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Because the Landlord Engaged in Fraud, the Four-Year Rent-Overcharge Statute of Limitations Runs Back Four Years from When the Rent Overcharge Action Was Brought/Criteria for Collateral Estoppel Explained (Not Met Here)/Question of Fact Re: Piercing Corporate Veil

The Court of Appeals, in a full-fledged opinion by Judge Read, over a dissent, determined that the four-year statute of limitations in rent-overcharge actions, where the landlord engaged in fraud, does not begin to run when the first overcharge payment is made, but rather extends back four years from when the overcharge action is brought.  Here there was evidence the landlord used a fictitious tenant and rent to justify the rent charged the tenants.  The landlord argued the tenants’ action was time-barred because it was brought more than four years after the first overcharge payment was made. In addition to the statute-of-limitations ruling, the Court of Appeals held the collateral estoppel doctrine was not correctly applied by the courts below and there was a question of fact whether the corporate veil should be pierced due to the principal’s control over the corporate-landlord and the principal’s fraudulent acts:

Julie Conason (Conason) and Geoffrey Bryant (Bryant) (collectively, tenants) are the rent-stabilized tenants of an apartment in a residential building in Manhattan. Megan Holding LLC (Megan) is the building’s owner and tenants’ landlord. … Conason asserted an overcharge claim against Megan in April 2009, almost five and one-half years after she occupied the apartment under a vacancy lease. The principal issue on this appeal is whether CPLR 213-a’s four-year statute of limitations completely bars this claim. Because of the unrefuted proof of fraud in the record, we conclude that section 213-a merely limits tenants’ recovery to those overcharges occurring during the four-year period immediately preceding Conason’s rent challenge, and that the lawful rent on the base date must be determined by using the default formula devised by the New York State Division of Housing and Community Renewal (DHCR or the agency) … . * * *

CPLR 213-a fixes a four-year statute of limitations for claims of residential rent overcharge; specifically, this provision states that

“[a]n action on a residential rent overcharge shall be commenced within four years of the first overcharge alleged and no determination of an overcharge and no award or calculation of an award of the amount of any overcharge may be based upon an overcharge having occurred more than four years before the action is commenced. This section shall preclude examination of the rental history of the housing accommodation prior to the four-year period immediately preceding the commencement of the action” (emphasis added) (CPLR 213-a; see also Rent Stabilization Law [Administrative Code of City of NY] § 26-516 [a] [2]; Rent Stabilization Code [9 NYCRR 2520.6 [f]; 2526.1 [a] [2]). * * *

Collateral estoppel comes into play when four conditions are fulfilled:

“(1) the issues in both proceedings are identical, (2) the issue in the prior proceeding was actually litigated and decided, (3) there was a full and fair opportunity to litigate in the prior proceeding, and (4) the issue previously litigated was necessary to support a valid and final judgment on the merits” … . … . …

Civil Court’s findings of fraud are not entitled to preclusive effect because two of the four prerequisites for collateral estoppel are unmet: the issues in Civil Court (breach of the warranty of habitability) and Supreme Court (evidence of fraud sufficient to render the rent on the base date unreliable) are not identical (the first condition), and findings of fraud were not necessary to support the judgment entered on the April 8th order, which awarded tenants rent abatement on account of Megan’s breach of the warranty of habitability and directed Megan to remedy code violations (the fourth condition). Conason v Megan Holding LLC, 2015 NY Slip Op 01553, CtApp 2-24-15

 

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Findings in a Sanctions Proceeding Against an Attorney Should Not Have Been Given Collateral Estoppel Effect in an Attorney-Disciplinary Proceeding

The Court of Appeals reversed the Appellate Division finding that sanctions imposed upon an attorney, stemming from the attorney’s representation of a client in a civil matter, should not have been given collateral estoppel effect in an attorney-disciplinary proceeding:

This case is distinguishable from Matter of Levy (37 NY2d 279, 281 [1975]), where we determined that it was neither unreasonable nor unfair to impose collateral estoppel in a disciplinary proceeding after the attorney had been convicted of a criminal offense. There, we held that the attorney would not be permitted to relitigate the issue of guilt after he was convicted following a criminal trial, at “which rigorous safeguards were imposed to insure against an unjust conviction” … .

By contrast, the determination here was made on papers — without cross-examination or the opportunity to call witnesses. … While the issue of whether [the attorney] had made false statements in her written declaration concerning her prior knowledge of [an annuity] agreement may have been relevant, it was certainly not the focus of the hearing … . The cursory nature of the sanctions proceeding itself failed to provide a full and fair opportunity to litigate the issue. Matter of Dunn, 2015 NY Slip Op 01556, CtApp 2-24-15

 

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Some of the Requirements for the Application of Attorney Work-Product and Trial-Preparation Privileges Explained

The Second Department explained some of the requirements for the application of attorney work-product and trial-preparation privileges:

Attorney work product under CPLR 3101(c), which is subject to an absolute privilege, is generally limited to materials prepared by an attorney, while acting as an attorney, which contain his or her legal analysis, conclusions, theory, or strategy … . “[T]he mere fact that a narrative witness statement is transcribed by an attorney is not sufficient to render the statement work product'” … . Contrary to the plaintiff’s contention, she did not meet her burden of establishing that the audio recording of an interview she conducted with the defendant Nicoletta Starks prior to the commencement of the instant action constituted attorney work product. Among other things, the plaintiff failed to show that the recording contained elements of opinion, analysis, theory, or strategy … .

The plaintiff argues, in the alternative, that the recording constitutes trial preparation material, which is subject to a conditional privilege under CPLR 3101(d)(2). However, the conclusory assertions set forth in her supporting affidavit are insufficient to meet her burden of establishing, with specificity, that the recording was prepared “exclusively in anticipation of litigation” … . Geffner v Mercy Med Ctr, 2015 NY Slip Op 01411, 2nd Dept 2-18-15

 

Criteria for Determining Motions to Dismiss Affirmative Defenses Explained

The Second Department explained the analytical criteria for determining motions to dismiss affirmative defenses:

Pursuant to CPLR 3211(b), “[a] party may move for judgment dismissing one or more defenses, on the ground that a defense is not stated or has no merit” (CPLR 3211[b]). When moving to dismiss an affirmative defense, the plaintiff bears the burden of demonstrating that the affirmative defense is “without merit as a matter of law” … . “In reviewing a motion to dismiss an affirmative defense, the court must liberally construe the pleadings in favor of the party asserting the defense and give that party the benefit of every reasonable inference” … . Bank of NY v Penalver, 2015 NY Slip Op 01407, 2nd Dept 2-18-15

 

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Criteria for Discovery in a Special Proceeding Explained/Criteria for Leave to File a Late Notice of Claim Explained

The Second Department determined petitioner’s application for leave to file a late notice of claim was properly denied, as was petitioner’s request for discovery prior to the hearing.  The court explained the relevant analytical criteria:

In a special proceeding, where disclosure is available only by leave of the court (see CPLR 408), the Supreme Court has broad discretion in granting or denying disclosure …, although it must balance the needs of the party seeking discovery against such opposing interests as expediency and confidentiality … . Contrary to the petitioners’ contention, they failed to demonstrate that the requested discovery was necessary and that providing the requested discovery would not unduly delay this proceeding … .

In determining whether to permit service of a late notice of claim, the court must consider all relevant facts and circumstances, including whether (1) the public corporation acquired actual knowledge of the essential facts constituting the claim within 90 days of the incident or a reasonable time thereafter, (2) the petitioner had a reasonable excuse for the delay, and (3) the public corporation was prejudiced by the delay in its ability to maintain its defense on the merits (see Education Law § 3813[2-a]; General Municipal Law § 50-e[5]…). The injured petitioner’s assertion that she did not immediately appreciate the nature and severity of her injuries during the first 90 days after the subject incident is unavailing without supporting medical evidence explaining why the possible permanent effects of the injuries took so long to become apparent and to be diagnosed … . * * *

In addition, the petitioners failed to establish that the respondent acquired actual knowledge of the essential facts constituting the claim within 90 days after the claim arose or within a reasonable time thereafter … . * * *

Finally, the petitioners failed to establish that the respondent would not be substantially prejudiced in its defense on the merits by the significant delay should leave be granted … . Matter of Bramble v New York City Dept of Education, 2015 NY Slip Op 01450, 2nd Dept 2-18-15

 

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Criteria for Vacation of a Stipulation of Settlement Not Met

In finding that the motion to vacate a stipulated settlement was properly denied, the Second Department explained the relevant analytical criteria:

“Settlements entered into in open court are binding and are not lightly cast aside” … . A stipulation is an independent contract which is subject to basic principles of contract law … . “Only where there is cause sufficient to invalidate a contract, such as fraud, collusion, mistake or accident, will a party be relieved from the consequences of a stipulation made during litigation” … . Mortgage Elec Registration Sys Inc v Kontarinis, 2015 NY Slip Op 01430, 2nd Dept 2-18-15

 

Further Proceedings Are Stayed When Counsel’s Motion to Withdraw Is Granted

The First Department noted that when plaintiff’s counsel’s motion for leave to withdraw was granted, further proceedings against plaintiff were stayed pursuant to CPLR 321 (c):

When the court granted plaintiff’s counsel’s motion for leave to withdraw, further proceedings against plaintiff were stayed, by operation of CPLR 321(c), until 30 days after notice to appoint another attorney had been served upon her … . While the stay was in effect, the court had no power to decide defendant’s motion for summary judgment dismissing the complaint. Fan v Sabin, 2015 NY Slip Op 01400, 1st Dept 2-17-15

 

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Plaintiff Placed Her Mental Condition In Controversy—Defendant Entitled to Have Her Examined by a Psychiatrist

The First Department, in the context of an action for retaliatory discharge, sexual harassment and intentional infliction of emotional distress, determined plaintiff had placed her mental condition in controversy and defendant was entitled to have plaintiff examined by a psychiatrist.  Plaintiff had alleged “extreme mental and physical anguish,” “severe anxiety,” eczema, hair pulling, depression and suicidal feelings:

Under these circumstances, the court providently exercised its discretion in determining that defendant had demonstrated that plaintiff had placed her mental condition “in controversy” by alleging unusually severe emotional distress, so that a mental examination by a psychiatrist is warranted to enable defendant to rebut her emotional distress claims (CPLR 3121[a]…). Although plaintiff asserts that an examination would be unduly intrusive into private matters, she did not propose conditions or seek a protective order limiting the scope or extent of the examination … . Clark v Allen & Overy LLP, 2015 NY Slip Op 01398, 1st Dept 2-17-15

 

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Motion for a Change of Venue Can Be Entertained in “Dangerous Sex Offender” Trials and Hearings Under the Mental Hygiene Law/Non-Final Order Which Necessarily Affects the Final Order Is Appealable

The Court of Appeals, in a full-fledged opinion by Judge Lippman, determined that “dangerous sex offender” trials and hearings under the Mental Hygiene Law are subject to the change of venue procedures under the CPLR.  Here, after the motion for a change of venue was denied, the petitioner refused to attend the hearing.  The Court of Appeals noted that the denial of the motion to change venue, although a non-final order, was appealable because it necessarily affected the final order:

Mental Hygiene Law § 10.08 (e) provides that “[a]t any hearing or trial pursuant to the provisions of this article, the court may change the venue of the trial to any county for good cause, which may include considerations relating to the convenience of the parties or witnesses or the condition of the respondent.”  * * * The construction of the provision is somewhat ambiguous, in that, if the legislature intended to restrict a change of venue to article 10 trials, the reference to “any hearing or trial” would appear to be superfluous. We see no need to read a restriction into the statute limiting annual review hearings solely to the few counties where secure treatment facilities are located.

However, petitioner failed to establish good cause for the change of venue. As noted above, the statute provides that good cause “may include considerations relating to the convenience of the parties or witnesses or the condition of the respondent” (Mental Hygiene Law § 10.08 [e]). The affidavit submitted in support of the motion did urge, generally, that it would be inconvenient and burdensome for unnamed family members and other potential witnesses to travel to Oneida County, but failed to identify a single witness that would testify on petitioner’s behalf. Nor did the affidavit set forth the subject of any proposed testimony — let alone identify any information that would be potentially relevant to the issue of whether petitioner remained a dangerous sex offender in need of confinement. Therefore, the motion for a change of venue was properly denied. Matter of Tyrone D v State of New York, 2015 NY Slip Op 01301, CtApp 2-13-15

 

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Four-Year Statute of Limitations Under Magnuson-Moss Warranty Act Started to Run When the Vehicle Was Delivered, I.E., When the Vehicle Was Leased===Three-Year Statute of Limitations for the General Business Law 349 Cause of Action Started to Run When the Vehicle Was Subsequently Purchased (After the Lease-Period)

Plaintiff leased a car (from BMW) for several years and then purchased it.  After the purchase plaintiff sought coverage for repairs under the Magnuson-Moss … Warranty Act (Warranty Act) and sought damages pursuant to General Business Law 349 (deceptive business practices).  The Second Department determined the Warranty Act cause of action accrued on the date the car was delivered (leased) and therefore was time-barred.  However, the General Business Law cause of action accrued when the car was purchased and was timely:

In moving to dismiss a cause of action as barred by the applicable statute of limitations, a defendant bears the initial burden of demonstrating, prima facie, that the time within which to commence the action has expired … . The burden then shifts to the plaintiff to raise a question of fact as to whether the statute of limitations was tolled or was otherwise inapplicable, or whether the action was actually commenced within the applicable limitations period … . To make a prima facie showing, the defendant must establish, inter alia, when the plaintiff’s cause of action accrued … .

Claims brought under the Warranty Act are covered by the four-year statute of limitations prescribed by UCC 2-725 … . That statute specifically defines the date of accrual to be “when the breach occurs, regardless of the aggrieved party’s lack of knowledge of the breach. A breach of warranty occurs when tender of delivery is made, except that where a warranty explicitly extends to future performance of the goods and discovery of the breach must await the time of such performance, the cause of action accrues when the breach is or should have been discovered” (UCC 2-725[2]).

Here, BMW met its prima facie burden by establishing that the plaintiff had four years from November 10, 2007, the date she accepted delivery of the vehicle, to commence the Warranty Act cause of action, but that this action was not commenced until November 22, 2011. … The “New Vehicle Limited Warranty” did not guarantee future performance but only promised to repair or replace defective parts for a specified period of time… . …

Actions pursuant to General Business Law § 349 must be commenced within three years of the date of accrual … , which first occurs when the plaintiff has been injured by a deceptive act or practice that is in violation of section 349 … . As this cause of action is predicated on the sale of the vehicle, which took place in October 2010, it was timely commenced on November 22, 2011, within the three-year statute of limitations … . Loiodice v BMW of N Am LLC, 2015 NY Slip Op 01244, 2nd Dept 2-11-15

 

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