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COMMUNICATIONS BETWEEN PLAINTIFFS’ FINANCIAL ADVISOR AND COUNSEL DURING THE SALE OF PLAINTIFFS’ BUSINESS TO DEFENDANT ARE PRIVILEGED (FIRST DEPT).

The First Department, reversing Supreme Court, determined communications between plaintiffs’ financial advisor (KDC) and plaintiffs’ counsel in connection with the sale of plaintiffs’ company to defendant were privileged:

It is true that KDC was not retained to assist plaintiffs’ counsel in providing legal advice. However, the unrebutted evidence reflects that KDC spent some portion of its time helping counsel to understand various aspects of the transaction for that purpose. As such, KDC’s presence was necessary to enable attorney-client communication … .

Plaintiffs also had a reasonable expectation that the confidentiality of communications between their counsel and KDC would be maintained. Plaintiffs’ counsel attested that KDC promised to keep all such communications confidential. The governing Purchase and Sale Agreement also specified that all privileged documents related to the transaction would remain protected from disclosure to defendant even after closing … .

Contrary to defendant’s contention, the Cooperation Clause in KDC’s engagement letter did not undermine the reasonableness of this expectation of confidentiality, as it only required “reasonabl[e]” assistance to the Company (now owned by defendant), and should thus not be read to require KDC to turn over privileged documents … . Spicer v GardaWorld Consulting (UK) Ltd., 2020 NY Slip Op 01448, First Dept 3-3-20

 

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PLAINTIFF ALLEGED THE LANDLORD’S FAILURE TO REPAIR SHOWER-CURTAIN BRACKETS CREATED THE DANGEROUS WATER-ON-THE-FLOOR CONDITION WHICH CAUSED THE SLIP AND FALL; AN OPEN AND OBVIOUS CONDITION CAN STILL BE A DANGEROUS CONDITION; LANDLORD’S MOTION FOR SUMMARY JUDGMENT SHOULD NOT HAVE BEEN GRANTED (FIRST DEPT).

The First Department, reversing Supreme Court, determined defendant landlord’s motion for summary judgment in this wet-bathroom-floor slip and fall case should not have been granted. Plaintiff alleged the landlord failed to repair brackets for the shower curtain. The fact that the water on the floor was an open and obvious condition relieved landlord of the duty to warn, but not the duty to keep the property safe:

Supreme Court erred in granting summary judgment to defendants on the basis that plaintiff failed to identify the condition of water on the floor before he slipped and fell. Supreme Court incorrectly found that any conclusion that plaintiff slipped and fell because of water accumulation would be based on speculation. Plaintiff argues correctly that, even if in his deposition testimony he did not explicitly state that he noticed water on the floor before he stepped out of the shower, a jury could reasonably infer that he slipped and fell on water on the floor due to the absence of a shower curtain … . Defendants’ proof failed to negate this reasonable inference … .

“[E]ven if a hazard qualifies as open and obvious’ as a matter of law, that characteristic merely eliminates the property owner’s duty to warn of the hazard, but does not eliminate the broader duty to maintain the premises in a reasonably safe condition” … .

… Defendants argue that the broken brackets were not an inherently dangerous condition but rather a benign condition. However, as plaintiff correctly observes, the purpose of the shower brackets was to hold up the shower curtain, and the purpose of a shower curtain is to prevent the accumulation of water when the shower is in use. Matos v Azure Holdings II, L.P., 2020 NY Slip Op 01441, First Dept 3-3-20

 

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PLAINTIFFS STATED A CAUSE OF ACTION FOR FRAUD AND PROPERLY ALLEGED A CIVIL CONSPIRACY (FIRST DEPT).

The First Department, reversing Supreme Court, determined plaintiffs had, inter alia, stated a cause of action for fraud and properly alleged a related civil conspiracy. Plaintiffs are owners of commercial buildings and defendants included an employee of one of the plaintiffs and several contractors who did work for the plaintiffs. Plaintiffs alleged invoices for work were inflated and the excess payments were split among defendants. With respect to the fraud and civil conspiracy causes of action, the First Department wrote:

To state a cause of action for fraud, a plaintiff must allege “a material misrepresentation of a fact, knowledge of its falsity, an intent to induce reliance, justifiable reliance by the plaintiff and damages” … . Such a claim must be pleaded with particularity (CPLR 3016[b] …). “[A]ctual knowledge[, however,] need only be pleaded generally, [given], particularly at the prediscovery stage, that a plaintiff lacks access to the very discovery materials which would illuminate a defendant’s state of mind” … . …

Here, we find that plaintiffs sufficiently pleaded fraud causes of action with the information available to them in a pre-discovery posture … . They alleged the creation and presentation for payment to plaintiffs of false, forged or inflated purchase orders; that defendants “knew that the work described on the bogus purchase orders or invoices and other contract forms was either falsely stated, overcharged or not provided, and knew that Plaintiffs would rely on these falsified or doctored purchase orders to make unwarranted payments”; that plaintiffs “relied on these purchase orders, invoices and other contract forms in making unnecessary payments to . . . defendants” to their detriment; that such reliance was “justifiable” and “reasonable”; and that plaintiffs were damaged as a result of defendants’ fraud. After discovery, plaintiffs can amplify their pleadings and defendants can renew their motions. But at this stage, plaintiffs should be allowed to probe defendants’ knowledge of the alleged fraudulent scheme. …

Although New York does not recognize an independent cause of action for civil conspiracy, allegations of civil conspiracy are permitted “to connect the actions of separate defendants with an otherwise actionable tort” … . To establish a claim of civil conspiracy, the plaintiff must demonstrate the primary tort, plus the following four elements: an agreement between two or more parties; an overt act in furtherance of the agreement; the parties’ intentional participation in the furtherance of a plan or purpose; and resulting damage or injury … . Plaintiffs pleaded the underlying fraud against defendants …, as well as an agreement that “[d]efendants acted in concert and conspired to defraud [p]laintiffs’ business.” As a result, plaintiffs were damaged because they paid monies to the defendants “for non-existent, unnecessary, and/or overpriced construction and maintenance services.” Cohen Bros. Realty Corp. v Mapes, 2020 NY Slip Op 01440, First Dept 3-3-20

 

PLAINTIFF WAS ENGAGED IN REPAIR WORK WHEN A PERMANENT LADDER IN AN ELEVATOR SHAFT ALLEGEDLY VIBRATED CAUSING HIM TO FALL; EVEN IF A HARNESS WERE AVAILABLE, COMPARATIVE NEGLIGENCE IS NOT A DEFENSE TO A LABOR LAW 240(1) ACTION; DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT SHOULD NOT HAVE BEEN GRANTED (FIRST DEPT).

The First Department, reversing Supreme Court, determined plaintiff’s Labor Law 240(1) cause of action should not have been dismissed. Plaintiff was engaged in a long-term project to repair elevator cables which were striking objects in the elevator shaft. While using a ladder that was permanently affixed in the shaft when it allegedly vibrated causing him to fall:

… [W]hile an unsecured ladder that moves or shifts constitutes a prima facie violation of Labor Law § 240(1) … , the ladder from which plaintiff fell was secured to the structure, and, other than allegedly vibrating, it did not move, shift or sway. Under the circumstances, an issue of fact exists whether the secured, permanently affixed ladder that allegedly vibrated provided proper protection for plaintiff.

The record demonstrates, contrary to defendants’ contention, that at the time of his accident plaintiff was performing not routine maintenance but repair work, which falls within the protective ambit of Labor Law § 240(1) … . …

Defendants failed to establish that plaintiff was the sole proximate cause of his accident, as they submitted no evidence that plaintiff knew that he was supposed to use a harness for climbing ladders or that he disregarded “specific instructions” to do so … . Further, to the extent the ladder failed to provide proper protection, plaintiff’s failure to use a harness amounts at most to comparative negligence, which is not a defense to a Labor Law § 240(1) claim … . Kehoe v 61 Broadway Owner LLC, 2020 NY Slip Op 01391, First Dept 2-27-20

 

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PLAINTIFF ALLEGED THE FAILURE OF DEFENDANT ATTORNEYS TO PROPERLY PREPARE THE EYEWITNESS TO THE ACCIDENT RESULTED IN THE WITNESS’S INCONSISTENT TESTIMONY AT TRIAL AND A DEFENSE VERDICT; ARGUING THAT THERE WOULD HAVE BEEN A PLAINTIFF’S VERDICT ABSENT THE ATTORNEYS’ MALPRACTICE IS TOO SPECULATIVE TO SUPPORT A LEGAL MALPRACTICE ACTION (FIRST DEPT).

The First Department, reversing Supreme Court, determent defendant attorneys’ motion for summary judgment in this legal malpractice action should have been granted. Plaintiff was allegedly struck by a garbage truck and seriously injured. Plaintiff could not describe the truck and plaintiff’s case depended upon the testimony of an eyewitness, Arenas. Arenas’s descriptions of the truck were not consistent and there was a defense verdict. Plaintiff alleged defendant attorneys failed to properly prepare Arenas for his deposition, which resulted in Arenas’s inconsistent testimony at trial:

“[M]ere speculation of a loss resulting from an attorney’s alleged omissions . . . is insufficient to sustain a claim” for legal malpractice” … . Plaintiff’s assertion that, had Arenas been better prepared, the jury would have returned a favorable verdict is pure speculation … . Defendants met their burden of showing that plaintiff cannot establish causation, in that plaintiff cannot prove that it would have prevailed in the underlying action “but for” defendant’s alleged negligence in preparing Arenas for his deposition … .

Although there are issues of fact regarding whether defendants may have departed from the applicable standard of care, any claim that the jury would have reached a different result in the personal injury action is wholly speculative. First, it is wholly speculative that Arenas would have testified to a different description of the truck either at his deposition or at trial had he been shown the investigative reports. Although the investigative reports were read to him line by line at his deposition, his description of the truck did not change and he adhered to his belief, that the front of the truck he saw strike and run over plaintiff was bullnosed. Even if Arenas’s statement in support of plaintiff’s motion in this case is accurate, that he would have testified differently had he been differently prepared, this, at best, creates an issue of fact about what he would have said at trial. It does not eliminate speculation about what the jury’s verdict would have been, given that Arenas’s description of the truck otherwise lacked detail, and the absence of any additional proof identifying defendants’ truck and driver as being involved in underlying accident. Caso v Miranda Sambursky Slone Sklarin Verveniotis LLP, 2020 NY Slip Op 01384, First Dept 2-27-20

 

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PLAINTIFF DID NOT SUFFICIENTLY ALLEGE THAT NEW YORK’S PROPERTY TAX SYSTEM DISCRIMINATES AGAINST PROPERTY OWNERS IN “MAJORITY-MINORITY” NEIGHBORHOODS; COMPLAINT SHOULD HAVE BEEN DISMISSED IN ITS ENTIRETY (FIRST DEPT).

The First Department, in a comprehensive opinion by Justice Kern, reversing (modifying) Supreme Court, determined the complaint alleging the New York property tax system is unconstitutional should have been dismissed in its entirety for failure to state a cause of action. The opinion is too detailed to fairly summarize here. With respect to the allegations the property tax system discriminates against property owners in “majority-minority” neighborhoods, the court wrote:

… [P]laintiff does not adequately allege a causal connection between the property tax system and any racial disparities in the availability of housing. Plaintiff has failed to allege sufficient concrete facts or produce statistical evidence showing that the application of the property tax system, as opposed to other factors, causes financial barriers that inhibit the ability of minority residents to own homes. Additionally, plaintiff does not allege sufficient concrete facts or produce statistical evidence showing how the current property tax system contributes to higher rates of foreclosure or discourages the production of rental units in majority-minority communities. …

… [P]laintiff has failed to meet its burden “to allege facts at the pleading stage or produce statistical evidence demonstrating a causal connection” between the property tax system and the continued segregation of New York City neighborhoods sufficient to “make out a prima facie case of disparate impact” … . …

… [P]laintiff argues that the terms and conditions of all home, condominium and cooperative sales and apartment rentals include the transfer of an illegal tax burden that make purchasing or renting a dwelling more expensive in affected communities. The portion of the FHA [Fair Housing Act] upon which plaintiff relies makes it unlawful to “discriminate against any person in the terms, conditions, or privileges of sale or rental of a dwelling . . . because of race, color, religion, sex, familial status, or national origin” … . However, in the context of taxation, defendants are not involved in the terms and conditions of the sale or rental of property … . Tax Equity Now NY LLC v City of New York, 2020 NY Slip Op 01401, First Dept 2-27-20

 

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ALTHOUGH MOVING MONEY THROUGH A NEW YORK BANK IS ENOUGH TO CONFER PERSONAL JURISDICTION ON OUT-OF-STATE PARTIES, SUPREME COURT CORRECTLY HELD IT WAS NOT ENOUGH TO MAKE NEW YORK A CONVENIENT FORUM (FIRST DEPT).

The First Department determined that, although using a New York bank for an allegedly fraudulent transaction is sufficient to acquire personal jurisdiction over out-of-state parties, it does not necessarily follow that New York is a convenient forum. Supreme Court properly found New York was not a convenient forum in these actions involving individuals and corporations in Saudi Arabia and the United Arab Emirates, as well as a Swiss bank:

… [T]he court properly considered the following matters, among others: (1) none of the parties to either action is a New York citizen or resident or (if an entity) is formed under New York law or has its principal place of business in New York; … (2) the alleged conduct at issue primarily occurred in the UAE, Saudi Arabia and Switzerland, with the sole New York connection being the fleeting presence of the bribery funds at a nonparty New York correspondent bank while en route from the UAE to Switzerland; (3) the bulk of the relevant documentary evidence is located in the UAE, Saudi Arabia, Switzerland and BVI, and most witnesses are located outside New York and beyond New York’s subpoena power; (4) there is a likelihood that foreign substantive law will govern; (5) there are alternative fora available (Switzerland and the UAE) with greater connection to the subject matter; and (6) in the Pictet [bank] action, Switzerland has an interest in regulating the conduct of a bank operating within its borders … . …

As Supreme Court correctly recognized … “[o]ur state’s interest in the integrity of its banks . . . is not significantly threatened every time one foreign national, effecting what is alleged to be a fraudulent transaction, moves dollars through a bank in New York. . . . New York’s interest in its banking system is not a trump to be played whenever a party to such a transaction seeks to use our courts for a lawsuit with little or no apparent contact with New York” (Mashreqbank PSC v Ahmed Hamad Al Gosaibi & Bros. Co., 23 NY3d 129, 137 [2014] … ).

In accordance with Mashreqbank, this Court has declined to disturb the motion court’s discretionary determination that New York is not a convenient forum in cases where the sole connection to New York was the passage of wired funds through a correspondent bank in the state … . Al Rushaid Parker Drilling Ltd. v Byrne Modular Bldgs. L.L.C., 2020 NY Slip Op 01277, First Dept 2-25-20

 

THE RECORD DID NOT DEMONSTRATE A SELECTED UNSWORN JUROR COULD NOT RENDER AN IMPARTIAL VERDICT BECAUSE OF AN OUT-OF-TOWN MEETING ON THE DAY BEFORE THE TRIAL WAS LIKELY TO CONCLUDE, THE PEOPLE’S FOR CAUSE CHALLENGE SHOULD NOT HAVE BEEN GRANTED, NEW TRIAL ORDERED (FIRST DEPT).

The First Department, reversing defendant’s conviction, determined the judge should not have granted the People’s for cause challenge to a selected by unsworn juror. Although the juror had an important out-of-town meeting on the day before the trial was to conclude, the record did not demonstrate the juror could not render an impartial verdict on that ground:

The record did not justify the court’s discharge for cause of a selected but unsworn juror. Both defendant and the People initially declined to challenge the juror peremptorily or for cause. However, the prosecutor challenged the juror for cause, over defense objection, after the court, concerned about an important out-of-town meeting that the prospective juror was scheduled to attend on a day before the anticipated conclusion of the trial, announced that it would grant such a challenge. Although subsequent questioning demonstrated that rescheduling the meeting would be inconvenient for the juror, it did not establish that the juror, who never directly asked to be excused for hardship or otherwise, had “a state of mind that [was] likely to preclude him from rendering an impartial verdict based on the evidence adduced at the trial” … . By way of contrast, in People v Williams (44 AD3d 326, 326 [1st Dept 2007], lv denied 9 NY3d 1010]), we found that the selected but unsworn juror at issue was unfit for service because her scheduling conflict involving a funeral “would make it difficult for her to focus on the trial.” Here, the juror’s responses did not establish a sufficient basis to sustain a challenge for cause, which was the only issue presented to and ruled upon by the court. People v Manning, 2020 NY Slip Op 01308, First Dept 2-25-20

 

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THERE WAS EVIDENCE THE WATER ON THE FLOOR WAS A RECURRENT DANGEROUS CONDITION; PLAINTIFF SHOULD HAVE BEEN ALLOWED TO PRESENT AS A WITNESS DEFENDANT’S EMPLOYEE, THE BUILDING SUPERINTENDENT AT THE TIME OF THE SLIP AND FALL, DESPITE LATE NOTIFICATION; THE DIRECTED VERDICT WAS REVERSED (FIRST DEPT).

The First Department, reversing the directed verdict, determined the proof demonstrated water leaking from the ceiling onto the floor was a recurrent dangerous condition which was not addressed by the landlord. The First Department also held that a witness for the plaintiff, who was defendant’s employee at the time of the accident, should have been allowed to testify:

Plaintiff’s trial evidence established prima facie that defendant had constructive notice of the water on the floor of the lobby of its building on which plaintiff allegedly slipped and fell … . Plaintiff testified that at least four times before his accident, every few months, he observed water leaking from the ceiling onto the floor below in the area where he fell. His former girlfriend, with whom he lived in the building, testified that before the date of the accident “there were leaks and then afterward it was leaking again.” This testimony established that “an ongoing and recurrent dangerous condition existed in the area of the accident that was routinely left unaddressed by the landlord” … . Issues of credibility were for the jury.

The trial court improvidently exercised its discretion in precluding the testimony of Henry Soto, defendant’s building superintendent at the time of the accident, on the ground that it was prejudicial to defendant. Defendant could not have been prejudiced or surprised by plaintiff’s disclosure of Soto as a witness on the eve of trial, since Soto was defendant’s employee at the time of the accident … . Monzac v 1141 Elder Towers LLC, 2020 NY Slip Op 01243, First Dept 2-20-20

 

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RESPONDENT WAS A CUSTOMER OF PETITIONER SECURITIES CORPORATION WITHIN THE MEANING OF FINANCIAL INDUSTRY REGULATORY AUTHORITY (FIRA) RULES AND THEREFORE COULD COMPEL ARBITRATION (FIRST DEPT). ​

The First Department, reversing Supreme Court, over an extensive dissent, determined respondent was a customer of petitioner (LekUS) and therefore could compel FINRA (Financial Industry Regulatory Authority) arbitration. Petitioner had been sued by FINRA in connection with shares of Cannibis Science, Inc. (CBIS) purchased by respondent and held by petitioner for trading:

The record establishes that respondent was a customer of nonparty Lek Securities UK, Ltd. (LekUK), where he had his account, and was also a client of petitioner Lek Securities Corp. (LekUS), with which he had a series of direct agreements. Under those agreements, LekUS conditioned its provision of depository and execution services for certain trades on respondent’s providing certain representations and an indemnity … .

Specifically, respondent purchased shares of Cannabis Science, Inc. (CBIS) in a series of transactions in 2015 and 2016 that required that the shares be held and sold in the United States. For each transaction, respondent executed an agreement (Deposit Agreement) directly with LekUS pursuant to which LekUS deposited the shares in its account at the Depository Trust & Clearing Corporation (DTCC). In each Deposit Agreement, (1) respondent represented that his answers to certain questions were true and acknowledged that LekUS would rely on those representations; (2) LekUS agreed to act as the “Processing Broker” to provide the services of depositing and reselling the shares; and (3) LekUS accepted respondent’s “Deposit Securities Request” on certain conditions, including that any claims by respondent or disputes arising from respondent’s representations in the Deposit Agreement “shall be governed by New York law and subject to the exclusive venue and jurisdiction of the courts and arbitration forums in the City and State of New York,” and that respondent would indemnify LekUS in connection with claims arising from respondent’s representations in the Deposit Agreement or from “the deposit process or the subsequent sale of the securities.”

When respondent sought to trade the CBIS shares deposited with LekUS, he communicated with Michael Mainwald, who was located at the office of LekUS, had a LekUS phone number and email address, and was registered with FINRA as the “principal operating officer” of LekUS.

… LekUS notified respondent that it had been sued by FINRA in connection with CBIS transactions and that LekUS sought indemnification by defendant pursuant to the Deposit Agreements. …

… [R]espondent was a “customer” of LekUS within the meaning of FINRA Rule 12200, and was therefore entitled to demand arbitration. Matter of LEK Sec. Corp. v Elek, 2020 NY Slip Op 01134, First Dept 2-18-20

 

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