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Motion to Amend Pleadings to Conform to the Proof Was Properly Granted by the Trial Court—Although the Counterclaim Was Not Pled, the Subject of the Counterclaim Was Central to the Trial—Amendment Did Not Prejudice the Plaintiffs

The Court of Appeals, in a full-fledged opinion by Judge Rivera, determined the Appellate Division abused its discretion when it reversed Supreme Court’s grant of a motion to amend the pleadings to conform to the proof. Although not pled as a counterclaim, whether the defendant was entitled to payments under a settlement agreement, and whether the settlement agreement extinguished defendant’s liability under promissory notes held by the plaintiffs, were central to the lawsuit and were the subject of judicial admissions.  Therefore amending the pleadings to conform to the proof did not result in prejudice to the plaintiffs:

 This Court has in the past recognized that, absent prejudice, courts are free to permit amendment even after trial… . Prejudice is more than “the mere exposure of the [party] to greater liability” … . Rather, “there must be some indication that the [party] has been hindered in the preparation of [the party’s] case or has been prevented from taking some measure in support of [its] position” (id.). The burden of establishing prejudice is on the party opposing the amendment … .

Applications to amend pleadings are within the sound discretion of the court, and that of the Appellate Division … . Courts are given “considerable latitude in exercising their discretion, which may be upset by us only for abuse as a matter of law” … . Nevertheless, we have found such an abuse of discretion where the Appellate Division reversed a trial court’s grant of an amendment and the record established that the opposing party suffered “no operative prejudice” as a result of the mere omission to plead a defense … . Kimso Apts LLC v Gandhi, 2014 NY Slip OP 08219, CtApp 11-25-14

 

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Class Action Mechanism Is Available Where the Relevant Statute Imposes a Non-Mandatory Penalty and the Penalty Is Waived by the Class

The Court of Appeals, in a full-fledged opinion by Judge Lippman, over a dissent, determined that class action suits brought by tenants pursuant to CPLR 901 (b) were properly allowed to go forward.  The suits alleged the tenants, who were in rent-stabilized apartments, were overcharged when the landlords decontrolled the apartments despite their receipt of tax benefits under the J-51 program.  The Court of Appeals, in 2009, determined that the receipt of J-51 tax benefits precluded the landlords from decontrolling the apartments.  The central issue was the availability of the class action mechanism, which is generally not available where the suit seeks the imposition of a penalty.  Here the treble damages (penalty) provision of the Rent Stabilization Law (RSL 26-516) was waived by the plaintiffs. The waiver was deemed valid, clearing the way for the class actions:

CPLR 901 (b) prohibits any claim for penalties to be brought as a class action. It states, “[u]nless a statute creating or imposing a penalty, or a minimum measure of recovery specifically authorizes the recovery thereof in a class action, an action to recover a penalty, or minimum measure of recovery created or imposed by statute may not be maintained as a class action” (CPLR 901 [b]). The language of CPLR 901 (b) itself says it is not dispositive that a statute imposes a penalty so long as the action brought pursuant to that statute does not seek to recover the penalty. * * *

From a policy standpoint, permitting plaintiffs to bring these claims as a class accomplishes the purpose of CPLR 901 (b). Preemptively responding to the argument raised by defendants here, the State Consumer Protection Board emphasized the importance of class actions: “The class action device responds to the problem of inadequate information as well as to the need for economies of scale” for “. . . a person contemplating illegal action will not be able to rely on the fact that most people will be unaware of their rights — if even one typical person files a class action, the suit will go forward and the other members of the class will be notified of the action either during the proceedings or after a judgment is rendered in their favor” (Mem of State Consumer Protection Bd, Bill Jacket, L 1975, ch 207).

Where a statute imposes a non-mandatory penalty, plaintiffs may waive the penalty in order to bring the claim as a class action … . Borden 400 E 55th St Assoc LP, 2014 NY Slip Op 08211, CtApp 11-24-14

 

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Failure to Apply for Zoning Variance Re: Sale of Adult Materials Rendered Plaintiff’s Free-Speech Challenge to the Code Speculative, i.e., Not Ripe for Review

The Third Department determined that plaintiff’s free-speech-violation claims re: the city’s failure to specify a zone for the sale of adult material were not ripe for review.  Plaintiff did not inform the city of his intent to sell adult material and did not use the procedures in place to obtain a zoning variance allowing the sale of adult material:

We shall not address plaintiff’s assertion that the failure of the Code of the City of Troy to specify a zone where adult materials may be sold violates plaintiff’s free speech rights under both the US and NY Constitutions, as this issue is not ripe for our review. According to the City’s Assistant Plans Examiner, if a particular use was not set forth in the list of allowed uses or special permit uses enumerated in the Code, as was the case with adult establishments, a use variance could be obtained by seeking approval from the appropriate zoning board. Because [plaintiff’s principal] did not disclose the extent of plaintiff’s sale of adult material in applying for a certificate of occupancy, and therefore did not follow the process set out in the Code to apply for a use variance, any harm that plaintiff may have suffered pursuant to such Code was speculative and contingent upon the City’s anticipated rejection of plaintiff’s proposal. Under these circumstances, plaintiff’s challenge to the constitutionality of the Code is not ripe for review … . Your Place LLC v City of Troy, 2014 NY Slip Op 08098, 3rd Dept 11-20-14

 

Passive Website Informing Readers of a Surgical Procedure Offered In Florida Does Not Constitute “Transaction of Business” In New York—New York Courts Do Not Have Personal Jurisdiction Over the Florida Defendants

The Court of Appeals, in a full-fledged opinion by Judge Rivera, determined that a passive website explaining the availability of back surgery in Florida is not enough to afford New York courts long-arm jurisdiction (pursuant to CPLR 302—doing business in New York) over Laser Spine Institute (LSI) which subsequently treated the New York plaintiff in Florida:

In May 2008, plaintiff was suffering from severe back pain. While on the homepage of a well-known internet service provider plaintiff discovered an advertisement for LSI, a surgical facility specializing in spine surgery, with its home facility and principal place of business in Tampa, Florida. Plaintiff clicked on the LSI advertisement, and viewed a 5-minute video presentation of a testimonial from a former LSI patient and professional golfer, extolling LSI’s medical services. The advertisement appeared to hold out the promise of relief for plaintiff’s back problems so he communicated with LSI by telephone and internet to inquire about possible surgical procedures to alleviate his pain. These would be the first of plaintiff’s several contacts with LSI, which led to his eventual decision to undergo surgical procedures by LSI medical professionals in Florida. Those surgeries are the underlying basis for plaintiff’s action against defendants. * * *

In order to satisfy “‘the overriding criterion’ necessary to establish a transaction of business” within the meaning of CPLR 302 (a) (1), a non-domiciliary must commit an act by which it “purposefully avails itself of the privilege of conducting activities within [New York]” … . Plaintiff here admits that he was the party who sought out and initiated contact with defendants after viewing LSI’s website. According to plaintiff, that website informed viewers about LSI medical services and its professional staff. However, he has not asserted that it permitted direct interaction for online registration, or that it allowed for online purchase of LSI services … . Passive websites, such as the LSI website, which merely impart information without permitting a business transaction, are generally insufficient to establish personal jurisdiction … . Paterno v Laser Spine Inst, 2014 NY Slip Op 08054, CtApp 11-20-14

 

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Complaint Based Upon Injury Caused by a Horse Which Had Gotten Loose After Defendant Rode the Horse to a Tavern Could Be Amended to Plead Negligence of the Horse’s Owner as Well as Strict Liability/Vicious Propensities in the Alternative

The Third Department determined plaintiff should be allowed to amend the complaint to include a negligence cause of action against the owner of a horse (Whiskey) which injured plaintiff.  The two theories, negligence and strict liability, can be pled in the alternative. The defendant rode the horse to a tavern.  While the defendant was in the tavern, the horse broke loose.  Plaintiff helped get control of the horse and was injured when he was holding the reigns.  The Third Department noted the 2013 Court of Appeals decision (Hastings) which held that a lawsuit based upon injury caused by a cow which had escaped the farm could be based upon the negligence of the owner in allowing the cow to escape, and not upon strict liability for the vicious propensities of the cow.  Here, both the negligence of the owner and vicious propensity/strict liability issues are raised by the facts:

Defendant apparently disputes plaintiff’s claim that Whiskey’s conduct constituted a vicious propensity–as opposed to normal equine behavior–upon which strict liability can be based. If defendant were successful in establishing the absence of a vicious propensity, this would lead to the very outcome of which the Court of Appeals disapproved in Hastings — defendant would be immunized for Whiskey’s behavior despite having been allegedly negligent in allowing the horse to roam from where it was being kept [FN3]. Inasmuch as we cannot predict how a jury will decide the question of whether Whiskey’s actions constituted a vicious propensity, we discern no reason why the two theories could not be pleaded in the alternative. Thus, if Whiskey’s actions were determined to constitute a vicious propensity, plaintiff would be limited to pursuing a claim based on strict liability … . If, however, a jury determined that Whiskey’s conduct did not constitute a vicious propensity, the jury could then decide whether defendant is liable based upon his alleged negligence in allowing the horse to stray from where it was kept… . Carey v Burton P Schwab, 2014 NY Slip Op 08096, 3rd Dept 11-20-14

 

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Defendant Cannot Meet Its Burden In a Summary Judgment Motion Solely by Pointing to Proof Problems in the Plaintiff’s Case/Court, Pursuant to Its Power to Search the Record in Determining a Summary Judgment Motion, Cannot Address Claims that Were Not the Subject of the Motion

In a private nuisance action, the Third Department noted that a defendant cannot prevail on a summary judgment motion solely by arguing gaps or proof problems in the plaintiff’s case and the court cannot “search the record” to dismiss claims that were not the subject of the summary judgment motion:

In support of their motions for summary judgment, defendants did nothing more than argue that plaintiffs failed to plead — and ultimately will be unable to prove — compensable damages and, therefore, dismissal of plaintiffs’ first and second causes of action sounding in private nuisance and trespass was warranted. Even assuming, without deciding, that defendants’ assessment of plaintiffs’ pleadings and examination before trial testimony is accurate, the case law makes clear that the moving party must affirmatively demonstrate its entitlement to summary judgment “and does not meet its burden [in this regard merely] by noting gaps in its opponent’s proof” … . * * *

…Although CPLR 3212 (b) — cited by Supreme Court here — indeed permits a court to search the record and grant summary judgment to a nonmoving party, Supreme Court’s authority in this regard extends “only . . . to a cause of action or issue that is the subject of the motions before the court” … . Stated another way, “[a] motion for summary judgment addressed to one claim or defense does not provide a basis for the court to search the record to grant summary judgment on an unrelated claim or defense” … . Schillaci v Sarris, 2014 NY Slip Op 08072, 3rd Dept 11-20-14

 

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Heightened Pleading Requirements for Fraud Not Met

The First Department determined that plaintiff’s fraud cause of action was properly dismissed for failure to meet the heightened pleading requirements:

Plaintiff has not satisfied the heightened pleading standard for a fraud claim under CPLR § 3016(b) because it failed to identify any of the allegedly, false representations that [defendant] made with the then present intent to induce plaintiff’s investment in the project. Moreover, the fraudulent inducement claim duplicates the breach of contract claim because plaintiff has not alleged any representation that is collateral to the contract … . “A fraud-based claim is duplicative of breach of a contract claim when the only fraud alleged is that the defendant was not sincere when it promised to perform under the contract.” MMCT LLC v JTR Coll Point LLC, 2014 NY Slip Op 08103, 1st Dept 11-20-14

 

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In a Lead-Paint-Injury Case, Non-party Medical Records Not Discoverable (Re: Plaintiff’s Mother and Siblings)–Non-party Academic Records Should Be Submitted for In Camera Review–Mother Cannot Be Compelled to Submit to an IQ Test

The Third Department determined the extent of allowable discovery re: non-parties in a lead-paint-injury case.  The defense sought medical and academic records of plaintiff’s mother and siblings, all non-parties, and sought to compel the mother to undergo an IQ test.  The Third Department held that the non-party medical records were not discoverable (except for the mother’s records during pregnancy), the non-party academic records should be submitted to the court for in camera review, and the mother should not be compelled to undergo an IQ test:

A subdivision of the main disclosure statute provides that “[u]pon objection by a person entitled to assert the privilege, privileged matter shall not be obtainable” (CPLR 3101 [b]). Medical records are protected by a doctor-patient privilege and cannot be disclosed without consent or a waiver of the privilege (see CPLR 4504 [a]…). A plaintiff waives the privilege by commencing an action that places his or her mental or physical condition at issue, but nonparties are not subject to having their medical histories made public merely because a relative commences an action … . As plaintiff’s mother and siblings did not consent and have not waived that privilege, Supreme Court should not have ordered disclosure of their medical records … . An exception exists for the mother’s medical records during the time of her pregnancy with and birth of plaintiff, but plaintiff has already provided an authorization for those records … .

Regarding the mother’s and siblings’ academic records, defendants have submitted an expert affidavit, as noted above, indicating that those records are relevant and necessary to determine whether other factors caused plaintiff’s injuries … . Considering that these records are private but not privileged, Supreme Court reasonably balanced defendants’ need for them and their possible relevance against the burden to these nonparties from disclosure, requiring that the siblings’ records be produced to the court for an in camera review … . The mother’s academic records should similarly be submitted to the court for review and redaction of any privileged material. …

Defendants’ need for her IQ test results, however, are not outweighed by the burden on her to undergo such a test, as well as the potential for extending this litigation by focusing on information extraneous to plaintiff’s condition, such as all of the factors contributing to the mother’s IQ … . Considering the private and personal nature of the information sought and the potential delay due to myriad collateral issues, defendants should not be able to compel plaintiff’s mother, a nonparty, to undergo an IQ test … . Perez v Fleischer, 2014 NY Slip Op 008101, 3rd Dept 11-20-14

 

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Failure to File Proof of Service Is a Procedural Irregularity Which Can Be Cured

The Second Department reversed Supreme Court, finding that plaintiff’s failure to file proof of service of a complaint was a procedural irregularity which had been promptly cured.  The defendant (Hernandez), who was in default, was given 30 days to appear and answer:

The failure to file proof of service is a procedural irregularity, not a jurisdictional defect, that may be cured by motion or sua sponte by the court in its discretion pursuant to CPLR 2004 … . Here, in light of the plaintiff’s prompt action in moving to correct the irregularity following the denial of his motion for leave to enter a default judgment and the lack of prejudice to Hernandez, the Supreme Court improvidently exercised its discretion in denying that branch of the plaintiff’s motion which was to deem the filing of proof of service on Hernandez timely nunc pro tunc … . However, contrary to the plaintiff’s contention, a court may not grant such relief retroactive to Hernandez’s prejudice by placing him in default as of a date prior to the order … . In other words, service will not be deemed complete …, as the plaintiff argues (see CPLR 308[4]). Rather, Hernandez must be afforded an additional 30 days after service upon him of a copy of this decision and order to appear and answer … . Khan v Hernandez, 2014 NY Slip Op 07985, 2nd Dept 11-19-14

 

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Filing of Article 78 Petition Itself Constituted a Demand that Respondent Perform Its Duty, the Triggering Event for the Four-Month Statute of Limitations in a Mandamus to Compel Proceeding/Supreme Court and Surrogate’s Court Have Concurrent Jurisdiction Over the Administration of an Estate

The Second Department noted that Supreme Court and Surrogate’s Court have concurrent jurisdiction over the administration of a decedent’s estate. The petitioner commenced the Article 78 proceeding to compel the NYC Employees’ Retirement System (NYCERS) to accept a designation of a beneficiary form.  Surrogate’s Court had declined to exercise jurisdiction over the proceeding. The Second Department explained that the filing of the petition itself triggered the four-month statute of limitations for mandamus, so the proceeding was timely:

In a proceeding in the nature of mandamus to compel, the four-month statute of limitations begins to run “after the respondent’s refusal, upon the demand of the petitioner . . . to perform its duty” (CPLR 217[1]…). The filing of a CPLR article 78 petition can itself be construed as a demand … . Here, the petitioner made her demand that NYCERS perform its duty to accept her late husband’s fully completed and notarized designation of beneficiary form by filing the petition in this proceeding … . Accordingly, the petition is not time-barred … . Matter of Gopaul v NYC Employees’ Retirement Sys, 2014 NY Slip Op 0802-0, 2nd Dept 11-19-14

 

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