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DEFENSE COUNSEL’S FAILURE TO MOVE TO REOPEN SUPPRESSION HEARING BASED ON NEW EVIDENCE LEARNED AT TRIAL CONSTITUTED INEFFECTIVE ASSISTANCE.

The First Department, over an extensive dissent, determined defense counsel was ineffective for failing to move to reopen the suppression hearing. Defendant was convicted of burglary. A bag of tools was the subject of a suppression motion. At the suppression hearing, the police officer testified the bag was open at defendant’s feet. The suppression court ruled the “burglar’s tools” were properly seized under the “plain view” exception to the warrant requirement. At trial, the building superintendent who stopped the defendant testified the bag was in defendant’s hand and closed when the police arrived. Based on that new information, defense counsel should have requested the reopening of the suppression hearing:

 

Under CPL 710.40(4), a suppression hearing may be reopened upon a showing that the defendant has discovered “additional pertinent facts” that “could not have [been] discovered with reasonable diligence before the determination of the motion.” Here, the additional facts were “pertinent” because the superintendent’s testimony, if credited, would have undermined the ruling that the tools were admissible because they were in plain view. This was not a minor or routine inconsistency; the superintendent’s version was completely at odds with a plain view theory. Any issue of whose recollection was most reliable should have been presented to the hearing court. People v Kindell, 2016 NY Slip Op 00027, 1st Dept 1-7-16

 

CRIMINAL LAW (INEFFECTIVE ASSISTANCE, FAILURE TO REOPEN SUPPRESSION HEARING BASED ON NEW EVIDENCE)/EVIDENCE (INEFFECTIVE ASSISTANCE, FAILURE TO REOPEN SUPPRESSION HEARING BASED ON NEW EVIDENCE)/ATTORNEYS (INEFFECTIVE ASSISTANCE, FAILURE TO REOPEN SUPPRESSION HEARING BASED ON NEW EVIDENCE)/INEFFECTIVE ASSISTANCE (FAILURE TO REOPEN SUPPRESSION HEARING BASIED ON NEW EVIDENCE)/SUPPRESSION (INEFFECTIVE ASSISTANCE, FAILURE TO REOPEN SUPPRESSION HEARING BASED ON NEW EVIDENCE)

ALTHOUGH VACATUR OF A DEFAULT JUDGMENT WAS NOT AVAILABLE UNDER CPLR 5015, VACATUR WAS AVAILABLE UNDER CPLR 317.

The First Department, reversing Supreme Court, determined defendant’s (the LLC’s) motion to vacate a default judgment should have been granted. Although the LLC did not present a reasonable excuse for default, and therefore vacatur pursuant to CPLR 5015 was not available, the requirements for vacatur pursuant to CPLR 317 were met:

 

Although the LLC is not entitled to vacatur under CPLR 5015(a)(1), as it did not show a reasonable excuse for its default … , it is entitled to vacatur under CPLR 317, as it moved to vacate within a year after it learned of the default and just five months after entry of the default order, it showed that it did not personally receive the summons and complaint in time to defend it, and it presented a meritorious defense to the action (see CPLR 317…). The affidavit the LLC submitted in support of its motion was sufficient to show a meritorious defense … — namely, that it is an out-of-possession landlord that bears no liability for the injuries that allegedly occurred in its tenant’s bar due to the criminal acts of third parties … . Marte v 102-06 43 Ave., LLC, 2016 NY Slip Op 00061, 1st Dept 1-7-16

CIVIL PROCEDURE (VACATUR OF DEFAULT JUDGMENT UNDER CPLR 317 AVAILABLE BUT NOT UNDER CPLR 5015 )/DEFAULT JUDGMENTS, VACATUR (AVAILABLE UNDER CPLR 317 BUT NOT UNDER CPLR 5015)

HERE DISCLAIMERS WERE UNNECESSARY BECAUSE THE ACTIVITY WHICH LED TO INJURY WAS NOT WITHIN THE OVERALL SCOPE OF THE POLICY-COVERAGE; HAD THE DISCLAIMERS BEEN BASED UPON AN EXCLUSION FROM COVERAGE, AS OPPOSED TO THE OVERALL SCOPE OF THE COVERAGE, THEY WOULD HAVE BEEN INVALID AS UNTIMELY.

The First Department determined the declarations page of defendant's insurance policy described what the policy covered, not exclusions from what otherwise would be covered. The distinction was crucial because the insurer was late in disclaiming coverage. If the disclaimers had been based upon an exclusion from coverage, the disclaimers would have been invalid as untimely. But because the disclaimers were based on the scope of the coverage of the policy, the disclaimers were unnecessary. Here it was deemed that injury from falling concrete during demolition of a chimney was outside the scope of the policy, which was limited to: (1) carpentry — interior … ; (2) dry wall or wallboard Installation” … ; (3) contractors — subcontracted work — in connection with construction, reconstruction, repair or erection of buildings  … ; and (4) contractors — subcontracted work — in connection with construction, reconstruction, repair or erection of buildings  … uninsured/underinsured … :

“Disclaimer pursuant to section 3420(d) [now § 3420(d)(2)] is unnecessary when a claim falls outside the scope of the policy's coverage portion. Under those circumstances, the insurance policy does not contemplate coverage in the first instance, and requiring payment of a claim upon failure to timely disclaim would create coverage where it never existed. By contrast, disclaimer pursuant to section 3420(d) is necessary when denial of coverage is based on a policy exclusion without which the claim would be covered” … .

… [T]he subject policy's classification limitations of coverage merely define the activities that were included within the scope of coverage “in the first instance” … and do not constitute exclusions from coverage that would otherwise exist. Stated otherwise, the relevant policy language of … the declarations page states the activities that are covered. If the loss in question did not arise from activities within the classifications set forth on the declarations page, then coverage is lacking “by reason of lack of inclusion” … , and “the policy as written could not have covered the liability in question under any circumstances” … . Black Bull Contr., LLC v Indian Harbor Ins. Co., 2016 NY Slip Op 00002, 1st Dept 1-5-16

INSURANCE LAW (NO DISCLAIMER NECESSARY WHERE INJURY CAUSED BY ACTIVITY OUTSIDE THE SCOPE OF THE POLICY)/DISCLAIMERS (INSURANCE LAW, NO DISCLAIMER NECESSARY WHERE INJURY CAUSED BY ACTIVITY OUTSIDE THE SCOPE OF THE POLICY)/EXCLUSIONS FROM COVERAGE (INSURANCE LAW, IF AN INSURER SEEKS TO ENFORCE A POLICY EXCLUSION, TIMELY DISCLAIMER REQUIRED)/DISCLAIMERS (IF AN INSURER SEEKS TO ENFORCE A POLICY EXCLUSION, TIMELY DISCLAIMER IS REQUIRED)

JUDGE FAILED TO MAKE IT CLEAR THAT ACQUITTAL ON THE TOP COUNT (ATTEMPTED MURDER) BASED ON SELF-DEFENSE REQUIRED ACQUITTAL ON ANY LESSER COUNT STEMMING FROM THE SAME CONDUCT; NEW TRIAL ORDERED.

The First Department reversed defendant's conviction and ordered a new trial because the trial judge did not make it clear that if the jury found defendant acted in self-defense (justification defense) with respect to the top count (attempted murder) it could not consider a related lesser count:

The jury acquitted defendant of attempted murder in the second degree and assault in the first degree, but found him guilty of attempted first-degree assault, arising out of the stabbing of his cousin. Justification was a central issue at trial, and, because of the defect in the court's charge, it is impossible to discern whether acquittal of the top count was based on the jury's finding of justification in a manner that would mandate acquittal on the lesser count.

Considered as a whole, the court did not adequately convey the principle that, if the jury found defendant not guilty of the top count of attempted murder in the second degree on the basis of justification, it should not consider any lesser counts to the extent based on the same conduct… . People v Colasuonno, 2016 NY Slip Op 00021, 1st Dept 1-5-16

CRIMINAL LAW (JUDGE FAILED TO MAKE IT CLEAR THAT ACQUITTAL ON TOP COUNT BASED ON THE JUSTIFICATION DEFENSE REQUIRED ACQUITTAL ON ANY LESSER COUNT STEMMING FROM THE SAME CONDUCT, NEW TRIAL ORDERED)/JURY INSTRUCTIONS (JUDGE FAILED TO MAKE IT CLEAR THAT ACQUITTAL ON TOP COUNT BASED ON THE JUSTIFICATION DEFENSE REQUIRED ACQUITTAL ON ANY LESSER COUNT STEMMING FROM THE SAME CONDUCT, NEW TRIAL ORDERED)/JUSTIFICATION DEFENSE (JUDGE FAILED TO MAKE IT CLEAR THAT ACQUITTAL ON TOP COUNT BASED ON THE JUSTIFICATION DEFENSE REQUIRED ACQUITTAL ON ANY LESSER COUNT STEMMING FROM THE SAME CONDUCT, NEW TRIAL ORDERED)

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DEPARTMENT OF HEALTH EXECUTIVE-COMPENSATION-CAP AND CONFLICT-OF-INTEREST RULES FOR AGENCIES PROVIDING SERVICES TO DEVELOPMENTALLY DISABLED CHILDREN DO NOT VIOLATE THE SEPARATION OF POWERS DOCTRINE.

The First Department, in a full-fledged opinion by Justice Dickerson, reversing Supreme Court, determined that two Department of Health (DOH) rules concerning services provided to developmentally disabled children did not violate the separation of powers doctrine. One rule placed a cap on executive compensation, and the other prohibited an agency which evaluates a child’s need for services from itself providing those services (“conflict of interest” rule). The First Department explained the underlying general principles and then went through each of the Boreali [71 NY2d 1] “separation of powers” factors for each rule:

“The cornerstone of administrative law is derived from the principle that the Legislature may declare its will, and after fixing a primary standard, endow administrative agencies with the power to fill in the interstices in the legislative product by prescribing rules and regulations consistent with the enabling legislation” … . “The constitutional principle of separation of powers . . . requires that the [L]egislature make the critical policy decisions, while the executive branch’s responsibility is to implement those policies” … . “The branches of government cannot always be neatly divided, however, and common sense must be applied when reviewing a separation of powers challenge. As long as the [L]egislature makes the basic policy choices, the legislation need not be detailed or precise as to the agency’s role” … . Where an agency has been endowed with broad power to regulate in the public interest, courts generally will uphold reasonable acts that further the regulatory scheme … .

[The Boreali] factors are (1) “whether the agency did more than balanc[e] costs and benefits according to preexisting guidelines, but instead made value judgments entail[ing] difficult and complex choices between broad policy goals to resolve social problems”; (2) “whether the agency merely filled in details of a broad policy or if it wrote on a clean slate, creating its own comprehensive set of rules without benefit of legislative guidance”; (3) “whether the [L]egislature has unsuccessfully tried to reach agreement on the issue, which would indicate that the matter is a policy consideration for the elected body to resolve”; and (4) “whether the agency used special expertise or competence in the field to develop the challenged regulations” … . The “central theme” of a Boreali analysis is that “an administrative agency exceeds its authority when it makes difficult choices between public policy ends, rather than find[ing] means to an end chosen by the Legislature” … . Agencies for Children’s Therapy Servs., Inc. v New York State Dept. of Health,  2015 NY Slip Op 09647, 2nd Dept 12-30-15

ADMINISTRATIVE LAW (SERVICES FOR DEVELOPMENTALLY DISABLED CHILDREN, DOH EXECUTIVE COMPENSATION CAP AND CONFLICT OF INTEREST RULES DO NOT VIOLATE SEPARATION OF POWERS DOCTRINE)/DEVELOPMENTALLY DISABLED CHILDREN, SERVICES FOR (DOH EXECUTIVE COMPENSATION CAP AND CONFLICT OF INTEREST RULES DO NOT VIOLATE SEPARARY OF POWERS)/DEPARTMENT OF HEALTH (EXECUTIVE COMPENSATION CAP AND CONFLICT OF INETERST RULES DO NOT VIOLATE SEPARATION OF POWERS DOCTRINE)/SEPARATION OF POWERS DOCTRINE (SERVICES FOR DEVELOPMENTALLY DISABLED CHILDREN, DOH EXECUTIVE COMPENSATION CAP AND CONFLICT OF INTEREST RULES DO NOT VIOLATE SEPARATION OF POWERS DOCTRINE)

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INCONSISTENCIES IN TWO FINAL RENT-ADJUSTMENT ORDERS ALLOWED RECONSIDERATION OF THE NATURE OF THE MAJOR CAPITAL IMPROVEMENTS [MCI’S] DESCRIBED IN THE ORDERS

In a rent-increase matter which was before the NYS Division of Housing and Community Renewal (DHCR), the First Department, over an extensive two-justice dissent, determined a discrepancy between two prior rent-adjustment orders constituted “an irregularity in a vital matter” which allowed the DHRC, on remand, to reconsider the two (final) orders. The discrepancy related to the nature of the “major capital improvement [MCI]” (purportedly justifying a rent increase) to which each order referred. The dissent argued that the two orders were final orders and collateral estoppel prohibited further reexamination of them. Matter of 60 E. 12th St. Tenants’ Assn. v New York State Div. of Hous. & Community Renewal, 2015 NY Slip Op 09599, 1st Dept 12-29-15

 

ADMINISTRATIVE LAW (RECONSIDERATION OF INCONSISTENT FINAL ORDERS BY NYS DIVISION OF HOUSING AND COMMUNITY RENEWAL)/DIVISION OF HOUSING AND COMMUNITY RENEWAL [DHCR] (RECONSIDERATION OF INCONSISTENT FINAL RENT-ADJUSTMENT ORDERS) ADMINISTRATIVE LAW; LANDLORD-TENANT. .

SECURITY DEPOSIT CANNOT BE USED BY THE LANDLORD AS AN OFFSET AGAINST UNPAID RENT, BUT CAN BE USED BY THE TENANT TO REDUCE AMOUNT OWED TO THE LANDLORD.

In finding the special referee exceeded the scope of the reference from Supreme Court, the First Department explained the consequences of a landlord’s failure to place a security deposit in a separate account pursuant to General Obligations Law 7-103:

Section 7-103 prohibits landlords from commingling security deposits with their own funds. Violation of the statute gives rise to an action in conversion and the right to immediate return of the funds … . A landlord who violates Section 7-103 of the General Obligations Law cannot use the security as an offset against unpaid rents. This is so because a landlord is considered to be a trustee with respect to those funds deposited as security. To allow the landlord to set off the rent against the deposit would be to treat the deposit as a debt and the landlord as a debtor, the situation the statute was enacted to change … .The same logic does not pertain where a tenant seeks to apply the security deposit to reduce amounts found owing to the landlord.  23 E. 39th St. Mgt. Corp. v 23 E. 39th St. Dev., LLC, 2015 NY Slip Op 09605, 1st Dept 12-29-15

LANDLORD-TENANT (SECURITY DEPOSIT CANNOT BE USED AS OFFSET AGAINST UNPAID RENT)/LANDLORD-TENANT (SECURITY DEPOSIT CAN BE USED TO REDUCE AMOUNT TENANT OWES LANDLORD)/SECURITY DEPOSIT (LANDLORD CANNOT USE AS OFFSET AGAINST UNPAID RENT)/SECURITY DEPOSIT (CAN BE USED TO REDUCE AMOUNT OWED LANDLORD BY TENANT)

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PLAINTIFF STRUCK WHEN TWO WORKERS LOST CONTROL OF A HEAVY BEAM THEY WERE LOWERING TO THE GROUND ENTITLED TO SUMMARY JUDGMENT ON LABOR LAW 240 (1) CAUSE OF ACTION; EXPERT OPINION THAT NO SAFETY DEVICES WERE NECESSARY INSUFFICIENT TO DEFEAT SUMMARY JUDGMENT MOTION.

The First Department affirmed Supreme Court’s grant of summary judgment to the plaintiff in a Labor Law 240 (1) cause of action. Plaintiff was injured when a heavy beam being lowered by two other workers struck him in the chest and leg when the workers lost control of it. The court noted an expert opinion that no safety devices were needed was insufficient to establish the absence of a Labor Law 240 (1) violation:

The court properly found a “causal connection between the object’s inadequately regulated descent and plaintiff’s injury” … . By submitting an expert affidavit, plaintiff met his initial burden of showing that the beam “required securing for the purposes of the undertaking” … , and that statutorily enumerated safety devices could have prevented the accident … . It is undisputed that no enumerated safety devices were provided, and the testimony and expert opinion that such devices were neither necessary nor customary is insufficient to establish the absence of a Labor Law § 240(1) violation ”’ . The “height differential cannot be described as de minimis given the amount of force [the beam was] able to generate over [its] descent” … . Plaintiff was not the sole proximate cause of his injuries, which were caused at least in part by the lack of safety devices to check the beam’s descent as well as the manner in which the other two workers lowered the beam; comparative negligence is no defense to the Labor Law § 240(1) claim … . Bonaerge v Leighton House Condominium, 2015 NY Slip Op 09632, 1st Dept 12-29-15

LABOR LAW (PLAINTIFF STRUCK BY BEAM LOWERED BY TWO WORKERS)/EVIDENCE (EXPERT OPINION NO SAFEY EQUIPMENT NECESSARY DID NOT DEFEAT PLAINTIFF’S SUMMARY JUDGMENT MOTION IN A LABOR LAW 240 (1) ACTION)/EXPERT OPINION (OPINION THAT NO SAFETY EQUIPMENT WAS NECESSARY WAS INSUFFICIENT TO DEFEAT SUMMARY JUDGMENT IN LABOR LAW 240 (1) ACTION)

FRAUD AND FRAUDULENT CONCEALMENT CAUSES OF ACTION AGAINST MORGAN STANLEY, STEMMING FROM RESIDENTIAL MORTGAGE-BACKED SECURITIES, PROPERLY SURVIVED A MOTION TO DISMISS.

The First Department, in a full-fledged opinion by Justice Friedman, determined Morgan Stanley’s motion to dismiss fraud and fraudulent concealment causes of action was properly denied.  The action stemmed from residential mortgage backed securities (RMBS) and the collapse of subprime mortgages. In essence, Morgan Stanley argued the plaintiff, Basis Yield, a mutual fund, did not allege justifiable reliance on the ratings of the investments and did not allege it exercised due diligence in researching the quality of the investments. With respect to the “failure to allege the exercise of due diligence” argument, the court wrote:

… Morgan Stanley … argues that the fraud claims are legally insufficient because Basis Yield does not allege that it conducted, or sought to conduct, a due diligence investigation into the allegedly misrepresented matters. This argument relies on the well-established principle that a plaintiff suing for fraud (and particularly a sophisticated plaintiff, such as Basis Yield) must establish that it “has taken reasonable steps to protect itself against deception” … . * * *

If accepted, Morgan Stanley’s position would require the prospective purchaser of a credit instrument to assume that the instrument’s credit rating is fraudulent until the rating has been verified through a detailed retracing of the steps of the underwriter and credit rating agency. This would largely negate the utility of the credit ratings of negotiable bonds and notes that are published by accredited rating agencies. Morgan Stanley does not draw our attention to any New York decision holding that the due diligence obligation of even a sophisticated investor extends so far as to require it to seek to verify the accuracy of an accredited agency’s credit rating of a note or bond through an investigation of nonpublic information. Basis Yield Alpha Fund Master v Stanley, 2015 NY Slip Op 09645, 1st Dept 12-29-15

FRAUD (FRAUD AND FRAUDULENT CONCEALMENT CAUSES OF ACTION AGAINST MORGAN STANLEY, STEMMING FROM RESIDENTIAL MORTGAGE-BACKED SECURITIES)/RESIDENTIAL MORTGAGE-BACKED SECURITIES (FRAUD AND FRAUDULENT CONCEALMENT CAUSES OF ACTION AGAINST MORGAN STANLEY)/MORGAN STANLEY (FRAUD AND FRAUDULENT CONCEALMENT CAUSES OF ACTION AGAINST)

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FACEBOOK’S SUIT AGAINST LAW FIRMS WHICH REPRESENTED A CLIENT IN A FRAUDULENT SUIT AGAINST FACEBOOK DISMISSED.

The First Department, reversing Supreme Court, dismissed a malicious prosecution and Judiciary Law 487 action brought by Facebook against law firms which represented a client who brought a fraudulent lawsuit against Facebook. The client apparently forged a contract with Mark Zuckerberg (the founder of Facebook) which would have given the client a 50% interest in Facebook. The client’s suit against Facebook was dismissed and the client was indicted for wire fraud. The First Department held that the “conclusory” allegations in the complaint did not sufficiently plead the “no probable cause to bring the suit” element of a malicious prosecution cause of action or the “egregious conduct” element of a Judiciary Law 487 cause of action:

With respect to the element of probable cause [re: malicious prosecution], a plaintiff must allege that the underlying action was filed with “a purpose other than the adjudication of a claim” and that there was “an entire lack of probable cause in the prior proceeding” … . Moreover, the lack of probable cause must be “patent” … . In this context, the Court of Appeals has stated as follows: “Probable cause is the knowledge of facts, actual or apparent, strong enough to justify a reasonable man in the belief that he has lawful grounds for prosecuting the defendant in the manner complained of. The want of probable cause does not mean the want of any cause, but the want of any reasonable cause, such as would persuade a man of ordinary care and prudence to believe in the truth of the charge” … . In a malicious prosecution action, the burden of proof to establish a want of probable cause is on the plaintiffs … .

Here, the … court’s granting of a TRO at the inception of the [client’s] action, prior to any of the defendants’ representation of [the client], created a presumption that [the client] had probable cause to bring the case. This presumption must be overcome by specifically pleaded facts … . Moreover, a plaintiff’s factual allegations regarding lack of probable cause and malice may be disproved by the evidentiary material submitted by defendant in support of a motion to dismiss … .

Applying these principles to this case, we find that the allegations in the instant complaint concerning defendants’ lack of probable cause are entirely conclusory, and are thus inadequate to support the lack of probable cause element of the malicious prosecution claim … . * * *

Relief under a cause of action based upon Judiciary Law § 487 “is not lightly given” … and requires a showing of “egregious conduct or a chronic and extreme pattern of behavior” on the part of the defendant attorneys that caused damages … . Allegations regarding an act of deceit or intent to deceive must be stated with particularity … ; the claim will be dismissed if the allegations as to scienter are conclusory and factually insufficient … . Facebook, Inc. v DLA Piper LLP (US), 2015 NY Slip Op 09602, 1st Dept 12-29-15

ATTORNEYS (MALICIOUS PROSECUTION ACTION AGAINST LAW FIRMS WHICH REPRESENTED A CLIENT IN A FRAUDULENT SUIT DISMISSED)/MALICIOUS PROSECUTION (ACTION AGAINST LAW FIRMS WHICH REPRESENTED A CLIENT IN A FRAUDULENT SUIT DISMISSED)/JUDICIARY LAW 487 (ACTION AGAINST LAW FIRMS WHICH REPRESENTED A CLIENT IN A FRAUDULENT SUIT DISMISSED)

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