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WASTEWATER TREATMENT COMPANY’S CONTRACT WITH THE MUNICIPALITY WAS NOT VOID; THE CONTRACT WAS IN THE PUBLIC INTEREST AND THERE WAS NO PROOF THE BID SPECIFICATIONS WERE IMPROPERLY DEVELOPED WITH THE COMPANY OR DESIGNED TO ENSURE THE COMPANY RECEIVED THE CONTRACT (THIRD DEPT).

The Third Department, over a partial dissent, determined the plaintiff municipality breached its contract with defendant sewage-treatment company. The plaintiff municipality argued that, although there was competitive bidding under General Municipal Law 103 and 120-w, the contract was void because the bid specifications were improperly developed with the defendant and were designed to ensure defendant got the contract, but that argument was rejected by both Supreme Court and the Third Department:

… [P]laintiff provided nothing to contradict the proof that [use of defendant’s technology] served the public interest because it was safer, more reliable and less likely to generate troublesome odors than other technologies.

[D]efendant produced an affidavit from plaintiff’s then-mayor, who stated that the options for sludge treatment had been thoroughly investigated and that the type of equipment offered by defendant would further the public interest by stabilizing plaintiff’s sludge disposal costs, providing an environmentally sensitive means for that disposal and decreasing odors emanating from the WWTF [wastewater treatment facility] that might affect ongoing waterfront development. The then-mayor further averred that the bid documents were prepared by municipal employees and that the specifications included nothing of peculiar benefit to defendant. … Defendant’s president, a mechanical engineer, confirmed that point and averred that “[n]early any sludge drying pelletizing system on the market” could have satisfied the bid specifications. Plaintiff accordingly failed to meet its burden of showing that the 2004 agreement was void, and defendant demonstrated its entitlement to summary judgment on claims relating to that agreement’s validity … . City of Kingston v Aslan Envtl. Servs., LLC, 2020 NY Slip Op 00192, Third Dept 1-9-20

 

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DEFENDANT CLEANING SERVICE CONTRACTOR SUBMITTED EVIDENCE WHICH CREATED A QUESTION OF FACT WHETHER, PURSUANT TO THE ESPINAL CRITERIA, IT LAUNCHED AN INSTRUMENT OF HARM WHICH CAUSED PLAINTIFF’S SLIP AND FALL; DEFENDANT’S MOTION FOR SUMMARY JUDGMENT SHOULD NOT HAVE BEEN GRANTED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined defendant cleaning service contractor’s motion for summary judgment in this slip and fall case should not have been granted. Plaintiff alleged defendant was liable under Espinal for launching or creating an instrument of harm by mopping the floor without placing warning signs in the are where she fell:

Generally, a contractual obligation, standing alone, will not give rise to tort liability in favor of a third party (see Espinal v Melville Snow Contrs., 98 NY2d 136, 140). However, there are three exceptions to the general rule … . …

Here, the plaintiff alleged only one of the Espinal exceptions: that the defendant created or launched an instrument of harm. Thus, in support of its motion for summary judgment dismissing the complaint, the defendant was required to establish, prima facie, that it did not create or launch an instrument of harm … . … [T]he defendant’s submissions demonstrated the existence of triable issues of fact regarding the location of “wet floor” signs and whether the wet floor or the signs were readily observable by a reasonable use of the plaintiff’s senses as she entered the area through a closed door … . Thus, the defendant failed to establish, prima facie, that it did not create the condition that caused the plaintiff to fall or that it provided adequate notice of the alleged hazardous condition … . Ramsey v Temco Serv. Indus., Inc., 2020 NY Slip Op 00166, Second Dept 1-8-20

 

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PLAINTIFFS’ ACTION ALLEGING BREACH OF AN ORAL CONTRACT REGARDING REPAYMENT OF A LOAN SECURED BY A NOTE AND MORTGAGE SHOULD HAVE BEEN DISMISSED AS BARRED BY THE STATUTE OF FRAUDS; THE FRAUD AND UNJUST ENRICHMENT CAUSES OF ACTION MUST BE DISMISSED AS DUPLICATIVE OF THE BREACH OF CONTRACT CAUSE OF ACTION (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiffs’ action alleging breach of an alleged oral contract concerning the repayment of a loan secured by a note an mortgage should have been dismissed as barred by the statute of frauds. The fraud and unjust enrichment causes of action must also be dismissed as duplicative of the breach of contract cause of action:

The complaint alleged that contemporaneously with executing the note and mortgage, the plaintiffs and the defendant entered into an oral agreement providing, inter alia, that in exchange for assigning a contract to purchase certain real property to the defendant, the plaintiffs would be responsible for paying only the interest on the loan. The complaint, which asserted causes of action sounding in breach of contract, fraud, and unjust enrichment, sought, among other things, recovery of the settlement amount paid by the plaintiffs in the foreclosure action, less the amount of interest allegedly due pursuant to the oral agreement. The defendant moved pursuant to CPLR 3211(a) to dismiss the complaint. The Supreme Court denied the motion, and the defendant appeals.

Accepting the facts as alleged in the complaint as true, and according the plaintiffs the benefit of every possible inference, dismissal of the breach of contract cause of action should have been granted, since enforcement of the alleged oral agreement, ostensibly to modify the note and mortgage, is barred by the statute of frauds (see General Obligations Law §§ 5-703[1]; 5-1103 … ). Dismissal of the causes of action alleging fraud and unjust enrichment should also have been granted as they are duplicative of the unenforceable contractual cause of action and thus constitute an impermissible attempt to circumvent the statute of frauds … . Botanical Realty Assoc. Urban Renewal, LLC v Gluck, 2020 NY Slip Op 00099, Second Dept 1-8-20

 

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PLAINTIFFS WERE NOT SIGNATORIES TO CONTRACTS WHICH REQUIRED ARBITRATION OF WAGE-UNDERPAYMENT ALLEGATIONS AND PLAINTIFFS DID NOT EXPLOIT THE BENEFITS OF THE CONTRACTS; THEREFORE PLAINTIFFS COULD NOT BE COMPELLED TO ARBITRATE (SECOND DEPT).

The Second Department determined the plaintiffs in this putative class action alleging wage-underpayment in violation of Labor Law article 6 could not be compelled to arbitrate. Plaintiffs were not parties to the contracts with defendants which compelled arbitration and did not seek to exploit the benefits of those contracts:

… [U]nder limited circumstances nonsignatories may be compelled to arbitrate” … . Under the direct benefits theory of estoppel, a nonsignatory may be compelled to arbitrate where the nonsignatory “knowingly exploits” the benefits of an agreement containing an arbitration clause, and receives benefits flowing directly from the agreement … . “The benefits must be direct, and the party seeking to compel arbitration must demonstrate that the party seeking to avoid arbitration relies on the terms of the agreement containing the arbitration provision in pursuing its claim” … . Where the benefits are merely “indirect,” a nonsignatory cannot be compelled to arbitrate a claim … . “A benefit is indirect where the nonsignatory exploits the contractual relation of the parties, but not the agreement itself” … .

Here, contrary to the defendants’ contention, the plaintiffs should not be compelled to arbitrate based upon the agreements. The record does not establish that the plaintiffs were even aware of the existence of the agreements or that they knowingly exploited the benefits of the agreements … . Arboleda v White Glove Enter. Corp., 2020 NY Slip Op 00098, Second Dept 1-8-20

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DEFENDANT NEED NOT BE INFORMED AT THE TIME OF THE PLEA TO A SEX OFFENSE THAT HE OR SHE MAY BE SUBJECT TO A MENTAL HYGIENE LAW ARTICLE 10 CIVIL ACTION AS THE RELEASE DATE APPROACHES (THIRD DEPT).

The Third Department determined defendant, a sex offender who was found to suffer from a mental abnormality after Mental Hygiene Law Article 10 trial, was not entitled specific performance of his plea agreement, which made no mention of the of potential Mental Hygiene Law proceedings:

Respondent next challenges Supreme Court’s denial of his pretrial motion to dismiss the petition inasmuch as his 1997 plea agreement is a legal and binding contract — one that entitled him to specific performance. Proceedings pursuant to the Sex Offender Management and Treatment Act “are expansive civil proceedings, which are entirely separate from and independent of the original criminal action” … . Moreover, “[i]t is well settled that trial courts are required to advise defendants who plead guilty regarding the direct consequences of such plea, but they have no obligation to iterate every collateral consequence of the conviction” … . As relevant here, “the potential for either civil confinement or supervision pursuant to [the Sex Offender Management and Treatment Act] is a collateral consequence of a guilty plea and, therefore, the current state of the law does not require that defendants be informed of it prior to entering a plea of guilty” … . As such, we discern no error in Supreme Court’s denial of respondent’s request for specific performance. Nor are we persuaded by respondent’s assertion that specific performance is appropriate because the Mental Hygiene Law article 10 litigation ensued following the expiration of his sentence, as the article 10 proceeding commenced upon the date that the petition was filed, prior to respondent’s release date … . Matter of State of New York v Robert G., 2020 NY Slip Op 00009, Third Dept 1-2-20

 

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GENERAL OBLIGATIONS LAW 5-321 VOIDS A LEASE PROVISION ABSOLVING THE LANDLORD OF LIABILITY FOR DAMAGE TO A TENANT’S PROPERTY CAUSED BY THE LANDLORD’S NEGLIGENCE, BUT DOES NOT VOID A LEASE PROVISION ABSOLVING THE LANDLORD OF LIABILITY FOR THE TENANT’S LOST PROFITS CAUSED BY THE LANDLORD’S NEGLIGENCE (FIRST DEPT).

The First Department noted that the exculpatory clauses in the lease which relieved the landlord from liability for the tenant’s lost profits caused by the landlord’s negligence is not void pursuant to General Obligations Law (GOL) 5-321. GOL 5-321 refers only to property damage, not lost profits:

The claim for lost profits, however, was properly dismissed. General Obligations Law § 5-321 provides:

“Every covenant, agreement or understanding in or in connection with or collateral to any lease of real property exempting the lessor from liability for damages for injuries to person or property caused by or resulting from the negligence of the lessor, his agents, servants or employees, in the operation or maintenance of the demised premises or the real property containing the demised premises shall be deemed to be void as against public policy and wholly unenforceable.”

The exculpatory clauses in the lease relieving defendants of liability for lost profits resulting from their own negligence are not void under General Obligations Law § 5-321 because lost profits are distinct from property damage … . …

Moreover, paragraph 23 of the lease amendment specifically provides that “[n]otwithstanding anything to the contrary . . . Tenant waives, to the full extent permitted by law, any claim for consequential or punitive damages in connection [with damage to Tenant’s property]”  … . In view of this unequivocal exculpatory clause stating that no other provision in the lease shall entitle the tenant to consequential damages, the claim for lost profits is barred … . Chaitman v Moezinia, 2019 NY Slip Op 09396, First Dept 12-26-19

 

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THE SUBCONTRACTORS DID NOT SIGN THE PRIMARY CONTRACT WHICH INCLUDED AN ARBITRATION PROVISION; HOWEVER THE SUBCONTRACTORS EXPLOITED THE ARBITRATION PROVISION BY PARTICIPATING IN PRE-ARBITRATION MEDIATION; THEREFORE THE SUBCONTRACTORS WERE ESTOPPED FROM COMPELLING LITIGATION (THIRD DEPT).

The Third Department, reversing Supreme Court, determined that the subcontractors, who did not sign the primary contract which included an arbitration provision in the “General Conditions,” had exploited the benefits of the primary contract and therefore should be compelled to arbitrate. The primary contract was between Corning Hospital and Gilbane, the general contractor. One subcontractor (Mancini) was responsible for general construction of the building and the other (Alliance) was responsible for the installation of veneer stone panels, which had begun to fall off the building:

… “[U]nder the direct benefits theory of estoppel, a nonsignatory may be compelled to arbitrate where the nonsignatory knowingly exploits the benefits of an agreement containing an arbitration clause, and receives benefits flowing directly from the agreement” … . … “Where the benefits are merely ‘indirect,’ a nonsignatory cannot be compelled to arbitrate a claim. A benefit is indirect where the nonsignatory exploits the contractual relation of the parties, but not the agreement itself” … . Noting that “it can be difficult to distinguish between direct and indirect benefits,” the Court of Appeals stated that “[t]he guiding principle is whether the benefit gained by the nonsignatory is one that can be traced directly to the agreement containing the arbitration clause” … .

Respondent argues that Mancini and Alliance are estopped from compelling litigation regarding the veneer stone panels because Alliance previously served a demand for arbitration on Gilbane and Mancini, with the demand specifically stating that one of the bases for seeking arbitration was the dispute resolution section of the General Conditions related to the construction project … . Following that demand for arbitration, Alliance, Gilbane and Mancini took part in mediation, as required prior to arbitration per a provision of the dispute resolution section of the General Conditions — a provision that Alliance also cited in its demand for arbitration. As a result of the mediation, those three entities then entered into a settlement agreement and released each other from liability regarding anything related to the veneer panels. …

Based on Alliance’s demand citing the applicability of the arbitration section of the General Conditions, and Mancini’s acquiescence to that demand, both of these nonsignatories to the prime contract and General Conditions should be compelled to arbitrate pursuant to the direct benefits theory of estoppel. Accordingly, the applications to permanently stay arbitration should have been denied, and the parties should proceed to arbitration. Matter of Alliance Masonry Corp. (Corning Hosp.), 2019 NY Slip Op 09348, Third Dept 12-26-19

 

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THE BUILDING OWNER AND MANAGER WERE ADDITIONAL INSUREDS UNDER A POLICY ISSUED TO THE CONTRACTOR HIRED TO RENOVATE CONCRETE WALKWAYS; THE OWNER AND MANAGER ARE ENTITLED TO COVERAGE FOR A SLIP AND FALL ALLEGED TO HAVE BEEN CAUSED BY PAINTING THE WALKWAYS ALL THE SAME COLOR AND THEREBY DISGUISING A CHANGE IN ELEVATION (FIRST DEPT).

The First Department, in a full-fledged opinion by Justice Kapnick, determined plaintiffs are additional insureds under an insurance policy issued by defendant to nonparty Upgrade, the contractor hired to restore concrete catwalks. Plaintiffs, Windsor Apartments and Argo Real Estate, are entitled to coverage for a slip and fall in plaintiffs’ building allegedly caused by painting the floor all the same color, thereby disguising a change in elevation:

Defendant State National issued a commercial general liability (CGL) policy to Upgrade during the relevant time period. The policy contained a “Blanket Additional Insured” Endorsement that limited coverage to operations performed by or on behalf of Upgrade:

“It is agreed that this Policy shall include as additional Insureds any person or organization to whom the Named Insured [Upgrade] has agreed by written contract to provide coverage, but only with respect to operations performed by or on behalf of the Named Insured and only with respect to occurrences subsequent to the making of such written contract.”

The State National policy also stated that its coverage was primary, with exceptions not applicable here, for damages arising out of the premises or operations for which an entity is added as an additional insured.

The policy issued by plaintiff Fireman’s Fund Insurance Company (Fireman’s) to Windsor and Argo provided that coverage was excess when its insureds, Windsor and Argo, have other primary insurance available to them covering liability for damages arising out of the premises or operations for which they have been added as an additional insured. * * *

… [S]ince the injury to the plaintiff in the underlying action here “arose out of” Upgrade’s operation of painting the walkways, plaintiffs are additional insureds under the State National policy and the policy is primary in connection with the underlying action. Fireman’s Fund Ins. Co. v State Natl. Ins. Co., 2019 NY Slip Op 09399, First Dept 12-26-19

 

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PLAINTIFF SUBMITTED EVIDENCE OF DEFENDANTS’ BREACH OF A STIPULATION OF SETTLEMENT; PLAINTIFF’S MOTION TO VACATE (RESCIND) THE STIPULATION SHOULD NOT HAVE BEEN DENIED WITHOUT A HEARING (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff’s motion to vacate a stipulation of settlement should not have been granted without a hearing. Plaintiff presented evidence defendants breached the stipulation raising a question whether the stipulation should be rescinded:

… [T]he plaintiff argued that the stipulation should be vacated because the defendants had “openly and willfully violated” the terms of the stipulation. In support of his position, the plaintiff submitted, inter alia, his own affidavit, in which he stated that the defendants had, among other things, assaulted his wife, refused to provide him with an accounting, and had made it impossible for him to operate his plumbing business as agreed to in the stipulation by, among other things, removing and destroying equipment from his office, disconnecting his phone line, and changing locks on the property.

“As a general rule, rescission of a contract is permitted for such a breach as substantially defeats its purpose. It is not permitted for a slight, casual, or technical breach, but . . . only for such as are material and willful, or, if not willful, so substantial and fundamental as to strongly tend to defeat the object of the parties in making the contract'” … .

Under the circumstances, the factual assertions set forth in the plaintiff’s affidavit were sufficient to warrant a hearing on the issue of whether the stipulation should be rescinded due to the defendants’ alleged breaches … . Young v Young, 2019 NY Slip Op 09321, Second Dept 12-24-19

 

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PLAINTIFF POLICE OFFICER’S MOTION FOR SUMMARY JUDGMENT AGAINST THE DRIVER OF THE TRACTOR TRAILER WHICH STRUCK HIM WHEN HE WAS STANDING IN THE ROADWAY SHOULD HAVE BEEN GRANTED, FREEDOM FROM COMPARATIVE FAULT NO LONGER NEED BE SHOWN; OTHER ISSUES ADDRESSED IN THE DECISION INCLUDE THE EMPLOYER’S LIABILITY, THE TRUCK RENTAL COMPANIES’ LIABILITY, THE EMERGENCY DOCTRINE, WORKERS’ COMPENSATION AND GENERAL MUNICIPAL LAW 205-e (SECOND DEPT).

The Second Department, reversing (modifying) Supreme Court determined plaintiff police officer was entitled to summary judgment against the driver of the tractor trailer which struck the officer who was standing in the roadway both under a common law negligence theory and under General Municipal Law 205-e. The court dealt with several other issues including: (1) whether a second police officer was engaged in an emergency operation, giving rise to the reckless disregard standard, when he stopped to assist the plaintiff who had made a traffic stop (the answer is no); (2) whether the second officer was liable based upon the position of his car (the answer is no, the car furnished a condition for the accident but was not the cause); (3) whether the injured officer’s recovery was confined to Workers’ Compensation (there is a question of fact whether the injury was “grave”); (4) whether the Graves Amendment protected the truck rental companies (the answer is yes); (5) whether vicarious liability applies to the truck driver’s employer (there is a question of fact on that issue). With respect to the common law negligence and the General Municipal Law 205-e causes of action, the court wrote:

… [T]he plaintiffs were not required to demonstrate that the injured plaintiff was free from comparative negligence in order to obtain summary judgment on the issue of Burke’s [the truck driver’s] liability on the first cause of action [negligence]. * * *

When the light changed, Burke began his left turn onto northbound Midland Avenue. Prior to beginning his turn, Burke was aware that there was a police officer conducting a traffic stop on foot and a police car parked on the northbound side of Midland Avenue. Although Burke believed he could make the turn safely, the rear of the trailer hit the injured plaintiff. * * *

The plaintiffs also established … Burke’s liability as to … a violation of General Municipal Law § 205-e. … [T]hat statute permits a police officer to bring a tort claim for injuries sustained “while in the discharge or performance at any time or place of any duty imposed by . . . superior officer[s]” where such injuries occur “directly or indirectly as a result of any neglect, omission, willful or culpable negligence of any person or persons in failing to comply with the requirements of any of the statutes, ordinances, rules, orders and requirements of the federal, state, county, village, town or city governments” … . In order to recover under the statute, “a police officer must demonstrate injury resulting from negligent noncompliance with a requirement found in a well-developed body of law and regulation that imposes clear duties” … .

Vehicle and Traffic Law § 1146(a) requires a driver to “exercise due care to avoid colliding with any . . . pedestrian.” Here, the unrebutted evidence established a prima facie violation of § 1146(a), as it demonstrated that Burke failed to exercise due care to avoid hitting the injured plaintiff. Cioffi v S.M. Foods, Inc., 2019 NY Slip Op 09251, Second Dept 12-24-19

 

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