Press Your Luck, Pay The Bill: When Refusing To Drop A Doomed Claim Becomes Sanctionable

When does a litigant’s persistence (and perhaps, stubbornness) cross the line into sanctionable conduct? That is the question at the heart of Cortlandt St. Recovery Corp. v. TPG Capital Management, L.P., et al. (Index 651176/2017), a Commercial Division decision by Justice Robert Reed that should give pause to any litigant tempted to keep fighting after the writing is on the wall. In the decision, Justice Reed admonished a plaintiff that continued to litigate claims that had already been rejected in a closely related action arising from the same underlying deal and theory of liability. The decision offers a cautionary lesson on the continuing duty to evaluate the viability of one’s claims as litigation unfolds.

The Facts: A Claim Already Laid to Rest

In Cortlandt St. Recovery Corp., defendant Apax NY moved for summary judgment dismissing the complaint as against it pursuant to CPLR 3212. Apax NY also sought sanctions under 22 NYCRR 130-1.1, arguing that Plaintiff continued to pursue claims it knew, or should have known, lacked a legal basis.

The sanctions request was grounded in a closely related action, Cortlandt St. Recovery Corp. v. Bonderman, Index No. 653357/2011, also before Justice Reed, which arose from the same transaction and advanced a similar theory of liability. In that action, the court granted summary judgment dismissing claims that were substantially similar to those asserted against Apax NY. The First Department affirmed that dismissal in March 2024.

After the affirmance, Apax NY notified Plaintiff that the claims against it were no longer viable and requested that Plaintiff voluntarily dismiss them. Plaintiff refused. Apax NY then moved for summary judgment and sanctions, contending that Plaintiff’s continued prosecution of the claims, was frivolous despite the related adverse ruling, warranted an award of fees and costs.

The Court’s Ruling

Justice Reed found that Cortlandt’s failure to withdraw its claims after receiving notice of the dismissal of virtually identical claims constituted frivolous conduct under 22 NYCRR 130-1.1. Plaintiff was aware that its claims potentially lacked merit as early as March of 2023 when Defendant obtained summary judgment, and at the latest, March 2024 when the First Department affirmed the dismissal. According to Justice Reed, Plaintiff was on notice as of March 2024 that its claims would not withstand judicial scrutiny.

Plaintiff also failed to oppose Apax NY’s February 2026 motion, despite receiving two adjournments, and did not seek voluntary dismissal until April 2026. The Court found that the continued prosecution frivolous under 22 NYCRR 130-1.1 and awarded Apax NY actual expenses and reasonable attorneys’ fees incurred from April 2023, the month after the related summary judgment decision.

Takeaway

For commercial litigants, Cortlandt St. Recovery Corp. serves as areminder that the obligation to assess the merits of a claim does not end when the complaint is filed. A party that continues to assert claims after a related action has rejected the same core theory may face more than dismissal; it may also face fee-shifting sanctions. Counsel should treat an adverse dispositive ruling in a related action as a serious prompt to reevaluate the claim, assess whether meaningful distinctions remain, and, where appropriate, discontinue untenable claims before continued litigation becomes sanctionable.