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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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DOCUMENT PURPORTING TO CONSTITUTE A CONTRACT FOR THE SALE OF TWO PROPERTIES DID NOT SATISFY THE STATUTE OF FRAUDS, PLAINTIFF’S ACTION FOR SPECIFIC PERFORMANCE PROPERLY DISMISSED (SECOND DEPT).

The Second Department determined the one page document purporting to be a contract to sell two properties to defendant did not satisfy the statute of frauds. Therefore plaintiff’s action for specific performance was properly dismissed:

In a real estate transaction, the essential terms of a contract typically include the purchase price, the time and terms of payment, the required financing, the closing date, the quality of title to be conveyed, the risk of loss during the sale period, and adjustments for taxes and utilities … . “[W]here a contract’s material terms are not reasonably definite, the contract is unenforceable” … .

Here, the defendant demonstrated her prima facie entitlement to judgment as a matter of law dismissing the complaint on the basis that the agreement did not satisfy the statute of frauds. The agreement did not state all of the essential terms, including allocation of the price between the two properties, whether one property could be sold without the other, the terms of payment, and the risk of loss during the sale period, and did not mention the adjustments for taxes and utilities which would customarily be included in a transaction of this nature … . In addition, the agreement did not include the necessary parties because not all of the owners of the properties executed the agreement … . 443 Jefferson Holdings, LLC v Sosa, 2019 NY Slip Op 05376, Second Dept 7-3-19

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ARBITRATOR’S AWARD OF ATTORNEY’S FEES TO PLAINTIFF IN THIS BREACH OF CONTRACT DISPUTE REINSTATED; MONEY JUDGMENT SHOULD NOT HAVE BEEN GRANTED TO A PARTY WHICH HAD CONTRACTED WITH PLAINTIFF, BUT WITH WHICH DEFENDANT DID NOT HAVE AN AGREEMENT TO ARBITRATE; COURT-REVIEW OF ARBITRATION AWARDS DISCUSSED IN DETAIL (FIRST DEPT).

The First Department, in a full-fledged opinion by Justice Renwick, reversing Supreme Court, determined the arbitrator’s award of attorney’s fees to the plaintiff should not have been vacated, but the arbitrator’s award of a money judgment to OHM, which had contracted with plaintiff but was not a party to any agreement to arbitrate with the defendant, should be vacated. The opinion includes a clear explanation of a court’s limited powers of review of an arbitration award and is too comprehensive to fairly summarize here. The court noted, with regard to the American rule generally prohibiting the award of attorney’s fees, New York law is preempted by the Federal Arbitration Act (FAA):

… [T]he parties agree that manifest disregard of the law is the only appropriate ground to vacate the arbitrator’s award of attorneys’ fees … .

For an award to be set aside for manifest disregard, the arbitrator must understand and correctly state the law, but proceed to disregard the same … . Application of the “manifest disregard of law” standard requires the court to make, in essence, three inquiries: (1) whether the legal principle allegedly ignored by the arbitrator was well defined, explicit, and clearly applicable; (2) whether the arbitrators knew of the governing legal principle; and, (3) whether knowing that principle, the arbitrators refused to apply it or ignored it … . A court may not vacate an arbitration award because it thinks the arbitrators made the wrong decision … . Indeed, even if the court thinks that the arbitrator reached the wrong result or applied the law incorrectly, the court should nevertheless confirm the award, “despite [the] court’s disagreement with it on the merits, if there is a barely colorable justification for the outcome reached” … . * * *

Under established law, “[t]he question whether the parties have submitted a particular dispute to arbitration, i.e., the question of arbitrability, is an issue for judicial determination [u]nless the parties clearly and unmistakably provide otherwise”  … . * * *

Arbitration is a matter of contract, and a party cannot be forced to arbitrate a dispute that it did not expressly agree to submit to arbitration … . “Courts should not assume that the parties agreed to arbitrate arbitrability unless there is clear and unmistakable evidence that they did so . . . . In this manner the law treats silence or ambiguity about the question who (primarily) should decide arbitrability’ differently from the way it treats silence or ambiguity about the question whether a particular merits-related dispute is arbitrable because it is within the scope of a valid arbitration agreement’ for in respect to this latter question the law reverses the presumption” … . An arbitrator’s decision to assert jurisdiction, over objection, is subject to a much broader and more rigorous judicial review than an arbitral decision on the merits, and because it is “a question for the court to decide,” it is subject to de novo judicial review … . Matter of Steyn v CRTV, LLC, 2019 NY Slip Op 05341, First Dept 7-2-19

 

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RESTITUTION SHOULD NOT HAVE BEEN ORDERED BECAUSE IT WAS NOT PART OF THE PLEA AGREEMENT, THE ARGUMENT SURVIVES THE GUILTY PLEA AND THE WAIVER OF APPEAL; DEFENDANT’S CONTENTION HE WAS DEPRIVED OF HIS RIGHT TO COUNSEL DID NOT SURVIVE THE WAIVER OF APPEAL BECAUSE DEFENDANT DID NOT ASSERT THE DEPRIVATION INFECTED THE PLEA AGREEMENT OR THE VOLUNTARINESS OF THE PLEA (FOURTH DEPT).

The Fourth Department determined restitution should not have been ordered because it was not part of the plea agreement. The court noted that defendant’s argument he was deprived of his right to counsel with respect to his decision to testify before the grand jury was not forfeited by his guilty plea, but was encompassed by his waiver of appeal. The Fourth Department declined to follow a 3rd Department decision which held a deprivation-of-counsel argument survives a waiver of appeal irrespective of whether the deprivation infected the guilty plea. Here defendant did not assert that the alleged deprivation of his right to counsel infected the plea bargaining process or tainted the voluntariness of the plea:

Defendant’s further contention that County Court erred in ordering him to pay restitution because restitution was not part of the plea agreement survives both his guilty plea and his unchallenged waiver of the right to appeal … . Moreover, contrary to the People’s contention, defendant preserved his contention for appellate review by objecting to the imposition of restitution on the same ground he now advances … . On the merits, it is undisputed that the plea bargain did not include restitution, and the court therefore erred in awarding restitution without affording defendant the opportunity to withdraw his plea … . People v Richardson, 2019 NY Slip Op 05310, Second Dept 6-28-19

 

PLAINTIFF HOMEOWNER WAS NOT ENTITLED TO PAYMENTS MADE TO AN UNLICENSED HOME IMPROVEMENT CONTRACTOR FOR WORK PERFORMED SOLELY ON THE GROUND THAT THE CONTRACTOR WAS UNLICENSED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff was not entitled to the return of payments made to defendant unlicensed contractor for work performed. Plaintiff’s motion for summary judgment on that cause of action should not have been granted:

Although an unlicensed contractor may not enforce a home improvement contract against a homeowner or seek recovery in quantum meruit for work performed … , here, the defendant is not seeking to enforce the parties’ contract or to recover in quantum meruit. Rather, the plaintiff homeowner is seeking to recover money already paid to the defendant pursuant to the contract. Where a homeowner receives the benefit of the services of an unlicensed contractor, he or she is not entitled to recoup payments made for such services solely on the basis that the defendant was unlicensed … . “The parties, in these circumstances, should be left as they are” … . Rusin v Design-Apart USA, Ltd., 2019 NY Slip Op 05172, Second Dept 6-26-19

 

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