By notice of motion dated October 3, 2006, defendants ("LOMBJ" and "Josephson") move for an order pursuant to CPLR 2201 staying entry of a judgment entered against them, vacating the judgment, and modifying the stipulation of settlement giving rise to the judgment. By order to show cause dated October 20, 2006, defendants move for an order vacating a restraining notice and information subpoena and sanctioning plaintiff.

By Affirmation dated Oct. 23, 2006, plaintiff opposes defendants' motions and

seeks an order piercing LOMBJ's corporate veil, permitting her to maintain a special proceeding pursuant to Debtor and Creditor Law on the basis that defendants have fraudulently conveyed their assets, and granting her attorney fees and sanctions. However, having failed to comply with CPLR 2215 which requires that such applications be advanced by a notice of cross-motion, I do not consider plaintiff's application except to the extent that she requests that sanctions or costs be imposed. [*2]

On January 14, 2005, plaintiff, a former associate of LOMBJ, commenced an action against defendants seeking $11,052.33 plus a statutory penalty of $2,763.08 on three causes of action alleging that defendants failed to pay her salary and reimburse her for expenses, thereby violating sections 190 and 198 of article six of the Labor Law and breaching their implied contract with her, and on two causes of action arising from defendants' failure to make payment on a promissory note dated July 26, 2004 which is attached to the complaint. The promissory note is a letter written on LOMBJ stationery in which Josephson admitted owing plaintiff $11,052.33 and agreed to pay that amount "as rapidly as incoming funds permit." It is undisputed that Josephson is the sole proprietor of LOMBJ.

In their answer, defendants denied liability and asserted five affirmative defenses alleging that plaintiff had obtained the promissory note by false pretenses and fraudulent inducement, that she was not entitled to payment having operated as a faithless servant and by virtue of her own culpable conduct, and that article six of the Labor Law was inapposite. They interposed three counterclaims for rescission and damages for misrepresentation, breach of fiduciary duty, and breach of contract, seeking reimbursement for compensation in the amount of $35,000 including sums which had been paid to plaintiff without defendants' knowledge that she had set up a competing practice and diverted defendants' clients thereto.

On May 18, 2006, the parties entered into a so-ordered stipulation of settlement of plaintiff's complaint and defendants' counterclaims. A pre-printed form of the court was used ("Stipulation of Settlement and Affidavit Upon Default") which offers settling parties a choice of remedies for a debtor's breach: the creditor may either enter judgment without notice to the debtor for the amount originally sued for or agreed to in the settlement, less any payments made, together with interest and disbursements, or restore the case to the calendar for trial. The parties altered the form and agreed that defendants would pay plaintiff $5,800 as follows:

$2,300 on May 18, 2006; $500 on or before each of June 15, 2006, July 15, 2006, August 15, 2006, September 15, 2006, October 15, 2006, November 15, 2006, December 15, 2006.

The parties also agreed that:

[u]pon such payment all parties shall be released from liability to each other concerning the matters in this dispute.

In the event Debtor fails to make any payment as agreed to above, Creditor, upon completing the Affidavit below setting forth such default, shall be entitled to:

a) enter Judgment with 14 days written notice to the Debtor, for the amount of $9,500 less any payments made, together with interest and disbursements.

By letter dated August 17, 2006, plaintiff advised defendants that they had failed to make the August 15 payment of $500 and that pursuant to the stipulation, should they fail to make it within 14 days of August 17, a judgment would be entered against them, and that she would seek damages for no less then $400 for additional time expended by her on the matter. She also observed that defendants had failed to pay the July 15 installment timely. (Affirmation of Maury B. Josephson, dated Oct. 3, 2006 [Josephson Oct. 3 Aff.], Exh. A).

By letter dated September 18, 2006, plaintiff advised defendants that they had failed to [*3]make the September 15 payment of $500 and that pursuant to the stipulation, should they fail to make the it within 14 days of September 18, a judgment would be entered against them, and that she would seek damages for no less then $400 for additional time expended by her on the matter. She also observed that they had failed to pay the July 15 and August 15 installments timely. (Id., Exh. B).

On October 4, 2006, judgment was entered in favor of plaintiff and against defendants in the amount of $5,700 plus interest, costs, and disbursements. On the same day, a restraining notice issued pursuant to CPLR 5222(b) to the North Fork Bank against LOMBJ. (Affirmation of Maury B. Josephson, dated Oct. 19, 2006 [Josephson Oct. 19 Aff], Exh. 3). The parties agree that the bank account of The Law Office of Maury B. Josephson, PC ("PC"), not LOMBJ's, was restrained.

By letter dated October 16, 2006, Josephson informed plaintiff that she had failed to serve defendants with the judgment, notice of entry, or any of the papers on which the judgment is based, and that the restraining notice was wrongfully issued against non-party PC. (Josephson Oct. 19 Aff., Exh. 2). He demanded that plaintiff immediately serve on defendants the judgment, judgment roll, and all the papers, and that she cause the immediate release and withdrawal of the notice of restraint, and stated that the PC was formed "well after" plaintiff's services ended and acknowledged that some of the payments made pursuant to the stipulation were made on checks drawn on PC's account. Josephson indicated a willingness to consider alternative arrangements with plaintiff "including the possible acceleration of the remaining $2,000 due and some additional amount, assuming the prevailing circumstances allow for such an arrangement to be feasible." (Id.).

On October 25, 2006, pursuant to an order I rendered during oral argument on October 24,^[FN1] defendants paid plaintiff $2,000. (Letter of Maury B. Josephson, dated Oct. 31, 2006).

Defendants assert that the default provision of the stipulation of settlement constitutes an unenforceable penalty provision and that plaintiff's August and September letters were inappropriately sent solely to "trigger an opportunity for her to attempt the ex parte entry of judgment for an additional several thousand dollars." (Josephson Oct. 3 Aff.). Josephson nonetheless admits having failed to comply with the stipulation and assures the court that he is prepared to recommence the monthly payments "at the earliest possible time [his] financial circumstances allow" and that "[a] decision on advancement of attorneys fees to a party in an unrelated matter pending in the Superior Court of New Jersey, coming on for hearing on or about October 20, 2006, may provide [him] with access to funds sufficient to pay [plaintiff] in full shortly thereafter." (Id.). He seeks a stay of judgment because "[b]ased on the tone and tenor of [plaintiff's] letters, [he has] reason to believe [plaintiff] is going to take this opportunity to make [*4]an ex parte application for judgment to the Clerk of the Court." (Id.).

Plaintiff, in opposition, alleges that as defendants failed to pay the September installment within 14 days after receipt of her letter of September 18, judgment was entered on October 4, 2006 and an information subpoena and restraining notice issued. (Affirmation of Deborah S. Zarsky, dated Oct. 17, 2006 [Zarsky Oct. 17 Aff.]). She denies that the amount provided for in the event of defendants' default represents liquidated damages, but constitutes a bargained-for penalty provision that she believes was necessary given defendants' unreliable payment history. (Id.).

In reply, defendants accuse plaintiff of improperly seeking to enter judgment ex parte and maintain that the penalty set forth in the stipulation is disproportionate to plaintiff's actual damages. (Reply Affirmation of Maury B. Josephson, dated Oct. 23, 2006 [Josephson Reply Aff.]).

Because "[a] liquidated damage provision has its basis in the principle of just compensation for loss" (Truck Rent-A-Center v Puritan Farms 2nd Inc., 41 NY2d 420, 424 [1977]), it "is an estimate, made by the parties at the time they enter into their agreement, of the extent of the injury that would be sustained as a result of breach of the agreement." (Id.). Thus, where such a provision requires the payment of a sum of money that is "grossly disproportionate to the amount of actual damages," it will be deemed an unenforceable penalty which has the dual potential of compelling a party "out of fear of economic devastation, to continue performance" and of giving the other party, in the event of default, "a windfall well above actual harm sustained" which, in sum, "would lead to the most terrible oppression in pecuniary dealings." (Id. [internal quotes omitted]). By contrast, "[a] contractual provision fixing damages in the event of breach will be sustained if the amount liquidated bears a reasonable proportion to the probable loss and the amount of actual loss is incapable or difficult of precise estimation." (Id.). In determining whether a provision constitutes an unenforceable penalty, it "should be interpreted as of the date of its making and not as of the date of its breach," and it is immaterial whether the parties label the provision as one calling for liquidated damages rather than a penalty. (Id. at 425).

The party seeking to avoid the enforcement of a liquidated damages provision has the burden of showing that the damages are, in fact, a penalty, and must demonstrate either that the damages flowing from a party's breach were "readily ascertainable" at the time the agreement was entered into, or that the damages are "conspicuously disproportionate" to the foreseeable losses. (Bates Advertising USA, Inc. v 498 Seventh, LLC, 7 NY3d 115 [2006]; JMD Holding Corp. v Congress Fin. Corp., 4 NY3d 373, 380 [2005]). If the provision is deemed unenforceable, recovery is limited to the actual damages proven. (JMD Holding, 4 NY3d at 380).

Although the Court in JMD Holding reiterated the Truck Rent-A-Center standard against which liquidated damages provisions are measured, it also acknowledged that it has generally cautioned against interfering with parties' agreements. Thus, "[a]bsent some element of fraud, exploitive over-reaching or unconscionable conduct . . . to exploit a technical breach," there is an insufficient basis for a court "to refuse enforcement of the agreement of the parties." (JMD Holding, 4 NY3d at 380, quoting Fifty States Mgt. Corp. v Pioneer Auto Parks, 46 NY2d 573 [1979]). The Court also recognized that there exists a trend favoring "freedom of contract through the enforcement of stipulated damage provisions as long as they do not clearly disregard the principle of compensation." (Id. at 381, quoting 3 Farnsworth, Contracts § 12.18, at 303-304 [*5][3d ed]). The Court also quoted the Seventh Circuit Court of Appeals in XCO Intl. Inc. v Pacific Scientific Co., 369 F 3d 998, 1002-1003 (2004) ("[t]he rule [against penalty clauses] hangs on, but is chastened by an emerging presumption against interpreting liquidated damages clauses as penalty clauses."). (JMD Holding, 4 NY3d at 381).

The Court of Appeals has also recently indicated that the threat of damages for a breach, in and of itself, will not justify striking a reasonable liquidated damages provision, observing that "the prospect of damages in the event of breach may always be said to encourage parties to comply with their contractual obligations [and that] [l]iquidated damages are not transformed into a penalty merely because they operate in this way as well, so long as they are not grossly out of scale with foreseeable losses." (Bates, 7 NY3d at 120). Thus, while adhering to the Truck Rent-A-Center standard, the Court has indicated that a default provision that includes a reasonable additional incentive to perform is enforceable.

Default provisions contained in settlement agreements have also been measured against the Truck Rent-A-Center standard. (See eg Quaker Oats Co. v Reilly, 274 AD2d 565 [2d Dept 2000]; Zervakis v Kyreakedes, 257 AD2d 619 [2d Dept 1999]; ABCO Refrigeration Supply Corp. v Designs by Keiser Corp., 239 AD2d 165 [1st Dept 1997], lv denied 91 NY2d 866; Lauter v Howe, 158 AD2d 393 [1st Dept 1990]; Willner v Willner,145 AD2d 236 [2d Dept 1989]; Shemesh v Burstein PC, 2001 WL 1657202, 2001 NY Slip Op 50056[U] [App Term, 1st Dept]). Some courts, however, in upholding stipulations of settlement, have not addressed default provisions contained therein. (See Cadlerock Joint Venture LP v Rubenstein, 26 AD3d 219 [1st Dept 2006]; Bynum v Scheiner, 2006 WL 3028270, 2006 NY Slip Op 07682 [2d Dept 2006]; McKenzie v Vintage Hallmark PLC, 302 AD2d 503 [2d Dept 2003]; Bank of New York v Forlini, 220 AD2d 377 [2d Dept 1995]; Ribner v Ribisi, 10 Misc 3d 144 [App Term, 9th & 10th Jud Dists 2006]; S & P Assoc. v Keenan, 2002 WL 1880288, 2002 NY Slip Op 50324[U] [App Term, 1st Dept]). Rather, those courts considered only whether the enforcement of the stipulation would be "unjust or inequitable or permit the other party to gain an unconscionable

advantage . . ." (Eg Bank of New York, 220 AD2d at 378, and cases cited therein). In another decision, residential tenants were relieved of the forfeiture of their long-term rent stabilized tenancy upon their brief lapse in paying pursuant to a stipulation of settlement, circumstances which are not presented here. (Hunter Hale, LLC v Peguero, 10 Misc 3d 141[A], 2005 NY Slip Op 52226[U], *1 [App Term, 1st Dept 2005]).

Thus, although stipulations of settlement are favored by courts as a means of resolving disputes (Hallock v State of New York, 64 NY2d 224 [1984]), it has been held that a provision contained in a stipulation that is designed "to secure performance by threat of a large payment rather than to provide a reasonable assessment of probable damages" will not be enforced (Quaker Oats, 274 AD2d 565, 566), a proposition that has lost some of its appeal post-Bates (7 NY3d at 120). In Quaker Oats, a decision relied on by defendants, the parties settled a multi-million dollar federal civil action (see Quaker Oats Co. v Reilly, NYLJ, July 15, 1999, at 34, col 2 [Sup Ct, Suffolk County]), and agreed that the defendants would pay the plaintiff $10,000 upon signing the settlement agreement and execute a note in the principal amount of $355,000 in the plaintiff's favor, secured by a mortgage on their home, and that in the event of a default on the note, the outstanding balance of the note would increase by $125,000 as liquidated damages. Upon the defendants' failure to pay the note at its maturity, the plaintiff commenced a mortgage foreclosure action and moved for summary judgment. One of the defendants cross-moved for [*6]summary judgment claiming that the $125,000 constituted an unenforceable penalty.

The court reversed the lower court's denial of the defendant's cross-motion and granted it, holding that the $125,000 increase was "grossly disproportionate" to the plaintiff's probable actual damages associated with bringing a mortgage foreclosure action, which were determined by calculating the interest accrued from the time of the breach by submitting receipts for court costs and attorney billable hour statements in connection with the action. As the purpose of the $125,000 was to secure the defendants' performance rather than provide a reasonable assessment of the probable damages, the court held it to be an unenforceable penalty. (See also Zervakis, 257 AD2d 619 [default provision in stipulation of settlement which required defendants to pay more than twice the amount stipulated, despite timely payment of 90 percent of amount due, held so disproportionate to actual damages caused by justifiable delay in paying balance that it constituted unenforceable penalty]).

By contrast, in ABCO Refrigeration, 239 AD2d 165, the plaintiff agreed to accept $20,000 from defendants in full satisfaction of its $37,000 claim for goods sold and delivered, provided the defendants paid the $20,000 in specified installments. The parties also agreed that upon the defendants' default in making any of the installment payments within 10 days of its due date, the plaintiff could enter judgment for the original amount claimed, less any installments paid, and that the agreement was to constitute a general release if all of the installments were timely paid. The defendants failed to make the first installment, whereupon the plaintiff entered judgment for $37,000. The court affirmed the lower court's rejection of the defendants' claim that the default provision constituted an unenforceable $17,000 penalty, observing that the default payment amount of $37,000 was almost identical to the plaintiff's original claim and that the parties did not intend to supplant their original contract. (Id.).

As the circumstances underlying the decision in ABCO are more analogous to those presented here than are those underlying the decision in Quaker Oats, I believe it constitutes guiding precedent, and I observe that leave to appeal it was denied. Thus, in light of ABCO, JMD Holding, and Bates, I find it pertinent to my decision here that the instant parties specifically agreed that plaintiff would be entitled to enter judgment in an amount greater than the amount for which they had settled, but appreciably less than the amount that she originally sought.

While the default provision permits plaintiff to enter judgment for $9,500 instead of the agreed-upon $5,800, and $9,500 may be disproportionate to the actual damages sustained by plaintiff as of the time defendants defaulted, I find that when the stipulation was executed, plaintiff's damages were not ascertainable. At that time, plaintiff's damages could have amounted to as little as $500 if defendants defaulted in paying the last installment, and as much as the full $5,800 plus costs and interest in the events both that the $2,300 check did not clear and defendants failed to make any of the installment payments. Defendants have not established that $9,500 is grossly disproportionate to plaintiff's foreseeable loss of $5,800 plus costs and interest. Moreover, the damages provided for were appreciably less than the $13,815.41 plaintiff originally sought. Thus, defendants obtained a benefit in avoiding a trial which exposed them to liability for $13,815.41, plus interest and costs. Their payment of $3,800 of the $5,800 settlement amount is immaterial to the issue of whether the provision constitutes an unenforceable penalty, as the provision must be evaluated as of the time the stipulation was executed. (Truck Rent-A-Center, 41 NY2d at 425). [*7]

I thus find that defendants have failed to satisfy their burden of proving that the provision constituted an unenforceable penalty.

Defendants' other arguments are also meritless. I reject defendants' claim that their default is de minimis as they did not simply default in paying a single installment and were not merely late in paying. Rather, they defaulted in paying the balance after making three of eight installment payments, two of which were late, and they did not pay the September installment despite due notice. The instant circumstances are thus distinguishable from those presented in Bank of New York, 220 AD2d 377, where the defendants' default was "inadvertent and minor when measured against the harsh result" and they made an immediate effort to cure the default which had been frustrated by the plaintiff's failure to send the default notice to them instead of their attorney, whom plaintiffs knew was no longer representing them. (See also Ribner, 10 Misc 3d 144 [defendants substantially complied with stipulation where on final day of 30-day grace period, they mailed check post-dated for nine days later]; S & P Assoc., 2002 WL 1880288 [late payment of final $3,000 installment after five timely payments totaling $25,000 held not to warrant windfall to plaintiff of twice the amount of negotiated settlement]). Here, defendants did not substantially comply with the terms of the stipulation of settlement. (See Cadlerock Joint Venture, 26 AD3d 219 [defendants failed to make first scheduled payment in timely manner and failed to cure default within seven-day cure period, although it timely paid second installment]; Bynum, 2006 WL 3028270 [defendants failed to pay either of two installments]; McKenzie, 302 AD2d 503 [defendants failed to pay fees owed within 30 days of execution of stipulation of settlement and did not timely cure on written notice; that plaintiff received defendants' payment same day it entered judgment insufficient to justify vacating stipulation]).

I also find that in sending defendants the August and September letters and entering judgment without additional notice, plaintiff complied with the terms of the stipulation requiring that she afford defendants 14 days' notice before entering judgment and committed no impropriety.

For all of these reasons, defendants have failed to provide any basis for vacating the judgment against them.

In seeking an order vacating the restraining notice, Josephson reiterates the arguments set forth in the motion to stay and vacate the judgment, alleges that he "dutifully paid" plaintiff, offered her "the full remainder of liability" under the stipulation "plus some additional consideration," and explained to her the impropriety of the restraint. He maintains that the bank account of the non-party PC was restrained through plaintiff's affirmative misrepresentation which resulted in the interference with PC's business, and surmises that plaintiff did so by presenting to the clerk of the court a copy of one of PC's checks with which he previously paid her. (Josephson Oct. 19 Aff., Exh. 4). He claims that PC was formed several months after plaintiff's employment with LOMBJ ended. (Id.).

Josephson also argues that as his only interest in the PC is the receipt of compensation for his personal services, of which 90 percent is exempt from restraint, execution, or levy by law (CPLR 5205[d][2]), only 10 percent may be restrained and executed upon pursuant to CPLR 5231, and that as he resides in Nassau County and has not been regularly employed in or had a place for transaction of business within New York City since December 2004, the restraining notice was issued without this court's jurisdiction (CPLR 5221[a][3]; New York City Civil Court [*8]Act § 1508[a][1]). Josephson also relies on 22 NYCRR § 208.37 as prohibiting issuance of the restraining notice, claiming that he appears in this case by an attorney, namely, himself. (Id.).

In opposition, plaintiff alleges that PC is a successor to or alter ego of LOMBJ, that both PC and LOMBJ are or were wholly owned and operated by Josephson out of 111 John Street, New York, NY 10038, and that defendants evidenced their exercise of complete domination over PC when they issued checks pursuant to the stipulation which were drawn on PC's account. She submits in support a print out of the result of an Entity Information Search she conducted of the website operated by the New York State Division of Corporations which reflects that PC's address is 111 John Street, Suite 800, New York, NY 10038 (Affirmation of Deborah S. Zarsky, dated Oct. 23, 2006 [Zarsky Oct. 23 Aff.]), and observes that in seeking the stay, Josephson offered to pay her from funds obtained from PC. She maintains that her underlying claims against defendants accrued in September 2004, that her initial demand for payment was made in or about August 26, 2004, and that PC was incorporated on October 5, 2004, thus giving rise to a reasonable inference that Josephson fraudulently formed PC in order to shield his law practice from her reach, and thus contends that every conveyance made by Josephson to PC and every payment made by a Josephson client to PC since the commencement of her action against defendants is fraudulent within the meaning of Debtor and Creditor Law §§ 273-a and 276. (Id.).

In reply, Josephson denies plaintiff's allegations concerning the PC, and observes that plaintiff has taken no steps to pierce PC's corporate veil and that no proceeding has been commenced against PC. According to Josephson, plaintiff was aware when she commenced the action that PC's New York County office was closed as she served him with the summons and complaint at his office in Nassau County after unsuccessfully attempting to serve him in New York County. Josephson explains that the New York State Division of Corporations reflects the old address because PC failed to update it. He thus asserts that the restraining notice was improperly issued. (Josephson Reply Aff.).

Pursuant to CPLR 5221(a)(3), if the judgment sought to be enforced was entered in the New York City Civil Court and the respondent resides or is regularly employed or has a place for the regular transaction of business in person within that city, a special enforcement proceeding shall be commenced there. However, if subdivision three is inapplicable, the proceeding may be commenced in a county in which the respondent resides or is regularly employed or has a place for the regular transaction of business in person. (CPLR 5221[a][4]). These provisions apply to restraining notices (CPLR 5221[b]), and the term "respondent" in these provisions refers not only to the judgment debtor, but also the person upon whom the restraining notice is served, such as a bank. (Siegel, Practice Commentaries, McKinney's Cons Laws of NY, C5221:2). If the judgment creditor issues a restraining notice from the wrong court and that court is a court of limited jurisdiction, such as the New York City Civil Court, the error negates the court's subject matter jurisdiction over the notice even if one of the respondents has a place for the regular transaction of business in New York City. (Id.).

Here, the judgment against defendants was entered in the New York City Civil Court and it is undisputed that defendants reside or are regularly employed or regularly transact business outside of New York City. That the North Fork Bank has numerous branches in New York City does not confer jurisdiction on this court. (Id.). Thus, the restraining notice should have issued from a county outside of New York City. (CPLR 5221[a][4]). As this court does not have jurisdiction over the restraining notice, it is vacated. (See Matter of Mfrs. Trust Co. v Valenti, 17 [*9]Misc 2d 386 [Sup Ct, New York County 1959] [installment payment order void as it issued from court without jurisdiction over judgment debtor]; Ray Block Stationery Co., Inc. v James W. Dougherty, P.C., 125 Misc 2d 579 [Civ Ct, Queens County 1984] [petition to turnover funds dismissed as civil court lacked jurisdiction based on respondent's lack of contacts with New York City]; Gary Morgan Chevrolet & Oldsmobile v Main, 146 Misc 2d 472 [County Ct, Schoharie County 1990] [special proceeding to punish judgment debtor for contempt for failing to answer information subpoena dismissed as court lacked jurisdiction]).

Given this result, I need not address defendants' other arguments.

Josephson accuses plaintiff of abuse of process and engaging in all three kinds of frivolous conduct proscribed in Part 130 of the Rules of the Chief Administrator of the Court (22 NYCRR § 130-1.1[c]), and asks for an award of costs. (Josephson Oct. 19 Aff.). Plaintiff seeks sanctions against Josephson and LOMBJ for engaging in frivolous conduct as he admittedly breached the stipulation of settlement and provided no ground for vacating the ensuing judgment pursuant to CPLR 5015. (Zarsky Oct. 23 Aff.). She asks for attorney fees for every action she has undertaken since signing the stipulation of settlement including costs and disbursements for entering the judgment and serving it, for issuing and serving the information subpoena and restraining notice, for reviewing, opposing, and filing papers in opposition to the motion to vacate judgment and order to show cause, and for appearing in court at the October 24 return date of defendants' motions. (Id.).

In reply, Josephson takes issue with plaintiff's assertion that he provided no ground to vacate the judgment, observing that a court may vacate a judgment for sufficient reason and in the interests of substantial justice. (Josephson Reply Aff.)

Subpart 130-1.1(c) of the Rules defines frivolous conduct, in pertinent part, as conduct that is "completely without merit in law and cannot be supported by a reasonable argument for an extension, modification or reversal of existing law [or] is undertaken primarily to delay or prolong the resolution of the litigation, or to harass or maliciously injure another." (22 NYCRR

§ 130-1.1[c]). In determining whether conduct is frivolous, I must consider:

(1) the circumstances under which the conduct took place, including the time available for investigating the legal or factual basis of the conduct; and (2) whether or not the conduct was continued when its lack of legal or factual basis was apparent, should have been apparent, or was brought to the attention of counsel or the party.

Although I find that in litigating the stipulation of settlement and restraining notice, neither party advanced arguments that are completely without merit in law, I believe that, as the judgment constitutes the resolution of the underlying litigation, and in light of their admission that they failed to pay the judgment based on their financial circumstances, defendants' motion for an order vacating it and modifying the stipulation was undertaken primarily to delay this final step in resolving the litigation. I also find that although plaintiff caused the issuance of the restraining notice in the wrong jurisdiction, under the circumstances, there is an insufficient basis [*10]upon which to impose sanctions and/or costs on her. (22 NYCRR § 130-1.1[1]).

Accordingly, defendants' motion for an order vacating the judgment, staying the entry of judgment, modifying the stipulation of settlement, vacating the restraining notice, and imposing sanctions is granted only to the extent that the restraining notice is vacated. The parties are directed to contact chambers to arrange for a mutually convenient date on which the above-referenced hearing on sanctions may be held.

This constitutes the decision and order of the court.

_______________________________

Barbara Jaffe, JCC

DATED:December 20, 2006

New York, New York