If At First You Don’t Succeed, Try, Try Again, Particularly If CPLR 306-b is Involved
Print Article- Posted on: Dec 6 2024
Today’s BLOG article concerns CPLR 306-b.[1] As previously explained in prior articles, actions or proceedings (collectively, “Actions”) are commenced by filing the initiatory papers with the appropriate county clerk. CPLR 304(a).[2] Once the Action is commenced, the plaintiff is required to serve the initiatory papers on the defendant, and generally such service must occur within 120 days after the Action is commenced. CPLR 306-b. “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.” Id. 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. Leader, 97 N.Y.2d at 104. In this regard, the Leader Court recognized that because “good cause” and “the interest of justice” are “stated separately, joined by the word ‘or’ [t]hey cannot be defined by the same criteria; otherwise, one would have been sufficient.” Id. (citation omitted).
“To establish good cause, a plaintiff must demonstrate reasonable diligence in attempting service.” Bumpus v. New York City Tr. Auth., 66 A.D.3d 26, 31 (2nd Dep’t 2009) (citing Leader); see also Wilmington Savings Fund Society, FSB v. James, 174 A.D.3d 835, 837 (2nd Dep’t 2019)). “Good cause will not exist where a plaintiff fails to make any effort at service or fails to make at least a reasonably diligent effort at service.” Bumpus, 66 A.D.3d at 31 (citations omitted). Where “good cause” is not established, “courts must consider the ‘interest of justice’ standard of CPLR 306-b.” Bumpus, 66 A.D.3d at 32 (citations omitted); see also Wilmington, 174 A.D.3d at 837.
Under the “interest of justice” standard, a court must analyze “the factual setting of the case and a balancing of the competing interests presented by the parties.” Gjurashaj v. ABM Industry Groups, LLC, 213 A.D.3d 479, 480 (1st Dep’t 2023) (citing Leader, internal quotation marks omitted); see also Wells Fargo Bank v. Barrella, 166 A.D.3d 711, 713 (2nd Dep’t 2018). In addition, while no single factor “is determinative,” courts may consider factors such as “diligence, or lack thereof, along with any other relevant factor in making its determination, including expiration of the statute of limitations, the meritorious nature of the cause of action, the length of delay in service, the promptness of a plaintiff’s request for the extension of time, and prejudice to defendant.” Id.
The Appellate Division, Second Department, addressed CPLR 306-b on November 27, 2024, in HSBC Bank USA, N.A. v. Labin, a residential mortgage foreclosure action in which the Court reversed the grant of a lender’s motion to extend the time to serve process on the borrower pursuant to CPLR 306-b because the lender failed to demonstrate that its service efforts were reasonably diligent or that the motion should be granted in “the interest of justice.”
The lender in Labin commenced its foreclosure action in 2013 and claimed to have served the borrower at the mortgaged premises and “at an adjacent premises.” Almost six years later, the lender moved for a default judgment after the borrower failed to appear in the action. One month later, the borrower moved to dismiss the complaint for lack of personal jurisdiction pursuant to CPLR 3211(a)(8). Before deciding either motion, the motion court referred the issue of proper service of process to a special referee to “hear and report.” In August 2019, the referee “issued a report finding that the plaintiff had failed to properly effectuate service.” The following month, the lender moved pursuant to CPLR 306-b to extend the time to serve the borrower. In August of 2022, the motion court denied the borrower’s motion to dismiss and granted the lender’s motion to extend pursuant to CPLR 306-b. On the borrower’s appeal, the Second Department reversed.
First, the Court found that “good cause” was lacking because the lender did not “demonstrate reasonable diligence in attempting to effect service” and, therefore, it was not entitled to an extension for good cause.” (Citations and internal quotation marks omitted.) In this regard, the Court stated:
By the time the [lender] moved for an extension of time, the Supreme Court had already determined that the [borrower] presented sufficient evidence to warrant a hearing on the validity of service of process, and the special referee had already found that service was improper. The [lender] also failed to show that it had made any efforts to locate the [borrower] and confirm her place of residence, such as by submitting evidence of records searches. Since the [lender] did not demonstrate that its failure to properly effectuate service within the 120-day period following the commencement of this action was due to circumstances beyond its control, it was not entitled to an extension for good cause. (Citations, internal quotation marks, ellipses, and brackets omitted.)
Nor did the lender convince the Court that the extension should be granted under the “broader” interest of justice standard, which is “more flexible [and] accommodates late service that might be due to mistake, confusion, or oversight, so long as there is no prejudice to the defendant.” (Citation and internal quotation marks omitted.) When utilizing the “interest of justice” standard, “the court must carefully analyze the factual setting of the case and a balancing of the competing interests presented by the parties.” (Citation omitted.) In determining that the “interests of justice” would not be furthered by granting the lender’s motion, the Court stated:
Here, the [lender] was on notice in December 2018 that service upon the defendant allegedly was defective when the [borrower] moved to dismiss the complaint for lack of personal jurisdiction. The [lender] nonetheless waited nearly 10 months thereafter to move for an extension of time to serve the [borrower]. Moreover, the [lender]’s motion was made more than two months after the hearing before the special referee concluded, even though the evidence at the hearing demonstrated that the [borrower] had been residing in Canada for decades. Although the statute of limitations had already expired by the time the [lender] moved for an extension of time, the [lender] failed to demonstrate that it diligently prosecuted this action. Moreover, the [lender] submitted no evidence that the [borrower] had actual notice of the action against her within the 120-day service period. Further, the [lender] failed to rebut the inference of substantial prejudice to the [borrower] that arose from the protracted delay in obtaining such notice. (Citations, internal quotation marks, ellipses, and brackets omitted.)
Thus, the Court determined that the motion court acted “improvidently” in granting the lender’s CPLR 306-b motion. Further, to the extent that the borrower was not properly served with process and the lender did not establish entitlement to an extension under CPLR 306-b, the borrower’s motion to dismiss the complaint for lack of personal jurisdiction pursuant to CPLR 3211(a)(8) should have been granted.
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.
[1] This BLOG has previously addressed CPLR 306-b. See, e.g., [here], [here], [here], [here] and [here]. The history and import of CPLR 306-b, as discussed in prior BLOGS, is explained by the Court of Appeals in Leader v. Maroney, Ponzini & Spencer, 97 N.Y.2d 95, 101 (2001).
[2] This BLOG has previously addressed CPLR 304. See, e.g., [here] and [here].
