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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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RE TIMELINESS OF CLAIMS ALLEGING DEFECTIVE MORTGAGES UNDERLYING RESIDENTIAL MORTGAGE BACKED SECURITIES, WHERE THE CONTRACT CALLS FOR TIMELY NOTICES OF BREACH, NO NOTICE OF BREACH REQUIRED WHERE DEFENDANT ITSELF DISCOVERS THE DEFECTIVE MORTGAGE.

The First Department, in a full-fledged opinion by Justice Gische, over a dissent, ruled on the timeliness of claims that defendant, GreenPoint Mortgage Funding, had breached representations and warranties regarding the quality of mortgages underlying residential mortgage backed securities (RMBS). The court determined the claims were timely with regard to defective mortgages discovered by the defendant itself, despite the absence of notices of breach. But the claims were not timely with respect to the defective mortgages discovered by the plaintiff but for which no timely notices of breach were provided:

The issues before us are related to the contractual requirement and sufficiency of notices of breach (breach notice). We consider whether a breach notice is required when the underlying contract claim is based upon a defendant’s independent discovery or knowledge of the nonconforming mortgages. We also consider whether an otherwise late breach notice can relate back in time to the commencement of the underlying action in order to avoid dismissal. … [W]e hold that the breach of contract claims based upon defendant’s alleged independent discovery or likely knowledge of nonconforming mortgage loans do not require breach notices to be sent before an action may be brought. We further hold that the doctrine of relation back does not save claims that do require that a breach notice be sent as a precondition to bringing an action. U.S. Bank N.A. v GreenPoint Mtge. Funding, Inc., 2016 NY Slip Op 08968, 1st Dept 12-29-16

SECURITIES (RE TIMELINESS OF CLAIMS ALLEGING DEFECTIVE MORTGAGES UNDERLYING RESIDENTIAL MORTGAGE BACKED SECURITIES, WHERE THE CONTRACT CALLS FOR TIMELY NOTICES OF BREACH, NO NOTICE OF BREACH REQUIRED WHERE DEFENDANT ITSELF DISCOVERS THE DEFECTIVE MORTGAGE)/RESIDENTIAL MORTGAGE BACKED SECURITIES (RE TIMELINESS OF CLAIMS ALLEGING DEFECTIVE MORTGAGES UNDERLYING RESIDENTIAL MORTGAGE BACKED SECURITIES, WHERE THE CONTRACT CALLS FOR TIMELY NOTICES OF BREACH, NO NOTICE OF BREACH REQUIRED WHERE DEFENDANT ITSELF DISCOVERS THE DEFECTIVE MORTGAGE)/CONTRACT LAW (RESIDENTIAL MORTGAGE BACKED SECURITIES, RE TIMELINESS OF CLAIMS ALLEGING DEFECTIVE MORTGAGES UNDERLYING RESIDENTIAL MORTGAGE BACKED SECURITIES, WHERE THE CONTRACT CALLS FOR TIMELY NOTICES OF BREACH, NO NOTICE OF BREACH REQUIRED WHERE DEFENDANT ITSELF DISCOVERS THE DEFECTIVE MORTGAGE)

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CRITERIA FOR DENIAL OF A MOTION FOR SUMMARY JUDGMENT AS PREMATURE ILLUSTRATED.

CIVIL PROCEDURE, INSURANCE LAW, CONTRACT LAW.

The Third Department determined defendant insurance company’s motion for summary judgment should have been denied as premature. Plaintiff was seeking reformation of the insurance contract to add plaintiff as an insured. Plaintiff held a mortgage on the insured property when the property was destroyed by fire:

Erie’s [the insurance company’s] motion for summary judgment should have been denied as premature. “[A] summary judgment motion is properly denied as premature when the nonmoving party has not been given reasonable time and opportunity to conduct disclosure relative to pertinent evidence that is within the exclusive knowledge of the movant or a codefendant” … . As is relevant to plaintiff’s claim, a party seeking reformation of a contract must establish, by clear and convincing evidence, either that the writing at issue was executed under mutual mistake or that there was a fraudulently induced unilateral mistake … .

The importance of documents and depositions that plaintiff sought but had not been provided is readily apparent. The premise of plaintiff’s cause of action is that, in executing the relevant insurance policy, the corporation and Erie both intended to include plaintiff as a loss payee but that, by mutual mistake, he was omitted. Erie had exclusive knowledge of its understanding of the intended coverage and any intended loss payees at the time of the execution of the relevant insurance policy. Moreover, it is likely to be in exclusive possession of any collateral documents memorializing the intended scope of the relevant insurance policy. Further, plaintiff’s contention that Erie has exclusive possession of employees and materials that could shed light on its intent as to the insurance policy is patently reasonable and not merely speculation … . Imrie v Ratto, 2016 NY Slip Op 08907, 3rd Dept 12-29-16

CIVIL PROCEDURE (CRITERIA FOR DENIAL OF A MOTION FOR SUMMARY JUDGMENT AS PREMATURE ILLUSTRATED)/SUMMARY JUDGMENT (CRITERIA FOR DENIAL OF A MOTION FOR SUMMARY JUDGMENT AS PREMATURE ILLUSTRATED)/INSURANCE LAW (REFORMATION OF POLICY, CRITERIA FOR DENIAL OF A MOTION FOR SUMMARY JUDGMENT AS PREMATURE ILLUSTRATED)/CONTRACT (REFORMATION, CRITERIA FOR DENIAL OF A MOTION FOR SUMMARY JUDGMENT AS PREMATURE ILLUSTRATED)/REFORMATION (INSURANCE POLICY, CRITERIA FOR DENIAL OF A MOTION FOR SUMMARY JUDGMENT AS PREMATURE ILLUSTRATED)

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DESPITE THE EXPRESS EXCLUSION OF LIABILITY TO THIRD PARTIES IN THE CONTRACT BETWEEN DEFENDANT SECURITY COMPANY AND DEFENDANT THEATER, THE COMPLAINT ALLEGED A COMMON-LAW DUTY OWED BY THE SECURITY COMPANY TO PLAINTIFF, THE SECURITY COMPANY ALLEGEDLY DIRECTED PLAINTIFF TO RESTRAIN A NONPARTY WHO THEN ASSAULTED AND INJURED PLAINTIFF.

The Second Department determined defendant Arrow Security, a company under contract with defendant theater, Paramount, to provide security for patrons, was not entitled to a dismissal of the complaint. Plaintiff, an employee of Paramount, alleged he was instructed by Arrow to restrain a person, John Doe, who was in the rear alley of the theater premises. Plaintiff alleged he was beaten and injured by John Doe. The contract between Arrow and Paramount specifically stated the contract did not create a duty owed to third parties. However, the court concluded the complaint stated a claim for common-law negligence because it was alleged Arrow directed plaintiff to restrain John Doe:

… Arrow failed to conclusively establish that it owed no common-law duty to the plaintiff. To the contrary, the allegations in the complaint, viewed in the light most favorable to the plaintiff … , set forth a cognizable legal theory under which Arrow could be found to have assumed a duty of care to the plaintiff by calling for and instructing him to investigate, restrain, and/or detain the intoxicated John Doe … . A duty of care may be assumed where a “defendant’s conduct placed plaintiff in a more vulnerable position than plaintiff would have been in had defendant done nothing” … , or where a defendant’s conduct “enhanced the risk that plaintiff faced, created a new risk or induced plaintiff to forego some opportunity to avoid risk” … . Garda v Paramount Theatre, LLC, 2016 NY Slip Op 08841, 2nd Dept 12-28-16

NEGLIGENCE (DESPITE THE EXPRESS EXCLUSION OF LIABILITY TO THIRD PARTIES IN THE CONTRACT BETWEEN DEFENDANT SECURITY COMPANY AND DEFENDANT THEATER, THE COMPLAINT ALLEGED A COMMON-LAW DUTY OWED BY THE SECURITY COMPANY TO PLAINTIFF, THE COMPLAINT ALLEGED THE SECURITY COMPANY DIRECTED PLAINTIFF TO RESTRAIN A NONPARTY WHO THEN ASSAULTED AND INJURED PLAINTIFF)/CONTRACT, TORT LIABILITY STEMMING FROM (DESPITE THE EXPRESS EXCLUSION OF LIABILITY TO THIRD PARTIES IN THE CONTRACT BETWEEN DEFENDANT SECURITY COMPANY AND DEFENDANT THEATER, THE COMPLAINT ALLEGED A COMMON-LAW DUTY OWED BY THE SECURITY COMPANY TO PLAINTIFF, THE COMPLAINT ALLEGED THE SECURITY COMPANY DIRECTED PLAINTIFF TO RESTRAIN A NONPARTY WHO THEN ASSAULTED AND INJURED PLAINTIFF)/ASSAULT (NEGLIGENCE, DESPITE THE EXPRESS EXCLUSION OF LIABILITY TO THIRD PARTIES IN THE CONTRACT BETWEEN DEFENDANT SECURITY COMPANY AND DEFENDANT THEATER, THE COMPLAINT ALLEGED A COMMON-LAW DUTY OWED BY THE SECURITY COMPANY TO PLAINTIFF, THE COMPLAINT ALLEGED THE SECURITY COMPANY DIRECTED PLAINTIFF TO RESTRAIN A NONPARTY WHO THEN ASSAULTED AND INJURED PLAINTIFF)/DUTY (NEGLIGENCE, DESPITE THE EXPRESS EXCLUSION OF LIABILITY TO THIRD PARTIES IN THE CONTRACT BETWEEN DEFENDANT SECURITY COMPANY AND DEFENDANT THEATER, THE COMPLAINT ALLEGED A COMMON-LAW DUTY OWED BY THE SECURITY COMPANY TO PLAINTIFF, THE COMPLAINT ALLEGED THE SECURITY COMPANY DIRECTED PLAINTIFF TO RESTRAIN A NONPARTY WHO THEN ASSAULTED AND INJURED PLAINTIFF)

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