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ASSIGNMENT TO PLAINTIFF OF ALL RIGHT, TITLE AND INTEREST TO $626 MILLION IN RESIDENTIAL MORTGAGE-BACKED SECURITIES DID NOT SPECIFICALLY MENTION FRAUD CLAIMS; THE RIGHT TO SUE MORGAN STANLEY FOR FRAUD, THEREFORE, WAS NOT ASSIGNED TO PLAINTIFF.

In 2006 and 2007 plaintiff FSAM bought $626 million in residential mortgage-backed securities (RMBS) from defendant Morgan Stanley. “All right, title and interest” to those securities were then assigned to plaintiff Dexia, which paid FSAM the same amount FSAM paid Morgan Stanley. The plaintiffs, FSAM and Dexia, sued Morgan Stanley, alleging Morgan Stanley knew the RMBS were of poor quality but represented they were prudent AAA-rated securities. The First Department determined the fraud claims did not transfer to Dexia because no specific mention of them was made in the assignment. The court further determined FSAM did not have standing to assert the fraud claims because Dexia paid FSAM for them and FSAM, therefore, could not establish damages:

 

The Court of Appeals recently explained that “the right to assert a fraud claim related to a contract or note does not automatically transfer with the respective contract or note” … . “Thus, where an assignment of fraud or other tort claims is intended in conjunction with the conveyance of a contract or note, there must be some language — although no specific words are required — that evinces that intent and effectuates the transfer of such rights” … . “Without a valid assignment, only the . . . assignor may rescind or sue for damages for fraud and deceit’ because the representations were made to it and it alone had the right to rely on them” … .

We find that plaintiff FSAM’s agreement to deliver “all right, title and interest” in the RMBS to the Dexia plaintiffs did not include fraud claims, since FSAM only assigned rights in the subject securities without explicitly referencing any related tort claims or the overall transaction between FSAM and defendants … .

Because FSAM received from the Dexia plaintiffs the same amount it originally paid for the securities, FSAM cannot establish damages … . Dexia SA/NV v Stanley, 2016 NY Slip Op 00122, 1st Dept 1-12-16

 

CONTRACT LAW (FRAUD CLAIMS NOT SPECIFICALLY MENTIONED IN ASSIGNMENT ARE NOT ASSIGNED)/ASSIGNMENTS (FRAUD CLAIMS NOT SPECIFICALLY MENTIONED IN ASSIGNMENT ARE NOT ASSIGNED)/FRAUD (FRAUD CLAIMS NOT SPECIFICALLY MENTIONED IN ASSIGNMENT ARE NOT ASSIGNED)

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THEORIES OF LIABILITY NOT FAIRLY IMPLIED FROM THE NOTICE OF CLAIM CAN NOT BE INCLUDED IN SUPPLEMENTAL BILL OF PARTICULARS.

The First Department determined Supreme Court properly refused to allow the supplementing of a bill of particulars because the new theories of liability could not be implied from the notice of claim. This was a slip and fall case. The notice of claim alleged the fall was caused by liquid on a stair. The supplemental bill sought to allege the stair was defective and a building employee was not properly trained:

 

Contrary to plaintiff’s contention, he may not rely on his testimony at his General Municipal Law § 50-H hearing to rectify any deficiencies in the notice of claim, because he never testified that there was an issue with the step itself and traditionally such testimony has only been “permitted to clarify the location of an accident or the nature of injuries, [it] may not be used to amend the theory of liability set forth in the notice of claim where, as here, amendment would change the nature of the claim'” … .

Accordingly, the motion court properly struck the allegations from the supplemental bill of particulars, as new theories of liability that cannot be fairly implied from the notice of claim, and precluded plaintiff’s expert from testifying with regard to them … . Lewis v New York City Hous. Auth., 2016 NY Slip Op 00040, 1st Dept 1-7-16

 

NEGLIGENCE (THEORIES NOT FAIRLY IMPLIED FROM NOTICE OF CLAIM CANNOT BE INCLUDED IN SUPPLEMENTAL BILL OF PARTICULARS)/NOTICE OF CLAIM (THEORIES NOT FAIRLY IMPLIED FROM NOTICE OF CLAIM CANNOT BE INCLUDED IN SUPPLEMENTAL BILL OF PARTICULARS)/BILL OF PARTICULARS (CANNOT BE SUPPLEMENTED TO INCLUDE THEORIES NOT FAIRLY IMPLIED FROM NOTICE OF CLAIM)/MUNICIPAL LAW (BILL OF PARTICULARS CANNOT BE SUPPLEMENTED TO INCLUDE THEORIES NOT FAIRLY IMPLIED FROM NOTICE OF CLAIM)

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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. .

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STIPULATION WHICH DID NOT SPECIFICALLY CALL FOR A REDUCTION OF CHILD SUPPORT UPON THE EMANCIPATION OF THE OLDEST CHILD WOULD NOT BE INTERPRETED OTHERWISE.

The First Department, over a two-justice dissent, determined that a stipulation which was incorporated but not merged into the divorce did not call for the reduction of child support upon emancipation of the older child. The dissent argued that, applying standard principles of contract interpretation, it was clear the parties intended emancipation of the older child would result in the reduction of child support, despite the absence of a formula for the reduction in the stipulation:

There is no evidence, other than plaintiff’s testimony, that the parties had agreed to a reduction in child support on account of any purported emancipation of the older child. Indeed, their agreement, freely entered into, does not allocate plaintiff’s child support obligation as between the children or provide a formula for a reduction in the event of one child’s emancipation … . “When child support has been ordered for more than one child, the emancipation of the oldest child does not automatically reduce the amount of support owed under an order of support for multiple children” … . Schulman v Miller, 2015 NY Slip Op 09603, 1st Dept, 12-29-15

FAMILY LAW (STIPULATION DID NOT CALL FOR REDUCTION OF CHILD SUPPORT UPON EMANCIPATION OF OLDER CHILD)/CONTRACT LAW (STIPULATION DID NOT CALL FOR REDUCTION OF CHILD SUPPORT UPON EMANCIPATION OF OLDER CHILD)/STIPULATION, DIVORCE (STIPULATION DID NOT CALL FOR REDUCTION OF CHILD SUPPORT UPON EMANCIPATION OF OLDER CHILD)/CHILD SUPPORT (STIPULATION DID NOT CALL FOR REDUCTION OF CHILD SUPPORT UPON EMANCIPATION OF OLDER CHILD)

FAILURE TO NAME INDIVIDUAL POLICE OFFICERS, OR JOHN DOE OFFICERS, IN A NOTICE OF CLAIM PRECLUDED SUIT AGAINST THE POLICE OFFICERS SUBSEQUENTLY NAMED IN THE COMPLAINTS.

The First Department affirmed the lower court’s dismissal of an action against the police department and several named individual police officers because the notice of claim named only the New York City Police Department as a defendant and did not name any individual officers or any “john doe” officers. Justice Sweeney explained his reasoning for affirming in a concurring memorandum. Two justices dissented in a memorandum by Justice Manzanet-Daniels. Justice Sweeney argued that the underlying purpose of a notice of claim is to allow the municipality to make a timely investigation into the allegations. By failing to name individual officers, the municipality was not given sufficient notice. The dissent argued that the General Municipal Law does not require the naming (in a notice of claim) of individual employees of a municipality to state a valid claim against employees of a municipality:

Plaintiffs here did not put the City on notice that it would seek to impose liability upon specific employees of the NYPD. Indeed, as the action progressed, more and more police officers were added as individual defendants, the last of which over three years removed from the incident in question, thus rendering a timely investigation into and assessment of the claims impossible. To permit such a result raises questions of fundamental fairness for the individual defendants, since they were not put on notice, even in a generic way by way of “Police Officer John Doe” or similar language, that they were going to become defendants. Moreover, the prejudice accruing to both the municipal and individual defendants from such a delay is obvious, since memories fade over time, records that could have easily been obtained early on may have been archived, lost or discarded, and witnesses may have relocated, just to name a few of the potential obstacles. Delay in investigating and evaluating a claim defeats the purpose of GML § 50-e. Alvarez v City of New York, 2015 NY Slip Op 09601, 1st Dept 12-29-15

MUNICIPAL LAW (NOTICE OF CLAIM, FAILURE TO NAME POLICE OFFICERS OR JOHN DOE OFFICERS PRECLUDED SUIT AGAINST OFFICERS SUBSEQUENTLY NAMED)/NOTICE OF CLAIM (FAILURE TO NAME POLICE OFFICERS OR JOHN DOE OFFICERS PRECLUDED SUIT AGAINST OFFICERS SUBSEQUENTLY NAMED)/POLICE OFFICERS (NOTICE OF CLAIM, FAILURE TO NAME POLICE OFFICERS OR JOHN DOE OFFICERS PRECLUDED SUIT AGAINST OFFICERS SUBSEQUENTLY NAMED)

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