A long-stalled East Harlem development fight is back on the docket, with an appellate court reviving CSN Realty’s bid to hold two developers personally on the hook for roughly $3 million tied to a failed sale at 2252 Third Avenue. The First Department’s ruling sends the years-long dispute over the 2018 deal back to the trial court for discovery, after CSN claimed the buyers hid behind a single-purpose LLC that left the property effectively judgment-proof.
According to The Real Deal, CSN obtained a damages judgment over missed closings and extension fees but could not collect because the buyer, 2252 Third Avenue LLC, was reportedly undercapitalized. CSN’s court filings, quoted by the outlet, say the shell entity “had exactly $0.00 in its account” when it negotiated the $12 million contract. The contract was ultimately terminated in 2021 after a missed March 1, 2020 closing date. Defendants Roy Moussaieff and Yousef Althkefati have filed a verified answer denying the allegations and disputing that there is any basis for piercing the corporate veil.
In a written opinion dated May 21, 2026, the Appellate Division, First Department reversed the lower court, holding that a general merger clause did not automatically wipe out CSN’s fraudulent-inducement claims against Moussaieff and Althkefati, according to New York Courts. The panel ruled that alleged assurances the LLC “had sufficient capital to close” were statements about present fact, not just rosy promises about future performance, which keeps the fraud claims alive for now. The court unanimously denied the developers’ motion to dismiss and sent the case back for further proceedings.
CSN had agreed in 2018 to sell the East Harlem property for $12 million and contends the buyers were planning a 20-story mixed-use tower at the site. The sale never closed, and a memorandum of contract lingered on the title, effectively freezing CSN’s ability to move the site. After holding onto a $600,000 deposit, CSN won a roughly $3 million judgment in August 2023 for penalties and extension fees, then filed a new lawsuit in May 2024 to pierce the corporate veil and reach the developers personally, as reported by The Real Deal. An earlier appeal tweaked the judgment to reduce the principal by the deposit amount, while still affirming the core breach-of-contract findings.
Legal implications
The ruling highlights that garden-variety merger clauses and the so-called duplicative-claims doctrine do not necessarily kill fraud claims when the alleged lies involve existing facts rather than broken promises. Legal commentators point out that New York courts will entertain fraud claims that are collateral to a contract and that plaintiffs can pursue “out-of-pocket” losses that are different from classic lost-profits damages, according to analysis by Freiberger Haber LLP. In practical terms, that means discovery is likely to zero in on corporate records, bank statements and testimony about whether the LLC was thinly capitalized or had its funds commingled with the individual defendants’ other operations.
What's next
With the dismissal now reversed, the case heads back to the trial court and into the grinding phase of discovery, where CSN will try to build the factual record needed to justify piercing the corporate veil. The appellate order’s denial of the motion to dismiss and remand for further fact-finding typically signals a parade of depositions, document demands and wrangling over how far discovery can go, as set out in New York Courts. Both sides are expected to dig into the LLC’s bank accounts, any intercompany transfers and who really controlled the deal before a judge decides whether personal liability is on the table.
For neighbors in East Harlem, the saga is a familiar lesson in how stalled deals can leave prominent corners tied up while lawyers duke it out. The 2252 Third Avenue site has been floated as a future 20-story tower but remains unbuilt, as outlined by CityRealty. The next phase will play out in conference rooms and court filings, with both sides pressing tight legal theories about corporate form and responsibility before anything changes on the ground.
