You are here: / / INDEMNITOR WAS NOT NOTIFIED OF A TAX AUDIT UNTIL A TAX ASSESSMENT WAS IMPOSED,...

INDEMNITOR WAS NOT NOTIFIED OF A TAX AUDIT UNTIL A TAX ASSESSMENT WAS IMPOSED, UNDER THE CONTRACT, PREJUDICE SUFFICIENT TO RELIEVE THE INDEMNITOR OF THE CONTRACTUAL OBLIGATION TO INDEMNIFY NEED NOT ENTAIL TANGIBLE ECONOMIC LOSS, IT WAS ENOUGH THE INDEMNITOR WAS DENIED THE OPPORTUNITY TO CONTROL THE DEFENSE OF THE AUDIT.

The First Department determined the plaintiffs’ motion for summary judgment relieving them of liability for the costs of a tax audit should have been granted. In a stock purchase agreement (SPA) plaintiffs agreed to indemnify Dearborn for costs associated with tax audits relating to any time up until the closing date. Dearborn had been sold by plaintiffs to a third party. A tax audit of Dearborn was conducted resulting in a $2.2 million tax assessment. In violation of the SPA, Dearborn did not notify plaintiffs of the tax audit. The SPA provided that the failure to notify would be actionable only to the extent plaintiffs were prejudiced by it. The issue before the First Department was whether the prejudice must be economic loss, or whether the inability to control the defense of the tax audit was sufficient. Reversing Supreme Court, the First Department held the deprivation of the right to control the defense of the audit was sufficient:

What we must determine, therefore, is the standard that plaintiffs must meet to demonstrate that the untimely notice of the second audit that they received caused them actual prejudice, and whether, on this record, that standard has been met. We agree with plaintiffs that, contrary to the view of Supreme Court and the position of defendants, in view of their “sole right” under the SPA to “control” the defense of the second audit (expressly including the rights to choose counsel and to settle), plaintiffs need not establish “tangible economic injury” to show that they have been actually prejudiced by the late notice … . Rather, to establish actual prejudice due to late notice, it suffices for an indemnitor afforded the right to control the defense of an idemnifiable claim to show that it was deprived of its right to exercise that right for a material portion of the proceedings on the claim. Conergics Corp. v Dearborn Mid-West Conveyor Co., 2016 NY Slip Op 07750, 1st Dept 11-17-16

CONTRACT LAW (INDEMNITOR WAS NOT NOTIFIED OF A TAX AUDIT UNTIL A TAX ASSESSMENT WAS IMPOSED, PREJUDICE SUFFICIENT TO RELIEVE THE INDEMNITOR OF THE CONTRACTUAL OBLIGATION TO INDEMNIFY NEED NOT ENTAIL TANGIBLE ECONOMIC LOSS, IT IS ENOUGH THE INDEMNITOR WAS DENIED THE OPPORTUNITY TO CONTROL THE DEFENSE OF THE AUDIT)/INDEMNIFICATION (INDEMNITOR WAS NOT NOTIFIED OF A TAX AUDIT UNTIL A TAX ASSESSMENT WAS IMPOSED, UNDER THE CONTRACT, PREJUDICE SUFFICIENT TO RELIEVE THE INDEMNITOR OF THE CONTRACTUAL OBLIGATION TO INDEMNIFY NEED NOT ENTAIL TANGIBLE ECONOMIC LOSS, IT WAS ENOUGH THE INDEMNITOR WAS DENIED THE OPPORTUNITY TO CONTROL THE DEFENSE OF THE AUDIT)

You might also like
SOLICITATIONS FOR NEWSPAPER AND MAGAZINE SUBSCRIPTIONS WERE MATERIALLY MISLEADING IN VIOLATION OF GENERAL BUSINESS 349, THE SOLICITATIONS IMPLIED THEY WERE SENT DIRECTLY FROM THE PUBLISHER (FIRST DEPT).
Handcuffing Defendant Constituted an Arrest/Defendant’s Actions Did Not Justify Use of Handcuffs
DNA Evidence Which Excluded Defendant Was Not Enough to Warrant Vacation of Conviction, or Even a Hearing on the Motion to Vacate
QUESTIONS OF FACT ABOUT ASSUMPTION OF THE RISK AND THE LOCATION OF AN UNPADDED SNOW MACHINE POLE PRECLUDED SUMMARY JUDGMENT IN THIS SKIING ACCIDENT CASE (FIRST DEPT).
DEFENDANT DRIVER WAS ENTITLED TO SUMMARY JUDGMENT IN THIS BICYCLE-CAR TRAFFIC ACCIDENT CASE; PLAINTIFF BICYCLIST WAS TRAVELING THE WRONG WAY ON A ONE-WAY STREET AND DID NOT SLOW DOWN APPROACHING THE INTERSECTION WHERE HE COLLIDED WITH THE SIDE OF DEFENDANT’S CAR (FIRST DEPT).
HEARSAY IN ACCIDENT REPORT NOT ADMISSIBLE UNDER THE BUSINESS RECORDS EXCEPTION TO THE HEARSAY RULE, DEFENDANTS’ MOTIONS FOR SUMMARY JUDGMENT SHOULD HAVE BEEN GRANTED (FIRST DEPT).
PLAINTIFF’S WORK, DELIVERING TILES TO THE WORK SITE, WAS COVERED BY LABOR LAW 240(1) AS “NECESSARY AND INCIDENTAL” TO THE PROTECTED CONSTRUCTION-ACTIVITY (FIRST DEPT).
THE ATTORNEY GENERAL’S PETITION ALLEGING RESPONDENT DISINFECTANT-DISTRIBUTOR ENGAGED IN PRICE GOUGING AT THE OUTSET OF THE COVID-19 PANDEMIC SHOULD NOT HAVE BEEN DISMISSED; THE CONTROLLING STATUTE, GENERAL BUSINESS LAW 396-R, IS NOT VOID FOR VAGUENESS (FIRST DEPT).

Categories

Sign Up for the Mailing List to Be Notified When the Site Is Updated.

  • This field is for validation purposes and should be left unchanged.

Copyright © 2026 New York Appellate Digest, Inc.
Site by CurlyHost | Privacy Policy

42 USC 1983 ACTIONS AGAINST INDIVIDUAL POLICE OFFICERS DO NOT RELATE BACK TO... PAUCITY OF INFORMATION PROVIDED TO DEFENDANT CONCERNING THE BASIS FOR HER ARREST...