Starting July 7, 2025, a new Rule 23 will take effect in the Commercial Division of the New York Supreme Court, authorizing the filing of amicus curiae briefs for the first time in trial-level proceedings. This important development further cements the Commercial Division’s role—both statewide and here in Westchester—as a forward-thinking venue for resolving sophisticated business disputes.

The new rule, adopted by Administrative Order of Chief Administrative Judge Joseph A. Zayas, allows non-parties to seek leave to submit amicus briefs by motion, typically brought on by order to show cause. The movant must file the proposed brief with its motion and make specified disclosures regarding its interest in the matter and any involvement by the parties or third parties in the brief’s preparation or funding. The court may deny the motion if it would cause judicial recusal or undue delay.

The rule was proposed by the Commercial Division Advisory Council, which noted that, unlike appellate courts, trial courts generally lack formal procedures for considering amicus briefs. The Council emphasized that the Commercial Division’s unique docket—regularly featuring high-stakes and precedential commercial matters—makes it especially well-suited for a rule encouraging thoughtful input from outside stakeholders.

As the Advisory Council explained, Rule 23 will “distinguish the Commercial Division from other trial courts and build upon its reputation as a leading and innovative court for resolving significant litigation.”

In Westchester, where the Commercial Division is overseen by Justices Linda Jamieson and Gretchen Walsh, the new rule provides a clear mechanism for industry groups, bar associations, and other interested entities to weigh in on cases that may have broader business implications. It also reflects the continued evolution of the Commercial Division into a model of specialized, efficient, and transparent judicial administration.

For litigants and practitioners in Westchester, Rule 23 opens the door to more robust legal discourse and may offer valuable support in cases that raise novel or complex legal questions. As the Commercial Division continues to innovate, this latest addition further enhances its standing as a national leader in commercial adjudication.

To learn more about new developments in the Westchester Commercial Division, please subscribe to the Westchester Commercial Division Blog.

Westchester Commercial Division Justice Linda S. Jamieson issued a detailed Decision and Order in Camsan Inc. v. OPRA III LLC, Index No. 64814/2022 (and related actions), addressing multiple motions involving mechanic’s liens filed against a large residential construction project in Rye. The decision clarifies the application of New York’s Lien Law in the context of condominium developments and reaffirms the courts’ liberal approach toward lien enforcement.

Background

The case involves an expansive and complex construction project at 120 Old Post Road in Rye, now a condominium property. Numerous contractors and suppliers—ranging from general contractor Hudson Meridian Construction Group to smaller subcontractors like Camsan Inc., Valex Enterprises, and GFC Lighting—filed mechanic’s liens after allegedly not being paid for their work.

The property owner, OPRA III LLC (“OPRA”), moved to discharge all liens, asserting that they were facially invalid. OPRA argued that the liens (1) were filed against outdated or incorrect lot designations, (2) included sold units that were no longer owned by OPRA, or (3) were improper “blanket liens” against the entire condominium.

Multiple lienholders cross-moved to amend their liens nunc pro tunc to reflect only unsold units or those still owned by OPRA, and also sought court orders compelling OPRA to disclose ownership details.

Legal Analysis

Justice Jamieson rejected OPRA’s attempt to invalidate the liens wholesale, emphasizing several key principles of New York lien law:

  1. Liberal Construction of Lien Law: Citing Court of Appeals and Second Department precedent, the court reiterated that the Lien Law is remedial in nature and should be construed liberally to protect the rights of contractors and suppliers. Technical defects—such as overbroad property descriptions—do not necessarily invalidate a lien.
  1. Substantial Compliance Standard: The court found that the lienholders had substantially complied with the Lien Law. Even where a lien encompassed more property than appropriate, it could be enforced against the portion properly subject to the lien. Justice Jamieson cited E. Coast Mines & Materials Corp. v Golf Course Props. Co., 228 AD2d 545 [2d Dep’t 1996] as controlling authority.
  1. Doctrine of Laches Applies to Lien Challenges: The court found OPRA’s delay in raising challenges to the liens troubling. OPRA had participated in discovery and mediation for over a year without objecting to the liens’ validity. Justice Jamieson held that such delay prejudiced the lienholders, making OPRA’s position susceptible to a laches defense.
  1. Lien Validity Despite Condominium Conversion: Even though OPRA had sold some units, it still retained ownership of others at the time many liens were filed. Thus, consistent with Mussen v Franklin Square Assocs., V., LLC, 22 AD3d 1022, 1023 [3d Dep’t 2005], the liens remained valid as to the units still owned by OPRA and were not invalid on their face.

Ruling

In the Court’s Decision & Order, Justice Jamieson:

  • Denied OPRA’s motion to discharge the liens, except as to three defaulting parties.
  • Permitted all lienholders to amend their liens nunc pro tunc to properly identify unsold or OPRA-owned units.
  • Directed OPRA to disclose with particularity which units it currently owns and which it owned at the time each lien was filed.
  • Denied all requests for escrow or attorneys’ fees.

Conclusion

This ruling underscores the Commercial Division’s continued fidelity to the Lien Law’s remedial purpose. Owners seeking to challenge mechanic’s liens must do so promptly and cannot rely on hypertechnical defects—especially where the underlying labor and materials benefited the property. The decision is a reminder to contractors and owners alike that equity, timing, and a fair reading of the law all play crucial roles in lien enforcement.

To learn more about new developments in the Westchester Commercial Division, please subscribe to the Westchester Commercial Division Blog.

On January 28, 2025, New York State’s Chief Administrative Judge signed Administrative Order #38-2025, setting in motion significant changes for the Commercial Division’s jurisdiction over cases seeking only equitable or declaratory relief. Here’s what you need to know:

What’s Changing?

Until now, parties seeking treatment in the Commercial Division simply had to certify that their case was “presumptively commercial” according to the Rules for Commercial Division assignment. However, effective March 31, 2025, any case seeking exclusively equitable or declaratory relief must now also meet a county-specific monetary threshold. For Westchester County, that threshold is set at $100,000.

How Is the Threshold Determined?

The Court will assess whether a case meets the monetary requirement by considering the “value of the object of the action.” Under the new rule, this value is defined as the greatest of the following: (1) the value of the suit’s intended benefit; (2) the value of the right being protected; and (3) the value of the injury being averted.

This assessment is based on the details provided in the Commercial Division addendum and the operative pleadings at the time the party applies for Commercial Division assignment.

Why the Change?

The amendment, proposed by the Commercial Division Advisory Council, aims to streamline the Division’s caseload. By requiring a monetary threshold even for cases solely seeking equitable or declaratory relief, the Division hopes to reduce the number of less resource-intensive cases. This shift is intended to allow the Division to focus more effectively on complex and high-stakes litigations that demand its specialized resources.

Impact on Practitioners and Litigants

  • For Attorneys: When filing for Commercial Division assignment, it will no longer be sufficient to simply certify a case as “presumptively commercial.” Attorneys must now carefully evaluate the monetary value of the case’s benefits or potential injury, ensuring that they meet the set threshold for Westchester County.
  • For Litigants: Parties must be prepared to demonstrate that their case’s “object” meets or exceeds the monetary requirement, which may influence how claims are presented and strategized in the pleadings.

Final Thoughts

This administrative amendment is expected to refine the scope of cases accepted by the Commercial Division. By imposing a clear monetary benchmark, the Division reinforces its commitment to managing its resources effectively and addressing only those cases that genuinely require its specialized attention.

Stay tuned for further updates as the implementation date approaches, and feel free to reach out with any questions or comments regarding this development.

To learn more about new developments in the Westchester Commercial Division, please subscribe to the Westchester Commercial Division Blog.

The New York County Lawyers Association (NYCLA) recently celebrated a major milestone in the legal community, honoring the 30th Anniversary of the Commercial Division of the New York State Supreme Court. The event took place on March 4, 2025, at The Pierre Hotel in Manhattan, bringing together legal luminaries, corporate counsel, and judiciary members, including Westchester Commercial Division Justice Linda S. Jamieson, to recognize the Division’s impact on business litigation in New York.

A Night of Recognition and Celebration

NYCLA’s 2025 Annual Gala paid tribute to the Commercial Division’s pivotal role in shaping commercial litigation over the past three decades. The evening’s highlight was the presentation of NYCLA’s highest honor, the William Nelson Cromwell Award, to the Commercial Division Justices from across New York State, recognizing their dedication to upholding excellence in commercial law.

Among the distinguished speakers at the event were: Chief Judge Rowan D. Wilson, Chief Administrative Judge Joseph A. Zayas, Heather C. Mulligan, President and CEO of The Business Council of New York State, Inc., and Brian P. Campbell, Treasurer of the Association of Corporate Counsel (ACC).

Their remarks underscored the Commercial Division’s crucial role in maintaining New York’s position as a global center for business and commerce.

Honorary General Counsel Committee: A Powerful Tribute

Demonstrating widespread corporate support for the Commercial Division, 54 General Counsel from leading corporations joined the Honorary General Counsel Committee to commemorate this special occasion. Chaired by Michael Fricklas, Chief Legal Officer and Corporate Secretary of Advance, this committee included top legal executives from major organizations such as The New York Times, BlackRock, Goldman Sachs, Pfizer, Morgan Stanley, and NBCUniversal. Their participation reflected the Division’s significant influence on corporate litigation and governance.

A Historic Event for the Bench and Bar

NYCLA’s Annual Gala has long been considered the “bench and bar event of the year,” attracting prominent judges, attorneys, and business leaders. This year’s celebration was no exception, as the event brought together state and federal trial and appellate court judges, along with government officials, to honor the Commercial Division’s lasting impact.

The event was chaired by Robert L. Haig of Kelley Drye & Warren LLP, further cementing its prestige within the legal community.

Westchester’s Commercial Division: A Premier Venue for Business Disputes

As part of New York’s esteemed Commercial Division, Westchester County’s Commercial Division, led by Justices Linda Jamieson and Gretchen Walsh, has become a key forum for resolving complex business disputes in Westchester. With its efficient case management, sophisticated rulings, and business-savvy judiciary, Westchester’s Commercial Division has earned a reputation for excellence, attracting high-profile commercial cases and providing a crucial venue for businesses operating in the region. Its continued success highlights the Division’s statewide impact and reinforces New York’s leadership in commercial litigation.

The Legacy of the Commercial Division

Since its establishment, the Commercial Division has been a model for efficiency, expertise, and fairness in resolving complex commercial disputes. The 30th Anniversary celebration was a testament to its success and the enduring commitment of the judiciary, legal professionals, and business leaders who support its mission.

NYCLA’s recognition of the Commercial Division at this year’s Gala reaffirmed the importance of a robust, business-friendly legal framework in New York, ensuring that the state remains a premier hub for commerce and law.

Embracing Technology Disputes and Enhancing Efficiency with Referee Appointments

A recently issued Administrative Order by the Chief Administrative Judge of the Courts (AO/77/24, dated February 14, 2024) brings two important changes to the Commercial Division Rules that will affect case jurisdiction and case management.

Expanded Jurisdiction for Technology-Related Matters

What’s New?

Section 202.70(b)(1) of the Uniform Rules for the Supreme and County Courts has been amended to explicitly include “technology transactions and/or commercial disputes involving or arising out of technology” among the examples of commercial cases eligible for Commercial Division treatment. This change confirms the Division’s authority to handle disputes where technology plays a central role.

Why This Change?

In its accompanying memorandum, the Commercial Division Advisory Council emphasized that technology is an increasingly vital element in modern business. With New York positioned as both a financial and technology hub, the amended rule ensures that the Commercial Division’s sophisticated expertise is leveraged for disputes arising from technology-related business transactions. The memorandum notes that several other states’ business courts have already embraced this approach, underscoring the importance of a clear statement regarding the Division’s jurisdiction over technology disputes. ​

Introduction of Commercial Division Rule 9-b – The Referee Option

What’s New?

The new Rule 9-b, added to Section 202.70(g) of the Rules, provides that “on consent of the parties, and with the agreement of the Court, any person may be appointed by the Court to act in place of the assigned Supreme Court Justice, to determine any or all issues or to perform any act, with all the powers of the Supreme Court.” This innovative provision aims to offer an alternative mechanism for resolving complex issues without overburdening the judicial docket.

Why Introduce Referees?

According to the accompanying memorandum from the Commercial Division Advisory Council, the use of referees has been underutilized in New York. Referees—particularly experienced private practitioners—can efficiently handle numerous or complex issues in litigation, such as cases with multiple emergency rulings or extensive procedural orders. By delegating certain adjudicative functions, the Division seeks to expedite case resolution and preserve judicial resources for the most resource-intensive disputes. ​

Final Thoughts

These amendments signal a proactive effort by the Commercial Division to modernize its practices and to ensure that its jurisdiction reflects today’s business realities. By explicitly embracing technology-related disputes and introducing a flexible referee mechanism, the Division reinforces its commitment to efficiency and to resolving complex commercial litigation in a timely manner.

Stay tuned for further insights as these changes take effect, and please feel free to reach out with questions on these developments.

Sources: Administrative Order AO/77/24 ​; Commercial Division Advisory Council Memoranda on technology and referees.

An order of attachment is a provisional remedy that prevents a defendant from disposing of assets during the pendency of an action. In cases in which a defendant disposes of property with intent to defraud creditors or frustrate the enforcement of a judgment, Article 62 of the CPLR provides a mechanism to preserve those assets. Westchester Commercial Division Justice Linda Jamieson recently granted this remedy in Richard Stadtmauer et al. v. Mark Nordlicht et al., Index No. 51825/2020.

The Facts

In 2003, Nordlicht co-founded the Platinum Funds, a Manhattan-based family of hedge funds. PPVA was Platinum Funds’ signature fund and a master fund with three feeder funds. Plaintiffs are two investors in PPVA who lost millions of dollars following the fund’s collapse. Nordlicht personally guaranteed repayment of certain promissory notes issued to Plaintiffs by PPVA.

In January 2020, in a JAMS arbitration commenced by Plaintiffs against Nordlicht to enforce the personal guaranty, Hon. Bernard Fried (Ret.) issued a final award in favor of Plaintiffs in the amount of $14,896,316.16. Immediately thereafter, Plaintiffs commenced a proceeding in the Southern District of New York to confirm the award. Nordlicht sought to have the award set aside on the grounds that he lacked the resources to pay it.

Plaintiffs simultaneously commenced an action in the Westchester Commercial Division, asserting claims for constructive fraudulent transfer, actual fraudulent transfer, and reverse veil piercing to unwind Nordlicht’s scheme, and seeking a prejudgment order of attachment preventing Defendants from transferring, encumbering, or otherwise affecting title to the properties in New Rochelle and New York City.

Applicable Legal Standards

As Justice Jamieson held, “[t]he law on attachments is well-settled” and Plaintiffs’ burden “is onerous.” The Second Department has explained: “Attachment is a provisional remedy designed to secure a debt by preliminary levy upon the property of the debtor to conserve it for eventual execution, and the courts have strictly construed the attachment statute in favor of those against whom it may be employed.” Hume v. 1 Prospect Park ALF, LLC, 137 A.D.3d 1080, 1081, 28 N.Y.S.3d 125, 126 (2d Dep’t 2016).

“In order to obtain an order of attachment under CPLR 6201(3), the plaintiff must demonstrate that the defendant has or is about to conceal his or her property in one or more of several enumerated ways, and has acted or will act with the intent to defraud his or her creditors, or to frustrate the enforcement of a judgment in favor of the plaintiff.” Mineola Ford Sales Ltd. v. Rapp, 242 A.D.2d 371, 371, 661 N.Y.S.2d 281, 282 (2d Dep’t 1997) (citations omitted).

Further, “[t]he moving papers must contain evidentiary facts – as opposed to conclusions – proving the fraud.” Id. “In addition to proving fraudulent intent, plaintiffs must also show probable success on the merits of the underlying action ….” Id. (citations omitted). Finally, “the movant must show that the amount demanded from the defendant exceeds all counterclaims known to the plaintiff. Reed Smith LLP v. LEED HR, LLC, 156 A.D.3d 420, 420, 67 N.Y.S.3d 9 (1st Dep’t 2017).

Application

Plaintiffs argued that Nordlicht strategically disposed of substantially all of his assets by placing them beyond the reach of his creditors under the names of his wife, various LLCs, trusts, overseas entities and other shell entities. They explained Nordlicht’s modus operandi for disclaiming legal ownership of his assets while still exercising control:

“Mr. Nordlicht has arranged his affairs to transfer and keep assets out of his name and to avoid being held accountable to creditors. To carry out this scheme, Mr. Nordlicht has adopted a specific modus operandi in his financial arrangements. First, Mr. Nordlicht organizes a shell company with his wife, Ms. Kalter, having nominal ownership and control. Second, notwithstanding his ownership in name, Mr. Nordlicht in fact controls and dominates the shell company, directing or participating in substantially all financial decisions for it. Third, any funds or interests in the shell company are extracted to accounts held by Ms. Kalter or another closely affiliated party, such as a family-owned LLC or trust.”

Justice Jamieson found that Plaintiffs adequately explained Defendants’ “intricate attempts to insulate Nordlicht from his significant creditors, with ample, substantiated details” and that Defendants acted with the required fraudulent intent.

Further, many of Defendants’ positions – for example, that Ms. Kalter was the only one with control over a given LLC – were rejected as “entirely implausible or directly contradicted by evidence that plaintiffs submit on reply.” Although Ms. Kalter claimed to be the only one who ever had control over a particular entity, Plaintiffs submitted emails showing that Nordlicht in fact had control. Plaintiffs also submitted, among other evidence, documents with “two extremely different versions of Kalter’s signature, claiming that one of those versions is a forgery.”

Finally, the amount demanded against Defendants exceeded the value of any counterclaims as the arbitration award conclusively resolved all counterclaims against Nordlicht, who received nothing.

Accordingly, Plaintiffs were granted an order of attachment.

Takeaways: Disposing of one’s assets that should be subject to execution to satisfy outstanding debts will not render oneself “judgment proof.” And, to obtain an order of attachment, plaintiffs must satisfy an onerous burden.

To learn more about new developments in the Westchester Commercial Division, please subscribe to the Westchester Commercial Division Blog.

George Krikorian, a law student at Elisabeth Haub School of Law at Pace University, assisted with the preparation of this post.

Business litigation often involves both contract and tort claims. A fraud or negligence claim that is deemed “duplicative” of a breach of contract claim, however, will be dismissed. When is that the case? The Westchester Commercial Division and the Appellate Division, Second Department recently answered this question in Oceanview Associates, LLC v. HLS Builders Corp., et al., Index No. 51687/2018, 2020 N.Y. Slip Op. 03519 (2d Dep’t June 24, 2020). 

Oceanview Associates, LLC commenced this action to recover damages for an allegedly defectively constructed parapet wall on the roof of a multi-unit residential building. The defendants included the project’s general contractor and superintendent of construction. The complaint asserted claims, inter alia, to recover damages for breach of contract, negligence, and fraud.

Westchester Commercial Division Justice Linda S. Jamieson dismissed the defendants’ negligence and fraud claims pursuant to CPLR 3211(a) on the grounds that the allegations underlying those claims were the same as the allegations underpinning the breach of contract claim. The plaintiff appealed.

The Second Department affirmed the dismissal of the plaintiff’s negligence claim.

“[A] simple breach of contract is not to be considered a tort unless a legal duty independent of the contract itself has been violated …. This legal duty must spring from circumstances extraneous to, and not constituting elements of, the contract, although it may be connected with and dependent upon the contract.” Clark-Fitzpatrick, Inc. v. Long Is. R.R. Co., 70 N.Y.2d 382, 389 (1987) (citations omitted). “Put another way, where the damages alleged ‘were clearly within the contemplation of the written agreement … [m]erely charging a breach of a ‘duty of due care,’ employing language familiar with tort law, does not, without more, transform a simple breach of contract into a tort claim.’” Dormitory Auth. of the State of N.Y. v. Samson Constr. Co., 30 N.Y.3d 704, 711 (2018) (quoting Clark-Fitzpatrick, Inc., 70 N.Y.2d at 390).

Against this backdrop, the Second Department agreed with the Westchester Commercial Division and concluded: “Here, the complaint did not allege facts that would give rise to a duty owed to the plaintiff that is independent of the duty imposed by the parties’ contract” (slip op. at 3-4).

The Court also affirmed the dismissal of the plaintiff’s fraud claim.

“[W]here…a claim to recover damages for fraud is premised upon an alleged breach of contractual duties and the supporting allegations do not concern representations which are collateral or extraneous to the terms of the parties’ agreement, a cause of action sounding in fraud does not lie.” McKernin v. Fanny Farmer Candy Shops, 176 A.D.2d 233, 234 (2d Dep’t 1991).

Here, the Second Department held that as the plaintiff’s fraud claim was based on the same allegations as its breach of contract claim “and amounted to nothing more than a failure to perform under the contract” (slip op. at 4) (citations omitted), its dismissal was proper.

Takeaway: To survive a challenge that a tort claim is really just a contract claim in tort claim clothing, a party must sufficiently allege that a legal duty, independent of the contract itself, has been violated.

To learn more about new developments in the Westchester Commercial Division, please subscribe to the Westchester Commercial Division Blog.

George Krikorian, a law student at Elisabeth Haub School of Law at Pace University, assisted with the preparation of this post.

On Monday, June 8, I co-moderated a Virtual Town Hall discussion with Hon. Linda S. Jamieson and Hon. Gretchen Walsh about litigating in the Westchester Commercial Division during COVID-19 and beyond, the Court’s operations, and the methods the justices are using to move cases forward. The justices have worked very hard throughout the pandemic, and we’re grateful for the time they took out of their busy schedules to speak with members of the Westchester County Bar Association. Here are some key takeaways:

Transition to Virtual Court

The justices have been using Skype for Business, the only video conferencing platform authorized by the New York State Unified Court System. Overall, conducting conferences and oral arguments via Skype for Business has been a smooth transition and efficient. Justice Jamieson views the use of virtual platforms as the wave of the future, at least for conferences, and encourages lawyers to do a test run before a real conference.

In addition, the justices have been flexible with attorneys during the pandemic, as they realize that it’s an especially difficult time for those with young children at home. If lawyers don’t have the ability to use Skype, the justices allow them to call in. But while the justices are understanding when it comes to attorneys’ ability to be productive at home, they don’t appreciate attorneys taking advantage of the increased flexibility.

Finally, Justice Walsh has found that the level of civility has gone up tremendously during the pandemic.

Trials

The justices agreed that trials would be difficult to conduct virtually. Both expressed concern about the ability to assess witness credibility via Skype, as it is hard to evaluate body language virtually. The justices also noted that attorneys may be uncomfortable cross-examining a witness that is not physically on the stand, as there is a risk that the witness is not answering the questions on his/her own.

As for the return of in-person jury trials, the justices agreed that they would not require jurors to come into the courthouse any time soon. Justice Jamieson noted that neither judges nor jurors want to expose themselves to COVID-19, and, it would require a great deal of maneuvering to safely space out jurors in the courtroom. Justice Jamieson believes that we’ll start to have jury trials at some point after a vaccine is available.

Settlement and ADR

The justices have been reaching out to lawyers to encourage them to settle and, during the pandemic, they have been successful in settling cases.

To learn more about new developments in the Westchester Commercial Division, please subscribe to the Westchester Commercial Division Blog.

George Krikorian, a law student at Elisabeth Haub School of Law at Pace University, assisted with the preparation of this post.

It is not uncommon for litigants to sit on their rights and, after years have passed, argue that they are entitled to delayed accrual of their claims under the discovery rule. This was the key issue in a recent decision by Westchester Commercial Division Justice Linda S. Jamieson in Gelaj v. Gelaj, et al., Index No. 68512/2019.

The Facts

Plaintiff Pashko Gelaj is the nephew of defendant Miter Gelaj (“Miter”). Plaintiff alleged that in 2009, he and his father, non-party Ndue Gelaj (“Ndue”), were equal owners of 111 East Mosholu Corp. (“Company”). Miter, however, always claimed that he was a half-owner of the Company with Ndue and Plaintiff had no interest. Critically, in 2015, Miter commenced an action concerning that issue, in which Plaintiff was a defendant.

In July 2009, the Company sold a piece of property. Plaintiff alleged that it was sold “with the expectation that half of the proceeds from the Property’s sale would be invested on [Plaintiff’s] behalf,” but alleged nothing more concerning his “expectation.” The Complaint further alleged that the proceeds were split between Ndue and Miter. Defendant Rocco Adonna, a financial advisor working for defendant AFM Advisor Group, allegedly helped both Ndue and Miter invest the proceeds of the sale.

According to Plaintiff, in April 2018 – nine years after the sale – he “inquired” about the status of his share and learned that his alleged half of the proceeds went to Miter. The Complaint was silent about the details of Plaintiff’s inquiry. Eighteen months later, Plaintiff brought four claims against Miter: fraud, constructive trust, conversion and unjust enrichment. The defendants moved to dismiss each of these claims as time-barred.

Fraud

It is well settled that “the time within which the action must be commenced shall be the greater of six years from the date the cause of action accrued or two years from the time the plaintiff discovered the fraud … or could with reasonable diligence have discovered it.” Monteleone v. Monteleone, 162 A.D.3d 761, 762, 78 N.Y.S.3d 247, 248-249 (2d Dep’t 2018). Further, “[a] cause of action based upon fraud accrues, for statute of limitation purposes, at the time the plaintiff possesses knowledge of facts from which the fraud could have been discovered with reasonable diligence.” Id.

In that regard, “[t]he test as to when fraud should with reasonable diligence have been discovered is an objective one.” Gutkin v. Siegal, 85 A.D. 3d 687, 688, 926 N.Y.S.2d 485, 486 (1st Dep’t 2011). “Where the circumstances are such as to suggest to a person of ordinary intelligence the probability that he has been defrauded, a duty of inquiry arises, and if he omits that inquiry when it would have developed the truth, and shuts his eyes to the facts which call for investigation, knowledge of the fraud will be imputed to him.” Id.

Here, the transaction that gave rise to Plaintiff’s claim occurred in 2009, so the six years expired in 2015. But Plaintiff relied on the two-year discovery rule, arguing that he had no reason to distrust his uncle and doubt that he would invest the proceeds on his behalf. Justice Jamieson, citing Gutkin, supra, disagreed:

This narrative removes from plaintiff all responsibility for ensuring that the substantial proceeds were invested on his behalf. Rather, it paints a vision of a harmonious family in which plaintiff’s wishes would be carried out by Miter without question. This picture, however, is not reality. In 2015 … Miter commenced a litigation against both plaintiff and his father, among others, asserting that he – and not plaintiff- owned half of the company. Even if plaintiff was excused from not inquiring about the status of his alleged investment in 2009 or for six years thereafter, there is simply no excuse for not inquiring once he learned that Miter claimed an ownership right in the company to his exclusion. That should have been the red flag to plaintiff that caused him to inquire about the 2009 investment. [Emphasis added].

Accordingly, Plaintiff’s fraud claim was dismissed.

Constructive Trust, Unjust Enrichment, and Conversion

For a constructive trust claim, the six-year statute of limitations starts to run “upon the occurrence of the wrongful act giving rise to a duty of restitution and not from the time the facts constituting fraud are discovered.” Auffermann v. Distl, 56 A.D.3d 502, 502, 867 N.Y.S.2d 527, 528 (2d Dep’t 2008). Despite being unaware of the exact date, Plaintiff argued the wrongful act occurred when Miter withdrew the funds out of his personal investment account and used them. Justice Jamieson rejected this argument, finding that the complaint plainly stated that the wrongful act occurred at the time of the July 2009 sale when Miter deposited the proceeds into his own account. “The alleged wrong occurred when Miter put the money in his own account ‘rather than for the benefit of the plaintiff,’ not when he later took the money out of the account and used it.” Thus, the six-year statute of limitations had expired in 2015.

An unjust enrichment claim also has a six-year statute of limitations, which runs upon the occurrence of the wrongful act. Coombs v. Jervier, 74 A.D.3d 724, 724, 906 N.Y.S.2d 267, 269 (2d Dep’t 2010). Again, as the wrongful act occurred at the time of the July 2009 sale, this claim was time-barred as well.

Finally, for a conversion claim, “a three-year statute of limitation applies and runs from the date that the conversion took place, not from the discovery of the theft.” Torrance Const., Inc. v. Jacques, 127 A.D.3d 1261, 1265, 8 N.Y.S.3d 441, 446 (2d Dept. 2015). As the statute of limitations expired three years after the 2009 sale, this claim was time-barred.

Takeaway: Plaintiffs should not sit on their rights and then rely on the discovery rule to save a fraud claim.

George Krikorian, a law student at Elisabeth Haub School of Law at Pace University, assisted with the preparation of this post.

Join us on Monday, June 8, as Lachtman Cohen P.C. partner Brian Cohen co-moderates a Virtual Town Hall discussion with Hon. Linda S. Jamieson and Hon. Gretchen Walsh about litigating in the Westchester Commercial Division during COVID-19 and beyond.

See the invite for details: WCBA June 2020 Event Flyer

Register with the Westchester County Bar Association.