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PLAINTIFF STATED A BREACH OF CONTRACT CAUSE OF ACTION BASED UPON DEFENDANT CONTRACTOR’S ALLEGED FAILURE TO PAY THE PREVAILING WAGE FOR WORK ON PROPERTIES OWNED BY THE NYC HOUSING AUTHORITY (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff had stated a cause of action for violation of the “prevailing wage” requirement of the Labor Law when plaintiff did work for a contractor (Zoria Housing) on properties owned by the NYC Housing Authority (NYCHA):

… [T]he plaintiff stated viable breach of contact causes of action based on violations of statutorily mandated provisions in agreements between Zoria Housing and NYCHA, requiring the payment of prevailing wages and overtime pay. “In situations where the Labor Law requires the inclusion of a provision for payment of the prevailing wage in a labor contract between a public agency and a contractor, a contractual obligation is created in favor of the contractor’s employees, and an employee covered by or subject to the contract, in his or her status as third-party beneficiary to the contract, possesses a common-law cause of action against the contractor to recover damages for breach of such a contractual obligation” … . Here, the complaint alleges, in effect, that Zoria Housing failed to pay the plaintiff “prevailing wages” and overtime pay in breach of municipal contracts that included prevailing-wage and overtime provisions pursuant to the Labor Law (see generally Labor Law §§ 220, 231). The complaint thus stated viable breach of contract causes of action … . Singh v Zoria Hous., LLC, 2018 NY Slip Op 05513, Second Dept 7-25-18

EMPLOYMENT LAW (PLAINTIFF STATED A BREACH OF CONTRACT CAUSE OF ACTION BASED UPON DEFENDANT CONTRACTOR’S ALLEGED FAILURE TO PAY THE PREVAILING WAGE FOR WORK ON PROPERTIES OWNED BY THE NYC HOUSING AUTHORITY (SECOND DEPT))/LABOR LAW (PLAINTIFF STATED A BREACH OF CONTRACT CAUSE OF ACTION BASED UPON DEFENDANT CONTRACTOR’S ALLEGED FAILURE TO PAY THE PREVAILING WAGE FOR WORK ON PROPERTIES OWNED BY THE NYC HOUSING AUTHORITY (SECOND DEPT))/CONTRACT LAW (EMPLOYMENT LAW, PLAINTIFF STATED A BREACH OF CONTRACT CAUSE OF ACTION BASED UPON DEFENDANT CONTRACTOR’S ALLEGED FAILURE TO PAY THE PREVAILING WAGE FOR WORK ON PROPERTIES OWNED BY THE NYC HOUSING AUTHORITY (SECOND DEPT))/MUNICIPAL LAW (EMPLOYMENT LAW, PLAINTIFF STATED A BREACH OF CONTRACT CAUSE OF ACTION BASED UPON DEFENDANT CONTRACTOR’S ALLEGED FAILURE TO PAY THE PREVAILING WAGE FOR WORK ON PROPERTIES OWNED BY THE NYC HOUSING AUTHORITY (SECOND DEPT))

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QUESTION OF FACT WHETHER GENERAL CONTRACTOR’S REMOVAL OF A TANK EXPOSING AN OPENING LAUNCHED AN INSTRUMENT OF HARM IMPOSING CONTRACT-BASED LIABILITY, FACT THAT OPENING WAS OBVIOUS AND KNOWN TO PLAINTIFF SPEAKS TO COMPARATIVE NEGLIGENCE AND DID NOT WARRANT SUMMARY JUDGMENT IN FAVOR OF DEFENDANTS (FIRST DEPT).

The First Department, over a two-justice dissent, determined that the general contractor’s (Harbour’s) motion for summary judgment in this slip and fall case was properly denied. Plaintiff alleged that Harbour removed a tank and exposed a dangerous opening in a metal plate. Plaintiff alleged, while working at the site, he stepped backwards into the opening and fell, hitting his head on the concrete floor. The First Department held there was a question of fact whether Harbour launched an instrument of harm by not taking remedial measures to make the area safe after removing the tank. The fact that the opening was obvious and plaintiff knew about it did not warrant summary judgment in favor of the defendants:

Although both defendants argue that the exposed opening in the metal plate was open, obvious, readily observable and known to plaintiff, a property owner has a nondelegable duty to maintain its premises in a reasonably safe condition, taking into account the forseeability of injury to others … . Moreover, although a defect or hazard may be discernable, this does not end the analysis, or compel a determination in favor of the property owner … . Plaintiff’s awareness of a dangerous condition does not negate a duty to warn of the hazard, but only goes to the issue of comparative negligence … . Given the exposed opening’s proximity to equipment that required service, the circumstances of plaintiff’s accident present an issue of fact of not only whether the condition was open and obvious, but also whether it was inherently dangerous… . Some hazards, although discernable, may be hazardous because of their nature and location … . Defendants did not establish that the exposed opening – given its location in the floor near other mechanical equipment in the pump room – was not only open and obvious, but that there was no duty to warn, and that the condition was not inherently dangerous … .

A contractual obligation, standing alone, will not give rise to tort liability in favor of a noncontracting third party (Espinal 98 NY2d at 138]). One exception to this broad rule is where the contracting party, in failing to exercise reasonable care in the performance of his duties, “launche[s] a force or instrument of harm” (Espinal at 140). We depart from the dissent in finding that Harbour failed to make a prima facie showing that it did not owe plaintiff a duty of care and that it did not negligently cause, create or exacerbate a dangerous condition. Farrugia v 1440 Broadway Assoc., 2018 NY Slip Op 05222, First Dept 7-12-18

NEGLIGENCE (SLIP AND FALL, QUESTION OF FACT WHETHER GENERAL CONTRACTOR’S REMOVAL OF A TANK EXPOSING AN OPENING LAUNCHED AN INSTRUMENT OF HARM IMPOSING CONTRACT-BASED LIABILITY, FACT THAT OPENING WAS OBVIOUS AND KNOWN TO PLAINTIFF SPEAKS TO COMPARATIVE NEGLIGENCE AND DID NOT WARRANT SUMMARY JUDGMENT IN FAVOR OF DEFENDANTS (FIRST DEPT))/CONTRACT LAW (TORT LIABILITY, SLIP AND FALL, QUESTION OF FACT WHETHER GENERAL CONTRACTOR’S REMOVAL OF A TANK EXPOSING AN OPENING LAUNCHED AN INSTRUMENT OF HARM IMPOSING CONTRACT-BASED LIABILITY, FACT THAT OPENING WAS OBVIOUS AND KNOWN TO PLAINTIFF SPEAKS TO COMPARATIVE NEGLIGENCE AND DID NOT WARRANT SUMMARY JUDGMENT IN FAVOR OF DEFENDANTS (FIRST DEPT))/ESPINAL (TORT LIABILITY, SLIP AND FALL, QUESTION OF FACT WHETHER GENERAL CONTRACTOR’S REMOVAL OF A TANK EXPOSING AN OPENING LAUNCHED AN INSTRUMENT OF HARM IMPOSING CONTRACT-BASED LIABILITY, FACT THAT OPENING WAS OBVIOUS AND KNOWN TO PLAINTIFF SPEAKS TO COMPARATIVE NEGLIGENCE AND DID NOT WARRANT SUMMARY JUDGMENT IN FAVOR OF DEFENDANTS (FIRST DEPT))/COMPARATIVE NEGLIGENCE (SLIP AND FALL, QUESTION OF FACT WHETHER GENERAL CONTRACTOR’S REMOVAL OF A TANK EXPOSING AN OPENING LAUNCHED AN INSTRUMENT OF HARM IMPOSING CONTRACT-BASED LIABILITY, FACT THAT OPENING WAS OBVIOUS AND KNOWN TO PLAINTIFF SPEAKS TO COMPARATIVE NEGLIGENCE AND DID NOT WARRANT SUMMARY JUDGMENT IN FAVOR OF DEFENDANTS (FIRST DEPT))/SLIP AND FALL (QUESTION OF FACT WHETHER GENERAL CONTRACTOR’S REMOVAL OF A TANK EXPOSING AN OPENING LAUNCHED AN INSTRUMENT OF HARM IMPOSING CONTRACT-BASED LIABILITY, FACT THAT OPENING WAS OBVIOUS AND KNOWN TO PLAINTIFF SPEAKS TO COMPARATIVE NEGLIGENCE AND DID NOT WARRANT SUMMARY JUDGMENT IN FAVOR OF DEFENDANTS (FIRST DEPT))/OPEN AND OBVIOUS (SLIP AND FALL, QUESTION OF FACT WHETHER GENERAL CONTRACTOR’S REMOVAL OF A TANK EXPOSING AN OPENING LAUNCHED AN INSTRUMENT OF HARM IMPOSING CONTRACT-BASED LIABILITY, FACT THAT OPENING WAS OBVIOUS AND KNOWN TO PLAINTIFF SPEAKS TO COMPARATIVE NEGLIGENCE AND DID NOT WARRANT SUMMARY JUDGMENT IN FAVOR OF DEFENDANTS (FIRST DEPT))

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THE ARBITRATOR’S DECISION TO OVERLOOK AN INSTANCE OF TARDINESS (ONE MINUTE LATE DUE TO A DISABLED TRAIN BLOCKING TRAFFIC) WHICH OTHERWISE WOULD REQUIRE THE GRIEVANT’S TERMINATION WAS NOT IRRATIONAL AND DID NOT EXCEED THE ARBITRATOR’S ENUMERATED POWERS (FOURTH DEPT).

The Fourth Department, reversing Supreme Court, determined that the arbitrator’s finding there was just cause to overlook the grievant’s one-minute tardiness for work. The collective bargaining agreement (CBA) included an eight-step disciplinary procedure for tardiness. Essentially eight instances of tardiness led to termination. Grievant had seven instances of tardiness at the time she was one minute late. She was delayed by a disabled train and she had called 10 minutes before her starting time to say she might be late because of the train:

We agree with respondent that the arbitrator’s award was not irrational. An award is irrational “if there is no proof whatever to justify” it… , and “[a]n arbitration award must be upheld when the arbitrator offer[s] even a barely colorable justification for the outcome reached’ ” … . Here, there is a colorable justification for the arbitrator’s determination. The attendance policy was a no-fault, straightforward progression of discipline that would be imposed for every incident of tardiness. Nevertheless, the CBA also had the “just cause” provision, and the arbitrator concluded that strict adherence to the attendance policy could be rejected in exceptional cases. …

We also agree with respondent that the arbitrator did not exceed a specifically enumerated limitation on his power. The CBA provided that the arbitrator “shall have no power or authority to add to, subtract from, modify, change, or alter any provisions of this Agreement.” Contrary to petitioner’s contention, the arbitrator did not impose any new requirement upon petitioner before it could discipline its employees and thus did not add to or alter the CBA. As explained above, the arbitrator determined, under the specific facts of this case, that the penalty of termination could not be upheld. The arbitrator did not adopt any new rules that petitioner must follow in future disciplinary cases, and we therefore reject petitioner’s slippery slope argument … . Matter of Lift Line, Inc. (Amalgamated Tr. Union, Local 282), 2018 NY Slip Op 05102, Fourth Dept 7-6-18

​ARBITRATION (THE ARBITRATOR’S DECISION TO OVERLOOK AN INSTANCE OF TARDINESS (ONE MINUTE LATE DUE TO A DISABLED TRAIN BLOCKING TRAFFIC) WHICH OTHERWISE WOULD REQUIRE THE GRIEVANT’S TERMINATION WAS NOT IRRATIONAL AND DID NOT EXCEED THE ARBITRATOR’S ENUMERATED POWERS (FOURTH DEPT))/EMPLOYMENT LAW (ARBITRATION, THE ARBITRATOR’S DECISION TO OVERLOOK AN INSTANCE OF TARDINESS (ONE MINUTE LATE DUE TO A DISABLED TRAIN BLOCKING TRAFFIC) WHICH OTHERWISE WOULD REQUIRE THE GRIEVANT’S TERMINATION WAS NOT IRRATIONAL AND DID NOT EXCEED THE ARBITRATOR’S ENUMERATED POWERS (FOURTH DEPT))/CONTRACT LAW (COLLECTIVE BARGAINING AGREEMENT, THE ARBITRATOR’S DECISION TO OVERLOOK AN INSTANCE OF TARDINESS (ONE MINUTE LATE DUE TO A DISABLED TRAIN BLOCKING TRAFFIC) WHICH OTHERWISE WOULD REQUIRE THE GRIEVANT’S TERMINATION WAS NOT IRRATIONAL AND DID NOT EXCEED THE ARBITRATOR’S ENUMERATED POWERS (FOURTH DEPT))/COLLECTIVE BARGAINING AGREEMENT  (THE ARBITRATOR’S DECISION TO OVERLOOK AN INSTANCE OF TARDINESS (ONE MINUTE LATE DUE TO A DISABLED TRAIN BLOCKING TRAFFIC) WHICH OTHERWISE WOULD REQUIRE THE GRIEVANT’S TERMINATION WAS NOT IRRATIONAL AND DID NOT EXCEED THE ARBITRATOR’S ENUMERATED POWERS (FOURTH DEPT))

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ALTHOUGH INDIVIDUAL DEFENDANTS, OFFICERS OR EMPLOYEES OF DEFENDANT CORPORATION, DID NOT SIGN THE AGREEMENT IN THEIR INDIVIDUAL CAPACITIES, THEY ARE ENTITLED TO ENFORCE THE ARBITRATION PROVISION OF THE AGREEMENT (FIRST DEPT).

The First Department determined the individual defendants, officers or employees of the corporate defendant, are entitled to enforce the arbitration provision of the contract, even though they were not signatories:

The individual defendants, who were officers or employees of [defendant corporation] and did not sign the [agreement] in their individual capacities, are nevertheless entitled to enforce the arbitration provision, because any breach of the [agreement] would have to be the result of an action or inaction attributable to them. A rule allowing corporate officers and employees to enforce arbitration agreements entered into by the corporate principal “is necessary not only to prevent circumvention of arbitration agreements but also to effectuate the intent of the signatory parties to protect individuals acting on behalf of the principal in furtherance of the agreement” … . Further, even a nonsignatory may be estopped from avoiding arbitration where he knowingly accepted the benefits of an agreement with an arbitration clause … . Huntsman Intl. LLC v Albemarle Corp., 2018 NY Slip Op 04962, First Dept 7-3-18

​CONTRACT LAW (ARBITRATION, CORPORATION LAW, ALTHOUGH INDIVIDUAL DEFENDANTS, OFFICERS OR EMPLOYEES OF DEFENDANT CORPORATION, DID NOT SIGN THE AGREEMENT IN THEIR INDIVIDUAL CAPACITIES, THEY ARE ENTITLED TO ENFORCE THE ARBITRATION PROVISION OF THE AGREEMENT (FIRST DEPT))/ARBITRATION (CORPORATION LAW, CONTRACT LAW, ALTHOUGH INDIVIDUAL DEFENDANTS, OFFICERS OR EMPLOYEES OF DEFENDANT CORPORATION, DID NOT SIGN THE AGREEMENT IN THEIR INDIVIDUAL CAPACITIES, THEY ARE ENTITLED TO ENFORCE THE ARBITRATION PROVISION OF THE AGREEMENT (FIRST DEPT))/CORPORATION LAW (CONTRACT LAW, ARBITRATION, ALTHOUGH INDIVIDUAL DEFENDANTS, OFFICERS OR EMPLOYEES OF DEFENDANT CORPORATION, DID NOT SIGN THE AGREEMENT IN THEIR INDIVIDUAL CAPACITIES, THEY ARE ENTITLED TO ENFORCE THE ARBITRATION PROVISION OF THE AGREEMENT (FIRST DEPT))

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THE COLLECTIVE BARGAINING AGREEMENTS ARE AMBIGUOUS ON THE ISSUE WHETHER COUNTY RETIREES WHO BECOME ELIGIBLE FOR MEDICARE ARE ENTITLED TO THE FULL MEDICAL BENEFITS AFFORDED THEM AT RETIREMENT, EXTRINSIC EVIDENCE, I.E., WHAT HAD BEEN DONE IN THE PAST, SUPPORTS THE DETERMINATION THAT RETIREES WHO BECOME ELIGIBLE FOR MEDICARE ARE NOT ENTITLED TO FULL BENEFITS (FOURTH DEPT).

The Fourth Department determined retired Monroe County employees who become eligible for Medicare are not entitled to the full medical insurance benefits which were afforded them at retirement. The collective bargaining agreements (CBAs) were deemed ambiguous on the issue and the court looked to what had been done in the past as controlling extrinsic evidence:

Inasmuch as the contract language is reasonably susceptible of more than one interpretation, we conclude that the CBAs are ambiguous with respect to whether retirees who are eligible for or enrolled in Medicare are entitled to fully-paid health insurance coverage that is equivalent to the insurance coverage in effect at the time they retired. Thus, we turn to extrinsic evidence to determine the parties’ intent with respect to the health insurance coverage to be provided to those retirees who are eligible for or enrolled in Medicare. Where, as here, “a contract is ambiguous, its interpretation remains the exclusive function of the court unless determination of the intent of the parties depends on the credibility of extrinsic evidence or on a choice among reasonable inferences to be drawn from extrinsic evidence’ ” … . …

For decades, defendants provided retirees who were not yet eligible for Medicare with health insurance benefits, but provided retirees enrolled in Medicare with only Medicare supplement plans. No objection was made and, until recently, the union representing plaintiffs never sought to negotiate any additional benefits for retirees eligible for or enrolled in Medicare. Ames v County of Monroe, 2018 NY Slip Op 04886, Fourth Dept 6-29-18

​MUNICIPAL LAW (EMPLOYMENT LAW, THE COLLECTIVE BARGAINING AGREEMENTS ARE AMBIGUOUS ON THE ISSUE WHETHER COUNTY RETIREES WHO BECOME ELIGIBLE FOR MEDICARE ARE ENTITLED TO THE FULL MEDICAL BENEFITS AFFORDED THEM AT RETIREMENT, EXTRINSIC EVIDENCE, I.E., WHAT HAD BEEN DONE IN THE PAST, SUPPORTS THE DETERMINATION THAT RETIREES WHO BECOME ELIGIBLE FOR MEDICARE ARE NOT ENTITLED TO FULL BENEFITS (FOURTH DEPT))/CONTRACT LAW (MUNICIPAL LAW, THE COLLECTIVE BARGAINING AGREEMENTS ARE AMBIGUOUS ON THE ISSUE WHETHER COUNTY RETIREES WHO BECOME ELIGIBLE FOR MEDICARE ARE ENTITLED TO THE FULL MEDICAL BENEFITS AFFORDED THEM AT RETIREMENT, EXTRINSIC EVIDENCE, I.E., WHAT HAD BEEN DONE IN THE PAST, SUPPORTS THE DETERMINATION THAT RETIREES WHO BECOME ELIGIBLE FOR MEDICARE ARE NOT ENTITLED TO FULL BENEFITS (FOURTH DEPT))/EMPLOYMENT LAW (MUNICIPAL LAW, THE COLLECTIVE BARGAINING AGREEMENTS ARE AMBIGUOUS ON THE ISSUE WHETHER COUNTY RETIREES WHO BECOME ELIGIBLE FOR MEDICARE ARE ENTITLED TO THE FULL MEDICAL BENEFITS AFFORDED THEM AT RETIREMENT, EXTRINSIC EVIDENCE, I.E., WHAT HAD BEEN DONE IN THE PAST, SUPPORTS THE DETERMINATION THAT RETIREES WHO BECOME ELIGIBLE FOR MEDICARE ARE NOT ENTITLED TO FULL BENEFITS (FOURTH DEPT))/COLLECTIVE BARGAINING AGREEMENTS (MUNICIPAL LAW, THE COLLECTIVE BARGAINING AGREEMENTS ARE AMBIGUOUS ON THE ISSUE WHETHER COUNTY RETIREES WHO BECOME ELIGIBLE FOR MEDICARE ARE ENTITLED TO THE FULL MEDICAL BENEFITS AFFORDED THEM AT RETIREMENT, EXTRINSIC EVIDENCE, I.E., WHAT HAD BEEN DONE IN THE PAST, SUPPORTS THE DETERMINATION THAT RETIREES WHO BECOME ELIGIBLE FOR MEDICARE ARE NOT ENTITLED TO FULL BENEFITS (FOURTH DEPT))/MEDICAL INSURANCE BENEFITS (MUNICIPAL LAW, EMPLOYMENT LAW, THE COLLECTIVE BARGAINING AGREEMENTS ARE AMBIGUOUS ON THE ISSUE WHETHER COUNTY RETIREES WHO BECOME ELIGIBLE FOR MEDICARE ARE ENTITLED TO THE FULL MEDICAL BENEFITS AFFORDED THEM AT RETIREMENT, EXTRINSIC EVIDENCE, I.E., WHAT HAD BEEN DONE IN THE PAST, SUPPORTS THE DETERMINATION THAT RETIREES WHO BECOME ELIGIBLE FOR MEDICARE ARE NOT ENTITLED TO FULL BENEFITS (FOURTH DEPT))

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ELIMINATION OF A POSITION WAS ALLEGED TO CONSTITUTE AN IMPROPER DISMISSAL UNDER THE GUISE OF RETRENCHMENT, ALTHOUGH RETRENCHMENT IS NOT ARBITRABLE UNDER THE TERMS OF THE COLLECTIVE BARGAINING AGREEMENT, THE CLAIM THAT THE EMPLOYEE WAS IMPROPERLY DISMISSED UNDER THE GUISE OF RETRENCHMENT WAS DEEMED ARBITRABLE (FOURTH DEPT).

The Fourth Department, reversing Supreme Court, determined the petition seeking a permanent stay of arbitration of an employment dispute should not have been granted. The Fourth Department found that the dispute concerned whether an employee of a community college was improperly dismissed (by eliminating the position). The matter was deemed arbitrable based upon the language of the collective bargaining agreement (CBA) and the grievance. Under the CBA, if a position is “retrenched” the action is not arbitrable. Although the term “retrenched” was used in eliminating the position, the grievance alleged the employee was improperly dismissed under the guise of “retrenchment:”

We … agree with respondent that the grievance, as properly construed, should be submitted to arbitration. The CBA defines “grievance,” in relevant part, as “a claimed violation, misinterpretation or inequitable application of this agreement, except as excluded herein.” Pursuant to the CBA, a grievance may be submitted to arbitration if it remains unresolved after the second stage of the grievance procedure. Although the CBA specifies several exclusions from the definition of a “grievance” that are therefore not subject to arbitration, including a decision by petitioner to retrench a position, all other grievances remain subject to arbitration. Contrary to the court’s determination, we conclude that the arbitration clause at issue here is broad, despite the existence of such exclusions … .

Where, as here, “there is a broad arbitration clause and a reasonable relationship between the subject matter of the dispute and the general subject matter of the parties’ [CBA], the court should rule the matter arbitrable, and the arbitrator will then make a more exacting interpretation of the precise scope of the substantive provisions of the [CBA], and whether the subject matter of the dispute fits within them”… . The grievance at issue concerns whether the member was improperly dismissed without just cause under the guise of retrenchment, and a reasonable relationship exists between the subject matter of the grievance and the general subject matter of the CBA … . Thus, ” it is for the arbitrator to determine whether the subject matter of the dispute falls within the scope of the arbitration provisions of the [CBA]’ ” … . Matter of Onondaga Community Coll. (Professional Adm’rs of Onondaga Community Coll. Fedn. of Teachers & Adm’rs), 2018 NY Slip Op 04878, Fourth Dept 6-29-18

​ARBITRATION (EMPLOYMENT LAW, ELIMINATION OF A POSITION WAS ALLEGED TO CONSTITUTE AN IMPROPER DISMISSAL UNDER THE GUISE OF RETRENCHMENT, ALTHOUGH RETRENCHMENT IS NOT ARBITRABLE UNDER THE TERMS OF THE COLLECTIVE BARGAINING AGREEMENT, THE CLAIM THAT THE EMPLOYEE WAS IMPROPERLY DISMISSED UNDER THE GUISE OF RETRENCHMENT WAS DEEMED ARBITRABLE (FOURTH DEPT))/CONTRACT LAW (COLLECTIVE BARGAINING AGREEMENT, ELIMINATION OF A POSITION WAS ALLEGED TO CONSTITUTE AN IMPROPER DISMISSAL UNDER THE GUISE OF RETRENCHMENT, ALTHOUGH RETRENCHMENT IS NOT ARBITRABLE UNDER THE TERMS OF THE COLLECTIVE BARGAINING AGREEMENT, THE CLAIM THAT THE EMPLOYEE WAS IMPROPERLY DISMISSED UNDER THE GUISE OF RETRENCHMENT WAS DEEMED ARBITRABLE (FOURTH DEPT))/COLLECTIVE BARGAINING AGREEMENT (ARBITRATION, ELIMINATION OF A POSITION WAS ALLEGED TO CONSTITUTE AN IMPROPER DISMISSAL UNDER THE GUISE OF RETRENCHMENT, ALTHOUGH RETRENCHMENT IS NOT ARBITRABLE UNDER THE TERMS OF THE COLLECTIVE BARGAINING AGREEMENT, THE CLAIM THAT THE EMPLOYEE WAS IMPROPERLY DISMISSED UNDER THE GUISE OF RETRENCHMENT WAS DEEMED ARBITRABLE (FOURTH DEPT))/EMPLOYMENT LAW (ARBITRATION, COLLECTIVE BARGAINING AGREEMENT, ELIMINATION OF A POSITION WAS ALLEGED TO CONSTITUTE AN IMPROPER DISMISSAL UNDER THE GUISE OF RETRENCHMENT, ALTHOUGH RETRENCHMENT IS NOT ARBITRABLE UNDER THE TERMS OF THE COLLECTIVE BARGAINING AGREEMENT, THE CLAIM THAT THE EMPLOYEE WAS IMPROPERLY DISMISSED UNDER THE GUISE OF RETRENCHMENT WAS DEEMED ARBITRABLE (FOURTH DEPT))

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FRAUDULENT INDUCEMENT CAUSE OF ACTION MUST BE BASED UPON MATTERS COLLATERAL TO THE CONTRACT, NOT THE BREACH OF PROVISIONS OF THE CONTRACT ITSELF (FIRST DEPT).

The First Department noted that contract provisions cannot be the bases for a fraudulent inducement cause of action. Only matters collateral to the contract will support fraudulent inducement:

Plaintiffs alleged six different bases for the fraudulent inducement claim. The alleged misrepresentations regarding assistance operating the preschool, the working fire alarm, and use of the stroller area, area near the kitchen, and upstairs gym, are all ” directly related to a specific provision of the contract,'” not collateral to the lease, and cannot be used to sustain a fraudulent inducement claim … . Plaintiffs properly pled a fraudulent inducement claim with respect to defendants materially misrepresenting that a 2004 letter of no objection was all plaintiffs would need, failing to disclose to plaintiffs that defendant intended to remove oversight over homeless individuals on the property, and fraudulently misrepresenting that homeless individuals were living on the property legally, when they were doing so illegally … . Plaintiffs properly pled that, as a result of these statements, which plaintiffs allege were made with the intention to deceive them, they signed the lease and developed the property … . Iken v Bohemian Brethren Presbyt. Church, 2018 NY Slip Op 04830, First Dept 6-28-18

FRAUD (FRAUDULENT INDUCEMENT CAUSE OF ACTION MUST BE BASED UPON MATTERS COLLATERAL TO THE CONTRACT, NOT THE BREACH OF PROVISIONS OF THE CONTRACT ITSELF (FIRST DEPT))/CONTRACT LAW (FRAUDULENT INDUCEMENT CAUSE OF ACTION MUST BE BASED UPON MATTERS COLLATERAL TO THE CONTRACT, NOT THE BREACH OF PROVISIONS OF THE CONTRACT ITSELF (FIRST DEPT))/LANDLORD-TENANT (LEASE, CONTRACT LAW, FRAUDULENT INDUCEMENT CAUSE OF ACTION MUST BE BASED UPON MATTERS COLLATERAL TO THE CONTRACT, NOT THE BREACH OF PROVISIONS OF THE CONTRACT ITSELF (FIRST DEPT))

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PLAIN LANGUAGE OF THE COLLECTIVE BARGAINING AGREEMENT LIMITED THE RIGHT TO DEMAND ARBITRATION TO THE UNION, NOT THE FIRED EMPLOYEE (CT APP).

The Court of Appeals, in a brief memorandum, over a three-judge dissenting opinion, determined that the plain language of the collective bargaining agreement (CBA) limited the right to demand arbitration to the union and not the fired employee:

From the dissent:

The language of CBA clearly grants the employee the right to elect arbitration. Even were the agreement ambiguous in that regard, it must be construed in favor of the employee’s right to demand arbitration. New York has established a policy favoring arbitration … , and the CBA itself provides that “in order to establish a more harmonious and cooperative relationship between the County. . . and its [p]ublic [e]mployees. . . [t]he provisions of this resolution shall be liberally construed.”

The majority’s contrary interpretation — that the CBA gives the right to proceed to arbitration only to the union — would mean that the employee could “elect” to exercise “his/her rights” only where the union agrees to arbitrate — a restriction that does not appear in the agreement. The employee may not know at the time of election whether the union will pursue arbitration, and therefore could not know the scope of “his/her rights” until it is too late. Further, the rights-granting language in the CBA treats the arbitration right and the [Civil Service Law] 75 right in parallel, emphasizing the employee’s right to choose. Matter of Widrick (Carpinelli), 2018 NY Slip Op 04780, CtApp 6-28-18

​ARBITRATION (COLLECTIVE BARGAINING AGREEMENT, PLAIN LANGUAGE OF THE COLLECTIVE BARGAINING AGREEMENT LIMITED THE RIGHT TO DEMAND ARBITRATION TO THE UNION, NOT THE FIRED EMPLOYEE (CT APP))/CONTRACT LAW (COLLECTIVE BARGAINING AGREEMENT, PLAIN LANGUAGE OF THE COLLECTIVE BARGAINING AGREEMENT LIMITED THE RIGHT TO DEMAND ARBITRATION TO THE UNION, NOT THE FIRED EMPLOYEE (CT APP))/EMPLOYMENT LAW (COLLECTIVE BARGAINING AGREEMENT, PLAIN LANGUAGE OF THE COLLECTIVE BARGAINING AGREEMENT LIMITED THE RIGHT TO DEMAND ARBITRATION TO THE UNION, NOT THE FIRED EMPLOYEE (CT APP))/COLLECTIVE BARGAINING AGREEMENT (PLAIN LANGUAGE OF THE COLLECTIVE BARGAINING AGREEMENT LIMITED THE RIGHT TO DEMAND ARBITRATION TO THE UNION, NOT THE FIRED EMPLOYEE (CT APP))/UNIONS (ARBITRATION, COLLECTIVE BARGAINING AGREEMENT, PLAIN LANGUAGE OF THE COLLECTIVE BARGAINING AGREEMENT LIMITED THE RIGHT TO DEMAND ARBITRATION TO THE UNION, NOT THE FIRED EMPLOYEE (CT APP))

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IN THIS ACTION STEMMING FROM PLAINTIFF’S INSURING OF RESIDENTIAL MORTGAGE BACKED SECURITIES ISSUED BY DEFENDANT, PLAINTIFF WAS REQUIRED TO SHOW JUSTIFIABLE RELIANCE AND LOSS CAUSATION FOR ITS FRAUDULENT INDUCEMENT CAUSE OF ACTION, PLAINTIFF’S RECOVERY WAS LIMITED TO THAT DESCRIBED IN THE SOLE REMEDY PROVISION, AND PLAINTIFF WAS NOT ENTITLED TO ATTORNEY’S FEES (CT APP).

The Court of Appeals, in a full-fledged opinion by Judge Garcia, over a partial dissent, determined certain aspects of defendant Countrywide’s motion for summary judgment against plaintiff insurer, Ambac, stemming from residential mortgage backed securities issued by Countrywide, were properly granted. Ambac’s argument that it need not demonstrate justifiable reliance or loss causation in support of its fraudulent inducement cause of action was rejected, as was Ambac’s argument that it was entitled to relief over and above that specified in the sole remedy clause, as well as attorney’s fees:

Public policy reasons support the justifiable reliance requirement. Where a “sophisticated business person or entity . . . claims to have been taken in,” the justifiable reliance rule “serves to rid the court of cases in which the claim of reliance is likely to be hypocritical” … . Excusing a sophisticated party such as a monoline financial guaranty insurer from demonstrating justifiable reliance would not further the policy underlying this “venerable rule.”

Likewise, there is no merit to Ambac’s argument that it need not show loss causation. Loss causation is a well-established requirement of a common law fraudulent inducement claim for damages. * * *

Ambac’s complaint fails to include breach of contract allegations beyond those that fall under the sole remedy provision … , and accordingly Ambac is limited to the repurchase protocol as the potential remedy for those claims. * * *

In New York, “the prevailing litigant ordinarily cannot collect . . . attorneys’ fees from its unsuccessful opponents. . . . Attorneys’ fees are treated as incidents of litigation, rather than damages. . . . The exception is when an award is authorized by agreement between the parties or by statute or court rule” … . … [T]his Court [has] held that a court “should not infer a party’s intention to waive the benefit of the rule unless the intention to do so is unmistakably clear from the language of the promise … . Ambac Assur. Corp. v Countrywide Home Loans, Inc., 2018 NY Slip Op 04686, CtApp 6-27-18

​INSURANCE LAW (IN THIS ACTION STEMMING FROM PLAINTIFF’S INSURING OF RESIDENTIAL MORTGAGE BACKED SECURITIES ISSUED BY DEFENDANT, PLAINTIFF WAS REQUIRED TO SHOW JUSTIFIABLE RELIANCE AND LOSS CAUSATION FOR ITS FRAUDULENT INDUCEMENT CAUSE OF ACTION, PLAINTIFF’S RECOVERY WAS LIMITED TO THAT DESCRIBED IN THE SOLE REMEDY PROVISION, AND PLAINTIFF WAS NOT ENTITLED TO ATTORNEY’S FEES (CT APP))/FRAUD  (IN THIS ACTION STEMMING FROM PLAINTIFF’S INSURING OF RESIDENTIAL MORTGAGE BACKED SECURITIES ISSUED BY DEFENDANT, PLAINTIFF WAS REQUIRED TO SHOW JUSTIFIABLE RELIANCE AND LOSS CAUSATION FOR ITS FRAUDULENT INDUCEMENT CAUSE OF ACTION, PLAINTIFF’S RECOVERY WAS LIMITED TO THAT DESCRIBED IN THE SOLE REMEDY PROVISION, AND PLAINTIFF WAS NOT ENTITLED TO ATTORNEY’S FEES (CT APP))/CONTRACT LAW  (IN THIS ACTION STEMMING FROM PLAINTIFF’S INSURING OF RESIDENTIAL MORTGAGE BACKED SECURITIES ISSUED BY DEFENDANT, PLAINTIFF WAS REQUIRED TO SHOW JUSTIFIABLE RELIANCE AND LOSS CAUSATION FOR ITS FRAUDULENT INDUCEMENT CAUSE OF ACTION, PLAINTIFF’S RECOVERY WAS LIMITED TO THAT DESCRIBED IN THE SOLE REMEDY PROVISION, AND PLAINTIFF WAS NOT ENTITLED TO ATTORNEY’S FEES (CT APP))/SECURITIES  (IN THIS ACTION STEMMING FROM PLAINTIFF’S INSURING OF RESIDENTIAL MORTGAGE BACKED SECURITIES ISSUED BY DEFENDANT, PLAINTIFF WAS REQUIRED TO SHOW JUSTIFIABLE RELIANCE AND LOSS CAUSATION FOR ITS FRAUDULENT INDUCEMENT CAUSE OF ACTION, PLAINTIFF’S RECOVERY WAS LIMITED TO THAT DESCRIBED IN THE SOLE REMEDY PROVISION, AND PLAINTIFF WAS NOT ENTITLED TO ATTORNEY’S FEES (CT APP))/RESIDENTIAL MORTGAGE BACKED SECURITIES  (IN THIS ACTION STEMMING FROM PLAINTIFF’S INSURING OF RESIDENTIAL MORTGAGE BACKED SECURITIES ISSUED BY DEFENDANT, PLAINTIFF WAS REQUIRED TO SHOW JUSTIFIABLE RELIANCE AND LOSS CAUSATION FOR ITS FRAUDULENT INDUCEMENT CAUSE OF ACTION, PLAINTIFF’S RECOVERY WAS LIMITED TO THAT DESCRIBED IN THE SOLE REMEDY PROVISION, AND PLAINTIFF WAS NOT ENTITLED TO ATTORNEY’S FEES (CT APP))/ATTORNEY’S FEES (IN THIS ACTION STEMMING FROM PLAINTIFF’S INSURING OF RESIDENTIAL MORTGAGE BACKED SECURITIES ISSUED BY DEFENDANT, PLAINTIFF WAS REQUIRED TO SHOW JUSTIFIABLE RELIANCE AND LOSS CAUSATION FOR ITS FRAUDULENT INDUCEMENT CAUSE OF ACTION, PLAINTIFF’S RECOVERY WAS LIMITED TO THAT DESCRIBED IN THE SOLE REMEDY PROVISION, AND PLAINTIFF WAS NOT ENTITLED TO ATTORNEY’S FEES (CT APP))

, ,

PLAINTIFFS’ CONCLUSORY ALLEGATION OF FRAUD DID NOT DEFEAT THE AGREEMENT TO ARBITRATE (SECOND DEPT).

The Second Department determined the arbitration clause of the contract between plaintiffs and defendant was enforceable, despite the plaintiffs’ allegation of fraud in connection with the contract:

A party may not be compelled to arbitrate a dispute unless there is evidence which affirmatively establishes that the parties clearly, explicitly, and unequivocally agreed to arbitrate the dispute… . Under both federal and New York law, unless it can be established that there was a grand scheme to defraud which permeated the entire agreement, including the arbitration provision, a broadly worded arbitration provision will be deemed separate from the substantive contractual provisions, and the agreement to arbitrate may be valid despite the underlying allegation of fraud … .

The broad arbitration clause in the 2014 agreement, together with the other provisions of the 2014 agreement, demonstrate that the plaintiffs explicitly and unequivocally agreed to arbitrate the matters that are the subject of this action. In addition, the plaintiffs’ bare conclusory assertions of fraud failed to establish that any alleged fraud was part of a grand scheme that permeated the entire agreement, including the arbitration clause … . Zafar v Fast Track Leasing, LLC, 2018 NY Slip Op 04774, Second Dept 6-27-18

ARBITRATION (CONTRACT LAW, FRAUD, PLAINTIFFS’ CONCLUSORY ALLEGATION OF FRAUD DID NOT DEFEAT THE AGREEMENT TO ARBITRATE (SECOND DEPT))/CONTRACT LAW (ARBITRATION, PLAINTIFFS’ CONCLUSORY ALLEGATION OF FRAUD DID NOT DEFEAT THE AGREEMENT TO ARBITRATE (SECOND DEPT))/FRAUD (ARBITRATION, CONTRACT LAW, PLAINTIFFS’ CONCLUSORY ALLEGATION OF FRAUD DID NOT DEFEAT THE AGREEMENT TO ARBITRATE (SECOND DEPT))

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