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Contract Provision Protected Contractee from Damages for Delay Caused by Regulators​

In a full-fledged opinion by Justice Mazzarelli, the First Department determined, among many other contract-issues, that delays allegedly caused by regulators (re: asbestos-removal) were included in the contract provision which insulated the contractee from delay-related damages:

“A clause which exculpates a contractee from liability to a contractor [Bovis] for damages resulting from delays in the performance of the latter’s work is valid and enforceable and is not contrary to public policy if the clause and the contract of which it is a part satisfy the requirements for the validity of contracts generally”…. However, such a clause may be disregarded under certain recognized exceptions, including one for delays that are “uncontemplated” …. Delays are not considered uncontemplated when they “are reasonably foreseeable, arise from the contractor’s work during performance, or . . . are mentioned in the contract” …. Further, a party seeking to invoke any of the exceptions to the general rule that no damages for delay clauses are enforceable bears a heavy burden … .

Here, Bovis failed to carry its heavy burden. The contract specifically anticipated the possibility that the involvement of regulators would delay the process. Again, Bovis expressly acknowledged that it assumed the “risk of all regulatory and other Governmental Authority delays.” Certainly this lifted the no damages for delay clause out of the exception for uncontemplated delays. There is no basis for Bovis to argue that by alleging that the extent of the regulatory delays was extreme and unprecedented it stated a claim for delay damages. As this Court has stated in finding a no damages for delay clause enforceable, “[W]hile the conditions themselves may not have been anticipated, the possibility, however unlikely, of their arising was contemplated and addressed by the parties in their agreement” … .  Bovis Lend Lease (LMB), Inc v Lower Manhattan Dev Corp, 2013 NY Slip Op 03804, 1st Dept, 5-28-13

CONSTRUCTION CONTRACT

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Retainer Agreement in Divorce Action Which Addressed Only Work “Up To” Trial Did Not Allow Recovery of Attorney’s Fees for Trial​

The First Department determined that a retainer agreement for work “up to” a trial in a divorce action precluded the law firm from recovering any fees for the trial.  To cover those fees a second retainer agreement was required:

The plain language of the retainer states that the law office’s representation of Blisko includes work leading “up to” a trial, “but not including an actual trial.” Indeed, the law office acknowledges that the retainer did not include representation at trial. Following the commencement of the trial on August 18, 2009, the retainer between the law office and Blisko terminated and plaintiff was representing Blisko without a written retainer …. Law Off of Sheldon Eisenberger v Blisko, 2013 NY Slip Op 03802, 1st Dept,. 5-28-13

 

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Doctrine of Continuous Representation/Retainer Agreement in Estate Proceeding “Unconscionable”​

In a case involving “gifts” and a 40% contingency fee for three defendant attorneys’ work on an estate worth several tens of millions, the First Department applied the “doctrine of continuous representation” to toll the statute of limitations and found the fee arrangement(s) “unconscionable:”

The claims relating to the gifts the widow made to the three individual defendants are not time-barred. Rather, they were tolled under the doctrine of continuous representation …. Contrary to the individual defendants’ contention, the doctrine applies where, as here, the claims involve self-dealing at the expense of a client in connection with a particular subject matter….  * * *

The revised retainer agreement is both procedurally and substantively unconscionable…. The evidence shows that the widow believed that under the contingency arrangement, she would receive the “lion’s share” of any recovery. In fact, as it operated, the law firm obtained over 50% of the widow’s share of proceeds. Thus, the law firm failed to show that the widow fully knew and understood the terms of the retainer agreement–an agreement she entered into in an effort to reduce her legal fees … .

In considering the substantive unconscionability of the revised retainer agreement, the Referee correctly considered such factors as the proportionality of the fee to the value of the professional services rendered… , and the risks and rewards to the attorney upon entering into the contingency agreement … .

The amount the law firm seeks ($44 million) is also disproportionate to the value of the services rendered (approximately $1.7 million) … .Matter of Lawrence, 2013 NY Slip Op 03759, 1st Dept, 5-22-13

 

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Question of Fact About Whether Release Procured by Fraud or Duress

In upholding the denial of defendant’s (Countrywide’s) motion for summary judgment based upon the execution of a release, the Second Department determined that the allegations of fraud and duress in procurement of the release raised a question of fact:

 The Countrywide defendants’ motion was properly denied. Although the plaintiff’s execution of the release in favor of the defendants was “a jural act of high significance” …, “a motion to dismiss should be denied where fraud or duress in the procurement of the release is alleged”… . Here, the plaintiff sufficiently alleged that the Countrywide defendants procured the release by means of fraud or duress, so as to warrant denial of their motion.   Warmhold v Zagarino, 2013 NY Slip Op 03668, 2nd Dept, 5-22-13

 

Theory of Damages in Contract Action​

The Second Department explained the theory underlying damages for breach of contract and noted that damages are usually ascertained as of the date of the breach:

It has long been recognized that the theory underlying damages for breach of contract is to make good or replace the loss caused by the breach… . Damages are intended to return the parties to the point at which the breach arose and to place the nonbreaching party in as good a position as it would have been had the contract been performed (…Restatement [Second] of Contracts §§ 347, comment a; § 344). Thus, damages for breach of contract are ordinarily ascertained as of the date of the breach… .. Seidman v Industrial Recycling Props, Inc, 2013 NY Slip Op 03659, 2nd Dept, 5-22-13

 

Unambiguous Release Is a Jural Act of High Significance Which Must Be Enforced

In explaining the legal principles underlying the enforcement of releases, the Second Department wrote:

Public policy favors the enforcement of settlements …, and a release is “a jural act of high significance without which the settlement of disputes would be rendered all but impossible” ….. Generally, a valid release constitutes a complete bar to an action on a claim which is the subject of the release…, and should not “be converted into a starting point for renewed litigation” …


“[A] release is governed by principles of contract law”…, and a release “that is complete, clear, and unambiguous on its face must be enforced according to the plain meaning of its terms”…. “Whether or not a writing is ambiguous is a question of law to be resolved by the courts” … . Inter-Reco, Inc v Lake Park 175 Froehlich Farm, LLC, 2013 NY Slip Op 03637, 2nd Dept, 5-22-13

 

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Wife’s Stipulation Waiving Claim to Benefits Valid Even though Law Unclear at Time of Stipulation and Benefits Later Determined by Court of Appeals to Be Marital Property

The Second Department determined that plaintiff-wife’s stipulation that variable supplement fund (VSF) benefits were not marital property should be upheld, even though the law was unclear at the time of the stipulation and the Court of Appeals subsequently determined the benefits were marital property:

The Referee was correct in noting that, at the time of the parties’ stipulation of settlement, the law on the issue of whether VSF benefits were subject to equitable distribution was unclear. The law was later clarified when the Court of Appeals held that VSF benefits were marital property subject to equitable distribution …. However, the fact that the plaintiff did not have definitive guidance on the issue of whether VSF benefits were subject to equitable distribution is not a sufficient basis upon which she may avoid the effects of her otherwise knowing and voluntary waiver. Thus, it was error to permit the defendant to avoid the consequences of her waiver of any interest in the VSF. Lamassa v Lamassa, 2013 NY Slip Op 03639, 2nd Dept, 5-22-13

 

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Action for Fraud Can Not Be Based Upon Same Allegations as Action for Breach of Contract​

The Second Department explained that an action for fraud can not be based on breach of contract allegations:

“The elements of a cause of action sounding in fraud are a material misrepresentation of an existing fact, made with knowledge of the falsity, an intent to induce reliance thereon, justifiable reliance upon the misrepresentation, and damages” …. However, “a cause of action premised upon fraud cannot lie where it is based on the same allegations as the breach of contract claim” …. Where a claim to recover damages for fraud is premised upon an alleged breach of contractual duties, and the allegations with respect to the purported fraud do not concern representations which are collateral or extraneous to the terms of the parties’ agreement, a cause of action sounding in fraud does not lie …. Further, “[g]eneral allegations that defendant entered into a contract while lacking the intent to perform it are insufficient to support [a] claim” of fraudulent inducement… .  Fromowitz v W Park Assoc, Inc, 2013 NY Slip Op 03633, 5-22-13

 

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Teachers’ and School Administrators’ Grievances Re Staff Cuts Stemming from School Closings Deemed Arbitrable​

The First Department determined the teachers’ and school administrators’ unions’ grievances concerning staff cuts inherent in the Department of Education’s (DOE’s) plan to close 24 underperforming schools were arbitrable, rejecting the DOE’s argument.  The arbitrator ruled the plan violated the collective bargaining agreement’s (CBA’s) requirements that staff cuts be done on the basis of seniority:

While broadly referencing educational laws and regulations, the DOE fails to identify any law that “prohibit[s], in an absolute sense, [the] particular matters [to be] decided”… [“[i]t is only when the interest in maintaining adequate standards is attached to a well-defined law that public policy is implicated”]). The underlying grievance in no way impinges on the authority of the SED (State Education Department] to approve a plan for the closure or the reopening of the 24 underperforming schools as new schools under the Education law (Education Law § 2590-h). Nor can the DOE rely on its own inclusion of proposed staffing changes in its plan to close schools to support its argument that staffing issues are now a state policy, law or regulation having the effect of law, which removes them from the dispute resolution regimen provided in the CBAs. Matter of Board of Educ of the City Sch Dist of the City of NY v Mulgrew, 2013 NY Slip Op 03580, 1st Dept, 5-16-13

 

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Ratified Release Precluded Employment Discrimination Action

The First Department reversed Supreme Court and granted defendant’s motion to dismiss plaintiffs employment discrimination, retaliation and hostile work environment claims.  Plaintiffs signed a release and received severance pay based upon the terms of the release.  The First Department determined plaintiffs’ claims that the signed the release under duress were foreclosed by their ratification of the release (accepting the severance pay):

The motion court should have dismissed the complaint in its entirety. “Generally, a valid release constitutes a complete bar to an action on a claim which is the subject of the release” …. A release will not be treated lightly because it is a “a jural act of high significance without which the settlement of disputes would be rendered all but impossible” …. Where the language is clear and unambiguous, the release is binding on the parties unless it is shown that it was procured by fraud, duress, overreaching, illegality or mutual mistake … . *  *  *

Assuming arguendo that issues of fact exist as to duress and overreaching, plaintiffs are nevertheless barred from challenging the releases on those grounds because they ratified the releases. Ratification occurs when a party accepts the benefits of a contract and fails to act promptly to repudiate it…. Thus, a plaintiff cannot claim that he or she was compelled to execute an agreement under duress while simultaneously accepting the benefits of the agreement …  Allen v Riese Org, Inc, 2013 NY Slip Op 03547, 1st Dept, 5-16-13

 

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