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DEFENDANT ALLEGED ITS PRINCIPAL PLACE OF BUSINESS WAS IN NASSAU COUNTY BUT NEVER AMENDED ITS CERTIFICATE OF INCORPORATION WHICH DESIGNATED ITS PRINCIPAL PLACE OF BUSINESS AS QUEENS COUNTY; DEFENDANT’S MOTION TO CHANGE THE VENUE OF THIS SLIP AND FALL CASE FROM QUEENS TO NASSAU COUNTY SHOULD NOT HAVE BEEN GRANTED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined defendant in this slip and fall case (Valley Park) did not present sufficient evidence to support a change of venue from Queens County to Nassau County:

“To effect a change of venue pursuant to CPLR 510(1), a defendant must show that the plaintiff’s choice of venue is improper and that its choice of venue is proper” … . To succeed on its motion, Valley Park was obligated to demonstrate that, on the date that this action was commenced, none of the parties resided in Queens County … . Only if Valley Park made such a showing was the plaintiff required to establish, in opposition, via documentary evidence, that the venue she selected was proper … .

… Although Valley Park claimed that its principal office was in Nassau County and that it no longer maintained its principal office in Queens County, it failed to prove that its certificate of incorporation had been amended to designate a county other than Queens … . The plaintiff’s submission, in opposition, of a certified copy of Valley Park’s certificate of incorporation, which stated that Valley Park’s principal office was located in Queens County, further underscored that her choice of venue was proper. Green v Duga, 2021 NY Slip Op 06990, Second Dept 12-15-21

 

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PLAINTIFFS DEMONSTRATED A DEMAND ON THE BOARD OF DIRECTORS TO PURSUE A DERIVATIVE ACTION WAS FUTILE; THE COMPLAINT ADEQUATELY ALLEGED BREACH OF FIDUCIARY DUTY, A CLAIM FOR WHICH NO DAMAGES NEED BE ALLEGED (FIRST DEPT).

The First Department, reversing Supreme Court, determined the requirement that a demand on the board of directors to pursue a derivative action was futile and therefore is excused. In addition, the complaint adequately alleged a breach of fiduciary duty:

Plaintiffs properly alleged demand futility as required under Business Corporation Law § 626 (c) by asserting that at least four out of seven of the members of derivative plaintiff/nominal defendant Xerox Holdings Corporation’s board of directors were controlled by Icahn, Xerox’s largest single shareholder, and thus lacked the independence to make an impartial decision on bringing suit … . * * *

… [T]he claim for breach of fiduciary duty was pleaded with the particularity required by CPLR 3016(b), as the complaint states that the Icahn defendants used confidential information about Xerox’s planned acquisition of HP Inc. to buy HP common shares before news of the acquisition became public and before HP’s stock price increased … . …

… [P]laintiffs’ claims do not fail for lack of damages, as damages “have never been considered to be an essential requirement for a cause of action founded on a breach of fiduciary duty” … . The function of an action for breach of fiduciary duty “is not merely to compensate the plaintiff for wrongs committed by the defendant but . . . to prevent them, by removing from . . . trustees all inducement to attempt dealing for their own benefit in matters . . . to which their . . . trust relates” … . Miami Firefighters’ Relief & Pension Fund v Icahn, 2021 NY Slip Op 06446, First Dept 11-18-21

 

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THE PRE-ANSWER, PRE-DISCOVERY MOTION TO DISMISS SHOULD NOT HAVE BEEN CONVERTED TO A SUMMARY JUDGMENT MOTION; QUESTIONS OF FACT ABOUT WHETHER THERE WAS A DE FACTO MERGER OF TWO CORPORATIONS; QUESTION OF FACT WHETHER PART PERFORMANCE BY INACTION SATISFIED THE STATUTE OF FRAUDS (SECOND DEPT).

The Second Department, reversing Supreme Court, determined (1) the pre-answer, pre-discovery motion to dismiss should not have been converted to a summary judgment motion; (2) there were questions of fact about whether there was a de facto merger of two defendant corporations; and (3) there was a question of fact whether the breach of contract action was barred by the statute of frauds (part performance). The “de facto merger” and “part performance” discussions are substantive and too detailed to summarize here. The Second Department noted that even inaction will satisfy part performance of a contract when inaction is a term of the oral agreement:

Supreme Court erred in converting the motion to dismiss to one for summary judgment (see CPLR 3211[c] … ). The plaintiff objected to this procedure on the ground that he had not received any discovery, and no preliminary conference had taken place due to the pendency of the motion to dismiss, which was made only one month after this action was commenced. Indeed, a motion for summary judgment is premature when a party had no reasonable opportunity to conduct discovery, and discovery may result in disclosure of evidence relevant to the causes of action asserted in the complaint (see CPLR 3212[f] … ). Here, issue was not yet joined and there had been no opportunity to engage in discovery regarding the plaintiff’s allegations of successor liability and fraud with respect to the apparent transformation of [defendant] Labs into [defendant] Diagnostics. Therefore, converting the motion to dismiss into a motion for summary judgment was premature.

… The defendants’ evidence did not establish as a matter of law that Diagnostics was not the de facto continuation of Labs … . * * *

Part performance in the form of inaction may … suffice to invoke the doctrine, if inaction is pleaded as a term of the oral agreement and alleged to be unequivocally referable to the oral agreement, and the element of detrimental reliance is present … . … [D]efendants failed to demonstrate … that the plaintiff did not partially perform by refraining from seeking to confirm the arbitration award, thereby rendering the statute of frauds inapplicable. Menche v CDx Diagnostics, Inc., 2021 NY Slip Op 05964, Second Dept 11-3-21

 

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PLAINTIFF SHOULD NOT HAVE BEEN ALLOWED TO CONFORM THE PLEADINGS TO THE PROOF RE: PIERCING THE CORPORATE VEIL; DEFENDANT WAS PREJUDICED BY THE FAILURE TO PLEAD THE SUPPORTING ALLEGATIONS (SECOND DEPT). ​

The Second Department, reversing Supreme Court, determined plaintiff should not have been allowed to conform the pleadings to the proof re: piercing the corporate veil for two reasons: (1) defendant Chilled was prejudiced by the failure to plead facts supporting the alter ego theory; and (2) the proof at trial did not demonstrate Chilled was the alter ego of defendant EMB:

Chilled demonstrated that it was prejudiced in the preparation of its defense by the lack of notice that the plaintiff would seek to pierce EMB’s corporate veil or prove that Chilled was an alter ego of EMB … . In general, claims involving veil piercing or alter ego liability are fact-laden … . Chilled established that the lack of notice hindered its ability to present evidence that might have shown … that corporate formalities were respected or that EMB and Chilled dealt with each other at arms’ length. * * *

… [T]he plaintiff failed to establish that Chilled exercised complete domination over EMB in the transaction with the plaintiff … . …

,,, [T]he plaintiff failed to establish that Chilled used its alleged domination of EMB to commit a fraud or wrong against the plaintiff … . Americore Drilling & Cutting, Inc. v EMB Contr. Corp., 2021 NY Slip Op 05845, Second Dept 10-27-21

 

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A FOREIGN CORPORATION WHICH REGISTERS TO DO BUSINESS IN NEW YORK CONSENTS TO THE SERVICE OF PROCESS IN NEW YORK BUT DOES NOT CONSENT TO THE GENERAL JURISDICTION OF NEW YORK (CT APP). ​

The Court of Appeals, in a full-fledged opinion by Judge Singas, over a two-judge dissent, determined that a corporation registered to do business in New York consents to the service of process in New York, but not to general jurisdiction in New York. The underlying lawsuit stemmed from a car accident in Virginia. Both Ford and Goodyear were sued. Neither the car or the tire were made or sold in New York:

Aybar [the New York resident who drove the car] purchased the vehicle in New York from a third party. Ford did not sell the vehicle in this state in the first instance, nor did Ford design or manufacture the vehicle here. Similarly, Goodyear designed, manufactured, and initially sold the tire in other states. It is undisputed that Ford was incorporated in Delaware and maintains its principal place of business in Michigan and that Goodyear was incorporated and has its principal place of business in Ohio. At all relevant times, Ford and Goodyear were registered with the New York Secretary of State as foreign corporations authorized to do business in this state and had appointed in-state agents for service of process in accordance with the Business Corporation Law. * * *

We have never conflated statutory consent to service with consent to general jurisdiction, and the fact remains that, under existing New York law, a foreign corporation does not consent to general jurisdiction in this state merely by complying with the Business Corporation Law’s registration provisions. Aybar v Aybar, 2021 NY Slip Op 05393, Ct App 10-7-21

 

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THE SOLE MEMBER OF THE LLC WHICH OWNED THE PROPERTY COULD NOT BE HELD LIABLE FOR THE DANGEROUS CONDITION SOLELY BY VIRTUE OF HIS MEMBER STATUS; HOWEVER THERE WAS A QUESTION OF FACT WHETHER THE LLC COULD BE LIABLE (SECOND DEPT).

The Second Department, reversing (modifying) Supreme Court in this premises liability case, determined the sole member of the LLC (Romanoff) which owned the premises was not liable, but there was a question of fact whether the LLC had constructive knowledge of the defective railing which collapsed when plaintiff leaned on it:

… [T]he plaintiff failed to raise a triable issue of fact. Romanoff, as a member of the LLC, cannot be held liable for the company’s obligations by virtue of that status alone … , and the plaintiff failed to adduce evidence as to the existence of circumstances that would entitle him to pierce the corporate veil to impose personal liability on Romanoff … .

… [T]he Romanoff defendants failed to establish, prima facie, that the LLC did not have constructive notice of the alleged hazardous condition … . In support of their motion, the Romanoff defendants submitted … evidence that the porch railing that collapsed had not been physically inspected in the eight months following the purchase of the premises. They also failed to demonstrate that the alleged dangerous condition of the porch railing was latent and not discoverable upon a reasonable inspection. … [T]he Romanoff defendants relied upon the plaintiff’s deposition testimony that, as he leaned onto the railing to shake dust out of a blanket, he felt the railing move as soon as he made contact with it, and it did not appear to be attached to anything. Hayden v 334 Dune Rd., LLC, 2021 NY Slip Op 04481, Second Dept 7-21-21

 

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THE ACTION CONTESTING THE AMENDMENT TO THE BY-LAWS OF A NOT-FOR-PROFIT CORPORATION WHICH OWNS RECREATIONAL LAND AND COLLECTS DUES FROM LOT OWNERS MUST BE BROUGHT AS AN ARTICLE 78 PROCEEDING, NOT AN ACTION FOR A DECLARATORY JUDGMENT; THE ACTION IS THEREFORE TIME-BARRED (THIRD DEPT).

The Third Department, reversing Supreme Court, determined the amendment to the by-laws defendant not-for-profit corporation which owns land underneath a man-made lake must be contested in an Article 78 action, not a declaratory judgment action. Therefore the four-month Article 78 statute of limitations applied and the action was time-barred. The underlying dispute involved the assessment of annual dues for lots which had been exempt from dues. Plaintiffs are the owners of those lots:

Supreme Court concluded that the action being challenged was a legislative act, which cannot be challenged in a CPLR article 78 proceeding but must be maintained in a declaratory judgment action. However, the cases addressing legislative acts deal with challenges to “governmental activity,” rather than the activity of nonpublic corporations … . This is an important distinction as the rule prohibiting the use of CPLR article 78 proceedings to challenge acts of legislative bodies “is derived from the separation-of-powers doctrine,” and so “has no application to the quasi-legislative acts of administrative agencies” … . Similarly, it does not apply to the actions or decisions of nonpublic corporations. * * *

Whether defendant’s alleged interest in plaintiffs’ property is based on the imposition of restrictive covenants or the possibility of a lien if plaintiffs fail to pay dues on multiple lots, any such alleged interest would be based on the amended bylaws. Accordingly, though all of plaintiffs’ causes of action are couched in declaratory judgment language, they can be distilled to challenges to defendant’s enactment of the amended bylaws that could have been raised in a CPLR article 78 proceeding and are therefore subject to a four-month statute of limitations … . Indeed, other courts have held that a challenge to a corporation’s amendment of its bylaws must be raised via a CPLR article 78 proceeding commenced within four months of such amendment … . Doyle v Goodnow Flow Assn., Inc., 2021 NY Slip Op 02580, Third Dept 4-29-21

 

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THE SEVEN-YEAR STATUTE OF LIMITATIONS IN NYC’S VICTIMS OF GENDER-MOTIVATED VIOLENCE PROTECTION LAW (VGM) IS NOT PREEMPTED BY THE ONE-YEAR OR THREE-YEAR CPLR STATUTES OF LIMITATIONS; ALTHOUGH DEFENDANT AND DEFENDANT S CORPORATION MAY BE ONE AND THE SAME, THERE WAS ENOUGH EVIDENTIARY SUPPORT FOR THE NEGLIGENT HIRING AND SUPERVISION CAUSE OF ACTION TO SURVIVE THE MOTION TO DISMISS (FIRST DEPT).

The First Department, in a full-fledged opinion by Justice Acosta, reversing Supreme Court, determined the seven-year statute of limitations in NYC’s Victims of Gender-Motivated Violence Protection Law (VGM) was not preempted by the one-year statute of limitations for assault in the CPLR and the negligent hiring and supervision cause of action should have survived the motion to dismiss even though the S corporation (PDR) and the defendant (Rofe) may be one and the same. The complaint alleged plaintiffs were subjected to unwanted sexual touching by defendant Rofe during voice-over coaching sessions offered by defendant S corporation (PDR):

… [W]e find that the legislative intent of the VGM was to create a civil rights remedy or cause of action such as in VAWA, rather than to extend the statute of limitations for a particular class of assaults. Since the nature of the claim is for a civil rights violation (providing a remedy for those subjected to violence because of their gender), the seven-year limitations period provided in the Administrative Code is not preempted by the CPLR statute of limitations for assault claims. * * *

To be sure, defendants may be correct that PDR essentially has no corporate structure separate from Rofe. Plaintiffs themselves do not appear to distinguish between Rofe and PDR in their brief. Nevertheless, plaintiffs have sufficiently alleged that Rofe was an employee of PDR and, through the submission of additional evidence in opposition to the motion to dismiss, have also sufficiently alleged that there may have been other employees of PDR who either hired, or supervised Rofe or whom Rofe hired or supervised. The acts of a corporation’s agent and the knowledge acquired by the agent are presumptively imputed to the corporation … . Thus, Rofe’s knowledge (as an alleged agent of PDR) that an employee was potentially violent or prone to sexual assaults would normally be imputed to PDR, potentially requiring PDR to supervise that employee, and the cause of action for negligent hiring and supervision should be reinstated as against PDR … . Engelman v Rofe, 2021 NY Slip Op 01321, First Dept 3-2-21

 

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THE DEFENDANT LIMITED LIABILITY COMPANIES FUNCTIONED AS A SINGLE INTEGRATED UNIT WITH PLAINTIFF’S EMPLOYER; PLAINTIFF’S ONLY REMEDY IN THIS SLIP AND FALL CASE IS THE WORKERS’ COMPENSATION LAW BENEFITS HE APPLIED FOR AND RECEIVED BEFORE BRINGING THIS LABOR LAW 240(1) ACTION (FIRST DEPT). ​

The First Department, reversing Supreme Court, over an extensive dissent, determined the corporate entities plaintiff sued in this slip and fall case function as a single integrated entity with plaintiff’s employer, the nursing home where he was injured. Plaintiff had applied for and received Workers’ Compensation benefits and then brought this Labor 240(1) action. The First Department held that plaintiff’s exclusive remedy was Workers’ Compensation:

… [W]e find that Hopkins Ventures has shown ownership of 100% of both KFG Land and KFG Operating and that it exercised complete managerial and financial control over both companies, operating them as if they were a single integrated entity. Since the evidentiary proof submitted by KFG Land was sufficient to make out its prima facie case, that the LLCs functioned as a single integrated entity in connection with the joint venture of acquiring and operating the property and nursing home, the exclusivity provisions of the WCL apply. Plaintiff failed to raise a material issue of fact to defeat defendant’s motion for summary judgment. …

Although the dissent reaches the underlying merits of plaintiff’s cross appeal concerning the dismissal of his Labor Law §240(1) on the basis that he was not engaged in a “repair” or “alteration” within the meaning of Labor Law § 240(1) at the time of his accident, we affirm on the ground that even if plaintiff was engaged in alteration or repair, the exclusivity provisions of the WCL would be his sole remedy since he applied for and received those benefits. Fuller v KFG L & I, LLC, 2020 NY Slip Op 07998, First Dept 12-29-20

 

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THE PROOF WAS NOT SUFFICIENT TO SUPPORT PIERCING THE CORPORATE VEIL AND SUMMARY JUDGMENT SHOULD HAVE BEEN GRANTED ON THAT ISSUE (FIRST DEPT). ​

The First Department, reversing Supreme Court, determined the proof was not sufficient to support piercing the corporate veil and summary judgment should have been granted on that issue:

“Generally, a plaintiff seeking to pierce the corporate veil must show that (1) the owners exercised complete domination of the corporation in respect to the transaction attacked; and (2) that such domination was used to commit a fraud or wrong against the plaintiff which resulted in plaintiff’s injury” … .

“Since, by definition, a corporation acts through its officers and directors, to hold a shareholder/officer … personally liable, a plaintiff must do more than merely allege that the individual engaged in improper acts or acted in ‘bad faith’ while representing the corporation.” … Instead, “[t]he party seeking to pierce the corporate veil must establish that the owners [of the corporation], through their domination, abused the privilege of doing business in the corporate form to perpetrate a wrong or injustice against that party such that a court in equity will intervene” … .

Here, … the complaint … does not sufficiently allege injury to plaintiff. …

[Plaintiff]  “failed to produce evidence that the individual defendants took steps to render the corporate defendant insolvent in order to avoid plaintiffs’ claim for damages or otherwise defraud plaintiffs” … . Sutton 58 Assocs. LLC v Pilevsky, 2020 NY Slip Op 08020, First Dept 12-29-20

 

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