Contract Law – Page 93 – New York Appellate Digest

PLAINTIFF’S SILENCE COUPLED WITH GOING FORWARD TO ENTER THE LEASE CONSTITUTED ACCEPTANCE OF THE REAL ESTATE BROKER’S COUNTEROFFER FOR THE BROKERAGE FEE (SECOND DEPT).

The First Department determined plaintiff’s silence after defendant real estate broker’s counteroffer for the brokerage fee, coupled with plaintiff’s going ahead to enter the lease procured by the broker, constituted acceptance of the counteroffer:

…[T]he plaintiff established, prima facie, its entitlement to a judgment declaring that the brokerage commission due was five percent of the rent for the first five years of the lease agreement by submitting evidence that the defendant did not reject the counteroffer, but instead proceeded to have its client enter into the lease agreement. “While mere silence, when not misleading, cannot be construed as acceptance, a counteroffer may be accepted by conduct”… . The defendant’s conduct of moving forward with the lease agreement upon receiving the plaintiff’s counteroffer established that the objective manifestation of the parties’ intent was an agreement to the brokerage rate set forth in the counteroffer … . Gator Hillside Vil., LLC v Schuckman Realty, Inc., 2018 NY Slip Op 01178, Second Dept 2-21-18

CONTRACT LAW (PLAINTIFF’S SILENCE COUPLED WITH GOING FORWARD TO ENTER THE LEASE CONSTITUTED ACCEPTANCE OF THE REAL ESTATE BROKER’S COUNTEROFFER FOR THE BROKERAGE FEE (SECOND DEPT))/COUNTEROFFER (CONTRACT LAW, REAL ESTATE, PLAINTIFF’S SILENCE COUPLED WITH GOING FORWARD TO ENTER THE LEASE CONSTITUTED ACCEPTANCE OF THE REAL ESTATE BROKER’S COUNTEROFFER FOR THE BROKERAGE FEE (SECOND DEPT))/REAL ESTATE (BROKERAGE FEE, CONTRACT LAW, PLAINTIFF’S SILENCE COUPLED WITH GOING FORWARD TO ENTER THE LEASE CONSTITUTED ACCEPTANCE OF THE REAL ESTATE BROKER’S COUNTEROFFER FOR THE BROKERAGE FEE (SECOND DEPT))/SILENCE (CONTRACT LAW, COUNTEROFFER, PLAINTIFF’S SILENCE COUPLED WITH GOING FORWARD TO ENTER THE LEASE CONSTITUTED ACCEPTANCE OF THE REAL ESTATE BROKER’S COUNTEROFFER FOR THE BROKERAGE FEE (SECOND DEPT))

February 21, 2018

ALLEGATIONS IN COMPLAINT AND AFFIDAVIT SUBMITTED IN RESPONSE TO A MOTION TO DISMISS MUST BE TREATED AS TRUE, PLAINTIFF RAISED A QUESTION OF FACT WHETHER RELEASE PROCURED BY FRAUD (SECOND DEPT).

The Second Department determined defendants’ motion to dismiss the complaint in this personal injury action, based upon a release signed by the plaintiff, was properly denied. Plaintiff submitted an affidavit which, together with the complaint, raised the issue whether the release was procured by fraud:

“In resolving a motion for dismissal pursuant to CPLR 3211(a)(5), the plaintiff’s allegations are to be treated as true, all inferences that reasonably flow therefrom are to be resolved in his or her favor, and where, as here, the plaintiff has submitted an affidavit in opposition to the motion, it is to be construed in the same favorable light” … . “A party may move for judgment dismissing one or more causes of action asserted against him on the ground that . . . the cause of action may not be maintained because of . . . [a] release” (CPLR 3211[a][5]). However, a motion pursuant to CPLR 3211(a)(5) to dismiss a complaint on the basis of a release “should be denied where fraud or duress in the procurement of the release is alleged” … .

Here, in support of their motion to dismiss the complaint, the defendants submitted an affidavit of their insurance carrier’s claims representative and a copy of the release signed by the plaintiff, which, by its terms, barred the instant action against them … . In opposition, however, the plaintiff’s allegations were sufficient to raise a question of fact as to whether the defendants procured the release by fraud, whether the release was signed by the plaintiff under circumstances which indicate unfairness, and whether it was “not fairly and knowingly made” … . Sacchetti-Virga v Bonilla, 2018 NY Slip Op 01210, Second Dept 2-21-18

CONTRACT LAW (ALLEGATIONS IN COMPLAINT AND AFFIDAVIT SUBMITTED IN RESPONSE TO A MOTION TO DISMISS MUST BE TREATED AS TRUE, PLAINTIFF RAISED A QUESTION OF FACT WHETHER RELEASE PROCURED BY FRAUD (SECOND DEPT))/RELEASES (ALLEGATIONS IN COMPLAINT AND AFFIDAVIT SUBMITTED IN RESPONSE TO A MOTION TO DISMISS MUST BE TREATED AS TRUE, PLAINTIFF RAISED A QUESTION OF FACT WHETHER RELEASE PROCURED BY FRAUD (SECOND DEPT))/FRAUD (RELEASES, ALLEGATIONS IN COMPLAINT AND AFFIDAVIT SUBMITTED IN RESPONSE TO A MOTION TO DISMISS MUST BE TREATED AS TRUE, PLAINTIFF RAISED A QUESTION OF FACT WHETHER RELEASE PROCURED BY FRAUD (SECOND DEPT))/CIVIL PROCEDURE (MOTION TO DISMISS, ALLEGATIONS IN COMPLAINT AND AFFIDAVIT SUBMITTED IN RESPONSE TO A MOTION TO DISMISS MUST BE TREATED AS TRUE, PLAINTIFF RAISED A QUESTION OF FACT WHETHER RELEASE PROCURED BY FRAUD (SECOND DEPT))/CPLR 3211 (a)(5) (ALLEGATIONS IN COMPLAINT AND AFFIDAVIT SUBMITTED IN RESPONSE TO A MOTION TO DISMISS MUST BE TREATED AS TRUE, PLAINTIFF RAISED A QUESTION OF FACT WHETHER RELEASE PROCURED BY FRAUD (SECOND DEPT))

February 21, 2018

Architectural Malpractice, Contract Law, Negligence

CITY WAS NOT A THIRD PARTY BENEFICIARY OF A CONSTRUCTION CONTRACT BETWEEN THE DORMITORY AUTHORITY OF NYS AND DEFENDANT ARCHITECTS, MALPRACTICE ACTION AGAINST THE ARCHITECTS WAS DUPLICATIVE OF THE BREACH OF CONTRACT ACTION (CT APP).

The Court of Appeals, in a full-fledged opinion by Judge DiFiore, over two partial dissenting opinions, determined the city was not a third-party beneficiary of a contract between the Dormitory Authority of the State of New York (DASNY) and defendant architects (Perkins) and the negligence cause of action (professional malpractice) by DASNY against Perkins was duplicative of the the breach of contract cause of action. Perkins had contracted with DASNY to construct a building. During excavation a neighboring building, sidewalks, sewers, etc. settled. The building gradually settled about eight inches. The majority explained when a tort action, in addition to a breach of contract action, is viable in the context of architectural malpractice:

With respect to construction contracts, we have generally required express contractual language stating that the contracting parties intended to benefit a third party by permitting that third party “to enforce [a promisee’s] contract with another” … . In the absence of express language, “[s]uch third parties are generally considered mere incidental beneficiaries” … . This rule reflects the particular nature of construction contracts and the fact that — as is the case here — there are often several contracts between various entities, with performance ultimately benefitting all of the entities involved. * * *

… [T]here are circumstances where a professional architect may be subject to a tort claim for failure to exercise due care in the performance of contractual obligations. In seeking to “disentangl[e] tort and contract claims,” we focused in Sommer both on potential catastrophic consequences of a failure to exercise due care and on the nature of the injury, the manner in which it occurred, and the resulting harm (79 NY2d at 552). We distinguished between the situation where the harm was an “abrupt, cataclysmic occurrence” not contemplated by the contracting parties and one where the plaintiff was essentially seeking enforcement of contract rights (79 NY2d at 552). Here, the … building settled during the course of several months, damaging adjacent structures. However, even if any “abrupt” or “catastrophic” consequences either could have or did result from Perkins’ alleged negligence, the fact remains that the only damages alleged appear to have been within the contemplation of the parties under the contract — and … are identical for both claims. Put another way, there was no injury alleged here that a separate negligence claim would include that is not already encompassed in DASNY’s contract claim. Dormitory Auth. of the State of N.Y. v Samson Constr. Co., 2018 NY Slip Op 01115, CtApp 2-15-18

CONTRACT LAW (CITY WAS NOT A THIRD PARTY BENEFICIARY OF A CONSTRUCTION CONTRACT BETWEEN THE DORMITORY AUTHORITY OF NYS AND DEFENDANT ARCHITECTS, MALPRACTICE ACTION AGAINST THE ARCHITECTS WAS DUPLICATIVE OF THE BREACH OF CONTRACT ACTION (CT APP))/THIRD PARTY BENEFICIARY (CONSTRUCTION CONTRACT, CITY WAS NOT A THIRD PARTY BENEFICIARY OF A CONSTRUCTION CONTRACT BETWEEN THE DORMITORY AUTHORITY OF NYS AND DEFENDANT ARCHITECTS, MALPRACTICE ACTION AGAINST THE ARCHITECTS WAS DUPLICATIVE OF THE BREACH OF CONTRACT ACTION (CT APP))/CONSTRUCTION CONTRACTS (THIRD PARTY BENEFICIARY, CITY WAS NOT A THIRD PARTY BENEFICIARY OF A CONSTRUCTION CONTRACT BETWEEN THE DORMITORY AUTHORITY OF NYS AND DEFENDANT ARCHITECTS, MALPRACTICE ACTION AGAINST THE ARCHITECTS WAS DUPLICATIVE OF THE BREACH OF CONTRACT ACTION (CT APP))/NEGLIGENCE (ARCHITECTURAL MALPRACTICE, CITY WAS NOT A THIRD PARTY BENEFICIARY OF A CONSTRUCTION CONTRACT BETWEEN THE DORMITORY AUTHORITY OF NYS AND DEFENDANT ARCHITECTS, MALPRACTICE ACTION AGAINST THE ARCHITECTS WAS DUPLICATIVE OF THE BREACH OF CONTRACT ACTION (CT APP))/ARCHITECTURAL MALPRACTICE (CITY WAS NOT A THIRD PARTY BENEFICIARY OF A CONSTRUCTION CONTRACT BETWEEN THE DORMITORY AUTHORITY OF NYS AND DEFENDANT ARCHITECTS, MALPRACTICE ACTION AGAINST THE ARCHITECTS WAS DUPLICATIVE OF THE BREACH OF CONTRACT ACTION (CT APP))

February 15, 2018

Civil Procedure, Contract Law, Fiduciary Duty, Fraud

PLAINTIFF ALLEGED CONTINUING BREACHES OF CONTRACT, AIDING AND ABETTING FRAUD, NEGLIGENT MISREPRESENTATION AND AIDING AND ABETTING BREACH OF FIDUCIARY DUTY FOR THE DURATION OF THE DEBT-RIDDEN WORKERS’ COMPENSATION TRUST, WHICH WAS TERMINATED 25 DAYS BEFORE THE EXPIRATION OF THE SIX YEAR STATUTE OF LIMITATIONS, THOSE CAUSES OF ACTION SHOULD NOT HAVE BEEN DISMISSED (THIRD DEPT).

The Third Department, modifying Supreme Court, determined the causes of action for breach of contract, aiding and abetting fraud and negligent misrepresentation, and aiding and abetting a breach of fiduciary duty should not have been dismissed as time barred. The underlying suit is based on the allegation that defendant insurance broker was on the board of a Workers’ Compensation trust, which plaintiff had joined, and which was $82 million in debt. The Third Department held that the six-year statute of limitations applied to all the (above-described) causes of action and the complaint alleged continuing breaches throughout the period of membership in the trust, which terminated 25 days before the expiration of the statute of limitations (i.e., the six-year period before the suit was brought extended back to March 24, 2008, and the trust was terminated on April 17, 2008):

… [T]he amended complaint alleges continuing contractual obligations on the part of defendant and specifies that the various acts and omissions constituting the breaches occurred “[t]hroughout the entire course of [p]laintiff’s membership in the [t]rust.” Deeming these allegations as true and according them every favorable inference, as we must … , we conclude that defendant failed to make the requisite prima facie showing that plaintiff’s breach of contract claim is time-barred in its entirety … . …

[P]laintiff’s causes of action for negligent misrepresentation and aiding and abetting fraud are timely insofar as they allege conduct occurring [during the 25 day window]. …

… [W]e disagree with Supreme Court’s conclusion that the entirety of plaintiff’s aiding and abetting breach of fiduciary duty claim is governed by a three-year statute of limitations. Because plaintiff does not seek equitable relief, a six-year statute of limitations period applies to a breach of fiduciary duty cause of action if “an allegation of fraud is essential to” such claim … . While a claim of fraud generally requires an affirmative misrepresentation, “fraud may also result from a fiduciary’s failure to disclose material facts when the fiduciary had a duty to disclose and acted with the intent to deceive” … . Krog Corp. v Vanner Group, Inc., 2018 NY Slip Op 00876, Third Dept 2-8-18

February 8, 2018

Contract Law, Medical Malpractice

COMPLAINT ALLEGING BREACH OF A CONTRACT TO PROVIDE MEDICAL SERVICES PROPERLY DISMISSED FOR FAILURE TO STATE A CAUSE OF ACTION (SECOND DEPT).

The Second Department determined plaintiff’s breach of contract action in this medical malpractice case was properly dismissed for failure to state a cause of action:

… [A] cause of action to recover damages for breach of contract to provide medical services “will withstand a test to its legal sufficiency only where it is based upon an express special promise to effect a cure or to accomplish some definite result”… . Here, the plaintiff’s allegations, even supplemented by her affidavit submitted in opposition to the defendants’ motion to dismiss the complaint, failed to state a cause of action to recover damages for breach of contract to provide medical services. The plaintiff’s allegations as to the formation and terms of any alleged contract are vague and entirely conclusory. Moreover, the alleged damages, which are in the nature of pain and suffering, are not recoverable in a cause of action to recover damages for breach of contract to provide medical services … . Detringo v South Is. Family Med., LLC, 2018 NY Slip Op 00821, Second Dept 2-7-18

CONTRACT LAW (MEDICAL MALPRACTICE, COMPLAINT ALLEGING BREACH OF A CONTRACT TO PROVIDE MEDICAL SERVICES PROPERLY DISMISSED FOR FAILURE TO STATE A CAUSE OF ACTION (SECOND DEPT))/MEDICAL MALPRACTICE (CONTRACT LAW, COMPLAINT ALLEGING BREACH OF A CONTRACT TO PROVIDE MEDICAL SERVICES PROPERLY DISMISSED FOR FAILURE TO STATE A CAUSE OF ACTION (SECOND DEPT))

February 7, 2018

Attorneys, Contract Law, Limited Liability Company Law

UNEXECUTED CONTRACT THAT COULD NOT BE COMPLETED WITHIN A LIFETIME NOT ENFORCEABLE, ATTORNEY WHO REPRESENTED THE DEFENDANT LLC SHOULD HAVE BEEN DISQUALIFIED IN THIS ACTION BROUGHT ON BEHALF OF A DECEASED MEMBER (SECOND DEPT).

The Second Department, modifying Supreme Court, determined plaintiff’s breach of contract action based upon an unexecuted contract which could not be completed within a lifetime was properly granted. Plaintiff’s decedent was a member of a limited liability company (Ocean Rich) which had taken out a life insurance policy for plaintiff’s decedent, payable to Ocean State. The agreement which was never signed would have required that the proceeds of the policy be used to buy out plaintiff’s decedent’s share of the LLC. The Second Department further determined counsel for the defendant LLC should be disqualified because he had represented the LLC before plaintiff’s decedent’s death:

… [T]he defendants demonstrated their prima facie entitlement to judgment as a matter of law dismissing the causes of action to recover damages for breach of contract, breach of the implied covenant of good faith and fair dealing, and tortious interference with contract, by submitting evidence that the agreement was never executed by the members of Ocean Rich, and therefore does not satisfy the statute of frauds. … Since the alleged promise upon which the plaintiff relied—that Ocean Rich would purchase the decedent’s interest in it from his estate with the proceeds of the subject insurance policy—could not, by its terms, “be completed before the end of a lifetime,” the Supreme Court properly granted [defendants’ motion for summary judgment]. …

… [T]he plaintiff alleged in an affidavit that the defendants’ counsel was involved in the formation of Ocean Rich, and the defendants’ counsel admitted that he had represented Ocean Rich in “various past matters.” Counsel’s prior representation of Ocean Rich “was in fact represent[ation of] its [three] shareholders,” whose competing interests are at issue in this action … . Likewise, counsel’s involvement in the formation of Ocean Rich and his representation of it against third parties was “substantially related” to the present action… . Since the defendants’ counsel was “in a position to receive relevant confidences” from the decedent, whose estate’s interests “are now adverse to the defendant[s’] interests,” the Supreme Court should have granted that branch of the plaintiff’s cross motion which was to disqualify the defendants’ counsel … . Deerin v Ocean Rich Foods, LLC, 2018 NY Slip Op 00820, Second Dept 2-7-18

CONTRACT LAW (UNEXECUTED CONTRACT THAT COULD NOT BE COMPLETED WITHIN A LIFETIME NOT ENFORCEABLE, ATTORNEY WHO REPRESENTED THE DEFENDANT LLC SHOULD HAVE BEEN DISQUALIFIED IN THIS ACTION BROUGHT ON BEHALF OF A DECEASED MEMBER (SECOND DEPT))/STATUTE OF FRAUDS (UNEXECUTED CONTRACT THAT COULD NOT BE COMPLETED WITHIN A LIFETIME NOT ENFORCEABLE, ATTORNEY WHO REPRESENTED THE DEFENDANT LLC SHOULD HAVE BEEN DISQUALIFIED IN THIS ACTION BROUGHT ON BEHALF OF A DECEASED MEMBER (SECOND DEPT))/GENERAL OBLIGATIONS LAW (STATUTE OF FRAUDS, UNEXECUTED CONTRACT THAT COULD NOT BE COMPLETED WITHIN A LIFETIME NOT ENFORCEABLE, ATTORNEY WHO REPRESENTED THE DEFENDANT LLC SHOULD HAVE BEEN DISQUALIFIED IN THIS ACTION BROUGHT ON BEHALF OF A DECEASED MEMBER (SECOND DEPT))/CORPORATION LAW (ATTORNEYS, CONFLICT OF INTEREST, UNEXECUTED CONTRACT THAT COULD NOT BE COMPLETED WITHIN A LIFETIME NOT ENFORCEABLE, ATTORNEY WHO REPRESENTED THE DEFENDANT LLC SHOULD HAVE BEEN DISQUALIFIED IN THIS ACTION BROUGHT ON BEHALF OF A DECEASED MEMBER (SECOND DEPT))/LIMITED LIABILITY COMPANY LAW (ATTORNEYS, CONFLICT OF INTEREST, UNEXECUTED CONTRACT THAT COULD NOT BE COMPLETED WITHIN A LIFETIME NOT ENFORCEABLE, ATTORNEY WHO REPRESENTED THE DEFENDANT LLC SHOULD HAVE BEEN DISQUALIFIED IN THIS ACTION BROUGHT ON BEHALF OF A DECEASED MEMBER (SECOND DEPT))/ATTORNEYS (CONFLICT OF INTEREST, UNEXECUTED CONTRACT THAT COULD NOT BE COMPLETED WITHIN A LIFETIME NOT ENFORCEABLE, ATTORNEY WHO REPRESENTED THE DEFENDANT LLC SHOULD HAVE BEEN DISQUALIFIED IN THIS ACTION BROUGHT ON BEHALF OF A DECEASED MEMBER (SECOND DEPT))/CONFLICT OF INTEREST (ATTORNEYS, LIMITED LIABILITY COMPANY LAW, (UNEXECUTED CONTRACT THAT COULD NOT BE COMPLETED WITHIN A LIFETIME NOT ENFORCEABLE, ATTORNEY WHO REPRESENTED THE DEFENDANT LLC SHOULD HAVE BEEN DISQUALIFIED IN THIS ACTION BROUGHT ON BEHALF OF A DECEASED MEMBER (SECOND DEPT))

February 7, 2018

Civil Procedure, Contract Law

PLAINTIFF WAS ENTITLED TO A JURY TRIAL ON THE ISSUE OF THE APPROPRIATE DISCOUNT RATE TO BE APPLIED TO A JURY VERDICT IN THIS BREACH OF CONTRACT ACTION (FOURTH DEPT).

The Fourth Department, reversing Supreme Court, in a case sent back by the Court of Appeals for a determination of the appropriate discount rate on a jury verdict in a breach of contract action, held the plaintiff’s request for a jury trial on the issue should have been granted:

… [I]t is undisputed that, prior to the original trial in this matter, plaintiff demanded a jury trial on all issues. During that trial, “[o]ver the [plaintiff’s] objection, the jury was provided with a verdict form that did not allow for any damages discount” … . Although the Court of Appeals remitted the matter for the purpose of establishing a discount rate, it did not indicate whether the discount rate should be determined by the trial court or a jury. Nevertheless, prior to the trial that is the subject of this appeal, plaintiff renewed its request for a jury, which the court denied. Contrary to defendant’s contention, neither article 50-A nor article 50-B of the CPLR requires that the discount rate be determined by the court. As the Court of Appeals stated, this is a breach of contract action… . Article 50-A deals with periodic payment of judgments in actions concerning medical and dental malpractice, and article 50-B deals with periodic payment of judgments in actions concerning personal injury, injury to property, and wrongful death. Furthermore, we conclude that Toledo v Iglesia Ni Christo (18 NY3d 363 [2012]) does not require the trial court to determine the discount rate in this case inasmuch as Toledo was a wrongful death case within the purview of CPLR article 50-B. Village of Herkimer v County of Herkimer, 2018 NY Slip Op 00756, Fourth Dept 2-2-18

CIVIL PROCEDURE (JURY TRIAL, PLAINTIFF WAS ENTITLED TO A JURY TRIAL ON THE ISSUE OF THE APPROPRIATE DISCOUNT RATE TO BE APPLIED TO A JURY VERDICT IN THIS BREACH OF CONTRACT ACTION (FOURTH DEPT))/DAMAGES (JURY TRIAL, PLAINTIFF WAS ENTITLED TO A JURY TRIAL ON THE ISSUE OF THE APPROPRIATE DISCOUNT RATE TO BE APPLIED TO A JURY VERDICT IN THIS BREACH OF CONTRACT ACTION (FOURTH DEPT))/DISCOUNT RATE (DAMAGES, JURY TRIAL, PLAINTIFF WAS ENTITLED TO A JURY TRIAL ON THE ISSUE OF THE APPROPRIATE DISCOUNT RATE TO BE APPLIED TO A JURY VERDICT IN THIS BREACH OF CONTRACT ACTION (FOURTH DEPT))/JURY TRIAL (BREACH OF CONTRACT, DISCOUNT RATE, PLAINTIFF WAS ENTITLED TO A JURY TRIAL ON THE ISSUE OF THE APPROPRIATE DISCOUNT RATE TO BE APPLIED TO A JURY VERDICT IN THIS BREACH OF CONTRACT ACTION (FOURTH DEPT))/CONTRACT LAW (DAMAGES, JURY TRIAL, PLAINTIFF WAS ENTITLED TO A JURY TRIAL ON THE ISSUE OF THE APPROPRIATE DISCOUNT RATE TO BE APPLIED TO A JURY VERDICT IN THIS BREACH OF CONTRACT ACTION (FOURTH DEPT))

February 2, 2018

Contract Law, Employment Law

NON-SOLICITATION AGREEMENT WAS THE PRODUCT OF OVERREACHING AND WILL NOT BE ENFORCED (FOURTH DEPT).

The Fourth Department determined Supreme Court correctly found, after a bench trial, that a non-solicitation agreement between defendant Johnson and her employers (plaintiffs) should not be enforced because the agreement was the product of overreaching:

Plaintiffs had the burden of demonstrating that, in imposing the terms of the non-solicitation covenant, they did not engage in “overreaching, coercive use of dominant bargaining power, or other anti-competitive misconduct, but ha[d] in good faith sought to protect a legitimate interest” … , and they did not meet that burden. The evidence established that the non-solicitation covenant was imposed as a condition of Johnson’s employment, after she had left her former employer and her position there had been filled, which belies plaintiffs’ contention that Johnson’s bargaining position was equal or superior to theirs… . In addition, plaintiffs required all employees, regardless of position, to sign an agreement containing a non-solicitation covenant as a condition of employment, which undercuts plaintiffs’ contention that the covenant was necessary to protect their legitimate business interests … . Finally, the fact that the agreement provides for partial enforcement of the non-solicitation covenant, which is clearly over-broad under New York law, casts doubt on plaintiffs’ good faith in imposing the covenant on Johnson … . Brown & Brown, Inc. v Johnson, 2018 NY Slip Op 00728, Fourth Dept 2-2-18

EMPLOYMENT LAW (NON-SOLICITATION AGREEMENT WAS THE PRODUCT OF OVERREACHING AND WILL NOT BE ENFORCED (FOURTH DEPT))/CONTRACT LAW (NON-SOLICITATION AGREEMENT WAS THE PRODUCT OF OVERREACHING AND WILL NOT BE ENFORCED (FOURTH DEPT))/NON-SOLICITATION AGREEMENT (EMPLOYMENT LAW, NON-SOLICITATION AGREEMENT WAS THE PRODUCT OF OVERREACHING AND WILL NOT BE ENFORCED (FOURTH DEPT))/CONTRACT LAW (NON-SOLICITATION AGREEMENT WAS THE PRODUCT OF OVERREACHING AND WILL NOT BE ENFORCED (FOURTH DEPT))

February 2, 2018

Appeals, Contract Law, Landlord-Tenant

CLAUSE IN THE COMMERCIAL LEASES WHICH WAIVED THE AVAILABILITY OF DECLARATORY RELIEF WAS VALID AND ENFORCEABLE AND EXTENDED TO PRECLUDE THE AVAILABILITY OF A YELLOWSTONE INJUNCTION IN THIS LEASE TERMINATION PROCEEDING, WHETHER WAIVER VIOLATED PUBLIC POLICY, ALTHOUGH NOT RAISED BELOW, PROPERLY CONSIDERED ON APPEAL (FIRST DEPT).

The Second Department, in a full-fledged opinion by Justice Dillon, over an extensive dissenting opinion, determined the waiver-of-declaratory-relief clause in the commercial leases was enforceable and precluded both the plaintiffs’ declaratory judgment action and the availability of a Yellowstone injunction (which would have stayed termination of the lease while the merits are considered). Although not raised below, the appellate court had the authority to consider whether the waiver violated public policy (no public policy violation found). The plaintiffs’ (tenants’) declaratory judgment and Yellowstone injunction actions were in response to the landlord’s notice to cure, which gave the tenants’ 15 days to cure certain alleged lease violations before termination of the leases. The waiver clause included a statement that the parties intended all disputes to be dealt with in summary proceedings:

Paragraph 67(H) in the rider of each lease provided that the tenant: “waives its right to bring a declaratory judgment action with respect to any provision of this Lease or with respect to any notice sent pursuant to the provisions of this Lease. Any breach of this paragraph shall constitute a breach of substantial obligations of the tenancy, and shall be grounds for the immediate termination of this Lease. It is further agreed that in the event injunctive relief is sought by Tenant and such relief shall be denied, the Owner shall be entitled to recover the costs of opposing such an application, or action, including its attorney’s fees actually incurred, it is the intention of the parties hereto that their disputes be adjudicated via summary proceedings.” * * *

… “[W]here a contract provision is arguably void as against public policy, that issue may be raised for the first time at the Appellate Division by a party, or by the court on its own motion” … . We therefore reach the merits of the public policy issue raised on appeal. * * *

Here, the parties were sophisticated entities that negotiated at arm’s length and entered into lengthy and detailed leases defining each party’s rights and obligations with great apparent care and specificity. 159 MP Corp. v Redbridge Bedford, LLC, 2018 NY Slip Op 00537, Second Dept 1-31-18

LANDLORD-TENANT (DECLARATORY RELIEF, YELLOWSTONE INJUNCTION, CLAUSE IN THE COMMERCIAL LEASES WHICH WAIVED THE AVAILABILITY OF DECLARATORY RELIEF WAS VALID AND ENFORCEABLE AND EXTENDED TO PRECLUDE THE AVAILABILITY OF A YELLOWSTONE INJUNCTION IN THIS LEASE TERMINATION PROCEEDING, WHETHER WAIVER VIOLATED PUBLIC POLICY, ALTHOUGH NOT RAISED BELOW, PROPERLY CONSIDERED ON APPEAL (FIRST DEPT))/CONTRACT LAW (LANDLORD-TENANT, LEASES, DECLARATORY RELIEF, YELLOWSTONE INJUNCTION, CLAUSE IN THE COMMERCIAL LEASES WHICH WAIVED THE AVAILABILITY OF DECLARATORY RELIEF WAS VALID AND ENFORCEABLE AND EXTENDED TO PRECLUDE THE AVAILABILITY OF A YELLOWSTONE INJUNCTION IN THIS LEASE TERMINATION PROCEEDING, WHETHER WAIVER VIOLATED PUBLIC POLICY, ALTHOUGH NOT RAISED BELOW, PROPERLY CONSIDERED ON APPEAL (FIRST DEPT))/YELLOWSTONE INJUNCTION (LANDLORD-TENANT, CLAUSE IN THE COMMERCIAL LEASES WHICH WAIVED THE AVAILABILITY OF DECLARATORY RELIEF WAS VALID AND ENFORCEABLE AND EXTENDED TO PRECLUDE THE AVAILABILITY OF A YELLOWSTONE INJUNCTION IN THIS LEASE TERMINATION PROCEEDING, WHETHER WAIVER VIOLATED PUBLIC POLICY, ALTHOUGH NOT RAISED BELOW, PROPERLY CONSIDERED ON APPEAL (FIRST DEPT))/DECLARATORY JUDGMENT (WAIVER, LANDLORD-TENANT, CLAUSE IN THE COMMERCIAL LEASES WHICH WAIVED THE AVAILABILITY OF DECLARATORY RELIEF WAS VALID AND ENFORCEABLE AND EXTENDED TO PRECLUDE THE AVAILABILITY OF A YELLOWSTONE INJUNCTION IN THIS LEASE TERMINATION PROCEEDING, WHETHER WAIVER VIOLATED PUBLIC POLICY, ALTHOUGH NOT RAISED BELOW, PROPERLY CONSIDERED ON APPEAL (FIRST DEPT))/COMMERCIAL LEASES (WAIVER OF DECLARATORY RELIEF, YELLOWSTONE INJUNCTION, CLAUSE IN THE COMMERCIAL LEASES WHICH WAIVED THE AVAILABILITY OF DECLARATORY RELIEF WAS VALID AND ENFORCEABLE AND EXTENDED TO PRECLUDE THE AVAILABILITY OF A YELLOWSTONE INJUNCTION IN THIS LEASE TERMINATION PROCEEDING, WHETHER WAIVER VIOLATED PUBLIC POLICY, ALTHOUGH NOT RAISED BELOW, PROPERLY CONSIDERED ON APPEAL (FIRST DEPT))/WAIVERS (LANDLORD-TENANT, COMMERCIAL LEASES, CLAUSE IN THE COMMERCIAL LEASES WHICH WAIVED THE AVAILABILITY OF DECLARATORY RELIEF WAS VALID AND ENFORCEABLE AND EXTENDED TO PRECLUDE THE AVAILABILITY OF A YELLOWSTONE INJUNCTION IN THIS LEASE TERMINATION PROCEEDING, WHETHER WAIVER VIOLATED PUBLIC POLICY, ALTHOUGH NOT RAISED BELOW, PROPERLY CONSIDERED ON APPEAL (FIRST DEPT))/APPEALS (CONTRACT LAW, PUBLIC POLICY, CLAUSE IN THE COMMERCIAL LEASES WHICH WAIVED THE AVAILABILITY OF DECLARATORY RELIEF WAS VALID AND ENFORCEABLE AND EXTENDED TO PRECLUDE THE AVAILABILITY OF A YELLOWSTONE INJUNCTION IN THIS LEASE TERMINATION PROCEEDING, WHETHER WAIVER VIOLATED PUBLIC POLICY, ALTHOUGH NOT RAISED BELOW, PROPERLY CONSIDERED ON APPEAL (FIRST DEPT))/PUBLIC POLICY (APPEALS, CONTRACTS, CLAUSE IN THE COMMERCIAL LEASES WHICH WAIVED THE AVAILABILITY OF DECLARATORY RELIEF WAS VALID AND ENFORCEABLE AND EXTENDED TO PRECLUDE THE AVAILABILITY OF A YELLOWSTONE INJUNCTION IN THIS LEASE TERMINATION PROCEEDING, WHETHER WAIVER VIOLATED PUBLIC POLICY, ALTHOUGH NOT RAISED BELOW, PROPERLY CONSIDERED ON APPEAL (FIRST DEPT))

January 31, 2018

Attorneys, Contract Law

PLAINTIFF’S ACTION FOR BREACH OF CONTRACT, ALLEGING DEFENDANT-ATTORNEYS FAILED TO RETURN THE BALANCE OF THE FEE PAID AT THE CONCLUSION OF THE CASE, PROPERLY SURVIVED A MOTION TO DISMISS (FIRST DEPT).

The First Department determined defendant-attorneys’ motion to dismiss the breach of contract cause of action, alleging the failure to return the balance of fees paid, was properly denied. Plaintiff alleged there was an oral agreement to return any few balance remaining when the action was resolved. Defendants did not provide plaintiff with an accounting of the hour spent on the case:

Defendants moved to dismiss, arguing that the breach of contract claim was not adequately pleaded and that plaintiff’s claim is barred by the “voluntary payment doctrine.”

The voluntary payment doctrine “bars recovery of payments voluntarily made with full knowledge of the facts, and in the absence of fraud or mistake of material fact or law” … . In the context of an attorney-client relationship, the attorney bears the burden of showing that the parties’ fee agreement was fair, reasonable, and fully known and understood by plaintiff … .

Plaintiff has sufficiently alleged a claim for breach of contract based on defendants’ failure to return the unearned balance of his retainer, pursuant to the parties’ oral agreement … . While defendants assert that plaintiff voluntarily made payments to compensate them for their services, they have not established that plaintiff had full knowledge of the relevant facts, such as the number of hours spent by defendants in connection with their representation of him … . Nor did they submit any evidence to show that the amount of plaintiff’s payments was fair and reasonably related to the value of services rendered … . Dubrow v Herman & Beinin, 2018 NY Slip Op 00478, First Dept 1-25-18

ATTORNEYS (FEES, CONTRACT LAW, PLAINTIFF’S ACTION FOR BREACH OF CONTRACT, ALLEGING DEFENDANT-ATTORNEYS FAILED TO RETURN THE BALANCE OF THE FEE PAID AT THE CONCLUSION OF THE CASE, PROPERLY SURVIVED A MOTION TO DISMISS (FIRST DEPT))/CONTRACT LAW (ATTORNEY’S FEES, PLAINTIFF’S ACTION FOR BREACH OF CONTRACT, ALLEGING DEFENDANT-ATTORNEYS FAILED TO RETURN THE BALANCE OF THE FEE PAID AT THE CONCLUSION OF THE CASE, PROPERLY SURVIVED A MOTION TO DISMISS (FIRST DEPT))/ATTORNEY’S FEES (CONTRACT LAW, PLAINTIFF’S ACTION FOR BREACH OF CONTRACT, ALLEGING DEFENDANT-ATTORNEYS FAILED TO RETURN THE BALANCE OF THE FEE PAID AT THE CONCLUSION OF THE CASE, PROPERLY SURVIVED A MOTION TO DISMISS (FIRST DEPT))/VOLUNTARY PAYMENT DOCTRINE (ATTORNEY’S FEES, PLAINTIFF’S ACTION FOR BREACH OF CONTRACT, ALLEGING DEFENDANT-ATTORNEYS FAILED TO RETURN THE BALANCE OF THE FEE PAID AT THE CONCLUSION OF THE CASE, PROPERLY SURVIVED A MOTION TO DISMISS (FIRST DEPT))

January 25, 2018