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Reports by Attorneys Which Relate to an Insurer’s Decision to Accept or Reject a Claim Are Discoverable—Reports by Attorneys Made After the Claim Is Rejected Are Not Discoverable

The Fourth Department determined the records generated by attorneys which related to an insurer’s decision whether to accept or reject a claim were discoverable as records made in the regular course of business—even if the records relate in part to potential litigation.  Records generated by attorneys after the claim was denied are privileged and not discoverable:

“It is well settled that [t]he payment or rejection of claims is a part of the regular business of an insurance company. Consequently, reports which aid it in the process of deciding which of the two indicated actions to pursue are made in the regular course of its business’ ” … . “Reports prepared by . . . attorneys before the decision is made to pay or reject a claim are thus not privileged and are discoverable . . . , even when those reports are mixed/multi-purpose’ reports, motivated in part by the potential for litigation with the insured” … . Here, the documents submitted to the court for in camera review constitute multi-purpose reports motivated in part by the potential for litigation with plaintiff, but also prepared in the regular course of defendant’s business in deciding whether to pay or reject plaintiff’s claim, and thus plaintiff is entitled to disclosure of those documents.  Lalka v Aca Ins. Co., 2015 NY Slip Op 03995, 4th Dept 5-8-15

 

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Attorney-in-Fact Used His Power to Create a Gift (by Deed) to Himself and/or Third Parties—Deed Declared Null and Void

The Fourth Department determined the deed purporting to transfer a life estate to the attorney-in-fact was null and void. Essentially, the attorney-in-fact used his power to make a gift to himself and/or third parties, which created an unrebutted presumption of impropriety:

It is well settled that “[a] power of attorney . . . is clearly given with the intent that the attorney-in-fact will utilize that power for the benefit of the principal” … . “The relationship of an attorney-in-fact to his principal is that of agent and principal . . . and, thus, the attorney-in-fact must act in the utmost good faith and undivided loyalty toward the principal, and must act in accordance with the highest principles of morality, fidelity, loyalty and fair dealing’ . . . Consistent with this duty, an agent may not make a gift to himself or a third party of the money or property which is the subject of the agency relationship” … . “In the event such a gift is made, there is created a presumption of impropriety [that can] be rebutted [only] with a clear showing that the principal intended to make the gift” …, or that the gift was in the principal’s best interest … . Borders v Borders, 2015 NY Slip Op 04022, 4th Dept 5-8-15

 

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Court Can Not Use Its Contempt Power to Compel the District Attorney to Prosecute a Criminal Matter

The District Attorney did not wish to proceed with disorderly conduct prosecutions against persons who demonstrated in support of the Occupy Movement. The City Court judge handling the cases, however, ordered the district attorney to appear at a scheduled suppression hearing, threatening to exercise the court’s contempt powers if the district attorney did not appear. The district attorney appeared but informed the judge no witnesses would be called. When the judge persisted, again threatening to use the contempt powers, the district attorney brought an Article 78 proceeding seeking a writ of prohibition.  The writ was granted and the Court of Appeals affirmed.  Under the doctrine of separation of powers, only the district attorney can decide whether to prosecute.  The courts can not compel the prosecution of criminal actions:

“Prohibition is available to restrain an inferior court or Judge from exceeding its or his [or her] powers in a proceeding over which the court has jurisdiction” … . To demonstrate a clear legal right to the extraordinary writ of prohibition, a petitioner is required to show that the challenged action was “in reality so serious an excess of power incontrovertibly justifying and requiring summary correction” … .

“The concept of the separation of powers is the bedrock of the system of government adopted by this State in establishing three coordinate and coequal branches of government, each charged with performing particular functions” … . Under the doctrine of separation of powers, courts lack the authority to compel the prosecution of criminal actions … . Such a right is solely within the broad authority and discretion of the district attorney’s executive power to conduct all phases of criminal prosecution (see County Law § 700 [1]… ).

The courts below correctly determined that a trial court cannot order the People to call witnesses at a suppression hearing or enforce such a directive through its contempt powers. Any attempt by the Judge here to compel prosecution through the use of his contempt power exceeded his jurisdictional authority. It is within the sole discretion of each district attorney’s executive power to orchestrate the prosecution of those who violate the criminal laws of this State … . Matter of Soares v Carter, 2015 NY Slip Op 03879, CtApp 5-7-15

 

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Whether Plaintiff “Justifiably Relied” on Alleged Misrepresentations Is Not Generally a Question Which Can Be Resolved in a Motion to Dismiss for Failure to State a Cause of Action

Reversing the appellate division, over two-judge dissent, the Court of Appeals determined (in the context of a motion to dismiss for failure to state a cause of action) plaintiff had sufficiently pled “justifiable reliance” on the representations at issue. The complaint alleged defendant (Goldman Sachs) “fraudulently induced plaintiff to provide financial guaranty for a synthetic collateralized debt obligation (CDO), known as ABACUS. In its complaint, plaintiff alleges that defendant fraudulently concealed the fact that its hedge fund client …, which selected most of the portfolio investment securities in ABACUS, planned to take a “short” position in ABACUS, thereby intentionally exposing plaintiff to substantial liability; had plaintiff known this information, it would not have agreed to the guaranty.” The complaint further alleged defendant affirmatively misrepresented the role of the hedge fund in answer to plaintiff's questions. Those allegations were sufficient to survive a motion to dismiss:

To plead a claim for fraud in the inducement or fraudulent concealment, plaintiff must allege facts to support the claim that it justifiably relied on the alleged misrepresentations. It is well established that “if the facts represented are not matters peculiarly within the [defendant's] knowledge, and [the plaintiff] has the means available to [it] of knowing, by the exercise of ordinary intelligence, the truth or the real quality of the subject of the representation, [the plaintiff] must make use of those means, or [it] will not be heard to complain that [it] was induced to enter into the transaction by misrepresentations” … . Moreover, “[w]hen the party to whom a misrepresentation is made has hints of its falsity, a heightened degree of diligence is required of it. It cannot reasonably rely on such representations without making additional inquiry to determine their accuracy” … . Nevertheless, the question of what constitutes reasonable reliance is not generally a question to be resolved as a matter of law on a motion to dismiss … .  ACA Fin. Guar. Corp. v Goldman, Sachs & Co., 2015 NY Slip Op 03876, CtApp 5-7-15

 

Plaintiff Cannot Be the Only Link between the Defendant and the Forum/Defendant’s “Minimum Contacts” with New York Not Demonstrated

The Second Department determined New York courts did not have subject matter jurisdiction in an action against a Texas physician who had treated plaintiff’s late mother when she resided in Texas and Florida.  The court explained the relevant analysis:

Where a motion is made to dismiss an action for lack of personal jurisdiction, it is the plaintiff who bears the ultimate burden of proving a basis for such jurisdiction … . A plaintiff relying on CPLR 302(a)(3)(ii) “must show that (1) the defendant committed a tortious act outside New York; (2) the cause of action arose from that act; (3) the tortious act caused an injury to a person or property in New York; (4) the defendant expected or should reasonably have expected the act to have consequences in New York; and (5) the defendant derived substantial revenue from interstate or international commerce” … . Once those elements are met, an assessment must then be made as to whether a finding of personal jurisdiction satisfies due process … .

Here, the plaintiff failed to establish that the defendant’s alleged tortious act — prescribing medication in Texas to the plaintiff’s mother while she was in Texas and in Florida — caused injury in New York … . Moreover, under the circumstances, the plaintiff failed to establish that the defendant expected or should reasonably have expected the act to have consequences in New York, or that the defendant “derive[d] substantial revenue from interstate . . . commerce” (CPLR 302[a][3][ii]). In addition, the plaintiff failed to establish that the defendant had the requisite “minimum contacts” with New York such that the prospect of defending a suit here comported with “traditional notions of fair play and substantial justice,” as required by the Federal Due Process Clause … .

On February 25, 2014, the Supreme Court of the United States rendered a decision refining the “minimum contacts” analysis set forth in International Shoe Co. (see Walden v Fiore, _____ US _____, 134 S Ct 1115). The Supreme Court determined that a “plaintiff cannot be the only link between the defendant and the forum. Rather, it is the defendant’s conduct that must form the necessary connection with the forum State that is the basis for its jurisdiction over him” (id. at 1122). Moreover, the Supreme Court held that, “[d]ue process requires that a defendant be haled into court in a forum State based on his own affiliation with the State, not based on the random, fortuitous, or attenuated’ contacts he makes by interacting with other persons affiliated with the State” … . Waggaman v Arauzo, 2014 NY Slip Op 03259, 2nd Dept 5-7-14

 

Doctrine of Judicial Estoppel Precluded Plaintiff from Taking a Position Contrary to the Position Plaintiff Took In Two Prior Successful Actions

The Third Department determined the position taken by plaintiff in prior successful actions, i.e., that defendant was the owner of certain lots, precluded plaintiff, under the doctrine of judicial estoppel, from taking the position defendant was not the owner of those lots in the instant proceeding:

Under the doctrine of judicial estoppel, or estoppel against inconsistent positions, “if a party assumes a position in one legal proceeding and prevails in maintaining that position, that party will not be permitted to assume a contrary position in another proceeding simply because the party’s interests have changed” … . “The doctrine rests upon the principle that a litigant should not be permitted . . . to lead a court to find a fact one way and then contend in another judicial proceeding that the same fact should be found otherwise” …. . Green Harbour Homeowners Assn., Inc. v Ermiger, 2015 NY Slip Op 03899, 3rd Dept 5-7-15

 

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Courts Do Not Have Subject Matter Jurisdiction Over Disputes Requiring Inquiry Into Religious Doctrine

The Second Department determined a dispute among religious parties could not be determined in the courts because it would involve an impermissible inquiry into religious doctrine or practice:

“The First Amendment forbids civil courts from interfering in or determining religious disputes, because there is substantial danger that the state will become entangled in essentially religious controversies or intervene on behalf of groups espousing particular doctrines or beliefs. Civil disputes involving religious parties or institutions may be adjudicated without offending the First Amendment as long as neutral principles of law are the basis for their resolution” … . Here, the claims asserted by the plaintiff are nonjusticiable, as they cannot be resolved based on neutral principles of law. Rather, resolution of the issues raised would necessarily involve an impermissible inquiry into religious doctrine or practice … . Rodzianko v Parish of the Russion Orthodox Holy Virgin Protection Church Inc, 2014 NY Slip Op 03249, 2nd Dept 5-7-14

 

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Most of Plaintiff’s Causes of Action Were Allegations Concerning the Conduct of a State Employee in His Official Capacity—Therefore, Those Causes of Action Were Actually Against the State and Could Only Be Heard in the Court of Claims/Elements of Intentional Infliction of Emotional Distress Explained

The Second Department upheld the dismissal of several causes of action (brought in Supreme Court) which were determined to constitute actions against the state because they were directed at the official conduct of an individual employed by the state. Actions against the state can be heard only in the Court of Claims. The suit was brought by a doctor employed by the SUNY Downstate Medical Center and alleged breach of contract, wrongful termination of employment, promissory estoppel, defamation and intentional infliction of emotional distress.  The Second Department concluded that only defamation should survive because that cause of action was against plaintiff’s boss, Dr. Abulafia, in his individual, not official, capacity.  The intentional infliction of emotional distress cause of action, which was also against Dr. Abulafia in his individual capacity, was dismissed because it was not sufficiently alleged:

“The Court of Claims has limited jurisdiction to hear actions against the State itself, or actions naming State agencies or officials as defendants, where the action is, in reality, one against the State—i.e., where the State is the real party in interest” … . Generally, “[t]he Court of Claims has exclusive jurisdiction over actions for money damages against State agencies, departments, and employees acting in their official capacity in the exercise of governmental functions” … . “Where, however, the suit against the State agent or officer is in tort for damages arising from the breach of a duty owed individually by such agent or officer directly to the injured party, the State is not the real party in interest—even though it could be held secondarily liable for the tortious acts under respondeat superior” … .

Contrary to the plaintiff’s contention, the Supreme Court properly granted those branches of the defendants’ motion which were to dismiss the causes of action to recover damages for breach of contract, wrongful termination of employment, and promissory estoppel insofar as asserted against Abulafia, correctly concluding that it lacked subject matter jurisdiction to entertain those cases of action insofar as asserted against Abulafia, as those causes of action arose from acts performed, and determinations made, by Abulafia as a State employee acting in his official capacity… . * * *

“In order to state a cause of action to recover damages for intentional infliction of emotional distress, the complaint must allege conduct that was so outrageous in character, and so extreme in degree, as to go beyond all possible bounds of decency . . . and [was] utterly intolerable in a civilized community'” … . Even accepting as true the allegations in the complaint regarding Abulafia’s conduct, and according the plaintiff the benefit of every possible favorable inference …, Abulafia’s conduct was not “so outrageous in character, and so extreme in degree” as to qualify as intentional infliction of emotional distress … .  Borawski v Abulafia, 2014 NY Slip Op 03221, 2nd Dept 5-7-14

 

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Motion to Dismiss In Which Documentary Evidence Was Submitted—Court’s Role Is to Determine Whether Plaintiff Has a Cause of Action, Not Whether Plaintiff Has Stated a Cause of Action—Although the Complaint Alleged Interference With a Competitive Bidding Process Involving Public Entities, the Case Fit an Exception to the Rule that Competitive Bidding Issues Be Determined in an Article 78 Proceeding—It Was Alleged a Private Party (Defendant) Interfered with the Competitive Bidding Process

Reversing Supreme Court, the Third Department determined plaintiff had adequately pled a cause of action for tortious interference with contract. The plaintiff alleged that defendant subverted a bidding process for the installation of artificial turf at state and local schools. Usually competitive bidding cases are brought in an Article 78 proceeding against the relevant public entity. This case fit an exception to that rule because it was brought against a private party working with the public entities. There was also some question whether the proceeding was a motion to dismiss for failure to state a cause of action or a motion for summary judgment.  Because documentary evidence was submitted, the court’s role was to determine whether the plaintiff has a cause of action, not whether plaintiff has stated one:

…[S]ince the motion (made shortly after serving the answer and before disclosure) argued an absence of any legal viability of the alleged causes of action, Supreme Court did not err in treating the motion as a narrowly framed post-answer CPLR 3211 (a) (7) ground asserted in a summary judgment motion … . When dismissal is sought for failure to state a cause of action and, as here, plaintiff submits affidavits, “a court may freely consider [those] affidavits . . . and ‘the criterion is whether the proponent of the pleading has a cause of action, not whether he [or she] has stated one'” … .

Turning to the merits of the motion, “the laws requiring competitive bidding were designed to benefit taxpayers rather than corporate bidders and, thus, should be construed and administered with sole reference to the public interest” … . Therefore, the remedy for an alleged violation of the competitive bidding statutes typically involves a timely CPLR article 78 proceeding challenging the bidding process … . However, a narrow exception to the limited remedy may exist where a plaintiff does not seek relief from the public entity, but brings an action against someone working on behalf of the public entity in the competitive bidding process who allegedly engaged in egregious conduct unknown to the public entity aimed at intentionally subverting a fair process … . Allegations of restricting competition to artificial turf manufactured by A-Turf could be part of a cognizable claim under the narrow exception … . Chenango Contr., Inc. v Hughes Assoc., 2015 NY Slip Op 03903, 3rd Dept 5-7-15

 

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Jury’s Finding that the Defendant Was Negligent but that the Negligence Was Not the Proximate Cause of the Accident Was Against the Weight of the Evidence—Motion to Set Aside the Verdict Should Have Been Granted—New Trial Ordered

The Third Department determined Supreme Court should have granted plaintiff’s motion to set aside the verdict.  Plaintiff was injured when her bicycle struck a recessed manhole cover.  Defendant construction company had placed barrels in the roadway to create a pedestrian walkway.  The placement of barrels served to direct users of the walkway toward the recessed manhole. The jury found the placement of the barrels negligent but further found that negligence was not the proximate cause of the accident.  The verdict was against the weight of the evidence because the only reason the placement of the barrels would be deemed negligent is that the barrels diverted traffic toward the recessed manhole:

“A jury’s finding that a party was at fault but that [such] fault was not a proximate cause of the accident is inconsistent and against the weight of the evidence only when the issues are so inextricably interwoven as to make it logically impossible to find negligence without also finding proximate cause” … . Further, we view the evidence in the light most favorable to the nonmoving party, defendant, and afford deference to the jury’s credibility determinations … . A “plaintiff’s own conduct may be a superceding cause which severs the causal connection between [the] defendant’s negligence and the injury [when] a plaintiff’s negligence [is] more than mere contributory negligence, which would be relevant in apportioning culpable conduct” … .

* * * The only theory presented at trial as to why such placement was negligent, as indicated in the jury instructions, was that it diverted traffic toward a dangerous recessed manhole cover. Given that the uncontested evidence was that plaintiff was diverted in just such a manner, no fair interpretation of the evidence “would support the conclusion that [plaintiff’s] conduct was so extraordinary or unforeseeable as to make it unreasonable to hold defendant[] responsible for the resulting damages” … . Therefore, Supreme Court erred in denying plaintiff’s motion to set aside the verdict. Durrans v Harrison & Burrowes Bridge Constructors, Inc., 2015 NY Slip Op 03896, 3rd Dept 5-7-15

 

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