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By: Jonathan H. Freiberger Discovery, an important part of the litigation process, enables litigants to collect information to assist in the prosecution and defense of a case. Section 3101 of the CPLR provides that, in general, “there should be full disclosure of all matter material and necessary in the prosecution or defense of an action, regardless of the burden of proof” by, inter alia , a party and its representatives. “The words material and necessary, are to be interpreted liberally to require disclosure, upon request, of any facts bearing on the controversy which will assist preparation for trial.” Ayres v. Bloomberg, L.P. , 235 A.D.3d 709, 713 (2 nd Dep’t 2025) (citations, internal quotation marks and ellipses omitted). Because full disclosure is important, there are penalties for abusing the disclosure process. Today’s BLOG article focusses on spoliation of evidence. “Under the common-law doctrine of spoliation, when a party negligently loses or intentionally destroys key evidence, the responsible party may be sanctioned under CPLR 3126 .” Washington v. Church & Nostrand Apparel Corp. , 2025 WL 1450331 at *1 (2 nd Dep’t May 21, 2025) (citation and internal quotation marks omitted; hyperlink added). Such sanctions can include, inter alia , striking pleadings, prohibiting a party from supporting or opposing claims or defenses , and resolving issues in a manner consistent with the claims of the aggrieved party. CPLR 3216. Sanctions for spoliation of evidence require a showing: “(1) that the party with control over the evidence had an obligation to preserve it at the time it was destroyed; (2) that the records were destroyed with a ‘culpable state of mind’, and finally, (3) that the destroyed evidence was relevant to the party's claim or defense such that the trier of fact could find that the evidence would support that claim or defense.” Voom HD Holdings LLC v. EchoStar Satellite L.L.C. , 93 A.D.3d 33, 45 (1 st Dep’t 2012) (citation omitted); see also Washington , 2025 WL 1450331 at *1. “A ‘culpable state of mind’ for purposes of a spoliation sanction includes ordinary negligence.” Id . (citation omitted); see also Harry Winston, Inc. v. Eclipse Jewelry, Corp. , 215 A.D.3d 421 (1 st Dep’t 2023).) “The intentional or willful destruction of evidence is sufficient to presume relevance, as is destruction that is the result of gross negligence.” Parauda v. Encompass Ins. Co. of America , 188 A.D.3d 1083, 1086 (2 nd Dep’t 2020). However, in situations where evidence is negligently destroyed, spoliation sanctions will be assessed when accompanied by a demonstration that the destroyed documents were relevant. Gulledge v. Jefferson County , 229 A.D.3d 991, 993 (3 rd Dep’t 2024) (citation omitted). Spoliation of evidence was the issue addressed in Blinbaum v. Chan , a case decided by the Appellate Division, First Department, on June 3, 2025. The parties in Blinbaum were adjoining townhouse owners who entered into a license agreement pursuant to RPAPL 881 so that renovations to the defendants’ property could be made. Pursuant to the license agreement, the plaintiff, in his sole discretion, could determine “when and how repairs to his property would be made should any damage be caused by defendants’ renovation.” The plaintiff commenced his action in 2020, claiming that his townhouse was damaged in 2018 by water infiltration from his roof. The plaintiff repaired his roof in 2021 after further water infiltration. The defendants sought spoliation sanctions in 2022, claiming that the roof repairs violated a court order permitting the defendants’ expert to inspect the roof. The Motion Court denied the motion without prejudice and directed a new inspection to take place in 2023. After the 2023 inspection, the defendants supported their renewed spoliation motion with an affidavit from an architect opining that the roof repairs prosecuted in 2021 prevented a meaningful inspection. The plaintiff opposed the motion by, inter alia , submitting evidence that the defendants’ counsel and insurer inspected the roof in 2018 and “again in 2021 and 2023, when repairs were removed at the request of defendants’ expert, providing full access to the roof.” The First Department unanimously affirmed the motion court’s denial of the renewed spoliation motion, finding that the defendants “failed to establish that the missing evidence was their sole means of defending against plaintiff’s claims or that the repairs plaintiff made to his roof in July 2021 prejudiced their ability to defend against plaintiff’s claims that defendants’ construction work damaged his property.” (Citations omitted.) The Court noted that the defendants failed to deny that their insurance carrier and counsel took photographs at a 2018 roof inspection and that the defendants’ expert stated he was able to distinguish the repairs made in 2021 from pre-existing repairs. In addition, the Court noted that the license agreement permitted the Plaintiff “to repair his roof, which he had delayed undertaking for years during the litigation.” Because the water infiltration had been ongoing since 2018, “the repairs plaintiff made to his roof do not constitute spoliation, as the record shows that those repairs were done for the purpose of mitigating the damage to plaintiff’s home and not in bad faith to harm defendants’ litigation posture.” (Citation omitted.) Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice. This BLOG has written numerous articles addressing spoliation. To find such articles, please see the BLOG tile on our website and type “spoliation” into the “search” box. RPAPL 881 permits a homeowner to commence a special proceeding for a license to enter the neighboring property of the respondent for the purpose of making repairs to the petitioner’s property that cannot be made without such access and where such access is denied by the respondent. [This BLOG has numerous articles addressing RPAPL 881 . To find such articles, please see the BLOG tile on our website and type “RPAPL 881” in the search box.

By:  Jeffrey M. Haber In Skyview Capital, LLC v. Conduent Business Servs., LLC , 2025 N.Y. Slip Op. 03291 (1st Dept. June 03, 2025) ( here ), the Appellate Division, First Department addressed various issues concerning fraud causes of action with which readers of this Blog are familiar: the duplication doctrine, justifiable reliance and disclaimer clauses. As discussed below, Skyview Capital arose from defendant’s sale to plaintiff of certain assets, namely, customer care call centers and customer care contracts, called “Liberty.” In April 2018, Conduent Business Services, LLC (“Conduent”) announced that it intended to divest its “Liberty Business,” a business handling contracts for delivering customer support services through call centers (the “Business”). On July 21, 2018, Conduent and its financial advisor, UBS, gave Skyview Capital, LLC (“Skyview”), an investment firm specializing in acquiring, or “carv out,” “underperforming businesses” from large corporations, a management presentation (“July MP”) containing an overview of the Business, including its operations, clients, and financial projections. Among other things, and relevant to the Court’s decision, the July MP disclaimed Conduent’s “obligation to provide the recipient with access to additional information, to update th Presentation or such additional information or to correct any inaccuracies herein or therein.”  According to Skyview, Conduent told Skyview during the presentation that one of its clients—Sprint—planned to “repatriate” 150 jobs to the U.S. and, specifically, to Liberty. On August 3, 2018, Skyview issued a letter of interest valuing the business at $60 million, only to withdraw from the process two weeks later because it lacked sufficient time to undertake appropriate due diligence. In September 2018, Conduent shared a management presentation (“September MP”) with Skyview that contained, inter alia , an updated forecast. Conduent also gave Skyview access to a Virtual Data Room (“VDR”) containing thousands of documents detailing material operational, financial, and legal aspects of the Business. Among the documents were monthly rosters tallying “in-scope” Liberty employees, including recruiters (“Rosters”). The Rosters included information about employee positions and assignments and reflected reductions in headcount. In addition, Conduent’s 2017 and 2018 SEC filings publicly disclosed that it routinely implemented reductions in force (“RIF”) across its workforce. From September 24 to 26, 2018, Skyview met with Conduent and UBS, after which the parties executed an Equity Securities and Asset Purchase Agreement (“Initial APA”) for Skyview to purchase the Business. The Initial APA provided for a deferred closing, and the parties ultimately executed an amended APA and closed four months later, on February 1, 2019 (“Closing”). On February 1, the parties executed an Amended and Restated Equity Securities and Asset Purchase Agreement (“APA”) and closed the transaction.  Skyview agreed to pay $7.5 million at Closing and issued three promissory notes for (1) $5 million due in February 2020 (plus interest), (2) $12.5 million due in August 2020 (plus interest), and (3) $3,125,142—the amount of cash transferred to Skyview at Closing—due in August 2020 (plus interest) (collectively, the “Notes”). After certain working capital-related adjustments, Conduent paid Skyview $6,239,403 at Closing. The final APA contained extensive business-related representations and warranties, all of which were carried forward from the Initial APA. Among others, Skyview represented and warranted that “other than the representations and warranties specifically contained in or any Ancillary Document, there are no representations or warranties of Seller … with respect to the Business, ... Buyer ... specifically disclaims that it is relying upon or has relied upon any such other representations or warranties that may have been made ….”  Skyview also “acknowledge that it ... ha conducted own independent review and analysis of and, based thereon, ha formed an independent judgment concerning, the Business ….” According to Conduent, post-closing, Skyview struggled to finance the business. The $5 million Note came due in February 2020. Skyview defaulted, triggering cross-defaults under the other Notes. Conduent alleged that Skyview had not made any payment under the Notes, resulting in an outstanding principal balance of $20,625,142, with interest accruing at 8.5% under the Note’s late-payment rate. Skyview filed the action on February 3, 2020, alleging that Conduent breached the APA and misrepresented and omitted material information about Liberty during the diligence process, including (a) internal forecasts, (b) Sprint’s repatriation reversal, and (c) the RIF.  Conduent filed a motion to dismiss the complaint on March 19, 2020, which was denied on May 25, 2021. On August 20, 2020, Conduent answered the complaint and asserted counterclaims against Skyview for failing to meet its payment obligations under certain transaction-related agreements. Thereafter, the parties engaged in extensive discovery. On July 24, 2023, Conduent moved for summary judgment on Skyview’s claims and in favor of Conduent’s counterclaims. That same day, Skyview moved for partial summary judgment on its “ordinary course contract” claim. The motion court heard oral argument on December 5, 2023.  Two days later, the motion court issued a decision and order (1) dismissing Skyview’s advertising-based fraud theory, (2) denying Conduent’s motion as to Skyview’s claims in all other respects, (3) granting Skyview summary judgment as to its ordinary course contract claim, and (4) granting Conduent summary judgment as to its counterclaims for monies due for Conduent’s post-Closing transition services. Conduent filed notices of appeal on January 5, 2024. Skyview filed a notice of appeal on January 23, 2024 and cross-appealed on January 25, 2024. The Appellate Division, First Department unanimously modified the motion court’s order, on the law, to grant Conduent’s motion for summary judgment dismissing Skyview’s fraud claim and request for punitive damages and declaring that the setoff limit under the promissory notes was $5 million, deny Conduent’s motion as to its third counterclaim and remand for a hearing on that claim, deny Skyview’s motion for partial summary judgment, and otherwise affirmed. The Court held that Skyview’s “fraud claims based on Conduent’s failure to disclose reductions in force (RIFs) of recruiters and nonparty Sprint’s change of plan concerning repatriating 150 jobs duplicative of its contract claims. Under New York law, a fraud claim will be deemed duplicative of a contract claim when the fraud claim arises from the same facts, seeks the same damages and does not allege a breach of any duty collateral to or independent of the parties’ agreements. The Court also held that “Skyview’s fraud claim asserting that Conduent should have disclosed the Q3 reforecast, while not duplicative of the contract claims, should have been dismissed.” The Q3 2018 reforecast was an internal forecast that Conduent prepared internally. Conduent allegedly did not disclose the Q3 reforecast, which included estimated revenue that was materially lower for 2018, 2019, and 2020, compared to the figures disclosed in the July MP. The Court noted that the July MP that was sent to Skyview from Conduent’s investment banker, “said that Conduent had no duty to update it.” “In addition,” said the Court, “both the initial asset purchase agreement (initial APA) and amended asset purchase agreement (APA) state Skyview ‘ha made its own evaluation of the adequacy and accuracy of all estimates, projections, forecasts furnished’ to it.” The Court concluded that those “disclaimers specific enough to bar Skyview’s fraud claim.” In New York, a party’s disclaimer of reliance cannot preclude a fraudulent inducement claim unless: (1) the disclaimer is specific to the fact alleged to be misrepresented or omitted; and (2) the alleged misrepresentation or omission does not concern facts peculiarly within the knowledge of the non-moving party. “Accordingly, only where a written contract contains a specific disclaimer of responsibility for extraneous representations, that is, a provision that the parties are not bound by or relying upon representations or omissions as to the specific matter, is a plaintiff precluded from later claiming fraud on the ground of a prior misrepresentation as to the specific matter.” The Court further held that because Skyview is a sophisticated party, it could not show justifiable reliance on misrepresentations. One of the more “nettlesome” elements of a fraud claim is justifiable reliance. Whether a plaintiff justifiably relied on a misrepresentation or omission is a fact-intensive inquiry. For this reason, the courts look to whether the plaintiff had the “means available to him for discovering, ‘by the exercise of ordinary intelligence,’ the true nature of a transaction he is about to enter into” and whether he made “use of those means”. If the plaintiff does not do so, “he will not be heard to complain that he was induced to enter into the transaction by misrepresentations.” After all, a plaintiff cannot claim justifiable reliance on a misrepresentation when he or she could have discovered the truth with reasonable diligence. Sophisticated parties have a heightened duty to use the means available to them to verify the truth of the information upon which they rely and to use their sophistication to conduct due diligence. A sophisticated plaintiff cannot establish justifiable reliance on an alleged misrepresentation if the plaintiff failed to make use of the means of verification that were available to him. Thus, to sustain a claim of fraud, sophisticated parties must have discharged their own affirmative duty to exercise ordinary intelligence and conduct an independent appraisal of the risks they are assuming. The Court found that Skyview “failed to make use of the means of verification that were available to it.” The Court noted that “ nder the initial APA, Skyview had access to Conduent’s books and records from September 28, 2018 until February 1, 2019.” The Court explained that with such access, “ t could have tested the prediction of $461 million in revenue for 2018 against such books and records,” but did not. “Furthermore,” said the Court, “on October 16, 2018, Conduent sent Skyview a forecast of $439.4 million for 2018, which much lower than the $461 million forecast (and also lower than the Q3 reforecast of $446 million).” “In light of the dismissal of Skyview’s fraud claim,” the Court held that Conduent was “entitled to partial summary judgment on its first and second counterclaims to the extent of declaring that the maximum Skyview set off against its liability on the promissory notes $5 million (the limit set forth in the APA).” ________________________________________ Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice. To find articles related to the duplication doctrine, justifiable reliance and disclaimer clauses, visit the “ Blog ” tile on our  website  and enter the search terms desired ( e.g. , justifiable reliance , disclaimer clauses, duplication) or any other related search term in the “search” box Slip Op. at *1 (citation omitted). Havell Capital Enhanced Mun. Income Fund, L.P. v. Citibank, N.A. , 84 A.D.3d 588, 589 (1st Dept. 2011). Slip Op. at *1. Id. Id. Id. (citing HSH Nordbank AG v. UBS AG , 95 A.D.3d 185, 201 (1st Dept. 2012), and Permasteelisa, S.p.A. v. Lincolnshire Mgt., Inc. , 16 A.D.3d 352, 352 (1st Dept. 2005)). Basis Yield Alpha Fund v. Goldman Sachs Group, Inc. , 115 A.D.3d 128, 137 (1st Dept. 2014). See also Danann Realty Corp. v. Harris , 5 N.Y.2d 317, 323 (1959); MBIA Ins. Corp. v. Merrill Lynch , 81 A.D.3d 419 (1st Dept. 2011). Basis Yield , 115 A.D.3d at 137. Slip Op. at *1 (quoting Ventur Group, LLC v. Finnerty , 68 A.D.3d 638, 639 (1st Dept. 2009) (internal quotation marks omitted), and citing Global Mins. & Metals Corp. v. Holme , 35 A.D.3d 93, 100 (1st Dept. 2006), lv. denied 8 N.Y.3d 804 (2007)). DDJ Mgt., LLC v. Rhone Group L.L.C. , 15 N.Y.3d 147, 155 (2010) (internal quotation marks omitted). Id. 88 Blue Corp. v. Reiss Plaza Assoc. , 183 A.D.2d 662, 664 (1st Dept. 1992) (internal citations omitted). Id. (internal quotation marks omitted). KNK Enters. Inc. v. Harriman Enters., Inc. , 33 A.D.3d 872 (2d Dept. 2006). McGuire Children, LLC v. Huntress , 24 Misc. 3d 1202 , at *12 (Sup. Ct., Erie County), aff’d , 83A.D.3d 1418 (4th Dept. 2011). Id. Id. Slip Op. at *1. Id. Id. Id. Id. at *2.

By:  Jeffrey M. Haber In today’s Fraud Notes, we examine Yudkin v. Evergreen Terrace 888 Corp. , 2025 NY Slip Op 03223 (2d Dept. May 28, 2025) ( here ), and Lapin v. Verner , 2025 NY Slip Op 03184 (2d Dept. May 28, 2025) ( here ). Yudkin involved the statute of limitations for fraud and the continuing wrong doctrine. Lapin involved the failure to plead the elements of a fraud claim. Yudkin v. Evergree Terrace 888 Corp. “A defendant who moves to dismiss a complaint pursuant to CPLR 3211(a)(5) on the ground that it is barred by the statute of limitations bears the initial burden of proving, prima facie, that the time in which to sue has expired.” “The burden then shifts to the nonmoving party to raise a question of fact as to the applicability of an exception to the statute of limitations, as to whether the statute of limitations was tolled, or as to whether the action was actually commenced within the applicable limitations period.” A cause of action sounding in breach of contract is governed by a six-year statute of limitations, which “begins at the time of the breach, even when no damage occurs until later, and even though the injured party may be ignorant of the existence of the wrong or injury.” A cause of action based upon fraud must be commenced within six years from the time of the fraud or within two years from the time the fraud was discovered, or with reasonable diligence could have been discovered, whichever is longer. The cause of action accrues when “every element of the claim, including injury, can truthfully be alleged,” “even though the injured party may be ignorant of the existence of the wrong or injury.” Determining when accrual occurs is not easy and often contested. So too is the determination of when the plaintiff discovered or could have discovered the fraud. In New York, “plaintiffs will be held to have discovered the fraud when it is established that they were possessed of knowledge of facts from which it could be reasonably inferred, that is, inferred from facts which indicate the alleged fraud.” “ ere suspicion will not constitute a sufficient substitute” for knowledge of the fraud. “Where it does not conclusively appear that a plaintiff had knowledge of facts from which the fraud could reasonably be inferred, a complaint should not be dismissed on motion and the question should be left to the trier of the facts.” Moreover, where the circumstances suggest to a person of ordinary intelligence the probability that s/he has been defrauded, a duty of inquiry arises, and if s/he fails to undertake that inquiry when it would have developed the truth and shuts his/her eyes to the facts which call for investigation, knowledge of the fraud will be imputed to him/her. The test as to when fraud should with reasonable diligence have been discovered is an objective one. Thus, while it is true that New York courts will not grant a motion to dismiss a fraud claim where the plaintiff’s knowledge is disputed, courts will dismiss a fraud claim when the alleged facts establish that a duty of inquiry existed and that an inquiry was not pursued. “The burden of establishing that the fraud could not have been discovered before the two-year period prior to the commencement of the action rests on the plaintiff, who seeks the benefit of the exception.” The foregoing principles were at issue in Yudkin . Yudkin was an action to recover damages for breach of contract and fraud. As alleged in the amended complaint , in January 2012, plaintiff entered into a contract with defendant Evergreen Terrace 888 Corp., the sponsor of an offering plan to convert a rental building in Brooklyn, N.Y. to a condominium building, to purchase a unit in the building. Plaintiff tendered a down payment of $11,000 in connection with the contract. On April 15, 2013, the sponsor’s broker informed plaintiff that the building was going to remain a rental building and agreed to return plaintiff’s down payment. In an email dated April 22, 2013, the sponsor informed plaintiff that the sponsor decided to keep the building as a rental building due to “sign off issues and appraisal issues.” In June 2014, the sponsor sold the building to defendant 888 Oscar & August, LLC, and another entity. On August 11, 2014, the sponsor officially abandoned its offering plan for the condominium conversion. In November 2020, plaintiff commenced the action to recover damages for breach of contract and fraud against, among others, defendants. Defendants moved pursuant to CPLR 3211(a) to dismiss the amended complaint insofar as asserted against each of them on the ground, among others, that it was barred by the statute of limitations . Plaintiff opposed the motions and cross-moved pursuant to CPLR 306-b to extend the time to serve one of the defendants with the summons with notice. In an order dated October 7, 2022, the motion court granted the defendants’ motions and denied, as moot, plaintiff’s cross-motion. Plaintiff appealed. The Appellate Division, Second Department affirmed. The Court found that defendants established that plaintiff’s breach of contract cause of action was time-barred, since plaintiff commenced the action more than six years after the alleged breach occurred in April 2013. The Court held that plaintiff failed to raise a question of fact as to when the claim accrued. Regarding the fraud claim, the Court found that defendants established that plaintiff’s fraud cause of action was time-barred. The Court explained that “plaintiff did not commence action until November 2020, more than six years after the alleged fraud and more than two years after the plaintiff possessed knowledge of facts from which the alleged fraud could have been discovered with reasonable diligence.” The Court held that plaintiff failed to raise a question of fact as to when the fraud claim accrued. The Court also rejected plaintiff’s contention that the continuing wrong doctrine tolled the statute of limitations. Under New York law, the doctrine “may only be predicated on continuing unlawful acts and not on the continuing effects of earlier unlawful conduct. The distinction is between a single wrong that has continuing effects and a series of independent, distinct wrongs.” The Court found that the sponsor’s official abandonment on August 11, 2014, of its offering plan for the condominium conversion was predicated entirely on the alleged wrong of the earlier misrepresentations made to the plaintiff, and therefore, the continuing wrong doctrine did not apply. Lapin v. Verner It is well settled that “ cause of action alleging fraud requires the plaintiff to plead: (1) a material misrepresentation of a fact, (2) knowledge of its falsity, (3) an intent to induce reliance, (4) justifiable reliance, and (5) damages.” Under CPLR 3016(b), each of the foregoing elements must be pleaded “in detail.” Conclusory allegations will not suffice. Neither will allegations based on information and belief. If “sufficient factual allegations of even a single element are lacking,” then the claim must be dismissed. Claims of “ raud and fraudulent inducement are not pleaded with the requisite particularity under CPLR 3016(b)” unless “the words used by defendants” are set forth. This means that general descriptions of what was said will not suffice. The plaintiff must identify the “who, what, where, when and how” of the alleged fraud. The plaintiff also must allege a misrepresentation of present or existing fact. “ llegations of fraudulent misrepresentations which amount to no more than ‘ ague expressions of hope and future expectation’, or ‘mere opinion and puffery’ . . . provide an insufficient basis upon which to predicate a claim of fraud.” Thus, for example, representations related to the expected return on an investment are not actionable because “a prediction of something which is expected to occur in the future will not sustain an action for fraud.” As this Blog has noted in several articles, many cases involving an alleged fraud often rise and fall on the scienter element of the cause of action. To allege scienter, a plaintiff must allege with particularity that the defendant had an “actual intent to deceive, manipulate, or defraud.” Scienter must be pleaded with “sufficient detail[]”; “conclusory statement of intent” are insufficient. To succeed, therefore, the plaintiff must allege facts from which there is some “rational basis for inferring that the alleged misrepresentations were knowingly made.” Scienter is a very difficult element to plead. In fact, the scienter element is the hardest to plead because the evidence of intent most often rests solely with the defendant. Because of this difficulty, intent is often inferred from circumstantial evidence. Another element of a fraud claim that is difficult to plead is “justifiable reliance.” The New York Court of Appeals has emphasized the importance of the justifiable reliance element, noting that it is a “fundamental precept” of a fraud claim and is critical to the success of such a claim. Determining whether a plaintiff justifiably relied on a misrepresentation or omission, however, is “always nettlesome” because it is so fact intensive. 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.” 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. The same is true with regard to documents that a party signs , such as contracts, offering plans, and private placement memoranda. “A party who signs a document without any valid excuse for not having read it is ‘conclusively bound’ by its terms.” When that happens, the plaintiff’s failure to read the document prevents him/her from establishing justifiable reliance. It is important to remember that fraud does not always involve an affirmative statement. Sometimes a person can perpetrate a fraud through the omission of a material fact . Where fraud by omission is claimed, the plaintiff must allege that the defendant had a duty to disclose the omitted fact . A duty to disclose arises when (1) the defendant speaks on the subject, in which case he/she must speak truthfully and completely about the matter ; (2) there is a fiduciary relationship between the plaintiff and defendant ; or (3) the defendant possesses “special facts” about the matter not known by the plaintiff. A fraud by omission claim is not sustainable where information allegedly withheld is ascertainable through publicly available sources.  Nor is an omission case sustainable where the omitted information could have been discovered by the plaintiff through the exercise of ordinary intelligence. Both of the foregoing circumstances will negate application of the special facts doctrine. Finally, as in a fraud by misrepresentation case, the plaintiff must satisfy the other elements of the claim – namely, intent to defraud, justifiable reliance , and injury. And the plaintiff must do so with particularity. All of the foregoing principles were at issue in Lapin . In Lapin , plaintiff commenced the action against defendants to recover damages for breach of fiduciary duty and fraud in relation to a failed real estate investment. Plaintiff alleged, inter alia , that an agent of defendants deceived plaintiff into investing in a real estate project being overseen by the individual defendant. Plaintiff alleged that the agent misrepresented that the individual defendant, who is the chief executive officer of defendant Springhouse Partners, Inc., was a “real estate mogul,” and that the investment was “conservative” and would generate an annual 5% return with distributions within 18 to 24 months. Plaintiff further alleged that defendants made material omissions of fact by failing to disclose their involvement in certain other concomitant investments, and by failing to disclose that “the project was overleveraged” and “susceptible to interest rate changes.” Prior to interposing an answer, defendants moved, inter alia , pursuant to CPLR 3211(a) to dismiss the cause of action alleging fraud on the ground, among others, that plaintiff failed to state a cause of action. In an order dated August 3, 2023, the motion court, inter alia , granted that branch of defendants’ motion. Plaintiff appealed. The Appellate Division , Second Department affirmed. The Court held that “plaintiff failed to state a cause of action for fraud.” The Court found that the “allegations of fraudulent misrepresentations amount to ‘no more than vague expressions of hope and future expectation’ or ‘mere opinion and puffery,’ and nonactionable.” Moreover, said the Court, plaintiff failed to allege facts to support an inference of scienter or that plaintiff reasonably relied on the representations alleged to have been made by defendants. Further, the Court found that “the allegations of material omissions of fact … fail to support a cause of action for fraud.” The Court explained that plaintiff failed to plead “facts … which might give rise to a reasonable inference that the alleged omissions were material or that the defendants otherwise had a duty to disclose the alleged omissions to the plaintiff, or that the plaintiff justifiably relied on the alleged omissions.” Accordingly, the Court concluded that the motion court “properly granted that branch of the defendants’ motion which was pursuant to CPLR 3211(a) to dismiss the cause of action alleging fraud.” Takeaway Yudkin highlights the need for litigants to act on the facts and circumstances from which it can be reasonably inferred that they were the victims of fraud. The failure to bring suit when the facts suggest fraud will result in dismissal. Thus, even though the discovery rule allows the victim of fraud to bring suit when the very nature of the fraud prevents him/her from knowing that he or she was defrauded, the courthouse doors will, nevertheless, close on the litigant who sits on his/her rights when the facts indicate that a wrong has been done. Lapin highlights the need to satisfy each element of a fraud claim . As made clear by the Court, the failure to allege each element of the claim with particularity will result in the dismissal of cause of action . _________________________________ Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice. To find articles related to the elements of a fraud claim and the statute of limitations related to a fraud claim, visit the “ Blog ” tile on our  website  and enter the search terms desired ( e.g. , misrepresentation or omission, scienter, justifiable reliance, statute of limitations ) or any other related search term in the “search” box Lautman v. 2800 Coyle St. Owners Corp. , 223 A.D.3d 658, 659-660 (2d Dept. 2024) (internal quotation marks omitted); Kaul v. Brooklyn Friends Sch. , 220 A.D.3d 939, 940-941 (2d Dept. 2023). Lautman , 223 A.D.3d at 660; Plaza Invs. v. Capital One Fin. Corp. , 165 A.D.3d 853, 854 (2d Dept. 2018). CPLR 213(2). Houtenbos v. Fordune Assn., Inc. , 200 A.D.3d 662, 666 (2d Dept. 2021); Ely-Cruikshank Co. v. Bank of Montreal , 81 N.Y.2d 399, 402 (1993). CPLR 213(8); Seidenfeld v. Zaltz , 162 A.D.3d 929, 934 (2d Dept. 2018). Carbon Capital Mgmt., LLC v. Am. Express Co. , 88 A.D.3d 933, 939 (2d Dept. 2011) (citation and alterations omitted). Schmidt v. Merchants Despatch Transp. Co. , 270 N.Y. 287, 300 (1936). Erbe v. Lincoln Rochester Trust Co. , 3 N.Y.2d 321, 326 (1957). Id. Trepuk v. Frank , 44 N.Y.2d 723, 725 (1978). Gutkin v. Siegal , 85 A.D.3d 687, 688 (1st Dept. 2011).  Id. (citation and internal quotation marks omitted). See Shalik v. Hewlett Assocs., L.P. , 93 A.D.3d 777, 778 (2d Dept. 2012). Celestin v. Simpson , 153 A.D. 3d 656, 657 (2d Dept. 2017). Yudkin , Slip Op. at *2 (citing CPLR 213(2) and Kaul , 220 A.D.3d at 941. Id. Id. Id. (citing Kotlyarsky v. Abrazi , 188 A.D.3d 853, 855 (2d Dept. 2020); Coleman v. Wells Fargo & Co. , 125 A.D.3d 716, 716-717 (2d Dept. 2015)). Id. Blaize v. New York City Dept. of Educ. , 205 A.D.3d 871, 874 (2d Dept.2022) (citations and internal quotation marks omitted). Yudkin , Slip Op. at *2 (citing Fricke v. Beauchamp Gardens Owners Corp. , 222 A.D.3d 718, 720 (2d Dept. 2022)). Benjamin v. Yeroushalmi , 178 A.D.3d 650, 654 (2d Dept. 2019) (citing Eurycleia Partners, LP v. Seward & Kissel, LLP , 12 N.Y.3d 553, 559 (2009)). Stortini v. Pollis , 138 A.D.3d 977, 978–79 (2d Dept. 2016). Id. See Facebook, Inc. v. DLA Piper LLP (US) , 134 A.D.3d 610, 615 (1st Dept. 2015) (“Statements made in pleadings upon information and belief are not sufficient to establish the necessary quantum of proof to sustain allegations of fraud.”). RKA Film Fin., LLC v. Kavanaugh , 2018 WL 3973391, at *3 (Sup. Ct., N.Y. County 2018) (quoting Shea v. Hambros PLC , 244 A.D.2d 39, 46 (1st Dept. 1998)). See also Gregor v. Rossi , 120 A.D.3d 447 (1st Dept. 2014). Gregor , 120 A.D.3d at 447; Orchid Constr. Corp. v. Gottbetter , 89 A.D.3d 708, 710–11 (2d Dept. 2011) (dismissing complaint where plaintiff failed to allege, among other things, “the time or place” of alleged misrepresentations); Saul v. Cahan , 153 A.D.3d 947, 950 (2d Dept. 2017) (citations omitted) (dismissing fraud claim because plaintiff failed to alleged “specific dates and items” relative to the “circumstances underlying” the cause of action for fraud). INTL FCStone Mkts., LLC v. Corrib Oil Co. Ltd. , 172 A.D.3d 492, 493 (1st Dept. 2019). International Oil Field Supply Servs. Corp. v. Fadeyi , 35 A.D.3d 372, 375 (2d Dept. 2006). DH Cattle Holdings Co. v. Smith , 195 A.D.2d 202, 208 (1st Dept. 1994). High Tides, LLC v. DeMichele , 88 A.D.3d 954, 958 (2d Dept. 2011). Dragon Inv. Co. II LLC v. Shanahan , 49 A.D.3d 403, 403 (1st Dept. 2008) (internal quotation marks and citation omitted); Lipman v. Shapiro , 150 A.D.3d 517 (1st Dept. 2017) (citations omitted) (dismissing plaintiff’s fraud claim because the alleged representations were based on a future event, not an existing fact). Zutty v. Rye (NOR) , 33 Misc. 3d1226(A), 2011 WL 5962804 at *11 (Sup. Ct., N.Y. Co. Apr. 15, 2011). Zanett Lombardier, Ltd. v. Maslow , 29 A.D.3d 495 (1st Dept. 2006) (citation omitted); Fried v. Lehman Bros. Real Estate Assoc. III, L.P. , 156 A.D.3d 464, 464–65 (1st Dept. 2017) (citation omitted) (dismissing complaint because “conclusory” allegations of scienter were “not pleaded with the requisite particularity”); Giant Group v. Arthur Andersen LLP , 2 A.D.3d 189, 190 (1st Dept. 2003). Houbigant, Inc. v. Deloitte & Touche LLP , 303 A.D.2d 92, 93 (1st Dept. 2003). Pludeman v. N. Leasing Sys., Inc. , 10 N.Y.3d 486, 488 (2008). Ambac Assurance Corp. v. Countrywide Home Loans, Inc. , 31 N.Y.3d 569 (2018). DDJ Mgt., LLC v. Rhone Group L.L.C. , 15 N.Y.3d 147, 155 (2010) (internal quotation marks omitted). Curran, Cooney, Penney v. Young & Koomans , 183 A.D.2d 742, 743) (2d Dept. 1992). See also Danann Realty Corp. v. Harris , 5 N.Y.2d 317, 322 (1959). 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). Ferrarella v. Godt , 131 A.D.3d 563, 567-568 (2d Dept. 2015) (quoting Gillman v. Chase Manhattan Bank , 73 N.Y.2d 1, 11 (1988)); see also Sorenson v. Bridge Capital Corp. , 52 A.D.3d 265, 266 (1st Dept. 2008). Stortini , 138 A.D.3d at 978; Sorenson , 52 A.D.3d at 266. Bank of Am., N.A. v. Bear Stearns Asset Mgmt. , 969 F. Supp. 2d 339, 351 (S.D.N.Y. 2013). Balanced Return Fund Ltd. v. Royal Bank of Canada , 138 A.D.3d 542, 542 (1st Dept. 2016). Pramer S.C.A. v. Abaplus Int’l Corp. , 76 A.D.3d 89, 99 (1st Dept. 2010). “The ‘special facts’ doctrine holds that ‘absent a fiduciary relationship between parties, there is nonetheless a duty to disclose when one party’s superior knowledge of essential facts renders a transaction without disclosure inherently unfair.’” Greenman-Pedersen, Inc. v. Berryman & Henigar, Inc. , 130 A.D.3d 514, 516 (1st Dept. 2015), lv. denied , 29 N.Y.3d 913 (2017) (quoting, Pramer , 76 A.D.3d at 99). Northern Group Inc. v. Merrill Lynch, Pierce, Fenner & Smith Inc. , 135 A.D.3d 414 (1st Dept. 2016). Black v. Chittenden , 69 N.Y.2d 665, 669 (1986); Schumaker v. Mather , 133 N.Y. 590, 596 (1892). CPLR 3016(b). Lapin , Slip Op. at *2. Id. (citations omitted). Id. (citations omitted). Id. Id. (citations omitted). Id.

By: Jonathan H. Freiberger In today’s Blog, we revisit the requirement in RPAPL 1351(1) that a foreclosure sale occur within 90 days of the date of the judgment of foreclosure and sale. By way of brief background, and as previously discussed in this BLOG, the 90-day requirement became effective in December of 2016. However, the rule does not apply in situations where the sale occurred prior to the effective date of the amendment. U.S. Bank, N.A. v. Peralta , 191 A.D.3d 924, 925 (2 nd Dep’t 2021). Moreover, in order to set aside a foreclosure sale pursuant to RPAPL 1351(1), the borrower must demonstrate that the delay “prejudiced a substantial right.” Wells Fargo Bank, N.A. v. Singh , 204 A.D.3d 732, 734 (2 nd Dep’t 2022); Bank of America, N.A. v. Lynch , 85 Misc.3d 1273(A), *5 (Supreme Court Suffolk Co. 2025). Also relevant to today’s BLOG is CPLR 5015(a)(1) , which permits a court to “relieve a party” from a judgment or order on the ground of “excusable default, if such motion is made within one year after service of a copy of the judgment or order with written notice of its entry upon the moving party, or, if the moving party has entered the judgment or order, within one year after such entry.” “A party seeking to vacate a default pursuant to CPLR 5015(a)(1) must demonstrate a reasonable excuse for his or her delay in appearing and answering the complaint and a potentially meritorious defense to the action.” Wells Fargo Bank, N.A. v. Besemer , 131 A.D.3d 1047, 1049 (2 nd Dep’t 2015) (citations, internal quotation marks and brackets omitted). Whether an excuse is “reasonable” is a determination “within the sound discretion” of the motion court. HSBC Bank USA, N.A. v. Gias , 215 A.D.3d 810, 812 (2 nd Dep’t 2023). Against this backdrop, we can discuss HSBC Bank USA, N.A. v. Gallo , a mortgage foreclosure action decided on May 28, 2025, by the Appellate Division, Second Department. The borrower in Gallo defaulted in her repayment obligation under a note and mortgage. The lender commenced suit, and the defendant answered the complaint. The lender served motions for summary judgment and for a judgment of foreclosure and sale on the borrower’s counsel, who failed to oppose either motion. Both motions were granted. A judgment of foreclosure and sale was entered on January 18, 2017, and a foreclosure sale was held on September 28, 2018. The borrower moved, pursuant to CPLR 5015(a)(1), to vacate the summary judgment order and the judgment of foreclosure and sale, to set aside the foreclosure sale, and to vacate the referee’s deed because the property was not sold within 90 days of the judgment of foreclosure and sale. The borrower supported her application with, inter alia , the claim that her attorney was negligent and was publicly censured for professional misconduct. The lender opposed the motion by submitting evidence of the borrower’s bankruptcy proceeding and her two orders to show cause seeking to stay the foreclosure sale . The motion court denied the motion and the borrower appealed. In affirming, the Second Department rejected the borrower’s arguments under CPLR 5015(a)(1). The Court noted that even though CPLR 5015(a)(1) requires a motion to vacate be made within one year after the service of the order or judgment with notice of entry , “the Supreme Court has the inherent authority to vacate an order in the interest of justice, even where the statutory one-year period under CPLR 5015(a)(1) has expired.” (Citation omitted.) The borrower’s motion was made more than two and a half years after notice of entry of the judgment of foreclosure and sale. In any event, the Court found that the borrower failed to demonstrate a reasonable excuse for failing to oppose the summary judgment motion or the motion for a judgment of foreclosure and sale and, accordingly did not have to consider whether the borrower “demonstrated the existence of a potentially meritorious opposition to those motions.” (Citation omitted.) The Court also rejected the Borrower’s arguments pursuant to RPAPL 1351(1) and stated: The Supreme Court properly rejected the contention that the foreclosure sale should be set aside and the referee's deed should be vacated pursuant to RPAPL 1351(1). RPAPL 1351(1) was amended, effective December 20, 2016, to provide that a judgment of foreclosure and sale shall direct that the subject property be sold “within ninety days of the date of the judgment”. Here, the waived any objection to the omission of the language required by RPAPL 1351(1) by failing to oppose the plaintiff's motion to confirm the referee's report and for a judgment of foreclosure and sale, and by waiting more than two years to move to vacate the order and judgment of foreclosure and sale. In any event, under the circumstances of this case, the court providently exercised its discretion in excusing the 's delay in conducting the foreclosure sale pursuant to CPLR 2004 . (Citations and internal quotation marks omitted, hyperlink added.] Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice. This BLOG has previously written about RPAPL 1351(1) < here =">here"> . This BLOG has written dozens of articles addressing numerous aspects of residential mortgage foreclosure. To find such articles, please see the BLOG tile on our website and search for any foreclosure, or other commercial litigation, issue that may be of interest you.

By:  Jeffrey M. Haber On many occasions, we have written about Ponzi schemes that have been the subject of enforcement actions brought by, and/or settlements with, the Securities and Exchange Commission (“SEC” or the “Commission”). We remain unsurprised by the frequency with which people operate a Ponzi scheme and do so by exploiting the trust and friendship that exist in groups of people who have something in common, such as a religious group, an ethnic group, or a community – also known as affinity fraud. Today, we examine an enforcement action brought by the SEC involving a Ponzi-like scheme that targeted retired senior citizens that the defendant met through his church community. S.E.C. v. Mattson On May 22, 2025, the SEC announced ( here ) that it charged the former CEO of LeFever Mattson (“defendant”), a real estate investment firm, with defrauding approximately 200 investors of at least $46 million by selling them fake interests in real estate investment limited partnerships. Many of these investors were retired senior citizens that defendant met through his church community. According to the SEC, from approximately 2007 through April 2024, defendant orchestrated a Ponzi-like scheme that involved offering and selling fake interests in various legitimate limited partnerships created and managed by his company LeFever Mattson, a California corporation (“LeFever Mattson”). The limited partnerships in which defendant purported to sell interests (the “affiliated limited partnerships”) were real and invested in residential and commercial real estate. The affiliated limited partnerships were managed and partly owned by LeFever Mattson, a Citrus Heights, California-based company, which defendant co-founded and ran as both the entity’s chief executive officer and chief financial officer. LeFever Mattson has been in business since 1989 and boasted an approximately $400 million portfolio of real estate investments, most of which consisted of ownership interests in 50 limited partnerships. While the affiliated limited partnerships were real, and were in fact owned by a defined set of real investors, the SEC alleged that defendant fraudulently raised funds from another set of investors by falsely purporting to sell them ownership stakes in those same affiliated limited partnerships. Defendant allegedly told the investors that their investments would buy them a portion of LeFever Mattson’s ownership interests in specific affiliated limited partnerships and would entitle them to proportional distributions of the income generated by the underlying properties. According to the SEC, these representations were materially false. The SEC alleged that defendant took steps to hide his alleged fraudulent scheme from people associated with LeFever Mattson, including by using a personal post office box to receive documents from investors, receiving investor funds and sending purported distributions from a bank account in the name of LeFever Mattson that only defendant could fully access, and instructing his personal assistant not to discuss the investors with anyone else at LeFever Mattson. According to the SEC , defendant kept documents related to his alleged fraudulent scheme, including commercial bookkeeping records, on his laptop, which the SEC alleged he deleted after receiving an investigative subpoena from the staff of the Commission’s Division of Enforcement that required him to produce certain records concerning, among other things, the affiliated limited partnerships. Because defendant allegedly concealed his fake limited partnership sales from people associated with LeFever Mattson, said the SEC, the fake sales were not reflected in the legitimate records demonstrating ownership percentages of the affiliated limited partnerships. As a result, the SEC alleged that the investors who purchased interests in the affiliated limited partnerships from defendant never became actual limited partners or acquired any actual ownership interests, and they never received legitimate distributions from the limited partnerships in which they thought they invested. Instead, alleged the SEC, defendant commingled new investor funds with other personal and business funds in a bank account that he controlled and allegedly used the commingled funds to make Ponzi-like payments to existing investors. The SEC also alleged that defendant misappropriated investor money to fund certain real estate transactions through his personal partnership, relief defendant KS Mattson Partners LP (“KS Mattson Partners”), pay expenses of KS Mattson Partners, and pay for personal expenses. According to the SEC, defendant concealed from investors the fact that he was orchestrating a Ponzi-like scheme by, among other things, using some new investor funds to make payments to deceive existing investors, and providing investors with altered limited partnership documents.  Defendant also allegedly prepared a separate set of false tax records for the defrauded investors , which contradicted the legitimate annual tax filings for the affiliated limited partnerships that he signed and submitted to the Internal Revenue Service. The SEC maintained that LeFever Mattson discovered defendant’s alleged misconduct in late 2023. In around April 2024, following an internal investigation, defendant resigned from his positions as chief executive officer and chief financial officer. In September 2024 and October 2024, LeFever Mattson and all of its affiliated limited partnerships filed for Chapter 11 bankruptcy protection. As a result of the conduct alleged in the SEC’s complaint ( here ), the SEC charged defendant with violating the antifraud provisions of the Securities Act of 1933 (“Securities Act”) and the Securities Exchange Act of 1934 (“Exchange Act”) as well as the securities registration provisions of the Securities Act. The SEC claimed that KS Mattson Partners was unjustly enriched by defendant’s violations. The SEC seeks a permanent injunction against defendant, disgorgement of ill-gotten gains with prejudgment interest , and civil monetary penalties. The Commission also seeks an order prohibiting defendant from serving as an officer or director of a public company as well as from participating in the issuance, purchase, offer, or sale of any security.  Finally, the SEC seeks disgorgement of ill-gotten gains with prejudgment interest from KS Mattson Partners.   __________________________________ Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice. This Blog has examined Ponzi schemes and affinity fraud on numerous occasions. To find the articles related to Ponzi schemes and affinity fraud, visit the “ Blog ” tile on our website and enter “Ponzi scheme” or “affinity fraud” in the “search” box. This Blog has examined financial elder abuse on numerous occasions. To find the articles related to financial elder abuse or financial exploitation of seniors, visit the “ Blog ” tile on our website and enter “financial elder abuse” in the “search” box. The SEC filed its complaint in the U.S. District Court for the Northern District of California. It is important to remember that a complaint merely contains allegations. Until the claims in the complaint are fully adjudicated, readers should not interpret the allegations as anything more than statements of claimed facts made by the SEC against the defendant.

By:  Jeffrey M. Haber A claim for fraud requires “a material misrepresentation of a fact, knowledge of its falsity, an intent to induce reliance, justifiable reliance by the plaintiff and damages.” In First Trinity Life Ins. Co. v. Advance Funding LLC , 2025 N.Y. Slip Op. 03133 (1st Dept. May 22, 2025) ( here ), discussed below, knowledge of falsity ( i.e. , scienter) and reliance were the elements at issue. First Trinity concerned the assignment of lottery winnings. A former defendant won a New York State Lottery game in April 2008 that had a minimum prize of $2 million. In August 2016, the former defendant entered into an agreement with defendant Advance Funding, LLC (“AF”) in which he agreed to assign 32 months of prize payments totaling over $800,000 in exchange for a lump sum payment of $465,000. AF then assigned its right to the money to plaintiff in exchange for a payment in excess of $500,000. Plaintiff alleged that although AF represented that the former defendant had been paid in full by AF (and even included a wire transfer), the former defendant never received what he was owed and, therefore, plaintiff paid AF but did not receive any lottery payments. In connection with the assignment to AF, the former defendant filed a petition in Schenectady, New York to approve the transfer. However, the former defendant later moved to strike the assignment and disavow an affidavit he signed in which he agreed to the transaction. He later withdrew the order to show cause in exchange for an increased lump sum payment. Thereafter, the former defendant brought an application seeking to stop any more payments by the state’s Lottery Commission because AF allegedly did not make the additional payments promised to him in the settlement. Defendant moved for summary judgment dismissing the action on the grounds that she was without knowledge of the circumstances underlying the action. Defendant claimed that, as a favor to her boss, she assisted his brother’s company, defendant AF, to broker structured settlements for various winners (such as lottery winners) with large institutional funders, such as plaintiff.  Defendant claimed that when she was reviewing documents to close AF’s transaction with plaintiff, she was provided with a wire transfer that plaintiff alleged to be fraudulent . This wire transfer showed that the former defendant was paid $335,000. Defendant claimed that she had no reason to doubt the authenticity of that document. According to defendant, she was employed by Northeastern Capital Funding LLC (“Northeastern”) from May 2006 until June 2017 and never had any ownership interest in that entity. She emphasized that her job responsibilities included contacting funding entities to inform them of transactions between Northeastern and winners/settlement recipients. Defendant argued that she never had interactions with winners or structured settlement recipients. Defendant provided similar services for AF.  Plaintiff maintained that defendant helped to facilitate hundreds of transactions for AF and Northeastern. It insisted that in each transaction it entered into with AF and Northeastern, its sole contact person was defendant and that she held herself out as a senior officer for AF. Plaintiff further alleged that for the transaction at issue—the purchase from AF of the former defendant’s lottery winnings for $552,000—it was defendant who provided the closing binder and other documents to plaintiff. Plaintiff claimed that it relied upon those documents and other representations from defendant when executing the transaction. Plaintiff alleged that the wire transfer was fraudulent, that the former defendant never received the money he was owed by AF, and that plaintiff did not receive the stream of lottery payments for which it paid $552,000. Plaintiff claimed that bank statements showed that defendant received significant payments from Majestic Funding LLC (“Majestic”), an LLC owned by the same principals that owned AF and Northeastern, despite the fact that she never worked for Majestic. Plaintiff contended that defendant was a key point person at AF and was not a mere low-level employee. Defendant argued that plaintiff did not show that she knew the wire confirmations were fake and that the agreement between AF and plaintiff was an arm’s length transaction, thereby vitiating plaintiff’s reliance on her statements. Defendant also argued that she could not be held personally liable for AF’s alleged fraud . Defendant moved for summary judgment, claiming, inter alia , that the court lacked personal jurisdiction over her and that plaintiff failed to demonstrate that she perpetrated a fraud on it. The motion court denied the motion. First, the motion court held it that it possessed jurisdiction over defendant. The motion court noted that “ here no dispute that this case involves a New York resident … who won a lottery in New York and a transaction between AF and about those lottery winnings in New York (including a litigation in New York to approve the transaction between AF and [the former defendant).” The motion court found that defendant “signed her emails with a signature block that indicated that she was the director of the legal department for AF and included an address on Wall Street.” Under such circumstances, the motion court concluded that defendant could not “claim surprise that she subject to a lawsuit in New York about a New York lottery winner when she worked for a company that did business out of a New York office and represented to others that she did business out of that New York office.” “Simply put,” concluded the motion court, “there numerous contacts to satisfy New York’s long-arm statute, even despite claim that she never lived in New York.” Second, the motion court found that issues of fact precluded the grant of summary judgment , noting that “a jury could conclude that was part of the fraudulent scheme as she was the main contact person involved on behalf of AF,” while at the same time believing “ account … that she was not a part of the alleged fraud.” The motion court found “multiple issues of fact” concerning defendant’s knowledge of the false wire transfer and her intent to induce reliance . Among other things, the motion court noted that defendant provided AF with a closing binder of transaction documents, which included, inter alia , identification documents for the former defendant, including his photo ID and W-9 form, affidavits by both AF and the former defendant indicating that the assignment was fully authorized, as well as the court documents approving the assignment. Most critically, said the motion court, plaintiff requested, and defendant provided, confirmation that the former defendant had been paid what he was due. According to plaintiff, defendant provided the sought after proof of funding and payment. The motion also found that there was an issue of fact regarding defendant’s personal liability for the alleged fraudulent scheme. Defendant maintained that she was a low-level employee even though she signed her emails with the signature line “Director, Legal Dept.”, which is an officer position. “That raises an issue about her role with AF and that she might be considered a corporate officer,” said the motion court. Under New York law, noted the motion court, “a corporate officer who participates in the commission of a tort may be held individually liable, regardless of whether the officer acted on behalf of the corporation in the course of official duties and regardless of whether the corporate veil is pierced.” Defendant appealed. The Appellate Division, First Department affirmed the portions of the motion court’s order involving personal jurisdiction and fraud. The Court held that the motion court “properly found that it had personal jurisdiction over under New York’s long-arm statute, as the second amended complaint allege that she engaged in purposeful actions directed at New York and that her actions substantially related to plaintiff’s claims.” The Court explained that, “ lthough an employee ‘acting on behalf of his employer does not create jurisdiction upon the employee individually’…, the record support a finding that was acting in her individual capacity as part of the fraudulent scheme, and not simply conducting business on behalf of defendant Advance Funding, LLC.” The Court noted that “ f it is true, as plaintiff allege , that knowingly sent a fake wire transfer to plaintiff in an effort to fraudulently induce the underlying transaction, she would not have been conducting legitimate business on behalf of the corporation.” Further, said the Court, “the transaction at issue was specifically tied to New York.” The Court found that defendant “allegedly consented to and benefitted from that transaction, and it uncontested that she was paid for the services she undertook on behalf of Advance Funding.” The Court also held that the motion court “properly denied motion with respect to the fraud cause of action.” “At a minimum,” said the Court, “there are factual issues surrounding whether made a material misrepresentation of fact with knowledge as to its falsity, and whether plaintiff relied on the representation and on the allegedly fraudulent wire transfer documentation.” The Court noted that in her motion, defendant merely raised issues of credibility which were more properly resolved by the jury: With respect to the underlying transaction, plaintiff requested confirmation that the lottery winner had been paid in full by Advance Funding. In response, provided a copy of a check that was issued to the winner and a purported wire transfer in the amount of $335,000, which was later discovered to be a fraud. also represented that the winner had been fully paid, and in fact that he had been overfunded by $10,000. Although asserts that she had no idea that the wire transfer was fraudulent, this assertion merely raises an issue of fact as to credibility that cannot be properly resolved on the summary judgment motion. The Court also found that there were “some factual issues regarding whether plaintiff’s reliance on the fraudulent wire transfer was reasonable.” The Court noted that defendant “provided Trinity with a closing binder containing more than 20 documents,” which “Trinity reviewed …, asked questions , and … requested written confirmation from Advance Funding regarding the accuracy of its representations.” In response to plaintiff’s inquiries, defendant “provided Trinity with the fraudulent wire transfer and her own assurances that the lottery winner had actually been paid more than he was owed.” The Court concluded that plaintiff “was entitled to rely on representations.” ____________________________________________ Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice. Eurycleia Partners, LP v. Seward & Kissel, LLP , 12 N.Y.3d 553, 559 (2009); Braddock v. Braddock , 60 A.D.3d 84 (1st Dept.), appeal withdrawn 12 N.Y.3d 780 (2009). This Blog has examined cases involving fraud and personal jurisdiction on numerous occasions. To find articles related to these topic, visit the “ Blog ” tile on our website and enter “personal jurisdiction”, “fraud”, “fraudulent inducement” and any of the elements of a fraud claim in the “search” box. Am. Exp. Travel Related Services Co., Inc. v. N. Atl. Resources, Inc. , 261 A.D.2d 310, 311 (1st Dept. 1999). Slip Op. at *1 (citing, CPLR 302(a)(1); Deutsche Bank Sec., Inc. v. Montana Bd. of Invs. , 7 N.Y.3d 65, 71 (2006)). Id. (quoting Laufer v. Ostrow , 55 N.Y.2d 305, 313 (1982); and citing  Grosso v. Cy Twombly Found. , — A.D.3d —, 2025 N.Y. Slip Op. 02007, *1 (1st Dept. 2025)). Id. Id. Id. Id. (citing, Eurycleia , 12 N.Y.3d at 559 (2009). Id. Id. Id. at *1-*2. Id. Id. (citing, DDJ Mgmt., LLC v. Rhone Group LLC , 15 N.Y.3d 147, 156 (2010)).

By: Jeffrey M. Haber In Libman v. Hershey Co. , 2025 N.Y. Slip Op. 31769(U), (Sup. Ct., N.Y. County May 5, 2025) ( here ), the motion court was asked to consider whether a front-of-the-package label on the Twizzlers candy wrapper violated General Business Law (“GBL”) §§ 349 and 350. Front-of-package labels are labels that manufacturers put on the front of packaged foods to give consumers basic nutrition information in a way that is easy to understand and allows them to compare different products more efficiently and effectively. These labels typically highlight when foods contain high levels of nutrients that are commonly overconsumed and linked to adverse health outcomes (e.g., sodium, added sugar, and saturated fat). By contrast, the nutritional facts label on the back of the packaging provides comprehensive nutrition information per serving for the product. It includes all nutrients, serving size, and % Daily Value, and is intended to help consumers understand the nutritional content of a specific food and how it fits into their overall diet. Thus, while front-of-package labeling focuses on key nutrients (like saturated fat, sodium, and added sugars) and may use a “Low,” “Med,” or “High” scale for easy understanding, the nutrition facts label provides comprehensive nutrition information per serving for the product. GBL Section 349 prohibits “ eceptive acts or practices,” and Section 350 bars “ alse advertising.”  To plead a cause of action under either section, a plaintiff must allege that the defendant “engaged in (1) consumer-oriented conduct that is (2) materially misleading and that (3) plaintiff suffered injury as a result of the allegedly deceptive act or practice.” Notably, the deceptive practice does not have to rise to “the level of common-law fraud to be actionable under section 349.” In fact, “ lthough General Business Law § 349 claims have been aptly characterized as similar to fraud claims, they are critically different.” For example, while reliance is an element of a fraud claim, it is not an element of a GBL § 349 claim. Whether a statement is misleading is governed by an objective reasonable consumer standard. Under that standard, the statement must be “likely to mislead a reasonable consumer acting reasonably under the circumstances.” “Accordingly, “plaintiffs must do more than plausibly allege that a label might conceivably be misunderstood by some few consumers.” Instead, “ laintiffs must plausibly allege that a significant portion of the general consuming public or of targeted customers, acting reasonably in the circumstances, could be misled.” “ court may determine as a matter of law that an allegedly deceptive advertisement would not have misled a reasonable consumer.” “ n determining whether a reasonable consumer would have been misled by a particular advertisement, context is crucial.” Relevant to today’s article, courts examining allegedly misleading product claims will rely on common-sense observations and judicial experience. “Courts have also found that the presence of a disclaimer or similar clarifying language, such as a Nutrition Fact Panel, may defeat a claim of deception.” “Thus, where the allegedly deceptive practice is fully disclosed, there is no deception claim.” Finally, a plaintiff must prove “actual” injury to recover under the statutes, though not necessarily pecuniary harm. And, the plaintiff must prove the deceptive act caused the injury. Libman v. Hershey Company Libman was brought as a putative class action in which plaintiffs asserted claims for deceptive business practices and false advertising pursuant to GBL §§ 349 and 350 on behalf of a proposed class of New York State consumers who purchased strawberry-flavored Twizzlers King-Size Candy (“Twizzlers”), which is produced by defendant. Plaintiffs alleged that the front-of-the-package branding of Twizzlers as a “low fat snack” mislead consumers into believing that Twizzlers is “specially made or altered” to be low fat and that the product is not just low fat but also low sugar. Defendant moved, pre-answer, to dismiss the amended complaint pursuant to CPLR 321l(a)(7) ( i.e. , failure to state a claim). Plaintiff opposed the motion. As discussed below, the motion court granted the motion. Plaintiff alleged that the front-of-the-package branding of Twizzlers as a “low fat snack” is misleading to consumers as it lulls them into believing the candy is “specially made or altered” to be low fat and that the candy is also low sugar. Plaintiffs admitted, however, that Twizzlers is “low fat,’ containing zero grams of “Total Fat,” as accurately reflected in the Nutrition Facts label on the reverse side of the product packaging. The motion court ruled that plaintiffs failed to adequately allege facts demonstrating that reasonable consumers were likely to be misled in the manner they claimed. The motion court noted that the “specially made or altered” claim was premised on an alleged technical violation of an FDA food-labelling regulation that allows for the use of “low fat” on food labels, but requires additional disclosure language on the label “ f the food meets these conditions without the benefit of special processing, alteration, formulation, or reformulation to lower fat content.” The motion court further noted that “private plaintiffs are not authorized to sue for violations of the Federal Food, Drug, and Cosmetic Act, FDA regulations, or identical New York labeling requirements under New York’s Agriculture and Markets Law. Thus, concluded the motion court, plaintiffs’ claim, that the Twizzlers’ packaging violated the FDA’s food-labelling regulation because it omitted the required additional disclosure language despite being a type of candy that is inherently low fat without any special alteration, had to be dismissed. Turning to the GBL allegations, the motion court held that plaintiffs failed to allege “facts sufficient to allow a reasonable inference that the labeling of Twizzlers as a ‘low fat snack’ constitute false advertising or a deceptive business practice.” The motion court explained that plaintiffs did not “allege that reasonable consumers aware of the federal regulation, much less that they incorporate the regulation into their day-to-day marketplace expectations.” Similarly, said the motion court, plaintiffs failed to “supply extrinsic evidence that the perceptions of ordinary consumers align with the FDA’s labeling standards, such that they would understand any product labelled as a ‘low fat snack’ as having been ‘specially made or altered’ to be low fat absent the regulation’s additional disclosure language.” In facts, noted the motion court, “plaintiffs concede that reasonable consumers that Twizzlers is ‘candy,’ as is … expressly stated on the front of the product’s packaging.” Accordingly, concluded the motion court, “it is beyond cavil that reasonable consumers understand that candy, as a category, is not inherently low fat.” With respect to plaintiffs’ other theory of liability – that "low fat snack" is likely to mislead consumers into thinking that Twizzlers are also low sugar – the motion court found that plaintiffs made several concessions that were fatal to their claims under GBL 349 and 350. For example, plaintiffs conceded “that: Twizzlers does not expressly market itself as ‘low sugar’; the Nutrition Facts and Ingredient List included on the product packaging accurately disclose its total and per-serving added sugar content and percentage Daily Value of added sugars; the front of the product packaging describes the product as ‘candy’; and reasonable consumers understand that Twizzlers is ‘candy’ made from sugar.” “These concessions,” concluded the motion court, were “fatal to plaintiffs’ claim, as no reasonable consumer, understanding that Twizzlers is candy made from sugar, would reasonably assume the product was low in sugar absent any express claim to that effect, especially given the accurate disclosure of the product’s sugar content on the reverse side of the product packaging.” ______________________ Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice. Koch v. Acker, Merrall & Condit Co. , 18 N.Y.3d 940, 941 (2012); Goshen v. Mut. Life Ins. Co. of New York , 98 N.Y.2d 314, 324 n.l (2002) (explaining the “standard for recovery under § 350, while specific to false advertising, is otherwise identical to section 349”). Boule v. Hutton , 328 F.3d 84, 94 (2d Cir. 2003) (citing Gaidon v. Guardian Life Ins. Co. , 94 N.Y.2d 330, 343 (1999)). Gaidon , 94 N.Y.2d at 343. Stutman v. Chemical Bank , 95 N.Y.2d 24, 29 (2000); Small v. Lorillard Tobacco Co. , 94 N.Y.2d 43, 55-56 (1999). Oswego Laborers’ Local 214 Pension Fund v. Marine Midland Bank , 85 N.Y.2d 20, 26 (1995). Jessani v. Monini N. Am., Inc. , 744 Fed. App’x 18, 19 (2d Cir. 2018). Id. Fink v. Time Warner Cable , 714 F.3d 739, 741 (2d Cir. 2013) (citing Oswego , 85 N.Y.2d at 26). Id. at 742. See , e.g. , Warren v. Coca-Cola Co. , 670 F. Supp. 3d 72, 80-83 (S.D.N.Y. 2023). Mazella v. Coca-Cola Co. , 548 F. Supp. 3d 349, 357 (S.D.N.Y. 2021). Id. (citing Broder v. MBNA Corp. , 281 A.D.2d 369, 371 (1st Dept. 2001). Stutman v. Chemical Bank , 95 N.Y.2d 24, 29 (2000); Oswego , 85 N.Y.2d at 26. Id. ; Oswego , 85 N.Y.2d at 26. Slip at *3. Id. (quoting 21 C.F.R. § 101.62(b)(2)(ii)) (internal quotation marks omitted). Id. (citing 21 U.S.C. § 337(a); Steele v. Wegmans Food Markets, Inc., 472 F. Supp. 3d 47, 49 (S.D.N.Y. 2020)). Id. Id. Id. at *3-*4 (citing Warren v. Whole Foods Mkt. Grp., Inc. , 574 F. Supp. 3d 102, 113-14 (E.D.N.Y. 2021); N. Am. Olive Oil Ass’n v. Kangadis Food Inc. , 962 F. Supp. 2d 514, 519 (S.D.N.Y. 2013); Wynn v. Topco Assocs., LLC , No. 19-CV-11104 (RA), 2021 WL 168541, at *3 ([S.D.N.Y. Jan. 19, 2021)). Id. at *4. Id. Id. Id. Id.

By:  Jeffrey M. Haber A contract is an agreement between two or more parties to do something ( e.g. , provide goods or services) in exchange for a benefit. When one or more parties to a contract fail to perform a term in their agreement, they are in breach of that agreement. Most breaches fall into one of two categories: actual or anticipatory. In the former, a party to the contract fails or refuses to perform his/her obligations under the agreement or performs his/her obligations incompletely. In the latter, a party to the contract declares, before performance is required, that he/she does not intend to perform the obligations under the agreement.   A breach of contract, regardless of the form it takes, entitles the non-breaching party to bring an action for damages. When one party unconditionally refuses to perform under the contract, regardless of when performance is supposed to take place, the refusal is called a “repudiation” of the contract.  A breach may be considered a repudiation even if it is not of an essential term or a material breach of an intermediate term. (This Blog previously wrote about the types of breaches  here .) Anticipatory Breach Examined There are two types of anticipatory breaches: (1) express, and (2) implied. In an express repudiation, a party to a contract announces, before performance is required, that he/she will not perform under the agreement. The repudiation must be clear, straightforward, and directed at the other party. The declaration cannot be qualified or ambiguous. (For example, “Unless it stops raining, I will not be able to fix the roof.”) In an implied repudiation, a party takes actions that put the performance of a contract out of his/her power to perform (such as when a contractor sells the tools required to fix his customer’s roof). If the breach can be shown to be repudiatory in nature, then the non-breaching party can terminate the contract, even though the date for performance has not yet occurred or proceed as if the contract is valid. Importantly, the non-repudiating party need not tender performance or prove its ability to perform the contract in the future. Rather, the non-repudiating party is relieved of his/her obligation of future performance and can recover the present value of his/her damages from the repudiating party’s breach of the contract. The decision whether to accept that the contract has been repudiated and terminate or wait until the date for performing the obligation passes and treat the defaulting party as being in actual breach, is not an easy one.  One commentator described the difficulty as follows: If the promisee regards the apparent repudiation as an anticipatory repudiation, terminates his or her own performance and sues for breach, the promisee is placed in jeopardy of being found to have breached if the court determines that the apparent repudiation was not sufficiently clear and unequivocal to constitute an anticipatory repudiation justifying nonperformance. If, on the other hand, the promisee continues to perform after perceiving an apparent repudiation, and it is subsequently determined that an anticipatory repudiation took place, the promisee may be denied recovery for post-repudiation expenditures because of his or her failure to avoid those expenses as part of a reasonable effort to mitigate damages after the repudiation. “When one party to a contract commits an anticipatory breach, the nonbreaching party, must choose one of two options: either treat the contract as terminated and seek damages, or ignore the breach and wait for the breaching party to perform.” The nonbreaching party must “make an election and cannot ‘at the same time treat the contract as broken and subsisting. One course of action excludes the other.’” “On learning of the breach, the other party has a reasonable time to elect its remedy.” “In determining which election the nonbreaching party has made, ‘the operative factor … is whether the non-breaching party has taken an action (or failed to take an action) that indicated to the breaching party that had made an election.’” Once the nonbreaching party has chosen a remedy, the choice becomes binding and cannot be altered. Accordingly, asserting a cause of action alleging breach of contract precludes pleading a cause of action alleging anticipatory breach of contract. Whether a party has anticipatorily breached a contract is ordinarily a question of fact reserved for a jury, but a court may decide the issue as a matter of law when the purported repudiation is embodied in an unambiguous writing. Can the Breaching Party Take Back the Repudiation? A breaching party can repudiate the contract and then later retract the repudiation, as long as the non-breaching party has not made a material change in his/her position because of the repudiation. Notwithstanding, retraction cannot be made if the only contractual obligation remaining is for one party to pay money to the other. In that case, the party seeking the payment must wait until the due date for the payment has passed. The Non-Breaching Party’s Duty to Mitigate If one party repudiates the contract, most courts require the non-breaching party to avoid incurring unnecessary costs or expenses. This is referred to as “mitigating damages” and generally means that the non-breaching party cannot sit on his/her rights and let the situation get worse. JP Pizza Eastport, LLC v. Luigi’s Main St. Pizza, Inc. The foregoing principles were recently addressed by the Appellate Division, Second Department , in JP Pizza Eastport, LLC v. Luigi’s Main St. Pizza, Inc. , 2025 N.Y. Slip Op. 02915 (2d Dept. May 14, 2025) ( here ). JP Pizza was an action, inter alia , to recover damages for breach of contract involving certain real property located in Eastport (hereinafter, the “subject premises”) that was owned by defendant Luigi’s on Main, LLC (“Luigi’s, LLC). The subject premises was a mixed-use property with a pizzeria business and residential apartments located thereon. Defendant Luigi’s Main Street Pizza, Inc. (hereinafter, “Luigi’s Pizza”) operated the pizzeria business. In July 2018, Luigi’s Pizza sold the pizzeria business to plaintiff JP Pizza Eastport, LLC (hereinafter, “JP Pizza”). On or around the same date as the closing of the sale of the pizzeria business, Luigi’s Pizza, as lessor, entered into a lease agreement with JP Pizza for a portion of the subject premises used for the operation of the pizzeria business. On or around July 16, 2018, plaintiff 491 Montauk Highway Eastport, LLC (hereinafter, “Montauk Highway, LLC”) entered into a contract to purchase the subject premises from Luigi’s, LLC. JP Pizza and Montauk Highway, LLC were related companies, sharing a common managing member. Pursuant to the contract, Montauk Highway, LLC paid a down payment of $33,250, which was deposited into an escrow account . The contract provided that the closing was to occur on or around September 15, 2018. The contract required Luigi’s, LLC to deliver a “ ertificate of ccupancy or other required certificate of compliance, or evidence that none was required, covering the building(s) and all of the other improvements located on the property authorizing their use as a commercial property with permit for restaurant, cottage and apartment rentals” at closing. The contract further provided that Luigi’s, LLC could adjourn the closing up to October 15, 2018, if necessary, in order to cure any defects or objections to title. By letter dated August 22, 2018, plaintiffs advised defendants they had discovered that the pizzeria business and the subject premises lacked “required approvals, permits, and licenses,” declared all agreements entered into between the parties “void ab initio,” and demanded the immediate return of the $33,250 down payment paid by Montauk Highway, LLC, in connection with the contract for the sale of the subject premises and the payment of certain monies allegedly expended by JP Pizza in connection with the purchase of the pizzeria business and the making of improvements to the subject premises. Plaintiffs further advised defendants that JP Pizza would cease operations of the pizzeria business on the following day and that it would return the subject premises to Luigi’s Pizza. JP Pizza vacated the subject premises and ceased operations in August 2018. By letter dated August 27, 2018, defendants responded that they would obtain any required certificates for the subject premises in accordance with the terms of the contract. On September 4, 2018, plaintiffs commenced the action asserting causes of action sounding in, among other things, fraud, rescission, and breach of contract. The complaint did not assert a cause of action seeking specific performance of the contract . Defendants interposed an answer, asserting, inter alia , an affirmative defense alleging that Montauk Highway, LLC, had repudiated the contract and that Luigi’s, LLC, was entitled to retain the down payment as liquidated damages. In May 2019, several months after JP Pizza had vacated the subject premises and stopped paying rent, Luigi’s, LLC, entered into a 10-year lease agreement for the subject premises with a third party. Thereafter, by letter dated November 25, 2019, plaintiffs purported to schedule a time-of-the-essence closing for December 9, 2019. After the completion of discovery, defendants moved, among other things, for summary judgment dismissing the cause of action alleging breach of contract . Plaintiffs cross-moved, inter alia , for summary judgment on that cause of action. In an order dated March 22, 2022, the Supreme Court , among other things, granted that branch of the defendants’ motion and denied that branch of the plaintiffs’ cross-motion. Plaintiffs appealed. The Appellate Division, Second Department affirmed . The Court held that “the Supreme Court properly granted that branch of the defendants’ motion which was for summary judgment dismissing the cause of action alleging breach of contract and denied that branch of the plaintiffs’ cross-motion which was for summary judgment on that cause of action.” The Court found that “defendants established their prima facie entitlement to summary judgment dismissing the cause of action alleging breach of contract.” The Court explained that defendant established that plaintiffs had anticipatorily breached the contract of sale: Pursuant to the contract, the defendants had until September 15, 2018, to obtain the requisite approvals and were entitled to extend that deadline to October 15, 2018. By declaring the contract void ab initio through their attorney’s letter dated August 22, 2018, and demanding the return of the down payment, the plaintiffs anticipatorily breached the contract. Having found that plaintiffs breached the contact of sale, the Court explained that defendants properly elected their remedy for said breach by ignoring the breach and waiting for plaintiffs to perform. But, as noted, plaintiffs did not perform. Under the circumstances, the Court found that plaintiffs repudiated the contract , entitling defendants to retain the down payment for the subject property: The plaintiffs’ conduct, first by the letter declaring the contract void ab initio and demanding the return of the down payment, and then by the commencement of this action, amounted to a positive and unequivocal expression of their intent not to perform, and the defendants, under the terms of the contract, were entitled to retain the down payment as liquidated damages for the plaintiffs’ anticipatory breach. _______________________________________ Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice. This Blog has examined cases involving an anticipatory breach of contract on numerous occasions. To find articles related to this topic, visit the “ Blog ” tile on our website and enter “anticipatory breach” in the “search” box. Princes Point LLC v. Muss Dev. L.L.C. , 30 N.Y.3d 127, 133 (2017); Fuoco Group, LLP v. Weisman & Co. , 222 A.D.3d 619, 621-622 (2d Dept. 2023); see also 10-54 Corbin on Contracts § 54.1 (2017) (“An anticipatory breach of a contract by a promisor is a repudiation of contractual duty before the time fixed in the contract for . . . performance has arrived”); 13 Williston on Contracts § 39:37 (4th ed.). Norcon Power Partners v. Niagara Mohawk Power Corp. , 92 N.Y.2d 458, 463 (1998) (noting that an anticipatory repudiation “can be either a statement by the obligor to the obligee indicating that the obligor will commit a breach that would of itself give the obligee a claim for damages for total breach or a voluntary affirmative act which renders the obligor unable or apparently unable to perform without such a breach”) (internal quotation marks omitted). Tenavision, Inc. v. Neuman , 45 N.Y.2d 145, 150 (1978) (noting that the expression of intent not to perform must be “positive and unequivocal”). See also Central Park Capital Grp., LLC v. Machin , 189 A.D.3d 984, 986 (2d Dept. 2020) (quoting, Princes Point , 30 N.Y.3d at133). Strasbourger v. Leerburger , 233 N.Y. 55, 59 (1922);  see also American List Corp. v. U.S. News & World Report , 75 N.Y.2d 38, 44 (1989). American List Corp. , 75 N.Y.2d at 44. Id. Norcon Power , 92 N.Y.2d at 463 (quoting, Crespi,  The Adequate Assurances Doctrine after U.C.C. § 2-609: A Test of the Efficiency of the Common Law , 38 Vill. L. Rev. 179, 183 (1993)). Contract Pharmacal Corp. v. Air Indus. Grp. , 224 A.D.3d 873, 874 (2d Dept. 2024); see Princes Point , 30 N.Y.3d at 133. Inter-Power of N.Y. v. Niagara Mohawk Power Corp. , 259 A.D.2d 932, 934 (3d 1999) (quoting, Strasbourger , 233 N.Y. at 59). Todd English Enters. LLC v. Hudson Home Grp., LLC , 206 A.D.3d 585, 587 (1st Dept. 2022). AG Props. of Kingston, LLC v. Besicorp-Empire Dev. Co., LLC , 14 A.D.3d 971, 973 (3d Dept. 2005) (quoting, Bigda v, Fischbach Corp. , 898 F. Supp. 1004, 1013 (S.D.N.Y. 1995), aff’d 101 F.3d 108 (2d Cir. 1996)). See Lucente v. International Bus. Machs. Corp. , 310 F.3d 243, 258-259 (2d Cir. 2002). Id. at 258-260. Briarwood Farms, Inc. v. Toll Bros., Inc. , 452 Fed. App’x. 59, 61 (2d Cir. 2011). Slip Op. at *3. Id. at *2. Id. Id. (citing Contract Pharmacal , 224 A.D.3d at 874). Id. at *2-*3 (citation omitted).

By: Jonathan H. Freiberger In today’s article, we will discuss Yesmin v. Aliobaba, LLC , an Opinion and Order rendered on May 14, 2025, in which the Appellate Division, Second Department, held that “a notice of pendency that was unexpired at the time of the foreclosure sale has no effect on the title acquired by a good faith purchaser for value from a sale conducted pursuant to the judgment of foreclosure and sale.” By way of brief background, the borrower in Yesmin secured a $600,000 loan with a mortgage on a residential property in Queens, New York. Upon the borrower’s default, the lender commenced a mortgage foreclosure action in which a notice of pendency was filed and extended. In 2017, the motion court entered a judgment of foreclosure and sale (“JFS”). The borrower appealed from the JFS but did not seek a stay of its enforcement pursuant to CPLR 5519 during the pendency of the appeal. Within ninety days of the entry of the JFS, a foreclosure sale occurred and the property was sold. Thereafter, the purchaser took title to the property by referee’s deed. Three years later, the Second Department reversed the JFS and denied the lender’s motion to confirm the referee’s report and for a judgment of foreclosure and sale finding, inter alia , that the report was not supported by admissible evidence. Thereafter, the borrower commenced an action pursuant to RPAPL Article 15 against the purchaser to cancel and discharge the referee’s deed. The Borrower argued that “since the that authorized the sale had been reversed, the referee’s deed must be canceled” and that the purchaser “took title subject to a valid notice of pendency, which had not expired by the time of the foreclosure sale , and, therefore, ’s title, taken by the referee’s deed, was invalidated by the reversal of the .” The purchaser cross-moved for summary judgment and for the imposition of an equitable lien on the property arguing, inter alia , that “it was a good faith purchaser for value whose title was protected from the effects of the reversal of the .” The purchaser appealed from the motion court’s order granting the borrower’s motion. The Court framed the issue to be decided as “whether the referee’s deed was invalidated by the reversal of the .” The Court noted that it must first examine “the statutory authority vested in the courts to remedy the effects that a judgment of foreclosure and sale, subsequently reversed, vacated, or otherwise set aside, may have had on the rights of the parties with regard to the property at issue.” The Court stated that CPLR 5523 permits an “appellate court reversing or modifying a final judgment order restitution of property or rights lost by the judgment.” It further noted that its order reversing the JFS “left untouched” the motion court’s grant of summary judgment and “did not order restitution of the property or rights lost by the .” The Court further stated that: ursuant to CPLR 5015(d) where a judgment has been set aside or vacated, the Supreme Court is authorized to direct and enforce restitution in like manner and subject to the same conditions as where a judgment is reversed or modified on appeal. Of significance, the ability of a trial or appellate court to order restitution of property is qualified by the condition that “where the title of a purchaser in good faith and for value would be affected, the court may order the value or the purchase price restored or deposited in court” ( id. § 5523). The effect of this provision is that where title to the property has been transferred to a purchaser in good faith and for value, in the event of an appellate reversal, restitution of the property is no longer available and the successful appellant must content itself with restoration of the value or purchase price already paid. It was undisputed that the purchaser was a purchaser for value at the foreclosure sale . The borrower, however, argued that the purchaser could not be a “good faith” purchaser because a valid notice of pendency was of record at the time of the foreclosure sale. The Court rejected this contention noting, inter alia , that a notice of pendency serves to “prevent a defendant from thwarting the objective of an action by transferring the property to an unwitting third party” and “to provide constructive notice of a plaintiff’s claim to potential purchasers or incumbrancers, and not for a defendant’s benefit.” (Citations and internal quotation marks omitted.) The Court further recognized that constructive notice is unnecessary at a foreclosure sale because “the purchaser has actual notice of the plaintiff’s claim to a lien on the property and is well aware that the title to the property is transferring through foreclosure.” Further, the Court noted that the entry of a judgment of foreclosure and sale: transforms the lender’s rights from “potential” to “real”; are conclusive unless overturned on appeal; and, are fully enforceable in the absence of a judicially issued stay pending disposition of the appeal.” (Citations and internal quotation marks omitted.) Because no stay was obtained, the lender was free to proceed with a foreclosure sale. Because notices of pendency are frequently in place at the time of a foreclosure sale, the Court found “untenable” the borrower’s contention that “title acquired by referee’s deed, otherwise taken in good faith and for value, is nonetheless negated upon reversal of the judgment because the notice of pendency of the foreclosure action had not yet expired at the time of the foreclosure sale…. If the Court was to find to the contrary, it “would render meaningless the need to obtain a stay and run contrary to the established caselaw requiring a stay pending disposition of the appeal in order to protect title and restrict alienability.” (Citations omitted.) The Court found that the purchaser “established that no stay was issued precluding the foreclosure sale and that it was a purchaser in good faith and for value, whose title is insulated from the effects of the reversal of the .” Thus: Contrary to 's contention, the referee's deed was not rendered void merely by the reversal of the . Her reliance on cases in which the judgment was found void for lack of personal jurisdiction are inapposite, as the judgment here was not found void. Furthermore, we note that has not sought to set aside the foreclosure sale itself. Since no party argues that the referee's deed cannot be set aside without also setting aside the foreclosure sale, that issue is not before us. Since established that it is “a purchaser in good faith and for value” whose title would be affected by restitution of 's property rights lost by the , may not seek restitution by canceling the referee's deed and, instead, is limited to monetary relief against the plaintiff to the foreclosure action. Thus, the Court reversed the order appealed from, denied the borrower’s motion for summary judgment , and granted the purchaser’s motion for summary judgment dismissing the complaint. Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice. This BLOG has written dozens of articles addressing numerous aspects of residential mortgage foreclosure. To find such articles, please see the BLOG tile on our website and search for any foreclosure, or other commercial litigation, issue that may be of interest you. This BLOG has written numerous articles addressing notices of pendency. To find such articles, please see the BLOG tile on our website and type “notice of pendency” into the “search” box. Simply stated, a notice of pendency (or lis pendens) is a provisional remedy governed by Article 65 of the CPLR. The purpose of a notice of pendency is to put defendants and the world on constructive notice of the full scope of the rights claimed by plaintiff to defendant’s real property. Sjogren v. Land Assoc., LLC , 223 A.D.3d 963, 965 (3 rd Dep’t 2024). This BLOG has written numerous articles on referee reports. See, e.g., < here =">here"> , < here =">here"> and < here =">here"> .

By:  Jeffrey M. Haber The allure of guaranteed profits from sophisticated crypto asset and foreign exchange trading served as the underlying predicate for the claims asserted by the Securities and Exchange Commission (“SEC”) against Ramil Palafox (“Defendant”), the founder of Praetorian Group International Corporation (“PGI Global”), a now-defunct entity he controlled, in S.E.C. v. Palafox , Case 1:25-cv-00681 (E.D. Va. 2025). The case marks the first crypto enforcement action under Paul Atkins, the new Chairman of the SEC. According to the SEC, from in or about January 2020 through in or about October 2021 (the “Relevant Period”), Defendant orchestrated an international securities fraud scheme to misappropriate millions of dollars of investor funds he obtained through PGI Global. PGI Global claimed to be a crypto asset and foreign exchange (“Forex”) trading company . The SEC alleged that Defendant and PGI Global associates working at his direction represented to investors that PGI Global was generating large returns from crypto asset trading and Forex trading. According to the SEC, investors who purchased PGI Global “membership packages” were promised large passive returns from these purported trading operations . Though investors were promised such returns merely in exchange for their investments in PGI Global, said the SEC, PGI Global also allegedly offered members a multi-level marketing style system of referral incentives to encourage PGI Global membership package holders to recruit new investors. Defendant allegedly secured over $198 million in Bitcoin (BTC) and fiat currency investments for PGI Global during the Relevant Period. The SEC maintained that Defendant obtained these funds from victims who purchased PGI Global membership packages based on false promises that their investments would guarantee them large low-risk returns from Forex and crypto asset trading. According to the SEC, Defendant misappropriated over $57 million of the funds he obtained through PGI Global’s unregistered securities offerings. Rather than trade with these funds as promised, the SEC alleged that Defendant used investor money to enrich himself and various insiders, including members of his family and certain other PGI Global associates—purchasing, among other things, real estate, Lamborghinis, and items from retailers including Cartier, Versace, and Louis Vuitton. The SEC also alleged that Defendant transferred funds, assets, vehicles, and other items purchased with PGI Global investor funds to the relief defendants. The SEC claimed that Defendant used the vast majority of the remaining PGI Global investor funds to pay certain other investors—payments that ostensibly represented profits and other rewards those investors had earned from PGI Global’s trading operations.  The SEC alleged that this money represented funds circulated from new investors to old investors. The SEC further alleged that these payments allowed Defendant to continue PGI Global’s Ponzi-like scheme until its collapse in late 2021.  According to the SEC, PGI Global never filed a registration statement in connection with its offerings of securities in the form of PGI Global membership packages. Defendant and others nevertheless offered and sold these PGI Global securities via general solicitations to investors worldwide, alleged the SEC. Commenting on the action, Scott Thompson, Associate Director of the SEC’s Philadelphia Regional Office, said: “As alleged in our complaint, attracted investors with the allure of guaranteed profits from sophisticated crypto asset and foreign exchange trading, but instead of trading, bought himself and his family cars, watches, and homes using millions of dollars of investor funds . We will continue to investigate and take action against bad actors who take advantage of investors with promises of guaranteed passive income and other lies and deceit.” “ used the guise of innovation to lure investors into lining his pockets with millions of dollars while leaving many victims empty-handed,” said Laura D’Allaird, Chief of the Commission’s new Cyber and Emerging Technologies Unit. “In reality, his false claims of crypto industry expertise and a supposed AI-powered auto-trading platform were just masking an international securities fraud.” The SEC’s complaint ( here ), filed in the U.S. District Court for the Eastern District of Virginia, charges Defendant with violating the anti-fraud and registration provisions of the federal securities laws. The complaint seeks permanent injunctive relief, conduct-based injunctions preventing Defendant from participating in multi-level-marketing programs involving the offer or sale of securities and offerings of crypto assets bought or sold as a security, disgorgement of ill-gotten gains with prejudgment interest , and civil penalties. The complaint also names several persons and entities as relief defendants and seeks disgorgement of their ill-gotten gains and prejudgment interest. In a parallel action, Defendant was arraigned on criminal charges brought by the U.S. Attorney’s Office for the Eastern District of Virginia. ___________________________________ Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice A multi-level marketing program is a relative of a pyramid scheme. “ pyramid scheme is an illegal investment scam based on a hierarchical setup.” See  Investopedia.com,  What Is a Pyramid Scheme? How Does It Work?  (Updated June 3, 2024) ( here ). In the classic pyramid scheme, “participants attempt to make money solely by recruiting new participants, usually where: he promoter promises a high return in a short period of time; o genuine product or service is actually sold; and he primary emphasis is on recruiting new participants.” See  Investor.gov,  Pyramid Schemes  ( here ). To lure recruits into the scheme, pyramid scheme promoters work hard to make the operation look legitimate. But they are not and ultimately collapse because the promoter cannot raise enough money from new investors to pay earlier ones. This Blog has examined multi-level marketing schemes on numerous occasions. To find articles related to multi-level marketing schemes, visit the “ Blog ” tile on our website and enter “Multi-Level” or “Multi-Level Marketing Schemes” in the “search” box. It is important to remember that a complaint merely contains allegations. Until the claims in the complaint are fully adjudicated, readers should not interpret the allegations as anything more than statements of claimed facts made by the SEC against the defendant.

By: Jeffrey M. Haber This Blog has often noted that “securities fraud comes in all shapes and sizes.” ( E.g. ,  here .) Though the alleged fraudulent scheme may differ, the types of schemes implemented tend to fall into one of the following (non-exclusive) categories: financial statement/accounting fraud; pyramid schemes; Ponzi schemes; pump-and-dump schemes; affinity fraud; promissory note fraud; Internet fraud; “microcap” stock fraud; and fraud concerning information about a company, its operations and future prospects ( id .). One of the frauds mentioned above – Ponzi schemes – occur all too often, notwithstanding regulatory efforts to stop such frauds. A Ponzi scheme is intended to give investors the false impression that their investment is profitable. In a Ponzi scheme, the fraudster/promoter pays early investors with money that the investor believes is the return on his/her/its investment. In actuality, the money used to pay the investor comes from the investor’s own principal investment dollars or the pooled investment dollars of subsequent investors. As previous investors are “paid” their investment returns, the fraudster/promoter seeks new investors to fund the payments being made. Since Ponzi schemes need a steady supply of new investors to fund payments to early investors, Ponzi schemes ultimately collapse as the fraudster/promoter fails to lure enough new investors to cover the payments due to the prior investors. Once the Ponzi scheme has collapsed, recovering funds can be extremely difficult, especially if all the funds were paid out to earlier investors or misappropriated by the fraudster/promoter. In today’s post, this Blog looks at SEC v. Alexander, et al. , Case No. 4:25-cv-00446 (E.D. Tex. Apr. 29, 2025), an enforcement action brought by the U.S. Securities and Exchange Commission (“SEC” or the “Commission”) in which the defendants are alleged to have employed a Ponzi scheme that bilked 200 investors out of at least $91 million. Between May 2021 and February 2024, defendants Kenneth W. Alexander II (“Defendant A”) and Robert D. Welsh (“Defendant B”) allegedly orchestrated a Ponzi scheme, with Defendant Caedrynn E. Conner’s (“Defendant C”) substantial assistance and participation, that raised at least $91 million from more than 200 investors in an unregistered securities offering . Defendants A and B allegedly operated the scheme, which they called the Vanguard JV Cash Program, through Vanguard Holdings Group Irrevocable Trust (“VHG”), a Texas common law trust controlled by Defendant A. Defendants A and B allegedly promoted VHG as a highly profitable international bond trading business that held billions in assets. According to the SEC, they told investors that VHG or its affiliates would use investor funds to trade, or engage in other dealmaking, in the international bond markets. They also allegedly told investors that investments in VHG would have a14-month term, and that investors would receive 12 guaranteed monthly payments of between 3% to 6%, with the principal to be returned at the end of the 14-month term. In truth, said the SEC, VHG used investor funds – not profits from bond trading – to make these payments. As part of their scheme, alleged the SEC, Defendants A and B offered investors the option, for an additional fee, to protect their investments from risk of loss through purported financial instruments that Defendants A and B called “pay orders”. According to the SEC, investors who purchased the pay orders were required to enter into “pooling agreements” with other investors and a purported fiduciary (the “Fiduciary”). The SEC alleged that the Fiduciary was owned and controlled by a longtime associate of Defendants A and B and acted at Defendant A and B’s direction at all relevant times. The SEC further alleged that, pursuant to the pooling agreements, in the event VHG failed to make the guaranteed monthly payments, the Fiduciary was responsible for liquidating the pay order and distributing the proceeds to investors. However, said the SEC, the purported protection offered by the pay orders and the Fiduciary was illusory. The SEC alleged that VHG’s bank records did not reflect the purchase of any pay orders, and the Fiduciary never attempted to liquidate them. The SEC alleged that in July 2022, Defendants A and B authorized Defendant C, who was an early VHG investor and promoter, to create an investment program to pool funds to invest in the Vanguard JV Cash Program. According to the SEC, Defendant C operated this program (the “Benchmark JV Cash Program”) through Benchmark Capital Holdings Irrevocable Trust (“Benchmark”), a Texas common law trust that he controlled. According to the SEC, the Benchmark JV Cash Program was structured like the Vanguard JV Cash Program, including the pay order protection feature, except Benchmark generally promised even higher guaranteed monthly returns. The SEC alleged that Defendant C represented to Benchmark investors that their funds would be pooled to invest in VHG, and that the returns Benchmark received from VHG would fund the guaranteed monthly returns paid to Benchmark investors. Through Benchmark, said the SEC, Defendant C raised approximately $54.9 million from investors, more than $46 million of which he allegedly directed to VHG. According to the SEC, the Fiduciary also served as the purported fiduciary for Benchmark investors who purchased pay orders. The SEC alleged that during all relevant times, VHG had no material sources of revenue. The SEC also alleged that Defendant A misappropriated millions of dollars of investor funds for his personal use and Defendant B received more than a million dollars of investor funds. According to the SEC, Defendants A and B misused investor funds by using them to make Ponzi payments to Vanguard JV Cash Program investors – i.e. , using funds from earlier investors to make monthly payments to later investors – and to pay victims of another apparent scheme that they started before, and then operated in parallel with, the VHG Ponzi scheme. For his part, said the SEC, Defendant C misappropriated millions of dollars of Benchmark investor funds. According to the SEC, in or around February 2023, the VHG and Benchmark schemes began to collapse when VHG and Benchmark ceased paying the purported guaranteed monthly returns to nearly all investors. Throughout 2023, said the SEC, Defendants A and B made, and directed the Fiduciary to make, false excuses (such as blaming banks and attorneys) for VHG’s failure to make the monthly payments. Defendant C allegedly repeated, and directed others to repeat, many of the same false statements to Benchmark investors. The SEC alleged that these statements had the effect of prolonging the Ponzi scheme because Defendants continued to solicit new investments and to encourage existing investors to roll over their principal to new l4-month terms, rather than withdraw their funds as their investment terms expired. Ultimately, the SEC claimed that the VHG and Benchmark schemes resulted in tens of millions of dollars of investor losses. Commenting on the complaint, Sam Waldon, Acting Director of the SEC’s Division of Enforcement , said: “As we allege, the defendants conducted a large-scale Ponzi scheme that caused devastating losses to investor victims, while [Defendants A and C misappropriated millions of dollars of investor funds. We remain unwavering in our commitment to hold individuals accountable for defrauding investors.” The SEC’s complaint ( here ), filed in the U.S. District Court for the Eastern District of Texas, charged defendants with violating the antifraud and registration provisions of the federal securities laws. The SEC seeks permanent injunctive relief, disgorgement of ill-gotten gains with prejudgment interest , and civil penalties against each of the defendants. A copy of the press release announcing the enforcement action can be found here . ___________________________ Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice This Blog has examined Ponzi schemes on numerous occasions. To find the articles related to Ponzi schemes, visit the “ Blog ” tile on our website and enter “Ponzi scheme” in the “search” box. According to the SEC, Defendant C used the money from the alleged Ponzi scheme to purchase a $5 million home. It is important to remember that a complaint merely contains allegations. Until the claims in the complaint are fully adjudicated, readers should not interpret the allegations as anything more than statements of claimed facts made by the SEC against the defendants.

By: Jonathan H. Freiberger Today’s article relates to a decision in a mortgage foreclosure action that combines numerous concepts about which we have previously written. We will quickly revisit CPLR 3215(c) , which provides, in pertinent part, that: If the plaintiff fails to take proceedings for the entry of judgment within one year after the default, the court shall not enter judgment but shall dismiss the complaint as abandoned, without costs, upon its own initiative or on motion, unless sufficient cause is shown why the complaint should not be dismissed…. Courts have held that the language of CPLR 3215(c) is “mandatory” in the first instance unless plaintiff demonstrates “sufficient cause” for the failure to timely take proceedings for the entry of a default judgment. U.S. Bank N.A. v. Pane , __ N.Y.S.3d __, 2025 N.Y. Slip Op. 02619 (2 nd Dep’t April 30, 2025). We have also addressed the consequences of the death of a party during the pendency of a litigation. See, e.g. , < here =">here"> , < here =">here"> and < here =">here"> . Because litigation can be a drawn-out process, it is not uncommon for a party to die in the process. CPLR § 1015 , which addresses this circumstance, provides, inter alia , that “ f a party dies and the claim for or against him is not thereby extinguished the court shall order substitution of the proper parties.” Significantly, the “death of a party divests the court of jurisdiction and stays the proceedings until a proper substitution has been made pursuant to CPLR 1015(a). Moreover, any determination rendered without such substitution will generally be deemed a nullity.” Hayden v. Brown , 230 A.D.3d 657, 658 (2 nd Dep’t 2024) (citations and internal quotation marks omitted); see also Sorcigli v. Lombardo , __ N.Y.S.3d __, 2025 N.Y. Slip Op. 02365 (2 nd Dep’t April 23, 2025). The proceedings are generally stayed “pending the substitution of a personal representative for the decedent.” Wells Fargo Bank, N.A. v. Miglio , 197 A.D.3d 776, 777 (2 nd Dep’t 2021) (citations and internal quotation marks omitted); see also Sorcigli , supra, at *1. However, “if a party’s death does not affect the merits of a case, there is no need for strict adherence to the requirement that the proceedings be stayed pending substitution.” Wells Fargo Bank, N.A. v. Miglio , 197 A.D.3d 776, 777 (2 nd Dep’t 2021)(citation and internal quotation marks omitted); see also Nationstar Mortgage, LLC v. Persaud , 231 A.D.3d 842 (2 nd Dep’t 2024). Against this backdrop, today we discuss U.S. Bank N.A. v. Sanon , a case decided by the Appellate Division, Second Department, on May 7, 2025. In January 2009, the lender in Sanon commenced an action to foreclose a mortgage delivered by the borrower to secure the repayment of his obligations under a promissory note . The borrower was promptly served with process but failed to appear in the action or answer the complaint and, accordingly, was in default in or about February of 2009. The borrower died in July of 2012. Subsequently, the lender moved for leave to enter a default judgment and for an order of reference. While the motion was unopposed, it was denied by the motion court by an order entered in October of 2015, in which the motion court “also directed dismissal of the complaint pursuant to CPLR 3215(c ) based on the 's failure to take proceedings for the entry of judgment within one year of 's default in appearing or answering the complaint….” Thereafter, in 2020, the lender moved pursuant to CPLR 5015(a)(4) to vacate the dismissal order and to restore the action to the active calendar “arguing that the Supreme Court was without jurisdiction to enter the order because had died prior to the issuance of the dismissal order and, thus, the court was divested of jurisdiction until such time as a legal representative of the estate was substituted for the deceased defendant in this action.” The motion was denied and the lender appealed. The Second Department affirmed. After discussing some of the legal issues addressed , supra , the Court stated: However, if a party’s death does not affect the merits of a case, there is no need for strict adherence to the requirement that the proceedings be stayed pending substitution. Indeed, a mortgagor who has been duly served with notice of a foreclosure action and defaults in appearing is not entitled to notice of any subsequent judgment or sale. …It is undisputed that failed to appear or answer the complaint. Since defaulted in appearing or answering the complaint approximately 3½ years prior to his death, neither he nor any of his successors in interest was entitled to notice of a judgment of foreclosure or of an ensuing sale of the subject property. Pursuant to CPLR 3215(c), the ’s time to take proceedings for the entry of judgment expired approximately 2½ years prior to ’s death. Under the circumstances, the Supreme Court correctly determined that ’s death did not affect the merits of this action, and there was no need to strictly adhere to the requirement for a stay pending substitution. Since the court was not divested of jurisdiction upon ’s death, the dismissal order was properly issued. Accordingly, the court properly denied the ’s motion pursuant to CPLR 5015(a)(4) to vacate the dismissal order, to restore the action to the active calendar, and to substitute the administrator of estate in place of . Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice. This BLOG has written dozens of articles addressing various aspects of residential mortgage foreclosure. To find such articles, please see the BLOG tile on our website and search for any foreclosure, or other commercial litigation, issue that may be of interest to you. This BLOG has written numerous articles addressing CPLR 3215(c). To find such articles, please see the BLOG tile on our website and type “3215(c)” into the “search” box. This BLOG has previously written about Persaud < here =">here"> . This BLOG has addressed various issues related to service of process. See, e.g., < here =">here"> , < here =">here"> , < here =">here"> , < here =">here"> , < here =">here"> and < here =">here"> . This BLOG has previously addressed default judgments. See, e.g ., < here =">here"> , < here =">here"> , < here =">here"> and < here =">here"> . CPLR 5015 permits the court to vacate its own judgment or order under certain circumstances set forth therein. This BLOG has previously written about CPLR 5015 . See, e.g ., < here =">here"> , < here =">here"> , < here =">here"> , < here =">here"> .