As readers of this blog no doubt are aware, clients sometimes take a “shoot first, ask questions later” approach during the early stages of litigation. This is especially true when bringing a CPLR 3213 motion for summary judgment in lieu of complaint, which, under narrow circumstances, provides an accelerated procedure for litigants to obtain a monetary judgment. But with the streamlined process of obtaining this relief comes potentially fatal penalties for failing to provide sufficient advance notice of the motion, as a recent decision from Manhattan Commercial Division Justice Margaret Chan demonstrates.
Background:
In SD Stability SDIRA, LLC, et al. v Maxben Holdings, LLC, plaintiffs (“Plaintiffs”) entered into a $500,000 loan agreement with defendant (“Defendant”) providing that the loan would be repaid by April 21, 2022. Six months later, Plaintiffs entered into a second $500,000 loan agreement with Defendant, whereby Defendant agreed to remit monthly interest payments of 10% in addition to the $500,000 principal sum by August 23, 2022. According to Plaintiffs, Defendant defaulted under the terms of both Notes.
On March 19, 2024, Plaintiffs commenced a CPLR 3213 motion-action, setting the return date for April 9. According to Plaintiffs’ counsel, the process server was not able to personally serve Defendant’s representative until March 21.
In opposition, Defendant argued that the motion for summary judgment in lieu of complaint should be denied for lack of personal jurisdiction due to Plaintiffs’ failure to give Defendant sufficient advance notice of the motion (a “fatal jurisdictional defect,”) as the return date was set for 19 days after the date of service rather than 20 days as required under CPLR 320 (a).
On reply, Plaintiffs argued that the shortened return date was not a fatal jurisdictional defect because Defendant made a timely appearance and therefore was not prejudiced.
Analysis:
Justice Chan rejected Plaintiffs’ argument.
First, the Court explained that Plaintiffs’ reliance on Blue Lagoon, LLC v Reisman, 214 AD3d 938, 939 [2d Dept 2023] – a case that overlooked the defective return date where plaintiff amended its notice of motion to provide sufficient time to respond, and where the motion was adjourned several times – was misplaced because, unlike in Blue Lagoon , the parties in Maxben Holdings did not adjourn the motion at any point, and Plaintiffs never amended their defective notice of motion to revise the return date of the motion.
Second, the Court rejected Plaintiffs’ contention that Defendant suffered no prejudice because it made a timely appearance. Notably, Plaintiffs relied on ICICI Bank UK PLC Antwerp Branch v Manilal, 2020 WL 2747793 [Sup Ct NY County 2020] , for the proposition that “where a defendant appears and opposes the motion on the merits, the court may disregard the fact that the return date did not satisfy the time requirements set forth in CPLR 3213.” The Court found that the Manilal case was inapplicable to the circumstances in Maxben Holdings because Defendant did not oppose Plaintiffs’ motion “on the merits,” but rather, opposed it solely on the basis of lack of personal jurisdiction. Given these circumstances, the Court denied Plaintiffs’ motion for summary judgment in lieu of complaint for lack of jurisdiction.
Upshot:
The Maxben Holdings decision is a reminder that while a motion for summary judgment in lieu of complaint is a powerful tool, failure to follow the basic requirements for filing the requisite motion papers have fatal penalties. Counselors should be mindful of providing sufficient time in the notice of motion to account for potential issues with service of process. Otherwise, litigating with a “full speed ahead, take no prisoners” approach can lead to many sleepless nights over losing this type of motion on jurisdictional grounds.
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