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FUNDS FOR PERSONAL CARE SERVICES ARE MEDICAID FUNDS SUBJECT TO THE AUDIT AND RECOUPMENT AUTHORITY OF THE CITY OF NEW YORK HUMAN RESOURCES ADMINISTRATION; APPELLATE DIVISION REVERSED (CT APP)..

The Court of Appeals, reversing the Appellate Division, determined funds paid for personal care were Medicaid funds which were subject to the audit and recoupment authority of the City of New York Human Resources Administration (HRA). The facts are explained in the Appellate Division decision:

For the reasons stated in the dissenting opinion below (Matter of People Care Inc. v City of New York, 175 AD3d 134, 147-152 [1st Dept 2020] [Richter, J.P., dissenting]), we conclude that the funds for personal care services paid to petitioner People Care, Inc. under the Health Care Reform Act (Public Health Law §§ 2807-v [1] [bb] [i], [iii]) are Medicaid funds subject to the audit and recoupment authority of the City of New York Human Resources Administration (HRA) in accordance with the parties’ 2001 contract. Matter of People Care Inc. v City of N.Y. Human Resources Admin., 2021 NY Slip Op 01834, CtApp 3-25-21

 

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IN THE CONTEXT OF AN INDEMNIFICATION CLAUSE REQUIRED BY THE WORKERS’ COMPENSATION LAW, THE 1ST DEPARTMENT NOTED THAT, UNDER THE COMMON LAW, UNSIGNED DOCUMENTS ARE ENFORCEABLE AS LONG AS THE PARTIES INTENDED TO BE BOUND (FIRST DEPT).

The First Department noted that the written-indemnification-clause requirement in Workers’ Compensation Law section 11 does not require that the document be signed to be enforceable:

Plaintiff was injured while engaged in renovation of an apartment in Park Regis’s cooperative building. The motion court correctly concluded that ASA, plaintiff’s employer, was bound by the provisions of the alteration agreement between Park Regis and the nonparty cooperative shareholder lessees requiring the lessees’ general contractor to indemnify and procure insurance in favor of Park Regis (see Workers’ Compensation Law § 11 …). …

Even if the alteration agreement were not signed by ASA, ASA would still be bound by it, because the record shows that it intended to be bound by it (see Flores v Lower E. Side Serv. Ctr., Inc., 4 NY3d 363, 369 [2005] [“nothing in the language of (Workers’ Compensation Law § 11) or its legislative history (suggests) that, in addition to requiring a written indemnification clause, the Legislature intended to deviate from the common-law rule that written documents can be enforced even if they are not signed”]). ASA’s field supervisor and project manager testified that ASA “signs every alteration agreement[]” before commencing work, that he believed ASA had done so in connection with this project, that he understood ASA to be bound by the terms of the alteration agreement requiring it to procure insurance for and indemnify Park Regis, and that ASA had indeed procured insurance for Park Regis as required by the alteration agreement. Shala v Park Regis Apt. Corp., 2021 NY Slip Op 01870, First Dept 3-25-21

 

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THE COMMERCIAL LEASE GUARANTEE MET THE DEFINITION OF AN INSTRUMENT FOR THE PAYMENT OF MONEY; THE COVID-19 RESTRICTIONS ON ENFORCEMENT OF COMMERCIAL LEASE GUARANTEES DO NOT APPLY; THE WARRANTY OF HABITABILITY DEFENSE IS NOT AVAILABLE (FIRST DEPT).

The First Department, reversing Supreme Court, determined: (1) although guarantees generally are not instruments for the payment of money within the meaning of CPLR 3213, the language of the guarantee was unconditional and therefore met the criteria of such an instrument; (2) the COVID-19-related provision of the NYC Administrative Code and executive orders, prohibiting enforcement of commercial lease guarantees, do not apply where the business were not required to cease operations; (3) the warranty of habitability was not available as a defense because of the language of the guarantee; and (4) a commercial tenant cannot assert the warranty of habitability:

While a guarantee of both payment and performance does not qualify as an instrument for the payment of money only under CPLR 3213 … , paragraph 1 of the guaranty signed by defendants includes an unconditional obligation to pay all rent and additional rent owed under the sublease, and therefore does so qualify … ; “it required no additional performance by plaintiff[] as a condition precedent to payment or otherwise made defendant[s’] promise to pay something other than unconditional” … .

While the prohibition on the enforcement of commercial lease guaranties against natural persons under Administrative Code of City of NY § 22-1005 applies to businesses that were required to “cease operation” or “close to members of the public” under executive orders 202.3, 202.6, or 202.7, issued in connection with the COVID-19 pandemic, defendants never asserted that the nonparty subtenant ceased operations or closed to the public as a result of those orders.

Defendants’ claim that they properly raised warranty of habitability defenses under the sublease is without merit. Such defenses are not available to defendants because all defenses under the guaranty, with the exception of prior payment, were waived. Moreover, a commercial tenant cannot avail itself of the statutory warranty of habitability (see Real Property Law § 235-b …). iPayment, Inc. v Silverman, 2021 NY Slip Op 01846, First Dept 3-25-21

 

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EVEN THOUGH PLAINTIFF MAY HAVE ACCEPTED DEFECTIVE GOODS WITHIN THE MEANING OF THE UCC, THE UCC PROVIDES REMEDIES, INCLUDING THE RIGHT TO BE MADE WHOLE AND THE RIGHT TO REVOKE THE ACCEPTANCE; PLAINTIFF’S VERDICT SHOULD NOT HAVE BEEN SET ASIDE (SECOND DEPT). ​

The Second Department, in a full-fledged opinion by Justice Christopher, reversing Supreme Court, determined the verdict should not have been set aside in this consumer law case. Plaintiff ordered kitchen cabinets. When they arrived one box was opened by defendant-seller’s representative to confirm the color. Plaintiff then signed a “Completion Certificate” which indicated the cabinets had been found satisfactory. In fact the cabinets were not satisfactory as revealed when they were installed. The Second Department noted that, although under the UCC plaintiff, based on the “Completion Certificate,” could not reject the goods, the UCC provides that she could be made whole, and, in fact, could revoke her acceptance, in addition to other available remedies. Therefore plaintiff’s verdict awarding $30,000 should not have been set aside:

“Acceptance of goods by the buyer precludes rejection of the goods accepted” (UCC 2-607[2]; see Comment 2). However, “acceptance does not of itself impair any other remedy provided by [article 2 of the UCC] for non-conformity” (UCC 2-607[2] …). “Thus, ‘acceptance leaves unimpaired the buyer’s right to be made whole, and that right can be exercised by the buyer not only by way of cross-claim for damages, but also by way of recoupment in diminution or extinction of the [purchase] price'” … . …

Moreover, after the buyer has accepted allegedly non-conforming goods, the buyer may revoke acceptance of the goods under certain limited circumstances and “obtain the same remedies as are available upon rejection” … . …

… [E]ven if the jury found that the plaintiff did not properly revoke her acceptance of the cabinets, the jury could have found that the plaintiff was entitled to other remedies pursuant to UCC 2-607 … .

… [T]he jury’s verdict that … the defendant breached their contract with the plaintiff, breached the implied warranty of fitness, and that the plaintiff was entitled to damages in the amount of $30,000 was supported by a valid line of reasoning and permissible inferences from the evidence at trial … . Campbell v Bradco Supply Co., 2021 NY Slip Op 01745, Second Dept 3-24-21

 

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CPLR 7515, ENACTED IN 2018, DOES NOT APPLY RETROACTIVELY TO PROHIBIT MANDATORY ARBITRATION OF SEXUAL HARASSMENT CLAIMS (FIRST DEPT).

The First Department, reversing Supreme Court, determined CPLR 7515, enacted in 2018, should not be applied retroactively to prohibit arbitration of a sexual harassment claim:

The provisions of CPLR 7515 relied on by plaintiff are not retroactively applicable to arbitration agreements, like the one at issue, that were entered into preceding the enactment of the law in 2018, so that plaintiff’s argument that this law prohibits arbitration of her claims is unavailing … . Newton v LVMH Moet Hennessy Louis Vuitton Inc., 2021 NY Slip Op 01558, First Dept 3-18-21

 

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PLAINTIFF SHOULD NOT HAVE BEEN ALLOWED TO AMEND THE BILL OF PARTICULARS AFTER DISCOVERY WAS CLOSED TO RAISE A NEW THEORY OF LIABILITY STEMMING FROM FACTS NOT PREVIOUSLY ALLEGED; DEFENDANT OUT-OF-POSSESSION LANDLORD DEMONSTRATED THE LEASE DID NOT REQUIRE THE LANDLORD TO MAINTAIN THE DOOR WHICH PLAINTIFF ALLEGED CLOSED ON HER HAND (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff’s motion to amend the bill of particulars after discovery was complete should not have been granted and defendant out-of-possession landlord’s motion for summary judgment should have been granted. Plaintiff alleged the door of a retail store closed on her hand as she was pushing a cart with merchandise through the doorway. She alleged the door was not properly maintained. After discovery she sought to amend her bill of particulars to allege there was a crack in the floor which caused the cart to get stuck as she was attempting to pass through the doorway:

“While leave to amend a bill of particulars is ordinarily to be freely given in the absence of prejudice or surprise” … , “once discovery has been completed and the case has been certified as ready for trial, [a] party will not be permitted to amend the bill of particulars except upon a showing of special and extraordinary circumstances” … . In such a case, leave may properly be granted “where the plaintiff makes a showing of merit, and the amendment involves no new factual allegations, raises no new theories of liability, and causes no prejudice to the defendant” … . However “where a motion for leave to amend a bill of particulars alleging new theories of liability not raised in the complaint or the original bill is made on the eve of trial, leave of court is required, and judicial discretion should be exercised sparingly, and should be discreet, circumspect, prudent, and cautious” … . “In exercising its discretion, the court should consider how long the party seeking the amendment was aware of the facts upon which the motion was predicated, whether a reasonable excuse for the delay was offered, and whether prejudice resulted therefrom” … .

… [T]he proposed amendment to the bill of particulars raised an entirely new theory of liability well after discovery had been completed, and was advanced only in response to the defendant’s motion for summary judgment. Moreover, the plaintiff failed to proffer a reasonable excuse for her delay in seeking the amendment … , and the proposed amendment was prejudicial to the defendant … . * * *

… [T]he defendant [out-of-possession landlord] demonstrated its … entitlement to summary judgment dismissing the complaint by submitting, inter alia, the lease, which established that the tenant enjoyed complete and exclusive possession of the demised premises at the time of the plaintiff’s injury and that the defendant was not responsible for maintenance of the door. King v Marwest, LLC, 2021 NY Slip Op 08225, Second Dept 3-17-20

 

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THE ELEVATOR COMPANY, BY CONTRACT, HAD COMPLETE RESPONSIBILITY FOR ELEVATOR MAINTENANCE; THEREFORE THE BUILDING OWNER AND MANAGER WERE ENTITLED TO SUMMARY JUDGMENT DISMISSING THE COMPLAINT AGAINST THEM IN THIS RES IPSA LOQUITUR ELEVATOR-MALFUNCTION-ACCIDENT CASE (FIRST DEPT).

The First Department, recalling and vacating a decision in this case released on December 8, 2020, determined the building owner (1067 Fifth) and manager (Elliman) did not have constructive or action notice of the defect in the elevator door which allegedly caused it to close on plaintiff’s shoulder, pinning her while the elevator descended. However liability may be demonstrated under the res ipsa loquitur theory. But because the building owner and manager had, by contract, relinquished all control over the maintenance of the elevator to defendant elevator company, American, their motions for summary judgment were granted:

… [U]nder the terms of its contract with 1067 Fifth, American was responsible for providing “full comprehensive maintenance and repair services” for the elevators, which included maintaining “[t]he entire vertical transportation system,” including “all engineering, material, labor, testing, and inspections needed to achieve work specified by the contract.” Further, under the terms of the contract, maintenance “include[s], but is not limited to, preventive services, emergency callback services, inspection and testing services, repair and/or direct replacement component renewal procedures.” The contract also provided for American to “schedule [ ] systematic examinations, adjustments, cleaning and lubrication of all machinery, machinery spaces, hoistways and pits,” and to do all “repairs, renewals, and replacements . . . as soon as scheduled or other examinations reveal the necessity of the same.” Further, American agreed to provide emergency call-back service 24 hours a day, 7 days a week. Given such broad contractual responsibilities, American’s contract can be said to have “entirely displaced” the responsibility of 1067 Fifth and Elliman to maintain the safety of the building’s elevators, which gave rise to a duty owed directly to plaintiff by American (see Espinal v Melville Snow Contrs., 98 NY2d 136, 140 [2002]). Sanchez v 1067 Fifth Ave. Corp., 2021 NY Slip Op 01522, First Dept 3-16-21

 

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ALTHOUGH THE PUBLIC HEALTH LAW GAVE THE DECEDENT’S DAUGHTER THE AUTHORITY TO EXECUTE THE NURSING HOME’S ADMISSION AGREEMENT ON BEHALF OF HER FATHER, THE PUBLIC HEALTH LAW DID NOT GIVE HER THE AUTHORITY TO SIGN A BINDING ARBITRATION AGREEMENT ON HER FATHER’S BEHALF; THEREFORE THE DECEDENT’S WIFE WAS NOT BOUND BY THE ARBITRATION AGREEMENT IN HER SUIT AGAINST THE NURSING HOME (FIRST DEPT).

The First Department, reversing Supreme Court, determined plaintiff wife’s adult daughter had the authority, pursuant to the Public Health Law, to execute the nursing home’s admission agreement on behalf of plaintiff’s husband (her father), who was deemed incapable of making health-care related decisions. In addition to the admission agreement, plaintiff’s daughter signed a binding arbitration agreement on her father’s behalf. After plaintiff’s husband died, plaintiff sued the nursing home which asserted that that the matter was subject to the arbitration agreement. The First Department held that, pursuant to the Public Health Law, plaintiff’s daughter had the authority to sign the admission agreement, because it related to her father’s health care, but she did not have the authority to sign the arbitration agreement:

The authority of the decedent’s daughter to act as a “surrogate” decision-maker pursuant to PHL 2994-d at the time decedent was admitted to JHL was limited to making decisions regarding “[a]ny treatment, service, or procedure to diagnose or treat an individual’s physical or mental condition” (PHL 2994-a[12]). Although she had authority, pursuant to PHL 2994-d, to execute the Agreement for purposes of admitting her father into the facility for health care treatment, she did not have the authority to execute the Binding Arbitration Agreement on his behalf. Such agreement was entirely optional and had no bearing on the father’s health care. Accordingly, it is entirely outside of the purview of surrogate decision-maker’s authority set forth in PHL 2994-d. Gayle v Regeis Care Ctr., LLC, 2021 NY Slip Op 01197, First Dept 2-25-21

 

FORBEARANCE CAN BE ADEQUATE CONSIDERATION CREATING A VALID CONTRACT (FIRST DEPT)

The First Department, reversing (modifying) Supreme Court, in a full-fledged opinion by Justice Gonzalez, determined summary judgment should not have been awarded dismissing the breach of contract cause of action in the multi-million dollar lawsuit involving Russian oil and gas. The opinion is too detailed to summarize here. On the breach of contract cause of action, the court noted that forbearance can be adequate consideration creating a valid contract:

“A valuable consideration, in the sense of the law, may consist either in some right, interest, profit, or benefit accruing to the one party, or some forbearance, detriment, loss, or responsibility given, suffered, or undertaken by the other” … . Indeed, “any basic contemporary definition would include the idea that [consideration] consists of either a benefit to the promisor or a detriment to the promisee” … . “The slightest consideration is sufficient to support the most onerous obligation” … . …

When plaintiff first agreed to join defendants in the oil business, he allegedly did so as a one-third partner. According to the Undisputed Statement of Facts, the parties disputed their respective obligations and “discussed [for several years] options for compensating [plaintiff] for the stock and cash he caused to be transferred.” In 2001, when the parties drafted the Investment Agreement, plaintiff agreed to a 15% stake and a 15% share of the profits, a marked reduction in what he would have expected to receive as an alleged one-third partner. Plaintiff also agreed to forego any right to profits pre-dating October 2001. …

The record thus suggests … that the 2001 Investment Agreement was a binding contract supported by plaintiff’s forbearance. Notably, … defendants began to perform under the agreement … , … suggesting that it was a binding accord for which plaintiff’s forbearance had supplied consideration. Lebedev v Blavatnik, 2021 NY Slip Op 01002, First Dept 2-16-21

 

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PETITIONERS WERE ENTITLED TO SUMMARY DETERMINATION IN THIS EXECUTIVE LAW 63 SPECIAL PROCEEDING SOUNDING IN FRAUD STEMMING FROM UNCONSCIONABLE EQUIPMENT FINANCE LEASES AND OPPRESSIVE DEBT COLLECTION PRACTICES; RESPONDENTS’ REQUEST FOR FURTHER DISCOVERY, WHICH IS DISFAVORED IN SPECIAL PROCEEDINGS, WAS PROPERLY DENIED (FIRST DEPT).

The First Department, in a full-fledged opinion by Justice Webber, determined the respondents in this Executive Law 63 special proceeding were not entitled to additional discovery, including depositions, and petitioners were entitled to summary determination in this fraud and deceptive business practices action. The petition, brought by the NYS Attorney General, alleged respondents engaged in fraud and deception in having small businesses sign unconscionable equipment finance leases (EFLs) for credit card processing equipment leading to oppressive debt collection practices. The court noted that discovery in a special proceeding is disfavored and is permitted only on leave of court upon a showing of “ample need:”

Supreme Court correctly found that petitioners demonstrated respondents’ liability under Executive Law § 63(12). Under Executive Law § 63(12), “the test for fraud is whether the targeted act has the capacity or tendency to deceive or creates [*5]an atmosphere conducive to fraud” … . “Executive Law § 63(12) was meant to protect not only the average consumer, but also the ignorant, the unthinking, and the credulous” … . “[P]ublic reports and lawsuits of alleged fraud are sufficient to put a plaintiff on inquiry notice of fraud” … . * * *

We held in our prior decision that allegations that the [respondents] created legal obligations through misrepresentations and fraud and then attempted to enforce those obligations through abusive pre-litigation and litigation practices sufficiently demonstrated that the [respondents’] debt collection activities and procuring of default judgments were “objectively baseless” … . Matter of People of the State of New York v Northern Leasing Sys., Inc., 2021 NY Slip Op 00914, First Dept 2-11-21

 

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