First Department Grants Extension of Time to Serve Summons and Complaint on a Mechanic’s Lien Discharge Bond Surety Under CPLR 306
Print Article- Posted on: Jan 12 2024
Today’s Blog relates to extensions of time to serve a defendant under CPLR 306-b, a topic previously addressed by this Blog [HERE], [HERE] and [HERE]. The background discussion in today’s Blog was taken from the linked prior Blogs.
Under the present “commencement by filing” system, an action (or proceeding) (collectively, an “Action”) is commenced by filing (CPLR 304(a)) the initiatory paper(s) with the “clerk of the court in the county in which the [A]ction … is brought or any other person designated by the clerk of the court for that purpose (CPLR 304(c)). Once an Action is commenced, the plaintiff (or petitioner) (collectively, a “Plaintiff”) must effectuate service of process pursuant to the parameters of CPLR 306-b, which provides:
Service of the summons and complaint, summons with notice, third-party summons and complaint, or petition with a notice of petition or order to show cause shall be made within one hundred twenty days after the commencement of the [A]ction, provided that in an [A]ction …. If service is not made upon a defendant within the time provided in this section, the court, upon motion, shall dismiss the action without prejudice as to that defendant, or upon good cause shown or in the interest of justice, extend the time for service.
Among other things, CPLR 306-b provides that, in general, service of process on a defendant (or respondent) (collectively, a “Defendant”) must be effectuated within 120 days of the commencement of an Action. The Court of Appeals in Leader v. Maroney, Ponzini & Spencer, 97 N.Y.2d 95 (2001), explained the history of CPLR 306-b. According to Leader, “[a]s originally enacted in 1992, CPLR 306-b transformed New York from a commencement-by-service to a commencement-by-filing jurisdiction.” Leader, 97 N.Y.2d at 100 (citation omitted). Plaintiffs were “considerabl[y] benefit[ed]” by “making the act of filing the point at which a claim is interposed for Statute of Limitations purposes.” Leader, 97 N.Y.2d at 100 (citation omitted). Under the old statute, a Plaintiff was afforded 120 days to effectuate service of process and the Action would be “deemed dismissed” if service was not timely made. Leader, 97 N.Y.2d at 100 (citation omitted). “The plaintiff was free to commence a new [A]ction and serve process within a second 120-day period from the date of the automatic dismissal, even if the Statute of Limitations had expired.” Leader, 97 N.Y.2d at 100 (citation omitted). For a variety of reasons, the “deemed dismissed” provisions of the old statute were considered “unnecessarily harsh” and were amended to provide that if service of process is not made within the 120-day period after the commencement of the Action, an unserved Defendant can move for the dismissal, without prejudice, or the court could extend Plaintiff’s time to serve a Defendant “upon good cause shown or in the interest of justice.” Leader, 97 N.Y.2d at 101 (citing CPLR 306-b).
The Leader Court, in a trio of cases, was called upon to determine the circumstances under which a Plaintiff would be permitted to avail itself of the extension provisions of CPLR 306-b. Importantly, the Leader Court made clear that, under CPLR 306-b, “good cause” and “the interest of justice” are “two separate standards by which to measure an application for an extension of time to serve” a Defendant if service is not made within 120 days of the commencement of an Action. See also State of New York Mortgage Agency v. Braun, 182 A.D.3d 63, 66 (2nd Dep’t 2020). “Good cause” and “the interest of justice” standards are discussed [HERE].
“Good cause” is established by demonstrating “reasonable diligence in attempting service.” Wells Fargo Bank, NA v. Barrella, 166 A.D.3d 711, 713 (2nd Dep’t 2018) (citation and internal quotation marks omitted). Absent “good cause” the court must consider the “interest of justice” standard, which requires a careful judicial analysis of the factual settings of the case and a balancing of the competing interests presented by the parties. Id. (citation and internal quotation marks omitted). Under the “interest of justice” standard, as opposed to “good cause”, “diligent efforts at service” need not be established “as a threshold matter”; although it may be considered “along with any other relevant factor.” Id. (citation and internal quotation marks omitted). Other relevant factors may include the “expiration of the statute of limitations, the potentially meritorious nature of the cause of action, the length of delay in service, the promptness of a plaintiff’s request for the extension of time, and prejudice to defendant.” Id. (citation internal quotation marks and brackets omitted). Relying on Leader, the Barrella Court reiterated that “[w]here the plaintiff’s delay in serving a defendant is protracted, and the defendant has no notice of the action for a protracted period of time, an inference of substantial prejudice arises. Id. at 714 (citations omitted).
On January 11, 2024, the Appellate Division, First Department, decided 1400 Ardel Const’n & Design Group, Inc. v. VBG 990 AOA, LLC, a case addressing the “interest of justice” standard. [EDS Note: some of the background facts set forth herein were found on documents filed on the court’s NYSCEF system.] Plaintiff in Ardel was a construction contractor and defendant VBG is the owner of property that Ardel, pursuant to a contract, was to redevelop and renovate. Ardel claimed that VBG breached the agreement (including failure to pay for some of Ardel’s work). Ardel filed a mechanics’ lien, which was ultimately discharged by a “Discharge of Mechanic’s Lien Bond” issued by defendant Atlantic Specialty Insurance. [EDS. Note: this BLOG addressed mechanic’s lien discharge bonds [HERE].] Ardel commenced action against VBG for, inter alia, breach of contract and against Atlantic to foreclose its lien on the bond.
Ardel did not effectuate service of process on Atlantic and VBG moved to dismiss the complaint. After the motion to dismiss was decided, Ardel moved for an extension of time to serve Atlantic pursuant to, inter alia, CPLR 306-b. The motion court denied the motion and plaintiff appealed. The First Department reversed and stated:
Plaintiff’s motion for an extension of time to serve Atlantic with the summons and complaint should have been granted because plaintiff established the existence of several relevant factors weighing in favor of the extension. The eight-month delay in service that would have resulted from the grant of the extension was not so protracted to allow for an inference that Atlantic suffered prejudice from the delay. Moreover, although there is no record evidence that Atlantic was given actual or constructive notice of the claim, plaintiff aptly notes that any claim of prejudice is undercut by the fact that Atlantic, who posted a bond for the release of the mechanic’s lien, knew there was a high likelihood of litigation involving it as defendant VBG’s surety and had ample opportunity to investigate the claim. The record further establishes the potential merits of the lien foreclosure claim, and because the statute of limitations has expired, the denial of the extension would bar plaintiff from litigating the otherwise timely filed claim against Atlantic. [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.
