Yes I Can Licensed Behavior Analyst PLLC v. Green Tree Cap., LLC

26-113-cv Yes I Can Licensed Behavior Analyst PLLC v. Green Tree Cap., LLC UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT SUMMARY ORDER RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL. At a stated term of the United States Court of Appeals for the Second Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the 13th day of November, two thousand twenty-six. PRESENT: JOHN M. WALKER, JR., DENNIS JACOBS, JOSEPH F. BIANCO, Circuit Judges. _____________________________________ YES I CAN LICENSED BEHAVIOR ANALYST PLLC, TRIUMPH BEHAVIOR SUPPORT LLC, YES I CAN SERVICES INC, YICIF LLC, METROPOLITAN MENTAL HEALTH PC, ZAREPHATH INC., YIC REALTY AZ LLC, SIMCHA FELLER, ROCHEL ITA FELLER, Plaintiffs-Appellants, v. 26-113-cv GREEN TREE CAPITAL, LLC, DELAWHO HOLDINGS LLC, YITZCHOK WOLF, AKA ISAAC WOLF, SARA BETYAKOV, AKA SARAH BEITYAKOV, MATTHEW STAFFORD, ARIEL BOUSKILA, STEVEN BERKOVITCH, BERKOVITCH & BOUSKILA, PLLC, ABC CORPORATIONS 1−10, JOHN DOES 1-10, JOHN DOE INVESTORS 1-10, Defendants-Appellees, JONATHAN BRAUN, Defendant. _____________________________________ FOR PLAINTIFFS-APPELLANTS: JONATHAN E. NEUMAN, Fresh Meadows, New York. FOR DEFENDANTS-APPELLEES GREEN ARIEL BOUSKILA, Berkovitch & Bouskila, TREE CAPITAL, LLC, DELAWHO PLLC, Pomona, New York. HOLDINGS LLC, YITZCHOK WOLF, AKA ISAAC WOLF, SARA BETYAKOV, AKA SARAH BEITYAKOV AND MATTHEW STAFFORD: FOR DEFENDANTS-APPELLEES ARIEL CHRISTOPHER R. MURRAY, Murray Legal BOUSKILA, STEVEN BERKOVITCH AND PLLC, Mineola, New York. BERKOVITCH & BOUSKILA, PLLC: Appeal from a judgment of the United States District Court for the Southern District of New York (Paul A. Engelmayer, Judge). UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that the judgment of the district court, entered on December 29, 2025, is AFFIRMED. Plaintiffs-Appellants Yes I Can Licensed Behavior Analyst PLLC (“YIC”), Triumph Behavior Support LLC, Yes I Can Services Inc, YICIF LLC, Metropolitan Mental Health PC, Zarephath Inc., YIC Realty AZ LLC, Simcha Feller, and Rochel Ita Feller appeal from the district court’s dismissal of the Second Amended Complaint (“SAC”) against Defendants-Appellees 2 Green Tree Capital, LLC, Delawho Holdings LLC, Yitzchok Wolf, a.k.a. Isaac Wolf, Sara Betyakov, a.k.a. Sarah Beityakov, and Matthew Stafford (collectively, the “Green Tree Defendants”), and Ariel Bouskila, Steven Berkovitch, and Berkovitch & Bouskila, PLLC (collectively, the “B&B Defendants”), for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). We assume the parties’ familiarity with the underlying facts, procedural history, and issues on appeal, to which we refer only as necessary to explain our decision to affirm. BACKGROUND The following factual background is taken from the SAC and all well-pleaded factual allegations are assumed to be true. See Horn v. Stephenson, 11 F.4th 163, 166 (2d Cir. 2021). This case arises from a dispute over a $2 million merchant cash advance (“MCA”), a type of business financing transaction where a company receives cash in exchange for its future receivables. Plaintiffs provide education, support, and therapy to children with autism, special needs, and trauma who live in the tri-state area and Arizona. To fund its operations, YIC sought a $2 million loan from Green Tree, a merchant cash-advance company, and Green Tree “fraudulently induced [YIC] to enter into contracts not reflecting the terms agreed upon,” including a “criminally usurious and unenforceable” loan disguised as an MCA. App’x at 162– 63, 173. The MCA agreement contains a number of terms, including, among others, that: (1) YIC would receive an advance payment of $2.5 million (minus $500,000 in underwriting and origination fees) in exchange for Green Tree’s purchase of YIC’s future receipts until YIC paid Green Tree $3,749,999, as the principal and interest on the MCA; (2) YIC was to repay this amount through daily $62,500 payments during a 60-day period 1; (3) Simcha Feller, owner and 1 According to the SAC, based on these numbers, “Defendants were going to receive $1.75 million [] in 3 principal of YIC, was obligated to execute a personal guarantee, an affidavit of confession of judgment for the full $3,749,999, and a blanket security interest in his personal assets; (4) Green Tree would have the irrevocable right, through power of attorney, to withdraw funds from YIC’s bank accounts, prevent the transfer of those funds, and block YIC from selling its business; (5) YIC would be obligated to pay Green Tree’s attorneys’ fees; and (6) YIC would be prohibited from obtaining funding from other sources. Between March 8, 2024 and April 9, 2024, YIC made fifteen $62,500 payments, falling short of the daily payment schedule. Days later, Green Tree used the B&B Defendants, who are lawyers, and their law firm, to file an entry of judgment in New York State court against YIC for defaulting under the agreement, with YIC’s affidavit of confession being the basis for Green Tree to obtain an automatic judgment of confession for over $3.5 million, including for over $700,000 in legal fees (the “First Judgment”). Plaintiffs sought to enjoin enforcement of the First Judgment and also filed a separate plenary action in New York State court seeking (1) a preliminary injunction to stay enforcement of the First Judgment, and (2) vacatur of the First Judgment based on claims for fraudulent inducement, breach of contract, and procedural error in obtaining the judgment, as well as a claim for excessive attorneys’ fees. The state court vacated the $700,000 legal fees portion of the judgment as grossly disproportionate to the legal services rendered but denied Plaintiffs’ motion to vacate the judgment in all other respects, as well as the motion for a preliminary injunction. The state court also dismissed Plaintiffs’ claims for fraudulent inducement, breach of contract, and procedural error. interest on a $2 million [] loan (87.5%) in only 60 days.” App’x at 146. 4  Defendants, through the B&B Defendants, then obtained a confession of judgment against Plaintiffs for over $3 million (the “Second Judgment”). Plaintiffs then filed the SAC, alleging that Defendants engaged in a predatory lending and criminal usury scheme, and seeking damages for substantive and conspiracy civil Racketeer Influenced and Corrupt Organizations Act (“RICO”) claims under 18 U.S.C. § 1962, along with state law claims. Defendants moved to dismiss the complaint for lack of subject matter jurisdiction, lack of personal jurisdiction, and failure to state a claim, including on res judicata grounds. See Fed. R. Civ. P. 12(b)(1)–(2), 12(b)(6). The district court granted the motion to dismiss principally on the basis of res judicata in light of the Second Judgment; the court also concluded that Plaintiffs otherwise failed to plead the elements necessary for substantive and conspiracy claims under RICO. See generally Yes I Can Licensed Behavior Analyst PLLC v. Green Tree Cap. LLC, No. 24-cv-7360, 2025 WL 3715243 (S.D.N.Y. Dec. 23, 2025). This appeal followed. DISCUSSION We review de novo a district court’s application of res judicata and dismissal for failure to state a claim under Rule 12(b)(6). Whitfield v. City of New York, 96 F.4th 504, 518 (2d Cir. 2024). In doing so, we accept “all allegations in the complaint as true and draw[] all inferences in favor of the plaintiff,” and “[o]ur review of a res judicata dismissal is limited to the plaintiff’s complaint, documents attached or incorporated therein, and materials appropriate for judicial notice, including all filings and judgments made in state court.” Rosenthal v. Roosevelt Island Operating Corp., 185 F.4th 48, 54–55 (2d Cir. 2026) (internal quotation marks and citations omitted). 5  To survive a motion to dismiss, a plaintiff pursuing a substantive RICO claim must plausibly allege “(1) conduct, (2) of an enterprise, (3) through a pattern (4) of racketeering activity, as well as injury to business or property as a result of the RICO violation. The pattern of racketeering activity must consist of two or more predicate acts of racketeering.” Lundy v. Cath. Health Sys. of Long Island Inc., 711 F.3d 106, 119 (2d Cir. 2013) (internal quotation marks and citation omitted). A RICO conspiracy claim requires allegations that the co-conspirators “knew about and agreed to facilitate” the racketeering activity. Baisch v. Gallina, 346 F.3d 366, 377 (2d Cir. 2003) (internal quotation marks and citation omitted). The district court held that Plaintiffs’ claims are barred by res judicata in light of the Second Judgment, except as to the B&B Defendants, and that on the merits, Plaintiffs failed to state civil RICO claims. Yes I Can, 2025 WL 3715243, at *7–8, *12. As to the latter issue, the district court noted that “[t]he Second Circuit has not resolved whether litigation activity can serve as the basis for RICO predicate acts,” and concluded that, at a minimum, such a predicate must plausibly allege a “systematic abuse[]” or “allege with the requisite specificity that the default judgments were fraudulently secured by defendants.” Id. at *11. Because such allegations were lacking in the SAC, the district court held that “the SAC [did] not allege any predicate acts” and “fail[ed] to state substantive or RICO conspiracy claims.” Id. at *12. We need not reach whether the SAC stated plausible predicate acts because, as set forth below, we conclude that res judicata bars the federal claims against all Defendants, including the B&B Defendants. See Jusino v. Fed’n of Cath. Tchrs., Inc., 54 F.4th 95, 100 (2d Cir. 2022) (“We may affirm on any ground with support in the record, including grounds upon which the district court did not rely.”) (internal quotation marks and citations omitted). 6  The Full Faith and Credit Act, 28 U.S.C. § 1738, requires federal courts to “give to a state-court judgment the same preclusive effect as would be given that judgment under the law of the State in which the judgment was rendered”—here, New York. Whitfield, 96 F.4th at 505 (internal quotation marks and citation omitted). Under New York law, res judicata is an affirmative defense, and the party asserting it bears the burden of demonstrating that “(1) the previous action involved an adjudication on the merits; (2) the previous action involved the plaintiffs or those in privity with them; [and] (3) the claims asserted in the subsequent action were, or could have been, raised in the prior action.” Rosenthal, 185 F.4th at 55 (alteration in original) (internal quotation marks and citation omitted). Here, the first element is met because, under New York law, a judgment of confession like the Second Judgment constitutes an adjudication on the merits. Canfield v. Elmer E. Harris & Co., 170 N.E. 121, 122 (N.Y. 1930) (“A judgment by confession stands in much the same position as one by stipulation or consent and is a conclusive adjudication of all matters embraced in it and a bar to any subsequent action on the same claim.”). Indeed, New York Civil Practice Law and Rules Section 3218 makes plain that a confession “judgment may be docketed and enforced in the same manner and with the same effect as a judgment in an action in the supreme court.” N.Y. C.P.L.R. § 3218(b) (emphasis added). With respect to the second element, “[i]t is fundamental that a judgment in a prior action is binding not only on the parties to that action, but on those in privity with them.” Green v. Santa Fe Indus., Inc., 514 N.E.2d 105, 108 (1987). They need not be a party of record for privity to apply. Watts v. Swiss Bank Corp., 265 N.E.2d 739, 743 (N.Y. 1970). New York courts have recognized that privity is a flexible inquiry based on the facts and circumstances of the case. See id. (noting that although it does not possess a “technical and well-defined 7 meaning,” privity applies flexibly considering “the circumstances” and “the purposes of the case at hand”). As the district court correctly concluded, the Green Tree Defendants are parties or privies under the SAC because, even though not all those Defendants were named in the state court action, they are alleged co-conspirators in the formation of and collection under the MCA agreement, which was established as valid under the Second Judgment. See In re Teltronics Servs., Inc., 762 F.2d 185, 192 (2d Cir. 1985) (concluding that alleged co-conspirator in conduct underlying prior action is “entitled to the res judicata effect of that decision”). However, we disagree with the district court’s conclusion that the allegations pertaining to the B&B Defendants were insufficient to demonstrate that they were also in privity with the Defendants in the state court lawsuit for purposes of res judicata. To be sure, the district court correctly noted that “[t]he Second Circuit, applying New York law, has held that an attorney- client relationship, without more, is insufficient to establish privity between counsel to a party in the prior action and that party itself.” Yes I Can, 2025 WL 3715243, at * 8 (internal quotation marks and citation omitted). But here, the SAC alleges more than an attorney-client relationship between the B&B Defendants and Green Tree, which was a party to the state lawsuit. In particular, the SAC alleges that the B&B Defendants “participated in fraud by collecting on this illegal debt and filing papers in state court asserting grossly inflated attorney’s fees in order to freeze and extort a larger sum from Plaintiffs.” App’x at 183; see also id. at 192 (alleging that the B&B Defendants “unlawfully, knowingly, and willfully, combined, conspired, confederated, and agreed with members of the Enterprise to violate 18 U.S.C. § 1962(c) as described above, in violation of 18 U.S.C. § 1962(d)”). Notwithstanding those allegations, the district court found no privity because “the B&B Defendants did not seek attorney’s fees with respect to the Second Judgment, nor do they point 8 to any circumstances suggesting a particular personal interest in the outcome of that proceeding.” Yes I Can, 2025 WL 3715243, at * 8. However, the B&B Defendants did not file for attorneys’ fees in the Second Judgment precisely because the state court determined that the attorneys’ fees from the First Judgment were “grossly disproportionate to the legal services rendered.” App’x at 210. Thus, the B&B Defendants did have a financial interest in that lawsuit, even though that interest was reduced to zero in the Second Judgment as a result of the state court’s ruling. In short, at its core, the SAC alleges that the B&B Defendants were co-conspirators with Green Tree, and participated in fraud, in the collection of unlawful debt and assertion of attorneys’ fees. Those allegations are sufficient to put the B&B Defendants in privity with Green Tree for purposes of res judicata. As to the third element, under New York’s “transactional approach” to res judicata, “once a claim is brought to a final conclusion, all other claims arising out of the same transaction or series of transactions are barred, even if based upon different theories or if seeking a different remedy.” Giannone v. York Tape & Label, Inc., 548 F.3d 191, 194 (2d Cir. 2008) (internal quotation marks and citations omitted); see O’Brien v. City of Syracuse, 54 N.Y.2d 353, 357 (1981). In other words, “if claims arise out of the same factual grouping they are deemed to be part of the same cause of action and the later claim will be barred.” Davidson v. Capuano, 792 F.2d 275, 278 (2d Cir. 1986) (internal quotation marks and citations omitted). As the district court correctly concluded, the claims in the SAC are barred by res judicata to the extent they are based on the MCA agreement’s validity, which is a necessary step in giving full faith and credit to the Second Judgment. Moreover, the substantive and conspiracy RICO claims largely rest on allegations that seek to undermine the MCA agreement’s validity, including the “false statements” in the agreement, App’x at 179, Defendants’ “misrepresenting 9 the amount of the loan,” id. at 183, and the “usurious,” “unenforceable,” and “fraudulent” nature of the MCA agreement, id. at 182–83. The only other allegation in the SAC is that the B&B Defendants participated in this fraud, which again is based on the foreclosed allegation that the MCA agreement was an unenforceable loan. In sum, because the civil RICO claims are based on allegations that cannot be proven without the invalidation of the Second Judgment and all the Defendants in this lawsuit were in privity with the parties in the state court action as alleged co-conspirators, the civil RICO claims are barred under the doctrine of res judicata. Therefore, dismissal of the federal claims was warranted under Rule 12(b)(6). * * * We have considered Appellants’ remaining arguments and conclude that they are without merit. Accordingly, we AFFIRM the judgment of the district court. FOR THE COURT: Catherine O’Hagan Wolfe, Clerk of Court 10