Stern v. Highland Lake Homeowners Association

Background

Plaintiffs Mendel Stern, Aharon Ostreicher, Yochonon Markowitz, Abraham Kohn, Isaac Schwimmer, Esther Schwimmer, Joel Sabel, Yoel Fried, Fraida M. Fried, Melech Krauss, Israel Ostreicher, and their families asserted state and federal claims concerning alleged anti-Hasidic policies at the Highland Lake gated community. Plaintiffs sought a preliminary injunction concerning defendants’ use of an entrance and exit gate.

In support of that request, plaintiffs relied primarily on an affirmation attributed to Isaac Schwimmer. The affirmation described alleged hostility toward Hasidic residents, the effect of the gate on transportation and deliveries, and difficulties involving school buses. At an August 29, 2018 hearing, plaintiffs’ counsel repeated several factual assertions based on the affirmation. The parties then agreed to a temporary arrangement under which the gates would remain open except during specified overnight and Sabbath periods. The court entered that agreement as a So-Ordered Stipulation on September 5, 2018.

Discovery and Motion

During discovery, Isaac Schwimmer testified that he had never reviewed or signed the affirmation and did not recognize the signature. He also testified that some statements in the affirmation were inaccurate or outside his knowledge. Plaintiffs’ counsel later informed the court that the affirmation had actually been signed by Abraham Schwimmer, Isaac Schwimmer’s brother, and that counsel had not known this when submitting it.

Defendants moved under Rule 60(b) of the Federal Rules of Civil Procedure to vacate the So-Ordered Stipulation, arguing that their agreement had been obtained through fraudulent inducement or material misrepresentations. Plaintiffs conceded that the affirmation had been falsified but opposed the motion.

Rule 60(b) Analysis

The court held that Rule 60(b) was unavailable because the So-Ordered Stipulation was an interlocutory order—a temporary, non-final order—rather than a final judgment or order. The court also concluded that a motion under Rule 60(b)(3), which addresses fraud or misconduct, would have been untimely because it was brought more than one year after the stipulation was entered.

Inherent Power to Revisit the Stipulation

The court nevertheless held that a district court has inherent equitable power to reconsider and modify its interlocutory orders before final judgment. It treated defendants’ request as one relying on that power rather than Rule 60(b).

The court found that the Schwimmer Affirmation was the only party affirmation supporting plaintiffs’ preliminary-injunction motion and that the affirmation was not signed by Isaac Schwimmer. Because the affirmation supplied the central factual support for plaintiffs’ request, the court concluded that the evidence underlying the motion had been materially misrepresented. The court further found that defendants reasonably relied on the affirmation when deciding to enter the stipulation.

The court also concluded that rescission was supported by New York contract law. It explained that a stipulation is a contract and that a contract induced by fraud may be rescinded. The court found significant evidence of a material misrepresentation, an intent to induce reliance, reasonable reliance by defendants, and grounds for rescission.

Disposition

The court GRANTED defendants’ motion to vacate the So-Ordered Stipulation pursuant to its inherent equitable powers to revisit interlocutory orders. It directed the Clerk to vacate the stipulation at ECF No. 40 and terminate the motion at ECF No. 90. The ruling vacated the temporary gate-access arrangement; it did not decide the underlying state and federal claims.