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Law Re: Liquidated Damages Explained

The Fourth Department concluded that defendant’s papers were not sufficient to warrant summary judgment invalidating a liquidated damages provision of an agreement, but noted that plaintiff may not be able to prove the validity of the provision at trial. Liquidated damages are valid only if they bear a reasonable relationship to the loss; otherwise they constitute an unenforceable penalty. Here plaintiff sold defendant a car with the condition that the car not be re-sold for one year. Defendant sold the car two weeks after purchase and plaintiff sued to enforce the $20,000 liquidated damages provision of the “agreement not to export.”  The court explained the relevant law:

Liquidated damages are enforceable only to the extent that they comprise ” 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’ ” … . As a general rule, a liquidated damages clause is enforceable only if the stipulated amount of damages “bears a reasonable proportion to the probable loss and the amount of actual loss is incapable or difficult of precise estimation” … . If, however, the clause provides for damages that are ” plainly or grossly disproportionate to the probable loss, the provision calls for a penalty and will not be enforced’ ” … .

Here, defendant failed to meet his initial burden of establishing as a matter of law that the amount of liquidated damages does not bear a reasonable relation to plaintiff’s actual damages. In support of his motion, defendant relied on affidavits from himself and his attorney, both of whom asserted, upon information and belief only, that plaintiff sustained no actual damages, and that the liquidated damages clause is therefore unenforceable. Defendant offered no evidence in support of those conclusory assertions, and therefore failed to meet his initial burden of proof … . Thus, the court properly denied defendant’s motion, “regardless of the sufficiency of the opposing papers” … . Although defendant may be correct in contending that plaintiff cannot establish at trial that it sustained any actual damages as a result of defendant’s breach of the Agreement, it is well settled that a party moving for summary judgment must affirmatively establish the merits of its cause of action or defense “and does not meet its burden by noting gaps in its opponent’s proof” … . Great Lakes Motor Corp. v Johnson, 2015 NY Slip Op 07394, 4th Dept 10-9-15

 

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Guilty Plea to Possession of a Weapon Charge in One County Precluded Prosecution for the Same Offense in Another County (Double Jeopardy)

The Fourth Department determined charges stemming from the possession of a weapon in two counties triggered the protection against double jeopardy:

Defendant was convicted, following a jury trial, of reckless endangerment in the first degree (Penal Law § 120.25) and criminal possession of a weapon in the second degree (§ 265.03 [3]). The charges arose from an incident in which defendant discharged a firearm into the bedroom window of an occupied, residential home in Oswego County during the early morning hours of March 5, 2012. Defendant was apprehended by the police later that day at a motel in Onondaga County, where a handgun was found in his vehicle. Prior to his trial in Oswego County Court, defendant was charged with and pleaded guilty to, in Onondaga County Court, criminal possession of a weapon in the second degree for the handgun recovered from his vehicle. * * *

It is well settled that a defendant has “the right not to be punished more than once for the same crime” … . “When successive prosecutions are involved, the guarantee serves a constitutional policy of finality for the defendant’s benefit . . . and protects the accused from attempts to secure additional punishment after a prior conviction and sentence” … . This case presents a prototypical instance of a constitutional double jeopardy violation inasmuch as defendant was prosecuted and convicted of a crime in Oswego County to which he had pleaded guilty in Onondaga County. In both instances, the charge was the same: criminal possession of a weapon in the second degree pursuant to Penal Law § 265.03 (3).

We reject the People’s contention that double jeopardy did not attach because defendant was convicted in Oswego County before he was sentenced on his guilty plea in Onondaga County. “[T]ermination of a criminal action by entry of a guilty plea constitutes a previous prosecution for double jeopardy purposes” … . People v Gardner, 2015 NY Slip Op 07363, 4th Dept 10-9-15

 

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Exclusion of Defendant’s Brother from the Courtroom Based Upon the Fear of a Testifying Witness Was Proper, Despite Lack of Express Findings by Trial Judge

The First Department determined the exclusion of a single spectator (defendant’s brother) during the testimony of a witness was proper, despite the absence of express findings by the trial judge. The witness expressed her fear of defendant’s brother. The court explained the analytical criteria:

The People established an overriding interest that warranted a courtroom closure that was limited to the exclusion of a single spectator during the testimony of a single witness … . Contrary to defendant’s arguments, the witness articulated a specific fear of testifying in the presence of defendant’s brother, and we find that this fear justified the limited closure … . The trial court was in the best position to determine whether the witness’ expression of fear rose to a level justifying the closure. We note that the court was aware of the brother’s approach to a different witness. Although “a timely objection . . . would have permitted the court to rectify the situation instantly by making express findings” …, defendant made no such objection, and thus did not preserve his complaint that the court failed to set forth express findings of fact to justify the exclusion of defendant’s brother. Accordingly, we decline to review this claim in the interest of justice. As an alternative holding, we find that the court’s ruling “implicitly adopted the People’s particularized showing” and was “specific enough that a reviewing court can determine whether the closure order was properly entered” .. . People v Williams, 2015 NY Slip Op 07335, 1st Dept 10-8-15

 

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Criteria for the “Fiduciary Exception” to the Attorney-Client Privilege in the Context of a Derivative Action Explained

The First Department, in a full-fledged opinion by Justice Acosta, in a matter of first impression, developed analytical criteria for determining whether documents sought by the plaintiff major investor (NAMA) in defendant limited liability company (Alliance) (formed for a major real estate development project) were protected by the attorney-client privilege. The documents at issue are communications between the managers of defendant Alliance and their attorneys, defendant Greenberg.  Supreme Court held that the 3000 communications were not protected by attorney-client privilege pursuant to the “fiduciary exception” to the privilege (re: derivative actions) because the interests of the plaintiff were not adverse to Alliance. However, that finding was not based upon a review of the communications. The First Department determined each individual communication must be reviewed to find whether it evinces an adversarial relationship. If so, such “adversity” would be only one factor to weigh in concluding whether “good cause” exists to invoke the “fiduciary exception” to the privilege. The First Department adopted the reasoning of a Fifth Circuit case, Garner v Wolfinbarger, 430 Fed 1093, which sets out a list of factors to be applied in finding good cause to apply the fiduciary exception to the privilege. “Adversity” is but one of those factors:

In the corporate context, where a shareholder (or, as here, an investor in a company) brings suit against corporate management for breach of fiduciary duty or similar wrongdoing, courts have carved out a “fiduciary exception” to the privilege that otherwise attaches to communications between management and corporate counsel. * * *

In 1970, the U.S. Court of Appeals for the Fifth Circuit extended the fiduciary exception to the corporate environment in Garner v Wolfinbarger (430 F2d 1093 [5th Cir 1970], cert denied 401 US 974 [1971]), for the first time allowing shareholders to use the exception to pierce the corporate attorney-client privilege. The Garner court was persuaded by two English cases that “treat[ed] the relationship between shareholder and company as analogous to that between beneficiaries and trustees” (id. at 1102). Relying on those cases and the traditional crime-fraud and joint-representation exceptions for the proposition that the corporate attorney-client privilege is not absolute, the court summarized its reasoning in the following way:

“[W]here the corporation is in suit against its stockholders on charges of acting inimically to stockholder interests, protection of those interests as well as those of the corporation and of the public require that the availability of the privilege be subject to the right of the stockholders to show cause why it should not be invoked in the particular instance” (id. at 1103-1104). * * *

While some factors in the Garner test are relevant to a determination of adversity, Garner did not create a categorical adversity limitation. Thus, adversity is not a threshold inquiry but a component of the broader good-cause inquiry. Moreover, of the Garner factors that pertain to adversity, some will indicate whether the parties are generally adverse, while others will require a review of the communications in dispute; the relevant factors may weigh against finding good cause to apply the fiduciary exception with respect to those communications that reveal adversity. Accordingly, a court may find that the party seeking disclosure has shown good cause to be given access to some communications but not others. NAMA Holdings, LLC v Greenberg Traurig LLP, 2015 NY Slip Op 07346, 1st Dept 10-8-15

 

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Late Disclaimer on a Valid Ground Not Excused

The First Department determined the failure to timely disclaim coverage on a valid ground was ineffective. The fact that other grounds for disclaimer might have been investigated does not excuse the late disclaimer: …”Insurance Law § 3420(d) ‘precludes an insurer from delaying issuance of a disclaimer on a ground that the insurer knows to be valid . . . while investigating other possible grounds for disclaiming'”… . Endurance Am. Specialty Ins. Co. v Utica First Ins. Co., 2015 NY Slip Op 07329, 1st Dept 10-8-15

 

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Critieria for Amendement of a Notice of Claim Explained

The First Department determined Supreme Court should have granted plaintiff’s motion to amend the notice of claim to include mention of a defective handrail, despite plaintiff’s failure to invoke the proper statutory authority (General Municipla Law 50-e(5)). The court explained the criteria for an amendment:

Under GML § 50-e(5), a notice of claim may be amended within one year and ninety days of an accident to include new theories of liability … . Plaintiff’s cross motion was made eleven months after the accident, well within the one-year-and-ninety- day limitation period.

In determining whether an application for leave to serve a late notice of claim should be granted, a court shall consider “whether the public corporation . . . acquired actual knowledge of the essential facts constituting the claim within the time specified in subdivision one . . . or within a reasonable time thereafter” (GML § 50-e[5]). The court shall also consider “all other relevant facts and circumstances,” including whether the delay “substantially prejudiced the public corporation in maintaining its defense on the merits” (id.).

“In determining whether the city was prejudiced by any mistake, omission, irregularity or defect in the notice [of claim], the court may look to evidence adduced at a section 50-h hearing, and to such other evidence as is properly before the court'” … . * * *

We have previously held that prejudice will not be presumed … . Moreover, “[i]t may not be shown without evidence of an attempt to investigate the accident” … . Given defendant’s actual knowledge of the facts constituting the claim within a reasonable time after the accident, and the lack of evidence of an attempt to conduct an investigation either before or after it obtained knowledge of the issue concerning the handrail in this accident …, “conclusory assertions of prejudice, based solely on the delay in serving the notice of claim, are insufficient” … . Thomas v New York City Hous. Auth., 2015 NY Slip Op 07328, 1st Dept 10-8-15

 

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Slip and Fall on Ice Not an “Accident” Within Meaning of Retirement and Social Security Law

The Third Department confirmed the comptroller’s finding that petitioner, who worked for a town public safety department, was not entitled to enhanced disability benefits based upon a slip and fall on ice.  The incident did not constitute an “accident” within the meaning of the Retirement and Social Security Law:

As defined for purposes of the Retirement and Social Security Law, an unexpected and unfortunate incident does not constitute an accident, so as to support an award of benefits, “where the injury results from an expected or foreseeable event arising during the performance of routine employment duties'” … . Significantly, the burden is on the party seeking benefits to establish that the incident causing his or her injury was an accident … .

Here, petitioner testified that the night before the incident there was an ice storm, and he left for work early the following morning to allow him time to navigate the icy road conditions. He stated that he spoke to his supervisor while en route and arrived in the parking lot about 10 minutes prior to his regularly scheduled shift. As he exited his vehicle, he took a few steps and then slipped and fell in the parking lot. While he was on the ground, he saw that he was lying on ice, and water was running down the middle. Based upon petitioner’s testimony describing the occurrence and his awareness of the hazardous conditions created by the ice storm, he should have reasonably anticipated that the parking lot would be slippery when he exited his vehicle. Accordingly, as the precipitating event was entirely foreseeable, substantial evidence supports the Comptroller’s finding that the incident did not constitute an accident within the meaning of the Retirement and Social Security Law and, thus, that petitioner was not entitled to enhanced benefits… . Matter of Begley v DiNapoli, 2015 NY Slip Op 07323, 3rd Dept 10-8-15

 

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Sales Rep Who Worked from Home Was an Employee

The Third Department upheld the board’s determination that claimant, who worked from home as a sales representative for DaVinci, was an employee entitled to benefits:

Here, claimant knew DaVinci’s principal through prior business dealings and obtained the job after submitting a resume, but did not go through a formal hiring procedure. Through negotiation, the principal agreed to pay her $4,000 per month, plus health insurance, and to reimburse her for business-related expenses. Her compensation was initially supposed to be a draw on commission, but turned out to be a salary that she was paid every other week regardless of sales. Although claimant worked from home, she provided the principal with weekly activity reports, maintained regular contact by phone and email, and received specific instructions on products, pricing, delivery and clients. In addition, claimant contacted clients who she had dealings with in the past, but also claimant followed up on leads directed to her by the principal and met with him at conventions and product demonstrations. Notably, the principal provided claimant with a three dimensional television and other equipment needed to conduct her sales activities, as well as training on how to operate the equipment. In view of the foregoing, and notwithstanding the evidence that would support a contrary conclusion, substantial evidence supports the Board’s finding that an employment relationship existed between claimant and DaVinci… . Matter of Gluck (Davinci 3D Corp.–Commissioner of Labor), 2015 NY Slip Op 07320, 3rd Dept 10-8-15

 

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Corrections Officer Not Entitled to Performance of Duty Disability Benefits Based Upon Injury Stemming from Aiding an Inmate Who Was Having a Seizure

The Third Department determined a corrections officer was not entitled to “performance of duty” disability benefits based upon injury aiding an inmate who had a seizure. The court found that the “performance of duty” disability provision pertained only to injury caused by a violent inmate:

Retirement and Social Security Law § 507-b (a) provides for performance of duty disability retirement benefits to correction officers employed by the Department of Corrections and Community Supervision who are unable to perform their job duties “as the natural and proximate result of an injury, sustained in the performance or discharge of [their] duties by, or as a natural and proximate result of, an act of an inmate.” The statute does not specifically define an “act of an inmate.” The legislative history, however, reveals that “the statute was clearly intended to compensate correction officers who, because of the risks created by their ‘daily contact with certain persons who are dangerous [and] profoundly antisocial’ . . . become permanently disabled” … . In accordance with this intent, courts have construed the language to require that the injuries be caused by direct interaction with an inmate in order to qualify for benefits under the statute … .

Petitioner contends that she had direct interaction with the inmate while she was lowering him to the floor during his seizure. However, in analogous circumstances where a correction officer was injured while assisting an incapacitated inmate during a medical emergency, we held that the “inmate was not engaged in any act that was a proximate cause of petitioner’s. . . injury” (Matter of Esposito v Hevesi, 30 AD3d 667, 668 [2006]). Given the absence of any affirmative act on the part of the inmate here, we perceive no meaningful distinction to be drawn between this case and Matter of Esposito v Hevesi (supra) … . Matter of Laurino v DiNapoli, 2015 NY Slip Op 07327, 3rd Dept 10-8-15

 

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Where There Is Permanent Partial Disability, the Benefits Are Calculated Based Upon the Difference Between the Pre-Disability Earnings and the Actual Earnings During the Period of Disability

The Third Department determined the Board correctly calculated the benefits for a nurse who could no longer work as a nurse due to an allergic reaction to hand sanitizer (permanent partial disability). She found work as a part-time cashier at $8 an hour. She had earned over $2000 per week as a nurse. The Board awarded her benefits of $600 per week for 500 weeks. The Third Department held the Board correctly used the difference between her nursing salary and her earnings as a cashier earnings during the period of disability as the basis for the award. The court explained the analytical criteria:

Workers’ Compensation Law § 15 (3) (w) provides that the compensation rate for injured employees who have permanent partial disabilities that are not subject to schedule awards is based upon “the difference between the injured employee’s average weekly wages and his or her wage-earning capacity thereafter in the same employment or otherwise” … . Workers’ Compensation Law § 15 (5-a) further provides that the wage- earning capacity of an injured employee with a partial disability “shall be determined by his [or her] actual earnings” while disabled … . Notably, the Court of Appeals has recognized that “where actual earnings during the period of the disability are established, wage[-]earning capacity must be determined exclusively by the actual earnings of the injured employee without evidence of capacity to earn more or less during such disability period” … .

Vocational and functional considerations, such as a claimant’s age, education, training, experience, restrictions and related factors, are appropriately taken into account with respect to loss of wage-earning capacity only as they are relevant to the duration of a claimant’s permanent partial disability benefits … . Matter of Baczuk v Good Samaritan Hosp., 2015 NY Slip Op 07313, 3rd Dept 10-8-15

 

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