Contract Law – Page 95 – New York Appellate Digest

LIMITED LIABILITY PROVISION PRECLUDED RECOVERY FOR BREACH OF CONTRACT FOR ANY AMOUNT OVER THE LIMITATION, ALTHOUGH THE LIMITATION OF LIABILITY WAS AN AFFIRMATIVE DEFENSE, IT WAS PROPERLY CONSIDERED ON A MOTION TO DISMISS (FIRST DEPT).

The First Department determined the limitation of liability provision precluded recovery for breach of contract for any amount over the limitation. The contract was an exclusive licensing agreement (ELA) for a securities trading system (ATS). The First Department noted that it was proper to consider the limitation of liability, an affirmative defense, on a motion to dismiss:

It was not error for Supreme Court to rule on the enforceabilty of the liability limitation provision, although it is an affirmative defense, on a motion to dismiss. In the ordinary course of deciding motions, courts consider whether documentary evidence establishes an asserted defense, in this case a defense concerning the limitation of liability provisions in the parties’ contracts … .

New York courts routinely enforce such liability-limitation provisions, especially when negotiated by sophisticated parties. The Court of Appeals has recognized that “[a] limitation on liability provision . . . represents the parties’ Agreement on the allocation of the risk of economic loss in the event that the contemplated transaction is not fully executed, which the courts should honor.* * * [The parties] may later regret their assumption of the risks of non-performance in this manner, but the courts let them lie on the bed they made”… . However, such clauses are unenforceable when, “[i]n contravention of acceptable notions of morality, the misconduct for which it would grant immunity smacks of intentional wrongdoing. This can be explicit, as when it is fraudulent, malicious or prompted by the sinister intention of one acting in bad faith. Or, when, as in gross negligence, it betokens a reckless indifference to the rights of others, it may be implicit” … . Electron Trading, LLC v Morgan Stanley & Co. LLC, 2018 NY Slip Op 00380, First Dept 1-15-18

CONTRACT LAW (LIMITED LIABILITY PROVISION PRECLUDED RECOVERY FOR BREACH OF CONTRACT FOR ANY AMOUNT OVER THE LIMITATION, ALTHOUGH THE LIMITATION OF LIABILITY WAS AN AFFIRMATIVE DEFENSE, IT WAS PROPERLY CONSIDERED ON A MOTION TO DISMISS (FIRST DEPT))/CIVIL PROCEDURE (MOTION TO DISMISS, AFFIRMATIVE DEFENSE, (LIMITED LIABILITY PROVISION PRECLUDED RECOVERY FOR BREACH OF CONTRACT FOR ANY AMOUNT OVER THE LIMITATION, ALTHOUGH THE LIMITATION OF LIABILITY WAS AN AFFIRMATIVE DEFENSE, IT WAS PROPERLY CONSIDERED ON A MOTION TO DISMISS (FIRST DEPT))/AFFIRMATIVE DEFENSE (CIVIL PROCEDURE, MOTION TO DISMISS, LIMITED LIABILITY PROVISION PRECLUDED RECOVERY FOR BREACH OF CONTRACT FOR ANY AMOUNT OVER THE LIMITATION, ALTHOUGH THE LIMITATION OF LIABILITY WAS AN AFFIRMATIVE DEFENSE, IT WAS PROPERLY CONSIDERED ON A MOTION TO DISMISS (FIRST DEPT))

January 15, 2018

Contract Law

THE ABSENCE OF A PRICE FOR INTERNET SERVICE IN THE CONTRACT FOR THE PURCHASE OF SATELLITE TELEVISION SERVICE RENDERED THE CONTRACT AN UNENFORCEABLE AGREEMENT TO AGREE (SECOND DEPT).

The Second Department determined defendant's motion for summary judgment in this contract action was properly granted. The agreement for the purchase of satellite television equipment was silent about fees for Internet service, which constituted a material term. Therefore the agreement was merely an unenforceable agreement to agree:

“To create a binding contract, there must be a manifestation of mutual assent sufficiently definite to assure that the parties are truly in agreement with respect to all material terms” … . “[A] court cannot enforce a contract unless it is able to determine what in fact the parties have agreed to” … . Accordingly, “[i]f an agreement is not reasonably certain in its material terms, there can be no legally enforceable contract” … . “While there are some instances where a party may agree to be bound to a contract even where a material term is left open . . . there must be sufficient evidence that both parties intended that arrangement” … . “[A] mere agreement to agree, in which a material term is left for future negotiations, is unenforceable” … , unless “a methodology for determining the material terms can be found within the four corners of the agreement or the agreement refers to an objective extrinsic event, condition, or standard by which the material terms may be determined” … .

Here, the defendant demonstrated its prima facie entitlement to judgment as a matter of law dismissing the complaint by submitting evidence establishing that the contract lacked a material term regarding the price or fees to be paid to the plaintiff for Internet-related service, and therefore constituted an unenforceable agreement to agree … . Total Telcom Group Corp. v Kendal on Hudson, 2018 NY Slip Op 00189, Second Dept 1-10-18

CONTRACT LAW (THE ABSENCE OF A PRICE FOR INTERNET SERVICE IN THE CONTRACT FOR THE PURCHASE OF SATELLITE TELEVISION SERVICE RENDERED THE CONTRACT AN UNENFORCEABLE AGREEMENT TO AGREE (SECOND DEPT))/AGREEMENT TO AGREE (THE ABSENCE OF A PRICE FOR INTERNET SERVICE IN THE CONTRACT FOR THE PURCHASE OF SATELLITE TELEVISION SERVICE RENDERED THE CONTRACT AN UNENFORCEABLE AGREEMENT TO AGREE (SECOND DEPT))/MATERIAL TERM (CONTRACT LAW, THE ABSENCE OF A PRICE FOR INTERNET SERVICE IN THE CONTRACT FOR THE PURCHASE OF SATELLITE TELEVISION SERVICE RENDERED THE CONTRACT AN UNENFORCEABLE AGREEMENT TO AGREE (SECOND DEPT))/PRICE (CONTRACT LAW, MATERIAL TERM, THE ABSENCE OF A PRICE FOR INTERNET SERVICE IN THE CONTRACT FOR THE PURCHASE OF SATELLITE TELEVISION SERVICE RENDERED THE CONTRACT AN UNENFORCEABLE AGREEMENT TO AGREE (SECOND DEPT))

January 10, 2018

Contract Law, Negligence

SNOW REMOVAL CONTRACTORS NOT LIABLE FOR PARKING LOT SLIP AND FALL, ESPINAL EXCEPTIONS DID NOT APPLY (THIRD DEPT).

The Third Department determined the defendants who had contracted with the property owner/manager to remove snow from the parking lot where plaintiff slipped and fell on ice were not liable to plaintiff under an Espinal exception:

It is well-settled that a party that contracts with a property owner to provide snow and ice removal services cannot be liable to a third party who is injured on the property unless “(1) . . . the contracting party, in failing to exercise reasonable care in the performance of his [or her] duties launche[d] a force or instrument of harm; (2) . . . the plaintiff detrimentally relie[d] on the continued performance of the contracting party's duties; [or] (3) . . . the contracting party has entirely displaced the other party's duty to maintain the premises safely” (Espinal v Melville Snow Contrs., 98 NY2d 136, 140 [2002] … ).

… [W]hile [the snow removal contractor] retained some independent authority, we cannot conclude that the agreement “displaced entirely” [the property owner's] duty to maintain the property … . …

[The defendants' meteorologist's] affidavit fails to raise a material question of fact, inasmuch as the evidence demonstrates only that defendants may have failed to clear all of the ice and snow, a fact that does not constitute the affirmative creation of a dangerous condition … . Hutchings v Garrison Lifestyle Pierce Hill, LLC, 2018 NY Slip Op 00057, Third Dept 1-4-18

NEGLIGENCE (SNOW REMOVAL CONTRACTORS NOT LIABLE FOR PARKING LOT SLIP AND FALL, ESPINAL EXCEPTIONS DID NOT APPLY (THIRD DEPT))/SLIP AND FALL (SNOW REMOVAL CONTRACTORS NOT LIABLE FOR PARKING LOT SLIP AND FALL, ESPINAL EXCEPTIONS DID NOT APPLY (THIRD DEPT))/CONTRACT LAW (NEGLIGENCE, SNOW REMOVAL CONTRACTORS NOT LIABLE FOR PARKING LOT SLIP AND FALL, ESPINAL EXCEPTIONS DID NOT APPLY (THIRD DEPT))/ESPINAL EXCEPTIONS (NEGLIGENCE, CONTRACT LAW, SNOW REMOVAL CONTRACTORS NOT LIABLE FOR PARKING LOT SLIP AND FALL, ESPINAL EXCEPTIONS DID NOT APPLY (THIRD DEPT))/SNOW REMOVAL CONTRACTORS (NEGLIGENCE, SLIP AND FALL, SNOW REMOVAL CONTRACTORS NOT LIABLE FOR PARKING LOT SLIP AND FALL, ESPINAL EXCEPTIONS DID NOT APPLY (THIRD DEPT))

January 4, 2018

Contract Law, Negligence

QUESTIONS OF FACT WHETHER THE OWNER OF A DOMESTIC VIOLENCE SHELTER AND THE SECURITY COMPANY HIRED BY THE SHELTER WERE LIABLE FOR THE SHOOTING OF A CHILD JUST OUTSIDE THE GATE OF THE SHELTER, THE CHILD WAS AN INTENDED BENEFICIARY OF THE CONTRACT BETWEEN THE SHELTER AND THE SECURITY COMPANY (FIRST DEPT).

The First Department, in a full-fledged opinion by Justice Acosta, affirmed the denial of the defendants' motions for summary judgment in this third party assault case. The defendants are the owner-operators of a domestic violence shelter and the security company hired by the shelter. Plaintiff child, CB, was shot while CB and his father, Bobby B, were waiting for CB's mother to come down to the gate to accompany CB back to where she and CB were residing in the shelter. Bobby B had asked the guards to let the child in because Bobby B had been followed by several men. The child was not let in. The guards called CB's mother a couple of times telling her the child was waiting. One of the men who followed Bobby B approached with a gun and demanded Bobby B's jacket. In a struggle the gun discharged striking and paralyzing CB:

With respect to the common-law duty, landowners have “a duty to exercise reasonable care in maintaining [their] . . . property in a reasonably safe condition under the circumstances”…, which includes taking minimal safety precautions to protect against reasonably foreseeable criminal acts of third persons … .

We reject defendants' contention that they had no common-law duty to CB because the shooting took place outside the building, i.e., because CB was on the street side of the gate. Plaintiffs raised issues of fact as to whether the security booth, gate, and recessed area that CB was standing in were part of the shelter property and not the public sidewalk. However, even if CB was not standing on shelter property, it cannot be said that under any circumstance [the owner] owed no duty to him. …

Although the contract [with defendant security company] clearly provides that CB is an intended third-party beneficiary, there are issues of fact as to the benefits that CB is entitled to under the contract. It should be noted, however, that allowing a child in danger to enter the shelter does not appear to be in derogation of any rules prohibiting unarmed guards from intervening in an altercation. CB v Howard Sec., 2018 NY Slip Op 00087, First Dept 1-4-18

NEGLIGENCE (QUESTIONS OF FACT WHETHER THE OWNER OF A DOMESTIC VIOLENCE SHELTER AND THE SECURITY COMPANY HIRED BY THE SHELTER WERE LIABLE FOR THE SHOOTING OF A CHILD JUST OUTSIDE THE GATE OF THE SHELTER, THE CHILD WAS AN INTENDED BENEFICIARY OF THE CONTRACT BETWEEN THE SHELTER AND THE SECURITY COMPANY (FIRST DEPT))/ASSAULT BY THIRD PARTY (NEGLIGENCE, QUESTIONS OF FACT WHETHER THE OWNER OF A DOMESTIC VIOLENCE SHELTER AND THE SECURITY COMPANY HIRED BY THE SHELTER WERE LIABLE FOR THE SHOOTING OF A CHILD JUST OUTSIDE THE GATE OF THE SHELTER, THE CHILD WAS AN INTENDED BENEFICIARY OF THE CONTRACT BETWEEN THE SHELTER AND THE SECURITY COMPANY (FIRST DEPT))/CONTRACT LAW (THIRD-PARTY ASSAULT, SECURITY COMPANY, QUESTIONS OF FACT WHETHER THE OWNER OF A DOMESTIC VIOLENCE SHELTER AND THE SECURITY COMPANY HIRED BY THE SHELTER WERE LIABLE FOR THE SHOOTING OF A CHILD JUST OUTSIDE THE GATE OF THE SHELTER, THE CHILD WAS AN INTENDED BENEFICIARY OF THE CONTRACT BETWEEN THE SHELTER AND THE SECURITY COMPANY (FIRST DEPT))/THIRD PARTY BENEFICIARY (CONTRACT LAW, SECURITY COMPANY, QUESTIONS OF FACT WHETHER THE OWNER OF A DOMESTIC VIOLENCE SHELTER AND THE SECURITY COMPANY HIRED BY THE SHELTER WERE LIABLE FOR THE SHOOTING OF A CHILD JUST OUTSIDE THE GATE OF THE SHELTER, THE CHILD WAS AN INTENDED BENEFICIARY OF THE CONTRACT BETWEEN THE SHELTER AND THE SECURITY COMPANY (FIRST DEPT))

January 4, 2018

Contract Law

IN A DESIGN-BUILD TURNKEY PROJECT, A PROPERTY OWNER IS NOT A THIRD PARTY BENEFICIARY OF CONTRACTS ENTERED INTO BY THE TURNKEY BUILDER IN CHARGE OF THE PROJECT (THIRD DEPT).

The Third Department explained the concept of a design-build “turnkey” project, noting that the property owner is generally not a third-party beneficiary of the contracts entered into by the entity in charge of the design-build “turnkey” project (here RBG):

It is undisputed that neither plaintiff entered into a contract with RZA nor RDI. Rather, RBG entered into contracts with each of those entities, as would be expected in a turnkey project. “In turnkey or design-build construction projects, an owner contracts with one entity to both design and build the project and the turnkey builder is responsible for every phase of the construction from final design through subcontracting, construction, finishing, and testing. The design-builder generally cannot shift liability and is the single point of responsibility under a design-build contract, because” the design-builder is responsible for all phases of construction, including “the responsibility for holding the contracts with its trade contractors” … .

Generally, a party may not assert a cause of action for breach of contract against a person or entity with whom it is not in privity … . Without a contractual relationship and the resulting privity, plaintiffs could proceed against RZA or RDI only if plaintiffs were third-party beneficiaries of RBG’s contract with those entities or had the functional equivalent of privity… .”[O]rdinarily, construction contracts are not construed as conferring third-party beneficiary enforcement rights” … . Luckow v RBG Design-Build, Inc., 2017 NY Slip Op 09221, Third Dept 12-28-17

CONTRACT LAW (CONSTRUCTION, DESIGN-BUILD, TURNKEY, IN A DESIGN-BUILD TURNKEY PROJECT, A PROPERTY OWNER IS NOT A THIRD PARTY BENEFICIARY OF CONTRACTS ENTERED INTO BY THE TURNKEY BUILDER IN CHARGE OF THE PROJECT (THIRD DEPT))/THIRD PARTY BENEFICIARY (CONTRACT LAW, CONSTRUCTION, DESIGN-BUILD, TURNKEY, IN A DESIGN-BUILD TURNKEY PROJECT, A PROPERTY OWNER IS NOT A THIRD PARTY BENEFICIARY OF CONTRACTS ENTERED INTO BY THE TURNKEY BUILDER IN CHARGE OF THE PROJECT (THIRD DEPT))/CONSTRUCTION (CONTRACT LAW, DESIGN-BUILD, TURNKEY, IN A DESIGN-BUILD TURNKEY PROJECT, A PROPERTY OWNER IS NOT A THIRD PARTY BENEFICIARY OF CONTRACTS ENTERED INTO BY THE TURNKEY BUILDER IN CHARGE OF THE PROJECT (THIRD DEPT))/DESIGN-BUILD (CONTRACT LAW, CONSTRUCTION, DESIGN-BUILD, TURNKEY, IN A DESIGN-BUILD TURNKEY PROJECT, A PROPERTY OWNER IS NOT A THIRD PARTY BENEFICIARY OF CONTRACTS ENTERED INTO BY THE TURNKEY BUILDER IN CHARGE OF THE PROJECT (THIRD DEPT))/TURNKEY PROJECT (CONTRACT LAW, CONSTRUCTION, DESIGN-BUILD, TURNKEY, IN A DESIGN-BUILD TURNKEY PROJECT, A PROPERTY OWNER IS NOT A THIRD PARTY BENEFICIARY OF CONTRACTS ENTERED INTO BY THE TURNKEY BUILDER IN CHARGE OF THE PROJECT (THIRD DEPT))

December 28, 2017

Contract Law, Employment Law, Municipal Law

SUPREME COURT DOES NOT HAVE THE POWER TO CONSIDER THE MERITS OF AN ARBITRATION AWARD, AWARD CONFIRMED (FOURTH DEPT).

The Fourth Department, reversing Supreme Court, determined the arbitrator had not exceeded her authority in interpreting the collective bargaining agreement (CBA) to require full medical coverage for retiring firefighters. The Fourth Department explained the limited review powers of a court with respect to arbitration awards:

“It is well settled that judicial review of arbitration awards is extremely limited”… . The court must vacate an arbitration award where the arbitrator exceeds a limitation on his or her power as set forth in the CBA … . The court, however, lacks the authority to “examine the merits of an arbitration award and substitute its judgment for that of the arbitrator simply because it believes its interpretation would be the better one”… .

Here, the arbitrator merely interpreted and applied the provisions of the CBA, as she had the authority to do. The court is powerless to set aside that interpretation merely because the court disagrees with it, and we may not countenance such an action. In any event, we conclude that the plain language of the CBA supports the arbitrator’s reasoning. Matter of Lackawanna Professional Fire Fighters Assn., Local 3166, IAFF, AFL-CIO (City of Lackawanna), 2017 NY Slip Op 08994, Fourth Dept 12-22-17

ARBITRATION (SUPREME COURT DOES NOT HAVE THE POWER TO CONSIDER THE MERITS OF AN ARBITRATION AWARD, AWARD CONFIRMED (FOURTH DEPT))/EMPLOYMENT LAW (COLLECTIVE BARGAINING AGREEMENT, (SUPREME COURT DOES NOT HAVE THE POWER TO CONSIDER THE MERITS OF AN ARBITRATION AWARD, AWARD CONFIRMED (FOURTH DEPT))/MUNICIPAL LAW (COLLECTIVE BARGAINING AGREEMENT, (SUPREME COURT DOES NOT HAVE THE POWER TO CONSIDER THE MERITS OF AN ARBITRATION AWARD, AWARD CONFIRMED (FOURTH DEPT))/CONTRACT LAW (COLLECTIVE BARGAINING AGREEMENT, SUPREME COURT DOES NOT HAVE THE POWER TO CONSIDER THE MERITS OF AN ARBITRATION AWARD, AWARD CONFIRMED (FOURTH DEPT))

December 22, 2017

Contract Law, Real Estate

DEFENDANTS HAD NOT CLEARED UP LIENS ON THE PROPERTY ON LAW DAY, SO THEY WERE NOT READY TO CLOSE AND WERE NOT ENTITLED TO KEEP PLAINTIFFS’ DOWN PAYMENT, WHETHER DEFENDANTS HAD A DUTY TO SPEAK WHEN PLAINTIFFS ASKED FOR AN ADJOURNMENT OF THE CLOSING CANNOT BE DETERMINED ON A MOTION TO DISMISS (SECOND DEPT).

The Second Department, reversing Supreme Court, determined defendants-sellers, in the context of a motion to dismiss the complaint, were not entitled to keep the down payment based upon plaintiffs’ failure to attend the closing pursuant to a time of the essence demand. Defendants did not demonstrate they were able to close because there were outstanding liens on the property. In addition, there was a question whether defendants had a duty to speak when plaintiffs requested an adjournment of the closing, an issue that cannot be resolved in a motion to dismiss:

Here, the mortgage indebtedness on the subject property amounted to $11,265,000, nearly three times the portion of the purchase price due at the closing. The defendants only satisfied $8,850,000 of that indebtedness in October 2014, about six months after the law day. Further, in order to close, the defendants were required to clear other liens of up to $25,000, and deliver their corporation formation documents to the title company, which allegedly was not done.

On the question of specific performance, a purchaser seeking specific performance of a real estate contract must demonstrate that he or she was ready, willing, and able to perform on the contract, regardless of any anticipatory breach by the seller … . An anticipatory breach of the contract excuses the purchaser from tendering performance, but does not excuse the purchaser from the requirement that it be ready, willing, and able to perform … .

The defendants were not required to consent to the adjournment of a time-of-the-essence closing … . However, the question here is whether the defendants had any obligation to respond. A duty to speak arises where there is a duty of fair dealing between the parties pursuant to a contractual relationship, and failure to speak is inconsistent with “honest dealings” and misleads another… .. Such a duty may be created by a course of conduct … . Here, the plaintiff was a tenant of the defendants; therefore, there was a prior course of conduct not explored on this record, as well as opportunities to speak and actual communication between the parties with respect to this transaction one day prior to the law day. 533 Park Ave. Realty, LLC v Park Ave. Bldg. & Roofing Supplies, LLC, 2017 NY Slip Op 08802, Second Dept 12-20-17

REAL ESTATE (TIME OF THE ESSENCE, DEFENDANTS HAD NOT CLEARED UP LIENS ON THE PROPERTY ON LAW DAY, SO THEY WERE NOT READY TO CLOSE AND WERE NOT ENTITLED TO KEEP PLAINTIFFS’ DOWN PAYMENT, WHETHER DEFENDANTS HAD A DUTY TO SPEAK WHEN PLAINTIFFS ASKED FOR AN ADJOURNMENT OF THE CLOSING CANNOT BE DETERMINED ON A MOTION TO DISMISS (SECOND DEPT))/CONTRACT LAW (REAL ESTATE, TIME OF THE ESSENCE, DEFENDANTS HAD NOT CLEARED UP LIENS ON THE PROPERTY ON LAW DAY, SO THEY WERE NOT READY TO CLOSE AND WERE NOT ENTITLED TO KEEP PLAINTIFFS’ DOWN PAYMENT, WHETHER DEFENDANTS HAD A DUTY TO SPEAK WHEN PLAINTIFFS ASKED FOR AN ADJOURNMENT OF THE CLOSING CANNOT BE DETERMINED ON A MOTION TO DISMISS (SECOND DEPT))/TIME OF THE ESSENCE (REAL ESTATE, DEFENDANTS HAD NOT CLEARED UP LIENS ON THE PROPERTY ON LAW DAY, SO THEY WERE NOT READY TO CLOSE AND WERE NOT ENTITLED TO KEEP PLAINTIFFS’ DOWN PAYMENT, WHETHER DEFENDANTS HAD A DUTY TO SPEAK WHEN PLAINTIFFS ASKED FOR AN ADJOURNMENT OF THE CLOSING CANNOT BE DETERMINED ON A MOTION TO DISMISS (SECOND DEPT))/DUTY TO SPEAK (REAL ESTATE, TIME OF THE ESSENCE, REQUEST FOR ADJOURNMENT, DEFENDANTS HAD NOT CLEARED UP LIENS ON THE PROPERTY ON LAW DAY, SO THEY WERE NOT READY TO CLOSE AND WERE NOT ENTITLED TO KEEP PLAINTIFFS’ DOWN PAYMENT, WHETHER DEFENDANTS HAD A DUTY TO SPEAK WHEN PLAINTIFFS ASKED FOR AN ADJOURNMENT OF THE CLOSING CANNOT BE DETERMINED ON A MOTION TO DISMISS (SECOND DEPT))/SPECIFIC PERFORMANCE (REAL ESTATE, TIME OF THE ESSENCE, DEFENDANTS HAD NOT CLEARED UP LIENS ON THE PROPERTY ON LAW DAY, SO THEY WERE NOT READY TO CLOSE AND WERE NOT ENTITLED TO KEEP PLAINTIFFS’ DOWN PAYMENT, WHETHER DEFENDANTS HAD A DUTY TO SPEAK WHEN PLAINTIFFS ASKED FOR AN ADJOURNMENT OF THE CLOSING CANNOT BE DETERMINED ON A MOTION TO DISMISS (SECOND DEPT)

December 20, 2017

Consumer Law, Contract Law, Insurance Law

ALLEGATION THAT DEFENDANT INSURER PRESSURED PHYSICIANS TO FIND NO CAUSAL CONNECTION BETWEEN THE ACCIDENT AND INJURY IN NO-FAULT CASES STATED A CAUSE OF ACTION UNDER THE GENERAL BUSINESS LAW, EMOTIONAL DISTRESS IS NOT AN ELEMENT OF DAMAGES FOR BREACH OF CONTRACT, THE ALLEGATIONS DID NOT SUPPORT A CLAIM FOR PUNITIVE DAMAGES (THIRD DEPT).

The Third Department, partially reversing Supreme Court, over a two-justice concurrence, determined plaintiff’s General Business Law (deceptive business practices) cause of action should not have been dismissed for failure to state a cause of action. The plaintiff alleged the defendant insurance company pressured physicians to find no causal connection between the injury and the accident (no-fault claims). The Third Department further found that the claims for consequential damages for emotional distress and punitive damages, stemming from breach of contract, were properly dismissed. The concurring justices argued that the emotional distress was a legitimate damages-claim for breach of contract:

… [P]laintiff alleged that defendant engaged in a consumer-oriented pattern and practice aimed at the public at large of wrongfully denying claims for no-fault benefits by pressuring the physicians it hired to perform IMEs to provide medical reports that would support the denial of benefits and, further, that she suffered injury as a result of that practice. Such allegations are sufficient to plead a cause of action pursuant to General Business Law § 349 “‘at this early prediscovery stage'”… . …

It has long been the rule that “absent a duty upon which liability can be based, there is no right of recovery for mental distress resulting from the breach of a contract-related duty”… .. As Supreme Court noted, plaintiff failed to satisfy this standard because she did not allege the existence of any relationship or duty between the parties separate from the contractual obligation. …

Plaintiff’s claim for punitive damages was likewise properly dismissed. Punitive damages may be recovered for breach of contract “only where a defendant’s conduct was (1) actionable as an independent tort, (2) egregious, (3) directed toward the plaintiff and (4) part of a pattern directed at the public” … . Plaintiff’s allegations that defendant engaged in unfair claim settlement practices do not allege a tort independent of the parties’ contract sufficient to state a claim for recovery of punitive damages … . Brown v Government Employees Ins. Co., 2017 NY Slip Op 08774, Third Dept 12-14-17

CONTRACT LAW (INSURANCE LAW, ALLEGATION THAT DEFENDANT INSURER PRESSURED PHYSICIANS TO FIND NO CAUSAL CONNECTION BETWEEN THE ACCIDENT AND INJURY IN NO-FAULT CASES STATED A CAUSE OF ACTION UNDER THE GENERAL BUSINESS LAW, EMOTIONAL DISTRESS IS NOT AN ELEMENT OF DAMAGES FOR BREACH OF CONTRACT, THE ALLEGATIONS DID NOT SUPPORT A CLAIM FOR PUNITIVE DAMAGES (THIRD DEPT))/INSURANCE LAW ( ALLEGATION THAT DEFENDANT INSURER PRESSURED PHYSICIANS TO FIND NO CAUSAL CONNECTION BETWEEN THE ACCIDENT AND INJURY IN NO-FAULT CASES STATED A CAUSE OF ACTION UNDER THE GENERAL BUSINESS LAW, EMOTIONAL DISTRESS IS NOT AN ELEMENT OF DAMAGES FOR BREACH OF CONTRACT, THE ALLEGATIONS DID NOT SUPPORT A CLAIM FOR PUNITIVE DAMAGES (THIRD DEPT))/GENERAL BUSINESS LAW (ALLEGATION THAT DEFENDANT INSURER PRESSURED PHYSICIANS TO FIND NO CAUSAL CONNECTION BETWEEN THE ACCIDENT AND INJURY IN NO-FAULT CASES STATED A CAUSE OF ACTION UNDER THE GENERAL BUSINESS LAW, EMOTIONAL DISTRESS IS NOT AN ELEMENT OF DAMAGES FOR BREACH OF CONTRACT, THE ALLEGATIONS DID NOT SUPPORT A CLAIM FOR PUNITIVE DAMAGES (THIRD DEPT))/DECEPTIVE BUSINESS PRACTICES (INSURANCE LAW, ALLEGATION THAT DEFENDANT INSURER PRESSURED PHYSICIANS TO FIND NO CAUSAL CONNECTION BETWEEN THE ACCIDENT AND INJURY IN NO-FAULT CASES STATED A CAUSE OF ACTION UNDER THE GENERAL BUSINESS LAW, EMOTIONAL DISTRESS IS NOT AN ELEMENT OF DAMAGES FOR BREACH OF CONTRACT, THE ALLEGATIONS DID NOT SUPPORT A CLAIM FOR PUNITIVE DAMAGES (THIRD DEPT))/EMOTIONAL DISTRESS (BREACH OF CONTRACT, DAMAGES, ALLEGATION THAT DEFENDANT INSURER PRESSURED PHYSICIANS TO FIND NO CAUSAL CONNECTION BETWEEN THE ACCIDENT AND INJURY IN NO-FAULT CASES STATED A CAUSE OF ACTION UNDER THE GENERAL BUSINESS LAW, EMOTIONAL DISTRESS IS NOT AN ELEMENT OF DAMAGES FOR BREACH OF CONTRACT, THE ALLEGATIONS DID NOT SUPPORT A CLAIM FOR PUNITIVE DAMAGES (THIRD DEPT))/PUNITIVE DAMAGES (INSURANCE LAW, ALLEGATION THAT DEFENDANT INSURER PRESSURED PHYSICIANS TO FIND NO CAUSAL CONNECTION BETWEEN THE ACCIDENT AND INJURY IN NO-FAULT CASES STATED A CAUSE OF ACTION UNDER THE GENERAL BUSINESS LAW, EMOTIONAL DISTRESS IS NOT AN ELEMENT OF DAMAGES FOR BREACH OF CONTRACT, THE ALLEGATIONS DID NOT SUPPORT A CLAIM FOR PUNITIVE DAMAGES (THIRD DEPT))/DAMAGES (CONTRACT LAW, ALLEGATION THAT DEFENDANT INSURER PRESSURED PHYSICIANS TO FIND NO CAUSAL CONNECTION BETWEEN THE ACCIDENT AND INJURY IN NO-FAULT CASES STATED A CAUSE OF ACTION UNDER THE GENERAL BUSINESS LAW, EMOTIONAL DISTRESS IS NOT AN ELEMENT OF DAMAGES FOR BREACH OF CONTRACT, THE ALLEGATIONS DID NOT SUPPORT A CLAIM FOR PUNITIVE DAMAGES (THIRD DEPT))

December 14, 2017

Contract Law, Securities

UNDER THE TERMS OF THE RELEVANT CONTRACTS, WHICH MUST BE INTERPRETED TOGETHER TO GIVE EFFECT TO THEIR TERMS, PLAINTIFF DID NOT HAVE STANDING TO SUE IN ONE ASPECT OF THIS ACTION STEMMING FROM THE SALE OF ALLEGEDLY DEFECTIVE RESIDENTIAL MORTGAGE-BACKED SECURITIES (FIRST DEPT).

The First Department, in a full-fledged opinion by Justice Moskowitz, modifying Supreme Court, in actions stemming from the sale of allegedly defective residential mortgage-backed securities, determined that, according to the terms of the relevant contracts, plaintiff did not have standing to sue in one aspect of the action because a critical assignment had not been accomplished in accordance with the contract. The opinion is fact-specific and too complex to fairly summarize here. With respect to Supreme Court’s failure to interpret the two relevant agreements such that both are given effect, the court explained:

In interpreting a contract a court should favor an interpretation that gives effect to all the terms of an agreement rather than ignoring terms or interpreting them unreasonably … . Indeed, “where two seemingly conflicting contract provisions reasonably can be reconciled, a court is required to do so and to give both effect” … . We have also found that “agreements executed at substantially the same time and related to the same subject matter are regarded as contemporaneous writings and must be read together as one” … . Thus, in failing to harmonize the … agreement[s], the motion court essentially read … terms out of existence. U.S. Bank N.A. v GreenPoint Mtge. Funding, Inc., 2017 NY Slip Op 08644, First Dept 12-12-17

SECURITIES (RESIDENTIAL MORTGAGE-BACKED SECURITIES, CONTRACT LAW, UNDER THE TERMS OF THE RELEVANT CONTRACTS, WHICH MUST BE INTERPRETED TOGETHER TO GIVE EFFECT TO THEIR TERMS, PLAINTIFF DID NOT HAVE STANDING TO SUE IN ONE ASPECT OF THIS ACTION STEMMING FROM THE SALE OF ALLEGEDLY DEFECTIVE RESIDENTIAL MORTGAGE-BACKED SECURITIES (FIRST DEPT))/CONTRACT LAW (RESIDENTIAL MORTGAGE-BACKED SECURITIES, CONTRACT LAW, UNDER THE TERMS OF THE RELEVANT CONTRACTS, WHICH MUST BE INTERPRETED TOGETHER TO GIVE EFFECT TO THEIR TERMS, PLAINTIFF DID NOT HAVE STANDING TO SUE IN ONE ASPECT OF THIS ACTION STEMMING FROM THE SALE OF ALLEGEDLY DEFECTIVE RESIDENTIAL MORTGAGE-BACKED SECURITIES (FIRST DEPT))/RESIDENTIAL MORTGAGE-BACKED SECURITIES (CONTRACT LAW, UNDER THE TERMS OF THE RELEVANT CONTRACTS, WHICH MUST BE INTERPRETED TOGETHER TO GIVE EFFECT TO THEIR TERMS, PLAINTIFF DID NOT HAVE STANDING TO SUE IN ONE ASPECT OF THIS ACTION STEMMING FROM THE SALE OF ALLEGEDLY DEFECTIVE RESIDENTIAL MORTGAGE-BACKED SECURITIES (FIRST DEPT))

December 12, 2017

Contract Law, Securities

THE RESIDENTIAL MORTGAGE-BACKED SECURITIES CONTRACTS PROVIDED FOR THE SOLE REMEDY OF CURE AND REPURCHASE, PLAINTIFF TRUSTEE’S CAUSES OF ACTION FOR GENERAL CONTRACT DAMAGES DISMISSED (CT APP).

The Court of Appeals, in a full-fledged opinion by Judge Stein, over an extensive two-judge dissent, determined plaintiff trustee (HSBC) was limited to the cure and replurchase remedy described in the contracts for these residential mortgage-backed securities, and could not sue for general contract damages:

In these appeals stemming from four residential mortgage-backed securities (RMBS) transactions, we are asked to decide whether claims for general contract damages based on alleged breaches of a “no untrue statement” provision can withstand a motion to dismiss based on a contract provision mandating cure or repurchase as the sole remedy for breaches of mortgage loan-specific representations and warranties. We hold that, inasmuch as the claims for general contract damages at issue here are grounded in alleged breaches of the mortgage loan-specific representations and warranties to which the limited remedy fashioned by the sophisticated parties applies, plaintiffs’ claims for general contract damages should be dismissed. * * *

.. .[I]t is readily apparent from the face of the complaints that the alleged breaches of the No Untrue Statement Provision are, in fact, based upon alleged breaches of the Mortgage Representations. … [T]he sole remedy for breaches of the Mortgage Representations is cure or repurchase. HSBC cannot “subvert this ‘exclusive remedies’ limitation” of liability by simply re-characterizing its claims … . Rather, “[r]eading the [contracts] as a harmonious and integrated whole” … and honoring “the exclusive remedy that the[se] [sophisticated] parties fashioned” … , we conclude that the Sole Remedy Provision applies, precluding HSBC from seeking general contract damages for the particular claims challenged on this appeal. Nomura Home Equity Loan, Inc., Series 2006-FM2 v Nomura Credit & Capital, Inc., 2017 NY Slip Op 08622, CtApp 12-12-17

SECURITIES (THE RESIDENTIAL MORTGAGE-BACKED SECURITIES CONTRACTS PROVIDED FOR THE SOLE REMEDY OF CURE AND REPURCHASE, PLAINTIFF TRUSTEE’S CAUSES OF ACTION FOR GENERAL CONTRACT DAMAGES DISMISSED (CT APP))/CONTRACT LAW (THE RESIDENTIAL MORTGAGE-BACKED SECURITIES CONTRACTS PROVIDED FOR THE SOLE REMEDY OF CURE AND REPURCHASE, PLAINTIFF TRUSTEE’S CAUSES OF ACTION FOR GENERAL CONTRACT DAMAGES DISMISSED (CT APP))/RESIDENTIAL MORTGAGE-BACKED SECURITIES (THE RESIDENTIAL MORTGAGE-BACKED SECURITIES CONTRACTS PROVIDED FOR THE SOLE REMEDY OF CURE AND REPURCHASE, PLAINTIFF TRUSTEE’S CAUSES OF ACTION FOR GENERAL CONTRACT DAMAGES DISMISSED (CT APP))/SOLE REMEDY PROVISIONS (THE RESIDENTIAL MORTGAGE-BACKED SECURITIES CONTRACTS PROVIDED FOR THE SOLE REMEDY OF CURE AND REPURCHASE, PLAINTIFF TRUSTEE’S CAUSES OF ACTION FOR GENERAL CONTRACT DAMAGES DISMISSED (CT APP))