Court affirms penalties for lender’s counsel after foreclosure misstep—compliance lapses prove costly
A New York court hit a lender’s attorney with $15,000 in penalties for mishandling a foreclosure, spotlighting strict compliance in mortgage litigation.
In 2002, Pearl Connor executed a $228,000 note in favor of the plaintiff’s predecessor, secured by a mortgage on Brooklyn property. After Connor allegedly defaulted, the predecessor began a foreclosure action in 2006. By October 2007, the Supreme Court issued a judgment of foreclosure and sale against Connor due to her default.
Despite this prior judgment, Private Capital Group LLC, as successor, started a new foreclosure action in February 2009 against Connor and Adrian Cutting, without seeking leave of court as required after a prior foreclosure judgment. The defendants responded with various affirmative defenses. Before a scheduled bench trial in 2022, they argued the new action should be dismissed under New York law because the plaintiff never sought permission to bring another foreclosure case.
At the outset of the trial, Connor and Cutting moved to dismiss the complaint on those grounds and also requested attorney’s fees and sanctions under court rules, alleging that the plaintiff’s counsel, Ross Eisenberg, engaged in frivolous conduct by proceeding without proper legal grounds.
The Supreme Court granted the motion to dismiss and held a hearing on the request for sanctions and attorney’s fees. Following the hearing, the court ordered Eisenberg to pay $10,000 in attorney’s fees to the defendants and $5,000 to the Lawyers’ Fund for Client Protection. Eisenberg and Palm Avenue Hialeah Trust, a nonparty, appealed the order.
On October 29, 2025, the Appellate Division, Second Department, affirmed the lower court’s decision. The appellate court found that the Supreme Court properly exercised its discretion in awarding sanctions and attorney’s fees, noting that courts may impose such penalties for conduct that is frivolous—meaning it is without merit, intended to delay litigation, or asserts false material facts. While the appellate court said the lower court could have explained the penalty amounts in more detail, it found the sums appropriate given Eisenberg’s conduct.
For mortgage professionals, this case is a clear reminder: when handling foreclosure actions, especially after a prior judgment, every procedural step must be followed. Failing to comply with court requirements can result in significant financial penalties for both attorneys and their clients.
This decision is not just about a single foreclosure or one attorney’s fees. It signals that courts expect strict adherence to foreclosure procedures and will hold parties accountable for frivolous litigation. For those working in mortgage servicing or foreclosure, compliance is essential to avoid costly mistakes and reputational risk.
The Private Capital Group LLC v Connor decision, issued October 29, 2025, stands as a practical warning: follow the rules, or you could be the next one facing penalties.
