On April 29, 2026, the Second Department issued a decision in Karp v. Madison Realty Capital, L.P., 2026 NY Slip Op. 02637, holding that questions of fact precluded dismissal based on a release where the release allegedly was procured through economic duress, explaining:
Generally, a valid release constitutes a complete bar to an action on a claim which is the subject of the release. A release may be invalidated, however, for any of the traditional bases for setting aside written agreements, namely, duress, illegality, fraud, or mutual mistake. In addition, a release may be set aside on the ground that it was not fairly and knowingly made. This basis for setting aside a release may be applied in situations falling far short of actual fraud such as when, because the releasor has had little time for investigation or deliberation, or because of the existence of overreaching or unfair circumstances, it was deemed inequitable to allow the release to serve as a bar to the claim of an injured party. Although a defendant has the initial burden of establishing that it has been released from any claims, a signed release shifts the burden going forward to the plaintiff to show that there has been fraud, duress or some other fact which will be sufficient to void the release.
In resolving a motion to dismiss pursuant to CPLR 3211(a)(5), the plaintiff’s allegations are to be treated as true, and all inferences that reasonably flow therefrom are to be resolved in his or her favor.
Here, in support of their motion, the defendants submitted, inter alia, a copy of the forbearance agreement signed by the plaintiff Eli Karp, which contained a waiver and release clause (hereinafter the release). The plaintiffs’ allegations were sufficient, however, to raise a question of fact as to whether the release was obtained under circumstances that indicate unfairness and whether the release was not fairly or knowingly given. Specifically, the plaintiffs alleged that as part of the loan to own scheme, the defendants created economic pressure in order to place the plaintiffs in a position where they had to enter into the forbearance agreement to avoid foreclosure and that the plaintiffs’ attorney participated in this scheme by providing the plaintiffs with only signature pages of the closing documents and failing to discuss or explain the release. Accordingly, the Supreme Court should have denied those branches of the defendants’ motion which were pursuant to CPLR 3211(a)(5) to dismiss the causes of action to recover damages for breach of contract and breach of the covenant of good faith and fair dealing.
(Internal quotations and citations omitted).