A New York appellate court recently ruled in a case involving Berko Associates LLC and B. Jaffe Real Estate JV LLC, impacting how fees are enforced under limited liability company agreements. The court's decision, issued on October 27, 2026, clarified the standing of a non-signatory party in a breach of contract claim. This ruling affects businesses and individuals involved in similar contractual disputes.

The case stems from a dispute over alleged unpaid fees totaling $172,500 that Berko Associates claimed were owed under a limited liability company (LLC) agreement. The agreement was originally signed by B. Jaffe Real Estate and two non-parties, Astor Tribeca Common Equity LLC and Astor Tribeca Preferred Equity LLC, for the purpose of leasing and developing properties in Manhattan. Berko Associates was not a signatory to the agreement but was defined as an "affiliate" of the two non-parties.

Berko Associates acted as a consultant and asset manager for the project, seeking an acquisition fee of $720,000 for its services. When the defendants allegedly failed to pay the full amount, Berko Associates filed a lawsuit for breach of contract and quantum meruit, which is a claim for payment for services rendered when no formal contract exists. The defendants responded with five affirmative defenses and counterclaims for tortious interference.

The case reached the Appellate Division of the Supreme Court of New York after the Supreme Court granted Berko Associates' motion for summary judgment on the breach of contract claim. The lower court dismissed the defendants' affirmative defenses and counterclaims, leading to the appeal.

In its ruling, the appellate court modified the lower court's decision. The court ruled that Berko Associates lacked standing to enforce the LLC agreement's acquisition fee provision. The court stated, "Section 13.14 of the LLC Agreement bars enforcement of the contract by third parties and explicitly provides that the agreement was 'entered into . . . for the exclusive benefit of [defendant B. Jaffe Real Estate JV LLC].'" This clause clearly indicated that the agreement was not intended to benefit any third parties, including Berko Associates.

The court also reinstated Berko Associates' quantum meruit claim, indicating that while issues of fact existed regarding the reasonable value of the services rendered, the breach of contract claim should be dismissed due to lack of standing. The court emphasized that the parties to the LLC agreement intended to bar third parties from enforcing its terms.

Judge Webber, along with Judges Kapnick, Shulman, Pitt-Burke, and Hagler, presided over the case. The ruling clarified that even though Berko Associates was defined as an affiliate in the agreement, it did not grant them enforcement rights. The court noted that the inclusion of affiliates in the agreement did not imply that they could enforce its terms.

This ruling has significant implications for businesses and individuals involved in similar contractual relationships. It reinforces the principle that only parties to a contract, or those explicitly granted rights within the contract, can enforce its provisions. This decision serves as a reminder for companies to clearly define the roles and rights of affiliates in their agreements.

Moving forward, this ruling may influence how parties draft LLC agreements and similar contracts, ensuring that the rights of non-signatory parties are clearly outlined. It also highlights the importance of understanding the implications of being defined as an affiliate in a contract.

Details about potential appeals or related cases were not available in the court filing. However, the ruling sets a precedent for future cases involving non-signatory parties and their ability to enforce contractual agreements.