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CHOICE OF LAW PROVISIONS OF CONTRACT DID NOT CONSTITUTE AN UNAMBIGUOUS WAIVER OF SOVEREIGN IMMUNITY, THE INDIAN NATION WAS IMMUNE FROM SUIT IN THIS BREACH OF CONTRACT ACTION.

The Second Department, reversing Supreme Court, determined the choice law provisions in a contract between plaintiff and defendant Unkechaug Indian Nation did not include a clear-cut waiver of sovereign immunity and must be construed against the drafter, the plaintiff here. Therefore the defendant was immune from suit for breach of contract:

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Here, the plaintiff contends that the defendant waived its sovereign immunity by virtue of a choice-of-law provision stating that the contract would be governed by the laws of New York, and by the following provision of the contract:

“[The] parties agree that any claim or controversy regarding this Contract shall be most conveniently and economically resolved in Suffolk County, New York, and therefore, the parties agree that any claim or action brought for enforcement, interpretation or damages under this Contract shall be brought only in Suffolk County and the parties agree to forebear from filing a claim in any other jurisdiction.”

Although this clause requires “any claim or controversy” regarding the contract to be resolved in Suffolk County, it does not require that such claim or controversy be resolved by a state court. Rather, under the clause, a party could bring a claim before a mediator, an arbitrator, a tribal court, a state court, or a federal court, as long as the selected forum was located in Suffolk County. Thus, unlike the cases involving arbitration clauses, this clause does not unequivocally express the defendant’s agreement to be sued in a state court. …

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The fact that the contract also includes a choice-of-law provision does not resolve the ambiguity in the subject clause, since the law of the State of New York could be applied in other forums besides a state or federal court to interpret the contract … . Aron Sec., Inc. v Unkechaug Indian Nation, 2017 NY Slip Op 04413, 2nd Dept 6-7-17

 

INDIAN LAW (SOVEREIGN IMMUNITY, CHOICE OF LAW PROVISIONS OF CONTRACT DID NOT CONSTITUTE AN UNAMBIGUOUS WAIVER OF SOVEREIGN IMMUNITY, THE INDIAN NATION WAS IMMUNE FROM SUIT IN THIS BREACH OF CONTRACT ACTION)/CONTRACT LAW (SOVEREIGN IMMUNITY, CHOICE OF LAW PROVISIONS OF CONTRACT DID NOT CONSTITUTE AN UNAMBIGUOUS WAIVER OF SOVEREIGN IMMUNITY, THE INDIAN NATION WAS IMMUNE FROM SUIT IN THIS BREACH OF CONTRACT ACTION)/IMMUNITY (INDIAN NATION, SOVEREIGN IMMUNITY, CHOICE OF LAW PROVISIONS OF CONTRACT DID NOT CONSTITUTE AN UNAMBIGUOUS WAIVER OF SOVEREIGN IMMUNITY, THE INDIAN NATION WAS IMMUNE FROM SUIT IN THIS BREACH OF CONTRACT ACTION)/SOVEREIGN IMMUNITY (INDIAN NATION, CHOICE OF LAW PROVISIONS OF CONTRACT DID NOT CONSTITUTE AN UNAMBIGUOUS WAIVER OF SOVEREIGN IMMUNITY, THE INDIAN NATION WAS IMMUNE FROM SUIT IN THIS BREACH OF CONTRACT ACTION)

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A HEARING IS NECESSARY TO DETERMINE WHETHER A POSTNUPTIAL AGREEMENT IS UNCONSCIONABLE, CRITERIA EXPLAINED.

The Second Determined a hearing was necessary to determine whether a postnuptial agreement, which appeared to strip the wife of her assets, was unconscionable. The court explained the relevant law:

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Postnuptial agreements are contracts which require consideration … . Although postnuptial agreements are generally subject to ordinary principles of contract law … , the parties, as husband and wife, have a fiduciary relationship to each other … .To warrant equity’s intervention, no actual fraud need be shown, for relief will be granted if the settlement is manifestly unfair to a spouse because of the other’s overreaching … . A motion to set aside an agreement between spouses may be denied without a hearing if the agreement is fair on its face… .

Here, it cannot be said that the agreement is fair on its face. It appears from the record that the defendant has received no benefit from the agreement. It also appears that she relinquished all assets of the marriage, along with her inheritance rights and right to spousal support. Where an agreement appears to be so one-sided and unfair that no rational person exercising common sense would make it, and no fair and honest person would accept it, there should be a hearing to determine whether the agreement is unconscionable in substance … . Further, the circumstances under which the agreement was executed must be examined … A reviewing court examining a challenge to a postnuptial agreement will view the agreement in its entirety and under the totality of the circumstances… . Without a hearing to determine the totality of the circumstances, including the extent of the parties’ assets, and the circumstances surrounding the execution of the agreement, it cannot be determined on this record whether equity should intervene to invalidate the parties’ agreement. Barclay v Barclay, 2017 NY Slip Op 04414, 2nd Dept 6-7-17

 

FAMILY LAW (POSTNUPTIAL AGREEMENT, A HEARING IS NECESSARY TO DETERMINE WHETHER A POSTNUPTIAL AGREEMENT IS UNCONSCIONABLE, CRITERIA EXPLAINED)/CONTRACT LAW (FAMILY LAW, POSTNUPTIAL AGREEMENT, A HEARING IS NECESSARY TO DETERMINE WHETHER A POSTNUPTIAL AGREEMENT IS UNCONSCIONABLE, CRITERIA EXPLAINED)/POSTNUPTIAL AGREEMENT (UNCONSCIONABLE, A HEARING IS NECESSARY TO DETERMINE WHETHER A POSTNUPTIAL AGREEMENT IS UNCONSCIONABLE, CRITERIA EXPLAINED)

PLAINTIFF DEEMED TO HAVE READ AND UNDERSTOOD THE SETTLEMENT DOCUMENT BEFORE SIGNING, LEGAL MALPRACTICE COMPLAINT AGAINST HER ATTORNEYS PROPERLY DISMISSED.

The Second Department determined plaintiff’s legal malpractice and fraudulent concealment complaint against her prior attorneys was properly dismissed. Plaintiff alleged she was not aware a document she signed settled a lawsuit for $200,000. The court explained she was deemed to have read and understood the document before signing it:

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” A party is under an obligation to read a document before he or she signs it, and a party cannot generally avoid the effect of a [document] on the ground that he or she did not read it or know its contents'” … . Generally, a cause of action alleging that the plaintiff was induced to sign something different from what he or she thought was being signed only arises if the signer is illiterate, blind, or not a speaker of the language in which the document is written … . Here, the … defendants established their prima facie entitlement to judgment as a matter of law dismissing the causes of action asserted against the … firm … by presenting evidence that the plaintiff could read and understand English, that she had the opportunity to read the document dated June 10, 2009, which expressly stated that she was accepting $200,000 “as full and final compensation for her loss of services claim,” and that she never expressed any difficulty understanding the terms of the document … . In opposition, the plaintiff failed to raise a triable issue of fact as to whether she was incapable of understanding the document signed by her based on her conclusory testimony that “[n]o one . . . explained [it] to me.” Anderson v Dinkes & Schwitzer, P.C., 2017 NY Slip Op 03721, 2nd Dept 5-19-17

CONTRACT LAW (PLAINTIFF DEEMED TO HAVE READ AND UNDERSTOOD THE SETTLEMENT DOCUMENT BEFORE SIGNING, LEGAL MALPRACTICE COMPLAINT AGAINST HER ATTORNEYS PROPERLY DISMISSED)

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AFTER FATHER’S DEATH, SON COULD NOT SEEK AN INJUNCTION AGAINST MOTHER AND SUE MOTHER FOR BREACH OF CONTRACT BASED UPON MOTHER AND FATHER’S AGREEMENT NOT TO MODIFY OR REVOKE THEIR WILLS WITHOUT THE MUTUAL CONSENT OF THE PARTIES.

The Second Department determined plaintiff-son’s complaint seeking an injunction prohibiting his mother (defendant) from transferring any property mother inherited from father (Vitus) was properly dismissed. Mother and father, by contract, agreed not to modify or revoke their wills without the “mutual written consent of the parties.” The court found there was no contractual impediment to mother’s transferring (the inherited) property after father’s death and plaintiff could not maintain a breach of contract action during defendant’s lifetime:

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Contrary to the plaintiff’s contention, there is nothing in the unambiguous language of the agreement which prevents the defendant from making inter vivos gifts or transfers of assets she inherited from Vitus’s residuary estate … . Accordingly, the Supreme Court correctly, pursuant to CPLR 3211(a)(1), directed dismissal of the causes of action for injunctive relief and breach of contract to the extent that they are based on any past and future inter vivos transfers of any property inherited by the defendant from Vitus’s residuary estate.

Accepting the facts as alleged in the complaint as true, and according the plaintiff the benefit of every possible favorable inference (see CPLR 3211[a][7] …), the Supreme Court correctly directed the dismissal of the complaint to the extent that it sought to enjoin the defendant from breaching the agreement by revoking or modifying her will or executing a new will. During the defendant’s lifetime, the plaintiff is precluded from maintaining an action predicated upon a breach of the agreement as it relates to the defendant’s promise not to revoke or modify her will or execute a new will … . Tretter v Tretter, 2017 NY Slip Op 03982, 2nd Dept 5-17-17

 

TRUSTS AND ESTATES (AFTER FATHER’S DEATH, SON COULD NOT SEEK AN INJUNCTION AGAINST MOTHER AND SUE MOTHER FOR BREACH OF CONTRACT BASED UPON MOTHER AND FATHER’S AGREEMENT NOT TO MODIFY OR REVOKE THEIR WILLS WITHOUT THE MUTUAL CONSENT OF THE PARTIES)/CONTRACT LAW (TRUSTS AND ESTATES, AFTER FATHER’S DEATH, SON COULD NOT SEEK AN INJUNCTION AGAINST MOTHER AND SUE MOTHER FOR BREACH OF CONTRACT BASED UPON MOTHER AND FATHER’S AGREEMENT NOT TO MODIFY OR REVOKE THEIR WILLS WITHOUT THE MUTUAL CONSENT OF THE PARTIES)

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ALTHOUGH MOST OF THE CAUSES OF ACTION STEMMING FROM THE PURCHASE OF RESIDENTIAL MORTGAGE-BACKED SECURITIES WERE TIME-BARRED, A LIMITED BACKSTOP GUARANTY CAUSE OF ACTION AND A FAILURE TO NOTIFY CAUSE OF ACTION WERE REINSTATED.

The First Department, in a full-fledged opinion by Justice Moskowitz, reinstated a couple of causes of action in a lawsuit stemming from the purchase of residential mortgage-backed securities, the bulk of which was deemed time-barred. A limited backstop guaranty cause of action and a cause of action stemming from the failure to notify of a material breach were reinstated. The intertwined contracts and guarantees and the legal reasoning stemming from recent similar cases are too detailed to fairly summarize here. Bank of N.Y. Mellon v WMC Mtge., LLC, 2017 NY Slip Op 03881, 1st Dept 5-11-17

 

SECURITIES (RESIDENTIAL MORTGAGE-BACKED SECURITIES, ALTHOUGH MOST OF THE CAUSES OF ACTION STEMMING FROM THE PURCHASE OF RESIDENTIAL MORTGAGE-BACKED SECURITIES WERE TIME-BARRED, A LIMITED BACKSTOP GUARANTY CAUSE OF ACTION AND A FAILURE TO NOTIFY CAUSE OF ACTION WERE REINSTATED)/CONTRACT LAW (RESIDENTIAL MORTGAGE-BACKED SECURITIES, ALTHOUGH MOST OF THE CAUSES OF ACTION STEMMING FROM THE PURCHASE OF RESIDENTIAL MORTGAGE-BACKED SECURITIES WERE TIME-BARRED, A LIMITED BACKSTOP GUARANTY CAUSE OF ACTION AND A FAILURE TO NOTIFY CAUSE OF ACTION WERE REINSTATED)/RESIDENTIAL MORTGAGE-BACKED SECURITIES (RESIDENTIAL MORTGAGE-BACKED SECURITIES, ALTHOUGH MOST OF THE CAUSES OF ACTION STEMMING FROM THE PURCHASE OF RESIDENTIAL MORTGAGE-BACKED SECURITIES WERE TIME-BARRED, A LIMITED BACKSTOP GUARANTY CAUSE OF ACTION AND A FAILURE TO NOTIFY CAUSE OF ACTION WERE REINSTATED)/CIVIL PROCEDURE (RESIDENTIAL MORTGAGE-BACKED SECURITIES, ALTHOUGH MOST OF THE CAUSES OF ACTION STEMMING FROM THE PURCHASE OF RESIDENTIAL MORTGAGE-BACKED SECURITIES WERE TIME-BARRED, A LIMITED BACKSTOP GUARANTY CAUSE OF ACTION AND A FAILURE TO NOTIFY CAUSE OF ACTION WERE REINSTATED)

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ORAL OFFER TO SELL SHARES IN FAMILY CORPORATION FORMED SOLELY TO OWN ONE PIECE OF REAL PROPERTY WAS SUBJECT TO THE STATUTE OF FRAUDS, THE WRITING REQUIREMENT WAS NOT REMOVED BY PART PERFORMANCE. 

The Third Department determined defendant’s oral offer to sell to plaintiff her shares in a family corporation (SEI) formed solely to hold one piece of property (Beach Cove) as its single asset was subject to the statute of frauds (and therefore unenforceable). The court further found that certain actions, like opening a bank account, did not amount to part performance sufficient to overcome the writing requirement of the statute of frauds:

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SEI was a single-asset corporation — that single asset being its ownership of Beach Cove — and, inasmuch as the alleged oral agreement involved the sale of plaintiff’s shares of stock in a corporation whose only asset was an interest in real property, the statute of frauds indeed applied here … . As the alleged oral agreement was not reduced to writing, plaintiff could avoid application of the statute of frauds only if her conduct fell within the part performance exception. In this regard, while the actions upon which plaintiff relies — i.e., opening a bank account in anticipation of a wire transfer of funds from defendant, retrieving her SEI stock certificates to relinquish to defendant, hiring an attorney to coordinate with defendant and/or reduce the alleged oral agreement to writing, timely removing her personal possessions from Beach Cove and promptly vacating the premises in accordance with defendant’s alleged wishes — are consistent with plaintiff’s assertion that she and defendant had a deal to sell plaintiff’s shares in SEI to defendant for $900,000, such actions are not unequivocally referable to — or unintelligible without reference to — the alleged oral agreement, nor so substantial in quality to irremediably alter the situation. Wells v Hodgkins, 2017 NY Slip Op 03824, 3rd Dept 5-11-17

CONTRACT LAW (ORAL OFFER TO SELL SHARES IN FAMILY CORPORATION FORMED SOLELY TO OWN ONE PIECE OF REAL PROPERTY WAS SUBJECT TO THE STATUTE OF FRAUDS, THE WRITING REQUIREMENT WAS NOT REMOVED BY PART PERFORMANCE)/REAL PROPERTY (ORAL OFFER TO SELL SHARES IN FAMILY CORPORATION FORMED SOLELY TO OWN ONE PIECE OF REAL PROPERTY WAS SUBJECT TO THE STATUTE OF FRAUDS, THE WRITING REQUIREMENT WAS NOT REMOVED BY PART PERFORMANCE)/STATUTE OF FRAUDS (ORAL OFFER TO SELL SHARES IN FAMILY CORPORATION FORMED SOLELY TO OWN ONE PIECE OF REAL PROPERTY WAS SUBJECT TO THE STATUTE OF FRAUDS, THE WRITING REQUIREMENT WAS NOT REMOVED BY PART PERFORMANCE)/CORPORATION LAW  (ORAL OFFER TO SELL SHARES IN FAMILY CORPORATION FORMED SOLELY TO OWN ONE PIECE OF REAL PROPERTY WAS SUBJECT TO THE STATUTE OF FRAUDS, THE WRITING REQUIREMENT WAS NOT REMOVED BY PART PERFORMANCE)

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RELEASE REFERRED ONLY TO INJURIES SUFFERED BY DEFENDANT AND THEREFORE DID NOT PRECLUDE A SUIT STEMMING FROM INJURIES TO ANOTHER.

The Third Department, reversing Supreme Court, determined a release referred only to claims arising from injuries suffered by defendant, and not injuries suffered by another:

In March 2013, third-party defendant John Salewski, while operating a tractor trailer owned by his employer and third-party defendant Werner Enterprises, Inc., was involved in a collision with a tractor trailer operated by defendant. Plaintiff is Salewski’s wife and was a passenger in the vehicle operated by Salewski at the time of the accident. Defendant commenced a personal injury action against Salewski and Werner for damages allegedly sustained in that accident. That action was settled in June 2014, and, in connection therewith, defendant executed a general release in favor of Salewski and Werner. In April 2015, plaintiff commenced this action against defendant for damages that she allegedly sustained as a result of the accident. Defendant answered and thereafter commenced a third-party action for contribution and indemnification against Salewski and Werner. Instead of answering, Salewski and Werner moved to dismiss the third-party complaint pursuant to CPLR 3211 (a) (5) on the ground of release. Supreme Court granted the motion, holding that the plain language of the release barred the third-party action. * * *

Here, the release clearly defines the incident, the claim and the lawsuit. The fact that there are multiple references to the term “injuries” indicates an unambiguous intention to limit the release’s application only to the personal injuries suffered by defendant in the incident. We further find this language to be a clear and unambiguous expression of the parties’ intention that the release applies only to claims related to defendant’s injuries. As such, and giving full meaning and effect to its material provisions, the release plainly manifests an intent to release Salewski and Werner for any and all claims related to defendant’s personal injuries, and not to claims for contribution and indemnification for injuries allegedly suffered by another party — here, plaintiff … . Salewski v Music, 2017 NY Slip Op 03582, 3rd Dept 5-5-17

 

CONTRACT LAW (RELEASE REFERRED ONLY TO INJURIES SUFFERED BY DEFENDANT AND THEREFORE DID NOT PRECLUDE A SUIT STEMMING FROM INJURIES TO ANOTHER)/NEGLIGENCE (RELEASE REFERRED ONLY TO INJURIES SUFFERED BY DEFENDANT AND THEREFORE DID NOT PRECLUDE A SUIT STEMMING FROM INJURIES TO ANOTHER)/RELEASES (RELEASE REFERRED ONLY TO INJURIES SUFFERED BY DEFENDANT AND THEREFORE DID NOT PRECLUDE A SUIT STEMMING FROM INJURIES TO ANOTHER)

CAUSE OF ACTION FOR MONEY HAD AND RECEIVED SHOULD NOT HAVE BEEN DISMISSED.

The Second Department, reversing (modifying) Supreme Court, determined the cause of action for money had and received should not have been dismissed. Plaintiff alleged he gave the proceeds of an annuity to his sister (defendant) for safe-keeping (in her bank account) until he decided how to dispose of it. The agreement was oral but the cause of action was in the nature of quasi-contract (unjust enrichment) and was therefore not barred by the statute of frauds:

“The essential elements of a cause of action for money had and received are (1) the defendant received money belonging to the plaintiff, (2) the defendant benefitted from receipt of the money, and (3) under principles of equity and good conscience, the defendant should not be permitted to keep the money. The action depends upon equitable principles in the sense that broad considerations of right, justice and morality apply to it” … .

Here, the plaintiff alleged sufficient facts to assert a cause of action for money had and received. The complaint alleges that the defendant received a benefit when she received the proceeds of the plaintiff’s surrendered annuity, with the understanding that the defendant would keep those proceeds safe while the plaintiff determined how he wanted to dispose of the funds … . Contrary to the defendant’s contention, a plaintiff need not allege malice to state a cause of action for money had and received … . Litvinoff v Wright, 2017 NY Slip Op 03501, 2nd Dept 5-3-17

 

CONTRACT BETWEEN NYU AND A PHARMACEUTICAL COMPANY CONCERNING THE DEVELOPMENT OF A CANCER-INHIBITING DRUG IS AMBIGUOUS, NYU’S COMPLAINT SEEKING ROYALTIES SHOULD NOT HAVE BEEN DISMISSED.

The First Department, in a full-fledged opinion by Justice Andrias, over a two-justice dissenting opinion, reversing Supreme Court, determined the terms of a contract between New York University (NYU) and a pharmaceutical company were ambiguous. Therefore NYU’s complaint seeking royalties for its role in the development of a cancer-inhibiting drug should not have been dismissed. The language of the contract is too technical to fairly summarize here. New York Univ. v Pfizer Inc., 2017 NY Slip Op 03464, 1st Dept. 5-2-17

 

CONTACT LAW (CONTRACT BETWEEN NYU AND A PHARMACEUTICAL COMPANY CONCERNING THE DEVELOPMENT OF A CANCER-INHIBITING DRUG IS AMBIGUOUS, NYU’S COMPLAINT SEEKING ROYALTIES SHOULD NOT HAVE BEEN DISMISSED)/AMBIGUITY (CONTRACT LAW, CONTRACT BETWEEN NYU AND A PHARMACEUTICAL COMPANY CONCERNING THE DEVELOPMENT OF A CANCER-INHIBITING DRUG IS AMBIGUOUS, NYU’S COMPLAINT SEEKING ROYALTIES SHOULD NOT HAVE BEEN DISMISSED)

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NO OUT-OF-POCKET LOSS ALLEGED, FRAUDULENT INDUCEMENT CAUSE OF ACTION PROPERLY DISMISSED FOR FAILURE TO STATE A CAUSE OF ACTION.

The Court of Appeals, in a full-fledged opinion by Judge Rivera, determined plaintiff chef’s failure to allege out-of-pocket loss in this fraudulent inducement action required dismissal of the complaint for failure to state a cause of action. Plaintiff was hired by defendant restaurant (Chipotle) to develop a ramen restaurant chain. Plaintiff was an at will employee by the terms of his contract. All went well until plaintiff was told defendant had contracted with another chef for the same service, the deal had fallen apart, and the other chef would sue upon the opening of the ramen restaurant. Plaintiff was fired after confronting defendant about the deal with the other chef. Plaintiff alleged he was fraudulently induced to contract with Chipotle in that he never would have entered the agreement had he been informed of the failed deal with the other chef:

In New York, as in multiple other states, “‘[t]he true measure of damage is indemnity for the actual pecuniary loss sustained as the direct result of the wrong’ or what is known as the ‘out-of-pocket’ rule” … . Under that rule, “[d]amages are to be calculated to compensate plaintiffs for what they lost because of the fraud, not to compensate them for what they might have gained . . . . [T]here can be no recovery of profits which would have been realized in the absence of fraud” … . Moreover, this Court has “consistent[ly] refus[ed] to allow damages for fraud based on the loss of a contractual bargain, the extent, and indeed . . . the very existence of which is completely undeterminable and speculative” … . Connaughton v Chipotle Mexican Grill, Inc., 2017 NY Slip Op 03445, CtApp 5-2-17

FRAUD (NO OUT-OF-POCKET LOSS ALLEGED, FRAUDULENT INDUCEMENT CAUSE OF ACTION PROPERLY DISMISSED FOR FAILURE TO STATE A CAUSE OF ACTION)/CONTRACT LAW (FRAUDULENT INDUCEMENT, NO OUT-OF-POCKET LOSS ALLEGED, FRAUDULENT INDUCEMENT CAUSE OF ACTION PROPERLY DISMISSED FOR FAILURE TO STATE A CAUSE OF ACTION)/FRAUDULENT INDUCEMENT (CONTRACT LAW, NO OUT-OF-POCKET LOSS ALLEGED, FRAUDULENT INDUCEMENT CAUSE OF ACTION PROPERLY DISMISSED FOR FAILURE TO STATE A CAUSE OF ACTION)/EMPLOYMENT LAW (FRAUDULENT INDUCEMENT, CONTRACT LAW, NO OUT-OF-POCKET LOSS ALLEGED, FRAUDULENT INDUCEMENT CAUSE OF ACTION PROPERLY DISMISSED FOR FAILURE TO STATE A CAUSE OF ACTION)

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