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Failure to Mention the Rate of Compensation Required Dismissal of the Contract Cause of Action Under the Statute of Frauds/However the Allegation Defendant Employed Plaintiff Was Sufficient to Allow the Quantum Meruit Cause of Action to Go Forward

The First Department determined the contract cause of action must be dismissed under General Obligations Law 5-701(a)(10) because there was no mention of the rate of compensation,  but that there were sufficient allegations to allow the quantum meruit cause of action to go forward:

In Davis & Mamber, this Court held that for a writing evidencing a contract “[t]o satisfy the Statute of Frauds . . . a memorandum must contain expressly or by reasonable implication all the material terms of the agreement, including the rate of compensation if there has been agreement on that matter” … . … Davis & Mamber precluded a contract claim for failure to satisfy the applicable provision of the statute of frauds, because the relied-on writings lacked any reference to the agreed-on compensation; however, it permitted a quantum meruit claim, because the rule for a writing establishing quantum meruit claims is less exacting, requiring only that the writing “evidenced the fact of plaintiff’s employment [by defendant] to render the alleged services” …. Here, as in Davis & Mamber, the emails … fail to make any reference to payment terms, and accordingly fail to satisfy the statute of frauds as to the contract claim … . However, they suffice to show that [defendant] employed plaintiff, and are therefore enough to satisfy the statute for purposes of plaintiff’s quantum meruit claim.  Chapman, Spira & Carson LLC v Helix BioPharma Corp, 2014 NY Slip Op 01685, 1st Dept 3-18-14

 

No Need to Allege “the Benefit Was Conferred at the Behest of the Defendant”

In a full-fledged opinion by Justice Acosta, the First Department determined  a 2012 Court of Appeals case (Georgia Malone & Co Inc v Reider, 19 NY3d 511) did not change the law of unjust enrichment and explained the nature of the relationship between the parties which must be alleged in the pleadings:

It is well established that to successfully plead unjust enrichment “[a] plaintiff must allege that (1) the other party was enriched, (2) at that party’s expense, and (3) that it is against equity and good conscience to permit the other party to retain what is sought to be recovered'” … . A claim for unjust enrichment “is undoubtedly equitable and depends upon broad considerations of equity and justice” … . A plaintiff is not required to allege privity. It must, however, “assert a connection between the parties that [is] not too attenuated” … . Thus, although a plaintiff could satisfy this requirement by alleging that the benefit was conferred at the behest of the defendant …, the Court of Appeals has never required such a relationship. Rather, the pleadings merely have to “indicate a relationship between the parties that could have caused reliance or inducement” … . Philips Intl Invs LLC v Pektor, 2014 Slip Op 01700, 1st Dept 3-18-14

 

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Landlord Cannot Recover Lost Rent In Action Based Upon Breach of Covenant to Keep the Premises in Good Repair

Over the dissents of two justices, the First Department determined that lost rent was not recoverable for breach of a lease provision requiring a tenant to keep the premises in good repair:

It is well settled that lost rent is not recoverable as damages for breach of a lease covenant requiring a tenant to keep the premises in good repair. An action alleging breach of such a covenant can be brought either before or after the expiration of the lease term … . In Appleton v Marx (191 NY 81 [1908]), the Court of Appeals identified two different measures of damages, depending on when the action is commenced. If the action is brought before the lease expires, a landlord can recover “the injury done to the reversion” (id. at 83), i.e. “the difference between the value of the premises with the improvement and absent the improvement” … . On the other hand, if the action is brought after the expiration of the lease term, “the measure of the damages is the cost of putting the premises into repair” … . In neither circumstance, however, did the Court of Appeals provide that lost rent is included in the measure of damages.  Building Serv Local 32B-J Pension Fund v 101 Ltd Partnership, 2014 NY Slip Op 01544, 1st Dept 3-11-14

 

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Criteria for Interpreting a Settlement Agreement Which Is Incorporated But Not Merged Into the Judgment of Divorce

In finding that a settlement agreement was not ambiguous and had been complied with by the mother, the Third Department explained the status of a separation agreement which is incorporated but not merged into a judgment of divorce:

A settlement agreement that is incorporated into, but not merged with, a judgment of divorce remains an independent contract, binding on the parties and subject to the rules of contract interpretation … . “Where the language of the agreement is clear, the court must determine the intent of the parties by examining the agreement itself” … .”Whether language is ambiguous is a matter of law to be determined by the court, and in rendering this determination a court may not add or excise terms, nor distort the meaning of those used” … . Matter of Drake v Drake, 516960, 3rd Dept 2-27-14

 

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Question of Fact Whether a “Special Relationship” Had Developed Such that the Insurance Broker Might Be Liable for Negligent Advice About Coverage

In a full-fledged opinion by Judge Graffeo, over a dissent, the Court of Appeals determined there was a question of fact whether the relationship between the insurance broker and the plaintiff was a “special relationship” such that the broker might be liable for negligent advice about sufficient coverage. Plaintiff was a business owner who suffered losses for business interruption caused by several roof-failures. The issue was whether the insurance the broker advised plaintiff to purchase was sufficient for plaintiff’s needs. The court explained the general principles involved:

As a general principle, insurance brokers “have a common-law duty to obtain requested coverage for their clients within a reasonable time or inform the client of the inability to do so; however, they have no continuing duty to advise, guide or direct a client to obtain additional coverage” … . Hence, in the ordinary broker-client setting, the client may prevail in a negligence action only where it can establish that it made a particular request to the broker and the requested coverage was not procured. * * *Where a special relationship develops between the broker and client, we have also indicated that the broker may be liable, even in the absence of a specific request, for failing to advise or direct the client to obtain additional coverage … . In Murphy [90 NY2d at 272] , we recognized that “particularized situations may arise in which insurance agents, through their conduct or by express or implied contract with customers and clients, may assume or acquire duties in addition to those fixed at common law” and that the question of whether such additional responsibilities should be “given legal effect is governed by the particular relationship between the parties and is best determined on a case-by-case basis” … . We identified three exceptional situations that may give rise to a special relationship, thereby creating an additional duty of advisement:”(1) the agent receives compensation for consultation apart from payment of the premiums; (2) there was some interaction regarding a question of coverage, with the insured relying on the expertise of the agent; or (3) there is a course of dealing over an extended period of time which would have put objectively reasonable insurance agents on notice that their advice was being sought and specially relied on” … . Voss v The Netherlands Insurance Company…, 11, CtApp 2-25-14

 

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Despite the Contractual Agreement to Apply Delaware Law, Because There Was No Conflict Between Delaware and New York Law, and Because the Parties Disagreed About Which Law to Apply, the Court Applied New York Law

The First Department determined there was no conflict between Delaware and New York law concerning non-solicitation agreements. Therefore, because the parties disagreed about which law should be applied (despite the contractual agreement to apply Delaware law), the court applied New York law, the law of the forum state:

By their own terms, all of the nonsolicitation agreements were to be governed by and construed in accordance with Delaware law. Nonetheless, the parties differ as to whether New York law or Delaware law should be applied.In light of the parties’ disagreement as to which state’s law should apply, our first step is to determine whether there is an actual conflict between the laws of the jurisdictions involved … . For an actual conflict to exist, “the laws in question must provide different substantive rules in each jurisdiction that are relevant’ to the issue at hand and have a significant possible effect on the outcome of the trial'” … . Under New York law, an employee’s noncompetition agreement is reasonable and, therefore, enforceable “only if it: (1) is no greater than is required for the protection of the legitimate interest of the employer, (2) does not impose undue hardship on the employee, and (3) is not injurious to the public” … . The parties’ briefs disclose no conflict of laws that would have a ” significant possible effect on the outcome of the trial'” … . To be sure, the moving defendants argued before the motion court that “Delaware law does not differ significantly from New York law as to the test for enforceability” and that applying New York law “should not make a material difference to the outcome” of the case. Thus, we apply the law of New York, the forum state… . TBA Global LLC v Proscenium Events LLC 2014 NY Slip Op 01266, 1st Dept 2-25-14

 

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Criteria for Interpreting Ambiguous Terms in Separation Agreement

The Third Department explained how ambiguity in the terms of a separation agreement is to be handled by the courts:

Ambiguity in a separation agreement is resolved, as with any contract, by determining the parties’ intent from within the instrument’s four corners, if possible, and otherwise from extrinsic evidence … . In doing so, “[t]he court is not limited to the literal language of the agreement, but should also include a consideration of whatever may be reasonably implied from that literal language”… . Matter of Apjohn v Lubinski, 516326, 3rd Dept 2-20-14

 

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Two-Year Time Limit On Bringing Suit Against Insurer for Cost of Replacement of Damaged Property Unreasonable If Replacement Cannot Reasonably Be Done Within Two Years

In a full-fledged opinion by Judge Smith, the Court of Appeals, in answering a question posed by the Second Circuit, determined a two-year time-limit on bringing suit against an insurance company was unreasonable because suit could not be brought until the damaged property was replaced. Therefore, as was true in this case, if the damage-repair takes longer than two years, the insured cannot sue for payment:

“[A]n agreement which modifies the Statute of Limitations by specifying a shorter, but reasonable, period within which to commence an action is enforceable” … . We conclude that the contractual period at issue here — two years from the date of “direct physical loss or damage” (i.e., from the date of the fire) — is not reasonable if, as the Second Circuit's question requires us to assume, the property cannot reasonably be replaced within two years.It is true, as the District Court pointed out, that there is nothing inherently unreasonable about a two-year period of limitation. In fact, we have enforced contractual limitation periods of one year … . The problem with the limitation period in this case is not its duration, but its accrual date. It is neither fair nor reasonable to require a suit within two years from the date of the loss, while imposing a condition precedent to the suit — in this case, completion of replacement of the property — that cannot be met within that two-year period. A “limitation period” that expires before suit can be brought is not really a limitation period at all, but simply a nullification of the claim. It is true that nothing required defendant to insure plaintiff for replacement cost in excess of actual cash value, but having chosen to do so defendant may not insist on a “limitation period” that renders the coverage valueless when the repairs are time-consuming. Executive Plaza LLC v Peerless Insurance Company, 2, CtApp 2-13-14

 

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Agent for Partially Disclosed Principal Is Personally Liable on the Contract

In finding the agent (Sussman) liable for a contract because the principal was not fully disclosed, the Second Department wrote:

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…[The evidence] indicates at best that Sussman was acting as an agent for a “partially disclosed principal,” in that the agency relationship was known, but the identity of the principal remained undisclosed (Restatement [Second] of Agency § 4[2]…). As an agent for an undisclosed principal, Sussman became personally liable under the contract (…Restatement [Second] of Agency § 321). Stonhard v Blue Ridge Farms, LLC, 2014 NY Slip Op 00985, 2nd Dept 2-13-14

 

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Labor Law Suit for Gratuities Not Preempted by Labor Management Relations Act or Prohibited by Collective Bargaining Agreement

In a full-fledged opinion by Justice Renwick, the First Department determined the plaintiffs, food and beverages servers at Madison Square Garden, had stated a cause of action against the defendant Garden under Labor Law 196-d. The plaintiffs alleged the Garden was not distributing to the plaintiffs all the “service charges” paid by customers who were led to believe the “service charges” were gratuities for the servers. The First Department rejected the Garden’s argument that the claims were preempted by federal law (Labor Management Relations Act [LMRA]) and, alternatively, subject to mandatory arbitration under the collective bargaining agreement [CBA].

Section 301 of the LMRA provides that “[s]uits for violation of contracts between an employer and a labor organization representing employees in an industry affecting commerce … may be brought in any district court of the United States having jurisdiction of the parties” (29 USC § 185[a]. The Supreme Court has interpreted this section to preempt state law claims “founded directly on rights created by collective bargaining agreements” as well as “claims substantially dependent on an analysis of a collective bargaining agreement'”… . * * *

Section 301 [of the LMRA] … does not preempt state claims when state law confers an independent statutory right to bring a claim … .Even if resolution of a state-law claim “involves attention to the same factual considerations as the contractual determination … such parallelism [does not mandate preemption]” … .

A defendant’s reliance on the CBA is not enough to “inject—a federal question into an action that asserts what is plainly a state-law claim”… . * * *

A CBA cannot preclude a lawsuit concerning individual statutory rights unless the arbitration clause in the agreement is “clear and unmistakable” that the parties intended to arbitrate such individual claims … . “A clear and unmistakable’ waiver exists where one of two requirements is met: (1) if the arbitration clause contains an explicit provision whereby an employee specifically agrees to submit all causes of action arising out of his employment to arbitration; or (2) where the arbitration clause specifically references or incorporates a statute into the agreement to arbitrate disputes” … . “Arbitration clauses that cover any dispute concerning the interpretation, application, or claimed violation of a specific term or provision’ of the collective bargaining agreement do not contain the requisite clear and unmistakable’ waiver because the degree of generality [in the arbitration provision] falls far short of a specific agreement to submit all federal claims to arbitration'”… . Tamburino v Madison Sq Garden LP, 2014 NY Slip Op 0895, 1st Dept 2-11-14

 

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