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THE $140 MILLION PAID BY BEAR STEARNS TO THE SEC TO SETTLE AN ACTION ALLEGING THE FACILITATION OF LATE TRADING WAS NOT A “PENALTY IMPOSED BY LAW” AND THEREFORE WAS A COVERED LOSS UNDER THE TERMS OF THE INSURANCE POLICIES (CT APP).

The Court of Appeals, reversing the Appellate Division, in a full-fledged opinion by Judge DiFiore, over an extensive dissent, determined the funds paid to the Security and Exchange Commission (SEC) to settle an action alleging Bear Stearns “facilitated late trading” and “deceptive market timing activity” did not constitute a “penalty imposed by law” and therefore was a covered loss under the insurance policies:

… [U]nder relevant New York law, penalties have consistently been distinguished from compensatory remedies, damages, and payments otherwise measured through the harm caused by wrongdoing. Thus, at the time the parties contracted, a reasonable insured would likewise have understood the term “penalty” to refer to non-compensatory, purely punitive monetary sanctions. In this case, the question therefore distills to whether the disputed $140 million settlement payment meets that standard. …

… Bear Stearns demonstrated that the $140 million disgorgement payment was calculated based on wrongfully obtained profits as a measure of the harm or damages caused by the alleged wrongdoing that Bear Stearns was accused of facilitating. This can be contrasted with the $90 million payment denominated a “penalty,” which was not derived from any estimate of harm or gain flowing from the improper trading practices. J.P. Morgan Sec. Inc. v Vigilant Ins. Co., 2021 NY Slip Op 06528, CtApp 11-23-21

 

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THE OUT-OF-POSSESSION LANDLORD IN THIS SLIP AND FALL CASE DEMONSTRATED (1) THE LEASE DID NOT REQUIRE IT TO MAINTAIN A DRAIN WHICH PERIODICALLY BECAME CLOGGED CAUSING GARBAGE TO FLOAT TO THE SIDEWALK, AND (2) IT DID NOT HAVE ACTUAL OR CONSTRUCTIVE NOTICE OF THE PRESENCE OF THE GARBAGE ON THE SIDEWALK WHICH ALLEGEDLY CAUSED PLAINTIFF’S SLIP AND FALL (FIRST DEPT). ​

The First Department, reversing (modifying) Supreme Court, determined the out-of-possession landlord, SMHS, was not responsible for the fish skin on the sidewalk which allegedly caused plaintiff to slip and fall. The tenant, Lobster, a wholesale seafood company, had contracted with defendant Sanitation to remove garbage, including fish parts, from the tenant’s premises. There was a question of fact whether Sanitation was liable under a contract-based Espinal theory for launching an instrument of harm. But SMHS demonstrated the lease did not require SMHS to maintain the sidewalk or the drains which at times became clogged with garbage and that it did not have actual or constructive knowledge of the dangerous condition:

SMHS, an out-of-possession landlord, was not contractually obligated to maintain the premises … .Although its lease with Lobster did not demise to Lobster “the pipes, ducts, conduits, wires, fixtures and equipment, the structural elements which serve the Demised Premises,” SMHS and Lobster’s course of conduct establishes that Lobster was responsible for maintaining and repairing the trench drain … . Moreover, although the lease afforded SMHS a contractual right of reentry to make needed repairs, liability would not be predicated on “‘a significant structural or design defect that is contrary to a specific statutory provision'” … .

Nor can SMHS be held liable for plaintiff’s injuries under Administrative Code of City of NY § 7-210, which imposes a nondelegable duty on land owners to maintain their sidewalks in a reasonably safe condition … . SMHS established … that it neither created the hazardous condition nor had actual notice of it or constructive notice of its existence for a sufficient length of time to discover and remedy it … . Arias v Sanitation Salvage Corp., 2021 NY Slip Op 06534, First Dept 11-23-21

 

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A SUBPOENA ISSUED BY AN ATTORNEY IS A “JUDICIAL” SUBPOENA SUBJECT TO A CONTEMPT PROCEEDING WITHOUT THE NEED TO FIRST SEEK A COURT ORDER COMPELLING COMPLIANCE (FIRST DEPT).

The First Department, reversing Supreme Court, determined a subpoena issued by an attorney was a “judicial” subpoena and defendant Patterson’s failure to appear for a deposition and produce documents was punishable by contempt without the need to first obtain a court order compelling compliance:

Critical to the resolution of this appeal is whether this type of subpoena is a “judicial” subpoena, as defined by CPLR 2308(a), or a “non-judicial” subpoena, as defined by CPLR 2308(b). … [T]he disobedience of a judicial subpoena is punishable by contempt of court, while a person served with a non-judicial subpoena cannot be held in contempt unless the court first issues an order compelling compliance with the subpoena that is then disobeyed  … .

We find that the subpoena is a “judicial” subpoena, the disobedience of which is punishable by contempt … . CPLR 2308(a) embraces subpoenas issued by an officer of the court (such as an attorney) at any stage of a judicial proceeding, regardless of whether the subpoena was specifically returnable in court … . Cadlerock Joint Venture, L.P. v Patterson, 2021 NY Slip Op 06535, First Dept 11-23-21

 

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DEFENDANT HAD BEEN TAKEN DOWN TO THE GROUND AND HANDCUFFED AT THE TIME THE BACKPACK HE WAS WEARING WAS SEARCHED; THE PEOPLE PRESENTED NO EVIDENCE OF EXIGENCY; THE SEARCH WAS THEREFORE UNJUSTIFIED (FIRST DEPT).

The First Department, reversing Supreme Court, determined the People did not demonstrate exigent circumstances which justified the search of the backpack he was wearing. The defendant had been taken down to the ground and handcuffed at the time of the search:

At the suppression hearing, when questioned as to why he patted down defendant and the drawstring backpack, the officer merely responded “[f]or our safety.” * * *

Exigency justifying the search of a container incident to arrest is not established in the absence of some reasonable basis for the belief that the contents of the container might pose a danger to the arresting officers or that there is a legitimate concern for the preservation of evidence which might reasonably be thought to reside within the container … . …

The record does not contain evidence or testimony supporting a determination that the officer had objective reasonable grounds to believe that the drawstring backpack contained contents that would place his safety at risk or that he was concerned that the bag contained evidence that defendant could destroy. Thus, the circumstances did not suggest that any exigency required an immediate search … . People v Collins, 2021 NY Slip Op 06552, First Dept 11-23-21

 

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THE REMARKS MADE BY THE POLICE DURING THE INTERROGATION OF DEFENDANT SERVED TO NEGATE THE MIRANDA WARNINGS; INTERROGATION CONTINUED AFTER DEFENDANT ASSERTED HIS RIGHT TO COUNSEL; THE ERRORS WERE DEEMED HARMLESS BECAUSE DEFENDANT WOULD HAVE BEEN CONVICTED EVEN IF THE STATEMENTS HAD BEEN SUPPRESSED (FOURTH DEPT).

The Fourth Department determined questioning by the police effectively negated the Miranda warnings and questioning continued after defendant invoked his right to counsel. The errors were deemed harmless because the defendant would have been convicted even if the statements had been suppressed:

“Properly administered Miranda rights can be rendered inadequate and ineffective when they are contradicted by statements suggesting that there is a price for asserting the rights to remain silent or to counsel, such as foregoing ‘a valuable opportunity to speak with an assistant district attorney, to have [the] case[ ] investigated or to assert alibi defenses’ ” … . The police officer’s statement here improperly implied to defendant that the interrogation would be his “only opportunity to speak” … , and his advice that providing an explanation would benefit defendant effectively “implied that . . . defendant[‘s] words would be used to help [him], thus undoing the heart of the warning that anything [he] said could and would be used against [him]” … . * * *

… [A]bout 20 minutes into the interrogation, defendant expressly stated that he did not “want to talk about more of this[, i.e., the shooting]. That’s it.” … [D]efendant thereby unequivocally invoked his right to remain silent …  inasmuch as “[n]o reasonable police officer could have interpreted that statement as anything other than a desire not to talk to the police” … . Defendant’s responses to the police officers when they resumed the interrogation did not negate his prior unequivocal invocation of his right to remain silent because the police officers failed to reread the Miranda warnings to defendant before resuming the interrogation and therefore failed to scrupulously honor his right to remain silent … . People v Marrero, 2021 NY Slip Op 06510, Fourth Dept 11-19-21

 

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IN THIS CHILD VICTIMS ACT ACTION ALLEGING SEXUAL ABUSE BY THE DEFAULTING DEFENDANT WHO ALLEGEDLY WAS AN EMPLOYEE OF THE NON-DEFAULTING DEFENDANT, IT WAS AN IMPROVIDENT EXERCISE OF DISCRETION TO DELAY THE DAMAGES ASPECT OF THE SUIT AGAINST THE DEFAULTING DEFENDANT UNTIL THE TRIAL OR DISPOSITION OF THE SUIT AGAINST THE NON-DEFAULTING DEFENDANT (FOURTH DEPT). ​

The Fourth Department, reversing Supreme Court, determined delaying the damages aspect of the action against a defaulting defendant until the trial or disposition of the action against a non-defaulting defendant was improper under the facts. The Fourth Department noted that it can substitute its discretion for the lower court’s, even where there has been no abuse of discretion by the lower court. The defaulting defendant was an employee of the non-defaulting defendant, YMCA Buffalo Niagara, when he allegedly sexually abused plaintiff. The lawsuit was brought pursuant to the Child Victims Act:

… [Although] a court may, under appropriate circumstances, defer entry of judgment and a determination of damages against a defaulting defendant until resolution of a separately-commenced companion action against non-defaulting defendants, we … agree with plaintiff’s … contention that the court’s decision to do so here constitutes an improvident exercise of its discretion … . We therefore substitute our own discretion “even in the absence of abuse [of discretion]” … .

… [W]e agree with plaintiff that “further delay undermines the purpose of the Child Victims Act, which is to ‘finally allow justice for past and future survivors of child sexual abuse, help the public identify hidden child predators through civil litigation discovery, and shift the significant and lasting costs of child sexual abuse to the responsible parties’ ” … . Given the schedule of the separate action and the accompanying “uncertainty as to when plaintiff’s claims may be resolved against [YMCA Buffalo Niagara], additional delay may hinder [plaintiff’s] efforts to prove damages against defendant and secure a final judgment, particularly considering defendant’s age and the prospect that defendant’s assets may be dissipated in the interim” … . By contrast, we note that the court did not identify any prejudice to YMCA Buffalo Niagara … . “Although judicial economy, which is an important consideration under CPLR 3215 (d) . . . , may favor a single damages proceeding involving both the defaulting and non-defaulting defendants,” we conclude here that “such consideration does not outweigh the significant prejudice that may inure to plaintiff … . LG 46 DOE v Jackson, 2021 NY Slip Op 06507, Fourth Dept 11-19-21

 

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IN THIS POST-DIVORCE ACTION, THE PROCEEDS OF THE SALE OF THE PARTIES’ REAL PROPERTY SHOULD NOT HAVE BEEN DISTRIBUTED WITHOUT A FULL EVIDENTIARY HEARING (FOURTH DEPT).

The Fourth Department, reversing (modifying) Supreme Court, determined the court should have conducted a hearing before distributing the proceeds of the sale of the parties’ farm in this post-divorce action:

… [T]he court erred in deciding the value of plaintiff’s credits without a full evidentiary hearing permitting the parties to offer proof of valuation … . Plaintiff offered no direct proof of the value of the relevant assets, and defendant was not afforded an opportunity to cross-examine the court-appointed appraiser or review the appraisals … . The court’s decision also failed to articulate the factors it considered or the reasons for its determination to partially grant certain credits to plaintiff and deny others … . … [W]e remit the matter to Supreme Court for a hearing and appropriate findings of fact and conclusions of law with respect to the parties’ entitlement to credits. Edwards v Edwards, 2021 NY Slip Op 06504, Fourth Dept 11-19-21

 

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THE FACTS THAT THE PARKED CAR IN WHICH DEFENDANT WAS SITTING WITH TWO OTHERS WAS IN A HIGH CRIME AREA AND WAS NOT RUNNING DID NOT PROVIDE THE POLICE WITH AN ARTICULABLE, CREDIBLE REASON TO APPROACH THE CAR; THE EVIDENCE SUBSEQUENTLY SEIZED AND THE STATEMENTS SUBSEQUENTLY MADE SHOULD HAVE BEEN SUPPRESSED (FOURTH DEPT).

The Fourth Department, vacating defendant’s guilty plea and dismissing the indictment, determined the police did not have an articulable. credible reason for approaching the parked car defendant was sitting in. Therefore the evidence subsequently seized and the statements subsequently made should have been suppressed:

Where … “police officers approach a vehicle that is already parked and stationary, the only level of suspicion necessary to justify that approach is an articulable, credible reason for doing so, not necessarily indicative of criminality” … . The approach, however, “must be predicated on more than a hunch, whim, caprice or idle curiosity” … . Here, the officer testified at the suppression hearing that he and his partner approached the vehicle because the apartment complex at which it was parked was in a high crime area and because the vehicle was not running and had three occupants. The hearing record is devoid, however, of evidence that the officer was “aware of or observed conduct which provided a particularized reason to request information” from the occupants of the vehicle … . People v King, 2021 NY Slip Op 06499, Fourth Dept 11-19-21

 

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THE CO-GUARDIAN SHOULD NOT HAVE BEEN REMOVED WITHOUT A HEARING; ALTHOUGH THE CO-GUARDIAN HAS A FELONY CONVICTION, SHE OBTAINED A CERTIFICATE OF RELIEF FROM DISABILITIES; THEREFORE, ALTHOUGH SURROGATE’S COURT CAN REMOVE THE CO-GUARDIAN IN THE EXERCISE OF DISCRETION, REMOVAL IS NOT AUTOMATIC (FOURTH DEPT).

The Fourth Department, reversing Surrogate’s Court, determined the co-guardians’ petition to remove co-guardian respondent Suzette Bonerb should not have been granted without a hearing. Petitioner and Suzette Bonerb were previously appointed co-guardians of their adult child, Whitney Bonerb, and co-trustees of the Whitney Bonerb Credit Shelter Supplemental Needs Trust. Although respondent Suzette had been convicted of a felony, which would allow removal by Surrogate’s Court sua sponte, Suzette had been granted a certificate of relief from disabilities. Therefore a hearing was required:

… [T]he certificate does not prevent the Surrogate “from revoking [respondent’s appointments] in the exercise of its discretion (see Correction Law § 701 [3]); it merely preclude[s] the automatic revocation of” those appointments … . * * *

… [R]espondent conceded that she had been convicted of a felony, but established that she disclosed that fact in the applications for appointments and that she later obtained a certificate of relief from disabilities with respect to that felony (see Correction Law § 701). … [S]he contended that she had been advised by counsel that she was eligible to be appointed a fiduciary at the time when she signed the statement to that effect. Consequently, the Surrogate must make a credibility determination concerning those issues, and then exercise her discretion concerning whether respondent should be removed from her appointments … . Matter of Bonerb, 2021 NY Slip Op 06487, Fourth Dept 11-19-21

 

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QUESTIONS OF FACT ABOUT DEFENDANT’S KNOWLEDGE THE ICE AND SNOW WHERE PLAINTIFF SLIPPED AND FELL WAS A RECURRING CONDITION (CONSTRUCTIVE NOTICE), AS WELL AS DEFENDANT’S ROLE IN CREATING THE CONDITION (FOURTH DEPT).

The Fourth Department, reversing (modifying) Supreme Court, determined there were questions of fact about defendant’s (Ryco’s) “constructive notice” and “creation” of the snow and ice condition in the are where plaintiff slipped and fell:

With respect to constructive notice, it is well settled that a “defendant who has actual knowledge of a recurring dangerous condition can be charged with constructive notice of each specific recurrence of the condition” … . Here, the Ryco defendants’ own submissions raise a triable issue of fact whether they had actual knowledge of a recurring dangerous condition in the parking lot in front of the entrance where plaintiff fell, thereby placing them on constructive notice … .

… [T]he Ryco defendants’ own submissions “failed to eliminate the existence of a triable issue of fact as to whether the ice on which . . . plaintiff allegedly slipped and fell was formed when snow piles created by the [Ryco] defendant[s’] snow removal efforts melted and refroze” … . Britt v Northern Dev. II, LLC, 2021 NY Slip Op 06486, Fourth Dept 11-19-21

 

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