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Courts Will Not Intercede to Resolve a Dispute Between Two Wrongdoers—“In Pari Delicto”

The Second Department explained the doctrine of in pari delicto, where a court will not resolve a dispute between two wrongdoers:

“The doctrine of in pari delicto mandates that the courts will not intercede to resolve a dispute between two wrongdoers. The doctrine survives because it serves important public policy purposes. First, denying judicial relief to an admitted wrongdoer deters illegality. Second, in pari delicto avoids entangling courts in disputes between wrongdoers” … . The evidence established that the plaintiff knew that the defendants were offering to sell what amounted to a franchise as defined by General Business Law § 681(3), to multiple persons at the same time that the plaintiff and the defendants entered into their agreement, and that the plaintiff was both aware of and complicit in the defendants’ violation of the Franchise Sales Act. Under the circumstances, the court properly applied the doctrine of in pari delicto, “not to favor [the]; defendant, but as a matter of public policy” … . Burgers Bar Five Towns LLC v Burger Holdings Corp, 2014 NY Slip Op 03870, 2nd Dept 6-4-14

 

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Criteria for Setting Aside a Stipulation of Settlement Explained

In finding plaintiff’s motion to vacate a stipulation of settlement was properly denied, the Second Department explained the operative principles:

“Stipulations of settlement are judicially favored, will not lightly be set aside, and are to be enforced with rigor and without a searching examination into their substance’ as long as they are clear, final and the product of mutual accord'” … . A stipulation of settlement may not be set aside except on a showing of fraud, collusion, mistake, or accident … . Yan Ping Liang v Wei Xuan Gao, 2014 NY Slip Op 04003, 2nd Dept 6-4-14

 

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Jury Instructions Which Lumped Counts Together and Did Not Give the Jury the Information Necessary to Distinguish One Count from Another Mandated a New Trial

The Second Department determined a new trial was required because the jury instructions were defective.  The court lumped counts charging the same crime together when explaining the elements, but did not give the jury any indication how the counts differed from one another.  The jury was given no indication which counts implicated defendant as an accessory and which counts implicated defendant as a principal:

We agree with the defendant that the charge, as given, suggested that if the jury found the defendant guilty of any one of the subject counts, it should find him guilty of all three counts. Furthermore, because the court’s charge failed to define the counts in a way that would distinguish them from one another, the jury could not have known which count was based on a finding that the defendant had engaged in sexual intercourse with the complainant and which count was based on accessorial liability and a finding that the codefendant had engaged in sexual intercourse with the complainant. Contrary to the People’s contention, parenthetical notations on the verdict sheet cannot supplant a court’s duty to charge the jury as required by CPL 300.10(4). Since it is not possible to determine whether the jury here actually found that the defendant had himself engaged in sexual intercourse with the complainant or that he had acted as an accessory to the codefendant’s sexual intercourse with the complainant, the defendant is entitled to a new trial on those charges … . People v Jadharry, 2014 NY Slip Op 04028, 2nd Dept 6-4-14

 

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Motion to Compel Discovery in Class Action Suit Erroneously Denied—“Full Disclosure” Criteria Explained

The First Department determined the motion court erred when it denied plaintiffs-intervenors' motion to compel the defendants to disclose documents in a class action suit.  The suit was brought on behalf of children with developmental disabilities against the NYC Administration for Children's Services and the Office for People with Developmental Disabilities.  Any privacy-related issues could be handled by redaction:

Under CPLR 3101(a), “full disclosure” is required for “all matter material and necessary in the prosecution or defense of an action.” The Court of Appeals has held that “material and necessary” is “to be interpreted liberally,” and that the test of whether matter should be disclosed is “one of usefulness and reason” … . City of New York  Maul, 2014 NY Slip Op 03941, 1st Dept 6-3-14

 

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In this Shareholder Derivative Lawsuit, Causes of Action Not Subject to the “Internal Affairs” Doctrine Should Not Have Been Dismissed

The First Department determined many of the causes of action in this shareholder derivative suit were not governed by Bermuda law under the “internal affairs” doctrine and, therefore, should not have been dismissed:

Plaintiffs — minority shareholders of Culligan Ltd. — bring this derivative action on behalf of that entity, a Bermuda company that does business in New York. Supreme Court granted the motion to dismiss upon finding that Bermuda law applied to the case pursuant to the “internal affairs” doctrine. That doctrine “recognizes that only one State should have the authority to regulate a corporation’s internal affairs — matters peculiar to the relationships among or between the corporation and its current officers, directors, and shareholders”  Since the internal affairs doctrine does not apply to those defendants who are not current officers, directors, and shareholders of Culligan Ltd. … Bermuda law does not apply to claims asserted against them.

Nor does the internal affairs doctrine apply to claims based on sections of the Business Corporation Law (BCL) enumerated in BCL §§ 1317 and 1319. BCL § 1319(a)(1) expressly provides that BCL § 626 (shareholders’ derivative action) shall apply to a foreign corporation doing business in New York. Thus, the issue of plaintiffs’ standing to bring a shareholder derivative action is governed by New York law, not Bermuda law … . …

Pursuant to German-American Coffee Co. v Diehl (216 NY 57, 62-64 [1915]) and BCL §§ 1319(a)(1), 719(a)(1), and 510, New York law applies to the second cause of action, which alleges that the directors of Culligan Ltd. declared illegal dividends.

To the extent plaintiffs allege violations of BCL § 720 (e.g. waste and unlawful conveyance), which is made applicable to foreign corporations doing business in New York by BCL § 1317(a)(2), those claims are also governed by New York law … . However, to the extent plaintiffs allege a violation of a section of the Business Corporation Law not enumerated in BCL § 1317 (e.g. § 717, which is part of plaintiffs’ breach of fiduciary duty claim), New York law does not apply … . Those claims are governed by Bermuda law …, and were thus correctly dismissed. Culligan Soft Water Co v Clayton Dubilier & Rice LLC, 2014 NY Slip Op 03955, 1st Dept 6-3-14

 

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Question of Fact Whether Defendant’s Negligence Precluded Her Reliance on the Doctrine of Mutual Mistake to Rescind a Valid Oral Contract

The First Department determined there a question of fact about defendant’s negligence and the related applicability of the doctrine of mutual mistake. The parties orally agreed to share funeral expenses and commence a lost will proceeding based upon the understanding that the original will could not be found.  However, the original will was subsequently found.  The defendant moved to rescind the contract on the basis of mutual mistake and Supreme Court granted the motion.  In reversing, the First Department noted the doctrine of mutual mistake would not be available if defendant were negligent in initially failing to find the will, and a question of fact had been raised about defendant’s negligence in that regard:

Plaintiff met her obligations under the agreement to pay one half of the decedent’s funeral expenses and attorneys fees for the proceeding. Defendant did, as required, commence a lost will proceeding. Both parties thus fulfilled the terms of the oral agreement. It was only less than one month before the hearing on the lost will proceeding was to commence that defendant’s husband found the original will in the same box which defendant had searched prior to entering into the agreement. It was at that point that defendant attempted to abrogate the contract. It is noteworthy that defendant, in her motion for summary judgment dismissing the complaint argued that the contract should be rescinded due to a mutual mistake as to the existence of the original will. The question of mutual mistake, therefore, is central to the disposition of this case.

Defendant’s alleged negligence in searching for the original 1991 will, the absence of which formed the basis of the oral agreement to commence a lost will proceeding, is an important factor in determining whether the doctrine of mutual mistake may be invoked to rescind this otherwise valid oral agreement. ” Mistake, to be available in equity, must not have arisen from negligence, where the means of knowledge were easily accessible.'” … . The doctrine of mutual mistake “may not be invoked by a party to avoid the consequences of its own negligence” … . Gitelson v Quinn, 2014 NY Slip Op 03942, 1st Dept 5-3-14

 

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State and City Human Rights Law Retaliation Claims Were Not Precluded by Dismissal of Federal Retaliation Claims Pursuant to the Family and Medical Leave Act—Different Protected Activities Involved

The First Department, in a full-fledged opinion by Justice Richter, determined plaintiff’s state and city human rights law retaliation claims against her employer were not precluded by the dismissal of her federal action under the Family and Medical Leave Act (FMLA):

Under the doctrine of collateral estoppel, a party is precluded from relitigating in a subsequent action an issue clearly raised and decided against that party in a prior action … . To successfully invoke this doctrine, two requirements must be met. First, the issue in the second action must be identical to an issue which was raised, necessarily decided and material in the first action. Second, the party to be precluded must have had a full and fair opportunity to litigate the issue in the earlier action … . Where a federal court declines to exercise jurisdiction over a plaintiff’s state law claims, collateral estoppel can still bar those claims provided that the federal court decided issues identical to those raised by the plaintiff’s state claims … . The party seeking to invoke collateral estoppel bears the burden of establishing identity of issue … . Applying these principles, we conclude that defendants have not met their burden of showing that plaintiff’s state and city claims of retaliatory termination are barred by collateral estoppel. The retaliation claims asserted here are entirely distinct from those raised and decided in the federal action. There, the court only decided whether plaintiff was retaliated against for exercising her FMLA rights. Here, however, plaintiff does not claim retaliation based on her exercise of FMLA rights, but instead alleges retaliation, under the State and City Human Rights Laws, based on entirely different instances of protected activity. Specifically, plaintiff alleges she was discharged for filing a written complaint about her reprimand for allegedly reading a book during work hours, and for verbally complaining about an alleged inappropriate comment. Because the federal court’s decision did not address either of these claimed bases for retaliation, it cannot be said that the federal action “necessarily decided” the same issues raised by the State and City retaliation claims, and thus collateral estoppel does not apply… .  Ji Sun Jennifer Kim v Goldberg, Weprin, Finkel, Goldstein, LLP, 2014 NY Slip Op 03961, 1st Dept 5-3-14

 

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Violation of Defendant’s Right to Remain Silent Was Harmless Error—Elements of “Extreme Emotional Disturbance” Defense to Murder Explained

The Third Department, over a dissent, determined that the error in eliciting testimony, in violation of defendant’s post-Miranda right to remain silent, about defendant’s failure to apprise law enforcement that he shot the victims while under extreme emotional disturbance, was harmless error.  The decision includes a detailed discussed of the relevant criteria for “extreme emotional disturbance:”

As the Court of Appeals has instructed, the extreme emotional disturbance defense is comprised of both subjective and objective elements. “The subjective element focuses on the defendant’s state of mind at the time of the crime and requires sufficient evidence that the defendant’s conduct was actually influenced by an extreme emotional disturbance” …, i.e., “that the [defendant’s]; claimed explanation as to the cause of his [or her]; action [was]; not contrived or [a]; sham” … . This subjective element is “generally associated with a loss of self-control” … . The objective element, in turn, “requires proof of a reasonable explanation or excuse for the emotional disturbance . . . [, which]; must be determined by viewing the subjective mental condition of the defendant and the external circumstances as the defendant perceived them to be at the time, however inaccurate that perception may have been, and assessing from that standpoint whether the explanation or excuse for [the]; emotional disturbance was reasonable” … .

To be sure, the extreme emotional disturbance defense “is significantly broader in scope than the ‘heat of passion’ doctrine [that]; it replaced” … and, for that reason, the “[a];ction[s]; influenced by [such defense]; need not be spontaneous” … . “‘Rather, it may be that a significant mental trauma has affected a defendant’s mind for a substantial period of time, simmering in the unknowing subconscious and then inexplicably coming to the fore'” … . That said, evidence demonstrating a defendant’s “high degree of self-control” … , as well as any “postcrime conduct . . . suggest[ing]; . . . that [the defendant]; was in full command of his [or her]; faculties and had consciousness of guilt” … , is entirely inconsistent with an extreme emotional disturbance defense.  People v Pavone, 2014 NY Slip Op 03881, 3rd Dept 5-29-14

 

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To Demonstrate “Defamation by Implication” Where the Factual Statements Are Substantially True, It Must Be Shown the Communication as a Whole Imparts a Defamatory Inference and the Author Intended or Endorsed the Defamatory Inference

In a full-fledged opinion by Justice Feinman, the First Department adopted criteria for determining whether a publication is defamatory by implication.  The subject of the case was a published magazine article describing a conspiracy in Russia involving hundreds of millions in illicit funds.  The plaintiffs alleged that the article defamed them by implying involvement in the conspiracy. The First Department affirmed the dismissal of the complaint and adopted a standard which requires the plaintiff to demonstrate the defamatory inference of the substantially true statements, as well as that the author intended or endorsed that inference:

“Defamation by implication is premised not on direct statements but on false suggestions, impressions and implications arising from otherwise truthful statements” … . The implied defamation cause of action was recognized by the Court of Appeals in a 1963 decision determining that, although the publication at issue contained no directly defamatory statements, “a jury should decide whether a libelous intendment would naturally be given to it by the reading public acquainted with the parties and the subject-matter” … . The following year, the U.S. Supreme Court’s landmark decision in New York Times Co. v Sullivan (376 US 254 [1964]) found that the free speech protections guaranteed by the First Amendment to the U.S. Constitution placed substantial limits on the right to recover for defamatory statements … . In a 1977 libel decision, after discussing the impact Sullivan had on defamation jurisprudence, the Court of Appeals addressed an aspect of the plaintiff’s claim that was akin to implied defamation, noting that although an author “could not make up facts out of whole cloth, omission of relatively minor details in an otherwise basically accurate account is not actionable. This is largely a matter of editorial judgment in which the courts, and juries, have no proper function” … . * * *

“[I]f a communication, viewed in its entire context, merely conveys materially true facts from which a defamatory inference can reasonably be drawn, the libel is not established. But if the communication, by the particular manner or language in which the true facts are conveyed, supplies additional, affirmative evidence suggesting that the defendant intends or endorses the defamatory inference, the communication will be deemed capable of bearing that meaning” … .

…[T]his inquiry requires “an especially rigorous showing”: the “language must not only be reasonably read to impart the false innuendo, but it must also affirmatively suggest that the author intends or endorses the inference”… . * * *

… To survive a motion to dismiss a claim for defamation by implication where the factual statements at issue are substantially true, the plaintiff must make a rigorous showing that the language of the communication as a whole can be reasonably read both to impart a defamatory inference and to affirmatively suggest that the author intended or endorsed that inference. We believe this rule strikes the appropriate balance between a plaintiff’s right to recover in tort for statements that defame by implication and a defendant’s First Amendment protection for publishing substantially truthful statements… . Stepanov v Dow Jones & Co Inc, 2014 NY Slip Op 03940, 1st Dept 5-29-14

 

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Lack of Standing Defense Waived By Absence from Answer—Objections to Authority to Sign Lease Waived by Ratification of the Signed Documents

The Third Department, in a dispute over what was due and owing under a lease agreement, determined the “lack of standing” defense had been waived by the failure to raise it in the answer, and allegedly unauthorized execution of relevant documents had been ratified:

Initially, defendant claims that plaintiff lacks standing to enforce any obligations created by the lease or confirmation agreement, as it was not a party to either document. We agree with Supreme Court that this claim was waived by defendant’s failure to assert it in the answer (see CPLR 3211 [a]; [3]; [e]…).. Defendant further argues that the confirmation agreement is not legally valid, as it was not signed by plaintiff and … PDC [the original lessor, Provident Development Corporation] had transferred the building to plaintiff prior to executing the confirmation agreement. However, “[a];n unauthorized execution of an instrument affecting the title to land or an interest therein may be ratified by the owner of the land or interest so as to be binding upon him [or her];” … . Such a ratification may be shown by the owner’s failure to timely repudiate the unauthorized actions, or by conduct consistent with an intent to be bound … . Here, plaintiff has never repudiated PDC’s execution of the confirmation agreement; on the contrary, the record reveals that, beginning on the commencement date established by the agreement and continuing through 2011, plaintiff regularly invoiced defendant for payments due at the intervals and in the amounts specified in that agreement and accepted defendant’s resulting payments — thus ratifying the confirmation agreement by accepting benefits due thereunder … . Provident Bay Rd LLC v NYSARC Inc, 2014 NY Slip Op 03895, 3rd Dept 5-29-14

 

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