Key Points

  • The Appellate Division, First Department, unanimously held that Section 13.14 of the LLC agreement, a no-third-party-beneficiary clause, bars nonsignatory Berko & Associates LLC from enforcing the agreement's acquisition-fee provision.
  • Being defined as an "affiliate" in the agreement, and being mentioned in the Section 13.9 jury waiver, did not give Berko enforcement rights or make the agreement ambiguous.
  • The court reversed summary judgment for Berko on breach of contract, granted the defendants summary judgment on their lack-of-standing defense, and dismissed the contract claim.
  • Berko's quantum meruit claim was reinstated, but fact issues on the reasonable value of its services preclude summary judgment; the defendants' payment, valuation and documentary-evidence defenses were restored.
  • Dismissal of the defendants' estoppel defense and tortious interference counterclaims was affirmed.

A New York appeals court on Oct. 27 dismissed a real estate consultant's breach of contract claim for $172,500 in fees under a Manhattan development venture's limited liability company agreement. The court held that a clause reserving the contract's benefits to the venture and its members barred the consultant from enforcing it, even though the agreement named the consultant as an affiliate of two of its signatories.

A unanimous five-justice panel of the Appellate Division, First Department, reversed the summary judgment that Justice Arthur F. Engoron of State Supreme Court in Manhattan had granted Berko & Associates LLC on its breach of contract claim against B. Jaffe Real Estate JV LLC and other defendants. The panel dismissed that claim for lack of standing. In the same unsigned decision, it revived Berko's alternative claim for quantum meruit.

The ruling leaves Berko a path to payment only through the quantum meruit claim. The panel denied Berko summary judgment on that claim because "issues of fact exist concerning, among other things, the reasonable value of the services rendered."

The dispute arises from a limited liability company agreement that the defendants signed with two nonparties, Astor Tribeca Common Equity LLC and Astor Tribeca Preferred Equity LLC, to lease and develop three properties in Manhattan: 72 Warren Street, 74 Warren Street and 84-88 West Broadway. Berko did not sign the agreement, but the document defined it as an "affiliate" of the two Astor entities. According to the decision, Berko acted as a "consultant and asset manager in connection with the acquisition broker, debt financing and equity investment" on the project.

Berko claimed that Section 4.9(b) of the agreement entitled it to a $720,000 acquisition fee. It sued for breach of contract and quantum meruit, contending that the defendants had not paid the full fee, and sought $172,500. The defendants answered with five affirmative defenses, including that Berko lacked standing to sue, and two counterclaims accusing Berko of tortious interference.

On cross-motions for summary judgment, Justice Engoron ruled for Berko on the contract claim. The court dismissed the quantum meruit claim because a contract governed the parties' relationship, and it dismissed the defendants' defenses and counterclaims. The order was entered July 9, 2025.

The appeals court turned instead to Section 13.14 of the agreement. That clause 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 adds that the agreement 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."

"This no-third-party beneficiary clause bars plaintiff, a nonsignatory to the agreement, from seeking to enforce its terms," the panel wrote. The panel relied on a 2006 First Department decision holding that "the best evidence of the intent to bestow a benefit upon a third party is the language of the contract itself."

Berko argued that the agreement's jury waiver, Section 13.9, made its status ambiguous because the waiver refers to the possibility of "dispute[s] among the members or their affiliates . . . concerning this agreement." The panel rejected that argument. Quoting the Court of Appeals, it wrote 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."

"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," the panel wrote. In its view, the jury waiver's mention of affiliates "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."

The panel found that the agreement's use of the term in its definitions section and in the jury waiver "underscores that the parties knew how to grant 'affiliates' enforcement rights in Section 13.14 had they intended to do so." It called the parties' choice to leave affiliates out of that clause "clear and unambiguous."

The decision also sorted the defendants' remaining defenses. The panel restored the third, fourth and fifth affirmative defenses, which concern payment, valuation and documentary evidence, because they bear on the quantum meruit claim. It upheld dismissal of the first defense, which rested on estoppel. The trial court's earlier denial of Berko's request for an order to show cause and a temporary restraining order "does not serve as a decision on the merits for the purposes of collateral estoppel," the panel wrote.

The defendants fared no better on their counterclaims. The panel upheld their dismissal, holding that Berko's lawsuit, on which the tortious interference counterclaims rested, "cannot be considered frivolous."

Justice Webber presided over the panel, which also included Justices Kapnick, Shulman, Pitt-Burke and Hagler. The court awarded no costs.

Simon I. Malinowski of Peraino Malinowski LLP represented the defendants. Marc Jonas Block of the Law Offices of Marc Jonas Block, P.C., represented Berko.

Berko's reinstated quantum meruit claim faces the defendants' restored defenses on payment, valuation and documentary evidence, and issues of fact remain on the reasonable value of Berko's services.