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CIVIL COURT WHICH AWARDED RENT ARREARS IN THE EVICTION PROCEEDING DID NOT HAVE SUBJECT MATTER JURISDICTION OVER THE CLAIM FOR RENT DUE FOR THE REMAINDER OF THE LEASE (POST-EVICTION); THEREFORE THE ACTION IN SUPREME COURT FOR THE POST-EVICTION RENT AS LIQUIDATED DAMAGES WAS NOT BARRED BY THE DOCTRINE OF RES JUDICATA (FIRST DEPT).

The First Department, reversing Supreme Court, determined the doctrine of res judicata did not apply to this action for rent due as liquidated damages. Although the eviction proceeding in Civil Court awarded defendant the rent arrears, Civil Court did not have subject matter jurisdiction over the claim for the rent due for the remainder of the lease term (post-eviction). Therefore the rent-as-liquidated-damages claim could be brought in Supreme Court:

This action, in which plaintiff seeks the recovery of rent arrears, is not barred by the doctrine of res judicata, as plaintiff could not have sought relief for its current claims in the Civil Court eviction proceeding. Although the rent arrears claim arises out of the same transaction as the claim for future rent … , res judicata is inapplicable where the plaintiff could not seek a particular remedy in the first action because of a limitation on a court’s subject matter jurisdiction, and plaintiff wishes to seek that remedy in the second action … .

The liquidated damages clause in the lease expressly provided that plaintiff was under no duty to mitigate damages by re-letting the premises and further provided that, even if Levant was evicted, it was to remain liable for its monetary obligations under the lease … . However, Civil Court, which determined the eviction proceeding, is “without authority to address a claim for the balance of rent due” as liquidated damages … . Thus, once plaintiff had been awarded judgment in the summary proceeding, the parties’ relationship as landlord and tenant ended and whatever monetary liability Levant may have had to plaintiff at that point “was no longer in the nature of rent, but was in the nature of contract damages” … . Prospect Resources Inc. v Levant Capital N. Am., Inc., 2025 NY Slip Op 02169, First Dept 4-15-25

Practice Point: Here the court which handled the eviction proceedings did not have subject matter jurisdiction over the claim for post-eviction rent as liquidated damages. Therefore the doctrine of res judicata did not preclude the suit for the post-eviction rent in Supreme Court.

 

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THE NOTE WAS ENDORSED IN BLANK REQUIRING PLAINTIFF TO DEMONSTRATE POSSESSION OF THE NOTE AT THE TIME THE FORECLOSURE ACTION WAS COMMENCED; FAILURE TO DEMONSTRATE POSSESSION CONSTITUTED A FAILURE TO DEMONSTRATE STANDING TO FORECLOSE (THIRD DEPT).

The Third Department, reversing Supreme Court, determined the plaintiff mortgage company did not demonstrate standing to foreclose. The note was endorsed in blank, meaning that it was payable to any bearer of the instrument. Therefore the plaintiff was required to show possession of the note at the time the action was commenced. The evidence submitted was insufficient:

Despite being the originator of the note, the record fails to demonstrate whether plaintiff reacquired the note prior to commencement of this action in order to satisfy its moving burden. Plaintiff’s reliance on JP Morgan Chase Bank, N.A. v Venture (148 AD3d 1269, 1270-1271 [3d Dept 2017]) is misplaced. Although the type of indorsement was not identified in the decision that was handed down, we take judicial notice of the record filed in that matter and confirm that the note annexed to the complaint in Venture contained a special indorsement payable to only plaintiff … . This is materially different than here, where the note was indorsed in blank, meaning it was payable to any bearer of the instrument (see UCC 1-201 [b] [21] [B]), therefore requiring plaintiff to perform the additional step of proving possession at the time of commencement … . Neither the moving attorney affirmation nor the affidavit of merit for the loan servicer/attorney-in-fact are sufficient to do so. We further reject plaintiff’s contention that the complaint was sufficient to establish possession of the note at commencement, as the complaint contained conflicting allegations and was unverified, and therefore it lacked the evidentiary value to support such claim … . United Wholesale Mtge., LLC v Smith, 2025 NY Slip Op 02117, Third Dept 4-10-25

Practice Point: Consult this decision for some insight into the proof required to demonstrate a note, endorsed in blank, was possessed by the plaintiff at the time the foreclosure action was commenced. If the defendant raises plaintiff’s lack of standing as an issue, the plaintiff must prove possession at commencement in order to proceed.​

 

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ISSUING A RULING BEFORE FATHER COMPLETED HIS TESTIMONY IN THIS CUSTODY PROCEEDING DEPRIVED THE PARTIES OF DUE PROCESS OF LAW (THIRD DEPT).

The Third Department, reversing Family Court, determined the judge’s issuing a ruling awarding custody to father before father’s direct testimony had been completed violated due process:

The parties, as well as the attorney for the child, share the view that Family Court improperly ended the hearing before its completion, and we agree. At a hearing on an initial custody determination, due process requires that each party be provided a full and fair opportunity to be heard … . The parties must be permitted to present evidence on their own behalf and ” ‘cross-examine . . . key witness[es]’ ” … . Aside from due process considerations, a court’s “abrupt termination of the proceedings [may] preclude[ ] a meaningful best interests analysis, leaving the court . . . with insufficient information upon which to reach a reasoned conclusion” … .

Recognizing that this custody proceeding largely turned upon the credibility of the mother and the father, each of whom alleged that the other was an unfit parent, Family Court deprived both parties of a full and fair opportunity to be heard by inexplicably cutting off the father’s direct testimony and failing to allow any cross-examination of him. Further, given that the court granted the father sole legal and primary physical custody of the child in the face of the mother’s allegations that the father had committed numerous acts of domestic violence, including in front of the child, the court’s failure to allow cross-examination of the father deprived it of sufficient information to perform a meaningful best interests analysis … . Accordingly, we reverse and remit for a new fact-finding hearing … . Matter of Casey Q. v Jeffrey O., 2025 NY Slip Op 01981, Third Dept 4-3-25

Practice Point: Here in this child custody dispute, the judge issued a ruling awarding custody to father before father had completed his direct testimony. The premature ruling deprived the parties of due process of law.

 

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HERE THE PARTY WHO WAS AWARDED COSTS ON APPEAL WAS ENTITLED TO REIMBURSEMENT OF THE COST OF PROCURING THE TRANSCRIPTS FOR THE RECORD ON APPEAL (SECOND DEPT).

The Second Department, reversing (modifying) Supreme Court, determined the party who has been awarded costs on appeal is entitled the cost of procuring the transcripts included in the record on appeal:

Pursuant to CPLR 8301(a)(13), a party to whom costs are awarded on appeal is entitled to tax his or her necessary disbursements for “reasonable and necessary expenses as are taxable according to the course and practice of the court, by express provision of law or by order of the court.” Under the circumstances of this case, the defendant was entitled to disbursements for the expense of procuring trial transcripts for the purpose of preparing a record on appeal pursuant to CPLR 8301(a)(13) … . Thandi v Otsego Mut. Fire Ins. Co., 2025 NY Slip Op 01967, Second Dept 4-2-25

Practice Point: Here is a concrete example of what it means to be awarded “costs” after an appeal.

 

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THE PETITIONER WAS ENTITLED TO A HEARING ON WHETHER HIS ACKNOWLEDGMENT OF PATERNITY WAS BASED ON A MISREPRESENTATION BY MOTHER AND WHETHER PETITIONER IS ESTOPPED FROM DENYING PATERNITY BASED ON THE BEST INTERESTS OF THE CHILD (SECOND DEPT).

The Second Department, reversing Family Court, determined the petitioner was entitled to a hearing on the issues of whether petitioner’s (appellant’s) acknowledgment of paternity was procured by a misrepresentation by mother and, if so, whether the petitioner should be estopped from challenging the acknowledgment based on the best interests of the child. As is often the case in Family Court reversals, the failure to hold a hearing is the problem:

“Where . . . a party seeks to challenge an acknowledgment of paternity more than 60 days after its execution, Family Court Act § 516-a(b) requires the court to conduct a hearing to determine the issues of fraud, duress, or a material mistake of fact [in the execution of the acknowledgment of paternity] before ordering a [genetic marker test]” … . “In the event the court determines that a valid ground for vacatur of the acknowledgment exists, the issue of whether the petitioner should be estopped, in accordance with the child’s best interest, from vacating the acknowledgment of paternity, must [then also] be evaluated at a hearing” … . * * *

Here, the issue of the appellant’s paternity was not actually litigated in connection with the prior proceedings … . The Family Court’s findings … that the appellant, … would have been equitably estopped from seeking vacatur of the acknowledgment of paternity, were made without a hearing, during an appearance on the appellant’s petitions to modify custody and visitation, when, in response to the appellant raising the issue of his attempts to vacate the acknowledgment of paternity, the attorney for the child indicated that the child viewed the appellant as her father. Thus, contrary to the court’s determination, the doctrine of collateral estoppel is inapplicable … . Matter of Stephen B.J.B. v Marcia N.S.C., 2025 NY Slip Op 01921, Second Dept 4-2-25

Practice Point: The most frequent basis for Family Court reversals is the judge’s failure to hold a hearing before making a ruling.

 

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FAMILY COURT LOST SUBJECT MATTER JURISDICTION AFTER THE NEGLECT PETITION WAS DISMISSED; THEREFORE THE COURT SHOULD NOT HAVE CONTINUED THE CHILD’S PLACEMENT IN FOSTER CARE (FIRST DEPT).

The First Department, reversing Family Court, in a full-fledged opinion by Justice Gesmer, determined Family Court lost subject matter jurisdiction after the neglect petition against mother was dismissed. Therefore the child’s placement in foster should not have been continued by the court. The First Department also noted that mother’s mental-health records from the period after the filing and after the dismissal of the neglect petition were improperly admitted:

We … find that Family Court lacked subject matter jurisdiction to continue R.C.’s foster care placement for the reasons articulated in Matter of Jamie J. (Michelle E.C.) (30 NY3d 275 [2017]), in which the Court of Appeals held that “Family Court’s jurisdiction terminates upon dismissal of the original neglect or abuse petition” … .

The “court’s lack of subject matter jurisdiction is not waivable, but may be raised at any stage of the action, and the court may . . . on its own motion . . . at any time, when its attention is called to the facts, refuse to proceed further and dismiss the action” … .

Here, once the neglect petition against the mother was dismissed, Family Court lacked subject matter jurisdiction to continue the child’s temporary removal from the mother’s care and placement in foster care … . Accordingly, it should have immediately returned the child to the mother’s care and terminated the child’s foster care placement. It erred when it determined that it could hold permanency hearings based on the pending neglect petition against the putative father, since the child was not removed from his care, but from the mother’s. … Indeed, there is no evidence in the record that the child ever resided with the putative father and no indication that he ever sought custody of the child.

Furthermore, we find that the failure of Family Court to immediately return the child to the care of the mother after the dismissal of the neglect petition against her—as well as the subsequent protracted proceedings, including the dispositional hearing, which lasted nearly a year and a half—violated her due process rights … . Matter of R.C. (D.C.–R.R.), 2025 NY Slip Op 01859, First Dept 3-27-25

Practice Point: Here Family Court lost subject matter jurisdiction after the neglect petition against mother was dismissed and did not have the authority to continue the child’s placement in foster care.

Practice Point: The protracted proceedings after the dismissal of the neglect petition, during which the child remained in foster care, violated mother’s right to due process.

 

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THE COMPLAINT SUFFICIENTLY ALLEGED FACTS THAT WOULD SUPPORT PIERCING THE CORPORATE VEIL (SECOND DEPT).

The Second Department, reversing (modifying) Supreme Court, determined the cause of action alleging that the corporate veil should be pierced should not have been dismissed. The complaint alleged failure to adhere to LLC formalities, inadequate capitalization, commingling of assets, and the personal use of LLC funds:

“To survive a motion to dismiss the complaint, a party seeking to pierce the corporate veil must allege facts that, if proved, establish that the party against whom the doctrine is asserted (1) exercised complete domination over the corporation with respect to the transaction at issue, and (2) through such domination, abused the privilege of doing business in the corporate form to perpetrate a wrong or injustice against the plaintiff such that a court in equity will intervene” … . “Factors to be considered in determining whether an individual has abused the privilege of doing business in the corporate or LLC form include the failure to adhere to LLC formalities, inadequate capitalization, commingling of assets, and the personal use of LLC funds” … . “Additionally, the corporate veil will be pierced to achieve equity, even absent fraud, when a corporation has been so dominated by an individual or another corporation and its separate entity so ignored that it primarily transacts the dominator’s business instead of its own and can be called the other’s alter ego” … . “[A] fact-laden claim to pierce the corporate veil is unsuited for resolution on a pre-answer, pre-discovery motion to dismiss” … . Goldberg v KOSL Bldg. Group, LLC, 2025 NY Slip Op 01790, Second Dept 3-26-25

Practice Point: Here the allegations in the complaint that defendant failed to adhere to LLC formalities, inadequately capitalized the corporate entities, commingled assets, and personally used LLC funds sufficiently supported plaintiff’s seeking to pierce the corporate veil.

 

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PLAINTIFF ALLEGED DEFENDANT HOSPITAL WAS NEGLIGENT IN PLACING HIM IN A ROOM WITH A PERSON WITH COVID; PLAINTIFF WAS ENTITLED TO DISCOVERY OF THAT PERSON’S MEDICAL RECORDS TO DETERMINE WHEN THE HOSPITAL BECAME AWARE OF THE COVID DIAGNOSIS (FOURTH DEPT).

The Fourth Department, reversing Supreme Court, determined plaintiff was entitled to discovery of another’s medical records. Plaintiff alleged the hospital was negligent in placing plaintiff in a room with a person with COVID. The sought medical records may reveal when the hospital became aware of the COVID diagnosis:

Although “discovery determinations rest within the sound discretion of the trial court, the Appellate Division is vested with a corresponding power to substitute its own discretion for that of the trial court, even in the absence of abuse” … . CPLR 3101 (a) provides that “[t]here shall be full disclosure of all matter material and necessary in the prosecution or defense of an action, regardless of the burden of proof.” “What is material and necessary is left to the sound discretion of the lower courts and includes any facts bearing on the controversy which will assist preparation for trial by sharpening the issues and reducing delay and prolixity. The test is one of usefulness and reason” … .

Pursuant to CPLR 4504 (a), “a person authorized to practice medicine . . . shall not be allowed to disclose any information which [they] acquired in attending a patient in a professional capacity, and which was necessary to enable [them] to act in that capacity.” The physician-patient privilege may be overcome, however, where the plaintiff establishes that the information in the medical records is material and necessary to their claim … . Here, plaintiffs established that the nonparty patient’s hospital records would show when defendant, its agents, servants and employees became aware that the patient had tested positive for COVID-19 and that such information is material and necessary to establish whether defendant had notice that it was placing plaintiff in the same room as a person who had COVID-19 … . Martin v Kaleida Health, 2025 NY Slip Op 01756, Fourth Dept 3-21-25

Practice Point: Here plaintiff was entitled to limited discovery of another’s medical records because the records were “material and necessary to the prosecution of the action.”

 

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IN ORDER TO SEEK COURT REVIEW OF AN ALLEGED VIOLATION OF A COLLECTIVE BARGAINING AGREEMENT BY AN EMPLOYER AND/OR A UNION, AN EMPLOYEE MUST BRING A PLENARY ACTION, NOT AN ARTICLE 78 PROCEEDING (CT APP). ​

The Court of Appeals, in a full-fledged opinion by Judge Wilson, affirming the dismissal of appellant-employee’s Article 78 petition, determined an employee who has exhausted the contractual grievance process and alleges the employer breached a collective bargaining agreement must bring a plenary action, not an Article 78 proceeding, for any further review:

… [W]hen a claim arises under a collective bargaining agreement that creates a mandatory grievance process, the employee “may not sue the employer directly for breach of that agreement but must proceed, through the union, in accordance with the contract. Unless the contract provides otherwise, only when the union fails in its duty of fair representation can the employee go beyond the agreed procedure and litigate a contract issue directly against the employer” … . Allegations that an employer has breached the collective bargaining agreement are contract claims that may not be resolved in an article 78 proceeding … . Thus, when an employee alleges that an employer has breached a term in a collective bargaining agreement, the proper mechanism is a plenary action alleging both breach of contract by the employer and breach of the duty of fair representation by the union … . * * *

The procedure applicable to an employee’s claim depends on the source of the right or benefit the employee asserts. Statutory or constitutional claims are appropriately brought in an article 78 proceeding … . Claims arising exclusively from an alleged breach of a term in a collective bargaining agreement must be brought through a civil action for breach of contract … and must meet the requirements set out in Ambach (70 NY2d at 508). Matter of Dourdounas v City of New York, 2025 NY Slip Op 01671, CtApp 3-20-25

Practice Point: An employee who, after exhausting the grievance mechanism in a collective bargaining agreement, seeks court review of whether the employer and/or the union breached the collective bargaining agreement must bring a plenary action, not an Article 78 proceeding.

 

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TO SUFFICIENTLY ALLEGE THE APPLICABILITY OF THE FRAUD EXCEPTION TO THE FOUR-YEAR LOOKBACK FOR A “FRAUDULENT SCHEME TO INFLATE RENTS” ACTION, THE PLAINTIFF NEED NOT ALLEGE RELIANCE ON A FRAUDULENT REPRESENTATION; IT IS ENOUGH TO ALLEGE SUFFICIENT INDICIA OF FRAUD OR A COLORABLE CLAIM OF FRAUD (CT APP). ​

The Court of Appeals, reversing (modifying) the Appellate Division, in a full-fledged opinion by Judge Garcia, determined that to sufficiently allege the applicability of the fraud exception to the four-year statute of limitations (“lookback” period) in a “fraudulent scheme to inflate rents” action, a plaintiff need not allege satisfaction of each element of common-law fraud (including reliance), rather the plaintiff need only allege “sufficient indicia” of fraud:

… [T]he fraud exception serves a far different purpose than an allegation of common law fraud. The fraud exception, applicable only to an overcharge claim, simply allows for review of the rental history outside the four-year lookback period and then … “solely to ascertain whether fraud occurred—not to furnish evidence for calculation of the base date rent or permit recovery for years of overcharges barred by the statute of limitations” … . The exception operates to protect not only current tenants, who may or may not have relied on a fraudulent representation, but future tenants and the overall rent regulatory system. Requiring that a tenant show reliance on a landlord’s fraudulent representation would exempt an “unscrupulous landlord in collusion with a tenant” from the consequences of engaging in a scheme to evade the law’s protection … . Given the narrow purpose and scope of the fraud exception, there is no basis for imposing the pleading requirements of a common law fraud claim. Instead, we require plaintiffs to put forth “sufficient indicia of fraud” or a “colorable claim” of a fraudulent scheme but do not impose a burden to establish each element of a common law fraud claim.

… [T]o invoke the fraud exception, a plaintiff must allege sufficient indicia of fraud, or a colorable claim of a fraudulent scheme to evade the protections of the rent stabilization laws, to withstand a motion to dismiss on statute of limitations grounds. Such allegations must include more than an assertion that a tenant was overcharged—a mere allegation of a high rent increase is insufficient for the fraud exception to apply … We address only the reliance issue here. On remittal the Appellate Division should apply our established standard—assessing whether plaintiffs’ complaint alleges sufficient indicia of fraud or a colorable claim of a fraudulent scheme “to remove tenants’ apartment from the protections of rent stabilization” … . Burrows v 75-25 153rd St., LLC, 2025 NY Slip Op 01669, CtApp 3-20-25

Practice Point: Consult this opinion for insight into what the complaint must allege to invoke the fraud exception to the four-year lookback period for a “fraudulent scheme to inflate rents” action.

 

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