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THE UNION’S CHALLENGE TO THE DEDUCTION OF THE COST OF HEALTH INSURANCE FROM A VILLAGE POLICE OFFICER’S PAYCHECK WAS A BREACH-OF-CONTRACT ACTION FOR WHICH THE STATUTE OF LIMITATIONS BEGAN RUNNING ANEW FOR EACH PAYCHECK (SECOND DEPT). ​

The Second Department, reversing (modifying) Supreme Court, in a full-fledged opinion by Justice Brathwaite Nelson, determined the action by the union on behalf of a village police officer challenging the deduction of health insurance costs from each paycheck was a breach-of-contract action and the statute of limitations began running anew for each paycheck:

Teamsters Local 445 (hereinafter the Union) filed a demand for arbitration of a grievance against the Village of Maybrook alleging that the Village breached the parties’ collective bargaining agreement (hereinafter CBA) by deducting a certain amount from each paycheck of Sergeant Michael Maresca for health insurance costs. The Supreme Court granted the Village’s petition to permanently stay arbitration on the ground that the claim sought to be arbitrated was barred by the four-month statute of limitations applicable to CPLR article 78 proceedings. The principal issues raised on this appeal are (1) whether the underlying claim is in the nature of CPLR article 78 seeking review of an administrative determination or in the nature of breach of contract, and (2) if the latter, whether the claim is predicated on a single breach or a series of breaches that occurred with each paycheck. … [W]e determine that the nature of the claim is breach of contract and that the claim is predicated on a series of independent alleged breaches. Since the statute of limitations began anew as to each breach, we find that the claim to be arbitrated was not wholly time-barred. We therefore modify the order appealed from by … granting the Union’s cross-motion to the extent of compelling arbitration of so much of the grievance as was not time-barred. Matter of Village of Maybrook v Teamsters Local 445, 2023 NY Slip Op 06051, Second Dept 11-22-23

Practice Point: Here the union’s challenge to the deduction of the cost of health insurance from a village police officer’s paycheck was governed by the six-year statute of limitations for a breach of contract action, not the four-month statute of limitations for an Article 78 proceeding. The statute began running anew for each paycheck.

 

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PLAINTIFF DID NOT DEMONSTRATE THE RELEASE WAS PROCURED BY FRAUD, CRITERIA EXPLAINED (SECOND DEPT).

The Second Department, reversing (modifying) Supreme Court, determined plaintiff did not demonstrate the release plaintiff agreed to was procured by fraud. Therefore the motion to dismiss the causes of action covered by the release should have been granted:

“Generally, a valid release constitutes a complete bar to an action on a claim which is the subject of the release” … . “If the language of a release is clear and unambiguous, the signing of a release is a jural act binding on the parties” … . “Notably, a release may encompass unknown claims, including unknown fraud claims, if the parties so intend and the agreement is fairly and knowingly made” … .

“A release should never be converted into a starting point for . . . litigation except under circumstances and under rules which would render any other result a grave injustice” … . “A release may be invalidated, however, for any of the traditional bases for setting aside written agreements, namely, duress, illegality, fraud, or mutual mistake” … . “Although a defendant has the initial burden of establishing that it has been released from any claims, a signed release shifts the burden of going forward . . . to the [plaintiff] to show that there has been fraud, duress or some other fact which will be sufficient to void the release” …  “A plaintiff seeking to invalidate a release due to fraudulent inducement must establish the basic elements of fraud, namely a representation of material fact, the falsity of that representation, knowledge by the party who made the representation that it was false when made, justifiable reliance by the plaintiff, and resulting injury” … . “[A] party that releases a fraud claim may later challenge that release as fraudulently induced only if it can identify a separate fraud from the subject of the release” … . JM UC Group, LLC v Precious Care Mgt., LLC, 2023 NY Slip Op 06034, Second Dept 11-22-23

Practice Point: The decision includes the text of a detailed release which is worth reading. A release can even cover unknown claims, even unknown fraud claims. Here plaintiff did not demonstrate the release was procured by fraud and the relevant causes of action should have been dismissed.

 

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THE LIFE INSURANCE POLICY REQUIRED WRITTEN NOTICE OF ANY ASSIGNMENT OF THE POLICY; THE FAILURE TO PROVIDE WRITTEN NOTICE PRECLUDED THE ASSIGNEE FROM BRINGING A CLAIM UNDER THE POLICY AGAINST THE INSURER (CT APP).

The Court of Appeals, in a full-fledged opinion by Judge Halligan, answering a question from the Second Circuit, determined the failure to give notice of the assignment of the life insurance policy precluded the assignee from suing the insurer:

The United States Court of Appeals for the Second Circuit has asked us to determine whether, where a life insurance policy provides that “assignment will be effective upon Notice” in writing to the insurer, the failure to provide such written notice voids the assignment so that the purported assignee does not have contractual standing to bring a claim under the Policy … . … [W]e reformulate the question as follows:

Where a life insurance policy provides that ‘assignment will be effective upon notice’ in writing to the insurer, does the failure to provide such written notice deprive the purported assignee of contractual standing to bring a claim under the Policy against the insurer?

We answer the reformulated question in the affirmative. Brettler v Allianz Life Ins. Co. of N. Am.2023 NY Slip Op 05958, CtApp 11-20-23

Practice Point: Here the life insurance policy required written notice to the insurer of any assignment of the policy. The failure to provide notice precluded the assignee from bringing a claim under the policy against the insurer.

 

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THE LOCAL LAW CREATING THE POLICE ACCOUNTABILITY BOARD (PAB) WITH THE POWER TO DISCIPLINE POLICE OFFICERS CONFLICTED WITH THE POLICE UNION’S COLLECTIVE BARGAINING AGREEMENT (CBA); BECAUSE THE UNION NEVER AGREED TO THE TRANSFER OF DISCIPLINARY POWERS TO THE PAB, THE LOCAL LAW WAS INVALID (CT APP).

The Court of Appeals, in a full-fledged opinion by Judge Egan, affirming the Appellate Division, over a three-judge dissent, determined the Local Law creating a Police Accountability Board (PAB) with the power to discipline police officers was invalid because the law conflicted with the union’s (the Locust Club’s)  collective bargaining agreement (CBA) and the union had never agreed to the change:

Since the 1980s, the collective bargaining agreement (hereinafter CBA) in place between the City of Rochester and the Rochester Police Locust Club, Inc. (hereinafter the Locust Club), the union representing police officers in the City, has governed the procedure for disciplining police officers. In 2019, the Council of the City of Rochester adopted, the Mayor of the City of Rochester signed, and voters approved via referendum, Local Law No. 2, which created the Police Accountability Board (hereinafter PAB), a body of nine City residents whose powers included the exclusive authority to “investigate and make determinations respecting” any police officer accused of misconduct. That authority included the power to conduct a hearing on the alleged misconduct and to impose disciplinary sanctions, up to and including dismissal, if the officer were found guilty. The City’s police chief was free to impose additional punishment upon that officer, but was obliged at a minimum to implement the sanction determined by the PAB.

There is no dispute that the disciplinary procedures set forth in Local Law No. 2 deviated in significant respects from the agreed-upon procedures set forth in the CBA then in effect and that they were not agreed to by the Locust Club. The Locust Club and others commenced this combined CPLR article 78 proceeding and declaratory judgment action to challenge Local Law No. 2 and, in particular, its transfer of police disciplinary authority to the PAB. Supreme Court ultimately granted the petition in part and held, among other things, that Local Law No. 2 was invalid to the extent that it transferred that authority. Upon the City Council’s appeal, the Appellate Division affirmed … . The Appellate Division held that the City was obliged to negotiate with the Locust Club on the issue of police discipline because in 1985 it had repealed the provision of its charter vesting a local official in charge of the police force with unilateral authority over police discipline and that the City’s effort to revive that authority in Local Law No. 2 necessarily failed under the Municipal Home Rule Law because it was inconsistent with a general law, namely, “the Taylor Law’s mandate of collective bargaining for police discipline” … .  Matter of Rochester Police Locust Club, Inc. v City of Rochester, 2023 NY Slip Op 05959, CtApp 11-21-23

Practice Point: The Local Law creating the Police Accountability Board (PAB) and granting the PAB the power to discipline police officers conflicted with disciplinary provisions in the police union’s collective bargaining agreement (CBA). Because the union never agreed to the transfer of disciplinary powers to the PAB, the Local Law was deemed invalid.

 

THE BREACH OF CONTRACT SUIT STEMMED FROM CONSTRUCTION DELAYS; THE LOST PROFITS CLAIM SHOULD HAVE BEEN DISMISSED AS SPECULATIVE (FOURTH DEPT).

The Fourth Department, reversing (modifying) Supreme Court, determined the defendants’ motion to dismiss the claim for lost profits in this breach of contract action should have been granted. The suit was premised on construction delays which postponed the start-date for the operation of the business. The underlying business was a start-up. Damages for lost profits therefore were not contemplated when the contract was entered. In addition, because no comparable businesses were identified, lost profits would necessarily be speculative:

To recover damages for lost profits, “it must be shown that: (1) the damages were caused by the breach; (2) the alleged loss must be capable of proof with reasonable certainty[;] and (3) the particular damages were within the contemplation of the parties to the contract at the time it was made” … . * * *

… [W]e conclude that “[i]t would be highly speculative and unreasonable to infer an intent to assume the risk of lost profits in what was to be a start-up venture” … . …

The lay assumption by plaintiff that it would have earned the same net profit during the months in which completion of the project was delayed as it did during the same months of the following year is too speculative to support a calculation of damages … . Buffalo Riverworks LLC v Schenne, 2023 NY Slip Op 05823, Fourth Dept 11-17-23

Practice Point: To recover lost profits under a breach of contract theory, the profits must have been within the contemplation of the parties when the contract was entered and there must be some benchmark by which the amount of lost profits can be measured (comparable businesses for example). Here the business was a start-up and the court determined the amount of profits could not have been within the contemplation of the parties when the construction contract was entered.

 

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PLAINTIFF’S HUSBAND, THE INSURED, WAS DRIVING WHEN PLAINTIFF WAS SERIOUSLY INJURED IN A TRAFFIC ACCIDENT; PLAINTIFF MAY BE ABLE TO SHOW HER HUSBAND HAD REQUESTED COVERAGE ON HER BEHALF AND, BECAUSE THE INSURER (ALLEGEDLY) NEGLIGENTLY FAILED TO PROVIDE THE COVERAGE, THE INSURER IS OBLIGATED TO COVER HER LOSS, DESPITE HER STATUS AS A NONCLIENT (FOURTH DEPT).

The Fourth Department, reversing (modifying) Supreme Court, determined that the injured plaintiff might be able to show her husband (the insured) requested supplemental spousal liability (SSL) coverage on her behalf and that she was harmed by the insurer’s failure to provide it, despite her status as a nonclient. Plaintiff’s husband was driving and plaintiff was a passenger when she was seriously injured in a traffic accident:

“An insurance agent ordinarily does not owe a duty of care to a nonclient; however, where an agent’s negligence results in an insured being without coverage, the agent may be liable for damages sustained by an injured third party if the third party was the intended beneficiary of the insurance contract and ‘the bond between [the agent and the third party is] so close as to be the functional equivalent of contractual privity’ . . . The functional equivalent of privity may be found . . . where the defendants are aware that their representations are ‘to be used for a particular purpose,’ there was ‘reliance by a known party or parties in furtherance of that purpose’ and there is ‘some conduct by the defendants linking them to the party or parties and evincing [the] defendant[s’] understanding of their reliance’ ” … .

“[A] third party may sue as a beneficiary on a contract made for [its] benefit. However, an intent to benefit the third party must be shown, and, absent such intent, the third party is merely an incidental beneficiary with no right to enforce the particular contracts” … . Thus, “[p]arties asserting third-party beneficiary rights under a contract must establish (1) the existence of a valid and binding contract between other parties, (2) that the contract was intended for [their] benefit and (3) that the benefit to [them] is sufficiently immediate, rather than incidental, to indicate the assumption by the contracting parties of a duty to compensate [them] if the benefit is lost” … . Smith v NGM Ins. Co., 2023 NY Slip Op 05815, Fourth Dept 11-17-23

Practice Point: An insurer may be liable for negligently failing to provide requested coverage for a nonclient. Here, the insured, plaintiff’s husband, allegedly requested supplemental spousal liability (SSL) coverage on behalf of his wife, the injured plaintiff. The insurer, which allegedly failed to provide the requested coverage, may be liable for her loss.

 

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PLAINTIFF REAL ESTATE BROKER’S CAUSES OF ACTION (SEEKING THE REAL ESTATE COMMISSION) AGAINST THE BUYERS WHO SUBSEQUENTLY BOUGHT THE PROPERTY USING A DIFFERENT BROKER SHOULD HAVE BEEN DISMISSED; THE QUANTUM MERUIT, TORTIOUS INTERFERENCE WITH CONTRACT AND FRAUD CAUSES OF ACTION WERE NOT MADE OUT (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the quantum meruit, tortious interference with contract and fraud causes of action should have been dismissed. Plaintiff, a real estate broker, had made an offer on sellers’ property on behalf of the Sorkin defendants which was rejected. Subsequently the Sorkin defendants, using a different broker, made another offer on the sellers’ property which was accepted. Plaintiff sued for the brokerage commission. The tortious interference with contract cause of action should have been dismissed because the Sorkins did not procure a breach of contract. The quantum meruit cause of action should have been dismissed because plaintiff was not a proximate, as opposed to a remote and indirect, link to the consummation of the sale. The fraud cause of action should have been dismissed because plaintiff could not have detrimentally relied on any alleged misrepresentation by the Sorkins that they were not longer interested in the property:

… [T]he Sorkin defendants demonstrated … that the plaintiff’s sole efforts consisted of some brief contacts with the sellers and the Sorkin defendants, and that after the sellers rejected the offers obtained by the plaintiff from the Sorkin defendants, no further negotiations took place between the plaintiff and the sellers regarding a possible sale to the Sorkin defendants. Subsequently, the sellers negotiated a sale of the subject property to the Sorkin defendants through a different broker, and the sale was consummated. Consequently, the Sorkin defendants established, prima facie, that the plaintiff was “not the direct and proximate link, as distinguished from one that is indirect and remote, between the bare introduction of the sellers to the buyers and the consummation of the sale” … . * * *

[Re: fraud:] Even if the Sorkin defendants misrepresented to the plaintiff that they were no longer interested in purchasing the subject property, there could be no “specific detrimental reliance by plaintiff on this misrepresentation, inasmuch as plaintiff could not have compelled the [Sorkin defendants] to speak with plaintiff” … . City RE Group, LLC v 2633 Ocean Realty, LLC, 2023 NY Slip Op 05586, Second Dept 11-8-23

Practice Point: Although plaintiff real estate broker briefly introduced the buyers to the sellers and submitted an offer which was rejected, plaintiff could not sue for the real estate commission when the buyers submitted another offer through another broker which was accepted. Plaintiff could not make out causes of action for quantum meruit, tortious interference with contract or fraud (based upon the allegation the buyers misrepresented to plaintiff that the were no longer interested in the property).

 

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PLAINTIFF RAISED QUESTIONS OF FACT ABOUT THE EXISTENCE OF AN AGREEMENT WITH DEFENDANT ABOUT EACH HAVING 50% OWNERSHIP OF TWO RESTAURANTS; DEFENDANT USED THE RESOURCES FROM THOSE RESTAURANTS TO OPEN A THIRD; PLAINTIFF’S CONSTRUCTIVE TRUST AND UNJUST ENRICHMENT CAUSES OF ACTION SHOULD NOT HAVE BEEN DISMISSED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff, in her affidavit, had raised questions of fact about the existence of a constructive trust and whether defendant was unjustly enriched. Plaintiff and defendant were in a romantic relationship. Plaintiff alleged she and defendant agreed two restaurants would be jointly owned but would be in defendant’s name for tax purposes. After the relationship ended, defendant had used the resources from the two restaurants to open a third:

“To prove unjust enrichment, a party must show that the other party was enriched at his or her expense, and it is against equity and good conscience to permit that person to retain what is sought to be recovered” … . In order to impose a constructive trust, a litigant is generally required to establish four elements by clear and convincing evidence: “(1) a fiduciary or confidential relationship; (2) an express or implied promise; (3) a transfer in reliance on the promise; and (4) unjust enrichment” … . However, the four “elements . . . serve only as a guideline, and a constructive trust may still be imposed . . . provided that those factors are substantially present” … . Further, there is no requirement that the alleged promise be expressly stated; rather, “a promise may be implied or inferred from the very transaction itself” … . Courts have also “extended the transfer element to include instances where funds, time and effort were contributed in reliance on a promise to share in some interest in property, even though no transfer actually occurred” … . Canas v Oshiro, 2023 NY Slip Op 05585, Second Dept 11-8-23

Practice Point: Here plaintiff and defendant were in a romantic (i.e., a confidential) relationship. The alleged oral agreement that they each had a 50% interest in two restaurants supported plaintiff’s action for constructive trust and unjust enrichment based upon defendant’s using the resources from the restaurants to open a third.

 

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DECEDENT’S SON’S ACTION AGAINST THE COUNTY COMMISSIONER OF SOCIAL SERVICES RE: MEDICAID REIMBURSEMENT FOR DECEDENT’S NURSING-HOME CARE WAS CONTRACTUAL IN NATURE; NO NOTICE OF CLAIM WAS REQUIRED; THERE ARE QUESTIONS OF FACT ABOUT WHETHER THE TRANSFER OF FATHER’S ASSETS TO SON FOR LESS THAN MARKET VALUE WAS FOR PURPOSES OTHER THAN MEDICAID PLANNING (THIRD DEPT).

The Third Department, reversing Supreme Court, determined no notice of claim was required for decedent’s son’s action against the Rensselaer County Commissioner of Social Services and there was a question of fact whether the transfer of decedent’s assets to decedent’s son was in anticipation of nursing home costs. The action against the county sounded in contract, not tort, and therefore there was no “notice of claim” requirement. It was not clear whether decedent’s need for nursing-home care was anticipated and whether there were reasons for the transfer of assets at less than market value unrelated to Medicaid planning. The county was seeking $178,084,47 for decedent’s nursing-home care, the alleged fair market value of the assets transferred to decedent’s son during the 60-month Medicaid look-back period:

… County Law § 52 — indisputably still rooted in tort-like claims — does not extend so far as to encompass claims that are contractual in nature … . * * *

Mindful that this is a plenary action, rather than a proceeding in which our review of an administrative determination is circumscribed, the Commissioner’s own submissions raise material issues of fact as to whether the subject transfers, or some portion thereof, were exclusively for a purpose other than Medicaid planning, necessitating denial of her motion regardless of the sufficiency of the opposing papers … . RSRNC, LLC v Wilson, 2023 NY Slip Op 05432, Third Dept 10-26-23

Practice Point: Actions against a county which are based in contract, not tort, do not trigger the notice-of-claim requirement.

Practice Point: Transfers of assets for less than market value are not necessarily subject to the 60-month look-back for Medicaid nursing-home-costs reimbursement. Here there were questions of fact whether nursing-home care was anticipated at the time of the transfer and whether the transfer was made for legitimate purposes unrelated to Medicaid planning.

 

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IN THIS SLIP AND FALL CASE, THERE WAS NO EXPRESS INDEMNIFICATION AGREEMENT BETWEEN DEFENDANT GROCERY STORE AND THE FLO0R-CLEANING DEFENDANTS AND THERE WAS NO EVIDENCE THE FLOOR-CLEANING DEFENDANTS WERE NEGLIGENT OR CAUSED THE INJURY; THEREFORE THE GROCERY STORE’S INDEMNIFICATION AND CONTRIBUTION ACTIONS SHOULD HAVE BEEN DISMISSED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the indemnification and contribution causes of action brought by the defendant grocery store (ShopRite) against the floor-cleaning defendants (Advance and Corporate) in this slip and fall case should have been dismissed. There was no express indemnification agreement. There was no showing Advance and Corporate were negligent. Safier v Wakefern Food Corp., 2023 NY Slip Op 05413, Second Dept 10-25-23

 

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