You are here: / “Bad Faith Claims Handling” Cause of Action Properly Dismissed...

Search Results

/ , ,

“Bad Faith Claims Handling” Cause of Action Properly Dismissed As Duplicative of Breach of Contract Cause of Action/Sanctions Appropriate for Inclusion of Dismissed Cause of Action in Amended Complaint

The First Department determined a purported cause of action for “bad faith claims handling” in an insurance-coverage dispute was duplicative of the breach of contract cause of action (and was therefore properly dismissed). The court further determined that attorney sanctions were appropriate for including a dismissed cause of action in an amended complaint. The First Department explained the (rare) circumstance when breach of contract will give rise to a distinct tort cause of action (not the case here):

In some circumstances “[t]he very nature of a contractual obligation, and the public interest in seeing it performed with reasonable care, may give rise to a duty of reasonable care in performance of the contract obligations, and the breach of that independent duty will give rise to a tort claim” …, in which the Court held that “a fire alarm company owed its customer a duty of reasonable care independent of its contractual obligations, and that notwithstanding a contractual provision exculpating the alarm company from damages flowing from its negligence, it could be held liable in tort for its gross failure to properly perform its contractual services” … . Further, “[w]here a party has fraudulently induced the plaintiff to enter into a contract, it may be liable in tort” … . However, “where a party is merely seeking to enforce its bargain, a tort claim will not lie” … . Orient Overseas Assoc. v XL Ins. Am., Inc., 2015 NY Slip Op 07788, 1st Dept 10-27-15

 

/ ,

Under the Circumstances Plaintiff Could Not Strictly Comply with the Whistleblower Statute by Complaining to the Very People Involved in the Wrongful Conduct—Plaintiff Entitled to Back Pay and Prejudgment Interest for Retaliatory Demotion

The Court of Appeals, in a full-fledged opinion by Judge Abdus-Salaam, determined that plaintiff had complied with the whistleblower statute and was entitled to prejudgment interest on his award for retaliatory demotion. The statute, Civil Service Law  75-b, requires that any allegedly wrongful act first be reported to the “appointing authority.” However, in this case, the “appointing authority” were the very people plaintiff alleged committed the wrongful act. In this circumstance plaintiff’s complaints to his immediate superiors and then to the inspector general were deemed to comply with the statute. The Court of Appeals also reasoned that, because the purpose of the whistleblower statute is to make whistleblowers whole, the award of prejudgment interest under the statute is proper:

Under these particular circumstances, strict compliance with the reporting requirements of Civil Service Law § 75-b would not serve the purpose of the statute. Rather, courts should use their discretion in determining whether the overall actions of the plaintiff constitute a good faith effort to report the misconduct. In cases such as this — where the appointing authority is the one engaging in the alleged misconduct — an employee’s good faith effort to report the misconduct should be evaluated with attention to the employee’s practical inability to report to the appointing authority. The “good faith” provision in the statute affords courts the discretion to determine whether a plaintiff has met its requirements and appears to adequately account for situations like the one presented here. * * *

Here, an overall view of the comprehensive package of remedies listed in Labor Law § 740 (5), including undefined “compensation” and “remuneration,” demonstrates that the Legislature sought to make a whistleblowing plaintiff whole, which would include an award of prejudgment interest.  … [B]ecause the remedies listed in the statute appear to seek to make a whistleblowing plaintiff whole, awarding prejudgment interest would serve that purpose. By demoting plaintiff rather than awarding him a planned promotion and significant raise, defendants deprived plaintiff of access to what would have been a higher salary for a period of over 10 years. Awarding back pay with interest would serve to make plaintiff whole; thus, he is entitled to such a recovery. Tipaldo v Lynn, 2015 NY Slip Op 07698, CtApp 10-22-15

 

/

SAFE Act Restrictions on Ownership of Assault Rifles and Ammunition Feeding Devices Constitutional

The Third Department, in a full-fledged opinion by Justice Devine, determined that the restrictions on ownership of assault rifles and ammunition feeding devices in the “SAFE Act” furthered the substantial, compelling, governmental interests in public safety and crime prevention and, therefore, are constitutional:

We will accept, for purposes of discussion, that the SAFE Act substantially burdens the right to keep and bear arms so as to subject it to Second Amendment scrutiny … . We will also assume, although it is debatable, that the weapons and feeding devices addressed by the SAFE Act are not the type of dangerous and exotic weaponry that merit no Second Amendment protection … . The question accordingly becomes whether the challenged provisions survive intermediate scrutiny, namely, whether they “bear[] a substantial relationship to the achievement of an important governmental objective” … .

With regard to the objective pursued, “New York has substantial, indeed compelling, governmental interests in public safety and crime prevention” … . [Plaintiffs] provided no proof to call the well-established premise behind the challenged provisions into question, namely, that the governmental interest in public safety is substantially furthered by reducing access to weapons designed to quickly fire significant amounts of ammunition and the ammunition feeding devices required to hold that ammunition … . Thus, we agree with Supreme Court that “[t]he core prohibitions . . . of assault weapons and large-capacity magazines [contained in the SAFE Act] do not violate the Second Amendment”… . Schulz v State of New York Exec., Andrew Cuomo, Governor, 2015 NY Slip Op 07728, 3rd Dept 10-22-15

 

/ , ,

The Precise Terms of the Stipulation Were Not Demonstrated to Have Been Violated—Contempt Finding Improper

The Third Department determined the wife was improperly held in contempt re: a stipulation about refinancing the marital residence. The stipulation required that the wife make a good faith effort to refinance, but did not address the consequences of a failed attempt. By finding the wife in contempt for failing to refinance, the court improperly re-wrote the stipulation:

“To sustain a civil contempt finding based upon the violation of a court order, it must be established that there was a lawful court order in effect that clearly expressed an unequivocal mandate, that the person who allegedly violated the order had actual knowledge of its terms, and that his or her actions or failure to act defeated, impaired, impeded or prejudiced a right of the moving party” … . Such violation, in turn, “must be established by clear and convincing evidence” … . “The decision of whether to hold in contempt a party who fails to comply with a court order rests within the court’s sound discretion” … .

Here, a review of the underlying order makes clear that Supreme Court found the wife to be in contempt of the parties’ April 2012 stipulation based upon her failure to refinance the marital residence “as agreed or otherwise take action to remove [the husband’s] name from the existing mortgage.” The parties’ stipulation, however, did not require the wife to successfully refinance the marital residence and remove the husband’s name from the existing mortgage; rather, the stipulation only imposed upon her the obligation to “make a good faith effort to obtain [such] financing . . . and remove [the husband’s] name from the mortgage within 45 days after receiving the [quitclaim deed].” Notably, the stipulation was silent as to the parties’ respective rights and obligations in the event that the wife attempted — but did not actually succeed — in obtaining such financing … and, by directing the sale of the marital residence in the event that the wife did not obtain refinancing within a specified time period, Supreme Court essentially revised the parties’ agreement to supply a solution to a problem that, on the face of the agreement, the parties themselves apparently did not contemplate. Howe v Howe, 2015 NY Slip Op 07709, 3rd Dept 10-22-15

 

/ , ,

The State’s “Donate Life Registry” (Re: Consent to Organ Donation) Is a Governmental, Not Proprietary, Function

The Third Department, in a full-fledged opinion by Justice Peters, reversing the Court of Claims, determined the “donate life registry,” which is based upon consent to organ donation indicated on driver’s license renewal applications, was a governmental, not a proprietary, function. Therefore the state may not be held liable for negligence with respect to organ donation absent a special relationship. No special relationship was alleged here. The lawsuit alleged claimant’s mother did not consent to the donation of her organs and that the Department of Health negligently interpreted a drawn line on the renewal application as a signature. The Court of Claims had upheld the “violation of the right of sepulcher” cause of action. The opinion includes detailed discussions of the law surrounding governmental versus proprietary functions, as well as the nature of governmental involvement in organ donation:

Quintessential examples of purely governmental functions include police and fire protection … and traffic regulation … . On the other hand, a governmental entity acts in a purely proprietary capacity when it serves as a landlord by virtue of its ownership and maintenance of property … . In determining where along the continuum a governmental entity’s challenged conduct falls, it is necessary to examine “‘the specific act or omission out of which the injury is claimed to have arisen and the capacity in which that act or failure to act occurred'”… . * * *

By establishing the Donate Life Registry and facilitating the identification of organ and tissue donors and the making of anatomical gifts through DMV applications and renewals, defendant is protecting and promoting the health and welfare of the public through the exercise of its general police powers. It is axiomatic that “‘[p]rotecting health and safety is one of municipal government’s most important duties'”… . Drever v State of New York, 2015 NY Slip Op 07726, 3rd Dept 10-22-15

 

/

Flawed Procedure Following “Batson” Challenges to the Prosecution’s Exclusion of Two Nonwhite Jurors Required Reversal

The Third Department determined reversal and a new trial were necessary because of flaws in the procedure used following the “Batson” challenge of the prosecution’s peremptory challenges to two nonwhite members of the jury panel.  The judge denied the Batson challenges. The Third Department explained the correct procedure and the flawed procedure actually used:

A Batson challenge implicates a three-step process in which, “[a]t step one, ‘the moving party bears the burden of establishing a prima facie case of discrimination in the exercise of peremptory challenges'” … . “Once a prima facie showing of discrimination is made, the nonmovant must come forward with a race-neutral explanation for each challenged peremptory — step two” … . The explanation at step two is “not required to be ‘persuasive, or even plausible’; as long as the reasons for the challenges are ‘facially neutral,’ even ‘ill-founded’ reasons will suffice” … , and determining whether the step two explanation is adequate is “a question of law” … . If the nonmoving party provides an adequate explanation, “the burden then shifts back, at step three, to the moving party to persuade the court that reasons are merely a pretext for intentional discrimination” … . This step is a factual issue in which the trial court has broad discretion in determining credibility … .

Initially, we note that the Batson application, made before the end of jury selection, was timely … and any issue regarding the sufficiency of defendant’s step one showing is now moot since the People offered step two race neutral reasons for the challenged peremptory challenges … . The reasons offered by the People included, as to juror No. 19, that the father of her children had been prosecuted by the Schenectady County District Attorney’s office for robbery and “presumably” was in prison. Regarding juror No. 127, the People explained in some detail that there were jurors after her that they preferred to use to fill the twelfth and final seat. Although these reasons were facially race-neutral satisfying the People’s step two burden, defendant points out that the People’s statement regarding juror No. 19 had significant factual errors embellishing on her actual comment, and also that the People did not challenge a white juror whose sister had “been in and out of trouble for years, felonies, in trouble with the law.” As such, there were important factual issues implicating credibility that needed to be resolved at step three. However, as conceded by the People in their brief on appeal, County Court ruled on the Batson application at the conclusion of step two.

The improper compressing of a Batson inquiry does not necessarily mandate reversal, as the movant must preserve the issue as to whether a meaningful step three inquiry occurred … . Indeed, whatever procedural problems may exist in a Batson inquiry, the overriding concern is that a properly preserved question regarding the ultimate issue of discrimination is meaningfully addressed … . Here, defendant sufficiently preserved the issue and the ultimate issue was not adequately addressed. After the People offered their race neutral reasons as to the second relevant juror, defendant began to respond and urged that the record was not complete. County Court stated that the record was complete and summarily denied defendant’s Batson challenge. “[T]he court did not appear to give any consideration to pretext, nor was the basis of its ruling reflected in the record”… . People v Grafton, 2015 NY Slip Op 07701, 3rd Dept 10-22-15

 

/ , ,

Statute of Limitations for Breach of Fiduciary Duty Tolled Until Fiduciary’s Roles Terminated

In an action against a fiduciary stemming from the distribution of an estate, Supreme Court determined the six-year statute of limitations applied to the breach of fiduciary duty cause of action and precluded any evidence from prior to 2007.  The Third Department agreed that the six-year statute was the correct one, but held that the statute never started running because the fiduciary’s roles were never terminated. Therefore pre-2007 evidence was not precluded:

Although “New York law does not provide a single statute of limitations for breach of fiduciary duty claims [and] the choice of the applicable limitations period depends on the substantive remedy that the plaintiff seeks” …, the parties do not dispute that a six-year period applies to these two remaining causes of action. However, the statute of limitations for a claim alleging a breach of fiduciary duty is tolled until there has been an open repudiation by the fiduciary or the relationship has otherwise been clearly terminated … .

There is nothing in this record indicating that respondents’ relevant fiduciary roles have terminated. Although many of the actions about which petitioners complain were done openly, petitioners also allege that they were repeatedly assured that such actions were ultimately in their best interests. The amended petition alleges that respondents have not to date repudiated their positions as fiduciaries. That allegation is not denied in this pre-answer motion, which was supported only by an attorney’s affirmation and memorandum of law. Matter of Therm, Inc., 2015 NY Slip Op 07732, 3rd Dept 10-22-15

 

/ ,

Multi-million Dollar Legal Malpractice Action Stemming from Commercial Mortgage-Backed Securities Dismissed

The Court of Appeals, in an extensive opinion by Judge Rivera, determined a multi-million dollar malpractice action should have been dismissed. The law firm, Cadwalader, was hired by the plaintiff, Nomura, in connection with Nomura’s commercial mortgage-backed securities investments. Cadwalader’s role was to advise and confirm that Nomura’s securitized commercial mortgage loans qualified as real estate mortgage investment conduit (REMIC) trusts. When a hospital which had been deemed REMIC-qualified by Cadwalader went bankrupt and defaulted on its loan, Nomura settled with the trustee for $67.5 million. Nomura then sued Cadwalader. The opinion is fact-specific and cannot be fairly summarized here. Based upon the facts and the evidence, the Court of Appeals determined Cadwalader demonstrated it had done what it was hired to do, and had exercised due diligence in fulfilling its limited obligations. Nomura failed to raise a question of fact to the contrary. Nomura, the court found, was seeking to impose duties upon Cadwalader which it had expressly reserved to itself. Nomura Asset Capital Corp. v Cadwalader, Wickersham & Taft LLP, 2015 NY Slip Op 07693, CtApp 10-22-15

 

/ ,

Securities Did Not Pass Outside the Estate, Requirements of Transfer on Death Security Registration Act (TODSRA) Not Me

The First Department, in a full-fledged opinion by Justice Gische, over a concurring opinion arguing the matter had already been determined by Surrogate’s Court, determined a letter sent by decedent to Merrill Lynch did not meet the requirements of the Transfer on Death Security Registration Act (TODSRA) such that the securities account passed to the beneficiary outside the estate:

In order to take advantage of New York’s [TODSRA] law, certain categories of owners may request that a security be registered in beneficiary form (EPTL 13-4.2). The institution holding the securities account, however, is not required to either offer or accept a request to register a security in beneficiary form (EPTL 13-4.8). It is only if the owner requests that a security be held in beneficiary form and the entity holding the security accepts the designation, that an enforceable contractual relationship is created between the owner and that registering entity, requiring the registering entity to act in accordance with the designation (EPTL 13-4.9). Under TODSRA, the registering entity has the sole right to establish the terms and conditions under which it will receive and implement requests to register securities in beneficiary form (EPTL 13-4.10), and TODSRA statutorily mandates that the registering entity have certain protections in the process (EPTL 13-4.8).

A registering entity is not the owner of the security, but rather the person or entity that originates or transfers title to a security by registration, which includes a broker such as defendant (EPTL 13-4.1[i]). Thus, under the statute, it is perfectly clear that a unilateral action by an owner of a securities account to designate a beneficiary in the event of death is not by itself sufficient. Arroyo-Graulau v Merrill Lynch Pierce, Fenner & Smith, Inc., 2015 NY Slip Op 07774, 1st Dept 10-22-15

 

/ ,

Police Did Have Sufficient Suspicion to Justify Telling Defendant to Drop a Bag He Was Holding—Suppression Should Have Been Granted

The First Department determined the police did not have a founded suspicion criminal activity was afoot when they directed defendant to drop a bag he was holding. Therefore defendant’s suppression motion should have been granted:

The police officers’ initial approach and their intrusion upon defendant’s freedom by directing that he drop the bag were unsupported by a founded suspicion that criminality was afoot necessary to the exercise of the common-law right to inquire … . The officers approached defendant based solely on their observation of him carrying a shopping bag or gift bag that seemed rigid. While one officer testified that, based on his experience, he thought it might be a “booster bag” used for shoplifting, he essentially described an ordinary shopping bag. Further, it was conceded that defendant was not free to leave at the time he was ordered to drop the bag and its use as a booster bag became apparent. Defendant’s innocuous behavior in walking in and out of a store with the bag and his ensuing behavior did not justify further interference to obtain explanatory information … . People v Ties, 2015 NY Slip Op 07753, 1st Dept 10-22-15

 

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