Fraud – Page 14 – New York Appellate Digest

Attorneys, Contract Law, Evidence, Fraud

DAMAGES FOR BREACH OF HOME IMPROVEMENT CONTRACT NOT PROVEN, RESTITUTION IS NOT A REMEDY UNDER THE GENERAL BUSINESS LAW, GROUNDS FOR PUNITIVE DAMAGES NOT PROVEN, STATUTORY FEES, INCLUDING ATTORNEY’S FEES, APPLICABLE (SECOND DEPT).

The Second Department determined plaintiff did not submit sufficient proof of damages stemming from the alleged breach of a home improvement contract, and the restitution and punitive damages awards were improper. The statutory General Business Law awards, including attorney’s fees, were applicable:

… [T]he plaintiff failed to meet her burden of proving damages for breach of contract. The appropriate measure of damages for breach of a home improvement contract by the contractor for defective construction is the cost to repair the defects … , as of the date the cause of action accrued … . Here, the plaintiff did not proffer competent evidence to establish her costs to repair the defendants’ defective work as of the date the cause of action accrued … . Accordingly, the damages award in the sum of $9,358.96 for breach of contract must be set aside.

We also agree with the defendants that the jury improperly awarded the sum of $17,730 as restitution damages pursuant to General Business Law § 772, representing the total sum paid by the plaintiff under the home improvement contract before the defendants abandoned the project, since restitution damages are not provided for under that statute … .

Further, we agree with the defendants that the plaintiff is not entitled to recover punitive damages. Although the jury found that the defendants were liable for breach of contract, the plaintiff failed to establish that the defendants’ conduct was egregious, directed toward the plaintiff, and part of a pattern directed at the public … . Moreover, to the extent that the plaintiff’s case rested on allegations of fraud, she failed to establish that the defendants’ conduct was so gross, wanton, or willful, or of such high moral culpability, as to justify an award of punitive damages … . Crippen v Adamao2018 NY Slip Op 07287, Second Dept 10-31-18

CONTRACT LAW (DAMAGES FOR BREACH OF HOME IMPROVEMENT CONTRACT NOT PROVEN, RESTITUTION IS NOT A REMEDY UNDER THE GENERAL BUSINESS LAW, GROUNDS FOR PUNITIVE DAMAGES NOT PROVEN, STATUTORY FEES, INCLUDING ATTORNEY’S FEES, APPLICABLE (SECOND DEPT))/EVIDENCE (BREACH OF CONTRACT, DAMAGES FOR BREACH OF HOME IMPROVEMENT CONTRACT NOT PROVEN, RESTITUTION IS NOT A REMEDY UNDER THE GENERAL BUSINESS LAW, GROUNDS FOR PUNITIVE DAMAGES NOT PROVEN, STATUTORY FEES, INCLUDING ATTORNEY’S FEES, APPLICABLE (SECOND DEPT))/DAMAGES (BREACH OF CONTRACT, DAMAGES FOR BREACH OF HOME IMPROVEMENT CONTRACT NOT PROVEN, RESTITUTION IS NOT A REMEDY UNDER THE GENERAL BUSINESS LAW, GROUNDS FOR PUNITIVE DAMAGES NOT PROVEN, STATUTORY FEES, INCLUDING ATTORNEY’S FEES, APPLICABLE (SECOND DEPT))/FRAUD (HOME IMPROVEMENT CONTRACT, DAMAGES FOR BREACH OF HOME IMPROVEMENT CONTRACT NOT PROVEN, RESTITUTION IS NOT A REMEDY UNDER THE GENERAL BUSINESS LAW, GROUNDS FOR PUNITIVE DAMAGES NOT PROVEN, STATUTORY FEES, INCLUDING ATTORNEY’S FEES, APPLICABLE (SECOND DEPT))/HOME IMPROVEMENT CONTRACT DAMAGES FOR BREACH OF HOME IMPROVEMENT CONTRACT NOT PROVEN, RESTITUTION IS NOT A REMEDY UNDER THE GENERAL BUSINESS LAW, GROUNDS FOR PUNITIVE DAMAGES NOT PROVEN, STATUTORY FEES, INCLUDING ATTORNEY’S FEES, APPLICABLE (SECOND DEPT))/GENERAL BUSINESS LAW (HOME IMPROVEMENT CONTRACTS, DAMAGES FOR BREACH OF HOME IMPROVEMENT CONTRACT NOT PROVEN, RESTITUTION IS NOT A REMEDY UNDER THE GENERAL BUSINESS LAW, GROUNDS FOR PUNITIVE DAMAGES NOT PROVEN, STATUTORY FEES, INCLUDING ATTORNEY’S FEES, APPLICABLE (SECOND DEPT))/LICENSES (HOME IMPROVEMENT CONTRACTORS, (DAMAGES FOR BREACH OF HOME IMPROVEMENT CONTRACT NOT PROVEN, RESTITUTION IS NOT A REMEDY UNDER THE GENERAL BUSINESS LAW, GROUNDS FOR PUNITIVE DAMAGES NOT PROVEN, STATUTORY FEES, INCLUDING ATTORNEY’S FEES, APPLICABLE (SECOND DEPT))/PUNITIVE DAMAGES (BREACH OF CONTRACT, FRAUD, DAMAGES FOR BREACH OF HOME IMPROVEMENT CONTRACT NOT PROVEN, RESTITUTION IS NOT A REMEDY UNDER THE GENERAL BUSINESS LAW, GROUNDS FOR PUNITIVE DAMAGES NOT PROVEN, STATUTORY FEES, INCLUDING ATTORNEY’S FEES, APPLICABLE (SECOND DEPT))

October 31, 2018

Civil Procedure, Fraud, Insurance Law

COMPLAINT STATED A FRAUD CAUSE OF ACTION BASED UPON ALLEGED MISREPRESENTATIONS ABOUT INSURANCE COVERAGE MADE BY DEFENDANT TO THE INJURED PLAINTIFF, BUT DID NOT STATE A FRAUD CAUSE OF ACTION BASED UPON ALLEGED MISREPRESENTATIONS MADE BY DEFENDANT TO THE NONPARTY INSURER, THERE WAS NO ALLEGATION THE MISREPRESENTATIONS MADE TO THE INSURER WERE TO BE COMMUNICATED TO THE PLAINTIFF (SECOND DEPT).

The Second Department determined the fraud cause of action against the property insurer which had disclaimed coverage should have been dismissed. Plaintiff was injured on property owned by defendant Kirit and insured by nonparty Liberty Mutual Insurance. The fraud cause of action based upon alleged misrepresentations about the insurance coverage made to plaintiff by Kirit properly survived a motion to dismiss. But the fraud cause of action based upon alleged misrepresentations by Kirit to Liberty Mutual should have been dismissed:

The elements of a cause of action to recover damages for fraud are “a material misrepresentation of a fact, knowledge of its falsity, an intent to induce reliance, justifiable reliance by the plaintiff and damages” … . Moreover, where a cause of action is based on fraud, “the circumstances constituting the wrong shall be stated in detail” (CPLR 3016[b]… ).

Here, construing the complaint liberally, accepting all factual allegations to be true, and giving the plaintiff the benefit of all favorable inferences … , the complaint adequately stated a cause of action alleging fraud based upon the allegations that the defendants knowingly made misrepresentations to the plaintiff regarding insurance coverage for the renovation project. The complaint stated the misrepresentations with sufficient particularity to clearly inform the defendants of the incidents complained of … . However, the plaintiff failed to state a cause of action based upon alleged misrepresentations the defendants made to Liberty Mutual, as the plaintiff failed to adequately allege that the misrepresentations were made for the purpose of being communicated to the plaintiff in order to induce his reliance thereon or that these misrepresentations were relayed to the plaintiff, who then relied upon them … . Robles v Patel, 2018 NY Slip Op 06779, Second Dept 10-10-18

FRAUD (COMPLAINT STATED A FRAUD CAUSE OF ACTION BASED UPON ALLEGED MISREPRESENTATIONS ABOUT INSURANCE COVERAGE MADE BY DEFENDANT TO THE INJURED PLAINTIFF, BUT DID NOT STATE A FRAUD CAUSE OF ACTION BASED UPON ALLEGED MISREPRESENTATIONS MADE BY DEFENDANT TO THE NONPARTY INSURER, THERE WAS NO ALLEGATION THE MISREPRESENTATIONS MADE TO THE INSURER WERE TO BE COMMUNICATED TO THE PLAINTIFF (SECOND DEPT))/INSURANCE LAW (FRAUD, COMPLAINT STATED A FRAUD CAUSE OF ACTION BASED UPON ALLEGED MISREPRESENTATIONS ABOUT INSURANCE COVERAGE MADE BY DEFENDANT TO THE INJURED PLAINTIFF, BUT DID NOT STATE A FRAUD CAUSE OF ACTION BASED UPON ALLEGED MISREPRESENTATIONS MADE BY DEFENDANT TO THE NONPARTY INSURER, THERE WAS NO ALLEGATION THE MISREPRESENTATIONS MADE TO THE INSURER WERE TO BE COMMUNICATED TO THE PLAINTIFF (SECOND DEPT))/CIVIL PROCEDURE (FRAUD, COMPLAINT STATED A FRAUD CAUSE OF ACTION BASED UPON ALLEGED MISREPRESENTATIONS ABOUT INSURANCE COVERAGE MADE BY DEFENDANT TO THE INJURED PLAINTIFF, BUT DID NOT STATE A FRAUD CAUSE OF ACTION BASED UPON ALLEGED MISREPRESENTATIONS MADE BY DEFENDANT TO THE NONPARTY INSURER, THERE WAS NO ALLEGATION THE MISREPRESENTATIONS MADE TO THE INSURER WERE TO BE COMMUNICATED TO THE PLAINTIFF (SECOND DEPT))/CPLR 3016 (FRAUD, COMPLAINT STATED A FRAUD CAUSE OF ACTION BASED UPON ALLEGED MISREPRESENTATIONS ABOUT INSURANCE COVERAGE MADE BY DEFENDANT TO THE INJURED PLAINTIFF, BUT DID NOT STATE A FRAUD CAUSE OF ACTION BASED UPON ALLEGED MISREPRESENTATIONS MADE BY DEFENDANT TO THE NONPARTY INSURER, THERE WAS NO ALLEGATION THE MISREPRESENTATIONS MADE TO THE INSURER WERE TO BE COMMUNICATED TO THE PLAINTIFF (SECOND DEPT))

October 10, 2018

Civil Procedure, Fraud, Insurance Law

INSURANCE AGENCY ALLEGED FRAUD ON THE PART OF THE INSURED WHICH RESULTED IN A LOWER PREMIUM, THE COMPLAINT ADEQUATELY ALLEGED A FRAUD CAUSE OF ACTION (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the complaint stated a cause of action for fraud and should not have been dismissed. The plaintiff, an insurance agency, alleged the defendant insured (Aminov) misrepresented its gross income, and therefore paid a lower premium:

“The elements of a cause of action to recover damages for fraud are (1) a misrepresentation or a material omission of fact which was false, (2) knowledge of its falsity, (3) an intent to induce reliance, (4) justifiable reliance by the plaintiff, and (5) damages” … . “In actions for fraud, corporate officers and directors may be held individually liable if they participated in or had knowledge of the fraud, even if they did not stand to gain personally” … .

In addition to alleging all of the elements of a fraud cause of action, CPLR 3016(b) provides that “the circumstances constituting the wrong shall be stated in detail.” The purpose of this heightened pleading requirement “is to inform a defendant with respect to the incidents complained of” and “should not be confused with unassailable proof of fraud” … .

Here, contrary to the Supreme Court's conclusion, the complaint, as amplified by the plaintiff's submission in opposition to the motion, alleged all of the elements constituting fraud, and further stated “the basic facts to establish [those] elements,” as required by CPLR 3016(b) … . In particular, the plaintiff alleged a specific misrepresentation, intentionally made by Aminov … , in the context of applying for a policy of insurance from the plaintiff, and that the plaintiff relied upon that misrepresentation to its detriment, as it consequently charged and collected a lower premium than it otherwise would have for the instant insurance policy. Assuming the facts alleged to be true and according the plaintiff the benefit of every favorable inference, these allegations set forth a cognizable cause of action alleging fraud, and stated in sufficient detail the facts constituting the wrong … . Moreover, the fraud cause of action is not duplicative of the breach of contract cause of action, as it does not relate to a failure to perform under the insurance policy, but, rather, to an alleged misrepresentation made in applying for the policy … . Minico Ins. Agency, LLC v B&M Cleanup Servs., 2018 NY Slip Op 06729, Second Dept 10-10-18

FRAUD (INSURANCE AGENCY ALLEGED FRAUD ON THE PART OF THE INSURED WHICH RESULTED IN A LOWER PREMIUM, THE COMPLAINT ADEQUATELY ALLEGED A FRAUD CAUSE OF ACTION (SECOND DEPT))/CIVIL PROCEDURE (FRAUD, INSURANCE AGENCY ALLEGED FRAUD ON THE PART OF THE INSURED WHICH RESULTED IN A LOWER PREMIUM, THE COMPLAINT ADEQUATELY ALLEGED A FRAUD CAUSE OF ACTION (SECOND DEPT))/INSURANCE LAW (FRAUD, (INSURANCE AGENCY ALLEGED FRAUD ON THE PART OF THE INSURED WHICH RESULTED IN A LOWER PREMIUM, THE COMPLAINT ADEQUATELY ALLEGED A FRAUD CAUSE OF ACTION (SECOND DEPT))

October 10, 2018

Family Law, Fraud

PARTIES’ CONSENT TO A DNA TEST DID NOT ELIMINATE THE NEED FOR A HEARING TO DETERMINE WHETHER AN ACKNOWLEDGEMENT OF PATERNITY NEARLY 20 YEARS AGO WAS THE PRODUCT OF FRAUD, FAMILY COURT PROPERLY FOUND THAT FRAUD WAS NOT ESTABLISHED (SECOND DEPT).

The Second Department determined the parties' consent to a DNA test did not eliminate the need for a hearing on the vacation of the the acknowledgment of paternity on the basis of fraud:

On November 22, 1998, an acknowledgment of paternity was executed with respect to the subject child, which contained the signatures of the mother and the father. Seventeen years later, the father filed the instant petition to vacate the acknowledgment of paternity on the ground of fraud, alleging, inter alia, “I do not believe that I have ever executed an acknowledgment” of paternity. Although the parties consented to a DNA test, the Family Court proceeded to conduct a hearing on the issue of whether the acknowledgment of paternity should be vacated on the ground of fraud. At the conclusion of the hearing, the court determined that the father failed to establish that the acknowledgment of paternity was fraudulently executed, and thus denied the father's petition. The father appeals.

Contrary to the father's contention, the parties' consent to a DNA test did not obviate the need for a hearing on the issue of whether the acknowledgment of paternity should be vacated on the ground of fraud. Where, as here, a party seeks to challenge an acknowledgment of paternity more than 60 days after its execution, “Family Court Act § 516-a(b) requires the court to conduct a hearing to determine the issues of fraud, duress, or a material mistake of fact [in the execution of the acknowledgment of paternity] before ordering a [genetic marker test]” … . Matter of Andrew E. v Angela N.S., 2018 NY Slip Op 06530, Second Dept 10-3-18

FAMILY LAW (PARTIES' CONSENT TO A DNA TEST DID NOT ELIMINATE THE NEED FOR A HEARING TO DETERMINE WHETHER AN ACKNOWLEDGEMENT OF PATERNITY NEARLY 20 YEARS AGO WAS THE PRODUCT OF FRAUD, FAMILY COURT PROPERLY FOUND THAT FRAUD WAS NOT ESTABLISHED (SECOND DEPT))/FRAUD (FAMILY LAW, PATERNITY, PARTIES' CONSENT TO A DNA TEST DID NOT ELIMINATE THE NEED FOR A HEARING TO DETERMINE WHETHER AN ACKNOWLEDGEMENT OF PATERNITY NEARLY 20 YEARS AGO WAS THE PRODUCT OF FRAUD, FAMILY COURT PROPERLY FOUND THAT FRAUD WAS NOT ESTABLISHED (SECOND DEPT))/PATERNITY (FRAUD, PARTIES' CONSENT TO A DNA TEST DID NOT ELIMINATE THE NEED FOR A HEARING TO DETERMINE WHETHER AN ACKNOWLEDGEMENT OF PATERNITY NEARLY 20 YEARS AGO WAS THE PRODUCT OF FRAUD, FAMILY COURT PROPERLY FOUND THAT FRAUD WAS NOT ESTABLISHED (SECOND DEPT))/DNA (PATERNITY, PARTIES' CONSENT TO A DNA TEST DID NOT ELIMINATE THE NEED FOR A HEARING TO DETERMINE WHETHER AN ACKNOWLEDGEMENT OF PATERNITY NEARLY 20 YEARS AGO WAS THE PRODUCT OF FRAUD, FAMILY COURT PROPERLY FOUND THAT FRAUD WAS NOT ESTABLISHED (SECOND DEPT))

October 3, 2018

Contract Law, Fraud, Insurance Law, Securities

INSURER OF RESIDENTIAL MORTGAGE-BACKED SECURITIES NOT ENTITLED TO RECOVER ALL CLAIMS PAID OUT AS A RESULT OF 50% OF THE UNDERLYING MORTGAGES GOING INTO DEFAULT UNDER A FRAUD THEORY, ONLY A BREACH OF CONTRACT THEORY WAS AVAILABLE (FIRST DEPT).

The First Department, modifying Supreme Court, in a full-fledged opinion by Justice Manzanet-Daniels, determined plaintiff insurer's (MBAI's) motion for summary judgment should have been denied in its entirety in this action stemming from the insuring of residential mortgage-backed securities. MBAI sought to recover all the payments made after more than 50% of the mortgages underlying the securities went into default:

MBIA seeks “Claims Payment Damages” and “Repurchase Damages.” The “Claims Payment Damages” consist of “all claims payments that MBIA has made . . . [or] will likely incur,” and are designed to put MBIA in the same position it would have been in had the policy never been issued. As such, they constitute rescissory damages and are not recoverable by plaintiff monoline insurer seeking redress under an irrevocable policy. We have made clear that an insurer is “not entitled to damages amounting to all claims payments it made or will make under the policies,” inasmuch as such damages are “rescissory damages to which the insurer is not entitled” … .

“Repurchase Damages” represent the difference between the claims payments MBIA made or is projected to incur, and those MBIA would have made had [defendant] Credit Suisse repurchased nonconforming lines, i.e., those that breached the representations and warranties.

While such repurchase damages are in theory recoverable, the fraud claim was nonetheless correctly dismissed. It has long been the rule that parties may not assert fraud claims seeking damages that are duplicative of those recoverable on a cause of action for breach of contract (see e.g. Manas v VMS Assoc., LLC, 53 AD3d 451, 454 [1st Dept 2008]). As we noted in Manas, fraud damages are meant to redress a different harm than damages on a cause of action for breach of contract. Contract damages are meant to restore the nonbreaching party to as good a position as it would have been in had the contract been performed; fraud damages are meant to indemnify losses suffered as a result of the fraudulent inducement … . Where all of the damages are remedied through the contract claim, the fraud claim is duplicative and must be dismissed … . * * *

… [T]he order of the Supreme Court … [which] granted defendants' motion for summary judgment dismissing the fraudulent inducement claim, denied so much of plaintiff's motion for summary judgment as sought a ruling that an insurer does not have to prove loss causation in connection with a fraudulent inducement claim, granted so much of plaintiff's motion as sought a ruling on the meaning of the “No Monetary Default” representation and the “Mortgage Loan Schedule” representation in the Pooling and Service Agreement for the subject residential mortgage-backed securitization transaction, and denied plaintiff's motion to supplement the record in opposition to defendants' motion, should be modified, on the law, to deny plaintiff's motion as to the meaning of the representations, and otherwise affirmed … . MBIA Ins. Corp. v Credit Suisse Sec. (USA) LLC, 2018 NY Slip Op 06060, First Dept 9-13-18

INSURANCE LAW (SECURITIES, INSURER OF RESIDENTIAL MORTGAGE-BACKED SECURITIES NOT ENTITLED TO RECOVER ALL CLAIMS PAID OUT AS A RESULT OF 50% OF THE UNDERLYING MORTGAGES GOING INTO DEFAULT UNDER A FRAUD THEORY, ONLY A BREACH OF CONTRACT THEORY WAS AVAILABLE (FIRST DEPT))/CONTRACT LAW (INSURANCE LAW, SECURITIES, INSURER OF RESIDENTIAL MORTGAGE-BACKED SECURITIES NOT ENTITLED TO RECOVER ALL CLAIMS PAID OUT AS A RESULT OF 50% OF THE UNDERLYING MORTGAGES GOING INTO DEFAULT UNDER A FRAUD THEORY, ONLY A BREACH OF CONTRACT THEORY WAS AVAILABLE (FIRST DEPT))/SECURITIES (INSURANCE LAW, INSURER OF RESIDENTIAL MORTGAGE-BACKED SECURITIES NOT ENTITLED TO RECOVER ALL CLAIMS PAID OUT AS A RESULT OF 50% OF THE UNDERLYING MORTGAGES GOING INTO DEFAULT UNDER A FRAUD THEORY, ONLY A BREACH OF CONTRACT THEORY WAS AVAILABLE (FIRST DEPT))/FRAUD (INSURANCE LAW, SECURITIES, INSURER OF RESIDENTIAL MORTGAGE-BACKED SECURITIES NOT ENTITLED TO RECOVER ALL CLAIMS PAID OUT AS A RESULT OF 50% OF THE UNDERLYING MORTGAGES GOING INTO DEFAULT UNDER A FRAUD THEORY, ONLY A BREACH OF CONTRACT THEORY WAS AVAILABLE (FIRST DEPT))/RESIDENTIAL MORTGAGE BACKED SECURITIES (INSURER OF RESIDENTIAL MORTGAGE-BACKED SECURITIES NOT ENTITLED TO RECOVER ALL CLAIMS PAID OUT AS A RESULT OF 50% OF THE UNDERLYING MORTGAGES GOING INTO DEFAULT UNDER A FRAUD THEORY, ONLY A BREACH OF CONTRACT THEORY WAS AVAILABLE (FIRST DEPT))

September 13, 2018

Election Law, Fraud

FRAUD WARRANTED INVALIDATION OF THE DESIGNATING PETITION (FOURTH DEPT).

The Fourth Department determined the designating petition was properly invalidated on the basis of fraud:

“As a general rule, a candidate's designating petition will be invalidated on the ground of fraud only if there is a showing that the entire designating petition is permeated with that fraud” … . “Even where the designating petition is not permeated with fraud, however, when the candidate has participated in or is chargeable with knowledge of the fraud, the designating petition will generally be invalidated” (id. at 509). Here, petitioners established that multiple subscribing witnesses, including respondent, attested falsely that they had witnessed certain signatures on the designating petition inasmuch as they had allowed third-parties to sign the petition on behalf of the person named as the signatory on the designating petition … , and that respondent attested to certain signatures although he was not “in the presence of the signatories when [they] signed the [designating] petition” … . Thus, the court properly determined that respondent's participation in fraudulent acts warranted invalidating the designating petition for the Democratic Party … . Matter of Buttenschon v Salatino, 2018 NY Slip Op 05988, Fourth Dept 9-7-18

ELECTION LAW (FRAUD WARRANTED INVALIDATION OF THE DESIGNATING PETITION (FOURTH DEPT))/FRAUD (ELECTION LAW, FRAUD WARRANTED INVALIDATION OF THE DESIGNATING PETITION (FOURTH DEPT))

September 7, 2018

Employment Law, Fraud, Insurance Law, Tax Law

IN THIS QUI TAM (WHISTLEBLOWER) ACTION THE COMPLAINT SUFFICIENTLY ALLEGED DEFENDANT CAPTIVE INSURANCE COMPANY FILED FALSE TAX RETURNS AND TERMINATED THE WHISTLEBLOWER FOR RAISING HIS CONCERNS WITH HIS SUPERIORS (FIRST DEPT).

The First Department, in a full-fledged opinion by Justice Manzanet-Daniels, determined a qui tam (whistleblower) action alleging a captive insurance company (Moody's) violated the New York False Claims Act (NYFCA) by filing false tax returns properly survived the motion to dismiss. The court further held that the relator's retaliation claim, alleging unlawful termination of employment for raising questions about Moody's taxes, also properly survived the motion to dismiss. Captive insurance company's receive favorable tax treatment only if they meet certain criteria:

While the typical NYFCA claim involves the State paying out money on account of a false claim, a “reverse false claim” occurs when someone uses a false record to conceal or avoid an obligation to pay the government … . A defendant knowingly makes a false claim under the NYFCA if the defendant had “actual knowledge” of the falsity of the claim or acted “in deliberate ignorance” or “reckless disregard” of its truth or falsity (State Finance Law § 188[3][a]).

The motion court correctly found that the complaint sufficiently alleges that Moody's “tax treatment of MAC was aggressive, risky, and/or abusive due to its sham nature,” and that Moody's knowingly submitted false claims. * * *

The complaint sufficiently alleges that defendants had knowledge of relator's protected activity and that they retaliated against him because of his protected activity. Relator alleges that he repeatedly complained about MAC's noncompliance with the tax laws to Moody's tax department as well as to his superiors … . Anonymous v Anonymous, 2018 NY Slip Op 05963, First Dept 8-30-18

INSURANCE LAW (IN THIS QUI TAM (WHISTLEBLOWER) ACTION THE COMPLAINT SUFFICIENTLY ALLEGED DEFENDANT CAPTIVE INSURANCE COMPANY FILED FALSE TAX RETURNS AND TERMINATED THE WHISTLEBLOWER FOR RAISING HIS CONCERNS WITH HIS SUPERIORS (FIRST DEPT))/CAPTIVE INSURANCE COMPANIES (IN THIS QUI TAM (WHISTLEBLOWER) ACTION THE COMPLAINT SUFFICIENTLY ALLEGED DEFENDANT CAPTIVE INSURANCE COMPANY FILED FALSE TAX RETURNS AND TERMINATED THE WHISTLEBLOWER FOR RAISING HIS CONCERNS WITH HIS SUPERIORS (FIRST DEPT))/TAX LAW (INSURANCE LAW, IN THIS QUI TAM (WHISTLEBLOWER) ACTION THE COMPLAINT SUFFICIENTLY ALLEGED DEFENDANT CAPTIVE INSURANCE COMPANY FILED FALSE TAX RETURNS AND TERMINATED THE WHISTLEBLOWER FOR RAISING HIS CONCERNS WITH HIS SUPERIORS (FIRST DEPT))/FRAUD (INSURANCE LAW, TAX LAW, IN THIS QUI TAM (WHISTLEBLOWER) ACTION THE COMPLAINT SUFFICIENTLY ALLEGED DEFENDANT CAPTIVE INSURANCE COMPANY FILED FALSE TAX RETURNS AND TERMINATED THE WHISTLEBLOWER FOR RAISING HIS CONCERNS WITH HIS SUPERIORS (FIRST DEPT))/EMPLOYMENT LAW (IN THIS QUI TAM (WHISTLEBLOWER) ACTION THE COMPLAINT SUFFICIENTLY ALLEGED DEFENDANT CAPTIVE INSURANCE COMPANY FILED FALSE TAX RETURNS AND TERMINATED THE WHISTLEBLOWER FOR RAISING HIS CONCERNS WITH HIS SUPERIORS (FIRST DEPT))/QUI TAM (IN THIS QUI TAM (WHISTLEBLOWER) ACTION THE COMPLAINT SUFFICIENTLY ALLEGED DEFENDANT CAPTIVE INSURANCE COMPANY FILED FALSE TAX RETURNS AND TERMINATED THE WHISTLEBLOWER FOR RAISING HIS CONCERNS WITH HIS SUPERIORS (FIRST DEPT))/WHISTLEBLOWER (IN THIS QUI TAM (WHISTLEBLOWER) ACTION THE COMPLAINT SUFFICIENTLY ALLEGED DEFENDANT CAPTIVE INSURANCE COMPANY FILED FALSE TAX RETURNS AND TERMINATED THE WHISTLEBLOWER FOR RAISING HIS CONCERNS WITH HIS SUPERIORS (FIRST DEPT))

August 30, 2018

Civil Procedure, Contract Law, Fraud, Real Estate

REAL ESTATE CONTRACT LIMITING REMEDIES CONSTITUTED DOCUMENTARY EVIDENCE SUFFICIENT TO WARRANT DISMISSAL OF CAUSES OF ACTION FOR SPECIFIC PERFORMANCE AND REFORMATION OF THE PURCHASE CONTRACT, PLEADING REQUIREMENTS FOR FRAUDULENT MISREPRESENTATION EXPLAINED (SECOND DEPT).

The Second Department, modifying Supreme Court, determined defendant's motion to dismiss causes of action for specific performance and reformation of a real estate purchase contract should have been granted. However the motion to dismiss the fraudulent misrepresentation cause of action was properly denied. The Second Department determined the limitation of remedies in the real estate contract constituted documentary evidence justifying dismissal pursuant to CPLR 3211(a)(1). The requirements for sufficiently pleading a cause of action for fraudulent misrepresentation were explained as well:

“To succeed on a motion to dismiss based upon documentary evidence pursuant to CPLR 3211(a)(1), the documentary evidence must utterly refute the plaintiff's factual allegations, conclusively establishing a defense as a matter of law” … . “An unambiguous contract provision may qualify as documentary evidence under CPLR 3211(a)(1)” … . Here, the parties' contract, which limited the plaintiff's remedies in the event that the defendants were unable to clear defects in title, established a complete defense as a matter of law to the first and third causes of action, seeking specific performance and reformation of the contract based upon mutual mistake, respectively … . …

Where a cause of action is based on a misrepresentation or fraud, “the circumstances constituting the wrong shall be stated in detail” (CPLR 3016[b]). Here, the complaint sufficiently stated a cause of action to recover damages for fraudulent misrepresentation by alleging that the defendants misrepresented that they owned 42-55 27th Street and had the right to convey it, that they made this representation despite knowing that it was false, and that the plaintiff reasonably relied upon the representation to his detriment. Hiu Ian Cheng v Salguero, 2018 NY Slip Op 05831, Second Dept 8-22-18

CIVIL PROCEDURE (MOTION TO DISMISS ON DOCUMENTARY EVIDENCE, REAL ESTATE CONTRACT LIMITING REMEDIES CONSTITUTED DOCUMENTARY EVIDENCE SUFFICIENT TO WARRANT DISMISSAL OF CAUSES OF ACTION FOR SPECIFIC PERFORMANCE AND REFORMATION OF A REAL ESTATE PURCHASE CONTRACT, PLEADING REQUIREMENTS FOR FRAUDULENT MISREPRESENTATION EXPLAINED (SECOND DEPT))/CPLR 3211 (MOTION TO DISMISS ON DOCUMENTARY EVIDENCE, REAL ESTATE CONTRACT LIMITING REMEDIES CONSTITUTED DOCUMENTARY EVIDENCE SUFFICIENT TO WARRANT DISMISSAL OF CAUSES OF ACTION FOR SPECIFIC PERFORMANCE AND REFORMATION OF A REAL ESTATE PURCHASE CONTRACT, PLEADING REQUIREMENTS FOR FRAUDULENT MISREPRESENTATION EXPLAINED (SECOND DEPT))/CONTRACT LAW (MOTION TO DISMISS ON DOCUMENTARY EVIDENCE, REAL ESTATE CONTRACT LIMITING REMEDIES CONSTITUTED DOCUMENTARY EVIDENCE SUFFICIENT TO WARRANT DISMISSAL OF CAUSES OF ACTION FOR SPECIFIC PERFORMANCE AND REFORMATION OF A REAL ESTATE PURCHASE CONTRACT, PLEADING REQUIREMENTS FOR FRAUDULENT MISREPRESENTATION EXPLAINED (SECOND DEPT))/REAL ESTATE (MOTION TO DISMISS ON DOCUMENTARY EVIDENCE, REAL ESTATE CONTRACT LIMITING REMEDIES CONSTITUTED DOCUMENTARY EVIDENCE SUFFICIENT TO WARRANT DISMISSAL OF CAUSES OF ACTION FOR SPECIFIC PERFORMANCE AND REFORMATION OF A REAL ESTATE PURCHASE CONTRACT, PLEADING REQUIREMENTS FOR FRAUDULENT MISREPRESENTATION EXPLAINED (SECOND DEPT))/FRAUD (MOTION TO DISMISS ON DOCUMENTARY EVIDENCE, REAL ESTATE CONTRACT LIMITING REMEDIES CONSTITUTED DOCUMENTARY EVIDENCE SUFFICIENT TO WARRANT DISMISSAL OF CAUSES OF ACTION FOR SPECIFIC PERFORMANCE AND REFORMATION OF A REAL ESTATE PURCHASE CONTRACT, PLEADING REQUIREMENTS FOR FRAUDULENT MISREPRESENTATION EXPLAINED (SECOND DEPT))

August 22, 2018

Civil Procedure, Fraud, Municipal Law, Negligence, Toxic Torts

ACTIONS AGAINST THE COUNTY STEMMING FROM PLAINTIFF’S EXPOSURE TO ASBESTOS WHILE WORKING ON COUNTY PROPERTY WERE TIME BARRED, INCLUDING AN ACTION ALLEGING FRAUDULENT CONCEALMENT OF THE PRESENCE OF ASBESTOS (SECOND DEPT).

The Second Department determined plaintiff's actions stemming from exposure to asbestos, including an action against the county alleging fraudulent concealment of the presence of asbestos where plaintiff worked, were time barred:

Generally, an action to recover damages for personal injuries caused by the latent effects of exposure to any substance or combination of substances must be commenced within three years of the date of discovery of the injury by the plaintiff or from the date when, through the exercise of reasonable diligence, such injury should have been discovered by the plaintiff, whichever is earlier (see CPLR 214-c[2] …). “For purposes of CPLR 214-c, discovery occurs when, based upon an objective level of awareness of the dangers and consequences of the particular substance, the injured party discovers the primary condition on which the claim is based'” … . Where, as here, a claim is asserted against a municipality, the statute of limitations as to the claim against the municipality is 1 year and 90 days and is measured from the date of discovery of the injury or from the date when, through the exercise of reasonable diligence, the injury should have been discovered, whichever is earlier … . O'Brien v County of Nassau, 2018 NY Slip Op 05774, Second Dept 8-15-18

TOXIC TORTS (ASBESTOS, ACTIONS AGAINST THE COUNTY STEMMING FROM PLAINTIFF'S EXPOSURE TO ASBESTOS WHILE WORKING ON COUNTY PROPERTY WERE TIME BARRED, INCLUDING AN ACTION ALLEGING FRAUDULENT CONCEALMENT OF THE PRESENCE OF ASBESTOS (SECOND DEPT))/ASBESTOS (ACTIONS AGAINST THE COUNTY STEMMING FROM PLAINTIFF'S EXPOSURE TO ASBESTOS WHILE WORKING ON COUNTY PROPERTY WERE TIME BARRED, INCLUDING AN ACTION ALLEGING FRAUDULENT CONCEALMENT OF THE PRESENCE OF ASBESTOS (SECOND DEPT))/MUNICIPAL LAW (TOXIC TORTS, ACTIONS AGAINST THE COUNTY STEMMING FROM PLAINTIFF'S EXPOSURE TO ASBESTOS WHILE WORKING ON COUNTY PROPERTY WERE TIME BARRED, INCLUDING AN ACTION ALLEGING FRAUDULENT CONCEALMENT OF THE PRESENCE OF ASBESTOS (SECOND DEPT))/CIVIL PROCEDURE (STATUTE OF LIMITATIONS, TOXIC TORTS, ACTIONS AGAINST THE COUNTY STEMMING FROM PLAINTIFF'S EXPOSURE TO ASBESTOS WHILE WORKING ON COUNTY PROPERTY WERE TIME BARRED, INCLUDING AN ACTION ALLEGING FRAUDULENT CONCEALMENT OF THE PRESENCE OF ASBESTOS (SECOND DEPT))/(STATUTE OF LIMITATIONS, TOXIC TORTS, ACTIONS AGAINST THE COUNTY STEMMING FROM PLAINTIFF'S EXPOSURE TO ASBESTOS WHILE WORKING ON COUNTY PROPERTY WERE TIME BARRED, INCLUDING AN ACTION ALLEGING FRAUDULENT CONCEALMENT OF THE PRESENCE OF ASBESTOS (SECOND DEPT))/FRAUD (ASBESTOS, ACTIONS AGAINST THE COUNTY STEMMING FROM PLAINTIFF'S EXPOSURE TO ASBESTOS WHILE WORKING ON COUNTY PROPERTY WERE TIME BARRED, INCLUDING AN ACTION ALLEGING FRAUDULENT CONCEALMENT OF THE PRESENCE OF ASBESTOS (SECOND DEPT))

August 15, 2018

Fiduciary Duty, Fraud, Real Estate

THERE ARE QUESTIONS OF FACT WHETHER THE BROKER REPRESENTED BOTH SELLERS AND BUYER WITHOUT DISCLOSING THE DUAL REPRESENTATION, A BREACH OF A FIDUCIARY DUTY, AND THERE ARE QUESTIONS OF FACT WHETHER THE SELLERS WERE FRAUDULENTLY INDUCED BY THE BROKER TO ENTER THE PURCHASE AGREEMENT, BROKER’S MOTION FOR SUMMARY JUDGMENT SHOULD NOT HAVE BEEN GRANTED (FOURTH DEPT).

The Fourth Department, reversing (modifying) Supreme Court, determined there was a question of fact whether defendant real estate broker, JRMR, breached a fiduciary duty owed to the sellers of real property, and whether JRMR fraudulently induced the sellers to enter the purchase agreement. Although JRMR represented the sellers, emails between JRMR and the buyer raised a question of fact whether JRMR was acting on behalf of both the buyer and the sellers without disclosing the dual representation (a breach of a fiduciary duty):

It is well settled that, “because of a broker’s fiduciary duties, he [or she] has the affirmative duty not to act for a party whose interests are adverse to those of the principal, unless he [or she] has the consent of the principal given after full knowledge of the facts . . . Accordingly, he [or she] cannot act as agent for both seller and purchaser of property in a real estate transaction” … . “Where a broker’s interests or loyalties are divided due to . . . [the] representation of multiple parties, the broker must disclose to the principal . . . the material facts illuminating the broker’s divided loyalties”… . Indeed, “[a] failure to disclose any interest tending to influence the [broker] . . . constitutes a breach of [the broker’s] fiduciary obligation and precludes [the broker] from recovering for services rendered” … . * * *

… [The sellers’] evidence raised issues of fact whether [the broker] made misrepresentations to them concerning the value of their properties and the willingness of [the buyer] to purchase different property, and whether [the broker] knew of the falsity of those statements and made them with the intent to induce [the sellers’] reliance on them. [The sellers] also submitted evidence raising triable issues of fact whether they justifiably relied on [the broker’s] misrepresentations and suffered damages as a result. Northland E., LLC v J.R. Militello Realty, Inc., 2018 NY Slip Op 05078, Fourth Dept 7-6-18

REAL ESTATE (THERE ARE QUESTIONS OF FACT WHETHER THE BROKER REPRESENTED BOTH SELLERS AND BUYER WITHOUT DISCLOSING THE DUAL REPRESENTATION, A BREACH OF A FIDUCIARY DUTY, AND THERE ARE QUESTIONS OF FACT WHETHER THE SELLERS WERE FRAUDULENTLY INDUCED BY THE BROKER TO ENTER THE PURCHASE AGREEMENT, BROKER’S MOTION FOR SUMMARY JUDGMENT SHOULD NOT HAVE BEEN GRANTED (FOURTH DEPT))/FRAUD (REAL ESTATE, THERE ARE QUESTIONS OF FACT WHETHER THE BROKER REPRESENTED BOTH SELLERS AND BUYER WITHOUT DISCLOSING THE DUAL REPRESENTATION, A BREACH OF A FIDUCIARY DUTY, AND THERE ARE QUESTIONS OF FACT WHETHER THE SELLERS WERE FRAUDULENTLY INDUCED BY THE BROKER TO ENTER THE PURCHASE AGREEMENT, BROKER’S MOTION FOR SUMMARY JUDGMENT SHOULD NOT HAVE BEEN GRANTED (FOURTH DEPT))/BROKERS (REAL ESTATE, THERE ARE QUESTIONS OF FACT WHETHER THE BROKER REPRESENTED BOTH SELLERS AND BUYER WITHOUT DISCLOSING THE DUAL REPRESENTATION, A BREACH OF A FIDUCIARY DUTY, AND THERE ARE QUESTIONS OF FACT WHETHER THE SELLERS WERE FRAUDULENTLY INDUCED BY THE BROKER TO ENTER THE PURCHASE AGREEMENT, BROKER’S MOTION FOR SUMMARY JUDGMENT SHOULD NOT HAVE BEEN GRANTED (FOURTH DEPT))/FIDUCIARY DUTY (REAL ESTATE, BROKERS, THERE ARE QUESTIONS OF FACT WHETHER THE BROKER REPRESENTED BOTH SELLERS AND BUYER WITHOUT DISCLOSING THE DUAL REPRESENTATION, A BREACH OF A FIDUCIARY DUTY, AND THERE ARE QUESTIONS OF FACT WHETHER THE SELLERS WERE FRAUDULENTLY INDUCED BY THE BROKER TO ENTER THE PURCHASE AGREEMENT, BROKER’S MOTION FOR SUMMARY JUDGMENT SHOULD NOT HAVE BEEN GRANTED (FOURTH DEPT))

July 6, 2018