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THE NYC DEPARTMENT OF SOCIAL SERVICES DOES NOT HAVE THE AUTHORITY TO RECOVER MEDICAID OVERPAYMENTS FROM PERSONAL CARE SERVICE PROVIDERS (FIRST DEPT).

The First Department, in a full-fledged opinion by Justice Kahn. over a two-justice dissent, determined that The City of New York Human Resources Administration Department of Social Services (HRA) does not have the authority to audit and recover overpayments of funds provided pursuant to the Health Care Reform Act (HCRA) from personal care service providers such as petitioner People Care Incorporated d/b/a Assisted Care:

The determinative issue on this appeal is not whether the HCRA funds were denominated as “Medicaid rates of payment” or “Medicaid rate adjustments” in the statute and the MOU [memorandum of understanding]. Rather, the issue presented here is whether, under the terms of the 2001 contract, Public Health Law § 2807-v(1)(bb)(i) and the MOU superseded the provisions of that contract as to the auditing and recoupment of HCRA funds. * * *

… [N]either Public Health Law § 2807-v(1)(bb), as the governing statute, nor the MOU between DOH [NYS Department of Health] and HRA, entered into pursuant to that statute, contains any language delegating DOH’s auditing and recoupment authority to HRA or any other agency. Matter of People Care Inc. v City of New York Human Resources Admin., 2019 NY Slip Op 05756, First Dep 7-23-19

 

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ALTHOUGH THERE IS NO CAUSE OF ACTION FOR CIVIL CONSPIRACY IN NEW YORK, THE ELEMENTS OF CONSPIRACY, INCLUDING OVERT ACTS, WERE PROPERLY PLED AS PART OF THE FRAUD CAUSE OF ACTION (FIRST DEPT). ​

The First Department, modifying Supreme Court, determined that, although there is no cause of action for civil conspiracy in New York, the conspiracy alleged here was validly pled as part of the fraud cause of action. The unjust enrichment cause of action should have been dismissed because there was no close relationship between the plaintiff and defendant. The complaint did not support the punitive damages claim because it did not allege defendants’ actions were aimed at the public or showed moral turpitude. The permanent injunction cause of action was validly pled because the injury cannot be fully compensated by money damages. The action stemmed from a failed partnership to develop a cure for rare genetic blood disorders:

The complaint states a cause of action for fraud by alleging that Sloan-Kettering knowingly misrepresented or omitted a material fact for the purpose of inducing plaintiff to rely upon it, that plaintiff justifiably relied on the misrepresentation or omission, and that plaintiff sustained injury … . …

… “[C]ivil conspiracy is not recognized as an independent tort in this State” … . Rather, the “allegations in the complaint herein charging conspiracy are deemed part of the remaining causes of action to which they are relevant” … . Here, the conspiracy charge remains as part of the fraud cause of action. …

… “[L]iability for fraud may be premised on knowing participation in a scheme to defraud, even if that participation does not by itself suffice to constitute the fraud” … . Allegations of conspiracy “serve to enable a plaintiff to connect a defendant with the acts of his co-conspirators where without it he could not be implicated” … .

… [P]laintiff sufficiently alleges overt acts …. …

… [T]he liability of a defendant as a conspirator for co-conspirators’ wrongful acts “does not necessarily depend upon his active participation in the particular overt acts” … . Moreover, once a conspiracy is established, all defendants are liable for each other’s acts in furtherance of the conspiracy … . Errant Gene Therapeutics, LLC v Sloan-Kettering Inst. for Cancer Research, 2019 NY Slip Op 05754, First Dept 7-23-19

 

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THE PURPORTED REFORMATION OF THE INSURANCE CONTRACT TO REDUCE COVERAGE AFTER THE TRAFFIC ACCIDENT OCCURRED IS UNENFORCEABLE, THE INSURER IS LIABLE FOR THE ORIGINAL COVERAGE AMOUNT (SECOND DEPT).

The Second Department, reversing Supreme Court, determined that the reformation of the insurance contract to reduce the bodily injury coverage limits from $250,000 to $80,000 was unenforceable because the change was made after the traffic accident occurred:

In December 2011, the plaintiff allegedly was injured when a vehicle in which he was a passenger was involved in a collision. At the time of the collision, the vehicle was driven by nonparty Douglas Giambrone and owned by nonparty Carol Giambrone (hereinafter together the Giambrones), and was insured by the defendant under a liability policy providing for bodily injury coverage up to $250,000 per person/$500,000 per occurrence. In May 2012, the plaintiff commenced an action against the Giambrones to recover damages for personal injuries he sustained in the accident. In August 2012, the defendant entered into an agreement with the Giambrones to reform the policy to reduce the bodily injury coverage to a single $80,000 limit. Thereafter, the Giambrones notified the plaintiff that the coverage limit applicable to the accident was $80,000. The plaintiff subsequently obtained a judgment against the Giambrones in the amount of $300,000 in the underlying personal injury action. …

An insurer may not retroactively reform a policy to reduce the stated bodily injury coverage limits after a loss caused by its insured occurs, even if the reduced limits still meet or exceed the statutory minimum (see Olivio v Government Empls. Ins. Co. of Washington, D.C., 46 AD2d 437, 443-445; Reliance Ins. Cos. v Daly, 38 AD2d 715, 716). … The plaintiff … demonstrated his prima facie entitlement to judgment as a matter of law declaring that the defendant is obligated to satisfy the first $250,000 of the judgment he obtained against the Giambrones.  McGuckin v Privilege Underwriters Reciprocal Exch., 2019 NY Slip Op 05654, Second Dept 7-17-19

 

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FRAUD IN THE INDUCEMENT CAUSE OF ACTION WAS NOT DUPLICATIVE OF THE BREACH OF CONTRACT CAUSE OF ACTION; MOTION TO DISMISS SHOULD NOT HAVE BEEN GRANTED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined defendants’ motion to dismiss the fraud cause of action should not have been granted. Supreme Court held the fraud action was duplicative of the breach of contract action:

“The essential elements of a cause of action for fraud are representation of a material existing fact, falsity, scienter, deception and injury” … . “Mere unfulfilled promissory statements as to what will be done in the future are not actionable as fraud and the injured party’s remedy is to sue for breach of contract” … . Where, however, it is alleged that the defendant made misrepresentations of present facts that were collateral to the contract and served as an inducement to enter into the contract, a cause of action alleging fraudulent inducement is not duplicative of a breach of contract cause of action … .

… [T]he cause of action alleging fraudulent inducement was not duplicative of the breach of contract cause of action. The first cause of action alleges that the defendants knowingly made false representations in … financial statements, which were collateral to the APA [asset purchase agreement], that these false statements were made in order to induce the plaintiff to enter into the APA, that the plaintiff would not have entered into the APA but for these false statements, and that the plaintiff was injured by this fraudulent conduct …. As the first cause of action alleges misrepresentations of present fact that were collateral to the APA and further alleges that these misrepresentations induced the plaintiff to enter into the APA, the court should have denied that branch of the defendants’ motion which was to dismiss the first cause of action. Did-it.com, LLC v Halo Group, Inc., 2019 NY Slip Op 05644, Second Dept 7-17-19

 

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SUPREME COURT SHOULD HAVE DETERMINED WHETHER THE MATTER WAS ARBITRABLE INSTEAD OF SENDING IT TO AN ARBITRATION PANEL, THE APPELLANTS ARGUED THEY WERE NOT PARTIES TO THE AGREEMENT WITH THE ARBITRATION CLAUSE (SECOND DEPT).

The Second Department, reversing Supreme Court, noted that it is the court’s role, in the first instance, to decide whether a matter is arbitrable. Here the appellants argued they were not parties to the agreement with the arbitration clause. Supreme Court erroneously referred that issue to an arbitration panel. The Second Department remitted the matter to Supreme Court to resolve the arbitrability question:

It is a “well-settled proposition that the question of arbitrability is an issue generally for judicial determination in the first instance” … . “If the court determines that the parties had not made an agreement to arbitrate, that concludes the matter and a stay of arbitration will be granted or the application to compel arbitration will be denied” … . This threshold determination must be made by the court unless the parties have “evinced a clear and unmistakable agreement to arbitrate arbitrability” … . Since the determination of whether the appellants were bound by the arbitration provision in the payment agreement was a threshold question for the courts, and not the arbitrator, to decide, we disagree with the Supreme Court’s determination to refer that issue to an arbitration panel … . Matter of Kent Waterfront Assoc., LLC v National Union Fire Ins. Co. of Pittsburgh, 2019 NY Slip Op 05664, Second Dept 7-17-19

 

PASSING REFERENCE IN A CONTRACT TO A ‘TERMS AND CONDITIONS’ PAGE THAT WAS NOT PART OF THE CONTRACT REVIEWED BY PLAINTIFF DID NOT SERVE TO INCORPORATE THE PAGE INTO THE AGREEMENT (FIRST DEPT).

The First Department determined that a passing reference to a “Terms and Conditions” page which purported to require all contract disputes to be litigated in North Carolina did not incorporate that page into the document:

… [T]he Terms and Conditions section never appeared in the proposed agreement that plaintiff ultimately reviewed and signed, and it is undisputed that plaintiff never saw the Terms and Conditions page. Indeed, the final 29-page agreement, which did not include the “Terms and Conditions,” was paginated consecutively and signed on each page by both parties. Therefore, contrary to defendants’ suggestions, plaintiff had no reason to ask for any other documents.

Although documents may be incorporated by reference as part of an executed agreement … , the doctrine of incorporation by reference “is grounded on the premise that the material to be incorporated is so well known to the contracting parties that a mere reference to it is sufficient” … . The referenced material must be described in the contract such that it is identifiable beyond all reasonable doubt … . Here the agreement’s oblique reference to an otherwise unidentified Terms and Conditions page, which was never provided to plaintiff, is insufficient to meet this exacting standard … . Eshaghpour v Zepsa Indus., Inc., 2019 NY Slip Op 05490, First Dept 7-9-19

 

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DEFENDANT’S MOTION TO DISMISS THE COMPLAINT FOR LACK OF PERSONAL JURISDICTION SHOULD HAVE BEEN GRANTED, DEFENDANT’S ONLY CONNECTION TO THE CORPORATION WHICH HAD CONTACTS WITH NEW YORK WAS HIS SALARY; THEREFORE THE CORPORATION’S NEW YORK CONTACTS COULD NOT BE IMPUTED TO DEFENDANT (FIRST DEPT).

The First Department, reversing Supreme Court, determined defendant’s (Sprinkle’s) motion to dismiss the complaint for lack of personal jurisdiction should have been granted, noting that Sprinkle’s only connection with the corporation alleged to have breached the contract was his salary. The corporation’s contacts with New York could not, therefore, be imputed to Sprinkle:

The complaint fails to state a cause of action as against Sprinkle for tortious interference with contract, because there is no allegation that Sprinkle personally benefitted from the corporations’ alleged breach of contract; the only benefit he is alleged to have received is his salary from the corporations … .

Plaintiff failed to make a sufficient start on a showing of jurisdiction over Sprinkle to entitle it to jurisdictional discovery … . Because the conduct complained of involved the diversion of funds from outside New York to recipients outside New York, the “critical events,” and thus the situs of injury, were not in New York … . Moreover, plaintiff does not allege that Sprinkle received substantial revenue from interstate or international commerce (see CPLR 302[a][3][ii]). Because Sprinkle did not personally benefit from the breach of contract, the corporations’ contacts with New York cannot be imputed to him … .

Nor can Sprinkle be said to have “reasonably expected” his actions to have consequences in New York … as he neither did anything to avail himself of New York nor took any steps to project himself into New York. Given that Sprinkle had no contact with New York and did not purposefully avail himself of New York, the constitutional guarantee of due process bars New York courts from exercising personal jurisdiction over him. Greenbacker Residential Solar LLC v OneRoof Energy, Inc., 2019 NY Slip Op 05487, First Dept 7-9-19

 

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FRAUD CAUSE OF ACTION, AS ALLEGED, IS NOT DUPLICATIVE OF THE ACTION FOR BREACH OF A LOAN GUARANTEE AND SHOULD NOT HAVE BEEN DISMISSED ON THAT GROUND (FIRST DEPT).

The First Department, reversing Supreme Court, determined plaintiff’s fraud cause of action was not duplicative on the action for breach of a loan guarantee and should not have been dismissed:

Plaintiff alleges that, as CEO of nonparty Karmaloop, Inc., defendant Gregory Selkoe solicited from plaintiff a bridge loan in the amount of $2,040,000. Plaintiff agreed, on condition that Selkoe personally guarantee the loan. Selkoe provided the personal guarantee, and also represented to plaintiff that he had previously given only one other personal guarantee, and that Karmaloop had never defaulted on any loan payment. Both of these representations were false, in that, unbeknownst to plaintiff, Selkoe had previously guaranteed a loan issued to another Karmaloop executive, and Karmaloop had defaulted on that loan.

The foregoing states a claim for fraudulent inducement, which is not duplicative of plaintiff’s claim for breach of the guarantee. Plaintiff does not allege that Selkoe misrepresented the intent to perform on the guarantee and underlying promissory note, which would render the fraud claim duplicative, but rather alleges that Selkoe misrepresented his and Karmaloop’s ability to perform … .

At this early juncture, we find that plaintiff should be “permitted to plead in the alternative (see CPLR 3014),” and its claim “for fraud, should not be dismissed as duplicative of the breach-of-contract cause of action” … . Man Advisors, Inc. v Selkoe, 2019 NY Slip Op 05483, First Dept 7-9-19

 

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DEFENDANT WAS ENTITLED TO FURTHER INQUIRY TO DETERMINE WHETHER SHE VIOLATED THE PLEA AGREEMENT, COUNTY COURT DID NOT SENTENCE HER IN ACCORDANCE WITH THE PLEA AGREEMENT BASED SOLELY ON THE PROSECUTOR’S ASSERTION SHE DID NOT COMPLETE A MENTAL HEALTH COURT PROGRAM (SECOND DEPT).

The Second Department determined defendant was entitled to further inquiry into whether she violated the terms of her plea agreement. Defendant was not sentenced in accordance with the agreement based solely on the prosecutor’s assertion she had not successfully completed a Mental Health Court program:

The County Court failed to conduct an inquiry sufficient to assure that the defendant had, in fact, violated the terms of the plea agreement and that the information upon which it based the sentence was reliable and accurate … . Thus, we remit the matter … for a sufficient inquiry and a new determination as to whether the defendant violated the terms of the plea agreement, and for resentencing thereafter.

Moreover, as acknowledged by the People, the County Court should not have pronounced sentence without first receiving a presentence investigation report … . People v Dimon, 2019 NY Slip Op 05417, Second Dept 7-3-19

 

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THE CLAUSE OF THE COLLECTIVE BARGAINING AGREEMENT WHICH STATED THE AGREED FIREFIGHTER STAFFING LEVEL WAS 36 DID NOT BARGAIN AWAY THE MUNICIPALITY’S RIGHT TO ELIMINATE POSITIONS, THEREFORE THE MUNICIPALITY’S REFUSAL TO FILL A FIREFIGHTER VACANCY WAS NOT ARBITRABLE (THIRD DEPT). ​

The Third Department, reversing Supreme Court, over a two-justice concurrence which argued an additional ground for reversal, determined that the municipality had not bargained away (in the collective bargaining agreement [CBA]) its right to eliminate positions or lay off workers for economic reasons. Therefore the municipality’s refusal to fill a vacant firefighter position was not arbitrable (against public policy):

The clause [in the CBA] at issue requires petitioner to fill vacancies as soon as possible to maintain “agreed upon” staffing levels, which, at the effective date of the contract, was 36 firefighters. However, the operative clause does not contain the explicit term precluding downward readjustment of that agreed-upon minimum level that was present in Matter of Burke v Bowen [40 NY2d 264]. Rather, the clause at issue authorizes petitioner to unilaterally eliminate equipment or close a station on 30 days’ notice and requires that the parties bargain the impact of any such change. We conclude that this clause, considered in its entirety, does not meet the “stringent test” necessary to establish that petitioner “bargain[ed] away its right to eliminate positions or terminate or lay off workers for budgetary, economic or other reasons” … . Accordingly, the dispute is not arbitrable for reasons of public policy. Matter of City of Plattsburgh (Plattsburgh Permanent Firemen’s Assn.), 2019 NY Slip Op 05367, Third Dept 7-3-19

 

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