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By: Jonathan H. Freiberger In today’s BLOG we will discuss Tri-Rail Designers & Builders, Inc. v. Concrete Superstructures, Inc. , a case decided on November 12, 2025, by the Appellate Division, Second Department. In Tri-Rail , the Court decided a “question which has not been directly addressed” in the Second Department involving the impact of non-compliance with the Servicemembers Civil Relief Act (f/k/a the Soldiers’ and Sailors’ Civil Relief Act) (the “Act”) on obtaining a default judgment. The plaintiff in Tri-Rail  was a general contractor hired for a construction project that entered into a written contract with a concrete subcontractor. The subcontractor did not complete the project and was sued, along with its president, by the general contractor. The defendants failed to appear, and the general contractor moved for, and was granted, a default judgment. The following year, the defendants moved, pursuant to CPLR 5015(a) , to vacate the default judgment based on the general contractor’s admitted failure to support its motion with a non-military affidavit as to the subcontractor’s president. The subcontractor argued that the general contractor’s omission warranted the requested vacatur. The subcontractor’s president was personally served with process and never claimed to be in the active military. The defendants appealed from the motion court’s denial of the motion. The Second Department affirmed. The Court recognized that to succeed on a motion for leave to enter a default judgment, the plaintiff must demonstrate: “(1) service of process upon the defendant, (2) the failure of the defendant to appear or answer the complaint, and (3) the merits of the plaintiff’s cause of action.” In addition, “a motion for leave to enter a default judgment must be supported by what has been colloquially termed a “non-military affidavit,” which “is derived from federal law” not the CPLR. The Court noted that “the purpose of the Soldiers’ and Sailors’ Civil Relief Act is to prevent default judgments from being entered against members of the armed services in circumstances where they might be unable to appear and defend themselves.” (Citations, internal quotation marks and brackets omitted.) As stated by the Court, non-military affidavits must be based on an investigation and supported by specific facts. Further, the investigation must be conducted after the default, and not simply after the commencement of the action. [1]   In framing the relevant issue on appeal and in articulating its holding, the Court stated: It is clear that a non-military affidavit is counted amongst the proof required for a movant to meet its burden on a motion for leave to enter a default judgment. A movant's failure to provide a non-military affidavit is sufficient to warrant denial of such a motion in the first instance. However, the instant appeal presents a more nuanced question: where a default judgment was improperly entered in the absence of a non-military affidavit, is a defendant entitled to vacatur of the default judgment as of right? We hold that the failure to provide a non-military affidavit does not automatically warrant vacatur of an otherwise validly entered default judgment. [Citations omitted.] In reaching its conclusion, the Court analyzed the statutory text of the Act, which limits the ability to vacate default judgments to applications “made ‘by or on behalf of the servicemember.’” Accordingly, the remedies afforded by the Act are not available to everyone. Thus, the Court held that “a movant's failure to provide a non-military affidavit does not entitle a defendant to vacatur of an otherwise validly entered default judgment as of right. Where, as here, the defaulting party has made no assertion of being on active military duty at the time of his or her default, he or she falls outside of the protection afforded by the Act.” The Court explained that: where, as here, a default judgment was improperly entered, in order to be afforded the protection of the Act, a defendant seeking vacatur must establish as part of their initial burden that this remedy is sought "by or on behalf of the servicemember." To hold otherwise and to grant any defendant the right to challenge a default judgment would permit civilians to take advantage of those protections that were specifically afforded to our servicemembers and would belie the purpose of the Act. What was intended by the legislature as a shield should not be used permissively as a sword. The Court stressed that its holding does not alter a plaintiff’s burden on an application for leave to enter a default judgment. Such a movant is still required to provide a non-military affidavit and the failure to provide one warrants denial of the application. According to the Court, the issue decided was never addressed previously in the Second Department but is consistent with decisions from other New York courts. Simply stated, because the president never purported to be in the active military, the defendants failed to establish that he “is entitled to the protections of the Act and, therefore, the general contractor’s failure to “support its motion with a non-military affidavit was a mere irregularity and does not warrant vacatur of the defendants' default…." 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] Typically, inquiries are made to the Department of Defense Manpower Data Center , which provides a statement indicating whether an individual is on active military service.

By:  Jeffrey M. Haber In Sire Spirits, LLC v. Beam Suntory, Inc. , 2025 N.Y. Slip Op. 06297 (1st Dept. Nov. 18, 2025), the Appellate Division, First Department affirmed the denial of a motion to amend a complaint seeking damages for “diminution of enterprise value” due to the alleged fraud. Under CPLR 3025(b), leave to amend is freely given unless the amendment is prejudicial or patently meritless. However, New York’s fraud damages rule limits recovery to out-of-pocket losses—the actual pecuniary loss caused by the fraud—not speculative gains or lost profits. As discussed below, Sire’s proposed amendment effectively sought unrealized profits by reframing them as diminished business value, violating the out-of-pocket damages rule. The Court held that such damages were legally insufficient and barred as a matter of law, emphasizing that fraud claims cannot include potential earnings or enterprise valuation. Applicable Rules of The Road Amended Pleadings CPLR 3025(b)  provides, in pertinent part, that “[a] party may amend his [or her] pleading … at any time by leave of court or by stipulation of all parties.” [1]  Importantly, CPLR 3025(b) provides that “[l]eave [to amend] shall be freely given.…” Thus, “unless the proposed amendment would unfairly prejudice or surprise the opposing party, or is palpably insufficient or patently devoid of merit,” the motion for leave to amend should be granted. [2]   Prejudice may be found where “the nonmoving party has been hindered in the preparation of its case or has been prevented from taking some measure in support of its position.” [3]  “Prejudice is more than the mere exposure of the party to greater liability” as “there must be some indication that the party has been hindered in the preparation of the party’s case or has been prevented from taking some measure in support of its position.” [4]  The burden of demonstrating prejudice or surprise “falls upon the party opposing the motion.” [5]  Conclusory statements of prejudice cannot defeat a motion to amend a pleading. [6]   An amendment will not cause surprise when the causes of action alleged in the amended pleading are based on the facts and circumstances already pleaded or already known by the non-moving party. [7]  For this reason, new theories of liability pertaining to the facts and circumstances already in controversy will not bar a motion to amend. [8]   Delay in-and-of-itself is not enough to defeat a motion for leave to amend. For this reason, “[m]ere lateness is not a barrier” to amendment, absent prejudice. [9]  “It must be lateness coupled with significant prejudice to the other side, the very elements of the laches doctrine.” [10]  As the Court of Appeals recognized, “absent prejudice, courts are free to permit amendment even after trial.” [11]  Thus, where a case has not proceeded to meaningful discovery, the amendment of a pleading will not prejudice a defendant. [12]  Moreover, the mere passage of time, without “consequential” prejudice, separate and apart from the delay, is insufficient to defeat a motion for leave to amend. [13]  Even unexcused lateness, without prejudice, will not bar amendment. [14]   “The determination whether to grant leave to amend a pleading is within the court’s discretion, and the exercise of that discretion will not lightly be disturbed.” [15]  Thus, “[a] party opposing leave to amend ‘must overcome a heavy presumption of validity in favor of [permitting amendment].’” [16]   Fraud Damages To allege a cause of action based on fraud, plaintiffs must assert “a misrepresentation or a material omission of fact which was false and known to be false by defendant, made for the purpose of inducing the other party to rely upon it, justifiable reliance of the other party on the misrepresentation or material omission, and injury. [17]  To withstand a motion to dismiss, plaintiffs must satisfy each element of the claim. Generally, plaintiffs are allowed to recover only their out-of-pocket damages – that is, the actual pecuniary loss sustained as the direct result of the alleged fraud. [18]  Under the out-of-pocket damages rule, plaintiffs may recover what they lost because of the fraud, not what they might have gained had there been no fraud. [19]  In other words, plaintiffs cannot recover the profits that would have been realized in the absence of the fraud. For that reason, plaintiffs cannot recover damages for fraud based on the loss of a contractual bargain, “the extent, and, indeed the very existence of which is completely undeterminable and speculative.” [20] To determine whether the plaintiff sustained out-of-pocket losses, courts employ a two-part test. [21]  First, the plaintiff must show the actual value of the consideration it received. [22]  Second, the plaintiff must prove that the defendant’s fraudulent inducement directly caused the plaintiff to agree to deliver consideration that was greater than the value of the received consideration. [23]  The difference between the value of the received consideration and the delivered consideration constitutes the plaintiff’s out-of-pocket damages. [24] Sire Spirits, LLC v. Beam Suntory, Inc. [Eds. Note: The factual background comes from the briefing on appeal.] Sire brought the action in 2023, against defendants for, among other claims, fraud. Initially, Sire sought “all monetary losses” due to the fraud, punitive damages, attorneys’ fees, and costs. The motion court dismissed the requests for punitive damages, attorneys’ fees, and costs with prejudice. The First Department affirmed. [25] As fact discovery was approaching its conclusion, Sire informed defendants, through an expert witness disclosure, that it intended to seek damages for “[l]loss of sales and profits and disruption of business growth.” In response, Defendants Beam Suntory Inc. and Jim Beam Brands Co. (collectively, “Beam”) sought leave to file an early summary judgment motion, explaining that damages based on lost profits, lost opportunities, and the like were not permitted under New York’s “out-of-pocket” damages rule. Looking to avoid unnecessary motion practice, the motion court urged the parties to stipulate that with respect to the fraud claims, Sire was limited to out-of-pocket damages. Thereafter, Sire stipulated that “lost profits” and “lost business opportunities” damages were not available on its fraud claims. Sire moved to amend its complaint. Sire proposed adding two paragraphs to its complaint, alleging that the fraud “fundamentally disrupted” Sire’s business and caused Sire’s business’s value “to be diminished” by “millions of dollars.” Sire also sought to add a request for damages based on the “diminution” of its “enterprise value.” Beam opposed the motion, arguing that damages based on estimates of what revenues Sire might have earned but for the fraud violated New York law – e.g. , damages that plaintiffs alleging fraud cannot recover under the out-of-pocket rule. [26]   The motion court denied the motion, holding, in part: plaintiffs attempt to repackage barred lost profits damages by relabeling it “diminution of value” does not pass muster. Whatever plaintiff calls these damages, they are still based on the potential value the company could have realized absent the defendants’ alleged misconduct. As the court has previously held in this matter, fraud claims are limited to recovery of the actual pecuniary loss. One cannot recover for potential lost earnings on a fraud theory. [27] Sire appealed. The First Department unanimously affirmed. The Court held that “Plaintiffs’ proposed amendment to the prayer for relief in its pleading, which sought recovery based on profits not realized as a result of the alleged fraud, violated the out-of-pocket damages rule.” [28]  The Court explained that “Plaintiffs fail[ed] to explain how expert discovery would have availed them, because the [motion] court ruled as a matter of law based on plaintiffs’ own characterization of their damages.” [29]  “Accordingly,” said the Court, “the proposed amendment was palpably insufficient, and the [motion] court properly denied it.” [30] Takeaway Sire  serves as a reminder to practitioners and litigants that leave to amend may be freely given but within reason. Under CPLR 3025(b), courts generally grant leave to amend pleadings unless the amendment causes unfair prejudice or is palpably insufficient or patently devoid of merit. In Sire , the Court determined that the proposed amendment was patently devoid of merit because Sire could not recover “diminution in value” damages under the out-of-pocket damages rule. _______________________________________ 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] This Blog examined motions to amend under CPLR 3025(b) on numerous occasions, including: Amended Pleadings Under CPLR 3025(b) ; The Court of Appeals Makes a Ruling on “the Proper Scope of the Trial Court’s Discretion to Grant Leave to Amend a Complaint Under CPLR 3025(b)” ; and Defendant Barred From Adding a Counterclaim for Fraud Because the Claim Was Deemed Patently Devoid of Merit . [2] Cirillo v. Lang , 206 A.D.3d 611, 612 (2d Dept. 2022) (citations omitted). See also Greene v. Esplanade Venture P’ship , 36 N.Y.3d 513, 526 (2021); Matter of Chustckie , 203 A.D.3d 820, 822 (2d Dept. 2022); Toiny, LLC v. Rahim , 214 A.D.3d 1023, 1024 (2d Dept. 2023) (citations omitted). [3] Cirillo , 206 A.D.3d at 612 (citation, internal quotation marks, and brackets omitted). [4] Kimso Apartments, LLC v. Gandhi , 24 N.Y.3d 403, 411 (2014) (citations, internal quotation marks and brackets omitted). [5] Toiny , 214 A.D.3d at 1024 (citation and internal quotation marks omitted); see also   Kimso , 24 N.Y.3d at 411 (citations). [6] See Petion v. New York City Health & Hosps. Corp. , 175 A.D.3d 519, 520 (2d Dept. 2019). [7] See , e.g. , Bamira v. Greenberg , 256 A.D.2d 237, 239 (1st Dept. 1998). [8] See , e.g. , Harding v. Filancia , 144 A.D.2d 538, 540 (2d Dept. 1988); Matter of Smith , 104 A.D.2d 445, 448 (2d Dept. 1984). [9] Edenwald Contr. Co. v. City of New York , 60 N.Y.2d 957, 959 (1983); see also Granieri v. Ryder Truck Rental, Inc. , 112 A.D.2d 189, 190 (2d Dept. 1985); Matter of Chustckie , 203 A.D.3d at 822. [10] Shields v. Darpoh , 207 A.D.3d 586, 587 (2d Dept. 2022) (internal quotation marks and citations omitted). [11] Kimso , 24 N.Y.3d at 411 (citations omitted). [12] Janssen v. Inc. Vill. of Rockville Ctr. , 59 A.D.3d 15, 24 (2d Dept. 2008); see also Seda v. New York City Housing Auth. , 181 A.D.2d 469, 470 (1st Dept. 1992); 558 Seventh Ave Corp. v. Times Sq. Photo, Inc. , No. 653090/2020, 2023 WL 360630, at *1 (Sup. Ct., N.Y. County Jan. 18, 2023). [13] Granieri , 112 A.D.2d at 190. [14] See   Holchendler v. We Transp., Inc. , 292 A.D.2d 568, 569 (2d Dept. 2002); Hilltop Nyack Corp. v. TRMI Holdings Inc. , 275 A.D.2d 440, 441 (2d Dept. 2000). [15] AFBT-II, LLC v. Country Vill. on Mooney Pond, Inc. , 21 A.D.3d 972, 972 (2d Dept. 2005) (citations omitted). [16] McGhee v. Odell , 96 A.D.3d 449, 450 (1st Dept. 2012) (quoting Otis Elevator Co. v. 1166 Ave. of Americas Condo. , 166 A.D.2d 307, 307 (1st Dept. 1990)). [17] Lama Holding Co. v. Smith Barney , 88 N.Y.2d 413, 421 (1996) (citations omitted). [18] This Blog wrote about the out-of-pocket rule on numerous occasions, including: Out-of-pocket Fraud Damages: Proof Required to Determine the Value of Restricted Securities ; Out-Of-Pocket Damages, Intent to Deceive and The Business Judgment Rule ; First Department Affirms Dismissal of Fraud Claim Because Damages Alleged Were Speculative ; and Damages in a Holder Claim Found to Be Too Speculative For Recovery . [19] Connaughton v. Chipotle Mexican Grill, Inc. , 29 N.Y.3d 137, 142-43 (2017) (quoting, Lama, supra ) (internal quotations omitted)). [20] Id . [21] Kumiva Grp., LLC v. Garda USA Inc. , 146 A.D.3d 504, 506 (1st Dept. 2017). [22] Id . [23] Id. [24] Id. [25] Sire Spirits, LLC v. Beam Suntory, Inc. , 227 A.D.3d 630, 632 (1st Dept. 2024). [26] Sapienza v. Becker & Poliakoff , 173 A.D.3d 640 (1st Dept. 2019) (quotation marks and brackets omitted). [27] Connaughton , 29 N.Y.3d at 142-43; see also Rondeau v. Houston , 224 A.D.3d 616, 617 (1st Dept. 2024). [28] Slip Op. at *1. [29] Id. [30] Id.

By: Jonathan H. Freiberger On October 31, 2025, the Supreme Court, Kings County, decided loanDepot.com LLC v. Ortner , a case addressing the meaning of the “taking proceedings” requirement of CPLR 3215(c) . [1]  By way of brief background, when a defendant defaults in appearing in an action, [2]  CPLR 3215(c) requires that the plaintiff act promptly to secure a default judgment. As previously discussed in prior BLOG articles, CPLR 3215(c) 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 held that the language of CPLR 3215(c) is mandatory in the first instance unless plaintiff demonstrates “sufficient cause” for the failure to timely “take proceedings for the entry of [a default] judgment]”. See, e.g., US Bank v. Onuoha , 162 A.D.3d 1094, 1095 (2 nd  Dep’t 2018); Wells Fargo Bank v. Cafasso , 158 A.D.3d 848, 849 (2 nd Dep’t 2018). A default judgment need not be obtained within one year, as long as proceedings to obtain a default judgment have been initiated. See   Bank of America v. Lucido , 163 A.D.3d 614, 615 (2 nd  Dep’t 2018); see also Bank of America, N.A. v. Bhola , 219 A.D.3d 430, 432 (2 nd  Dep’t 2023); Mort. Electronic Registration Systems, Inc. v. McVicar , 203 A.D.3d 915, 916 – 17 (2 nd Dep’t 2022). Numerous cases have addressed the issue of the meaning of “taking proceedings” and this BLOG has addressed this issue in “ ‘Initiating Proceedings’ Under CPLR 3215(c) Revisited” and “Second Department Finds that Requesting Foreclosure Settlement Conference Satisfies Requirement for ‘Taking Proceedings’ Under CPLR 3215(c)”. In the latter article, we discussed the Second Department’s decision in U.S. Bank N.A. v. Jerriho-Cadogan , 224 A.D.3d 788 (2 nd  Dep’t 2024), in which the Court, following its decision in Citimortgage, Inc v. Zaibak , 188 A.D.3d 982 (2 nd  Dep’t 2020), held that filing a settlement conference RJI satisfied the “taking proceedings” requirement. loanDepot is a mortgage foreclosure action [3]  in which the court was presented with “a question of statutory construction with significant consequences for foreclosure litigation in New York: whether the filing of a request for judicial intervention for purposes of convening a mandatory settlement conference-an act required before a defendant is in default-constitutes the ‘taking of proceedings for the entry of judgment after the default’ within the meaning of CPLR 3215(c).” Disagreeing with the Second Department’s decision in Zaibak and its progeny, the loanDepot court determined it did not. The loanDepot  Court noted that pursuant to “ 22 NYCRR 202.12-a(b)(l) , the Request for Judicial Intervention ("RJI") for a settlement conference must be filed ‘at the same time as proof of service’; and under CPLR 3408(a)(1) , proof of service must be filed within twenty days of service.’” (Emphasis in original.) Thus, the court concluded, that in “every foreclosure action subject to CPLR 3408 settlement conferences … the RJI must be filed before the defendant's time to answer has expired-before a default can occur as a matter of law.” For a variety of reasons (each of which the court found sufficient to warrant a departure from Zaibak ), the court concluded that a settlement conference RJI does not constitute “taking proceedings.” [4] First, the court concluded that Zaibak  conflicted with the legislative and regulatory scheme because of the timing issues previously mentioned. Simply stated, in foreclosure actions settlement conference RJIs, generally, are required to be filed before a default occurs. Accordingly, “ Zaibak inverts CPLR 3215(c) by treating a pre-default filing as compliance with a post-default statutory mandate.” (Emphasis in original.) Thus, CPLR 3215(c) and 3408 cannot be harmonized under Zaibak.  However, “[t]his statutory tension disappears once CPLR 3215(c) is construed the way every Department of the Appellate Division (including the Second Department, save for the aberrant Zaibak line of cases) has already construed it: the phrase ‘take proceedings’ means a motion for judicial relief directed toward the entry of a default judgment, not the ministerial filing of an RJI.” Second, Zaibak  is “irreconcilable” with the express language of CPLR 3125(d)  -- which relates to multi-defendant situations in which a defendant answers and another defendant defaults -- and requires the plaintiff to make “‘an application to the court’ ‘within one year of the default’ before a default can be taken against the nonappearing party.” Thus, the “statutory text leaves no doubt that the Legislature required a judicial application - not a ministerial filing such as an RJI - to qualify as the taking of proceedings.’"  (Internal brackets omitted.) Third, the loanDepot  court noted that the statutory purpose of CPLR 3215 (c), which was drafted decades before the foreclosure conference RJI requirement, was the entry of judgment. The purpose of the settlement conference was loss mitigation. Thus: a settlement-conference RJI cannot constitute "tak[ing] proceedings for the entry of judgment" within the meaning of CPLR 3215(c) for a fundamental threshold reason: when CPLR 3215(c) was enacted in 1962 …, the Legislature had not yet created-nor even contemplated-the mandatory settlement conference procedure codified decades later in 22 NYCRR 202.12-a. A later-adopted court rule cannot possibly retroactively redefine a statutory term (and the intent of the legislature in enacting it) that predates it. The Legislature designed CPLR 3215(c) to require post-default prosecutorial action for the entry of a judgment, not a ministerial administrative filing created years later for a wholly different purpose. Fourth, the ministerial steps involved with the filing of an RJI “do not seek adjudication” and, therefore, “are not ‘proceedings’ for judgment.” The filing of the RJI is “a predicate to negotiation-not adjudication” and CPLR 3215(c), “calls for proceedings for the entry of judgment,” which implicates “the court's authority to determine rights or grant judicial relief.” Fifth, the court noted that of CPLR 3215(c) “reflects a legislative judgment that dormant claims should not be kept alive indefinitely and that plaintiffs bear the responsibility to prosecute their actions diligently,” and provides for mandatory dismissal if violated. “Because the statute's purpose is to compel diligence in prosecuting actions to judgment, with the attendant benefit of clearing court backlogs, its effect necessarily evaporates if courts begin carving out judicial exceptions based on sympathetic facts, administrative filings, or post- default settlement procedures.” Finally, the court spent significant time analyzing why “ Zaibak  and its progeny are not precedentially dispositive under stare decisis  [and concluded that] Zaibak neither raised nor considered the specific questions presented here.” Ultimately, the court concluded that dismissal of the action was mandatory because the plaintiff failed to move for a default judgment within a year of defendant’s default and the filing of an RJI did not satisfy the “taking proceedings” requirement of CPLR 3215. 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 written numerous articles addressing CPLR 3215(c). To find such articles, please see the BLOG tile on our website and type “CPLR 3215(c)” into the “search” box. [2]  This BLOG has previously addressed issues related to a defendant’s appearance in an action. See, e.g. , [ here ], [ here ], [ here ] and [ here ]. [3]  This BLOG has written dozens of articles addressing numerous aspects of residential mortgage foreclosure. To find such articles, please see the BLOG tile on our website and search for any foreclosure or other commercial litigation issue that may be of interest to you. [4]  The loanDepot court provides a thoughtful and detailed analysis of each of the bases of its decision, and we will briefly summarize each one.

By:  Jeffrey M. Haber In today’s article, we explore New York’s heightened pleading standard for defamation per se and defamation by implication. In Armbruster Capital Mgt., Inc. v. Barrett , 2025 N.Y. Slip Op. 06493 (4th Dept. Nov. 21, 2025), defendants sought to amend a counterclaim alleging that emails from plaintiff’s executives implied defendant lacked professional integrity. Initially denied by the motion court, the amendment was later deemed sufficient because defendants provided specific emails satisfying CPLR 3016(a), which requires particular words, time, place, and manner of the alleged defamatory statements. The Appellate Division, Fourth Department, found the emails suggested ethical noncompliance, qualifying as defamation per se, thereby eliminating the need to plead special damages. The Court explained that even if substantially true, the statements conveyed a false impression that defendant resigned solely due to burdensome compliance policies, meeting the rigorous standard for defamation by implication. The Court also held the proposed amendment was not meritless and permitted defendants to add individual parties, concluding the motion court abused its discretion in denying the motion to amend. The dispute in Armbruster  centered on an asset purchase agreement (APA) between plaintiff and Apex Wealth Advisers, LLC, formerly known as Apex Advisers, LLC (Apex), which was owned by defendant Elizabeth Barrett. Plaintiff and defendants entered into the APA whereby defendant sold Apex’s client list to plaintiff for a set price, payable in installments. In connection with the APA, defendant agreed to work part-time for plaintiff for the purpose of providing plaintiff with assistance in retaining Apex’s former clients. However, defendant resigned from plaintiff’s employment after less than a year. Plaintiff commenced the action for breach of a restrictive covenant in the APA, and defendants counterclaimed for, inter alia , defamation, alleging that plaintiff made statements asserting that defendant lacked professional competence or integrity. Plaintiff moved to dismiss the defamation counterclaim pursuant to CPLR 3016(a) and 3211(a)(7). Defendants cross-moved for leave to amend the defamation counterclaim and to add as parties plaintiff’s chief executive officer and president (individual parties), who authored the alleged defamatory statements. The motion court granted the motion and denied the cross-motion. Defendants appealed only from the denial of their cross-motion. A party asserting a claim for defamation must show “a false statement, published without privilege or authorization to a third party, constituting fault as judged by, at a minimum, a negligence standard, and it must either cause special harm or constitute defamation per se.” [1]   Statements “that tend to injure another in his or her trade, business or profession” constitute defamation per se. [2]   In addition, a plaintiff claiming defamation, must plead the claim with particularity, that is, the plaintiff must “set forth in the complaint the particular words complained of, as required by CPLR 3016 (a), and must state the time, place and manner of the allegedly false statements and to whom such statements were made.” [3]   As an initial matter, the Court rejected plaintiff’s assertion, raised as an alternative basis for affirmance, “that the proposed amended counterclaim failed to comply with CPLR 3016 (a).” [4]  The Court noted that “[i]n support of their cross-motion, defendants submitted the emails that were sent by the individual parties, which contained the alleged defamatory statements.” [5]  “[I]n doing so,” concluded the Court, defendants “met the pleading requirements of CPLR 3016 (a) … as the [motion] court implicitly found. [6] Addressing the cross-motion, the Court “conclude[d] that the [motion] court abused its discretion in denying defendants’ cross-motion”. [7]   The Court found that “Defendants sufficiently alleged that the statements made by the individual parties were false and that they were reasonably susceptible of a defamatory connotation.” [8]  “In determining the sufficiency of a defamation pleading,” noted the Court, “we must consider ‘whether the contested statements are reasonably susceptible of a defamatory connotation’”, [9]  and, in doing so, “we must ‘give the disputed language a fair reading in the context of the publication as a whole.’” [10]   The Court concluded that “the disputed language provide[d] a basis ‘from which the ordinary reader could draw an inference’ … that plaintiff was accusing defendant of failing to adhere to ethical standards in the investment trading industry.” [11]  The Court noted that “the emails were sent to clients of plaintiff who had previously been clients of defendants and advised them that defendant was no longer employed by plaintiff.” [12]  “The emails stated that the investment trading industry was ‘highly regulated,’ that plaintiff had ‘compliance policies’ to protect its clients against ‘conflicts of interest,’ and that defendant found those policies ‘overly burdensome,’ thereby suggesting that defendant failed to adhere to such policies and standards.” [13] The Court further held that the statements constituted defamation per se, such that defendants did not need to allege special damages. [14]  “‘A statement imputing incompetence or dishonesty to the [party] is defamatory per se if there is some reference, direct or indirect, in the words or in the circumstances attending to their utterance, which connects the charge of incompetence or dishonesty to the particular profession or trade engaged in by [the party].’” [15]  The statement “must be more than a general reflection upon [the party’s] character or qualities[;] . . . [it] must reflect on [the party’s] performance or be incompatible with the proper conduct of [their] business.” [16]  The Court found that, as alleged in the proposed amended counterclaim, “the statements conveyed that defendant was unable to conduct her work in a legally compliant and ethical manner and that she lacked professional competence or integrity.” [17] Regarding the merit of the proposed amendment, the Court held that it was not “patently lacking in merit”. [18]  After recounting the substance of the emails exchanged between plaintiff’s chief executive officer and defendant, as well as deposition testimony, the Court found that “defendant’s statements established that [defendant] found the policies burdensome and time-consuming, but they [did] not establish that [defendant] left plaintiff’s employment because of those policies, as stated in the emails by the individual parties.” [19] “Moreover,” said the Court, “even assuming, arguendo, that the statements were substantially true and that defendants are relying on a theory of defamation by implication, we conclude that the proposed amended counterclaim is not patently lacking in merit.” [20]  “Defamation by implication is premised not on direct statements but on false suggestions, impressions and implications arising from otherwise truthful statements.” [21]  “There is a heightened legal standard for a claim of defamation by implication.” [22]  “Under that standard, ‘[t]o survive a motion to dismiss a claim for defamation by implication where the factual statements at issue are substantially true, the [party asserting the defamation claim] must make a rigorous showing that the language of the communication as a whole can be reasonably read both to impart a defamatory inference and to affirmatively suggest that the author intended or endorsed that inference.’” [23]   “The second part of the test is an objective inquiry and asks whether the plain language of the communication itself suggests that an inference was intended or endorsed.” [24] The Court held that defendant “met the heightened pleading standard.” [25] The Court found that the statements at issue did “not tell the whole story and conveyed a false impression that defendant was entirely at fault for the demise of the employment relationship because she found plaintiff’s compliance policies burdensome.” [26]  In context, the Court said that defendant left plaintiff’s employ after an “outburst” by plaintiff’s chief executive officer who “blamed defendant for the departure of a large client, said that he did not trust her and that she would steal all of plaintiff’s clients, and threatened legal action against her.” [27]  “Thus”, concluded the Court, “the statements by the individual parties, even if true, conveyed the false suggestion and impression that the only reason defendant left plaintiff’s employment was because she did not want to comply with policies that were in place to ‘protect[ ]’ the clients.” [28]  The plain language of the statements, therefore, “suggested that the individual parties intended that false suggestion and impression so that the clients would remain with plaintiff.” [29] ________________________ 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] Fika Midwifery PLLC v. Independent Health Assn., Inc. , 208 A.D.3d 1052, 1054 (4th Dept. 2022) (internal quotation marks omitted); see Miserendino v. Cai , 218 A.D.3d 1261, 1262 (4th Dept. 2023); Accadia Site Contr., Inc. v. Skurka , 129 A.D.3d 1453, 1453 (4th Dept. 2015). [2] Fika Midwifery , 208 A.D.3d at 1054 (internal quotation marks omitted). [3] Id.  (internal quotation marks omitted). [4] Slip Op. at *2. [5] Id. [6] Id. , citing Accadia , 129 A.D.3d at 1454; McRedmond v. Sutton Place Rest. & Bar, Inc. , 48 A.D.3d 258, 259 (1st Dept. 2008); Polish Am. Immigration Relief Comm. v. Relax , 172 A.D.2d 374, 374 (1st Dept. 1991). [7] Id. , citing Holst v. Liberatore , 105 A.D.3d 1374, 1374 (4th Dept. 2013); LHR, Inc. v. T-Mobile USA, Inc. , 88 A.D.3d 1301, 1304 (4th Dept. 2011). [8] Id. [9] Id. , quoting Davis v. Boeheim , 24 N.Y.3d 262, 268 (2014); see Bisimwa v. St. John Fisher Coll. , 194 A.D.3d 1467, 1471 (4th Dept. 2021). [10] Id. , quoting Armstrong v. Simon & Schuster , 85 N.Y.2d 373, 380 (1995). [11] Id. , quoting James v. Gannett Co. , 40 N.Y.2d 415, 420 (1976), r’arg denied , 40 N.Y.2d 990 (1976). [12] Id. [13] Id. [14] Id. [15] Miserendino , 218 A.D.3d at 1265. [16] Id. , quoting Golub v. Enquirer/Star Group , 89 N.Y.2d 1074, 1076 (1997). [17] Slip Op. at *2. [18] Id. [19] Id.  at 2- 3. [20] Id.  at *3. [21] Armstrong , 85 N.Y.2d at 380-381; see also Bisimwa , 194 A.D.3d at 1472; Partridge v. State of New York , 173 A.D.3d 86, 90 (3d Dept. 2019). [22] Slip Op. at *3, citing Bisimwa , 194 A.D.3d at 1472). [23] Id. , quoting Bisimwa , 194 A.D.3d at 1472; see also Partridge , 173 A.D.3d at 91-92. [24] Id. , quoting Partridge , 173 A.D.3d at 94 (internal quotation marks omitted). [25] Id. [26] Id. [27] Id. [28] Id. [29] Id.

By: Jeffrey M. Haber On April 14, 2026, the Appellate Division, First Department issued a decision in which it reiterated the limits of fraud claims in the corporate governance context. In Massoumi v. Ganju , 2026 N.Y. Slip Op. 02208 (1st Dept. Apr. 14, 2026), the Court unanimously affirmed summary judgment dismissing fraud claims brought by a former chief executive officer who alleged that his fellow executives and directors misled him in advance of a board meeting that resulted in his removal. Background Facts Plaintiff served as Chief Executive Officer of Zocdoc, Inc., and, like some of the defendants, also held roles within the company’s senior leadership. Defendants included two board members and senior managers, as well as a company employee holding the title “Founder,” though not a board member. In advance of a scheduled board meeting, plaintiff believed the agenda would focus primarily on product development and marketing strategy. In reliance on that understanding, plaintiff and others prepared presentations and conducted dry-run rehearsals for the board meeting consistent with that vision. The meeting did not go as Plaintiff envisioned. Rather than discussing product development and marketing, the board initiated a leadership review, appointed new officers, amended the company’s bylaws, placed plaintiff on administrative leave, and ultimately removed him as chief executive officer. Plaintiff sued, alleging that defendants committed fraud by misleading him prior to the meeting. Plaintiff’s claims were based on three specific incidents: (1) an email from one of the defendants, stating “sounds good” in response to plaintiff’s proposed presentation topics circulated to senior management for the board meeting at issue; (2) a PowerPoint deck labeled “final,” forwarded by another defendant the day before the meeting, along with an agenda; and (3) defendants’ participation in dry-run rehearsals preparing for the meeting as though it would proceed as planned. According to plaintiff, these actions collectively conveyed false assurances that no adverse employment action would occur at the meeting and that the focus would remain on marketing strategy and product development. The First Department’s Decision Under New York law, fraud can be based not only on affirmative misrepresentations, but also on half-truths or misleading partial disclosures. [1]  The Court emphasized that when fraud claims are based on affirmative misrepresentations, as plaintiff alleged, the statements must be untrue and must communicate false information: Although half-truths and misleading partial disclosures can support a fraud claim … , plaintiff casts these three incidents as actionable misrepresentations rather than omissions. For this framing to adequately support his claim, however, the communicative content of these incidents must have been untrue as to the subsequent injurious actions of the board at the meeting. [2]   The Court held that plaintiff failed to meet this standard. [3]  The Court explained that a short email stating “sounds good” was “merely an acknowledgment,” not a factual representation. [4] “Likewise,” said the Court, “an internal document labeled ‘final’ sent in an otherwise contentless email does not, on its own, amount to a promise or warranty.” [5]  Finally, the Court noted that participation in rehearsal meetings, standing alone, did not constitute an actionable misrepresentation, particularly where such participation fell within ordinary employee functions. [6]  Thus, the Court refused to transform routine corporate communications into actionable false representations. Perhaps the most consequential part of the Court’s decision concerned the distinction between the duties owed as a fiduciary and the duty of disclosure. Plaintiff argued that defendants, given their overlapping roles on the board and in management, had an obligation to warn him that his termination was under consideration. The Court rejected that argument, stating that, as directors, defendants’ fiduciary duty ran to the corporation and its shareholders, not to plaintiff personally. [7]  Therefore, defendants “were not required to forewarn plaintiff that his possible termination would occur at the board meeting.” [8] As such, concluded the Court, plaintiff could not “claim that he was justified in concluding that directors would not discharge these duties.” [9]   Takeaway In Massoumi , the Court emphasized that ordinary corporate communications, such as brief email acknowledgments, circulating agendas or presentation materials, and participation in meeting rehearsals, do not, without more, constitute affirmative misrepresentations of fact for purposes of a fraud claim. Similarly, statements such as “sounds good,” internal documents labeled “final,” or participation in preparatory meetings do not, without more, communicate factual assurances about future board decisions. Massoumi shows that courts will not infer misrepresentations of fact from vague, informal, or customary internal corporate exchanges. Massoumi  also shows that where a plaintiff characterizes alleged misconduct as an affirmative misrepresentation, as opposed to an omission or half‑truth, the statement at issue must itself be untrue and must convey false factual information. As discussed, the Court rejected plaintiff’s attempts to reframe neutral or context‑free communications as false merely because the board later acted inconsistently with plaintiff’s expectations. The Court’s decision underscores that internal coordination and preparation for board meetings are ordinary incidents of corporate life and do not imply false representations about the substance or outcome of a board meeting. Accordingly, participation in dry‑run rehearsals or other preparatory meetings, standing alone, did not support a fraud claim, particularly where such participation fell within routine employee or officer responsibilities. Of particular note, the Court rejected the argument that directors and senior officers have a fiduciary obligation to warn an executive that his/her removal was under consideration. In doing so, the Court reaffirmed that directors’ fiduciary duties run to the corporation and its shareholders, not to individual executives whose interests may diverge from the company’s. Finally, because officers and directors must be free to discharge their governance duties, an executive cannot reasonably rely on contentless communications or on silence as assurance that adverse action will not occur. The Court rejected the notion that an executive is justified in assuming that a board would refrain from exercising its authority simply because it had not disclosed its intentions beforehand. _________________________________ 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 and not on matters handled by the firm. _________________________________ [1] DIRECTV, LLC v. Nexstar Broadcasting, Inc. ,  199 A.D.3d 561 , 562 (1st Dept. 2021). [2] Slip Op. at *1 (citation omitted). [3] Id. [4] Id.  at *2. [5] Id. [6] Id.  (citing Eurycleia Partners, LP v. Seward & Kissel, LLP ,  12 N.Y.3d 553 , 559-562 (2009)). [7] Id.   [8] Id.  (citing Klaassen v. Allegro Dev. Corp. , 106 A.3d 1035, 1043-1044 (Del. 2014); Benihana of Tokyo, Inc. v. Benihana, Inc. , 891 A.2d 150, 191 (Del Ch. 2005), aff’d , 906 A.2d 114 (Del. 2006)). [9] Id.

By: Jonathan H. Freiberger Today’s article is about MCLP Asset Co. v. Zaveri , an action that involves numerous areas of the law about which we frequently write -- mortgage foreclosure, FAPA, CPLR 205(a), CPLR 205-A and statutes of limitation. [1] Statute of Limitations in Foreclosure Actions By way of brief background, and as previously written in this BLOG, an action to foreclose a mortgage is governed by a six-year statute of limitations. CPLR 213(4) ; see also   Medina v. Bank of New York Mellon Trust Co., N.A . , 240 A.D.3d 879 (2 nd Dep’t 2025); Fed. Nat. Mort. Assoc. v. Schmitt , 172 A.D.3d 1324, 1325 (2 nd Dep’t 2019). When a mortgage is payable in installments, “separate causes of action accrue for each installment that is not paid and the statute of limitations begins to run on the date each installment becomes due.” HSBC Bank USA, N.A. v. Gold , 171 A.D.3d 1029, 1030 (2 nd  Dep’t 2019). Most mortgages, however, provide that a mortgagee may accelerate the entire debt in the event of, inter alia , a payment default by a mortgagor. Once the mortgagee’s election to accelerate is properly made, “the borrower’s right and obligation to make monthly installments ceased and all sums become immediately due and payable, and the six-year Statute of Limitations begins to run on the entire mortgage debt.” EMC Mortgage Corp. v. Patella , 279 A.D.2d 604, 605 (2 nd  Dep’t 2001) citations and internal quotation marks and brackets omitted); see also   Medina , 240 A.D.3d at 881; HSBC , 171 A.D.3d at 1030. FAPA The Foreclosure Abuse Prevention Act  (“FAPA”), which went into effect in December of 2022, “represents the Legislature’s response to litigation strategies and certain legal principles that distorted the operation of the statute of limitations in foreclosure actions.” Genovese v. Nationstar Mortgage LLC , 223 A.D.3d 37, 41 (1 st Dep’t 2023) (citation omitted). Thus, inter alia , FAPA’s provisions were designed to prevent lenders from circumventing statute of limitations problems in residential mortgage foreclosure actions by the simple expedient of accelerating and deaccelerating loans to restart the running of statutes of limitations. The First, Second and Third Departments have all held that FAPA is to be applied retroactively. See, e.g., Genovese v. Nationstar Mortgage LLC , 223 A.D.3d 37 (1 st  Dep’t 2023), [2]   97 Lyman Avenue, LLC v. MTGLQ Investors, L.P. , 233 A.D.3d 1038 (2 nd  Dep’t 2024); U.S. Bank N.A. v. Lynch , 233 A.D.3d 113 (3 rd  Dep’t 2024) [3] CPLR 205(a) and 205-A [4] Sometimes the applicable statute of limitations expires after the dismissal of a timely commenced action. Such an occurrence is not be a problem if a new action can be commenced before the limitations period expires. However, issues may arise when an otherwise timely action is dismissed subsequent to the expiration of the limitations period. Depending on the nature of the dismissal, even in the latter scenario, a plaintiff may be permitted to commence a new action notwithstanding the expiration of the applicable statute of limitations by virtue of the savings provisions of CPLR 205(a) . CPLR 205(a) is a “remedial” statute that “has existed in New York law since at least 1788” and can [t]race[] its roots to seventeenth century England.” Wells Fargo Bank, N.A. v. Eitani , 148 A.D.3d 193, 199 (2 nd Dep’t 2017), appeal dismissed , 29 N.Y.3d 1023 (2017). The purpose of CPLR 205(a) is to “ameliorate the potentially harsh effect of the Statute of Limitations in certain cases in which at least one of the fundamental purposes of the Statute of Limitations has in fact been served, and the defendant has been given timely notice of the claim being asserted by or on behalf of the injured party.” George v. Mt. Sinai Hospital , 47 N.Y.2d 170, 177 (1979). Thus, the statute provides “a second opportunity to the claimant who has failed the first time around because of some error pertaining neither to the claimant’s willingness to prosecute in a timely fashion nor to the merits of the underlying claim.” George , 47 N.Y.2d at 178-79. To address the previously discussed gamesmanship employed by lenders to artificially extend applicable statutes of limitation, FAPA added CPLR 205-A, which limits the ability of lenders to manipulate the statute of limitations in mortgage foreclosure actions. MCLP Asset Co., Inc. v. Zaveri All the previously discussed principles are addressed in MCLP . In MCLP, the plaintiff lender’s predecessor in interest commenced an action in 2012 to foreclose a mortgage that was “deemed abandoned” and dismissed in 2017 pursuant to CPLR 3404 . A subsequent appeal from the denial of the predecessor lender’s motion to restore was dismissed as abandoned. Another of plaintiff’s predecessors in interest commenced the subject foreclosure action in 2019. The motion court granted the defendant’s motion to dismiss the complaint on statute of limitations grounds. On the lender’s appeal, the Fourth Department reversed “concluding that the 2019 action was not time-barred inasmuch as CPLR 205 (a) applied to extend the statute of limitations.” Shortly after the appeal was decided, however, FAPA was enacted and, inter alia , amended CPLR 205 to provide that "[t]his section shall not apply to any proceeding governed by CPLR 205-a. (Ellipses and brackets omitted.) After the complaint was reinstated, the predecessor assigned the mortgage to the plaintiff lender, who moved for summary judgment. The borrower cross-moved for leave to amend the answer to include a statute of limitations defense based on FAPA’s amendment of CPLR 205 and its enactment of CPLR 205-a. The motion court granted the borrower’s cross-motion. Thereafter, relying on decisions from the First and Second Departments, the motion court concluded that “FAPA was intended to be applied retroactively and, pursuant to CPLR 3212(b) , searched the record and granted summary judgment to the borrower . On appeal, the lender argued that “FAPA, particularly CPLR 205-a, [should not be] applie[d] retroactively.” As to retroactivity, the Court stated: Retroactive operation is not favored by the courts and statutes will not be given such construction unless the language expressly or by necessary implication requires it. However, remedial legislation should be given retroactive effect in order to effectuate its beneficial purpose. Factors to consider in determining whether a statute should be applied retroactively include, whether the legislature has made a specific pronouncement about retroactive effect or conveyed a sense of urgency; whether the statute was designed to rewrite an unintended judicial interpretation; and whether the enactment itself reaffirms a legislative judgment about what the law in question should be. [Citations, ellipses and brackets omitted.] Based on the legislative history, the Fourth Department determined that FAPA was intended to apply retroactively. Specifically with respect to CPLR 205-a, the Court stated: we note that, in drafting that provision, which was modeled on CPLR 205 (a), the legislature did not include the CPLR 205 (a) language "requiring that the court set forth on the record the specific conduct constituting the neglect, which conduct shall demonstrate a general pattern of delay in proceeding with the litigation, which had occasioned erroneous judicial interpretations that the court's recitation of the specific conduct is a condition precedent to the bar against an extension of the statute of limitations for a neglect based dismissal. Indeed the legislative history makes clear that in omitting the aforementioned language, the legislature intended to correct those "erroneous judicial interpretations". In enacting CPLR 205-a, the legislature sought to, inter alia, bring greater clarity in mortgage foreclosure actions concerning what constitutes a neglect to prosecute and thereby promote "the objectives of 'finality, certainty and predictability,' to the benefit of both plaintiffs and defendants". We thus conclude that the legislature intended for CPLR 205-a, like the rest of FAPA, to apply retroactively. [Citations, ellipses and brackets omitted.] In addition, the Court found the new CPLR 205-a did not operate to extend the statute of limitations and, therefore, the motion court properly granted summary judgment to the borrower. Specifically, the Court noted that CPLR 205-a does not apply to successors in interest or assignees unless it is pleaded and proved that they are “acting on behalf of the original plaintiff” or where the first action is dismissed for any form of neglect. The Court also rejected, on the merits, the lender’s argument that the retroactive application of FAPA is violative of its due process rights. [5] 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 written dozens of articles addressing numerous aspects of residential mortgage foreclosure. To find such articles, please see the BLOG  tile on our website  and search for any foreclosure, or other commercial litigation, issue that may be of interest you. In particular, as relates to today’s article, type “FAPA”, “statute of limitations”, “CPLR 205” and/or “CPLR 205-a” into the search box. [2]   Genovese was also discussed in this BLOG’s article: “ The Appellate Division, First Department, Reiterates in Two Cases That The Foreclosure Abuse Prevention Act (“FAPA”) is to Have Retroactive Application and Otherwise Passes Constitutional Muster ”.   [3] Lynch was also discussed in this BLOG’s article: “ The Appellate Division, Third Department, Holds that Retroactive Application of the Foreclosure Abuse Prevention Act (“FAPA”) Does Not Violate Due Process ”.   [4]  In previous BLOG articles, we compared CPLR 205(a) with 205-A. See, e.g.,  [ here ] and [ here ]. [5] On November 25, 2025, the New York Court of Appeals decided two cases: Article 13 LLC v. Ponce De Leon Fed. Bank  and Van Dyke v. U.S. Bank, N. A. , in which the Court determined that certain provisions of FAPA operate retroactively and that such retroactive application violates neither the lender’s substantive nor procedural due process rights as applied to the subject cases. We will address these cases in next week’s BLOG article.

By: Jeffrey M. Haber In Kassirer v. Gotlib , 2026 N.Y. Slip Op. 02154 (1st Dept. Apr. 9, 2026), the Appellate Division, First Department, reaffirmed a bedrock principle of New York contract law: agreements to agree are not enforceable. The case arose from an alleged oral agreement to pursue a Manhattan real estate acquisition through yet‑to‑be‑formed entities, with ownership interests, management rights, and funding obligations left largely undefined. Although the plaintiff contributed $1.6 million toward the venture, the Court held that the purported agreement lacked the definiteness required to form a binding contract. The absence of agreed-upon material terms, combined with the sophistication and complexity of the contemplated transaction, rendered the arrangement nothing more than a preliminary, nonbinding framework. As a result, the Court dismissed the plaintiff’s breach of contract and declaratory judgment claims, underscoring that intent and partial performance cannot cure fundamental contractual vagueness. Kassirer v. Gotlib [Eds. Note: the factual discussion that follows was distilled from the decisions of the courts in this case and the parties’ briefing on appeal.] Plaintiffs, Isaac Kassirer, and his entity, Emerald Equity Group LLC (“Emerald”), alleged that Kassirer and the individual defendants entered into an oral agreement to purchase a piece of Manhattan real estate through defendant 685 Investors LLC, that Kassirer arranged for third-party financing of $25 million toward a $30 million deposit and that the three individual parties agreed to each make up the remaining $5 million by paying $1,660,000. According to plaintiffs, the oral agreement provided that (1) the parties would work together to acquire some or all of the properties; (2) Kassirer would “fund or procure sources of funding” for any downpayment that “may” be required and would fund or procure a third of the funds “required to acquire whatever Properties the defendants decided to acquire; (3) Kassirer would receive one-third of the membership interests in a limited liability company (that was not yet formed) that would act as the manager “of the entity/entities which would own, either directly or through subsidiaries, some or all of the Properties”; and (4) “upon the first closing of the purchase of any of the Properties,” $1,660,000 would be returned to Kassirer. Kassirer’s portion was paid through Emerald. Kassirer claims that defendants thereafter shut him out of the venture, making him only a limited partner. Plaintiffs brought suit, seeking (1) a judgment declaring that he was a one-third partner in defendant 685 Manager LLC and entitled to a share of certain fees and distributions, and (2) the return of his $1.6 million, under theories of breach of contract and unjust enrichment.  Defendants moved to dismiss the complaint. Among other arguments, defendants argued that plaintiffs failed to allege the existence of an enforceable contract. At most, said defendants, plaintiffs alleged only an unenforceable agreement to agree – that is, an agreement to later agree on the terms of an operating agreement for a limited liability company. According to defendants, at most, there was an oral agreement to split membership interests in a yet-to-be-formed entity that would manage another yet-to-be-formed entity that would own Manhattan real estate, and if a down payment was required, Kassirer would contribute a third of the down payment and a third of the purchase price. In other words, defendants argued that plaintiffs failed to plead the existence of an oral agreement with sufficient detail to make it binding. Instead, defendants argued that plaintiffs pleaded an inchoate “agreement,” made on an unspecified date to acquire some unspecified real estate and to split membership interests in a nonexistent entity that was to manage another nonexistent entity that would own unspecified properties. Because plaintiffs failed to plead any of the material terms of the agreement, let alone that there was mutual assent to those terms, defendants argued, plaintiffs failed to plead the existence of a contract at all. The motion court denied the motion to dismiss. The First Department unanimously modified the order to the extent of granting the motion to dismiss plaintiffs’ first and second causes of action for a declaratory judgment and breach of contract and otherwise affirmed. Governing Legal Principles To establish the existence of an enforceable agreement, a plaintiff must establish an offer, acceptance of the offer, consideration, mutual assent, and an intent to be bound.  Mutual assent or the meeting of the minds must include agreement on all essential terms. [1] The threshold inquiry is “whether there is a sufficiently definite offer such that its unequivocal acceptance will give rise to an enforceable contract.” [2]  “Impenetrable vagueness and uncertainty will not do.” [3]   When “there are sufficient material terms absent from the” alleged contract, no enforceable agreement exists. [4]   Additionally, when the subject matter of the alleged agreement is complex and of the type usually put in writing, courts are even more likely to conclude that there is no agreement. [5]   Finally, when a material term of a purported agreement is left for future negotiations, courts hold that, at most, there is only an unenforceable agreement to agree. [6] The First Department’s Decision The Court held that “[t]he [motion] court should have granted defendants’ motion to dismiss the breach of contract claim.” [7]  The Court found that “the parties’ purported oral agreement [was] plainly nothing more than an unenforceable ‘agreement to agree’” “[g]iven the plethora of vague and missing material terms.” [8] Takeaway Kassirer  reaffirms a core principle of New York contract law: courts will not enforce preliminary understandings that lack definite, agreed-upon material terms. Arrangements that leave essential terms open for future negotiation are, at most, an unenforceable agreement to agree. To plead an enforceable contract, a plaintiff must allege mutual assent to all essential terms. That requirement was not met in Kassirer . The alleged oral agreement contemplated the future purchase of unspecified real estate, through entities that had not yet been formed, pursuant to operating agreements that did not yet exist, with funding and repayment obligations that were contingent and ill-defined. In the Court’s opinion, this was not a completed bargain but an framework dependent on future decisions and negotiations, which New York does not recognize as binding. The decision makes clear that plaintiff’s contribution of $1.6 million did not alter the Court’s analysis. While defendants acknowledged receipt of the funds, payment alone cannot supply missing material terms or establish mutual assent. As the Kassirer  Court explained, the exchange of consideration does not transform an indefinite, forward-looking understanding into a binding contract. Without a contract, plaintiff’s claim for breach of contract necessarily failed. Ultimately, Kassirer  underscores a fundamental rule on contract enforcement: where essential terms are left unresolved, there is no enforceable contract. Courts will enforce agreements the parties actually made, not the deals they hoped to complete later. ________________________________ 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 and not on matters handled by the firm. ___________________________________ [1] Kowalchuk v. Stroup , 61 A.D.3d 118, 121 (1st Dept. 2009).  [2] Express Indus. & Terminal Corp. v. N.Y. State Dept. of Transp. , 93 N.Y.2d 584, 589-90 (1999) (citation omitted). [3] Id.  (citation omitted). [4] Argent Acquisitions, LLC v. First Church of Religious Science , 118 A.D.3d 441, 445 (1st Dept. 2014); see also Caniglia v. Chicago Tribune-New York News Syndicate , 204 A.D.2d 233, 234 (1st Dept. 1994) (“The IAS Court properly dismissed, without leave to replead, the plaintiffs’ first cause of action, purporting to set forth a cause of action for breach of contract, as too indefinite, and therefore, unenforceable, for plaintiffs’ failure to allege, in nonconclusory language, as required, the essential terms of the parties’ purported . . . contract[.]”). [5] See Manufacturers Hanover Trust Co. v. Margolis , 115 A.D.2d 406, 407 (1st Dept. 1985); Emigrant Bank v. UBS Real Estate Secs., Inc. , 2007 WL 5650108 (Sup. Ct., N.Y. County Mar. 14, 2007) (when “a contract of this magnitude and complexity is of a type usually committed to writing,” that weighs against finding a non-written, enforceable agreement); Al-Bawaba.com , Inc. v. Nstein Techs. Corp. , 25 Misc. 3d 1245(A) (Sup. Ct., Kings County 2009) (no oral agreement when it is “clearly the sort of complex, legally-sophisticated contract that necessarily would require a writing”). [6] Argent , 118 A.D.3d 441, 445 (citing J oseph Martin, Jr., Delicatessen v. Schumacher , 52 N.Y.2d 105, 109 (1981)); see also Srivatsa v. Rosetta Holdings LLC , 213 A.D.3d 514, 514 (1st Dept. 2023) (oral agreement to grant shares in an LLC was “at most, an unenforceable agreement to agree”). [7] Slip Op. at *1 [8] Id.  (citing Srivatsa , 213 A.D.3d at 514-515).

By: Jeffrey M. Haber In KSFB Mgt., LLC v. Goldman Sachs & Co., LLC , 2026 N.Y. Slip Op. 02064 (1st Dept. Apr. 7, 2026), the Appellate Division, First Department, affirmed dismissal of claims alleging breach of contract, breach of the implied covenant of good faith and fair dealing, and fraud. KSFB Mgt., LLC (“KSFB”) claimed that Goldman Sachs & Co., LLC (“Goldman”) and another defendant deceived it into managing a subsidiary while secretly pursuing a competing sale that excluded KSFB, allegedly misusing confidential information shared under a nondisclosure agreement (“NDA”). The Court held that KSFB failed to identify specific confidential information misused, as required to plead breach of the NDA. It further ruled that the NDA did not obligate Goldman to avoid conflicts or prioritize a joint sale. Finally, the Court held that the fraud claims failed because the alleged oral assurances on which the claims were based were contradicted by explicit conflict disclosures in a later engagement letter, making reliance unreasonable as a matter of law. KSFB Mgt., LLC v. Goldman Sachs & Co., LLC Plaintiff alleged that Goldman and defendant Focus Financial Partners, LLC (“Focus”), who entered a stipulation of discontinuance after the appeal was filed, engaged in a months-long scheme to deceive plaintiff, a business management firm providing services for high-net-worth individuals, into continuing to manage Focus’s non-party subsidiary, NKSFB, LLC (“NKSFB”), while Goldman assisted Focus to pursue a combined sale of NKSFB and KSFB. Plaintiff alleged that unbeknownst to it, Goldman and defendant Patrick Fels (“Fels”) were simultaneously advising Focus in a competing transaction to sell Focus and NKSFB to Clayton Dubilier & Rice LLC (“CD&R”), which excluded plaintiff. According to the complaint, defendants used the expectation of a joint sale of NKSFB and KSFB to induce plaintiff to provide confidential information under the NDA. Under Paragraph 2 of the NDA, Goldman agreed to “keep the Confidential Information confidential,” and therefore, it would not, “without prior written consent of [Focus and KSFB], (i) use, for itself or on behalf of any other person, any portion of the Confidential Information for any purpose other than the Purpose, or (ii) disclose any portion of the Confidential Information to any person, other than . . . in connection with the Purpose.” “Confidential Information,” in turn, was defined in Paragraph 1 of the NDA as “all oral, written or digital information furnished by or on behalf of [Focus or KSFB] to [Goldman]” in connection with the joint NKSFB sale, “whether furnished before or after the date hereof.” Such information included “the identity of [Focus or KSFB] and/or the identity of the [NKSFB] or any other affiliate . . . and/or the fact that [Focus or KSFB] or its affiliates may be considering a possible strategic transaction.” It further encompassed “material provided directly by [NKSFB] or any other affiliate, agent or representative of [Focus or KSFB].” This definition of “Confidential Information,” however, did not include information that “was known by [Goldman]” at the time of disclosure by either Focus or KSFB. In addition to the foregoing, Paragraph 8 of the NDA provided that Focus and KSFB would “be granted access to any electronic dataroom or other file sharing platform used to share Confidential Information” with Goldman. To avoid any doubt, the NDA went on to provide that “any Confidential Information of another party received or accessed by a party, whether provided by [Goldman, Focus, or KSFB], contained in a data room or otherwise, [would] be used by such party only for the purposes of a mutually agreeable strategic transaction assisted by [Goldman] and any such sharing or disclosure by a party [would] not constitute a license to use or any transfer of ownership or other rights with respect to such Confidential Information or any waiver or grant of use of such Confidential Information for any other purpose.” According to plaintiff, defendants allegedly used the confidential information in their negotiations with CD&R. To minimize Goldman’s legal exposure for this alleged scheme, defendants allegedly convinced plaintiff to sign an engagement letter, which included several disclaimers of liability. KSFB commenced the action on February 8, 2024, asserting claims for (i) breach of the NDA against Focus and Goldman (Count I); (ii) breach of the covenant of good faith and fair dealing against Focus and Goldman (Count IV); (iii) fraudulent concealment, misrepresentation, and inducement against all defendants, as well as declaratory judgment regarding the enforceability of the allegedly fraudulently induced engagement letter (Counts VI, VII, & IX — the fraud-based claims); (iv) breach of fiduciary duty against Goldman and aiding and abetting breach of fiduciary duty against Focus, Patrick Fels, and another defendant (Counts II & III); (v) tortious interference with prospective economic advantage (Count V); and (vi) unjust enrichment. Goldman and Fels moved to dismiss the first, fourth, and sixth causes of action pursuant to CPLR 3211(a)(7). The motion court granted the motion. The First Department unanimously affirmed. The Court held that the “motion court properly dismissed the first cause of action alleging that defendants breached (i) paragraph 2 of the NDA and (ii) a section of paragraph 8.” [1]  The Court found that “[p]laintiff made only vague and conclusory statements that defendants disclosed confidential information, as defined in the NDA, and failed to identify what confidential information was allegedly misused.” [2]  The Court explained that “[p]laintiff allege[d] that Goldman shared confidential information with nonparty CD&R to assist them in negotiations to acquire defendant Focus and NKSFB. [However,] Plaintiff was not involved in those negotiations, and its confidential information would not have been material to those discussions. [For this reason,] … plaintiff’s complaint suffers from the absence of any allegations about whether the confidential information that was allegedly disclosed belonged to plaintiff or Focus.” [3]  “We need not accept as true plaintiff’s conclusory allegations, made upon information and belief,” said the Court, “that Goldman disclosed plaintiff’s confidential information to CD&R.” [4]   The Court also held that the motion court “correctly dismissed the contract claim based on allegations that Goldman breached that portion of paragraph 8.” [5]  The Court noted that the “purpose of the NDA was to allow Goldman to receive confidential information from Focus and plaintiff.” [6] “Thus,” explained the Court, “paragraph 8 should be read to refer to the dataroom or platform used to share Focus’ and plaintiff’s confidential information with Goldman, not a separate dataroom or platform set up to share Focus’ confidential information with CD&R.” [7]   Moreover, the Court held that the “motion court providently dismissed the breach of the implied covenant of good faith and fair dealing claim[,]” [8]  “[i]mplicit in all contracts.” [9] Pursuant to the implied covenant, “neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract.” [10]  Yet, “the covenant of good faith and fair dealing … cannot be construed so broadly as effectively to nullify other express terms of a contract, or to create independent contractual rights.” [11] Nor can one party invoke the duty of good faith to imply obligations inconsistent with the terms of the contractual relationship. [12]  Ultimately, “‘a party who asserts the existence of an implied-in-fact covenant bears a heavy burden’ to ‘prove not merely that it would have been better or more sensible to include such a covenant, but rather that the particular unexpressed promise sought to be enforced is in fact implicit in the agreement viewed as a whole.’” [13] The Court held that “plaintiff did not meet its ‘heavy burden’ to show that defendants agreed in the NDA to forego, explicitly or implicitly, any action that would create a conflict with the proposed sale of plaintiff and NKSFB.” [14]   The Court noted that the “NDA provide[d] that the parties thereto (Focus, plaintiff, and Goldman) had “an interest in entering into discussions wherein [ea]ch Disclosing Party may share information with Recipient [Goldman] . . . for the purpose of pursuing a possible relationship between Recipient and the Disclosing Parties in which Recipient may advise and assist with respect to a possible strategic transaction involving” NKSFB.” [15]  “The NDA itself was not an agreement in which Goldman committed itself to helping Focus and plaintiff sell KSFB and NKSFB,” said the Court. [16] The Court further held that the “motion court … properly dismissed the sixth cause of action alleging fraud because plaintiff failed to satisfy the element of justifiable reliance.” [17]   To state a claim for fraud, a complaint must allege a representation or omission of a material fact, falsity, scienter, reliance, and damages. [18] Similarly, a claim premised on fraudulent inducement requires “specific statement[s] made by defendants (or by anyone else) that would have fraudulently induced the contract.” [19]  Stated differently, to state a claim for fraudulent inducement, a plaintiff must allege “(1) a misrepresentation or an omission of material fact which was false and known to be false by the defendant, (2) the misrepresentation was made for the purpose of inducing the plaintiff to rely upon it, (3) justifiable reliance of the plaintiff on the misrepresentation or material omission, and (4) injury.” [20]   Plaintiff alleged that on a September 16, 2022 phone call, Fels “repeatedly assured [plaintiff] that there was no, and would be no conflict” in Goldman acting as an investment banker for both Focus and plaintiff. [21] “Any alleged reliance on these oral statements,” said the Court, was “irreconcilable with the engagement letter which the parties signed four months later.” [22]  The Court explained that “[i]n the engagement letter, the parties unambiguously agreed that ‘potential conflicts of interest, or a perception thereof, may arise as a result of [Goldman] rendering services to both [Focus and KSFB] simultaneously,’ that KSFB’s and Focus’ ‘interests may not always be aligned,’ and that the arrangement ‘will not give rise to any claim of conflict of interest against Goldman.’” [23] “On the September call,” said the Court, “Fels also stated that Focus and Goldman were ‘committed to the same goal’ as KSFB.” [24]  The Court concluded that “[t]his allegation fail[ed] to state a claim for fraud for the same reasons.” [25] Moreover, noted the Court, “[t]he engagement letter explicitly stated that the parties only contemplated a ‘possible sale of all or a portion of [NKSFB] . . . and/or [KSFB]’ [and] … disclosed that Goldman ‘may currently be providing and may in the future provide’ other ‘services that could impact the transaction contemplated.’” [26]  “In light of these written disclaimers,” concluded the Court, “it was unreasonable as a matter of law for plaintiff, a sophisticated party, to rely on Goldman’s oral representations made months earlier during the September call.” [27] Finally, the Court rejected “[p]aintiff’s argument that the motion court failed to apply the peculiar knowledge exception to the fraud claims,” stating that the argument “lack[ed] merit.” [28]  The Court found that “[p]laintiff fail[ed] to articulate any undisclosed information that was  uniquely  in defendants’ possession.” [29]   This was especially so, said the Court, because “the engagement letter notified plaintiff concerning potential ‘conflicts of interest’ that may exist between Focus and plaintiff that could ‘impact the [NSKFB/KSFB] transaction.’” [30] Takeaway KSFB  underscores the courts’ insistence on precision, restraint, and contractual fidelity when sophisticated parties litigate deal‑related disputes. The Court’s decision illustrates that allegations of breach and fraud must be grounded in concrete facts, not suspicion or hindsight. Plaintiffs claiming misuse of confidential information under an NDA must identify what information was shared, who owned it, and how it was improperly used; vague assertions that confidential information “must have been disclosed” will not suffice. The decision also reinforces that courts will not rewrite agreements to impose obligations that the parties did not expressly bargain for. An NDA designed to facilitate information sharing does not, without more, restrict a financial advisor from pursuing other transactions. Finally, the ruling reaffirms that sophisticated parties cannot reasonably rely on prior oral assurances when subsequent written agreements explicitly disclose the information allegedly misstated or omitted. As KSFB demonstrated, written disclaimers remain a powerful shield against fraud claims. ____________________________________ 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 and not on matters handled by the firm. ____________________________________ [1] Slip Op. at *1. [2] Id.  (citing Art Capital Group, LLC v. Carlyle Inv. Mgt. LLC,   151 A.D.3d 604 , 605 (1st Dept. 2017);  see also Parker Waichman LLP v. Squier, Knapp & Dean Communications, Inc.,   138 A.D.3d 570 , 570-571 (1st Dept. 2016)). [3] Id. [4] Id.  (citing Skillgames, LLC v. Brody,   1 A.D.3d 247 , 250 (1st Dept. 2003)). [5] Id.  at *2. [6] Id. [7] Id.  (citing Beal Sav. Bank v. Sommer,   8 N.Y.3d 318 , 324 (2007)). [8] Id. [9] Atlas El. Corp. v. United El. Group, Inc. , 77 A.D.3d 859, 861 (2d Dept. 2010)). [10] Id. [11] Fesseha v. TD Waterhouse Inv. Servs., Inc. , 305 A.D.2d 268, 268 (1st Dept. 2003)). [12] Gottwald v. Sebert , 193 A.D.3d 573, 582 (1st Dept. 2021); Sheth v. NY Life Ins. Co. , 273 A.D.2d 72, 73 (1st Dept. 2000)). [13] Singh v. City of New York , 40 N.Y.3d 138, 146 (2023) (quoting Rowe v. Great Atl. & Pac. Tea Co. , 46 N.Y.2d 62, 69 (1978)). [14] Slip Op. at *2 (citing Cordero v. Transamerica Annuity Serv. Corp.,   39 N.Y.3d 399 , 410 (2023) (internal quotation marks omitted));  see also Singh,  40 N.Y.3d at 146. [15] Id. [16] Id. [17] Id.  at *3. [18] See Albert Apt. Corp. v. Corbo Co. , 182 A.D.2d 500, 500 (1st Dept. 1992). [19] See EVUNP Holdings LLC v. Frydman , 225 A.D.3d 469, 469 (1st Dept. 2024). [20] See CANBE Props., LLC v. Curatola , 227 A.D.3d 654, 656 (2d Dept. 2024). [21] Slip Op. at *3. [22] Id.  (citing HSH Nordbank AG v. UBS AG ,  95 A.D.3d 185 , 204-206 (1st Dept. 2012) (dismissing fraud claim based on “extracontractual representations” concerning “alignment of interests” where contract “expressly disclosed the potential for conflicts of interests . . . and provided that HSH would have no claim against UBS arising from such conduct”);  Societe Nationale D’Exploitation Industrielle des Tabacs et Allumettes v Salomon Bros. Intl. , 249 A.D.2d 232, 233 (1st Dept. 1998),  lv. denied , 95 N.Y.2d 762 (2000) (dismissing fraud claim because alleged oral representations were contradicted by letter confirmation agreements)). [23] Id. [24] Id. [25] Id. [26] Id. [27] Id. [28] Id.  at *4. [29] Id.  (orig’l emphasis) (citing S kyview Cap., LLC v. Conduent Bus. Servs., LLC ,  239 A.D.3d 426 , 428 (1st Dept. 2025) (finding that “plans were not peculiarly within [the defendants’] knowledge” because the plaintiff “could have inquired” about them] ; MBIA Ins. Corp. v. Merrill Lynch ,  81 A.D.3d 419 , 419 (1st Dept. 2011) (declining to apply the peculiar knowledge exception because the plaintiff was a sophisticated business entity that could have obtained the truth about the defendants’ allegedly fraudulent representations through investigation)). [30] Id.

By: Jeffrey M. Haber Financial abuse of seniors and other vulnerable adults is among the most damaging and the least visible forms of investor harm. It arises when age, illness, cognitive decline, or dependence on trusted professionals erodes an individual’s ability to evaluate advice or resist coercion, even while legal capacity nominally remains intact. In the securities context, this vulnerability intersects directly with federal and state regulation, in which advisory relationships are built on trust, discretion, and an informational imbalance. When those features are exploited, the resulting harm implicates not only private loss but the integrity of the regulatory system itself. The SEC’s enforcement action against the Estate of John R. Brodacki, III and Castle Hill Financial Group, LLC, illustrates how financial exploitation and abuse can run afoul of professional and/or regulatory compliance. According to the SEC, from at least June 2018 through September 2025, defendants fraudulently induced their clients – many of whom were elderly, retired, or seriously ill – to transfer money to Castle Hill. The SEC alleged that Brodacki told the clients that their funds would be used to invest for their benefit and/or that of their relatives. The clients understood that defendants would manage these investments as their investment advisers, and they never told them otherwise, said the SEC.  As examples, defendants told some clients that they would invest in high-yield bank accounts, stocks, bonds, certificates of deposit, notes, or securities of private companies. The SEC alleged that instead of making such investments, defendants used clients’ funds largely to pay Brodacki’s own personal and business expenses, including lavish meals, membership fees to exclusive social clubs, tuition, and travel; to make payments to other advisory clients; and to make payments to Brodacki’s family members. According to the SEC, defendants returned only $162,750 to 18 investors, and most of those repayments were made from other advisory clients’ funds entrusted to defendants to invest on their own behalf, which, the SEC said, was behavior typical of a Ponzi scheme. The SEC further alleged that defendants continued to solicit and accept client funds for purported investment advisory services even after the registered investment adviser with which they were associated terminated the relationship in July 2025. The SEC charged each defendant with breaching their fiduciary duties to at least 18 of their advisory clients and misappropriating approximately $1.68 million in client funds in violation of Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. The SEC seeks disgorgement with prejudgment interest from each defendant, a civil money penalty and a permanent injunction against Castle Hill. Takeaway The alleged misconduct is instructive not simply because of the magnitude of the losses —approximately $1.68 million — but because it demonstrates how exploitation may occur in the absence of overt incapacity, coercion, or recognizable fraud. According to the SEC, clients relied on longstanding personal relationships with the adviser and received documentation purporting to reflect legitimate, appreciating investments. Others sought conservative income‑generation or estate‑planning solutions and were instead directed into off‑platform transactions that circumvented custodial protections and supervisory controls. As alleged, the misconduct operated through consent that was valid and procedurally documented, yet substantively undermined by trust, dependency, and informational asymmetry. The SEC’s enforcement action reflects a regulatory view that exploitation of senior and vulnerable investors is not a peripheral concern, but an important component of adviser fraud. By grounding its claims in breaches of fiduciary duty under Sections 206(1) and 206(2) of the Investment Advisers Act, the SEC treated the misuse of trust, authority, and client dependency as integral to the violation itself. Apparent authorization, personal familiarity, or documentation does not insulate conduct from regulatory scrutiny when those features are used to disguise breaches of fiduciary duty, fraud, and misappropriation. More broadly, the action highlights the risk of financial abuse in regulated environments. Written custodial requirements, supervisory policies, and disclosure alone are insufficient, where advisers induce clients to operate outside established safeguards — particularly where age, illness, or isolation heightens susceptibility. The enforcement action underscores the SEC’s mission that protecting vulnerable investors is inseparable from maintaining market confidence, and that enforcement must address the subtle ways in which alleged financial exploitation and abuse adapts to compliant‑looking structures. The litigation release announcing the enforcement action can be found here . The complaint, filed in Securities and Exchange Commission v. Personal Representative of the Estate of John R. Brodacki, III and Castle Hill Financial Group, LLC , No. 3:26-cv-30055 (D. Mass. filed Apr. 2, 2026), can be found here . ________________________________ 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 and not on matters handled by the firm.

By:  Jeffrey M. Haber In Kober v. Nestampower , 2025 N.Y. Slip Op. 06609 (2d Dept. Nov. 26, 2025), the Appellate Division, Second Department, decided an appeal involving disputes over membership interests in a limited liability company. After a member’s death, her daughter attempted to assign the trust’s LLC interest to herself and siblings without obtaining consent from other members. Plaintiffs sued for declaratory relief and damages. The Court held that under New York’s Limited Liability Company Law and the LLC’s operating agreement, an assignment of interest does not confer management rights or membership unless expressly permitted and consented to by existing members. Since plaintiffs lacked such consent, they were not members of the LLC and had no standing to assert the derivative claims alleged in the complaint. Defendants Rita Nestampower and Martha Gendel and their sister Bernice Klein (the “decedent”) were members of KGN Associates, LLC (hereinafter, “KGN” or the “LLC”). The sisters formed KGN on February 26, 2003, for the purpose of owning and managing commercial property in Farmingdale, New York. KGN also owned two parcels of vacant land in Yaphank, New York. All properties were inherited from the sisters’ father. In October 2004, the decedent assigned her interest in the LLC “to the extent of thirty three and one third Percent (33 1/3%) of the Net Profits in the [LLC] as defined by the [LLC]” to a living trust in her name (hereinafter, the “trust”), of which she was the trustee. In June 2010, the decedent died, and plaintiff, Linda Robin Kober (“Kober”), the decedent’s daughter, became the trustee of the trust. In February 2011, Kober executed an assignment on behalf of the trust (the “assignment”), intending to assign the trust’s interest in the LLC to herself and the decedent’s other children, plaintiff Bettina Iris Rabinowitz (“Rabinowitz”) and defendant Jules Mark Klein (“Klein”), each as an 11.11% member. In February 2018, Kober and Rabinowitz (collectively, the “plaintiffs”), individually and derivatively on behalf of the LLC, commenced the action against, among others, defendants, inter alia , to recover damages for breach of fiduciary duty and for declaratory relief. In particular, plaintiffs asserted the following four causes of action: First – declaratory judgment that plaintiffs and Klein were members of the LLC, each owning an 11.11% interest, and permanently enjoining defendants from excluding them from the management of the LLC; Second – on behalf of the LLC and against defendants in an amount equal to the difference between the fair market value and the sales price of the Yaphank property, with interest from the date of sale, and reasonable attorney’s fees for the prosecution of the claim; Third –  on behalf of the LLC against the attorney and his law firm for the LLC in connection with the sale of the Yaphank property, in an amount equal to the difference between the fair market value and the sales price of the Yaphank property, with interest from the date of sale; and Fourth – on behalf of the LLC against defendants, permanently enjoining them from selling the Farmingdale property without notice to plaintiffs and Klein, and without permitting them to participate equally in the management of the LLC, together with reasonable attorney’s fees in prosecuting the claim. Thereafter, plaintiffs moved for summary judgment on the complaint. Defendants cross-moved for summary judgment dismissing the first, second, and fourth causes of action on the ground, among others, that plaintiffs lacked standing to assert derivative causes of action on behalf of the LLC. In an amended order dated April 30, 2021, the Supreme Court denied plaintiffs’ motion and granted defendants’ cross-motion. Plaintiffs appealed. The Second Department affirmed. “A membership interest in a limited liability company is assignable in whole or in part.” [1]  However, the assignment of a membership interest “does not . . . entitle the assignee to participate in the management and affairs of the limited liability company or to become or to exercise any rights or powers of a member.” [2]  Rather, “the only effect of an assignment of a membership interest is to entitle the assignee to receive, to the extent assigned, the distributions and allocations of profits and losses to which the assignor would be entitled.” [3]  “A person can become a member of a limited liability company by assignment, but only where the operating agreement grants the assignor such power, and, then, where the conditions of such authority have been complied with.” [4]   Looking at the LLC’s operating agreement, the Court noted that the agreement “allow[ed] for the transfer of a membership interest, but provide[d] that new members [could] only be admitted with the consent of the LLC’s other members”. [5]  The assignment at issue provided that the transfer of the membership interest was “[s]ubject to the acceptance of [the] assignment and assumption by the LLC.” [6]  The Court found that, as demonstrated by defendants in their cross-motion, “there had not been any prior consent allowing for the transfer of any membership interest to the plaintiffs”. [7]  As a result, the Court held that “defendants established their prima facie entitlement to judgment as a matter of law dismissing the first, second, and fourth causes of action”. [8]  “In opposition,” said the Court, “plaintiffs failed to raise a triable issue of fact, as they [did] not dispute that they failed to obtain the consent of the LLC’s other members to be admitted as members of the LLC when they acquired their membership interest.” [9]  “Therefore,” concluded the Court, “plaintiffs, as nonmembers who had not been admitted as members of the LLC, lacked standing to pursue derivative causes of action on behalf of the LLC.” [10]   For the reasons stated with respect to defendants’ cross-motion, the Court held that “plaintiffs failed to demonstrate their prima facie entitlement to judgment as a matter of law on the complaint.” [11] Takeaway Under the LLC Law, assigning a membership interest only transfers economic rights (profits and losses), not management rights or membership status. As explained in Kober , becoming a member requires compliance with the operating agreement and consent from existing members. Kober  also underscores the importance of an operating agreement. An operating agreement typically includes a number of provisions that give clarity to the conduct of the LLC and its members. For example, an operating agreement specifies: (a) each member’s ownership percentage, voting rights, and responsibilities; (b) whether the LLC is member-managed or manager-managed, detailing decision-making authority and operational procedures, provisions that are important in determining the fiduciary duties each member has, or may have, vis-à-vis the other and/or the LLC; and (c) the rules for admitting new members and transferring interests, ensuring that ownership changes occur only with proper consent—avoiding issues like those in Kober . Moreover, an operating agreement typically addresses profit distribution, dispute resolution, and dissolution procedures, thereby reducing risk and uncertainty. Without an operating agreement, the LLC Law applies by default, which may not align with members’ intentions. A tailored agreement, therefore, gives members flexibility and control. In Kober , the LLC had an operating agreement that governed the admission of new members. Under that agreement, even if an assignment occurs, without explicit consent from other members, the assignee cannot participate in management or assert member rights. The failure to obtain the consent of the other members was the death knell of plaintiff’s derivative claims. Only members of an LLC have standing to bring derivative actions on behalf of an LLC. As made clear in Kober , nonmembers, even with assigned economic interests, cannot pursue such claims. _______________________ 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] Behrend v. New Windsor Group, LLC , 180 A.D.3d 636, 639 (2d Dept. 2020); see Limited Liability Company Law (“LLC Law”) § 603(a)(1). [2] LLC Law § 603(a)(2); see Behrend , 180 A.D.3d at 639. It is important to note that Section 603(a) of the LLC Law makes clear that an assignment of a membership interest is governed by the statute, “[e]xcept as provided in the operating agreement.” [3] LLC Law § 603(a)(3); see Behrend , 180 A.D.3d at 639. [4] Behrend , 180 A.D.3d at 639; see  LLC Law § 602(b)(2). [5] Addressing the terms of the operating agreement, the motion court found that there was “no provision in the Operating Agreement which contradicts the language of [LLCL] § 603(a)(3).” [6] Slip Op. at *2. [7] Id.  (citing Behrend , 180 A.D.3d at 640; Kaminski , 169 A.D.3d at 786). The Supreme Court found “There is no provision in the Operating Agreement that a member’s interest may be evidenced by a certificate issued by the company, and plaintiffs do not claim that such a certificate reflecting transfer of membership was ever issued. The Operating Agreement at ¶ 13 sets forth the process whereby members may admit new members. Plaintiffs do not allege that the defendant members ever caused the Company to admit plaintiffs as members.” [8] Id. [9] Id.  (citing Kaminski v. Sirera , 169 A.D.3d 785, 786 (2d Dept. 2019)). [10] Id.  (citing   Tzolis v. Wolff , 10 N.Y.3d 100, 102 (2008); Harounian v. Harounian , 198 A.D.3d 734, 736 (2d Dept. 2021); Kaminski , 169 A.D.3d at 786). [11] Id.  (citing Behrend , 180 A.D.3d at 640).

By:  Jeffrey M. Haber In Brearly v. Weis Mkts., Inc. , 2025 N.Y. Slip Op. 34485(U) (Sup. Ct., Broome County Oct. 31, 2025), the motion court was asked to consider the viability of claims for violations of General Business Law (“GBL”) §§ 349 and 350, which prohibit false advertising and deceptive acts or practices in the conduct of any business, trade, or commerce. [1] As discussed below, the motion court held that plaintiff failed to satisfy the elements of the claims asserted. In particular, plaintiff alleged that “Salt & Vinegar Flavored Potato Chips” packaging was misleading under GBL §§ 349 and 350 because it implied natural ingredients, though the chips contained artificial flavorings like malic acid. The motion court held the claims failed. While the packaging was consumer-oriented, an element of a GBL claim, it was not materially misleading: the label stated “flavored,” signaling artificial ingredients, and omitted terms like “all natural.” Additionally, the motion court rejected plaintiff’s “price premium” theory of damages because the chips were a lower-cost store brand, not marketed at a premium. Without material deception or injury, the motion court concluded that the complaint did not meet statutory requirements necessary to withstand the motion to dismiss. Summary of the Action Plaintiff alleged that she purchased defendant’s “Salt & Vinegar Flavored Potato Chips” from January 2022 through January 2025. She asserted that many consumers, including herself, seek foods made with natural flavors and ingredients and try to avoid products containing artificial flavoring, which they view as potentially less healthy. Plaintiff claimed that the product’s packaging misled consumers because the chips did not contain real vinegar; instead, the vinegar taste was derived from artificial ingredients. Plaintiff emphasized that the words “salt & vinegar” appeared in a large, white font at the top of the front label, while the phrase “flavored potato chips” appeared below it in a smaller, darker font, allegedly suggesting the presence of natural ingredients. Plaintiff also pointed to the imagery on the packaging: a glass bowl that appeared to hold salt and a wooden spoon next to a cruet filled with vinegar. Despite these representations, the ingredient panel on the back listed sodium diacetate and malic acid—both artificial flavorings—rather than vinegar. Plaintiff further asserted that she paid more for the product than she otherwise would have had she known it contained artificial flavoring, even though the chips were sold as a more economical store-brand alternative to national brands. She alleged that these labeling and pricing practices amounted to deceptive conduct in violation of the GBL. The GBL To state a claim under GBL §§ 349 and 350, “a plaintiff must allege that a defendant has engaged in (1) consumer-oriented conduct, that is (2) materially misleading, and that (3) the plaintiff suffered injury as a result of the allegedly deceptive act or practice. [2]  A claim under these statutes does not lie when the plaintiff alleges only “a private contract dispute over policy coverage and the processing of a claim which is unique to the[] parties, not conduct which affects the consuming public at large.” [3]  Thus, a plaintiff claiming the benefit of either Section 349 or Section 350 “must charge conduct of the defendant that is consumer-oriented” or, stated differently, “demonstrate that the acts or practices have a broader impact on consumers at large.” [4]   Notably, the deceptive practice does not have to rise to “the level of common-law fraud to be actionable under section 349.” [5]  In fact, “[a]lthough General Business Law § 349 claims have been aptly characterized as similar to fraud claims, they are critically different.” [6]  For example, while reliance is an element of a fraud claim, it is not an element of a GBL § 349 claim. [7]   Nevertheless, a plaintiff must allege the existence of a materially misleading act or advertisement to state a cause of action under GBL §§ 349 and 350. [8]  The test for both a deceptive act or deceptive advertisement is whether the act or advertisement is “likely to mislead a reasonable consumer acting reasonably under the circumstances.” [9] Whether a particular act or advertisement is materially misleading may be made by a reviewing court as a matter of law. [10] The Motion Court’s Decision As to the first element, the motion court found there was “no question … the packaging at issue is consumer oriented.” [11]  Though plaintiff satisfied the first element of the claims, the motion court held that plaintiff failed to satisfy the second and third elements of the claims. With regard to the second element ( i.e. , consumer-oriented conduct that is materially misleading), the motion court held that plaintiff failed to state a claim. [12]  The motion court found that the “label at issue expressly state[d] the chips [were] ‘flavored’, thereby indicating the presence or possibility of artificial ingredients.” [13] Plaintiff alleged that the packaging was deceptive because a reasonable consumer would expect the chips to contain only “natural” ingredients based on the label “Salt & Vinegar Flavored Potato Chips” juxtaposed with the image of a cruet containing vinegar adjacent to a bowl containing salt. Defendant argued, among other things, that no reasonable consumer would be misled into believing that its salt and vinegar potato chips did not contain artificial ingredients. Defendant further argued that the packaging at issue did not contain overt statements, such as “all natural,” and that the presence of a cruet filled with amber liquid, ostensibly vinegar, did not create the false impression about the ingredients of the chips. The representations about flavoring, as opposed to ingredients, said defendant, were standard marketing techniques that had been widely held to be permissible in other litigations. The motion court also held that “[p]laintiff’s position [was] further undercut by the omission of any terms that den[ied] the presence of artificial ingredients to a reasonable consumer, such as ‘all natural’”. [14]  “Although the front label refer[red] to a flavor (i.e., vinegar),” said the motion court, “it makes no claims about ingredients or the source of the vinegar flavoring, nor [was] it reasonable to presume the product contain[ed] a specific ingredient”. [15]  “Case law repeatedly dismisses claims alleging deception by flavoring coming from a particular ingredient,” noted the motion court. [16]  Therefore, the motion court found that the “complaint conflate[d] the packaging’s representations about the product’s flavoring with its ingredients and, therefore, fail[ed] to state a viable cause of action because the packaging [was] unlikely to mislead a reasonable consumer”. [17]   The motion court further held that plaintiff failed to satisfy the third element of the claim, “namely … that plaintiff suffered an injury from the supposedly false or misleading packaging”. [18]  In the complaint, plaintiff advanced a “price premium theory”, under which “[a] company market[s] a product as having a unique quality, that the marketing allowed the company to charge a price premium for the product, and that the plaintiff paid the premium and later learned that the product did not, in fact, have the marketed quality”. [19]  The motion court found that the allegations in the complaint actually undermined plaintiff’s position: “A review of the complaint, however, reveals plaintiff’s acknowledgment that defendant’s potato chips were not marketed as a national brand at a premium price, but rather as a ‘private label product’ sold at a lower cost compared to national brands.” [20]   The motion court concluded that “[w]ithout the allegation that plaintiff paid a premium for defendant’s product because of its labeling, but rather an admission that she did not, plaintiff … failed to satisfy the third prong of a claim for deceptive practice and/or false advertising by failing to allege damages arising from the allegedly deceptive labeling of defendant's product”. [21]   Takeaway For GBL §§ 349 and 350 claims, plaintiffs must demonstrate that the subject marketing is materially misleading and caused actual harm. As explained by the motion court in Brearly , flavor descriptions and imagery alone, without explicit ingredient claims, generally do not suffice. Additionally, price-premium arguments require evidence that the product was sold at a higher price due to the alleged misrepresentation. In Brearly , plaintiff failed to allege harm due to a price premium, especially since plaintiff acknowledged that defendant’s potato chips were not marketed as a national brand at a premium price. _______________________________ 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] This Blog has written numerous articles examining GBL §§ 349 and 350, including: New York Court of Appeals Reaffirms that Claims Under GBL 349 and 350 Must Have a Broader Impact On Consumers at Large; GBL 349 and 350, Contractual Privity and The Warranty of Merchantability; and Licorice Sticks and New York’s General Business Law. In addition to the foregoing articles, readers can find additional articles examining GBL § 349 by clicking on the  BLOG  tile on our  website  and searching for any GBL topics that may be of interest to you. [2] Koch v. Acker, Merrall & Condit Co. , 18 N.Y.3d 940, 941 (2012); Goshen v. Mutual Life Ins. Co. of N.Y. , 98 N.Y.2d 314, 324 n.1 (2002). GBL § 349(a) provides that “[d]eceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service in this state are hereby declared unlawful[,]” while GBL § 350 states that “[f]alse advertising in the conduct of any business, trade or commerce or in the furnishing of any service in this state is hereby declared unlawful.” [3] New York Univ. v. Continental Ins. Co. , 87 N.Y.2d 308, 321 (1995) (internal quotation marks omitted). [4] Oswego Laborers’ Local 214 Pension Fund v. Marine Midland Bank , 85 N.Y.2d 20, 25 (1995). [5] Boule v. Hutton , 328 F.3d 84, 94 (2d Cir. 2003) (citing Gaidon v. Guardian Life Ins. Co. , 94 N.Y.2d 330, 343 (1999)). [6] Gaidon , 94 N.Y.2d at 343. [7] Stutman v. Chemical Bank , 95 N.Y.2d 24, 29 (2000); Small v. Lorillard Tobacco Co. , 94 N.Y.2d 43, 55-56 (1999). [8] See Himmelstein, McConnell, Gribben, Donoghue & Joseph, LLP v. Matthew Bender & Co., Inc. , 37 N.Y.3d 169, 176 (2021); Andre Strishak & Assocs., P.C. v. Hewlett Packard Co. , 300 A.D.2d 608, 609 (2d Dept. 2002). [9]   Oswego , 85 N.Y.2d at 26. See also   Andre Strishak , 300 A.D.2d at 609;  Himmelstein , 37 N.Y.3d at 178. [10] Id. [11] Slip Op. at *4 (citation omitted). [12] Id.  at *5. [13]   Id.  (citing Angeles v. Nestlé USA, Inc. , 632 F. Supp. 3d 309, 315 (S.D.N.Y. 2022)). [14] Id.  at 6 (citing Marotto v. Kellogg Co., 2018 WL 10667923, at 8 (S.D.N.Y. 2018)). [15] Id.  (citing Wynn v. Topco Assocs., LLC , 2021 WL 168541, at *4 (S.D.N.Y. 2021)). [16] Id.  (citing Oldrey v. Nestlé Waters North America, Inc. , 2022 WL 2971991 (S.D.N.Y. 2022); see also Myers v. Wakerfern Food Corp. , 2022 WL 603000 (S.D.N.Y. 2022) (“flavor designation does not convey an explicit ingredient claim”)). [17] Id.  (citing Angeles , 632 F. Supp. 3d at 315-316). [18] Id. [19] Colpitts v. Blue Diamond Growers , 527 F. Supp. 3d 562, 577 (S.D.N.Y. 2021) (internal citations omitted); Hawkins v. Coca-Cola Co. , 654 F. Supp. 3d 290, 301 (S.D.N.Y. 2023). [20] Slip Op. at *7. [21] Id.

By:  Jeffrey M. Haber In today’s Fraud Notes, we examine two cases involving different issues impacting a fraud claim. In RSD857, LLC v. Wright , 2025 N.Y. Slip Op. 06833 (1st Dept. Dec. 09, 2025), we examine the actionability of appraisals. In Olshan Frome Wolosky, LLP v. Kestenbaum , 2025 N.Y. Slip Op. 06816 (Dec. 09, 2025), we examine the duplication doctrine. [1] RSD857  involved allegations that one of the defendants orchestrated a foreclosure rescue scheme to acquire another defendant’s property through deceptive short sale tactics. Defendant claimed that the other defendant promised to preserve his equity and allow him to remain in his home but induced him to transfer title under false pretenses. A key element of the alleged scheme was an appraisal that allegedly undervalued the property using flawed methodologies that caused defendant and the lender to approve the short sale. On appeal, the First Department held that defendant stated a fraud claim against the appraiser notwithstanding the fact that an appraisal is generally not actionable because it is an opinion as to value. In Olshan , plaintiff sought payment of unpaid legal fees for representing certain defendants in three commercial actions. The parties formalized their relationship in July 2022 through an engagement agreement, later modified by a July 2023 revised fee agreement after one of the defendants promised to make payment. When defendants failed to comply, Olshan withdrew and sued for breach of contract, fraudulent inducement, and veil piercing. The motion court dismissed all claims against most of the defendants, finding, inter alia , the fraud claim duplicative of the breach of contract claim and the veil-piercing allegations to be insufficient. On appeal, the First Department reinstated the breach of contract claim against one of the defendants, holding that the emails exchanged with respect to the revised fee agreement evidenced a binding modification, but affirmed dismissal of the fraud and veil-piercing claims. RSD857 v. Wright RSD857  arose from allegations of a predatory mortgage foreclosure rescue scheme involving multiple defendants. At the center of the controversy is defendant Albert Wright (“Wright”), a homeowner who claimed he was fraudulently induced to transfer title to his property (the “Property”) under the guise of a short sale arrangement designed to save his home from foreclosure. Wright and his wife, Doreen Green (“Green”), purchased the Property in 1998 for $95,000. Over the years, they refinanced multiple times to fund repairs. In 2006, they obtained a $1.151 million mortgage loan secured by the Property. The loan eventually went into default in April 2011, and by 2017, the mortgagee initiated a foreclosure action against Wright, Green, and others. In September 2017, defendant Michael Petrokansky (“Petrokansky”) approached Wright on behalf of YKSNAK Holdings LLC (“YKSNAK”), acknowledging the foreclosure and initially offering to purchase the Property outright. Petrokansky later proposed an alternative to the purchase: he would assist Wright in keeping his home through a short sale arrangement. Thereafter, Petrokansky allegedly assured Wright that he could prevent foreclosure, preserve Wright’s equity, and allow him to remain in the Property. In February 2018, Wright and Green executed a memorandum of contract to sell the Property to RSD857. Allegedly acting on Petrokansky’s advice, Wright filed for Chapter 13 bankruptcy on March 5, 2018, to halt foreclosure proceedings. On April 4, 2018, Wright and Green signed a short sale contract to sell the Property to defendant Joby Hcock1131 LLC for $520,000, and on April 9, 2018, they executed a memorandum of option contract with YKSNAK. In January 2019, Petrokansky arranged for two appraisals of the Property; defendant John Viscusi (“Viscusi”) performed the second. Wright alleged that Viscusi grossly undervalued the Property at $825,000, ignoring its development potential. The appraisal, dated January 18, 2019, was allegedly instrumental in convincing Wright and the mortgagee to approve the short sale. Wright alleged that Viscusi’s appraisal employed unreliable standards and methodologies, misrepresented zoning restrictions, omitted prior sale contracts, and failed to include comparable rentals or land sales. According to Wright’s counterclaims/crossclaims, a forensic review later identified these deficiencies and concluded that the appraisal did not comply with professional standards. In particular, the review showed that Viscusi’s appraisal egregiously undervalued the property by millions of dollars, contained numerous errors, was misleading, and was not credible. Although Viscusi invoiced Petrokansky, the appraisal stated it was prepared for Wright, indicating that Viscusi knew Wright would rely on it. Wright alleged that this awareness, combined with the appraisal’s flaws, supported his fraud claim against Viscusi. On October 17, 2019, Wright and Green executed a short sale approval application. Eleven days later, on October 28, 2019, they signed approximately 20 documents intended to resolve the foreclosure and finalize the short sale. Among these documents were a residential contract of sale transferring the property to RSD857 for $850,000 and a deed recorded on November 18, 2019. A property transfer report listed the sale price as $975,000. Wright alleged that RSD857 paid $975,000 to the mortgagee, despite an outstanding balance exceeding $1.7 million. Following this transaction, the court discontinued the foreclosure action and canceled the notice of pendency. In August 2020, defendant, Spencer Developers Inc. (“Spencer”), applied to demolish the Property and construct a luxury condominium tower. Wright claimed that Petrokansky reneged on promises to allow him to remain in the home and instead sought to eject him. In his amended answer, Wright asserted eight affirmative defenses and nine counterclaims, including, as relevant to the appeal and this article, fraud against RSD857, Petrokansky, Viscusi, and Cohen. Wright alleged that Petrokansky and his affiliates orchestrated a scheme to strip him of his property under false pretenses, aided by, among other things, Viscusi’s false and misleading appraisal. Viscusi, among others, moved to dismiss the counterclaims/crossclaims. Regarding the fraud claim asserted against Viscusi, the motion court denied the motion. Viscusi argued that the fraud claim should be dismissed because an appraisal is a matter of opinion upon which there can be no basis for detrimental reliance. Wright maintained that an appraisal is actionable when it is supported by flimsy and unreliable information. It is well settled that appraisals are generally not actionable under a theory of fraud or fraudulent inducement because such representations of value are matters of opinion upon which there can be no basis for detrimental reliance. [2]   However, “an opinion, especially an opinion by an expert, may be found to be fraudulent if the grounds supporting it are so flimsy as to lead to the conclusion that there was no genuine belief back of it.” [3]   Furthermore, “an assessment of market value that is based upon misrepresentations concerning existing facts may support a cause of action for fraud”. [4]  In such a case, the appraisal is actionable because it is a factual representation—not an opinion. [5]   Based upon the foregoing principles, the motion held that Wright stated a claim for fraud against Viscusi. The motion court explained that Petrokansky allegedly arranged for Viscusi to prepare an appraisal in which Viscusi significantly undervalued the Property by “using unreliable standards and methodologies, to make the short sale more appealing to the lender and to mislead Mr. Wright”. The motion court pointed to the forensic review appraisal and analysis that was performed, which identified numerous misrepresentations and deficiencies in Viscusi’s appraisal. The motion court explained that according to the forensic review, Viscusi failed to prepare a report in conformity with the Uniform Standards of Professional Appraisal Practice; failed to accurately report publicly available information that Wright and Green had twice contracted to sell the Property before the short sale transaction; accurately report current zoning restrictions; failed to identify the development potential for the site; included a misleading statement with respect to the highest and best use for the Property; and failed to cite any comparable rentals or comparable properties for sale in the appraisal. Additionally, the forensic review found fault with Viscusi’s cost approach because Viscusi failed to include or cite information on comparable land sales in the area. The motion court also found that Viscusi may have been aware that Wright would rely on the appraisal. [6]  The motion court explained that although Viscusi sent the invoice for the appraisal to Petrokansky, the first page of the appraisal stated that it was prepared for Wright. Given the number of alleged misstatements and deficiencies in the appraisal, together with Viscusi’s acknowledgement that the appraisal had been prepared for Wright, the motion court held that Wright pleaded facts sufficient to state a claim of fraud. [7] On appeal, the First Department affirmed. The Court held that the motion court “properly denied Viscusi’s motion to dismiss the counterclaims against him because Wright adequately pleaded a claim for fraud.” [8] The Court found that “Wright's allegations that Viscusi’s valuation of the [P]roperty at $825,000, and that ‘statements used to support this valuation’ were ‘false and misleading and misrepresented material facts,’ were supported by the forensic analysis performed by [the forensic] appraiser … annexed to Wright’s pleading”. [9]  That analysis, said the Court, showed “that Viscusi’s appraisal egregiously undervalued the [P]roperty by millions of dollars, contained numerous errors, was misleading, and [was] not credible.” [10] “Moreover”, said the Court, “Wright adequately pleaded that Viscusi was aware that his misrepresentations would reasonably be relied upon by Wright”. [11]   The motion explained that “Viscusi’s appraisal explicitly stated that its intended recipient was Wright, and that its intended use was for Wright, as ‘lender/client,’ to evaluate the [P]roperty as to its fair market value.” [12]  Under those circumstances, the Court concluded that “Wright sufficiently pleaded that he reasonably relied on Viscusi’s appraisal for this purpose.” [13]   Olshan Frome Wolosky, LLP v. Kestenbaum Olshan arose from a non-payment of legal fees, in which plaintiff, Olshan Frome Wolosky LLP (“Olshan”), asserted five causes of action against defendants, Fortis Property Group, LLC (“Fortis”), FPG Maiden Lane, LLC (“FPG Maiden Lane”), FPG Maiden Holdings, LLC (“FPG Maiden Holdings”), Joel Kestenbaum, and Louis Kestenbaum (collectively, the “Defendants”): (1) breach of contract; (2) unjust enrichment; (3) quantum merit; (4) fraudulent misrepresentation; and (5) charging lien. Defendants moved to dismiss the complaint in its entirety. The motion court granted in part, and denied in part the motion. Olshan alleged that the fees owed by defendants stemmed from its representation of defendants in three different ongoing commercial actions in New York County Supreme Court (collectively, the “Actions”).  Defendants’ retention of Olshan was memorialized in July 2022 through Olshan’s Engagement Letter and accompanying Terms of Engagement (collectively, the “Engagement Agreement”). The Engagement Agreement was signed by Fortis’ General Counsel on behalf of FPG Maiden Lane, formally commencing Olshan’s representation of the Defendants. Olshan continuously provided legal services to Defendants until November 2023. Olshan alleged that Defendants defaulted on payments multiple times under the payment procedure clause of the Engagement Agreement, but that Olshan had continued representing Defendants because they had promised to pay. The most notable of these promises asserted in the complaint occurred on July 12, 2023, when Fortis’ General Counsel informed Olshan that “Louis [Kestenbaum] ha[d] approved payment of $425k to fully resolve the open invoices from November through April,” and further set out new guidelines regarding how Defendants’ would handle payments from thereon out. Olshan accepted these new terms, thus forming a supplementary agreement between the parties (“Revised Fee Agreement”). When Defendants allegedly did not comply with the new terms, Olshan indicated that it would not continue representing Defendants without full payment for the services previously rendered. The parties formally severed their relationship by stipulating to a substitution of counsel in one of the Actions. Olshan asserted three causes of action that are relevant to the appeal and this article: (1) breach of contract for failing to pay legal fees (encompassing the alleged Revised Fee Agreement); (2) fraudulent inducement based on the allegation that Louis Kestenbaum never intended to perform the July 2023 payment promises; and (3) an alter ego/veil-piercing claim to hold Louis Kestenbaum personally liable for the debts of the Fortis entities.   By decision and order dated August 21, 2024, the motion court granted the motion in relevant part. The motion court dismissed the breach of contract cause of action as against Fortis, Louis and Joel Kestenbaum, and FPG Maiden Holdings, LLC, on the grounds of lack of privity. The motion court also dismissed the fraudulent misrepresentation claim for failure to state a claim and because the cause of action was duplicative of the breach of contract cause of action, and held that the complaint be dismissed in its entirety as against Louis Kestenbaum. Olshan appealed the dismissal order, but only with respect to: (1) the breach of contract claim; (2) the fraud claim; and (3) the alter ego/veil-piercing theory against Louis Kestenbaum. The First Department unanimously modified the order, on the law, to deny the motion to dismiss the first cause of action as against Fortis, and otherwise affirmed. The Court held that the motion court “should have allowed the cause of action for breach of contract to proceed as against Fortis ….” [14]  The Court noted that “[a]lthough a breach of contract cause of action generally cannot be asserted against a nonsignatory to the agreement and Fortis … did not execute the engagement letter, the complaint sufficiently allege[d] that the engagement letter was modified by the later revised fee agreement, which bound Fortis … to the terms of the engagement letter”. [15]  The Court found that the “emails between the parties [were] sufficient to demonstrate [the parties’] agreement to modify the engagement letter so that Fortis … would pay the outstanding and ongoing legal fees under the terms of the revised fee agreement”. [16]   Turning to the fraud cause of action, the Court held that the motion court “properly dismissed the cause of action … as against Louis Kestenbaum”. [17]  The Court observed that “in effect”, plaintiff claimed that “Louis Kestenbaum made a promise of payment without the intent to perform that promise”. [18]  The Court explained that “[e]ven assuming the truth of this allegation, … Kestenbaum’s alleged statement would not constitute a promise collateral or extraneous to the agreements at issue”. [19]  Notably, the Court found that “[p]laintiff also did not allege that it sustained any damages that would not be recoverable under its breach of contract cause of action. Rather, plaintiff merely seeks to recover its legal fees, which it is entitled to under the terms of the agreements should it prevail in this action”. [20]  Under such circumstances, the claim was duplicative of the breach of contract claim. Finally, the Court held that “plaintiff failed to allege sufficient facts that would warrant piercing the corporate veil to hold Louis Kestenbaum personally liable for the legal fees that the Fortis entities allegedly owe to plaintiff.” [21]  The Court explained that “[a]lthough Louis Kestenbaum may have dominated some of the Fortis entities, plaintiff failed to allege that he abused the corporate form for the purpose of obtaining legal services without intending to pay for them.” [22]   Takeaway RSD857  raises several significant legal implications concerning fraud causes of action. Generally, appraisals are treated as opinions, not actionable statements of fact. However, the RSD857  court reaffirmed that an appraisal may support a fraud claim when its underlying methodology is so deficient that it suggests no genuine belief in its accuracy. As discussed, Wright alleged that Viscusi’s appraisal undervalued the property by ignoring development potential, misreporting zoning restrictions, and omitting comparable sales. These alleged deficiencies, coupled with forensic findings, allowed the Court to infer fraudulent intent and affirm the denial of the motion to dismiss. RSD857 , therefore, underscores that professionals cannot shield themselves behind the “opinion” defense when their work is knowingly misleading or recklessly prepared. RSD857  also highlights a critical principle concerning reliance: when a person knows that a third party will rely on their work, tort liability may attach for fraudulent preparation. In RSD857 , Viscusi’s appraisal explicitly stated it was prepared for Wright, creating a reliance scenario that the Court found actionable. Olshan  raises several significant legal implications concerning breach of contract and fraud causes of action. Olshan  highlights the fact that emails can constitute a binding modification of an agreement. As noted, the First Department held that the July 2023 Revised Fee Agreement—formed through email exchanges—was enforceable against Fortis even though Fortis did not sign the original engagement letter. Olshan  also reaffirms three principles involving fraud claims: fraud claims based on promises without intent to perform are not actionable; promises to perform are not collateral to the contract; and fraud damages that seek the same damages as the contract claim are duplicative. _________________________________ 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]  This Blog  has written dozens of articles addressing numerous aspects of fraud claims and fraud claims and breach of contract claims asserted in the same action. To find such articles, please see the  Blog  tile on our  website  and search for any fraud, fraudulent inducement,  breach of contract, or other commercial litigation, topics that may be of interest you. As relates to today’s article, type “fraud”, “justifiable reliance”, “fraudulent inducement”, “matters of opinion”, or “duplication” into the “search” box. [2]   Brang v. Stachnik , 235 App. Div. 591, 592 (1932), aff’d , 261 N.Y. 614 (1933); Ellis v. Andrews , 56 N.Y. 83, 85-87 (1874); Stuart v. Tomasino , 148 A.D.2d 370, 371 (1st Dept. 1989). [3]   Ambassador Factors v. Kandel & Co. , 215 A.D.2d 305, 308 (1st Dept. 1995) (citation omitted); see also   Ultramares Corp. v. Touche , 255 N.Y. 170, 186 (1931). [4]   Flandera v. AFA Am., Inc. , 78 A.D.3d 1639, 1640 (4th Dept. 2010). [5]   See Cristallina v. Christie, Manson & Woods Int’l , 117 A.D.2d 284, 294 (1st Dept. 1986); People v. Peckens , 153 N.Y. 576, 591 (1897) (statement “as to value” amounts to an actionable “affirmation of fact” when “made by a person knowing them to be untrue, with an intent to deceive and mislead”); Polish & Slavic Fed. Credit Union v. Saar , 39 Misc. 3d 850, 855 (Sup. Ct., Kings County 2013) (“[T]o the extent that the EMVs [ i.e. , estimated market values] of the subject properties were extrapolated from misrepresentations of factual data, the appraisal itself may be considered a factual misrepresentation rather than a mere matter of opinion.”).  [6]   See Rodin Props. Shore Mall v. Ullman , 264 A.D.2d 367, 368-369 (1st Dept. 1999) (“[w]hen a professional ... has a specific awareness that a third party will rely on his or her advice or opinion, the furnishing of which is for that very purpose, and there is reliance thereon, tort liability will ensue if the professional report or opinion is negligently or fraudulently prepared”). [7]   Houbigant, Inc. v. Deloitte & Touche , 303 A.D.2d 92, 100 (1st Dept. 2003). [8]  Slip Op. at *1. [9]   Id.  (citations omitted). [10]   Id. [11]   Id.  (citation omitted). [12]   Id. [13]   Id. (citing Remediation Capital Funding LLC v. Noto , 147 A.D.3d 469, 470-471 (1st Dept. 2017)). [14]  Slip Op. at *1. [15]   Id.  (citing Lawrence M. Kamhi, M.D., P.C. v. East Coast Paint Mgt., P.C. , 177 A.D.3d 726, 727 (2d Dept. 2019)). [16]   Id.  (citing Kataman Metals LLC v. Macquarie Futures USA, LLC , 227 A.D.3d 569, 569 (1st Dept. 2024)). [17]   Id. [18]   Id. [19]   Id.  (citing Cronos Group Ltd. v XComIP, LLC , 156 A.D.3d 54, 65 (1st Dept. 2017)). [20]   Id.  (citing MaÑas v. VMS Assoc., LLC , 53 A.D.3d 451, 454 (1st Dept. 2008)). [21]   Id. [22]   Id.  (citations omitted).