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Retroactive Tax Credit Restrictions Violated Due Process

The Court of Appeals, in a full-fledged opinion by Chief Judge Lippman, determined that the retroactive changes in the Empire Zones Program (restricting the availability of tax credits) did not, as the appellate divisions held, violate the Takings Clause, but did violate the Due Process Clause:  The Court wrote:

The purported taking here is plaintiffs’ obligation to pay tax to the State in the absence of a valid tax credit. However, “[t]he mere imposition of an obligation to pay money . . . does not give rise to a claim under the Takings Clause of the Fifth Amendment” …. Federal courts have held that “[f]or retroactive taxation to be a taking, it must be ‘so arbitrary as to constrain to the conclusion that it was not the exertion of taxation'”…. The retroactive tax liability imposed in the present case cannot be characterized as so flagrant as to constitute the confiscation of property under the Takings Clause. Plaintiffs had no guarantee that they would ever recoup their business investments through the receipt of tax credits, and the New York Constitution provides that tax exemptions are freely repealable (NY Const, art XVI, § 1).  *  *  *

We now turn to that other question: whether plaintiffs’ due process rights were infringed by the statute utilizing the three factors articulated in Replan. In terms of “the taxpayer’s forewarning of a change in the legislation and the reasonableness of his reliance on the old law” (Replan, 70 NY2d at 456), the plaintiffs had no warning and no opportunity at anytime in 2008 to alter their behavior in anticipation of the impact of the 2009 Amendments. * * *The second factor, the length of the period of retroactivity, also benefits plaintiffs. * * * Regardless of whether the period of retroactivity is deemed to span 16 or 32 months, the length of retroactivity should be considered excessive and weighs against the State. * * *   On the third factor, dispositive in this case, the State fails to set forth a valid public purpose for the retroactive application of the 2009 Amendments. The legislature did not have an important public purpose to make the law retroactive.  James Square Associates LP et al v Mullen …, Nos 87, 88, 89, 90, 91, CtApp, 6-4-13

 

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Forum Non Conveniens Doctrine Applied

In affirming the dismissal of the action on forum non conveniens grounds, the First Department described the criteria and relevant facts as follows:

The doctrine of forum non conveniens, as codified under CPLR 327, permits a court to stay or dismiss an action “where it is determined that the action, although jurisdictionally sound, would be better adjudicated elsewhere” …. The doctrine rests on considerations of justice, fairness and convenience … . * * *

The subject matter of this action – insurance coverage for liability relating to the manufacture of products in Massachusetts – has no substantial connection to New York. When the policies were issued, Warren was a Massachusetts corporation and had its principal place of business in that state. Liberty Mutual, the insurer under the policies at issue, is a Massachusetts corporation that has its principal place of business in that state. Both plaintiffs are foreign corporations that maintain their principal places of business in other states… . Century Indem Co v Liberty Mut Ins Co, 2013 NY Slip Op 03953, 1st Dept, 6-4-13

 

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Preclusion Proper Remedy for Discarding of Computer Containing Crucial Evidence​

The First Department affirmed Supreme Court’s precluding plaintiff from offering any evidence and/or testimony at trial in opposition to defendants’ defenses and counterclaims stemming from plaintiff’s discarding a computer containing crucial evidence:

Plaintiff’s conduct evinces a higher degree of culpability than mere negligence…. Indeed, the record shows that, despite numerous court orders and the court’s assignment of a special referee to supervise discovery, plaintiff delayed discovery and did not disclose to defendants that it had discarded the subject computer for almost two years, notwithstanding that such disclosure was specifically requested by defendants. Further, the testimony of plaintiff’s bookkeeper that a litigation hold, either written or oral, was never issued directing him to preserve electronic data, supports a finding that plaintiff’s disposal of the subject computer was, at the very least, grossly negligent ….  Defendants established that plaintiff’s spoliation of critical evidence compromised defendants’ ability to prosecute their counterclaims … . Accordingly, the court did not abuse its discretion in determining that preclusion was an appropriate spoliation sanction. Harry Wiess, Inc v Moskowitz, 2013 NY Slip Op 03927, 1st Dept, 5-30-13

 

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Statute of Limitations for Fraud Applies to Forgery​

The Second Department noted that the statute of limitations provisions for fraud are applied to forgery:

Contrary to the plaintiff’s contention, the statute of limitations for a fraud cause of action applies to a cause of action alleging forgery … .The statute of limitations for a fraud-based cause of action requires that the action be commenced within six years after the allegedly fraudulent act or within two years after discovery, whichever is later….   Faison v Lewis, 2013 NY Slip OP 03813, 2nd Dept, 5-29-13

 

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Family Court Has Power to Issue Judgment for Child Support Arrearages

After Family Court ruled it did not have jurisdiction to issue a judgment for child support arrearages, the Third Department determined that the court did in fact have jurisdiction.   In a full-fledged opinion by Justice Peters, the Third Department wrote:

While “Family Court is a court of limited jurisdiction, constrained to exercise only those powers granted to it by the State Constitution or by statute” …, it is empowered “to determine applications to modify or enforce judgments and orders of support” … .In that regard, petitioner [child support collection unit] is authorized to commence violation proceedings “on behalf of persons” who receive child support pursuant to a court order … .  *  *  *

Petitioner thus acted well within its statutory authority in commencing this proceeding to enforce a child support order that respondent had “fail[ed] to obey,”  and  Family  Court  likewise had  subject  matter  jurisdiction to consider it… .  In the Matter of Chemung County Support Collection Unit…v Greenfield, 515864, 3rd Dept, 5-30-13

 

 

 

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Mother’s Prior Consent to Placement with Sister Did Not Preclude Mother’s Petition for Custody​

The Third Department reversed Family Court’s dismissal of the biological mother’s petition for custody of a child who had been placed with her sister with the biological mother’s consent.  The Third Department determined the mother’s prior consent to custody did not preclude her petition and the respondent, as a nonparent, bore the responsibility to demonstrate extraordinary circumstances warranting her custody of the child.  The Third Department noted:

…[W]hile “no parent has an absolute right to custody of a child . . . it is settled law that, as between a biological parent . . . and a nonbiological parent . . ., the parent has a superior right that cannot  be  denied  unless the nonparent  can establish that the parent has relinquished that right because of ‘surrender, abandonment,  persisting neglect, unfitness or other like extraordinary circumstances'” … .  In the Matter of Evelyn C …, 514179, 3rd Dept, 5-30-13

 

 

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Imposition of Separate and Contradictory Permanency Goals for Father and Mother Disallowed

In reversing Family Court, the Third Department determined the imposition of separate and contradictory permanency goals violated Family Court Act 1089 [d] [2] [i]:

At the end of the hearing, Family Court continued the children’s placement and approved petitioner’s goal of reunification as to the mother only. As to the father, the court disapproved the goal of reunification, directed petitioner to commence a permanent neglect proceeding to terminate his parental rights and suspended his supervised visitation.  *  *  *

Family Court erred by imposing separate and contradictory permanency goals on the mother and father.  Upon concluding at the end of a permanency hearing that a child is not to be returned immediately to a parent, the court must determine whether the permanency goal should be approved or modified and may select among five statutory permanency goals (see Family Ct Act § 1089 [d] [2] [i]; …).  These “goal[s] are listed as alternatives, with the court to choose only one.  Nothing in the statute indicates that the court may select and impose on the parties two or more goals simultaneously” … .  The statute contemplates the commencement of termination proceedings against a parent only when the permanency goal is “placement for adoption” (Family Ct Act § 1089 [d] [2] [i] [B]). To require such proceedings as to one parent where, as here, the permanency goal is reunification with the other parent is not only inconsistent with the statutory goals but also with the overall goal of permanent neglect proceedings, to further the children’s best interests by freeing them for adoption when positive parental relationships no longer exist … .  In the Matter of Julian P, 512450, 3rd Dept, 5-30-13

 

 

 

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Negligence and Fraudulent Misrepresentation Causes of Action Can Not Be Based on Allegations of Breach of Contract 

In determining Supreme Court should have dismissed the negligence and fraudulent misrepresentations cause of action in a complaint based upon breach of contract, the Third Department wrote:

“[A] simple breach of contract claim is not to be considered a tort unless a legal duty independent of the contract itself has been violated . . .[, which] legal duty must spring from circumstances extraneous to, and not constituting elements of, the contract” ….  Plaintiffs have not demonstrated any special relationship or legal duty aside from the contractual relationship….   The  negligence and  fraudulent misrepresentation claims are based upon  the same  alleged wrongful conduct as the breach of contract claim, rendering them duplicative … . Rorok v Moore’s Flatwork…, 515459, 3rd Dept, 5-30-13

 

 

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Defective Acknowledgment Rendered Prenuptial Agreement Invalid

In a full-fledged opinion by Judge Graffeo, the Court of Appeals determined that a defective acknowledgment on a prenuptial agreement was the type of defect that could be cured but that the notary’s affidavit was not sufficient to cure the defect.  Therefore, the prenuptial agreement was invalid.  The opinion includes an extensive discussion of the statutory requirements for acknowledgments and the limited circumstances in which defects can be cured.  With regard to the specific defect at issue, the Court of Appeals wrote:

In the certificate of acknowledgment relating to the husband’s signature, the “to me known and known to me” phrase was inexplicably omitted, leaving only the following statement: “On the 8 [sic] day of July, 1997, before me came Gary Galetta described in and who executed the foregoing instrument and duly acknowledged to me that he executed the same.” Absent the omitted language, the certificate does not indicate either that the notary public knew the husband or had ascertained through some form of proof that he was the person described in the prenuptial agreement. New York courts have long held that an acknowledgment that fails to include a certification to this effect is defective. Thus, we agree with the Appellate Division, which unanimously concluded that the certificate of acknowledgment did not conform with statutory requirements.  Galetta v Galetta, No 94, CtApp, 5-30-13

 

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