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DISCLAIMER IN SUBCONTRACT IS AMBIGUOUS, MOTION TO DISMISS FRAUD COUNTERCLAIM BASED UPON THE DISCLAIMER SHOULD NOT HAVE BEEN GRANTED.

The Fourth Department, reversing Supreme Court, determined there was a question of fact whether a disclaimer in a subcontract precluded the fraud counterclaim. The court further determined the fraud counterclaim was not duplicative of the breach of contract counterclaim and the fraud counterclaim was pled with sufficient specificity. Plaintiff, Pike, did concrete and steel construction work. Defendant subcontractor, Jersen, was hired to do masonry work:

The fraud counterclaim is the sole focus of this appeal. In that counterclaim, Jersen alleged that, before it began work on the project, Pike was informed by at least one of its other subcontractors that its substrate work was not “accurate, flat or level,” i.e., was deficient. Nevertheless, Pike represented to Jersen that the substrate work “had been erected in accordance with the contract requirements and was plumb, level, and true and that [Pike] had performed a professional survey of the structural steel to confirm the same.” Jersen alleged that Pike’s representations to Jersen “were false,” and that Pike “concealed and recklessly withheld from Jersen knowledge that the substrate was not dimensionally accurate, flat or level.” Additionally, Jersen alleged that Pike made those false representations “in order to deceive Jersen and induce Jersen to commence installation upon the substrate.” Jersen further alleged that it relied on Pike’s representations and would not have commenced installation of the masonry work had Pike not misrepresented to Jersen that the substrate had been installed in accordance with the contract requirements. According to Jersen, it suffered damages as a result of its reliance on Pike’s false representations. * * *

We conclude that the subcontract is ambiguous whether the disclaimer clause in section 1.8 precludes Jersen from relying on any opinions or representations concerning work performed by others after Jersen executed the subcontract, and thus that section 1.8 does not “conclusively establish[ ] a defense” to the counterclaim for fraud … . Pike Co., Inc. v Jersen Constr. Group, LLC, 2017 NY Slip Op 01116, 4th Dept 2-10-17

CONTRACT LAW (DISCLAIMER IN SUBCONTRACT IS AMBIGUOUS, MOTION TO DISMISS FRAUD COUNTERCLAIM BASED UPON THE DISCLAIMER SHOULD NOT HAVE BEEN GRANTED)/FRAUD (DISCLAIMER IN SUBCONTRACT IS AMBIGUOUS, MOTION TO DISMISS FRAUD COUNTERCLAIM BASED UPON THE DISCLAIMER SHOULD NOT HAVE BEEN GRANTED)/DISCLAIMER (CONTRACT LAW, FRAUD, DISCLAIMER IN SUBCONTRACT IS AMBIGUOUS, MOTION TO DISMISS FRAUD COUNTERCLAIM BASED UPON THE DISCLAIMER SHOULD NOT HAVE BEEN GRANTED)

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ETHICAL VIOLATION CANNOT BE USED AS A SWORD TO AVOID PAYMENT OF ATTORNEY’S FEE; BECAUSE TRIAL PREPARATION NOT NECESSARY, LOWER ATTORNEY’S-FEE PERCENTAGE APPLIED.

The Court of Appeals, in a full-fledged opinion by Judge DiFiore, determined the fee arrangement contracts between plaintiff's attorney, Menkes, and two attorneys Menkes contracted with for assistance, Manheimer and Golomb, should be enforced according to standard prinicples of contract interpretation. Menkes argued that Manheimer was not entitled to payment because the clients were never informed (by Menkes) of Manheimer's involvement (an ethical violation). Golomb argued he was entitled to 40% of the fees because the matter did not settle at the mediation session. The Court of Appeals determined the 40% term only applied if it became necessary to prepare for trial (the case settled before trial preparation):

Menkes's attempt to use the ethical rules as a sword to render unenforceable, as between the two attorneys, the agreements with Manheimer that she herself drafted is unavailing. Her failure to inform her clients of Manheimer's retention, while a serious ethical violation, does not allow her to avoid otherwise enforceable contracts under the circumstances of this case … . * * *

Here, the mediator and Golomb communicated in the days following the May 20 mediation session, with the mediator continuing to act as go-between. Ten days after the session, the mediator communicated the final $8 million offer, which Golomb accepted. Reading the agreement as a whole, the plain language of the agreement entitles Golomb to 12% of net attorneys' fees. Marin v Constitution Realty, LLC, 2017 NY Slip Op 01019, CtApp 2-9-17

ATTORNEYS (FEES, ETHICAL VIOLATION CANNOT BE USED AS A SWORD TO AVOID PAYMENT OF ATTORNEY'S FEE, BECAUSE TRIAL PREPARATION NOT NECESSARY, LOWER ATTORNEY'S-FEE PERCENTAGE APPLIED)/CONTRACT LAW (ATTORNEY'S FEES, ETHICAL VIOLATION CANNOT BE USED AS A SWORD TO AVOID PAYMENT OF ATTORNEY'S FEE, BECAUSE TRIAL PREPARATION NOT NECESSARY, LOWER ATTORNEY'S-FEE PERCENTAGE APPLIED)

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PLAINTIFF ENTITLED TO SUMMARY JUDGMENT ON HIS LABOR LAW 240 (1) CLAIM; QUESTION OF FACT WHETHER INDEMNIFICATION AGREEMENT WAS INTENDED TO BE EFFECTIVE RETROACTIVELY.

The Second Department, reversing Supreme Court, determined plaintiff was entitled to summary judgment on his Labor Law 240 (1) cause of action. Plaintiff, who was not wearing a harness, had fallen through a skylight. The anchor points for harnesses had not yet been installed. The employer’s motion for summary judgment dismissing the property owner’s third-party complaint seeking indemnification was, however, properly denied. The Workers’ Compensation Law allows suit only when the injury is grave (not so here) or where there is a written indemnification agreement. Here there was an indemnification agreement entered after the accident. There was a question of fact whether the agreement was intended to be effective retroactively:

Here, the plaintiff established his prima facie entitlement to judgment as a matter of law by submitting evidence that he was not provided with necessary protection from the gravity-related risk of his work and that the absence of the necessary protection was a proximate cause of his injuries … .

… An employer may be held liable for contribution or indemnification only when its employee has sustained a grave injury as defined by the Workers’ Compensation Law or when there is a “written contract entered into prior to the accident or occurrence by which the employer had expressly agreed to contribution or indemnification of the claimant” … . The Workers’ Compensation Law does not bar indemnification or contribution pursuant to a written agreement that was entered into after the employee’s injury and which the parties agree will have retroactive effect … . “[I]ndemnity contracts are to be strictly construed to avoid reading into them duties which the parties did not intend to be assumed” … . Therefore, an indemnity contract will not be held to have retroactive effect “unless by its express words or necessary implication it clearly appears to be the parties’ intention to include past obligations” … . Cacanoski v 35 Cedar Place Assoc., LLC, 2017 NY Slip Op 00956, 2nd Dept 2-8-17

 

LABOR LAW-CONSTRUCTION LAW (PLAINTIFF ENTITLED TO SUMMARY JUDGMENT ON HIS LABOR LAW 240 (1) CLAIM, QUESTION OF FACT WHETHER INDEMNIFICATION AGREEMENT WAS INTENDED TO BE EFFECTIVE RETROACTIVELY)/WORKERS’ COMPENSATION LAW (PLAINTIFF ENTITLED TO SUMMARY JUDGMENT ON HIS LABOR LAW 240 (1) CLAIM, QUESTION OF FACT WHETHER INDEMNIFICATION AGREEMENT WAS INTENDED TO BE EFFECTIVE RETROACTIVELY)/CONTRACT LAW (WORKERS’ COMPENSATION LAW, INDEMNIFICATION AGREEMENT, QUESTION OF FACT WHETHER INDEMNIFICATION AGREEMENT WAS INTENDED TO BE EFFECTIVE RETROACTIVELY)

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NO DEMONSTRATION A PARTICULAR INTERPRETATION OF AN AMBIGUOUS CONTRACT WAS THE ONLY FAIR INTERPRETATION; THEREFORE MOTIONS FOR SUMMARY JUDGMENT WERE PROPERLY DENIED.

The Fourth Department, over a two-justice dissent, determined motions for summary judgment in this contract-interpretation case were properly denied. The contract at issue was an operating agreement for plaintiff limited liability company. Both the majority and the dissent found the contract language ambiguous. The majority concluded reference to extrinsic evidence was necessary, precluding summary judgment. The dissent argued plaintiffs had shown their interpretation was the only fair interpretation:

“It is well settled that a contract must be read as a whole to give effect and meaning to every term . . . Indeed, [a] contract should be interpreted in a way [that] reconciles all [of] its provisions, if possible’ ” … . Therefore, “[e]ffect and meaning must be given to every term of the contract . . . , and reasonable effort must be made to harmonize all of its terms” … . It is equally well settled that “[t]he interpretation of an unambiguous contractual provision is a function for the court . . . , and [t]he proper inquiry in determining whether a contract is ambiguous is whether the agreement on its face is reasonably susceptible of more than one interpretation . . . To be entitled to summary judgment, the moving party has the burden of establishing that its construction of the [contract] is the only construction [that] can fairly be placed thereon” … .

Here, neither party established that its interpretation of the Agreement is the only reasonable interpretation thereof … . Consequently, summary judgment is inappropriate at this juncture because a “determination of the intent of the parties depends on the credibility of extrinsic evidence or on a choice among reasonable inferences to be drawn from extrinsic evidence” … . Maven Tech., LLC v Vasile, 2017 NY Slip Op 00840, 4th Dept 2-3-17

 

CONTRACT LAW (NO DEMONSTRATION A PARTICULAR INTERPRETATION OF AN AMBIGUOUS CONTRACT WAS THE ONLY FAIR INTERPRETATION; THEREFORE MOTIONS FOR SUMMARY JUDGMENT WERE PROPERLY DENIED)/AMBIGUOUS CONTRACT TERMS (NO DEMONSTRATION A PARTICULAR INTERPRETATION OF AN AMBIGUOUS CONTRACT WAS THE ONLY FAIR INTERPRETATION; THEREFORE MOTIONS FOR SUMMARY JUDGMENT WERE PROPERLY DENIED)

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HEATING AGREEMENT WAS A COVENANT WHICH RUNS WITH THE LAND, ORAL WAIVER MAY BE VALID DESPITE WRITING REQUIREMENT IN THE COVENANT.

The First Department determined there was a question of fact whether plaintiff building owner waived a heating agreement, which was a covenant running with the land. The covenant obligated defendant to provide heat to plaintiff’s building as long as both buildings existed. The fact that the covenant required any waiver to be in writing was not dispositive. Oral waivers may be valid:

The motion court correctly concluded that the obligation undertaken by the previous owners of a building, currently owned by defendant, to provide steam heat to adjacent buildings, including one owned by plaintiff, as reflected in a written agreement between the previous owners of defendant’s building and the previous owners of the adjacent buildings (Heating Agreement), which was recorded in the Office of the City Register of the City of New York, is a covenant running with the land. Accordingly, it is binding on defendant so long as both buildings are in existence … . * * *

In this case, the agreement provides that “in the event the owner of any of said parcels [including plaintiff] shall elect to terminate and cancel this agreement with respect to said parcel, which election shall be made by written notice to the owner of Parcel I [currently, defendant], then this agreement shall end and terminate with respect to any such parcel as of . . . the date when notice of election to cancel is given.”

Plaintiff’s contention that this language precludes its waiver of the covenant by any means other than a writing is misplaced. “[A] contracting party may orally waive enforcement of a contract term notwithstanding a provision to the contrary in the agreement. Such waiver may be evinced by words or conduct, including partial performance” … . Here, the record reflects that a representative of plaintiff orally advised a member of defendant’s coop board that plaintiff would install its own boiler to provide heat to its own building independently. Condor Funding, LLC v 176 Broadway Owners Corp., 2017 NY Slip Op 00719, 1st Dept 2-2-17

 

CONTRACT LAW (COVENANT RUNNING WITH THE LAND, HEATING AGREEMENT WAS A COVENANT WHICH RUNS WITH THE LAND, ORAL WAIVER MAY BE VALID DESPITE WRITING REQUIREMENT IN THE COVENANT)/CONTRACT LAW (WAIVER, HEATING AGREEMENT WAS A COVENANT WHICH RUNS WITH THE LAND, ORAL WAIVER MAY BE VALID DESPITE WRITING REQUIREMENT IN THE COVENANT)/REAL PROPERTY LAW (COVENANT RUNNING WITH THE LAND, HEATING AGREEMENT WAS A COVENANT WHICH RUNS WITH THE LAND, ORAL WAIVER MAY BE VALID DESPITE WRITING REQUIREMENT IN THE COVENANT)/COVENANT RUNNING WITH THE LAND (HEATING AGREEMENT WAS A COVENANT WHICH RUNS WITH THE LAND, ORAL WAIVER MAY BE VALID DESPITE WRITING REQUIREMENT IN THE COVENANT)

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COUNTY NOT IMMUNE FROM SUIT ALLEGING NEGLIGENT MAINTENANCE OF DRAINAGE SYSTEM; INDEPENDENT CONTRACTOR MAY BE LIABLE FOR LAUNCHING AN INSTRUMENT OF HARM; FLOOD DAMAGE RESULTED FROM DREDGING OPERATION.

The Second Department determined the county was not entitled to summary judgment on governmental immunity grounds and an independent contractor for the county was not entitled to summary judgment because of the contractual relationship. Plaintiffs alleged the county and the contractor were negligent in dredging a pond resulting in flood damage. The county could be liable in ordinary negligence for maintenance of the drainage system (as opposed to design) and the subcontractor could be liable for launching an instrument of harm:

Although a governmental entity may be entitled to immunity from liability arising out of claims that it negligently designed a sewerage or storm drainage system … , the immunity does not extend to claims that it negligently maintained the system … . Here, even assuming the subject project fell within the ambit of a governmental function, the plaintiffs contend that the County was negligent, inter alia, in its maintenance of the pond and oversight of the dredging operations. * * *

Generally, an independent contractor owes no tort duty of care to third parties … . However, there are “three situations in which a party who enters into a contract to render services may be said to have assumed a duty of care—and thus be potentially liable in tort—to third persons … where the contracting party, in failing to exercise reasonable care in the performance of his duties, launches a force or instrument of harm … . Nachamie v County of Nassau, 2017 NY Slip Op 00657, 2nd Dept 2-1-17

MUNICIPAL LAW (COUNTY NOT IMMUNE FROM SUIT ALLEGING NEGLIGENT MAINTENANCE OF DRAINAGE SYSTEM, INDEPENDENT CONTRACTOR MAY BE LIABLE FOR LAUNCHING AN INSTRUMENT OF HARM, FLOOD DAMAGE RESULTED FROM DREDGING OPERATION)/NEGLIGENCE (COUNTY NOT IMMUNE FROM SUIT ALLEGING NEGLIGENT MAINTENANCE OF DRAINAGE SYSTEM, INDEPENDENT CONTRACTOR MAY BE LIABLE FOR LAUNCHING AN INSTRUMENT OF HARM, FLOOD DAMAGE RESULTED FROM DREDGING OPERATION)/IMMUNITY (COUNTY NOT IMMUNE FROM SUIT ALLEGING NEGLIGENT MAINTENANCE OF DRAINAGE SYSTEM, INDEPENDENT CONTRACTOR MAY BE LIABLE FOR LAUNCHING AN INSTRUMENT OF HARM, FLOOD DAMAGE RESULTED FROM DREDGING OPERATION)/CONTRACT LAW (INDEPENDENT CONTRACTOR MAY BE LIABLE FOR LAUNCHING AN INSTRUMENT OF HARM, FLOOD DAMAGE RESULTED FROM DREDGING OPERATION)

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DEUTSCHE BANK BREACHED CREDIT DEFAULT SWAP AGREEMENTS.

The First Department, in a decision too detailed to fairly summarize here, determined the defendant Deutsche Bank breached credit default swap agreements with plaintiff Good Hill Master Fund. Good Hill was found to have acted in good faith and in a commercially reasonable manner in negotiating the price of the notes at issue. In addition Supreme Court did not abuse its discretion in prohibiting expert testimony offered by Deutsche Bank because interpretation of the contracts was within the ken of the trial judge:

We find no basis to disturb the court’s determination that Deutsche Bank breached the credit default swap agreements at issue here … . As the trial court found in awarding judgment in Good Hill’s favor, Good Hill negotiated at arm’s length with Bank of America to sell six tranches of notes the Bank had previously sold Good Hill at $.29 on the dollar, so that the Bank of America could unwind and terminate a securitization in the then-declining mortgage market. Bank of America’s resulting writedown of the B6 notes would trigger a negative credit event under the swap agreements. As a result, Good Hill negotiated with Bank of America to forgive only 17% of the principal amount, resulting in a smaller payout to Deutsche Bank under the swap agreements, as opposed to forgiving principal of 71% across the board on all the tranches of notes based on the $.29 purchase price. Bank of America was free to accept or reject that 83% allocation and had rejected several prior proposals from Good Hill that would have resulted in no payment or an even smaller payment to Deutsche Bank. Good Hill Master Fund L.P. v Deutsche Bank AG, 2017 NY Slip Op 00428, 1st Dept 1-24-17

SECURITIES (DEUTSCHE BANK BREACHED CREDIT DEFAULT SWAP AGREEMENTS)/RESIDENTIAL MORTGAGE BACKED SECURITIES (CREDIT DEFAULT SWAP AGREEMENT, DEUTSCHE BANK BREACHED CREDIT DEFAULT SWAP AGREEMENTS)/CREDIT DEFAULT SWAP AGREEMENTS (DEUTXCHE BANK BREACHED CREDIT DEFAULT SWAP AGREEMENTS)/CONTRACT LAW (CREDIT DEFAULT SWAP AGREEMENT, DEUTSCHE BANK BREACHED CREDIT DEFAULT SWAP AGREEMENTS)/EVIDENCE (CONTRACT LAW, EXPERT TESTIMONY NOT NECESSARY TO INTERPRET CREDIT DEFAULT SWAP AGREEMENT)/EXPERT OPINION (CONTRACT LAW, EXPERT TESTIMONY NOT NECESSARY TO INTERPRET CREDIT DEFAULT SWAP AGREEMENT)

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APPELLATE COURT NEED NOT REVIEW ISSUES NOT SUPPORTED BY DOCUMENTS IN THE APPENDIX; COUPLING DECLARATORY JUDGMENT WITH SPECIFIC PERFORMANCE WAIVED RIGHT TO JURY TRIAL; FAITHLESS SERVANT DOCTRINE FORFEITED PLAINTIFF’S RIGHT TO A STOCK OPTION.

The Second Department determined (1) certain issues in plaintiff’s appeal could not be addressed because the necessary documents were not included in the appendix provided to the appellate court, (2) the faithless servant doctrine applied to plaintiff who, by his disloyalty, forfeited his contractual right to a stock option, and (3) the plaintiff waived his right to a jury trial in this declaratory judgment action:

This Court is not obligated to determine an issue where the appendix submitted to it is inadequate to permit review … . * * *

Where a plaintiff joins an equitable claim for specific performance to a legal claim for damages, the plaintiff waives the right to a jury trial … . “[A] declaratory judgment action . . . can be legal or equitable in nature, and to determine whether a party is entitled to a jury trial, it is necessary to examine which of the traditional actions would most likely have been used to present the instant claim had the declaratory judgment action not been created'” … .

Here, the Supreme Court correctly determined that the plaintiff’s declaratory judgment cause of action was in the nature of a prayer for specific performance … . Accordingly, the court correctly determined that the plaintiff had waived his right to a jury trial … .  * * *

… [T]he court properly applied the faithless servant doctrine and determined that, pursuant to that doctrine, the plaintiff forfeited the right to exercise the stock option … . Trimarco v Data Treasury Corp., 2017 NY Slip Op 00503, 2nd Dept 1-25-17

 

EMPLOYMENT LAW (FAITHLESS SERVANT DOCTRINE FORFEITED PLAINTIFF’S RIGHT TO A STOCK OPTION)/FAITHLESS SERVANT DOCTRINE (FAITHLESS SERVANT DOCTRINE FORFEITED PLAINTIFF’S RIGHT TO A STOCK OPTION)/CIVIL PROCEDURE (COUPLING DECLARATORY JUDGMENT WITH SPECIFIC PERFORMANCE WAIVED RIGHT TO JURY TRIAL)/DECLARATORY JUDGMENT (COUPLING DECLARATORY JUDGMENT WITH SPECIFIC PERFORMANCE WAIVED RIGHT TO JURY TRIAL)/SPECIFIC PERFORMANCE (COUPLING DECLARATORY JUDGMENT WITH SPECIFIC PERFORMANCE WAIVED RIGHT TO JURY TRIAL)/CONTRACT LAW (COUPLING DECLARATORY JUDGMENT WITH SPECIFIC PERFORMANCE WAIVED RIGHT TO JURY TRIAL)/JURY TRIAL (CIVIL, COUPLING DECLARATORY JUDGMENT WITH SPECIFIC PERFORMANCE WAIVED RIGHT TO JURY TRIAL)/APPEALS (APPELLATE COURT NEED NOT REVIEW ISSUES NOT SUPPORTED BY DOCUMENTS IN THE APPENDIX)

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IN A LAWSUIT BY EMPLOYERS AGAINST THE ADMINISTRATORS AND TRUSTEES OF A WORKERS’ COMPENSATION TRUST FOUND TO BE $188 MILLION IN DEBT, THE EMPLOYERS WERE DEEMED THIRD PARTY BENEFICIARIES OF THE CONTRACT BETWEEN THE ADMINISTRATORS AND THE TRUST, MANY OF THE EMPLOYERS’ NONCONTRACTUAL CLAIMS WERE PROPERLY DISMISSED AS DERIVATIVE (PERTAINING TO THE TRUST) RATHER THAN DIRECT.

In a case related to State of N.Y. Workers’ Compensation Bd. v Wang, 2017 NY Slip Op 00057, 3rd Dept 1-5-17, referenced immediately above, the Third Department, in a full-fledged opinion by Justice Garry (much too complex to summarize here), determined, inter alia, (1) the employer plaintiffs could sue as third-party beneficiaries of the contract between the workers’ compensation trust and its administrators, and (2) many of the employers’ noncontractual claims were properly dismissed as derivative, i.e., pertaining to the trust, rather than direct:

This Court recently held that an employer member of a group self-insured trust successfully alleges third-party beneficiary status by asserting “(1) the existence of a valid and binding contract between [the trust and its administrators], (2) that the contract was intended for [the employer member’s] benefit, and (3) that the benefit to [the employer member] is sufficiently immediate to indicate the assumption by [the trust and its administrators] of a duty to compensate it if the benefit is lost” … . * * *

Supreme Court dismissed many of [the noncontractual] causes of action upon determining that they belonged in the first instance to the trust rather than to the employer members and were thus derivative rather than direct. The distinction between derivative and direct claims is grounded upon the principle that a stockholder does not have an individual cause of action that derives from harm done to the corporation, but may bring a direct claim when “the wrongdoer has breached a duty owed directly to the shareholder which is independent of any duty owing to the corporation” … . In determining whether a claim is direct or derivative, a court must “look to the nature of the wrong and to whom the relief should go” and should consider “(1) who suffered the alleged harm (the corporation or the suing stockholders, individually); and (2) who would receive the benefit of any recovery or other remedy (the corporation or the stockholders, individually)” … . Accredited Aides Plus, Inc. v Program Risk Mgt., Inc., 2017 NY Slip Op 00058, 3rd Dept 1-5-17

 

WORKERS’ COMPENSATION LAW  (IN A LAWSUIT BY EMPLOYERS AGAINST THE ADMINISTRATORS AND TRUSTEES OF A WORKERS’ COMPENSATION TRUST FOUND TO BE $188 MILLION IN DEBT, THE EMPLOYERS WERE DEEMED THIRD PARTY BENEFICIARIES OF THE CONTRACT BETWEEN THE ADMINISTRATORS AND THE TRUST, MANY OF THE EMPLOYERS’ NONCONTRACTUAL CLAIMS WERE PROPERLY DISMISSED AS DERIVATIVE (PERTAINING TO THE TRUST) RATHER THAN DIRECT)/TRUSTS AND ESTATES (WORKERS’ COMPENSATION TRUST, IN A LAWSUIT BY EMPLOYERS AGAINST THE ADMINISTRATORS AND TRUSTEES OF A WORKERS’ COMPENSATION TRUST FOUND TO BE $188 MILLION IN DEBT, THE EMPLOYERS WERE DEEMED THIRD PARTY BENEFICIARIES OF THE CONTRACT BETWEEN THE ADMINISTRATORS AND THE TRUST, MANY OF THE EMPLOYERS’ NONCONTRACTUAL CLAIMS WERE PROPERLY DISMISSED AS DERIVATIVE (PERTAINING TO THE TRUST) RATHER THAN DIRECT)/CONTRACT LAW (WORKERS’ COMPENSATION TRUST, IN A LAWSUIT BY EMPLOYERS AGAINST THE ADMINISTRATORS AND TRUSTEES OF A WORKERS’ COMPENSATION TRUST FOUND TO BE $188 MILLION IN DEBT, THE EMPLOYERS WERE DEEMED THIRD PARTY BENEFICIARIES OF THE CONTRACT BETWEEN THE ADMINISTRATORS AND THE TRUST, MANY OF THE EMPLOYERS’ NONCONTRACTUAL CLAIMS WERE PROPERLY DISMISSED AS DERIVATIVE (PERTAINING TO THE TRUST) RATHER THAN DIRECT)

TERMS OF CONTRACT WERE NOT ABSOLUTE AND UNCONDITIONAL, MOTION TO DIMSISS BREACH AND REPUDIATION OF CONTRACT CAUSE OF ACTION SHOULD NOT HAVE BEEN GRANTED.

The First Department, over a two justice dissent, determined that the motion to dismiss the breach and repudiation of contract cause of action should not have been granted. The decision is fact-specific and cannot fairly be summarized here. In essence, plaintiff alleged the defendant did not have the right under the contract to refuse to cooperate in the settlement of a claim for the full amount.  The majority concluded the language of the contract did not provide defendant with an unconditional and absolute right to refuse to cooperate by refusing to agree to certain reassignments of claims as part of the settlement:

Characterizing the assignment of the … claims as absolute and unconditional, the dissent … would hold that plaintiff did not have a contractual right to compel [defendant] to reassign those claims to a third party as a condition of a settlement that attributed no value to them. However, contrary to these findings, the assignment was not absolute and unconditional … . Guidance Enhanced Green Terrain, LLC v Bank of Am. Merrill Lynch, 2017 NY Slip Op 00068, 1st Dept 1-5-17

CONTRACT LAW (TERMS OF CONTRACT WERE NOT ABSOLUTE AND UNCONDITIONAL, MOTION TO DIMSISS BREACH AND REPUDIATION OF CONTRACT CAUSE OF ACTION SHOULD NOT HAVE BEEN GRANTED)

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