Corporation Law – Page 14 – New York Appellate Digest

PLAINTIFF DID NOT DEMONSTRATE THE CONTINUITY OF OWNERSHIP ELEMENT OF THE DE FACTO MERGER DOCTRINE SUCH THAT THE ASSETS OF ONE DEFENDANT SHOULD BE USED TO SATISFY THE DEBT OF ANOTHER (FOURTH DEPT).

The Fourth Department, modifying Supreme Court, determined plaintiff did not show that there was a continuity of ownership such that, pursuant to the de facto merger doctrine, the assets of defendant NYP Ag should be used to satisfy a judgment against NYP Management:

“Traditionally, courts have considered several factors in determining whether a de facto merger has occurred: (1) continuity of ownership; (2) a cessation of ordinary business and dissolution of the predecessor as soon as practically and legally possible; (3) assumption by the successor of the liabilities ordinarily necessary for the uninterrupted continuation of the business of the predecessor; and (4) a continuity of management, personnel, physical location, assets, and general business operation” … . …

… [C]ourts have flexibility in determining whether a transaction constitutes a de facto merger. While factors such as shareholder and management continuity will be evidence that a de facto merger has occurred . . . , those factors alone should not be determinative” … . … “[I]n non-tort actions, continuity of ownership is the essence of a merger’ ” … , and is a necessary predicate to finding a de facto merger… Here, inasmuch as [plaintiff] failed to establish continuity of ownership, it failed to establish that there was a de facto merger between the two corporations … . R&D Electronics, Inc. v NYP Mgt., Co., Inc., 2018 NY Slip Op 04151, Fourth Dept 6-8-18

CORPORATION LAW (PLAINTIFF DID NOT DEMONSTRATE THE CONTINUITY OF OWNERSHIP ELEMENT OF THE DE FACTO MERGER DOCTRINE SUCH THAT THE ASSETS OF ONE DEFENDANT SHOULD BE USED TO SATISFY THE DEBT OF ANOTHER (FOURTH DEPT))/DEBTOR-CREDITOR (CORPORATION LAW, PLAINTIFF DID NOT DEMONSTRATE THE CONTINUITY OF OWNERSHIP ELEMENT OF THE DE FACTO MERGER DOCTRINE SUCH THAT THE ASSETS OF ONE DEFENDANT SHOULD BE USED TO SATISFY THE DEBT OF ANOTHER (FOURTH DEPT))/DE FACTOR MERGER (CORPORATION LAW, DEBTOR-CREDITOR, PLAINTIFF DID NOT DEMONSTRATE THE CONTINUITY OF OWNERSHIP ELEMENT OF THE DE FACTO MERGER DOCTRINE SUCH THAT THE ASSETS OF ONE DEFENDANT SHOULD BE USED TO SATISFY THE DEBT OF ANOTHER (FOURTH DEPT))

June 8, 2018

Agency, Corporation Law, Real Estate, Real Property Law

FORMER PRESIDENT OF THE CORPORATION WHICH OWNED AN APARTMENT BUILDING HAD THE APPARENT AUTHORITY TO SELL THE BUILDING, BUYER WAS A BONA FIDE PURCHASER (SECOND DEPT).

The Second Department determined that the ostensible president the corporation (Lowbet) which owned an apartment building, Liu, had the apparent authority to sell the building, and the buyer, 44th Street Realty, was a bona fide purchaser. Although Liu had been removed as president and replaced by petitioner, that information was not provided to the Department of State Division of Corporations:

The petitioner and Liu married in 1985 and then separated in 1995, after which the petitioner moved to China. Since 1995, Liu has run the day-to-day business of Lowbet, with the petitioner’s knowledge and consent. In August 2006, Liu was removed as president of Lowbet and the petitioner and his son were named president and vice president, respectively. However, the petitioner did not update this information with the Department of State Division of Corporations.

44th Street Realty established, prima facie, that the subject deed was only voidable, not void ab initio, since the petitioner alleged that Liu’s signature and authority to convey were acquired by fraudulent means, but did not allege that Liu’s signature was forged … .

44th Street Realty also established, prima facie, that Liu was cloaked with apparent authority to sign the deed on behalf of Lowbet. The petitioner had condoned Liu’s unfettered control and operation of the day-to-day business of Lowbet, which gave rise to the appearance that Liu possessed authority to enter into a real estate transaction on behalf of Lowbet … . Under the circumstances, 44th Street Realty’s reliance upon the appearance of Liu’s authority was reasonable … .

Further, 44th Street Realty made a prima facie showing that it was a bona fide purchaser by demonstrating that it had paid valuable consideration for the property, in good faith and without knowledge of any alleged fraud by Liu … . Real Property Law §§ 266 and 291 protect the title of a bona fide purchaser for value who lacks knowledge of fraud by the grantor or affecting the grantor’s title … . 44th Street Realty’s submissions established that it had no knowledge of facts that would lead a reasonably prudent purchaser to inquire about possible fraud … . Matter of Shau Chung Hu v Lowbet Realty Corp., 2018 NY Slip Op 03529, Second Dept 5-16-18

REAL ESTATE (APPARENT AUTHORITY, FORMER PRESIDENT OF THE CORPORATION WHICH OWNED AN APARTMENT BUILDING HAD THE APPARENT AUTHORITY TO SELL THE BUILDING, BUYER WAS A BONA FIDE PURCHASER (SECOND DEPT))/REAL PROPERTY LAW (BONA FIDE PURCHASER, APPARENT AUTHORITY, FORMER PRESIDENT OF THE CORPORATION WHICH OWNED AN APARTMENT BUILDING HAD THE APPARENT AUTHORITY TO SELL THE BUILDING, BUYER WAS A BONA FIDE PURCHASER (SECOND DEPT))/AGENCY (APPARENT AUTHORITY, FORMER PRESIDENT OF THE CORPORATION WHICH OWNED AN APARTMENT BUILDING HAD THE APPARENT AUTHORITY TO SELL THE BUILDING, BUYER WAS A BONA FIDE PURCHASER (SECOND DEPT))/CORPORATION LAW (APPARENT AUTHORITY, FORMER PRESIDENT OF THE CORPORATION WHICH OWNED AN APARTMENT BUILDING HAD THE APPARENT AUTHORITY TO SELL THE BUILDING, BUYER WAS A BONA FIDE PURCHASER (SECOND DEPT))/APPARENT AUTHORITY (REAL ESTATE, FORMER PRESIDENT OF THE CORPORATION WHICH OWNED AN APARTMENT BUILDING HAD THE APPARENT AUTHORITY TO SELL THE BUILDING, BUYER WAS A BONA FIDE PURCHASER (SECOND DEPT))/BONA FIDE PURCHASER (REAL ESTATE, FORMER PRESIDENT OF THE CORPORATION WHICH OWNED AN APARTMENT BUILDING HAD THE APPARENT AUTHORITY TO SELL THE BUILDING, BUYER WAS A BONA FIDE PURCHASER (SECOND DEPT))

May 16, 2018

Civil Procedure, Contract Law, Corporation Law, Defamation

ALTHOUGH THE DEFENDANT NEW YORK COMPANY IS A WHOLLY OWNED SUBSIDIARY OF AN ISRAELI COMPANY, THE TWO ENTITIES OPERATED INDEPENDENTLY SUCH THAT NEW YORK COULD NOT EXERCISE JURISDICTION OVER THE ISRAELI COMPANY, A QUALIFIED PRIVILEGE RE DEFAMATORY REMARKS ALLEGEDLY MADE BY DEFENDANT DOES NOT INSULATE THE DEFENDANT FROM A CAUSE OF ACTION BASED UPON BREACH OF A CONTRACTUAL NON-DISPARAGEMENT CLAUSE (FIRST DEPT).

The First Department found that a defendant company, IAI, which operates in Israel, was not subject to personal jurisdiction in New York under the theory that defendant IAINA, which operates in New York, was a department of IAI. The court explained the relevant criteria. The court further held that a common interest privilege (with respect to alleged defamatory remarks regarding the plaintiff, defendant IAINA’s employee) does not insulate defendant from the alleged breach of a contractual non-disparagement clause:

Defendants established that IAI North America, Inc. (IAINA), which does business in the State of New York, is not a mere department of IAI, which operates primarily in Israel, and therefore that jurisdiction over IAINA is not jurisdiction over IAI … . The key executive personnel of the subsidiary were not assigned to their positions by the foreign parent, the subsidiary trained its own personnel, the parent did not write and publish all of the sales literature used by the subsidiary, and the subsidiary prepared its own financial statements … . … While IAINA is a wholly owned subsidiary of IAI, common ownership is “intrinsic to the parent-subsidiary relationship and, by [itself], not determinative”… . IAINA showed that it observed corporate formalities. Nothing in plaintiff’s affirmation indicates that IAI interferes in the selection and assignment of IAINA’s executive personnel, and the CEO of IAINA denied this. He also denied that IAI controlled IAINA’s marketing and operational policies. Plaintiff claimed that IAI had control over the approval of IAINA’s annual budget during the 11 years he worked at IAINA. However, this does not suffice … . …

IAINA … contends that the cause of action for breach of a non-disparagement clause should be dismissed because, even if it made disparaging remarks about plaintiff (its former employee), the remarks were privileged. However, the common interest privilege it relies on — which is part of the law of defamation — does not apply to a claim for breach of a non-disparagement clause … . Wolberg v IAI N. Am., Inc., 2018 NY Slip Op 03321, First Dept 5-8-18

CIVIL PROCEDURE (ALTHOUGH THE DEFENDANT NEW YORK COMPANY IS A WHOLLY OWNED SUBSIDIARY OF AN ISRAELI COMPANY, THE TWO ENTITIES OPERATED INDEPENDENTLY SUCH THAT NEW YORK COULD NOT EXERCISE JURISDICTION OVER THE ISRAELI COMPANY, A QUALIFIED PRIVILEGE RE DEFAMATORY REMARKS ALLEGEDLY MADE BY DEFENDANT DOES NOT INSULATE THE DEFENDANT FROM A CAUSE OF ACTION BASED UPON BREACH OF A CONTRACTUAL NON-DISPARAGEMENT CLAUSE (FIRST DEPT))/JURISDICTION (CIVIL PROCEDURE, CORPORATIONS, ALTHOUGH THE DEFENDANT NEW YORK COMPANY IS A WHOLLY OWNED SUBSIDIARY OF AN ISRAELI COMPANY, THE TWO ENTITIES OPERATED INDEPENDENTLY SUCH THAT NEW YORK COULD NOT EXERCISE JURISDICTION OVER THE ISRAELI COMPANY, A QUALIFIED PRIVILEGE RE DEFAMATORY REMARKS ALLEGEDLY MADE BY DEFENDANT DOES NOT INSULATE THE DEFENDANT FROM A CAUSE OF ACTION BASED UPON BREACH OF A CONTRACTUAL NON-DISPARAGEMENT CLAUSE (FIRST DEPT))/CORPORATIONS (JURISDICTION, ALTHOUGH THE DEFENDANT NEW YORK COMPANY IS A WHOLLY OWNED SUBSIDIARY OF AN ISRAELI COMPANY, THE TWO ENTITIES OPERATED INDEPENDENTLY SUCH THAT NEW YORK COULD NOT EXERCISE JURISDICTION OVER THE ISRAELI COMPANY, A QUALIFIED PRIVILEGE RE DEFAMATORY REMARKS ALLEGEDLY MADE BY DEFENDANT DOES NOT INSULATE THE DEFENDANT FROM A CAUSE OF ACTION BASED UPON BREACH OF A CONTRACTUAL NON-DISPARAGEMENT CLAUSE (FIRST DEPT))/DEFAMATION (NON-DISPARAGEMENT CLAUSE, A QUALIFIED PRIVILEGE RE DEFAMATORY REMARKS ALLEGEDLY MADE BY DEFENDANT DOES NOT INSULATE THE DEFENDANT FROM A CAUSE OF ACTION BASED UPON BREACH OF A CONTRACTUAL NON-DISPARAGEMENT CLAUSE (FIRST DEPT))/QUALIFIED PRIVILEGE (DEFAMATION, NON-DISPARAGEMENT CLAUSE, A QUALIFIED PRIVILEGE RE DEFAMATORY REMARKS ALLEGEDLY MADE BY DEFENDANT DOES NOT INSULATE THE DEFENDANT FROM A CAUSE OF ACTION BASED UPON BREACH OF A CONTRACTUAL NON-DISPARAGEMENT CLAUSE (FIRST DEPT))/NON-DISPARAGEMENT CLAUSE (DEFAMATION, A QUALIFIED PRIVILEGE RE DEFAMATORY REMARKS ALLEGEDLY MADE BY DEFENDANT DOES NOT INSULATE THE DEFENDANT FROM A CAUSE OF ACTION BASED UPON BREACH OF A CONTRACTUAL NON-DISPARAGEMENT CLAUSE (FIRST DEPT))/CONTRACT LAW (DEFAMATION, NON-DISPARAGEMENT CLAUSE, A QUALIFIED PRIVILEGE RE DEFAMATORY REMARKS ALLEGEDLY MADE BY DEFENDANT DOES NOT INSULATE THE DEFENDANT FROM A CAUSE OF ACTION BASED UPON BREACH OF A CONTRACTUAL NON-DISPARAGEMENT CLAUSE (FIRST DEPT))/PRIVILEGE (DEFAMATION, COMMON INTEREST, A QUALIFIED PRIVILEGE RE DEFAMATORY REMARKS ALLEGEDLY MADE BY DEFENDANT DOES NOT INSULATE THE DEFENDANT FROM A CAUSE OF ACTION BASED UPON BREACH OF A CONTRACTUAL NON-DISPARAGEMENT CLAUSE (FIRST DEPT))/COMMON INTEREST PRIVILEGE (DEFAMATION, A QUALIFIED PRIVILEGE RE DEFAMATORY REMARKS ALLEGEDLY MADE BY DEFENDANT DOES NOT INSULATE THE DEFENDANT FROM A CAUSE OF ACTION BASED UPON BREACH OF A CONTRACTUAL NON-DISPARAGEMENT CLAUSE (FIRST DEPT))

May 8, 2018

Civil Procedure, Corporation Law

ALTHOUGH DEFENDANT FOREIGN CORPORATION DID NOT HAVE AN OFFICE IN NEW YORK COUNTY, IT HAD DESIGNATED NEW YORK COUNTY AS ITS PLACE OF BUSINESS IN ITS FILING WITH THE SECRETARY OF STATE, MOTION TO CHANGE VENUE SHOULD NOT HAVE BEEN GRANTED (FIRST DEPT).

The First Department, reversing Supreme Court, determined defendants’ motion to change venue should not have been granted. Although defendant foreign corporation did not have a place of business in New York County, it had designated New York County as the location of its business in its filing with the Secretary of State:

Wakefern, a foreign corporation, submitted a copy of its application for authorization to conduct business filed with the Secretary of State, in which it identified New York County as “[t]he county within this state where its office is to be located” … . Wakefern’s designation of New York County in its application is controlling for venue purposes, even if it does not actually have an office in New York County … . Janis v Janson Supermarkets LLC, 2018 NY Slip Op 03333, First Dept 5-8-18

CORPORATION LAW (CIVIL PROCEDURE, VENUE, ALTHOUGH DEFENDANT FOREIGN CORPORATION DID NOT HAVE AN OFFICE IN NEW YORK COUNTY, IT HAD DESIGNATED NEW YORK COUNTY AS ITS PLACE OF BUSINESS IN ITS FILING WITH THE SECRETARY OF STATE, MOTION TO CHANGE VENUE SHOULD NOT HAVE BEEN GRANTED (FIRST DEPT))/CIVIL PROCEDURE (VENUE, CORPORATION LAW, ALTHOUGH DEFENDANT FOREIGN CORPORATION DID NOT HAVE AN OFFICE IN NEW YORK COUNTY, IT HAD DESIGNATED NEW YORK COUNTY AS ITS PLACE OF BUSINESS IN ITS FILING WITH THE SECRETARY OF STATE, MOTION TO CHANGE VENUE SHOULD NOT HAVE BEEN GRANTED (FIRST DEPT))/VENUE (CORPORATION LAW, ALTHOUGH DEFENDANT FOREIGN CORPORATION DID NOT HAVE AN OFFICE IN NEW YORK COUNTY, IT HAD DESIGNATED NEW YORK COUNTY AS ITS PLACE OF BUSINESS IN ITS FILING WITH THE SECRETARY OF STATE, MOTION TO CHANGE VENUE SHOULD NOT HAVE BEEN GRANTED (FIRST DEPT))/FOREIGN CORPORATIONS (CIVIL PROCEDURE, VENUE, ALTHOUGH DEFENDANT FOREIGN CORPORATION DID NOT HAVE AN OFFICE IN NEW YORK COUNTY, IT HAD DESIGNATED NEW YORK COUNTY AS ITS PLACE OF BUSINESS IN ITS FILING WITH THE SECRETARY OF STATE, MOTION TO CHANGE VENUE SHOULD NOT HAVE BEEN GRANTED (FIRST DEPT))

May 8, 2018

Civil Procedure, Corporation Law, Workers' Compensation

WORKER’S COMPENSATION TRUST DEEMED TO OWE THE WORKERS’ COMPENSATION BOARD $220 MILLION, ATTEMPTS TO AMEND THE COMPLAINT TO ADD CAUSES OF ACTION AFTER THE STATUTE OF LIMITATIONS HAD RUN FAILED, CRITERIA EXPLAINED, CRITERIA FOR A GENERAL BUSINESS LAW 35O CAUSE OF ACTION AND PLEADING AN ALTER EGO THEORY ADDRESSED (THIRD DEPT).

The Third Department determined the relation-back doctrine did not apply to the attempts to amend the complaint in this Worker’s Compensation trust action. The trust was formed as self-insurance for Workers’ Compensation claims, but was determined to owe the Workers’ Compensation Board $220 million. The decision is too complex to fairly summarize here. It comprehensively addresses the criteria for amending complaints, the relation-back doctrine, the General Business Law section 350 cause of action, and the corporate alter ego (piercing the corporate veil) pleading requirements:

“[T]he rule on a motion for leave to amend a pleading is that the movant need not establish the merits of the proposed amendment and, in the absence of prejudice or surprise resulting directly from the delay in seeking leave, such applications are to be freely granted unless the proposed amendment is palpably insufficient or patently devoid of merit” … . A claim is palpably insufficient or patently devoid of merit where it would be barred by the applicable statute of limitations. …

Where the issue is whether a claim may be interposed against a defendant who was named as a party before the statute of limitations expired, the query is limited to whether the earlier complaint “gave notice of the transactions, occurrences, or series of transactions or occurrences, to be proved pursuant to the amended pleading” … . …

“The relation back doctrine permits a [plaintiff] to amend a [complaint] to add a [defendant] even though the statute of limitations has expired at the time of amendment so long as the [plaintiff] can demonstrate three things: (1) that the claims arose out of the same occurrence, (2) that the later-added [defendant] is united in interest with a previously named [defendant], and (3) that the later-added [defendant] knew or should have known that, but for a mistake by [plaintiff] as to the later-added [defendant’s] identity, the [action] would have also been brought against him or her” … . …

The corporate veil will be pierced and liability imposed when either (1) there is complete domination of a corporation by an individual or another corporation with respect to the transaction being attacked that resulted in a fraud or wrong against the complaining party, or (2) “when a corporation has been so dominated by an individual or another corporation and its separate entity so ignored that it primarily transacts the dominator’s business instead of its own and can be called the other’s alter ego” … . Here, the proposed complaint alleges only that [the two entities] had common owners, officers and directors and that they shared the same office space, addresses and telephone numbers. Such allegations, standing alone, are insufficient to plead the elements required to establish alter ego liability … . Belair Care Ctr., Inc. v Cool Insuring Agency, Inc., 2018 NY Slip Op 03196, Third Dept 5-3-18

CIVIL PROCEDURE (COMPLAINTS, WORKER’S COMPENSATION TRUST DEEMED TO OWE THE WORKERS’ COMPENSATION BOARD $220 MILLION, ATTEMPTS TO AMEND THE COMPLAINT TO ADD CAUSES OF ACTION AFTER THE STATUTE OF LIMITATIONS HAD RUN FAILED, CRITERIA EXPLAINED, CRITERIA FOR A GENERAL BUSINESS LAW 35O CAUSE OF ACTION AND PLEADING AN ALTER EGO THEORY ADDRESSED (THIRD DEPT))/AMENDMENT OF COMPLAINTS (WORKER’S COMPENSATION TRUST DEEMED TO OWE THE WORKERS’ COMPENSATION BOARD $220 MILLION, ATTEMPTS TO AMEND THE COMPLAINT TO ADD CAUSES OF ACTION AFTER THE STATUTE OF LIMITATIONS HAD RUN FAILED, CRITERIA EXPLAINED, CRITERIA FOR A GENERAL BUSINESS LAW 35O CAUSE OF ACTION AND PLEADING AN ALTER EGO THEORY ADDRESSED (THIRD DEPT))/RELATION BACK DOCTRINE (AMENDMENT OF COMPLAINTS, WORKER’S COMPENSATION TRUST DEEMED TO OWE THE WORKERS’ COMPENSATION BOARD $220 MILLION, ATTEMPTS TO AMEND THE COMPLAINT TO ADD CAUSES OF ACTION AFTER THE STATUTE OF LIMITATIONS HAD RUN FAILED, CRITERIA EXPLAINED, CRITERIA FOR A GENERAL BUSINESS LAW 35O CAUSE OF ACTION AND PLEADING AN ALTER EGO THEORY ADDRESSED (THIRD DEPT))/COMPLAINTS (AMENDMENT, WORKER’S COMPENSATION TRUST DEEMED TO OWE THE WORKERS’ COMPENSATION BOARD $220 MILLION, ATTEMPTS TO AMEND THE COMPLAINT TO ADD CAUSES OF ACTION AFTER THE STATUTE OF LIMITATIONS HAD RUN FAILED, CRITERIA EXPLAINED, CRITERIA FOR A GENERAL BUSINESS LAW 35O CAUSE OF ACTION AND PLEADING AN ALTER EGO THEORY ADDRESSED (THIRD DEPT))/CORPORATION LAW (PLEADING, ALTER EGO, PIERCING THE CORPORATE VEIL, CRITERIA FOR PLEADING AN ALTER EGO THEORY ADDRESSED (THIRD DEPT))/ALTER EGO (CORPORATION LAW, CRITERIA FOR PLEADING AN ALTER EGO THEORY ADDRESSED (THIRD DEPT))/CORPORATE VEIL, PIERCING (PLEADING, CRITERIA FOR PLEADING AN ALTER EGO THEORY ADDRESSED (THIRD DEPT))/GENERAL BUSINESS LAW 350 (PLEADING REQUIREMENTS FOR GENERAL BUSINESS LAW 350 CAUSE OF ACTION (THIRD DEPT))

May 3, 2018

Corporation Law, Employment Law, Intellectual Property, Trade Secrets, Unfair Competition

IN THIS MISAPPROPRIATION OF TRADE SECRETS, UNFAIR COMPETITION, UNJUST ENRICHMENT ACTION, DAMAGES CANNOT BE MEASURED BY THE DEVELOPMENT COSTS AVOIDED BY THE COMPANY WHICH MISAPPROPRIATED THE TRADE SECRETS (CT APP).

The Court of Appeals, in a full-fledged opinion by Judge Feinman, over an extensive three-judge dissenting opinion, determined that the “cost avoidance” measure of damages should not be applied in this misappropriation of trade secrets, unfair competition and unjust enrichment action. Plaintiff proved at trial that former employees defected to defendant rival company, bringing trade secrets with them. Plaintiff’s only proof of damages was its expert’s opinion about how much it would have cost the rival company to develop the product without the misappropriated trade secrets (“avoided costs”):

… [T]he measure of damages in a trade secret action must be designed, as nearly as possible, to restore the plaintiff to the position it would have been in but for the infringement. Whether those losses are measured by the defendant’s profits, revenues, cost savings or any other measure of unjust gain, there is “no presumption of law or of fact” that such a figure will adequately approximate the losses incurred by the plaintiff … . A plaintiff therefore may not elect to measure its damages by the defendant’s avoided costs in lieu of its own losses. * * *

… [D]amages in trade secret actions must be measured by the losses incurred by the plaintiff, and … damages may not be based on the infringer’s avoided development costs. * * *

… .[W]here a defendant saves, through its unlawful activities, costs and expenses that otherwise would have been payable to third parties, those avoided third-party payments do not constitute funds held by the defendant “at the expense of” the plaintiff. Therefore, a plaintiff bringing an unjust enrichment action may not recover as compensatory damages the costs that the defendant avoided due to its unlawful activity in lieu of the plaintiff’s own losses. E.J. Brooks Co. v Cambridge Sec. Seals, 2018 NY Slip Op 03171, CtApp 5-3-18

CORPORATION LAW (MISAPPROPRIATION OF TRADE SECRETS, UNFAIR COMPETITION, UNJUST ENRICHMENT, IN THIS MISAPPROPRIATION OF TRADE SECRETS, UNFAIR COMPETITION, UNJUST ENRICHMENT ACTION, DAMAGES CANNOT BE MEASURED BY THE DEVELOPMENT COSTS AVOIDED BY THE COMPANY WHICH MISAPPROPRIATED THE TRADE SECRETS (CT APP))/TRADE SECRETS (MISAPPROPRIATION OF TRADE SECRETS, UNFAIR COMPETITION, UNJUST ENRICHMENT, IN THIS MISAPPROPRIATION OF TRADE SECRETS, UNFAIR COMPETITION, UNJUST ENRICHMENT ACTION, DAMAGES CANNOT BE MEASURED BY THE DEVELOPMENT COSTS AVOIDED BY THE COMPANY WHICH MISAPPROPRIATED THE TRADE SECRETS (CT APP))/UNFAIR COMPETITION (MISAPPROPRIATION OF TRADE SECRETS, UNFAIR COMPETITION, UNJUST ENRICHMENT, IN THIS MISAPPROPRIATION OF TRADE SECRETS, UNFAIR COMPETITION, UNJUST ENRICHMENT ACTION, DAMAGES CANNOT BE MEASURED BY THE DEVELOPMENT COSTS AVOIDED BY THE COMPANY WHICH MISAPPROPRIATED THE TRADE SECRETS (CT APP))/UNJUST ENRICHMENT (MISAPPROPRIATION OF TRADE SECRETS, UNFAIR COMPETITION, UNJUST ENRICHMENT, IN THIS MISAPPROPRIATION OF TRADE SECRETS, UNFAIR COMPETITION, UNJUST ENRICHMENT ACTION, DAMAGES CANNOT BE MEASURED BY THE DEVELOPMENT COSTS AVOIDED BY THE COMPANY WHICH MISAPPROPRIATED THE TRADE SECRETS (CT APP))/DAMAGES (AVOIDED COSTS, (MISAPPROPRIATION OF TRADE SECRETS, UNFAIR COMPETITION, UNJUST ENRICHMENT, IN THIS MISAPPROPRIATION OF TRADE SECRETS, UNFAIR COMPETITION, UNJUST ENRICHMENT ACTION, DAMAGES CANNOT BE MEASURED BY THE DEVELOPMENT COSTS AVOIDED BY THE COMPANY WHICH MISAPPROPRIATED THE TRADE SECRETS (CT APP))/AVOIDED COSTS (DAMAGES, MISAPPROPRIATION OF TRADE SECRETS, UNFAIR COMPETITION, UNJUST ENRICHMENT, IN THIS MISAPPROPRIATION OF TRADE SECRETS, UNFAIR COMPETITION, UNJUST ENRICHMENT ACTION, DAMAGES CANNOT BE MEASURED BY THE DEVELOPMENT COSTS AVOIDED BY THE COMPANY WHICH MISAPPROPRIATED THE TRADE SECRETS (CT APP))/INTELLECTUAL PROPERTY (MISAPPROPRIATION OF TRADE SECRETS, UNFAIR COMPETITION, UNJUST ENRICHMENT, IN THIS MISAPPROPRIATION OF TRADE SECRETS, UNFAIR COMPETITION, UNJUST ENRICHMENT ACTION, DAMAGES CANNOT BE MEASURED BY THE DEVELOPMENT COSTS AVOIDED BY THE COMPANY WHICH MISAPPROPRIATED THE TRADE SECRETS (CT APP))

May 3, 2018

Corporation Law, Workers' Compensation

DEFENDANT PROPERTY OWNER WAS THE ALTER EGO OF PLAINTIFF’S EMPLOYER, PLAINTIFF’S ONLY REMEDY FOR INJURY FROM A FALL WAS UNDER THE WORKERS’ COMPENSATION LAW (FOURTH DEPT).

The Fourth Department determined defendant property owner was the alto ego of plaintiff’s employer (Fox Run) and therefore plaintiff’s only remedy for his on the job injury was under the Workers’ Compensation Law. Plaintiff worked on a farm and was injured when he fell from a hayloft:

… [W]e conclude that defendant established as a matter of law that it was the alter ego of Fox Run. Defendant and Fox Run were single-member-owned LLCs that were created on the same day “for a single purpose[,] to operate a horse stable business” … . Both defendant and Fox Run had the same individual owner … , and shared the same insurance policy … . Defendant had “[n]o separate set of [financial] books” and “no separate accounting or tax reporting”… .

In addition, defendant had no employees … and “was formed solely for the purpose of owning the premises upon which plaintiff’s employer . . . operate[d]” its horse farm … . Fox Run leased property from no one other than defendant, there was no written lease agreement, and Fox Run did not pay any rent to defendant … . Finally, Fox Run’s owner paid defendant’s property taxes as well as the operating expenses of the property … . Buchwald v 1307 Porterville Rd., LLC, 2018 NY Slip Op 03006, Fourth Dept 4-27-18

WORKERS’ COMPENSATION LAW (DEFENDANT PROPERTY OWNER WAS THE ALTER EGO OF PLAINTIFF’S EMPLOYER, PLAINTIFF’S ONLY REMEDY FOR INJURY FROM A FALL WAS UNDER THE WORKERS’ COMPENSATION LAW (FOURTH DEPT))/CORPORATION LAW (WORKERS’ COMPENSATION LAW, DEFENDANT PROPERTY OWNER WAS THE ALTER EGO OF PLAINTIFF’S EMPLOYER, PLAINTIFF’S ONLY REMEDY FOR INJURY FROM A FALL WAS UNDER THE WORKERS’ COMPENSATION LAW (FOURTH DEPT))

April 27, 2018

Corporation Law, Limited Liability Company Law, Workers' Compensation

DEFENDANT WAS THE ALTER EGO OF PLAINTIFF’S EMPLOYER, THEREFORE WORKERS’ COMPENSATION WAS THE ONLY REMEDY FOR THE PLAINTIFF WHO WAS INJURED ON THE JOB (SECOND DEPT).

The Second Department determined that the defendant was the alter ego of plaintiff’s employer and therefore plaintiff’s only remedy for the on the job injury was under the Workers’ Compensation Law:

Generally, employees injured in the course of their employment may recover against their employers only under the Workers’ Compensation Law … . Workers’ Compensation Law § 29(6) expressly provides that “[t]he right to compensation or benefits under this chapter, shall be the exclusive remedy to an employee” … . The exclusive remedy provisions also bar employees from seeking damages from “alter egos” of their employers … .. The alter ego rule applies when one of the entities in question controls the other or when the two entities operate as a single integrated entity … . A mere showing that the entities are related—by, for example, sharing officers or ownership—is insufficient… .

Here, the defendant established, prima facie, that it was an alter ego of the plaintiff’s employer by submitting evidence that, among other things, in addition to owning the premises, it was the sole owner and manager of the limited liability company that was the plaintiff’s employer, that the plaintiff’s employer was formed to provide bus drivers for the defendant’s pupil transportation business, and that the two entities shared the same Workers’ Compensation insurance policy … . Clarke v First Student, Inc., 2018 NY Slip Op 02766, Second Dept 4-25-18

WORKER’S COMPENSATION LAW (DEFENDANT WAS THE ALTER EGO OF PLAINTIFF’S EMPLOYER,THEREFORE WORKERS’ COMPENSATION WAS THE ONLY REMEDY FOR THE PLAINTIFF WHO WAS INJURED ON THE JOB (SECOND DEPT))/CORPORATION LAW (WORKERS’ COMPENSATION, ALTER EGO, DEFENDANT WAS THE ALTER EGO OF PLAINTIFF’S EMPLOYER,THEREFORE WORKERS’ COMPENSATION WAS THE ONLY REMEDY FOR THE PLAINTIFF WHO WAS INJURED ON THE JOB (SECOND DEPT))/ALTER EGO (WORKERS’ COMPENSATION, DEFENDANT WAS THE ALTER EGO OF PLAINTIFF’S EMPLOYER,THEREFORE WORKERS’ COMPENSATION WAS THE ONLY REMEDY FOR THE PLAINTIFF WHO WAS INJURED ON THE JOB (SECOND DEPT))

April 25, 2018

Corporation Law, Fiduciary Duty

AN ACTION AGAINST A NOT FOR PROFIT CORPORATION FOR BREACH OF A FIDUCIARY DUTY MUST ALLEGE THE FAILURE TO ACT IN GOOD FAITH ON BEHALF OF THE CORPORATION OR ITS MEMBERS, NOT, AS HERE, THE FAILURE TO ACT IN A MEMBER’S PERSONAL BEST INTEREST (SECOND DEPT).

The Second Department noted that an action against a not for profit corporation (here a yacht club) for breach of a fiduciary duty must allege the failure to act in good faith on behalf of the corporation or its members, not the failure to act in good faith in a member’s (plaintiff’s) personal best interest. The board had excluded plaintiff’s domestic partner, who was not a member, from the club:

The elements of a cause of action to recover damages for breach of fiduciary duty are (1) the existence of a fiduciary relationship, (2) misconduct by the defendant, and (3) damages directly caused by the defendant’s misconduct … . The directors of a not-for-profit corporation like the Club “have the fiduciary obligation to act on behalf of the corporation in good faith and with reasonable care so as to protect and advance its interests” … . Here, however, the complaint did not allege that the Club defendants failed to act in good faith on behalf of the Club or its members’ collective interests, but merely alleged that they failed to act in [plaintiff’s] personal best interest … . Accordingly, the complaint did not state a cause of action to recover damages for breach of fiduciary duty. Nachbar v Cornwall Yacht Club, 2018 NY Slip Op 02795, Second Dept 4-25-18

CORPORATION LAW (AN ACTION AGAINST A NOT FOR PROFIT CORPORATION FOR BREACH OF A FIDUCIARY DUTY MUST ALLEGE THE FAILURE TO ACT IN GOOD FAITH ON BEHALF OF THE CORPORATION OR ITS MEMBERS, NOT, AS HERE, THE FAILURE TO ACT IN A MEMBER’S PERSONAL BEST INTEREST (SECOND DEPT))/NOT FOR PROFIT CORPORATION (AN ACTION AGAINST A NOT FOR PROFIT CORPORATION FOR BREACH OF A FIDUCIARY DUTY MUST ALLEGE THE FAILURE TO ACT IN GOOD FAITH ON BEHALF OF THE CORPORATION OR ITS MEMBERS, NOT, AS HERE, THE FAILURE TO ACT IN A MEMBER’S PERSONAL BEST INTEREST (SECOND DEPT))/YACHT CLUB (CORPORATION LAW, AN ACTION AGAINST A NOT FOR PROFIT CORPORATION FOR BREACH OF A FIDUCIARY DUTY MUST ALLEGE THE FAILURE TO ACT IN GOOD FAITH ON BEHALF OF THE CORPORATION OR ITS MEMBERS, NOT, AS HERE, THE FAILURE TO ACT IN A MEMBER’S PERSONAL BEST INTEREST (SECOND DEPT)/FIDUCIARY DUTY (CORPORATION LAW, AN ACTION AGAINST A NOT FOR PROFIT CORPORATION FOR BREACH OF A FIDUCIARY DUTY MUST ALLEGE THE FAILURE TO ACT IN GOOD FAITH ON BEHALF OF THE CORPORATION OR ITS MEMBERS, NOT, AS HERE, THE FAILURE TO ACT IN A MEMBER’S PERSONAL BEST INTEREST (SECOND DEPT))

April 25, 2018

Corporation Law, Landlord-Tenant

BECAUSE ONLY A CORPORATE ENTITY FORMED BY PLAINTIFF TENANT WAS NAMED ON THE LEASE, PLAINTIFF WAS NOT ENTITLED TO RENT STABILIZATION PROTECTIONS (FIRST DEPT).

The First Department, reversing Supreme Court, over a dissent, ,determined plaintiff (Fox) was not entitled to the protections of rent stabilization because the lease was in the name of a corporate entitled formed by the plaintiff and plaintiff was not named in the lease:

In 2008, at Fox’s suggestion, a renewal lease was entered into by plaintiff MBE Ltd., an entity wholly owned by Fox, with the understanding that Fox would continue to occupy the apartment; MBE executed renewal leases for the apartment in 2010 and 2012. Fox has continued to live in the apartment since MBE became the tenant of record. In 2014, defendant 12 East 88th LLC purchased the building and informed Fox that the lease would not be renewed.

Because the 2008 lease, and the subsequent lease renewals, named MBE as the sole tenant and did not identify as the occupant of the apartment a particular individual with a right to demand a renewal lease, Fox is not entitled to the renewal of the lease … .

… [T]his Court [has] established that “a corporation is entitled to a renewal lease where the lease specifies a particular individual as the occupant and no perpetual tenancy is possible” … . Our … cases have construed the first requirement strictly, denying rent stabilization protections to individual occupants who are not actually identified in an entity’s rent stabilized lease … . Fox v 12 E. 88th LLC, 2018 NY Slip Op 02289, First Dept 4-3-18

LANDLORD-TENANT (RENT STABILIZATION, BECAUSE ONLY A CORPORATE ENTITY FORMED BY PLAINTIFF TENANT WAS NAMED ON THE LEASE, PLAINTIFF WAS NOT ENTITLED TO RENT STABILIZATION PROTECTIONS (FIRST DEPT))/RENT STABILIZATION (BECAUSE ONLY A CORPORATE ENTITY FORMED BY PLAINTIFF TENANT WAS NAMED ON THE LEASE, PLAINTIFF WAS NOT ENTITLED TO RENT STABILIZATION PROTECTIONS (FIRST DEPT))/CORPORATION LAW (LANDLORD-TENANT, RENT STABILIZATION, BECAUSE ONLY A CORPORATE ENTITY FORMED BY PLAINTIFF TENANT WAS NAMED ON THE LEASE, PLAINTIFF WAS NOT ENTITLED TO RENT STABILIZATION PROTECTIONS (FIRST DEPT))

April 3, 2018