20-3663-cv Koral v. Alsou Saunders, Est. of Gregg Saunders

United States Court of Appeals for the Second Circuit

AUGUST TERM 2021 No. 20-3663

LISA NECKRITZ KORAL, Plaintiff-Appellant,

v.

ALSOU SAUNDERS, INDIVIDUALLY AND AS ADMINISTRATRIX OF THE ESTATE OF GREGG SAUNDERS, ESTATE OF GREGG SAUNDERS, Defendants-Appellees.

ARGUED: OCTOBER 6, 2021 DECIDED: MAY 31, 2022

ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NEW YORK

Before: JACOBS, MENASHI, Circuit Judges, KAPLAN, District Judge.*

Thirteen years after her divorce from Gregg Saunders (“Gregg”), plaintiff

Lisa Neckritz Koral (“Lisa”) brought suit against the Estate of Gregg Saunders,

* Judge Lewis A. Kaplan of the United States District Court for the Southern District of New York, sitting by designation. and against Gregg’s widow (Alsou Saunders), individually and as administratrix

of the Estate, claiming that Gregg misrepresented the value of his real estate

investments during divorce proceedings. As to one commercial property

investment, it is alleged that Gregg sold half of his share for hundreds of

thousands of dollars, failed to disclose the sale or the proceeds to Lisa or to their

neutral appraiser, and then concealed the fact of the sale — thereby depriving

Lisa of her share of their marital assets. The United States District Court for the

Eastern District of New York (Feuerstein, J.) granted summary judgment in favor

of the defendants on the ground that the discovery rule did not apply to Lisa’s

claims and dismissed Lisa’s claims as time-barred; the district court did not

consider whether Lisa’s claims should be tolled. We affirm in part, and in part

vacate and remand for consideration of the doctrine of equitable estoppel as to

one of the contested investments.

Judge Kaplan dissents in a separate opinion.

____________________

MATTHEW J. PRESS, Press Koral LLP, New York, NY, for Plaintiff-Appellant.

RUSSELL L. PENZER, Lazer, Aptheker, Rosella & Yedid,

2 P.C., Melville, NY, for Defendants-Appellees.

DENNIS JACOBS, Circuit Judge:

This diversity suit arises from the 2004 divorce of Lisa Neckritz Koral

(“Lisa”) and Gregg Saunders (“Gregg”). In the divorce proceedings, they traded

statements of net worth (among other disclosures), conducted an appraisal on

several commercial properties fractionally owned by Gregg, expressed

satisfaction that their assets were fully disclosed, and disclaimed further inquiry.

They signed a stipulation of settlement in July 2004; their divorce was final

within a month.

Gregg died in a car accident nearly a decade later, and Lisa was deposed in

connection with his wrongful death proceeding. During her 2016 deposition,

Lisa was advised that Gregg’s investments in commercial property may have

been worth millions of dollars. She then became suspicious that Gregg had

misrepresented the value of his real estate holdings, that the appraisal was

inaccurate, and that the stipulation of divorce settlement was induced by fraud.

A year after the deposition, Lisa commenced this fraud action against the Estate

of Gregg Saunders and against Alsou Saunders, Gregg’s widow, individually

3 and in her capacity as administratrix. This appeal is taken from the judgment of

the United States District Court for the Eastern District of New York (Feuerstein,

J.), which dismissed the complaint on summary judgment, on the ground that

the claims are barred by the statute of limitations.

Notwithstanding that this suit was filed thirteen years after the divorce,

Lisa contends that the suit is timely by virtue of the discovery rule or equitable

estoppel. 1 As the district court held, the discovery rule does not apply to Lisa’s

claims. However, the district court did not consider whether Gregg’s alleged

fraudulent concealment warrants tolling the statute of limitations. The evidence

suggests that Gregg may have committed fraud in connection with the sale of

one of his real estate holdings, and then concealed that fraud. Accordingly, we

affirm in part, and in part vacate and remand so that the district court can

determine whether equitable estoppel tolls Lisa’s claims arising from Gregg’s

1Lisa argues that her claims should be tolled pursuant to the doctrines of fraudulent concealment or equitable tolling. Opening Br. at 23. However, for the reasons set forth in Point V, we construe Lisa’s argument as a request to apply equitable estoppel. See Pearl v. City of Long Beach,

(2d Cir. 2002) (explaining the varying uses of terminology regarding tolling).

4 sale of that investment.

I

Lisa and Gregg married in 1997 and filed for divorce in 2002. During their

marriage, Gregg worked in the commercial real estate business as a broker and

investor. The value of his commercial real estate investments was an issue

during the divorce proceedings, including (as relevant in this appeal) the value

of a property in Danbury (the “Danbury Property”), a property in Southbury (the

“Southbury Property”), and a property in Long Island City (the “LIC Property”)

(together, the “Properties”).

At the outset of proceedings, the parties exchanged net worth statements.

Gregg’s “Statement,” made under penalty of perjury, gave the combined value of

his real estate holdings, bank accounts, and home equity, among other assets, at

$855,000 as of August 6, 2002. An addendum described the Properties and

represented that they contributed nothing to Gregg’s net worth. An affirmation

from Gregg’s lawyer, dated June 2002, described the Properties based on Gregg’s

representations (the “Affirmation”).

5 The parties jointly retained an accountant from PricewaterhouseCoopers to

appraise the Properties (as well as two other properties not at issue on appeal).

Following his review, Richard Marchitelli (“Marchitelli”) issued a report (the

“Report”) concluding that the LIC Property and the Danbury Property were

worth nothing, and that the Southbury Property was worth $755,000.

The Report came with important caveats. First, the Properties were valued

as of May 1, 2002, though the Report was issued nearly a year later on March 25,

2003. Second, Marchitelli disclosed that he lacked complete information. In

particular, he lacked access to: the books and records of the managing partners of

the Properties; the invoices or written documentation for most expenditures

and/or equity contributions by the managing partner; full copies of the leases;

and overall written documentation of revenue sources and distributions.

Instead, Marchitelli relied on verbal and written representations by Gregg, his

partners, and his partners’ representatives, and (presumably) market conditions

and professional expertise. Lisa’s counsel questioned the accuracy of

Marchitelli’s preliminary reports, and complained that Marchitelli was not

“given complete and full information.” Joint App’x 248. Nevertheless, though

6 Lisa considered retaining a second real estate expert, she ultimately instructed

her attorney to take no further steps in connection with the appraisal of Gregg’s

property.

Although Gregg provided Lisa with the Statement and participated in the

appraisal process, Lisa remained skeptical about the accuracy of Gregg’s

disclosures. Accordingly, on August 23, 2003, she deposed him regarding his

assets. When asked about his ownership interest in the LIC Property, Gregg

testified:

I don’t know because I am in an entity that is in partnership with another entity, so it may be 18.9 percentage or – I think it might say like 18.9 percent, but that is 18.9 percent of 45 percent of 100 percent. I don’t know specifically.

Joint App’x 616.

On July 22, 2004, Lisa and Gregg entered a stipulation of settlement (the

“Stipulation”), which specified the division of assets, and provided that Gregg

would take possession of each of the Properties. The Stipulation also set forth

several representations: the parties “ha[d] made full disclosure of all assets or

income in a net worth statement furnished to the other party through counsel”;

7 they had conducted independent inquiries into the financial circumstances of one

another through discovery and with the aid of a neutral appraiser; and they had

“conducted discovery to their satisfaction.” Joint App’x 74. The parties waived

their rights to additional inquiry and represented that their attorneys were

instructed to take no further steps in connection with the investigation or

appraisal of the other’s property.

The parties acknowledged that the

“financial status of the parties has been fully explained to both parties by

counsel,” and that the Stipulation “is not the result of any fraud, duress,

coercion, pressure or undue influence.”

. The Stipulation was

incorporated into the Judgment of Divorce in August 2004.

Gregg died in a car accident in 2012, and Lisa was deposed in the wrongful

death action in 2016. According to Lisa, the Estate was then “forced to reveal

details about [Gregg’s] finances and his real estate holdings,” and she learned

from the insurance company that the real estate in which Gregg had invested

was worth “tens of millions of dollars” at the time of the divorce. See

at 11 ¶¶

9-10; 18 ¶¶ 47-48; see also id. at 228 (Lisa’s testimony explaining that a woman

from the insurance company approached her and “put[] a rough number value

8 on the estate”). From the time of her 2016 deposition, Lisa suspected that Gregg

had lied about the value of the Properties during divorce proceedings and had

induced Lisa to sign the Stipulation and thereby suffer the loss of her share of the

true value of the Properties.

II

The complaint, filed on December 1, 2017, alleges fraud, fraud in the

inducement, breach of fiduciary duty, and constructive trust. The amended

complaint, filed in February 2018, challenged the value of the Properties as

represented in the Statement, the Affirmation, the Report, and the Stipulation.

A year later, the district court denied a motion to dismiss, holding, inter

alia, that (i) releases and waivers in matrimonial settlements can be set aside on

the basis of fraudulent inducement or concealment; (ii) there is a fiduciary duty

between spouses during divorce negotiations; (iii) Gregg made a “separate”

representation in the Stipulation that he fully disclosed his assets and income in

the Statement; (iv) Lisa did not waive her right to sue for fraud in the Stipulation;

and (v) the Stipulation could be set aside based on proof that the Report was

9 “tainted” by false information provided by Gregg. The case proceeded to

discovery.

Though Lisa initiated this action based on suspicion, she used the

discovery process to build her case that Gregg misrepresented and concealed

information related to the value of the Properties. Some examples follow.

First, Lisa learned during discovery that Gregg sold half his interest in the

LIC Property after the Statement and the Report were issued, but before the

divorce was final. Gregg had owned an 18.19% interest in a partnership that

owned an interest in the LIC Property. On May 16, 2003, Gregg sold 9.095% of

the partnership (half his interest) to a friend, Geoffrey Gordon, for $650,000.

According to a declaration subscribed by Gordon, he understood that the

purchase value did not necessarily reflect fair market value, but he wanted to

invest in real estate, and he knew that Gregg needed money to finance his

divorce. The sale proceeds of $650,000 were paid into the escrow account of

Gregg’s corporate attorney.

Second, Lisa learned that, when the entity that owned the LIC Property

refinanced in June 2003 (before the divorce), the restated mortgage identified an

10 unpaid balance of just under $20 million, which was less than the outstanding

debt stated in the Report. The defendants dispute Lisa’s characterization, and

maintain that the $20 million in outstanding debt represented unpaid principal,

but did not account for the amount of total indebtedness, including, for example,

unpaid fees and interest that existed as of May 2002.

Third, Lisa claims that certain documents, which reflect the leasing of the

Properties (and which were produced in discovery in this action), were

inconsistent with the leases and rent roll information that Gregg provided to

Marchitelli during the appraisal process. For example, according to Lisa, the

documents revealed that the LIC Property renewed a lease with one of its

tenants, National Wholesale Liquors, which provided for a higher base rent and

a longer lease term than the initial lease. Lisa argues that Gregg withheld the

renewed lease information from Marchitelli.

In a motion for partial summary judgment, Lisa argued that these

omissions are material because, if Gregg had disclosed the sale of the LIC

Property, as well as the refinanced mortgage, and updated lease and rent terms

(among other relevant information), the Report might have concluded that the

11 Properties were worth more, and Lisa might not have ceded her interests in the

Properties in the Stipulation. On these grounds, Lisa argues that the Stipulation

was induced by fraud and should be rescinded.

The defendants cross-moved for summary judgment on the ground that

Lisa’s claims are time-barred, and that in any event no reasonable jury could

conclude that the Stipulation was induced by fraud or that Gregg breached his

fiduciary duty to Lisa. Though the Stipulation was signed in 2004, Lisa

maintains that her claims are timely pursuant to the discovery rule or equitable

estoppel.

In September 2020, the district court adopted a report & recommendation,

which concluded that the discovery rule was inapplicable and that the claims

were time-barred. The district court did not consider possible application of

equitable estoppel. But the court further ruled that, even if the claims were

timely, Lisa identified insufficient evidence to create a triable issue of fact that

Gregg misrepresented assets or induced justifiable reliance at the time of the

divorce proceeding. Based on the foregoing, the district court granted summary

judgment in the defendants’ favor and dismissed the case.

12 III

We review the district court’s rulings on summary judgment de novo.

Tiffany & Co. v. Costco Wholesale Corp.,

, 83 (2d Cir. 2020).

“Summary judgment is warranted only upon a showing ‘that there is no genuine

dispute as to any material fact and the movant is entitled to judgment as a matter

of law.’” See Johnson v. Killian,

(2d Cir. 2012) (per curiam)

(quoting Fed. R. Civ. P. 56(a)). We must “resolve all ambiguities and draw all

permissible factual inferences in favor of the party against whom summary

judgment is sought.” Terry v. Ashcroft,

(2d Cir. 2003) (citation

omitted). “Summary judgment is appropriate ‘[w]here the record taken as a

whole could not lead a rational trier of fact to find for the non-moving party.’”

Johnson,

(alteration in original) (quoting Matsushita Elec. Indus.

Co. v. Zenith Radio Corp.,

(1986)).

In New York, an action for fraud must be commenced within six years of

the fraud, or within two years from the time that plaintiff discovered the fraud or

13 reasonably could have discovered it. Sargiss v. Magarelli,

(2009) (citing

(8); § 203(g)). Likewise, a fraud-based breach of

fiduciary duty claim “must be commenced within 6 years from the date of the

fraudulent act or 2 years from the date the party discovered the fraud or could,

with due diligence, have discovered it.” Murphy v. Morlitz,

, 30

(2d Cir. 2018) (summary order) (citing Kaufman v. Cohen,

(1st Dep’t 2003)). The statute of limitations for constructive trust claims is six

years, beginning upon occurrence of the wrongful act, regardless of when it is

discovered. Kaufman,

.

The events giving rise to Lisa’s claims – the provision of the Statement, the

appraisal process, and the signing of the Stipulation – occurred between 2002

and 2004. Lisa invokes the discovery rule and equitable estoppel to argue that

this suit, initiated more than thirteen years later, is nevertheless timely.

IV

Under the discovery rule, accrual occurs within two years of when the

plaintiff “discovered the fraud, or could with reasonable diligence have

14 discovered it.”

(8); see also

(g)(1). “The

inquiry as to whether a plaintiff could, with reasonable diligence, have

discovered the fraud turns on whether the plaintiff was possessed of knowledge

of facts from which [the fraud] could be reasonably inferred.” Sargiss,

(internal quotation marks and citation omitted; alterations in original).

“[I]t is knowledge of facts not legal theories that commences the running of the

two-year limitations period.” CSAM Cap., Inc. v. Lauder,

(1st Dep’t 2009) (citation omitted).

The district court ruled that Lisa could not invoke the discovery rule

because she failed to identify any “actual specific misrepresentation” prior to

initiating suit. Koral v. Saunders, No. 17 Civ. 7011,

, at *8

(E.D.N.Y. May 25, 2020), report and recommendation adopted, No. 17 Civ. 7011,

(E.D.N.Y. Sept. 30, 2020). While Lisa concedes that she has not

specified a misrepresentation, she argues that this action is timely nevertheless

because she initiated it within two years of developing suspicions during the

wrongful death proceeding, and well within two years of identifying evidence of

fraud during discovery in this action.

15 Lisa relies on cases in which the plaintiff discovered facts supporting fraud

claims before initiating suit. See, e.g., Sargiss,

(holding that claim

was timely when brought after daughter discovered financial documents in late

father’s home); Abele Tractor & Equip. Co. v. Balfour,

, 701 (3d

Dep’t 2015) (reversing summary judgment on limitations grounds, finding issue

of fact regarding timeliness of suit brought after tax records were discovered

during unrelated litigation). Lisa, however, did not uncover facts supporting her

fraud claims during the wrongful death proceeding, or at any other time prior to

initiating suit. Instead, she developed suspicions based on representations

during the wrongful death proceeding, filed her complaint, and then used

discovery in this case to validate her suspicions.

The discovery rule is not a tool to aid speculation or to validate a hunch.

As Lisa has not shown that she had any “knowledge of facts” supporting the

fraud within two years prior to initiating suit, we agree with the district court

that she cannot invoke the discovery rule to save her claims. CSAM,

.

16 V

In the alternative, Lisa argues that tolling is warranted by Gregg’s

concealment of the fraud.

New York courts and the courts of this Circuit variously use the terms

“fraudulent concealment,” “equitable tolling,” and “equitable estoppel,” not

always with clear delineation. See Pearl v. City of Long Beach,

(2d Cir. 2002) (explaining the varying uses of terminology). And Lisa casts her

argument largely in terms of a distinction between active and passive

concealment. The terminology is a distraction. Federal district courts in this

Circuit sometimes differentiate between active and passive concealment when

considering a claim of fraudulent concealment, see, e.g., Bennett Silvershein

Assocs. v. Furman, No. 91 Civ. 3118,

, at *5 (S.D.N.Y. Aug. 28,

1997); but the New York cases do not invoke such a distinction. Because Lisa

alleged state law claims, we look to New York state cases. 2

2New York state courts do not distinguish between the doctrines of equitable tolling and equitable estoppel. See Abbas v. Dixon,

(2d Cir. 2007).

17 In New York, “equitable estoppel” is applicable “[1] ‘where the defendant

conceals from the plaintiff the fact that he has a cause of action [and] [2] where

the plaintiff is aware of his cause of action, but the defendant induces him to

forego suit until after the period of limitations has expired.’” Pearl,

(citing Joseph M. McLaughlin, Practice Commentaries, N.Y. C.P.L.R. C201:6, at 63

(McKinney 1990)); see also Zumpano v. Quinn,

(2006) (citing

Simcuski v. Saeli,

, 449 (1978)). Lisa’s claim is of the first variety.

The doctrine requires proof that “the defendant made an actual

misrepresentation or, if a fiduciary, concealed facts which he was required to

disclose, that the plaintiff relied on the misrepresentation and that the reliance

caused plaintiff to delay bringing timely action.” Kaufman,

.

But it is not enough to have been misled or defrauded. The plaintiff must

demonstrate her diligence in seeking the facts. Doe v. Holy See (State of Vatican

City),

(3d Dep’t 2005); see also Zola v. Gordon,

(S.D.N.Y.), on reargument,

(S.D.N.Y. 1988) (“Stated

another way, in cases involving fiduciary relationships, tolling ceases to work to

a plaintiff’s benefit when the plaintiff possesses sufficient facts that he must

18 engage in some inquiry, and he fails to live up to this obligation.”). And

“equitable estoppel does not apply where the misrepresentation or act of

concealment underlying the estoppel claim is the same act which forms the basis

of plaintiff’s underlying substantive cause of action.” Kaufman,

.

Lisa asserts that Gregg committed fraud when he misrepresented the

Properties’ values in the Statement (a misrepresentation that Gregg’s attorney

confirmed in the Affirmation and that Gregg reaffirmed in the Stipulation). Lisa

alleges that Gregg then concealed the purported fraud during the six-year

limitations period when he (1) submitted “false rental, expense and debt

information to the [a]ppraiser,” so that the Report falsely corroborated Gregg’s

misrepresentations; and (2) hid the sale of the LIC Property. Opening Br. 29-30;

see also Reply Br. 10-11.

Below we consider whether equitable estoppel tolls the limitations period

in connection with the representation that the Properties were valueless (Point

VI) or with respect to the sale of the LIC Property (Point VII).

19 VI

Lisa characterizes the fraud as Gregg’s misrepresentation of the value of

the Properties in the Statement, and characterizes the misrepresentations in the

Stipulation, as well as the provision of false information to Marchitelli, as

separate acts of concealment. We reject that characterization. All of these acts

constitute the underlying fraud, which was the representation that the Properties

were valueless. There are several intractable problems with applying equitable

estoppel to that claim.

First, and most simply, concealment of fraud must entail more than the

fraud itself, unconfessed. Kaufman,

. Whatever the nature of

fiduciary duty between a husband and a wife during divorce proceedings,

Cohen v. Cohen,

, 427–28 (S.D.N.Y. 2014), this does not relieve

an ex-spouse from the statute of limitations and does not allow tolling of the

limitations period absent an act of concealment that is separate from the fraud

itself, Zumpano,

. Gregg’s alleged fraud was the representation

that the Properties were valueless, a representation made in the Statement, the

Affirmation, and the Stipulation, and largely reaffirmed by the Report. Lisa does

20 not identify a subsequent or separate act of concealment that precluded her from

discovering that fraud.

Second, given Lisa’s access to the information about the Properties, she

cannot show diligence in uncovering the machinations that she claims corrupted

the appraiser’s Report. See Holy See,

. As Lisa concedes, she

participated “actively and extensively in [Gregg’s] real estate business.” Joint

App’x 253.1 ¶ 4. She visited properties, reviewed maps and plans, participated

in meetings and phone calls with current and prospective tenants, and

entertained key tenants and brokers. Although the Report assumes that the

representations provided by Gregg were accurate, Lisa’s professional role and

involvement allowed her to question and investigate their accuracy. She was in a

position to know and find out whether the Properties were worth millions (as

she now claims) or nothing.

Third, Lisa was on notice that certain information in the Report was

incomplete or inconsistent. Marchitelli expressly cautioned that he had limited

access to certain information throughout the appraisal process and in the Report.

Gregg owned shares of entities that in turn owned all or parts of the Properties,

21 and Marchitelli noted that he was not given access to the information held by the

entities in which Gregg had invested. During the appraisal process, Lisa’s

attorney complained that Marchitelli was not being given “complete and full

information,” with resulting “complications and errors in his preliminary

reports.” Joint App’x 248. Nevertheless, Lisa ultimately decided against

retaining a second real estate expert to review the Report — and instructed her

attorney to take no further steps in connection with the investigation or appraisal

of Gregg’s property.

Fourth, Lisa declined to probe an arresting discrepancy in the value of the

Southbury Property. Gregg had represented in the Statement that his interest in

the Southbury Property was worth nothing; but the Report valued that interest at

$755,000. The discrepancy runs counter to the idea that the appraiser acceded to

Gregg’s representations; much more importantly, Lisa chose not to diligently

seek out the reason for this inconsistency, which would have doubled the size of

the marital estate. Instead, Lisa chose to credit Gregg’s representations in the

Statement and the Stipulation, and the representation of Gregg’s lawyer in the

Affirmation.

22 In sum, Lisa failed to investigate Gregg’s assurances that his real estate

investments were worth nothing, notwithstanding warning signs and ample

opportunity to do so during the divorce proceedings. “Equitable estoppel will

not toll a limitations statute . . . where a plaintiff possesses timely knowledge

sufficient to place him or her under a duty to make inquiry and ascertain all the

relevant facts prior to the expiration of the applicable Statute of Limitations.”

Gleason v. Spota,

(2d Dep’t 1993) (internal quotation marks

and citation omitted).

VII

The undisclosed sale of the LIC Property, which increased Gregg’s cash

assets by $650,000, may support application of equitable estoppel. Though Lisa

acknowledged that the Stipulation was not induced by fraud and waived her

rights to further discovery, she is not barred from asserting claims arising from

fraud. Under New York law, “otherwise valid releases or waivers may be set

aside on the traditional bases of fraudulent inducement, fraudulent concealment,

23 misrepresentation, mutual mistake or duress.” Harding v. Naseman, No. 07 Civ.

8767,

, at *7 (S.D.N.Y. Nov. 14, 2008). This principle would be

particularly strong if spouses owe each other a fiduciary duty to disclose assets

in divorce.

The undisclosed $650,000 sale of half of Gregg’s interest in the LIC

Property is factually distinct from the non-disclosure of the Properties’ values.

The allegations concerning the Statement, the Affirmation, the Report, and the

Stipulation are integral to an overarching fraud to conceal the value (or not) of

disclosed assets. As to those assets, Lisa was in a position to pursue questions

and inconsistencies at the time of the divorce, and did not. The alleged cover-up

of $650,000 may stand upon a different footing because that cash asset was

undisclosed; Lisa did not learn about the sale of the LIC Property until discovery

in this case. That said, it is not clear that the sale of the LIC Property affects the

property’s valuation. Gordon, who purchased half of Gregg’s share in the LIC

Property for $650,000, states in his declaration that he was aware that $650,000

was not necessarily the fair market value of the LIC Property, and that he bought

the property interest to help Gregg finance the divorce.

24 The sale of the LIC Property and the ensuing circumstances could be found

to be fraudulent for the following reasons. First, Gregg did not disclose the

transaction or the proceeds. The Purchase Agreement stated that the proceeds

would be held in escrow by his real estate attorney, a measure that could be

found to be either a convenient accommodation or a concealment in itself.

Moreover, at his deposition in 2003, Gregg testified that he still owned over 18%

of the partnership interest in the LIC Property, notwithstanding that he sold half

of his share just months earlier. Further, as late as July 22, 2004, Gregg signed the

Stipulation without adjusting upwards by $650,000 the value of his cash assets.

It is a question of fact whether Gregg’s non-disclosure was part of the underlying

fraud or a concealment of it. However, the sale unquestionably and significantly

increased the value of Gregg’s assets.

Having concluded that Lisa has raised a question of material fact, we

vacate and remand for the district court to consider whether Lisa’s claim

regarding the $650,000 transaction is tolled and, if necessary, to consider whether

triable issues of fact preclude summary judgment on whether Lisa is entitled to a

portion of the proceeds from the LIC Property.

25 VIII

If the district court ultimately determines that Lisa’s claims arising from

the sale of the LIC Property are successful, the appropriate remedy will not be to

reopen the divorce proceedings or otherwise disturb the Stipulation — both of

which are beyond the reach of the federal district court. 3 Under New York law,

“one who has been induced by fraudulent misrepresentation to settle a claim

may recover damages without rescinding the settlement.” See Harding,

, at *5 (citing Slotkin v. Citizens Casualty Co.,

(2d Cir.

1979)); see also Sheridan v. Sheridan,

(3d Dep’t 1994)

(holding that because “plaintiff’s arguments . . . are aimed at specific financial

provisions and not the agreement as a whole,” allowing plaintiff’s claim to

proceed would not mandate setting aside the judgment of divorce). To the

extent that Lisa does have a timely, valid claim, it must be resolved with

damages arising solely from the sale of the LIC Property. See, e.g., Harding,

3Lisa may prefer to uphold the Judgment of Divorce, since her former husband is dead and her current husband’s law firm is her counsel.

26

, at *5 (explaining that the measure of damages is “the

difference between what would have been a fair and honest settlement and the

amount . . . accepted in reliance on the alleged misrepresentations of defendant”)

(citing Griffel v. Belfer,

(1st Dep’t 1960)).

IX

The thoughtful dissent justifies a brief rejoinder.

At the settlement of her divorce back in 2004, the plaintiff suspected that

her husband was concealing assets. In particular, she suspected that Gregg had

not given “complete and full information” about his assets, and that Gregg had

“lied in the past.” Joint App’x 248. She nevertheless averred that she was

satisfied with her husband’s disclosures and forswore the need for the further

inquiry that was available to her. The stipulation recited that “[e]ach party has

further made independent inquiry into the financial circumstances of the other

through discovery and inspection,” that “[e]ach party warrants and represents

that they have conducted discovery to their satisfaction,” and that they did not

wish to “take any further steps . . . in connection with such disclosure, discovery,

27 inspection, investigation and appraisal or valuation of the other’s property.”

.

So when the plaintiff filed her complaint more than six years afterward,

the suit was barred by the six-year period of limitations. Her invocation of the

two-year limitations period under the discovery rule does not render the claim

timely, because all that happened in the interim was the deepening of the

suspicion of fraud she harbored at the time of the divorce. This federal action

was thus initiated to find support for suspicions she could have pursued in the

divorce court.

According to the dissent, this outcome means that the claims are both too

late and too early at the same time. If so, that is a mere irony produced by sound

analysis. (The limited remand is to consider tolling for fraudulent concealment

of one asset, which is conceptually distinct from accrual of a limitations period.)

It is not enough for suspicion to brood. If the dissent prevailed, any

divorce settlement could be reopened in federal court, at any time, to pursue

28 suspicions that rankled since before divorce proceedings became final. That is

not a good idea; and it is fortunate that the statute of limitations defeats it.

It does not seem useful to respond to the dissent’s inventive equine

analogy.

CONCLUSION

For the reasons stated above, we affirm in part, and in part vacate and

remand for further proceedings consistent with this opinion.

29 1 LEWIS A. KAPLAN, District Judge, concurring in part, dissenting in part.

2 I concur in Part VII of the majority opinion. I respectfully dissent in

3 all other respects. In my view, the majority’s affirmance of the dismissal of

4 plaintiff’s broader fraud claim rests on a fundamental misapplication of the New

5 York statute of limitations applicable to the accrual of fraud claims and its interaction

6 with the principles governing summary judgment.

7 The pertinent New York statute is CPLR Section 213, subd. 8, which

8 establishes the prescriptive period for fraud claims. Such an

9 “action must be commenced [not later than] the greater of six years

10 from the date the cause of action accrued or two years from the time the

11 plaintiff . . . discovered the fraud, or could with reasonable diligence

12 have discovered it.” 1

13 It is common ground that the fraud occurred at the time of the divorce

14 settlement, which was much more than six years before the action was brought. In

15 consequence, the timeliness of plaintiff’s fraud claim depends upon whether

16 plaintiff’s commencement of this action in 2017 occurred less than two years after

1

Emphasis added. 1 she “discovered the fraud, or could with reasonable diligence have discovered it.”

2 In traveling to its conclusion that this discovery rule does not apply here, the majority

3 mounts two different horses, but those horses head off in different directions.

4 Neither, in my view, properly leads to the majority’s destination.

5 On the one hand, the majority faults plaintiff for “initiat[ing] this action

6 based on suspicion [and for] us[ing] the discovery process to build her case that

7 Gregg misrepresented and concealed information related to the value of the

8 Properties.” 12 In other words, she had not yet “discovered” the fraud by the time

9 she brought this suit in 2017. Indeed, in the majority’s words, she “ha[d] not shown

10 that she had any ‘knowledge of facts’ supporting the fraud within two years prior to

11 initiating the suit.” 3 Thus, the logic of the majority’s position is that plaintiff

12 “discovered” the fraud only after she brought this case. But I cannot square that

13 premise with the majority’s affirmance of the dismissal of her fraud claims on the

14 ground that plaintiff filed this case too late. For that matter, I cannot square it with

2

Slip op. at 10-11, 16-17 (first emphasis supplied, second in original). 3

Id. at 16-17.

2 1 the policy of New York’s discovery rule, the purpose of which is to give defrauded

2 victims, in appropriate circumstances, a chance to sue even after the general six year

3 prescriptive period has expired. In this case, the majority has ruled that plaintiff

4 sued too late to come within the six year period but too soon to gain the benefit of

5 the two year discovery period.

6 This branch of the majority’s rationale fails for another reason. It is

7 inconsistent with the facts that the district court was, and we are, bound to accept for

8 purposes of defendant’s motion for summary judgment.

9 First, the amended complaint alleged that plaintiff “first learned of [her

10 former husband]’s deception when she was called upon to give a deposition in the

11 case Saunders v. Rechler Equity Management, LLC and Rechler, No. 11520/13

12 (Nassau Cty.),” 4 which took place in 2016. It went on to assert that plaintiff:

13 “[i]n preparation for the deposition, . . . learned from defendants’

14 counsel that the Holdings actually were worth tens of millions of

15 dollars. Moreover, [she] learned that [her former husband] had been

4

JA17.

3 1 virtually inactive in the real estate business since the Stipulation was

2 signed in 2004, and thus none of the value of the Holdings (beyond

3 ordinary appreciation over time) related to any performance or

4 development since 2004. Indeed, [she] has been informed, and so

5 believes, that the defendants in the Rechler action consulted experts and

6 performed analyses that demonstrated that the [sic] nearly all the value

7 of the Holdings existed as of the time the Stipulation was signed in

8 2004.” 5

9 These allegations largely were confirmed by plaintiff’s deposition testimony in this

10 case and her declaration in opposition to defendant’s summary judgment motion. 6

5

Id. at 18. 6

JA 253.6-253.7 (declaration); JA 216, 228-29, 230-33 (deposition).

Indeed, the defendants’ statement of undisputed facts in support of their summary judgment motion took as a given that plaintiff had learned during the Rechler action that the value of her former husband’s estate and properties at the time of the divorce was higher than the value appraised at the start of the divorce action. Defendants’ Rule 56.1 Statement of Undisputed Facts, ECF No. 41-1, ¶ 19, Koral v. Saunders, No. 17-cv-7011 (SJF) (E.D.N.Y. filed Feb. 18, 2020). 4 1 This appeal arises in the context of a grant of summary judgment in

2 favor of the defendants. The evidence therefore must be viewed in the light most

3 favorable to the non-moving party. So viewed, the evidence demonstrates that

4 plaintiff discovered the fraud when she learned in 2016, in connection with the

5 deposition in the Rechler case, that her former husband’s real estate was worth many

6 millions of dollars rather than nothing, as he swore in the divorce proceedings.

7 While she presumably obtained additional evidence in pretrial proceedings in this

8 case, a jury would be entitled to find that her discovery of the fraud occurred less

9 than two years before she brought this lawsuit.

10 Turning to the majority’s other theme, the majority refers to evidence

11 that plaintiff may have been suspicious at the time of the 2002-03 divorce

12 proceedings with respect to her then-husband’s valuation of his real estate interests,

13 failed to investigate as fully as she might have done, and may have had sufficient

14 personal familiarity with those interests through her own involvement in the business

15 to have given her knowledge bearing importantly on their value. There may have

16 been other circumstances that perhaps would support a conclusion that any

5 1 ignorance on plaintiff’s part of the alleged true value of the then-husband’s real

2 estate interests was her own fault. 7 If all of those issues were resolved in

3 defendants’ favor, they might warrant a conclusion that plaintiff “discovered the

4 fraud, or could with reasonable diligence have discovered it” many years before she

5 brought this action. In that case, plaintiff’s fraud claims would be time-barred.

6 But they would be time-barred not because she first discovered the fraud, either

7 actually or constructively, after she brought the lawsuit. They would be barred

8 because she knew or was chargeable with knowledge of the fraud at the time of the

9 divorce proceedings in 2002-03. If that were so, “the greater of six years from the

10 date the cause of action accrued or two years from the time the plaintiff . . .

11 discovered the fraud, or could with reasonable diligence have discovered it” would

12 have been the six year period. So the untimeliness of the action on that assumption

13 would arise from the expiration of the six year period without regard to the discovery

14 period.

7

Slip op. at 5-9.

6 1 And that brings me back to something to which I already have alluded

2 – the fact that this is an appeal from a summary judgment of dismissal. The

3 plaintiff’s evidence must be viewed in the light most favorable to her. The question

4 whether the circumstances to which the majority refers – the suspicion, her failure

5 to pursue further investigation, and so on – warrant a conclusion that the plaintiff

6 either discovered or with reasonable diligence could have discovered the fraud many

7 years ago is a triable issue of fact. Summary judgment should have been denied.

8 Accordingly, I dissent as indicated.

7