Star201, LLC v Martinez
Categories
Attorneys and Parties
Brief Summary
Mortgage foreclosure; whether a foreign limited liability company (LLC) lacked capacity to sue in New York because it was allegedly doing business in the state without authorization.
The Supreme Court, Queens County, conditionally granted Martinez's cross-motion for summary judgment dismissing the complaint against him unless the plaintiff proved compliance with Limited Liability Company Law § 802(a) [before doing business in New York, a foreign limited liability company must apply for authority to do business in the state], and denied the plaintiff's motion for summary judgment and an order of reference without prejudice to renew.
The Appellate Division reversed the order insofar as appealed from, denied Martinez's cross-motion, vacated the portion of the order denying the plaintiff's motion without prejudice, and remitted for a merits determination of the plaintiff's motion.
Martinez failed to make a prima facie showing that the plaintiff was "doing business" in New York within the meaning of Limited Liability Company Law § 808(a) [a foreign limited liability company doing business in New York without a certificate of authority may not maintain an action in New York courts]. His proof showed only that the plaintiff had filed numerous foreclosure actions in New York, which is insufficient because Limited Liability Company Law § 803(a)(1) [maintaining or defending an action does not by itself constitute doing business in New York] excludes mere litigation activity from the definition of doing business.
Background
Star201, LLC commenced a mortgage foreclosure action against Valentin Martinez and others. Martinez answered and asserted affirmative defenses and counterclaims. The plaintiff later moved for summary judgment on the complaint against Martinez and for an order of reference. Martinez cross-moved for summary judgment dismissing the complaint against him, arguing that Star201, LLC, as a foreign limited liability company, lacked capacity to sue in New York because it was doing business in the state without authority.
Lower Court Decision
The Supreme Court, Queens County, ruled that Martinez's position had merit to the extent of conditionally granting his cross-motion unless the plaintiff provided proof within 30 days that it had complied with Limited Liability Company Law § 802(a) [before doing business in New York, a foreign limited liability company must apply for authority to do business in the state]. The court also denied the plaintiff's motion for summary judgment and an order of reference without prejudice to renewal upon such proof.
Appellate Division Reversal
The Appellate Division held that the burden was on Martinez to prove that the plaintiff's New York business activities were systematic and regular, rather than casual or occasional. The only proof he submitted was that the plaintiff had commenced numerous other mortgage foreclosure actions in New York. That was insufficient as a matter of law because maintaining lawsuits does not constitute doing business in the state under Limited Liability Company Law § 803(a)(1) [maintaining or defending an action does not by itself constitute doing business in New York]. Since Martinez failed to establish prima facie that the plaintiff was doing business in New York, his cross-motion should have been denied. The appellate court therefore reversed, denied the cross-motion, vacated the denial of the plaintiff's motion without prejudice, and remitted for a determination of the plaintiff's motion on the merits.
Legal Significance
This decision reinforces that a foreign limited liability company's litigation activity in New York, even if it includes multiple foreclosure filings, does not by itself establish that the company is doing business in the state so as to trigger the capacity bar of Limited Liability Company Law § 808(a) [a foreign limited liability company doing business in New York without a certificate of authority may not maintain an action in New York courts]. A defendant invoking the statutory bar must present evidence of continuous, systematic in-state business activity.
A defendant cannot defeat a foreclosure action merely by showing that a foreign LLC has filed many New York lawsuits; without proof of broader, regular business operations in the state, the LLC is not barred from maintaining the action.