (a)(1), a defendant can move “the court which rendered a judgment or order relieve a party from it upon such terms as may be just, on motion of any interested person with such notice as the court may direct” due to, among other things, “excusable default, if such motion is made within one year after service of a copy of the judgment or order with written notice of its entry upon the moving party, or, if the moving party has entered the judgment or order, within one year after such entry….” In seeking the vacatur of a default entered pursuant to CPLR 5015, a two-prong test must be satisfied requiring a defendant to “demonstrate a reasonable excuse for the default and a potentially meritorious defense to the action.”  Global Liberty Ins. Co. v. Shahid Mian, M.D., P.C. , 172 A.D.3d 1332 (2 nd Dep’t 2019) (citations omitted). While some might expect leniency from a court when a default judgment for failure to appear is entered against an unrepresented defendant, such was not the case in Kelly v. Hinkley , decided by the Appellate Division, Third Department, on September 24, 2020.  The plaintiff landlord and defendant tenant in Kelley were parties to a lease agreement.  Plaintiff commenced an action, and served defendant with a summons and complaint, after defendant stopped paying the monthly rent.  Defendant was served on June 22, 2018 and his answer was due on July 10, 2018.  On July 9, 2018, plaintiff’s counsel received a call from an attorney that claimed that he “had recently been retained by defendant.”  Counsel then stipulated to extend until July 19, 2018, defendant’s time to answer the complaint.  On July 19, however, a different attorney “who was anticipating being retained” contacted plaintiff’s counsel and requested a further extension.  Plaintiff’s counsel refused the request for an additional extension.  Ultimately, defendant never retained an attorney.  On July 23, four days later, a letter was sent to defendant advising that he was in default and that any answer that he filed would be rejected as untimely.  Defendant filed an answer with the Delaware County Clerk on August 1, 2018, but neglected to serve a copy on plaintiff.  On September 26, 2018, the Kelley plaintiff moved for a default judgment, on notice.  Defendant failed to oppose the motion, which was granted on November 5, 2018.  Defendant’s pro se motion to vacate the judgment pursuant to CPLR 5015(a)(1), made on January 22, 2019, was denied.  On appeal, the Third Department found that “Supreme Court did not abuse its discretion in denying defendant’s motion to vacate the default judgment.”  After noting the two prong analysis previously discussed herein, the Kelley Court recognized that “ motion to vacate a prior judgment or order is addressed to the court's sound discretion, subject to reversal only where there has been a clear abuse of that discretion.”  (Citations and internal quotation marks omitted.)   Citing numerous cases, the court rejected defendant’s argument that the default should be vacated due to his pro se status and his difficulty retaining counsel, finding that “Supreme Court did not abuse its discretion in concluding that defendant's purported inability to secure counsel and his unawareness of the procedural requirements due to his pro se status do not constitute reasonable excuses for his default.” The Court was not moved by the underlying facts either and stated: The record reveals that defendant was personally served with a summons and complaint on June 22, 2018 and that the summons explained that defendant must serve a copy of his answer on plaintiffs' attorney within 20 days. Defendant consulted with two separate attorneys, one of whom obtained an extension of time, but defendant failed to timely file or serve an answer. Defendant filed an answer a week after a letter from plaintiffs' counsel advised him that he was in default, that plaintiffs would not accept service of an answer and that any answer would be rejected as untimely. Defendant never served that answer, nor did he respond to plaintiffs' motion for a default judgment. Further, he waited 2½ months before moving to vacate the default judgment. Because the Court found that there was no reasonable excuse for defendant’s default, there was no need to determine whether defendant “demonstrated the existence of a potentially meritorious defense.”  (Citations and internal quotation marks omitted.) TAKEAWAY Pro se litigants should not count on leniency from the court due to their lack of knowledge.

A threshold question for litigants is whether the court can exercise personal jurisdiction over the defendant. After all, a court cannot issue a valid and binding judgment without possessing such jurisdiction. Assuming the court can exercise such jurisdiction, the next issue to consider is service of process. The Civil Practice Law and Rules (“CPLR”) govern the methods and manner of service in cases filed in the courts of New York. Where a corporation is a defendant, the Business Corporation Law (“BCL”) or the Limited Liability Company Law, as applicable, should also be considered.  In today’s article, we examine service of process upon a foreign corporation that is not registered to do business in the State of New York.  Service of Process Under the CPLR and the BCL Section 311(1) of the CPLR provides that personal service upon a foreign or domestic corporation must be made by delivering the summons “to an officer, director, managing or general agent, or cashier or assistant cashier or to any other agent authorized by appointment or by law to receive service.” Pursuant to BCL § 304(a), “ he secretary of state shall be the agent of every domestic corporation and every authorized foreign corporation upon whom process against the corporation may be served.” Pursuant to BCL § 307(a), the Secretary of State is also authorized to receive service on behalf of unauthorized foreign corporations amenable to the State’s jurisdiction. Thus, when the Secretary of State is authorized to receive service on behalf of a corporation, delivery of the summons to the Secretary of State constitutes compliance with the jurisdictional requirements of CPLR § 311(1). BCL §§ 306 and 307 contain additional requirements as to the manner of service of process when the Secretary of State is served on behalf of a corporation with the former containing the applicable provisions in the case of a domestic or foreign corporation registered to do business in New York and the latter  containing the applicable provisions in the case of an unregistered foreign corporation. Both sections provide that delivery of process to the Secretary of State or his/her deputy or his/her designated agent must occur at the office of the Department of State in the City of Albany.  Under BCL § 306 (b), duplicate copies of process must be delivered to the Secretary of State. Service is complete when the Secretary of State is so served. Id. Pursuant to BCL § 307, only one copy of process has to be served to the Secretary of State and a second copy, together with notice of service on the Secretary of State, must be personally delivered to the foreign corporation or sent to it by registered mail with return receipt requested; service is complete 10 days after an affidavit of compliance, together with certain other papers, is filed with the clerk of the court in which the action is pending. BCL § 307(b), (c).  The requirements in BCL §§ 306 and 307 are jurisdictional and require strict compliance. Meyer v. Volkswagen of Am. , 92 A.D.2d 488 (1st Dept. 1983).  Notably, New York permits service on unregistered, foreign corporations outside of New York “if the service through the Secretary of State of was consistent with service under a New York statute other than 307, then personal jurisdiction validly obtained over defendant.” Breer v. Sears Roebuck & Co. , 184 Misc. 2d 916, 921 (Sup. Ct., Bronx County 2000). Under CPLR § 313, a person or entity “may be served with the summons without the state, in the same manner as service is made within the state, by any person authorized to make service within the state or by any person authorized to make service by the laws of the state….” Thus, a defendant subject to long-arm jurisdiction in New York may be served outside of New York State in a manner consistent with New York law. Id. at 922. The foregoing issues were recently considered by the Appellate Division, Third Department. In Garrow v. Pittsburgh Logistics Systems, Inc. , 2020 N.Y. Slip Op. 05010 (3d Dept. Sept. 17, 2020) ( here ), the Court reversed the motion court’s order to extend the time for service on defendant Pittsburgh Logistics Systems, Inc. (PLS”), an unregistered foreign corporation, because plaintiff  failed to comply with the requirements of BCL § 307. Garrow v. Pittsburgh Logistics Systems, Inc. In March 2018, plaintiffs filed a summons with notice in the Saratoga County Clerk’s office naming PLS and United Furniture Industries, Inc. (“United Furniture”) as defendants. Plaintiffs thereafter sought to effectuate service upon PLS, a foreign corporation not authorized to do business in New York, by personally delivering the summons with notice to an authorized agent of the Secretary of State and sending a copy of the summons with notice by registered mail, return receipt requested, to the address that PLS had registered with the Bureau of Corporations and Charitable Organizations within Pennsylvania’s Department of State. The mailing, however, was not ultimately received by PLS, having instead been returned to plaintiffs’ attorney as undeliverable – a fact, noted the Court, that went unnoticed by plaintiffs for several months. Slip Op. at *1. In June 2018, plaintiffs filed a complaint, seeking to recover for personal injuries that plaintiff Ross Garrow had allegedly sustained during a furniture delivery to his place of employment. PLS learned of the personal injury action in July 2018 through correspondence from United Furniture’s insurance carrier and later sought and obtained a copy of the summons and complaint from the carrier. In September 2018, PLS filed an answer to the complaint, asserting various affirmative defenses, including lack of personal jurisdiction, and a cross claim against United Furniture.  Thereafter, PLS moved, pursuant to CPLR §§ 311(a) and 3211(a)(8), to dismiss the complaint against it on the ground that plaintiffs had failed to effectuate service in strict compliance with BCL § 307 and, thus, the motion court had not acquired personal jurisdiction over it. Plaintiffs opposed the motion and cross-moved for an order pursuant to CPLR § 2004 granting them a 30-day extension to file “the package containing the undelivered mailing of the ummons with otice” with the Saratoga County Clerk, as well as an order dismissing PLS’s affirmative defense alleging lack of personal jurisdiction. Slip Op. at *1. The motion court denied PLS’s motion, granted plaintiffs’ cross motion to the extent of affording them a 120-day extension of time under CPLR § 306-b “to start again” and otherwise denied plaintiffs’ cross motion. Id. PLS appealed. In the proceedings below, plaintiffs conceded that they failed to strictly comply with the requirements of BCL § 307. Slip Op. at *1. In particular, plaintiffs failed to timely file within 30 days an affidavit of compliance, together with the process and “the return receipt signed by or other official proof of delivery or … the original envelope with a notation by the postal authorities that acceptance was refused.” Id. (citing BCL § 307(c)(2). In seeking to extend the 30-day period within which to file the affidavit of compliance and the requisite accompanying documents, plaintiff relied on the extension provision contained in CPLR § 2004. That section provides that, “ xcept where otherwise expressly prescribed by law, the court may extend the time fixed by any statute, rule or order for doing any act, upon such terms as may be just and upon good cause shown, whether the application for extension is made before or after the expiration of the time fixed.” Importantly, because the failure to strictly comply with the procedures of BCL § 307 constitutes a jurisdictional defect, rather than a mere irregularity, the 30-day time period in BCL § 307(c)(2) is not subject to extension under CPLR § 2004. See Flannery v. General Motors Corp. , 86 N.Y.2d 771, 773 (1995); Flick v. Stewart-Warner Corp. , 76 N.Y.2d 50, 56-57 (1990); Smolen v. Cosco, Inc. , 207 A.D.2d 441, 441-442 (2d Dept. 1994). Thus, held the Court, the motion court “should have denied plaintiffs’ cross motion on this basis.” Slip Op. at *1. “Instead,” noted the Court, “on its own initiative, used CPLR 2004 to grant plaintiffs an extension under CPLR 306-b, affording plaintiffs 120 days from the date of its decision and order ‘to start again; i.e. , to re-serve PLS in full compliance with all of the terms of § 307.’” Id. In doing so, the motion court used the extension standard set forth in CPLR § 2004, rather than the one contained in CPLR § 306-b, which provides that a court may extend the 120-day time period for service following the commencement of the action “upon good cause shown or in the interest of justice.” The Court concluded that “ hen the proper standard applied, plaintiffs would not have been entitled to an extension of time under CPLR 306-b to properly serve PLS in accordance with Business Corporation Law § 307. Id. As noted, to be entitled to an extension of time to effectuate service upon a defendant under CPLR § 306-b, a plaintiff must make a showing of “good cause” for the failure to timely serve the defendant or, alternatively, that an extension of time is warranted “in the interest of justice.” The “good cause” showing is the more stringent ground for extension under CPLR § 306-b, requiring the plaintiff to establish that reasonably diligent efforts were made to effectuate service. See Leader v. Maroney, Ponzini & Spencer , 97 N.Y.2d 95, 104-105 (2001); Bumpus v. New York City Tr. Auth. , 66 A.D.3d 26, 31-32 (2d Dept. 2009). The Court found that “plaintiffs did not make reasonably diligent efforts to comply with the procedures of Business Corporation Law § 307.” Slip Op. at *1. The Court explained that “ lthough plaintiffs personally delivered the summons with notice to an authorized agent of the Secretary of State and sent a copy of the summons with notice by registered mail, return receipt requested, to the address that PLS had registered with the Bureau of Corporations and Charitable Organizations within Pennsylvania’s Department of State ( see Business Corporation Law § 307 , <2> ), they made absolutely no effort to thereafter file the affidavit of compliance and the requisite accompanying documents ( see Business Corporation Law § 307 <2> ).” Id. Moreover, noted the Court, “the excuse provided for plaintiffs’ failure to timely serve PLS in accordance with Business Corporation Law § 307 amount to law office failure, an excuse that has been held to be insufficient to constitute good cause.” Id. (citing Leader , 97 N.Y.2d at 104-105; Zegelstein v. Faust , 179 A.D.3d 541, 542 (1st Dept. Jan. 21, 2020); Rodriguez v. Consolidated Edison Co. of N.Y., Inc. , 163 A.D.3d 734, 736 (2d Dept. 2018). Thus, concluded the Court, “as plaintiffs did not make the requisite showing, they not entitled to an extension ‘upon good cause’ under CPLR 306-b.” Id. Addressing the alternative “interest of justice” standard, the Court analyzed “the factual setting of the case” and balanced “the competing interests presented by the parties.” Id. (quoting Leader , 97 N.Y.2d at 105). In conducting the analysis, “courts may consider the plaintiff’s diligence in attempting service, ‘along with any other relevant factor …, including expiration of the tatute of imitations, the meritorious nature of the cause of action, the length of delay in service, the promptness of a plaintiff’s request for the extension of time, and prejudice to defendant.” Id. (quoting Leader , 97 N.Y.2d at 105-106; Heath v. Normile , 131 A.D.3d 754, 755 (3d Dept. 2015). “In addition to plaintiffs’ failure to make reasonably diligent efforts to effectuate service pursuant to Business Corporation Law § 307,” said the Court, “plaintiffs did not seek an extension of time to complete service until November 2018 — approximately four months after sending a copy of the summons with notice to PLS by registered mail and roughly eight months after filing the summons with notice.” Slip Op. at *1. Notably, observed the Court, “ uch extension request was not prompted by plaintiffs’ own discovery of their failure to comply with Business Corporation Law § 307 (c) (2); rather, it was in response to PLS’s motion to dismiss the complaint against it for failure to properly effectuate service.” Id. Finally, said the Court, although the motion court was under the impression that the statute of limitations had not yet run, there was “no indication in the record as to why the three-year statute of limitations did not expire in March 2016, three years after the alleged injuries occurred and two years prior to the commencement of th action.” Id. (footnote omitted) (citing CPLR § 214(5). “Together,” concluded the Court, “the foregoing considerations weigh heavily against an extension under CPLR 306-b in the interest of justice.” Id. (citing Zegelstein , 179 A.D.3d at 542-543; Jung Hun Cho v. Bovasso , 166 A.D.3d 868, 870 (2d Dept. 2018).  Accordingly, the Court held that the motion court should have granted PLS’s motion to dismiss the complaint against it and denied plaintiffs’ cross motion. Takeaway Garrow shows that the failure to comply with the requirements of BCL § 307 will result in dismissal of the action. Such requirements are jurisdictional and not mere irregularities. Garrow also highlights the interplay between CPLR § 306-b and BCL § 307. Under CPLR § 306-b, if the plaintiff fails to comply with the service requirements of the CPLR and, as in Garrow , the BCL, “the court, upon motion, shall dismiss the action without prejudice as to that defendant, or upon good cause shown or in the interest of justice, extend the time for service.” The “good cause” and “interest of justice” prongs of Section 306-b constitute separate grounds for extensions, and are defined by separate criteria. Leader , 97 N.Y.2d at 104. “A good cause extension requires a showing of reasonable diligence in attempting to effect service upon a defendant.” Henneberry v. Borstein , 91 A.D.3d 493, 496 (1st Dept. 2012) (internal quotation marks omitted). “Good cause will not exist where a plaintiff fails to make any effort at service … or fails to make at least a reasonably diligent effort at service.” Bumpus , 66 A.D.3d at 31. Law office failure does not constitute “good cause”. Henneberry , 91 A.D.3d at 496. “By contrast, good cause may be found to exist where the plaintiff’s failure to timely serve process is a result of circumstances beyond the plaintiff's control.” Bumpus , 66 A.D.3d at 31-32 (internal citations omitted) (noting difficulties of service with a person in the military or difficulties with service abroad through the Hague Convention).  The interest of justice standard, however, is more lenient, allowing courts to accommodate late service that might be attributed to mistake, confusion or oversight, so long as it does not prejudice the defendants. Leader , 97 N.Y.2d at 104-105. As noted, courts may consider such factors as diligence, or lack thereof; the expiration of the statute of limitations; the meritorious nature of the causes of action; the length of the delay in service; the promptness of plaintiff’s request for an extension of time; and the prejudice to defendants. See Spath v. Zack , 36 A.D.3d 410, 413-414 (1st Dept. 2007).  In Garrow , the Court found that plaintiffs could not satisfy either the “good cause” or the “interest of justice” standards.

Over the years, this Blog has addressed numerous issues involving mortgage foreclosures in New York. < HERE =">HERE"> , < HERE =">HERE"> , < HERE =">HERE"> , < HERE =">HERE"> < HERE =">HERE"> , < HERE =">HERE"> , < HERE =">HERE"> , < HERE =">HERE"> < HERE =">HERE"> , < HERE =">HERE"> , < HERE =">HERE"> , < HERE =">HERE"> , < HERE =">HERE"> , < HERE =">HERE"> , < HERE =">HERE"> , < HERE =">HERE"> , < HERE =">HERE"> , < HERE =">HERE"> , < HERE =">HERE"> , < HERE =">HERE"> , < HERE =">HERE"> , < HERE =">HERE"> , < HERE =">HERE"> , < HERE =">HERE"> , < HERE =">HERE"> , < HERE =">HERE"> , < HERE =">HERE"> , < HERE =">HERE"> .  On September 16, 2020, the Appellate Division, Second Department, decided U.S. Bank, N.A. v. Tauber , in which a mortgagor was estopped from arguing that service of process was not made at a proper address – a new mortgage foreclosure issue for this Blog.  CPLR 308 provides a variety of methods for “personal service upon a natural person.”  According to CPLR 308(2), personal service on a natural person can be made by, among other things, “delivering the summons within the state to a person of suitable age and discretion at the actual place of business, dwelling place or usual place of abode of the person to be served.”   The defendant in Tauber was served with process at the foreclosure address pursuant to CPLR 308(2) when the summons and complaint were left with someone of suitable age and discretion at that location.  Defendant moved to vacate a judgment of foreclosure and sale pursuant to CPLR 5015 (a)(4) (which permits a litigant to obtain relief from a judgment or order) and to dismiss the action pursuant to CPLR 3211 (a)(8) (based on lack of personal jurisdiction).  Supreme court, without holding a hearing, denied both motions and defendant appealed.  On appeal, the Second Department reversed and remanded the matter for a hearing on whether service of process was proper and for a new determination of whether to vacate the judgment of foreclosure and sale. On remand, supreme court held a hearing and, thereafter, issued an order upholding service.  Defendant appealed once again.  In recognizing its broad powers of review, the Second Department stated that in “reviewing a determination made by a hearing court, the power of this Court is as broad as that of the hearing court, and this Court may render its own determination as warranted by the facts, taking into account that, in a close case, the hearing court had the advantage of seeing and hearing the witnesses.”  (Citation and internal quotation marks omitted.) The Tauber Court found that there was no reason “to disturb the Supreme Court’s conclusions” that service was proper.  Among other things, the Court found that Tauber was estopped from denying that the address at which she was served was not a proper address for service pursuant to CPLR 308(2).  An estoppel: "is imposed by law in the interest of fairness to prevent the enforcement of rights which would work fraud or injustice upon the person against whom enforcement is sought and who, in justifiable reliance upon the opposing party's words or conduct, has been misled into acting upon the belief that such enforcement would not be sought" ( Nassau Trust Co. v Montrose Concrete Prods. Corp., 56 NY2d at 184; see White v La Due & Fitch, Inc., 303 NY 122, 128 <1951> ). Fundamental v. Tocqueville , 7 N.Y.3d 96, 106 (2006). Tauber testified that she never lived at the foreclosure address at which she was served.  Moreover, the Court noted that “ hile, as a general matter, a defendant has no obligation to inform a party who may wish to sue of his or her whereabouts ( see Feinstein v Bergner , 48 NY2d 234, 241-242), "where a defendant willfully misrepresent his address or violate a statutory notification requirement, or where he engage in conduct calculated to prevent the plaintiff from learning his actual place of residence, he may be estopped from asserting the defense of defective service" ( Bank of N.Y. v MacPherson , 301 AD2d 485, 486 ).  Tauber, *1 to *2 . In finding that Tauber’s actions effectuated an estoppel, the Court stated: Here, despite the defendant's testimony that she never lived in the subject property, the evidence adduced at the hearing reflects that the defendant repeatedly held herself out as a resident of the subject property throughout the pendency of this litigation, including in applications for mortgage assistance through the federal government's "Making Home Affordable Program" and in a power of attorney she executed for the purpose of permitting a family member to participate on her behalf in court conferences pursuant to CPLR 3408(a). Moreover, the evidence reflects that the defendant never gave the plaintiff the address of her purported true place of residence, despite having ample opportunity to do so. Under these circumstances, the defendant is estopped from contending that the subject property was not her "dwelling place" or her "usual place of abode" (CPLR 308<2> ; see U.S. Bank Natl. Assn. v Vanvliet , 24 AD3d 906 , 908; Bank of N.Y. v MacPherson , 301 AD2d at 486). Tauber , at 2.