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QUESTIONS OF FACT WHETHER THE ADVERSE INTEREST EXCEPTION TO THE IN PARI DELICTO DEFENSE APPLIES IN THIS ACCOUNTANT MALPRACTICE CASE (FIRST DEPT). ​

The First Department, reversing Supreme Court, determined questions of fact were raised about whether the adverse interest exception bars the in pari delicto defense in this accountant malpractice case:

In this accounting malpractice action, plaintiffs, the liquidators of several hedge funds, allege that defendants failed to uncover fraudulent activity by the funds’ investment managers. The issue before us is whether the adverse interest exception to the equitable defense of in pari delicto bars the defense in this case (see Kirschner v KPMG LLP, 15 NY3d 446 [2010]). We find that plaintiffs raised issues of fact as to the adverse nature of their interests vis-a-vis those of their agents, the funds’ investment managers, that preclude summary dismissal of the complaint on the ground of the in pari delicto defense.

“To come within the exception, the agent must have totally abandoned his principal’s interests and be acting entirely for his own or another’s purposes” ,,, . The exception is applied only where the fraud is committed “against a corporation rather than on its behalf” … . “So long as the corporate wrongdoer’s fraudulent conduct enables the business to survive — to attract investors and customers and raise funds for corporate purposes — this test is not met” … . Thus, we conclude that the mere continuation of a corporate entity does not per se constitute a benefit that precludes application of the adverse interest exception. …

… [R]eliance on speculation about the benefits to be derived from the continued existence of an entity is inconsistent with the analysis of the adverse interest exception in Kirschner. It may be possible in every case to construct a hypothetical scenario where the company teetering on the brink of insolvency because of its agent’s fraud meets with an opportune circumstance that allows it to resume legitimate business operations. Permitting such speculation would render the adverse interest exception meaningless. Further, an ongoing fraud and a continued corporate existence may harm a corporate entity: The agent may prolong the company’s legal existence so that he can continue to loot from it, as appears to have been the case here. Conway v Marcum & Kliegman LLP, 2019 NY Slip Op 07338, First Dept 10-10-19

 

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PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT ON THE LABOR LAW 240 (1) CAUSE OF ACTION SHOULD HAVE BEEN GRANTED IN THIS CRANE-ACCIDENT CASE; THE ESPINAL ‘LAUNCHED AN INSTRUMENT OF HARM’ CAUSE OF ACTION AGAINST THE COMPANY WHICH REFURBISHED AND MAINTAINED THE CRANE SHOULD NOT HAVE BEEN DISMISSED (FIRST DEPT).

The First Department, reversing (modifying) Supreme Court, determined plaintiff’s motion for summary judgment on his Labor Law 240 (1) cause of action should have been granted in this crane-accident case. The First Department also held that the negligence action against the company (Hoffman) which refurbished and maintained the crane, based upon the Espinal “launched an instrument of harm” theory, should not have been dismissed:

The collapse of a crane constitutes a prima facie violation of Labor Law § 240(1) … . A plaintiff need not be directly injured by a portion of the crane for the Labor Law to apply — injuries that occur while trying to avoid being struck during a hoisting accident may qualify … . While plaintiff’s testimony at his deposition varied somewhat from his 50-h testimony, he repeatedly cautioned that the accident happened so fast it was difficult for him to describe exactly how it occurred. In any event, no matter which version is accepted, Labor Law § 240(1) applies to the … defendant … .

Hoffman refurbished the subject crane one year before the accident and performed maintenance on it several times thereafter. Although a contractual obligation, standing alone, will generally not give rise to tort liability in favor of a third person … , an exception exists where a contractor who undertakes to perform services pursuant to a contract negligently creates or exacerbates a dangerous condition so as to have “launched a force or instrument of harm” (Espinal v Melville Snow Contrs., 98 NY2d 136, 141-142 [2002] …). Hoffman failed to adequately address the findings of the independent crane company that conducted the post-accident investigation, which concluded that several maintenance and repair issues contributed to over wear on the crane’s wire ropes … . DeGidio v City of New York, 2019 NY Slip Op 07218, First Dept 10-8-1

 

PLAINTIFF WAIVED ITS RIGHT TO A JURY TRIAL BY INCLUDING A REQUEST FOR EQUITABLE RELIEF; ONCE WAIVED THE RIGHT CANNOT BE REVIVED (FIRST DEPT).

The First Department, reversing Supreme Court, determined plaintiff had waived its right to a jury trial by including a request for equitable relief and, once waived, the right cannot be revived:

Plaintiff has waived its right to a jury trial. When, as here, the complaint either joins legal and equitable causes of action arising out of the same alleged wrong or seeks both legal and equitable relief, there is a waiver of a plaintiff’s right to a jury trial … . Plaintiff’s sixth cause of action for a permanent injunction sounds in equity, is not incidental to the remaining claims and as a result of its inclusion, it can no longer be said that money damages would afford a complete remedy … . Furthermore, “[o]nce the right to a jury trial has been intentionally lost by joining legal and equitable claims, any subsequent dismissal, settlement or withdrawal of the equitable claim(s) will not revive the right to trial by jury” … . Errant Gene Therapeutics, LLC v Sloan-Kettering Inst. for Cancer Research, 2019 NY Slip Op 07226, First Dept 10-8-19

 

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PLAINTIFFS FELL FROM A LIFT TRUCK WHICH WAS STRUCK BY A BUS, SUMMARY JUDGMENT ON THE LABOR LAW 240 (1) CAUSE OF ACTION SHOULD HAVE BEEN GRANTED; HEARSAY ALONE WILL NOT DEFEAT A MOTION FOR SUMMARY JUDGMENT (FIRST DEPT).

The First Department, reversing Supreme Court, determined plaintiffs’ motion for summary judgment on the Labor Law 240 (1) cause of action should have been granted, noting that hearsay alone will not defeat a summary judgment motion:

Plaintiffs … established prima facie that defendants are liable for their injuries under Labor Law § 240(1) by submitting evidence that they fell to the ground and were injured when the lift truck upon which they were working moved when it was struck by a passing bus … . Moreover, the lift truck, which was being used as an elevated work platform, lacked a guardrail to prevent … . In opposition, defendants failed to raise an issue of fact. They rely instead on hearsay evidence as to how the accident may have occurred. Such hearsay evidence alone is insufficient to defeat a motion for summary judgment … . South v Metropolitan Transp. Auth., 2019 NY Slip Op 07213, First Dept 10-8-19

 

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THE PROHIBITION OF DOUBLE JEOPARDY DID NOT PRECLUDE THE PROSECUTION BASED UPON THE THEFT OF GOLDMAN SACHS SOURCE CODE UNDER A STATE STATUTE AFTER DEFENDANT’S CONVICTION UNDER A FEDERAL STATUTE WAS REVERSED; THE STATE STATUTE INCLUDED AN ELEMENT NOT INCLUDED IN THE FEDERAL STATUTE (FIRST DEPT).

The First Department determined defendant’s prosecution for unlawful use of secret scientific material did not violate the prohibition against double jeopardy. Defendant, while working for Goldman Sachs, had uploaded source code to a server in Germany. He was first charged under a federal statute, the National Stolen Property Act (NSPA). The Second Circuit reversed the NSPA conviction because the source code was deemed “intangible” at the time of the theft (when it was transmitted) and therefore did not meet the definition of “goods” in the federal statute. However, the state statute under which defendant was subsequently prosecuted, unlawful use of secret scientific material, included tangible electronically reproduced material, and the source code reproduced on the German server met that criteria:

Defendant’s argument rests on the claim that the “goods” element of the NSPA, which undisputedly requires that the property transported be “tangible,” is equivalent to the “tangible reproduction” element of New York’s unlawful use statute. That statute provides that “[a] person is guilty of unlawful use of secret scientific material when, with intent to appropriate . . . the use of secret scientific material, and having no right to do so and no reasonable ground to believe that he [or she] has such right, [the person] makes a tangible reproduction or representation of such secret scientific material by means of writing, photographing, drawing, mechanically or electronically reproducing or recording such secret scientific material” (Penal Law § 165.07). * * *

… [T]he Second Circuit did not hold that the source codes were intangible as they existed on the German server. Rather, it held that “at the time of the theft” … — which was the same as the time that the codes were transmitted — the codes were purely intangible. Because the elements are not equivalent, there is no inconsistency between the Second Circuit’s determination that the codes were intangible when transported and this Court’s determination that defendant made a tangible reproduction when he uploaded them to the German server, where they resided within a physical medium. People v Aleynikov, 2019 NY Slip Op 07211, First Dept 10-18-19

 

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VERDICT AWARDING ZERO DAMAGES FOR PAST PAIN AND SUFFERING IN THIS POLICE EXCESSIVE-FORCE CASE SET ASIDE; NEW TRIAL ORDERED UNLESS THE PARTIES STIPULATE TO A $200,000 DAMAGES AWARD (FIRST DEPT).

The First Department determined the verdict awarding plaintiff zero damages for past pain and suffering should have been set aside in this police-excessive-force case (42 USC 1983). The court ordered a new trial unless the parties stipulated to a $200,000 damages award:

Plaintiff sustained injuries when a New York City police officer smashed him in the nose with a bullet-proof shield after entering his apartment to execute a search warrant. After a trial, the jury found that the officer violated plaintiff’s rights under the Fourth Amendment to the U.S. Constitution by using excessive force while arresting him and that the excessive force was a substantial factor in causing his injuries. However, the jury awarded plaintiff no damages for pain and suffering. * * *

However, we find that the jury’s failure to award damages for past pain and suffering is contrary to a fair interpretation of the evidence and deviates materially from what would be reasonable compensation (CPLR 5501[c]; …). The undisputed evidence establishes that plaintiff was in pain the first night after being struck, that for about two weeks after the incident his broken nose and orbital bone fractures were “kind of rough,” that he could only breathe through his mouth, that he had to get medication, that he suffered “really bad” headaches, and that he required reconstructive nasal surgery as a result of his injuries. Shimukonas v City of New York, 2019 NY Slip Op 07147, First Dept 10-3-19

 

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PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT ON HIS LABOR LAW 240 (1) CAUSE OF ACTION IN THIS LADDER-FALL CASE SHOULD HAVE BEEN GRANTED; THE PROPERTY OWNER WAS ENTITLED TO COMMON LAW INDEMNITY (FIRST DEPT).

The First Department, reversing (modifying) Supreme Court, determined plaintiff was entitled to summary judgment on his Labor Law 240 (1) claim in this ladder-fall case, and the property owner, Church of God, was entitled to common law indemnity because plaintiff’s work was supervised by his apparent employer, Belfor:

Plaintiff’s testimony that the ladder wobbled, flipped, and flopped, causing him to fall, sets forth a prima facie violation of Labor Law § 240(1) … . Defendants failed to adduce any evidence rebutting plaintiff’s showing, making summary judgment appropriate.

Plaintiff testified that he was using a Belfor ladder at the time of his fall. Belfor’s deponent, who had no knowledge of the accident, conceded that Belfor had ladders on site, and could not say whether plaintiff’s employer, the subcontractor who furnished labor for the cleaning and debris removal portion of the project, also brought ladders. There were no other subcontractors on site. Belfor’s deponent also testified that Belfor had a site supervisor, the only Belfor employee on site that day, and that he would have been “in the thick of it,” and not performing paperwork or similar administrative tasks. Plaintiff, who wore a Belfor uniform at Belfor’s behest, testified that Belfor employees were “the bosses,” ordering him around. This evidence, taken together, is sufficient to establish that Church of God made a prima facie showing of entitlement to common law indemnity … . Rivera-Astudillo v Garden of Prayer Church of God in Christ, Inc., 2019 NY Slip Op 07033, First Dept 10-1-19

 

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DEFENDANT’S DRUG SALE CONVICTION WAS AGAINST THE WEIGHT OF THE EVIDENCE (FIRST DEPT).

The First Department reversed defendant’s drug-sale conviction as against the weight of the evidence. The police saw a woman approach defendant and the woman had a $10 bag of crack cocaine in her mouth when the police stopped her. The defendant had $10 in his pocket but no drugs on him. No exchange between the two was observed:

Two police officers testified that they observed defendant in a high drug trafficking area. They both saw defendant approach a man and talk to him. The man gave defendant money and there was an “exchange,” but the officers did not see what was exchanged. Shortly thereafter, one of the officers witnessed a woman approach defendant. The officer saw the woman speak to defendant and then touch his hand, but the officer did not see any money or drugs exchanged. Defendant and the woman separated, and the officer approached the woman. The officer identified herself, said that she just saw what happened, and heard the woman chewing on something. She asked the woman to spit out the object, which turned out to be a small bag containing $10 worth of crack cocaine. The officer never saw the woman put the bag in her mouth or even bring her hand to her mouth. The police then arrested the woman and defendant. Defendant did not have any drugs on him, but had $10 in his sweatshirt pocket and other denominations of cash in his pants pocket.

In the exercise of our factual review power, we conclude that the People did not prove beyond any reasonable doubt that defendant sold cocaine to the woman, which was the only crime charged. The officer who witnessed the transaction acknowledged she did not observe an exchange of anything, including money, drugs or unidentified objects, between defendant and the woman. In addition, the People’s theory that the woman put the bag in her mouth after purchasing it from defendant was contradicted by the officer’s testimony that she never saw the woman put anything into her mouth, or even put her hand to her mouth. Furthermore, the People’s theory that defendant sold two $10 bags, one to the man and the other to the woman, was inconsistent with the cash found on defendant. People v Correa, 2019 NY Slip Op 07017, First Dept 10-1-19

 

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AN INDIVIDUAL CORPORATE OFFICER, AS OPPOSED TO THE CORPORATION, CAN NOT BE HELD STRICTLY LIABLE FOR SEXUAL HARASSMENT UNDER THE NYC HUMAN RIGHTS LAW UNLESS THE OFFICER ENCOURAGED, CONDONED OR APPROVED THE SPECIFIC DISCRIMINATORY CONDUCT; COMPLAINT AGAINST THE CORPORATE OFFICER DISMISSED (FIRST DEPT).

The First Department, in full-fledged opinion by Justice Kern, over a two-justice dissent, reversing Supreme Court, determined that an individual corporate officer cannot be held strictly liable under the New York City Human Rights Law (HRL) for sexual discrimination unless the officer encouraged, condoned or approved the conduct. Here the plaintiff did not demonstrate the officer, Michael Bloomberg, was aware of the conduct by plaintiff’s supervisor (Ferris). The complaint against the officer was dismissed:

With respect to Mr. Bloomberg, the allegations in the complaint are as follows. Following Mr. Bloomberg’s example and leadership, Bloomberg L.P. bred a hostile work environment that led to the type of discrimination plaintiff experienced. Mr. Bloomberg was sued in a class action brought by female employees who alleged sexual harassment and creation of a hostile work environment while he was CEO of Bloomberg L.P. Mr. Bloomberg was also accused of condoning systemic top-down discrimination against female employees in a sexual harassment suit brought by the US Equal Employment Opportunity Commission on behalf of 58 female employees, not including the plaintiff. The complaint also cites various magazine articles and statements by public figures describing unsavory conduct and comments made by Mr. Bloomberg, directed at or regarding women other than plaintiff. * * *

… [W]we find that plaintiff’s City HRL claims must be dismissed as against Mr. Bloomberg because plaintiff has failed to sufficiently allege that Mr. Bloomberg is her employer for purposes of the City HRL. She has failed to allege that Mr. Bloomberg encouraged, condoned or approved the specific discriminatory conduct allegedly committed by Mr. Ferris. Doe v Bloomberg, L.P., 2019 NY Slip Op 06728, First Dept 9-24-19

 

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OHIO TRUSTEE’S REQUEST FOR PAYMENT PURSUANT TO A ROYALTY AGREEMENT WITH THE NEW YORK PLAINTIFF DID NOT CONFER JURISDICTION UPON NEW YORK, DESPITE A NEW YORK CHOICE OF LAW PROVISION (FIRST DEPT).

The First Department, reversing Supreme Court, determined the Ohio trustee’s request for payment under a 1986 royalty agreement with the New York plaintiff  did not confer jurisdiction upon New York, even though the contract included a New York choice of law provision:

The trustee’s requests from Ohio, by letter, telephone, and/or email, to plaintiff in New York to send him monies due under the royalty agreement that plaintiff had entered into in 1986 with nonparty Denise Somerville …— which would merely continue plaintiff’s previous practice of sending royalties to Somerville in Ohio — do not constitute the transaction of business under CPLR 302(a)(1) … .

… [N]egotiating a contract from outside New York “is insufficient to constitute the transaction of business in New York” … . …

The fact that the contract chooses New York law does not “constitute a voluntary submission to personal jurisdiction in New York” … . ABKCO Music, Inc. v McMahon, 2019 NY Slip Op 06721, First Dept 9-24-19

 

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