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THE COUNTERCLAIM FOR LOST PROFITS DID NOT DEMONSTRATE “LOST PROFITS” AS CONSEQUENTIAL DAMAGES WAS CONTEMPLATED BY THE PARTIES AT THE TIME THE CONTRACT FOR THE SALE OF GOODS WAS ENTERED; THE MOTION TO DISMISS THE COUNTERCLAIM SHOULD HAVE BEEN GRANTED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the motion to dismiss the defendant’s counterclaim for lost profits should not have been converted to a summary judgment motion and the counterclaim must be dismissed because defendant did not demonstrate consequential damages for lost profits was contemplated by the parties when the contract for the sale of goods was entered. The contract was for the sale of military ordnance (target practice rounds) for the Mexican Navy. In its counterclaim, the defendant alleged the goods were not timely delivered and were not accepted by the Mexican Navy:

Lost profits are a form of consequential damages that a buyer, such as the defendant, may recover if “the seller at the time of contracting had reason to know [of them] and which could not reasonably [have been] prevented by cover or otherwise” (UCC 2-715[2][a] …). “To determine whether consequential damages were reasonably contemplated by the parties, ‘the nature, purpose and particular circumstances of the contract known by the parties should be considered, as well as what liability the defendant fairly may be supposed to have assumed consciously, or to have warranted the plaintiff reasonably to suppose that it assumed, when the contract was made'” … . In order to recover consequential damages, a pleading party is required to allege that the damages were foreseeable and within the contemplation of the parties at the time the contract was made … . “[W]here the damages reflect a loss of profits on collateral business arrangements, they are only recoverable when (1) it is demonstrated with certainty that the damages have been caused by the breach, (2) the extent of the loss is capable of proof with reasonable certainty, and (3) it is established that the damages were fairly within the contemplation of the parties” … .

Here, the defendant’s allegations, even as supplemented by an affidavit from its president, failed to sufficiently allege that consequential damages as lost future profits resulting from the cancellation of the defendant’s contract with the Mexican Navy due to the plaintiff’s breach of contract were within the plaintiff’s contemplation at the time of entering into the contract for the sale of goods (see UCC 2-715[2][a] …). Island Ordnance Sys., LLC v Amerimex, Inc., 2024 NY Slip Op 00897, Second Dept 2-21-24

Practice Point: With respect to a contract for the sale of goods controlled by the UCC, a claim for lost profits must specifically allege “lost profits” as an element of consequential damages was contemplated by the parties at the time the contract was entered, not the case here.

 

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FOR PURPOSES OF THE RELATION-BACK DOCTRINE, A LANDLORD AND A TENANT ARE NOT “UNITED IN INTEREST” (FIRST DEPT).

The First Department, reversing Supreme Court, determined the landlord-tenant relationship between the insured and the defendant building owner, Marion, did not constitute a “unity of interest” such that a negligence action against Marion could be commenced after the statute of limitations had run:

There are three conditions that must be satisfied for a claim asserted against a subsequent defendant such as Marion to relate back to claims asserted against another defendant: (1) both claims must arise out of the same conduct, occurrence, or transaction; (2) the new party must be “united in interest” with the original defendant, and by reason of that relationship can be charged with such notice of the institution of the lawsuit such that he will not be prejudiced in maintaining his defense on the merits; and (3) the new party knew or should have known that, but for a mistake by the plaintiff as to the identity of the proper parties, the action would have been brought against him as well … . * * *

… [A] landlord-tenant relationship, standing alone, does not give rise to vicarious liability or otherwise create unity of interest, which, as the Court of Appeals has recently reaffirmed, requires a situation in which the parties “stand or fall together and the judgment against one will similarly affect the other” … . Kingstone Ins. Co. v Marion Pharm. Inc., 2024 NY Slip Op 00805, First Dept 2-15-24

Practice Point: A landlord and a tenant are not united in interest for purposes of the relation-back doctrine and will not support adding a landlord to a complaint after the statute of limitations has run.

 

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PARTIAL PAYMENT OF A DEBT WITHIN THE STATUTE OF LIMITATIONS PERIOD MAY REVIVE OR TOLL THE STATUTE OF LIMITATIONS FOR AN ACTION BASED UPON THE DEBT (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff in this suit against his employer seeking payment for work performed raised a question of fact whether the statute of limitations was revived by defendants’ partial payment:

There is a “long-standing common law rule” that partial payment of a debt, if made under “circumstances from which a promise to honor the obligation may be inferred,” will operate to start the statute of limitations running anew from the time the partial payment is made … . To show that the statute of limitations has been renewed by a partial payment, it must be shown that the payment was accompanied by circumstances amounting to “an absolute and unqualified acknowledgment by the debtor of more being due, from which a promise may be inferred to pay the remainder” … .

Here, the plaintiff alleged that, over a course of years, the defendants made repeated assurances that they would pay him salary and bonus money that he was owed pursuant to his employment arrangement. Further, he alleged that the defendants made a partial payment of outstanding bonus money to the plaintiff on July 17, 2015, within the statute of limitations. Under these circumstances, the plaintiff raised a question of fact as to whether the statute of limitations was tolled or revived … . Costello v Curan & Ahlers, LLP, 2024 NY Slip Op 00758, Second Dept 2-14-24

Practice Point: Partial payment of a debt made within the statute of limitations period may revive or toll the statute of limitations for an action based on the debt.

 

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DEFENDANT LIMITED LIABILITY COMPANY’S FAILURE TO UPDATE ITS ADDRESS FOR SERVICE OF PROCESS ON FILE WITH THE SECRETARY OF STATE FOR TEN YEARS WAS NOT A REASONABLE EXCUSE SUFFICIENT TO SUPPORT DENIAL OF PLAINTIFF’S MOTION FOR LEAVE TO ENTER A DEFAULT JUDGMENT (SECOND DEPT).

The Second Department, reversing Supreme Court, determined defendant limited liability company’s (FAC’s) failure to update its address for service of process on file with the Secretary of State was not a reasonable excuse sufficient to defeat a motion for leave to enter a default judgment:

Generally, a corporation’s failure to receive copies of process served upon the Secretary of State due to a breach of its own obligation to keep a current address on file with the Secretary of State does not constitute a reasonable excuse for its delay in appearing or answering the complaint, although “there is no per se rule” … . In determining whether a reasonable excuse was demonstrated, “a court should consider, among other factors, the length of time for which the address had not been kept current” … .  * * *

… FAC failed to meet its burden of establishing a reasonable excuse … . FAC’s failure to file with the Secretary of State the current address of the agent designated to receive service of process on its behalf for a period of at least 10 years, without providing any explanation of its failure, does not constitute a reasonable excuse … . Bachvarov v Khaimov, 2024 NY Slip Op 00753, Second Dept 2-14-24

Practice Point: Failure to update an LLC’s address for service of process on file with the Secretary of State is not a reasonable excuse for a default.

 

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AS LONG AS PLAINTIFF TAKES SOME ACTION THAT WOULD LEAD TO ENTRY OF A DEFAULT JUDGMENT WITHIN ONE YEAR AND NINETY DAYS OF THE DEFAULT, THE ACTION SHOULD NOT BE DISMISSED AS ABANDONED (SECOND DEPT).

The Second Department, reversing the sua sponte dismissal of the foreclosure complaint, noted that as long as a plaintiff initiates some action for the entry of judgment within one year and ninety days after a default, the action should not be dismissed as abandoned. Here the plaintiff made a request for judicial intervention within one year and ninety days:

… [P]laintiff demonstrated that, within one year after the defendants’ default, it filed a request for judicial intervention which sought a foreclosure settlement conference within the foreclosure action as mandated by CPLR 3408. “Where, as here, a settlement conference is a necessary prerequisite to obtaining a default judgment (see CPLR 3408[a], [m]), a formal judicial request for such a conference in connection with an ongoing demand for the ultimate relief sought in the complaint constitutes ‘proceedings for entry of judgment’ within the meaning of CPLR 3215(c)” … . Since the plaintiff demonstrated that it initiated proceedings for the entry of a judgment of foreclosure and sale within one year after the defendants’ default, it was not required to proffer a reasonable excuse or demonstrate a potentially meritorious cause of action (see CPLR 3215[c] …). US Bank N.A. v Jerriho-Cadogan, 2024 NY Slip Op 00790, Second Dept 2-14-24

Practice Point: Here in this foreclosure action the bank made a request for judicial intervention within one year and ninety days of the default. The action should not have been dismissed as abandoned.

 

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THE APPELLANT RAISED A QUESTION OF FACT ABOUT WHETHER SHE WAS SERVED WITH THE SUMMONS AND COMPLAINT ENTITLING HER TO A HEARING (SECOND DEPT). ​

The Second Department, reversing Supreme Court, determined the appellant had raised a question of fact about whether she was served with the summons and complaint requiring a hearing:

Here, the process server’s affidavit of service, in which he averred that he personally served the appellant, constituted prima facie evidence of valid service pursuant to CPLR 308(1) … . However, the Supreme Court erred in determining this branch of the motion without first conducting a hearing. The appellant demonstrated her entitlement to a hearing on the issue of service by submitting, among other evidence, her sworn denial, setting forth significant discrepancies between the description of the person allegedly served and the appellant’s physical appearance … . Under these circumstances, the appellant is entitled to a hearing on the issue of whether service was properly effected pursuant to the personal delivery provisions of CPLR 308(1) … . Matter of Rockman v Nassau County Sheriff’s Dept., 2024 NY Slip Op 00770, Second Det 2-14-24

Practice Point: Here, although plaintiff demonstrated proper service of process, the appellant raised a question of fact about whether she in fact was personally served by noting the process server’s description of the person served did not match her appearance.

 

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DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT IN THIS SLIP AND FALL CASE WAS PREMATURE AND SHOULD HAVE BEEN DENIED; CRITERIA EXPLAINED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined defendants’ motion for summary judgment in this slip and fall case was premature and should have been denied:

A motion for summary judgment may be denied as premature where it appears that the facts essential to oppose the motion exist but cannot then be stated (see CPLR 3212[f] …). “A party who contends that a summary judgment motion is premature is required to demonstrate that discovery might lead to relevant evidence or the facts essential to justify opposition to the motion were exclusively within the knowledge and control of the movant” … .

Here, the plaintiff demonstrated that further discovery, including records of the United States Postal Service, a deposition of the plaintiff’s former coworker, and discovery related to hearsay statements that the alleged defect had been reported to the defendants, may result in the disclosure of evidence relevant to the issue of whether the defendants had notice of the alleged defective condition … . Knowles v 21-43 27th St., LLC, 2024 NY Slip Op 00759, Second Dept 2-14-24

Practice Point: Here the defendants’ motion for summary judgment was deemed premature; criteria explained.

 

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THE REPEAL OF THE EMERGENCY OR DISASTER TREATMENT PROTECTION ACT (EDTPA) WAS NOT RETROACTIVE; THEREFORE DEFENDANT’S NURSING HOME WAS IMMUNE FROM SUIT STEMMING FROM PLAINTIFF’S DECEDENT’S DEATH FROM COVID-19 (FIRST DEPT).

The First Department determined the repeal of the Emergency or Disaster Treatment Protection Act (EDTPA) in April 2021 was not retroactive. Therefore defendant’s nursing home was immune from suit stemming from plaintiff’s decedent’s death from COVID-19. Although the Act does not confer immunity from gross negligence, gross negligence was not demonstrated because the Department of Health required nursing homes to admit COVID-positive patients:

As to the application of the EDTPA, defendant was entitled to immunity under that statute. The documents submitted with defendant’s motion to dismiss, including several pandemic-related policies, State Department of Health directives, and more than 1600 of pages of the decedent’s medical records, demonstrate that defendant was providing health care services to the decedent under the COVID-19 emergency orders when he was infected and, before that, “in accordance with applicable law”; the care provided was “impacted by” defendant’s “decisions or activities in response to or as a result of the COVID-19 outbreak and in support of the state’s directives”; and the decedent was provided care “in good faith” … . Hasan v Terrace Acquisitions II, LLC, 2024 NY Slip Op 00739, First Dept 2-13-24

Practice Point: This decision includes an extensive discussion of when a statute can be deemed to apply retroactively.

 

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THE ACTION FOR DAMAGES FOR MEDICAL SERVICES WAS NOT APPROPRIATE FOR A CLERK’S JUDGMENT FOR A SUM CERTAIN; DEFENDANT RAISED A QUESTION OF FACT WHETHER HE WAS PROPERLY SERVED WITH THE SUMMONS WITH NOTICE (FOURTH DEPT).

The Fourth Department, reversing Supreme Court, determined (1) the action for damages for medical services was not appropriate for a clerk’s judgment for a sum certain pursuant to CPLR 3215(a) and (2) defendant raised a question of fact about whether he was served with the summons with notice pursuant to CPLR 308(4):

… [T]he Clerk lacked authority under CPLR 3215 (a) to enter the default judgment. “CPLR 3215 (a) allows a party to seek a default judgment by application to the clerk if the claim is ‘for a sum certain or for a sum which can by computation be made certain’ ” … . “The limitation of clerk’s judgments to claims for a sum certain contemplates a situation in which, once liability has been established, there can be no dispute as to the amount due” … . “The statute is intended to apply to only the most liquidated and undisputable of claims, such as actions on money judgments and negotiable instruments” … . Under the circumstances of this case, we conclude that this action, which seeks to recover damages for medical services, is not for a sum certain or for a sum that by computation can be made certain … . * * *

Defendant submitted an affidavit in which he averred, inter alia, that he lived in the upstairs apartment of a two-story, two-family house, and that, because his apartment was not specified on the papers described in the process server’s affidavit of service, he never received service … . State of New York v Walker, 2024 NY Slip Op 00716, Fourth Dept 2-9-24

Practice Point: An action for a clerk’s judgment for a sum certain is only appropriate where there is absolutely no dispute about the amount due, not here in a case seeking damages for medical services.

 

THE COVID STATUTE OF LIMITATIONS TOLLS EXPLAINED (FOURTH DEPT).

The Fourth Department, reversing (modifying) Supreme Court, explained how the COVID toll of the statute of limitations works:

“A toll does not extend the statute of limitations indefinitely but merely suspends the running of the applicable statute of limitations for a finite and, in this instance, readily identifiable time period” … . “[T]he period of the toll is excluded from the calculation of the time in which the plaintiff can commence an action” (id.). In response to the COVID-19 pandemic, on March 20, 2020, the Governor issued [an] Executive Order … , which tolled “any specific time limit for the commencement, filing, or service of any legal action, notice, motion, or other process or proceeding, as prescribed by the procedural laws of the state, including but not limited to . . . the civil practice law and rules . . . from the date of this order until April 19, 2020.” The Governor later issued a series of nine subsequent executive orders that extended the tolling period through November 3, 2020 … . Thus, here, the statute of limitations was tolled from March 20, 2020, at which time 289 days remained in the limitations period, until November 3, 2020, and thereafter the “statute of limitations began to run again, expiring on [August 19, 2021]” … . State of New York v Williams, 2024 NY Slip Op 00709, Fourth Dept 2-9-24

Practice Point: The number of days left on the statute of limitations when the COVID toll was imposed remains when the toll is lifted.

 

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