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Procedure for Handling a Motion to Dismiss for Failure to State a Cause of Action When Documentary Evidence Is Submitted in Support of the Motion Explained—Attorney Discharged For Cause Is Not Entitled to “Quantum Meruit” Attorney’s Fees

In affirming the dismissal of plaintiff’s complaint, the Second Department explained the relevant analysis when documentary proof is submitted by a defendant in connection with a motion to dismiss for failure to state a cause of action pursunt to CPLR 3211(a)(7).  The action was brought by an attorney who had been discharged for cause by his clients prior to the settlement of a personal injury action:

In considering a motion to dismiss a complaint for failure to state a cause of action pursuant to CPLR 3211(a)(7), the court must accept the facts as alleged in the complaint as true, accord the plaintiff the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory … . Where, however, a defendant has submitted evidence in support of a motion to dismiss pursuant to CPLR 3211(a)(7), and the motion has not been converted into one for summary judgment, the criterion is whether the plaintiff has a cause of action, not whether he or she has stated one, and, “unless it has been shown that a material fact as claimed by the [plaintiff] to be one is not a fact at all and unless it can be said that no significant dispute exists regarding it, . . . dismissal should not eventuate” … . Dismissal pursuant to CPLR 3211(a)(7) is warranted if the evidentiary proof disproves an essential allegation of the complaint, even if the allegations of the complaint, standing alone, could withstand a motion to dismiss for failure to state a cause of action … . * * *

A client has the right to discharge his or her attorney at any time … . While an attorney who is discharged without cause before the completion of services may recover the reasonable value of his or her services in quantum meruit, an attorney who is discharged for cause is not entitled to any compensation or lien … . Here, the court held a hearing pursuant to 22 NYCRR 603.13(b) with respect to the plaintiff’s cross motion for attorney’s fees. The court determined that the plaintiff was properly discharged for cause, and, therefore, was not entitled to recover in quantum meruit. Siskin v Cassar, 2014 NY Slip Op 07646, 2nd Dept 11-12-14

 

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Motion to Dismiss Pursuant to CPLR 3211 (a)(1) [Documentary Evidence] Should Not Have Been Granted—Plaintiff Rebutted the Presumption of Validity of the Forum Selection Clause of the Relevant Contract

The Second Department determined Supreme Court should not have granted defendants’ motion to dismiss based upon the forum selection clause in the relevant contract.  Plaintiff rebutted the presumption of the validity of the clause:

A party seeking dismissal of a complaint under CPLR 3211(a)(1) must submit documentary evidence that ” conclusively establishes a defense to the asserted claims as a matter of law'” … . A contract provision may constitute documentary evidence under CPLR 3211(a)(1) …, and a forum selection clause contained in a contract may provide a proper basis for dismissal of a complaint under CPLR 3211(a)(1) … . A forum selection clause is “prima facie valid and enforceable unless it is shown by the challenging party to be unreasonable, unjust, in contravention of public policy, invalid due to fraud or overreaching, or it is shown that a trial in the selected forum would be so gravely difficult that the challenging party would, for all practical purposes, be deprived of its day in court” … . Accordingly, a forum selection clause will be given effect in the absence of a ” strong showing'” that it should be set aside … .

Here, the plaintiff has made the requisite strong showing that the forum selection clause in the nondisclosure agreement was “unreasonable.” Specifically, the plaintiff has contended, without contradiction, that neither the parties nor the agreement has any connection to the State of Delaware: none of the parties is located in Delaware, the nondisclosure agreement was not executed in Delaware, and performance of the agreement was not to take place in Delaware … . Accordingly, the prima facie enforceability and validity of the forum selection clause has been rebutted and, therefore, that clause does not “conclusively establish[ ] a defense to the asserted claims as a matter of law”… . US Mdse Inc v L & R Distribs Inc, 2014 NY Slip Op 07495, 2nd Dept 11-5-14

 

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Trial Court Properly Amended Pleadings Sua Sponte and Properly Allowed Plaintiff to Reopen the Case to Present Additional Evidence of Damages

The Second Department held that Supreme Court properly amended the pleadings sua sponte and properly allowed the plaintiff to reopen its case to present additional proof:

A court may amend pleadings before or after judgment to conform them to the evidence (see CPLR 3025[c]). Where no prejudice is shown, an amendment may be allowed during or even after trial … . Furthermore, an application for a continuance or adjournment is addressed to the sound discretion of the trial court, and the grant or denial thereof will be upheld on appellate review if the trial court providently exercised its discretion … . A trial court, in the exercise of discretion and for sufficient reasons, may allow a party to reopen his or her case, and supplement the evidence to cure any defects in the evidence that have inadvertently occurred … .

Here, under the circumstances of this case, the Supreme Court providently exercised its discretion in, sua sponte, amending the pleadings, continuing the trial, and permitting the plaintiff to reopen its case to present additional proof of damages … . MRI Enters Inc v Comprehensive Med Care of NY PC, 2014 NY Slip Op 07482, 2nd Dept 11-5-14

 

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Non-Party Attorneys Properly Held in Civil Contempt for Starting a Class Action Suit In Violation of Anti-Suit Injunctive Order

In a proceeding to liquidate the Executive Life Insurance Company of New York, non-party attorneys for objectors to the liquidation filed a class action lawsuit in federal court in violation of anti-suit injunctive orders issued by Supreme Court.  In affirming Supreme Court’s finding the non-party attorneys in contempt, the Second Department explained the criteria:

To prevail on a motion to punish for civil contempt, the movant must demonstrate that the alleged contemnor violated a clear and unequivocal court order, of which the alleged contemnor had knowledge, thereby prejudicing a right of a party to the litigation (see Judiciary Law § 753[A][3]…). “To satisfy the prejudice element, it is sufficient to allege and prove that the contemnor’s actions were calculated to or actually did defeat, impair, impede, or prejudice the rights or remedies of a party” … .

* * * The commencement of the class action violated the anti-suit injunctive provisions set forth in three court orders entered in this rehabilitation proceeding commenced pursuant to Insurance Law article 74, that was later converted into a liquidation proceeding … . An order of the court must be obeyed until that order is set aside, either by appeal or otherwise, where, as here, the court that issued the order had jurisdiction to issue it … . The petitioner also demonstrated that the commencement of the class action prejudiced its rights … . Matter of Executive Life Ins Co of NY, 2014 NY Slip Op 07506, 2nd Dept 11-5-14

 

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Dismissal of a Criminal Charge In the Interest of Justice Can Constitute a “Termination In Favor of the Accused” In the Context of a Malicious Prosecution Cause of Action

In affirming Supreme Court’s finding the actions time-barred, the Second Department explained when the one-year statute of limitations starts to run in false arrest (release from confinement), false imprisonment (release from confinement), and intentional infliction of emotional distress (date of arrest) causes of action.  Supreme Court had also dismissed the malicious prosecution cause of action on the ground that the “interest of justice” dismissal of the accusatory instrument in the underlying criminal case was not a favorable termination of the criminal action.  The Second Department disagreed, reinstated that cause of action and described the relevant analysis:

Here, the Supreme Court concluded that the underlying criminal proceeding, in which the accusatory instrument was dismissed in the interest of justice … , was not terminated in the plaintiff’s favor. This conclusion is incorrect. “[A]ny termination of a criminal prosecution, such that the criminal charges may not be brought again, qualifies as a favorable termination, so long as the circumstances surrounding the termination are not inconsistent with the innocence of the accused” … .

In Cantalino [96 NY2d 391], the Court of Appeals considered whether the dismissal of a criminal proceeding in the interest of justice was a ” favorable termination'” for purposes of a malicious prosecution action … . The Court explained that there was no “per se rule that a dismissal in the interest of justice can never constitute a favorable termination” … . Rather, the Court set forth a “case-specific rule,” whereby the courts are to determine whether, “under the circumstances of each case, the disposition was inconsistent with the innocence of the accused” … . In the case before it, the Court of Appeals concluded that the interest-of-justice dismissal constituted a favorable termination, citing the Criminal Court’s indication that it was dismissing the charges because they were unfounded … . It contrasted the case before it with a prior case, Ward v Silverberg (85 NY2d 993), in which it had found that an interest-of-justice dismissal was not a favorable termination of the criminal proceeding. The Court explained that, in Ward, unlike in Cantalino, the Criminal Court had “recognized that [the] plaintiff had committed the charged conduct, [but] it did not believe a criminal sanction was appropriate” … . Thus, “the criminal charges in Ward were dismissed out of mercy” … . A dismissal out of mercy “is fundamentally inconsistent with the accused’s innocence” … .

In the present case, the criminal charges against the plaintiff were not dismissed out of mercy. Rather, they were dismissed based upon “the weakness of the proof of guilt” … , a conclusion which is not inconsistent with the plaintiff’s innocence … . Bellissimo v Mitchell, 2014 NY 07464, 2nd Dept 11-5-14

 

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City Was “United in Interest” with Non-Profit Corporation Which Maintained Central Park Pursuant to a Contract with the City—Therefore Plaintiff, Who Was Allegedly Injured by a Truck Owned by the Non-Profit Corporation, Could Amend His Complaint to Include the Non-Profit Corporation After the Statute of Limitations Had Run—However the Extent to Which the City Was “United in Interest” Was Dictated by the Terms of the Contract

The First Department determined that the Conservancy, a non-profit corporation which maintains Central Park under a contract with the City of New York, was “united in interest” with the City.  Therefore, plaintiff, who allegedly had been injured by a maintenance truck owned by the Conservancy, could amend his complaint to include the Conservancy, even though the statute of limitations had run.  The ‘unity of interest” was defined by the terms of the contract.  Because the contract did not call for the City to indemnify the Conservancy for gross negligence, the complaint against the Conservancy could not include the gross negligence claim:

… [P]laintiff relied on the 2006 Central Park Agreement, a contract between the City and the Conservancy, a nonprofit organization, in which they acknowledged that they had formed an effective “public/private partnership.” Under the Agreement, the Conservancy is required to provide specified maintenance services in Central Park to the “reasonable satisfaction” of the City, and the City is broadly required to indemnify the Conservancy “from and against any and all liabilities . . . arising from all services performed and activities conducted by [the Conservancy] pursuant to this agreement in Central Park.” The City’s indemnification obligation, among other things, expressly excludes claims arising from gross negligence or intentional acts of the Conservancy or its agents or volunteers. As a result of the Agreement, the Conservancy acts, in effect, as an independent contractor fulfilling the City’s nondelegable obligation to maintain the City parks in reasonably safe condition … .

The City is vicariously liable for the Conservancy’s negligence in the course of providing maintenance in Central Park by virtue of the contractual indemnification provision, and the parties are thus united in interest … . Further, since the City has a nondelegable duty to maintain Central Park, it is vicariously liable for negligence committed by the contractor in the course of fulfilling that duty … . However, the City is correct that its interests are not united with those of the Conservancy with respect to the proposed gross negligence claim, and leave to assert that claim against the Conservancy is therefore denied. Brunero v City of New York Dept of Parks & Recreation, 2014 NY Slip Op 07444, 1st Dept 10-30-14

 

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How to Handle a Motion to Dismiss for Failure to State a Claim When Documentary Evidence Is Considered Explained/Dismissal of Foreclosure Action Based on Lack of Standing Is Not a Dismissal on the Merits/Striking of a Foreclosure Complaint for Failure to Comply with a Discovery Order Is Not a Dismissal on the Merits

The Second Department determined plaintiff did not have a cause of action to discharge his mortgage.  The court explained how a motion to dismiss pursuant to CPLR 3211(a)(7) for failure to state a claim is handled when documentary evidence is submitted and considered on the motion.  [With respect to the plaintiff’s allegations that the defendant could not institute new foreclosure proceedings against him, the court noted that the dismissal of a foreclosure complaint premised on a lack of standing is not a dismissal on the merits for res judicata purposes, and the striking of a complaint for noncompliance with a discovery order is also not a dismissal on the merits:]

On a motion to dismiss pursuant to CPLR 3211(a)(7) for failure to state a cause of action, the court must accept the facts alleged in the complaint as true, accord the plaintiff the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory … . Where, as here, evidentiary material is submitted and considered on a motion pursuant to CPLR 3211(a)(7), and the motion is not converted into one for summary judgment, the question becomes whether the plaintiff has a cause of action, not whether the plaintiff has stated one, and unless it has been shown that a material fact claimed by the plaintiff to be one is not a fact at all, and unless it can be said that no significant dispute exists regarding it, dismissal should not eventuate … . Caliguri v JPMorgan Chase Bank NA, 2014 NY Slip Op 07319, 2nd Dept 10-29-14

 

Language In Bill of Particulars Was Necessary to Support Claim for Punitive Damages—Language Should Not Have Been Struck as “Scandalous or Prejudicial”

The Second Department reversed Supreme Court’s order that plaintiff remove language from the bill of particulars which Supreme Court deemed “scandalous or prejudicial:”

… Counsel … made an oral application, in effect, pursuant to CPLR 3024, to strike certain language from the plaintiff’s bill of particulars. … The court … directed the plaintiff to remove allegations that the respondents engaged in “recklessness/reckless, intentional and malicious conduct, gross negligence, blatantly illegal conduct/illegal conduct” (hereinafter the subject language) from her bill of particulars … .  * * *

CPLR 3024(b) provides that “[a] party may move to strike any scandalous or prejudicial matter unnecessarily inserted in a pleading.” This rule is applicable to bills of particulars as well … . In reviewing a motion pursuant to CPLR 3024(b), “the inquiry is whether the purportedly scandalous or prejudicial allegations are relevant to a cause of action” … . Matters that are unnecessary to the viability of the cause of action and would cause undue prejudice to the defendants should be stricken from the pleading or bill of particulars … .

The causes of action asserted by the plaintiff in the complaint demonstrate that the subject language was relevant to this matter, and necessary to support the pleading based on the punitive damages sought. Irving v Four Seasons Nursing & Rehabilitation Ctr, 2014 NY Slip Op 07330, 2nd Dept 10-29-14

 

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Criteria for Dismissal of a Complaint Pursuant to CPLR 3211(a)(1) [Defense Based Upon Irrefutable Documentary Evidence] and CPLR 3211(a)(7) [Failure to State a Cause of Action] Explained

In the context of a legal  malpractice action, in affirming the denial of motions to dismiss, the Second Department explained the criteria for motions to dismiss pursuant to CPLR 3211(a)(1) [defense founded on documentary evidence] and CPLR 3211(a)(7) [failure to state a claim]:

A party seeking relief pursuant to CPLR 3211(a)(1) on the ground that his or her defense is founded upon documentary evidence ” has the burden of submitting documentary evidence that resolves all factual issues as a matter of law, and conclusively disposes of the plaintiff’s claim'” … . In the instant matter, the documentary evidence submitted by the defendants, consisting of the orders issued by the Supreme Court in the underlying action, failed to utterly refute the plaintiff’s allegations of malpractice or conclusively establish a defense as a matter of law in the instant action … . * * *

On a motion to dismiss pursuant to CPLR 3211(a)(7), the facts alleged in the complaint must be accepted as true, the plaintiff is accorded the benefit of every possible favorable inference, and the court’s function is to determine only whether the facts as alleged fit within any cognizable legal theory … . “Whether the complaint will later survive a motion for summary judgment, or whether the plaintiff will ultimately be able to prove [his or her] claims, of course, plays no part in the determination of a prediscovery CPLR 3211 motion to dismiss” … . Here, the plaintiff alleged that, but for the defendants’ negligence, including their failure to assert “appropriate claims against the proper parties, . . . the Plaintiff’s medical malpractice claim would have succeeded and resulted in a different, better and/or more positive outcome.” Construing the complaint liberally, accepting the facts alleged in the complaint as true, and according the plaintiff the benefit of every possible inference, as required, the plaintiff stated a cause of action to recover damages for legal malpractice … . Tooma v Grossbarth, 2014 NY Slip Op 07347, 2nd Dept 10-29-14

 

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Service Requirements of Education Law 3813(1) Do Not Apply to Disputes Involving the Public Interest As Opposed to Private Rights/Criteria for Granting an Extension (Nunc Pro Tunc) to Effect Service Pursuant to CPLR 306-b Explained

The Second Department determined an action challenging the award of a contract to a bus company by a school district should not have been dismissed for failure to comply with the service requirements of the Education Law and the CPLR.  The service requirements of Education Law 3813(1) do not apply to disputes involving the public interest as opposed to private rights.  The complaint was not served in accordance with CPLR 311(a)(7) because it was served upon a security guard and not one of the persons designated in the statute.  However, the matter was sent back for a ruling whether an extension of the time for service should be granted pursuant to CPLR 306-b:

In general, the service of a timely notice of claim pursuant to Education Law § 3813(1) is a condition precedent to the commencement of an action or proceeding against a school district, and failure to comply with this requirement is a fatal defect … . However, “not all actions and special proceedings have been held to be subject to the prerequisites of subdivision 1 of section 3813. The pertinent distinction is between actions and proceedings which on the one hand seek only enforcement of private rights and duties and those on the other in which it is sought to vindicate a public interest; the provisions of subdivision 1 of section 3813 are applicable as to the former but not as to the latter” … .

Because “[t]he central purposes of New York’s competitive bidding statutes are the (1) protection of the public fisc by obtaining the best work at the lowest possible price; and (2) prevention of favoritism, improvidence, fraud and corruption in the awarding of public contracts” …, a proceeding challenging the award of a contract pursuant to the competitive bidding statutes is a matter in the public interest … . Since the petitioners here do not seek only to enforce their private rights, Education Law § 3813(1) does not apply … . …

Pursuant to CPLR 306-b, where service is not made within 120 days of the commencement of the action or proceeding, the matter is subject to dismissal, but the court may, “upon good cause shown or in the interest of justice, extend the time for service.” The Court of Appeals has made clear that these are two distinct standards and that, while “good cause” requires a showing of reasonable diligence, “the interest of justice” has a broader scope, which can encompass late service due to “mistake, confusion or oversight, so long as there is no prejudice to the defendant” … . In determining whether an extension of time is warranted in the interest of justice, a court may consider, inter alia, “diligence, or lack thereof, . . . expiration of the Statute of Limitations, the meritorious nature of the cause of action, the length of delay in service, the promptness of a plaintiff’s request for the extension of time, and prejudice to defendant” … . Matter of Baumann & Sons Buses Inc v Ossining Union Free Sch Dist, 2014 NY Slip Op 07353, 2nd Dept 10-29-14