You are here: / Court of Appeals

Tag Archive for: Court of Appeals

STANDARD FOR REVIEW OF GOING-PRIVATE MERGERS ANNOUNCED; SHAREHOLDER CLASS ACTION CHALLENGING THE GOING-PRIVATE MERGER DISMISSED.

The Court of Appeals, in a full-fledged opinion by Judge Stein, determined a shareholder class action complaint challenging a going-private merger was properly dismissed for failure to state a cause of action. The court adopted a Delaware standard of review for going-private mergers, i.e., where the controlling shareholder seeks to buy out all the outstanding shares and, in effect, take the publicly-traded company private. Plaintiff argued the “entire fairness” review standard should be applied. Defendants argued the “business judgment” review standard should be applied. The Court of Appeals chose a middle ground (the Delaware standard) which is essentially the business judgment standard with added protections for minority shareholders:

Plaintiff urges that we apply the entire fairness standard, which places the burden on the corporation's directors to demonstrate that they engaged in a fair process and obtained a fair price. Defendants seek application of the business judgment rule, with or without certain conditions. We are persuaded to adopt a middle ground. Specifically, the business judgment rule should be applied as long as the corporation's directors establish that certain shareholder-protective conditions are met; however, if those conditions are not met, the entire fairness standard should be applied.

[The adopted Delaware standard has been summarized as follows:] … “[I]n controller buyouts, the business judgment standard of review will be applied if and only if: (i) the controller conditions the procession of the transaction on the approval of both a Special Committee and a majority of the minority stockholders; (ii) the Special Committee is independent; (iii) the Special Committee is empowered to freely select its own advisors and to say no definitively; (iv) the Special Committee meets its duty of care in negotiating a fair price; (v) the vote of the minority is informed; and (vi) there is no coercion of the minority” … . Matter of Kenneth Cole Prods., Inc, 2016 NY Slip Op 03545, CtApp 5-5-16

CORPORATION LAW (STANDARD FOR REVIEW OF GOING-PRIVATE MERGERS ANNOUNCED; SHAREHOLDER CLASS ACTION CHALLENGING THE GOING-PRIVATE MERGER DISMISSED)/SHAREHOLDER ACTIONS (STANDARD FOR REVIEW OF GOING-PRIVATE MERGERS ANNOUNCED; SHAREHOLDER CLASS ACTION CHALLENGING THE GOING-PRIVATE MERGER DISMISSED)/GOING PRIVATE MERGER (CORPORATION LAW, STANDARD FOR REVIEW OF GOING-PRIVATE MERGERS ANNOUNCED; SHAREHOLDER CLASS ACTION CHALLENGING THE GOING-PRIVATE MERGER DISMISSED)

,

COURT PROPERLY REFUSED TO APPROVE CLASS ACTION SETTLEMENT WHICH DID NOT GIVE OUT OF STATE SHAREHOLDERS THE RIGHT TO OPT OUT.

The Court of Appeals, in a full-fledged opinion by Judge Pigott, determined Supreme Court properly refused to approve a settlement in a class action challenging a corporate merger because there was no opt-out provision for out-of-state shareholders. Because the suit included claims for damages, effectively prohibiting out-of-state shareholders from bringing actions in other jurisdictions would deprive them of a property right:

While the complaint seeks predominately equitable relief, the settlement would also release any damage claims relating to the merger by out-of-state class members. The broad release encompassed in the agreement bars the right of those class members to pursue claims not equitable in nature, which … are constitutionally protected property rights. Jiannaras v Alfant, 2016 NY Slip Op 03548, CtApp 5-5-16

CIVIL PROCEDURE (COURT PROPERLY REFUSED TO APPROVE CLASS ACTION SETTLEMENT WHICH DID NOT GIVE OUT OF STATE SHAREHOLDERS THE RIGHT TO OPT OUT)/CLASS ACTIONS (COURT PROPERLY REFUSED TO APPROVE CLASS ACTION SETTLEMENT WHICH DID NOT GIVE OUT OF STATE SHAREHOLDERS THE RIGHT TO OPT OUT)/CORPORATION LAW (SHAREHOLDER CLASS ACTION, (COURT PROPERLY REFUSED TO APPROVE CLASS ACTION SETTLEMENT WHICH DID NOT GIVE OUT OF STATE SHAREHOLDERS THE RIGHT TO OPT OUT)/SHAREHOLDER ACTIONS (SHAREHOLDER CLASS ACTION, (COURT PROPERLY REFUSED TO APPROVE CLASS ACTION SETTLEMENT WHICH DID NOT GIVE OUT OF STATE SHAREHOLDERS THE RIGHT TO OPT OUT)

,

PARENT CORPORATION NOT LIABLE, UNDER A STRICT PRODUCTS LIABILITY THEORY, FOR ASBESTOS-CONTAINING PRODUCTS MANUFACTURED AND DISTRIBUTED BY A WHOLLY OWNED SUBSIDIARY.

The Court of Appeals, in a full-fledged opinion by Judge Pigott, reversing the Appellate Division, determined the products liability complaint against Ford USA, based upon asbestos brake linings manufactured and distributed by Ford UK, should have been dismissed. The Court of Appeals concluded Ford USA could only be held liable for a product manufactured and distributed by a wholly owned subsidiary by piercing the corporate veil, a theory unsupported by the facts alleged:

Ford USA was not a party within the distribution chain, nor can it be said that it actually placed the parts into the stream of commerce. Although plaintiff submitted evidence tending to show that Ford USA provided guidance to Ford UK in the design of certain tractor components, absent any evidence that Ford USA was in fact a manufacturer or seller of those components, Ford USA may not be held liable under a strict products liability theory … . * * *

Ford USA, as the parent corporation of Ford UK, may not be held derivatively liable to plaintiff under a theory of strict products liability unless Ford USA disregarded the separate identity of Ford UK and involved itself directly in that entity's affairs such that the corporate veil could be pieced … a conclusion that neither Supreme Court nor the Appellate Division reached in this instance. Finerty v Abex Corp., 2016 NY Slip Op 03411, CtApp 5-3-16

PRODUCTS LIABILITY (PARENT CORPORATION NOT LIABLE, UNDER A STRICT PRODUCTS LIABILITY THEORY, FOR ASBESTOS-CONTAINING PRODUCTS MANUFACTURED AND DISTRIBUTED BY A WHOLLY OWNED SUBSIDIARY)/CORPORATION LAW (PRODUCTS LIABILITY, PARENT CORPORATION NOT LIABLE, UNDER A STRICT PRODUCTS LIABILITY THEORY, FOR ASBESTOS-CONTAINING PRODUCTS MANUFACTURED AND DISTRIBUTED BY A WHOLLY OWNED SUBSIDIARY)/PIERCING THE CORPORATE VEIL (PRODUCTS LIABILITY, PARENT CORPORATION NOT LIABLE, UNDER A STRICT PRODUCTS LIABILITY THEORY, FOR ASBESTOS-CONTAINING PRODUCTS MANUFACTURED AND DISTRIBUTED BY A WHOLLY OWNED SUBSIDIARY)

,

BASED UPON THE POLICY LANGUAGE, AN ALL SUMS ALLOCATION AND VERTICAL EXHAUSTION APPLY TO EXCESS INSURANCE POLICIES IN THIS ASBESTOS INJURY ACTION.

The Court of Appeals, in a full-fledged opinion by Judge Stein, determined, pursuant to the language and provisions of the relevant excess insurance policies, (1) an “all sums,” as opposed to a “pro-rata,” allocation applies, and (2) vertical, as opposed to horizontal, exhaustion of available policies applies. The underlying claims relate to asbestos exposure over a period of years in the manufacture of pumps:

[The “all sums”] theory of allocation “permits the insured to ‘collect its total liability . . . under any policy in effect during’ the periods that the damage occurred,” up to the policy limits … . The burden is then on the insurer against whom the insured recovers to seek contribution from the insurers that issued the other triggered policies … . * * *

… [V]ertical exhaustion is more consistent than horizontal exhaustion with … language tying attachment of the excess policies specifically to identified policies that span the same policy period. Further, vertical exhaustion is conceptually consistent with an all sums allocation, permitting the Insured to seek coverage through the layers of insurance available for a specific year … . Matter of Viking Pump, Inc., 2016 NY Slip Op 03413, CtApp 5-3-16

 

INSURANCE LAW (BASED UPON THE POLICY LANGUAGE, AN ALL SUMS ALLOCATION AND VERTICAL EXHAUSTION APPLY TO EXCESS INSURANCE POLICIES IN THIS ASBESTOS INJURY ACTION)/CONTRACT LAW (INSURANCE POLICIES, BASED UPON THE POLICY LANGUAGE, AN ALL SUMS ALLOCATION AND VERTICAL EXHAUSTION APPLY TO EXCESS INSURANCE POLICIES IN THIS ASBESTOS INJURY ACTION)/ALL SUMS ALLOCATION (INSURANCE POLICIES, BASED UPON THE POLICY LANGUAGE, AN ALL SUMS ALLOCATION AND VERTICAL EXHAUSTION APPLY TO EXCESS INSURANCE POLICIES IN THIS ASBESTOS INJURY ACTION)/VERTICAL EXHAUSTION  (INSURANCE POLICIES, BASED UPON THE POLICY LANGUAGE, AN ALL SUMS ALLOCATION AND VERTICAL EXHAUSTION APPLY TO EXCESS INSURANCE POLICIES IN THIS ASBESTOS INJURY ACTION)/EXCESS INSURANCE (ASBESTOS INJURY, BASED UPON THE POLICY LANGUAGE, AN ALL SUMS ALLOCATION AND VERTICAL EXHAUSTION APPLY TO EXCESS INSURANCE POLICIES IN THIS ASBESTOS INJURY ACTION)

FAILURE TO TAKE INTO ACCOUNT CONSUMER BRAND PREFERENCE IN EVALUATING A CAR DEALER’S PERFORMANCE VIOLATES THE DEALER ACT; UNILATERAL CHANGE TO THE GEOGRAPHIC AREA USED TO EVALUATE A CAR DEALER’S PERFORMANCE DOES NOT VIOLATE THE DEALER ACT.

The Court of Appeals, in a full-fledged opinion by Judge Rivera, over a dissenting opinion, determined General Motors’ [GM’s] failure to take into account consumer-preference in determining an auto-dealer’s [franchisee’s] performance violated the Dealer Act. The court further determined that GM’s changes to the geographic area in which plaintiff-dealer’s sales performance is measured did not violate the act:

… [O]nce GM determined that statewide raw data must be adjusted to account for customer preference as a measure of dealer sales performance, GM’s exclusion of local brand popularity or import bias rendered the standard unreasonable and unfair because these preference factors constitute market challenges that impact a dealer’s sales performance differently across the state. It is unlawful under section 463 (2) (gg) to measure a dealer’s sales performance by a standard that fails to consider the desirability of the Chevrolet brand itself as a measure of a dealer’s effort and sales ability. * * *

… [A] revision of the [geographic area] is not perforce violative of section 463 (2) (ff). Rather, such change must be assessed on a case-by-case basis, upon consideration of the impact of the revision on a dealer’s position. Beck Chevrolet Co., Inc. v General Motors LLC, 2016 NY Slip Op 03412, CtApp 5-3-16

 

FRANCHISED MOTOR VEHICLE DEALER ACT (FAILURE TO TAKE INTO ACCOUNT CONSUMER BRAND PREFERENCE IN EVALUATING A CAR DEALER’S PERFORMANCE VIOLATES THE DEALER ACT; UNILATERAL CHANGE TO THE GEOGRAPHIC AREA USED TO EVALUATE A CAR DEALER’S PERFORMANCE DOES NOT VIOLATE THE DEALER ACT)/DEALER ACT (FAILURE TO TAKE INTO ACCOUNT CONSUMER BRAND PREFERENCE IN EVALUATING A CAR DEALER’S PERFORMANCE VIOLATES THE DEALER ACT; UNILATERAL CHANGE TO THE GEOGRAPHIC AREA USED TO EVALUATE A CAR DEALER’S PERFORMANCE DOES NOT VIOLATE THE DEALER ACT)/CAR SALES (DEALER ACT, FAILURE TO TAKE INTO ACCOUNT CONSUMER BRAND PREFERENCE IN EVALUATING A CAR DEALER’S PERFORMANCE VIOLATES THE DEALER ACT; UNILATERAL CHANGE TO THE GEOGRAPHIC AREA USED TO EVALUATE A CAR DEALER’S PERFORMANCE DOES NOT VIOLATE THE DEALER ACT)/AUTO SALES (DEALER ACT, FAILURE TO TAKE INTO ACCOUNT CONSUMER BRAND PREFERENCE IN EVALUATING A CAR DEALER’S PERFORMANCE VIOLATES THE DEALER ACT; UNILATERAL CHANGE TO THE GEOGRAPHIC AREA USED TO EVALUATE A CAR DEALER’S PERFORMANCE DOES NOT VIOLATE THE DEALER ACT)/VEHICLE AND TRAFFIC LAW (DEALER ACT, FAILURE TO TAKE INTO ACCOUNT CONSUMER BRAND PREFERENCE IN EVALUATING A CAR DEALER’S PERFORMANCE VIOLATES THE DEALER ACT; UNILATERAL CHANGE TO THE GEOGRAPHIC AREA USED TO EVALUATE A CAR DEALER’S PERFORMANCE DOES NOT VIOLATE THE DEALER ACT)

,

LEVEL THREE ASSESSMENT FOR INFLICTION OF SERIOUS INJURY PROPER EVEN THOUGH THERE WAS NO SEX OFFENSE COMMITTED DURING THE UNLAWFUL IMPRISONMENT OF A CHILD.

The Court of Appeals, in a full-fledged opinion by Judge DiFiore, over an extensive dissent, determined County Court did not abuse its discretion when it applied a statutory override for infliction of serious injury, adjudicating defendant a level three sex offender, despite the fact defendant was not charged with a sex offense. By statute, a defendant convicted of the unlawful imprisonment of a child is deemed a sex offender, even when no sex offense was committed. Here the child was assaulted (tortured) and seriously injured over the course of a five-day ordeal, but no sex offense was involved. The points assessed under the Sex Offender Registration Act (SORA) criteria rose only to a level one. Because of the extreme violence, County Court applied the statutory override:

… [T]he application of the override for “infliction of serious physical injury,” “automatically result[s] in a presumptive risk assessment of level [three]” (Guidelines at 3). Therefore, properly framed, defendant’s argument is that the SORA court abused its discretion in declining to engage in a downward departure from the presumptive risk level three. We disagree.

Defendant’s sole argument to the SORA court was that the absence of a sexual component to his crime, in and of itself, warranted a level one adjudication. That factor, the existence of which was not in dispute, was considered [when] the Board assessed him 0 points for risk factor 2 — Sexual Contact with Victim. Defendant made no other argument of a mitigating factor to the SORA court in support of a downward departure. In the exercise of its discretion, the SORA court declined to depart from the presumptive risk level three. People v Howard, 2016 NY Slip Op 03415, CtApp 5-3-16

CRIMINAL LAW (SORA, LEVEL THREE ASSESSMENT FOR INFLICTION OF SERIOUS INJURY PROPER EVEN THOUGH THERE WAS NO SEX OFFENSE COMMITTED DURING THE UNLAWFUL IMPRISONMENT OF A CHILD)/SEX OFFENDER REGISTRATION ACT (LEVEL THREE ASSESSMENT FOR INFLICTION OF SERIOUS INJURY PROPER EVEN THOUGH THERE WAS NO SEX OFFENSE COMMITTED DURING THE UNLAWFUL IMPRISONMENT OF A CHILD)/SORA (LEVEL THREE ASSESSMENT FOR INFLICTION OF SERIOUS INJURY PROPER EVEN THOUGH THERE WAS NO SEX OFFENSE COMMITTED DURING THE UNLAWFUL IMPRISONMENT OF A CHILD)

,

PROBABLE CAUSE TO ARREST SUPPORTED BY THE RECORD.

The Court of Appeals noted that its review of whether there was probable cause for arrest, a mixed question of fact and law, is limited to whether there is support for a probable-cause finding in the record. Here the police were conducting surveillance on a target drug dealer. The police observed defendant take a bag from the target’s car, which was deemed sufficient to provide probable cause to arrest:

After a Darden hearing … , Supreme Court found that the confidential information had given the police “cause to believe” that the surveillance target was engaged in “drug activity.” Insofar as a Darden hearing is held to ensure “that the confidential informant both exists and gave the police information sufficient to establish probable cause” … , it may be inferred from the Darden hearing court’s ruling, which was adopted by the suppression court for the purpose of determining probable cause, that the confidential information was not stale by the time of defendant’s arrest.

Furthermore, the officer’s justified belief that the surveillance target was trafficking in narcotics, together with the manner in which the bag was removed from the car, support the lower courts’ conclusion that the police had probable cause to arrest defendant for criminal possession of a controlled substance. Record support for probable cause may be found on the basis of “indicia of a drug transaction” known to “an experienced officer . . . trained in the investigation and detection of narcotics,” which include “handl[ing] [an] unidentified object in a manner typical of a drug sale” … . People v Joseph, 2016 NY Slip Op 03416, CtApp 5-3-16

CRIMINAL LAW (PROBABLE CAUSE TO ARREST SUPPORTED BY THE RECORD, REVIEW BY COURT OF APPEALS)/APPEALS (COURT OF APPEALS REVIEW, CRIMINAL LAW, PROBABLE CAUSE TO ARREST SUPPORTED BY THE RECORD)

PEOPLE NEED NOT PROVE DEFENDANT KNEW THE KNIFE DEFENDANT POSSESSED MET THE STATUTORY DEFINITION OF A GRAVITY KNIFE.

The Court of Appeals, in a full-fledged opinion by Judge Garcia, determined the People do not need to prove a defendant charged with possession of a gravity knife was aware the knife opened and locked by flicking the wrist downward. Here defendant claimed he always opened the knife with two hands, used it only to cut sheetrock and tile and did not know it was a gravity knife:

We … conclude that Penal Law § 265.01 (1) does not require the People to prove that defendants knew that the knife in their possession met the statutory definition of a gravity knife. The plain language of that subdivision demonstrates that the Legislature intended to impose strict liability to the extent that defendants need only be aware of their physical possession of the knife (see Penal Law §§ 15.00 [2]; 15.10). While knowing possession of the knife is required (see Penal Law § 15.15 [2]), we conclude it is not necessary that defendants know that the knife meets the technical definition of a gravity knife under Penal Law § 265.00 (5). People v Parrilla, 2016 NY Slip Op 03417, CtApp 5-3-16

CRIMINAL LAW (GRAVITY KNIFE, PEOPLE NEED NOT PROVE DEFENDANT KNEW THE KNIFE DEFENDANT POSSESSED MET THE STATUTORY DEFINITION OF A GRAVITY KNIFE)/GRAVITY KNIFE (CRIMINAL LAW, PEOPLE NEED NOT PROVE DEFENDANT KNEW THE KNIFE DEFENDANT POSSESSED MET THE STATUTORY DEFINITION OF A GRAVITY KNIFE)

DENIAL OF MOTION TO WITHDRAW PLEA WITHOUT A HEARING WAS NOT AN ABUSE OF DISCRETION.

The Court of Appeals determined that defendant's motion to withdraw his plea was properly denied without a hearing:

“When a defendant moves to withdraw a guilty plea, the nature and extent of the fact-finding inquiry rest[s] largely in the discretion of the Judge to whom the motion is made and a hearing will be granted only in rare instances” … . .”[O]ften, a limited interrogation by the court will suffice” … . Here, the court gave the parties an opportunity to argue in furtherance of the motion to withdraw the plea, and because both parties declined, the motion was appropriately decided on the written submissions. Furthermore, while defense counsel claimed that defendant had been pressured by his family to take the plea, this Court has “never recognized 'coercion' by family members as a reason for withdrawing a guilty plea”… , and the record here does not demonstrate that the court abused its discretion in denying the motion on that ground. Additionally, given defendant's silence in any sworn statement regarding his alleged use of drugs and alcohol and the court's ability to observe defendant during the colloquy …, it was not an abuse of discretion for the court to have denied the motion to withdraw the plea without holding a hearing. People v Manor, 2016 NY Slip Op 03414, CtApp 5-3-16

CRIMINAL LAW (DENIAL OF MOTION TO WITHDRAW PLEA WITHOUT A HEARING WAS NOT AN ABUSE OF DISCRETION)/WITHDRAW PLEA, MOTION TO (DENIAL OF MOTION TO WITHDRAW PLEA WITHOUT A HEARING WAS NOT AN ABUSE OF DISCRETION)

DNA TEST RESULTS DEEMED TESTIMONIAL HEARSAY TRIGGERING DEFENDANT’S RIGHT TO CONFRONT THE ANALYST(S) WITH FIRST-HAND KNOWLEDGE OF CRUCIAL STAGES OF THE ANALYSIS.

The Court of Appeals, in an extensive opinion by Judge DiFiore, over an equally extensive three-judge dissenting opinion, determined the results of DNA testing, which matched defendant's DNA to that found on a weapon, should not have been admitted based solely on the testimony of a laboratory analyst who did not witness crucial aspects of the testing. The evidence was deemed “testimonial” requiring the People to produce a witness with first-hand knowledge who can be cross-examined about essential aspects of the analysis:

Here, there was a criminal action pending against defendant, and the gun, found in the basement of a multifamily dwelling where defendant lived, was evidence seized by police for that prosecution. Swabs from the gun were then tested by an accredited public DNA crime laboratory with the primary (truly, the sole) purpose of proving a particular fact in a criminal proceeding — that defendant possessed the gun and committed the crime for which he was charged. The testing analysts purposefully recorded the DNA profile test results, thereby providing the very basis for the scientific conclusions rendered thereon. Under these circumstances, the laboratory reports as to the DNA profile generated from the evidence submitted to the laboratory by the police in a pending criminal case were testimonial. The DNA profiles were generated in aid of a police investigation of a particular defendant charged by an accusatory instrument and created for the purpose of substantively proving the guilt of a defendant in his pending criminal action. * * *

… [W]e conclude that it is the generated numerical identifiers and the calling of the alleles at the final stage of the DNA typing that effectively accuses defendant of his role in the crime charged. … [A] laboratory that uses a … multiple-analyst model, may adapt their operation so that a single analyst is qualified to testify as to the DNA profile testing. For example, an analyst who generated the DNA profile from one sample may also observe the final stage of testing or retesting involved in the generation of the other profile. Nor do we suggest that, when the testing analysts are unavailable, a fully qualified … expert … cannot testify after analyzing the necessary data, including an independent analysis of the computer imaging from the software used for calling the alleles and recording their separate and distinct analysis. Thus, the claim of a need for a horde of analysts is overstated and a single analyst, particularly the one who performed, witnessed or supervised the generation of the critical numerical DNA profile, would satisfy the dictates of Crawford [541 US 36] and Bullcoming [564 US 647]. People v John, 2016 NY Slip Op 03208. CtApp 4-28-16


Categories

Sign Up for the Mailing List to Be Notified When the Site Is Updated.

  • This field is for validation purposes and should be left unchanged.

Copyright © 2026 New York Appellate Digest, Inc.
Site by CurlyHost | Privacy Policy