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PLAINTIFF COULD NOT MOVE TO DISQUALIFY LAW FIRMS WHICH NEVER REPRESENTED PLAINTIFF (FIRST DEPT).

The First Department, reversing Supreme Court, determined plaintiff did not have standing to move to disqualify two law firms (SZA and ABZ), one of which represented defendant, on conflict of interest grounds in this foreclosure/property-ownership dispute because neither law firm ever represented plaintiff. Apparently there was some overlap of personnel in the two law firms:

The basis for a disqualification motion is the alleged breach of the fiduciary duty owed by an attorney to a current or former client … . When the law firm targeted by the disqualification motion has never represented the moving party, that firm owes no duty to that party. “[I]t follows that if there is no duty owed there can be no duty breached” … . Since plaintiff never had an attorney-client relationship with either SZA or ABZ, plaintiff had no standing to bring a motion to disqualify … .

To be sure, a court has the authority to act sua sponte to disqualify counsel if it finds a conflict of interest warranting disqualification … . However, the record before us does not support disqualification. The two defendants present a united front to plaintiff at this juncture. Their answers raise virtually the same affirmative defenses and counterclaims to the complaint, and the defenses and counterclaims of one defendant do not undermine the position of the other … . If defendants’ interests do come to diverge in this litigation then counsel of course has a duty to ensure compliance with rule 1.7 of the New York Rules of Professional Conduct (22 NYCRR 1200.0). HSBC Bank USA, N.A. v Santos, 2020 NY Slip Op 03976, First Dept 7-16-20

 

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QUESTION OF FACT WHETHER FORFEITURE OF DEFENDANT’S VEHICLE WOULD BE A CONSTITUTIONALLY IMPERMISSIBLE EXCESSIVE FINE (FIRST DEPT).

The First Department, reversing (modifying) Supreme Court, determined there was a question of fact whether forfeiture of defendant’s vehicle would impose an excessive hardship and would constitute an constitutionally impermissible excessive fine. Defendant pled guilty to possession of a weapon which was found in his vehicle:

Plaintiff established by a preponderance of the evidence that defendant, the registered and titled owner of the vehicle, who pleaded guilty to criminal possession of a firearm, used the vehicle as a means of committing the crime of criminal possession of a firearm … .

In opposition, defendant, acting pro se, submitted an affidavit and supporting evidence in support of his argument that forfeiture of the vehicle, which he needed for getting to work with his tools and picking up his children from school, would impose an excessive and tremendous hardship on him and his family, particularly given that this is his sole criminal offense, and in light of other mitigating facts. This evidence is sufficient to raise an issue of fact as to whether, under all the factual circumstances, civil forfeiture of the vehicle would be grossly disproportionate to the offense and therefore a constitutionally impermissible excessive fine … . Property Clerk, N.Y. City Police Dept. v Nurse, 2020 NY Slip Op 03866, First Dept 7-9-20

 

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QUESTIONS OF FACT ABOUT THE OWNERSHIP OF A SIDEWALK UTILITIES GRATE PRECLUDED SUMMARY JUDGMENT IN THIS SLIP AND FALL CASE (FIRST DEPT).

The First Department, reversing Supreme Court, in this slip and fall case, determined there were questions of fact about whether: (1) a sidewalk grate belonged to the abutting landowner (11 Madison) or the utility (Con Ed); and (2) whether the installation of the grate by the prior owner of the property constituted a special use of the sidewalk:

The record does not demonstrate conclusively that the owner of the sidewalk vault grate on which plaintiff Marie Saez allegedly tripped was defendant Con Ed, rather than the 11 Madison defendants, who owned the property abutting the sidewalk where the grate was located. There is an affidavit by the president of defendant Sapir Realty Management Corp. averring that the grates were already installed when the 11 Madison defendants acquired the property in 2003 and that the 11 Madison defendants had never been advised by Con Ed that they had any responsibility for maintaining the grates over Con Ed’s utility vaults or presented with any plans concerning the grates. There is also evidence that the 11 Madison defendants’ predecessor in interest had purchased and installed the non-standard vault gratings, and there is a note on the plot plan for the vault construction stating that this entity was to “supply, install and maintain” the non-standard gratings it had requested. As issues of fact exist whether Con Ed or the 11 Madison defendants owned the gratings, it cannot be concluded that Con Ed was responsible for maintaining the gratings and the area around them in safe condition … .

Issues of fact also exist as to whether the 11 Madison defendants’ predecessor’s installation of the non-standard vault grates constitutes a special use of the sidewalk by these defendants. Although there is evidence that they had no access to the grates and the vault, the evidence is not conclusive. Moreover, there is evidence that the transformers in the vaults provided electrical service solely to their property … . Saez v Sapir Realty Mgt. Corp., 2020 NY Slip Op 03863, First Dept 7-9-20

 

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POLICE DID NOT HAVE REASONABLE SUSPICION DEFENDANT WAS ENGAGED IN CRIMINAL ACTIVITY AT THE TIME OF THE STOP AND PURSUIT; THEREFORE THE WEAPON DISCARDED BY DEFENDANT SHOULD HAVE BEEN SUPPRESSED (FIRST DEPT).

The First Department, reversing Supreme Court and dismissing the indictment, determined the police who stopped and pursued the defendant did not have reasonable suspicion of criminal activity at the outset. So the weapon discarded by the defendant should have been suppressed:

“Police pursuit is regarded as significantly impeding a person’s freedom of movement, thus requiring justification by reasonable suspicion that a crime has been, is being, or is about to be committed” … . By contrast, “mere surveillance need not be justified by reasonable suspicion” … .

Although the police actions began as permissible observation, while following defendant slowly in their car without turning on their lights or sirens … , observation gave way to pursuit when the officers turned on their lights and sirens to cross the street against traffic and pull up ahead of defendant. Even crediting one of the officer’s testimony that his intent was to get a better view and alert oncoming traffic, not to cut off, block, or alarm defendant, the objective impact of this maneuver was “intimidating” and communicated “an attempt to capture or . . . intrude upon [defendant’s] freedom of movement” … .

Because it is undisputed that the circumstances before this police activity were not sufficient to create reasonable suspicion, it was unlawful and could not be validated by any subsequently acquired suspicion … . When defendant discarded a handgun during the course of the illegal pursuit, he did not voluntarily abandon it and it should have been suppressed … . People v Collins, 2020 NY Slip Op 03852, First Dept 7-9-20

 

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THE ATTORNEY GENERAL PROPERLY SERVED VALID SUBPOENAS ON THE VIRTUAL CURRENCY COMPANIES PURSUANT TO GENERAL BUSINESS LAW 352 (MARTIN ACT) IN A FRAUD INVESTIGATION; ONCE THE MOTIONS TO VACATE OR MODIFY THE EX PARTE ORDER RE: THE ISSUANCE OF THE SUBPOENAS WAS DETERMINED, THE COURT NO LONGER HAD ANY AUTHORITY OVER THE ATTORNEY GENERAL’S INVESTIGATION; THEREFORE THE VIRTUAL CURRENCY COMPANIES’ SUBSEQUENT MOTION TO DISMISS WAS NOT PROPERLY BEFORE SUPREME COURT OR THE APPELLATE DIVISION (FIRST DEPT).

The First Department, in a full-fledged opinion by Justice Gesmer, determined that the Attorney General (petitioner) properly served subpoenas on the virtual currency companies (respondents) pursuant to General Business Law (GBL) 352 (Martin Act) in a fraud investigation. The subpoenas were attacked on several grounds, all of which were rejected: (1) subject matter jurisdiction (arguing the virtual currency is not a commodity or a security): (2) long-arm jurisdiction (arguing insufficient contacts with New York); (3) ex parte order was not certified as required by GBL 352 (court found this a technical not jurisdictional defect). But before addressing the issues raised on appeal, the Second Department held that the court did not have statutory authority under the GBL to address the respondents’ motion to dismiss (which was the basis of the appeal). Under the GBL, once the motions to vacate or modify the subpoenas were determined, the court has no authority over the Attorney General’s investigation:

… [U]nder the Martin Act’s statutory scheme, once Supreme Court has issued an order responding to a GBL 354 application, it has no further role in the Attorney General’s investigation, except to rule on a motion by either party to vacate or modify the order, as respondents made here. Accordingly, once the court issued the order authorized by GBL 354 on April 24, 2019, and modified it by order dated May 16, 2019, the proceeding before it was concluded and there was no action or proceeding for Supreme Court to “dismiss” on May 21, 2019 when respondents filed their motion that resulted in the order now before the court. All that remained was the Attorney General’s ongoing investigation, in which, by statute, the courts have no further role at this stage. Indeed, neither party cites to, and this Court is unaware of, any prior case in which the subject of a Martin Act investigation has moved to “dismiss” an application by the Attorney General for an order pursuant to GBL 354. Matter of James v iFinex Inc., 2020 NY Slip Op 03880, First Dept 7-9-20

 

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THE COURT WAS TROUBLED BY NEW YORK CITY OFFICE OF ADMINISTRATIVE TRIAL AND HEARINGS’ (OATH’S) REQUIREMENT THAT PETITIONER PAY THE ORDERED RESTITUTION OF OVER $234,000 BEFORE PETITIONER COULD APPEAL THE DETERMINATION; THE ISSUE WAS NOT RAISED BY THE PARTIES AND THEREFORE COULD NOT BE DECIDED (FIRST DEPT).

The First Department noted it was troubled by the New York City Office of Administrative Trial and Hearings’ (OATH’S) requirement that petitioner pay the ordered restitution as a prerequisite to appealing the determination. The issue was not raised by the parties so the First Department could not decide it:

Although neither specifically preserved nor raised on appeal, we are troubled by the constitutional ramifications of an administrative tribunal insulating its decision by making judicial review contingent on satisfaction of its order, including, as here, the payment of money … . It seems patently unfair to force a litigant to pay restitution as a condition for filing an appeal where the litigant has received a waiver of prior payment of his fine due to financial hardship … . Petitioner here is excused from paying a $5,000 fine as a condition to filing an appeal based on financial hardship, but, notwithstanding its financial hardship, it is forced to pay almost a quarter of a million dollars ($234,152.57) before it can file an appeal. Under this system, if you do not have the financial means to pay, you cannot come into court and seek review regardless of the merits of the challenged administrative determination … . Nonetheless, because this constitutional issue was not fully briefed before us, we do not decide it. Matter of Sahara Constr. Corp. v New York City Off. of Admin. Trials & Hearings, 2020 NY Slip Op 03715, First Dept 7-2-20

 

PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT IN THIS COMPLEX BREACH OF CONTRACT ACTION INVOLVING THE SALE OF A BUSINESS AND A RELATED LEASE WAS PROPERLY GRANTED; THE TERMS OF THE CONTRACTS WERE UNAMBIGUOUS AND NEITHER THE DOCTRINE OF PREVENTION NOR THE DOCTRINE OF FRUSTRATION OF PURPOSE APPLIED (FIRST DEPT).

The First Department, in a full-fledged opinion by Justice Mazzarelli, determined plaintiffs’ motion for summary judgment in this complex business-sale and lease breach of contract action was properly granted. The transaction involved the sale of an ambulatory surgery business and lease of the premises to the buyer. More specifically, the transaction included an asset purchase agreement, an administrative services agreement, a lease agreement and a personal guarantee. The facts are too involved to fairly summarize. Essentially, the buyers (defendants) defaulted on several aspects of the contracts and their defenses were rejected. The First Department held the terms of the contracts were clear and unambiguous, the doctrine of prevention did not apply, and the frustration of purpose doctrine did not apply:

“`[U]nder the doctrine of prevention, when a party to a contract causes the failure of the performance of the obligation due, it cannot in any way take advantage of that failure'” … . In other words, “a party to a contract cannot rely on the failure of another to perform a condition precedent where he has frustrated or prevented the occurrence of the condition” … . …

“In order to invoke the doctrine of frustration of purpose, the frustrated purpose must be so completely the basis of the contract that, as both parties understood, without it, the transaction would have made little sense” … . Examples of a lease’s purposes being declared frustrated have included situations where the tenant was unable to use the premises as a restaurant until a public sewer was completed, which took nearly three years after the lease was executed … , and where a tenant who entered into a lease of premises for office space could not occupy the premises because the certificate of occupancy allowed only residential use and the landlord refused to correct it  … .

However, “frustration of purpose . . . is not available where the event which prevented performance was foreseeable and provision could have been made for its occurrence” … . Center for Specialty Care, Inc. v CSC Acquisition I, LLC, 2020 NY Slip Op 03631, First Dept 6-25-20

 

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PLAINTIFFS WERE ENTITLED TO SUMMARY JUDGMENT FINDING DEFENDANT-LANDLORD VIOLATED NYC LOCAL LAW NO. 1 BY FAILING TO TAKE REASONABLE MEASURES TO ADDRESS THE HAZARDOUS LEAD-PAINT CONDITION IN PLAINTIFFS’ APARTMENT; HOWEVER DEFENDANTS RAISED A QUESTION OF FACT WHETHER DEFENDANTS’ NEGLIGENCE WAS THE PROXIMATE CAUSE OF THE CHILD’S INJURIES (FIRST DEPT).

The First Department, reversing (modifying) Supreme Court, in a full-fledged opinion by Justice Moulton, determined plaintiffs demonstrated defendants violated Local Law No. 1 of the City of New York in failing to take reasonable measures to address the hazardous lead-based paint condition in plaintiffs’ apartment. However defendants’ medical expert raised a question of fact whether defendants’ negligence was the proximate cause of the plaintiff’s child’ (S.T.’s) injuries:

Under Local Law 1 defendants’ liability is not predicated on their observations of peeling paint or whether they are informed of it. Defendants’ liability does not depend on the mother demonstrating that she credibly complained about each and every instance or location of peeling paint. Even assuming that the mother never complained about the paint condition, defendants are charged with notice of the hazardous lead-based paint condition under Local Law 1 from the time that defendants were aware that S.T. moved into apartment. Moreover, Local Law 1 imposes on landlords “a specific duty to ameliorate hazardous levels of lead-based paint” … . Defendants cannot avoid liability by attempting to shift their statutory obligation to the mother by questioning her memory or her credibility, or for failing to inform them when the paint began to peel. Shifting the burden to the mother is inconsistent with the purpose of Local Law 1 which “is unquestionably intended to protect a definite class of persons [plaintiffs] from a particular hazard they are incapable of avoiding themselves” … . S.T. v 1727-29 LLC, 2020 NY Slip Op 03630, First Deptp 6-25-20

 

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DEFENDANT ALLEGED DEFENSE COUNSEL OVERSTATED THE RISK OF DEPORTATION CAUSING HIM TO REJECT A FAVORABLE PLEA OFFER; DEFENDANT ENTITLED TO A HEARING ON HIS MOTION TO VACATE HIS CONVICTION BASED UPON INEFFECTIVE ASSISTANCE (FIRST DEPT).

The First Department, reversing Supreme Court, determined a hearing was necessary on defendant’s motion to vacate his conviction based upon ineffective assistance of counsel. Defendant alleged defense counsel overstated the risk of deportation causing defendant to reject a favorable plea offer:

A defense attorney’s performance is deficient as a matter of law where he or she fails to accurately advise a client of the risk of deportation … . Here, defendant complains that his counsel overstated the immigration consequences of accepting an offer of a guilty plea to petit larceny by advising him that it would “definitely” result in deportation, when in fact it would only have rendered him deportable with the possibility of discretionary relief. Thus, defendant asserts that he rejected a favorable plea offer based on erroneous advice that the conviction would result in mandatory deportation.

We find that a hearing is necessary to determine whether counsel inaccurately advised defendant of the risk of deportation and if so, whether defendant was prejudiced by the attorney’s misadvice … . People v Qinghua Ni, 2020 NY Slip Op 03621, First Dept 6-25-20

 

PLAINTIFFS ALLEGED THEY PAID A BROKER FOR THE INSURANCE POLICY ISSUED BY DEFENDANT INSURER BUT THE INSURER CANCELLED THE POLICY FOR NONPAYMENT; THE INSURER ALLEGED THE BROKER WAS NOT IN THE CHAIN OF BROKERS LEADING FROM PLAINTIFFS TO THE INSURER; QUESTIONS OF FACT PRECLUDED SUMMARY JUDGMENT (FIRST DEPT).

The First Department, reversing (modifying) Supreme Court, determined defendant-insurer’s (Interstate’s) motion for summary judgment in this “wrongful policy cancellation” suit should not have been granted. Plaintiffs alleged they paid a broker for the policy issued by Interstate . The premiums never reached Interstate. Interstate alleged the broker was not in the chain of brokers leading from plaintiffs to Interstate. The policy was cancelled for nonpayment:

Plaintiffs allege that they paid a broker the initial premium for the excess liability coverage issued by defendants, and that the broker also procured a financing agreement for them for the balance of the premiums. The party financing the premiums paid the broker on plaintiffs’ behalf and plaintiffs complied with the financing agreement. Plaintiffs’ president testified that plaintiffs only dealt with that broker, who delivered the policies to them. However, the premiums never reached defendants, who canceled the policies. Thereafter, three persons were killed during the term of the policies in an accident on plaintiffs’ premises when the decedents inhaled hydrogen sulfide fumes (the accident). Defendants disclaimed coverage.

Where an insured makes timely payment to a broker in the chain of brokers and the insurer delivers the policy to the broker pursuant to the broker’s request, Insurance Law § 2121 precludes the insurer from canceling the policy based on nonpayment of premiums where the broker did not remit the payment to the insurer … .

Here, the record is replete with triable issues of fact as to whether the broker with whom plaintiffs state they dealt was in the chain of brokers leading from plaintiffs to Interstate, such that the payment of the premiums to the broker was sufficient to bind Interstate. Plaintiffs referred to the testimony of their president that the broker was the only broker used by them, and that the broker’s employee delivered the policies to them. Moreover, the premium checks were made payable to the broker, who prepared a loss summary, and no evidence was presented demonstrating that another broker delivered the policies to plaintiffs. However, the absence of significant paperwork naming the broker cited by plaintiffs as a broker in the transaction, the testimony of the wholesale brokers that they did not deal with the broker cited by plaintiffs and would not do so, and the Notice of Excess Line Placement naming a different entity as plaintiffs’ broker, raise questions that preclude summary judgment in favor of either plaintiffs or Interstate. Royal Waste Servs., Inc. v Interstate Fire & Cas. Co., 2020 NY Slip Op 03616, First Dept 6-25-20

 

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