Background
New Capital Solutions, LLC, a commercial mortgage advisory and brokerage firm headquartered in Greenwich, Connecticut, entered into a loan origination fee agreement in July 2019 with KOSL Properties, LLC, a New York limited liability company, and its managing member Bobby Ben-Simon. Under the agreement, New Capital would use best efforts to find a lender willing to make a roughly $4.2 million loan to KOSL secured by commercial property at 875 Mamaroneck Avenue in Mamaroneck, New York, in exchange for a one-percent origination fee. New Capital’s managing director William Horty contacted multiple lenders, ultimately submitting a complete loan application on KOSL’s behalf to M&T Bank, whose offices were in New York. The loan closed in April 2020; KOSL and Ben-Simon refused to pay the approximately $36,500 origination fee balance. New Capital sued in Connecticut Superior Court for breach of contract.
The choice-of-law issue emerged late in the proceedings. The defendants first raised New York Real Property Law § 442-d—which prohibits an unlicensed person from maintaining an action to recover compensation for real estate brokerage services in New York—just days before the July 2023 trial through a proposed amendment to their special defenses and a request for judicial notice of a prior federal decision that had dismissed a similar claim by the same plaintiff for lack of a New York broker’s license. The trial court denied the amendment as untimely but reserved the legal question of which state’s law governed, allowed extensive trial testimony on the underlying facts, and directed the parties to address choice of law in post-trial briefs. Neither party disputed that New Capital held no New York real estate broker’s license; its managing principal held only a New York residential mortgage loan originator license, which the court found to be a different credential.
In its April 2024 memorandum of decision, the trial court applied New York law, concluded that § 442-d barred the plaintiff’s claims, and entered judgment for the defendants. The court found that, although New Capital operated from its Connecticut office for most of the engagement, the transaction concerned a loan secured by New York real property, the borrower and its guarantor were New York parties, the lender’s offices were in New York, the loan approval and closing documents were executed in New York, and New Capital’s managing director traveled to New York to meet with the parties. New Capital appealed, challenging only the procedural notice question and the geographic scope of § 442-d—not the underlying choice-of-law analysis itself.
The Court’s Holding
The Connecticut Appellate Court (Clark, J., joined by Westbrook and Flynn, JJ.) affirmed on both grounds. On the notice question, the court held that Practice Book § 10-3(b)—which requires a party intending to rely on foreign law to give “notice in his or her pleadings or other reasonable written notice”—is directory rather than mandatory, just like the closely analogous § 10-3(a) governing reliance on statutes. The critical inquiry is whether the opposing party received adequate notice and a full and fair opportunity to litigate the issue. Here, the defendants’ pre-trial request to amend their special defenses explicitly identified § 442-d and New York law, their simultaneous request for judicial notice pointed to a prior ruling applying that statute to the same plaintiff, extensive cross-examination at trial probed the licensing and geographic facts, both parties briefed the issue in post-trial memoranda, and the defendants filed a motion to dismiss on the same ground. The plaintiff therefore had adequate notice and suffered no cognizable prejudice.
On the merits of § 442-d’s reach, the court affirmed the trial court’s determination that the statute applied even though New Capital physically performed much of its work from Connecticut. The statute bars suit for compensation for brokerage services “rendered in any place” in which it is applicable—it is not limited to services performed exclusively within New York’s borders. New Capital acted as agent for a New York principal (KOSL), solicited and negotiated with lenders whose offices were in New York, submitted a loan application to M&T Bank in New York, traveled to New York to attend a meeting with the defendants and the lender, and the loan was secured by New York real property with closing documents executed in New York. These contacts were sufficient to bring the services within the ambit of § 442-d regardless of where New Capital’s office was located.
Key Takeaways
- Practice Book § 10-3(b) is directory, not mandatory: a party that raises a foreign-law defense through pre-trial motions, judicial-notice requests, trial testimony, and post-trial briefs provides sufficient “reasonable written notice” even without a formal pleading amendment.
- New York Real Property Law § 442-d can bar fee recovery by an out-of-state broker whose physical office is outside New York if the brokerage services were rendered in connection with New York real property, New York principals, and New York lenders—especially where the broker’s representative traveled to New York and the loan closed there.
- A New York residential mortgage loan originator license does not satisfy § 442-d’s requirement of a real estate broker’s license; brokers working on New York commercial real estate transactions must hold the specific New York real estate broker credential to maintain a fee claim.
- Contractual forum selection clauses choosing Connecticut courts do not, standing alone, carry a corresponding choice-of-law provision; courts will still apply conflict-of-laws principles to determine which state’s substantive law governs the claim.
Why It Matters
This decision is a practical warning for commercial mortgage brokers and loan origination firms headquartered outside New York who routinely broker transactions involving New York real property. The court’s broad reading of § 442-d’s territorial reach—extending to electronic and telephonic contacts directed at New York parties and at least one in-person visit to New York—means that geographic distance from a broker’s home office provides little shelter if the deal, the borrower, and the lender are all rooted in New York. Firms that operate nationally from a single state of domicile cannot rely on a home-forum selection clause or on their Connecticut address to avoid New York’s licensing requirement.
The decision also clarifies Connecticut procedural law: a party that omits a foreign-statute defense from its initial pleadings but raises it clearly and repeatedly through pre-trial filings, evidence, and briefing will satisfy the notice requirement of Practice Book § 10-3(b). Litigants opposing late-raised foreign-law defenses must demonstrate concrete prejudice—not merely the lateness of the notice—to obtain relief, making it harder to escape a dispositive statutory bar on purely procedural grounds.