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DEFENDANT VIDEO-HOSTING SERVICE, VIMEO, DID NOT BREACH ITS CONTRACT WITH PLAINTIFF BY REMOVING FIVE VIDEOS POSTED BY PLAINTIFF CLAIMING CHILDHOOD VACCINATION LEADS TO AUTISM; THE COMMUNICATIONS DECENCY ACT AUTHORIZES INTERNET PROVIDERS TO REMOVE “OBJECTIONABLE” MATERIAL (FIRST DEPT).

The First Department, in a full-fledged opinion by Justice Singh, determined defendant video-hosting service, Vimeo, did not breach its contract with plaintiff by removing five videos posted by plaintiff which Vimeo concluded made false or misleading claims about vaccine safety. The videos claimed that childhood vaccines lead to autism:

This appeal concerns whether a video-hosting service may be held liable for its decision to remove videos that it determines violate its terms of service. Defendant Vimeo, Inc. prohibits users from posting videos that make false or misleading claims about vaccine safety. It removed five videos, posted by a commercial user, because the videos claimed that childhood vaccination leads to autism. The user sued, claiming that Vimeo had breached the parties’ contract. The motion court held that liability was precluded by section 230 of the Communications Decency Act. We agree. Section 230 prevents lawsuits against Internet service providers for their good-faith decisions to remove content that they consider objectionable. If service providers had to justify those decisions in court, or if plaintiffs could circumvent immunity through unsupported accusations of bad faith, section 230 would be a dead letter. This is as true for commercial users as for any other plaintiff. Therefore, we affirm dismissal of the complaint.

… [S]ection 230(c)(2) prohibits holding an interactive computer service provider liable for “any action voluntarily taken in good faith to restrict access to or availability of material that the provider . . . considers to be obscene, lewd, lascivious, filthy, excessively violent, harassing, or otherwise objectionable” (47 USC § 230[c][2][A]). Word of God Fellowship, Inc. v Vimeo, Inc., 2022 NY Slip Op 01978, First Dept 3-22-22

Practice Point: The Communications Decency Act allows Internet providers to take down posted material the providers deem “objectionable.” Here a video-hosting service, Vimeo, took down five videos posted by plaintiff which claimed childhood vaccination leads to autism. Plaintiff’s breach of contract action was dismissed.

 

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THE “SOLE REMEDY REPURCHASE PROTOCOL” IN THIS RESIDENTIAL MORTGAGE-BACKED SECURITIES CASE REQUIRES NOTICE OF EACH INDIVIDUAL DEFECTIVE LOAN BEFORE THE DEFENDANT IS REQUIRED TO REPURCHASE IT; OF THE 783 NONCONFORMING LOANS, 480 WERE NOT SPECIFICALLY IDENTIFIED; THE DEFENDANT WAS NOT OBLIGATED TO REPURCHASE THE UNIDENTIFIED LOANS (CT APP).

The Court of Appeals, in a full-fledged opinion by Judge DiFiore, reversing the Appellate Division, over an extensive partial dissent, determined that the “sole remedy repurchase protocol” contract provision of the residential-mortgage-backed-securities agreements requires notice of each defective loan before the obligation to repurchase is triggered:

Pursuant to the pooling and service agreement (PSA) establishing the trust, [defendant] DLJ made certain representations and warranties, including that each loan was underwritten in accordance with the originators’ underwriting standards and applicable law, that certain provided documentation was true and accurate, and that none of the loans were “high cost” or “predatory.” … [T]he PSA contains a “sole remedy” provision granting U.S. Bank, as trustee, the limited authority to seek a remedy for any breach by DLJ of these representations and warranties through a contractually established “repurchase protocol” requiring DLJ to cure, repurchase, or substitute a nonconforming mortgage loan within 90 days of notice or independent discovery of such breaching loan. * * *

… [T]he trustee’s expert reviewed 1,059 of the loans in the trust—including both previously noticed and unnoticed loans—and identified 783 allegedly nonconforming loans. Only 303 of these loans had been specifically identified by the trustee in its pre-suit letters; the remaining 480 loans were not listed in the schedules of breaching loans provided to DLJ prior to commencement of the action. * * *

A simple reading of the [agreement] demonstrates that the trustee’s assertion that loan-specific notice is not required is inconsistent with the contractual language of the repurchase protocol. The parties structured the repurchase protocol entirely through the lens of individual “mortgage loans”—clearly contemplating a loan-by-loan approach to the agreed-upon sole remedy for breach. U.S. Bank N.A. v DLJ Mtge. Capital, Inc., 2022 NY Slip Op 01866, Ct App 3-17-22

Practice Point: The plain language of a contract will be enforced. Here in this residential mortgage-backed securities case, under the terms of the contract, the defendant was not required to repurchase nonconforming loans about which it was not specifically notified. Of the 783 allegedly nonconforming loans, defendant was specifically notified of only 303.

 

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WHETHER THE AGREEMENT TO ARBITRATE IS VALID IS A THRESHOLD ISSUE FOR THE COURT, NOT THE ARBITRATOR (SECOND DEPT). ​

The Second Department, reversing Supreme Court, noted that the validity of an agreement to arbitrate is a threshold issue which must be determined by the court, not the arbitrator:

… [T]he petitioners raised a threshold issue regarding the validity of the purported agreement to arbitrate, as they contended that they did not sign, and that neither Graves nor AMF had the authority to sign, any contract on their behalf concerning the purported transaction involving the respondents. Thus, this threshold issue was for the Supreme Court, rather than an arbitrator, to determine … . Matter of Northeast & Cent. Contrs., Inc. v Quanto Capital, LLC, 2022 NY Slip Op 01791, Second Dept 3-16-22

 

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THE COMPLAINT SUFFICIENTLY STATED FACTS AMOUNTING TO A BREACH-OF-FIDUCIARY-DUTY CAUSE OF ACTION AGAINST DEFENDANT REAL ESTATE BROKER, DESPITE PLAINTIFF-SELLER’S CONSENT TO THE BROKER’S “DUAL AGENCY;” IT WAS ALLEGED THE BROKER WAS AWARE THE PROPERTY WAS TO BE SUBDIVIDED AND SOLD BY THE BUYERS FOR THREE TIMES THE PRICE AND SHE WOULD BE THE BUYERS’ BROKER FOR THE SUBSEQUENT SALES (FIRST DEPT). ​

The First Department, reversing Supreme Court, determined the complaint sufficiently stated a cause of action for breach of fiduciary duty by the defendant real estate broker, despite the plaintiff’s consent to the broker’s “dual agency:”

Although the complaint does not explicitly articulate a cause of action for breach of fiduciary duty, such a cause of action is manifest in its factual allegations, and the documentary evidence fails to utterly refute those allegations … . In connection with his sale of certain real property, plaintiff signed a disclosure form pursuant to Real Property Law § 443, giving his informed consent to a “dual agency with designated sales agent” relationship with defendants. The form states that a dual agent cannot give the seller or buyer “undivided loyalty.” Nevertheless, it does not relieve defendants from all fiduciary duty. The form states that defendant Nikki Carchedi, of defendant Stone House Properties, “is appointed to represent the seller in this transaction.” The complaint establishes a cause of action for breach of a fiduciary duty beyond the acknowledged “divided” duty by alleging that [defendant] Carchedi failed to disclose that she had a personal stake in the sale to the buyers, who planned to subdivide the property immediately after purchase and retain her as the broker for the sale of the subdivided parcels, and that they did so, listing the subdivided parcels for almost three times the price plaintiff received in his sale … . We also note plaintiff’s assertion that the agent representing the buyer was the son of Carchedi’s longtime client about whom plaintiff had expressed concern. Hahn v Stone House Props. LLC, 2022 NY Slip Op 01416, First Dept 3-8-22

​Practice Point: Even though breach-of-fiduciary-duty was not explicitly pled, the facts alleged stated a cause of action against defendant real estate broker.

Practice Point: Even though the seller signed a form consenting to the broker’s “dual agency,” the broker was not relieved of her fiduciary duty to the seller. Allegedly, the broker was aware the buyers were going to subdivide the property, sell it at three times the price, and that she would be the broker for the subsequent sales.

 

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THE CONTRACTOR COULD NOT ESCAPE LIABILITY FOR PAYMENT OF THE SUBCONTRACTOR; THE PAY-WHEN-PAID CLAUSE IN THE CONTRACT IS INVALID; NOTHING IN THE CONTRACT INDICATED THE CONTRACTOR WAS ACTING SOLELY AS AN AGENT FOR THE OWNER (FIRST DEPT).

The First Department, in a full-fledged opinion by Justice Moulton, determined defendant Sweet was not an agent such that it could avoid responsibility for paying a subcontractor, Arenson, for the construction work done by Arenson. The First Department further held General Business Law 756-a did not invalidate the precedent prohibiting pay-when-paid clauses like the one in the contract between Sweet and Arenson:

The scope letter, which is on Sweet’s letterhead, contains the following clause:”Subcontractor understands that Contractor is acting as an agent for the Owner, and agrees to look only to funds actually received by the Contractor (from the Owner) as payment for the work performed under this Subcontract.” [This is the prohibited pay-when-paid clause.] * * *

… Sweet was not an agent for a disclosed principal. The clearest indicator of Sweet’s role, its signature, supports this conclusion. The signature line for “Sweet Construction Approval” and the signature do not indicate that Sweet signed the contract as agent on behalf of a disclosed principal or reflect any limitations … . …

In characterizing itself as “only a facilitator of payment” and “merely a conduit” Sweet ignores that the subcontract provides that the work is to be performed pursuant to the “SCC General Requirements.” Those requirements, which also appear in the scope letter, provide that Arenson will … indemnify and hold Sweet harmless with respect to Arenson’s work; obtain liability insurance in Sweet’s favor; and recognize Sweet’s authority to issue safety violations and correct unsafe conditions. These general requirements, on their face, apply to Sweet in its own capacity, and not in its capacity as an agent. Bank of Am., N.A. v ASD Gem Realty LLC, 2022 NY Slip Op 01379, First Dept 3-3-22

 

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FAMILY COURT DID NOT HAVE JURISDICTION TO MODIFY A SEPARATION AGREEMENT WHICH WAS INCORPORATED BUT NOT MERGED INTO THE JUDGMENT OF DIVORCE; A PLENARY ACTION IS REQUIRED (FIRST DEPT).

The First Department, reversing (modifying) Family Court, determined Family Court did not have jurisdiction to modify the separation agreement by putting a cap on the child-support/spousal-support credit father was entitled to for his payment of the mortgage and apartment expenses:

A stipulation of settlement which is incorporated but not merged into the parties’ judgment of divorce may be reformed only in a plenary action … . Family Court does not have jurisdiction to modify a separation agreement … . Under the terms of the parties’ stipulation of settlement, the father is entitled to pay his $2,100 in monthly child support directly to the mortgagee of the parties’ former marital apartment. However, the Family Court erred in capping the father’s credit against support arrears at $25,200 per year based on this provision. Although Family Court found that there was no similar provision with respect to spousal support, in fact the parties’ stipulation permits the father to also deduct the payment of apartment expenses, including the mortgage, from his spousal support. Accordingly, Family Court improperly amended the stipulation by imposing an annual maximum credit to which the father is entitled based solely on his child support obligation. Matter of Deborah K. v Richard K., 2022 NY Slip Op 01391, First Dept 3-3-22

 

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THE STIPULATION OF SETTLEMENT IN THIS LANDLORD-TENANT ACTION WAS NOT INVALIDATED BY A CHANGE IN THE LAW BASED UPON A COURT OF APPEALS DECISION ISSUED A MONTH AFTER THE STIPULATION; A “MISTAKE OF LAW” DOES NOT INVALIDATE A STIPULATION OF SETTLEMENT (FIRST DEPT).

The First Department determined that a stipulation of settlement in open court was valid, despite a Court of Appeals decision which ruled the Housing Stability and Tenant Protection Act (HSTPA) cannot be applied retroactively. The retroactive application of the HSTPA (to the stipulation) was deemed a “mistake of law” which is not a ground for invalidating a stipulation:

On … the date of trial, the court facilitated settlement negotiations and the parties placed the material terms of their settlement on the record. “The in-court oral stipulation made here . . . evidences [defendant]’s unconditional agreement, through authorized counsel, to settle” for a sum certain of $7.5 million, provide leases at specific monthly rents for plaintiffs still living in the building, and enter into a confidentiality agreement … . “[W]hen the transcript . . . is read in its entirety, it is clear that what was spread upon the record was an oral stipulation and not simply an agreement to agree” … . “The fact that it is necessary for the parties to exchange general releases and execute a confidentiality agreement does not render the agreement invalid”… , nor does the parties’ representation that they would “execute formal settlement papers” demonstrate that there was no agreement on material terms … . …

We reject defendant’s contention that the decision of the Court of Appeals … , issued one month afterwards, requires that the settlement be vacated. While that decision held that the retroactive application of the [HSTPA] would violate due process …, previous interpretations to the contrary constituted “a mistake as to the law,” which is insufficient grounds for vacating a stipulation … . Nieborak v W54-7 LLC, 2022 NY Slip Op 01397, First Dept 3-3-22

 

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PLAINTIFF, WHILE ATTENDING A BEACH-FRONT PARTY, SUFFERED SEVERE INJURY WHEN HE DOVE OFF A BULKHEAD INTO SHALLOW WATER; HIS ACTION AGAINST THE PROPERTY OWNER FOR FAILURE TO WARN SHOULD NOT HAVE BEEN DISMISSED; THE PROPERTY OWNER’S INDEMNIFICATION ACTION AGAINST THE PERSON WHO RENTED THE AREA FOR THE PARTY WAS DISMISSED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff’s action against the owner of beach-front property where a party was being held should not have been dismissed. Plaintiff dove off a bulkhead into shallow water and suffered severe injury. Plaintiff alleged a negligent failure to warn against diving. Apparently the water was murky and the bulkhead extended 40 feet into a bay along a boat channel. In addition, the Second Department determined that the person who rented the area for the party (Hanson) did not agree, in the rental agreement, to indemnify the property owner for the owner’s alleged negligence:

The plaintiff testified that he believed the waters to be deep in the area in which he dove because the bulkhead was adjacent to a boating channel, it extended approximately 40 feet into the bay from the beach, and he had seen people swimming earlier in the day. … [I]t cannot be said as a matter of law that the plaintiff knew or should have known that he was diving into shallow waters, and thus, that his conduct constituted the sole proximate cause of the accident or an unforeseeable superseding event sufficient to absolve [the owner] of liability … . Moreover, [the owner] did not demonstrate, as a matter of law, that the plaintiff’s blood alcohol level was the sole proximate cause, or a superseding cause, of the accident … . …

“When a party is under no legal duty to indemnify, a contract assuming that obligation must be strictly construed to avoid reading into it a duty which the parties did not intend to be assumed” … . “The promise should not be found unless it can be clearly implied from the language and purpose of the entire agreement and the surrounding facts and circumstances” … . Particularly with agreements to indemnify, “[a]lthough the words might ‘seem to admit of a larger sense, . . . they should be restrained to the particular occasion and to the particular object which the parties had in view'” … .

Here, the indemnification provision on which [the owner] relies is contained in the agreement Hanson signed to rent the Community Center for a party. Hanson demonstrated … that a promise on his part to indemnify PPI for its alleged negligence in relation to its ownership and maintenance of the beach area and bulkhead cannot be “clearly implied from the language and purpose of [that] entire agreement and the surrounding facts and circumstances” … . Reilly v Patchogue Props., Inc., 2022 NY Slip Op 01334, Second Dept 3-2-22

 

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LESSOR OF THE VEHICLE INVOLVED IN THE REAR-END COLLISION WAS ENTITLED TO SUMMARY JUDGMENT PURSUANT TO THE GRAVES AMENDMENT; SUPREME COURT HAD THE AUTHORITY TO SEARCH THE RECORD AND GRANT SUMMARY JUDGMENT EVEN THOUGH NO MOTION HAD BEEN MADE (FIRST DEPT).

The First Department, reversing (modifying) Supreme Court, determined Bancorp, the lessor of the vehicle leased by Fordham and driven by Fajerman, was entitled to summary judgment in this rear-end collision case pursuant to the Graves Amendment. The First Department noted Supreme Court had the authority to search the record and award summary judgment in the absence of a motion:

Bancorp’s request to search the record and for summary judgment dismissing the complaint against it under the Graves Amendment (49 USC § 30106) should have been granted. “On a motion for summary judgment, the court may search the record and, if warranted, grant summary relief even in the absence of a cross motion” … . “Under the Graves Amendment, the owner of a leased or rented motor vehicle cannot be held vicariously liable ‘for harm to persons or property that results or arises out of the use, operation, or possession of the vehicle during the period of the rental or lease, if — (1) the owner (or an affiliate of the owner) is engaged in the trade or business of renting or leasing motor vehicles; and (2) there is no negligence or criminal wrongdoing on the part of the owner (or an affiliate of the owner)'” … . Here, the commercial lease agreement submitted by Bancorp, as well as the affidavit of Erika Caesar, Chief Diversity Officer of Assistant General Counsel for Bancorp, clearly establish that Bancorp, a commercial lessor of motor vehicles, had leased the vehicle that Fajerman was driving, to defendant Fordham. The commercial lease further establishes that Fordham was responsible for the maintenance and repairs for the vehicle during the period of the lease and during the time in which the accident occurred. Additionally, plaintiff did not allege any mechanical defects in the subject vehicle, and Fajerman also stated in her affidavit that the car did not have any mechanical defects. As such, Bancorp is entitled to judgment as a matter of law under the Graves Amendment … . Kalair v Fajerman, 2022 NY Slip Op 01244, First Dept 2-24-22

 

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THE BREACH OF IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING CAUSE OF ACTION SHOULD HAVE BEEN DISMISSED AS DUPLICATIVE OF THE BREACH OF CONTRACT CAUSE OF ACTION; THE APPEAL FROM AN ORDER WHICH WAS NOT THE PRODUCT OF A MOTION ON NOTICE MUST BE DISMISSED (FIRST DEPT).

The First Department, in a full-fledged opinion by Justice Higgitt which is too comprehensive and detailed to fairly summarize here. determined: (1) the cause of action for breach of implied covenant of good faith and fair dealing was duplicative of the breach of contract cause of action; and (2) an appeal from a supplemental order which was not the product of a motion on notice must be dismissed:

The implied covenant of good faith and fair dealing “embraces a pledge that neither party shall do anything that will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract” … , and is breached when a party acts in a manner that deprives the other party of the benefits of the contract (id.). Generally, a breach of the covenant of good faith and fair dealing is a breach of the contract itself … . Therefore, a separate cause of action for breach of the covenant cannot be maintained where, as here, “it is premised on the same conduct that underlies the breach of contract cause of action and is intrinsically tied to the damages allegedly resulting from a breach of the contract” … . Because a breach of the covenant of good faith and fair dealing is a breach of the contract itself, plaintiffs may press their theory that defendants acted in derogation of the covenant in conjunction with their cause of action for breach of the license agreements … . We note that to the extent defendants were entitled to exercise discretion in the manner in which they performed their obligations … , they were, under the covenant (and, by natural extension, under the license agreement itself) prohibited from acting arbitrarily, irrationally, or in bad faith … . …

Defendants’ appeal from the supplemental order is dismissed because that order was not the product of a motion on notice (see CPLR 2214); rather, the supplemental order was issued in response to an inquiry from counsel seeking clarity regarding the court’s decision and order determining the summary judgment motions (see CPLR 5701[a][2] …). Parlux Fragrances, LLC v S. Carter Enters., LLC, 2022 NY Slip Op 01250, First Dept 2-24-22

 

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