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A BREACH OF CONTRACT ACTION SHOULD NOT BE CONSOLIDATED WITH A TORT ACTION (FIRST DEPT).

The First Department, reversing Supreme Court, determined the breach of contract action and the fraudulent conveyance action should not have been consolidated:

In 2016, plaintiff commenced a breach of contract action against defendant eCommission Solutions, LLC (eCommission). In 2022, plaintiff commenced a fraudulent conveyance action against eCommission and its president, Paul Hoffman, and his wife, alleging that Hoffman transferred millions from eCommission to himself with the intent to defraud creditors like plaintiff.

… When one action sounds in contract and the other in tort, it is inappropriate to grant consolidation … . Indeed, the breach of contract and fraudulent conveyance actions present different questions of law and fact … . Moreover, the fraudulent conveyance action will be moot if plaintiffs fail to win the breach of contract action … . Finally, the two actions are at different stages, so that consolidation would lead to delay in trying the breach of contract action … .

Discovery in the fraudulent conveyance action should be stayed until the breach of contract action is resolved … . 3B Assoc. LLC v Ecommission Solutions, LLC, 2024 NY Slip Op 02086, First Dept 4-18-24

Practice Point: A breach of contract action should not be consolidated with a tort action (here an action for fraudulent conveyance).

 

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A CORPORATION WHICH ACQUIRES THE ASSETS AND LIABILITIES OF, BUT DOES NOT MERGE WITH, A PREDECESSOR CORPORATION, “INHERITS” THE CONTACTS THE PREDECESSOR CORPORATION HAD WITH NEW YORK STATE FOR PURPOSES OF NEW YORK’S PERSONAL JURISDICTION OVER THE SUCCESSOR CORPORATION (CT APP).

The Court of Appeals, in a full-fledged opinion by Judge Halligan, answering a certified question from the Second Circuit, determined that a corporation which acquires all the liabilities and assets of another corporation, but does not merge with the predecessor corporation, acquires the predecessor’s contacts with New York for purposes of New York’s personal jurisdiction over the successor corporation:

[The relevant] factors tip in favor of allowing successor jurisdiction where a successor purchases all assets and liabilities. … Sophisticated corporate entities such as SGBL [defendant] will undoubtedly engage in robust due diligence before agreeing to acquire all assets and liabilities of another entity. In doing so, they should understand where jurisdiction over such liabilities may lie and the potential cost if ultimately found liable, and will presumably negotiate a purchase price that is discounted by that prospect … .Lelchook v Société Générale de Banque au Liban SAL, 2024 NY Slip Op 02081, CtApp 4-18-24

Practice Point: A corporation which acquires the assets and liabilities of a predecessor corporation but does not merge with the predecessor corporation “inherits” the contacts the predecessor corporation had with New York for purposes of New York’s personal jurisdiction over the successor corporation.

 

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THE SECOND DEPARTMENT JOINED THE FIRST AND THIRD DEPARTMENTS IN HOLDING THAT THE EXTENDED STATUTE OF LIMITATIONS IN THE CHILD VICTIMS ACT APPLIES TO A NEW YORK RESIDENT WHO WAS ABUSED OUT-OF-STATE (SECOND DEPT).

The Second Department, joining the First and Third Departments, determined an action brought under the Child Victims Act by a person who was a resident of New York at the time the cause of action accrued can take advantage of the extended statute of limitations (CPLR 214-g) even where the wrongful conduct occurred out-of-state:

The plaintiff alleges that, when he was a resident of New York, he was the victim of childhood sexual abuse committed against him by Philip Foglietta, a football coach, while attending summer football camp in Vermont in 1972 and in Massachusetts in 1973 and 1975. * * *

… [W]e agree with the Appellate Division, First and Third Departments, that a plaintiff’s residence in New York at the time his or her claims or causes of action accrued is sufficient to bring those claims or causes of action within the purview of CPLR 214-g, even where, as here, the wrongful conduct underlying the New York resident’s causes of action occurred out-of-state … . * * *

The appellants’ focus on the location of the alleged wrongdoing is misplaced in this context, because the subject of CPLR 214-g is not the wrongful conduct itself, but rather the statute of limitations or notice of claim requirements that barred some New Yorkers from recovering damages for the underlying wrongdoing. CPLR 214-g did not criminalize or penalize behavior that was previously lawful, nor did it create a new private right of action. Rather, the statute revived prior claims or causes of action that already existed but were barred either because of the expiration of the applicable statute of limitations or the plaintiff’s failure to file a timely notice of claim (see id. § 214-g). Smith v Pro Camps, Ltd., 2024 NY Slip Op 02074, Second Dept 4-17-24

Practice Point: The Child Victims Act extends the statute of limitations for a plaintiff who was a New York resident at the time the cause of action accrued, even if the abuse took place in another state.

 

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A FORUM SELECTION CLAUSE IN AN INSURANCE POLICY WHICH VIOLATES NEW YORK LAW IS NOT ENFORCEABLE (SECOND DEPT).

The Second Department, in a full-fledged opinion by Justice Miller, determined that the forum selection clause in an insurance policy which violates New York law is not enforceable. The opinion is comprehensive and discusses several substantive civil procedure, contract law, corporation law, insurance law, workers’ compensation law and public policy issues which cannot fairly be summarized here:

This action is just one of many such actions commenced across the country alleging that the defendant Applied Underwriters, Inc. (hereinafter Applied Underwriters), and affiliated entities, all subsidiaries of Berkshire Hathaway, Inc., deceptively circumvented state laws and regulations in the marketing and sale of an unlawful workers’ compensation insurance program. Here, the defendants seek to enforce a forum selection clause, in favor of Nebraska, contained in an insurance policy that New York State regulators have found violates New York law. While parties are generally free to select a forum in which to resolve their contractual disputes, here, where it is alleged by the plaintiff, and found by New York State regulators, that New York law has been violated, a foreign corporation may not profit from such violation to the detriment of New York employers and workers. The forum selection clause contained in an illegal insurance policy is not enforceable. As a matter of public policy, New York companies shall not be compelled to litigate in Nebraska to vindicate their rights. Air-Sea Packing Group, Inc. v Applied Underwriters, Inc., 2024 NY Slip Op 02032, Second Dept 4-17-24

Practice Point: A forum selection clause (designating Nebraska as the forum) in an insurance policy which violates New York law is not enforceable.

 

PLAINTIFF IS THE SUCCESSOR IN INTEREST TO THE PLAINTIFF IN A PRIOR IDENTICAL ACTION WHICH WAS DISMISSED FOR FAILURE TO COMPLY WITH DISCOVERY DEMANDS AND ORDERS; THE INSTANT ACTION IS PRECLUDED BY THE DOCTRINE OF RES JUDICATA (FIRST DEPT).

The First Department, reversing Supreme Court, determined plaintiff 120 Lexington Ave Corp, as the successor in interest to 122-24 Lexington Ave Corp, was precluded from bringing the action by the doctrine of res judicata. A nearly identical action by 122-24 Lexington Ave Corp had been dismissed based upon plaintiff’s failure to comply with discovery demands and orders, which is deemed a dismissal on the merits:

Plaintiff concedes that it is the successor in interest to 122-24 Lexington Avenue Corp., an entity whose nearly identical case against Wesco was dismissed in May 2021 for failure to comply with discovery demands and court orders after the court had issued a conditional preclusion order. Because plaintiff is the successor to 122-24 Lexington, it is in privity with that entity and is bound by prior adjudications against it … . Furthermore, a dismissal based on a failure to provide discovery in the face of a preclusion order is considered an award on the merits, and thus is given res judicata effect … . 120 Lexington Ave. Corp. v Wesco Ins. Co., 2024 NY Slip Op 02004, First Dept 4-16-24

Practice Point: An action which was dismissed because plaintiff failed to comply with discovery demands and orders bars a subsequent action pursuant to the doctrine of res judicata.

 

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PLAINTIFF FELL THROUGH AN UNGUARDED STAIRWAY OPENING AND WAS ENTITLED TO SUMMARY JUDGMENT ON THE LABOR LAW 240(1) CAUSE OF ACTION; DEFENDANTS DID NOT SHOW THAT THE PRE-DEPOSITION SUMMARY JUDGMENT MOTION WAS PREMATURE (FIRST DEPT). ​

The First Department, reversing Supreme Court, determined plaintiff should have been awarded summary judgment on the Labor Law 240(1) cause of action and the pre-deposition summary judgment motion was not premature. While transporting large wooden panels past a stairway, plaintiff fell through an unguarded stairway opening:

The court should have granted plaintiff partial summary judgment on the Labor Law § 240 (1) claim because he was not provided with adequate protection to prevent his fall into the unguarded stairway opening … . …

… Labor Law § 240(1) is not dependent on a finding that the owner or general contractor had notice of the violation … …. [D]efendants failed to raise an issue of fact as to whether plaintiff was the sole proximate cause of his injuries. Defendants’ assertion that plaintiff removed the plywood barrier is speculative … .

The fact that no depositions have been taken does not preclude summary judgment in plaintiff’s favor, as defendants failed to show that discovery might lead to facts that would support their opposition to the motion … . Defendants also failed to show that facts essential to their opposition were within plaintiff’s exclusive knowledge … .  Blacio v Related Constr. LLC,2024 NY Slip Op 02008, First Dept 4-16-24

Practice Point: A plaintiff’s pre-deposition summary judgment motion will not be dismissed as premature unless defendant demonstrates discovery might lead to relevant facts or relevant facts are within plaintiff’s exclusive knowledge.

 

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THE THIRD DEPARTMENT JOINS THE OTHER DEPARTMENTS IN HOLDING THAT A PLAINTIFF NEED NOT MAKE A MOTION TO SET ASIDE THE VERDICT TO PRESERVE AN “AGAINST THE WEIGHT OF THE EVIDENCE” ARGUMENT ON APPEAL (THIRD DEPT). ​

The Third Department, affirming the defense verdict in this medical malpractice case, joined the other appellate division departments in finding that a plaintiff may make a “verdict is against the weight of the evidence” argument on appeal without moving to set aside the verdict on that ground:

… [We now join our colleagues in our sister Departments in concluding that plaintiffs were not required to preserve their weight of the evidence contention by moving to set aside the verdict upon that basis … . A trial court has the authority to order a new trial “on its own initiative” when the verdict is contrary to the weight of the evidence (CPLR 4404 [a]), and this Court’s power “is as broad as that of the trial court” … . Although we believe it remains best practice for a party to challenge a verdict upon this basis before the trial court, in light of its superior opportunity to evaluate the proof and credibility of witnesses … , we nonetheless agree that this Court is fully empowered to “order a new trial where the appellant made no motion for that relief in the trial court” … . To the extent that our prior decisions have suggested otherwise, they should no longer be followed … . Fitzpatrick v Tvetenstrand, 2024 NY Slip Op 01956, Third Dept 4-10-24

Practice Point: In this decision, the Third Department joined the other departments in holding that a plaintiff need not make a motion to set aside the verdict to preserve an “against the weight of the evidence” argument on appeal.

 

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HERE FAMILY COURT HAD THE INHERENT POWER TO DETERMINE WHETHER RESPONDENT WAS THE CHILD’S FATHER; RESPONDENT WAS JUDICIALLY ESTOPPED FROM CONTESTING PATERNITY BASED ON HIS POSITION IN A PRIOR PROCEEDING (SECOND DEPT).

The Second Department, reversing Family Court, determined Family Court had the power to determine whether father (Gunderson) is responsible for the support of the child and father was judicially estopped from contesting paternity because he was awarded parental access in a prior proceeding:

… [T]he Support Magistrate, sua sponte, dismissed the mother’s petition without prejudice on the ground that the Family Court lacked subject matter jurisdiction to enter an order of child support because the parties were never married and there was no acknowledgment of parentage or order of filiation. * * *

… [B]ecause the Family Court has jurisdiction to determine whether an individual parent is responsible for the support of a child (see Family Ct Act § 413[1][a]), in appropriate cases, it also has the inherent authority to ascertain whether a respondent is a child’s parent … .

Under the doctrine of judicial estoppel, “a party who assumes a certain position in a prior legal proceeding and secures a favorable judgment therein is precluded from assuming a contrary position in another action simply because his or her interests have changed” … . Here, Granderson successfully obtained an order awarding him parental access with the child based on his assertion that he was a parent to the child. Matter of Joseph v Granderson, 2024 NY Slip Op 01921, Second Dept 4-10-24

Practice Point: Here, based upon Family Court’s authority to determine whether a parent is responsible for the support of the child, Family Court had the inherent authority to determine whether respondent is the child’s father.

Practice Point: Here respondent sought and was awarded parental access in a prior proceeding. He was judicially estopped from contesting paternity in this proceeding.

 

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BECAUSE FAMILY COURT HAD EXCLUSIVE AND CONTINUING JURISDICTION OVER THIS CUSTODY CASE, MOTHER’S PETITION TO MODIFY CUSTODY SHOULD NOT HAVE BEEN SUMMARILY DISMISSED BECAUSE FATHER AND CHILD RESIDE OUT-OF-STATE (SECOND DEPT).

The Second Department, reversing Family Court, determined mother’s petition to modify custody should not have summarily dismissed because father and child were living out-of-state. Because New York has exclusive and continuing jurisdiction pursuant to the Uniform Child Custody Jurisdiction and Enforcement Act, the court should have allowed mother to present evidence on any connections to New York:

Pursuant to the Uniform Child Custody Jurisdiction and Enforcement Act, codified at article 5-A of the Domestic Relations Law, a court of this state which has made an initial custody determination has exclusive, continuing jurisdiction over that determination until it finds, as is relevant here, that it should relinquish that jurisdiction because “neither the child” nor “the child and one parent” have a “significant connection” with New York, and “substantial evidence is no longer available in this state concerning the child’s care, protection, training, and personal relationships” … .

… [T]he initial custody determination was rendered in New York. … Family Court should not have summarily dismissed the mother’s petitions on the ground that the child was living with the father out of state, without considering whether the court had exclusive, continuing jurisdiction pursuant to Domestic Relations Law § 76-a(1), and affording the mother an opportunity to present evidence as to that issue … . Matter of Brandon v Brady, 2024 NY Slip Op 01916, Second Dept 4-10-24

Practice Point: Where New York has exclusive and continuing jurisdiction over a custody matter pursuant to the Uniform Child Custody Jurisdiction and Enforcement Act, it is error to summarily dismiss a custody petition on the ground the child lives out-of-state. It must be determined whether there exist sufficient connections with New York to warrant hearing the case in New York.

 

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THE ELECTRICAL-CONTRACTOR CORP WAS NOT LICENSED TO DO ELECTRICAL WORK IN NYC; THE FACT THAT THE CORPORATION’S VICE PRESIDENT WAS LICENSED AND THE VICE PRESIDENT’S COMPANY, WHICH DID THE ELECTRICAL WORK AS A SUBCONTRACTOR, WAS LICENSED DOESN’T MATTER; THE CORPORATION CAN NOT SUE FOR BREACH OF CONTRACT (SECOND DEPT). ​

The Second Department, reversing Supreme Court, determined plaintiff electrical-contractor corporation could not sue for breach of contract because the corporation was not licensed in NYC to do electrical work, even though plaintiff’s vice president was licensed and the vice president’s company (QNCC) which did the work as plaintiff corporation’s subcontractor was licensed:

Administrative Code § 27-3017(a) states that it shall be unlawful for any person to, inter alia, perform electrical work in the City of New York unless that person is a licensed master electrician or special electrician. Licensing statutes are to be strictly construed … . …

The plaintiff’s contention that recovery should not be denied because QNCC was a duly licensed subcontractor which performed the electrical work is without merit. This Court has previously held that such a relationship is insufficient to permit an unlicensed contractor to recover for work performed in the City … . “‘So strict has been judicial construction of the statutory requirement through concern for the public health and welfare that the requirement may not be satisfied by employing or subletting’ the work to an appropriately licensed person” … . Moreover, that the plaintiff’s vice president had a master electrician’s license, and that the defendant’s architect knew that the electrical work permits were issued to an entity other than the plaintiff, does not bar the application of the above rule … . Electrical Contr. Solutions Corp. v Trump Vil. Section 4, Inc., 2024 NY Slip Op 01907, Second Dept 4-10-24

Practice Point: The NYC Administrative Code requirement that electrical work must be done by licensed entities or persons is strictly construed. Here the electrical-contractor corporation’s vice president was licensed and the vice president’s company which did the work as a subcontractor was licensed, but the corporation was not. The corporation could not sue for breach of contract.

 

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