BERKO ASSOCIATES LLC v. JAFFE REAL ESTATE JV LLC (2026)

Order, Supreme Court, New York County (Arthur F. Engoron, J.), entered July 9, 2025, which, to the extent appealed from as limited by the briefs, granted so much of plaintiff's motion for summary judgment as sought judgment in its favor on its cause of action for breach of contract and dismissal of defendants' affirmative defenses and counterclaims, unanimously modified, on the law, to deny so much of plaintiff's motion as sought summary judgment in its favor on the cause of action for breach of contract and dismissal of the second, third, fourth, and fifth affirmative defenses, and to vacate so much of the order as dismissed the cause of action for quantum meruit and reinstate that cause of action, and to grant summary judgment in defendants' favor on their second affirmative defense for lack of standing and dismiss the breach of contract cause of action, and otherwise affirmed, without costs.

In this action, plaintiff seeks $172,500.00 in fees that defendants allegedly owe pursuant to a limited liability company agreement (the LLC Agreement).  The LLC Agreement was signed by defendants and nonparties, Astor Tribeca Common Equity LLC and Astor Tribeca Preferred Equity LLC, to lease and develop three properties located at 72 Warren St, 74 Warren Street, and 84–88 West Broadway in Manhattan.  Plaintiff was not a signatory to the agreement, but it was specifically defined in the LLC Agreement as an “affiliate” of Astor Tribeca Common Equity LLC and Astor Tribeca Preferred Equity LLC. Plaintiff acted as a “consultant and asset manager in connection with the acquisition broker, debt financing and equity investment” on the project.  Pursuant to Section 4.9(b) of the LLC Agreement, plaintiff alleges that it was entitled to an acquisition fee in the amount of $720,000 for its services.

Plaintiff sued for breach of contract and quantum meruit, arguing that defendants have failed to pay the full acquisition fee due under the LLC Agreement.  Defendants answered and asserted five affirmative defenses, as well as two counterclaims against plaintiff for tortious interference.  The parties then cross-moved for summary judgment.  Supreme Court granted plaintiff's motion for summary judgment on the breach of contract claim and dismissed plaintiff's cause of action for quantum meruit, because there was a contract governing the parties' relationship.  Accordingly, Supreme Court dismissed defendants' affirmative defenses and counterclaims.

Defendants established entitlement to summary judgment on their second affirmative defense that plaintiff lacks standing to enforce the LLC Agreement's acquisition fee provision.  Section 13.14 of the LLC Agreement bars enforcement of the contract by third parties and explicitly provides that the agreement was “entered into ․ for the exclusive benefit of [defendant B. Jaffe Real Estate JV LLC], its Members, and their successors and assigns,” it is “expressly not intended for the benefit of any creditor of [defendant B. Jaffe Real Estate JV LLC] or any other Person,” and that “no ․ creditor or third party shall have any rights under this Agreement.”  The term “Member,” in turn, is defined to include each party to the agreement “together with each person hereafter admitted as and being a member of [B. Jaffe].”  This no-third-party beneficiary clause bars plaintiff, a nonsignatory to the agreement, from seeking to enforce its terms (see FGP 1, LLC v Dubrovsky, 197 AD3d 441, 443 [1st Dept 2021];  see also 767 Third Ave. LLC v Orix Capital Mkts, LLC, 26 AD3d 216, 218 [1st Dept 2006], lv denied 8 NY3d 803 [2007] [“The best evidence of the intent to bestow a benefit upon a third party is the language of the contract itself ․, and here, a provision of the agreement expressly negates enforcement by third parties”];  Mendel v Henry Phipps Plaza W., Inc., 16 AD3d 112, 113 [1st Dept 2005], affd 6 NY3d 783 [2006] ).

Plaintiff's argument that the jury waiver provision in the LLC Agreement creates ambiguity regarding its status as a third-party beneficiary lacks merit.  Section 13.9 of the LLC Agreement references the possibility of “dispute[s] among the members or their affiliates ․ concerning this agreement.”  It is well-settled that “[w]hether a contract is ambiguous is a question of law and extrinsic evidence may not be considered unless the document itself is ambiguous” (Bailey v Fish & Neave, 8 NY3d 523, 528 [2007] [internal quotation marks omitted] ).  Thus, “when parties set down their agreement in a clear, complete document, their writing should be enforced according to its terms” (id. [internal quotation marks and ellipsis omitted] ).

Applying these principles, the parties to the LLC Agreement clearly intended to bar third parties, like plaintiff, from enforcing the contract.  Although the LLC Agreement defines plaintiff as an “affiliate” of at least one Member, it does not state that an affiliate has enforcement rights under the contract.  Rather, the inclusion of “affiliates” in Section 13.9 merely reflects that the parties anticipated that affiliates might become involved in disputes related to the LLC Agreement and, in those circumstances, would be subject to the jury waiver.

That the LLC Agreement both defines “affiliate” in its definitions section and references “affiliates” in Section 13.9 underscores that the parties knew how to grant “affiliates” enforcement rights in Section 13.14 had they intended to do so.  The parties' choice to exclude affiliates such as plaintiff in Section 13.14 is clear and unambiguous (Quadrant Structured Prods.  Co. v Vertin, 23NY3d549, 560 [2014] ).  Accordingly, plaintiff's breach of contract cause of action should be dismissed because plaintiff lacks standing to sue to enforce the LLC Agreement's acquisition fee provision.

Given that Supreme Court should have dismissed the cause of action for breach of contract, plaintiff's cause of action for quantum meruit should be reinstated.  Nonetheless, plaintiff is not entitled to summary judgment on that cause of action, as issues of fact exist concerning, among other things, the reasonable value of the services rendered (see Fulbright & Jaworski, LLP v Carucci, 63 AD3d 487, 489 [1st Dept 2009] ).

Supreme Court properly dismissed the first affirmative defense, which sounds in estoppel.  The court's denial of plaintiff's request for an order to show cause and for a temporary restraining order does not serve as a decision on the merits for the purposes of collateral estoppel (Deeton v Ruckus 85 Corp., 243 AD3d 436, 436–37 [1st Dept 2025] ).

However, the third and fourth affirmative defenses, which concern payment and valuation, remain relevant to plaintiff's quantum meruit cause of action in particular.  The fifth affirmative defense, which concerns documentary evidence, is also relevant to plaintiff's quantum meruit claim.

Supreme Court properly dismissed defendants' counterclaims for tortious interference with contractual obligations and prospective business relations, as this action, which underlies the counterclaim, cannot be considered frivolous (cf. Arnon Ltd [IOM] v Beierwaltes, 125 AD3d 453, 453–454 [1st Dept 2015] ).