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​THE EMPLOYEE RESTRICTIVE COVENANTS (NONSOLICITATION AGREEMENTS) WERE PROPERLY ENFORCED; NINE OF DEFENDANT INSURANCE COMPANY’S CUSTOMERS FOLLOWED PLAINITFFS AFTER THEIR TERMIINATION; TWO-JUSTICE DISSENT (THIRD DEPT). ​

The Third Department, over a two-justice partial dissent, determined the defendant insurance company’s motion for summary judgment enforcing the nonsolicitation agreements were properly granted. Nine of defendant’s former customers followed plaintiffs after their termination from defendant’s employ:

… “[T]he application of the test of reasonableness of employee restrictive covenants focuses on the particular facts and circumstances giving context to the agreement” … . While such agreements are generally not favored, they can be “justified by the employer’s need to protect itself from unfair competition by former employees” … . “The employer has a legitimate interest in preventing former employees from exploiting or appropriating the goodwill of a client or customer, which had been created and maintained at the employer’s expense, to the employer’s competitive detriment” … . Here, when plaintiffs joined defendant’s insurance agency, neither had any prior experience in the insurance field, they were not licensed agents, nor did they have any clients or books of business of their own. As to the clients in question here, they were solicited, developed and serviced by defendant. As such, the accounts and clients are the product of defendant’s efforts, financial expenditures and goodwill, all of which defendant has a legitimate interest in protecting. Davis v Marshall & Sterling, Inc., 2023 NY Slip Op 03050, Third Dept 6-8-23

Practice Point: Here nine of the employer’s customers followed plaintiffs after their termination. Supreme Court properly enforced the nonsolicitation agreements. There was a two-justice dissent.

 

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PLAINTIFF LANDLORD WAS NOT ABLE TO SHOW THE FULLY EXECUTED LEASE WAS EVER DELIVERED TO DEFENDANT TENANT; THEREFORE THE LANDLORD WAS NOT ENTITLED TO SUMMARY JUDGMENT BASED UPON THE TERMS OF THE LEASE (FIRST DEPT). ​

The First Department, reversing Supreme Court, determined the plaintiff-landlord was not entitled to summary judgment based on the terms of the second amended lease because the landlord could not show that the defendant-tenant was ever provided with a fully executed lease:

… [A] leasehold estate cannot be conveyed without a legal delivery of the fully executed lease to the lessee … , and plaintiff did not offer sufficient proof to rebut [defendant’s] showing that he never received delivery of the executed second amendment during the lease period. Evidence of defendant’s continued occupancy and payment of rent after expiration of the first amendment to the lease in 2016 is equally consistent with a month-to-month tenancy giving rise to an obligation to pay use and occupancy, and therefore does not, without more, prove delivery of the second amendment. Walber 82 St. Assoc., LP v Fisher, 2023 NY Slip Op 02993, First Dept 6-6-23

Practice Point: A leasehold estate cannot be conveyed without legal delivery of the fully executed lease to the lessee.

 

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BUYER WAS ENTITLED TO SPECIFIC PERFORMANCE OF A CONTRACT FOR THE SALE OF “INCLUSIONARY AIR RIGHTS” (IAR’S); IAR’S DICTATE THE ALLOWED SQUARE FOOTAGE OF BUILDINGS ON A PARCEL OF LAND (THE ALLOWED NUMBER OF FLOORS FOR EXAMPLE) (FIRST DEPT).

The First Department, reversing (modifying) Supreme Court, in a full-fledged opinion by Justice Gonzalez, determined that a contract for the purchase of “inclusionary air rights” (IAR’s) was subject to specific performance. “Air rights” are controlled by zoning regulations. For example, if a 10,000 square-foot parcel of land is allowed 50,000 square feet of floor space, the air rights for that 10,000 square-foot parcel constitute 40,000 square feet. Here the contract for the purchase of air rights between sophisticated real estate developers was deemed to be subject to specific performance. Defendant seller tried to back out of the deal because the selling price was too low:

… New York courts have consistently considered air rights an “interest in real property” … . … [S]pecific performance is not solely limited to real property; the remedy may also apply in other instances, such as a conveyance of shares of stock in a close corporation or an agreement to sell shares in a cooperative real estate corporation … .

… [S]pecific performance may be available in actions where the market is opaque and the price of the goods is subject to intense fluctuation … . … [S]pecific performance is warranted because of the parties’ incorporation of a specific performance in their agreement, defendant’s willful breach of the agreement, the absence of an inequitable or disproportionate burden, and the admitted uncertainty of valuing IARs.  301 E. 60th St. LLC v Competitive Solutions LLC, 2023 NY Slip Op 02842, First Dept 5-30-23

Practice Point: A contract for the sale of “inclusionary air right” (IAR’s) which, for example, dictate the number of floors allowed in a building constructed on a parcel of land, can be subject to specific performance.

 

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THE “NO ACTION” PROVISION IN THE CONTRACT PRECLUDED PLAINTIFFS FROM BRINGING A JUDICIAL BREACH OF CONTRACT ACTION; THE AVAILABLE CONTRACTUAL REMEDIES WERE DEEMED EXCLUSIVE (FIRST DEPT). ​

The First Department, reversing the appellate division, in a full-fledged opinion by Justice Oing, over a two-justice dissent, determined the complaint seeking a judicial determination whether the contingent resource payment (CRP) agreement was breached when Exxon purchased InterOil Corporation was properly dismissed. Exxon successfully argued that plaintiffs’ only recourse was contractual under the terms of the CRP. The opinion is far too detailed to fairly summarize here:

[The CRP] § 8.05’s penultimate sentence not only provides that plaintiffs cannot bring a class action to challenge any aspect of the CRP agreement, but it also bars them from bringing any action or proceeding altogether, “[n]otwithstanding anything to the contrary in this Agreement . . . no individual Holder or other group of Holders will be entitled to exercise such rights.” Such “rights,” written in the plural as opposed to in the singular, refer to those set out in the beginning of the sentence — namely, “institut[ing] any action or proceeding at law or in equity or in bankruptcy or otherwise upon or under or with respect to this Agreement.” Mulacek v ExxonMobil Corp., 2023 NY Slip Op 02829, First De[t 5-25-23

Practice Point: Here a provision in the contract providing that no court action for breach of contract could be brought, a so-called “no action” clause, precluded plaintiffs’ lawsuit.

 

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“EXEMPT EMPLOYEES” UNDER THE CIVIL SERVICE LAW ARE TERMINABLE AT WILL; A COLLECTIVE BARGAINING AGREEMENT WHICH PURPORTS TO MAKE AN EXEMPT EMPLOYEE TERMINABLE FOR CAUSE IS UNENFORCEABLE (CT APP).

The Court of Appeals, reversing the appellate division, in a full-fledged opinion by Judge Garcia, determined a so-called “exempt employee (here the secretary to the town planning board) whose qualifications cannot be tested by a Civil Service examination is terminable at will. The collective bargaining agreement (CBA) defined the bargaining unit to include the secretary and permitted the town to terminate only for “just cause.” When the secretary was fired the union filed a grievance and sought arbitration. The Court of Appeals held the secretary. as an “exempt employee”  was terminable at will and arbitration was therefore not available:

Certain civil service positions are classified as “exempt” when the position is of a confidential nature and requires personal qualities that cannot practicably be tested by an examination. Exempt class employees are therefore terminable at will. In this case, the parties entered into a collective bargaining agreement that purports to provide for-cause termination protection to certain exempt class employees. We hold the agreement unenforceable to the extent it grants such protections, and therefore this dispute over an exempt class employee’s termination is not arbitrable. Matter of Teamsters Local 445 v Town of Monroe, 2023 NY Slip Op 02754, CtApp 5-23-23

Practice Point: A so-called “exempt employee” under the Civil Service Law is one whose skills cannot be tested by a Civil Service exam. Exempt employees are terminable at will. A collective bargaining agreement which purports to make exempt employees terminable for cause is unenforceable.

 

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A DEADLINE SET IN A TIME-IS-OF-THE-ESSENCE LETTER CAN BE WAIVED ORALLY, OR EVEN BY CONDUCT ALONE (SECOND DEPT).

The Second Department, reversing (modifying) Supreme Court, determined there was a question of fact whether defendant orally waived the deadline for the real estate transaction set in a time-is-of-the-essence letter:

… “[I]t is well settled, in New York, that an oral waiver of the time for the sale of real property will be given effect” … . [Plaintiff’s] assertion, made under the penalties of perjury, that he was assured by the defendant’s president that the plaintiff would not be held in default in the event that it failed to close the transaction on May 15, 2019, was sufficient to raise a triable issue of fact as to whether the defendant’s president made a statement … that operated as a waiver of the defendant’s right to enforce the May 15, 2019 deadline for the closing. Contrary to the defendant’s contention, in order for such a waiver to occur, it was not necessary that the [time-is-of-the-essence] letter be withdrawn in a formal communication from the defendant’s attorney. A waiver of the right to timely performance under a contract “need not be in writing in order to be valid and enforceable” … . Such a waiver may occur even without an oral statement, such as the one that was allegedly made in this case, and may instead be inferred solely from a party’s conduct … . LG723, LLC v Royal Dev., Inc., 2023 NY Slip Op 02653, Second Dept 5-17-23

Practice Point: A deadline in a time-is-of-the-essence letter can be waived orally or by conduct alone.

 

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THE SOLE MEMBER OF AN LLC WHICH OWNS THE PROPERTY HAS AN INSURABLE INTEREST IN THE PROPERTY; AN INSURER WHICH ACCEPTS PAYMENT ON A POLICY AFTER LEARNING OF THE INSURED’S ALLEGED MISREPRESENTATIONS WAIVES THE RIGHT TO RESCIND THE POLICY (SECOND DEPT).

The Second Department, reversing Supreme Court, determined: (1) plaintiff, as the sole member of an LLC which owned the property, had an insurable interest in the property; and (2) defendant’s accepting payment on the policy after defendant was aware of plaintiff’s alleged misrepresentations waived defendant’s right to rescind the policy:

… [A]s the sole owner of the LLC, the plaintiff had an insurable interest in the subject property, since destruction of the subject property would necessarily cause economic detriment to the plaintiff (see Insurance Law § 3401 …).

… “The continued acceptance of premiums by an insurance carrier after learning of sufficient facts which allow for the rescission of the policy, constitutes a waiver of the right to rescind” … . Here, the plaintiff established his prima facie entitlement to judgment as a matter of law by demonstrating that the defendant waived its right to assert the plaintiff’s misrepresentations as a basis for rescinding the policy, since the defendant renewed the policy and accepted a premium payment after it discovered the misrepresentations. Sabharwal v Hyundai Mar. & Fire Ins. Co., Ltd., 2023 NY Slip Op 02690, Second Dept 5-17-23

Practice Point: The sole member of an LLC which owns real property has an insurable interest in the property.

Practice Point: An insurer which accepts payment on a policy after learning of the insured’s alleged misrepresentations waives the right to rescind the policy.

 

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PLAINTIFF WAS DEEMED TO HAVE READ THE INFORMATION WHICH WAS HYPERLINKED; THEREFORE PLAINTIFF WAS DEEMED TO HAVE AGREED TO ARBITRATION (FIRST DEPT).

The First Department, reversing Supreme Court, determined plaintiff agreed to arbitrate based upon the hyperlinks in the document plaintiff reviewed:

Uber [defendant] sustained its burden of demonstrating that the parties had an explicit and unequivocal agreement to arbitrate. … [P]laintiff had agreed to be bound by the arbitration agreement when he affirmatively indicated and confirmed, by taking two separate actions, that he had reviewed and agreed to Uber’s updated terms of use, which were overtly hyperlinked as part of the pop-up screen and sufficient to form a binding contract … .

… [P]laintiff was on inquiry notice of the updated Terms of Use that required any disputes between the parties to be resolved by arbitration. Although a clickwrap agreement’s terms and conditions must be clear and conspicuous, they need not all be simultaneously and immediately visible; the terms may be binding and enforceable even if they are only accessible through a hyperlink … . The keys to enforceability are a reasonable indication of the existence of the additional terms and the user’s being required to manifest assent to them … . Brooks v Lang Yang, 2023 NY Slip Op 02610, First Dept 5-15-23

Practice Point: Here the plaintiff was deemed to have read information which was hyperlinked and therefore was deemed to have agreed to arbitrate.

 

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ALTHOUGH THE NYC ADMININSTRATIVE CODE MAKES TENANTS RESPONSIBLE FOR REMOVING ICE AND SNOW FROM SIDEWALKS, IT DOES NOT IMPOSE TORT LIABILITY FOR FAILURE TO DO SO; THE ADMINISTRATIVE CODE ALSO MAKES PROPERTY OWNERS RESPONSIBLE FOR SNOW AND ICE REMOVAL; THE LEASE SPECIFICALLY STATED DEFENDANT WAS NOT RESPONSIBLE FOR CLEARING SNOW AND ICE FROM THE SIDEWALK; DEFENDANT’S MOTION FOR SUMMARY JUDGMENT SHOULD HAVE BEEN GRANTED (FIRST DEPT).

The First Department, reversing Supreme Court, determined the tenant, 185th Operating, was not liable for a sidewalk ice and snow slip and fall. Although the NYC Administrative Code makes tenants responsible for removing ice and snow from sidewalks, it does not impose tort liability for a failure to do so. Here the lease explicitly stated the tenant is not responsible for clearing ice and snow:

Although the applicable statute requires tenants to clear snow and ice from the sidewalks around their premises, the statute does not impose tort liability for noncompliance (Administrative Code of the City of New York § 16-123[a] …). Furthermore, Administrative Code § 7-210(a), which requires property owners to maintain the sidewalk abutting their property, does not impose liability on 185 Operating, as 185 Operating is a tenant of the premises, not the owner. Not only did 185th Operating’s lease with defendant owner … specifically state that 185th Operating was not responsible for maintaining the sidewalks adjacent to the premises, but [the owner’s] lease with defendant Staples …, a tenant occupying the same building as 185th Operating, expressly made Staples responsible for clearing snow and ice from the sidewalk where the icy condition had occurred.

The record does not present any evidence that 185th Operating’s earlier voluntary snow removal created or exacerbated a hazardous condition that then caused plaintiff’s injury … . Cruz v Heights Broadway, LLC, 2023 NY Slip Op 02612, First Dept 5-16-23

Practice Point: Here the lease specifically stated the defendant tenant was not responsible for removing ice and snow from the sidewalk. The NYC Administrative Code requires tenants to remove ice and snow but does not impose tort liability for the failure to do so. The code also requires owners to remove ice and snow. The tenant’s motion for summary judgment should have been granted.

 

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THE RELEASE SIGNED BY PLAINTIFF BEFORE TAKING A MANDATORY COLLEGE FITNESS-EDUCATION COURSE PRECLUDED HER LAWSUIT AGAINST THE COLLEGE ALLEGING INJURIES SUSTAINED TAKING THE COURSE (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the release signed by the plaintiff precluded her suit against defendant community college (DCC) for alleged injuries sustained in a mandatory fitness education course:

The plaintiff enrolled in a wellness and fitness education course, which was a mandatory course that had to be taken as part of her general studies degree program at Dutchess Community College. The plaintiff informed the course instructor of her prior back injuries, and signed a release which, in relevant part, “discharge[d] Dutchess Community College from all liability for . . . any claim of injury to [the plaintiff’s] person . . . whether harm is caused by the negligence of the releasees or otherwise.” The release further provided that it was “intended to be broad and inclusive in keeping with state laws.” * * *

“Where the language of an exculpatory agreement expresses in unequivocal terms the intention of the parties to relieve a defendant of liability for its own negligence, the agreement will be enforced” … . “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'” … . Sjogren v Board of Trustees of Dutchess Community Coll., 2023 NY Slip Op 02551, Second Dept 5-10-23

Practice Point: An unambiguous release will preclude a lawsuit absent fraud sufficient to void the agreement.

 

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