Murray v NETZ 642 E. 96th Street, LLC
Attorneys and Parties
Brief Summary
Residential landlord-tenant litigation involving breach of the warranty of habitability and whether the court obtained personal jurisdiction over the landlord limited liability company (LLC) and its managing agent through proper service of process.
The Supreme Court granted the defendants' motion under CPLR 5015(a)(4) [rule allowing vacatur of a judgment or order for lack of jurisdiction] to vacate the default order and default judgment, dismissed the complaint against NETZ 642 E. 96th Street, LLC under CPLR 3211(a)(8) [rule permitting dismissal for lack of personal jurisdiction], and referred the issue of service on David Lipsh for a hearing.
The Appellate Division overturned the dismissal of the complaint against NETZ 642 E. 96th Street, LLC and remitted for a hearing and new determination on whether service on NETZ was valid. It dismissed the appeal from the referral for a hearing as to David Lipsh because that portion of the order was not appealable.
Although the process server's affidavit made a prima facie showing of valid service on NETZ through a person allegedly designated to receive process under CPLR 311-a(a)(iv) [service on a limited liability company may be made on a person designated by the LLC to receive process], Lipsh's affidavit denying that the law firm was authorized to accept service merely rebutted the presumption of proper service; it did not conclusively prove service was invalid. A hearing was therefore required.
Background
Nigel Murray, a tenant at a residential property owned by NETZ 642 E. 96th Street, LLC, sued the owner and its managing agent, David Lipsh, on October 10, 2019, seeking damages, among other things, for breach of the warranty of habitability. The defendants did not timely answer or otherwise appear. On December 9, 2020, the Supreme Court granted Murray leave to enter a default judgment, and after an inquest, judgment was entered on July 25, 2022, for $350,225. The defendants later moved on January 19, 2023, to vacate the default order and judgment for lack of personal jurisdiction and, after vacatur, to dismiss the complaint for improper service.
Lower Court Decision
The Supreme Court held that the default order and judgment should be vacated under CPLR 5015(a)(4). It further held that the complaint should be dismissed against NETZ 642 E. 96th Street, LLC for lack of personal jurisdiction under CPLR 3211(a)(8), and it sent the issue of whether David Lipsh was properly served to a referee for a hearing.
Appellate Division Reversal
The Appellate Division agreed that the appeal from the referral for a hearing as to Lipsh had to be dismissed because a direction for a judicial hearing to aid in deciding a motion does not affect a substantial right. However, it modified the order by deleting the dismissal of the complaint against NETZ. The court held that the process server's affidavit was prima facie evidence of valid service on NETZ, because the server stated he served Ian Axelrod at the Shiponi Law Firm, a person designated to receive process, and that Axelrod said he was authorized to accept the papers. Lipsh's affidavit denying that the firm was authorized rebutted that presumption, but did not conclusively establish improper service. The matter was therefore remitted for a hearing at which the plaintiff must prove proper service by a preponderance of the evidence.
Legal Significance
This decision reinforces New York service-of-process rules for limited liability companies. A process server's affidavit can establish prima facie valid service under CPLR 311-a(a)(iv), but a defendant's sworn denial of the recipient's authority can create a factual dispute. When that denial rebuts but does not conclusively negate service, the proper remedy is a traverse hearing rather than outright dismissal. The case also confirms that an order merely directing a hearing on service is generally not immediately appealable.
In New York, a sworn denial that a person was authorized to accept service for a limited liability company defeats the presumption created by the process server's affidavit, but it does not automatically require dismissal; if the facts are disputed, the court must hold a hearing to determine whether service was valid.