Contract Law – Page 106 – New York Appellate Digest

Appeals, Civil Procedure, Contract Law, Employment Law

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)

January 25, 2017

Contract Law, Trusts and Estates, Workers' Compensation

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)

January 5, 2017

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.

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)

January 5, 2017

Contract Law, 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.

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)

December 29, 2016

Civil Procedure, Contract Law, Insurance Law

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)

December 29, 2016

Contract Law, 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 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)

December 28, 2016

Contract Law

FORMULAIC LANGUAGE INDICATING THE ACCEPTANCE OF A BID WAS SUBJECT TO A WRITTEN AGREEMENT AND DEPOSIT DID NOT NEGATE THE FORMATION OF A BINDING CONTRACT UPON ACCEPTANCE.

The Court of Appeals, in a full-fledged opinion by Judge Rivera, reversing the Appellate Division, determined plaintiff (Stonehill) was entitled to summary judgment against defendant Bank of the West (BOTW) in this breach of contract action. BOTW offered for sale a syndicated loan at auction. Plaintiff bid on the loan and BOTW accepted the bid. The acceptance e-mail indicated it was “subject to” an executed agreement and a 10% deposit. BOTW argued that the “subject to” conditions were not met and a contract was never formed. The Court of Appeals disagreed noting a difference between conditions precedent to performance and conditions prefatory to the formation of a binding agreement:

In determining whether the parties intended to enter a contract, and the nature of the contract’s material terms, we look to the “objective manifestations of the intent of the parties as gathered by their expressed words and deeds” … . “[D]isproportionate emphasis is not to be put on any single act, phrase or other expression, but, instead on the totality of all of these, given the attendant circumstances, the situation of the parties, and the objectives they were striving to attain” … . With respect to auctions, the general rule is that a seller’s acceptance of an auction bid forms a binding contract, unless the bid is contingent on future conduct … . While an auction can be conditional, meaning property can be withdrawn after the close of bidding, it will not be deemed conditional absent explicit terms … . * * *

… [The acceptance] email stated that closure of the transaction required execution of a signed document and Stonehill’s tender of the 10% deposit. That, however, is not the same as a clear expression that the parties were not bound to consummate the sale and that BOTW could withdraw at any time, for any reason. Nor did BOTW make known its desire for an unrestricted exit from the deal before accepting Stonehill’s bid or anytime before it withdrew from the transaction. … There is a difference between conditions precedent to performance and those prefatory to the formation of a binding agreement. Stonehill Capital Mgt., LLC v Bank of the W., 2016 NY Slip Op 08481, CtApp 12-20-16

CONTRACT LAW (FORMULAIC LANGUAGE INDICATING THE ACCEPTANCE OF A BID WAS SUBJECT TO A WRITTEN AGREEMENT AND DEPOSIT DID NOT NEGATE THE FORMATION OF A BINDING CONTRACT UPON ACCEPTANCE)/AUCTIONS (CONTRACT LAW, FORMULAIC LANGUAGE INDICATING THE ACCEPTANCE OF A BID WAS SUBJECT TO A WRITTEN AGREEMENT AND DEPOSIT DID NOT NEGATE THE FORMATION OF A BINDING CONTRACT UPON ACCEPTANCE)/BID AND ACCEPTANCE (AUCTIONS, CONTRACT LAW, FORMULAIC LANGUAGE INDICATING THE ACCEPTANCE OF A BID WAS SUBJECT TO A WRITTEN AGREEMENT AND DEPOSIT DID NOT NEGATE THE FORMATION OF A BINDING CONTRACT UPON ACCEPTANCE)

December 20, 2016

Contract Law, Family Law

HEARING SHOULD HAVE BEEN HELD ON BIRTH PARENT’S PETITION TO ENFORCE A POSTADOPTION AGREEMENT ALLOWING THE BIRTH PARENT’S VISITATION WITH THE CHILD.

The Third Department determined a hearing should have been held on a birth parent’s petition to enforce a postadoption agreement which allowed visitation by the parent:

Family Court erred in dismissing the petition without an evidentiary hearing. Pursuant to Domestic Relations Law § 112-b (4), birth parents and adoptive parents may enter into a legally enforceable agreement regarding postadoption contact that may thereafter be enforced by filing a petition in Family Court … . Enforcement of a postadoption contact agreement, however, “will only be ordered if it is determined to be in the child’s best interests” … , and “[a]n evidentiary hearing is generally necessary to determine what is in the best interests of the child” … .

Here, while there were three appearances in Family Court on the petition at which the interested parties made factual representations, primarily through counsel, and legal arguments on the merits of the petition, no testimony was taken and no documentary evidence was admitted for consideration. The child’s adoptive parents and the attorney for the child opposed enforcement of the postadoption contact agreement and any contact between the child and petitioner based upon, among other factors, an alleged multi-year lapse in contact between petitioner and the child. The information submitted to the court raised factual questions regarding whether visits with petitioner would be in the child’s best interests or detrimental to those interests, necessitating an evidentiary hearing on that determinative issue … .

Further, the adoptive parents are persons whose interests may be adversely or inequitably affected by an order enforcing the postadoption contact agreement and, therefore, they should have been named as parties … . Matter of Lynn X. (Joseph W.), 2016 NY Slip Op 08415, 3rd Dept 12-15-16

FAMILY LAW (HEARING SHOULD HAVE BEEN HELD ON BIRTH PARENT’S PETITION TO ENFORCE A POSTADOPTION AGREEMENT ALLOWING THE BIRTH PARENT’S VISITATION WITH THE CHILD)/POSTADOPTION AGREEMENT (HEARING SHOULD HAVE BEEN HELD ON BIRTH PARENT’S PETITION TO ENFORCE A POSTADOPTION AGREEMENT ALLOWING THE BIRTH PARENT’S VISITATION WITH THE CHILD)/VISITATION (FAMILY LAW, HEARING SHOULD HAVE BEEN HELD ON BIRTH PARENT’S PETITION TO ENFORCE A POSTADOPTION AGREEMENT ALLOWING THE BIRTH PARENT’S VISITATION WITH THE CHILD)/ADOPTION (POSTADOPTION AGREEMENTS, HEARING SHOULD HAVE BEEN HELD ON BIRTH PARENT’S PETITION TO ENFORCE A POSTADOPTION AGREEMENT ALLOWING THE BIRTH PARENT’S VISITATION WITH THE CHILD)

December 15, 2016

Contract Law, Education-School Law, Employment Law

FACULTY MEMBERS SUFFICIENTLY ALLEGED BREACH OF CONTRACT CAUSE OF ACTION AGAINST UNIVERSITY BASED UPON POLICIES DESCRIBED IN THE FACULTY HANDBOOK.

The First Department, reversing Supreme Court, determined faculty members sufficiently alleged the policies in the university’s faculty handbook had the force of contract and therefore a breach of contract action was viable:

A university’s academic and administrative decisions require professional judgment and may only be reviewed by way of an article 78 proceeding to ensure that such decisions are not violative of the institution’s own rules and neither arbitrary nor irrational … . However, “[i]f the claim involves a matter of contractual right it may, of course, be vindicated in an action [at] law” … .

For the purpose of surviving respondents’ cross motion to dismiss, petitioners, tenured faculty members of respondent New York University’s School of Medicine, have sufficiently alleged that the policies contained in respondent’s Faculty Handbook, which “form part of the essential employment understandings between a member of the Faculty and the University,” have the force of contract … . Further, for the purposes of surviving respondents’ cross motion to dismiss, petitioners have sufficiently alleged that they had a mutual understanding with respondent that tenured faculty members’ salaries may not be involuntarily reduced. Additionally, petitioners have sufficiently alleged that they reasonably relied on oral representations by respondents that their salaries would not be involuntarily reduced. Matter of Monaco v New York Univ. & N.Y. Univ. School of Medicine, 2016 NY Slip Op 08467, 1st Dept 12-15-16

EMPLOYMENT LAW (FACULTY MEMBERS SUFFICIENTLY ALLEGED BREACH OF CONTRACT CAUSE OF ACTION AGAINST UNIVERSITY BASED UPON POLICIES DESCRIBED IN THE FACULTY HANDBOOK)/CONTRACT LAW (EMPLOYMENT LAW, FACULTY MEMBERS SUFFICIENTLY ALLEGED BREACH OF CONTRACT CAUSE OF ACTION AGAINST UNIVERSITY BASED UPON POLICIES DESCRIBED IN THE FACULTY HANDBOOK)/EDUCATION-SCHOOL LAW (UNIVERSITIES, FACULTY MEMBERS SUFFICIENTLY ALLEGED BREACH OF CONTRACT CAUSE OF ACTION AGAINST UNIVERSITY BASED UPON POLICIES DESCRIBED IN THE FACULTY HANDBOOK)

December 15, 2016

Contract Law, Landlord-Tenant, Negligence

DESPITE THE CITY CODE PROVISION CREATING A NONDELEGABLE DUTY ON THE OWNER’S PART TO MAINTAIN AN ABUTTING SIDEWALK, THE TERMS OF THE LEASE RAISED A QUESTION OF FACT ABOUT THE TENANT’S LIABILITY [LIABILITY TO THIRD PARTIES ARISING FROM CONTRACT].

The Second Department determined plaintiffs raised a question of fact when the terms of the lease created a duty on the part of the tenant (the City here) to maintain the abutting sidewalk:

Administrative Code of the City of New York § 7-210 imposes a nondelegable duty on a property owner to maintain and repair the sidewalk abutting its property, and specifically imposes liability upon certain property owners for injuries resulting from a violation of the code provision (see Administrative Code § 7-210…).

As a general rule, the provisions of a lease obligating a tenant to repair the sidewalk do not impose on the tenant a duty to a third party … . This is in accordance with the principle that “a contractual obligation, standing alone, will generally not give rise to tort liability in favor of a third party” … . However, the Court of Appeals has recognized that there are exceptions to this general rule and that there are situations in which a party who enters into a contract may be said to have assumed a duty of care to third parties

The lease, inter alia, required the City, at its sole cost and expense, to take good care of the sidewalk, and “make all repairs thereto, ordinary and extraordinary, foreseen and unforeseen.” It also provided that the former owner “shall have no responsibility and shall not be required to furnish any services, make any repairs or to perform any other maintenance work.” The plaintiffs’ submission of this evidence raised a triable issue of fact as to whether the City’s lease was comprehensive and exclusive as to sidewalk maintenance so as to entirely displace the former landowner’s duty to maintain the sidewalk … . Hsu v City of New York, 2016 NY Slip Op 08348, 2nd Dept 12-14-16

NEGLIGENCE (DESPITE THE CITY CODE PROVISION CREATING A NONDELEGABLE DUTY ON THE OWNER’S PART TO MAINTAIN AN ABUTTING SIDEWALK, THE TERMS OF THE LEASE RAISED A QUESTION OF FACT ABOUT THE TENANT’S LIABILITY [LIABILITY TO THIRD PARTIES ARISING FROM CONTRACT])/CONTRACT LAW (TORT LIABILITY TO THIRD PARTIES, DESPITE THE CITY CODE PROVISION CREATING A NONDELEGABLE DUTY ON THE OWNER’S PART TO MAINTAIN AN ABUTTING SIDEWALK, THE TERMS OF THE LEASE RAISED A QUESTION OF FACT ABOUT THE TENANT’S LIABILITY)/LANDLORD-TENANT (SLIP AND FALL, DESPITE THE CITY CODE PROVISION CREATING A NONDELEGABLE DUTY ON THE OWNER’S PART TO MAINTAIN AN ABUTTING SIDEWALK, THE TERMS OF THE LEASE RAISED A QUESTION OF FACT ABOUT THE TENANT’S LIABILITY [LIABILITY TO THIRD PARTIES ARISING FROM CONTRACT])/SLIP AND FALL (DESPITE THE CITY CODE PROVISION CREATING A NONDELEGABLE DUTY ON THE OWNER’S PART TO MAINTAIN AN ABUTTING SIDEWALK, THE TERMS OF THE LEASE RAISED A QUESTION OF FACT ABOUT THE TENANT’S LIABILITY [LIABILITY TO THIRD PARTIES ARISING FROM CONTRACT])/SIDEWALKS (DESPITE THE CITY CODE PROVISION CREATING A NONDELEGABLE DUTY ON THE OWNER’S PART TO MAINTAIN AN ABUTTING SIDEWALK, THE TERMS OF THE LEASE RAISED A QUESTION OF FACT ABOUT THE TENANT’S LIABILITY [LIABILITY TO THIRD PARTIES ARISING FROM CONTRACT])

December 14, 2016