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MOTION TO VACATE THE NOTE OF ISSUE AND COMPEL DISCOVERY PROPERLY DENIED; MISAPPROPRIATION OF TRADE SECRETS AND BREACH OF A NON-COMPETITION CLAUSE CAUSES OF ACTION SHOULD NOT HAVE BEEN DISMISSED (SECOND DEPT).

The Second Department, reversing (modifying) Supreme Court, determined: (1) plaintiff’s motion to vacate the note of issue and compel additional discovery was properly denied because the criteria of 22 NYCRR 202.21 were not met; (2) the misappropriation of trade secrets cause of action re: customer lists was properly dismissed; (3) the misappropriation of trade secrets cause of action re: development of a laser should not have been dismissed; and (4), the breach of the non-competition clause cause of action should not have been dismissed:

The elements of a cause of action to recover damages for misappropriation of trade secrets are: (1) possession of a trade secret; and (2) use of that trade secret in breach of an agreement, confidential relationship or duty, or as a result of discovery by improper means (see Tri-Star Light. Corp. v Goldstein, 151 AD3d 1102, 1106). A trade secret includes any compilation of information which provides the company with an opportunity to obtain an advantage over competitors who do not know or use it … . …

… [T]he plaintiff raised triable issues of fact as to whether the defendant used its trade secrets in the manufacture of particular lasers … . …

A restrictive covenant will not be enforced if it is unreasonable in time, space, or scope  … . Thus, “a restrictive covenant will only be subject to specific enforcement to the extent that it is reasonable in time and area, necessary to protect the employer’s legitimate interests, not harmful to the general public and not unreasonably burdensome to the employee” … . … [T]he plaintiff raised a triable issue of fact regarding whether the noncompetition clause should be partially enforced. A restrictive covenant may be partially enforced to the extent necessary to protect a company’s legitimate interests … . In particular, “restrictive covenants will be enforceable to the extent necessary to prevent the disclosure or use of trade secrets or confidential customer information” … .  Photonics Indus. Intl., Inc. v Xiaojie Zhao, 2020 NY Slip Op 04330, Second Dept 7-29-20

 

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UNDER THE CIRCUMSTANCES OF THIS CASE, WHETHER THE CONDITIONS PRECEDENT TO ARBITRATION OF A GRIEVANCE REQUIRED BY THE COLLECTIVE BARGAINING AGREEMENT WERE COMPLIED WITH IS A QUESTION FOR THE COURT, NOT THE ARBITRATOR (FOURTH DEPT).

The Fourth Department, reversing Supreme Court, determined it was for the court, not the arbitrator, to determine whether the conditions precedent for arbitration were met in this action seeking General Municipal Law Section 207-a benefits for an injured firefighter:

… [T]he CBA [collective bargaining agreement] contains conditions precedent to arbitration within the provisions addressing the grievance procedure and … the court should have decided whether the conditions precedent had been met. “Questions concerning compliance with a contractual step-by-step grievance process have been recognized as matters of procedural arbitrability to be resolved by the arbitrators,” except in cases involving “a very narrow arbitration clause or a provision expressly making compliance with the time limitations a condition precedent to arbitration” … . Here, compliance with the requirements of steps one and two of the grievance procedure and the time limitations for serving a grievance were conditions precedent to arbitration. Under these circumstances, we conclude that “it was for the court, and not the arbitrator, to decide whether the grievance[] had been timely [served] and completed by the . . . employee at steps one and two of the grievance procedure” … . Therefore, we … remit the matter to Supreme Court for a hearing on the issue whether the conditions precedent to arbitration were met and thereafter for a new determination on the petition to stay arbitration … . Matter of Village of Manlius (Town of Manlius Professional Firefighters Assn., Iaff Local #3316), 2020 NY Slip Op 04251, Fourth Dept 7-24-20

 

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ALTHOUGH NO GENERAL MUNICIPAL LAW NOTICE OF CLAIM NEED BE FILED FOR THE FEDERAL EMPLOYMENT DISCRIMINATION OR THE STATE HUMAN RIGHTS LAW CAUSES OF ACTION, A NOTICE OF CLAIM PURSUANT TO THE SYRACUSE CITY CHARTER WAS REQUIRED FOR THE HUMAN RIGHTS LAW CAUSES OF ACTION (FOURTH DEPT).

The Fourth Department, reversing (modifying) Supreme Court, determined the federal employment discrimination causes of action and the state Human Rights Law causes of action did not trigger the need to file a notice of claim under General Municipal Law section 50-e and 50-i, but the notice of claim requirement pursuant to the Syracuse City Charter did apply to the Human Rights Law causes of action:

… [T]he issue here is whether plaintiffs were required to file a notice of claim pursuant to the Syracuse City Charter.

We agree with plaintiffs that they did not need to file a notice of claim with respect to their Federal discrimination claims … . …

… [T]he notice of claim provisions of General Municipal Law §§ 50-e and 50-i are inapplicable to State claims under the Human Rights Law … . But that is because Human Rights claims “are not tort actions under section 50-e and are not personal injury, wrongful death, or damage to personal property claims under section 50-i” … . In contrast, Syracuse City Charter § 8-115 (3) is not limited to tort claims or claims for personal injury. It provides in relevant part that “[n]o action or special proceeding, for any cause whatever, . . . involving the rights or interests of the [C]ity shall be prosecuted or maintained against the [C]ity” unless a notice of claim was served on the City within three months after the accrual of such claim … . The broad language of that notice of claim requirement encompasses plaintiffs’ causes of action under the Human Rights Law … . Blackmon v City of Syracuse, 2020 NY Slip Op 04254, Fourth Dept 7-24-20

 

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FIREFIGHTER WAS SOLELY RESPONSIBLE FOR THE DELAY IN HOLDING HIS DISCIPLINARY HEARING AND THEREFORE WAS NOT ENTITLED TO BACK PAY FOR THE PRE-HEARING PERIOD OF SUSPENSION (FOURTH DEPT).

The Fourth Department, reversing Supreme Court. determined a firefighter was not entitled to back pay for the suspension period while awaiting a disciplinary hearing because the firefighter (or his attorney) was responsible for the delay:

Civil Service Law § 75 provides that a public employee may be suspended without pay for a maximum of 30 days while awaiting a hearing on disciplinary charges (see § 75 [3]). Although an employee suspended without pay for a longer period under those circumstances is generally entitled to receive back pay, he or she waives any claim to back pay if a delay in the disciplinary hearing beyond the 30-day maximum is “occasioned by” his or her own conduct … .

We agree with respondents that petitioner is not entitled to reinstatement or back pay because petitioner was solely responsible for the delay. Petitioner’s attorney is an experienced practitioner familiar with Civil Rights Law § 50-a. As such, petitioner’s attorney either knew or should have known that, in order to secure production of the [the disciplinary file of Kelly, another firefighter], section 50-a required that he obtain either Kelly’s consent or a court order. Indeed, respondents publicly announced in multiple press releases several months before the arbitration that Kelly’s file was confidential pursuant to section 50-a. Moreover, petitioner’s attorney had specific knowledge of the contents of the file because he was involved professionally in the investigation of Kelly’s misconduct. Based on that experience and knowledge, petitioner could have taken steps to obtain the file long before the arbitration commenced, such as asking Kelly for his consent or commencing a proceeding to obtain a court order. Because petitioner failed to take any action, “the entire period of delay in holding the hearing resulted from his dilatory tactics” … . Matter of Carcone v City of Utica, 2020 NY Slip Op 04103, Fourth Dept 7-17-20

 

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BECAUSE PETITIONER WAS REINSTATED IN HER JOB AND BACKPAY HAD BEEN PROVIDED FOR THE PERIOD OF WRONGFUL SUSPENSION BY THE TIME THE CONTEMPT HEARING WAS HELD, PETITIONER COULD NOT SHOW SHE HAD BEEN PREJUDICED BY ANY FAILURE TO COMPLY WITH THE RELEVANT ORDER; THEREFORE THE EMPLOYER SHOULD NOT HAVE HELD IN CONTEMPT (FOURTH DEPT).

The Fourth Department, reversing Supreme Court, determined petitioner’s employer (NYS Department of Transportation [DOT}]) should not have been held in contempt for the alleged failure to quickly restore petitioner to the payroll and provide backpay because DOT had fulfilled those directives by the time the contempt hearing was held:

… [W]e conclude that the court erred in granting that part of petitioner’s motion seeking to have the DOT respondents adjudged in contempt of the October 2015 judgment. “A finding of civil contempt must be supported by four elements: (1) a lawful order of the court, clearly expressing an unequivocal mandate, was in effect; (2) [i]t must appear, with reasonable certainty, that the order has been disobeyed; (3) the party to be held in contempt must have had knowledge of the court’s order, although it is not necessary that the order actually have been served upon the party; and (4) prejudice to the right of a party to the litigation must be demonstrated” … . A movant seeking a contempt order bears the burden of establishing the foregoing elements by clear and convincing evidence … . We review a court’s ruling on a contempt motion for an abuse of discretion … .

Here, we conclude that petitioner failed to show by clear and convincing evidence that the failure of the DOT respondents to immediately comply with the directives of the October 2015 judgment ” defeat[ed], impair[ed], impede[d] or prejudice[d]’ ” petitioner’s rights … . We are mindful that “[a]ny penalty imposed [for a civil contempt] is designed not to punish but, rather, to compensate the injured private party or to coerce compliance with the court’s mandate or both” … . By the time the court conducted the hearing on petitioner’s contempt motion, it was undisputed that she had been restored to the payroll, was receiving payment, and had been awarded back pay for the time she was wrongly suspended without pay. Thus, the goals of civil contempt would not be furthered by granting petitioner’s motion absent any prejudice to her once the relevant DOT respondents complied with the directives of the October 2015 judgment and restored her to paid status. Matter of Mundell v New York State Dept. of Transp., 2020 NY Slip Op 04099, Fourth Dept 7-17-20

 

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ARBITRATOR’S DECISION FINDING CLAIMANT WAS PROPERLY DISCHARGED FOR MISCONDUCT ENTITLED TO COLLATERAL ESTOPPEL EFFECT IN THE UNEMPLOYMENT INSURANCE PROCEEDING (THIRD DEPT).

The Third Department, reversing the Unemployment Insurance Appeal Board, determined the arbitration decision pursuant to the collective bargaining agreement should have been given collateral estoppel effect by the Administrative Law Judge (ALJ) in the unemployment insurance proceeding. The arbitrator found that the claimant engaged in misconduct warranting discharge. The arbitrator’s decision was issued prior to the ALJ’s decision. The ALJ found claimant did not engage in misconduct and was entitled to unemployment insurance benefits:

Although “the Board is not bound by arbitration decisions regarding [a] claimant’s discharge issued subsequent to the time the Board rendered its decision”… , the Board was informed of the arbitration decision prior to its decision. As such, the factual findings of the arbitrator should have been accorded collateral estoppel effect in relation to the final unemployment insurance decision, so long as the parties had a full and fair opportunity to litigate the misconduct issue at the arbitration hearing … . The fact that the arbitration decision was issued after the conclusion of the unemployment insurance hearing does not preclude its consideration for collateral estoppel purposes, as “the final factfinder in the administrative process is the Board, not the ALJ” … . As the Board indicated that the arbitrator’s decision was not part of the record before it — despite that decision being the focus of, and a copy of it annexed to, the employer’s administrative appeal — the matter must be remitted in order for the employer to submit the arbitration decision into the record and to provide an opportunity for claimant and the employer to provide additional evidence and testimony regarding the nature of the arbitration hearing … . Matter of Bruce (Town of N. Hempstead–Commissioner of Labor), 2020 NY Slip Op 03705, Third Dept 7-2-20

 

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PERSONAL INJURY ACTION BY MOTHER OF A 14-YEAR-OLD KILLED WHEN WORKING ILLEGALLY ON DEFENDANT FARM PROPERLY DISMISSED; THE RECOVERY UNDER THE WORKERS’ COMPENSATION LAW WAS THE EXCLUSIVE REMEDY BECAUSE THE INTENTIONAL-TORT EXCEPTION DID NOT APPLY; THE ACTION WAS PRECLUDED BY THE RES JUDICATA DOCTRINE; IN ADDITION THERE WAS NO EVIDENCE DEFENDANTS ACTED WILLFULLY OR INTENTIONALLY (THIRD DEPT).

The Third Department determined the personal injury action brought by decedent’s mother was properly dismissed because the recovery pursuant to the Workers’ Compensation Law was the exclusive remedy. Plaintiff’s decedent, 14-years-old, was killed operating a skid steer while illegally employed by defendant’s (Park’s) farm. Although plaintiffs recovered Workers’ Compensation benefits, plaintiffs argued an exception to the exclusive-remedy restriction for intentional torts applied. The Third Department held the exclusive-remedy restriction applied and there was no evidence of willful or intentional conduct on the part of the defendants:

Inasmuch as the [Workers’ Compensation] Board had already “determined that [decedent’s] injuries were suffered accidentally and in the course of employment” for the Farm, the claim that the Farm or its employees are liable “for an intentional tort based on the same event is barred by the exclusive remedy and finality provisions of the Workers’ Compensation Law, and by principles of res judicata” … . Even if the Board’s decision did not have preclusive effect, however, Supreme Court properly rejected the contention that Park engaged in “deliberate acts . . . to injure [decedent] or to have him injured” so as to bring this case within an exception to the exclusivity provisions of the Workers’ Compensation Law … . The record reflects that decedent used the skid steer without anyone’s knowledge and that, following the investigation into decedent’s death, Park pleaded guilty to willful failure to pay unemployment insurance contributions (see Labor Law § 633), endangering the welfare of a child (see Penal Law § 260.10) and prohibited employment of a minor (see Labor Law § 133). It could be inferred from those facts that Park was negligent in failing to supervise decedent, or even reckless in exposing decedent to dangerous work that his age left him unsuited for, but not that Park acted out of a “willful intent to harm” decedent, as required … . Smith v Park, 2020 NY Slip Op 03583, Third Dept 6-25-20

 

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ALTHOUGH DISFAVORED, DISCLOSURE OF REDACTED TAX RETURNS WAS WARRANTED IN THIS CASE (FIRST DEPT).

The First Department noted that the disclosure of tax returns is disfavored, but agreed with Supreme Court that disclosure of the redacted returns in this Labor-Law/employment-law dispute was warranted:

Plaintiffs claim that between 2010 and 2016 defendant employed them as a caretaker for her ailing aunt and that defendant violated, inter alia, several sections of the Department of Labor Regulations (12 NYCRR) requiring overtime pay, a minimum wage, and additional pay for split shifts. Defendant denies that she was plaintiffs’ employer for purposes of the regulations and provisions of the Labor Law, but admits that she paid plaintiffs by check from 2014 to 2016, albeit on her aunt’s behalf. Plaintiffs claim they were paid in cash by defendant between 2010 and 2013. Defendant, who denies that she was the source of the cash payments, seeks plaintiffs’ federal and state tax returns for 2010 to 2013, claiming she needs the returns to verify the cash amounts, as well as plaintiffs’ assertion that they were employees, and not independent contractors.

… [D]efendant demonstrated both that the specific information ordered disclosed was necessary to defend the action, and unavailable from other sources … . Since plaintiffs were paid in cash between 2010 and 2013 and there is no other evidence in the record establishing who paid their wages and how much they were paid during those years, defendant showed a specific need for the production of the three years of tax returns, which might show the amounts claimed by plaintiffs as income from the caretaker work, as well as whether they claimed the income as wages or as money earned through self-employment. Defendant demonstrated that investigating plaintiffs’ bank accounts would be inconclusive, since pay deposited in the accounts could have been commingled with other amounts, and because one of the plaintiffs claimed that she used several banking institutions and did not make deposits on a predictable basis. We note that the court already inspected the tax returns in camera and deemed them relevant. Currid v Valea, 2020 NY Slip Op 03590, First Dept 6-25-20

 

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PLAINTIFF’S DISABILITY DISCRIMINATION CAUSES OF ACTION UNDER THE STATE AND CITY HUMAN RIGHTS LAW PROPERLY SURVIVED SUMMARY JUDGMENT; THE DIFFERENT REQUIREMENTS OF THE STATE VERSUS CITY HUMAN RIGHTS LAW IN THIS CONTEXT EXPLAINED IN SOME DEPTH (FIRST DEPT).

The First Department, in a full-fledged opinion by Justice Acosta, determined plaintiff’s disability discrimination claims under the NYS and NYC Human Rights Law (HRL) properly survived summary judgment. Issues of fact were raised about whether defendant sufficiently engaged in dialogue about accommodating plaintiff’s needs prior to terminating her employment. The decision explains the different proof requirement for disability discrimination and accommodation under the NYSHML and the NYCHML, noting that the NYCHML imposes a heavier burden on the employer than the NYSHRL:

Under both the State and City HRLs, “the first step in providing a reasonable accommodation is to engage in a good faith interactive process that assesses the needs of the disabled individual and the reasonableness of the accommodation requested. The interactive process continues until, if possible, an accommodation reasonable to the employee and employer is reached” … . * * *

Unlike the State HRL where the employer must “engage[] in interactions with the employee revealing at least some deliberation upon the viability of” an accommodation … , the City HRL clearly requires a more rigorous process … . Indeed, to emphasize the seriousness by which employers must engage in the interactive process, the City Council amended the City HRL in 2018 … . The Committee Report … states: “This bill would clarify the reasonable accommodation requirement by expressly requiring, as a part of the reasonable accommodation process, that covered entities engage in a cooperative dialog with individuals who they know or should know may require accommodation.” * * *

Here, defendant cannot prevail in its summary judgment motion seeking to dismiss plaintiff’s State HRL disability claim because there are issues of fact as to whether defendant engaged plaintiff in a good faith interactive process to ascertain the viability of an appropriate accommodation. * * *

Given that the City HRL is even broader than the State HRL … , defendant has likewise failed to show that it engaged in an interactive process with plaintiff. Hosking v Memorial Sloan-Kettering Cancer Ctr., 2020 NY Slip Op 03484, First Dept 6-18-20

 

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UNDER THE TERMS OF THE EMPLOYMENT AGREEMENT AND THE APPLICABLE INSURANCE LAW PROVISIONS, AND UNDER THE PRINCIPLES OF UNJUST ENRICHMENT, PLAINTIFF EMPLOYEE, NOT DEFENDANT EMPLOYER, WAS ENTITLED TO THE DEMUTUALIZATION PROCEEDS WHEN THE MEDICAL MALPRACTICE INSURANCE CARRIER CONVERTED FROM A MUTUAL TO A STOCK INSURANCE COMPANY, DESPITE THE FACT THAT THE DEFENDANT EMPLOYER PAID THE POLICY PREMIUMS (THIRD DEPT).

The Third Department, reversing Supreme Court, in a full-fledged opinion by Justice Mulvey, dealt with insurance law, employment law, contract law, unjust enrichment and stare decisis in this dispute between defendant employer and plaintiff employee over the “demutualization” proceeds of an insurance policy. Plaintiff was employed as a certified nurse midwife by defendant. As part of the employment agreement defendant was required to maintain and pay the premiums for a malpractice insurance policy. When the insurance company (MLMIC) converted from a mutual insurance company to a stock insurance company (demutualization) the policyholder was entitled to nearly $75,000. Plaintiff-employee claimed the money was hers and brought an action for a declaratory judgment. Supreme Court agreed with plaintiff but, because there was no on-point appellate decision by the Court of Appeals or the Third Department, Supreme Court was required to follow a First Department decision and, based on that decision, found in favor of defendant-employer. The Third Department noted that it, unlike Supreme Court, was not bound by stare decisis and reversed:

… [P]er the relevant statute [(Insurance Law § 7307 [e] [3])] and the conversion plan’s definitions, plaintiff was entitled to the cash consideration … . * * *

… [T]he parties’ employment agreement provided that plaintiff would perform professional services for defendant. In exchange, defendant would pay her a stated salary and provide specified benefits including, as relevant here, obtaining and paying the premiums for professional liability insurance covering plaintiff. The record indicates that defendant purchased, controlled and maintained such a policy from MLMIC in plaintiff’s favor. Defendant was the policy administrator, selected the coverage and terms, and was responsible for all financial aspects of the policy. Notably, defendant paid annual premiums of approximately $25,710; plaintiff paid nothing toward the premiums and those amounts were not counted as income to plaintiff. Defendant received from MLMIC dividends, premium reductions and the return of premiums when the policy was canceled upon plaintiff leaving defendant’s employ, all without any objection by plaintiff. * * *

The reality is that neither party here bargained for the demutualization proceeds. Moreover, neither party actually paid for them, because membership interests in a mutual insurance company are not paid for by policy premiums; such rights are “acquired . . . at no cost, but rather as an incident of the structure of mutual insurance policies,” through operation of law and the company’s charter and bylaws … . * * *

Neither party changed its position based on demutualization and plaintiff’s conduct was neither tortious nor fraudulent. … [W]e conclude that defendant failed to meet its burden to establish its affirmative defense and counterclaim alleging unjust enrichment. Schoch v Lake Champlain OB-GYN, P.C., 2020 NY Slip Op 03444, Third Dept 6-18-20

 

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