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Plaintiff’s Lost Profits Deemed “General Damages,” Not “Consequential Damages,” Re: a Distribution Contract in which Plaintiff Agreed to Resell Defendant’s Product

In a full-fledged opinion by Judge Rivera, over a dissent, the Court of Appeals determined that, under the facts, lost profits were “general,” not “consequential” damages.  The distribution contract was for “CoStar stents” (manufactured by defendant) used in medical procedures. The contract called for plaintiff to resell defendant's stents. The resale price was the benchmark for the price of the transfer of the stents to plaintiff for resale. The distribution contract had precluded recovery for consequential damages. Plaintiff sought its lost profits as general damages:

The agreement was not a simple resale contract, whereone party buys a product at a set price to sell at whatever the market may bear. Rather, the price plaintiff paid defendant reflected the actual sales, and sales price, of CoStar stents. The agreement required plaintiff to pay defendant a transfer price calculated as a percentage of plaintiff's net sales of Costar: 61% for direct sales and 75% for indirect sales. Each quarter, the parties would calculate a minimum price based on net sales during the preceding quarter. Plaintiff remained obligated to pay defendant the full transfer price for its sales, even when the actual sales price exceeded the minimum price. Thus, the contract would only operate if plaintiff sold stents, and the payment defendant received bore a direct relationship to the market price plaintiff could obtain.  Indirect sales were sales made by affiliates. * * *

General damages “are the natural and probable consequence of the breach” of a contract … . They include “money that the breaching party agreed to pay under the contract.. . By contrast, consequential, or special, damages do not “directly flow from the breach” … . “The distinction between general and special contract damages is well defined, but its application to specific contracts and controversies is usually more elusive” … . Lost profits may be either general or consequential damages, depending on whether the non-breaching party bargained for such profits and they are “the direct and immediate fruits of the contract” … . Otherwise, where the damages reflect a “loss of profits on collateral business arrangements,” they are only recoverable when “(1) it is demonstrated with certainty that the damages have been caused by the breach, (2) the extent of the loss is capable of proof with reasonable certainty, and (3) it is established that the damages were fairly within the contemplation of the parties”… .  * * *

Here, the agreement used plaintiff's resale price as a benchmark for the transfer price. The contract clearly contemplated that plaintiff would resell defendant's stents. That was the very essence of the contract. Any lost profits resulting from a breach would be the “natural and probable consequence” of that breach …. .

Although the lost profits sought by plaintiff are not specifically identified in the agreement, it cannot be said that defendant did not agree to pay them under the contract, as these profits flow directly from the pricing formula. The purpose of the agreement was to resell. Indeed, defendant … sought to enter a market unavailable to it by capitalizing on plaintiff's distribution network. The fact is that both defendant and plaintiff depended on the product's resale for their respective payments. Biotronik AG v Conor Medsystems Ireland Ltd, 8, CtApp 3-27-14

 

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Cannot Sue Vehicle Owner as Vicariously Liable Under Vehicle and Traffic Law 388 Where Driver is Immunized from Suit Under Workers’ Compensation Law 29 (6)

In a full-fledged opinion by Judge Graffeo, the Court of Appeals determined that “a defendant may [not] pursue a third-party contribution claim under New York Vehicle and Traffic Law [section] 388 against the owner of a vehicle, where the vehicle driver's negligence was a substantial factor in causing the plaintiff's injuries, but the driver is protected from suit by the exclusive remedy provision of New York Workers' Compensation Law [section] 29 (6)…”.  Here the driver, who was determined to be negligent (90%), was using her husband's car to drive a co-worker to a business meeting. The co-worker was injured and his exclusive remedy against the driver was under the Workers' Compensation Law.  The co-worker sued the driver of the other car, who was also determined to be negligent (10%).  The owner of that car (the driver's husband) then sued the owner of the car in which the co-worker was riding (the employee-driver's husband) under Vehicle and Traffic Law section 388 for contribution and indemnification:

In sum, we hold that a defendant may not pursue a third-party contribution claim under Vehicle and Traffic Law § 388 against a vehicle owner where the driver's negligence was a cause of the plaintiff's injuries, but the driver is insulated from a lawsuit under Workers' Compensation Law § 29 (6).  Isabella…Hallock… v Koubek, 45, CtApp 3-27-14

 

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Question of Fact Whether a “Special Relationship” Had Developed Such that the Insurance Broker Might Be Liable for Negligent Advice About Coverage

In a full-fledged opinion by Judge Graffeo, over a dissent, the Court of Appeals determined there was a question of fact whether the relationship between the insurance broker and the plaintiff was a “special relationship” such that the broker might be liable for negligent advice about sufficient coverage. Plaintiff was a business owner who suffered losses for business interruption caused by several roof-failures. The issue was whether the insurance the broker advised plaintiff to purchase was sufficient for plaintiff’s needs. The court explained the general principles involved:

As a general principle, insurance brokers “have a common-law duty to obtain requested coverage for their clients within a reasonable time or inform the client of the inability to do so; however, they have no continuing duty to advise, guide or direct a client to obtain additional coverage” … . Hence, in the ordinary broker-client setting, the client may prevail in a negligence action only where it can establish that it made a particular request to the broker and the requested coverage was not procured. * * *Where a special relationship develops between the broker and client, we have also indicated that 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 … . In Murphy [90 NY2d at 272] , we recognized that “particularized situations may arise in which insurance agents, through their conduct or by express or implied contract with customers and clients, may assume or acquire duties in addition to those fixed at common law” and that the question of whether such additional responsibilities should be “given legal effect is governed by the particular relationship between the parties and is best determined on a case-by-case basis” … . We identified three exceptional situations that may give rise to a special relationship, thereby creating an additional duty of advisement:”(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” … . Voss v The Netherlands Insurance Company…, 11, CtApp 2-25-14

 

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Defendant Implicitly and Explicitly Waived His Right to Be Present During Side-Bar Conferences

In a full-fledged opinion by Judge Smith, over a dissent, the Court of Appeals determined defendant had implicitly and explicitly waived his right to be present during side-bar conferences (the “Antommarchi” right). The implicit waiver was the defendant’s inaction after the trial judge informed him he was welcome to attend the side-bar conferences. And the explicit waiver was defense counsel’s statement to the judge, which was made outside the hearing of the defendant, that the defendant has waived his right to attend the conferences:

Defendant waived his Antommarchi right both implicitly and explicitly. He did so implicitly when, after hearing the trial judge say that he was “welcome to attend” the bench conferences, he chose not to do so. And he waived it explicitly by his lawyer’s statement to the court. People v Flinn, 20, CtApp 2-25-14

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No “Exigent Circumstances”/Warrantless Search of Defendant’s Purse Incident to Arrest for Trespassing Not Justified

In a full-fledged opinion by Judge Lippman, over a partial dissent, the Court of Appeals determined the “exigent circumstances” exception to the warrant requirement did not apply and, therefore, the search of defendant’s purse incident to a “trespassing” arrest was not justified. The loaded handgun in the purse should have been suppressed. The court explained the relevant law:

Under the State Constitution, to justify a warrantless search incident to arrest, the People must satisfy two separate requirements. The first imposes spatial and temporal limitations to ensure that the search is “not significantly divorced in time or location from the arrest” … .The second, and equally important, predicate requires the People to demonstrate the presence of exigent circumstances … . We have recognized two interests underlying the exigency requirement: “the safety of the public and the arresting officer; and the protection of evidence from destruction or concealment” … . Exigency must be affirmatively demonstrated. Accordingly, even a bag “within the immediate control or 'grabbable area' of a suspect at the time of his arrest may not be subjected to a search incident to arrest, unless the circumstances leading to the arrest support a reasonable belief that the suspect may gain possession of a weapon or be able to destroy evidence located in the bag” … . People v Jimenez, 23, CtApp 2-25-14 

 

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Counsel’s Failure to Object to Prosecutor’s PowerPoint Presentation Did Not Require Reversal for Ineffective Assistance

In a full-fledged opinion by Judge Pigott, over a dissent, the Court of Appeals determined that defense counsel’s failure to object to a PowerPoint presentation used by the prosecutor in summation did not require reversal. During the presentation, the postmortem image of the child, Justice (whom the defendant was accused of suffocating), faded to white at 30-second intervals over six minutes:

Defendant does not dispute that the postmortem photograph itself was properly admitted at trial … . The slides depicting an already admitted photograph, with captions accurately tracking prior medical testimony, might reasonably be regarded as relevant and fair, albeit dramatic, commentary on the medical evidence, and not simply an appeal to the jury's emotions. The jury was being asked to decide not only whether defendant killed Justice, but also whether she intended to do so, an issue to which the question of how long she would have had to cover Justice's mouth and nose was certainly relevant. On the other hand, the relevance of the visual device whereby the postmortem picture faded at 30-second intervals over a six-minute period – with each slide fading more and more to white, and the final slide appearing totally white – is difficult to discern. This did not show how Justice's death occurred nor would it have aided the jury in its fact-finding function.If the issue had been preserved for our review by timely objection – and had the trial court ruled against defendant and the issue reached our Court – this Court would have had the opportunity to decide whether the trial court abused its discretion and the error required a reversal of the judgment of conviction. But that did not occur and the objection to the PowerPoint presentation that defendant now raises is not so “clear-cut” or “dispositive” an argument that its omission amounted to ineffective assistance of counsel… . People v Santiago, 22, CtApp 2-25-14

 

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Allegedly Flawed Service Overlooked Under CPLR 5304 Where Defendant Agreed by Contract that English Courts Would Have Jurisdiction Over Disputes and Defendant Had “Fair Notice” of the Lawsuit/Motion for Judgment In Lieu of Complaint Granted

The Court of Appeals determined summary judgment in lieu of complaint should have been granted to the plaintiff. Under the terms of a contract to provide wholesale seafood, the parties agreed the courts of England would have exclusive jurisdiction over disputes. The defendant was served in England and defaulted, but argued in opposition to the summary judgment motion in New York that the person upon whom the documents were served was not authorized to accept service. The Court of Appeals held that service was sufficient under CPLR 5304 because the defendant had agreed by contract that the English courts have jurisdiction and the defendant had “fair notice” of the lawsuit:

Although CPLR article 53 generally provides that a foreign judgment will not be enforced in New York if the foreign court did not have personal jurisdiction over the defendant (CPLR 5304[a][2]), an exception may be made if, “prior to the commencement of the proceedings [defendant] had agreed to submit to the jurisdiction of the foreign court with respect to the subject matter involved” (CPLR 5305[3]) and was afforded fair notice of the foreign court proceeding that gave rise to the judgment. We applied this principle in Galliano [15 NY3d 75], where we explained that enforcement of a foreign judgment is not repugnant to our notion of fairness if defendant was a party to a contract in which the parties agreed that disputes would be resolved in the courts of a foreign jurisdiction and defendant was aware of the ongoing litigation in that jurisdiction but neglected to appear and defend. We clarified that, so long as the exercise of jurisdiction by the foreign court does not offend due process, the judgment should be enforced without “microscopic analysis” of the underlying proceedings … . Landauer Limited v Monani Fish Co Inc, 27, CtApp 2-25-14

 

“Rubbing” Constitutes “Forcible Touching”

In a full-fledged opinion by Judge Read, the Court of Appeals determined that the allegation defendant “rubbed” his exposed penis on a subway passenger’s buttocks was sufficient to meet the pleading requirements for “forcible touching” in violation of Penal Law 130.52:

…[W]e hold that, when done with the relevant mens rea, any bodily contact involving the application of some level of pressure to the victim's sexual or intimate parts qualifies as a forcible touch within the meaning of Penal Law § 130.52. The allegation in the information here easily meets this test. People v Guaman, 29, CtApp 2-25-14

 

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No Prosecutorial Misconduct Where Prosecutors Told the Grand Jury that the Witness Defendant Asked the Grand Jury to Call Would Not Provide Relevant Evidence/Prosecutor’s Role in Grand Jury Explained in Some Detail

In a full-fledged opinion by Judge Abdus-Salaam, over a dissent, the Court of Appeals determined the prosecutors did not impair the integrity of the grand jury proceedings by suggesting a witness the defendant asked the grand jury to subpoena would not provide relevant testimony. The court explained the prosecutor’s role in the grand jury:

CPL article 190 governs the conduct of the grand jury and the parties which appear before that body, and it requires that all grand jury proceedings remain secret to protect the essential functions of those various actors (see generally CPL 190.05; 190.25 [4] [a]). Under this statutory regime, the exclusive “legal advisors of the grand jury are the court and the district attorney” (CPL 190.25 [6]), and their decision to present certain items of evidence and to exclude others is for the most part limited only by the rules of evidence applicable at trial (see CPL 190.30 [1]…).  In the same vein, the prosecutor enjoys “broad powers and duties, as well as wide discretion in presenting the People's case” to the grand jury … . Indeed, the prosecutor “determines the competency of witnesses to testify,” and he or she “must instruct the jury on the legal significance of the evidence” … .

Notably, though, due process imposes upon the prosecutor a “duty of fair dealing to the accused and candor to the courts,” thus requiring the prosecutor “not only to seek convictions but also to see that justice is done” … . This duty extends to the prosecutor's instructions to the grand jury and the submission of evidence … . The prosecutor also cannot provide “an inaccurate or misleading answer to the grand jury's legitimate inquiry” …, nor can the prosecutor accept an indictment that he or she knows to be based on false, misleading or legally insufficient evidence … .

Even under those principles, “[a] Grand Jury proceeding is not a mini trial, but a proceeding convened primarily to investigate crimes and determine whether sufficient evidence exists to accuse a citizen of a crime and subject him or her to a criminal prosecution” … . That being so, the prosecutor need not tread too lightly in pressing the People's case or rebutting the defendant's assertions. For example, where the defendant chooses to testify, the prosecutor may, within limits, ask probing or even skeptical questions of the defendant about issues raised by his or her testimony … . Similarly, in the role of legal advisor, the prosecutor need not instruct the grand jury on the full extent of its investigatory and deliberative powers … . The prosecutor may decline to instruct the grand jury about a variety of defenses, and he or she need not disclose certain forms of exculpatory evidence or reveal to the grand jury the circumstances surrounding the authorities' investigation of the case … . These examples illustrate that, in occupying a “dual role as advocate and public officer” … , the prosecutor is not obligated to present the evidence or make statements to the grand jurors in the manner most favorable to the defense. People v Thompson, 10, CtApp 2-20-14

 

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Public Trust Doctrine Re: Allowing a Restaurant in a Public Park/License and Lease Characteristics Compared

In a full-fledged opinion by Judge Graffeo, the Court of Appeals determined that a the city’s allowing a restaurant to operate in a public park did not violate the public trust doctrine and the arrangement between the city and the restaurant was a valid license, not a lease (which would have required approval by the legislature):

Under the public trust doctrine, dedicated parkland cannot be converted to a non-park purpose for an extended period of time absent the approval of the State Legislature … . * * * … [A]lthough it is for the courts to determine what is and is not a park purpose, … the Commissioner enjoys broad discretion to choose among alternative valid park purposes. Observing that restaurants have long been operated in public parks, we [in 795 Fifth Ave Corp v City of New York, 15 NY2d 221] rejected plaintiffs' public trust claim, holding that they could show only a “difference of opinion” as to the best way to use the park space and that this “mere difference of opinion [was] not a demonstration of illegality”… . * * *

We have stated that parkland cannot be leased, even for a park purpose, absent legislative approval … . * * *

A document is a lease “if it grants not merely a revocable right to be exercised over the grantor's land without possessing any interest therein but the exclusive right to use and occupy that land” … . It is the conveyance of “absolute control and possession of property at an agreed rental which differentiates a lease from other arrangements dealing with property rights” …. . A license, on the other hand, is a revocable privilege given “to one, without interest in the lands of another, to do one or more acts of a temporary nature upon such lands” … . That a writing refers to itself as a license or lease is not determinative; rather, the true nature of the transaction must be gleaned from the rights and obligations set forth therein. Finally, a broad termination clause reserving to the grantor “the right to cancel whenever it decides in good faith to do so” is strongly indicative of a license as opposed to a lease … . Union Square Park Community Coalition Inc v New York City Department of Parks and Recreation, 17, CtApp 2-20-14

 

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