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Plaintiff Not Entitled to Disqualification of a Defendant’s Law Firm—Relevant Communication Did Not Have the Potential to Be Significantly Harmful to Plaintiff—Information Was Generally Known

The First Department, in a full-fledged opinion by Justice Saxe, reversed Supreme Court finding that a communication between plaintiff and an attorney in a law firm representing a defendant did not require disqualification of the firm.  The contents of the communication did not have the potential to be significantly harmful to plaintiff because the relevant information was generally known:

A movant seeking disqualification of an opponent’s counsel bears a heavy burden … . A party has a right to be represented by counsel of its choice, and any restrictions on that right “must be carefully scrutinized” … . This right is to be balanced against a potential client’s right to have confidential disclosures made to a prospective attorney subject to the protections afforded by an attorney’s fiduciary obligation to keep confidential information secret (see New York Rules of Professional Conduct [22 NYCRR 1200.0] rule 1.18…). Courts should also examine whether a motion to disqualify, made during ongoing litigation, is made for tactical purposes, such as to delay litigation and deprive an opponent of quality representation … . The decision of whether to grant a motion to disqualify rests in the discretion of the motion court … .

Issues relating to the prospective client relationship based on events that occurred after April 2009 are governed by Rule 1.18 of the Rules of Professional Conduct (22 NYCRR 1200.0), rather than the repealed DR 5-108 (22 NYCRR 1200.27). …

The former Code of Professional Responsibility did not have a specific rule that governed disclosures during a prospective client consultation. Rule 1.18 of the Rules of Professional Conduct fills that void. It provides:

“(a) A person who discusses with a lawyer the possibility of forming a client-lawyer relationship with respect to a matter is a prospective client.’

“(b) Even when no client-lawyer relationship ensues, a lawyer who has had discussions with a prospective client shall not use or reveal information learned in the consultation, except as Rule 1.9 would permit with respect to information of a former client.

“(c) A lawyer subject to paragraph (b) shall not represent a client with interests materially adverse to those of a prospective client in the same or substantially related matter if the lawyer received information from the prospective client that could be significantly harmful to that person in the matter, except as provided in paragraph (d). If a lawyer is disqualified from representation under this paragraph, no lawyer in a firm with which that lawyer is associated may knowingly undertake or continue representation in such a matter, except as provided in paragraph (d)” … .

Thus, where a prospective client consults an attorney who ultimately represents a party adverse to the prospective client in matters that are substantially related to the consultation, the prospective client is entitled to obtain the attorney’s disqualification only if it is shown that the information related in the consultation “could be significantly harmful” to him or her in the same or substantially related matter (…Rule 1.18[c]).  Mayers v Stone Castle Partners LLC, 2015 NY Slip Op 00295, 1st Dept 1-8-15

 

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Courts Should Not Defer to Zoning Board of Appeals’ Determination of a Purely Legal Question (the Meaning of a Town Code Provision)

The Third Department determined Supreme Court erred when it deferred to the zoning board of appeals’ (ZBA’s) interpretation of the town code (because the interpretation was a purely legal issue) and the ZBA erred in its interpretation of the code. The Third Department found that the word “dwelling” was encompassed by the word “building” and, therefore, the code provision at issue allowed the construction of 74 single family dwellings on petitioner’s (Boni’s) parcel:

Supreme Court erred in deferring to the ZBA’s interpretation of the zoning ordinance, and the ZBA erred in its interpretation of the Town Code as it pertains to the Boni parcel. Although courts generally grant deference to a zoning board of appeals regarding its determination, no deference is required if the issue is one of pure legal interpretation of the zoning law … . Because zoning ordinances are in derogation of common law, they must be strictly construed against the municipality that drafted them, and any ambiguity must be resolved in favor of property owners … . The Boni parcel is located in a B-1 zoning district, which has 18 listed permitted uses, including one- and two-family dwellings (see Town Code of the Town of Clifton Park § 208-32 [A] [14]). Pursuant to § 208-33 (B) of the Town Code, in a B-1 district, “[n]o preexisting building(s) shall be rehabilitated or remodeled or new building(s) constructed on a vacant lot to a size greater than 12% of the lot size, with no single building to have a maximum square footage exceeding 4,800 square feet. Multiple buildings on a lot are allowed as long as the overall density limitations of this article are not exceeded.”

Essentially, petitioners argue that the word “buildings” in the last sentence of § 208-33 (B) of the Town Code includes one-family dwellings, leading to the conclusion that the Town Code permits them to build multiple dwellings on the Boni parcel as long as they comply with the density limitations. * * *

We agree with respondents that respondent Town of Clifton Park probably never envisioned a landowner being able to build 74 one-family dwellings on a single, unsubdivided parcel in a business district. Nevertheless, the plain language of the Town Code, strictly construed against the municipality, must be interpreted as permitting multiple buildings — including one-family dwellings — on a single lot as long as they do not exceed the density limitations … . Matter of Boni Enters LLC v Zoning Bd of Appeals of the Town of Clifton Park, 2015 NY Slip Op 00428, 3rd Dept 1-15-15

 

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Criteria for Interpreting Ambiguous Property Descriptions in Old Deeds Explained and Applied

The Third Department explained the analytical criteria for determining the location of boundary lines using old deeds which exhibit some ambiguity (thus allowing reference to extrinsic evidence).  The court explained that a hand-written, signed deed was preferred over a subsequent, unsigned type-written description of the property, and that the amount of acreage is the least reliable type of property description:

We agree with Supreme Court that as between the handwritten and typed versions of the April 1885 deed, the handwritten deed is the best evidence of the grantors’ intent, as it is the signed original instrument by which the disputed property was conveyed, while the typed version is an unsigned copy created decades later by an unknown transcriber (see Jerome Prince, Richardson on Evidence §§ 10-101, 10-102 [Farrell 11th ed 1995]). We further agree with the court that the disputed mark following the phrase “more or less” in the handwritten deed appears to be a comma; although it is oddly located on the line below the phrase “more or less” and outside the document’s left margin, it has the same shape as other commas in the deed, including a mark just before the phrase “more or less,” which the parties agree is a comma and which is represented by a comma in the typed version. Nevertheless, the questionable nature of the disputed mark creates an ambiguity that may be clarified by considering extrinsic evidence of the grantors’ intent … . * * *

Where … discrepancies exist in property descriptions, “the rules of construction require that resort be had first to natural objects, second to artificial objects, third to adjacent boundaries, fourth to courses and distances and last to quantity” … . According to these rules, a public highway or other artificial monument takes precedence over the amount of acreage specified in a deed, as “quantity is the least reliable of all descriptive particulars” … . Shattuck v Laing, 2015 NY Slip Op 00413, 3rd Dept 1-15-15

 

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Claimant’s PTSD Linked to 6-Day Stint at the Site of the Collapse of the World Trade Center

The Third Department affirmed the Worker’s Compensation Board’s findings that claimant’s post-traumatic stress disorder (PTSD), for which claimant first sought treatment in 2010, was related to his 6-day stint at the site of the collapse of the World Trade Center in 2001.  The court explained the broad applicability of the relevant statutes (Workers’ Compensation Law article 8-A) and the criteria for a full Board review (newly discovered evidence or a material change in condition):

At the World Trade Center site, claimant engaged in “perimeter containment” and “transports.” He testified that he “help[ed] control who came and left the . . . site,” escorted people to the site and brought them materials, equipment and personnel. Based on this evidence, the Board reasoned that claimant’s activity constituted participation in World Trade Center rescue, recovery or cleanup operations pursuant to Workers’ Compensation Law article 8-A. Generally, the Board requires that the “claimant directly participate in or otherwise have some tangible connection to the rescue, recovery or cleanup operations”…; its reasoning here is consistent with prior Board decisions addressing this issue … . Claimant’s uncontroverted testimony indicated that he supplied direct support and assistance to first responders engaged in rescue and recovery efforts at ground zero; thus, the Board’s determination that Workers’ Compensation Law article 8-A applies is supported by substantial evidence and will not be disturbed … . Matter of Regan v City of Hornell Police Dept, 2015 NY Slip Op 00407, 3rd Dept 1-15-15

 

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“Total Industrial Disability” Finding Affirmed—Partially Disabled Claimant Was Deemed Unable to Find Work Based Upon His Age, Education and Work History

The Third Department determined claimant, who had a marked permanent partial disability, was properly found to “totally industrially disabled” because his disability, coupled with his age, limited education and other factors, made it impossible for claimant to find work:

“A claimant who has a permanent partial disability may nonetheless be classified as totally industrially disabled where the limitations imposed by the work-related disability, coupled with other factors, such as limited educational background and work history, render the claimant incapable of gainful employment” … . Whether a claimant suffers from a total industrial disability is “a question of fact for the Board to resolve and its determination will not be disturbed if supported by substantial evidence” … . Matter of Rose v Roundpoint Constr, 2015 NY Slip Op 00421, 3rd Dept 1-15-15

 

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Wrong Valuation Date Did Not Require Striking of Appraisal Report/Presumption of the Validity of the Town’s Assessment Rebutted by Appraisal Report

The Third Department determined Supreme Court properly considered petitioner’s appraisal, despite the wrong valuation date, and properly reduced the tax assessment. The Third Department explained the criteria for striking an appraisal (not met here) and the proof required to rebut the presumption of the validity of the town’s assessment (proof-requirement met here):

…[P]etitioner’s appraiser erred in initially using a valuation date of March 1, 2011 rather than July 1, 2010 in his report. Nevertheless, Supreme Court was not required to strike the report.

An appraisal report may be stricken for use of an incorrect valuation date if the use of the correct date would have resulted in a different estimated valuation … . In that regard, this Court has held that an appraisal report need not be stricken if the appraiser credibly testifies that the “report would not have differed” if the correct valuation date had been used … . We explained that a six-month difference was a “minor deviation in valuation dates” that caused “no prejudice to [the] respondents . . . so as to warrant striking [the] report” … . Here, petitioner’s appraiser testified that the change in the valuation date did not result in a different final value. Petitioner’s appraisal “report was supported by ascertainable and verifiable data” and, thus, “any questions regarding the propriety of [the] assessment would affect only the weight accorded to the appraisal by the court and did not undermine the validity of the entire appraisal” … .

Similarly lacking in merit is respondents’ argument that petitioner did not overcome the presumptive validity of the tax assessment. Inasmuch as “a rebuttable presumption of validity attaches to the valuation of property made by the taxing authority” …, a petitioner “[i]n an RPTL article 7 tax certiorari proceeding . . . challenging the accuracy of an assessment bears the initial burden of coming forward with substantial evidence that the property was overvalued by the assessor” … . “Substantial evidence is a minimal threshold standard that simply ‘requires that [a] petitioner demonstrate the existence of a valid and credible dispute regarding valuation . . .'” … . A taxpayer most often meets this burden through submission of “a detailed, competent appraisal based on standard, accepted appraisal techniques and prepared by a qualified appraiser” … . Matter of Gran Dev LLC v Town of Davenport Bd of Assessors, 2015 NY Slip Op 00424, 3rd Dept 1-15-15

 

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Grassy Area Where Plaintiff Fell Was Not Part of a Highway or a Sidewalk–Prior Written Notice of the Defect (to the Town) Not Required

The Third Department determined the town’s requirement that it be provided with written notice of a defect before the town can be held liable for a related slip and fall did not apply to the grassy area where plaintiff fell:

Where, as here, a municipality has enacted a prior written notice provision (see Code of the Town of Clifton Park § 176-1 [A]), “a plaintiff may not bring a civil action against [the] municipality for damages as the result of an injury sustained by reason of a defective street, highway, bridge, culvert, sidewalk or crosswalk unless prior written notice of the allegedly defective condition has been given” … . Hence, in order to prevail upon its motion for summary judgment dismissing the complaint, the Town was required to establish as a matter of law that the grassy area in question constituted — insofar as is relevant here — either a highway, a sidewalk or a site that serves the same “functional purpose” as a highway or sidewalk… .

To be sure, a highway “encompasses the associated shoulders, guardrails, embankments, retaining walls and culverts” (…see Highway Law § 2 [4]…). As relevant here, whether the land adjacent to a highway is paved or otherwise improved does not determine its status as a shoulder; rather, the inquiry is whether the area in question creates “a general right of passage for the traveling public” … . Here, the Town failed to establish that the grassy area where plaintiff fell was designed or intended to provide a general right of passage; further, it is readily apparent from the photographs contained in the record on appeal that the grassy area where plaintiff’s accident occurred is too far removed from the edge of Old Route 146 to be considered an adjacent shoulder or to otherwise fall within the definition of a highway … .

We reach a similar conclusion with respect to whether the grassy area may be deemed to fall within the definition of a sidewalk. In this regard, “a grass strip between the sidewalk and the pavement of the road [indeed] is part of the sidewalk” … . Here, however, the grassy area depicted in the relevant photographs does not lie between a sidewalk and a roadway and, contrary to the Town’s contention, the mere fact that plaintiff and her son were traversing the grassy area to access the nearby parking lot (owned by Northway 9 Associates) does not render this area the functional equivalent of a sidewalk … . Cieszynski v Town of Clifton Park, 2015 NY Slip Op 00423, 3rd Dept 1-15-15

 

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Question of Fact About Whether ATV Driven with Owner’s Permission Based Upon Owner’s Restrictions on Use of the ATV

The Third Department determined a question of fact had been raised about whether an all terrain vehicle (ATV) was being operated with the owner’s consent at the time of a collision (a requirement for vicarious liability–Vehicle and Traffic Law 2411).  The owner claimed only his grandson had permission to operate the ATV and operation of the ATV on a public highway was not permitted by him.  The accident occurred when the ATV was driven by someone other than the owner’s grandson (with the grandson’s permission) on a public highway.  The grandson was driving an ATV which had just been damaged in an accident and they were using the public highway to return to the off-road trails:

Although [the owner] and his grandson both confirm that the restrictions regarding where the ATV could be operated had been imposed, when the “the disavowals are arguably suspect, as where there is evidence suggesting implausibility, collusion or implied permission, the issue of consent should go to a jury” … . Here, the testimony of [the owner] is self-interested and his grandson–who is not a party–has no interest of his own in contradicting his grandfather’s position. Under these circumstances, we are persuaded that the grandson’s alleged directions and assurances to [the driver of the ATV] could imply, when viewed in the light most favorable to plaintiffs, [the owner’s] restrictions were flexible and had been lifted under the circumstances. Accordingly, the issue of implied permission should be determined by a jury … .

Sepsi v Watson, 2015 NY Slip Op 00414, 3rd Dept 1-15-15

 

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“Findings” of Wrong-Doing in Bear Stearns’ Settlement Agreements with the Securities and Exchange Commission and the New York Stock Exchange Did Not Constitute an “Adjudication” of Wrong-Doing Which Would Support the Insurer’s Affirmative Defense Based Upon the “Dishonest Acts Exclusion” in the Professional Liability Insurance Policy—However, the Insurer’s Affirmative Defense Based Upon the Public Policy Precluding Coverage for Intentional Harm to Others Should Not Have Been Dismissed

The First Department, in a full-fledged opinion by Justice Mazzarelli, determined that the “dishonest acts exclusion” in the professional liability insurance policy issued by the defendant to the plaintiff (Bear Stearns) could not be used as an affirmative defense in Bear Stearns’ action seeking coverage for settlements paid by Bear Stearns.  Bear Stearns had entered settlement agreements with the Securities & Exchange Commission (SEC) and the New York Stock Exchange (NYSE) in which “findings” of misconduct were made.  The question before the First Department was whether those “findings” constituted an “adjudication” of wrong-doing such that the “dishonest acts exclusion” prohibited recovery from the insurer.  The First Department held that the “findings” did not constitute an adjudciation and the affirmative defense based on the “dishonest acts exclusion” was properly dismissed.  However, the First Department further found the affirmative defense based upon public policy (precluding coverage for monies paid by the insured as a result of intentional harm to others) should not have been dismissed:

Here, the issue is the applicability of the Dishonest Acts Exclusion, so defendants bear the specific burden of demonstrating that a settlement constitutes an “adjudication” for purposes of the exclusion.

In arguing that the term “adjudication” means any resolution of a dispute that has specific consequences for a party, defendants virtually ignore the part of the Dishonest Acts Exclusion that requires that any adjudication “establish that such Insured(s) were guilty of any deliberate, dishonest, fraudulent or criminal act or omission” (emphasis added). Defendants quote the dictionary definition of “adjudication,” but fail to note that “establish” is defined, in this context, as “to put beyond doubt” (Merriam—Webster’s Collegiate Dictionary [11th ed 2003]). It can hardly be said that the SEC Order and the NYSE Stipulation put Bear Stearns’s guilt “beyond doubt,” when those very same documents expressly provided that Bear Stearns did not admit guilt, and reserved the right to profess its innocence in unrelated proceedings. Again, in interpreting the policy we are guided by reason, and defendants’ position that the settlement documents “establish” guilt is not reasonable. * * *

Because the Dishonest Acts Exclusion does not apply, the motion court properly dismissed defendants’ affirmative defense based on that exclusion. However, the court should not have dismissed the affirmative defense invoking the public policy against permitting insurance coverage for disgorgement, to the extent it is based on the settlements with the SEC and the NYSE. Bear Stearns argues that the absence of an adjudication of wrongdoing within the meaning of the Dishonest Acts Exclusion bars defendants from relying on the “findings” in the settlement orders for purposes of the public policy doctrine. Again, however, as the Court of Appeals stated in the prior appeal, one of the two situations in which the contractual language of a policy may be overwritten is where an insured engages in conduct “with the intent to cause injury” … . JP Morgan Sec Inc v Vigilant Ins Co, 2015 NY Slip Op 00462, 1st Dept 1-15-15

 

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Only Out-of-Pocket Damages Allowed in Fraud Action (Re: a Real Estate Purchase Agreement)

The Third Department affirmed a judgment in favor of the plaintiffs stemming in large part from the fraudulent representation (re: a property information sheet) that a septic system, which failed, was “new.” The court noted the out-of-pocket rule for damages based upon fraud (lost profits/rents, etc. not recoverable):

[D]efendants’ realtor prepared a property information sheet — to be given to prospective buyers — bearing the notation, “Septic system totally new — le[a]ch field totally replaced — new 5000 gallon holding tank,” as well as the general qualification that “all information [was] deemed reliable but not guaranteed.” …[P]laintiffs … entered into a purchase and sale contract for the property. The contract, which reflected a purchase price of $545,000 and indicated that the buildings on the premises would be sold “as is,” also contained a waivable septic system contingency. Plaintiffs ultimately did not avail themselves of this contingency–a decision purportedly based, in part, upon plaintiffs’ belief that the property contained a new septic system. * * *

…[T]he case law makes clear that where, as here, a cause of action for fraud has been asserted, “[t]he true measure of damage is indemnity for the actual pecuniary loss sustained as the direct result of the wrong or what is known as the ‘out-of-pocket’ rule. . . . Damages are to be calculated to compensate plaintiffs for what they lost because of the fraud, not to compensate them for what they might have gained. Under the out-of-pocket rule, there can be no recovery of profits which would have been realized in the absence of fraud” … . Revell v Guido, 2015 NY Slip Op 00411, 3rd Dept 1-15-15

 

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