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PIERCING THE CORPORATE VEIL (ALTER EGO) ALLEGATIONS PROPERLY SURVIVED MOTION TO DISMISS.

The First Department determined defendants’ motion to dismiss breach of contract causes of action founded in part on piercing the corporate veil was properly denied:

[Plaintiff] alleged that [defendant] Diaz Rivera, exercised “complete dominion and control” and “complete business discretion” over “all aspects of [the corporation’s] management and operations,” and that [the corporation] and Diaz Rivera failed “to follow normal and customary corporate procedures with regard to [the corporation],” in that [the corporation] “fail[ed] to hold required meetings for [the corporation’s] partners, [and] fail[ed] to prepare and keep corporate records.” Finally, [defendant] alleged that Diaz Rivera, with an improper motive, commingled his funds with [corporation] funds, resulting in inadequate capitalization. …

We find that the allegations of an absence of corporate formalities, inadequate capitalization, and the commingling of corporate and personal funds, as well as the allegations that Diaz Rivera directed [the corporation] to take various actions that harmed [defendant], including failing to transfer property rights, siphoning resort revenues, and incurring unnecessary taxes, are sufficient to withstand this pre-answer motion to dismiss the complaint, based on alter ego liability, as against Diaz Rivera. Cargill Soluciones Empresariales, S.A. de C.V., SOFOM, ENR v Desarrolladora Farallon S. de R.L. de C.V.,2017 NY Slip Op 00069, 1st Dept 1-5-17

 

CORPORATION LAW (PIERCING THE CORPORATE VEIL (ALTER EGO) ALLEGATIONS PROPERLY SURVIVED MOTION TO DISMISS)/PIERCING THE CORPORATE VEIL  (PIERCING THE CORPORATE VEIL (ALTER EGO) ALLEGATIONS PROPERLY SURVIVED MOTION TO DISMISS)/ALTER EGO (CORPORATION LAW, (PIERCING THE CORPORATE VEIL (ALTER EGO) ALLEGATIONS PROPERLY SURVIVED MOTION TO DISMISS)

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QUESTION OF FACT WHETHER WORKER’S COMPENSATION LAW PRECLUDED SUIT IN NEGLIGENCE, DEFENDANT WAS BOTH AN OFFICER OF PLAINTIFF’S EMPLOYER AND OWNER, IN AN INDIVIDUAL CAPACITY, OF THE PREMISES WHERE PLAINTIFF SLIPPED AND FELL.

The Third Department, reversing Supreme Court, determined there was a question of fact whether the Workers’ Compensation Law precluded a lawsuit in negligence against the defendant, who was the president and a shareholder of plaintiff’s employer, Total Recall, and was the owner, in an individual capacity, of the building in which Total Recall is located. Plaintiff slipped and fell on ice in the parking lot behind the building:

… [W]hen an employee, during the course of his or her employment, is injured due to the negligence of a coemployee, the employee’s right to compensation lies under the exclusive provisions of the Workers’ Compensation Law (see Workers’ Compensation Law § 29 [6]…). Where the defendant is both the property owner and a corporate officer of the plaintiff’s employer, the defendant’s responsibility to provide the plaintiff with a safe place to work may be merged, in which case, workers’ compensation benefits are the sole remedy for the plaintiff … . If, however, the “defendant’s duty of care toward [the] plaintiff was owed purely in [the] capacity as owner of the property at the accident site, and not at all as a coemployee,” Workers’ Compensation Law § 29 (6) will not bar the plaintiff’s negligence action … .

The issue distills to whether the accident site was in an area that was exclusive to Total Recall and its employees such that defendant, as the property owner and an executive officer of Total Recall, had indistinguishable obligations to maintain the area in a reasonably safe condition. Garelle v Geinitz, 2016 NY Slip Op 08916, 3rd Dept 12-29-16

NEGLIGENCE (QUESTION OF FACT WHETHER WORKER’S COMPENSATION LAW PRECLUDED SUIT IN NEGLIGENCE, DEFENDANT WAS BOTH AN OFFICER OF PLAINTIFF’S EMPLOYER AND OWNER, IN AN INDIVIDUAL CAPACITY, OF THE PREMISES WHERE PLAINTIFF SLIPPED AND FELL)/WORKERS’ COMPENSATION LAW (NEGLIGENCE, QUESTION OF FACT WHETHER WORKER’S COMPENSATION LAW PRECLUDED SUIT IN NEGLIGENCE, DEFENDANT WAS BOTH AN OFFICER OF PLAINTIFF’S EMPLOYER AND OWNER, IN AN INDIVIDUAL CAPACITY, OF THE PREMISES WHERE PLAINTIFF SLIPPED AND FELL)/SLIP AND FALL (QUESTION OF FACT WHETHER WORKER’S COMPENSATION LAW PRECLUDED SUIT IN NEGLIGENCE, DEFENDANT WAS BOTH AN OFFICER OF PLAINTIFF’S EMPLOYER AND OWNER, IN AN INDIVIDUAL CAPACITY, OF THE PREMISES WHERE PLAINTIFF SLIPPED AND FELL)/CORPORATION LAW (QUESTION OF FACT WHETHER WORKER’S COMPENSATION LAW PRECLUDED SUIT IN NEGLIGENCE, DEFENDANT WAS BOTH AN OFFICER OF PLAINTIFF’S EMPLOYER AND OWNER, IN AN INDIVIDUAL CAPACITY, OF THE PREMISES WHERE PLAINTIFF SLIPPED AND FELL)

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DEFENDANT’S SUMMARY JUDGMENT MOTION WAS PREMATURE, PIERCING THE CORPORATE VEIL MIGHT BE AN ISSUE DETERMINING WHETHER WORKERS’ COMPENSATION IS THE SOLE REMEDY, FURTHER DISCOVERY NEEDED.

The Third Department determined defendant’s summary judgment motion in this wrongful death action should have been denied as premature. Plaintiff’s decedent was killed in a workplace accident and workers’ compensation death benefits were paid out. In addition to arguing that workers’ compensation was plaintiff’s sole remedy, defendant argued the corporation plaintiff sued had been dissolved and assets transferred to another corporation. Because piercing the corporate veil might be an issue, the Third Department held that plaintiff was entitled to discovery to flesh out the relationship among plaintiff’s decedent and the two corporations:

“[A] summary judgment motion is properly denied as premature when the nonmoving party has not been given reasonable time and opportunity to conduct disclosure relative to pertinent evidence that is within the exclusive knowledge of the movant or a codefendant” … . Although we have held that, “in certain situations, . . . more than one entity may be considered a plaintiff’s employer for purposes of workers’ compensation” … , defendant’s submissions fall far short of establishing that premise as a matter of law. A determination as to whether two entities are alter egos of each other requires a far more detailed record than is present here … . Pringle v AC Bodyworks & Sons, LLC, 2016 NY Slip Op 08924, 3rd Dept 12-29-16

CIVIL PROCEDURE (DEFENDANT’S SUMMARY JUDGMENT MOTION WAS PREMATURE, PIERCING THE CORPORATE VEIL MIGHT BE AN ISSUE, FURTHER DISCOVERY NEEDED)/CORPORATION LAW (DEFENDANT’S SUMMARY JUDGMENT MOTION WAS PREMATURE, PIERCING THE CORPORATE VEIL MIGHT BE AN ISSUE, FURTHER DISCOVERY NEEDED)/WORKERS’ COMPENSATION LAW (DEFENDANT’S SUMMARY JUDGMENT MOTION WAS PREMATURE, PIERCING THE CORPORATE VEIL MIGHT BE AN ISSUE TO DETERMINE WHETHER WORKERS’ COMPENSATION IS THE SOLE REMEDY, FURTHER DISCOVERY NEEDED)/NEGLIGENCE (DEFENDANT’S SUMMARY JUDGMENT MOTION WAS PREMATURE, PIERCING THE CORPORATE VEIL MIGHT BE AN ISSUE TO DETERMINE WHETHER WORKERS’ COMPENSATION IS THE SOLE REMEDY, FURTHER DISCOVERY NEEDED)/WRONGFUL DEATH (DEFENDANT’S SUMMARY JUDGMENT MOTION WAS PREMATURE, PIERCING THE CORPORATE VEIL MIGHT BE AN ISSUE TO DETERMINE WHETHER WORKERS’ COMPENSATION IS THE SOLE REMEDY, FURTHER DISCOVERY NEEDED)

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PETITIONER OPERATED AN ONSHORE PETROLEUM STORAGE FACILITY WITHOUT A LICENSE IN VIOLATION OF THE NAVIGATION LAW, LICENSE FEES AND PENALTIES PROPERLY IMPOSED UPON PETITIONER’S SOLE SHAREHOLDER.

The Third Department affirmed the respondent commissioner of environmental conservation’s determination petitioner had failed to obtain licenses and pay license fees for an onshore petroleum storage facility and failed to maintain an adequate secondary containment area for the storage tanks. The assessment of fees and penalties was upheld, as was piercing the corporate veil to impose the fees and penalties upon petitioner’s sole shareholder personally:

The applicable standard of review is whether substantial evidence supports respondent’s determination (see CPLR 7803 [4]…). Under this standard, “it is the responsibility of the administrative agency to weigh the evidence and choose from among competing inferences therefrom and, so long as the inference drawn and the ultimate determination made are supported by substantial evidence, it is not for the court to substitute its judgment for that of the administrative agency” … . Respondent is not bound by the ALJ’s factual findings and is entitled to make his own findings … . To that end, respondent’s determination will not be disturbed so long as it is supported by substantial evidence … . …

Under New York’s Navigation Law, a person is prohibited from operating a major petroleum storage facility in the absence of a license (see Navigation Law § 174 [1] [a]; [9]). Matter of Supreme Energy, LLC v Martens, 2016 NY Slip Op 08143, 3rd Dept 12-1-16

 

ENVIRONMENTAL LAW (PETITIONER OPERATED AN ONSHORE PETROLEUM STORAGE FACILITY WITHOUT A LICENSE IN VIOLATION OF THE NAVIGATION LAW, LICENSE FEES AND PENALTIES PROPERLY IMPOSED UPON PETITIONER’S SOLE SHAREHOLDER)/NAVIGATION LAW (PETITIONER OPERATED AN ONSHORE PETROLEUM STORAGE FACILITY WITHOUT A LICENSE IN VIOLATION OF THE NAVIGATION LAW, LICENSE FEES AND PENALTIES PROPERLY IMPOSED UPON PETITIONER’S SOLE SHAREHOLDER)/PETROLEUM STORAGE FACILITY (ENVIRONMENTAL LAW, NAVIGATION LAW, PETITIONER OPERATED AN ONSHORE PETROLEUM STORAGE FACILITY WITHOUT A LICENSE IN VIOLATION OF THE NAVIGATION LAW, LICENSE FEES AND PENALTIES PROPERLY IMPOSED UPON PETITIONER’S SOLE SHAREHOLDER)/CORPORATION LAW (ENVIRONMENTAL LAW, NAVIGATION LAW, PETITIONER OPERATED AN ONSHORE PETROLEUM STORAGE FACILITY WITHOUT A LICENSE IN VIOLATION OF THE NAVIGATION LAW, LICENSE FEES AND PENALTIES PROPERLY IMPOSED UPON PETITIONER’S SOLE SHAREHOLDER)/PIERCING THE CORPORATE VEIL (ENVIRONMENTAL LAW, NAVIGATION LAW, PETITIONER OPERATED AN ONSHORE PETROLEUM STORAGE FACILITY WITHOUT A LICENSE IN VIOLATION OF THE NAVIGATION LAW, LICENSE FEES AND PENALTIES PROPERLY IMPOSED UPON PETITIONER’S SOLE SHAREHOLDER)

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COMPLAINT STATED A CAUSE OF ACTION AGAINST BROKER INDIVIDUALLY FOR NEGLIGENT MISREPRESENTATION AND FOR BREACH OF A FIDUCIARY DUTY AGAINST THE BROKER’S CORPORATION.

The Second Department, reversing (modifying), Supreme Court determined the complaint stated a cause of against for negligent misrepresentation against an insurance broker (Weiss) individually and for breach of fiduciary duty against the broker’s corporation (JDW). It was alleged that the defendants failed to add plaintiff’s landlord as an additional insured and the broker signed a certificate which falsely indicated the landlord had been added to the policy:

Here, the Supreme Court erred in determining, upon reargument, that the complaint failed to state a cause of action sounding in negligent misrepresentation against Weiss individually. … [W]e note that the complaint, as amplified by the evidentiary materials submitted by the plaintiffs, alleged that Weiss personally signed a certificate of insurance falsely stating that the plaintiffs’ landlord had been added as an additional insured on a certain commercial general liability insurance policy, and forwarded this certificate to the plaintiffs, knowing that it was required by the plaintiffs’ landlord. This is sufficient, for purposes of CPLR 3211(a)(7), to state a cause of action against Weiss, based on his personal participation in the commission of a tort … . * * *

The common-law rule is that “an insurance broker acting as an agent of its customer has a duty of reasonable care to the customer to obtain [specifically] requested coverage within a reasonable time after the request, or to inform the customer of the agent’s inability to do so, [but] the agent owes no continuing duty to advise, guide or direct the customer insured to obtain additional coverage” … . However “[w]here a special relationship develops between the broker and client, . . . [the] broker may be liable, even in the absence of a specific request, for failing to advise or direct the client to obtain additional coverage” … . The Court of Appeals has identified three “exceptional situations” which may give rise to such a special relationship: ” (1) the agent receives compensation for consultation apart from payment of the premiums; (2) there was some interaction regarding a question of coverage, with the insured relying on the expertise of the agent; or (3) there is a course of dealing over an extended period of time which would have put objectively reasonable insurance agents on notice that their advice was being sought and specially relied on'” … .

Here, contrary to the defendants’ contention, the complaint sufficiently alleged that there was a course of dealing between JDW and the plaintiffs over an extended period of time, which may have given rise to a special relationship between them … . JT Queens Carwash, Inc. v JDW & Assoc., Inc., 2016 NY Slip Op 07295, 2nd Dept 11-9-16

 

INSURANCE LAW (COMPLAINT STATED A CAUSE OF ACTION AGAINST BROKER INDIVIDUALLY FOR NEGLIGENT MISREPRESENTATION AND FOR BREACH OF A FIDUCIARY DUTY AGAINST THE BROKER’S CORPORATION)/CORPORATION LAW (INSURANCE LAW, COMPLAINT STATED A CAUSE OF ACTION AGAINST BROKER INDIVIDUALLY FOR NEGLIGENT MISREPRESENTATION AND FOR BREACH OF A FIDUCIARY DUTY AGAINST THE BROKER’S CORPORATION)/NEGLIGENT MISREPRESENTATION (INSURANCE LAW, COMPLAINT STATED A CAUSE OF ACTION AGAINST BROKER INDIVIDUALLY FOR NEGLIGENT MISREPRESENTATION AND FOR BREACH OF A FIDUCIARY DUTY AGAINST THE BROKER’S CORPORATION)/FIDUCIARY DUTY (INSURANCE LAW, COMPLAINT STATED A CAUSE OF ACTION AGAINST BROKER INDIVIDUALLY FOR NEGLIGENT MISREPRESENTATION AND FOR BREACH OF A FIDUCIARY DUTY AGAINST THE BROKER’S CORPORATION)

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COMPLAINT SUFFICIENTLY ALLEGED A CAUSE OF ACTION UNDER THE DOCTRINE OF PIERCING THE CORPORATE VEIL, ISSUE NOT RAISED BELOW PROPERLY CONSIDERED ON APPEAL.

The Second Department determined plaintiff had stated a cause of action under the “pierce the corporate veil” theory. Weaver was the developer of a construction project and Andrea was the general contractor. Defendant Weinberg was a member of Weaver and a shareholder of Andrea. Plaintiff had obtained a unpaid judgment against Andrea. Plaintiff alleged Weinberg abused the privilege of doing business in corporate form and sought to pierce the corporate veil and hold Weinberg liable for Andrea’s debts. The court noted that, although the contention that New York does not recognize a cause of action for piercing the corporate veil was not raised below, the question could be considered on appeal because it involves a question of law which appears on the record and which could not have been avoided if raised at the proper time:

To survive a motion to dismiss the complaint, a party seeking to pierce the corporate veil must allege facts that, if proved, establish that the party against whom the doctrine is asserted (1) exercised complete domination over the corporation with respect to the transaction at issue, and (2) through such domination, abused the privilege of doing business in the corporate form to perpetrate a wrong or injustice against the plaintiff such that a court in equity will intervene … . “Factors to be considered in determining whether an individual has abused the privilege of doing business in the corporate or LLC form include the failure to adhere to [corporate or] LLC formalities, inadequate capitalization, commingling of assets, and the personal use of [corporate or] LLC funds” … .

“Additionally, the corporate veil will be pierced to achieve equity, even absent fraud, 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” … . A cause of action under the doctrine of piercing the corporate veil is “not required to meet any heightened level of particularity in its allegations … .

Here, the plaintiff adequately pleaded allegations that Weinberg dominated Andrea, and that he engaged in acts amounting to an abuse of the corporate form to perpetrate a wrong or injustice against the plaintiff. In this regard, the plaintiff alleged that Andrea was inadequately capitalized, that Weinberg commingled the assets of Andrea with the assets of Weaver, that Weinberg failed to adhere to corporate formalities with respect to Andrea, that Weinberg kept assets out of Andrea to avoid paying its debts and the judgment to the plaintiff, and that Weinberg used the account of Weaver to partially pay the debts of Andrea to the plaintiff. The plaintiff also sufficiently pleaded allegations that Weaver was the alter ego of Andrea. Olivieri Constr. Corp. v WN Weaver St., LLC, 2016 NY Slip Op 07302, 2nd Dept 11-9-16

 

CORPORATION LAW(COMPLAINT SUFFICIENTLY ALLEGED A CAUSE OF ACTION UNDER THE DOCTRINE OF PIERCING THE CORPORATE VEIL, ISSUE NOT RAISED BELOW PROPERLY CONSIDERED ON APPEAL)/PIERCING THE CORPORATE VEIL (COMPLAINT SUFFICIENTLY ALLEGED A CAUSE OF ACTION UNDER THE DOCTRINE OF PIERCING THE CORPORATE VEIL, ISSUE NOT RAISED BELOW PROPERLY CONSIDERED ON APPEAL)/APPEALS (COMPLAINT SUFFICIENTLY ALLEGED A CAUSE OF ACTION UNDER THE DOCTRINE OF PIERCING THE CORPORATE VEIL, ISSUE NOT RAISED BELOW PROPERLY CONSIDERED ON APPEAL)

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DISMISSAL OF ACTIONS STEMMING FROM THE MADOFF PONZI SCHEME AFFIRMED PURSUANT TO THE DOCTRINE OF IN PARI DELICTO (COURT WILL NOT RESOLVE A DISPUTE BETWEEN TWO WRONGDOERS).

The First Department, in a full-fledged opinion too complex for summary here (by Justice Tom), affirmed the dismissal of complaints stemming from the Madoff Ponzi scheme pursuant to the doctrine of in pari delicto (courts will not resolve a dispute between two wrongdoers).

In this case, plaintiff’s claims are precluded under the doctrine of in pari delicto. As the funds’ bankruptcy trustee, plaintiff stands in the funds’ shoes, and is subject to a defense based on the in pari delicto doctrine to the same extent as the funds … . Thus, the doctrine “prevents the trustee from recovering in tort if the corporation, acting through authorized employees in their official capacities, participated in the tort” … .

While a claim of in pari delicto sometimes requires factual development and is therefore not amenable to dismissal at the pleading stage … , the doctrine can apply on a motion to dismiss in an appropriate case … , such as where its application is “plain on the face of the pleadings” … . New Greenwich Litig. Trustee, LLC v Citco Fund Servs. (Europe) B.V., 2016 NY Slip Op 06796, 1st Dept 10-18-16

 

CIVIL PROCEDURE (DISMISSAL OF ACTIONS STEMMING FROM THE MADOFF PONZI SCHEME AFFIRMED PURSUANT TO THE DOCTRINE OF IN PARI DELICTO, COURT WILL NOT RESOLVE A DISPUTE BETWEEN TWO WRONGDOERS)/CORPORATION LAW (DISMISSAL OF ACTIONS STEMMING FROM THE MADOFF PONZI SCHEME AFFIRMED PURSUANT TO THE DOCTRINE OF IN PARI DELICTO, COURT WILL NOT RESOLVE A DISPUTE BETWEEN TWO WRONGDOERS)/IN PAR DELICTO (DISMISSAL OF ACTIONS STEMMING FROM THE MADOFF PONZI SCHEME AFFIRMED PURSUANT TO THE DOCTRINE OF IN PARI DELICTO, COURT WILL NOT RESOLVE A DISPUTE BETWEEN TWO WRONGDOERS)/MADOFF PONZI SCHEME (DISMISSAL OF ACTIONS STEMMING FROM THE MADOFF PONZI SCHEME AFFIRMED PURSUANT TO THE DOCTRINE OF IN PARI DELICTO, COURT WILL NOT RESOLVE A DISPUTE BETWEEN TWO WRONGDOERS)

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NEW YORK’S BORROWING STATUTE APPLIES PURSUANT TO CONTRACTUAL CHOICE OF LAW PROVISION; UNDER THE BORROWING STATUTE, THE CANADIAN STATUTE OF LIMITATIONS APPLIES AND RENDERS THE ACTION BROUGHT BY A CANADIAN PLAINTIFF UNTIMELY.

The First Department, in a full-fledged opinion by Justice Gische, determined a broad choice of law provision in a contract required the application of New York’s borrowing statute (CPLR 202). Plaintiff is a corporation incorporated under the law of the Province of Ontario Canada. The statute of limitations for breach of contract under Ontario law is two years. New York’s statute of limitations is six years. Because, under the facts, New York’s borrowing statute applies and therefore the Ontario statute of limitations controls, the action is untimely:

The borrowing statute is itself a part of New York’s procedural law and is a statute of limitations in its own right, existing as a separate procedural rule within the rules of our domestic civil practice, addressing limitations of time … . Thus, applying the borrowing statute is perfectly consistent with a broad choice-of-law contract clause that requires New York procedural rules to apply to the parties’ disputes. 2138747 Ontario, Inc. v Samsung C&T Corp., 2016 NY Slip Op 06671, 1st Dept 10-11-16

CIVIL PROCEDURE (NEW YORK’S BORROWING STATUTE APPLIES PURSUANT TO CONTRACTUAL CHOICE OF LAW PROVISION; UNDER THE BORROWING STATUTE, THE CANADIAN STATUTE OF LIMITATIONS APPLIES AND RENDERS THE ACTION BROUGHT BY A CANADIAN PLAINTIFF UNTIMELY)/CONTRACT LAW (CHOICE OF LAW, NEW YORK’S BORROWING STATUTE APPLIES PURSUANT TO CONTRACTUAL CHOICE OF LAW PROVISION; UNDER THE BORROWING STATUTE, THE CANADIAN STATUTE OF LIMITATIONS APPLIES AND RENDERS THE ACTION BROUGHT BY A CANADIAN PLAINTIFF UNTIMELY)/CORPORATION LAW (CHOICE OF LAW CONTRACTUAL PROVISION, NEW YORK’S BORROWING STATUTE APPLIES PURSUANT TO CONTRACTUAL CHOICE OF LAW PROVISION; UNDER THE BORROWING STATUTE, THE CANADIAN STATUTE OF LIMITATIONS APPLIES AND RENDERS THE ACTION BROUGHT BY A CANADIAN PLAINTIFF UNTIMELY)/STATUTE OF LIMITATIONS (NEW YORK’S BORROWING STATUTE APPLIES PURSUANT TO CONTRACTUAL CHOICE OF LAW PROVISION; UNDER THE BORROWING STATUTE, THE CANADIAN STATUTE OF LIMITATIONS APPLIES AND RENDERS THE ACTION BROUGHT BY A CANADIAN PLAINTIFF UNTIMELY)/BORROWING STATUTE (NEW YORK’S BORROWING STATUTE APPLIES PURSUANT TO CONTRACTUAL CHOICE OF LAW PROVISION; UNDER THE BORROWING STATUTE, THE CANADIAN STATUTE OF LIMITATIONS APPLIES AND RENDERS THE ACTION BROUGHT BY A CANADIAN PLAINTIFF UNTIMELY)/CHOICE OF LAW (CONTRACT, NEW YORK’S BORROWING STATUTE APPLIES PURSUANT TO CONTRACTUAL CHOICE OF LAW PROVISION; UNDER THE BORROWING STATUTE, THE CANADIAN STATUTE OF LIMITATIONS APPLIES AND RENDERS THE ACTION BROUGHT BY A CANADIAN PLAINTIFF UNTIMELY)

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JOINT VENTURE AGREEMENT, ALTHOUGH UNSIGNED, WAS VALID BECAUSE IT WAS CAPABLE OF BEING PERFORMED IN ONE YEAR; CAUSE OF ACTION FOR BREACH ACCRUED IN 2013 WHEN PAYMENT REQUIRED BY THE 2001 AGREEMENT WAS NOT MADE.

The First Department, in a full-fledged opinion by Justice Saxe, determined defendants’ motion to dismiss breach of contract and breach of fiduciary duty causes of action as untimely was properly denied. The facts, which concern the sale of interests in a Russian oil company, are too complex to summarize here. The court held that the complaint alleged a breach of a 2001 joint venture investment agreement based upon an alleged failure to pay plaintiff a portion of sale proceeds in 2013, making the 2014 lawsuit timely:

 

… [T]he motion court denied defendants’ motion to dismiss plaintiff’s causes of action for breach of their joint venture agreement and the 2001 Agreement, and for breach of defendants’ fiduciary duty. It held that although there was no written investment agreement signed by both defendants … plaintiff sufficiently pleaded the existence of a valid oral agreement by alleging that the parties agreed to the central terms of the unsigned investment agreement. It further held that the oral agreement was not void under the statute of frauds because it was capable of being performed within one year, and because the statute of frauds is generally inapplicable to joint ventures. It also rejected defendants’ argument that plaintiff’s breach of contract and breach of joint venture claims were time barred, reasoning that the claimed breach of the 2001 Agreement was defendants’ failure to pay plaintiff his percentage share of the 2013 … sale proceeds. * * *

This action was commenced within both limitations periods, because defendants “had a recurring obligation to pay plaintiff his . . . share of the profits generated by” the joint venture. … . A new claim accrued when the obligation to do so was allegedly breached in 2013. Lebedev v Blavatnik, 2016 NY Slip Op 06463, 1st Dept 10-4-16

 

CIVIL PROCEDURE (JOINT VENTURE AGREEMENT, ALTHOUGH UNSIGNED, WAS VALID BECAUSE IT WAS CAPABLE OF BEING PERFORMED IN ONE YEAR; CAUSE OF ACTION FOR BREACH ACCRUED IN 2013 WHEN PAYMENT REQUIRED BY THE 2001 AGREEMENT WAS NOT MADE)/CONTRACT LAW (JOINT VENTURE AGREEMENT, ALTHOUGH UNSIGNED, WAS VALID BECAUSE IT WAS CAPABLE OF BEING PERFORMED IN ONE YEAR; CAUSE OF ACTION FOR BREACH ACCRUED IN 2013 WHEN PAYMENT REQUIRED BY THE 2001 AGREEMENT WAS NOT MADE)/CORPORATION LAW (JOINT VENTURE AGREEMENT, ALTHOUGH UNSIGNED, WAS VALID BECAUSE IT WAS CAPABLE OF BEING PERFORMED IN ONE YEAR; CAUSE OF ACTION FOR BREACH ACCRUED IN 2013 WHEN PAYMENT REQUIRED BY THE 2001 AGREEMENT WAS NOT MADE)/JOINT VENTURES (JOINT VENTURE AGREEMENT, ALTHOUGH UNSIGNED, WAS VALID BECAUSE IT WAS CAPABLE OF BEING PERFORMED IN ONE YEAR; CAUSE OF ACTION FOR BREACH ACCRUED IN 2013 WHEN PAYMENT REQUIRED BY THE 2001 AGREEMENT WAS NOT MADE)/STATUTE OF FRAUDS (JOINT VENTURE AGREEMENT, ALTHOUGH UNSIGNED, WAS VALID BECAUSE IT WAS CAPABLE OF BEING PERFORMED IN ONE YEAR; CAUSE OF ACTION FOR BREACH ACCRUED IN 2013 WHEN PAYMENT REQUIRED BY THE 2001 AGREEMENT WAS NOT MADE)

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SOPHISTICATED INVESTOR DID NOT STATE A CAUSE OF ACTION FOR FRAUD.

The First Department, in a full-fledged opinion by Justice Gische, recalling and vacating a prior decision and order dated May 31, 2016, determined plaintiff did not state a cause of action for fraud. Plaintiff, a sophisticated investor, procured a majority interest in DuCool, a manufacturer of heating and cooling equipment. The plaintiff, in a share purchase agreement, acknowledged the speculative nature of the investment. And plaintiff was given full access to DuCool’s records prior to the purchase:

Where a cause of action is based in fraud, “the complaint must allege misrepresentation or concealment of a material fact, falsity, scienter on the part of the wrongdoer, justifiable reliance and resulting injury” … . Furthermore, where the plaintiff is a sophisticated party, “if the facts represented are not matters peculiarly within the [defendant’s] knowledge, and the [plaintiff] has the means available to [it] of knowing, by the exercise of ordinary intelligence, the truth or the real quality of the subject of the representation, [the plaintiff] must make use of those means, or [it] will not be heard to complain that [it] was induced to enter into the transaction by misrepresentations” … . Circumstances constituting fraud must be set forth in a complaint in detail (CPLR 3016[b]). MP Cool Invs. Ltd. v Forkosh, 2016 NY Slip Op 05944, 1st Dept 9-1-16

FRAUD (SOPHISTICATED INVESTOR DID NOT STATE A CAUSE OF ACTION FOR FRAUD)/SECURITIES (SOPHISTICATED INVESTOR DID NOT STATE A CAUSE OF ACTION FOR FRAUD)/CORPORATION LAW (SOPHISTICATED INVESTOR DID NOT STATE A CAUSE OF ACTION FOR FRAUD)

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