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Retaliation is the primary concern among those who decide to blow the whistle on wrongdoing. It represents a significant impediment to obtaining the primary goals of whistleblowing:  accountability and transparency of government and corporate activities. According to a 2010 government survey of federal employees, “approximately one-third of the individuals who felt they had been identified as a source of a report of wrongdoing also perceived either threats or acts of reprisal, or both.” ( See Merit Systems Protection Board, “Blowing the Whistle: Barriers to Federal Employees Making Disclosures,” November 2011 ( here )). In 2017, the survey was updated, finding that approximately 30 percent of government employees feared reprisal from reporting illegal or improper conduct. See Merit Systems Protection Board, “U.S. Merit Systems Protection Board 2017 Annual Employee Survey Results” ( here ). In the private sector, a survey showed that retaliation for blowing the whistle rose to 44% in 2017 from 22% in 2013, with 72% of employees who were retaliated against reporting that such reprisals occurred within one month of their reporting. See Global Business Ethics Survey, “The State of Ethics & Compliance in the Workplace, Ethics & Compliance Initiative,” March 2018 ( here ). In enacting the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act” or the “Act”), Congress adopted strong anti-retaliation provisions to protect SEC whistleblowers who blow the whistle on violations of the federal securities laws. In that regard, Congress created a private right of action for whistleblowers to combat retaliation associated with “any lawful act done by – ‘(i) in providing information to the Commission …; (ii) in initiating, testifying in, or assisting in any investigation or judicial or administrative action of the Commission based upon or related to such information; or (iii) in making disclosures that are required or protected under the Sarbanes-Oxley Act of 2002,’” the Securities Exchange Act of 1934, and “‘any other law, rule, or regulation subject to the jurisdiction of the .’” Notably, the Dodd-Frank Act does not limit the private right of action to employees. Congress extended the anti-retaliation protections to any individual claiming to have been retaliated against ( e.g. , threatened, harassed or subjected to discrimination) because of conduct protected under Act.  The SEC Whistleblower Program rules allow the SEC to prosecute violations of the anti-retaliation provisions of the Dodd-Frank Act through enforcement action.  This means that persons who retaliate against individuals who blow the whistle on fraud or other illegal conduct risk having to defend themselves against SEC investigations and enforcement actions that may result in penalties, disgorgement, and other monetary relief. On November 4, 2019, the SEC announced ( here ) that it filed claims against an online auction portal and its chief executive officer (“CEO”) in connection with their efforts to prohibit their investors from reporting misconduct to the SEC and other governmental agencies. As explained in the November 4 press release, the SEC filed an amended complaint ( here ) against Collectors Café and its CEO, Mykalai Kontilai (“Kontilai”), to add allegations that they unlawfully sought to prohibit their investors from reporting misconduct to the SEC. The Commission previously charged Collectors Café and Kontilai with conducting a $23 million fraudulent securities offering based on false statements to investors and alleged that Kontilai misappropriated over $6 million of investor proceeds. In its amended complaint, the SEC alleged that Collectors Café and Kontilai took actions to prevent investors from communicating directly with the SEC about their securities laws violations. In at least two instances, Collectors Café and Kontilai attempted to resolve investor allegations of wrongdoing against them by conditioning the return of investor money on the agreement of the investors to confidentiality clauses prohibiting the investors from communicating with law enforcement or regulators, including the SEC, about the alleged securities law violations. In one of those instances, Collectors Café and Kontilai filed a lawsuit claiming that the victims of their alleged fraud breached the confidentiality provision of the agreements by communicating with SEC staff about possible securities law violations. Collectors Café and Kontilai sought punitive and compensatory damages in that action, including repayment of the money paid to settle the claims of securities fraud. Thereafter, Collectors Café and Kontilai held the lawsuit out as a deterrent to other investors about communicating with the SEC. The SEC claimed that these actions and agreements violated the SEC’s whistleblower protection rules. Commenting on the new allegations, Kurt L. Gottschall, Director of the SEC’s Denver Regional Office, stated: “We allege that the defendants attempted to cover up their fraud by holding investors’ money hostage until the investors signed agreements preventing them from seeking law enforcement intervention. Through the amended complaint, the Commission seeks to hold the defendants accountable for their fraudulent stock offerings as well as the separate claims for violations of the Commission’s whistleblower protection laws.” Jane Norberg, Chief of the SEC’s Office of the Whistleblower, underscored the reach of the Act’s anti-retaliation protections, stating that “ he SEC’s whistleblower protections broadly protect not just employees, but anyone who seeks to report potential securities law violations to the Commission.” The SEC charged Collectors Café and Kontilai with violations of the antifraud and whistleblower provisions of the federal securities laws. The Commission is seeking preliminary and permanent injunctions, disgorgement, plus prejudgment interest, and penalties. The SEC also added Veronica Kontilai, Kontilai’s wife, as a relief defendant, seeking disgorgement, plus prejudgment interest, from her.

Last week, two Appellate Division courts affirmed the dismissal of fraud claims because the parties asserting the claims failed to demonstrate justifiable reliance, and assert their claim within the statute of limitations. Atlas MF Mezzanine Borrower, LLC v. Macquarie Tex. Loan Holder LLC , 2019 N.Y. Slip Op. 08009 (1st Dept. Nov. 7, 2019) ( here ), and Beacon Estates, LLC v. Ingrassia , 2019 N.Y. Slip Op. 08042 (4 th Dept. Nov. 8, 2019) ( here ). In today’s post, this Blog looks at each case. A Primer on the Statute of Limitations and Justifiable Reliance Statute of Limitations In New York, an action for fraud must be commenced within “the greater of six years from the date the cause of action accrued or two years from the time the plaintiff … discovered the fraud, or could with reasonable diligence have discovered it.” CPLR § 213(8); Boardman v. Kennedy , 105 A.D.3d 1375, 1376 (4th Dept. 2013). The defendant ( i.e. , the party most frequently making the motion) has the initial burden of establishing “that the time in which to commence the action has expired.” Zaborowski v. Local 74, Serv. Empls. Intl. Union, AFL-CIO , 91 A.D.3d 768, 768 (2d Dept. 2012). If the defendant meets that burden, the burden then shifts to the plaintiff to “aver evidentiary facts establishing that the action was timely or to raise a question of fact as to whether the action was timely.” Lessoff v. 26 Ct. St. Assoc., LLC , 58 A.D.3d 610, 611 (2d Dept. 2009). Where a plaintiff relies on the two-year discovery rule of the statute of limitations, “ he burden of establishing that the fraud could not have been discovered prior to the two-year period before the commencement of the action rests on the plaintiff who seeks the benefit of the exception.” Von Blomberg v. Garis , 44 A.D.3d 1033, 1034 (2d Dept. 2007); Lefkowitz v. Appelbaum , 258 A.D.2d 563 (2d Dept. 1999) (“The burden of establishing that the fraud could not have been discovered before the two-year period prior to the commencement of the action rests on the plaintiff, who seeks the benefit of the exception.”). Accord Berman v. Holland & Knight, LLP , 156 AD3d 429, 430 (1st Dept. 2017); Aozora Bank, Ltd. v. Deutsche Bank Sec. Inc. , 137 A.D.3d 685, 689 (1st Dept. 2016); Brooks v. AXA Advisors, LLC (appeal No. 2) , 104 A.D.3d 1178, 1180 (4th Dept. 2013). “A cause of action based upon fraud accrues, for statute of limitations purposes, at the time the plaintiff ‘possesses knowledge of facts from which the fraud could have been discovered with reasonable diligence.’” Oggioni v. Oggioni , 46 A.D.3d 646, 648 (2d Dept. 2007) (quoting Town of Poughkeepsie v. Espie , 41 A.D.3d 701, 705 (2d Dept. 2007)). “ here the circumstances are such as to suggest to a person of ordinary intelligence the probability that he has been defrauded, a duty of inquiry arises, and if he omits that inquiry when it would have developed the truth, and shuts his eyes to the facts which call for investigation, knowledge of the fraud will be imputed to him.” Gutkin v. Siegal , 85 A.D.3d 687, 688 (1st Dept. 2011) (citation and internal quotation marks omitted). Courts look at whether the plaintiff should have discovered the alleged fraud objectively. Prestandrea v. Stein , 262 A.D.2d 621, 622 (2d Dept. 1999); Gorelick v. Vorhand , 83 A.D.3d 893, 894 (2d Dept. 2011). Mere suspicion will not suffice as a substitute for knowledge of the fraudulent act. Erbe v. Lincoln Rochester Trust Co. , 3 N.Y.2d 321, 326 (1957). This inquiry “involves a mixed question of law and fact, and, where it does not conclusively appear that a plaintiff had knowledge of facts from which the alleged fraud might be reasonably inferred, the cause of action should not be disposed of summarily on statute of limitations grounds.”  Berman , 156 A.D.3d at 430. “Instead, the question is one for the trier of-fact.” Id . See also Sargiss v Magarelli , 12 N.Y.3d 527, 532 (2009). Justifiable Reliance In Ambac Assur. v. Countrywide , 31 N.Y.3d 569, 579 (2018), the Court of Appeals described the justifiable reliance requirement as a “‘fundamental precept’ of a fraud cause of action.” As such, a “plaintiff must allege facts to support the claim that it justifiably relied on the alleged misrepresentations.” ACA Fin. Guar. Corp. v. Goldman, Sachs & Co. , 25 N.Y.3d 1043, 1044 (2015); see also id . at 1051 (Read, J., dissenting on other grounds) (describing the justifiable reliance requirement as “our venerable rule”). Whether a plaintiff justifiably relied on a misrepresentation or omission is “always nettlesome” because it requires a fact-intensive analysis. DDJ Mgt., LLC v. Rhone Group L.L.C. , 15 N.Y.3d 147, 155 (2010) (internal quotation marks omitted). As the Court of Appeals observed, “ o two cases are alike ….” Id . For this reason, the courts look to whether the plaintiff exercised “ordinary intelligence” in ascertaining “the truth or the real quality of the subject of the representation.” Curran, Cooney, Penney v. Young & Koomans , 183 A.D.2d 742, 743) (2d Dept. 1992). Sophisticated parties have a heightened responsibility. They must use due diligence and take affirmative steps to protect themselves from misrepresentations by employing whatever means of verification are available at the time. If they fail to do so, their complaint will be dismissed. See , e.g. , HSH Nordbank AG v. UBS AG , 95 A.D.3d 185, 194-95 (1st Dept. 2012). Accord , Ashland Inc. v. Morgan Stanley & Co. , 652 F.3d 333, 337-38 (2d Cir. 2011) (“An investor may not justifiably rely on a misrepresentation if, through minimal diligence, the investor should have discovered the truth.”) (internal quotation marks and citation omitted). Atlas MF Mezzanine Borrower, LLC v. Macquarie Tex. Loan Holder LLC Background Atlas arose in connection with a foreclosure sale of a membership interest in a holding company (“HoldCo.”), which owned, through separate subsidiaries, eleven (11) apartment complexes (the “Properties”) in Texas (the “Auction”). Atlas MF Mezzanine Borrower, LLC (“Atlas”), through its holding company and subsidiaries, owned the Properties. Macquarie Texas Loan Holder LLC (“Macquarie”) loaned Atlas $71 million through a mezzanine loan that was secured by a pledge of Atlas’s membership interest in the holding company. Atlas defaulted on the loan in January 2017. Atlas claimed the default was the result of its reliance on the representations of forbearance by Macquarie – according to Atlas, Macquarie lulled it to believe that Macquarie would grant the forbearance when it reality Macquarie wanted Atlas to default so that it could foreclose on the loan. At the Auction (conducted on February 27, 2017), a dispute arose over whether Atlas had met the publicly disclosed requirements of the proceeding. As a result, Macquarie did not initially allow Atlas to bid. However, after Macquarie placed a credit bid for $73.5 million (reflecting the loan principal plus interest and fees), Macquarie “ma e an exception” to the requirements and permitted Atlas to bid. Atlas and defendants KKR REPA AIV-2 L.P. and KKR Osprey Venture LLC (together, the “KKR Defendants”), thereafter competed in the Auction, until the KKR Defendants bid $76.75 million and Atlas responded with a bid of $77 million. At that point, Macquarie suspended the Auction because Atlas was bidding millions of dollars in excess of the amount owed under the loan. The KKR Defendants alleged that Atlas did not intend to close on the purchase of HoldCo. and likely lacked the financial capacity to do so. Defendants contended that Atlas was trying to drive the KKR Defendants’ purchase price up as much as possible so that Atlas could receive any surplus above the amount owed under the loan. The KKR Defendants claimed that, at that point, they believed they would be declared the winning bidder at $76.75 million. Consequently, once the Auction resumed, the KKR Defendants did not attempt to surpass Atlas’s $77 million bid. Macquarie declared the KKR Defendants the winner based on their financial ability to close, which the KKR Defendants had disclosed pursuant to the publicly available terms of the Auction. Thereafter, the KKR Defendants and Macquarie executed a Contract of Sale for the holding company. On October 30, 2017, Atlas filed its verified first amended complaint. On May 1, 2018, the KKR Defendants filed an answer in which they denied Atlas’s allegations. On May 21, 2018, the KKR Defendants filed an amended answer in which they asserted eight counterclaims: (1) declaratory judgment, (2) tortious interference with a prospective economic advantage, (3) tortious interference with contracts, (4) abuse of process, (5) trespass, (6) conversion, (7) unjust enrichment, and (8) fraud. On June 25, 2018, Atlas moved to dismiss the counterclaims for tortious interference with contracts, abuse of process, trespass, conversion and fraud. On October 17, 2018, the motion court granted Atlas’s motion to dismiss the counterclaims from the bench. The KKR Defendants appealed the decision solely with respect to the dismissal of their fraud counterclaim. The First Department’s Decision The First Department unanimously affirmed. In their counterclaim, the KKR Defendants alleged that Atlas knew before the Auction that “it could not close on a sale of the properties and had no intention of doing so.” The KKR Defendants further alleged that Atlas placed bids “it knew it could not pay” in order to “drive up the sale price of the properties” so that it could “receive any surplus above what it owed to Macquarie.” Thus, according to the KKR Defendants, “Atlas’ bidding strategy was a fraud: it was designed to mislead KKR and the other auction participants into bidding against Atlas’ sham bids in order to increase Atlas’ profits.” Atlas claimed that these statements were not actionable as they were based on future events. The First Department agreed with the KKR Defendants. In particular, the Court held that “Plaintiff’s statement that its required deposit check was ‘on its way’ was an actionable statement of present fact, not of future expectation.” Slip Op. at *1. Notwithstanding, the First Department agreed with the motion court that the KKR Defendants failed to satisfy the justifiable reliance element of their fraud counterclaim. The KKR Defendants maintained that they relied on Atlas’s representation that the deposit check was “on its way”.  According to the KKR Defendants, because of the representation, they assumed the Atlas bids were legitimate and therefore made competing bids against Atlas. Had they known at the outset that Atlas was not a serious bidder, said the KKR Defendants, they would have stopped bidding at $73.75 million, which was the amount needed to beat Macquarie’s bid of $73.5 million. The First Department held that the KKR Defendants’ reliance was not justifiable. However, defendants’ allegations are insufficient to show reasonable reliance as a basis to continue bidding against plaintiff, where the fact that the check was not there was disclosed, the auctioneer disqualified plaintiff from bidding, and when the auctioneer later allowed bidding he stated that he was making “an exception” from the bidding procedures to allow plaintiff to bid ( ACA Fin. Guar. Corp. v Goldman, Sachs & Co. , 25 NY3d 1043, 1044 <2015> ). Id . The Court also rejected the KKR Defendants’ argument “that they reasonably relied on some implied representation about plaintiff’s financial condition.” Id . Nor do defendants’ allegations that they reasonably relied on some implied representation about plaintiff’s financial condition fare any better. By their own admission, defendants knew that plaintiff had defaulted on the underlying debt, that it had failed to tender the required deposit check for the auction, and that it was bidding more than the amount of the underlying debt. Based on this information, defendants ceased bidding some 15 minutes into the auction. Defendants do not allege they obtained any further information before making the decision to stop bidding. They had all the information necessary to determine that plaintiff likely did not have the ability to close. Id . Beacon Estates, LLC v. Ingrassia Background Plaintiffs commenced the action in 2017, seeking damages and declaratory relief associated with a 2007 agreement between Daniel P. Cappa, Sr. (“Cappa”), the sole member of plaintiff Beacon Estates, LLC (“Beacon”), and defendant Angelo Ingrassia (“Ingrassia”), the sole member of defendant 1612 Ridge Road, LLC (“1612 Ridge Road”). In their amended complaint, Plaintiffs asserted causes of action sounding in, inter alia , breach of contract and fraud. The fraud causes of action were based on, inter alia , the 2007 agreement between Cappa and Ingrassia whereby a permanent easement that allowed access to Beacon’s property by ingress and egress over property owned by 1612 Ridge Road was extinguished and replaced by a temporary easement. Plaintiffs alleged that Ingrassia misrepresented the terms of the 2007 agreement and exploited a personal relationship with Cappa to induce him into signing the 2007 document. Plaintiffs further alleged that, in October 2012, one of Cappa’s sons accompanied Cappa to a meeting with Ingrassia, during which Ingrassia indicated that Cappa’s easement was abandoned. Cappa questioned why the easement was abandoned, and Ingrassia told Cappa not to do anything until Ingrassia completed the sale of the property owned by 1612 Ridge Road. In 2013, 1612 Ridge Road sold its property to defendant Agree Rochester NY, LLC (“Agree”). Defendant L.A. Fitness International, LLC (“L.A. Fitness”) leases that property and operates a business thereon. In separate motions, Ingrassia, 1612 Ridge Road, L.A. Fitness, and Agree (collectively, “Defendants”) moved to dismiss the amended complaint against them contending, inter alia , that the claims asserted therein were time-barred. The motion court granted Defendants’ motions with respect to the second, fourth, and fifth causes of action in the amended complaint, sounding in breach of contract and fraud. The Appellate Division, Fourth Department, affirmed. The Court’s Decision The Court held that “defendants established that the action was commenced more than six years from the dates of the alleged acts of fraud.” Slip Op. at *1. As noted, the alleged fraud occurred in 2007 and the action was commenced in 2017. The Court also held that plaintiffs could not avail themselves of the two-year discovery rule, stating “that plaintiffs ‘possessed knowledge of facts from which they reasonably could have discovered the alleged fraud soon after it occurred, and in any event more than two years prior to the commencement of the action.’” Id ., quoting Brooks , 104 A.D.3d at 1180. Takeaway Readers of this Blog know that courts will not sustain a fraud claim in which the plaintiff fails to avail himself/herself/itself of the means to discover the truth or falsity of representations and omissions made by the alleged wrongdoer. Although the determination of whether reliance is justified is a fact sensitive one, ignoring facts that are in plain sight ( i.e. , facts that are publicly available), as in Atlas , is a sufficient reason to dismiss a fraud claim. Atlas underscores this principle. Beacon Estates highlights the need for litigants to act on facts and circumstances from which it could be reasonably inferred that they were the victims of a fraud. As Beacon Estates shows, the failure to bring suit when the facts indicate a fraud has occurred will result in dismissal. Thus, even though the discovery rule allows the victim of fraud to bring suit when the very nature of the fraud prevents him/her from knowing that he/she was defrauded, the courthouse doors will, nevertheless, close on the litigant who sits on his/her rights when the facts indicate that a wrong has be done.

This Blog, in “ Contract Must be Enforced According to Its Clear and Concise Terms Says Second Department ,” analyzed Gristede’s Operating Corp. v. Scarsdale Shopping Ctr. Assoc., LLC, 2019 N.Y. Slip Op. 07771 (2 nd Dep’t October 30, 2019), in which the Second Department found that, inter alia , clear and unambiguous contracts will be interpreted according their terms. The same analysis applies with respect to notice/termination provisions of construction contracts.  Thus, “ here a contract provides that a party must fulfill specific conditions precedent before it can terminate the agreement, those conditions are enforced as written and the party must comply with them.”  Summit Development Corp. v. Fownes , 74 A.D.3d 563 (1 st Dep’t 2010) (citations and quotation marks omitted).  The Summit Court, in reaching its decision, indirectly relied upon the Court of Appeals’ decision in A. S. Rampell, Inc. v. Hyster Co. , 3 N.Y.2d 369 (1957).  The Court in A. S. Rampell , adhering to the same principle, stated that “… where as here the parties have agreed to a termination clause, the clause has been enforced as written.  The parties assented to the terms of the contract when they entered into it, and no reason is now presented which justifies altering the clear provisions of the agreement.”  A. S. Rampell , 3 N.Y.2d at 382 (citations omitted). “Furthermore, this general rule fully applies to construction agreements, whose parties cannot terminate contractors unless they follow the contractual procedures to the letter .”  Mike Building & Contracting, Inc. v. Just Homes, LLC , 27 Misc.3d 833, 843 (Sup. Ct. Kings Co. 2010) (citations and internal quotation marks omitted).  Similarly, the Court in MCK Building Assoc., Inc. v. St. Lawrence University , 301 A.D.2d 726 (3 rd Dep’t 2003), in affirming the motion court’s grant of summary judgment in favor of the plaintiff, stated: Initially, we agree with Supreme Court that the contract was wrongfully terminated for default. Notably, defendant's contract termination letter not only cited defendant's “lack of job performance” and “disregard of contractual obligations,” but specifically stated that it was terminating the contract pursuant to provisions of one of the contract documents that governs termination for default. Under these provisions, plaintiff was required to provide 10 days' prior written notice of termination to defendant, its surety and the University. However, defendant's termination letter indicated that the contract was terminated “as of this date” and defendant's surety and the University were not given written notice of termination until several days later. Under these circumstances, it is clear that defendant's termination of the contract was wrongful. MCK Builders , 301 A.D.2d at 727 -28. The Supreme Court of the State of New York, New York County, in East Empire Construction Inc. v. Borough Construction Group LLC , 2019 NY Slip Op 33284(U) (Sup. Ct. New York Co. November 1, 2019), recently revisited these issues.  A defendant in Borough , Borough Construction Group LLC (“Group”), retained plaintiff subcontractor (“East”) to perform work on a project.  A relevant provision of the subcontract provides: if the Subcontractor defaults or neglects to carry out the Work in accordance with this Agreement and fails within five working days after receipt of written notice from the Contractor to commence and continue correction of such default or neglect with diligence and promptness, the Contractor may, by appropriate Modification, and without prejudice to any other remedy the Contractor may have, make good such deficiencies and may deduct the reasonable cost thereof from the payments then or thereafter due the Subcontractor. The subcontract also provides that Group “may terminate it if plaintiff repeatedly fails or neglects to carry out its work and ‘fails within a ten-day period after receipt of written notice to commence and continue correction of such default or neglect with diligence and promptness….’”  Similarly, the “scope of work sheet, annexed to the subcontract, provides that if plaintiff fails to perform, plaintiff will be issued a seventy-two hour notice to cure, and if it fails to rectify and remedy the situation within that timeframe, the project's owner will remove it from the project, and any costs and fees associated with its failure to perform will be back-charged and deducted from any monies owed to plaintiff.” After some disputes about East’s work, Group sent a letter to East giving East “notice of termination and that the subcontract ‘will be terminated in three business days from the date of this letter ….”  While the parties attempted to resolve their differences and the termination notice was cancelled, an “identical notice of termination letter as before, and again directed plaintiff to cease all work at the site immediately.” East sued Group alleging, among other things, that Group breached the subcontract by wrongfully terminating East, “failing to give the opportunity to cure any alleged defects, and failing to pay .]  The East Court granted East’s motion for partial summary judgment as to liability and, in so doing, stated: If a contract provides that a party must fulfill conditions precedent before it can terminate it, those conditions are enforceable and binding, and a party that fails to follow them may be held liable for breach of contract. (Black Riv. Plumbing, Heating & A. C., Inc. v Bd. of Educ. Thousand Is. Cent. Sch. Dist., 175 AD3d 1051 <4th dept 2019> ). Thus, in Black Riv. Plumbing, where the parties' contract required defendants to give plaintiff seven days to cure any deficiencies before terminating the contract, and defendants failed to do so, the Court granted the plaintiffs motion for liability on its breach of contract claim. *   *   * Here, the parties' subcontract and scope of work sheet require both written notice to plaintiff and an opportunity for it to cure any alleged defaults before the subcontract may be terminated. Even assuming that Borough's 72-hour notice of termination was sufficient rather than the 10-day notice provided in the subcontract, the notice directed plaintiff to cease immediately all of its work on the project, thus failing to give it an opportunity to cure before the subcontract was terminated. Plaintiff thereby establishes, prima facie, that defendants breached their agreement by failing to comply with its proper termination provisions. The East Court also found that because of Group’s breach of the subcontract by “fail to terminate the subcontract properly, barred from seeking an offset based on plaintiff’s alleged defaults, specifically, any expenses incurred by for finishing plaintiff’s work and other damages and costs and fees associated with plaintiff’s failure to perform, all of which depends on adherence to the notice, opportunity to cure and, termination procedures in the subcontract and scope of work sheet.” The East Court also found that “ failed to comply with section 3.4 of the subcontract, which requires five-days notice and an opportunity to cure before may correct plaintiff’s alleged deficiencies and ‘deduct the reasonable cost thereof’ from payments due plaintiff.”

Under New York’s rules of contract interpretation, “when parties set down their agreement in a clear, complete document, their writing should be enforced according to its terms.” Riverside S. Planning Corp. v. CRP/Extell Riverside, L.P. , 13 N.Y.3d 398, 403 (2009); W.W.W. Assoc. v. Giancontieri , 77 N.Y.2d 157, 162 (1990). “This rule is applied with special force ‘… where commercial certainty is a paramount concern, and where the instrument was negotiated between sophisticated, counseled business people negotiating at arm’s length.” Riverside , 13 N.Y.3d at 403-404, quoting Vermont Teddy Bear Co. v. 538 Madison Realty Co. , 1 N.Y.3d 470, 475 (2004) (internal quotation marks, ellipses and citations omitted). In such circumstances, courts are “extremely reluctant to interpret an agreement as impliedly stating something which the parties have neglected to specifically include.” Rowe v. Great Atl. & Pac. Tea Co. , 46 N.Y.2d 62, 72 (1978). Consequently, courts will not “by construction add or excise terms, nor distort the meaning of those used and thereby make a new contract for the parties under the guise of interpreting the writing.” Reiss v. Financial Performance Corp. , 97 N.Y.2d 195, 199 (2001) (internal quotation marks and citation omitted). When the parties to a contract dispute its meaning, resolution of the dispute often turns on the meaning of a term or terms in the agreement. Charges of ambiguity as to the meaning of the contract typically follow. Such was the case in Gristede’s Operating Corp. v. Scarsdale Shopping Ctr. Assoc., LLC , 2019 N.Y. Slip Op. 07771 (2d Dept. Oct. 30, 2019) ( here ). “Whether an agreement is ambiguous is a question of law for the courts . . . Ambiguity is determined by looking within the four corners of the document, not to outside sources.” Kass v. Kass , 91 N.Y.2d 554, 566 (1998) (citations omitted). The entire contract must be reviewed and “ articular words should be considered, not as if isolated from the context, but in the light of the obligation as a whole and the intention of the parties as manifested thereby. Form should not prevail over substance and a sensible meaning of words should be sought.” Atwater & Co. v. Panama R.R. Co. , 246 NY 519, 524 (1927). Where the language chosen by the parties has “a definite and precise meaning,” there is no ambiguity. Greenfield v. Philles Records , 98 N.Y.2d 562, 569 (2002) (citation omitted). In Gristede’s , the dispute turned on the meaning of an amendment to a contract for the sale of a lease between Gristedes and defendants Walgreen Co. and Walgreen Eastern Co. (“Walgreen”). In 2006, the Gristede’s plaintiffs and the Walgreen defendants were exploring and negotiating the potential sale of, inter alia , certain leases held by the plaintiffs. By letter dated November 14, 2006, the Walgreen defendants agreed that, for a three-year period, they would refrain from approaching, discussing, or negotiating with the owner of any of the premises at issue (“2006 Confidentiality Agreement”). Approximately five months later, on April 4, 2007, plaintiffs and the Walgreen defendants entered into a contract of sale in which the Walgreen defendants agreed to purchase six leases from the plaintiffs (the, “2007 Contract of Sale”). As relevant to the appeal, one of those leases concerned a property located in Scarsdale, N.Y. – known as Store No. 90 – that was owned by defendant Scarsdale Shopping Center Associates, LLC (“Scarsdale”). The Gristede’s plaintiffs and the Walgreen defendants additionally agreed to extend the 2006 Confidentiality Agreement for five years from the date of execution of the contract of sale. By amendment dated January 1, 2009, the Gristede’s plaintiffs and the Walgreen defendants amended the 2007 Contract of Sale so as limit its applicability to the purchase of only one lease for a property located in Manhattan, and “to terminate the Contract with to all other Property which has not been sold, assigned or otherwise transferred by Sellers to Purchaser as of the date hereof” (the “2009 Amendment”). Further, the amendment provided that “the Contract is terminated and deemed of no further force with respect to each and every Property (other than Store 561) which, as of the date hereof, has not been sold, assigned or otherwise transferred by Sellers to Purchaser pursuant to the Contract . . . and that the parties shall have no rights, obligations and liabilities thereto except to the extent that the same expressly survive the termination of the Contract.” Store No. 90 was one of the unsold properties that was excised from the 2007 Contract of Sale by the 2009 Amendment. In 2011, an alleged agent of the Walgreen defendants contacted Scarsdale about Store No. 90. Thereafter, the Gristede’s plaintiffs and the Walgreen defendants resumed negotiations regarding the potential sale of leases held by the plaintiffs. By letter agreement dated January 24, 2012 (the “2012 Agreement”), the Gristede’s plaintiffs and the Walgreen defendants confirmed that all the “terms, covenants and conditions” of the 2006 Confidentiality Agreement, as amended by the 2007 Contract of Sale would “remain in full force and effect.” Later in 2012, the Gristede’s plaintiffs commenced the action against the Walgreen defendants and Scarsdale. As relevant to the appeal, as against the Walgreen defendants, the plaintiffs asserted a breach of contract claim (the “fifth cause of action”) alleging that the Walgreen defendants breached the 2006 Confidentiality Agreement. The Walgreen defendants moved for summary judgment to dismiss the fifth cause of action. The Motion Court granted the motion. The Gristede’s plaintiffs appealed, and the Appellate Division, Second Department, affirmed. The Court found that “the Walgreen defendants established, prima facie, that the 2009 Amendment unambiguously terminated the 2006 Confidentiality Agreement insofar as its pertained to Store No. 90.” Slip Op. at 3. “Indeed,” said the Court, “in narrowing the applicability of the 2007 contract of sale to one property located in Manhattan, the plaintiffs and the Walgreen defendants clearly and unambiguously stated that they ‘shall have no rights, obligations and liabilities’ as to, among other properties, Store No. 90, ‘except to the extent that the same expressly survive the termination of the Contract.’” Id . (orig’l emphasis added). The Court noted that “ he 2007 contract of sale and 2009 amendment contain no express language preserving the 2006 confidentiality agreement as to Store No. 90.” Id . Consequently, “since an essential element of a breach of contract cause of action is the existence of a valid contract, the alleged contact between an agent of the Walgreen defendants and Scardale in 2011 could not have constituted a breach of the 2006 confidentiality agreement, as that agreement was clearly and unambiguosly terminated as to Store No. 90 at that time.” Id . (citations omitted). The Court rejected the claim that there was a breach because the 2012 Agreement provided that 2006 Confidentiality Agreement remained in full force and effect: “Although the subsequent 2012 agreement recited that the 2006 confidentiality agreement ‘remain in full force and effect,’ there was clearly no contractual prohibition against contact between the Walgreen defendants and Scarsdale in existence when the contact between the Walgreen defendants and Scarsdale was allegedly made.” Id . Takeaway Gristede’s shows that a clear and concise contract will be enforced according to its terms.  Claims of ambiguity will fail, as in Gristede’s , when the contract, read as a whole, and not in isolation, is susceptible to only one interpretation. This is especially so when the language used has a definite and precise meaning and cannot be the subject of a difference of opinion. In Gristede’s , the Court found that the agreements at issue satisfied these well-settled principles.

Previously, this Blog has written about the difficulties a party encounters when trying to vacate an arbitral award. ( E.g. , here , here and here .) Indeed, courts are very reluctant to disturb the decision of an arbitrator. The cases show that the courts limit vacatur of an arbitral award to a very narrow set of statutory and judicially created reasons. As shown in Matter of Nexia Health Tech., Inc. v. Miratech, Inc. , 2019 N.Y. Slip Op. 07701 (1st Dept. Oct. 24, 2019) ( here ), interpretative errors of law and fact are insufficient to overturn an arbitral award. Arbitration and the Policy That Favors It 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. In recent years, arbitration has increased in popularity and is part of most business and commercial contracts and employment agreements. This increase in popularity reflects the federal and state policy that arbitration is a favored means of resolving disputes. See , e.g. , Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp. , 460 U.S. 1, 24 (1983) (stating that the FAA evinces a “liberal federal policy favoring arbitration”); Epic Sys. Corp. v. Lewis , 138 S. Ct. 1612, 1621 (2018); Harris v. Shearson Hayden Stone, Inc. , 82 A.D. 2d 87, 91-93 (1st Dept.), aff’d , 56 N.Y.2d 627 (1981) (“ his State favors and encourages arbitration as a means of conserving the time and resources of the courts and the contracting parties. . . .”). In 1925, Congress enacted the United States Arbitration Act, now known as the Federal Arbitration Act (“FAA”), for the express purpose of making “valid and enforceable written provisions or agreements for arbitration of disputes arising out of contracts, maritime transactions, or commerce among the States or Territories or with foreign nations.” Its primary purpose is to ensure that “private agreements to arbitrate are enforced according to their terms.” Volt Info. Scis., Inc. v. Board of Trustees of Leland Stanford Junior Univ. , 489 U.S. 468, 479 (1989). Whether enforcing an agreement to arbitrate or construing an arbitration clause, courts and arbitrators must “give effect to the contractual rights and expectations of the parties.” Volt , 489 U.S. at 479. “ s with any other contract, the parties’ intentions control.” Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc. , 473 U.S. 614, 626 (1985). This is because an arbitrator derives his/her powers from the parties’ agreement to forgo the legal process and submit their disputes to private dispute resolution. See AT&T Techs., Inc. v. Communications Workers , 475 U.S. 643, 648-649 (1986). Underscoring the consensual nature of private dispute resolution, parties are “generally free to structure their arbitration agreements as they see fit.” AT&T Techs. , 475 U.S. at 648-649. And, they may specify with whom they choose to arbitrate their disputes. E.g. , Moses H. Cone , 460 U.S. at 20. It therefore falls to courts and arbitrators to give effect to contractual limitations, and when doing so, courts and arbitrators must not lose sight of the purpose of the exercise: to give effect to the intent of the parties. Volt , 489 U.S. at 479. Judicial Review of Arbitral Awards The Court’s role in reviewing an arbitration award is limited. An arbitration award will be confirmed even when the award does not conform to a court’s sense of justice so long as the arbitrator “offer even a barely colorable justification for the outcome reached.” Wien & Malkin LLP v. Helmsley-Spear, Inc. , 6 N.Y.3d 471, 479-80 (2006) (internal quotations omitted); Matter of Daesang Corp. v. NutraSweet , 167 A.D.3d 1, 15 (1st Dept. 2018), lv. denied , 32 N.Y.3d 915 (2019). Thus, an arbitral award will not be subject to vacatur for ordinary errors, even if an arbitrator’s legal and procedural rulings might reasonably be criticized on the merits. Id . As the United States Supreme Court observed: “The potential for . . . mistakes is the price for agreeing to arbitration.” Oxford Health Plans LLC v. Sutter , 569 U.S. 564, 572-573 (2013). See also Wilkins v. Allen , 169 N.Y. 494, 497 (1902) (noting that “however disappointing may be,” parties that have bargained for arbitration “must abide by it”). Under Section 10(a) of the FAA, a court will vacate an arbitral award for the following reasons: (1) the award was procured by corruption, fraud, or undue means; (2) there was evident partiality or corruption in the arbitrators . . . ; (3) the arbitrators were guilty of misconduct in refusing to postpone the hearing, or in refusing to hear evidence pertinent and material to the controversy, or of any other misbehavior by which the rights of any party have been prejudiced; or (4) the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made. 9 U.S.C. § 10(a)(1)-(4). here.=">here."> Apart from Section 10(a) of the FAA, courts have vacated arbitral awards when an arbitrator manifestly disregards the law. Duferco Intl. Steel Trading v. T. Klaveness Shipping A/S , 333 F.3d 383, 388 (2d Cir. 2003); Goldman v. Architectural Iron Co. , 306 F.3d 1214, 1216 (2d Cir. 2002) (citing DiRussa v. Dean Witter Reynolds Inc. , 121 F.3d 818, 821 (2d Cir 1997)). See also Matter of Daesang , 167 A.D.3d at 15-16 (citing Wein , 6 N.Y.3d at 480-81). Importantly, the doctrine does not apply to the facts. Wein , 6 N.Y.3d at 483. Application of the doctrine is limited. Matter of Arbitration No. AAA13-161-0511-85 Under Grain Arbitration Rules , 867 F.2d 130, 133 (2d Cir. 1989). It is a doctrine of last resort. Duferco , 333 F.3d at 389. It requires more than a simple error in law or a failure by the arbitrators to understand or apply it; and, it is more than an erroneous interpretation of the law. Id . The doctrine is “limited to the rare occurrences of apparent egregious impropriety on the part of the arbitrators.” Daesang , 167 A.D.3d 1, 15-16. To modify or vacate an award on the ground of manifest disregard of the law, a court must find both that (1) the arbitrators knew of a governing legal principle yet refused to apply it or ignored it altogether, and (2) the law ignored by the arbitrators was well defined, explicit, and clearly applicable to the case. Wallace v. Buttar , 378 F3d 182, 189 (2d Cir. 2004) (quoting Banco de Seguros del Estado v. Mutual Mar. Off., Inc. , 344 F.3d 255, 263 (2d Cir 2003)). See also Wien , 6 N.Y.3d at 480-81 (footnotes omitted). The petitioner bears a heavy burden when invoking the doctrine. As one district court observed, the manifest disregard standard is so difficult to satisfy that it “will be of little solace to those parties who, having willingly chosen to submit to inarticulated arbitration, are mystified by the result; for a party seeking vacatur on the basis of manifest disregard of the law ‘must clear a high hurdle.’” Goldman Sachs Ex’ion & Clearing, L.P. v. Official Unsecured Creditors’ Comm. of Bayou Grp. , 758 F. Supp. 2d 222, 225 (S.D.N.Y. 2010). Matter of Nexia Health Technologies, Inc. v. Miratech, Inc. Matter of Nexia arose in the context of information technology services that were performed by defendant Miratech, Inc. (“Miratech”), for plaintiff, Nexia Health Technologies, Inc. (“Nexia”). The dispute has its origins in 2012, when Nexia decided to upgrade its software platform, which had been in commercial use for approximately ten years. Nexia wanted to develop a next generation version of the software platform, Version 10 (“V10”), that would use modern development languages and incorporate more advanced software tools and architecture than the version then-in use. By May 2015, Nexia had partially developed V10, but needed external assistance to complete the upgrade for commercial release. Miratech contacted Nexia to offer its services in completing the new version of the software platform (“V10 Project”). Thereafter, in June 2015, the parties executed a Letter of Intent (“LOI”). The LOI defined the initial contractual relationship between Nexia and Miratech, the work to be performed in connection with the upgrade to V10 and informed the later negotiations and formation of the Master Services Agreement (“MSA”) between the parties. On January 1, 2016, the parties executed the MSA. The MSA contained certain limitations on liability. In Section 13.1, the parties agreed that neither would be liable for indirect damage (including negligence), loss or damage of data, loss of potential clients, lost profits, business fields or any other damages of the kind. In Section 13.2, the parties agreed that “total liability under a SOW/PO < i.e. , statements of work/purchase orders> i.e., statements of work/purchase orders> (including the sum of damages and loss reimbursements of a Party under the SOW) not exceed 10% of amounts paid by to Miratech during the 12 month period ending with the date of a Claim of other Party.” Thus, under this section, “ he total liability under an Agreement (including the sum of damages and loss reimbursements of a Party under the Agreement) not exceed (1) USD $1 million or (2) 10% of the amounts paid by to Miratech under the Agreement during the 12 month period ending with the date of the Claim of the other Party, whichever of the two amounts is lower.” Pursuant to the parties’ agreement, Miratech was to perform its services in three phases. Nexia paid Miratech the agreed-on fee for Phase 0 of the V10 Project, as well as the fee for completing Phase 1 of the project. In total, Nexia paid Miratech more than $1.6 million (Cdn) to develop the V10 software. Nexia claimed that it never received a product that met the contractual specifications in the MSA or had any commercial value. According to Nexia, as of April 30, 2016, the agreed upon deadline for completing Phase 2 of the V10 Project, Miratech had failed to deliver a compliant and stable version of V10 that could be delivered to Nexia’s clients for further testing. As a result, said Nexia, one of its primary clients cancelled its contract with the company. Because of Miratech’s alleged failure to timely deliver a marketable product, Nexia terminated the MSA on June 1, 2016. Miratech commenced an arbitration for payment of the amounts due in connection with the work performed in completing Phase 2 and Phase 3 of the V10 Project. Nexia counterclaimed, alleging that, among other things, Miratech breached the MSA. The arbitrator found in favor of Meritech. The arbitrator held that Miratech was entitled to be paid for all the time reflected in the invoices it submitted to Nexia in connection with Phase 2 of the V10 Project. The arbitrator also held that Miratech was to be compensated for Phase 3 of the V10 Project although there was no meeting of the minds as to the pricing of the work performed during Phase 3 as Nexia had been unjustly enriched by Miratech’s work during that phase. Consequently, the arbitrator awarded Miratech $1,183,633.60 (Cdn) for the work performed during Phase 2 of the V10 Project and $321,428.57 for the work performed during Phase 3 of the project. The arbitrator also awarded Miratech $410,549.24 (Cdn) in interest. At issue in Matter of Nexia was whether the arbitrator manifestly disregarded the law in failing to apply the limitations of liability clause of the MSA ( i.e. , Section 13.2) to the damages awarded for Phase 2 of the V10 Project. Slip Op. at *1. The Supreme Court held that the arbitrator did not manifestly disregard the limitations of liability clause. In doing so, the court denied Nexia’s petition to vacate the award and granted Meritech’s cross motion to confirm the award. The Court’s Decision The Appellate Division, First Department, affirmed. The Court found that the arbitrator “gave a colorable justification for the outcome reached.” Slip Op. at *2. “In reaching his conclusion,” observed the Court, “the arbitrator did not contradict an express term of the contract, rather, he interpreted it.” Id . The arbitrator found that a correct reading of the clause “assumes that invoices and amounts due must have been paid and the clause limits liability upon payment in the ordinary course.” Since no invoices were paid for Phase 2, the arbitrator reasoned that the limitation of liability clause did not limit the damages awarded to respondent for work performed under Phase 2. Id . “Even if the arbitrator’s interpretation was erroneous,” noted the Court, “it not equate to manifest disregard of the law.” Id . “Vacatur on the basis of manifest disregard of a contract is appropriate . . . where the arbitral award contradicts an express and unambiguous term of the contract.” Id . (quoting Wien at 6 N.Y.3d at 485). Moreover, the Court held that vacatur was not appropriate under 9 USC § 10(a)(4) of the FAA ( i.e. , the arbitrator exceeded his authority) because the arbitrator “had the power to interpret the contract and decide the issues based on the parties’ submissions.”   Id . Takeaway The First Department’s analysis and opinion, though short, underscores the difficulties a party faces trying to vacate an arbitration award on any of the enumerated grounds under the FAA and the manifest disregard of the law doctrine – difficulties that this Blog has noted in its previous posts. In light of the difficulties one encounters trying to vacate an arbitral award, parties agreeing to arbitrate their disputes should do so with their eyes wide open.  Arbitration can be a very effective forum for the resolution of disputes. It is a less formal and less costly alternative to resolve disputes.  But, as Matter of Nexia shows, parties should expect to live with the outcome of their arbitration, even if the outcome seems unjust or erroneous, or both.

There has been a lot of litigation regarding an out of possession landlord’s tort liability to third parties.  Generally, an out of possession landlord “is not liable for injuries resulting from the condition of the demised premises….”  Henry v. Hamilton Equities, Inc. (Ct Appeals October 24, 2019).  An exception exists where “the landlord covenants in the lease or otherwise to keep the land in repair.”  Henry (citing , Putnam v. Stout , 38 N.Y.2d 607 (1976)) (internal quotation marks and brackets omitted).  The general rule and its exception have a long history in the Court of Appeals and English law. In Cullings v. Goetz , 256 N.Y. 287 (1931), overruled by Putnam v. Stout , 38 N.Y.2d 607 (1976), plaintiff, after being injured while attempting to open defective sliding entrance doors at a garage, sued the lessee of the automobile repair shop where he was injured as well as the lessor/owner of the property.  The tenancy was subject to an oral lease.  “The trial judge left the question to the jury whether as one of provisions the owners had agreed to make the necessary repairs .”  Cullings , 256 N.Y. at 289.  The trial court instructed the jury that, in the event such an agreement was found, and a “failure to repair after notice of the need, owners as well as lessee were to be held for any negligence in the unsafe condition of the doors.”  Cullings , 256 N.Y. at 289. The Cullings lessor appealed after a jury found in favor of the plaintiff as against both defendants.  The Appellate Division reversed the trial court and dismissed the complaint as against the lessor holding that the failure of the owners to keep the promise to repair was unavailing to charge them with liability in tort.”  Cullings , 256 N.Y. at 289.  The Appellate Division ruled that “liability in tort must be confined to the lessee, whose possession and dominion were exclusive and complete.”  Cullings , 256 N.Y. at 289 - 90. The Cullings Court of Appeals, in concurring with the Appellate Division, held that “in this country as in England, a covenant to repair does not impose upon the lessor a liability in tort at the suit of the lessee or of others lawfully on the land in the right of the lessee.”  Cullings , 256 N.Y. at 290 (citations omitted).  “Liability in tort is an incident to occupation or control … occupation and control are not reserved through an agreement that the landlord will repair.”  Cullings , 256 N.Y. at 290 (citations omitted). The Court of Appeals, in Putnam v. Stout , 38 N.Y.2d 607 (1976), had occasion to reconsider the reasoning of, and overruled its decision in, Cullings.   The plaintiff in Putnam was injured when her foot got stuck in a hole in the driveway of a supermarket.  Plaintiff sued the lessee supermarket and the lessor property owner.  The Putnam Court of Appeals affirmed the liability rulings of the trial court and Appellate Division that both the lessee and lessor were liable for plaintiff’s injuries. Among other things, the lease in Putnam provided: the Tenant covenants and agrees that it will make all necessary incidental repairs to the interior of the demised premises. All other necessary repairs the Landlord agrees to make. * * * Should the Landlord neglect or refuse to make any such repairs * * * within a reasonable time after notice that the same are needed, the Tenant without liability or forfeiture of its term hereby demised may have such repairs made at the expense of the Landlord and may deduct from the rent the cost thereof. Putnam, 38 N.Y.2d at 613 (internal quotation marks and brackets omitted).  Because the tenant had the right and control to repair the defects in the driveway, the Court concluded that the tenant was properly found liable.  Putnam, 38 N.Y.2d at 613. The landlord in Putnam, relying on Cullings, argued that it had no liability for plaintiff’s injuries.  The Court of Appeals stated that the time to “reevaluate our adherence to the Cullings rule and reappraise the modern trend toward assessing liability solely upon the basis of the covenant to repair” has come.  Putnam, 38 N.Y.2d at 614 (citation omitted).  In overruling Cullings , the Putnam Court stated: We overrule Cullings … and adopt the Restatement formulation as the law rule to be applied. The Restatement rule rests on a combination of factors which, we think, more accurately and realistically place an increased burden on a lessor who contracts to keep the land in repair: First, the lessor has agreed, for a consideration, to keep the premises in repair; secondly, the likelihood that the landlord's promise to make repairs will induce the tenant to forego repair efforts which he otherwise might have made; thirdly, the lessor retains a reversionary interest in the land and by his contract may be regarded as retaining and assuming the responsibility of keeping his premises in safe condition; finally, various social policy factors must be considered: (a) tenants may often be financially unable to make repairs; (b) their possession is for a limited term and thus the incentive to make repairs is significantly less than that of a landlord; and (c) in return for his pecuniary benefit from the relationship, the landlord could properly be expected to assume certain obligations with respect to the safety of the others. Putnam, 38 N.Y.2d at 617 - 18 (citations omitted).  Thus, the Putnam Court held that “a landlord may be liable for injuries to persons coming onto his land with the consent of his lessee solely on the basis of his contract or covenant to keep the premises in repair.”  In determining that, in light of the holding, the lessor in Putnam was liable to the plaintiff, the Court stated: … it is clear that the landlord is also liable to plaintiff. It is undisputed, of course, that plaintiff was on the land with the permission of , that covenanted to keep the driveway in repair, that the disrepair created an unreasonable risk of harm to plaintiff, which performance of the covenant would have prevented, and that since had not even attempted to repair the driveway, he failed to exercise reasonable care to perform his contract. We conclude, therefore, that liable to plaintiff. The Henry Court of Appeals had the opportunity to revisit Putnam .  In reiterating the general rule of liability, the Court stated: Landowners generally owe a duty of care to maintain their property in a reasonably safe condition, and are liable for injuries caused by a breach of this duty. The duty is premised on the landowner's exercise of control over the property, because the person in possession and control of property is best able to identify and prevent any harm to others. In contrast, a "landowner who has transferred possession and control is generally not liable for injuries caused by dangerous conditions on the property. (Citations, quotation marks and brackets omitted.) The plaintiff in Henry was a nurse who was injured after slipping on water caused by a leaking roof in the nursing home where she worked.  As to the parties’ repair obligations: he lease stated that the tenant would, at its "sole cost and expense, maintain and keep all parts of the leased premises . . . in a good state of repair and condition." Moreover, although maintained the right to enter the facility to make repairs if the tenant failed to do so, the lease specified that it was not to be construed "as making it obligatory upon the part of to make such repairs or perform such work." Rather, the lease provided that "shall not be required to maintain, repair or replace any part of the leased premises or any of its fixtures, furniture, machines, equipment or appurtenances. Therefore, under the subject lease, it was the tenant who was obligated to make the repairs that related to the accident.  Accordingly, under a straightforward Putnam analysis the landlord should have no liability to the plaintiff.  The plaintiff in Henry , however, tried to use additional facts to confer liability on the landlord.  The subject nursing home was financed with a mortgage insured through the Federal Housing Administration, which is part of HUD.  Among other things, the agreements with HUD, which were incorporated into amendments to the lease, required the landlord to maintain the “mortgaged premises, accommodations and the grounds and equipment appurtenant thereto, in good repair and condition.”  Significantly, “the HUD regulatory agreement, as incorporated into the 1978 amendment to the lease, did not alter the contractual relationship between the and regarding control of the premises or replace 's contractual duty to perform maintenance and repairs at the facility.” As explained by the Henry Court of Appeals, “ he issue presented on this appeal is whether exception applies to a regulatory agreement between defendants, as owners of the property, and … HUD, as guarantor of the mortgage on defendants' premises.  After analyzing Putnam , the Court concluded that “it is the relationship between those two parties — the landlord and the tenant — as reflected in their agreements regarding the maintenance of the property, that drives the analysis.”  In this regard, the Henry Court stated: Critically, the HUD regulatory agreement, as incorporated into the 1978 amendment to the lease, did not alter the contractual relationship between the and regarding control of the premises or replace 's contractual duty to perform maintenance and repairs at the facility. Although the terms of the HUD agreement were to supersede all other requirements in conflict therewith, the regulatory agreement did not conflict with, or absolve of, its responsibilities under the original lease. Indeed, as previously noted, the amendment continued all terms from the lease that did not conflict with the regulatory agreement. Given the absence of a conflict on the issue of 's duties to make repairs, the HUD agreement, as incorporated into the lease amendment, was not a covenant that could be said to displace 's duties or alter the relationship between landlord and tenant in the manner contemplated by . In that regard, an analysis of the Court's rationale in Putnam for adopting the rule further indicates that the exception does not apply to (and should not be expanded to cover) the HUD regulatory agreement. In particular, the Putnam Court's emphasis on the likelihood that the landlord's promise to make repairs will induce the tenant to forgo repair efforts which it might otherwise have made clearly is not implicated by that agreement. The record reflects that regularly performed repairs (although perhaps negligently), including repairs to the alleged injury-causing roof condition in 2009, and retained a contractor to make further repairs to the roof two weeks before the accident. In addition, the regulatory agreement required monthly deposits into a reserve fund to be used for replacement of structural elements and mechanical equipment at the facility, and the 1978 amendment to the lease permitted only to withdraw money from the fund "for the purposes for which such fund is established." Significantly, successfully sought HUD's authorization for the release of money from this fund for the purpose of maintaining the facility's sprinkler system, whereas nothing in the record suggests that defendants ever performed any repairs. After its analysis, the Henry Court determined that the Putnam exception to the general rule regarding out of possession landlords was inapplicable to the case and, therefore, the landlord had no liability to plaintiff.  It should be noted that Justice Rivera filed a lengthy dissenting opinion in Henry . TAKEAWAY Lease language requiring a landlord to make certain repairs to leased premises could operate to make the landlord liable for personal injuries.

It is well settled that parties are free to contractually shorten a limitations period as long as their intent to do so is clearly stated and the time period is reasonable. Whitney Lane Holdings, LLC v. Don Realty, LLC , 159 A.D.3d 1163, 1165 (3d Dept. Mar. 8, 2018); John J. Kassner & Co. v. City of New York , 46 N.Y.2d 544, 550-551 (1979); see also CPLR 201, 213. But what is reasonable? As one might think, the answer to the question depends upon the facts and circumstances of each case. And, in that regard, it is “ he circumstances, not the time, the determining factor.” Executive Plaza, LLC v. Peerless Ins. Co. , 22 N.Y.3d 511, 519 (2014) (internal quotation marks and citation omitted). Often, the issue of reasonableness turns on the accrual date for the cause of action. For this reason, “an otherwise reasonable limitation period may be rendered unreasonable by an inappropriate accrual date.” Executive Plaza , 22 N.Y.3d at 519. Indeed, the enforceability of a contractual accrual date depends upon “whether the plaintiff had a reasonable opportunity to commence its action within the period of limitation.” Id . (internal quotation marks and citation omitted). As the Court of Appeals noted, “A ‘limitation period’ that expires before suit can be brought is not really a limitation period at all, but simply a nullification of the claim.” Id . at 518. In DiGesare Mech., Inc. v. U.W. Marx, Inc. , 2019 N.Y. Slip Op. 07668 (3d Dept. Oct. 24, 2019) ( here ), the Appellate Division, Third Department, was asked to decide, among other things, whether a shortened limitations period was too short to be considered fair and reasonable. DiGesare Mech. arose from the work at an improvement to public property known as the SUNY New Paltz New Residence Hall (“Project”). Defendant, U.W. Marx, Inc. (“Marx”), was engaged to construct the Project for the Dormitory Authority of the State of New York (“DASNY”) pursuant to a written agreement. The plaintiff, DiGesare Mechanical, Inc. (“DiGesare”), was engaged by Marx to perform certain work on the Project. Defendant, Liberty Mutual Insurance Company (“Liberty Mutual”), issued the Labor and Material Payment Bond required by State Finance Law §137, which promised, in relevant part, to pay unpaid subcontractors and suppliers to Marx under certain conditions. The Project began in mid-2014. According to DiGesare, it performed the necessary work and properly invoiced Marx, who did not object to the submitted invoices within the statutorily provided l2-day period. DiGesare contended that FOIL requests made to DASNY revealed that DASNY paid the total amount of the Project cost “less only retainage<,> ” including payment for DiGesare’s work on the Project. However, claimed DiGesare, Marx failed to remit $213,230.41 owed to Plaintiff for its services and supplies. DiGesare further noted that when it made a claim with Liberty Mutual for compensation, Liberty Mutual declined to make the payment, arguing that it was not obliged to do so under the bond. According to Defendants, DiGesare was not paid due to its faulty workmanship, which resulted in remediation, and DiGesare’s failure to maintain its schedule in connection with both its exterior and interior work, thus causing significant delays in the Project which resulted in litigation between DASNY and Marx. As a result, said Marx, DASNY held $l,893,115.20 from Marx due to the significant delays. Defendants contended that DiGesare knew of these delays, as there were several meetings and correspondence sent regarding the payments. These included threats made to DiGesare that monies owed to it would be held, which Defendants contended DiGesare understood as its last invoice was for “payment in full, less only retainage.” Plaintiff commenced the action on April 26, 2016. The Complaint alleged four causes of action against the Defendants: three against Marx, including breach of contract by non-payment, account stated on the unpaid invoices, and recovery in quantum meruit; as well as a single cause of action against Liberty Mutual seeking to collect against the statutorily required Labor and Material Payment Bond posted by Liberty Mutual. Marx answered the complaint by general denials, alleging various affirmative defenses, including that the action was time-barred by a shortened statute of limitations, as well as a single counterclaim alleging that it was DiGesare that breached the written contract. Liberty Mutual joined issue by denying the allegations of the Complaint and asserting eight affirmative defenses. DiGesare moved for summary judgment on its first, second and fourth causes of action (breach of contract by non-payment, account stated on the unpaid invoices, and against Liberty Mutual on the obligations of the Payment Bond), and Defendants cross-moved for summary judgment dismissing the complaint against Marx. Liberty Mutual opposed the relief sought by DiGesare, but made no affirmative application for relief. The motion court denied DiGesare’s motion, finding that a triable issue of fact existed as to whether Marx had breached the contract, and granted Defendants’ cross motion for summary judgment dismissing the complaint against Marx on the ground that DiGesare’s claims against Marx were time-barred by a six-month limitation period set forth in the subcontractor agreement. The motion court found the language of the two contracts at issue to be “clear and distinct”. Under the subcontractor agreement, “ ny claim by the Subcontractor against the Contractor must be filed with the Court within six (6) months after the Subcontractor’s last day of work on the Project site and must be commenced in New York State Supreme Court, County of Rensselaer.” Under the Payment Bond, “ o suit or action shall be commenced hereunder by any claim . . . fter expiration of one (1) year following the date on which ceased work of said Contract,” unless the limitation was prohibited by law. Similarly, the motion court found the shortened limitations periods to be fair and reasonable, noting that other courts had found a 6-month period in claims similar to the one at issue in the action to be permissible, including “this exact contract provision between a subcontractor and Marx. See Pace Plumbing & Heating, Inc. v. Ellis Hosp. , Index No. 242191-12 (Sup. Ct., Rensselaer County 2015) (noting exact provision against Marx). Thus, concluded the motion court, DiGesare had six months from October 13, 2015 to commence an action against Marx, and had one year from August 2015 to commence an action against Liberty Mutual. DiGesare did not commence the action until April 26, 2017. DiGesare appealed. The Third Department reversed. The Court found that the shortened limitations period in the subcontractor agreement nullified DiGesare’s claims because it did not provide DiGesare a reasonable opportunity to commence a litigation for non-payment. Here, plaintiff had no such opportunity, because the timing of its payment was subject to a condition – Marx’s receipt of payment from DASNY – that plaintiff could not control and that did not occur before the limitation period expired. Had plaintiff attempted to commence an action within the six-month period, the action would have been subject to dismissal as premature, as plaintiff’s claim had not yet accrued. Marx’s argument that plaintiff could have timely commenced its action within six months after the submission of its sixteenth invoice – the first invoice that Marx did not pay – is without merit, as Marx neither claimed nor showed that it had received payment from DASNY for plaintiff’s work within that time period, so that the claim would then have been due and payable. …The conflict in the subcontractor agreement between the limitation period and the payment provisions had the effect of nullifying plaintiff’s breach of contract claim; thus, the six-month limitation period is unreasonable and unenforceable, and Supreme Court should not have dismissed plaintiff’s complaint as time-barred. Slip Op. at *1. The Court noted that the facts and circumstances surrounding the payment from DASNY to Marx supported its reversal: The subcontractor agreement provided for plaintiff to receive monthly progress payments while work on the project was ongoing, less a specified percentage withheld as retainage, to be paid within seven days after Marx received payment from DASNY. Plaintiff was entitled to final payment of the entire unpaid balance following completion of the project and upon Marx’s receipt of payment from DASNY. Plaintiff established that it submitted a total of 20 invoices to Marx for its work on the project; Marx paid plaintiff for the first 15 of these invoices, but neither paid the amounts claimed in the final five invoices nor gave plaintiff written notice of disapproval of any of the invoices as required by the subcontractor agreement. In addition, plaintiff submitted pleadings from a separate litigation commenced by Marx against DASNY and the project architect. In that action, Marx had asserted that its work had been delayed by design defects and other errors and omissions on the part of DASNY and the project architect, and that DASNY had failed to make full payment to Marx for its work. DASNY counterclaimed against Marx for delay damages. Plaintiff submitted evidence revealing that this litigation was settled in February 2018, and that Marx received a settlement payment from DASNY thereafter. Plaintiff asserts that this settlement amount constituted DASNY’s final payment to Marx within the meaning of the subcontractor agreement. Therefore, plaintiff argues that Marx’s contractual obligation to make final payment to plaintiff was not triggered, and plaintiff’s cause of action for breach of contract did not accrue until the settlement was paid in 2018 — long after the six-month contractual limitation period expired in 2016. Id . Based upon the foregoing facts, the Third Department rejected Marx’s argument that DASNY’s settlement payment should not be considered the final payment for purposes of determining DiGesare’s entitlement to final payment by Marx under the subcontractor agreement as that payment was to settle a litigation only. “Marx commenced the litigation against DASNY to collect the unpaid balance it was allegedly owed,” observed the Court, “and it has neither claimed nor shown that DASNY made a payment that should be considered final payment to Marx on any other date.” Id . Takeaway Contractually shortened statutes of limitation limit a plaintiff’s right of action because they require him/her to act more quickly than the law would have otherwise permitted. “Generally intended to prevent stale claims which are difficult to defend,” a shortened limitations period encourages vigilance by the parties to a contract, thereby making it less likely there will be continued wrongdoing. Oppedisano v. D’agostino , 2017 N.Y. Slip Op. 32882 (Sup. Ct., Queens. County 2017). Thus, as long as the shortened period is reasonable, and otherwise conforms with the law, a shortened period of limitation is legally valid. Parties run into difficulties when, as in DiGesare Mech. , the shortened limitations period prevents the plaintiff from commencing his/her action within the limitations period. If the period “expires before suit can be brought,” then, as the Court of Appeals noted, and the DiGesare Mech . Court held, it “is not really a limitation period at all, but simply a nullification of the claim.”

To assert a fraud claim, a plaintiff must allege “a misrepresentation or a material omission of fact which was false and known to be false by defendant, made for the purpose of inducing the other party to rely upon it, justifiable reliance of the other party on the misrepresentation or material omission, and injury.” Mandarin Trading Ltd. v. Wildenstein , 16 N.Y.3d 173, 178 (2011) (internal quotation marks and citation omitted); Lama Holding Co. v Smith Barney , 88 N.Y.2d 413, 421 (1996). Often, plaintiffs complain that statements couched in terms of “belief” or “expectation” are false and should be actionable. Not surprisingly, however, courts have declined to find such statements actionable. The reason: they are “mere puff” or statements of opinion or exaggeration that no reasonable person would take seriously. Thompson v. Procter & Gamble Co. , 2018 WL 5113052, at *2 (S.D. Fla. Oct. 19, 2018); see also Hamilton Exhibition, LLC v. Imagine Exhibitions, Inc. , 2019 WL 2590639, at *3 (S.D.N.Y. June 11, 2019); Barilli v. Sky Solar Holdings, Ltd. , 389 F. Supp. 3d 232, 252 (S.D.N.Y. 2019); Davis v. Avvo, Inc. , 345 F. Supp. 3d 534, 542 (S.D.N.Y. 2018) (“ efendant’s … advertising of attorneys as ‘highly qualified,’ ‘the right,’ or the ‘best’ nonactionable puffery” under the Lanham Act and New York General Business Law). In contrast to puffery and expressions of opinion, a misrepresentation is a false statement of present or historical fact. Oregon Public Employees Retirement Fund v. Apollo Group Inc. , 774 F.3d 598, 606 (9th Cir. 2014). Misrepresentations of fact are actionable because they are capable of objective verification. E.g. , White v. Davidson , 150 A.D.3d 610, 611 (1st Dept. 2017). See also SEC v. Todd , 642 F.3d 1207, 1216-17 (9th Cir. 2011). On October 25, 2019, Judge William H. Pauley III addressed the foregoing principles in The Hertz Corp. v. Accenture LLP , 19-cv-3508 (S.D.N.Y. Oct. 25, 2019) ( here ), wherein he dismissed a claim for violations of the Florida Deceptive and Unfair Trade Practices Act (“FDUTPA”) because the challenged statements, which the Court held sounded in fraud, were mere puffery or too vague to be actionable. The Hertz Corp. v. Accenture LLP Background In 2016, Hertz decided to undergo a digital makeover by developing a new website and a suite of mobile applications for its vehicle rental brands (the “Project”). Since Hertz did not have the necessary expertise, it solicited proposals from technology service firms, including Accenture. Ultimately, Hertz hired Accenture following a one-day marketing presentation in which Accenture touted its expertise in website and mobile application development. The presentation contained slides stating that Accenture’s staff consisted of “800 xperts” who comprised “ he best talent in the world.” The presentation also stated “ e’ve got the skills you need to win” and that Accenture would “put the right team on the ground day one.” The Project was to be conducted in phases, and the services and deliverables for each phase were, in turn, specified in letters of intent (“LOIs”) and corresponding statements of work (“SOWs”). The LOIs and SOWs were governed by a Consulting Services Agreement between Hertz and Accenture that had been in place since 2004. Between August and November 2016, Accenture completed work on Phase 1, which involved various planning services and the development of a “Solution Blueprint” describing the processes and technologies needed to complete the Project. On January 30, 2017, Accenture and Hertz entered Phase 2 of the Project pursuant to an LOI that required Accenture to design, build, test, and deploy the website and mobile applications. Accenture committed to a December 2017 “go-live” date. Phase 2, however, was plagued with difficulties. By September 2017, Accenture informed Hertz that it would not be able to meet the promised December 2017 go-live date and requested an extension until January 2018. Accenture later requested a second extension until April 2018. Hertz alleged that many of Accenture’s problems in completing the Project were related to Accenture’s misrepresentations about the expertise of its staff. Hertz contended that Accenture’s developers were not experts as promised. Instead, they were inexperienced and unfamiliar with the technologies that Accenture recommended to Hertz for the Project. This inexperience, claimed Hertz, manifested itself in Accenture’s poor website and mobile application coding. Hertz further alleged that Accenture struggled to implement its “RAPID” technology, which was intended to streamline the development of portions of Hertz’s new website. Accenture recommended the RAPID technology, explaining that its implementation required expertise which Accenture’s developers possessed. Based upon the foregoing, Hertz acquired licenses for the technology. Ultimately, however, according to Hertz, Accenture failed to implement RAPID, and it later acknowledged that it “spent a good deal of time” trying to “fight[] through integration of RAPID” into the Project. Thereafter, Hertz hired a new technology services provider for the Project in June 2018 and terminated Accenture’s services. After Hertz removed Accenture from the Project, Hertz allegedly learned that Accenture had misrepresented the extent of its code testing. In total, Hertz paid Accenture over $32 million in fees and expenses during the Project. Hertz filed suit alleging, inter alia , that Accenture violated the FDUTPA. In that regard, Hertz alleged that Accenture made two categories of misrepresentations: (1) misstatements contained in the 2016 marketing presentation; and (2) misstatements concerning Accenture’s expertise with RAPID technology and the extent of its code testing. Accenture moved to dismiss the FDUTPA claims on the grounds that they failed to state a claim.  Specifically, Accenture argued that the alleged misstatements in the first category ( i.e. , misstatements contained in the 2016 marketing presentation) were not actionable as they were mere puffery, and the misstatements in the second category ( i.e. , misstatements concerning Accenture’s expertise with RAPID technology and the extent of its code testing) failed to satisfy the heightened pleading requirements of Rule 9(b). The Court agreed with Accenture and dismissed the FDUTPA claims. The Court’s Decision Hertz contended that, within the 2016 marketing presentation, Accenture falsely represented that its staff consisted of “800 xperts” amounting to “ he best talent in the world” and that Accenture would “put the right team on the ground day one” – a team that Accenture represented possessed “the skills you need to win”. Hertz averred that Accenture’s personnel were not experts. According to Hertz, most of Accenture’s developers were junior, inexperienced, and located offshore. Accenture claimed that, although the alleged misstatements satisfied the heightened pleading requirements of Fed. R. Civ. P. 9(b), they were nevertheless deficient because they were non-actionable puffery. Judge Pauley held that Accenture’s representation that it housed “800 xperts” amounting to “ he best talent in the world,” along with its promise that it had “the skills you need to win” and would “put the right team on the ground day one,” were “quintessential examples of puffery.” Slip Op. at 9. Such statements, noted the Court, were “analogous to statements that courts within ircuit have routinely dismissed as non-actionable puffery, albeit in non-FDUTPA cases.” Slip Op. at 8 (citations omitted). The Court rejected Hertz’s reliance on two Florida cases in which the courts held the puffery to be actionable. In the first one, the statements involved consumer goods ( e.g. , beer and dish soap) that were purchased by ordinary shoppers who could consider them to be “more than just a salesman’s lavish claims” ( Thompson , 2018 WL 5113052, at *2), and in the second one, the statements were part of a larger marketing campaign and packaging ( Marty v. Anheuser-Busch Cos. , 43 F. Supp. 3d 1333, 1342 (S.D. Fla. 2014)). The Court observed that Hertz did not resemble the plaintiffs in Thompson and Marty because it is a sophisticated, multi-billion-dollar company, which had a long-standing relationship with Accenture dating back to 2004. Slip Op. at 9. Accordingly, the Court concluded that the alleged misstatements in the marketing presentation were not actionable. Judge Pauley also held that Hertz failed to satisfy the heightened pleading requirements of Fed. R. Civ. P. with respect to Hertz’s claim that Accenture falsely represented its RAPID expertise and the extent of its website and mobile application code testing. Slip Op. at 9-10. The Court noted that the claim rested “on a single, vague accusation that ‘Accenture falsely led Hertz to understand that its developers had the required expertise to use RAPID properly.’” Id . at 10, citing the Complaint. “This conclusory allegation,” held the Court, “cannot satisfy Rule 9(b), as the Complaint fail to explain how or when Accenture led Hertz to develop that understanding.” Id . (citation omitted).  Under Rule 9(b), a plaintiff must (1) specify the statements that the plaintiff contends were fraudulent, (2) identify the speaker, (3) state where and when the statements were made, and (4) explain why the statements were fraudulent. Rombach v. Chang , 355 F.3d 164, 170 (2d Cir. 2004) (quotation marks omitted). In other words, the plaintiff must “set forth the who, what, when, where and how of the alleged fraud.” U.S. ex rel. Resnick v. Weill Med. Coll. of Cornell Univ. , 2010 WL 476707, at *4 (S.D.N.Y. Jan. 21, 2010) (quotation marks omitted). The Court explained that although Hertz discussed Accenture’s recommendation that Hertz use RAPID for the Project, it failed to plead more – i.e. , the who, what, when, where and how of the alleged fraud. “ s Accenture notes,” said Judge Pauley, “the mere fact that Accenture recommended RAPID to Hertz not support Hertz’s assertion that Accenture misrepresented its expertise.” Slip Op. at 10. Judge Pauley deemed Hertz’s allegations concerning Accenture’s code testing to be “likewise insufficient.” Id . In this regard, the Court noted that Hertz failed to identify any misstatement, stating that “ he Complaint baldly assert that ‘Accenture’s developers . . . misrepresented the extent of their testing of the code’” without specifying “what Accenture represented about its code testing in the first place.” Id . Thus, the Court dismissed “Hertz’s FDUTPA claim … with prejudice in its entirety.” Id . Takeaway Hertz shows that regardless of the circumstance, a plaintiff alleging fraud must plead the claim with particularity. Hertz also reminds litigators that mere puffery will not suffice to state a claim for relief. More is needed. The plaintiff must come forward with statements that are objectively verifiable. Finally, Hertz teaches that if a litigant is going to allege fraud, he/she must identify the statement or omission alleged to be false. Vague assertions about a fact or circumstance will not suffice to withstand a motion to dismiss.

Under the present “commencement by filing” system, an action (or proceeding) (collectively, an “Action”) is commenced by filing ( CPLR 304 (a))the initiatory paper(s) with the “clerk of the court in the county in which the ction … is brought or any other person designated by the clerk of the court for that purpose (CPLR 304(c)).  Once an Action is commenced, the plaintiff (or petitioner) (collectively, a “Plaintiff”) must effectuate service of process pursuant to the parameters of CPLR 306-b , which provides: Service of the summons and complaint, summons with notice, third-party summons and complaint, or petition with a notice of petition or order to show cause shall be made within one hundred twenty days after the commencement of the ction, provided that in an ction, except a proceeding commenced under the election law, where the applicable statute of limitations is four months or less, service shall be made not later than fifteen days after the date on which the applicable statute of limitations expires.  If service is not made upon a defendant within the time provided in this section, 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. Among other things, CPLR 306-b provides that, in general, service of process on a defendant (or respondent) (collectively, a “Defendant”) must be effectuated within 120 days of the commencement of an Action.  The Court of Appeals in Leader v. Maroney, Ponzini & Spencer , 97 N.Y.2d 95 (2001), explained the history of CPLR 306-b. According to Leader , “ s originally enacted in 1992, CPLR 306-b transformed New York from a commencement-by-service to a commencement-by-filing jurisdiction.”  Leader , 97 N.Y.2d at 100 (citation omitted).  Plaintiffs were “considerabl benefit ” by “making the act of filing the point at which a claim is interposed for Statute of Limitations purposes.”  Leader , 97 N.Y.2d at 100 (citation omitted).  Under the old statute, a Plaintiff was afforded 120 days to effectuate service of process and the Action would be “deemed dismissed” if service was not timely made.  Leader , 97 N.Y.2d at 100 (citation omitted).  “The plaintiff was free to commence a new ction and serve process within a second 120-day period from the date of the automatic dismissal, even if the Statute of Limitations had expired.”  Leader , 97 N.Y.2d at 100 (citation omitted).  For a variety of reasons, the “deemed dismissed” provisions of the old statute were deemed “unnecessarily harsh” and was amended. Thus, the statute was amended to provide that if service of process is not made within the 120-day period after the commencement of the Action, an unserved Defendant can move for the dismissal, without prejudice, or the court could extend Plaintiff’s time to serve a Defendant “upon good cause shown or in the interest of justice.”  Leader , 97 N.Y.2d at 101 (citing CPLR 306-b). The Leader Court, in a trio of cases, was called upon to determine the circumstances under which a Plaintiff would be permitted to avail itself of the extension provisions of CPLR 306-b.  Importantly, the Leader Court made clear that, under CPLR 306-b, “good cause” and “the interest of justice” are “two separate standards by which to measure an application for an extension of time to serve” a Defendant if service is not made within 120 days of the commencement of an Action. Good Cause “To establish good cause, a plaintiff must demonstrate reasonable diligence in attempting service.”  Bumpus v. New York City Tr. Auth. , 66 A.D.3d 26, 31 (2 nd Dep’t 2009) (citing Leader ).  “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 (citations omitted).  Where “good cause” is not established, “courts must consider the ‘interest of justice’ standard of CPLR 306-b.”  Bumpus , 66 A.D.3d at 32 (citations omitted). Interest of Justice To satisfy the “interest of justice” standard, a court must “careful ” analyze “the factual setting of the case and … balance … the competing interests presented by the parties.”  Leader , 97 N.Y.2d at 105.  Significantly, the Leader Court made clear that to satisfy the “interest of justice” standard, “a plaintiff need not establish reasonably diligent efforts at service as a threshold matter,” although it may consider plaintiff’s efforts to serve a defendant as one of many factors in its analysis.  Leader , 97 N.Y.2d at 105.  In determining whether the “interest of justice” compels the granting of the extension, the court may consider “any other factor in making its determination, including expiration of the Statute of Limitations, 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.  Leader , 97 N.Y.2d at 105-6 (footnote omitted). By Decision and Order dated October 23, 2019, the Appellate Division, Second Department, performed a CPLR 306-b analysis in Nationstar Mortgage, LLC v. Wilson .  The plaintiff in Nationstar , after a series of assignments, became the holder of a note and mortgage that was in default.  In October of 2014, Nationstar commenced a foreclosure action and, within a week, “purportedly” served a defendant by suitable age and discretion at the property being foreclosed. Defendant answered, asserted a defense based on improper service and, thereafter, moved to dismiss the complaint on that ground alleging that he did not reside at the subject premises.  Just over two weeks after making the motion, plaintiff “purportedly” served defendant at his residence.  Defendant made another motion to dismiss arguing that a surveillance camera in the lobby of his building contradicted the process server’s affidavit that he gained entry to the building to serve defendant. Supreme court issued an order dated January 11, 2016, granting defendant’s motion to the extent of scheduling a hearing on the issue of service.  The court also found that defendant’s first motion to dismiss was rendered moot by the second service.  On April 20, 2016, plaintiff moved for extension of time to serve defendant pursuant to CPLR 306-b.  After a hearing, the court determined that defendant was not properly served and that the process server was “totally lacking in credibility” based on the security camera footage.  Nonetheless, the court granted plaintiff’s motion under CPLR 306-b. On defendant’s appeal, the Second Department found that “the Supreme Court improvidently exercised its discretion in granting the plaintiff’s motion pursuant to CPLR 306-b for leave to extend the time to serve with the summons and complaint.”  As to “good cause,” the Court found that plaintiff did not establish that it “exercised diligent efforts in attempting to effect proper service on defendant.”  Plaintiff’s first attempt at service was made at a location that was not defendant’s residence and defendant so stated in his answer and in his first motion to dismiss.  Further, the Court noted that plaintiff waited until the day before the expiration of the 120-day period to attempt to reserve defendant.  However, “in regard to the second attempt at service, which the Supreme Court totally discredited, it cannot be said that the plaintiff exercised reasonable diligence in attempting service.” The Court, after noting that that the “interest of justice” standard is broader than that of “good cause” and is meant to “’accommodate late service that might be due to mistake, confusion or oversight, so long as there is no prejudice to the defendant’” (quoting Leader ), found that: the plaintiff failed to establish entitlement to an extension of time for service in the interest of justice. Even though was on notice in April 2015—when moved to dismiss for the second time based on improper service, relying on the surveillance video recording of the process server—that the February 2015 service was defective, and even though a copy of the video was sent to counsel for on February 26, 2016, still waited until April 2016 to move for an extension of time to serve . The plaintiff’s motion therefore was not made until one year after moved to dismiss, and 16 months after the expiration of the 120-day service period. The facts that the action was timely commenced, that had actual notice of the action within the 120-day service period, and that the statute of limitations had expired by the time the plaintiff moved to extend the time to serve, militate in favor of granting the plaintiff’s motion to extend the time to serve. However, these factors are outweighed by the lack of diligence evidenced by the Supreme Court’s finding that the process server never served , despite the process server’s affidavit claiming he did serve . (Citations omitted.)

Melville, NY ( Law Firm Newswire ) October 23, 2019 -  Freiberger Haber LLP is pleased to announce that co-founding partner, Jeffrey M. Haber, has been named by Super Lawyers magazine to be among the top lawyers in the New York metropolitan area for the eighth consecutive year. Mr. Haber was recognized for his work in business litigation. As part of his history of professional achievements, he was also recognized as a Super Lawyer in 2008-2010 and 2012-2019. Super Lawyers Magazine® is an affiliate of Thomson Reuters. It recognizes attorneys who have distinguished themselves by both a high degree of professional achievement and by peer recognition. Each year, no more than 5 percent of lawyers are recognized as Super Lawyers by the magazine. The annual selection involves a survey of lawyers, independent research evaluation of candidates, and peer reviews within each practice area. The magazine publishes its lists nationwide, as well as in leading city and regional magazines and newspapers across the country. A description of the selection process can be found on the Super Lawyers website. About Freiberger Haber LLP Located in New York City and Melville, Long Island, Freiberger Haber LLP is dedicated to representing corporations, small businesses, partnerships and individuals in a broad range of complex business, construction and commercial litigation matters. Founded by Jonathan H. Freiberger and Jeffrey M. Haber, Freiberger Haber leverages more than 50 years of combined experience to deliver sophisticated and creative representation to its clients. The firm’s approach is results oriented and client-centric, providing clients with the sophisticated counsel expected from larger firms with the flexibility and agility of a small firm. ATTORNEY ADVERTISING. © 2019 Freiberger Haber LLP. The law firm responsible for this advertisement is Freiberger Haber LLP, 425 Broadhollow Road, Suite 416, Melville, New York 11747, (631) 282-8985. Prior results do not guarantee or predict a similar outcome with respect to any future matter. Contact Jeffrey M. Haber: Freiberger Haber LLP Melville Office (Main Office): 425 Broadhollow Road, Suite 416 Melville, New York 11747 Tel: (631) 282-8985 Fax: (631) 390-6944 New York Office: 420 Lexington Avenue Suite 300 New York, NY 10017 Tel: (212) 209-1005 Fax: (212) 209-7101 Email:  info@fhnylaw.com

Stenographic services are an important part of any litigation. After all, deposition and trial testimony must be recorded, as they are part of the record. Typically, the attorney noticing the testimony retains the court reporter and commits to be directly responsible for the costs of the services. In some states, such as New York, the attorney is legally responsible (by rule, regulation or statute) for the stenographer’s fees, unless specifically disclaimed in writing. There are times, however, when the attorney and the client have an arrangement whereby the court reporter is requested to bill the client directly for the services performed. New York’s Statute of Frauds and General Business Law require this arrangement to be in writing and communicated in writing to the court reporter. Otherwise, the attorney will be held personally liable for the costs of such services. Disputes arise when the court reporter bills the attorney for the services rendered and does not receive any payment therefor. The court reporter claims that it has an actionable claim for an account stated. But, as Justice Margaret A. Chan of the Supreme Court, New York County, found in Veritext Corp. Servs. v U.S. Adjustment Corp . , 2019 N.Y. Slip Op. 33058(U) (Sup. Ct., N.Y. County Oct. 15, 2019) ( here ), the statute of frauds may be a defense to such a claim. Below, this Blog examines the account stated doctrine and the statute of frauds applicable to a promise by an attorney to answer for the debt of his/her client – that is, the attorney’s promise as the agent of the client to pay a court reporter’s fees on behalf of that client. The Doctrine of Account Stated The common-law doctrine of account stated is rooted in medieval England. Citibank (S. Dakota) N.A. v. Jones , 184 Misc. 2d 63, 64 (Dist. Ct., Nassau County 2000), citing Teeven, A History of Legislative Reform of the Common Law of Contracts, 26 U. Tol. L. Rev. 35, 46 (1994). The doctrine “is widely accepted, not only in New York, but in most jurisdictions….” Id . An account stated may be defined, broadly, as an agreement, express or implied, between the parties to an account based upon prior transactions between them, with respect to the correctness of the separate items composing the account, and the balance due. Jim-Mar Corp. v. Aquatic Constr. , 195 A.D.2d 868, 869 (3d Dept. 1993), citing, inter alia, Interman Indus. Prods. v R. S. M. Electron Power , 37 N.Y.2d 151 (1975), and Chisholm-Ryder Co. v Sommer & Sommer , 70 A.D.2d 429 (4th Dept.1979). Stated differently, an account stated is an agreement, independent of the underlying agreement ( Episcopal Health Servs., Inc. v. Pom Recoveries, Inc. , 138 A.D.3d 917 (2d Dept. 2016)), regarding the amount due on past transactions ( JP Morgan Chase Bank, N.A. v. Rabel , 27 Misc. 3d 656 (N.Y. City Civ. Ct. 2010)). An account stated is predicated upon a transaction between the parties such that it creates a debtor and creditor relationship, prior to the statement of the account. Bank of New York-Delaware v. Santarelli , 128 Misc. 2d 1003, 1004 (County Ct., Broome County 1985). To make an account stated, the indebtedness must refer to an existing debt; it cannot be made to create a liability where none existed before. Ryan Graphics, Inc. v. Bailin , 39 A.D.3d 249, 250 (1st Dept. 2007). A cause of action alleging an account stated cannot be used to collect under a disputed contract. Ross v. Sherman , 57 A.D.3d 758 (2d Dept. 2008). Since an account stated sounds in breach of contract, the agreement may be implied as well as express ( i.e. , an express agreement to treat a statement of debt as an account stated). Chisholm-Ryder , 70 A.D.2d at 431 (citation omitted); Grinnell v. Ultimate Realty, LLC , 38 A.D.3d 600 (2d Dept. 2007). An agreement may be implied if a party receiving a statement of account keeps it without objecting to it within a reasonable time because the party receiving the account is bound to examine the statement and object to it, if there is an objection. Id . Notably, silence is deemed acquiescence and warrants enforcement of the implied agreement to pay. Id . (citations omitted). An agreement may also be implied if the debtor makes partial payment. The partial payment is considered acknowledgment of the correctness of the account. Id ., citing, inter alia , Parker Chapin Flattau & Klimpl v Daelen Corp. , 59 A.D.2d 375, 377 (1st Dept. 1977). See also Shea & Gould v. Burr , 194 A.D.2d 369 (1st Dept. 1993) (receipt and retention of account without objection within a reasonable time coupled with a partial payment gives rise to an actionable account stated entitling plaintiff to summary judgment). An account presented to and accepted by the debtor does not lose its character as an account stated by reason of the account including installment payments. However, an account stated may only encompass amounts not yet due if there remains no further obligation to be performed by the party claiming payment. Gurney, Becker & Bourne, Inc. v. Benderson Dev. Co., Inc. , 47 N.Y.2d 995, 996 (1979). To state a cause of action for an account stated, a plaintiff must allege that: (1) the defendant is indebted to the plaintiff for a specific amount, constituting the sum of one or several billing invoices delivered to the defendant over a particular period of time; (2) the plaintiff’s demands have not been complied with; (3) the accounts remain outstanding; and (4) there is an absence of objection from the defendant. In the absence of fraud, mistake or other equitable considerations making it improper to recognize the agreement, if the foregoing elements are satisfied, then the account is conclusive. A cause of action for an account stated will fail where the defendant has rendered to the plaintiff its objections to its obligation to pay the amounts billed within a reasonable time. Joe O’Brien Investigations Inc. v. Zorn , 263 A.D.2d 812 (3d Dept. 1999). For purposes of a claim of account stated, whether a bill has been held without objection for a period of time sufficient to give rise to an inference of assent is typically a question of fact, and becomes a question of law only in those cases where only one inference is rationally possible. Accent Collections, Inc. v. Cappelli Enterprises, Inc. , 94 A.D.3d 1026, 943 N.Y.S.2d 189 (2d Dept. 2012); Whiteman, Osterman & Hanna, LLP v. Oppitz , 105 AD3d 1162, 1163 (3d Dept. 2013). However, generalized objections lodged by a defendant after receiving a plaintiff’s billing statements do not constitute objections to the billing statements. Costopoulos v. DeCoursey , 151 A.D.3d 1452, 57 N.Y.S.3d 249 (3d Dept. 2017). The Statute of Frauds Relating to Stenographic Services In New York, the statute of frauds is found in General Obligations Law (GOL) § 5-701 through 5-705. These provisions require a signed writing for certain types of agreements, including, but not limited to, agreements to answer for the debt of another person. GOL § 5-701(a)(2). The purpose of the Statute of Frauds is “to avoid fraud by preventing the enforcement of contracts that were never in fact made.”  Fox Co. v Kaufman Org. , 74 N.Y.2d 136, 140 (1989). Where a party promises to answer for the debt of another, the promise, if it is to be enforceable, “must either be evidenced by writing or plaintiff must prove it is supported by a new consideration.” Martin Roofing v Goldstein , 60 N.Y.2d 262, 265 (1983). When an attorney, during the course of litigation, obtains court reporting services on his/her client’s behalf, he/she will be held personally liable for the costs of such services unless the attorney expressly disclaims such responsibility. Urban Ct. Reporting v. Davis , 158 A.D.2d 401, 402 (1st Dept. 1990). “This is   ... t seems to us to be more equitable to hold the attorney liable in the absence of his express indication to the contrary, since the attorney may avoid liability by the simple expedient of indicating to the reporting service or other provider of services that the client and not the attorney is liable for the obligations incurred.” Id . This view was adopted by the Legislature in its enactment of General Business Law (GBL) § 399-cc. Elisa Dreier Reporting Corp. v. Global Naps Network, Inc. , 84 A.D.3d 122, 125 (2d Dept. 2011) GBL § 399-cc provides that “when an attorney of record orders a stenographic record of any judicial proceeding, deposition, statement or interview of a party ... it shall be the responsibility of such attorney to pay for the services and the costs of such record except where ... the attorney expressly disclaims responsibility for payment of the stenographic service or record in writing at the time the attorney orders ... that the record be made.” The Legislature enacted Section 399-cc “to protect court reporters in the event they unable to recover payment for their services.” Elisa Dreir Reporting , 84 A.D.3d at 126-127. Veritext Corp. Servs. v U.S. Adj. Corp. Plaintiff, Veritext Corporate Services (“Veritext”), provided court reporting and deposition services to defendant, U.S. Adjustment Corp. (“USAC”). Veritext alleged that it provided the services to various USAC attorneys and law office clients with the understanding that all billing would be submitted to and paid by USAC. Veritext maintained that it sent invoices to USAC for these services and that USAC made sporadic payments leaving invoices in the amount of $100,817.83 outstanding. Veritext averred that it had no record of any objection to the amounts listed on the invoices and since partial payment was made by USAC at various points, Veritext continued to provide the court reporting services until August 2015. Veritext moved for summary judgment against USAC for an account stated. USAC opposed the motion. Veritext argued that USAC made partial payment on the outstanding invoices and retained the invoices without objection. USAC’s failure to object to any of the statements, coupled with the payments on the account, argued Veritext, indicated an acquiescence to the balance due, thereby entitling it to summary judgment on the account stated. USAC argued that the motion should be denied because there was no proof that there was an underlying contract obligating it to pay Veritext’s invoices. USAC maintained that because Veritext failed to submit an affidavit by anyone with personal knowledge of the alleged “understanding” between the parties or any express written agreement evidencing that USAC would be responsible for payment, Veritext’s claim for account stated must be denied. USAC further argued that Veritext’s claim was barred by the statute of frauds ( i.e. , G0L § 701(a)(2) and GBL § 399-cc) because Veritext provided services to “various clients of defendant” and “to different law offices and attorneys” without any writing evidencing an assignment or agreement by those parties for USAC to pay for the stenographic services. USAC explained that under GOL §701(a)(2) and GBL § 399-cc, Veritext’s claim for an account stated should fail as the stenographic services must be paid by the attorneys of record, not USAC, in the absence of proof of a written assignment. The Court denied the motion. The Court’s Decision The Court found issues of fact concerning USAC’s liability for the invoices – that is, USAC’s obligation to pay the invoices sent to Veritext. Slip Op. at *3. The Court explained its finding as follows: Crucially, it is unclear whether defendant is required to pay plaintiffs invoices. GBL 399-cc requires that an attorney of record pay for stenographic services. The submitted invoices include the phrase “Bill To”, followed by the name of the attorney of record, and an address of USAC’s place of business. Additionally, it is unclear from the submitted evidence whether the attorneys of record assigned their obligations to pay plaintiff to defendant. Viewed in the light most favorable to defendant, this indicates that the attorneys of record, not defendant, are obligated to pay plaintiff. As such, summary judgment is inappropriate at this time. Id . at **3-4. Takeaway GBL § 399-cc provides that the attorney of record must pay for the requested stenographic services unless such responsibility is expressly disclaimed in writing at the time the services are requested. In Veritext , issues of fact prevented the grant of summary judgment because it was unclear who was responsible for the payment of Veritext’s invoices.

Purchasing real estate, a new home for example, is an expensive proposition.  It is rare that a new home buyer has enough cash on hand to make the purchase.  Therefore, it is typical for such a purchaser to seek mortgage financing to fund the purchase.  For this very reason, a real estate buyer would be reluctant to enter into a contract for the purchase of real estate without the ability to cancel the contract if a lender declines the purchaser’s application for purchase money financing.  Enter the mortgage contingency clause, which is a contractual provision typically found in contracts relating to real estate transactions. The precise language of a mortgage contingency clause can vary from contract to contract, but typically provide that a contract can be cancelled if the purchaser is unable to qualify for the type of mortgage specified in the contract.  Which combination of parties can cancel the contract and the circumstances under which a contract can be cancelled is based on the specific language of the clause. A mortgage contingency clause does not only benefit a purchaser.  Such clauses are “also for the benefit of the seller who wants to limit the period of time in which the property is off the market.  In addition, it is reasonable to infer that the seller would prefer the guaranteed financial commitment of a bank rather than the sometime uncertain personal financial obligation of a purchaser.”  W.W.W. Associates, Inc. v. Giancontieri , 152 A.D.2d 333, 340 (2 nd Dep’t 1989), reversed on other grounds , 77 N.Y.2d 157 (1990) (citation omitted).  If a “mortgage contingency clause was solely for the benefit of the … purchaser and not grant the seller the option to cancel the contract in the event the purchaser failed to obtain a mortgage commitment by a specified date,” then the seller cannot cancel the contract if the buyer failed to obtain a mortgage.  Coneys v. Game , 141 A.D.2d 795 (2 nd Dep’t 1988) (citation omitted).  A mortgage contingency clause will be deemed to be for the benefit of a seller when the seller has the right to cancel the contract upon the buyer’s failure to obtain a mortgage.  Grossman v. Perlman , 132 A.D.2d 522, 523 (2 nd Dep’t 1987) (citation omitted). Further, “ mortgage contingency clause is construed to create a condition precedent to the contract of sale he purchaser is entitled to return of the down payment where the mortgage contingency clause unequivocally provides for its return upon the purchaser's inability to obtain a mortgage commitment within the contingency period.”  Blair v. O’Donnell , 85 A.D.3d 954 (2 nd Dep’t 2011) (citations and internal quotation marks omitted). In any event, mortgage contingency clauses are a fertile source of litigation.  As is made plain by the caselaw, courts will rely on the language of the mortgage contingency clause in question to define the parties’ rights and remedies.  Some examples of related litigation follow. On October 16, 2019, the Second Department decided Federico v. Dolitsky .  The defendants in Federico entered into a contract to purchase a real property from the plaintiff and made a sizable down payment.  In addition: rider to the contract contained a mortgage contingency clause providing that the buyers' obligation to purchase the subject property was contingent upon them obtaining a mortgage commitment for a conventional mortgage "in an amount not more than $292,300.00 for 25/30 years at the prevailing rate of interest." The buyers were required to "use due diligence" in providing documentation to their institutional lender. The rider also provided that if the buyers were unable to obtain a mortgage commitment within 45 days of the execution of the contract, "the Seller may either cancel this agreement or extend this provision for an additional period of up to thirty (30) days, at the end of which, either party may cancel this agreement without any further liability to the other." After the mortgage application was denied, the buyer’s attorney advised the seller’s attorney, in writing, of the denial and cancelled the contract pursuant to the mortgage contingency clause.  The Federico action was commenced after the seller refused to return the down payment.  Both parties moved for summary judgment – the buyers arguing that they “properly canceled the contract upon receiving notice that their application had been denied” and the seller arguing that the “buyers’ ‘unilateral cancellation of the contract…was a willful default under the contract of sale,’” requiring the return of the down payment. The Federico supreme court denied the buyers’ motion and granted summary judgment to the seller.  In affirming the lower court, the Second Department found the mortgage contingency clause to be “clear and unambiguous” and, therefore, under traditional rules of contract interpretation, “the intent of the parties must be found within the four corners of the contract, giving practical interpretation to the language employed and the parties’ reasonable expectations.”  (Citation and internal quotation marks omitted.)  Under the subject clause, the Second Department found, the seller “had the unilateral right to either cancel the contract or extend the mortgage contingency period for an additional 30 days.  The buyers were only entitled to cancel the contract upon the expiration of that 30-day period.”  Thus, the buyer’s cancellation of the contract immediately upon the declination of its initial application was found to be improper. The mortgage contingency clause in Lot 57 Acquisition Corp. v. Yat Yar Equities Corp. , 63 A.D.3d 1109 (2 nd Dep’t 2009) lot 57> lot 57>, provided: …In the event, however, that the Purchaser is unable to obtain by one hundred and eighty (180) days from the date Purchaser’s attorney receives a countersigned contract, and the purchaser has notified the attorney for the Seller by certified mail, return receipt requested by said date, then either party shall have the option to cancel this contract, and in which event the Purchaser’s down payment shall be refunded with interest earned thereon, if any. The purchaser in Lot 57 still wanted the property although it did not obtain a mortgage.  Accordingly, purchaser did not notify the seller that it did not obtain the mortgage.  Thus, purchaser could not cancel the contract for that reason and would have to purchase the property for cash.  Nonetheless, Yat Yar, the seller, sent a cancellation notice.  In modifying supreme court’s denial of summary judgment in favor of purchaser and granting summary judgment in favor of purchaser, the Lot 57 Court stated: On its renewed cross motion, Yat Yar failed to demonstrate its prima facie entitlement to judgment as a matter of law, since it did not establish the facial validity of its cancellation of a contract for the sale of the subject property pursuant to a particular contractual provision.  Specifically, although Yat Yar established that the plaintiff failed to timely procure a mortgage loan for the purchase of the subject property, Yat Yar's right to cancel the contract pursuant to the mortgage contingency clause did not arise until the purchaser notified it by certified mail, return receipt requested, of such failure. Under these circumstances, Yat Yar's purported cancellation of the contract, concededly before it even had knowledge of the plaintiff's admitted failure to obtain a mortgage commitment within the period prescribed by the contract, was not valid.  Where the procedures for cancellation provided for by the contract specify conditions precedent to the right of termination, those procedures must be followed. The plaintiff, on the other hand, made a prima facie showing of its entitlement to judgment as a matter of law on the complaint, which sought to compel specific performance of the contract, by submitting proof of the validity of the contract of sale, its performance thereunder, and that it was ready, willing, and able to proceed to closing.  In opposition, the defendant failed to raise a triable issue of fact. (Citations omitted.)