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TO, SUA SPONTE, DECIDE BRANCHES OF A MOTION AND CROSS-MOTION ON A GROUND NOT RAISED BY THE PARTIES DEPRIVED PLAIINTIFF OF THE OPPORTUNITY TO REFUTE THE JUDGE’S DETERMINATION (SECOND DEPT).

The Second Department, reversing (modifying) Supreme Court in this foreclosure action, determined the judge should not have decided branches of a motion and cross-motion on a ground not raised by the parties, i.e. “in the interest of justice” on the ground the action was commenced “when foreclosures were stayed due to [the[ Covid-19 pandemic:”

“The lack of notice and opportunity to be heard implicates the fundamental issue of fairness that is the cornerstone of due process” … . As the plaintiff correctly contends, the Supreme Court improperly determined the subject branches of the parties’ motion and cross-motion on the ground that the action was commenced when “foreclosures were stayed due to [the] Covid-19 pandemic.” Sino [defendant] did not argue in support of the cross-motion that the plaintiff improperly commenced the action during any COVID-19-related stay or that it was prejudiced because the action was commenced during any COVID-19-related stay. Thus, the plaintiff was prejudiced, since it was “never afforded the opportunity to present evidence refuting the court’s sua sponte determination” … . Accordingly, the court should not have determined the subject branches of the motion and cross-motion on a ground that was never raised by the parties … . Austin 26 Dental Group, PLLC v Sino Northeast Metals (U.S.A.), Inc., 2024 NY Slip Op 04187, Second Dept 8-14-24

Practice Point: Judges cannot decide motions on a ground not raised by the parties.

 

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NYU SUFFICIENTLY ALLEGED AN INJURY-IN-FACT ENTITLING IT TO LITIGATE THE CONSTITUTIONALITY OF A NYC ZONING RESOLUTION PROHIBITING THE CONSTRUCTION OF CLASSROOMS AND DORMITORIES IN THE SPECIAL DISTRICT; THERE WAS A COMPREHENSIVE DISSENT (FIRST DEPT). ​

The First Department, over an extensive dissent, reversing Supreme Court, determined plaintiff New York University (NYU) had demonstrated an “injury in fact” which provided standing to contest the constitutionality of a New York City Zoning Regulation (ZR) prohibiting the construction of classrooms and dormitories:

NYU has sufficiently alleged an injury in fact. As stated by the Court of Appeals … , “[t]he injury-in-fact requirement necessitates a showing that the party has an actual legal stake in the matter being adjudicated and has suffered a cognizable harm that is not tenuous, ephemeral, or conjectural but is sufficiently concrete and particularized to warrant judicial intervention”; while this requirement “is closely aligned with [the] policy not to render advisory opinions,” “standing rules should not be applied in an overly restrictive manner where the result would be to completely shield a particular action from judicial review” … . * * *

NYU … has alleged not just an interference with its ability or abstract interest but with its actual present intentions and desires, a showing of specific plans is not a necessary additional requirement for an injury-in-fact showing. NYU’s claim that it has had a long-standing and continuing interest in expanding educational uses in the Special District whose implementation has been limited by the variance requirement is further evidenced by the fact that NYU previously put one of its Special District properties to educational use after obtaining a variance. There is no valid basis for predicating the injury-in-fact showing on evidence that NYU has expended time, money and other resources developing a particular plan for the renovation or conversion of a particular Special District property to educational uses. Judicial consideration of NYU’s claim seeking a declaration as to the unconstitutionality of the ZR amendment should not require that it first experience the harm it seeks to avoid by challenging the amendment. New York Univ. v City of New York, 2024 NY Slip Op 04183, First Dept 8-7-24

​Practice Point: Consult this decision for an explanation of what constitutes an injury-in-fact providing a party with standing to litigate the constitutionality of a zoning provision.

 

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HERE ALLEGATIONS OF FRAUD WERE ESSENTIAL TO THE BREACH OF FIDUCIARY DUTY CAUSE OF ACTION; THEREFORE THE SIX-YEAR STATUTE OF LIMITATIONS FOR FRAUD APPLIED AND THE CAUSE OF ACTION WAS TIME-BARRED (SECOND DEPT). ​

The Second Department, reversing (modifying) Supreme Court, determined the six-year statute of limitations for fraud controlled the breach of a fiduciary duty cause of action (which was therefore time-barred):

… [T]he six-year statute of limitations governing actions based on fraud applies (see CPLR 213[8]). “‘[W]here an allegation of fraud is essential to a breach of fiduciary duty claim, courts have applied a six-year statute of limitations under CPLR 213(8)'” … . Here, the defendants alleged that Hollander was part owner of a limited liability company that competed directly with the defendants, that Hollander failed to disclose that alleged conflict, and that Hollander used confidential information obtained from the defendants to directly compete with them. The plaintiffs allegedly denied GFR and Friedman Group, LLC, the opportunity to purchase at least four specific properties and used trade secrets to compete with GFR and Friedman Group, LLC, on at least three specific properties. The allegations of fraud are thus essential to the breach of fiduciary duty counterclaim, and the six-year statute of limitations applies. South Shore Estates, Inc. v Guy Friedman Realty Corp., 2024 NY Slip Op 04156, Second Dept 8-7-24

Practice Point: Where allegations of fraud are essential to a breach of fiduciary duty cause of action, the six-year statute of limitations for fraud applies.

 

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THE BANK DID NOT DEMONSTRATE IT WAS THE HOLDER OR ASSIGNEE OF THE NOTE AT THE TIME THE ACTION TO RECORD THE MORTGAGE WAS BROUGHT; THE BANK DID NOT HAVE STANDING TO BRING THE ACTION (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff bank did not demonstrate standing in 2017 to record a mortgage securing a note issued in 2008:

A plaintiff has standing where it is the holder or assignee of the underlying note at the time the action is commenced … . “Either a written assignment of the underlying note or the physical delivery of the note prior to the commencement of the . . . action is sufficient to transfer the obligation, and the mortgage passes with the debt as an inseparable incident” … . “[A]n assignment of a note and mortgage need not be in writing and can be effectuated by physical delivery” .. .

Here, the affidavits of Fernandez were insufficient to establish the plaintiff’s standing to record the mortgage. Although Fernandez’s second affidavit provided a proper foundation for the admission of business records, and attached a business record … , “[i]t is the business record itself, not the foundational affidavit, that serves as proof of the matter asserted” … . The business record attached to Fernandez’s second affidavit failed to establish, prima facie, that the plaintiff had possession of the note prior to commencing the instant action, as it failed to mention the defendant or otherwise identify the note to which it was referring. Moreover, the business record identifies itself merely as a “Certification.” It does not state when the note was either delivered to or assigned to the plaintiff. Bayview Loan Servicing, LLC v Healey, 2024 NY Slip Op 04054, Second Dept 7-31-24

Practice Point: Here the note was issued in 2008 and plaintiff bank sought to record the mortgage in 2017. The bank did not have standing to record the mortgage because it did not present proof it was the holder or assignee of the note when the action was brought.​

 

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WHETHER THE CHILD VICTIMS ACT (CVA) REVIVES OTHERWISE TIME-BARRED WORKERS’ COMPENSATION CLAIMS AND WHETHER PLAINTIFF’S DAMAGES ARE LIMITED TO WORKERS’ COMPENSATION BENEFITS ARE QUESTIONS OF LAW FOR THE COURT, NOT THE WORKERS’ COMPENSATION BOARD (FOURTH DEPT).

The Fourth Department, reversing (modifying) Supreme Court, held the court, not the Workers’ Compensation Board, must determine whether damages in this Child Victims Act (CVA) sexual-abuse action against the alleged perpetrator’s employer are limited to Workers’ Compensation benefits and whether claims for time-barred Workers’ Compensation benefits are revived by the Child Victims Act (CVA):​

” ‘As a general rule, when an employee is injured in the course of . . . employment, [the employee’s] sole remedy against [their] employer lies in [their] entitlement to a recovery under the Workers’ Compensation Law’ ” … . “[T]he issue whether a plaintiff was acting as an employee of a defendant at the time of the injury is a question of fact to be resolved by the Board” … .

“[C]ourts defer to [an] administrative agency where the issue involves knowledge and understanding of underlying operational practices or entails an evaluation of factual data and inferences to be drawn therefrom” … . However, “[w]here . . . the question is one of pure statutory interpretation, [courts] need not accord any deference to [an administrative body’s] determination and can undertake its function of statutory construction” … . As relevant here, although a factual determination with respect to the applicability of the Workers’ Compensation Law should be referred to the Board, which has primary jurisdiction over that issue, questions of law remain within the domain of the court … . Here, whether the CVA revives otherwise time-barred claims for workers’ compensation benefits, based on allegations of sexual abuse by a coworker, and whether plaintiffs are limited to benefits under the Workers’ Compensation Law even if their claims are revived, are questions of law to be decided by the court, not the Board. Thus, we agree with the plaintiffs that Supreme Court erred in granting defendant’s motion, staying the actions pending review by the Board, and holding plaintiffs’ cross-motions to amend their complaints in abeyance pending the Board’s decision. Bates v Gannett Co., Inc., 2024 NY Slip Op 03999, Fourth Dept 7-26-24

Practice Point: This decision deals with the questions of law raised by applying the Workers’ Compensation Law to sexual abuse claims revived by the Child Victims Act (CVA).​

 

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HERE THE RELATION-BACK DOCTRINE SHOULD HAVE BEEN APPLIED TO ADD DEFENDANT DESIGN, WHICH HAD A UNITY OF INTEREST WITH DEFENDANT EISENBACH, DESIGN’S CEO; THE PLAINTIFF HAD AGREED TO DISCONTINUE THE TIMELY ACTION AGAINST EISENBACH BASED ON MISREPRESENTATIONS MADE ON EISENBACH’S BEHALF (SECOND DEPT).

The Second Department, in a full-fledged opinion by Justice Dillon, reversing Supreme Court, determined the relation-back doctrine should have been applied to add a defendant, Design, to the law suit. The CEO of Design, Eisenbach, had been timely sued but the action was discontinued based upon misrepresentations made to plaintiff’s counsel on behalf of Eisenbach. Because of that unusual circumstance, based on the unity of interest between Design and its CEO, Eisenbach, plaintiff should have been allowed to add Design as a defendant after the statute of limitations had run for all parties (including Eisenbach):

These appeals involve the application of the relation-back doctrine to an unusual set of facts. Here, the plaintiffs seek to interpose untimely claims against a proposed corporate defendant by relating those claims back under CPLR 203(c) and (f) to an individual defendant who had been timely sued, discontinued from the action before the statute of limitations had run, and re-added as a defendant after the applicable statute of limitations had expired for all parties. Normally, the relation-back doctrine may only be applied when the party being added relates back to another party which has already been timely sued and which is a continuing defendant in the case. Under the peculiar circumstances of this case, where no party objected to, raised any contentions concerning, or appealed the granting of leave to re-add the previously discontinued individual as a party defendant, the relation-back doctrine may be applied. * * *

… [T]here is a fair reading of the record that had Eisenbach not been discontinued from the action based upon inaccurate representations, Design’s role at the construction site would have been revealed and an action timely commenced against it. Further, with Eisenbach named as an original defendant in the action, Design knew or should have known that but for a mistake as to the identity of the parties, it would have been named as a party defendant as well. Bisono v Mist Enters., Inc., 2024 NY Slip Op 03873, Second Dept 7-24-24

Practice Point: Usually the relation-back doctrine can be applied only to add a party with a unity of interest with a timely sued defendant. Here, although the defendant had been timely sued, the action had been discontinued based upon misrepresentations made by the defendant to the plaintiff. Under that unique circumstance, the relation-back doctrine was deemed available to the plaintiff.

 

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PETITIONER, A NONPROFIT ORGANIZATION FOR THE PRESERVATION AND PROTECTION OF THE HEALTH OF THE FINGER LAKES, HAD STANDING TO CONTEST A PERMIT ALLOWING THE DUMPING OF TREATED WASTE IN CAYUGA LAKE; ONE OF PETITIONER’S MEMBER’S DRINKING WATER COMES FROM CAYUGA LAKE (THIRD DEPT).

The Third Department, reversing Supreme Court, determined petitioner, a nonprofit organization for the preservation and protection of the health of the Finger Lakes, had standing to contest a permit allowing treated waste to be dumped into Cayuga Lake. Standing is conferred if one of petitioner’s members suffers harm greater than that suffered by the general public. Here a member’s drinking water comes from Cayuga Lake:

… [T]he sole issue on this appeal is whether petitioner sufficiently pleaded that at least one of its members would suffer an injury-in-fact that is different from harm suffered by the public at large, such as to confer petitioner with standing. Petitioner alleged in its petition/complaint that its members would be harmed by the leachate produced by County Line [waste treatment facility], which would be treated by the Ithaca treatment facility and then dumped into Cayuga Lake. According to petitioner, the type of solid waste that County Line would handle would create leachate that contains per- or polyfluoroalkyl substances (hereinafter PFAS), a by-product linked to adverse health outcomes and which the Ithaca treatment facility is not capable of completely filtering out of the treated leachate. Because the Ithaca treatment facility dumps treated leachate into Cayuga Lake and is incapable of completely filtering out PFAS, petitioner alleged that if County Line was permitted to operate its facility in accordance with its application, as DEC’s [*3]permit requires, PFAS would enter the lake and cause petitioner’s members harm. In setting forth this harm, petitioner specifically identified a member whose potable drinking water is only filtered through the ground in “beach wells” on Cayuga Lake. As these wells do not filter out PFAS, allowing PFAS to be dumped into the lake would render this member’s water contaminated and unsafe to drink. Matter of Seneca Lake Guardian v New York State Dept. of Envtl. Conservation, 2024 NY Slip Op 03856, Third Dept 7-18-24

Practice Point: Here a nonprofit whose purpose is to preserve and protect the health of the Finger Lakes had standing to contest a permit allowing the dumping of treated waste in Cayuga Lake. One of the member’s drinking water came from Cayuga Lake. Therefore the member suffered an injury greater than that suffered by the general public.

 

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THE IMMUNITY CONFERRED ON HEALTHCARE PROVIDERS DURING THE COVID PANDEMIC CAN BE BASED ON THE OVERALL STRAIN ON THE OVERWHELMED HEALTHCARE SYSTEM; ALTHOUGH THE DEFENDANTS IN THIS MED MAL CASE MAY DEMONSTRATE ENTITLEMENT TO IMMUNITY AS THE CASE PROGRESSES, THEY DID NOT DEMONSTRATE ENTITLEMENT TO IMMUNITY AS A MATTER OF LAW SUCH THAT THE COMPLAINT SHOULD BE DISMISSED (SECOND DEPT).

The First Department, in a full-fledged opinion by Justice Higgitt, determined defendants in this med mal case were not entitled to dismissal of the complaint based upon the immunity conferred by the Emergency or Disaster Treatment Protection Act (EDPTA) during the COVID pandemic. The plaintiff-patient, who did not have COVID, fell near his hospital bed and suffered a brain injury. After he fell, and before he suffered any symptoms of the injury from the fall, he was examined by two doctors. The doctors were not made aware of the fall. The defendants moved to dismiss the complaint at the outset of the case based on the EDPTA, noting that the immunity conferred by the statute was based upon the overall strain placed on the healthcare system by the pandemic. The Second Department determined that, although the defendants may be able to demonstrate their entitlement to immunity as the case progresses, they did not demonstrate entitlement to immunity as a matter of law such that the complaint should be dismissed at the outset:

… [O]f the three conditions imposed by former Public Health Law § 3082(1), there is no question that defendants were arranging for or providing health care services as per the statute, and were doing so in good faith. The parties’ dispute distills to whether defendants established, conclusively, that “the treatment of [plaintiff was] impacted by [defendants’] decisions or activities in response to or as a result of the COVID-19 outbreak” (former Public Health Law § 3082[1][b]). * * *

A statute conferring immunity must be strictly construed … , and a party seeking its protections “must conform strictly with its conditions” … . In this regard, we note that only minimal discovery had been conducted at the time the motion was made, and that the applicability of the defense, itself, requires a fact-intensive inquiry. Whether or not defendants may ultimately be able to demonstrate that they are entitled to immunity, it is premature to deem the analysis completed at this juncture … . Holder v Jacob, 2024 NY Slip Op 03864, First Dept 7-18-24

Practice Point: Healthcare providers may be entitled to statutory immunity during the COVID pandemic. Here the defendants were unable to demonstrate entitlement to immunity as a matter of law such that the med mal complaint should be dismissed. But they may be able demonstrate entitlement to immunity as the case progresses.

 

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THE DENTISTS’ FEE-SPLITTING AGREEMENT VIOLATED THE EDUCATION LAW; A COURT WILL NOT ENFORCE AN ILLEGAL CONTRACT (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the complaint seeking to enforce an illegal contract should have been dismissed:

… [T]he plaintiff entered into an asset purchase agreement (hereinafter the APA) to sell certain assets of its dental practice to the defendant, a licensed dentist who retained his own separate practice. The APA specified a purchase price of $250,000. A portion of that amount was to be paid as a percentage of the monthly revenue generated by the plaintiff’s practice or, under certain conditions, a percentage of the revenue generated from a potential sale of the defendant’s separate practice. * * *

The defendant established his entitlement to dismissal of the causes of action alleging breach of contract and unjust enrichment pursuant to CPLR 3211(a)(7). As the defendant correctly contends, the APA constituted a voluntary prospective arrangement for the splitting of fees in violation of the Education Law because it required the defendant to pay the plaintiff a percentage of revenue generated by the plaintiff’s practice and, under certain conditions, the defendant’s own separate dental practice (see Education Law §§ 6509-a, 6530[19] …). “‘It is the settled law of this State (and probably of every other State) that a party to an illegal contract cannot ask a court of law to help him or her carry out his or her illegal object, nor can such a person plead or prove in any court a case in which he or she, as a basis for his or her claim, must show forth his or her illegal purpose'” … . “‘Where the parties’ arrangement is illegal the law will not extend its aid to either of the parties . . . or listen to their complaints against each other, but will leave them where their own acts have placed them'” … . Advanced Dental of Ardsley, PLLC v Brown, 2024 NY Slip Op 03804, Second Dept 7-17-24

Practice Point: A fee-splitting agreement between dentists violates the Education Law.

Practice Point: A court will not enforce an illegal contract.

 

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PLAINTIFF, UNDER NEW JERSEY LAW, SUFFICIENTLY PLED A SPECIAL RELATIONSHIP WITH DEFENDANT BANK GIVING RISE TO A DUTY TO ENFORCE ITS ANTI-FRAUD PROCEDURES; PLAINTIFF WIRED $300,000 TO AN ACCOUNT WHICH HAD BEEN SET UP TO DEFRAUD PLAINTIFF (FIRST DEPT).

The First Department, over a comprehensive dissent, determined defendant JPMorgan Chase Bank owed a duty to plaintiff based upon its anti-fraud polices advertised on the bank’s website. Defendant David Tate opened an account at a New Jersey Chase bank in the name of his business, Alchemy. Tate did not provide any personal identification or any corporate documentation to the bank. Plaintiff, thinking she was investing in Alchemy, wired $300,000 to the Alchemy account which was appropriated by Tate:

Under New Jersey law, a bank and its depositor have an arm’s-length, debtor-creditor relationship … . Banks do not have a duty to protect depositors from the wrongful conduct of third parties with whom the bank has done business .. .

Nonetheless, a bank may have a duty of care “where a special relationship has been established from which a duty can be deemed to flow” … . A special relationship may be formed “by agreement, undertaking or contact” … . As pertinent here, an “undertaking” is “the willing assumption of an obligation by one party with respect to another or a pledge to take or refrain from taking particular action” … .

Crediting plaintiff’s factual allegations, construing the complaint liberally, and according it the benefit of every possible favorable inference …, we find that the complaint adequately pleaded that Chase assumed a duty to abide by the anti-fraud procedures that it publicized.

… [P]laintiff has adequately pleaded the existence of a special relationship with Chase, giving rise to a duty to plaintiff to enforce its anti-fraud procedures … . Plaintiff has likewise stated a claim against Chase in negligence, based on its alleged failure to abide by these safeguards when Tate opened Alchemy’s account with Chase … . Ben-Dor v Alchemy Consultant LLC, 2024 NY Slip Op 03797, Second Dept 7-11-24

Practice Point: In New Jersey, to sue a bank for the wrongful conduct of a third party, here the use of a bank account to defraud plaintiff, the bank must owe plaintiff a special duty. The majority held the anti-fraud policies on the bank’s website may be the basis for such a special duty. There was an extensive and comprehensive dissent.