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Supreme Court Should Not Have Ordered a Unified (Liability and Damages) Trial–Criteria Explained in Some Depth

The Second Department determined Supreme Court should not have granted plaintiff’s motion for a unified trial on liability and damages because the plaintiff had not demonstrated that the nature of his injuries had an important bearing on the issue of liability. Plaintiff, who was driving a golf cart,  was injured when he allegedly swerved to avoid defendant’s on-coming golf cart.  The court explained the relevant analytical criteria in some depth:

“In furtherance of convenience or to avoid prejudice [a] court . . . may order a separate trial of any claim, or of any separate issue” (CPLR 603). Furthermore, “[a] court may determine the sequence in which the issues shall be tried and otherwise regulate the conduct of the trial in order to achieve a speedy and unprejudiced disposition of the matters at issue” (CPLR 4011). These statutory provisions simply confirm that “the broad common-law powers of New York judges over conduct in their own courtrooms have been continued and have not been eliminated or impinged upon by any of the explicit CPLR provisions.”… .

“Judges are encouraged to order a bifurcated trial of the issues of liability and damages in any action for personal injury where it appears that bifurcation may assist in a clarification or simplification of issues and a fair and more expeditious resolution of the action” (22 NYCRR 202.42[a]…). “As a general rule, questions of liability and damages in a negligence action represent distinct and severable issues which should be tried and determined separately” … .

“The decision whether to conduct a bifurcated trial rests within the discretion of the trial court, and should not be disturbed absent an improvident exercise of discretion” (…see CPLR 603, 4011). Unified trials should only be held “where the nature of the injuries has an important bearing on the issue of liability” … . However, even where a trial is bifurcated, some evidence of injuries may nevertheless be admitted, in the trial court’s discretion, to establish liability at the liability phase of the trial, so long as such evidence is probative of liability and accompanied by “an appropriate limiting instruction” … .

Accordingly, when exercising its discretion in deciding whether to conduct a unified trial or a bifurcated trial, a court should determine whether the nature of the alleged injuries is probative of the issue of liability and, furthermore, should also evaluate the relative importance of such evidence to the parties’ dispute … . In addition, the probative value of such evidence to the issue of liability and its centrality to the parties’ dispute should be weighed against the degree to which the gravity of such injuries will likely engender sympathy for the plaintiff and thereby pose a risk of prejudice to the defendant … . Patino v County of Nassau, 2015 NY Slip Op 00509, 2nd Dept 1-21-15

 

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Twenty-Day Time-Limit for Making an Application to Stay Arbitration Starts When the Notice or Demand for Arbitration Is Received, Not When It Is Mailed/An Application for a Stay of Arbitration Is “Made” When It Is Filed/Appellate Court May Consider a Purely Legal Issue Raised for the First Time on Appeal

The First Department determined the twenty-day time-limit for an application to stay arbitration, when the notice or demand for arbitration is sent by mail, runs from the date the notice or demand is actually received.  The court further noted that it can rule on a purely legal question raised for the first time on appeal:

Even though CPLR 7503(c) says, “An application to stay arbitration must be made by the party served [with a notice or demand for arbitration] within twenty days after service upon him of the notice or demand” (emphasis added), case law establishes that, when the notice or demand is mailed — as it was in the case at bar — “[t]he notice to arbitrate does not start the time to respond until receipt”… . * * *

The issue of whether an application to stay arbitration is “made” (CPLR 7503[c]) when the petition is filed, as opposed to when it is served, is a purely legal one; hence, it “may properly be considered by this Court for the first time on appeal” … . In fact, an application is made when the petition is filed … . Matter of Travelers Prop Cas Co of Am v Archibald, 2015 NY Slip Op 00465, 1st Dept 1-20-15

 

Failure to Strictly Comply with the Service Instructions in the Court’s Order to Show Cause (Which Included Service by E-Mail and Text Message) Required Dismissal of the Petitions

The Third Department determined the failure to comply with the service instructions in Family Court’s order to show cause required the dismissal of the petitions:

Strict compliance with court-directed methods of service is necessary in order for the court to obtain personal jurisdiction over a respondent/defendant … . Here, petitioner’s counsel drafted and presented Family Court with a proposed order directing service pursuant to CPLR 308 (5). Specifically, the order required that the amended orders to show cause and petitions be served on two attorneys who had represented respondent in unrelated litigation and, further, that substituted service be completed as follows:

“2. By serving [respondent] at [two known] email addresses [and] by including with such emails copies of the [p]etitions, this [o]rder, and the [o]rders to show cause filed by [p]etitioner in support of the [p]etitions, in PDF format, each of such emails to be sent on or before April 28, 2014; and

3. By sending [respondent] an SMS/text message at [a known] subscriber number . . . advising her of the pendency of the two above-captioned proceedings and advising her to access her email addresses as set forth in paragraph 2 herein, to review this [o]rder and the contents of the attached PDF files and to contact her attorneys . . . for copies of the [o]rders to show cause and [p]etitions upon whom these papers have been served on her behalf, said text to be sent on or before April 28, 2014.”

Despite the fact that petitioner’s counsel created the terms upon which substituted service of process would be deemed sufficient, the record demonstrates that petitioner’s compliance with such terms was lacking. As to the email requirement, petitioner’s affidavit of service states that respondent was served on April 28, 2014 via two separate email addresses, as per Family Court’s order, and that both emails were returned as undeliverable. While neither dictates of due process nor Family Court’s order required proof that respondent actually received notice of the proceedings … , we observe that the affidavit of email service fails to state that the documents were, in fact, delivered to respondent in a PDF format.

Of greater concern, however, is the manner in which petitioner conducted service by text message. As to that particular mode of delivery, petitioner’s process server averred that, on April 28, 2014, he sent respondent a text message stating that “[p]aternity and custody petitions have been filed by [petitioner] regarding [the child]. Your court date in [Family Court] is May 21, 2014 at 9AM. Your failure to appear may result in a custody order and default. Contact [respondent’s attorneys] for copies of these documents.” Having neglected to state in the text message, as expressly required in Family Court’s order, that respondent should access her email accounts to review the documents that had been served in a PDF format by email and that the text message was being sent by virtue of Family Court’s order, we agree with Family Court’s determination that such substituted service was insufficient to confer personal jurisdiction over respondent … . Matter of Keith X v Kristin Y, 2015 NY Slip Op 00429, 3rd Dept 1-15-15

 

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Father’s Recording of Defendant’s Berating and Threatening Father’s Child Admissible Under the “Vicarious Consent” Theory (Father Vicariously Consented, on Behalf of the Child, to the Recording)/Variance Between Jury Instruction and Charges in the Indictment Was Harmless Error–No Possibility Defendant Was Convicted of a Theory Not Encompassed by the Indictment

The Second Department applied a “vicarious consent” theory to reject the defendant’s argument that the father’s recording of the defendant berating and threatening the father’s child violated the eavesdropping statutes, Penal Law 250.05 and CPLR 4506. Father had called mother’s cell phone which mother answered without speaking. Father could hear the defendant speaking to the child over the phone and recorded the defendant’s words.  In addition to the “vicarious consent” discussion, he Second Department noted that a variance between the jury instructions and the charges in the indictment was harmless error because there was no possibility the guilty verdict was based upon a theory not in the indictment.  With respect to the “vicarious consent” to the recording, the court wrote:

While … Penal Law § 250.05 serves the strong public policy goal of protecting citizens from eavesdropping, we are not persuaded that the New York Legislature intended to subject parents to criminal penalties when, “out of concern for the bests interests of their minor child, they record that child’s conversations” … . Given the similarity between the federal wiretap statute and New York’s eavesdropping statute, and recognizing that the “vicarious consent” exemption is rooted on a parent’s need to act in the best interests of his or her child …, we deem it appropriate to adopt it as an exemption to Penal Law § 250.05.

Here, the People sufficiently demonstrated that the father had a “good faith, objectively reasonable basis to believe” that it was necessary for the welfare of the infant to record the conversation …, such that he could consent to the recording on the infant’s behalf … . Accordingly, the “vicarious consent” exemption applies, and admission of the subject recording was not barred by CPLR 4506. People v Badalamenti, 2015 NY Slip Op 00384, 2nd Dept 1-14-15

 

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Supreme Court Properly Denied a Motion to Approve a Settlement of a Proposed Non-Opt-Out Class Action—Shareholders Who Objected to the Settlement Were Entitled to Opt Out to Preserve Their Damages Claims

The Second Department, over an extensive dissent, determined Supreme Court had properly denied defendant’s motion, made jointly with the plaintiff, to approve a settlement of a proposed non-opt-out class action.  The majority concluded that shareholders who objected to the settlement were entitled to “opt out” to preserve their damages claims, as the Court of Appeals held in Matter of Colt Indus Shareholder Litig, 77 NY2d 185.  The Second Department explained the facts of the case as follows:

The instant appeal arises from a merger between the defendant On2 Technologies, Inc. (hereinafter On2), a publicly held Delaware corporation that developed video compression technology, and Google, Inc. (hereinafter Google), the global technology conglomerate specializing in Internet-related services. On August 4, 2009, On2 entered into a merger agreement with Google and Oxide, Inc., a subsidiary of Google, pursuant to which Google agreed to acquire each share of On2 common stock in exchange for 60 cents worth of Google Class A common stock. At that time, the proposed transaction was valued at approximately $106.5 million.

On August 7, 2009, the plaintiff, on behalf of himself and other similarly situated shareholders of On2, commenced the instant action, alleging that On2’s board of directors breached its fiduciary duties to the shareholders by, inter alia, failing to ensure that the shareholders would receive maximum value for their shares. Among other things, the plaintiff sought certification of a class to prosecute the matter as a class action, a declaration that the merger agreement was unlawful and unenforceable, rescission of the merger agreement, and injunctive relief. In August 2009, other shareholders of On2 (hereinafter collectively the Delaware plaintiffs) commenced similar actions in the Delaware Court of Chancery.

On February 22, 2010, the parties to this action, as well as the Delaware plaintiffs, proposed a settlement, pursuant to which they agreed that “solely for the purpose of effectuating the [s]ettlement,” the instant action “may be maintained . . . as a non-opt out class action.” The settlement provided, inter alia, for dismissal of the New York and Delaware actions in their entirety, with prejudice, and a release of “any and all” merger-related claims. The proposed settlement class encompassed “all persons and entities who held shares of the common stock of On2 . . . at any time between August 4, 2009 and February 19, 2010.”

Upon notice of the proposed settlement to all record holders of On2 common stock, 226 of those shareholders filed objections to the proposed settlement. The objectors contested the proposed settlement, claiming that it contained “an astonishingly broad” release that would “unlawfully restrict” and “unduly burden” the rights of shareholders to pursue their own individual claims for damages. Following a fairness hearing, the Supreme Court denied approval of the settlement because it did not afford nonresident class members the opportunity to opt out of the settlement in order to preserve their right to assert claims for damages. We affirm.  Jinnaras v Alfant, 2015 NY Slip Op 00335, 2nd Dept 1-14-15

 

Abuse of Discretion to Grant Motion for Leave to Amend Answer On the Eve of Trial

The Second Department determined Supreme Court should not have granted defendant’s motion for leave to amend his answer, which was made long after the action had been certified for trial:

While leave to amend a pleading shall be freely granted (see CPLR 3025[b]), a motion for leave to amend is committed to the broad discretion of the court … . “In exercising its discretion, the court should consider how long the party seeking the amendment was aware of the facts upon which the motion was predicated [and] whether a reasonable excuse for the delay was offered” … . Generally, in the absence of prejudice or surprise to the opposing party, leave to amend pleadings should be freely granted unless the proposed amendment is palpably insufficient or patently devoid of merit … .

“However, where the application for leave to amend is made long after the action has been certified for trial, judicial discretion in allowing such amendments should be discrete, circumspect, prudent, and cautious'” … . “Moreover, when . . . leave is sought on the eve of trial, judicial discretion should be exercised sparingly” … . Yong Soon Oh v Hua Jin, 2015 NY Slip Op 00362, 2nd Dept 1-14-15

 

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Constructive Trust Causes of Action Should Not Have Been Dismissed on the Merits, Criteria Explained (Some Constructive Trust Causes of Action Were Properly Dismissed as Time-Barred, However)/Procedure Re: Motion to Dismiss for Failure to State a Cause of Action Described/Application of Statute of Limitations to Constructive Trusts Explained/”Dead Man’s” Statute Not Applicable to Certain Evidence, at Least at this Stage of the Proceedings

The Fourth Department determined causes of action alleging the existence of constructive trusts on behalf of petitioners re: real property and stock owned by decedent should not have been dismissed on the merits.  (However, in a second related appeal addressed in the same decision, the Fourth Department determined the real-property constructive trust actions were time-barred). Re: the company stock, respondent, the executor, alleged he was the sole owner but could not support the allegation with documentary evidence. Petitioners alleged the stock should be distributed as one of the assets of decedent’s estate.  The Fourth Department held that the petitioners had stated a valid constructive-trust cause of action. The court discussed in some depth the consideration of evidence submitted re: a motion to dismiss pursuant to CPLR 3211(a)(7), the nature of a constructive trust, the inapplicability of the “dead-man’s” statute (CPLR 4519) to certain evidence, and the application of the six-year statute of limitations to constructive trusts.  With respect to the nature of constructive trusts, the court wrote:

We agree with petitioners that the petition sufficiently states a cause of action for a constructive trust with respect to the NGR property, the Manitou Road property and NYSFC stock. “On a motion to dismiss pursuant to CPLR 3211, the pleading is to be afforded a liberal construction . . . We accept the facts as alleged in the [petition] as true, accord [the petitioners] the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory . . . In assessing a motion under CPLR 3211 (a) (7), . . . a court may freely consider affidavits submitted by the [petitioner] to remedy any defects in the [petition] . . . and the criterion is whether the proponent of the pleading has a cause of action, not whether he has stated one’ ” … .

“[I]t is well settled that [a] constructive trust may be imposed when property has been acquired in such circumstances that the holder of the legal title may not in good conscience retain the beneficial interest . . . In order to invoke the court’s equity powers, [a petitioner] must show a confidential or fiduciary relationship, a promise, a transfer in reliance thereon, a breach of the promise, and [the respondent’s] unjust enrichment . . . Inasmuch as a constructive trust is an equitable remedy, however, courts do not rigidly apply the elements but use them as flexible guidelines . . . In this flexible spirit, the promise need not be express, but may be implied based on the circumstances of the relationship and the nature of the transaction” … .

The facts as alleged in the petition and set forth in the corresponding affidavits establish the existence of a confidential and fiduciary relationship between respondent and decedents. The facts with respect to the NGR and Manitou Road properties establish that respondent promised to pay decedents for the NGR property and to reconvey the Manitou Road property to decedents after it was subdivided by respondent. The petition further alleges that the properties were transferred to respondent as a result of those promises, and that respondent breached those promises and was thereby unjustly enriched.

With respect to the NYSFC stock, the petition and corresponding affidavits allege that Anthony believed, until the day that he died, that he still owned the company and that respondent had made promises to “allow all of [decedents’] children to share in NYSFC.” While the allegations of an express promise are lacking, “[e]ven without an express promise, . . . courts of equity have imposed a constructive trust upon property transferred in reliance upon a confidential relationship. In such a situation, a promise may be implied or inferred from the very transaction itself. As Judge Cardozo so eloquently observed: Though a promise in words was lacking, the whole transaction, it might be found, was “instinct with an obligation” imperfectly expressed’ ” (Sharp, 40 NY2d at 122). Based on the circumstances of the relationship between respondent and decedents and the nature of their multiple transactions, we conclude that there are sufficient facts from which we can conclude that there was an implied promise made by respondent to decedents; that the transfer of stock, if indeed there was a transfer, was made in reliance upon that promise; and that the promise was thereafter broken, resulting in an unjust enrichment to respondent. Matter of Thomas, 2015 NY Slip Op 00017, 4th Dept 1-2-15

 

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Seizure of Claimant’s Computers Pursuant to a Warrant Did Not Give Rise to Conversion, Negligent Misrepresentation and Constitutional Tort Causes of Action—Elements of Those Causes of Action Explained

The Fourth Department reversed the Court of Claims and dismissed causes of action for conversion and negligent misrepresentation stemming from the seizure of claimant’s computers pursuant to a judicial warrant.  The court noted that the seizure pursuant to the authority of the warrant precluded the conversion cause of action and the absence of privity between the claimant and the investigators who said the computers would be promptly returned precluded the negligent representation cause of action. Alternate ways to seek return of the computers (an application to County Court and an Article 78 proceeding if the application were denied) precluded the constitutional tort cause of action:

An actionable “conversion takes place when someone, intentionally and without authority, assumes or exercises control over personal property belonging to someone else, interfering with that person’s right of possession” … . Here, a search warrant specifically authorized law enforcement to “search for and seize” six categories of items, including “[a]ll computers and computer storage media and related peripherals, electronic or computer data.” Claimants have never challenged the validity of the search warrant. Moreover, the unchallenged warrant placed no time limit on the retention of the items seized, and the authorization to “seize” the computers was not terminated until County Court ordered the property returned following Boerman’s guilty plea. We therefore conclude that defendant’s exercise of control over the computers did not constitute conversion inasmuch as it had the proper authority to exercise such control … .

The tort of “negligent misrepresentation requires [a claimant] to demonstrate (1) the existence of a special or privity-like relationship imposing a duty on the defendant to impart correct information to the plaintiff; (2) that the information was incorrect; and (3) reasonable reliance on the information’ ” … . We agree with defendant that, as a matter of law, there can be no “privity-like relationship” between an investigator and the target of his or her investigation … . Indeed, the relationship between investigator and target is the opposite of a “special position of confidence and trust” in which one party might justifiably rely upon the ” unique or specialized expertise’ ” of the other party … . Thus, as defendant correctly contends, the negligent misrepresentation claim fails as a matter of law … .

Even assuming, arguendo, that the initial seizure or continued detention of claimants’ computers violated the Search and Seizure Clause of the State Constitution (art I, § 12), we conclude that “no . . . claim [for constitutional tort] will lie where the claimant has an adequate remedy in an alternate forum” … . Here, claimants could have raised their constitutional arguments in an application to County Court seeking the return of their computers … or, if such motion were denied, in a CPLR article 78 proceeding seeking relief in the nature of mandamus or prohibition … . LM Bis Assoc Inc v State of New York, 2015 NY Slip Op 00007, 4th Dept 1-2-15

 

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Jury Verdict Finding Defendant’s Negligence Was Not the Proximate Cause of the Accident Should Not Have Been Set Aside—Criteria for Setting Aside a Verdict As Against the Weight of the Evidence Explained

The Fourth Department determined the trial court should not have set aside a verdict on the ground that it was against the weight of the evidence.  Plaintiff, a pedestrian, had been struck by a car driven by defendant.  The jury concluded the driver was negligent but the driver’s negligence was not the proximate cause of the accident:

“A verdict rendered in favor of a defendant may be successfully challenged as against the weight of the evidence only when the evidence so preponderated in favor of the plaintiff that it could not have been reached on any fair interpretation of the evidence” … . “A jury finding that a party was negligent but that such negligence 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’ ” … . Where, however, “a verdict can be reconciled with a reasonable view of the evidence, the successful party is entitled to the presumption that the jury adopted that view” … .

Here, the jury could have reasonably found from the evidence that plaintiff was not crossing the street in the crosswalk; that it was a dark, rainy evening; and that plaintiff emerged in defendant’s lane of travel from between stopped vehicles. The jury could also reasonably have found that, although defendant was negligent in, for example, the manner in which she approached the intersection before turning left, such negligence was not a proximate cause of the collision with plaintiff after she made the turn. Thus, “the finding of proximate cause did not inevitably flow from the finding of culpable conduct,” and the verdict therefore is not against the weight of the evidence … . Amorosi v Hubbard, 2015 NY Slip Op 00110, 4th Dept 1-2-15

 

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Defendant’s Motion to Vacate a Default Judgment of Divorce Should Have Been Granted Even Though Defendant First Appeared and Then Withdrew

The Fourth Department defendant’s motion to vacate a default judgment of divorce should have been granted, even though the defendant had appeared in the action and then withdrew.  The court noted that a default judgment cannot be appealed and the only remedy is therefore a motion to vacate:

We reject plaintiff’s contention that defendant could not move to vacate the judgment based on excusable default pursuant to CPLR 5015 (a) (1) because he appeared and then withdrew his appearance on the record. Regardless of the fact that defendant appeared initially, the judgment was entered upon defendant’s default. Defendant therefore could not appeal from the judgment of divorce (see CPLR 5511) and, indeed, his only remedy was to move to vacate the judgment of divorce pursuant to CPLR 5015 (a) (1) … .

We conclude that defendant demonstrated both a reasonable excuse for the default and a meritorious defense …, and that he is entitled to vacatur of those parts of the judgment of divorce distributing the parties’ assets …, the only parts of the judgment challenged by defendant on appeal … . Defendant averred that he informed his attorney that he disagreed with the proposed resolution of the parties’ retirement accounts and did not want to finalize the judgment on those terms, but that he was subsequently unable to contact his attorney, and a default judgment of divorce was entered without his knowledge. Furthermore, the judgment of divorce failed to resolve the outstanding issues regarding distribution of the retirement accounts, the home equity loan, and defendant’s enhanced earning capacity, which issues the parties expressly acknowledged remained to be resolved and were dependent upon, at least in part, the forthcoming report. Marshall v Marshall, 2015 NY Slip Op 00059, 4th Dept 1-2-15