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Statutes of limitations encourage plaintiffs to pursue the prosecution of their claims as soon as they are known. As the term implies, they are statutory mechanisms that limit the duration of a defendant’s liability for all types of alleged wrongdoing, e.g. , fraud, breach of fiduciary and negligence. These statutes “promote justice by preventing surprises through revival of claims that have been allowed to slumber until evidence has been lost, memories have faded, and witnesses have disappeared.” Railroad Telegraphers v. Railway Express Agency, Inc. , 321 U.S. 342, 348-349 (1944); CTS Corp. v. Waldburger , 134 S. Ct. 2175, 2183 (2014). In Epiphany Community Nursery School v. Levey , 2019 N.Y. Slip Op. 00842 (Feb. 5, 2019) ( here ), the Appellate Division, First Department, was asked to consider the application of the statute of limitations to two separate claims of fraud and whether the plaintiff pleaded justifiable reliance sufficient to invoke the discovery rule ( i.e. , the exception to the six-year limitation period that is based upon the time within which the plaintiff discovered or could have discovered the fraud with reasonable diligence).  As discussed below, the Court affirmed the dismissal of the first set of claims and reversed the order as to the second set of claims, finding that Epiphany adequately alleged that it justifiably relied on the alleged misrepresentations. The Statute of Limitations Relevant to a Fraud Cause of Action in New York 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). The moving defendant 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). “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). Epiphany Community Nursery School v. Levey Background The complaint alleged two sets of fraudulent acts discovered in a matrimonial action between Wendy Levey (“Wendy”) and Hugh Levey (“Hugh”) that was settled in October 2016. The first series of alleged fraudulent acts occurred between 2002 and 2003 when Hugh induced Epiphany, a not-for-profit corporation that operates a kindergarten and nursery school on the Upper East Side of Manhattan, to sell its extracurricular programs to nonparty Magic Management LLC (“Magic”) for an unreasonably low price. At that time, Hugh had a 100% ownership interest in defendant January Management, Inc., general partner of nonparty January Partners, L.P., which was the sole member of Magic. Pursuant to an asset purchase agreement dated February 12, 2003, Epiphany sold its extracurricular programs to Magic for $300,000, $30,000 of which was paid in cash and the remaining $270,000 was to be paid pursuant to a promissory note payable over 10 years in installments of $27,000, plus interest. Magic also agreed to pay monthly rent to use Epiphany’s facilities. Hugh claimed that although Magic occupied less than 10% of Epiphany’s space, Magic’s rent would be $481,026. Magic’s rent was represented to be more than $100,000 above Epiphany’s rent for the building. Wendy, who did not have a financial background, signed the asset purchase agreement on Epiphany’s behalf without obtaining her own appraisal or verifying whether Magic paid the school what it owed. The complaint alleged that the $300,000 purchase price was based on a fraudulent valuation commissioned by Hugh, which was “substantially inaccurate.” By applying false figures, Hugh allegedly reduced the purchase price by $1.5 million. The complaint further alleged that if the valuation had been properly calculated, the purchase price would have exceeded $1.8 million. The second set of fraudulent acts allegedly took place between 2007 and 2013. Hugh made unauthorized transfers of over $5.9 million from Epiphany’s bank accounts to himself and some of the collateral defendants by linking the bank accounts to his private banking portfolio. Hugh, with the assistance of defendant Davie Kaplan CPA, P.C. (“Davie Kaplan”), falsely recorded these transfers in Epiphany’s general ledgers as “loans.” However, there were no documents to memorialize these “loans.” Nor were any loan payments ever made. The “loans” were subsequently characterized as “other receivables.” At the end of each year, the other receivables were offset by fake charges Epiphany owed defendant Gruppo Levey & Co. (“GLC”) or Gruppo, Levey Holdings Inc. (“GLH”), GLC’s parent company, for “consulting fees” and “lease commissions.” Epiphany commenced the action on August 31, 2016, alleging 13 causes of action, including: (1) fraud by Hugh and Davie Kaplan; (2) aiding and abetting fraud by the collateral defendants and Davie Kaplan; (3) breach of fiduciary duty by Hugh; and (4) aiding and abetting breach of fiduciary duty by the collateral defendants and Davie Kaplan. Defendants moved to dismiss the complaint. The motion court granted the motion and dismissed the complaint with prejudice. The motion court held that (1) the first set of fraud claims were time-barred; (2) the second set of fraudulent acts constituted conversion and were time-barred; and (3) the nonfraud claims sounded in accounting malpractice and were time-barred as well. Epiphany appealed. The Court’s Decision With regard to the first series of allegedly fraudulent transactions, the First Department affirmed the dismissal of the claims as time-barred, finding that “ he action was commenced more than six years after th cause of action accrued.” Slip Op. at *2. The Court also held that Epiphany could not rely on the two-year discovery rule because it “could have discovered the alleged fraud when Wendy, as Epiphany’s Executive Director, signed the asset purchase agreement on Epiphany’s behalf in 2003.” Id . The Court observed that even though Wendy did not have a financial background, she signed the asset purchase agreement “without obtaining her own appraisal<,> ” did not question the disproportionally high rent, which was the basis for the undervaluation of the asset<,> ” and did not “verify whether Magic paid the rent due or made payments on the promissory note.” Id . at *2 (citing Aozora Bank, Ltd , 137 A.D.3d at 689; Gutkin , 85 A.D.3d at 688). “As for the second set of fraudulent acts relating to the unauthorized bank transfers that occurred between 2007 and 2013,” the Court found that Epiphany’s claims fell within the two-year discovery rule. Id . The Court noted that “Hugh – with assistance from Davie Kaplan’s employee, David Pitcher – devised a fraudulent scheme to intentionally falsify the financial statements and books and records of Epiphany and kept the knowledge of these transfers from the school.” Id . at **2-3. “Hugh made the alleged illicit and unauthorized transfers from Epiphany’s bank accounts and fraudulently concealed them by falsely designating the entries in Epiphany’s books and records as ‘loans’, by falsely manipulating Epiphany’s books and records to convert the purported ‘loans’ into ‘other receivables’, and offsetting the loans by falsely claiming monies owed by Epiphany for consulting services that were never provided.” Id . at *3. The Court concluded that “ ince the acts were allegedly concealed from Epiphany, defendants not establish[] a prima facie case that the school was on notice of the unauthorized transfers.” Id . The Court went on to say that “even if defendants ha established a prima facie case, it not conclusively appear that Epiphany had knowledge of the facts from which the fraud could reasonably be inferred.” Id . The dissent disagreed with this holding, arguing that Epiphany did not justifiably rely on Hugh’s misrepresentations and that Epiphany failed to comply with CPLR § 3016(b) in alleging such reliance. The majority took issue with this position, arguing that Epiphany’s allegations were neither “bare legal conclusions” nor “inherently incredible.” Id . Instead, the Court found that “the complaint state in detail Hugh’s fraudulent misconduct” and identified “the close familial relationship between Hugh and Wendy,” which impacted “Wendy’s reliance on Hugh” to “properly manag Epiphany’s finances.” Id . at *4.  The Court explained as follows: Epiphany alleges that Wendy relied on Hugh’s representations because of their familial relationship and his position as director of Epiphany. From the mid-1990s, Hugh began to involve himself in the financial matters of Epiphany. He became a member of the Board of Directors and held the position until 2013. Wendy trusted her husband. He was an experienced investment banker who had consulted on multibillion dollar transactions. She believed that Hugh would use his skills to further the financial interests of Epiphany. Wendy had no reason to believe that he would loot Epiphany’s funds, treating it as one of his businesses. Epiphany alleges that Hugh’s explanation for his conduct was that he had helped set up Epiphany and had a 50% interest in it. Id . at *3. These allegations – the existence of a relationship of trust or confidence and the superior knowledge or means of knowledge on the part of the person making the representation – said the majority, sufficed to satisfy the justifiable reliance requirement. Braddock v. Braddock , 60 A.D.3d 84, 89 (1st Dept. 2009). Here, the complaint alleges that Hugh went to great lengths to conceal the unauthorized transfers and therefore, Epiphany - and Wendy, in her capacity as Executive Director of Epiphany - could not have discovered the alleged fraud with reasonable due diligence. In particular, Hugh “caused bank statements to be diverted to the offices of Gruppo Levy and GLH” so that his fraudulent scheme would not be discovered. He also allegedly initiated these transfers at meetings with the employees of Gruppo Levy and GLH, not Epiphany. Additionally, he recorded the transfers as loans on the books and records, before offsetting them by services that were allegedly not provided so that Epiphany would not be alerted to the transfers. The complaint alleges that Hugh and Davie Kaplan’s actions prevented the public and government regulators from uncovering the fraud. Id . at *4. The dissent argued that dismissal of the fraud claim concerning the second series of transactions should have been affirmed on statute of limitations grounds, not because the claims sounded in fraud, but because they sounded in conversion: “Plaintiff’s allegations concerning Hugh’s misappropriations from its bank account state a cause of action, not for fraud, but for conversion — a claim subject to a strict three-year statute of limitations that contains no discovery provision (CPLR 214<4> ).” Id . at *6. “Accordingly,” concluded the dissent, “plaintiff’s claim is time-barred, since the three-year limitation period for conversion expired no later than June 30, 2016, two months before this action was commenced.” Id . The dissent noted that even if the claim were one for fraud, Epiphany failed to satisfy the justifiable reliance element of the cause of action. The dissent observed that “ bsent from the complaint is any well-pleaded allegation that any faithful agent of plaintiff — whether officer, director or employee — actually read or heard, much less relied upon, a false representation made by Hugh or any other defendant concerning the wrongful transfers.” Id . at *6. While Wendy “relied on Hugh personally to manage financial affairs honestly and competently,” there was “no allegation that any agent of plaintiff actually relied on Hugh’s written misrepresentations — because no such agent is alleged ever to have read those misrepresentations.” Id . Consequently, “the complaint fail to identify any particular individual acting as plaintiff’s agent who, at any point in time, read and relied on these misrepresentations.” Id . “After all,” noted the dissent, “if plaintiff cannot name any agent through whom it relied on the subject statements, how can it claim to have relied on those statements?” Id . Takeaway Epiphany highlights the factual nature of pleading justifiable reliance for statute of limitations purposes.  As this Blog observed previously applying the statute of limitations to a fraud claim is complicated. ( Here .) Determining when accrual occurs, and when the claim should have been discovered, is not easy and often contested. Epiphany highlights the fact-intensive nature of the inquiry.

Readers of this Blog know that we have addressed fiduciary duty claims in the past ( here ), most often in the context of a claim against a financial advisor, a corporate officer, or an LLC member ( e.g. , here , here , here ). There are, of course, other relationships that involve fiduciary duties, e.g. , lawyers, bankers, business partners, corporate officers and directors, managing shareholders, personal representatives (executors and administrators), and trustees. Fiduciaries, such as those listed here, have an obligation to act in a trustworthy manner, with honesty, and in the best interests of those to whom they owe such duties. When fiduciaries breach these duties and obligations, as was alleged in Cohen & Lombardo, P.C. v. Connors , 2019 N.Y. Slip Op. 00755 (4th Dept. Feb. 1, 2019) ( here ), litigation typically ensues. There are two types of fiduciary relationships: 1) those created by law ( e.g. , statute) or contract; and 2) those that arise from the circumstances underlying the relationship between the parties and the nature of the transactions at issue. While courts generally look to a statute or contractual arrangement to determine the nature of the parties’ relationship ( e.g. , the first type of fiduciary relationship), the existence of a fiduciary relationship is not dependent solely upon a statute or contractual relation. See EBC I, Inc. v. Goldman, Sachs & Co. , 5 N.Y.3d 11, 20 (2005). Rather, the actual relationship between the parties determines the existence of a fiduciary duty ( e.g. , the second type of fiduciary relationship). Id . There are three forms of fiduciary duties (often referred to as the “triad” duties): due care, loyalty, and candor. The duty of care requires a fiduciary to act as a reasonable and prudent person would in a similar circumstance. The duty of candor requires a fiduciary to act with honesty and transparency – i.e. , he/she must fully disclose information that may harm the business or individual that is owed the duty. The duty of loyalty requires fiduciaries to act in good faith and with the best interests of the business or individual in mind, putting the interests of the business or individual above their own personal interests. Examples of a breach of the duty of loyalty include: usurping a corporate or business opportunity; acting with a conflict of interest; competing with the business, partnership or corporation; and misappropriating assets of the business, partnership or corporation. The reasons for the loyalty rule are evident. A person cannot fairly act for his/her interest and the interest of others in the same transaction. Consciously or unconsciously, he/she will favor one side or the other, and where placed in this position of temptation, there is always the risk that he/she will favor the position of self-interest. Any disinterested and independent decision that is made by a fiduciary is analyzed under the business judgment rule. The business judgment rule is based on the premise that a court should not be entitled to Monday-morning quarterback decisions made by fully informed individuals who are free from conflicts of interest. Auerbach v. Bennett , 47 N.Y.2d 619 (1979). Thus, the courts will not second-guess the decisions made by fiduciaries and will not hold them personally liable even if the decision turns out to be the wrong one. If a fiduciary breaches the duty of loyalty, the business judgment rule does not apply, and the fiduciary may be held personally liable for his/her actions. Cohen & Lombardo, P.C. v. Connors Cohen & Lombardo involved a common situation faced by law firms today – partners have disagreements over the direction of their firm and decide to leave and start a new competing one. Often the departure involves clients moving with the departing partners and associates from the old firm signing on with the new one. In New York, and elsewhere, “ he members of a partnership owe each other a duty of loyalty and good faith, and ‘ s a fiduciary, a partner must consider his or her partners’ welfare, and refrain from acting for purely private gain.’” Gibbs v. Breed, Abbott & Morgan , 271 A.D.2d 180 184 (1st Dept. 2000 (quoting, Meehan v. Shaughnessy , 404 Mass. 419, 434 (1989)). “Partners are constrained by such duties throughout the life of the partnership and ‘ he manner in which partners plan for and implement withdrawals is subject to the constraints imposed on them by virtue of their status as fiduciaries.’” Id . at 184-85 (quoting Hillman, Loyalty in the Firm: A Statement of General Principles on the Duties of Partners Withdrawing from Law Firms , 55 Wash & Lee L. Rev. 997, 999 (1998)). Defendants Daniel R. Connors (“Connors”) and James J. Nash (“Nash”) were shareholders in Cohen & Lombardo, P.C. (“C&L” or the “Firm”). Both terminated their respective ownership interests in the Firm on May 2, 2016. The following day, four associates of the Firm resigned from their employment with C&L to join Conners and Nash (collectively, “Associate Defendants”). C&L commenced the action seeking damages for breach of fiduciary duty, misappropriation, and conspiracy to violate fiduciary duties. In its complaint, C&L alleged that, between August 2012 and April 29, 2016, Connors and Nash devised a plan to leave the Firm and establish a new law firm, taking with them most of C&L’s civil litigation practice; that Connors and Nash conspired with the Associate Defendants to carry out this plan; and that, shortly after defendants’ departure from C&L, several of the Firm’s long-time clients transferred their cases to the new firm established by Connors and Nash. Defendants moved to dismiss the complaint pursuant to CPLR §§ 3211 and 3016. The motion court granted defendants’ motion in part by dismissing the causes of action for conspiracy to violate fiduciary duties against each of the defendants. The court denied the motion with respect to the causes of action against Connors for breach of fiduciary duty and misappropriation and the cause of action against Nash for breach of fiduciary duty. Both parties appealed. The Appellate Division, Fourth Department, affirmed. The Court’s Decision The Court held that the Firm had met its burden of pleading a breach of fiduciary duty with particularity. Slip Op. at *1 (citing Litvinoff v. Wright , 150 A.D.3d 714, 715 (2d Dept. 2017)). In that regard, the Court found that, for pleading purposes, the Firm satisfactorily alleged the elements of the claim against Conners and Nash, to wit: the defendants owed the Firm a fiduciary duty, that the defendants committed misconduct, and that the Firm suffered damages caused by that misconduct. Id . (citing Northland E., LLC v. J.R. Militello Realty, Inc. , 163 A.D.3d 1401, 1402 (4th Dept. 2018)). The Court also held that the Firm adequately alleged a misappropriation claim against Conners. In affirming the motion court, the Fourth Department drew a distinction between stating a claim and proving a claim on a pre-answer motion to dismiss, where factual matter was submitted on the motion: “where, as here, evidentiary material is submitted and considered on a motion to dismiss a complaint pursuant to CPLR 3211 (a) (7), the question becomes whether the plaintiff has a cause of action, not whether the plaintiff has stated one, and unless it has been shown that a material fact as claimed by the plaintiff to be one is not a fact at all, and unless it can be said that no significant dispute exists regarding it, dismissal should not eventuate.” Slip op. at *2 (internal quotation marks and brackets omitted; quoting Gawrych v. Astoria Fed. Sav. & Loan , 148 A.D.3d 681, 683 (2d Dept. 2017)). Against the foregoing, the Court declined to determine whether C&L could “ultimately establish its allegations.” EBC I , 5 N.Y.3d at 19 (“Whether a plaintiff can ultimately establish its allegations is not part of the calculus in determining a motion to dismiss”). Thus, the Court held that it was an issue of fact whether “the items allegedly taken by Connors constitute misappropriated material.…” Id . Takeaway Conners & Lombardo is as much about the fiduciary duties law partners and associates owe to the law firm at which they work as it is about the pleading standards under the CPLR in a pre-answer motion to dismiss. While the Court did not delve into the facts and the allegations in any depth, the decision illustrates the point that “on a motion to dismiss under CPLR 3211, the pleading is to be given a liberal construction, the allegations contained within it are assumed to be true and the plaintiff is to be afforded every favorable inference.” Simkin v. Blank , 19 N.Y.3d 46, 52 (2012) (citation omitted). The Court’s citation to Pludeman v. Northern Leasing Sys., Inc. , 10 N.Y.3d 486, 491-492 (2008)) underscores this point. In Pludeman , the Court of Appeals explained that the purpose of CPLR 3016(b) is to inform a defendant of the complained-of conduct. For that reason, CPLR 3016(b) “should not be so strictly interpreted as to prevent an otherwise valid cause of action in situations where it may be impossible to state in detail the circumstances constituting a fraud.” 10 N.Y.3d at 491 (internal quotation marks and citation omitted). Therefore, at the pleading stage, a complaint need only “allege the basic facts to establish the elements of the cause of action.” Id . at 492. Thus, a plaintiff will satisfy CPLR 3016(b) when the facts permit a “reasonable inference” of the alleged misconduct. Id . In Conners & Lombardo , the Court found that the Firm met this standard. Slip Op. at *2.

In New York, judicial review of arbitration awards is limited. Tullett Prebon v. BGC Fin. , 111 A.D.3d 480, 482 (1st Dept. 2013). The reason for such a limited review is to promote the settlement of disputes efficiently and avoid protracted and expensive litigation. Id . Thus, the grounds upon which an arbitral award will be modified or vacated are few. These include: (1) “corruption, fraud, or misconduct in procuring the award”; (2) partiality of the arbitrator; (3) the arbitrator exceeded his power or imperfectly executed it; (4) failure to follow the procedures of Article 75 of the CPLR. CPLR 7511(b)(1)(i)-(iv).  Only when the record demonstrates one of the foregoing will a New York court vacate or modify an arbitral award under the CPLR. In Citrin Cooperman & Co., LLP v. Skyline Risk Management, Inc. , 2019 N.Y. Slip Op. 30200(U) (Sup. Ct. N.Y. County Jan. 7, 2019) ( here ), the Court considered whether a prior contact between the arbitrator and counsel sufficed to overturn an arbitral award. As discussed below, the Court found that the contact was “minimal” and insufficient to evidence any prejudice to the parties’ rights or the integrity of the proceeding. Citrin involved a dispute between Citrin Cooperman & Co., LLP (“Citrin”) and Skyline Risk Management, Inc. (“Skyline”), which the parties agreed would be resolved through binding arbitration before the American Arbitration Association (“AAA”). After a demand for arbitration was filed, a hearing was conducted on December 4, 2017, before Barbara A. Mentz (“Mentz”). By Decision and Award dated December 21, 2017, Mentz determined that Citrin was entitled to $17,500.00, plus pre-award interest of $1,717.39, from November 19, 2016, at the rate of 9%, to the date of the award, and $13,500.00, in attorneys’ fees (the “Award”). The total amount of the Award was $32,717.39. Citrin sought to confirm the Award and to enter judgment. CPLR 7510. Skyline sought vacatur of the Award under CPLR 7511(b)(1)(ii) on the ground that Mentz had an undisclosed, prior professional relationship with Citrin’s counsel. The Court granted the petition to confirm the Award and denied the cross-petition to vacate. Under CPLR 7511(b)(1)(ii), a court will vacate or modify an arbitral award when the arbitrator was biased or maintained an undisclosed personal relationship to one of the parties, resulting in a prejudiced decision. J.P. Stevens & Co. v. Rytex , 34 N.Y.2d 123, 129-130 (1974). Peripheral, superficial and insignificant contacts or relationships will not subject an arbitral award to vacatur or modification. In the Matter of Cross Props., Inc. v. Gimbel Bros., Inc ., 15 A.D.2d 913 (1st Dept. 1962). The relationship must be material. Id . See also J.P. Stevens , 34 N.Y.2d at 129. Mere inferences of impartiality are insufficient to warrant interference with the arbitrator’s award; the evidence must be stronger; it must be clear and convincing. Matter of Provenzano , 28 A.D.2d 528 (1st Dept. 1967), aff’d , J.D.H. Rest. Inc. v. New York State Liquor Auth. , 21 N.Y.2d 846 (1968). In Citrin , the Court found that Skyline “failed to satisfy the requisite heavy burden, to warrant vacatur of the award at issue.” Slip op. at *3. Skyline claimed that Mentz failed to disclose “a prior … contact with petitioner’s counsel (who was appearing on behalf of Citrin, approximately 5 1/2 years prior to the subject arbitration)” “until the day before the originally scheduled arbitration hearing between the … parties.” Id .  That contact, said the Court, consisted of “a single conference call of approximately 15 minutes in length, for the mere purpose of issuing a case scheduling order in another arbitration.…” Id . No other contact or conversations were had between counsel and Mentz on the matter since it settled, and counsel never appeared in front of Mentz since that time. Id . at **3-4. Such contact, held the Court, was “minimal” and did “not rise to the level of ‘clear and convincing evidence that any impropriety or misconduct of the arbitrator prejudiced its rights or the integrity of the arbitration process or award,’ to warrant vacatur of the … ward.” Slip Op. at *3 (citing US. Electronics, Inc. v. Sirius Satellite Radio , 73 A.D.3d 497, 498 (1st Dept. 2010). In addition, the Court found it significant that the parties were given one week to object to Mentz’s appointment as the arbitrator. Skyline availed itself of the opportunity. After reviewing the party’s positions, the AAA “confirmed Mentz as the arbitrator, determining that her previous contact would not prejudice the parties, nor the arbitration process herein.” Slip Op. at *4. The Court concluded that “ nder the within circumstances, respondent failed to meet its heavy burden to support that there was an appearance of bias or partiality, to warrant vacatur of the subject award.” Slip op. at *4. Consequently, the Court granted the petition and denied the cross-petition to vacate. Takeaway The facts of Citrin highlight the magnitude of bias needed to overturn an arbitral award. As the Court noted, the prior contact between the arbitrator and counsel was minimal. Its insignificance was underscored by the Court’s observation that had the parties been in a court, such contact would be insufficient to secure disqualification of the judge: “The Court notes that in a judicial proceeding, such a basis, that an attorney merely previously appeared before a particular judge, would never be grounds to disqualify that judge from hearing a subsequent case with the attorney.” Moreover, the fact that Mentz assured the parties that the prior contact “would in no way affect her impartiality, or ability to be fair and unbiased and serve as an arbitrator in matter” (Slip op. at *4) and the AAA’s concurrence in that assessment only reinforced the finding of no bias and the absence of any prejudice to the parties and the integrity of the proceeding.  Under such circumstances, vacatur would have been an improvident exercise of discretion.

The desired result of litigation is a judgment fully and finally resolving the matter.   In many instances, the resolution of a lawsuit involves a money judgment.  Article 52 of the CPLR governs the enforcement of money judgments.  There are several mechanisms by which a judgment creditor can enforce a money judgment against a judgment debtor. For example, CPLR 5018 permits a judgment to be docketed against real property of the judgment creditor.  Once a judgment is docketed, it becomes a lien against the judgment debtor’s interest in real property.  See CPLR 5203 . One of the many perks of being a judgment creditor with a docketed judgment against the judgment debtor’s interest in real property is that, with some exceptions, the judgment would have to be satisfied from the proceeds of the sale of the real property to a third-party.  This is because “CPLR 5203(a) gives priority to a judgment creditor over subsequent transferees with regard to the debtor's real property in a county where the judgment has been docketed with the clerk of that county.”  Matter of Accounts Retrievable System, LLC v. Conway , 83 A.D.3d 1052, 1053 (2 nd Dep’t 2011) (citations omitted).  The value of a judgment docketed against real property should not be underestimated. The petitioner in Retrievable , was the assignee of a judgment creditor’s interest in a judgment docketed against real property owned by Conway.  Subsequent to the docketing of the judgment, Conway sold the real property, but when the “title search was performed in connection with transaction, the judgment docketed … was not discovered and was not satisfied at closing.”  Retrievable , 83 A.D.3d at 1052.  Notwithstanding the sale to a third-party, the Second Department reversed Supreme Court’s denial of the judgment creditor’s petition and “the matter remitted to Supreme Court … for the entry of a judgment directing the Sheriff of Dutchess County to sell the subject real property to enforce the money judgment.”  Retrievable , 83 A.D.3d at 1052. Another mechanism for the enforcement of money judgments is the restraining notice.  CPLR 5222.   A restraining notice “serves as an injunction prohibiting the transfer of the judgment debtor’s property.”  Distressed Holdings, LLC v. Ehrler , 113 A.D.3d 111 (2 nd Dep’t 2013) (citation omitted).  Thus, pursuant to CPLR 5222(b), “ judgment debtor or obligor served with a restraining notice is forbidden to make or suffer any sale, assignment, transfer or interference with any property in which he or she has an interest ... except upon direction of the sheriff or pursuant to an order of the court, until the judgment or order is satisfied or vacated.” To enforce money judgments, by attempting to locate assets, a judgment creditor “may compel disclosure of all matter relevant to the satisfaction of the judgment, by serving upon any person a subpoena….”  CPLR 5223 .  The procedures for the service of “information subpoenas,” which may be served on a judgment debtor or “an individual or entity other than the judgment debtor” in an effort to locate assets of the judgment debtor that may be available to satisfy the judgment, is set forth in CPLR 5224 . To fully or partially satisfy a money judgment, a judgment creditor may bring a special proceeding against a judgment creditor or, inter alia , “a person in possession or custody of money or other personal property in which the judgment debtor has an interest.”  CPLR 5225 . In re New York Community Bank v. Bank of America , decided on January 24, 2019, by the New York Supreme Court, Appellate Division, First Department, involves a judgment creditor that brought a “turnover proceeding” to compel a bank to turnover the contents of a jointly owned safe deposit box. The petitioner in Community previously obtained an $11 million judgment against Ari Chitrik (“Chitrik”).  Bank of America (“BoA”), in response to an information subpoena, advised petitioner of a safe deposit box jointly owned by Chitrik and his wife (“Wife”).  Supreme Court granted the petition and directed “the Sheriff and/or BoA to break open the safety deposit box and turn its contents over to satisfy NYCB’s judgment against .”  Chitrik appealed and the First Department affirmed. In deciding the appeal, the Community Court was required to consider “whether a presumption of joint tenancy with rights of survivorship in a safety deposit box also extends to its contents where only one of the persons who rented the box is a judgment debtor.” In Community, the Court concluded that “NYCB’s establishment of a joint tenancy in the safe deposit box account is evidence that and also ‘possess’ its contents, making the whole of the account subject to NYCB’s levy.” (Citation omitted.) In reaching its conclusion, the Court explained, inter alia , that both Chitrik and Wife signed the rental agreement and agreed to be bound by the rental agreement rules, which defined “’Renter’” to include “’each Renter or Co-renter identified in the Rental Agreement.’” (Brackets omitted.)  The rental agreement provided, inter alia , that “access to a Box rented in the names of two or more persons … shall be under the control of each of them individually … as fully as though the Box was rented in his or her name alone … and each may have access to the Box and the right to surrender the Box….” “When two or more persons open a bank account, making a deposit of cash, securities, or other property, a presumption of joint tenancy with right of survivorship arises (Banking Law § 675(b).”  Community (some citations omitted).  The Court also noted that such presumption “extends to safe deposit boxes held jointly.”  Community (citation omitted).  Quoting Viggiano v. Viggiano , 136 A.D.2d 630, 630 (2 nd Dep’t 1988), the Community Court noted that “ f the presumption is applied, each named tenant ‘is possessed of the whole of the account so as to make the account vulnerable to the levy of a money judgment by the judgment creditor of one of the joint tenants.”  The Court found that the box rental agreement made plain that Chitrik and Wife were joint tenants with rights of survivorship with respect to the safe deposit box and, accordingly, by relying on the language of the agreement, petitioner met its burden. However, the Community Court noted that the statutory presumption of joint ownership “may be rebutted by showing that the true situation as to ownership is different and that the account was established in joint names solely as a matter of convenience, not with the intention of conferring any beneficial property interest on the other individual.”  Community (citation omitted).  The presumption may only be rebutted where there is “direct proof that no joint tenancy was intended.” Community (citation omitted).  Here, the only “evidence” submitted to rebut the presumption was an affirmation of counsel, which was deemed to be insufficient.

Melville, NY ( Law Firm Newswire ) January 30, 2019 -  Jonathan H. Freiberger, a member of the law firm of Freiberger Haber LLP, was recently quoted in the New York Post in an article about franchising issues related to the Bareburger hamburger chain. The link to the article can be found here. Located in New York City and Melville, Long Island,  Freiberger Haber LLP  is dedicated to representing corporations, small businesses, partnerships and individuals involved in a broad range of complex business, construction and commercial litigation matters. The firm combines the sophistication and counsel of a large national law firm with the economy, flexibility, commitment and personal attention 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: Jonathan H. Freiberger, Esq. Freiberger Haber LLP Melville Office (Main Office) 425 Broadhollow Road, Suite 416 Melville, N.Y. 11747 Tel: (631) 282-8985 (main) Tel: (631) 282-8983 (direct) New York Office 708 Third Avenue, 5th Floor New York, N.Y. 10017 Tel: (212) 209-1005 Fax: (212) 209-7101 Email:  info@fhnylaw.com

Insurance. It is an important part of life. People buy insurance for many reasons, such as for the protection of their health, auto, business and home. The expectation is that one’s insurance policy will cover enough risks to protect against financial loss.  As explained by Investopedia, an online resource “dedicated to financial education and empowerment” ( here ), “ nsurance policies are used to hedge against the risk of financial losses, both big and small, that may result from damage to the insured or her property, or from liability for damage or injury caused to a third party. ( Here .) Not surprisingly, disputes often arise over the scope coverage. Recently, the Appellate Division, Second Department, addressed a dispute over the scope of insurance coverage ( i.e. , the applicability of an exclusion) arising from losses caused by Hurricane Sandy. In Cohen & Slamowitz, LLP v. Zurich Am. Ins. Co. , 2019 N.Y. Slip Op. 00417 (2d Dept. Jan. 23, 2019) ( here ), the Court affirmed the dismissal of a breach of contract action, finding that the insurer properly declined to indemnify the insured for the claimed loss of business income caused by the hurricane. Insurance Policies are Contracts An insurance policy is a contract. Consequently, the principles of contract interpretation apply to an insurance policy. E.g. , Gilbane Bldg. Co./TDX Const. Corp. v. St. Paul Fire and Mar. Ins. Co. , 143 A.D.3d 146, 151 (1st Dept. 2016), aff’d sub nom. , Gilbane Bldg. Co./TDX Constr. Corp. v. St. Paul Fire and Mar. Ins. Co. , 31 N.Y.3d 131 (2018). In interpreting an insurance policy and the scope of coverage, the courts look to the specific language of the policy itself. Gilbane Bldg. Co./TDX Const. Corp. , 143 A.D.3d at 150-151; ABM Mgmt. Corp. v. Harleysville Worcester Ins. Co. , 112 A.D.3d 763, 764 (2d Dept. 2013); Consolidated Edison Co. of N.Y. v. Allstate Ins. Co. , 98 N.Y.2d 208, 221 (2002). Unambiguous terms are “given their plain and ordinary meaning.” Yeshiva Viznitz v. Church Mut. Ins. Co. , 132 A.D.3d 853, 854 (2d Dept. 2015); see also White v. Continental Cas. Co. , 9 N.Y.3d 264, 267 (2007). Thus, the courts will read the policy to comport with “common speech” and the expectations of the parties, and in “a manner that leaves no provision without force and effect.” ABM Mgmt. Corp. , 112 A.D.3d at 764 (internal quotation marks and citation omitted). Whether the terms are clear and unambiguous is an issue for the courts. Yeshiva Viznitz , 132 A.D.3d at 854. However, if the language in the policy is ambiguous, the court can use extrinsic evidence to determine the intent of the parties to the policy. State of New York v. Home Indemnity Co. , 66 N.Y.2d 669, 671 (1985). If the extrinsic evidence is conclusory, failing to equivocally resolve the ambiguity in a policy, interpretation of the policy remains a question of law for the court to decide; deciding any ambiguities against the insurer. Id . See also Yeshiva Viznitz , 132 A.D.3d at 854; White , 9 N.Y.3d at 267. Cohen & Slamowitz, LLP v. Zurich Am. Ins. Co. As noted, the dispute concerned the coverage of losses caused by Hurricane Sandy. The alleged losses stemmed from a disruption of the plaintiff’s telephone service due to severe flooding at its service provider’s lower Manhattan switch center during the hurricane. The defendants disclaimed coverage pursuant to the language of the insurance policy with the plaintiff. Thereafter, the plaintiff commenced the action to recover damages for breach of contract and for a judgment declaring that the defendants were obligated to indemnify the plaintiff for its claimed business income losses under the policy. The defendants moved for summary judgment dismissing the complaint and for a judgment declaring that the defendants were not obligated to indemnify the plaintiff for its claimed business income losses. The motion court granted the defendants’ motion. The plaintiff appealed. The Second Department affirmed, finding that the language of the policy was clear and unambiguous. The Court noted that the policy required the carrier to pay for the loss of business income “due to the necessary suspension of operations caused by direct physical loss or damage by a Covered Cause of Loss to dependent property at a premises not owned, leased, or operated by the plaintiff.” Slip op. at *2 (internal quotation marks omitted). The policy defined “dependent property” as “premises operated by others on whom the plaintiff depended to “ eliver materials or services to , or to others for account (not including water, communication or power supply services).” Id . Based upon the foregoing language, the Court held that since the plaintiff’s claimed business income losses “resulted from damage to a property operated by a communication service provider,” “the cause of loss was a disruption in communication services, not a ‘Covered Cause of Loss’ to ‘dependent property’ under the policy.” Id . Accordingly, the Court affirmed the dismissal of the contract claim, concluding that “the defendants not obligated to indemnify the plaintiff for its claimed business income losses pursuant to the policy.” Id . Takeaway As discussed, “ n insurance agreement is subject to principles of contract interpretation.” Universal Am. Corp. v. National Union Fire Ins. Co. of Pittsburgh, Pa. , 25 N.Y.3d 675, 680 (2015). “Any … exclusions or exceptions from policy coverage must be specific and clear in order to be enforced.” Seaboard Sur. Co. v Gillette Co. , 64 N.Y.2d 304, 311 (1984.) In Cohen & Slamowitz , the Court found that the terms of the policy were clear and unambiguous. Under those circumstances, denial of coverage was properly denied.

Arbitration is an alternative form of dispute resolution where the parties voluntarily agree that a neutral, private person will resolve any legal disputes between them, instead of a judge or jury in a court of law. Rent-A-Ctr., W, Inc. v. Jackson , 561 U.S. 63, 67 (2010) (noting that “arbitration is a matter of contract”). In business and commercial transactions, arbitration is the preferred means of resolving disputes. It is encouraged and recognized as the public policy of the State. Matter of Smith Barney Shearson v. Sacharow , 91 N.Y.2d 39, 49 (1997) (citations and quotation marks omitted). Id . Consequently, courts will interfere as little as possible with the agreement of consenting parties to submit their disputes to arbitration. Id . at 49-50. (citations omitted). Since arbitration is a “creature of contract” (Louis Dreyfus Negoce S.A. v. Blystad Shipping & Trading Inc. , 252 F.3d 218, 224 (2d Cir. 2001)), only signatories to a contract containing an arbitration agreement can be compelled to arbitrate. TBA Global, LLC v. Fidus Partners, LLC , 132 A.D.3d 195, 202 (1st Dept. 2015). Consequently, “a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.” AT&T Techs., Inc. v. Communications Workers of Am. , 475 U.S. 643, 648 (1986) (quoting Steelworkers v. Warrior & Gulf Nav. Co. , 363 U.S. 574, 582 (1960)). There are exceptions to the rule, e.g. , incorporation by reference, assumption, agency, veil-piercing/alter ego and estoppel. Merrill Lynch Inv. Managers v. Opibase, Ltd. , 337 F.3d 125, 129 (2d Cir. 2003). In Petrides & Co. LLC v. Yorktown Partners LLC , 2019 N.Y. Slip Op. 30157(U) (Sup. Ct. N.Y. County Jan. 18, 2019) ( here ), the exception at issue was the “direct benefits theory of estoppel.” Belzberg v. Verus Inv. Holdings Inc. , 21 N.Y.3d 626, 631 (2013) (adopting the doctrine from federal law and citing federal cases). Under this doctrine, “a nonsignatory may be compelled to arbitrate where the nonsignatory ‘knowingly exploits’ the benefits of an agreement containing an arbitration clause, and receives benefits flowing directly from the agreement.” Id . Where “the benefits are merely ‘indirect,’ a nonsignatory cannot be compelled to arbitrate a claim.” Id . “A benefit is indirect where the nonsignatory exploits the contractual relation of the parties, but not the agreement itself.” Id . (citations omitted). Petrides & Co. LLC v. Yorktown Partners LLC Background Petrides & Co. LLC (“Petrides”) moved to compel various entities managed by Yorktown Partners LLC (“Partners”) to arbitrate claims under a contract to which Yorktown was not a signatory, arguing that the direct benefits theory of estoppel subjected Yorktown to that contract’s arbitration clause. Partners, a private equity firm that specializes in energy investments, managed the entities bearing the Yorktown name (“Yorktown”). Yorktown collectively owns and controls Riley Exploration Group LLC (“Riley”), a non-party to the proceeding. Petrides and Riley were parties to a letter agreement pursuant to which Riley engaged Petrides to perform consulting services (the “Agreement”). Yorktown was not a party to the Agreement, nor did the Agreement require Petrides to provide services to Yorktown. Petrides and Riley agreed that all disputes related to the Agreement were subject to mandatory arbitration. The petition to compel arbitration issue arose from the 2002 investment by a Yorktown entity in Dernick Resources, Inc. (“'DRI”). Five years later, Yorktown increased its investment in DRI. In addition to Yorktown, other investors contributed money to DRI at that time. In 2009, via an exchange of shares with Yorktown and the minority investors in DRI, Cinco Resources, Inc. (“Cinco”), an oil and gas company formed by Yorktown in 2002, acquired approximately 85% of DRI. In connection with the exchange of shares, Cinco invested additional money in DRI through a preferred stock offering, pursuant to which the “Dernick Group” was given the right to participate to avoid dilution of their ordinary shares of DRI. Subsequently, between 2009 and 2010, at a time when Cinco required capital to invest in additional oil and gas properties at Yorktown’s direction, Cima Resources Inc. (“Cima”) was formed to purchase Cinco’s oil and gas property in Eagle Ford, South Texas. In 2011, the Dernick Group asserted a claim that Cinco, via Yorktown, had acted improperly by selling the Eagle Ford property to Cima, thereby diluting the value of the Dernick Group’s shares in Cinco, while at the same time failing to offer the Dernick Group any participation in the Cima investment. In November 2011, Cima was merged into Cinco. During February and March of 2012, the Dernick Group conducted settlement discussions with Yorktown and Cinco regarding their dilution claim. Following an unsuccessful mediation, those communications continued over several more years. In February 2015, Yorktown directed Riley to engage Petrides under the Agreement to manage settlement of the dispute with the Dernick Group. Riley had no interest or stake in the Dernick Group litigation. According to the Court, settling the dispute was important to Yorktown, and its executives, because it was taking up valuable executive time and causing Yorktown and Cinco to incur significant legal expenses. In April 2015, Petrides was able to forge a settlement between the parties. The Court noted that Petrides acted on behalf of Yorktown and its executives during the settlement negotiations with the Dernick Group, notwithstanding that the work was being performed under the Agreement. In addition to negotiating a resolution of the dilution issue, in March 2016, Petrides successfully negotiated the purchase of an oil and gas field by Riley that was owned by the Dernick Group. Petrides submitted an invoice for services rendered in connection with the Dernick Dispute. The invoice was not paid. Consequently, in April 2018, Petrides commenced an arbitration against Riley to recover the amounts owed pursuant to the success-fee provision of the Agreement. The Agreement required Riley to pay Petrides a monthly fee of $100,000.00 and success fees set forth in the Agreement. Although not a signatory to the Agreement, Petrides served an arbitration demand on Yorktown in October 2018, claiming that Yorktown was a third-party beneficiary of the Agreement and the real party in interest and, therefore, jointly liable with Riley for the fees owed to Petrides. Yorktown rejected the demand on the ground that it was not a signatory to the Agreement. In November 2018, Petrides filed a petition to compel Yorktown to arbitrate. The Court’s Decision The Court granted the motion. The Court found that “Yorktown knowingly exploited the benefits of the Agreement” and had “received the benefits of Petrides’ work under the Agreement.” Slip Op. at *8. The Court explained that “Petrides that benefits intentionally inured to Yorktown directly from Petrides’ performance under the Agreement and were not merely the byproduct of the relationship between Petrides and Yorktown.” Based upon “the undisputed facts show that the work performed by Petrides in connection with the Dernick Dispute specifically benefited Yorktown and was done … specifically under the auspices of the Agreement,” the Court granted the motion to compel arbitration against Yorktown. Id . Takeaway Although federal and state policy favors arbitration, a party cannot be required to submit to arbitration any dispute that he/she has not agreed to submit. United Steelworkers of Am. v. Warrior & Gulf Navigation Co. , 363 U.S. 574, 582 (1960). For this reason, courts are “wary of imposing a contractual obligation to arbitrate on a non-contracting party.” Smith/Enron Cogeneration Ltd. P’ship, Inc. v. Smith Cogeneration Int'l, Inc. , 198 F.3d 88, 97 (2d Cir. 1999). Notwithstanding, where a non-party knowingly exploits and directly receives a benefit from an agreement containing an arbitration clause, as in Petrides , the courts will compel the non-signatory to arbitrate any disputes flowing from the agreement.

Questions of arbitrability and waiver are often litigated by parties to a contract containing an agreement to arbitrate disputes arising thereunder. In the Matter of New Roots Charter School v. Ferreira , 2019 N.Y. Slip Op. 30137(U) (Sup. Ct. Tompkins Cnty. Jan. 16, 2019) ( here ), the Court was faced with these questions, having to decide whether the parties had agreed to arbitrate their disputes and if so whether the respondent had abandoned his right to litigate certain claims in court. Arbitrability and Waiver Arbitration is a favored means of resolving disputes. It is encouraged and recognized by the courts as the public policy of the State. Matter of Smith Barney Shearson v. Sacharow , 91 N.Y.2d 39, 49 (1997) (citations and quotation marks omitted). Id . This is especially so in the labor context. E.g. , New York City Transit Auth. v. Transport Workers Union of Am. , 99 N.Y.2d 1, 6-7 (2002). Consequently, courts will interfere as little as possible with the agreement of consenting parties to submit their disputes to arbitration. Id . at 49-50. (citations omitted). Nonetheless, “ ike contract rights generally, a right to arbitration may be modified, waived or abandoned.” Sherrill v. Grayco Bldrs. , 64 N.Y.2d 261, 272 (1985). Accordingly, a litigant may not compel arbitration when his/her use of the courts is “clearly inconsistent with later claim that the parties were obligated to settle their differences by arbitration.” Flores v. Lower E. Side Serv. Ctr., Inc. , 4 N.Y.3d 363, 372 (2005) (citations and internal quotation marks omitted). Similarly, where “the grounds urged for relief and remedies sought in each forum are separate and distinct, a party may vigorously pursue both avenues concurrently.” Matter of City School Dist. v. Poughkeepsie Pub. School Teachers Assn. , 35 N.Y.2d 599, 606 (1974). “Generally, when addressing waiver, courts … consider the amount of litigation that has occurred, the length of time between the start of the litigation and the arbitration request, and whether prejudice has been established.” Cusimano v. Schnurr , 26 N.Y.3d 391, 400-01 (2015). There is no bright-line rule or rigid formula “for identifying when a party has waived its right to arbitration;” rather, the courts apply the foregoing factors to the facts of the case before it.  Louisiana Stadium & Exposition Dist. v Merrill Lynch, Pierce, Fenner & Smith Inc. , 626 F3d 156, 159 (2d Cir 2010). “That said,” however, “‘ he key to a waiver analysis is prejudice.’” Id . And, when examining whether there is prejudice, the courts look to see if the opposing party is procedurally and substantively harmed by arbitration and whether the opposing party will incur excessive costs and delay by going to arbitration. Id . See also Cusimano , 26 N.Y.3d at 401. here.=">here."> Matter of New Roots Charter School v. Ferreira Background New Roots Charter School involved the termination of employment of the respondent, David Ferreira (“Ferreira”), a music teacher with the School and a member of the respondent New Roots Charter School Instructional Staff Association (“NRCSISA”), the bargaining representative for the School’s employees, by the petitioner, New Roots Charter School (“NRCS” or the “School”). On March 30, 2018, Ferreira was placed on paid administrative leave while NRCS investigated allegations of misconduct. Following the investigation, on April 30, 2018, school superintendent, Tina Nilsen-Hodges (“Nilsen-Hodges”), sent Ferreira a letter terminating his employment. The superintendent found that, among other things, Ferreira sent inappropriate messages to a former student, offered alcohol to an underage former student, engaged in non-consensual physical contact with a former student, and made false representations on his resume and to school administrators. Ferreira commenced the grievance process by meeting with Nilsen-Hodges on May 7, 2018. Approximately two weeks later, Ferreira filed a grievance pursuant to the collective bargaining agreement between the School and NRCSISA. Ferreira alleged that the School violated the collective bargaining agreement by terminating him “without just cause”. On April 30, 2018, Ferreira commenced an Article 78 proceeding in Madison County Supreme Court seeking, among other things, reinstatement to his position as a music teacher. Respondent filed a verified answer and certified record on May 14, 2018. On June 22, 2018, Nilsen-Hodges issued a supplemental letter of termination to Ferreira adding, among other things, smoking marijuana with students and soliciting students to live with him upon graduation to the bases for termination. On June 22, 2018, Ferreira commenced a grievance regarding the supplemental letter of termination. On September 6, 2018, Ferreira submitted a notice of intent to arbitrate. Following argument and additional submissions, the court issued a judgment, which found, among other things, and as relevant to the action, that the School had a rational basis for terminating Ferreira. The School filed a verified petition seeking to permanently stay arbitration on September 24, 2018, arguing that Ferreira had waived his right to pursue arbitration by the commencement and amendment of an Article 78 proceeding which, at least in part, raised the same issues regarding his termination. NRCSISA asserted that the Article 78 claim of bad faith termination was separate and distinct from Ferreira’s grievance under the collective bargaining agreement and, therefore, cross-moved to compel arbitration. The Court’s Decision As an initial matter, the Court found that the issues surrounding Ferreira’s termination were governed by the arbitration provision of the collective bargaining agreement. Slip op. at *4 (“The broad arbitration clause certainly encompasses the termination of employees.”) In fact, the Court observed that “there no dispute as to the arbitrability of the issue of Ferreira’s termination.” Id . “Thus, the dispute center upon whether the Article 78 proceeding commenced and amended in Madison County preclude arbitration of Ferreira’s termination” – that is, whether Ferreira waived the arbitration of his claims concerning his termination of employment. Id . In addressing the foregoing question, the Court held that Ferreira did not waive his right to arbitrate his termination of employment. Slip op. at *5 (“There is no indication that his right to arbitration was abandoned in favor of a Court proceeding”). The Court reasoned that the relief sought in the Article 78 proceeding differed from that sought in the arbitration. As such, despite there being “some risk of different outcomes,” Ferreira did not seek “judicial review of a potential contract violation.” Id . Further, although there is some risk of different outcomes, this can largely attributed to the different standards by which the claims are assessed. In the Article 78 proceeding, the issue was whether the Petitioner’s determination was arbitrary and capricious or an abuse of discretion. In such matters, the Court need only determine whether there was a rational basis for the determination and not whether it would have reached a different conclusion. In contrast, in an arbitration under the collective bargaining agreement, the arbitrator is empowered to evaluate all evidence and make credibility determinations to reach a determination whether the contract provision was violated. Id . (citation omitted). As a result, the Court denied the School’s motion to permanently stay the arbitration and granted Respondents’ cross-motion to compel arbitration. Takeaway New Roots Charter School illustrates the fact intensive analysis required to determine whether a party’s actions are “clearly inconsistent with later claim that the parties were obligated to settle their differences by arbitration.” Flores , 4 N.Y.3d at 372. As noted by the Court in New Roots Charter School , Ferreira did not take any action in the Article 78 proceeding that was “clearly inconsistent” with his intent to challenge his termination for lack of “just cause” in arbitration. The relief requested in the litigation challenged his termination as being in “bad faith,” a separate and distinct form of relief than requested in the arbitration, where Ferreira claimed that his termination lacked “just cause” as required under the collective bargaining agreement. The separate grounds for relief that Ferreira pursued, therefore, were sufficient for the Court to determine that he had not abandoned his right to arbitration.

To plead a fraud or fraudulent inducement claim, a plaintiff must allege the following: “a misrepresentation or a material omission of fact which was false and known to be false by the 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.” Pasternack v. Laboratory Corp. of Am. Holdings , 27 N.Y.3d 817, 827 (2016) (internal citations and quotation marks omitted). Each element must be satisfied. Many plaintiffs, however, often fail to do so. Today’s post looks at Levinson v. Twiage, LLC , 2019 N.Y Slip Op. 30131(U) (Sup. Ct. N.Y. Cnty. Jan. 14, 2019) ( here ), a case involving the justifiable reliance element of a fraud claim. In Levinson , the Court denied a motion dismiss, finding that the concealment of information in documents available to the plaintiffs negated a claim that the plaintiffs could have uncovered the fraud with reasonable diligence. A Brief Primer on the Justifiable Reliance Element of a Fraud Claim In a prior post, this Blog discussed the justifiable reliance element of a fraud claim and the difficulties encountered by sophisticated plaintiffs in defeating a motion to dismiss on that ground. ( Here .) As noted in that post: Determining whether a plaintiff justifiably relied on a misrepresentation or omission, however, is “always nettlesome” because it is so fact-intensive. DDJ Mgt., LLC v. Rhone Group L.L.C. , 15 N.Y.3d 147, 155 (2010) (internal quotation marks omitted). Recognizing this difficulty, 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) (“if the facts represented are not matters peculiarly within the party’s knowledge, and the other party has the means available to him of knowing, by the exercise of ordinary intelligence, the truth or the real quality of the subject of the representation, he must make use of those means, or he will not be heard to complain that he was induced to enter into the transaction by misrepresentations.”) (citation and internal quotation marks omitted). See also Danann Realty Corp. v. Harris , 5 N.Y.2d 317, 322 (1959).  Where the falsity of a representation could have been ascertained by reviewing “publicly available information,” courts have not hesitated to dismiss a fraud claim because of the failure to satisfy the justifiable reliance element. E.g. , HSH Nordbank AG v. UBS AG , 95 A.D.3d 185, 195 (1st Dept. 2012); see also Churchill Fin. Cayman, Ltd. v. BNP Paribas , 95 A.D.3d 614 (1st Dept. 2012). Levinson v. Twiage, LLC Background Plaintiffs brought an action for breach of an investment agreement, breach of fiduciary duty, and fraudulent inducement, seeking rescission of the parties’ agreement and restitution of their investments in Twiage, LLC (“Twiage” or the “Company”), a startup tech company. Plaintiff, John Levinson (“Levinson”), invested $500,000 in Twiage, under four separate Simple Agreements for Future Equity (the “SAFE Agreements”). In connection with those investments, defendants, John Hui (“Hui”) and Gregory P. Santulli (“Santulli”), agreed to provide Levinson with a seat on Twiage’s Board of Managers (the “Board”). Plaintiffs alleged that Levinson was fraudulently induced to invest in Twiage. Plaintiffs claimed that on four occasions during 2015 and 2016, Hui and Santulli met Levinson to solicit Levinson’s investment in the Company. During one of the meetings, Plaintiffs alleged that both Hui and Santulli represented that each contributed $200,000 in cash to Twiage. Based on these representations, which Plaintiffs alleged were material to Levison’s investment decision, Levinson invested $500,000 in the Company. Plaintiffs alleged that they subsequently learned the truth from reading Twiage’s financial statements in 2017.  Those documents, Plaintiffs claimed, revealed that Hui and Santulli did not make cash contributions into the Company. In September 2017, Hui and Santulli voted to remove Levinson from the Board. Plaintiffs maintained that Defendants did so to protect themselves from charges of misconduct. The Motion to Dismiss In their motion to dismiss, Defendants argued that the fraudulent inducement claim was precluded by the SAFE Agreements. In that regard, Defendants argued that the SAFE Agreements contained all the relevant terms and conditions of the parties’ agreement. As such, Plaintiffs could not claim to have been defrauded by representations that were not included in those agreements, especially since the SAFE Agreements integrated and memorialized the parties’ discussions and understandings. They also argued that Plaintiffs’ fraud in the inducement claim was actually a breach of contract claim as it concerned the terms and performance of the SAFE Agreements. Finally, Defendants argued that Plaintiffs were sophisticated investors and, as such, could not have relied on the alleged false statements given their “access … to relevant documents and information” before the investments were made and “in the five months from the initial investment.…” Slip op. at *4. In opposition, Plaintiffs argued that Defendants’ misrepresentations were collateral to the SAFE Agreements – i.e. , the SAFE Agreements did not reference any particular statement alleged to be false – and that, as a result, Defendants’ misrepresentations were not barred by the parole evidence rule. The Court’s Decision The Court ruled that “ he complaint state a claim for fraudulent inducement against Hui and Santulli.” Slip op. at *4. On the issue of justifiable reliance, the Court rejected Defendants’ argument that Levinson, as a sophisticated investor, “could and should have performed his due diligence to determine whether Hui and Santulli’s claims of investing $200,000 were true.” Id . In doing so, the Court found that even had Levinson performed due diligence, the documents “concealed Hui and Santulli’s failure to invest $200,000 each to Twiage.” In any event, even if Levinson were a sophisticated investor, defendants would have this court determine what actions could, would, or should constitute reasonable due diligence for Levinson to uncover defendants’ alleged fraud in light of the documents provided to Levinson which concealed Hui and Santulli’s investment into the company. Id . at *5. Because the SAFE Agreements showed “that Hui and Santulli both contributed $200,000 cash to Twiage and the financial statements initially reviewed by Levinson concealed Hui and Santulli’s failure to invest $200,000 each to Twiage,” the Court concluded that in the absence of evidence showing otherwise, there was no basis to find that Levinson did not reasonably rely on Defendants’ representations. Id . Specifically, Exhibit A to the Operating Agreement showing that Hui and Santulli both contributed $200,000 cash to Twiage and the financial statements initially reviewed by Levinson concealed Hui and Santulli’s failure to invest $200,000 each to Twiage. Defendants have no evidence to show that plaintiffs had the means to discover defendants’ alleged untruthful statements. Id . (citations omitted). Finally, the Court rejected Defendants’ argument that parole evidence could not be used to support Plaintiffs’ fraudulent inducement claims. Defendants argue that parole evidence may not be used to establish that plaintiffs were fraudulently induced into entering into the contract.  However, defendants do not cite to a merger clause within the SAFE Agreement, or any language indicating that Levinson disclaimed reliance on defendants’ representations that they each contributed $200,000 in cash to Twiage. Accordingly, the SAFE Agreements do not preclude the use of parole evidence to establish that defendants fraudulently induced Levinson from entering into the agreement. Id . (citations omitted). Takeaway To prevail on the justifiable reliance element of a fraud claim, a plaintiff must demonstrate that he/she took steps “to protect against deception.” DDJ Mgt. , 15 N.Y.3d at 154. The cases are clear that the courts will not protect plaintiffs “who have been so lax in protecting themselves” from fraud. Id . However, when the plaintiff does not have the means to uncover the fraud, as alleged in Levinson , courts will not dismiss the claim.

Commercial transactions very often involve parties from different states. One party can be domiciled in New York, for example, while the other can be incorporated or headquartered in Delaware. When a dispute arises between such geographically diverse parties, questions concerning the jurisdiction of a court over the parties often gets litigated.  This becomes even more pronounced when the corporation is a multinational company, which conducts business across the county and the world. In Daimler Ag v. Bauman , the United States Supreme Court addressed the constitutional parameters of general jurisdiction and held that a court has general jurisdiction over a foreign corporation when the corporation’s “affiliations … are so continuous and systematic as to render it essentially home ” (134 S. Ct. 746, 761 (2014) (citing Goodyear Dunlop Tires Operations, SA v. Brown , 131 S. Ct. 2846 (2011)), i.e. , the state “where is incorporated or has its principal place of business.” Id . at 760. The Court rejected the notion that a court could exercise general jurisdiction “in every State in which a corporation ‘engages in a substantial, continuous, and systematic course of business,” stating that such a “formulation” was “unacceptably grasping.” Id . at 761. Although the “paradigm forum for the exercise of general jurisdiction” over an individual is his/her “domicile” and for a corporation, its “place of incorporation and principal place of business” 134 S.Ct. at 760 (citation omitted), the Court also held that in the absence of these bases, a court could exercise jurisdiction over a corporation in the place where it is “essentially at home in the forum state.” Justice Sotomayor, concurring in the judgment, explained that the phrase “at home” signifies continuous and substantial contacts by a foreign corporation within a forum state such that it is “akin to those of a local enterprise that actually is ‘at home’ in the State.” Id . at 769. (citation omitted). Such proof, however, is difficult to muster. Thus, the Court “cast significant doubt on the notion that a corporation could ever be subject to general jurisdiction in a State that is neither its State of incorporation or its principal place of business.” Amelius v. Grand Imperial LLC , 2017 N.Y. Slip Op. 27297, at *10 (Sup. Ct. N.Y. Cnty. Sept. 11, 2017). After Daimler , parties have litigated whether a particular location constitutes a corporation’s principal place of business. In Hertz Corp. v. Friend , 559 U.S. 77 (2010), the Supreme Court held that a company’s principal place of business is the place “where officers direct, control, and coordinate the corporation’s activities,” or its nerve-center. Id . at 92-93. The analysis focuses on where a corporation’s “high-level” decisions are made. St. Paul Fire and Marine Ins. Co. v. Scopia Windmill Fund, LP , 87 F. Supp. 3d 603, 605 (S.D.N.Y. 2015). See also CBRE Inc. v. Pace Gallery LLC, No. 1:17-CV-2452, 2018 WL 740994, at *2 (S.D.N.Y. Feb. 6, 2018). In Kline v. Facebook, Inc. , 2019 NY Slip Op 30103(U) (Sup. Ct. N.Y. Cnty. Jan. 10, 2019) ( here ), the foregoing issues were before Justice Kathryn E. Freed, who held that the petitioner was unable to demonstrate that the respondents (multinational corporations) were “at home” in New York. Kline was decided in the context of a special proceeding under CPLR § 3102(c), in which the petitioner, Torin Kline (“Kline”), moved for pre-action discovery from respondents, Facebook, Inc. (“Facebook”) and Google, LLC (“Google”). Kline demanded that Facebook provide the identity(ies) of the person(s) who posted and/or sent false and defamatory posts about him on the Facebook website and/or mobile application. Kline also demanded that Google provide the identity of the person who maintained and used an email address that Kline argued had been used to send false and defamatory statements about him. here).=">here)."> Although the Court did not discuss the bases upon which Facebook and Google opposed the petition, a review of the briefing shows that each corporation argued, among other things, that the Court could not exercise general jurisdiction over them. The Court agreed with Facebook and Google and dismissed the petition. In dismissing the petition, the Court held that the paradigm bases on which general jurisdiction can be found were not present as to each respondent. In that regard, the Court observed that neither Facebook nor Google were “incorporated in New York” and neither “have their principal places of business” in the State, facts that Kline admitted. Slip op. at **2-3. The Court also found that neither company was otherwise “at home” in New York, despite having “offices in New York City.” Id . at *3. The Court rejected Kline’s argument that maintaining such offices “signifie that respondents had the required ‘continuous and systematic’ affiliations with the State of New York.” Id . “Rather,” said the Court, “petitioner merely assets that respondents are ‘at home’ in New York because they have such large offices, and employ so many people, in New York.” Id . Takeaway Historically, under New York law, an out-of-state corporate defendant was subject to a court’s general jurisdiction when it was “doing business” in the State on a “continuous and systematic” basis.   Lebron v. Encarnacion , 253 F. Supp. 3d 513, 518 (E.D.N.Y. 2017) (citing Laufer v. Ostrow , 55 N.Y.2d 305, 309-10 (1982)). However, in Daimler , “the Supreme Court largely eschewed New York’s traditional ‘doing business’ standard in favor of an inquiry into whether a defendant’s affiliations with New York rendered it essentially ‘at home’ here.” Lebron , 253 F. Supp. 3d at 518. As Kline shows, after Daimler “only a limited set of affiliations with a forum will render a defendant amenable to all-purpose jurisdiction there.” Daimler , 134 S.Ct. at 760. Thus, as to foreign corporations, “ he paradigm forum for general jurisdiction” is “the place of incorporation and the principal place of business.” Sonera Holding B.V. v. Cukurova Holding A.S. , 750 F.3d 221, 225 (2d Cir. 2014). As the Supreme Court noted, a foreign corporation cannot be found to be “doing business” through agents and subsidiaries in multiple jurisdictions. Daimler , 134 S.Ct. at 762 n.20 (noting that “ corporation that operates in many places can scarcely be deemed at home in all of them.”). Kline also shows the difficulty a plaintiff has in demonstrating that a foreign corporation is otherwise “at home” in a jurisdiction. Indeed, it is “ nly on truly ‘exceptional’ occasions general jurisdiction extend over who are ‘at home’ in a state that is not otherwise their domicile.” Sonera Holding B.V. , 750 F.3d at 225 (citation omitted). As Kline learned, having an office in a particular forum is not the type of “exceptional occasion” contemplated by the Supreme Court in Daimler .

On January 15, 2019, the New York State Supreme Court, Appellate Division, First Department rendered a decision in In re: New York State Land Title Association, Inc. v. New York State Department of Financial Services , in which the Court, inter alia , upheld certain provisions of the Insurance Law and related regulations promulgated by the Department of Financial Services (“DFS”) designed to “explicitly prohibit the practice of kickbacks from insurers to title closers, attorneys, and other agents in the real estate market.”  Land Title at *1. Section 6409(d) of New York’s Insurance Law provides, in pertinent part: No title insurance corporation, title insurance agent, or any other person acting for or on behalf of the title insurance corporation or title insurance agent, shall offer or make, directly or indirectly, any rebate of any portion of the fee, premium or charge made, or pay or give to any applicant, or to any person, firm, or corporation acting as agent, representative, attorney, or employee of the owner, lessee, mortgagee or the prospective owner, lessee, or mortgagee of the real property or any interest therein, either directly or indirectly, any commission, any part of its fees or charges, or any other consideration or valuable thing , as an inducement for, or as compensation for, any title insurance business, nor shall any applicant, or any person, firm, or corporation acting as agent, representative, attorney, or employee of the owner, lessee, mortgagee or of the prospective owner, lessee, or mortgagee of the real property or anyone having any interest in real property knowingly receive, directly or indirectly, any such rebate or other consideration or valuable thing.  (Emphasis added.) Part of the reason for the creation of the DFS was to “promote the reduction and elimination of … unethical conduct by … insurance … institutions and their customers.”  See Financial Services Law § 102(k).  After a lengthy five-year investigation, the DFS determined that some of practices of the title insurance industry “resulted in higher premiums and closing costs for consumers violate Insurance Law § 6409(d).”  Land Title at *2.  Specifically, DFS found that title insurers were spending “excessive” amounts of money on gifts, trips, entertainment, meals and the like (“Inducements”) to attract title insurance business from those able to direct title insurance business to a particular company and that such expenses were directly impacting the amount that consumers were paying for title insurance premiums.  Land Title at *2. DFS determined that the title insurance industry’s practices violated Insurance Law § 6409(d).  Thus, “ o prevent such practices and to protect consumers from exorbitant costs, DFS promulgated Insurance Regulation 208.”  Land Title at *3; Insurance Regulation 208 (11 NYCRR 228).  In determining the necessity of Insurance Regulation 208, the DFS recognized that: Consumers of title insurance usually rely upon the advice of real estate professionals, including attorneys or real estate agents, who order the policy on their behalf.  Consumers also typically pay any invoice presented at the closing without seeking documentation or further clarification…. See 11 NYCRR 228.0(a); Land Title at *3. Insurance Regulation 208 expressly recognizes that Insurance Law § 6409(d), among other provisions, prohibits title insurers and others acting on their behalf from “mak any rebate, directly or indirectly, or pay or giv any consideration or valuable thing, to any applicant, or to any person, firm or corporation acting as an agent, representative, attorney or employee of the actual or prospective owner, lessee, mortgagee of the real property or any interest therein, as an inducement for, or as compensation for, any title insurance business, including future title insurance business, and maintaining existing title insurance business, regardless of whether provided as a quid pro quo for specific business.”  See 11 NYCRR 228.2(a); Land Title at *3.  The Regulation, which specifies permissible and impermissible practices, prohibits offering Inducements for title insurance business.  See 11 NYCRR 228.2(b); Land Title *3-4.  Regulation 208, however, does permit certain expenditures for things such as advertising, promotional items of de minimus value, marketing events open to the general public, and the like.  See 11 NYCRR 228.2(c); Land Title at *4. In 2018, the Land Title petitioners commenced an Article 78 Proceeding seeking to annul Insurance Regulation 208.  The court below granted the petition < here =">here"> finding , inter alia , that the language “ or any other consideration or valuable thing ,” in Insurance Law § 6409(d) was ambiguous. The First Department, in modifying Supreme Court’s order, held that the “other consideration” language from Insurance Law § 6409(d) is unambiguous.  Thus, the First Department found that: The plain text of Insurance Law § 6409(d) unambiguously prohibits an insurer from "offer or mak , directly or indirectly , . . . any commission, any part of its fees or charges, or any other consideration or valuable thing , as an inducement for, or as compensation for, any title insurance business" …. The statute repeatedly states that a proscribed exchange may be done "indirectly." After listing specific types of consideration such as commissions, the legislature elaborates and plainly expands the statute's parameters to " any other consideration or valuable thing , as an inducement for, or as compensation for, any title insurance business" (Insurance Law § 6409 ) …. The use of the word "any" unambiguously indicates that this legislative prohibition was intended to be broadly construed, allowing for DFS to define "any other consideration or valuable thing," provided, of course, it had a rational basis to do so. Moreover, the phrases "an inducement" and "any title insurance" need not refer to a quid pro quo concerning one specific act of doing business, but may reasonably be applied to a more longstanding arrangement in which insurers regularly spend vast sums of money on extravagant gifts for referral sources, who are tacitly expected to return the favors by providing a reliable stream of referrals. Land Title at *6, 7 (emphasis supplied). The Land Title Court found that in enacting Regulation 208 “DFS reasonably sought to put an end to” the “ethically dubious scheme” of giving “lavish gifts” in anticipation of receiving title insurance business “unbeknownst to and at the expense of consumers, who ultimately pay higher premiums as a result.”  Land Title at *7.  This, the Court found, was “impermissible” under Insurance Law § 6409(d).  Land Title at *7.  DFS’ efforts were the result of a five-year investigation of the title insurance industry, the findings of which went a long way to support the notion that there was a rational basis for DFS’ promulgation of the related regulations. It is worth noting that the Land Title Court addressed other aspects of Regulation 208 and agreed with Supreme Court that there was no rational basis for DFS to promulgate same.  Thus, the First Department agreed that “there is no rational basis for DFS to impose an absolute ban on the collection of certain fees by in-house closers while permitting independent closers to collect the same fees as long as the fees are reasonable, and the requisite notice is provided to consumers.”  Land Title at *8. Similarly, the First Department agreed that there is no rational basis for “capping fees for certain ancillary searches at 200% of the out-of-pocket costs of those searches or 200% of certain other measures in the absence of any out-of-pocket costs.”  Land Title at *8.

Laches is an equitable bar to a claim that is based on a lengthy failure to assert one’s rights that prejudices an adverse party. The doctrine is “designed to promote justice by preventing surprises through the revival of claims that have been allowed to slumber until evidence has been lost, memories have faded, and witnesses have disappeared.” Order of R.R. Tels. v. Ry Express Agency, Inc. , 321 U.S. 342, 348-49 (1944). As explained in Law.Com’s online dictionary, the doctrine “is often raised in the list of ‘affirmative defenses’ in answers filed by defendants, but is seldom applied by the courts” ( here ). In Stancioff v. Danielson , 2018 N.Y. Slip Op. 33412(U) (Sup. Ct. N.Y. Cnty. Dec. 31, 2018) ( here ), the court addressed a laches defense on a motion for summary judgment, finding issues of fact with regard to the elements of the defense. Laches Under New York Law As noted, laches is an equitable defense that may be “asserted where neglect in promptly asserting a claim for relief results in prejudice to a defendant.…” Slip op. at *11 (citing Moreschi v. DiPasquale , 58 A.D.3d 545, 545 (1st Dept. 2009)). To invoke the doctrine, “a party must show: (1) conduct by an offending party giving rise to the situation complained of, (2) delay by the complainant in asserting his or her claim for relief despite the opportunity to do so, (3) lack of knowledge or notice on the part of the offending party that the complainant would assert his or her claim for relief, and (4) injury or prejudice to the offending party in the event that relief is accorded the complainant.” Cohen v. Krantz , 227 A.D.2d 581, 582 (2d Dept. 1996). All four elements are necessary to invoke the doctrine. Id .; Dwyer v. Mazzola , 171 A.D.2d 726, 727 (2d Dept. 1991) (citation omitted). When that occurs, the doctrine “will operate as a bar to the relief sought.” Stancioff , Slip Op. at *11. Delay “In order for laches to apply, there must be an unreasonable and inexcusable delay.” Waldman v. 853 St. Nicholas Realty Corp. , 64 A.D.3d 585, 588 (2d Dept. 2009). There is, however, no defined length of delay that will trigger the defense. Capital Crossing Bank v. Aurora Hospitality, LLC , 45 A.D.3d 1266, 1268 (4th Dept. 2007) (“Essentially, the defense of laches consists of an unreasonable delay by the plaintiff to the prejudice of the defendant. But mere delay, however long, absent the necessary elements to create an equitable estoppel , does not preclude the granting of equitable relief.”) (citation omitted). Thus, “ ere inaction or delay in bringing a proceeding, without a showing of prejudice, not constitute laches.” ( Haberman v. Haberman , 216 A.D.2d 525, 527 (2d Dept. 1995). Prejudice To show prejudice, the defendant must demonstrate “an injury, change of position, or other disadvantage resulting from delay.” Haberman , 216 A.D.2d at 527 (citations omitted). Knowledge While delay and prejudice are important elements of the doctrine, a plaintiff who has no knowledge of the facts giving rise to the cause of action cannot be charged with laches. Stancioff , Slip op. at *12 (quoting Platt v. Platt,  13 Sickels 646, 646 (1874) (“‘ aches cannot … exist where a party is ignorant of his rights, or where though apprehensive of them, there is such an obscurity in the transaction that he must, with painstaking, gather the facts or the evidence of them upon which the successful prosecution of the action must depend.’”). However, where a plaintiff knows or has reason to know about his/her claim, he/she must act diligently to protect his/her rights. Hayward v. Eliot National Bank , 96 U.S. 611, 618 (1877) (“when a party with full knowledge of the facts, acquiesces in a transaction and sleeps upon his rights, equity will not aid him”); see also Bank of Am., N.A. v. 414 Midland Ave. Assocs., LLC , 78 A.D.3d 746, 750 (2d Dept. 2010). Issues of Fact Whether the laches defense should be applied is an issue typically reserved for the trier of fact. Solomon R. Guggenheim Found. v. Lubell , 77 N.Y.2d 311, 311 (1991); Tri-Star Pictures, Inc. v. Leisure Time Prods., B.V. , 17 F.3d 38, 44 (2d Cir. 1994) (noting that “ he equitable nature of laches necessarily requires that the resolution be based on the circumstances peculiar to each case. The inquiry is a factual one.”); United States v. Portrait of Wally, A Painting By Egon Schiele , No. 99 Civ. 9940 (MBM), 2002 WL 553532, at *22 (S.D.N.Y. April 12, 2002) (laches requires a “fact intensive inquiry into the conduct and background of both parties in order to determine the relative equities” which is “often not amenable to resolution on a motion for summary judgment”). Stancioff v. Danielson Background Plaintiffs, the living heirs and descendants of Dimitri Stancioff (“Stancioff”), a Bulgarian minister, brought suit to recover a bejeweled, nineteenth-century Russian imperial snuffbox purportedly given to Stancioff by Emperor Nicholas II at the Conference of Peace held in St. Petersburg, Russia (the “Snuffbox”). Plaintiffs claimed that the snuffbox was “stolen or otherwise misappropriated” from their family sometime during World War II or its aftermath. According to the Court, “ veryone with any first hand knowledge of the[] events is now deceased.” Slip op. at *2.  “Indeed, not much was known about the whereabouts of the snuffbox until 2014,” when defendant, the Estate of Barbara Danielson (the “Estate”), consigned the box to defendant Christie’s, Inc. (“Christie’s”) for sale at auction. Id . Barbara Danielson inherited the snuffbox from her mother, Rosemary Danielson, who died sometime in 1981. Barbara Danielson died in 2013. According to the Court, “ t is not known how Rosemary came to possess the snuffbox except that, when Christie’s received the item for auction, a document was apparently contained inside bearing the letterhead of Waldo Frank Perez de Leon, describing, in great detail, a ‘ rectangular gold presentation snuffbox’ and listing the price of $8,000.” Id . The document contained no other information, such as the buyer, the seller or the date of sale. According to Christie’s research into the matter, Perez de Leon was the proprietor of an interior design shop in Miami, Florida, active at least during the mid-to-late 1960s. Perez de Leon died in 1982. Christie’s initially appraised the snuffbox at $120,000-$180,000. However, at a May 2015 auction, the snuffbox sold for $680,000. Plaintiffs initially took no issue with the sale and provided Christie’s with photographs of Stancioff to use in its catalogue and promotional materials, allegedly believing that the item was being auctioned at the behest of a Stancioff family member. However, by email dated June 3, 2015, plaintiffs Nadejda and Alex Stancioff contacted Christie’s, asserting that the snuffbox had been stolen from their family and warning Christie’s not to disburse the proceeds of the sale. Christie’s agreed to hold back the sale until it could investigate the claim. Although Christie’s was dismissed from the action, the snuffbox remains in Christie’s possession pending the resolution of the action. Plaintiffs filed suit, asserting two causes of action against the Estate: replevin and conversion (the first and second cause of action). The Estate moved for summary judgment to dismiss the claims against it. Among the defenses asserted was laches. The Court’s Decision The Court denied the Estate’s motion. The Court held that the Estate failed to establish any prejudice resulting from the Plaintiffs’ failure to promptly assert their claims: Here, to the extent that plaintiffs may have neglected to promptly assert their claim, the Estate has not established how this resulted in prejudice to it since anyone with first hand knowledge of the underlying facts has been deceased for far longer than the Estate has been in possession of the snuff box. Slip op. at *11. In addition, the Court held that the Estate failed to establish that the Plaintiffs did not exercise reasonable diligence to locate the snuffbox, or that the Plaintiffs’ alleged inaction had prejudiced the Estate. Slip op. at *12 (citing Matter of Flamenbaum , 22 N.Y.3d 962, 965 (2013)). The Court noted that “ hile the snuffbox came into Rosemary Danielson’s possession, it was never advertised for sale and appears to have been displayed only in Danielson’s home.” Id . at *13. Thus, there was an issue of fact as to whether Plaintiffs exercised reasonable diligence in locating the snuff box. As the Court observed, it was unclear “how far back such action < i.e. , reasonable diligence to locate the snuffbox> i.e., reasonable diligence to locate the snuffbox> would have needed to be taken to enable the Estate to escape the prejudice resulting from the delay.” Id . at *12. Takeaway Determining whether to apply the laches defense requires a “fact intensive inquiry into the conduct and background of both parties in order to determine the relative equities.” Portrait of Wally , 2002 WL 553532, at *22. For this reason, resolution of the defense is “often not amenable to resolution on a motion for summary judgment.” Id . Stancioff highlights the difficulties that a defendant must overcome to demonstrate that the application of the defense is appropriate.