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By: Jeffrey M. Haber Merger clauses and the duplication of claims doctrine often operate to limit the availability of fraudulent inducement claims alongside breach of contract claims. As a general matter, merger clauses are intended to preclude reliance on extrinsic representations, while the duplication of claims doctrine limits plaintiffs from recasting breach of contract claims as tort claims absent an independent legal duty. However, these doctrines are subject to important limitations: a merger clause will bar a fraudulent inducement claim only where it contains a sufficiently specific disclaimer of reliance on the particular misrepresentations at issue, and a fraud claim will not be deemed duplicative where it is predicated on misrepresentations of present fact collateral to the contract and implicating a distinct legal wrong. Against this backdrop, we examine the Appellate Division, First Department’s decision in CSN Realty Corp. v. Moussaieff, 2026 N.Y. Slip Op. 03228 (1st Dept. May 21, 2026). In CSN Realty, the Court held that a general merger clause did not foreclose a fraudulent inducement claim based on alleged misrepresentations made by non-parties to the contract, and further concluded that the fraud claim was not duplicative of the breach of contract claim because it rested on representations of then-existing fact that allegedly induced plaintiff to enter into the transaction. The decision also reaffirmed that fraud claims may proceed in the alternative, even where overlapping damages are alleged, in light of the distinct remedial framework applicable to fraud. In doing so, CSN Realty underscores a more nuanced and fact-sensitive application of these doctrines, confirming that fraud is not duplicative where it alleges a separate inducement-based injury grounded in extra-contractual misrepresentations. CSN Realty Corp. v. Moussaieff In or around March 2018, defendants, Roy Moussaieff (“Roy”) and Yousef Althkefati (“Althkefati”), among others, formed 2252 Third Avenue, LLC (“2252 Third Avenue” of “judgment debtor”) as the vehicle through which they would acquire the property located at 2252 Third Avenue in New York, New York (the “Property”).[1] As the transaction took shape, Roy and Althkefati represented to plaintiff that 2252 Third Avenue had sufficient capital to complete the $12,000,000 purchase. In response to that assurance, plaintiff required that the parties’ agreement expressly reflect them. Accordingly, the transaction agreement (the “Contract”) included specific provisions, set forth in a negotiated rider, stating that 2252 Third Avenue had “adequate funds to close” and that its obligations were not contingent upon financing. On March 19, 2018, the parties executed the Contract. Under its terms, plaintiff agreed to sell, and 2252 Third Avenue agreed to purchase, the Property for $12,000,000. 2252 Third Avenue was required to make a $600,000 down payment to be held in escrow, with the balance due at a closing scheduled for October 28, 2019. Among other provisions, the Contract included a general merger clause. As part of the Contract, the parties also entered into a rider (the “Rider”), which included a mortgage contingency clause and a general merger clause. Roy signed the Contract on behalf of 2252 Third Avenue. Plaintiff signed the Contract allegedly in reliance on the representations concerning 2252 Third Avenue’s financial ability to perform. Several months later, in or about October 2018, the parties entered into a first amendment to the Contract (the “First Amendment”). The amendment permitted 2252 Third Avenue to record a memorandum of contract against the Property, placing the transaction on public record. In exchange, $125,000 of the initial down payment was released from escrow to plaintiff. The recorded memorandum effectively signaled to the market that the Property was under contract. As the original closing date approached, 2252 Third Avenue had not completed the purchase. In October 2019, the parties negotiated a further extension, resulting in a second amendment to the Contract (the “Second Amendment”). The Second Amendment extended the closing date to March 1, 2020 and imposed additional payment obligations in the event of further delay, including a $2,000,000 payment and ongoing monthly fees. The Second Amendment also authorized additional releases of escrowed funds and reaffirmed the remaining contractual terms. 2252 Third Avenue did not close by the extended March 1, 2020 deadline. Nor did it make the $2,000,000 payment or the monthly payments required under the Second Amendment. After additional time passed without performance, on October 15, 2021, plaintiff issued a notice setting a time-of-the-essence closing for November 15, 2021. 2252 Third Avenue acknowledged the notice without objection. On the scheduled date, plaintiff appeared ready, willing, and able to complete the sale, but 2252 Third Avenue did not appear and did not tender performance. 2252 Third Avenue also did not pay the additional amounts that had accrued under the Second Amendment and did not remove the memorandum of contract from the Property. On December 30, 2021, plaintiff commenced the action against 2252 Third Avenue for breach of contract. On August 28, 2023, the motion court entered judgment in plaintiff’s favor and against 2252 Third Avenue in the amount of $3,000,000, plus interest (the “Judgment”).[2] Thereafter, in May 2024, plaintiff commenced the action, seeking to impose alter ego liability on the individual defendants, and alleging that Roy and Althkefati fraudulently induced plaintiff to enter into the Transaction. Defendants moved to dismiss the complaint. The motion court granted the motion. On appeal, the Appellate Division, First Department, reversed. The Court held that “Supreme Court should not have determined that the merger clause contained in the written contract barred plaintiff’s fraudulent inducement cause of action, which was interposed as against defendants Roy Moussaieff (Roy) and Yousef Althkefati.”[3] Under New York law, merger clauses are generally enforceable, but they will bar a fraudulent inducement claim only where the contract contains a sufficiently specific disclaimer of reliance on the particular misrepresentations at issue.[4] By contrast, a merger clause that is general and makes no reference to the particular representations alleged, does not bar an otherwise adequately pleaded fraudulent inducement claim.[5] Moreover, a merger clause does not apply to the representations made by third parties to an agreement.[6] With these principles in mind, the Court held that “[o]n its face, the merger clause agreed to by plaintiff and nonparty 2252 Third Avenue, LLC (the 2252 Third Avenue, LLC),” did not “apply to the representations by Roy and Althkefati,” because they were not parties to the Contract.[7] The Court also “reject[ed] defendants’ argument that the fraudulent inducement cause of action [was] duplicative of the breach of contract cause of action.”[8] In New York, fraudulent inducement claims are not duplicative of contract claims where the plaintiff alleges “misrepresentations of present fact” that are “collateral to the contract” and which “induced [plaintiff] to enter into the contract.”[9] So long as the plaintiff alleges a wrong “separate from or in addition to the contract duty,” a misrepresentation is “collateral to the contract” – and therefore can give rise to a fraudulent inducement claim – even if “the same circumstances give rise to the … breach of contract claim.”[10] This principle holds true even where the “alleged misrepresentations breached [] warranties made in” the agreement at issue.[11] In CSN Realty, the Court found that the “alleged representations by Roy and Althkefati that the 2252 Third Avenue, LLC had sufficient capital to close on the [P]roperty were representations of present fact, not future intent to perform.”[12] “Similarly, [the Court] reject[ed] defendants’ argument that plaintiff [sought] identical damages under the fraudulent inducement cause of action and the breach of contract cause of action.”[13] The Court explained that “[u]nder the circumstances of this case, at this early procedural stage plaintiff [was] entitled to maintain the fraudulent inducement claim in the alternative to the breach of contract claim.”[14] “This conclusion,” said the Court, was “especially true because the remedy available to plaintiff for fraudulent inducement under the ‘out-of-pocket rule’ [was] not lost profits but rather ‘the actual pecuniary loss sustained as the direct result of the wrong.’”[15] Takeaway CSN Realty highlights several nuanced takeaways about the interaction between merger clauses, fraudulent inducement, and the duplication of claims doctrine, particularly when viewed against the First Department’s broader jurisprudence. At the outset, CSN Realty reinforces the principle that general merger clauses are of limited preclusive effect. Consistent with settled law, the Court held that only a specific disclaimer of reliance tied to the particular alleged misrepresentation will bar a fraudulent inducement claim. Boilerplate merger language is insufficient. Notably, regardless of their specificity, the Court reiterated the point that merger clauses do not extend to representations made by non-parties to the contract, which was the case in CSN Realty. At the same time, the decision is notable because it departs from what is often a more restrictive approach taken by the First Department in analogous cases. In the First Department, fraud claims are frequently dismissed as duplicative where the damages sought in the fraud claim overlap with those recoverable for breach of contract. This is so even when the alleged misrepresentation is meaningfully distinct from the contractual undertaking – that is, the duty breached is independent of and collateral to the contract. CSN Realty represents, therefore, a more permissive application of the doctrine by making a distinction between lost profits and out-of-pocket damages. CSN Realty also reaffirms the point that a fraud claim may proceed where it is based on misrepresentations of present fact. In CSN Realty, those representations were memorialized in a contractual warranty (e.g., the Rider). Such statements are treated as assertions of then-existing fact, not mere promises of future performance, and therefore can support an independent fraud claim. __________________________________ Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes only and is not intended to be, and should not be, taken as legal advice. Unless otherwise stated, Freiberger Haber LLP’s articles are based on recently decided published opinions or litigation releases and not on matters handled by the firm. [1] The fact section of this article comes from the briefing on appeal. [2] CSN Realty Corp v. 2252 Third Avenue LLC, Index No. 657221/2021 (Sup. Ct. N.Y. County). [3] Slip Op. at *1. [4] Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Wise Metals Group, LLC, 19 A.D.3d 273, 275 (1st Dept. 2005); see also LibertyPointe Bank v. 75 E. 125th St., LLC, 95 A.D.3d 706, 706 (1st Dept. 2012). [5] See Laduzinski v. Alvarez & Marsal Taxand LLC, 132 A.D.3d 164, 169 (1st Dept. 2015) (boilerplate merger clause did not bar fraudulent inducement claim because it “ma[de] no reference to the particular representations allegedly made here by [defendants]”). [6] See Remediation Capital Funding LLC v. Noto, 147 A.D.3d 469, 471 (1st Dept. 2017). [7] Slip Op. at *1, citing Remediation Capital, 147 A.D.3d at 471. [8] Id. [9] Wyle Inc. v. ITT Corp., 130 A.D.3d 438, 439 (1st Dept. 2015); see also GoSmile, Inc. v. Levine, 81 A.D.3d 77, 81 (1st Dept. 2010); Laduzinski, 132 A.D.3d at 168-69; TIAA Global Invs. v. One Astoria Sq. LLC, 127 A.D.3d 75, 87 (1st Dept. 2015). [10] Id. at at 440-41; MBIA Ins. Corp. v. Countrywide Home Loans, Inc., 87 A.D.3d 287, 293 (1st Dept. 2011). [11] Id.; VXI Lux Holdco, S.A.R.L. v. SIC Holdings, LLC, 194 A.D.3d 628, 630 (1st Dept. 2021); MBIA Ins. Corp., 87 A.D.3d at 294. [12] Slip Op. at *1. [13] Id. [14] Id., citing Scarola Zubatov Schaffzin PLLC v. Dynamic Credit Partners, LLC, 210 A.D.3d 605, 607 (1st Dept. 2022); Shear Enters., LLC v. Cohen, 189 A.D.3d 423, 424 (1st Dept. 2020). [15] Id., quoting Connaughton v. Chipotle Mexican Grill, Inc., 29 N.Y.3d 137, 142 (2017).

By: Jonathan H. Freiberger When a court issues a decision and order that is self-effectuating, nothing further from the parties is required. Sometimes, however, a court’s decision will direct that the prevailing party either: (a) submit an order or judgment for the court to consider; or, (b) submit or settle an order or judgment, on notice, for the court’s consideration.[1] This issue, which has been confusing lawyers for quite some time, is addressed in 22 N.Y.C.R.R. §202.48 – “Submission of orders, judgments and decrees for signature”, which provides, in relevant part: (a) Proposed orders or judgments, with proof of service on all parties where the order is directed to be settled or submitted on notice, must be submitted for signature, unless otherwise directed by the court, within 60 days after the signing and filing of the decision directing that the order be settled or submitted. (b) Failure to submit the order or judgment timely shall be deemed an abandonment of the motion or action, unless for good cause shown. The Court of Appeals, in Funk v. Barry, 89 N.Y.2d 364 (1996), explained the distinction between “submitting” an order or judgment and “submitting or settling an order or judgment on notice”: By its plain terms, section 202.48 (a) speaks to the circumstances where the court's decision expressly directs a party to submit or settle an order or judgment. When a decision ends with the directive to "submit order," the court is generally directing the prevailing party to draw the order and present it to the judge who looks it over to make sure it reflects the decision properly, and then signs or initials it. This procedure typically calls for no notice to the opponent. A directive to "settle," by contrast, is reserved for more complicated dispositions, such as orders involving restraints or contemplating a set of follow-up procedures. Because the decision ordinarily entails more complicated relief, the instruction contemplates notice to the opponent so that both parties may either agree on a draft or prepare counter proposals to be settled before the court. The common element in both directives is that further drafting and judicial approval of the judgment or order is contemplated. Funk, 89 N.Y.2d at 367 (citations, internal quotation marks, ellipses, and brackets omitted). The ramifications of the failure to timely settle an order when directed by the court to do so was made plain by the Second Department in Citibank, N.A. v. Velazquez, 284 A.D.2d 364 (2001). There, in a mortgage foreclosure action, lender moved to confirm a referee’s report of sale and for leave to enter a deficiency judgment, which motion was unopposed. Lender’s motion was granted with an instruction to “submit judgment on notice to the Clerk of the County of Westchester.” Id. at 364. Lender failed to timely submit the judgment and, accordingly, its subsequent motion for leave to enter a deficiency judgment against borrower was denied “on the ground that it had been abandoned.” Id. The motion court’s ruling was affirmed by the Second Department because, inter alia, lender “did not show good cause for the lengthy delay in filing the deficiency judgment.” Id. The Court was more forgiving in Bank of New York Mellon Trust Co., N.A. v. Ahmed, 243 A.D.3d 851 (2d Dept. 2025), another mortgage foreclosure action. There, the lender failed to timely “settle” an order in accordance with 22 NYCRR 202.48 and stated that “a court should not deem an action or judgment abandoned where the result would not bring the repose to court proceedings that 22 NYCRR 202.48 was designed to effectuate, and would waste judicial resources.” Ahmed, 243 A.D.3d at 853 (citation and internal quotation marks omitted). The Court found that vacatur was not warranted because the borrower “was not prejudiced” by the lender’s failure to timely settle the order and “the denial of vacatur pursuant to 22 NYCRR 202.48(b) brought repose to the proceedings and preserved judicial resources.” Id. (citations and internal quotation marks omitted). Against this backdrop, we discuss Rosenberg v. Tool Time Construction Corp., a breach of contract action decided by the Appellate Division, Second Department, on May 20, 2026. After the defendant failed to appear in the action the plaintiff moved for a default judgment. In October of 2021, the motion court granted the unopposed motion and scheduled an inquest for damages. In January of 2022, after the inquest, the motion court awarded the plaintiff monetary damages against the defendant. A proposed judgment was not submitted by the plaintiff until November 2022. The defendant appealed from the motion court’s denial of its motion pursuant to 22 NYCRR 202.48 to dismiss the complaint as abandoned. The Second Department affirmed. After quoting the substance of 22 NYCRR 202.48, and determining it was inapplicable, the Second Department stated: However, 22 NYCRR 202.48 does not apply where the court merely directs a party to submit an order or judgment without expressly directing that the order or judgment be submitted on notice. Here, since the Supreme Court did not direct that a judgment based on its decision after the inquest be settled or submitted on notice, the plaintiffs were not required to comply with 22 NYCRR 202.48. Accordingly, the court should have denied that branch of the defendants' motion which was pursuant to 22 NYCRR 202.48 to dismiss the complaint as abandoned. (Citations and internal quotation marks 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. Unless otherwise stated, Freiberger Haber LLP’s articles are based on recently decided published opinions or litigation releases and not on matters handled by the firm. [1] This BLOG has previously written on this issue [here] [here], and some of the background in today’s article are derived therefrom.

By: Jonathan Freiberger According to Wikipedia, New York Senator William L. Marcy coined the phrase “to the victor belong the spoils” when “referring to the victory of Andrew Jackson in the election of 1828.” In certain situations, however, the failure of a litigant to act quickly when the Court issues a favorable decision on a motion could spoil the “spoils.” Sometimes the Court renders a decision on a motion instead of issuing an order or judgment. In such cases, it is often up to the prevailing litigant to take an additional step to effectuate the decision. In cases where Rule 202.48 of the Uniform Civil Rules for the Supreme Court and the County Court is applicable, the prevailing party must move quickly or run the risk of losing the benefit of a coveted victory. Rule 202.48 provides, in pertinent part: Section 202.48 Submission of orders, judgments and decrees for signature. (a) Proposed orders or judgments, with proof of service on all parties where the order is directed to be settled or submitted on notice, must be submitted for signature, unless otherwise directed by the court, within 60 days after the signing and filing of the decision directing that the order be settled or submitted. (b) Failure to submit the order or judgment timely shall be deemed an abandonment of the motion or action, unless for good cause shown. The Court of Appeals, in Funk v. Barry, 89 N.Y.2d 364 (1996), had occasion to resolve a “conflict among the Appellate Division Departments.” In Funk, the Court decided the question of “whether the 60-day time limit for the submission of proposed judgments for signature contained in 22 NYCRR 202.48 applies where the court’s decision contains no direction to submit or settle the order” by concluding that “the 60-day period applies only where the court explicitly directs that the proposed judgment or order be settled or submitted for signature.” Funk, 89 N.Y.2d at 365. After a bench trial, the supreme court in Funk found in favor of plaintiff in the amount of $5,000 on a conversion claim, but “did not direct any party to settle or submit the judgment for signature.” Funk, 89 N.Y.2d at 365. Eleven months after the verdict, counsel submitted a proposed judgment for entry and defense counsel objected. Plaintiff moved for an order permitting the entry of the judgment and defendant cross-moved for an order dismissing the action as abandoned pursuant to 22 NYCRR 202.48. Supreme court granted plaintiff’s motion and denied defendant’s cross-motion. The Appellate Division, Fourth Department, reversed and dismissed the action holding that the 60-day time limit applies “even where no direction to submit or settle an order or judgment is contained in the court’s decision.” Funk, 89 N.Y.2d at 366. In rendering its decision, the Funk Court of Appeals noted that a direction to “submit” an order is typically addressed to relatively simple cases where the court intends to look a draft order “over to make sure it reflects the decision properly, and then signs or initials it”, which procedure is typically done without notice to the opponent. Funk, 89 N.Y.2d at 367 (citation and internal quotation marks omitted). The Court noted that: A directive to “settle,” by contrast, is reserved for more complicated dispositions, such as orders involving restraints or contemplating a set of follow-up procedures. Because the decision ordinarily entails more complicated relief, the instruction contemplates notice to the opponent so that both parties may either agree on a draft or prepare counter proposals to be settled before the court. The common element in both directives is that further drafting and judicial approval of the judgment or order is contemplated. However, where no drafting by the parties is necessary because the matter involves an uncomplicated disposition or simple judgment for a sum of money which speaks for itself, or where the court or clerk draws the order, no direction to submit or settle will be utilized. In such cases, the order or judgment may then simply be entered by the clerk without prior submission to the court pursuant to CPLR 5016. Funk, 89 N.Y.2d at 367 (citation and some internal quotation marks omitted). Ultimately, the Court found that “the 60–day rule logically applies only where further court involvement in the drafting process is contemplated before entry.” Funk, 89 N.Y.2d at 368. The failure to timely “settle” an order pursuant to 22 NYCRR 202.48 can be excused upon the showing of “good cause”. 22 NYCRR 202.48(b). See also Parisi v. McElhatton, 209 A.D.2d 495 (2nd Dep’t 1994). On December 2, 2020, the Appellate Division, Second Department, addressed these issues in James B. Nutter & Co. v. McLaughlin. The plaintiff in James B. Nutter commenced an action to foreclose a mortgage and its unopposed motion for a judgment of foreclosure and sale was granted in a December 12, 2016 order that directed plaintiff to “submit” a judgment. While the James B. Nutter plaintiff submitted its proposed judgment, the court issued an order that “sua sponte, deemed the action abandoned, finding that the plaintiff failed to establish good cause for its failure to submit the judgment within 60 days of the order entered December 12, 2016.” In reversing the James B. Nutter supreme court, the Second Department stated: Pursuant to 22 NYCRR 202.48, an order or judgment which is directed to be settled or submitted on notice must be submitted for signature within 60 days after the signing and filing of the decision directing that the order or judgment be settled or submitted. A party who fails to submit the order or judgment within the 60-day time period will be deemed to have abandoned the action or motion, absent good cause shown. In this case, when the Supreme Court initially granted the plaintiff’s motion, inter alia, for a judgment of foreclosure and sale, it did not direct that the proposed judgment had to be settled or submitted on notice. 22 NYCRR 202.48 does not apply where, as here, the court merely directs a party to submit an order or judgment without expressly directing that the order or judgment be submitted on notice. Accordingly, the Supreme Court should not have denied the plaintiff’s motion for a judgment of foreclosure and sale for failure to comply with 22 NYCRR 202.48, and should not have deemed the action abandoned. (Citations 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. Unless otherwise stated, Freiberger Haber LLP’s articles are based on recently decided published opinions or litigation releases and not on matters handled by the firm.

By: Jonathan H. Freiberger On July 12, 2023, the Appellate Division, Second Department, in U.S. Bank Trust, N.A. v. Rahman, addressed an issue that has been confusing lawyers for quite some time involving 22 N.Y.C.R.R. §202.48 – “Submission of orders, judgments and decrees for signature”, which provides, in relevant part: (a) Proposed orders or judgments, with proof of service on all parties where the order is directed to be settled or submitted on notice, must be submitted for signature, unless otherwise directed by the court, within 60 days after the signing and filing of the decision directing that the order be settled or submitted. (b) Failure to submit the order or judgment timely shall be deemed an abandonment of the motion or action, unless for good cause shown. Many times, a court will issue a decision and order that requires nothing further from the parties. Frequently, however, a decision will direct that the prevailing party either: (a) submit an order or judgment for the court to consider; or, (b) submit or settle an order or judgment, on notice, for the court’s consideration. The choice that the court makes could have serious ramifications to the parties. As set forth in 22 N.Y.C.R.R § 202.48, if the prevailing party on a motion is directed to “submit or settle an order or judgment on notice”, the failure to do so within sixty days could operate as an abandonment of movant’s short-lived victory. The Court of Appeals, in Funk v. Barry, 89 N.Y.2d 364 (1996), explained the distinction between “submitting” an order or judgment and “submitting or settling an order or judgment on notice”: By its plain terms, section 202.48 (a) speaks to the circumstances where the court's decision expressly directs a party to submit or settle an order or judgment. When a decision ends with the directive to "submit order," the court is generally directing the prevailing party to draw the order and present it to the judge who looks it over to make sure it reflects the decision properly, and then signs or initials it. This procedure typically calls for no notice to the opponent. A directive to "settle," by contrast, is reserved for more complicated dispositions, such as orders involving restraints or contemplating a set of follow-up procedures. Because the decision ordinarily entails more complicated relief, the instruction contemplates notice to the opponent so that both parties may either agree on a draft or prepare counter proposals to be settled before the court. The common element in both directives is that further drafting and judicial approval of the judgment or order is contemplated. Funk, 89 N.Y.2d at 367 (citations, internal quotation marks, ellipses and brackets omitted). The ramifications of the failure to timely settle an order when directed by the court to do so was made plain by the Second Department in Citibank, N.A. v. Velazquez, 284 A.D.2d 364 (2001). There, in a mortgage foreclosure action, lender moved to confirm a referee’s report of sale and for leave to enter a deficiency judgment, which motion was unopposed. Lender’s motion was granted with an instruction to “submit judgment on notice to the Clerk of the County of Westchester.” Lender failed to timely submit the judgment and, accordingly, its subsequent motion for leave to enter a deficiency judgment against borrower was denied “on the ground that it had been abandoned.” The motion court’s ruling was affirmed by the Second Department because, inter alia, lender “did not show good cause for the lengthy delay in filing the deficiency judgment.” Rahman was also a mortgage foreclosure action in which borrower defaulted in appearing. [Eds. Note: the facts as set forth herein are simplified for editorial purposes.] On October 15, 2015, the motion court granted lender’s motion for a default judgment and for an order of reference in a decision that directed lender to “submit order” (the “October 2015 Decision”). Six months later, a proposed order was submitted by lender and an order was signed by the court three months thereafter. Subsequently, on August 13, 2018 (the “August 2018 Decision”), the court rendered another decision granting lender’s motion to confirm the referee’s report and for a judgment of foreclosure and sale. The August 2018 Decision directed lender to “settle a judgment on notice … on or before September 11, 2018.” Lender waited until October 29, 2018, to present a notice of settlement and proposed judgment to the court. Nonetheless, the judgment of foreclosure and sale was entered on November 21, 2018. In May of 2019, pursuant to, inter alia, 22 N.Y.C.R.R § 202.48, borrower moved to vacate the October 15 Decision and the related order as well as the August 13 Decision and the related judgment of foreclosure and sale. Lender appealed the denial of its motion and the Second Department affirmed. As to the October 15 Decision and related order the Court stated: 22 NYCRR 202.48 does not apply where the court merely directs a party to submit an order or judgment without expressly directing that the order or judgment be submitted on notice. Here, since the [October 2015 Decision] did not require that the proposed order of reference be settled or submitted on notice, the [lender] was not required to comply with 22 NYCRR 202.48. [Citations and internal quotation marks omitted.] As to the judgment of foreclosure and sale, the Court stated: Regarding the judgment of foreclosure and sale, it is within the sound discretion of the court to accept a belated order or judgment for settlement. Moreover, a court should not deem an action or judgment abandoned where the result would not bring the repose to court proceedings that 22 NYCRR 202.48 was designed to effectuate, and would waste judicial resources. Here, the Supreme Court providently exercised its discretion in accepting the judgment of foreclosure and sale, which was submitted to the court on notice 48 days after the deadline set forth in the court's [August 2018 Decision]. TAKEAWAY While the court may be forgiving (as it was in Rahman), such is not always the case. Practitioners should be mindful of the relevant rules and time periods and strive to comply with same. 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. Unless otherwise stated, Freiberger Haber LLP’s articles are based on recently decided published opinions or litigation releases and not on matters handled by the firm.

By: Jeffrey M. Haber Contract interpretation principles require courts to give effect to the parties’ intent as expressed in the plain language of their agreement, while reading the contract as a whole and avoiding constructions that render provisions meaningless. Where contractual terms introduce discretion or conditional performance, such as provisions allowing one party to determine whether services will be requested, questions of ambiguity may arise concerning the scope of the parties’ obligations. In such circumstances, courts often consider whether the agreement reflects a performance-based bargain or a broader allocation of risk and responsibility. These principles are illustrated in Prosight Specialty Mgt. Co., Inc. v. Altruis Group, LLC, 2026 N.Y. Slip Op. 03131 (1st Dept. May 19, 2026), a case concerning the interpretation of a services agreement and whether its discretionary language limited the provider’s obligations or affected its entitlement to compensation. Applicable Principles When interpreting contracts, a court’s “function is to apply the meaning intended by the parties, as derived from the language of the contract in question.”[1] For this reason, a “written agreement that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms.”[2] “When the parties have a dispute over the meaning, the court first asks if the contract contains any ambiguity, which is a legal matter for the court to decide.”[3] Whether there is an ambiguity “is determined by looking within the four corners of the document, not to outside sources.”[4] However, courts may “examine the entire contract and consider the relation of the parties and the circumstances under which it was executed” in determining whether an agreement is ambiguous.[5] “A contract is unambiguous if, on its face, it is reasonably susceptible of only one meaning.”[6] “To the extent that any of [an] agreement’s terms may be ambiguous, indefinite or uncertain, it is well settled that extrinsic or parol evidence is admissible to determine their meaning.”[7] Moreover, “[c]ontracts must be read as a whole and all terms of a contract must be harmonized whenever reasonably possible.”[8] “An interpretation that gives effect to all the terms of an agreement is preferable to one that ignores terms or accords them an unreasonable interpretation.”[9] Thus, courts “must examine the parties’ obligations and intentions as manifested in the entire agreement and seek to afford the language an interpretation that is sensible, practical, fair and reasonable.”[10] The courts should not, however, “rewrite the plain contractual language in an effort to right some perceived inequity in the parties’ bargain.”[11] Against the foregoing principles of contract interpretation, we examine Prosight Specialty Mgt. Co., Inc. v. Altruis Group, LLC. Prosight Specialty Mgt. Co., Inc. v. Altruis Group, LLC Prosight concerned a contract dispute between defendant, Altruis Group, LLC, and plaintiff, ProSight Specialty Insurance Company, Inc.; namely, whether defendant fulfilled its contractual obligations under a Niche Management Agreement (“NMA”) with plaintiff, and was entitled to commissions for services performed in 2021.[12] The parties entered into the NMA on February 4, 2020. Pursuant to the NMA, defendant agreed to serve as a managing general agent and provide services supporting plaintiff’s captive insurance business, including soliciting business and performing specified “Minimum Services.” The NMA appointed defendant as plaintiff’s niche administrator and authorized representative to act on plaintiff’s behalf in performing such services. The agreement applied on a calendar-year basis and was set to expire on December 31, 2021. On May 4, 2020, the parties executed an amendment to the NMA (“NMA Amendment”). Among other things, the amendment added a provision that, at plaintiff’s sole discretion, required defendant to perform “some, all or none” of the identified Minimum Services with respect to captive transactions. During 2020, defendant performed services requested by plaintiff, including sourcing captive business opportunities and supporting collateral management and reporting functions. In connection with defendant’s performance, plaintiff paid defendant commissions consistent with the terms of the NMA. In 2021, defendant continued to provide services in support of plaintiff’s captive program in response to requests from plaintiff. According to defendant, it performed all services requested of it, consistent with the NMA Amendment, which made the performance of Minimum Services contingent on plaintiff’s requests. Plaintiff, by contrast, contended that defendant failed to perform certain Minimum Services and did not develop the full range of capabilities contemplated by the agreement. By September 2021, plaintiff decided to exit the captive insurance business, although defendant continued to perform services and engage in business development activities through the fourth quarter of 2021. On November 15, 2021, plaintiff issued notice purporting to terminate the NMA for alleged material breach, asserting that defendant failed to provide certain Minimum Services required under the NMA Amendment. Defendant disputed the alleged breach and termination, maintaining that it performed all services requested by plaintiff and that, under the NMA Amendment, it was not required to perform services that plaintiff did not request. Defendant further contended that plaintiff failed to comply with the NMA’s contractual termination provisions, including the requirement to provide notice and an opportunity to cure any alleged breach. Plaintiff maintained its position that defendant failed to satisfy its contractual obligations and that full commission payments were not owed. Plaintiff moved for summary judgment on its breach of contract and declaratory judgment claims and on defendant’s counterclaim for breach of contract. The motion court denied plaintiff’s motion. The Appellate Division, First Department, unanimously affirmed. The First Department’s Decision The Court held that the motion court correctly “found that the contractual language at issue was ambiguous” and, therefore, “properly considered extrinsic evidence to interpret its meaning.”[13] The Court explained that, while the first sentence of the relevant contractual provision both authorized and required defendant to perform “all” of the specified Minimum Services under the NMA and the NMA Amendment, the second sentence provided that, at plaintiffs’ sole discretion, defendant would perform “some, all, or none” of those services.[14] Read together, said the Court, those provisions created ambiguity as to which, if any, of the Minimum Services defendant was obligated to perform absent a specific request from plaintiffs.[15] The Court also noted that “[d]eposition testimony and other evidence bolstered defendant’s interpretation that under the NMA Amendment, defendant was obligated to perform any of the delineated Minimum Services for a ‘captive insurance customer’ (Captive) when specifically requested to do so by plaintiffs, as plaintiffs were exploring and developing their Captive business.”[16] “Given the parties’ obligations and intentions,” concluded the Court, “defendant’s interpretation was ‘sensible, practical, fair, and reasonable.’”[17] Takeaway Prosight highlights three principal lessons regarding contract interpretation and the allocation of performance obligations. First, it underscores that ambiguity can arise even in seemingly straightforward contractual language when provisions conflict or introduce discretion. In Prosight, the juxtaposition of a clause requiring defendant to perform “all” Minimum Services with another permitting performance of “some, all, or none” of the Minimum Services created an internal inconsistency. When read as a whole, the agreement failed to clearly define defendant’s obligations, illustrating that ambiguity is not limited to vague terms but may emerge from competing obligations within the same provision. Second, Prosight emphasizes that courts will consider extrinsic evidence once ambiguity is found and may adopt the interpretation that best reflects a practical and commercially reasonable understanding of the parties’ relationship. In Prosight, deposition testimony and course-of-performance evidence supported defendant’s position that its duties were contingent on plaintiff’s requests. The Court favored this interpretation because, among other reasons, it aligned with how the parties actually conducted themselves. Third, Prosight demonstrates that discretionary performance provisions can affect entitlement to compensation, particularly where compensation is tied to the services performed. By making the performance of “Minimum Services” dependent on plaintiff’s election, the NMA and its amendment shifted control over both performance and payment. As a result, disputes over whether services were required, and whether they were adequately performed, raised factual issues that precluded summary judgment. __________________________________ Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes only and is not intended to be, and should not be, taken as legal advice. Unless otherwise stated, Freiberger Haber LLP’s articles are based on recently decided published opinions or litigation releases and not on matters handled by the firm. ___________________________________ [1] Duane Reade, Inc. v. Cardtronics, LP, 54 A.D.3d 137, 140 (1st Dept. 2008) (citation omitted). [2] Id., quoting Greenfield v. Philles Records, 98 N.Y.2d 562, 569 (2002)). [3] MPEG LA, LLC v. Samsung Elecs. Co., 166 A.D.3d 13, 17 (1st Dept. 2018), lv. denied, 32 N.Y.3d 912 (2018), citing Ashwood Capital, Inc. v. OTG Mgt., Inc., 99 A.D.3d 1, 7-8 (1st Dept. 2012). [4] Id., 166 A.D.3d at 17, quoting Kass v. Kass, 91 N.Y.2d 554, 566 (1998). [5] Kass, 91 N.Y.2d at 566; see also W.W.W. Assoc. v. Giancontieri, 77 N.Y.2d 157, 162 (1990). [6] B.D. v. E.D., 218 A.D.3d 9, 14-15 (1st Dept. 2023) (citations omitted); see also Breed v. Insurance Co. of N. Am., 46 N.Y.2d 351, 355 (1978) (a contract is unambiguous if the language has “a definite and precise meaning, unattended by danger of misconception in the purport of the [agreement] itself, and concerning which there is no reasonable basis for a difference of opinion”); Broad St., LLC v. Gulf Ins. Co., 37 A.D.3d 126, 131 (1st Dept. 2006) (citations omitted).. [7] Korff v. Corbett, 18 A.D.3d 248, 251 (1st Dept. 2005); see also W.W.W. Assoc., 77 N.Y.2d at 162. [8] Teliman Holding Corp. v. VCW Assoc., 211 A.D.3d 499, 500 (1st Dept. 2022). [9] Perlbinder v. Bd. of Managers of 411 E. 53rd St. Condo., 65 A.D.3d 985, 986-987 (1st Dept. 2009). [10] MPEG, 166 A.D.3d at 17 (citations omitted); see also Duane Reade, 54 A.D.3d at 140. [11] B.D., 218 A.D.3d at 18, citing Greenfield, 98 N.Y.2d at 570 (“a court is not free to alter the contract to reflect its personal notions of fairness and equity”). [12] The discussion of the facts of Prosight comes from the briefing on appeal. [13] Slip Op. at *1, citing Nova Cas. Co. v. Peter Thomas Roth Labs, LLC, 178 A.D.3d 468, 468 (1st Dept. 2019). [14] Id. [15] Id. (“Taking both sentences together, it is unclear which—some, all, or none—of the Minimum Services defendant was to provide, unless specifically requested to do so by plaintiffs.”) [16] Id. [17] Id., citing MPEG, 166 A.D.3d at 17.

By: Jeffrey M. Haber In today’s article, we examine Kingdom Assoc., Inc. v. WBC Servs. Inc., 2026 N.Y. Slip Op. 03070 (1st Dept. May 14, 2026), a case arising from a proposed subcontract for excavation and foundation work on a New York City project. Plaintiff alleged that defendant accepted its $8.28 million proposal and that it procured materials, obtained insurance, and prepared shop drawings in reliance thereon. Defendant argued that no binding contract existed because the proposal was never executed and required owner approval. After defendant stated the owner had not authorized the work, plaintiff filed a $1.075 million lien and sued. The Appellate Division, First Department held that plaintiff adequately stated claims for, among others, breach of contract and promissory estoppel, reversing the motion court’s dismissal of the causes of action. Kingdom Assoc., Inc. v. WBC Servs. Inc. Kingdom Associates arose from a proposed subcontract for excavation and foundation work at a New York City project.[1] Plaintiff alleged that defendant accepted its $8.28 million proposal in July 2024, creating a binding agreement, and that plaintiff began performance by procuring materials, obtaining insurance, and preparing shop drawings. Defendant maintained that no contract was formed because the proposal was never formally executed and required owner approval. Plaintiff alleged that defendant breached the contract and, alternatively, repudiated a clear promise on which it reasonably relied, causing damages of $1.075 million. The dispute began in April 2024, when plaintiff solicited bids for a portion of the project, including excavation, waterproofing, and foundation concrete. In response, defendant submitted a proposal and engaged in a series of email communications with plaintiff throughout July 2024. During these exchanges, the parties discussed project specifications, including drawings and scope changes. Plaintiff submitted a revised proposal on July 18, 2024, incorporating updated plans. That same day, defendant requested further details in the form of an itemized breakdown and also asked whether plaintiff could lower its price by $100,000. Plaintiff agreed and, shortly thereafter, submitted a revised proposal to defendant. On August 16, 2024, nearly a month after the final proposal was submitted, defendant informed plaintiff that the project owner had not authorized it to award the subcontract work and was still evaluating its options. Defendant thus took the position that no subcontract could be awarded at that time. Plaintiff argued that this communication was a unilateral termination of the agreement. It maintained that defendant never indicated during negotiations that owner approval was a prerequisite to contract formation and that it had already undertaken significant efforts in reliance on defendant’s representations. Thereafter, on August 23, 2024, plaintiff filed a mechanic’s lien against the project in the amount of $1,075,000. The lien was based on several categories of alleged costs, including insurance premiums, materials such as pipes and steel bars, shop drawings, and preconstruction services. Plaintiff subsequently commenced the action, asserting multiple causes of action. Those included: breach of contract, on the theory that an agreement existed and was wrongfully terminated; quantum meruit, seeking recovery for the value of services provided; promissory estoppel, based on alleged reliance on a clear promise of award; and unjust enrichment, alleging that the contractor benefited from plaintiff’s work without compensation. Defendant moved to dismiss. The motion court denied the motion. On appeal, the First Department reversed. The Court held that plaintiff stated a breach of contract claim.[2] To state a claim for breach of contract, a plaintiff must allege the “existence of a contract, the plaintiff's performance thereunder, the defendant’s breach thereof, and resulting damages.”[3] The Court found that plaintiff satisfied the elements of the claim by alleging that plaintiff: (1) “entered into an agreement with [defendant] to provide construction services,” (2) “performed under the agreement by providing labor and materials until [defendant] breached by unilaterally rescinding its agreement,” and (3) “suffered $1.075 million in expenses.”[4] Based on the foregoing, the Court concluded that “plaintiff stated the cause of action.”[5] The Court also held that plaintiff stated a claim for promissory estoppel.[6] “The elements of a claim for promissory estoppel are: (1) a promise that is sufficiently clear and unambiguous; (2) reasonable reliance on the promise by a party; and (3) injury caused by the reliance.”[7] The Court found that plaintiff satisfied the elements of the claim by pleading that: (1) “[defendant] made a clear and unambiguous promise that it was awarding the [subcontract] to” plaintiff; (2) “it was reasonable and foreseeable that [p]laintiff would rely on this unambiguous promise by [defendant] and commence work”; (3) “[defendant] violated its unambiguous promise to award the work” to plaintiff; and (4) “[d]ue to its detrimental reliance on [defendant’s] unambiguous promise, [p]laintiff [had] been damaged in the sum of [$1.075 million].”[8] The Court also noted that “[w]hile the email chain submitted by [defendant did] not contain a clear promise to award plaintiff the subcontract, it at least suggest[ed] the possibility that [defendant] made the promise to plaintiff in another manner.”[9] Based on the foregoing, the Court concluded that plaintiff stated a claim for promissory estoppel. Takeaway Kingdom Associates reaffirms the principle that, at the pleading stage, a plaintiff need not prove contract formation to survive dismissal. Allegations that the parties reached an agreement through negotiations, that performance began, and that the defendant repudiated the arrangement can suffice to state a breach of contract claim, even where there is no executed written agreement. Equally important, Kingdom Associates highlights the vitality of promissory estoppel as an alternative theory of liability. The Court recognized that a plaintiff’s allegations of a clear promise, coupled with reasonable reliance through performance, can support a claim for relief independent of a formal contract. In fact, the Court was willing to allow that a promise might be inferred from communications or proven through evidence beyond the written record. __________________________________ Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes only and is not intended to be, and should not be, taken as legal advice. Unless otherwise stated, Freiberger Haber LLP’s articles are based on recently decided published opinions or litigation releases and not on matters handled by the firm. ___________________________________ [1] The background facts and party assertions are taken from the briefing on appeal. [2] Slip Op. at *1. [3] Heijung Park v. Nam Yong Kim, 205 A.D.3d 429, 430 (1st Dept. 2022). [4] Slip Op. at *1. [5] Id. [6] Id. at *2. [7] Id. (quoting MatlinPatterson ATA Holdings LLC v. Federal Express Corp., 87 A.D.3d 836, 841-842 (1st Dept. 2011), lv. denied, 21 N.Y.3d 853 (2013)). [8] Id. (internal quotation marks omitted) [9] Id.

By: Jonathan H. Freiberger By way of brief background, and as set forth in one of our prior Blogs, Rule 3215(c) of the New York Civil Practice Law and Rules 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…. [Emphasis added.] Courts have noted 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]”. See, e.g., U.S. Bank Trust N.A. v. Valle, 247 A.D.3d 1086, 1088 (2nd Dep’t 2026); Wells Fargo Bank v. Cafasso, 158 A.D.3d 848, 849 (2nd Dep’t 2018). The Cafasso Court (quoting Giglio v. NTIMP, Inc., 86 A.D.3d 301 (2nd Dep’t 2011)), noted that “sufficient cause” “‘requir[es] both a reasonable excuse for the delay in timely moving for a default judgment, plus a demonstration that the cause of action is potentially meritorious.’” Cafasso, 158 A.D.3d at 849; see also Valle, 247 A.D.3d at 1089; Wells Fargo Bank, N.A. v. Robinson-John, 220 A.D.3d 974, 977 (2nd Dep’t 2023). The “reasonableness” of an excuse is within the sound discretion of the motion court. See, e.g., US Bank, N.A v. Onuoha, 162 A.D.3d 1094, 1095–96 (2nd Dep’t 2018) (citations omitted); Cafasso, 158 A.D.3d at 849 (citations omitted). Finally, a default judgment need not be obtained within one year, as long as proceedings to obtain a default judgment that “manifest an intent not to abandon the case, but to seek a judgment” have been initiated. Citizens Bank, N.A. v. Abrams, 2026 WL 1236819 at *3 (2nd Dep’t May 6, 2026) (citations and internal quotation marks omitted); see also Bank of America, N.A. v. Bhola, 219 A.D.3d 430, 432 (2nd Dep’t 2023). In mortgage foreclosure actions, the preliminary step of moving for an order of reference is deemed to be a sufficient “proceeding” toward the entry of judgment to satisfy the one-year time frame of CPLR 3215(c). See, e.g., Deutsche Bank v. Delisser, 161 A.D.3d 942, 943 (2nd Dep’t 2018); Bank of Am., N.A. v. Lucido, 163 A.D.3d 614, 615 (2nd Dep’t 2018); Mort. Electronic Registration Systems, Inc. v. McVicar, 203 A.D.3d 915, 916-17 (2nd Dep’t 2022). In Citibank, N.A. v. Kerszko, 203 A.D.3d 42 (2nd Dep’t 2022), the Court answered in the affirmative, the “interesting” question of “whether the presentment to a court of a proposed ex parte order to show cause for an order of reference, which is rejected by the court for defects inherent in the papers, qualifies as a taking of proceedings for the entry of judgment pursuant to CPLR 3215(c), so as to avoid dismissal of the complaint as abandoned under that statute.” Kerszko, 203 A.D.3d at 43 – 44. In so doing, the Kerszko Court, provided a thoughtful analysis of, inter alia, what it means to “take proceedings” under CPLR 3215(c). The Second Department, in U.S. Bank N.A. v. Jerriho-Cadogan, 224 A.D.3d 788, 790 (2nd Dep’t 2024), held that the plaintiff took the necessary “proceedings” by filing an RJI seeking a foreclosure settlement conference within a foreclosure action as mandated by CPLR 3408 because a “settlement conference is a necessary prerequisite to obtaining a default judgment.” (Citations omitted.) On May 13, 2026, the Appellate Division, Second Department, decided U.S. Bank N. A. v. Islam, a mortgage foreclosure action decided under CPLR 3215(c). In 2012, the lender in Islam commenced a mortgage foreclosure action against the borrower, who failed to timely answer or otherwise appear in the action. Three years later, the lender moved for a default judgment and an order of reference. Shortly thereafter, the motion court granted the lender’s motion and referred the matter to a referee to compute the amounts due under the mortgage. Four years after that, in 2019, the motion court conditionally dismissed the action as abandoned. In 2021, the borrower moved to dismiss the complaint pursuant to CPLR 3215(c). The lender cross-moved to vacate the 2019 dismissal order and for a judgment of foreclosure and sale. The motion court denied the borrower’s motion and granted the lender’s cross-motion. On the borrower’s appeal the Second Department reversed. First, the Court found that the lender failed to “take proceedings for the entry of judgment within one year after the [borrower]'s default.” Like in Jerriho-Cadogan, the lender filed an RJI for a foreclosure settlement conference. However, the Court, finding the filing insufficient in this case, stated: Although the [lender] filed a request for judicial intervention requesting a foreclosure settlement conference within the one-year period after the defendant's default, a settlement conference was not required in this case because the defendant did not reside at the property subject to foreclosure (see CPLR 3408[a][1]). As such, the filing of the request for judicial intervention did not constitute the taking of proceedings for the entry of a judgment pursuant to CPLR 3215(c) and did not toll the one-year deadline to do so (see US Bank N.A. v Pane, [237 A.D.3d 1237, 1239 (2nd Dep’t 2025)]. [Hyperlinks added.] Finally, the Court, unmoved by the lender’s excuse for not taking timely proceedings for the entry of judgment, stated: Moreover, the [lender] failed demonstrate a reasonable excuse for its failure to timely take proceedings for the entry of judgment. Contrary to the [lender]'s contention, the [lender]'s change of attorney does not constitute a reasonable excuse for its delay in taking proceedings for the entry of judgment under these circumstances, and in any event, the change of attorney occurred after the statutory one year period expired. Since the [lender] failed to proffer a reasonable excuse for its delay, this Court need not consider whether the [lender] had a potentially meritorious cause of action. Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice.

By: Jeffrey M. Haber In Kellinger v. Fox Media LLC, 2025 N.Y. Slip Op. 33835(U) (Sup. Ct., N.Y. County Oct. 8, 2025) (here), the New York Supreme Court granted a motion brought by defendants to enforce a $15,000 settlement agreement with plaintiff. The motion court found that plaintiff had confirmed the settlement by email, satisfying CPLR 2104’s requirement for a written agreement. Although plaintiff later claimed he only agreed to review the documents, the motion court held that his email constituted a binding acceptance of the settlement. In New York, settlement agreements “are judicially favored, will not lightly be set aside,” and will be enforced “with rigor and without a searching examination into their substance.”[1] A court called upon to enforce a settlement must be satisfied that the agreement is “clear, final and the product of mutual accord.”[2] Thus, an out-of-court agreement settling an action is binding on each party to the agreement only if “it is in a writing subscribed by him or his attorney.”[3] “In addition, since settlement agreements are subject to the principles of contract law, for an enforceable agreement to exist, all material terms must be set forth” in that writing, “and there must be a manifestation of mutual assent.”[4] One of the first cases in New York to analyze whether emails satisfy the requirements of CPLR 2104 was Forcelli v. Gelco Corp. In Forcelli, the plaintiff sued the defendant for damages resulting from an automobile accident. Following discovery, the parties each moved for summary judgment. On the same day that the parties filed their motions, the parties appeared for mediation. Although a settlement was not reached at the mediation, the parties continued their discussions. In a subsequent phone conversation, the plaintiff’s counsel orally agreed to accept a settlement offer made by the insurance carrier’s adjuster. The adjuster memorialized the agreement to settle in an email to the plaintiff’s counsel. Under the agreement, the insurer agreed to pay $230,000 to the plaintiff in exchange for a release from the plaintiff. The plaintiff’s attorney was to prepare the settlement documentation. The adjuster “signed” the email as follows: “Thanks Brenda Greene.” On May 4, 2011, the plaintiff executed a release. One week later, the motion court granted the defendant’s cross-motion to dismiss the complaint. The same day, the defendant’s attorney served the order with notice of entry on the plaintiff, and the plaintiff’s counsel sent the release and a signed stipulation of discontinuance to the adjuster. The adjuster received the “settlement documents” and forwarded them to the defendant’s counsel, who promptly “rejected” the release and stipulation of discontinuance. The defendant’s attorney asserted that a “settlement [was never] consummated under CPLR 2104 between the parties” and that the defendant considered the matter dismissed by [the motion] court’s order resolving the cross-motion. The plaintiff moved to vacate the order dismissing the case, arguing that the adjuster’s email “constituted a binding written settlement agreement pursuant to CPLR 2104”.[5] The plaintiff opposed the motion, arguing there was a binding settlement. The motion court granted the plaintiff’s motion. On appeal, the Appellate Division, Second Department, affirmed. The Court found that the adjuster’s email set forth the material terms of the parties’ settlement. According to the Court, the parties entered a valid settlement agreement on May 11, 2011, even though the release was not fully executed.[6] The Court rejected the defendant’s argument that the settlement agreement was invalid because neither the defendant nor its counsel executed the release and draft stipulation, holding that the adjuster was an agent with apparent authority to settle the case.[7] As to the “subscription” requirement of CPLR 2104, the Court noted that while emails cannot be signed in the traditional sense, “the lack of ‘subscription’ in the form of a handwritten signature has not prevented other courts from concluding that an email message, which is otherwise valid as a stipulation between parties, can be enforced pursuant to CPLR 2104.”[8] The Court also recognized the “widespread use of email” and how “unreasonable” it would be to determine that, due to the absence of a traditional signature, an email could not conform to CPLR 2104. The Court further noted that the adjuster purposely added her name at the end of the e-mail and that it was not automatically generated by the email software.[9] The Appellate Division, First Department, has cited Forcelli with approval, finding it to be of persuasive value.[10] Against the foregoing, we examine Kellinger v. Fox Media LLC.[11] In Kellinger, the parties verbally agreed to settle the action for $15,000, which defendant’s counsel attempted to confirm via email dated November 17, 2023. In the email, counsel wrote: “We will prepare the settlement agreement/general release and hold harmless and send to you on this email chain. Can you please confirm for me that we have agreed to settle for $15,000?” Plaintiff responded, “Yes we have agreed on $15,000 and I am awaiting settlement documents. Jim.” On November 27, 2023, counsel emailed the proposed general release/settlement agreement and the hold harmless agreement. Neither party disputed that plaintiff did not return a signed executed copy of these documents. Defendants moved to enforce the purported written settlement agreement between them and plaintiff. Defendants argued that the November 27 email satisfied the legal requirements under CPLR 2104 and, therefore, constituted an enforceable agreement. The motion court granted the motion, finding that “plaintiff, in subscribing to the settlement offer in the email, ha[d] entered into an enforceable agreement.”[12] The motion court noted that plaintiff did not “deny that he sent the email that confirmed the material terms of a settlement for $15,000 in exchange for the ‘settlement agreement/general release and hold harmless [agreement].’”[13] Instead, plaintiff tried to walk back the agreement, claiming his email merely indicated a willingness to review the documents—not a final acceptance. The motion court rejected this attempt as an effort to “distort the plain, declarative meaning of plaintiff’s whole statement, which, as the full context of the email conversation reveal[ed], was to confirm, per counsel’s request, the oral agreement that had already been agreed to in previous discussions.”[14] “This is especially true,” said the motion court, “as plaintiff does not ever reject the terms of the release in his emails to defendants’ counsel.”[15] The motion court reasoned that “plaintiff’s post-hoc rationalization strain[ed] credulity: had he intended, plaintiff could have explicitly conditioned the settlement on ‘an examination’ of the release documents, or, if the release contained terms beyond those he believed he had agreed to, he could have rejected them immediately after receiving it.”[16] But, plaintiff had done none of the foregoing. “In other words,” said the motion court, “to the extent that plaintiff now relies on the confidentiality provision in the release as creating a material term to which he did not agree, plaintiff did not provide a credible explanation for his failure to expeditiously deny the existence of the settlement on this ground when the release was first sent to him in November of 2023.”[17] “As such,” concluded the motion court, “defendants [had] demonstrated that plaintiff agreed to the material terms of the settlement.”[18] Takeaway Kellinger reaffirms the principle that under CPLR 2104, a settlement agreement can be enforceable if it is in writing and subscribed by the party or their attorney—even if the agreement is made via email. The decision also reflects a strong judicial preference for enforcing settlements that appear clear and mutually agreed upon, even if not formally executed. In Kellinger, the motion court reiterated that once parties reach an agreement, even by email, courts should enforce it “with rigor,” provided the essential terms are clear, and there is mutual assent. ___________________________ 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. [1] Forcelli v. Gelco Corp., 109 A.D.3d 244, 247-248 (2d Dept. 2013) (internal quotation marks omitted). [2] Id. [3] CPLR § 2014. CPLR 2104 provides, in relevant part that “An agreement between parties or their attorneys relating to any matter in an action, other than one made between counsel in open court, is not binding upon a party unless it is in a writing subscribed by him or his attorney or reduced to the form of an order and entered.” [4] Forcelli, 109 A.D.3d at 248 (internal quotation marks omitted). [5] Forcelli, 109 A.D.3d at 247. [6] Id. [7] Id. at 248 (citations omitted). [8] Id. [9] Id. at 251. [10] Jimenez v. Yanne, 152 A.D.3d 434, 434 (1st Dept. 2017) (finding email communications between counsel sufficiently set forth an enforceable agreement to settle the plaintiffs’ personal injury claims where plaintiffs’ counsel typed his name at the end of the email accepting the offer, thus satisfying CPLR 2104’s requirements); Matter of Phila. Ins. Indem. Co. v. Kendall, 197 A.D.3d 75, 79 (1st Dept. 2021). [11] This Blog previously examined emails and the subscription requirement of CPLR 2104 on numerous occasions. Some examples include: Second Department Reaffirms That E-mails Between Counsel Can Be Sufficient to Satisfy the Writing and Signature Requirement for Stipulations Pursuant to CPLR 2104; Did You Unintentionally Enter Into A Settlement Agreement by Email?; and Emails Following Mediation Sufficient to Confirm Settlement of Third-Party Contractual Indemnification Claim. To read additional articles in which we examined the enforceability of emails, please see the BLOG tile on our website and search for “email”, or any other commercial litigation issue that may be of interest you. [12] Slip Op. at *2 (citing Jimenez, 152 A.D.3d at 434). [13] Id. at *3. [14] Id. [15] Id. [16] Id. [17] Id. (citations omitted). [18] Id. at 3-4 (citation omitted).

By: Jonathan H. Freiberger Today’s article addresses 1995 Cam LLC v. West Side Advisors, LLC, a case decided on October 21, 2025, by the New York Court of Appeals. In 1995 Cam, the Court held that the guaranty executed by guarantor was a “good guy” guaranty and, therefore, liability under the subject commercial lease ended with the tenant’s surrender of possession of the premises and not with the landlord’s acceptance of the surrender. By way of background, a “good guy” guaranty is a type of guaranty frequently seen in conjunction with commercial leases. Such guarantees are typically executed by one or more owners of the tenant entity. “Under a standard ‘good guy guaranty,’ the guarantor is obligated to guarantee the lease payments until the tenant vacates and surrenders possession. This guaranty is so named because it is intended to induce the tenant to be a ‘good guy’ and leave the premises without undergoing the expense of eviction or removal of the tenant’s property.” 1995 Cam at Note 1 (citations and internal quotation marks omitted). Thus, the tenant, but not the “good guy” guarantor would be responsible for all rent due under the lease subsequent to the surrender. In 1995 Cam, the landlord and tenant entered into a commercial lease for office space in Manhattan. The initial lease was a standard form Real Estate Board of New York, Inc. (“REBNY”) lease with a rider. The lease was subsequently extended to, inter alia, include a limited personal guaranty from one of tenant’s officers, which was not a standard REBNY limited guaranty. Prior to the end of the lease term, tenant stopped paying rent and, on October 28, 2020, sent a letter to landlord advising of its intent to surrender the premises on November 30, 2020. On or about November 30, 2020, tenant vacated the premises and, after a walkthrough, delivered the keys to the premises to the building superintendent. The landlord commenced an action against tenant and guarantor to recover unpaid rent and expenses accruing both before and after the surrender of the premises. Ultimately, Supreme Court granted summary judgment to landlord. Tenant and guarantor appealed. The First Department affirmed, holding that “because the guaranty requires [tenant]'s surrender ‘pursuant to the terms of the Lease’ [tenant’s] failure to obtain [landlord]'s written acceptance of the surrender of the premises precluded [guarantor’s] avoidance of liability.” (Citations and internal quotation marks omitted.) The Court of Appeals granted leave for guarantor to appeal the judgment against it for post-vacatur damages. The Court framed the question presented as follows: “whether [guarantor]'s liability ends with [tenant]'s surrender of possession, or with [landlord]'s acceptance of surrender.” The Court’s analysis began with a discussion of general principles of contract construction. It noted that “[a] guaranty is subject to the ordinary principles of contract construction.” (Citations and internal quotation marks omitted.) Further, “[i]t is axiomatic that a contract is to be interpreted so as to give effect to the intention of the parties as expressed in the unequivocal language employed.” (Citations and internal quotation marks omitted.) In addition, “[i]n the absence of any ambiguity, we look solely to the language used by the parties to discern the contract's meaning.” (Citations and internal quotation marks omitted.) The Court noted that there was no claim of ambiguity with the lease. Specifically, as to the guaranty, the Court reiterated that such instruments are “to be interpreted in the strictest manner” and that: [i]mportantly, an interpretation that renders language in the guaranty superfluous is a view unsupportable under standard principles of contract interpretation. Accordingly, particular words should be considered, not as if isolated from the context, but in the light of the obligation as a whole and the intention of the parties as manifested thereby. Form should not prevail over substance and a sensible meaning of words should be sought. [Citations, internal quotation marks and brackets omitted.] The Court then quoted the operative provision of the guaranty: Guarantor guarantees that he shall pay to owner when due all Tenant's monetary obligations that have accrued under the terms of the Lease to the date that is the latest date that Tenant and its assigns, licensees and sublessees, if any, and shall have completely vacated and surrendered the Demised Premises to [Landlord] free and clear of any and all subtenants and/or occupants pursuant to the terms of the Lease (which date may be earlier than the stated expiration date in the Lease.) Tenant shall provide [Landlord] with not less than thirty (30) days prior notice of the date that it will be vacating and surrendering free and clear of any and all subtenants and other occupants. [Emphasis supplied; internal quotation marks, ellipses, brackets and footnote (noting that the “freely negotiated” guaranty is not a “standard” REBNY guaranty) omitted.] The Court recognized that while “surrender” is not defined in the guaranty, the REBNY lease contained two relevant provisions. The first (titled “End of Term”) provides that: Upon the expiration or other termination of the term of this Lease, Tenant shall quit and surrender to [Landlord] the Demised Premises, broom clean, in good order and condition, ordinary wear and damages which Tenant is not required to repair as provided elsewhere in this Lease excepted, and Tenant shall remove all its property. The second provision (titled “No Waiver”) provides that: No act or thing done by [Landlord] or [Landlord]'s agents during the term hereby demised shall be deemed an acceptance of a surrender of said premises, and no agreement to accept such surrender shall be valid unless in writing signed by [Landlord]. No employee of [Landlord] or [Landlord]'s agent shall have any power to accept the keys of said premises prior to the termination of the Lease and the delivery of keys to any such agent or employee shall not operate as a termination of the Lease or a surrender of the premises. In its opinion, the Court disagreed with the First Department’s reliance on the “No Waiver” provision to define “surrender”, which required a landlord’s acceptance. Doing so, according to the Court of Appeals, would “render most of the language in the guaranty superfluous.” In particular, the Court stated that the “language in the guaranty after ‘that have accrued under the terms of the Lease’ conditions [guarantor]'s liability on [landlord]'s actions. If [guarantor]'s liability were intended to be fully coterminous with that of [landlord]—that is, a full guaranty—all of the conditional language in the guaranty would be superfluous.” Conversely, the court found that the language in the “End of Term” provision of the REBNY lease would be more appropriately relied upon to define “surrender.” The Court stated: Relatedly, [the “End of Term” provision] of the REBNY Lease requires that at lease end, the tenant deliver the Premises vacant and broom clean. If the guaranty continued until the end of the Lease, there would be no need to reiterate the requirement that the Premises be delivered “completely vacant” in the guaranty. Inclusion of the “completely vacant” requirement in the guaranty becomes meaningful only if the guarantor's liability can end before the Lease ends, so that even when [the “End of Term” provision]'s “vacant and broom clean” requirement is not yet in effect (because the Lease has not ended), the “good guy” guaranty requires the premises be completely vacant at the earlier time as a condition of releasing the guarantor. [Footnote omitted.] The Court further found that because: the Lease does not require that the tenant give any notice to vacate at the end of the lease term; the inclusion of the 30–day notice provision in the guaranty makes sense only if the guaranty can terminate before the end of the lease, leaving the tenant, but not the guarantor, liable for post-surrender rent. Indeed, reading “surrender” in the guaranty to include acceptance would render the 30–day notice an impossibility. If, as [landlord] contends, “surrender” in the guaranty requires its acceptance, the notice requirement would require [tenant] to provide notice 30 days before [landlord] accepts the surrender, which would be both impossible and nonsensical. [Citations omitted.] Finally, the Court noted that the parties could have easily crafted a guaranty that was expressly a “good guy” guaranty without the need for the court to “resort to rules of construction regarding superfluity or canons that aid in determining the parties’ intent.” It should be noted that Justice Singas wrote a lengthy dissenting opinion in which one other justice concurred. Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice.

By: Jeffrey M. Haber As readers of this Blog know, we have written about many types of fraud over the years, such as affinity fraud, common law fraud, fraud in the inducement, fraudulent concealment, and securities fraud. Another type of fraud concerns fraud in the execution or fraud in the factum.[1] Three years ago, we examined Paredes v. Vorhand , a case involving this legal principle (here).[2] Since that time, we have not examined any cases involving fraud in the execution. Today, we do so. In Dodobayeva v. Rubinoff, 2025 N.Y. Slip Op. 05219 (2d Dept. Oct. 1, 2025) (here), plaintiff, claiming limited English skills, alleged she was deceived into signing a deed transferring property to her daughter-in-law. The Appellate Division, Second Department, affirmed the dismissal of her claim, ruling that she failed to exercise due diligence, as she neither read nor inquired about the documents. The Court also rejected her reliance on the two-year discovery rule for statute of limitations purposes, finding that she could have discovered the alleged fraud earlier. Fraud In the Factum: A Primer Fraud in the execution, or fraud in the factum, arises where a party did not know the nature or the contents of the document being signed, or the consequences of signing it, and was nonetheless misled into executing it.[3] “However, a party who signs a document without any valid excuse for not having read it is conclusively bound by its terms.”[4] “Moreover, a plaintiff is expected to exercise ordinary diligence and may not claim to have reasonably relied on a defendant’s representations or silence where he or she has means available to him or her of knowing, by the exercise of ordinary intelligence, the truth or the real quality of the subject of the representation.”[5] Thus, the failure to read the document before signing “prevents [the plaintiff] from establishing justifiable reliance, an essential element of fraud in the execution.”[6] In other words, absent some impairment (e.g., “the signer is illiterate, blind, or not a speaker of the language in which the document is written”),[7] a plaintiff cannot justifiably rely on another’s representation that the words used in the document means something other than what they state.[8] Importantly, the signer who claims to have some impairment must be free of negligence.[9] This means that disability by itself does not automatically excuse the signer from making a reasonable effort to learn the contents of the document being signed.[10] “The cases consistently hold that a person” with a disability or an inability to speak and/or read the English language “must make a reasonable effort to have the document read to him.”[11] The Two-Year Discovery Rule: A Primer “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.”[12] “‘Where a plaintiff relies upon the two-year discovery exception to the six-year limitations period, the burden of establishing that the fraud could not have been discovered prior to the two-year period before the commencement of the action rests on the plaintiff who seeks the benefit of the exception.’”[13] Although, “‘[o]rdinarily, an inquiry into when a plaintiff should have discovered an alleged fraud presents a mixed question of law and fact’”[14] “summary dismissal is appropriate where it conclusively appears that the plaintiff has knowledge of facts which should have caused [him or] her to inquire and discover the alleged fraud.”[15] “Thus, although ‘mere suspicion’ will not substitute for knowledge of the fraudulent act”,[16] a plaintiff may not “shut his [or her] eyes to facts which call for investigation.”[17] Dodobayeva v. Rubinoff With the foregoing principles in mind, we examine Dodobayeva v. Rubinoff, an action, inter alia, to set aside an allegedly fraudulent conveyance of an interest in real property. Background In February 2020, plaintiff sued her daughter-in-law (“defendant”), and another defendant, inter alia, to set aside a 2013 conveyance of plaintiff’s one-half interest in certain residential real property located in Queens, New York (hereinafter, the “premises”) to defendant. Plaintiff alleged, among other things, that she was fraudulently induced into signing certain documents, including a quitclaim deed, effectuating the conveyance of the premises, in that she believed, at the time that she signed the documentation to convey the premises, that she was executing documents to enable her son, defendant’s spouse, to become an owner of the premises. Plaintiff also alleged that she discovered for the first time in January 2020 that the documents that she signed in 2013 made defendant the sole owner of the premises. Plaintiff further alleged that as a native of Uzbekistan, she possessed “limited skills in the comprehension and use of the English language” at the time of the conveyance. Plaintiff additionally alleged that she executed the documents upon her justifiable reliance on purportedly fraudulent representations made by defendant at the time of the conveyance. Defendant answered the complaint and subsequently cross-moved, inter alia, pursuant to CPLR 3211(a)(5) and (7) to dismiss the cause of action alleging fraud on the grounds that it was time-barred and that plaintiff failed to state a cause of action. Plaintiff opposed. Plaintiff submitted an affidavit in which she stated that she signed the conveyance documents without reading them and that she would not have understood the documents even if she had tried to do so due to her English language limitations. Plaintiff further stated in her affidavit that she never had any conversations with her son about the 2013 conveyance or about the documents she signed until January 2020. In an order dated September 12, 2023, the Supreme Court, among other things, granted defendant’s cross-motion. Plaintiff appealed. The Second Department affirmed. The Second Department’s Decision The Court held that “plaintiff conclusively was presumed to have agreed to the terms of the documents and, accordingly, cannot establish that she lacked knowledge from which she could have discovered the alleged fraud with reasonable diligence.”[18] The Court explained that “plaintiff admitted that she neither read nor inquired about the contents of the documents upon which she relies to establish the fraud before she signed them. Yet, she failed to proffer any valid excuse for her failure to do so.”[19] Therefore, concluded the Court, plaintiff could not demonstrate fraud in the factum.[20] The Court also held that defendant “met her prima facie burden of demonstrating that the cause of action alleging fraud accrued no later than the date of the execution of the quitclaim deed in February 2013.”[21] Therefore, said the Court, the fraud in the execution cause of action was “time-barred” as having been “asserted more than six years later” after execution of the quitclaim deed.[22] The Court also held that plaintiff failed to “establish that the fraud could not have been discovered before the two-year period prior to the commencement of [the] action.”[23] “Accordingly,” the Court held that “the Supreme Court properly granted dismissal of the cause of action alleging fraud … as time-barred.”[24] Takeaway In Dodobayeva, plaintiff claimed that she was misled into signing a quitclaim deed transferring property to her daughter-in-law, believing it was for her son’s benefit. As discussed, plaintiff claimed that, due to language barriers, she did not understand the document. However, in affirming the dismissal of plaintiff’s fraud claim, the Court found that “plaintiff admitted that she neither read nor inquired about the contents of the documents upon which she relie[d] to establish the fraud before she signed them. Yet, she failed to proffer any valid excuse for her failure to do so.”[25] In doing so, the Court emphasized the principle that individuals are presumed to understand documents they sign unless they can show a valid, non-negligent reason—such as illiteracy or language barriers—and that they made reasonable efforts to understand the document before they sign it. In Dodobayeva, the Court also addressed the statute of limitations applicable to fraud causes of action. As discussed, the Court held that plaintiff failed to meet her burden of showing that she brought her claim within two years of discovering the alleged fraud. The Court found that plaintiff did not make any inquiries about the alleged fraud for seven years. Consequently, the Court affirmed the dismissal of plaintiff’s fraud claim as time-barred and unsupported by justifiable reliance. Dodobayeva therefore reinforces the principle that litigants have a duty to inquire into the facts and circumstances of the transactions into which they enter when they possess facts showing that they may be the victims of fraud. ____________________________ 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. [1] Fraud in the execution is different than fraud in the inducement. In the latter, the fraud is based on facts occurring prior or subsequent to the execution of a contract which tend to demonstrate that an agreement, valid on its face and properly executed, is to be limited or avoided. [2] Paredes v. Vorhand, 204 A.D.3d 1468 (4th Dept. 2022). [3] Fleming v. Ponziani, 24 N.Y.2d 105, 111 (1969); Gilbert v. Rothschild, 280 N.Y. 66, 71-72 (1939). [4] Cannariato v. Cannariato, 136 A.D.3d 627, 628 (2d Dept. 2016) (alteration and internal quotation marks omitted). [5] Lapin v. Verner, 238 A.D.3d 1128, 1129-1130 (2d Dept. 2025) (alterations and internal quotation marks omitted); see also Benjamin v. Yeroushalmi, 178 A.D.3d 650, 654 (2d Dept. 2019). [6] Sorenson v. Bridge Capital Corp., 52 A.D.3d 265, 266 (1st Dept. 2008), lv. dismissed, 12 N.Y.3d 748 (2009). [7] Anderson v. Dinkes & Schwitzer, P.C., 150 A.D.3d 805, 806 (2d Dept. 2017). [8] Countrywide Home Loans, Inc. v. Gibson, 157 A.D.3d 853, 856 (2d Dept. 2018); see also Ackerman v. Ackerman, 120 A.D.3d 1279, 1280 (2d Dept. 2014); Dasz, Inc. v. Meritocracy Ventures, Ltd., 108 A.D.3d 1084, 1084-1085 (4th Dept. 2013); Sorenson, 52 A.D.3d at 266. See also Pimpinello v. Swift & Co., 253 N.Y. 159, 163 (1930) (holding, “[i]f the signer [of a document] is illiterate, or blind, or ignorant of the alien language of the writing, and the contents thereof are misread or misrepresented to him by the other party, or even by a stranger, unless the signer be negligent, the writing is void”). [9] Sofio v. Hughes, 162 A.D.2d 518, 520 (2d Dept. 1990). [10] Id. [11] Id. (citing Albany Med. Center Hosp. v. Armlin, 146 A.D.2d 866, 867 (3d Dept. 1989), and Brian Wallach Agency v. Bank of N.Y., 75 A.D.2d 878, 879 (2d Dept. 1980)). [12] York v. York, 235 A.D.3d 1032, 1033 (2d Dept. 2025) (internal quotation marks omitted); see also CPLR 203(g); 213(8); Sargiss v. Magarelli, 12 N.Y.3d 527, 532 (2009). [13] York, 235 A.D.3d at 1033 (quoting Cannariato, 136 A.D.3d at 627). [14] Gormley v. Marist Bros. of the Schs., Province of the United States of Am., 236 A.D.3d 868, 870 (2d Dept. 2025) (quoting Vilsack v. Meyer, 96 A.D.3d 827, 828 (2d Dept. 2012)); see also Trepuk v. Frank, 44 N.Y.2d 723, 724-725 (1978). [15] Cannariato, 136 A.D.3d at 628 (internal quotation marks omitted). [16] Id. (quoting Erbe v. Lincoln Rochester Trust Co., 3 N.Y.2d 321, 326 (1957)). [17] Saphir Intl., SA v. UBS PaineWebber Inc., 25 A.D.3d 315, 316 (1st Dept. 2006) (quoting Schmidt v. McKay, 555 F.2d 30, 37 (2d Cir. 1977)); see also Shannon v. Gordon, 249 A.D.2d 291, 292 (2d Dept. 1988). [18] Slip Op. at *1 (citing Cannariato, 136 A.D.3d at 628). [19] Id. [20] Id. [21] Id. [22] Id. [23] Id. [24] Id. [25] Id.

By: Jeffrey M. Haber New York’s Limited Liability Company Law § 607 limits the remedies available to a creditor when the judgment debtor is an LLC member, confining recovery to the member’s economic interest and prohibiting any direct interference with LLC property. As demonstrated in Finance Holding Co., LLC v. Farzam, 2026 N.Y. Slip Op 31868(U) (Sup. Ct., N.Y. County Apr. 7, 2026), courts use the statute to protect the separation between the LLC and its members. Finance Holding involved a judgment enforcement action in which the petitioner sought to satisfy a nearly $2 million judgment against an individual LLC member by targeting his interests in two LLCs that owned residential apartment buildings. Through a series of motions, the motion court addressed the permissible scope of relief under LLC Law § 607, rejecting attempts to reach LLC assets or control their operations while permitting remedies directed solely at the debtor‑member’s economic interests. Finance Holding Co., LLC v. Farzam Finance Holding is a judgment-enforcement proceeding that arose as a consequence of petitioner obtaining a judgment against respondent for $1,903,366.57 in a related action. In that action, petitioner was seeking to enforce that judgment against respondent directly. In Finance Holding, petitioner moved to enforce its judgment against respondent’s ownership interests in two LLCs that own residential apartment buildings (“respondent LLCs”). Before the motion court were three motions. The first motion involved an order to show cause brought by petitioner seeking relief directed at respondent’s membership interests in the respondent LLCs. In response (the second motion), respondent filed a motion to dismiss the petition insofar as it sought relief against his wife. Separately, respondent’s wife filed her own motion to dismiss the petition as against her and sought attorney’s fees as a sanction under 22 NYCRR 130‑1.1 (the third motion). The motion court denied respondents’ motions. Respondent’s motion to dismiss was denied because he was not admitted to practice law in New York and, therefore, lacked the authority to appear or seek relief on behalf of another party, including his wife. As to the wife’s motion, petitioner clarified that she had been named in the proceeding solely to provide notice, based on her status as a 50 percent member of the respondent LLCs, and that no substantive relief was being sought against her personally. In light of that representation, the motion court denied the request for dismissal as academic. The motion court also denied the wife’s request for sanctions, finding that adding her to the proceeding for notice purposes did not constitute frivolous or vexatious conduct within the meaning of 22 NYCRR 130‑1.1. With those rulings, the motion court turned to petitioner’s motion on the merits. Petitioner sought a range of relief related to respondent’s interests in the respondent LLCs, including a turnover order, an order charging or garnishing his membership interests, appointment of a receiver over the LLCs, injunctive relief restraining the transfer of membership interests, a declaration establishing priority over other actual or potential creditors, and an award of attorney’s fees. The motion court granted in part and denied in part petitioner’s motion. In so ruling, the motion court determined that the majority of the relief sought by petitioner was unavailable as a matter of law. The motion court focused on the limits placed on a judgment creditor’s ability to pursue relief against assets owned by limited liability companies when the judgment is against an individual member. Respondents argued, and the motion court agreed, that because petitioner’s requested relief against the LLCs derived solely from its judgment against respondent as an LLC member, that relief was subject to Limited Liability Company Law (“LLC Law”) § 607. That statute bars a creditor of an LLC member from “obtain[ing] possession of, or otherwise exercising legal or equitable remedies with respect to, the property of the limited liability company.”[1] In practical terms, LLC Law § 607 protects an LLC’s assets and operations from being disrupted by the creditors of individual members. Applying LLC Law § 607, the motion court concluded that several categories of relief sought by petitioner were barred. Petitioner sought turnover of funds and real property held by the respondent LLCs, garnishment of proceeds from any sale of LLC assets or property, and injunctive relief preventing respondents from selling or otherwise disposing of LLC-held property. The motion court found that each of these requests would improperly allow petitioner, as a creditor of an individual member, to reach or control LLC property directly. Because the statute forecloses that result, the motion court denied the requested relief as statutorily unavailable.[2] The motion court next addressed petitioner’s request for a declaratory judgment establishing that it had priority over all other creditors of respondent in collecting proceeds necessary to satisfy the judgment. The motion court found this request procedurally and substantively deficient. The motion court noted that priority disputes among creditors are ordinarily resolved through proceedings that join adverse claimants, such as those contemplated by CPLR 5239.[3] In Finance Holding, however, petitioner had neither identified nor joined any other creditors whose rights would be affected by the requested declaration.[4] Petitioner also failed to allege that any such competing creditors even existed.[5] Without adverse parties or a concrete dispute over priority, the motion court concluded that there was no justiciable controversy for it to resolve.[6] As a result, the motion court denied that portion of petitioner’s motion.[7] The motion court thereafter addressed petitioner’s request for a turnover order and a charging order with respect to respondent’s membership interests in the LLCs. The motion court noted that under LLC Law § 607, a court has the authority to impose a charging order on respondent’s LLC membership interests.[8] Alternatively, said the motion court, a court could, but was not required to, direct turnover of respondent’s LLC membership interests to petitioner as judgment creditor.[9] “In choosing between these remedies,” the motion court took “into account that directing turnover would have the undesirable effect of making petitioner and [respondent’s wife] involuntary equal partners in the management of the buildings owned by the LLC respondents—over [the wife’s] strong objection.”[10] Additionally, explained the motion court, “petitioner [did] not explain why turnover would be more effective than a charging order for purposes of petitioner’s efforts to collect on its judgment against [respondent].”[11] Therefore, the motion court concluded “that imposing a charging order, rather than directing turnover, [was] the appropriate remedy.”[12] The motion court also denied petitioner’s request for the appointment of a receiver over respondent’s LLC membership interests and over the apartment buildings owned by the respondent LLCs, finding that petitioner failed to demonstrate the “special reason” required to justify such relief.[13] The motion court noted that petitioner did not show it had exhausted other, less intrusive means of enforcing the judgment, such as levying against real property owned by respondent personally.[14] Nor did petitioner explain how a receivership would be more effective in satisfying the judgment than a charging order directed at respondent’s membership interests.[15] The motion court also emphasized that the scope of the proposed receivership was overly broad. Rather than being limited to respondent’s interests in the respondent LLCs, petitioner sought a receiver with authority over the day‑to‑day operation, sale, and management of the apartment buildings owned by the LLCs.[16] The motion court found this particularly problematic, especially given that respondent holds only a 50 percent interest in the respondent LLCs.[17] Petitioner failed to address how appointing a receiver would affect or operate alongside the 50 percent ownership interest of respondent’s wife.[18] In light of these deficiencies, the motion court denied that request. Finally, the motion court rejected petitioner’s request for broad injunctive relief because a judgment creditor may not restrict an LLC’s control over its own assets and petitioner provided no basis for relief against respondent’s non‑debtor wife.[19] However, the motion court granted injunctive relief against respondent, enjoining him and his agents from transferring or disposing of his LLC membership interests and from dissipating any income, distributions, or proceeds payable to him from the LLCs.[20] Takeaway Focusing on LLC Law § 607, Finance Holding underscores the limits New York law places on judgment enforcement when the judgment debtor is an LLC member rather than the LLC itself. The central takeaway of the holding is that Section 607 operates as a statutory shield for LLC property, preventing a member’s creditors from reaching, controlling, or interfering with the assets owned by the LLC. The decision also illustrates that a creditor’s remedies are confined to the debtor‑member’s interest in the LLC. Section 607 bars turnover orders, garnishment, receiverships, and injunctions that would effectively give the creditor control over LLC property or management. As shown in Finance Holding, courts reject attempts to bypass this rule, especially where the requested relief would disrupt the LLC’s affairs or prejudice other members who are not judgment debtors. A related takeaway from the Finance Holding decision is the preference, under Section 607, for charging orders as an enforcement mechanism. A charging order allows a creditor to place a lien on distributions payable to the debtor‑member without altering ownership, governance, or control of the LLC. Finance Holding emphasizes that courts are reluctant to order turnover of membership interests or appoint receivers, where doing so would force non‑consensual business relationships, interfere with management, or go beyond the debtor’s economic rights, especially when the debtor owns less than 100% of the LLC. Overall, the key lesson of Finance Holding is that when a judgment debtor is an LLC member, Section 607 limits enforcement to the judgment debtor’s economic interests only. Courts will enforce those limits rigorously, protecting LLC assets and non‑debtor members from collateral damage while still allowing creditors a defined path to judgment recovery. __________________________________ Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes only and is not intended to be, and should not be, taken as legal advice. Unless otherwise stated, Freiberger Haber LLP’s articles are based on recently decided published opinions or litigation releases and not on matters handled by the firm. ___________________________________ [1] Slip Op. at *3, quoting LLC Law § 607(b). [2] Id. [3] Id. [4] Id. [5] Id. [6] Id., citing Premier Restorations of N.Y. Corp. v. New York State Dept. of Motor Vehs., 127 A.D.3d 1049, 1049 (2d Dept. 2015) (describing requirements for availability of declaratory-judgment claim). [7] Id. Also, the motion court denied petitioner’s request for an award of attorney’s fees. The motion court explained that attorney’s fees are not recoverable in a turnover proceeding brought under CPLR 5225(b), which was one of the statutory bases relied upon by petitioner. Id., citing Bienstock v. Greycroft Partners, L.P., 128 A.D.3d 459, 459 (1st Dept. 2015). Although petitioner sought additional forms of relief under other statutes, it did not identify any statutory provision authorizing the recovery of attorney’s fees in connection with those remedies. The motion court further emphasized that, absent a contractual or statutory basis, it did not possess inherent authority to award attorney’s fees simply because a party prevailed or incurred expenses. On that basis, petitioner’s application for attorney’s fees was denied in its entirety. [8] A charging order under LLC Law § 607 is a court-ordered lien placed on a debtor-member’s interest in an LLC, requiring the company to pay any distributions – profits or income – directly to the creditor instead of the member until the judgment is satisfied. It is a remedy for creditors to satisfy personal debts from a member’s LLC interest. [9] Slip Op. at *3, citing 79 Madison LLC v. Ebrahimzadeh, 203 A.D.3d 589, 589 (1st Dept. 2022); Sirotkin v. Jordan, LLC, 141 A.D.3d 670, 672 (2d Dept. 2016). [10] Id., citing TBC Funding LLC v. Kenwood Commons, LLC, 2026 N.Y. Slip Op. 26027, at *4 (Sup. Ct., Albany County 2026) (discussing the choice between a turnover order and a charging order). [11] Id. at *4. [12] Id. [13] Id., citing Itria Ventures LLC v. Beaver Street Pizza LLC, 194 A.D.3d 447, 447 (1st Dept. 2021) (internal quotation marks omitted). [14] Id. [15] Id. [16] Id., Hotez 71 Mezz Lender LLC v. Falor, 14 N.Y.3d 303, 418 (2010) (noting that a factor pointing toward granting the plaintiff’s request for the appointment of a receiver is that “plaintiff seeks receivership over defendants’ ownership/ membership interests, not the day-to-day operation of a foreign corporation”). [17] Id. [18] Id. [19] Id. [20] Id.

By: Jeffrey M. Haber Affinity fraud is a form of financial fraud that relies on social connections and trust. It most often occurs within identifiable groups, such as religious congregations, cultural or ethnic communities, professional networks, or social organizations, where members share common values, experiences, or identities. Rather than approaching targets as strangers, those promoting the scheme position themselves as insiders, using familiarity and perceived credibility to create comfort and reduce skepticism. In many cases, affinity fraud begins with what appears to be a legitimate opportunity. The investment or business venture is typically described as low‑risk and reliable, sometimes with returns that appear to be guaranteed. Details may be presented in broad or technical terms that discourage deeper questioning, and potential participants are often reassured that others within the community have already taken part. Because the offer is communicated through trusted channels, such as friends, colleagues, or respected community figures, individuals may rely more on personal trust than independent verification. As participation grows, the scheme often spreads through informal referrals rather than public advertising. Some affinity frauds are later revealed to be Ponzi or pyramid schemes, where returns paid to earlier participants are funded by money from newer ones rather than genuine profits. These structures can persist for extended periods, particularly when community members are reluctant to question or report someone they know personally. In some cases, individuals who promote the opportunity are unaware that they are participating in a fraudulent scheme themselves. The effects of affinity fraud extend beyond financial loss. Because the deception operates within trusted social networks, its discovery can strain relationships and create lasting tension within a community. Individuals may feel embarrassed, conflicted, or hesitant to speak openly about their experience. This dynamic can delay detection and complicate efforts to address the situation once concerns arise. Securities and Exchange Commission v. Robert L. Murray, Jr. On May 4, 2026, the United States District Court for the Northern District of Illinois entered a final judgment as to Robert L. Murray, Jr., a former U.S. Navy chief petty officer, in connection with the SEC’s enforcement action against Murray for allegedly engaging in a fraudulent investment scheme that used Facebook to target U.S. Navy active duty service members, veterans, and reservists.[1] According to the SEC’s complaint, defendant, a retired U.S. Navy Chief, operated an unregistered investment fund and investment advisory business through an entity known as Deep Dive Strategies, LLC (“DDS” or the “Fund”), and raised investor capital through material misrepresentations and omissions. According to the SEC, from approximately September 2020 through January 2022, defendant solicited investments in DDS from individuals throughout the United States, many of whom were active‑duty servicemembers, veterans, or otherwise affiliated with the U.S. Navy. The SEC alleged that defendant used his military background and social media presence within Navy‑affiliated investing communities to establish credibility and attract investors. In total, defendant allegedly raised approximately $354,800 from about 44 investors located in at least 14 states, including investors serving overseas. DDS was organized as a limited liability company in Ohio in September 2020. Defendant was the Fund’s sole managing member, controlled its bank and brokerage accounts, and made all investment decisions. Investors purchased membership interests in the Fund at $5,000 per unit. The SEC said that defendant provided some investors with an operating agreement and disclosure statement, which represented that DDS would pool investor funds and trade in publicly traded securities for the benefit of its members. The offering materials further disclosed that defendant would receive a two percent annual administrative fee and a twenty percent share of trading profits, but would not earn profits in years when the Fund incurred losses. The SEC alleged that both written and oral representations to investors stated that their funds would be used exclusively for securities trading and payment of disclosed Fund expenses. Investors were allegedly told that at the end of the 2021 calendar year, after a one‑year investment period, they could request redemption of their investment, net of profits or losses, and that redemption requests would be honored within fifteen days. According to the SEC, investors exercised no control over investment decisions, which were made solely by defendant, and defendant acted as an investment adviser to the Fund. The SEC alleged that defendant’s representations concerning the use of investor funds were false and misleading. While some Fund assets were initially used to trade securities, defendant allegedly began misappropriating investor funds almost immediately after receiving them. The SEC claimed that defendant transferred substantial amounts of Fund money to his personal bank accounts, withdrew large sums in cash, and used investor funds to pay personal expenses unrelated to Fund operations. The SEC further alleged that defendant’s securities trading activity on behalf of DDS was brief and unsuccessful. According to the complaint, DDS suffered substantial trading losses in January 2021, including losses associated with highly speculative options trading. By late January 2021, nearly all trading capital had been lost, said the SEC. Defendant allegedly made no further trades after January 23, 2021, and withdrew the remaining balance from the Fund’s brokerage account in early February 2021. Despite the cessation of trading activities, the SEC alleged that defendant continued to solicit and accept investor funds through February 2021. These additional funds were not deposited into the brokerage account or used for securities trading but instead were allegedly misappropriated. In total, the SEC claimed that defendant misappropriated approximately $148,000 of investor funds, representing nearly 42 percent of the capital raised, after accounting for permitted administrative fees. The SEC also alleged that defendant failed to provide investors with meaningful accounting information and gradually reduced communication with them beginning in March 2021. When some investors sought redemptions in accordance with the offering materials, defendant allegedly failed to return any funds. Although defendant reportedly told investors in August 2021 that he intended to wind down the Fund and return remaining assets, no such distributions were made. The SEC alleged that defendant never filed a registration statement with respect to the offer and sale of securities in DDS and did not qualify for an exemption from registration. The SEC further alleged that defendant used interstate commerce and the mails to conduct the offering through social media platforms, electronic communications, and bank transfers. Based on the foregoing allegations, the SEC asserted claims for violations of the antifraud provisions of the Securities Act of 1933 (“Securities Act”) and the Securities Exchange Act of 1934 (“Exchange Act”), including Section 10(b) and Rule 10b‑5, as well as violations of Sections 17(a)(1), (2), and (3) of the Securities Act. The SEC also alleged violations of the registration provisions of Sections 5(a) and 5(c) of the Securities Act. In addition, the SEC asserted claims under Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940 (“Investment Advisors Act”), alleging that defendant engaged in fraudulent and deceptive conduct while acting as an investment adviser to a pooled investment vehicle. The final judgment permanently enjoins defendant from violating Sections 5(a), 5(c), and 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act, and orders him to pay disgorgement in the amount of $112,271.71, which is to be deemed satisfied by the order of restitution entered against him in United States v. Murray, No. 22-cr-643 (N.D. Ill.), a parallel criminal matter. Takeaway The SEC’s enforcement action demonstrates how investment fraud can operate within trusted communities. The case shows that affinity fraud is defined not by the investment product, but by how shared identity and trust are used to attract and retain investors. Defendant, a retired U.S. Navy Chief, marketed an unregistered investment fund primarily to Navy servicemembers, veterans, and reservists through military‑focused social media groups. By emphasizing his military background and insider status, he leveraged the trust associated with shared service and rank. That reliance on military identity as a credibility tool is a central characteristic of affinity fraud. The investment was presented as legitimate and structured, complete with offering documents, stated fees, and redemption rights. Investors were told their money would be pooled and used solely for securities trading. In reality, trading activity was brief, highly speculative, and unsuccessful, and a substantial portion of investor funds was diverted to personal use. Promised transparency and redemptions never materialized, and communication with investors diminished as losses mounted. The enforcement action and judgment highlights how affinity fraud often overlaps with traditional securities violations. The conduct alleged included unregistered securities offerings, adviser fraud, material misrepresentations, and misappropriation of funds. Affinity fraud did not replace these violations; it amplified their impact by increasing investor reliance on trust rather than verification. The judgment, which imposed permanent injunctions and disgorgement, reinforces several lessons: shared background is not a substitute for due diligence; centralized control without oversight increases risk; lack of transparency and missed redemptions are serious red flags; and registration status matters. __________________________________ Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes only and is not intended to be, and should not be, taken as legal advice. Unless otherwise stated, Freiberger Haber LLP’s articles are based on recently decided published opinions or litigation releases and not on matters handled by the firm. ___________________________________ [1] The SEC’s litigation release announcing the entry of judgment was disseminated on May 5, 2026.