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BECAUSE THE DEFENDANT EMPLOYER SUFFERED NO DAMAGE AS A RESULT OF PLAINTIFF’S BREACH OF THE CONFIDENTIALITY PROVISION OF THE EMPLOYMENT CONTRACT, DEFENDANT EMPLOYER WAS NOT ENTITLED TO ENFORCEMENT OF THE LIQUIDATED DAMAGES PROVISION IN THE CONTRACT; PLAINTIFF’S BREACH-OF-AN-ORAL-CONTRACT CAUSE OF ACTION SHOULD NOT HAVE BEEN DISMISSED BECAUSE PLAINTIFF SUBMITTED EVIDENCE OF PARTIAL PERFORMANCE BY DEFENDANT AND PLAINTIFF’S RELIANCE ON THE ORAL MODIFICATION (FIRST DEPT).

The First Department, reversing (modifying) Supreme Court, determined that, although the law firm defendants demonstrated plaintiff attorney violated the confidentiality provision of her employment contract, the law firm was not entitled to enforcement of the liquidated damages provision of the contract because the law firm did not demonstrate it suffered any damage as a result of plaintiff’s breach. In addition, plaintiff’s cause of action alleging the law firm defendants violated an oral agreement promising her a five percent bonus related to attorney’s fees paid for cases in which she was involved should not have been dismissed because she presented some evidence she had in fact been paid several such bonuses:

“Liquidated damages constitute the compensation which, the parties have agreed, should be paid in order to satisfy any loss or injury flowing from a breach of their contract” … . “A contractual provision fixing damages in the event of breach will be sustained if the amount liquidated bears a reasonable proportion to the probable loss and the amount of actual loss is incapable or difficult of precise estimation. If, however, the amount fixed is plainly or grossly disproportionate to the probable loss, the provision calls for a penalty and will not be enforced” … . Although the party challenging the liquidated damages provision has the burden to prove that the liquidated damages are, in fact, an unenforceable penalty … , the party seeking to enforce the provision must necessarily have been damaged in order for the provision to apply … . Here, defendants did not identify to the motion court any damages that they sustained as a result of plaintiff’s breach of the agreement. …

The law firm defendants met their burden on summary judgment by providing plaintiff’s employment agreement which did not include any reference to a 5% nondiscretionary bonus, and which included a general merger clause requiring any modification to be in writing. However, plaintiff raised a triable issue of fact as to this claim. … [T]he Court of Appeals has held that while generally an oral modification may not be enforced in light of a merger clause, an oral modification may be enforced if there is partial performance that is “unequivocally referable to the oral modification” or if one party “induced another’s significant and substantial reliance upon an oral modification.” Rubin v Napoli Bern Ripka Shkolnik, LLP, 2020 NY Slip Op 00250, First Dept 1-14-20

 

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SANCTIONS IMPOSED FOR A DELAYED RESPONSE TO DISCOVERY DEMANDS WERE TOO SEVERE, EFFECTIVELY PRECLUDING PROOF OF COUNTERCLAIMS CENTRAL TO THE DEFENSE; NEW TRIAL ORDERED (FIRST DEPT).

The First Department, reversing the verdict in favor of plaintiff employees, determined the sanctions imposed upon the employer (appellants) for a delayed response to discovery demands were too severe and ordered a new trial. The plaintiffs alleged appellants breached oral employment contracts. The appellants in their counterclaims alleged plaintiffs breached their fiduciary duty by violating Securities and Exchange Commission (SEC) regulations and destroying and replacing handwritten notes about conversations with one of the appellants. The sanctions effectively prevented the appellants from demonstrating plaintiffs’ violation of SEC violations and destruction of evidence:

Pursuant to CPLR 3126, if a party “refuses to obey an order for disclosure or wilfully fails to disclose information which the court finds ought to have been disclosed . . . , the court may make such orders with regard to the failure or refusal as are just.” Although “[i]t is within the trial court’s discretion to determine the nature and degree of the penalty,” “[t]he sanction should be commensurate with the particular disobedience it is designed to punish, and go no further than that” … . Further, “the drastic remedy of striking a party’s pleading . . . for failure to comply with a discovery order is appropriate only where [it is] conclusively demonstrate[d] that the non-disclosure was willful, contumacious or due to bad faith” … .

Although the court here did not strike a pleading, its ruling could fairly be viewed as having done so, since the precluded evidence was critical to the fiduciary duty claims. Moreover, the court’s drastic sanctions were disproportionate to the alleged discovery malfeasance. It is unclear why a short continuance to give plaintiffs time to review the newly-produced documents would not have been a viable option, or why further curative instructions would not have sufficed. The record as a whole does not support a finding of willfulness or bad faith so as to justify the severe sanctions imposed … . No basis exists to indicate that this was anything other than a disagreement over the scope of discovery. Indeed, the court at trial stated that the alleged discovery omissions “appear[] not to have been in bad faith.” Beach v Touradji Capital Mgt., LP, 2020 NY Slip Op 00230, First Dept 1-14-20

 

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PLAINTIFF ALLEGED DEFENDANT’S EMPLOYEE, A SECURITY GUARD, ATTACKED HER; DEFENDANT’S EMPLOYEE ALLEGED PLAINTIFF ATTACKED HIM AND HE ACTED IN SELF DEFENSE; THE EMPLOYER WOULD NOT BE LIABLE UNDER EITHER SCENARIO; THE EMPLOYER’S MOTION FOR SUMMARY JUDGMENT SHOULD HAVE BEEN GRANTED (FIRST DEPT).

The First Department, reversing Supreme Court, determined the security guard’s employer’s (SEB’s) motion for summary judgment in this third-party assault case should have been granted. Plaintiff alleged the security guard attacked her without provocation. The security guard alleged he acted in self defense after plaintiff and others attacked him. The employer would not be liable in either scenario:

Plaintiff Gregory testified that SEB’s employee, a security guard who was then working at a movie theater, attacked her with a box cutter and slashed her face and body with it after she tapped him on the shoulder and told him she had enjoyed the movie she had just seen. The security guard gave a different version of events and claimed that he was acting in self defense after plaintiffs and others attacked him with box cutters. However, neither version of events would give rise to liability on the part of SEB. Under plaintiff’s version of events, SEB could not be held liable because SEB’s employee’s unprovoked assault on Gregory with a box cutter was not within the scope of any duties he may have had as a security guard and was not done in furtherance of SEB’s business interests … . Under the security guard’s version of events, even assuming for purposes of this appeal that his actions were within the scope of his duties as a security guard and were done in furtherance of SEB’s business interests, SEB would not be held liable because the security guard’s actions were taken in self-defense after being attacked by patrons of the movie theater. Gregory v National Amusements, Inc., 2020 NY Slip Op 00223, First Dept 1-9-20

 

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PLAINTIFFS WERE NOT SIGNATORIES TO CONTRACTS WHICH REQUIRED ARBITRATION OF WAGE-UNDERPAYMENT ALLEGATIONS AND PLAINTIFFS DID NOT EXPLOIT THE BENEFITS OF THE CONTRACTS; THEREFORE PLAINTIFFS COULD NOT BE COMPELLED TO ARBITRATE (SECOND DEPT).

The Second Department determined the plaintiffs in this putative class action alleging wage-underpayment in violation of Labor Law article 6 could not be compelled to arbitrate. Plaintiffs were not parties to the contracts with defendants which compelled arbitration and did not seek to exploit the benefits of those contracts:

… [U]nder limited circumstances nonsignatories may be compelled to arbitrate” … . Under the direct benefits theory of estoppel, a nonsignatory may be compelled to arbitrate where the nonsignatory “knowingly exploits” the benefits of an agreement containing an arbitration clause, and receives benefits flowing directly from the agreement … . “The benefits must be direct, and the party seeking to compel arbitration must demonstrate that the party seeking to avoid arbitration relies on the terms of the agreement containing the arbitration provision in pursuing its claim” … . Where the benefits are merely “indirect,” a nonsignatory cannot be compelled to arbitrate a claim … . “A benefit is indirect where the nonsignatory exploits the contractual relation of the parties, but not the agreement itself” … .

Here, contrary to the defendants’ contention, the plaintiffs should not be compelled to arbitrate based upon the agreements. The record does not establish that the plaintiffs were even aware of the existence of the agreements or that they knowingly exploited the benefits of the agreements … . Arboleda v White Glove Enter. Corp., 2020 NY Slip Op 00098, Second Dept 1-8-20

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PLAINTIFF STATED A CAUSE OF ACTION FOR VIOLATION OF LABOR LAW 196-d AGAINST A CORPORATE OFFICER AND A SHAREHOLDER INDIVIDUALLY FOR FAILING TO REMIT SERVICE CHARGES AND GRATUITIES TO THEIR WAITSTAFF EMPLOYEES; REQUEST FOR AN EXTENSION TO SEEK CLASS CERTIFICATION SHOULD HAVE BEEN GRANTED; MOTION TO AMEND THE COMPLAINT SHOULD HAVE BEEN GRANTED; PLAINTIFF’S DISCOVERY DEMANDS WERE PALPABLY IMPROPER (SECOND DEPT).

The Second Department, reversing (modifying) Supreme Court, determined: (1) plaintiff banquet server had stated a cause of action against the Cortses (an officer and a shareholder in the corporation, Falkirk Management, sued by plaintiff) individually alleging the Cortses were plaintiff’s employers within the meaning of Labor Law 196-d and did not remit service charges and gratuities to the waitstaff; (2) corporate shareholders and officers like the Cortes can be liable for corporate violations of the Labor Law; plaintiff’s discovery demands were burdensome or immaterial and therefore improper (CPLR 3101(a)); (3) plaintiff’s request for an extension to move for class certification should have been granted (CPLR 901(a); 902); and (4) plaintiff’s motion to amend the complaint should have been granted:

… [T]he complaint alleged that the Cortses exercised control over the “day-to-day operations” of “[the Country Club],” including “authority regarding the pay practices” of Falkirk Management. * * *

… [T]he information sought by the plaintiff in her first set of interrogatories and first request for the production of documents was largely burdensome or immaterial, and consequently, palpably improper … . * * *

A plaintiff’s need to conduct pre-class certification discovery to determine whether the prerequisites of a class action set forth in CPLR 901(a) can be satisfied constitutes good cause for the extension of the 60-day time period fixed by CPLR 902 … . * * *

[Re: the motion to amend the complaint:] the defendants alleged no surprise or prejudice … . Moreover, the proposed amendments are not palpably insufficient or patently devoid of merit … . Lomeli v Falkirk Mgt. Corp., 2020 NY Slip Op 00115, Second Dept 1-8-20

 

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THIRD-PARTY PLAINTIFFS WERE NOT REQUIRED TO AND DID NOT PARTICIPATE IN THE WORKERS’ COMPENSATION PROCEEDINGS; THEREFORE THE WORKERS’ COMPENSATION BOARD’S FINDING THAT THIRD-PARTY DEFENDANT WAS PLAINTIFF’S EMPLOYER WAS NOT BINDING ON THE THIRD-PARTY PLAINTIFFS (FIRST DEPT).

The First Department, reversing Supreme Court, determined the Workers’ Compensation Board’s finding that third-party defendant I & G Group was plaintiff’s employer was not binding on the third-party plaintiffs because the third-party plaintiffs did not participate in the Workers’ Compensation proceedings. Therefore the matter has to be litigated and I & G Group’s motion for summary judgment should should not have been granted:

The Court of Appeals has … recognized that a decision by the worker’s compensation board may not be binding on parties who do not participate in its hearings. * * * “[U]nless the Legislature expands the definition of parties in interest, the unfortunate result will be that a duplicative proceeding must be held and the issue of compensability adjudicated anew because defendants never had a full and fair opportunity’ to litigate the question” … .

Here, because it is undisputed that appellants [third-party plaintiffs] were not given notice of the worker’s compensation hearing, and were not afforded the opportunity to present evidence or cross-examine witnesses, their third-party claims, in which they challenge the identity of plaintiff’s employer, should not have been dismissed as precluded by the board’s prior determination of that issue … . Martinez v 250 W. 43 Owner, LLC, 2020 NY Slip Op 00058, First Dept 1-7-20

 

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PENSION OF POLICE OFFICER CONVICTED OF MURDER AND ATTEMPTED MURDER CAN, UNDER THE SON OF SAM LAW, BE REACHED TO SATISFY A $1 MILLION JUDGMENT OBTAINED BY THE CRIME VICTIM (THIRD DEPT).

The Third Department determined the Son of Sam Law trumped the CPLR, the Retirement and Social Security Law, and the Administrative Code of the City of New York with respect to the pension of a former NYC police officer who was convicted of murder and attempted murder and against whom plaintiff obtained a personal injury judgment of more than $1 million:

“Executive Law § 632-a sets forth a statutory scheme intended to improve the ability of crime victims to obtain full and just compensation from the person(s) convicted of the crime by allowing crime victims or their representatives to sue the convicted criminals who harmed them when the criminals receive substantial sums of money from virtually any source and protecting those funds while litigation is pending” … . … [I]n 2001, the Legislature amended the [Son of Sam] law to allow a crime victim to seek recovery from “funds of a convicted person,” which includes “all funds and property received from any source by a person convicted of a specified crime,” but specifically excludes child support and earned income (Education Law § 632-a [1] [c]). * * *

This Court has found … that CPLR 5205 (c) is superseded by the Son of Sam Law … . Defendant’s assertions that Retirement and Social Security Law § 110 and Administrative Code of the City of New York § 13-264 protect his pension from assignment to satisfy plaintiff’s money judgment are similarly without merit due to the broad reach of the Son of Sam Law … . Prindle v Guzy, 2020 NY Slip Op 00011, Third Dept 1-2-20

 

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ALTHOUGH THE ALLEGED RETALIATORY ACTIONS BY THE EMPLOYER TOOK PLACE YEARS AFTER PLAINTIFF STOPPED WORKING FOR THE EMPLOYER, THE COMPLAINT STATED VALID CAUSES OF ACTION FOR RETALIATORY EMPLOYMENT DISCRIMINATION AND PROMISSORY ESTOPPEL, SUPREME COURT REVERSED (FIRST DEPT). ​

The First Department, reversing Supreme Court, reinstated the retaliation (employment discrimination) and promissory estoppel causes of action against Artforum International Magazine. Plaintiff, an art curator, alleged sexual harassment by an Artforum publisher. After meeting with the two other publishers about the alleged harassment, the publishers allegedly promised to ensure the harassment would never happen again. Instead, plaintiff alleged, the publishers retaliated against her. The central issue on appeal is whether the actions by Artforum, which took place after plaintiff had left the magazine’s employment, could still be subject to the employment-discrimination prohibitions of the New York City Human Rights Law (NYC Administrative Code 8-107). The First Department held that the close-knit nature of the fine art business, and the effect the alleged retaliation by Artforum can have on plaintiff’s career in the art world, warranted finding plaintiff had stated valid causes of action:

… [T]here is jurisprudential grounding for expanding the boundaries of the employment context that is central to discrimination and retaliation claims in section 8-107(7) to the extent necessary to provide redress when there exists some nexus between the retaliatory harm alleged and a relationship characterized in some manner as one of employment, past or present. …

Similar reasoning can be justified in reading some expansiveness into the undefined and similarly ambiguous term “employment” for remedying retaliation under Administrative Code section 8-107(7). However, some safeguards are necessary to avoid the unintended consequence of allowing a lawsuit against a party who happens to be a plaintiff’s former employer on a retaliation theory when there is no reasonable connection between the harm alleged and that economic relationship. The plaintiff, if not a current employee, should be shown to occupy a subordinate position in an ongoing economic relationship that is threatened by the “employer’s” retaliation, and the nature of the retaliation itself should have a demonstrable nexus to the harm being alleged. Schmitt v Artforum Intl. Mag., Inc., 2019 NY Slip Op 09352, First Dept 12-26-19

 

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UNION REPRESENTING CITY EMPLOYEES HAS STANDING TO CONTEST THE CREATION OF A NEW CITY DEPARTMENT AFFECTING THOSE EMPLOYEES (THIRD DEPT).

The Third Department, reversing Supreme Court, determined the labor union representing employees of the city’s Office of the Building Inspector and Bureau of Code Enforcement had standing to contest an executive order issued by the mayor and related regulations which created a new Building Department:

“[S]tanding is a threshold determination and a litigant must establish standing in order to seek judicial review, with the burden of establishing standing being on the party seeking review” … . A petitioner challenging governmental action must “show ‘injury in fact,’ meaning that [the petitioner] will actually be harmed by the challenged [governmental] action[,]” and, further, that the injury “fall[s] within the zone of interests or concerns sought to be promoted or protected by the statutory provision under which the [governmental entity] has acted” … . For an organization to have standing, it must establish “‘that at least one of its members would have standing to sue, that it is representative of the organizational purposes it asserts and that the case would not require the participation of individual members'” … .

Petitioners allege that the Mayor unlawfully engaged in a legislative act by creating the Buildings Department and that this unlawful legislative act brought the union’s members under the auspices/jurisdiction of the Commissioner, who used that unlawful grant of authority to enact a regulation that respondents have relied on to supplant the members’ negotiated rights regarding disciplinary proceedings, as set forth in the applicable collective bargaining agreement. In our view, these allegations would, if proven, demonstrate the requisite harm flowing from the executive order, which would fall within the zone of interests … . Matter of Civil Serv. Empls. Assn., Inc., Local 1000, AFSCME, AFL-CIO v City of Schenectady, 2019 NY Slip Op 09342, Thrid Dept 12-26-19

 

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PLAINTIFF POLICE OFFICER’S MOTION FOR SUMMARY JUDGMENT AGAINST THE DRIVER OF THE TRACTOR TRAILER WHICH STRUCK HIM WHEN HE WAS STANDING IN THE ROADWAY SHOULD HAVE BEEN GRANTED, FREEDOM FROM COMPARATIVE FAULT NO LONGER NEED BE SHOWN; OTHER ISSUES ADDRESSED IN THE DECISION INCLUDE THE EMPLOYER’S LIABILITY, THE TRUCK RENTAL COMPANIES’ LIABILITY, THE EMERGENCY DOCTRINE, WORKERS’ COMPENSATION AND GENERAL MUNICIPAL LAW 205-e (SECOND DEPT).

The Second Department, reversing (modifying) Supreme Court determined plaintiff police officer was entitled to summary judgment against the driver of the tractor trailer which struck the officer who was standing in the roadway both under a common law negligence theory and under General Municipal Law 205-e. The court dealt with several other issues including: (1) whether a second police officer was engaged in an emergency operation, giving rise to the reckless disregard standard, when he stopped to assist the plaintiff who had made a traffic stop (the answer is no); (2) whether the second officer was liable based upon the position of his car (the answer is no, the car furnished a condition for the accident but was not the cause); (3) whether the injured officer’s recovery was confined to Workers’ Compensation (there is a question of fact whether the injury was “grave”); (4) whether the Graves Amendment protected the truck rental companies (the answer is yes); (5) whether vicarious liability applies to the truck driver’s employer (there is a question of fact on that issue). With respect to the common law negligence and the General Municipal Law 205-e causes of action, the court wrote:

… [T]he plaintiffs were not required to demonstrate that the injured plaintiff was free from comparative negligence in order to obtain summary judgment on the issue of Burke’s [the truck driver’s] liability on the first cause of action [negligence]. * * *

When the light changed, Burke began his left turn onto northbound Midland Avenue. Prior to beginning his turn, Burke was aware that there was a police officer conducting a traffic stop on foot and a police car parked on the northbound side of Midland Avenue. Although Burke believed he could make the turn safely, the rear of the trailer hit the injured plaintiff. * * *

The plaintiffs also established … Burke’s liability as to … a violation of General Municipal Law § 205-e. … [T]hat statute permits a police officer to bring a tort claim for injuries sustained “while in the discharge or performance at any time or place of any duty imposed by . . . superior officer[s]” where such injuries occur “directly or indirectly as a result of any neglect, omission, willful or culpable negligence of any person or persons in failing to comply with the requirements of any of the statutes, ordinances, rules, orders and requirements of the federal, state, county, village, town or city governments” … . In order to recover under the statute, “a police officer must demonstrate injury resulting from negligent noncompliance with a requirement found in a well-developed body of law and regulation that imposes clear duties” … .

Vehicle and Traffic Law § 1146(a) requires a driver to “exercise due care to avoid colliding with any . . . pedestrian.” Here, the unrebutted evidence established a prima facie violation of § 1146(a), as it demonstrated that Burke failed to exercise due care to avoid hitting the injured plaintiff. Cioffi v S.M. Foods, Inc., 2019 NY Slip Op 09251, Second Dept 12-24-19

 

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