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NEW YORK CITY HOUSING AUTHORITY ACTED ARBITRARILY AND CAPRICIOUSLY WHEN IT DENIED PETITIONER SUCCESSION RIGHTS TO HIS MOTHER’S APARTMENT.

The First Department, over a two-justice dissent, determined the New York City Housing Authority (NYCHA) acted arbitrarily and capriciously when it denied petitioner succession rights to his mother's apartment. Petitioner had moved in with his mother to care for her when she became unable to care for herself. The NYCHA knew petitioner had moved in to care for his mother but repeatedly denied petitioner's applications to become an occupant of his mother's apartment on “overcrowding” grounds:

Respondent's determination denying petitioner succession rights to his mother's apartment was arbitrary and capricious. Petitioner's mother submitted multiple applications to add petitioner to the lease as required by 24 CFR 966.4(a)(1)(v). The first application was denied on the ground that adding petitioner to the household “will create overcrowding”; the second, not on that basis but allegedly because petitioner signed the application on his disabled mother's behalf. NYCHA never considered evidence of petitioner's mother's disability in denying the applications.

The ground proffered for the denial, i.e., that adding petitioner to the household would result in overcrowding, creates an unacceptable Catch-22 — a request to add an additional family member will almost always result in overcrowding unless NYCHA fails simultaneously to consider transferring the applicant to a larger apartment. NYCHA guidelines provide that an “overcrowded” apartment should not result in a summary denial of the RFM's (remaining family member's) claims; rather, the housing manager should inform the new tenant that he may submit a request to transfer to a new apartment. Matter of Aponte v Olatoye, 2016 NY Slip Op 02708, 1st Dept 4-7-16


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CHALLENGE TO THE JURY INSTRUCTION ON CAUSATION OF DEATH IS SUBJECT TO THE PRESERVATION REQUIREMENT; DEFENDANT’S FAILURE TO OBJECT PRECLUDES REVIEW; STRONG DISSENT ARGUED THE JURY INSTRUCTION IS REVIEWABLE BECAUSE IT RELIEVED THE PEOPLE OF THEIR BURDEN OF PROOF.

The First Department, over an extensive dissent, determined defendant's appellate challenge to the jury instruction on causation of death was subject to the preservation requirement. The victim was assaulted by the defendant and died later at the hospital. The defense presented an expert who testified the victim was improving until he fell in the hospital. The cause of death, according to the defense expert, was the hospital's negligence in treating the victim after the fall. The defendant did not object to the causation jury instruction. The dissent would have reversed, either finding the preservation requirement did not apply because the jury instruction relieved the People of their burden of proof, or in the interest of justice:

Defendant failed to raise any challenge to the court's charge regarding causation of death at a time when the court could have easily rephrased the instruction. The issue is therefore unpreserved for appellate review (see CPL 470.05[2]). The claimed error does not fall within the “very narrow exception” discussed in People v Thomas (50 NY2d 467, 471 [1980]), as the dissent suggests. That narrow exception is only applicable “when the procedure followed at trial was at basic variance with the mandate of law prescribed by Constitution or statute” (id.). Here, as was the case in Thomas, preservation was necessary because defendant essentially claims that “a portion of the charge could, in the particular case, be interpreted as having a contrary effect” to the burden of proof charge that was correctly stated by the court (id. at 472). Nor is the exercise of interest of justice jurisdiction warranted; defendant was not deprived of a fair trial (see CPL 470.15[6] [a]). As an alternative holding, we consider the charge, viewed as a whole, to have properly conveyed the law regarding whether the assault was a sufficiently direct cause of the victim's death … . People v Castillo, 2016 NY Slip Op 02709, 1st Dept 4-7-16


JUDICIAL DIVERSION PROGRAM AVAILABLE TO DEFENDANTS CHARGED WITH BOTH QUALIFYING OFFENSES AND OFFENSES WHICH ARE NEITHER QUALIFYING NOR DISQUALIFYING.

The First Department, in a full-fledged opinion by Justice Sweeny, determined the defendant was eligible for judicial diversion where defendant was charged with both statutorily qualifying offenses and other offenses which were nowhere defined as qualifying or disqualifying offenses:

The Legislature amended the DLRA [Drug Law Reform Act] in 2009, enacting CPL 216.00 and 216.05 to create a mechanism for judicial diversion. Under this program, eligible felony offenders whose drug or alcohol abuse contributed to their criminal conduct, may, at the discretion of the court, be afforded the opportunity to avoid a felony conviction and a prison sentence by successfully participating in a judicially supervised substance abuse program. Unlike prior drug offense programs, judicial diversion does not require the prosecutor’s consent … . * * *

… [The statute] sets forth a list of disqualifying offenses/conditions that prevent a defendant from qualifying for judicial diversion, although as noted, even some of those offenses may not prevent disqualification with the People’s consent. In applying the principle “espressio unius est exclusio alterius,” “an irrefutable inference must be drawn that what is omitted or not included was intended to be omitted or excluded” … . The inescapable conclusion is that the Legislature’s decision not to list certain offenses as disqualifying means their mere inclusion in an indictment will not prevent an otherwise eligible defendant from making an application for judicial diversion. People v Smith, 2016 NY Slip Op 02596, 1st Dept 4-5-16

CRIMINAL LAW (JUDICIAL DIVERSION PROGRAM AVAILABLE TO DEFENDANTS CHARGED WITH BOTH QUALIFYING OFFENSES AND OFFENSES WHICH ARE NEITHER QUALIFYING NOR DISQUALIFYING)/JUDICIAL DIVERSION PROGRAM (JUDICIAL DIVERSION PROGRAM AVAILABLE TO DEFENDANTS CHARGED WITH BOTH QUALIFYING OFFENSES AND OFFENSES WHICH ARE NEITHER QUALIFYING NOR DISQUALIFYING)

12 TO 18 INCH FALL SUPPORTED SUMMARY JUDGMENT IN FAVOR OF PLAINTIFF UNDER LABOR LAW 240 (1).

The First Department determined a fall of 12 to 18 inches sufficed to award plaintiff summary judgment Labor Law 240 (1) action:

Plaintiff was injured when, while carrying wood planks, he fell through an opening in a latticework rebar deck to a plywood form that was 12 to 18 inches below. “There is no bright-line minimum height differential that determines whether an elevation hazard exists” … , and here, the record establishes that plaintiff's fall was the result of exposure to an elevation related hazard … . Brown v 44 St. Dev., LLC, 2016 NY Slip Op 02527, 1st Dept 3-31-16

LABOR LAW (12 TO 18 INCH FALL SUPPORTED SUMMARY JUDGMENT IN FAVOR OF PLAINTIFF UNDER LABOR LAW 240 (1))

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FRAUD CAUSES OF ACTION AGAINST DEUTSCHE BANK STEMMING FROM THE COLLAPSE OF MORTGAGE-BACKED SECURITIES DISMISSED AS UNTIMELY, ACCUSATIONS AGAINST DEUTSCHE BANK WERE WELL-KNOWN MORE THAN TWO YEARS BEFORE THE SUIT WAS BROUGHT.

In another lawsuit stemming from the collapse of mortgage-backed securities, the First Department determined fraud causes of action by Aozora Bank against Deutsche Bank were properly dismissed as untimely. Investigations, including a Congressional investigation, into the relevant actions of Deutsche Bank were well-known more than two years before the suit was brought:

The parties do not dispute that plaintiff's fraud causes of action were not timely under New York's six-year limitations period and, to be timely, must have been commenced within two years from the time plaintiff discovered the fraud, or with reasonable diligence could have discovered it (CPLR 213[8]). * * *

… [O]ne of the most significant sources of public information putting plaintiff on notice of its fraud claims is the Senate Report and its associated emails, which actually form the centerpiece of plaintiff's complaint. In fact, the Senate Report contains a 45-page section on Deutsche Bank entitled “Running the CDO Machine: Case Study of Deutsche Bank.” Taken with all the other information available in the public domain, the Senate Report is more than sufficient to have placed Aozora on inquiry notice of possible fraud by April 2011 at the latest … . Aozora Bank, Ltd. v Deutsche Bank Sec. Inc., 2016 NY Slip Op 02511, 1st Dept 3-31-16

FRAUD (FRAUD CAUSES OF ACTION AGAINST DEUTSCHE BANK STEMMING FROM THE COLLAPSE OF MORTGAGE-BACKED SECURITIES DISMISSED AS UNTIMELY, ACCUSATIONS AGAINST DEUTSCHE BANK WERE WELL-KNOWN MORE THAN TWO YEARS BEFORE THE SUIT WAS BROUGHT)/SECURITIES (FRAUD CAUSES OF ACTION AGAINST DEUTSCHE BANK STEMMING FROM THE COLLAPSE OF MORTGAGE-BACKED SECURITIES DISMISSED AS UNTIMELY, ACCUSATIONS AGAINST DEUTSCHE BANK WERE WELL-KNOWN MORE THAN TWO YEARS BEFORE THE SUIT WAS BROUGHT)/MORTGAGE-BACKED SECURITIES (FRAUD CAUSES OF ACTION AGAINST DEUTSCHE BANK STEMMING FROM THE COLLAPSE OF MORTGAGE-BACKED SECURITIES DISMISSED AS UNTIMELY, ACCUSATIONS AGAINST DEUTSCHE BANK WERE WELL-KNOWN MORE THAN TWO YEARS BEFORE THE SUIT WAS BROUGHT)/CIVIL PROCEDURE (FRAUD CAUSES OF ACTION AGAINST DEUTSCHE BANK STEMMING FROM THE COLLAPSE OF MORTGAGE-BACKED SECURITIES DISMISSED AS UNTIMELY, ACCUSATIONS AGAINST DEUTSCHE BANK WERE WELL-KNOWN MORE THAN TWO YEARS BEFORE THE SUIT WAS BROUGHT)

DERIVATIVE SUIT AGAINST JP MORGAN CHASE STEMMING FROM SUBPRIME MORTGAGE-BACKED SECURITIES DISMISSED.

The First Department determined a derivative suit against the board of directors of JP Morgan Chase stemming from subprime mortgage-backed securities was properly dismissed for failure to demonstrate the futility of a presuit demand upon the board. The decision includes particularly clear explanations of what must be alleged to sufficiently demonstrate futility under Delaware law pursuant to the “Aronson” and “Rales” tests. With regard to one of the two “Aronson” tests, the court wrote:

Plaintiffs contend that the board's action, including the adoption of the January 2007 resolution delegating authority to a management committee, was not a valid exercise of business judgment. However, this factual assertion examines the board's course of action in hindsight and hinges on certain warning signs that plaintiff alleges the board failed to heed, including some losses that reverted back to JPMorgan's balance sheet by September 2008. Delaware law presumes that in making a business decision the board of directors acts in good faith and in the honest belief that the action is taken in the best interests of the company … . In order to satisfy the second prong of the Aronson test, plaintiffs are required to plead particularized facts sufficient to raise a reason to doubt that [1] the action was taken honestly and in good faith or [2] the board was adequately informed in making the decision … . These facts do not rebut the presumption of regularity of the board's decision making process … . Although risky, the conduct plaintiff challenges, the board's authorization of the securitization and sale of investments, involves “legal business decisions that were firmly within management's judgment to pursue” … . The fact that investors later sued or made repurchase demands does not raise a reasonable doubt that the decision to engage in such transactions was not a valid exercise of business judgment … . Asbestos Workers Phila. Pension Fund v Bell, 2016 NY Slip Op 02510, 1st Dept 3-31-16

CORPORATION LAW (DERIVATIVE SUIT AGAINST JP MORGAN CHASE STEMMING FROM SUBPRIME MORTGAGE-BACKED SECURITIES DISMISSED)/MORTGAGE-BACKED SECURITIES (DERIVATIVE SUIT AGAINST JP MORGAN CHASE STEMMING FROM SUBPRIME MORTGAGE-BACKED SECURITIES DISMISSED)/SHAREHOLDERS' DERIVATIVE ACTION (DERIVATIVE SUIT AGAINST JP MORGAN CHASE STEMMING FROM SUBPRIME MORTGAGE-BACKED SECURITIES DISMISSED)

FAILURE TO COMPLY WITH NOTICE PROVISION OF NYC ADMINISTRATIVE CODE DID NOT TOLL STATUTE OF LIMITATIONS RE: AN ACTION SEEKING TO RECOVER THE COST OF BUILDING MODIFICATIONS REQUIRED BY THE CODE AFTER DEFENDANTS’ CONSTRUCTION OF A TALLER NEIGHBORING BUILDING.

The First Department, in a full-fledged opinion by Justice Tom, determined defendants' failure to give notice to plaintiff of their intent to increase the height of a neighboring building did not toll the statute of limitations. The suit concerned two provisions of the Administrative Code of the City of New York. One provision required notice to neighboring property owners of construction to increase the height of a building. The other required the owner of the newly constructed building to increase the height of the chimneys of surrounding buildings to bring them back into conformance with the Administrative Code. Plaintiff was seeking to recover the cost of modifying its chimney which was rendered noncompliant by defendants' now taller neighboring building. The new construction was completed in 2007. The court held defendants' failure to notify plaintiff of the new construction did not excuse plaintiff's failure to bring an action within three years of the completion of the new construction:

Pursuant to the statutory language, plaintiff's claim accrued when defendants' building (1) was erected; (2) was sited within 100 feet of plaintiff's chimney; and (3) was increased in height so that it exceeded the height of plaintiff's chimney vent. Here, all the factual circumstances required to establish a right of action occurred by January 2007, when the work on the building had been substantially completed. The January 22, 2007 temporary certificate of occupancy (CO), issued by the Department of Buildings (DOB), certified that defendants' building was 20 stories tall and “conform[ed] substantially to the approved plans and specifications[,] and to the requirements of all applicable laws, rules and regulations for the uses and occupancies specified” for the project. The approved condominium offering plan stated that the Arts Tower would consist of a cellar level and 20 additional stories. This documentary evidence is prima facie proof that as of January 20, 2007, the building was erected to a height that was 10 stories taller than plaintiff's chimney, and sited within 100 feet of the chimney, thus triggering the three-year limitations period on plaintiff's claim that defendants failed to comply with Administrative Code § 27-860(a). Moreover, plaintiff concedes that it was aware of the building's height by the time construction was substantially completed in 2007. Accordingly plaintiff's claim accrued on January 20, 2007, and this action, commenced in March 2014, is thus time-barred … . West Chelsea Bldg. LLC v Guttman, 2016 NY Slip Op 02548, 1st Dept 3-31-16

CIVIL PROCEDURE (FAILURE TO COMPLY WITH NOTICE PROVISION OF NYC ADMINISTRATIVE CODE DID NOT TOLL STATUTE OF LIMITATIONS RE: AN ACTION SEEKING TO RECOVER THE COST OF BUILDING MODIFICATIONS REQUIRED BY THE CODE AFTER DEFENDANTS' CONSTRUCTION OF A TALLER NEIGHBORING BUILDING)/ADMINSTRATIVE CODE OF THE CITY OF NEW YORK (FAILURE TO COMPLY WITH NOTICE PROVISION OF NYC ADMINISTRATIVE CODE DID NOT TOLL STATUTE OF LIMITATIONS RE: AN ACTION SEEKING TO RECOVER THE COST OF BUILDING MODIFICATIONS REQUIRED BY THE CODE AFTER DEFENDANTS' CONSTRUCTION OF A TALLER NEIGHBORING BUILDING)/BUILDING HEIGHT (NYC) (FAILURE TO COMPLY WITH NOTICE PROVISION OF NYC ADMINISTRATIVE CODE DID NOT TOLL STATUTE OF LIMITATIONS RE: AN ACTION SEEKING TO RECOVER THE COST OF BUILDING MODIFICATIONS REQUIRED BY THE CODE AFTER DEFENDANTS' CONSTRUCTION OF A TALLER NEIGHBORING BUILDING)/CHIMNEY HEIGHT (NYC) (FAILURE TO COMPLY WITH NOTICE PROVISION OF NYC ADMINISTRATIVE CODE DID NOT TOLL STATUTE OF LIMITATIONS RE: AN ACTION SEEKING TO RECOVER THE COST OF BUILDING MODIFICATIONS REQUIRED BY THE CODE AFTER DEFENDANTS' CONSTRUCTION OF A TALLER NEIGHBORING BUILDING)

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FINANCIAL ADVISOR IS NOT A PROFESSIONAL WHO CAN BE HELD LIABLE IN TORT BASED UPON A CONTRACTUAL RELATIONSHIP.

The First Department noted that a “financial advisor” is not a professional who may be liable in tort based upon a contract:

While “[p]rofessionals … may be subject to tort liability for failure to exercise reasonable care, irrespective of their contractual duties” … , a financial advisor … is not a “professional” … . Thus, any duty owed by the … defendants to render financial advisory services to plaintiff in a competent manner must arise out of a contract. Indeed, the complaint alleges that plaintiff “retained” the … defendants and that [defendant] “agreed to act as [his] financial advisor” … . However, “claims based on negligent or grossly negligent performance of a contract are not cognizable” … . Starr v Fuoco Group LLP, 2016 NY Slip Op 02143, 1st Dept 3-24-16

NEGLIGENCE (FINANCIAL ADVISOR IS NOT A PROFESSIONAL WHO CAN BE HELD LIABLE IN TORT BASED UPON A CONTRACTUAL RELATIONSHIP)/CONTRACT LAW (FINANCIAL ADVISOR IS NOT A PROFESSIONAL WHO CAN BE HELD LIABLE IN TORT BASED UPON A CONTRACTUAL RELATIONSHIP)/FINANCIAL ADVISOR (FINANCIAL ADVISOR IS NOT A PROFESSIONAL WHO CAN BE HELD LIABLE IN TORT BASED UPON A CONTRACTUAL RELATIONSHIP)/PROFESSIONAL LIABILITY (FINANCIAL ADVISOR IS NOT A PROFESSIONAL WHO CAN BE HELD LIABLE IN TORT BASED UPON A CONTRACTUAL RELATIONSHIP)

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SUIT ALLEGING BREACH OF FIDUCIARY DUTY IN CONNECTION WITH THE SALE OF AN ASSET OWNED NEARLY ENTIRELY BY BANKRUPT LEHMAN BROTHERS DISMISSED.

The First Department dismissed a complaint alleging, inter alia, breach of a limited partnership agreement and breach of fiduciary duty in connection of the sale of a fund (Archstone) nearly entirely owned by bankrupt Lehman Brothers. Plaintiff, who had purchased a 1% interest in the fund for $20 million, alleged the sale will generate enough to pay only the preferred interests and will “wipe out” the minority interests (including plaintiff). Plaintiff further alleged the sale was motivated by Lehman's desire to pay creditors relating to its 2008 bankruptcy. In dismissing the breach of fiduciary duty cause of action, the court explained the analytical criteria, including an “entire fairness” analysis:

Even under the heightened entire fairness standard advocated by plaintiff, the claim is insufficient. An “entire fairness” analysis focuses on two entwined considerations: fair dealing and fair price … . Plaintiff fails to allege facts demonstrating the absence of fairness, or that it did not “receive the substantial equivalent in value of what [it] had before” … . Conclusory assertions that amounts paid were “unfair” are insufficient … . Plaintiff concedes that the $16 billion transaction price attained Archstone's current value at the time of the transaction. Plaintiff also admits that the transaction “represented a premium of approximately 15% over the implied purchase price of Lehman's combined acquisitions of the interests of the other [s]ponsor [b]anks' interests earlier in 2012.” Plaintiff identifies no alternative transactions, let alone one that would have achieved more value for the Fund. Fiduciaries are “not required to abandon [a] transaction simply because a better deal might have become available in the future” … . Cambridge Capital Real Estate Invs., LLC v Archstone Enter. LP, 2016 NY Slip Op 02017, 1st Dept 3-22-16

PARTNERSHIP LAW (BREACH OF FIDUCIARY DUTY CAUSE OF ACTION BY MINORITY INTEREST HOLDER DISMISSED)/FIDUCIARY DUTY, BREACH OF (PARTNERSHIP LAW, BREACH OF FIDUCIARY DUTY CAUSE OF ACTION BY MINORITY INTEREST HOLDER DISMISSED)

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HEARSAY OFFERED IN OPPOSITION TO SUMMARY JUDGMENT PROPERLY CONSIDERED.

The First Department determined defendants, including defendant SSA, had made a prima facie showing of entitlement to summary judgment in this slip and fall case, but the plaintiff raised a question of fact whether an identified defect in the sidewalk caused her fall. The court noted that hearsay evidence supplied in opposition to the motion was properly considered because it was not the only evidence submitted in opposition. The case is a rare example of each side submitting evidence of all the required “slip and fall” elements:

Defendants made a prima showing of their entitlement to summary judgment, by submitting deposition testimony and an affidavit from SSA's managing member stating that SSA never did any work on the sidewalk where plaintiff fell, that he never received complaints about the sidewalk or curb prior to plaintiff's accident, and that he never observed the alleged hazardous curb and sidewalk condition while making his regular, twice-weekly inspections of the strip mall … .

In opposition, plaintiff raised triable issues of fact. Plaintiff testified that she fell when her left foot stepped into a hole-like depression in the curb/sidewalk, and she marked photographs to show where she fell. Plaintiff also submitted her daughter's affidavit, wherein she averred that after receiving a call about her mother's fall, she responded quickly to the scene of the accident and found her mother on the sidewalk. According to the daughter, her mother pointed to a broken and cracked curb/sidewalk condition and stated that the defective condition caused her to fall. This hearsay statement may be relied upon to defeat summary judgment where, as here, it is not the only evidence submitted in opposition to the motion … . The daughter added that the photographs taken of the sidewalk/curb seven months after the accident, and the area of the photographs her mother marked, accurately depicted the broken condition of the curb/sidewalk as it appeared on the date of the accident. The photographs show a broken curb/sidewalk. Taken together, the evidence raises triable issues of fact whether the broken sidewalk/curb caused plaintiff's fall, and whether the defective condition existed for a sufficient period of time prior to the accident for defendants to have discovered and remedied it … . Uncyk v Cedarhurst Prop. Mgt., LLC, 2016 NY Slip Op 02037, 1st Dept 3-22-16

NEGLIGENCE (HEARSAY OFFERED IN OPPOSITION TO SUMMARY JUDGMENT PROPERLY CONSIDERED)/EVIDENCE (HEARSAY OFFERED IN OPPOSITION TO SUMMARY JUDGMENT PROPERLY CONSIDERED) HEARSAY (HEARSAY OFFERED IN OPPOSITION TO SUMMARY JUDGMENT PROPERLY CONSIDERED)/SLIP AND FALL (ALL REQUIRED ELEMENTS OF SLIP AND FALL ADDRESSED BY BOTH SIDES IN SUMMARY JUDGMENT MOTION)

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