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Process Server

March 30, 2021

Litigation is a staple of the American legal system and injured parties count on it to deliver justice. However, before prevailing in litigation, you need to ensure that the logistics of your case are handled properly. This begins with making sure that the case you started is properly served. The process is fairly simple and generally easy to follow, but a failure to act timely, in good faith and with due diligence can ultimately destroy even an otherwise viable case before anyone ever gets to addressing the merits. So let’s discuss proper service.

The delivery of legal papers is called service of process, and the person who does the actual delivery is called a process server. [1] A person who is directly involved in a pending case, such as the plaintiff, can never serve papers to a defendant themselves without the consent of a judge (which would be a very unusual request and would likely require extreme circumstances), but they can hire a process server to do it for them. In New York, a process server must be over the age of 18, but there is no state-wide license requirement.

This rule differs by specific areas and some municipalities require process servers to be licensed; for example, in New York City, an unlicensed process server may not serve paper more than 5 times in a year. The service of process is critical to the success of a case moving forward and it is important to make sure that the process server you choose is in compliance with New York’s CPLR [2] (Civil Practice Law & Rules). There are many process service agencies in New York that employ licensed process servers, so if you are self-represented, do make sure you confirm that you are working with a licensed processional. If you are represented by counsel, it is generally the practice that the attorney will take care of selecting and overseeing the process server.

While this may seem like a simple concept, if something goes wrong during service of process, your action could be dismissed, and you could even lose the ability to re-file your cause of action. At that point, it may be small consolation that the process server is to blame, given the process server is unlikely to be in a position to reimburse you for your losses – large liability insurance policies not being common among process servers. Many things could go wrong during the service of process and the result is referred to as defective service.

Service of process is generally governed by Article 3 [3] of the CPLR, which directs with great specificity what proper service consists of. CPLR § 306(b) [4] requires the service of process to be made within 120 days of filing the initial complaint. If this is not completed, the court, upon motion of the other party, shall dismiss the action unless you show that you had “good cause” for the delay or that giving you more time to serve is “in the interest of justice”.

Generally, if the plaintiff shows “reasonably diligent efforts at service”, there is good cause. [5]

However, even if you cannot show “good cause”, you can still make an argument for the “interest of justice” standard to apply. [6] Under the interest of justice standard, the court will be “more flexible” and weigh different factors to determine if an extension should be granted [7], including whether you would suffer irreparable harm because the applicable Statute of Limitations [8] in your case was expiring and you would be unable to re-file, the length of the delay, [9] the true cause of the delay, your actions in attempting to resolve the delay, and more. For a clear set of examples, one can do much worse than the analysis offered by the 2nd Department in ___:

The 120-day service provision of CPLR 306-b can be extended by a court, upon motion, "upon good cause shown or in the interest of justice" (CPLR 306-b). "Good cause" and "interest of justice" are two separate and independent statutory standards (see Leader v Maroney, Ponzini & Spencer, 97 NY2d at 104). To establish good cause, a plaintiff must demonstrate reasonable diligence in attempting service (see Leader v Maroney, Ponzini & Spencer, 97 NY2d at 105-106). Good cause will not exist where a plaintiff fails to make any effort at service (see Valentin v Zaltsman, 39 AD3d 852 [2007]; Lipschitz v McCann, 13 AD3d 417 [2004]), or fails to make at least a reasonably diligent effort at service (see e.g. Kazimierski v New York Univ., 18 AD3d 820 [2005]; Baione v Central Suffolk Hosp., 14 AD3d 635, 636-637 [2005]; Busler v Corbett, 259 AD2d 13, 15 [1999]). By contrast, good cause may be found to exist where the plaintiff's failure to timely serve process is a result of circumstances beyond the plaintiff's control (see U.S. 1 Brookville Real Estate Corp. v Spallone, 13 Misc 3d 1236[A], 2006 NY Slip Op 52141[U], *3 [2006], citing Eastern Refractories Co., Inc. v Forty Eight Insulations, Inc., 187 FRD 503, 505 [1999]; see also Greco v Renegades, Inc., 307 AD2d 711, 712 [2003] [difficulties of service associated with locating defendant enlisted in military]; Kulpa v Jackson, 3 Misc 3d 227, 235 [2004] [difficulties associated with service abroad through the Hague Convention]).

If good cause for an extension is not established, courts must consider the "interest of justice" standard of CPLR 306-b (see e.g. Busler v Corbett, 259 AD2d at 17). The interest of justice standard does not require reasonably diligent efforts at service, but courts, in making their determinations, may consider the presence or absence of diligence, along with other factors (see Leader v Maroney, Ponzini & Spencer, 97 NY2d at 105). The interest of justice standard is broader than the good cause standard (see Mead v Singleman, 24 AD3d 1142, 1144 [2005]), as its factors also include the expiration of the statute of limitations, the meritorious nature of the action, the length of delay in service, the promptness of a request by the plaintiff for an extension, and prejudice to the defendant (see Leader v Maroney, Ponzini & Spencer, 97 NY2d at 105-106; Matter of Jordan v City of New York, 38 AD3d 336, 339 [2007]; Estey-Dorsa v Chavez, 27 AD3d 277 [2006]; Mead v Singleman, 24 AD3d at 1144; de Vries v Metropolitan Tr. Auth., 11 AD3d 312, 313 [2004]; Hafkin v North Shore Univ. Hosp., 279 AD2d 86, 90-91 [2000], affd 97 NY2d 95 [2001]; see also Slate v Schiavone Constr. Co., 4 NY3d 816 [2005]).

This safety net means that a plaintiff can save a case even if the Statute of Limitations has expired, but it is up to the judge to decide based on the context of the situation.

This firm recently resolved an action (Webster Bank v. Leinweber) [10] which perfectly illustrates why it is so important to ensure that your service of process is compliant with the CPLR and meets the reasonable diligence standard. In that action, plaintiff attempted to comply with service requirements of service on an individual by relying on CPLR § 308(4), which allows, after “due diligence” in first attempting at service in person [11] and/or by service to another individual that the defendant lives with and mailing a copy to the home address [12], the ability to serve by what is known as “nail and mail.” Nail & mail, is done by taping a copy of the summons to the door of the home, and mailing a copy to the address. However, that sort of service is should only be counted on as a last resort, after clearly demonstrating that the previous methods were tried with due diligence. Plaints must beware that "[t]he due diligence requirement of CPLR 308 (4) must be strictly observed, given the reduced likelihood that a summons served pursuant to that section will be received [13]" and that as a result, attempts at service are heavily scrutinized.

The courts of New York have repeatedly held, to plaintiffs’ peril, that due diligence requires that prior to resorting to nail and mail, that plaintiff attempt to determine defendant’s employment status and attempt to serve process on defendants at work using either of the two preferred methods. [14] Further, even two out of three attempts to serve a defendant at home cannot be made on “weekdays during hours when it reasonably could have been expected that the defendant was either working or in transit to and from work” for it to be adequate due diligence at service. [15]

In the Webster Bank action, the plaintiff’s process server visited the defendant’s home on three occasions, all on weekdays, with the earliest attempt being 8:21 AM and the latest being 6:58 PM. [16] When our office was retained, our client was already facing a motion for default judgment and we therefore cross-moved for leave to put in a late answer to the complaint and to oppose the pending motion for default judgment based on our client’s untimely receipt of notice of the case.

The Court not only denied the plaintiff’s motion for default judgment, but went further, and on its own, dismissed the matter outright. [17] The Court cited to O’Connell and declared that the three attempts at service were within the time period “when Defendant may reasonably expected to have been working or commuting from work” and that due diligence was further lacking in that “the process server did not attempt to determine Defendant’s employment address.”

To that end, while you may not have a personal control of the process server’s precise conduct, always remember, whether it is for yourself of a client, that “nail & mail” service is to be avoided when at all possible, with erring on the side of caution being the only way to go.

1 https://www.nycourts.gov/courthelp/goingtocourt/service.shtml

2 https://www.nysenate.gov/legislation/laws/CVP

3 https://www.nysenate.gov/legislation/laws/CVP/A3

4 https://www.nysenate.gov/legislation/laws/CVP/306-B

5 Matter of Board of Managers of Copley Court Condominium v. Ossining, 973 N.E.2d 158, 19 N.Y.3d 869, 950 N.Y.S.2d 63 (2012), citing to Leader v. Maroney, Ponzini, 761 N.E.2d 1018, 97 N.Y.2d 95, 736 N.Y.S.2d 291 (2001)

6 Leader v. Maroney, Ponzini, 761 N.E.2d 1018, 97 N.Y.2d 95, 736 N.Y.S.2d 291 (2001), citing to Alexander, Practice Commentaries, McKinney's Cons Laws of NY, Book 7B, C306-b:3, at 483; and Siegel, NY Prac § 63, at 86-87 [3d ed]

7 See Id at 104-105. “The New York State Bar Association's Commercial and Federal Litigation Section Committee on Civil Practice Law and Rules characterized the interest of justice standard as "more flexible" than the good cause standard, specifically noting that "[s]ince the term `good cause' does not include conduct usually characterized as `law office failure,' proposed CPLR 306-b provides for an additional and broader standard, i.e., the `interest of justice,' to accommodate late service that might be due to mistake, confusion or oversight, so long as there is no prejudice to the defendant" (Bill Jacket, L 1997, ch 476, at 14 [citations omitted] [emphasis added]).”

8 https://www.nycourts.gov/courthelp/goingtocourt/SOLchart.shtml

9 Slate v. Schiavone Construction Company, 829 N.E.2d 665, 4 N.Y.3d 816, 796 N.Y.S.2d 573 (2005).

10 Supreme Court of the State of New York for the County of Kings, Index # 501917/2019

11 CPLR § 308(1)

12 CPLR § 308(2)

13 Gurevitch v. Goodman, 269 A.D.2d 355, 702 N.Y.S.2d 634 (2d Dept. 2000).

14 O'Connell v. Post, 27 A.D.3d 630, 811 N.Y.S.2d 441 (2d Dept. 2006).Gurevitch v. Goodman, supra; Moran v. Harting, 212 AD2d 517 (2d Dept. 1995); Walker v. Manning, 209 AD2d 691 (2d Dept. 1994)

15 O'Connell , supra, citing to Earle v. Valente, 302 AD2d 353 (2d Dept. 2003) and Annis v Long, 298 AD2d 340 (2d Dept. 2002)

16 NYSCEF Doc # 4, Affidavit of Service on Defendant, Index # 501917/2019

17 NYSCEF Doc # 45, Decision & Order, Index # 501917/2019


When Pledging a Patent as Collateral, Remember That You Stand to Lose it Instantly Upon Default

March 16, 2021

Recently, this firm had the opportunity to litigate the questions of (1) whether the transfer of a patent held as collateral is immediate; (2) whether such transfer enables the recipient to enjoin future business deals pending upon transfer; and (3) whether the plaintiff is the rightful owner of U.S. Patent #US9,820,515B2.

On October 25, 2015, Plaintiff Korovchenko entered into a licensing agreement for exclusive distribution of items to be produced by defendant Kenneth Crocket. In March 2017, the trade details, payment schedules, and price listings were finalized after extensive negotiation, as well as the terms of exclusivity regarding sales in Europe. Beginning in March 2018 and continuing over the following months, the Plaintiff sent the Defendant a total of $247,525 via a bank transfer upon establishment of a manufacturing contract. After delays in manufacturing, the Plaintiff inquired multiple times regarding the status of production and delivery of the items. After being promised a completion date by mid-July 2018, the Defendant had not received anything as of January 2019 and proceeded with legal action.

On August 28, 2019, the Plaintiff and Defendant entered into a settlement agreement for compensation considerations to the Plaintiff for the purchase of goods which were not delivered. As per the original manufacturing agreement, Plaintiff would be due $700,000 in liquidated damages if the Defendant failed to deliver, but the settlement was negotiated down to $500,000. The settlement was due to the Plaintiff on January 26, 2020 and time was of the essence. Furthermore, if the Defendant was able to make payment by November 29, 2019, he would benefit from a larger reduction and only be required to pay a total of $350,000.

As part of the settlement, Defendant placed ownership of the U.S. Patent #US9,820,515B2 in escrow with our firm, as Plaintiff’s counsel, as collateral for Defendant’s promises. The collateral pledge in the agreement provided that if by January 27, 2020 there was still any outstanding balance on the settlement, the Plaintiff reserved the right to file for transfer of ownership of the patent immediately and without notice. Upon the Defendant’s failure to pay the settlement fee by January 27, 2020, our office, to enforce our client’s rights, filed for transfer of ownership of U.S. Patent #US9,820,515B2. Shortly thereafter, Defendant attempted to transfer personal ownership of the patent to his business Radiate Athletics, in an effort to change ownership of the patent and avoid the collateral pledge.

Accordingly, our office pursued a Temporary Restraining Order (TRO) upon the patent, thereby disallowing further usage and transfer during the pendency of litigation to enforce the collateral pledge. The TRO was granted. The court reconvened on October 1, 2020 and the Defendant disputed the Plaintiff’s motion for injunction on future business dealings involving the Defendant’s use of the patent. Defendant claimed that Plaintiff did not have the right to halt his business dealings involving the patent as it was his only vehicle to acquire the aforementioned compensation in order to eventually pay on his defaulted obligations to Plaintiff as agreed in the settlement agreement. Defendant attempted to argue that he should get to keep the patent, even though he had defaulted on the payment schedule, because by keeping the patent he would eventually be able to settle with Plaintiff. Our office of course opposed, arguing that his right to recover his patent upon timely payment had expired and that at this point, the collateral pledged was rightly the property of Plaintiff. As part of the relief sought, we requested declaratory relief that the rightful owner of U.S. Patent #US9,820,515B2 is the Plaintiff.

In the Court’s decision, the Plaintiff emerged victorious in each of the three disputed areas.

As to the first question, as per the original settlement agreement, both parties consented to immediate transfer of the patent upon failure to compensate the client. As a result, our office, on behalf of Plaintiff, was entirely within our rights to immediately file for ownership.

As a result of the immediate transfer of ownership, the Plaintiff then had sole discretion on the usage and licensing of the patent and therefore, the defendant's claims to rightful use of the patent to acquire capital to eventually cure his default did not satisfy the Court.

Lastly, the Plaintiff received declaratory relief confirming that the Plaintiff is the rightful and sole owner of U.S. Patent #US9,820,515B2 and that Defendant’s rights in it had been extinguished.

To view the entirety of the Court’s file online, you can visit NYSCEF and search for Index # 651920/2019 in New York County Supreme Court or read the case on DocketAlarm here.

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Business Judgement Rule

February 24, 2021

An important decision was handed down recently from the New York County Supreme Court that gives a newfound power to co-op apartment shareholders. On February 9th, 2021, the justices in the matter of Kotler v. The 979 Corporation ruled that the co-op board could not deny a transfer of shares from a decedent lessee to a family member provided that the family member is proven to be financially responsible according to the proprietary lease agreement.

Additionally, the shareholder was awarded damages for the unreasonable withholding of consent to transfer shares by the co-op board as well as attorney’s fees ensured in the proprietary lease agreement. This is a large victory for shareholders and presents a weakness to the co-op boards’ shield by the Business Judgement Rule.

New York real estate includes a rather large number of co-op (cooperative) apartment buildings that may sound strange in suburban and rural areas but is quite common in large cities. A co-op apartment building is a building that is treated as a corporation and each apartment owner is a shareholder of the corporation [1]. When you buy into a housing co-op, you are not purchasing real estate, but instead you are purchasing shares of the corporation [2]. These shares, however, provide the shareholders with property leases and ownership. Just like in a regular corporation, a board of directors, in this case known as the co-op board, is elected to make decisions on behalf of the apartment building [1]. In a co-op apartment everyone is committed to the same venture; one owner’s loss is borne by the entire building. Proving financial viability can be an invasive process, and often leads to decisions by the board to deny requests for ownership or sales to people they deem as “unfit” buyers.

Until recently, co-op boards were almost always protected in lawsuits by the Business Judgement Rule. This rule is meant to protect managers of corporations from legal liability for decisions they make in their day-to-day operations, and this rule applies to co-op boards because of the building’s corporate status. As long as the board is found to have been acting “in good faith,” they are protected from legal action on any decision they make [3]. But some recent cases in New York have broken this seemingly absolute power of the boards and have given shareholders a new opportunity for success in court.

In the matter of The Estate of Helen Del Tozo v. 33 Fifth Avenue Owners Corporation [4], the co-op board denied the transfer of shares from the deceased Helen Del Tozo to her two sons Michael and Robert, without giving a reason. The court found that holding to paragraph 16(b) of the proprietary lease agreement, the board cannot withhold consent of transfer to a lessee’s family member (or members) who is deemed to be financially responsible. Instead of being protected by the Business Judgement Rule, in a case where there is a proposed transfer of shares to a lessee’s family member, the board is held to a “heightened standard of reasonableness” which is a higher standard of care compared to the Business Judgement Rule. The board must prove that said family member is not able to make their required payments. If they cannot do this, they must approve the transfer of shares to the family member(s).

In a similar fashion to The Estate of Helen Del Tozo, the recent ruling of Kotler v. The 979 Corporation [5] stated that the board must approve a transfer of shares to the deceased lessee’s daughter after she proved that she would be able to make regular maintenance payments. In this case, the deceased lessee’s daughter provided the court with extensive financial statements and proof of assets that have a greater value than the costs of maintaining the apartment and shares. Therefore, the co-op “had no lawful basis to demand a transfer fee.” [6]

Additionally, the court ruled that the board breached the lease by improperly withholding consent on the transfer of shares and that the new shareholder was entitled to monetary damages. In cases where the tenant breaches the lease, the board is entitled to have their legal fees paid for them by the tenant. This is a reciprocal rule, meaning that in a case where the co-op board breaches the lease, the tenant is entitled to legal fees. This ruling gives substantial power to shareholders who want to transfer their ownership in an apartment to a financially responsible family member – not only do shareholders and potential shareholders now have a way to get past the Business Judgment Rule, but they have the further potential to recover legal fees if the co-op board acts unfairly. Even without commencing litigation, this now puts an actual liability on boards and cooperatives to act fairly and reasonable, rather than being able to hide behind the protection and shield of the Business Judgment Rule.

If you have a dispute with a co-op board and want to know if you have legal rights and the ability to litigate, don’t hesitate to contact The Law office of Alexander Paykin, P.C., for a free initial phone consultation, where we can discuss the merits of your particular case.

1 https://streeteasy.com/blog/what-is-a-co-op-apartment-nyc/

2 https://www.bankrate.com/glossary/c/cooperative/

3 https://www.law.cornell.edu/wex/business_judgment_rule

4 136 A.D.3d 486, 488 (1st Dept 2016), aff’d 28 N.Y.3d 1114 (2016), available at http://nycourts.gov/reporter/3dseries/2016/2016_01039.htm

5 2021 NY Slip Op 00801, available at: http://nycourts.gov/reporter/3dseries/2021/2021_00801.htm

6 Id.


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