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THE TERMS OF THE SETTLEMENT AGREEMENT DID NOT ALLOW THE COURT TO ALLOCATE ALL THE PROCEEDS OF AN INSURANCE POLICY TO THE WORKERS’ COMPENSATION BOARD, RESPONDENT, A FORMER MEMBER OF AN INSOLVENT WORKERS’ COMPENSATION TRUST WHICH HAD SETTLED WITH THE BOARD, WAS ENTITLED TO SOME OF THE PROCEEDS AND AN ACCOUNTING PURSUANT TO CPLR 7702 (THIRD DEPT).

The Third Department, reversing Supreme Court, determined that Supreme Court should not have allocated all the proceeds of an insurance policy to the Workers’ Compensation Board and should have ordered the Board to file an accounting pursuant to CPLR 7702. The Board is seeking compensation from members of a workers’ compensation trust which was found to be insolvent. Respondent was a member of the trust and settled with the Board, paying over $1,000,000. Subsequently, in accordance with the terms of the settlement agreement, both the Board and the respondent separately sought to recover funds from an insurance policy. Supreme Court ordered all the recovered proceeds to be paid to the Board and did not order the filing of a verified accounting. The Third Department found that respondent, under the terms of the settlement agreement with the Board, was entitled to some of the funds and an accounting should be filed by the Board. The matter was remitted:

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The provision of the settlement agreement governing allocation of damages obtained from third parties by petitioner is unambiguously applicable by its terms only to the share of the jointly-recovered settlement proceeds that are ultimately allocated to petitioner. This interpretation gives full meaning and effect to the material terms at issue, including respondent’s reservation of its claims against the parties formerly responsible for administration of the trust, the agreement that allocation of the jointly-recovered settlement proceeds would be made in the instant CPLR article 77 proceeding and the provision precluding respondent from using activities undertaken after May 31, 2012 to justify a claim to allocation of the settlement proceeds. Petitioner’s contrary view — that it is entitled to all settlement proceeds because they were insufficient to satisfy the trust’s outstanding obligations and, therefore, that no surplus existed for allocation to former trust members, including respondent — is counter to the plain language of the settlement agreement and would impermissibly render meaningless the express reservation to respondent of all of its claims against former trustees, administrators and professionals. For petitioner’s argument — that all damages recovered from any third party from any source must first be used to satisfy the trust’s outstanding obligations — to prevail, the settling members, like respondent, would have had to have waived their claims against such third parties or subordinated their independent claims to petitioner’s claims. The settlement agreement contains no such terms. Thus, the matter must be remitted for allocation of the jointly-recovered settlement proceeds between petitioner and respondent and, as to any such proceeds allocated to petitioner, a determination of whether there are surplus funds remaining for distribution among the settling former trust members, including respondent. Matter of New York State Workers’ Compensation Bd. v Murray Bresky Consultants, Ltd, 2017 NY Slip Op 08244, Third Dept 11-22-17

 

WORKERS’S COMPENSATION LAW (THE TERMS OF THE SETTLEMENT AGREEMENT DID NOT ALLOW THE COURT TO ALLOCATE ALL THE PROCEEDS OF AN INSURANCE POLICY TO THE WORKERS’ COMPENSATION BOARD, RESPONDENT, A FORMER MEMBER OF AN INSOLVENT WORKERS’ COMPENSATION TRUST WHICH HAD SETTLED WITH THE BOARD, WAS ENTITLED TO SOME OF THE PROCEEDS AND AN ACCOUNTING PURSUANT TO CPLR 7702 (THIRD DEPT))/CONTRACT LAW (WORKERS’ COMPENSATION LAW, SETTLEMENT AGREEMENT,  (THE TERMS OF THE SETTLEMENT AGREEMENT DID NOT ALLOW THE COURT TO ALLOCATE ALL THE PROCEEDS OF AN INSURANCE POLICY TO THE WORKERS’ COMPENSATION BOARD, RESPONDENT, A FORMER MEMBER OF AN INSOLVENT WORKERS’ COMPENSATION TRUST WHICH HAD SETTLED WITH THE BOARD, WAS ENTITLED TO SOME OF THE PROCEEDS AND AN ACCOUNTING PURSUANT TO CPLR 7702 (THIRD DEPT))/CIVIL PROCEDURE (WORKERS’ COMPENSATION LAW, SETTLEMENT AGREEMENT, VERIFIED ACCOUNTING, (THE TERMS OF THE SETTLEMENT AGREEMENT DID NOT ALLOW THE COURT TO ALLOCATE ALL THE PROCEEDS OF AN INSURANCE POLICY TO THE WORKERS’ COMPENSATION BOARD, RESPONDENT, A FORMER MEMBER OF AN INSOLVENT WORKERS’ COMPENSATION TRUST WHICH HAD SETTLED WITH THE BOARD, WAS ENTITLED TO SOME OF THE PROCEEDS AND AN ACCOUNTING PURSUANT TO CPLR 7702 (THIRD DEPT))/CPLR 7702  (WORKERS’ COMPENSATION LAW, SETTLEMENT AGREEMENT, VERIFIED ACCOUNTING, (THE TERMS OF THE SETTLEMENT AGREEMENT DID NOT ALLOW THE COURT TO ALLOCATE ALL THE PROCEEDS OF AN INSURANCE POLICY TO THE WORKERS’ COMPENSATION BOARD, RESPONDENT, A FORMER MEMBER OF AN INSOLVENT WORKERS’ COMPENSATION TRUST WHICH HAD SETTLED WITH THE BOARD, WAS ENTITLED TO SOME OF THE PROCEEDS AND AN ACCOUNTING PURSUANT TO CPLR 7702 (THIRD DEPT))

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THICKNESS OF THE ICE RAISED A QUESTION OF FACT ABOUT CONSTRUCTIVE NOTICE IN THIS SIDEWALK SLIP AND FALL CASE, PROMISE TO PURCHASE LIABILITY INSURANCE IS NOT THE SAME AS A PROMISE TO INDEMNIFY (THIRD DEPT).

The Third Department determined defendant property maintenance company’s motion for summary judgment in this ice slip and fall case was properly denied. Plaintiff’s testimony about the thickness of the ice raised a question of fact whether defendant had constructive notice of it. The property owner’s motion for summary judgment on the breach of contract action against the property maintenance company was properly granted. In the contract, the property maintenance company agreed to purchase liability insurance, which it did not do. An agreement to purchase insurance is not the same as a promise to indemnify and an action on the agreement need not await a judgment in the slip and fall case:

… [T]he record … includes plaintiff’s testimony that there was no lighting in the sidewalk area and no witness was able to contradict her account that there was ice in the area at the time that she fell. Further, there was no proof that anyone had performed a routine inspection of the area after 7:00 a.m. on the day of her alleged fall, i.e., at any time within 10 hours of the fall, but also no proof that there had been further accumulation of snow after the snowfall the day before. … [I]t is clear that plaintiff raised a triable issue of fact with regard to whether defendant had constructive notice of any dangerous conditions… . The key question to be resolved by the trier of fact is whether, during this 10-hour lapse of time … there was further precipitation that created a dangerous or unsafe condition on the sidewalk and, if so, whether there was sufficient time for defendant[s] … “to reasonably have discovered and remedied it” … .Plaintiff’s description of the thickness and extent of ice on the sidewalk, if accepted, is relevant to the factual question of how long it was present and whether it was visible and apparent such that it would have been discovered upon routine inspection, with sufficient time to remedy it … . Calvitti v 40 Garden, LLC, 2017 NY Slip Op 08241, Third Dept 11-22-17

NEGLIGENCE (SLIP AND FALL, THICKNESS OF THE ICE RAISED A QUESTION OF FACT ABOUT CONSTRUCTIVE NOTICE IN THIS SIDEWALK SLIP AND FALL CASE, PROMISE TO PURCHASE LIABILITY INSURANCE IS NOT THE SAME AS A PROMISE TO INDEMNIFY (THIRD DEPT))/SLIP AND FALL (THICKNESS OF THE ICE RAISED A QUESTION OF FACT ABOUT CONSTRUCTIVE NOTICE IN THIS SIDEWALK SLIP AND FALL CASE, PROMISE TO PURCHASE LIABILITY INSURANCE IS NOT THE SAME AS A PROMISE TO INDEMNIFY (THIRD DEPT))/SIDEWALKS (SLIP AND FALL, THICKNESS OF THE ICE RAISED A QUESTION OF FACT ABOUT CONSTRUCTIVE NOTICE IN THIS SIDEWALK SLIP AND FALL CASE, PROMISE TO PURCHASE LIABILITY INSURANCE IS NOT THE SAME AS A PROMISE TO INDEMNIFY (THIRD DEPT))/INSURANCE LAW (SLIP AND FALL, PROMISE TO PURCHASE LIABILITY INSURANCE IS NOT THE SAME AS A PROMISE TO INDEMNIFY (THIRD DEPT))

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TRANSMISSION REPAIR COMPANY OWED A DUTY TO PLAINTIFF’S DECEDENT AS A THIRD PARTY BENEFICIARY OF A TRUCK REPAIR CONTRACT WITH PLAINTIFF’S DECEDENT’S EMPLOYER, IF THE TRUCK HAD BEEN EQUIPPED WITH A FUNCTIONING NEUTRAL INTERLOCK SYSTEM IT WOULD NOT HAVE LURCHED BACK, KILLING PLAINTIFF’S DECEDENT (SECOND DEPT).

The Second Department determined plaintiff’s decedent could properly have been found to be a third-party beneficiary of a contract between a transmission repair company (Advanced) and plaintiff’s decedent’s employer (CCC).  CCC owned a garbage truck which was repaired by Advanced. There was no neutral interlock system on the truck. Such a system would have prevented the truck from lurching backward and pinning plaintiff’s decedent between the truck and a dumpster:

 

… [T]he record demonstrates that Advanced owed the decedent a duty as a third-party beneficiary of its contractual relationship between itself and CCC … . If the parties to the contract intended to confer a direct benefit on the decedent, a duty is owed to the decedent… . Although there was no written contract between the contracting parties, an intent to confer a direct benefit on the decedent may also be inferred from the circumstances …  including the parties’ oral agreement and course of conduct … .

An employee is not automatically a third-party beneficiary of a service contract between his or her employer and another party … . However, if the employer’s intent was to benefit its employees, third-party beneficiary status may be inferred …

At trial, the plaintiffs asserted that a proximate cause of the accident was the absence of a functioning neutral interlock system on the truck. The neutral interlock system would have prevented the truck from going backward while garbage was being loaded in the truck. CCC recognized that a neutral interlock system was an important safety feature of the truck. That system was part of the transmission system, which was serviced by Advanced. At trial, Advanced acknowledged that when the truck was road tested in November 2006, some six months prior to the accident, CCC should have been informed if a neutral interlock system was not working or not present, since this was one of the primary safety features of the truck.

The evidence indicated that Advance and CCC recognized that the neutral interlock system was an important safety feature. Further, it is clear from the record that Advance and CCC recognized that this safety feature’s primary benefit was to CCC’s employees who loaded the garbage trucks. Accordingly, it could be inferred that the decedent was a third-party beneficiary of the contractual relationship between CCC and Advanced. Vargas v Crown Container Co., Inc., 2017 NY Slip Op 08297, Second Dept 11-22-17

 

NEGLIGENCE (DUTY ARISING FROM CONTRACT, TRANSMISSION REPAIR COMPANY OWED A DUTY TO PLAINTIFF’S DECEDENT AS A THIRD PARTY BENEFICIARY OF A TRUCK REPAIR CONTRACT WITH PLAINTIFF’S DECEDENT’S EMPLOYER, IF THE TRUCK HAD BEEN EQUIPPED WITH A FUNCTIONING NEUTRAL INTERLOCK SYSTEM IT WOULD NOT HAVE LURCHED BACK, KILLING PLAINTIFF’S DECEDENT (SECOND DEPT))/CONTRACT LAW (NEGLIGENCE, DUTY ARISING FROM CONTRACT, TRANSMISSION REPAIR COMPANY OWED A DUTY TO PLAINTIFF’S DECEDENT AS A THIRD PARTY BENEFICIARY OF A TRUCK REPAIR CONTRACT WITH PLAINTIFF’S DECEDENT’S EMPLOYER, IF THE TRUCK HAD BEEN EQUIPPED WITH A FUNCTIONING NEUTRAL INTERLOCK SYSTEM IT WOULD NOT HAVE LURCHED BACK, KILLING PLAINTIFF’S DECEDENT (SECOND DEPT))/EMPLOYMENT LAW (DUTY TO EMPLOYEE ARISING FROM EMPLOYER’S CONTRACT FOR REPAIR, TRANSMISSION REPAIR COMPANY OWED A DUTY TO PLAINTIFF’S DECEDENT AS A THIRD PARTY BENEFICIARY OF A TRUCK REPAIR CONTRACT WITH PLAINTIFF’S DECEDENT’S EMPLOYER, IF THE TRUCK HAD BEEN EQUIPPED WITH A FUNCTIONING NEUTRAL INTERLOCK SYSTEM IT WOULD NOT HAVE LURCHED BACK, KILLING PLAINTIFF’S DECEDENT (SECOND DEPT))/THIRD PARTY BENEFICIARY (NEGLIGENCE, DUTY ARISING FROM CONTRACT, TRANSMISSION REPAIR COMPANY OWED A DUTY TO PLAINTIFF’S DECEDENT AS A THIRD PARTY BENEFICIARY OF A TRUCK REPAIR CONTRACT WITH PLAINTIFF’S DECEDENT’S EMPLOYER, IF THE TRUCK HAD BEEN EQUIPPED WITH A FUNCTIONING NEUTRAL INTERLOCK SYSTEM IT WOULD NOT HAVE LURCHED BACK, KILLING PLAINTIFF’S DECEDENT (SECOND DEPT))

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STIPULATION COMPLIED WITH THE CHILD SUPPORT STANDARDS ACT AND STATED THE PROPER STANDARD FOR AN UPWARD MODIFICATION OF SUPPORT (THIRD DEPT).

The Third Department, reversing Family Court, determined the child support provisions of a stipulation complied with the Child Support Standards Act (CSSA) and were enforceable. The Third Department further found that the proper standard for an upward modification of support was that which was agreed to in the stipulation:

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The stipulation, as well as the order of support, recite that the parties had been advised of and fully understood the child support provisions of the CSSA and that the application of the statute would result in the presumptively correct amount of child support to be awarded. The stipulation then sets forth the presumptive amount of child support that would be awarded under the CSSA and the agreed-upon figures used to calculate that amount, states that the parties are deviating from the presumptive amount and provides a detailed explanation of the reasons for the deviation therefrom. Thus, the opt out provisions of the stipulation fully comply with the CSSA … . That the judgment of divorce does not explicitly set forth the CSSA recitals is not determinative, as the statute only requires the inclusion of such recitals in the “agreement or stipulation . . . presented to the court for incorporation in an order or judgment” … .

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Generally, a party seeking modification of a child support provision derived from an agreement or stipulation incorporated but not merged into a judgment of divorce has the burden of proving, insofar as is relevant here, “that an unanticipated and unreasonable change of circumstances has occurred resulting in a concomitant increased need or that the needs of the children are not being adequately met”… . “The parties are free, however, to agree to different terms triggering a change in the obligations of the payor spouse, including the application of a standard other than substantial unanticipated and unreasonable change in circumstances as the basis for determining a modification application, provided that . . . the children’s personal right to receive adequate support is not adversely affected and public policy is not offended” … . Here, the parties’ 1999 stipulation expressly provides that either party may petition a court for a modification of child support based upon “a change of circumstances.” Through this clear and unqualified language, the parties plainly expressed an intent to dispense with the “unanticipated and unreasonable change of circumstances” standard in favor of a less burdensome “change of circumstances” standard … . Matter of Frederick-Kane v Potter, 2017 NY Slip Op 08219, Third Dept 11-22-17

 

FAMILY LAW (CHILD SUPPORT, STIPULATION COMPLIED WITH THE CHILD SUPPORT STANDARDS ACT AND STATED THE PROPER STANDARD FOR AN UPWARD MODIFICATION OF SUPPORT (THIRD DEPT))/CHILD SUPPORT (FAMILY LAW, STIPULATION COMPLIED WITH THE CHILD SUPPORT STANDARDS ACT AND STATED THE PROPER STANDARD FOR AN UPWARD MODIFICATION OF SUPPORT (THIRD DEPT))/CONTRACT LAW (FAMILY LAW, STIPULATION, CHILD SUPPORT, STIPULATION COMPLIED WITH THE CHILD SUPPORT STANDARDS ACT AND STATED THE PROPER STANDARD FOR AN UPWARD MODIFICATION OF SUPPORT (THIRD DEPT))/STIPULATION (FAMILY LAW, CHILD SUPPORT, STIPULATION COMPLIED WITH THE CHILD SUPPORT STANDARDS ACT AND STATED THE PROPER STANDARD FOR AN UPWARD MODIFICATION OF SUPPORT (THIRD DEPT))/UPWARD MODIFICATION (FAMILY LAW, CHILD SUPPORT, , STIPULATION COMPLIED WITH THE CHILD SUPPORT STANDARDS ACT AND STATED THE PROPER STANDARD FOR AN UPWARD MODIFICATION OF SUPPORT (THIRD DEPT))

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SERVICE AND VENUE PROVISIONS IN CONTRACT WITH A LIMITED LIABILITY COMPANY DID NOT APPLY TO DEFENDANT INDIVIDUALLY, DEFECTS IN SERVICE PROPERLY OVERLOOKED PURSUANT TO CPLR 2001 (THIRD DEPT).

The Third Department determined plaintiffs’ service of process on defendant was flawed but Supreme Court properly overlooked the defects under CPLR 2001. The Third Department further held that the defendant’s motion to change venue should have been granted. Both the method of service (mail) and venue were based on provisions in a purchase and sale contract. However, the purchase and sale agreement was with a limited liability company, but the confessions of judgment upon which the suit were based were signed by defendant in her personal capacity, not as the sole member of the LLC. Therefore the service and venue contract provisions did not apply:

Defendant and the limited liability companies of which she is a member “are distinct entities,” however, and the former is not individually bound by the contractual commitments of the latter… . Nothing in the purchase and sale agreement binds defendant to its terms, instead making clear that no “shareholder, director, officer of or principal or agent of” [the LLC] will “have any personal liability, directly or indirectly, under or in connection with” either the agreement or any amendments to it. …

Due to the inapplicability of those contractual provisions, plaintiffs’ effort to serve defendant by mail was deficient in that service “under CPLR 3213 is subject to the rules governing service of the summons generally” … . The mailing nevertheless placed defendant on notice of the pending motion for summary judgment in lieu of complaint, and she responded with a cross motion that opposed the motion on various grounds. Plaintiffs then arranged for proper, albeit untimely, service of defendant pursuant to CPLR 308 (2), and advised that they were amenable to any further adjournment of the return date “as defendant and [Supreme] Court may find proper.”… Accordingly, while a wholesale failure to timely serve defendant with the initiatory papers constitutes “a fatal jurisdictional defect”… , defendant was placed on notice, then submitted a cross motion that raised various objections and included substantive opposition before being properly served. In light of these peculiar circumstances, as well as the absence of any prejudice flowing from plaintiffs’ missteps, we are persuaded that the untimeliness of the proper service could be and rightly was overlooked (seeCPLR 2001, 2004 …). Capolino v Goren, 2017 NY Slip Op 08246, Third Dept 11-22-17

CIVIL PROCEDURE (SERVICE AND VENUE PROVISIONS IN CONTRACT WITH A LIMITED LIABILITY COMPANY DID NOT APPLY TO DEFENDANT INDIVIDUALLY, DEFECTS IN SERVICE PROPERLY OVERLOOKED PURSUANT TO CPLR 2001 (THIRD DEPT))/LIMITED LIABILITY COMPANY (SERVICE AND VENUE PROVISIONS IN CONTRACT WITH A LIMITED LIABILITY COMPANY DID NOT APPLY TO DEFENDANT INDIVIDUALLY, DEFECTS IN SERVICE PROPERLY OVERLOOKED PURSUANT TO CPLR 2001 (THIRD DEPT))/CONTRACT LAW (SERVICE AND VENUE PROVISIONS IN CONTRACT WITH A LIMITED LIABILITY COMPANY DID NOT APPLY TO DEFENDANT INDIVIDUALLY, DEFECTS IN SERVICE PROPERLY OVERLOOKED PURSUANT TO CPLR 2001 (THIRD DEPT))/CPLR 2001 (SERVICE AND VENUE PROVISIONS IN CONTRACT WITH A LIMITED LIABILITY COMPANY DID NOT APPLY TO DEFENDANT INDIVIDUALLY, DEFECTS IN SERVICE PROPERLY OVERLOOKED PURSUANT TO CPLR 2001 (THIRD DEPT))

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ARBITRATOR’S INTERIM DECISION RE PETITIONER’S SUSPENSION WITHOUT PAY WAS IMPROPER, AND THE ARBITRATOR’S DISMISSAL OF THE CHARGES VIOLATED PUBLIC POLICY, THIRD DEPT PROVIDED A COMPREHENSIVE DISCUSSION OF A COURT’S POWER TO REVIEW AN ARBITRATOR’S DECISION (THIRD DEPT).

The Third Department determined the arbitrator’s ruling in this employment matter violated public policy because the ruling, which dismissed the charges and imposed no penalty, acknowledged that petitioner had violated the Public Officers Law by sharing confidential information with her husband. Petitioner was employed by respondent Department of Corrections and Community Supervision (hereinafter DOCCS) … . Petitioner was suspended without pay for allegedly releasing confidential information to her husband, who had recently been released from prison on parole supervision in connection with his rape conviction. The decision too detailed to be fairly summarized here. It provides a comprehensive overview of the court’s role and powers in reviewing an arbitrator’s findings and is well worth reading carefully:

Section 33.5 (f) (4) of the CBA [collective bargaining agreement] prohibits arbitrators from adding new requirements to the provisions of the agreement. The arbitrator exceeded his power by adding a requirement to the CBA regarding what proof could be considered [in making an interim award] and by refusing to consider hearing evidence submitted by DOCCS to determine whether probable cause existed for petitioner’s suspension [without pay pending a hearing]. Therefore, the interim decision and award by the arbitrator was improper. * * *

… [T]he CBA could be read to require proof of every aspect of a particular charge before finding an employee guilty thereof, so we should not set aside the arbitrator’s conclusions on the ground that they are based on that interpretation … . DOCCS could have specified separate charges for each time petitioner accessed, and for each time she shared, confidential information. Instead, DOCCS proffered a single charge that petitioner accessed confidential information at least 14 times when she had no job-related reason to do so and shared that information with her husband at least eight times. Having found that DOCCS failed to establish that petitioner engaged in all of the conduct contained in the notice of discipline’s single charge, the arbitrator found her not guilty and imposed no penalty. As courts may not review an arbitrator’s findings of fact or law, even if the arbitrator made errors … , as long as the CBA was reasonably susceptible of the interpretation given to it by the arbitrator, Supreme Court erred in determining that the arbitrator exceeded his power. …

Although the arbitrator concluded that DOCCS failed to establish the charge as set forth in the notice of discipline, he factually determined that petitioner improperly accessed a confidential database 14 times, and at least one time she shared DOCCS’s confidential information with a parolee. These factual findings, which we must accept… , establish that petitioner violated Public Officers Law § 74 (3) (c). … [T]he relief granted in the arbitrator’s award — dismissal of the charges, with no penalty or repercussions for her misconduct, and reinstating her to the position in which she would continue to have access to confidential information — violated public policy, requiring vacatur of that award… . Matter of Virginia Livermore-johnson, 2017 NY Slip Op 08239, Third Dept 11-22-17

ARBITRATION (ARBITRATOR’S INTERIM DECISION RE PETITIONER’S SUSPENSION WITHOUT PAY WAS IMPROPER, AND THE ARBITRATOR’S DISMISSAL OF THE CHARGES VIOLATED PUBLIC POLICY, THIRD DEPARTMENT PROVIDED A COMPREHENSIVE DISCUSSION OF A COURT’S POWER TO REVIEW AN ARBITRATOR’S DECISION (THIRD DEPT))/EMPLOYMENT LAW (ARBITRATION, ARBITRATOR’S INTERIM DECISION RE PETITIONER’S SUSPENSION WITHOUT PAY WAS IMPROPER, AND THE ARBITRATOR’S DISMISSAL OF THE CHARGES VIOLATED PUBLIC POLICY, THIRD DEPARTMENT PROVIDED A COMPREHENSIVE DISCUSSION OF A COURT’S POWER TO REVIEW AN ARBITRATOR’S DECISION (THIRD DEPT))/CONTRACT LAW (COLLECTIVE BARGAINING AGREEMENT, ARBITRATOR’S INTERIM DECISION RE PETITIONER’S SUSPENSION WITHOUT PAY WAS IMPROPER, AND THE ARBITRATOR’S DISMISSAL OF THE CHARGES VIOLATED PUBLIC POLICY, THIRD DEPARTMENT PROVIDED A COMPREHENSIVE DISCUSSION OF A COURT’S POWER TO REVIEW AN ARBITRATOR’S DECISION (THIRD DEPT))/COLLECTIVE BARGAINING AGREEMENT (ARBITRATOR’S INTERIM DECISION RE PETITIONER’S SUSPENSION WITHOUT PAY WAS IMPROPER, AND THE ARBITRATOR’S DISMISSAL OF THE CHARGES VIOLATED PUBLIC POLICY, THIRD DEPARTMENT PROVIDED A COMPREHENSIVE DISCUSSION OF A COURT’S POWER TO REVIEW AN ARBITRATOR’S DECISION (THIRD DEPT))

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FRAUDULENT INDUCEMENT AND DEMAND FOR PUNITIVE DAMAGES SHOULD NOT HAVE BEEN DISMISSED IN THIS BREACH OF CONTRACT ACTION, PLAINTIFF ALLEGED AIR AMBULANCE WAS NOT EQUIPPED WITH PROPER EQUIPMENT AND PERSONNEL (FIRST DEPT).

The Second Department determined plaintiff’s fraudulent inducement cause of action and the punitive damages demand should not have been dismissed. Plaintiff contracted with defendants to transport his brother by air ambulance from Puerto Rico to New York. Plaintiff alleged no respiratory therapist was on the plane and the plane was not equipped with advanced life support equipment:

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The Supreme Court erred in granting that branch of the defendants’ cross motion which was for summary judgment dismissing the cause of action alleging fraudulent inducement. Contrary to the court’s determination, the cause of action alleging fraudulent inducement was not duplicative of the breach of contract cause of action, as it alleged that the defendants made misrepresentations of present fact that were collateral to the contract and served as an inducement to enter into the contract … .Contrary to the defendants’ contention, they failed to establish, prima facie, that their alleged misrepresentations of fact were not false and, therefore, not misrepresentations at all … .

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The Supreme Court also erred in granting that branch of the defendants’ cross motion which was for summary judgment dismissing so much of the complaint as sought to recover punitive damages. The defendants failed to make a prima facie showing that they did not engage in conduct having a high degree of moral culpability which manifested a conscious disregard for the rights of others or conduct so reckless as to amount to such disregard … . Greenberg v Meyreles, 2017 NY Slip Op 08351, Second Dept 11-20-17

 

FRAUD (CONTRACT, FRAUDULENT INDUCEMENT, PUNITIVE DAMAGES, FRAUDULENT INDUCEMENT AND DEMAND FOR PUNITIVE DAMAGES SHOULD NOT HAVE BEEN DISMISSED IN THIS BREACH OF CONTRACT ACTION, PLAINTIFF ALLEGED AIR AMBULANCE WAS NOT EQUIPPED WITH PROPER EQUIPMENT AND PERSONNEL (FIRST DEPT))/CONTRACT LAW (FRAUDULENT INDUCEMENT, PUNITIVE DAMAGES, FRAUDULENT INDUCEMENT AND DEMAND FOR PUNITIVE DAMAGES SHOULD NOT HAVE BEEN DISMISSED IN THIS BREACH OF CONTRACT ACTION, PLAINTIFF ALLEGED AIR AMBULANCE WAS NOT EQUIPPED WITH PROPER EQUIPMENT AND PERSONNEL (FIRST DEPT))/PUNITIVE DAMAGES (CONTRACT, FRAUDULENT INDUCEMENT AND DEMAND FOR PUNITIVE DAMAGES SHOULD NOT HAVE BEEN DISMISSED IN THIS BREACH OF CONTRACT ACTION, PLAINTIFF ALLEGED AIR AMBULANCE WAS NOT EQUIPPED WITH PROPER EQUIPMENT AND PERSONNEL (FIRST DEPT))

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LAW FIRM ASSOCIATE WAS ENTITLED TO 5% OF $5 MILLION FEE UNDER A BREACH OF ORAL CONTRACT THEORY, BUT NOT UNDER A LABOR LAW 190 THEORY (FOURTH DEPT).

The Fourth Department determined plaintiff, an associate in defendant law firm, was entitled to 5% of the $5 million fee collected by the law firm in an action on behalf of a client brought in by the associate. The jury found that the plaintiff was entitled to payment under the Labor Law 190 cause of action, as well as under the breach of contract cause of action. The Fourth Department determined the verdict on the Labor Law 190 cause of action should have been set aside because, under the law described in the jury instructions, the jury should have found the payment to be “incentive compensation” which is excluded from the type of pay covered by the Labor Law:

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Applying the facts to the law as stated in the jury charge, the evidence establishes that the collections bonus was “incentive compensation” because it was based on more than just plaintiff’s performance. Among other things, the matter took considerable effort from other attorneys, some of whom billed far more hours on the matter than plaintiff, and a partner conducted international arbitration and filed enforcement proceedings to secure a settlement collectible by the client. Contrary to plaintiff’s contention, inasmuch as the collections bonus was calculated as a percentage of the fee in the matter and “the fee collected” by defendant was based on the abovementioned factors outside of plaintiff’s control, the jury could not have rationally concluded that the collections bonus was anything other than “incentive compensation” excluded from protection under Labor Law § 193 (1). …

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… [T]he evidence adduced by plaintiff established, prima facie, that the parties entered into a binding oral agreement in which at least one of defendant’s partners promised to pay plaintiff a bonus consisting of 5% of the fee collections from any client generated by plaintiff if such fees exceeded $100,000, that plaintiff subsequently performed under the agreement by generating the client, and that defendant breached the agreement by failing to pay the collections bonus, thereby causing plaintiff to incur damages … . Doolittle v Nixon Peabody LLP, 2017 NY Slip Op 08126, Fourth Dept 11-17-17

 

EMPLOYMENT LAW (LAW FIRM ASSOCIATE WAS ENTITLED TO 5% OF $5 MILLION FEE UNDER A BREACH OF ORAL CONTRACT THEORY, BUT NOT UNDER LABOR LAW 190 THEORY (FOURTH DEPT))/LABOR LAW (INCENTIVE COMPENSATION, LAW FIRM ASSOCIATE WAS ENTITLED TO 5% OF $5 MILLION FEE UNDER A BREACH OF ORAL CONTRACT THEORY, BUT NOT UNDER LABOR LAW 190 THEORY (FOURTH DEPT))/INCENTIVE COMPENSATION (LABOR LAW, LAW FIRM ASSOCIATE WAS ENTITLED TO 5% OF $5 MILLION FEE UNDER A BREACH OF ORAL CONTRACT THEORY, BUT NOT UNDER LABOR LAW 190 THEORY (FOURTH DEPT))/CONTRACT LAW (EMPLOYMENT LAW, (LAW FIRM ASSOCIATE WAS ENTITLED TO 5% OF $5 MILLION FEE UNDER A BREACH OF ORAL CONTRACT THEORY, BUT NOT UNDER LABOR LAW 190 THEORY (FOURTH DEPT))

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EVEN THOUGH THE WRONG CORPORATION WAS NAMED IN THE CONTRACT DEFENDANT SIGNED AS PRESIDENT, DEFENDANT COULD NOT BE HELD PERSONALLY LIABLE, MOTION TO SET ASIDE THE VERDICT SHOULD HAVE BEEN GRANTED (FOURTH DEPT).

The Fourth Department determined defendant’s motion to set aside the verdict in this contract dispute should have been granted. Defendant signed the contract as president of a corporation which existed but was misnamed. Defendant could not be held personally liable:

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“According to the well settled general rule, individual officers or directors are not personally liable on contracts entered into on behalf of a corporation if they do not purport to bind themselves individually’ . . . However, it is also well established that an agent who acts on behalf of a nonexistent principal may be held personally liable on the contract”… . “The rule [was] designed to protect a party who enters into a contract where the other signatory represents that he is signing on behalf of a business entity that in fact does not exist, under any name . . . [Thus,] as long as the identity of the corporation can be reasonably established from the evidence[,] . . . [an e]rror in the use of the corporate name will not be permitted to frustrate the intent which the name was meant to convey’ . . . In such a situation, . . . there is no need or basis to impose personal liability on the person who signed the contract as agent for the entity”… . “Accordingly, absent an allegation that, at the time of the contract, a plaintiff was under an actual misapprehension that there was some other, unincorporated group with virtually the same name as that of the actual business entity, the [c]ourt will not permit the [plaintiff] to capitalize on [a] technical naming error in contravention of the parties’ evident intentions’ ” … .

Thus, courts have determined that the individual who signed the contract may be liable where there was no existing corporation under any name because, under those circumstances, the plaintiff has “no remedy except against the individuals who acted as agents of those purported corporations”… . Where, as here, there was an existing corporation and merely a misnomer in the name of the corporation, courts have declined to impose liability on the individual who signed the contract because the plaintiff has a remedy against the existing, albeit misnamed, corporation… .

Here, we conclude that no one was under an actual misapprehension that there was an entity with the name. TBW, INC. J.N.K. Mach. Corp. v TBW, Ltd., 2017 NY Slip Op 08106, Fourth Dept 11-17-17

 

CORPORATION LAW (CONTRACT LAW, EVEN THOUGH THE WRONG CORPORATION WAS NAMED IN THE CONTRACT DEFENDANT SIGNED AS PRESIDENT, DEFENDANT COULD NOT BE HELD PERSONALLY LIABLE (FOURTH DEPT))/CONTRACT LAW (CORPORATION LAW, EVEN THOUGH THE WRONG CORPORATION WAS NAMED IN THE CONTRACT DEFENDANT SIGNED AS PRESIDENT, DEFENDANT COULD NOT BE HELD PERSONALLY LIABLE (FOURTH DEPT))/CIVIL PROCEDURE (MOTION TO SET ASIDE THE VERDICT, EVEN THOUGH THE WRONG CORPORATION WAS NAMED IN THE CONTRACT DEFENDANT SIGNED AS PRESIDENT, DEFENDANT COULD NOT BE HELD PERSONALLY LIABLE, MOTION TO SET ASIDE THE VERDICT SHOULD HAVE BEEN GRANTED (FOURTH DEPT))/VERDICT, MOTION TO SET ASIDE, EVEN THOUGH THE WRONG CORPORATION WAS NAMED IN THE CONTRACT DEFENDANT SIGNED AS PRESIDENT, DEFENDANT COULD NOT BE HELD PERSONALLY LIABLE, MOTION TO SET ASIDE THE VERDICT SHOULD HAVE BEEN GRANTED (FOURTH DEPT))

,

BUYER OF PROPERTY WAS UNABLE TO RAISE A QUESTION OF FACT WHETHER SELLER WAS AWARE OF UNDERGROUND GAS TANKS ON THE PROPERTY (FIRST DEPT).

The First Department determined the seller of the property demonstrated it could not be held liable for the underground gas tanks found on the property. The purchase and sale contract indicated only that the seller was not aware of any underground fuel tanks:

​

The court properly found that defendant did not breach the contract by failing to disclose the presence of underground gas tanks on the property. …[D]efendant guaranteed and warranted only that it had not generated, stored or disposed of hazardous materials and had no knowledge of the previous presence of such materials on the property. Plaintiff failed to present evidence sufficient to raise a triable issue of fact as to whether defendant was responsible for the presence of the gas tanks or had any knowledge of it. The former owner of the property and a managing member of defendant testified that he was unaware of the presence of the gas tanks.

In addition, … defendant disclaimed and [did not make] any warranties or representations concerning environmental conditions. Plaintiff acknowledged that it was relying solely on its own expertise and consultants in this regard, and was purchasing the property “as is, where is” … . West 17th St. & Tenth Ave. Realty, LLC v N.E.W. Corp., 2017 NY Slip Op 08088, First Dept 11-16-17

 

REAL ESTATE (BUYER OF PROPERTY WAS UNABLE TO RAISE A QUESTION OF FACT WHETHER SELLER WAS AWARE OF UNDERGROUND GAS TANKS ON THE PROPERTY (FIRST DEPT))/CONTRACT LAW (REAL ESTATE, (BUYER OF PROPERTY WAS UNABLE TO RAISE A QUESTION OF FACT WHETHER SELLER WAS AWARE OF UNDERGROUND GAS TANKS ON THE PROPERTY (FIRST DEPT))/ENVIRONMENTAL LAW (REAL ESTATE, BUYER OF PROPERTY WAS UNABLE TO RAISE A QUESTION OF FACT WHETHER SELLER WAS AWARE OF UNDERGROUND GAS TANKS ON THE PROPERTY (FIRST DEPT))/UNDERGROUND GAS TANKS (REAL ESTATE, BUYER OF PROPERTY WAS UNABLE TO RAISE A QUESTION OF FACT WHETHER SELLER WAS AWARE OF UNDERGROUND GAS TANKS ON THE PROPERTY (FIRST DEPT))

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