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The Agency’s Determination Was Based Upon Its Own Precedents and Related Jurisprudence and Was Therefore “Rationally Based”—The Determination Should Not, Therefore, Be Disturbed by a Court—A Court May Not Substitute Its Own Judgment for that of the Agency

The First Department, in a full-fledged opinion by Justice Acosta, reversed Supreme Court’s denial of a motion to dismiss a petition to annul an agency-determination. The underlying proceedings involved two nurses accused of submitting false time sheets. In seeking a hearing allowed by the collective bargaining agreement, the union, on behalf of the nurses, requested certain documents relevant to the allegations from the New York City Human Resources Administration (HRA). HRA refused to turn over the documents, arguing that such “discovery” is not allowed in disciplinary actions (by the relevant regulations). The Board (of Collective Bargaining) ultimately ruled that some, but not all, of the requested documents (those kept in the regular course of business) should be turned over. HRA filed an Article 78 petition seeking to annul the Board’s determination. Supreme Court denied the union’s motion to dismiss the petition.  The 1st Department held the petition should have been dismissed. In reviewing an agency determination, the court looks only at whether the determination is rationally based. Here the Board’s determination was based upon its own precedents and related jurisprudence. Therefore, the determination must stand.  A court cannot substitute its own judgment for that of the agency:

“In reviewing an administrative agency determination, courts must ascertain whether there is a rational basis for the action in question or whether it is arbitrary and capricious” … . “A court cannot simply substitute its judgment for that of an administrative agency when the agency’s determination is reasonable” … . Moreover, “[i]t is well settled that the construction given statutes and regulations by the agency responsible for their administration, if not irrational or unreasonable, should be upheld” … . “Broad deference must therefore be accorded determinations of the Board, which … is the body charged with interpreting and implementing the [regulations] and determining the rights and duties of labor and management in New York City” … .

Given this deferential standard of review, we are compelled to hold that the petition should have been dismissed. The Board’s decision had a rational basis and was not arbitrary and capricious. To be sure, the Board engaged in a relatively expansive interpretation of the duty to furnish information embodied in [the regulations], when it determined that the duty applies in the context of these disciplinary proceedings instituted pursuant to the Agreement. But its interpretation was based on the holdings of some nine prior decisions and was not irrational … . The Board based its decision on its own precedents and related jurisprudence, and its interpretation of the [regulations], a statutory provision within its purview and expertise, was sufficiently reasonable to preclude our “substitut[ing] another interpretation” … . Matter of City of New York v New York State Nurses Assn., 2015 NY Slip Op 04437, 1st Dept 5-26-15

 

 

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Medical Examiner’s Testimony Did Not Rule Out the Possibility that Someone Other than the Defendant Contributed DNA to a Mixture from At Least Three Persons—Conviction Reversed as Against the Weight of the Evidence

The First Department, over a dissent, determined that defendant’s conviction of criminal possession of a weapon was against the weight of the evidence. The medical examiner testified there was a mixture of DNA from at least three persons found on the weapon and defendant “could” have been a contributor to that mixture. “In other words, the medical examiner could not rule out the reasonable possibility that another unrelated individual could match the DNA profile.”  The court explained its role in a “weight of the evidence,” as opposed to a “legal insufficiency,” analysis:

On this appeal, defendant does not ask us to reverse his convictions of criminal possession of a weapon in the second and third degrees on the ground that the trial evidence was legally insufficient to support such convictions. Instead, defendant argues that his convictions should be reversed because the jury’s verdict was against the weight of the evidence. An appellate court weighing the evidence “must, like the trier of fact below, weigh the relative probative force of conflicting testimony and the relative strength of conflicting inferences that may be drawn from the testimony'” … . “If based on all the credible evidence a different finding would not have been unreasonable” and if the “trier of fact has failed to give the evidence the weight it should be accorded, the appellate court may set aside the verdict” … . When an appellate court performs weight of the evidence review, it sits, in effect, as a “thirteenth juror” … .

We agree with defendant that the verdict was against the weight of the evidence … . The evidence failed to connect defendant with a pistol that had been discarded during a shooting incident. People v Graham, 2015 NY Slip Op 04401, 1st Dept 5-26-15

 

Sale of Notes Was Champertous—Seller Subcontracted Out Its Litigation for Political Reasons In Violation of Judiciary Law 489 (1)

The First Department determined plaintiff’s purchase of notes was champertous. Champerty “is the purchase of claims with the intent and for the purpose of bringing an action that [the purchaser] may involve parties in costs and annoyance, where such claims would not be prosecuted if not stirred up . . . in [an] effort to secure costs”. Champerty is prohibited by Judiciary Law 489 (1). Although purchases of claims for more than $500,000 are not subject to the champerty prohibition (Judiciary Law 489 (2)), the First Department held that the $500,000 must actually be paid.  Here the price was set at $1,000,000 but nothing had been paid. The court determined the seller of the notes had subcontracted out its litigation to plaintiff for political purposes:

The purported sale of the notes is champertous since [the seller] maintained significant rights in the notes and expected the lion’s share of any recovery from defendants … . There is every indication that plaintiff entered into the Purchase Agreement with the intent of pursuing litigation on [the seller’s] behalf in exchange for a fee; plaintiff’s intent was not to enforce the notes on its own behalf …. Indeed, plaintiff could not enforce all of the rights under the notes, since, as the motion court noted, “No reasonable finder of fact could conclude that [plaintiff] was making a bona fide purchase of securities.” On the contrary, “[t]he only reasonable way to understand the [Purchase Agreement] is that [the seller] was subcontracting out its litigation to [plaintiff] for political reasons.” Accordingly, the sale of the notes violated Judiciary Law § 489(1). Justinian Capital SPC v WestLB AG, 2015 NY Slip Op 04381, 1st Dept 5-21-15

 

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The Insurer Properly Reserved Its Rights to Disclaim Coverage When It Agreed to Defend a Legal Malpractice Action

The insurer agreed to defend an attorney in a legal malpractice action, but reserved its rights to disclaim coverage based upon the exclusion in the policy for actions arising from the conduct of a business owned by the attorney (as opposed to the law practice). The First Department rejected the argument that the insurer’s reservation of rights violated the policy:

The issuance of a reservation of rights allows the insurer the flexibility of fulfilling its obligation to provide its insured with a defense, while continuing to investigate the claim further. In fact, an insurance company’s failure to reserve the right to disclaim coverage may later result in the insurer being equitably estopped from doing so … . Thus, although plaintiffs are correct that the counterclaims, broadly construed, triggered defendants’ duty to provide them with a defense, defendants did not breach that duty by agreeing to do so, but with a reservation of rights to, among other things, later recoup their defense costs upon a determination of non-coverage … . Law Offs. of Zachary R. Greenhill P.C. v Liberty Ins. Underwriters, Inc., 2015 NY Slip Op 04382, 1st Dept 5-21-15

 

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Disagreement About the Meaning of a Term in the Shared-Fee-Agreement Did Not Render the Contract Ambiguous—No Need for Interpretation of the Term by the Court

The First Department, in an extensive decision, over a two-justice partial dissent, determined the shared-fee arrangements among attorneys were unambiguous and must be enforced as written, without reference to extrinsic evidence. The underlying personal injury case eventually settled for $8 million.  Along the way, plaintiff’s attorney, Menkes, entered into agreements with two attorneys for assistance with the case. Most of the decision addresses the agreement with an attorney, Golomb, concerning mediation and settlement negotiations. If the mediation resulted in a settlement, Golomb was entitled to 12% of the attorney’s fees.  If further work, beyond the mediation, were required, Golomb was entitled to 40% of the attorney’s fees. Menkes argued that, although the mediation session did not result in a settlement, the mediation was a “process” which continued beyond the initial session culminating in a settlement. The majority held that the term “mediation,” pursuant to the language of the contract, encompassed only the one session.  Once that session ended without a settlement, the 40% shared-fee-arrangement kicked in:

The issue before us is one of simple contract interpretation. Under well established precedent, agreements are to be generally construed in accord with the parties’ intent … . The best evidence of the parties’ intent is “what they say in their writing” … . “[W]hen parties set down their agreement in a clear, complete document, their writing should as a rule be enforced according to its terms” … . This rule is particularly applicable where the parties are sophisticated and are negotiating at arm’s length … . Language in a written agreement is deemed to be clear and unambiguous where it is reasonably susceptible of only one meaning or interpretation … . Finally, “[e]xtrinsic evidence may not be introduced to create an ambiguity in an otherwise clear document” … .

Here, as the dissent agrees, the language of the contract is unambiguous. Menkes argues that she interpreted the term “mediation” to constitute an ongoing process that would not be limited to a single session but rather would continue until an impasse or other termination had occurred. However, the assertion by a party to a contract that its terms mean something to him or her “where it is otherwise clear, unequivocal and understandable when read in connection with the whole contract” is not sufficient to make a contract ambiguous so as to require a court to divine its meaning … . The specific fee language that Menkes now claims supports her position was added to the agreement at her request. She takes the untenable position that she was never advised that the mediation reached an impasse or had been terminated. Yet despite the fact that the agreement went through several revisions, neither party saw fit to add any language to that effect. Both parties to the agreement are attorneys and thus know the importance of precision in the words used … . These clear terms, under these circumstances, need no interpretation by the court. Marin v Constitution Realty, LLC, 2015 NY Slip Op 04225, 1st Dept 5-19-15

 

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Supreme Court Used the Wrong Standards When It Denied Petitioner’s Request for Documents Relating to Complaints Alleging the Improper Use of School Property by an Employee of the Department of Education (the Employee Gave a Speech on School Property Which May Have Violated the Chancellor’s Regulations re: the Use of School Property for Political Purposes)—Correct Analytical Criteria Explained and Applied

The First Department determined Supreme Court used the wrong criteria when it denied petitioner’s request for documents relating to the investigation of complaints about the use of school buildings for political purposes.  The complaints concerned a speech given by an employee of the Department of Education (DOE) which criticized the positions on education policy taken by unnamed mayoral candidates.  The speech was put up on the DOE website. Petitioner alleged the speech violated specified Chancellor’s Regulations re: the conduct of school employees with respect political campaigns and elections.  Supreme Court erroneously held that petitioner must show that the denial of the request for documents was “arbitrary and capricious,” “an abuse of discretion,” “irrational,” or “unlawful.”  The proper analysis is whether the determination “was affected by an error of law” and  places the burden on the respondent to show the request falls within one of the statutory exceptions to disclosure.  The First Department reversed Supreme Court, applied the correct analytical criteria and found that any relevant privacy interests did not outweigh the public interest in disclosure:

The appropriate standard of review is whether the determination “was affected by an error of law” (CPLR 7803[3]…). Moreover, the burden is on respondents to establish “that the material requested falls squarely within the ambit of one of the[] statutory exemptions” from disclosure … . Under the circumstances of this case, the application of an improper legal standard is reversible error since it resulted in substantial prejudice to petitioner … .

Respondents failed to establish that disclosure of the materials at issue would “constitute an unwarranted invasion of personal privacy under the provisions of [§ 89(2)]” (Public Officers Law § 87[2][b]). They do not claim that any personal privacy category enumerated in § 89(2) is applicable. Therefore, we must determine whether any invasion of personal privacy would be unwarranted “by balancing the privacy interests at stake against the public interest in disclosure of the information” … . The speech at issue excoriated unspecified candidates in the 2013 mayoral election who had taken certain positions on education policy. Notwithstanding that the speech did not name any individual candidate or political party, the complaints to [the school district]  raised serious questions about the propriety of the speech and its publication on DOE’s website. We find that there is a “significant public interest” in the requested materials, which may shed light on whether this matter was adequately investigated … . Respondents failed to establish that the claimed privacy interests outweigh this public interest … . They assert that the materials contain personally identifying information such as home addresses, dates of birth, and Social Security numbers. However, that information can be redacted and does not provide a basis for withholding entire documents … . . Matter of Thomas v Condon, 2015 NY Slip Op 04237, 1st Dept 5-19-15

 

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Plaintiff Did Not Adequately Allege a Presuit Demand Would Be Futile

The First Department, noting that the presuit demand required by Business Corporation Law 626(c) applies to Limited Liability Companies, determined that plaintiff failed to adequately allege the presuit demand was excused as futile. The court noted that Business Corporation Law 625(c) does not differentiate between majority and minority shareholders and a corporation’s refusal to provide information is not on the list of circumstances where a demand is excused:

Pursuant to Business Corporation Law § 626(c), a plaintiff shareholder must “set forth in the complaint – with particularity – an attempt to secure the initiation of such action by the board or the reasons for not making such effort” … . Demand is excused due to futility when a complaint alleges with particularity that: (1) “a majority of the board of directors is interested in the challenged transaction”; or (2) “the board of directors did not fully inform themselves about the challenged transaction to the extent reasonably appropriate under the circumstances”; or (3) “the challenged transaction was so egregious on its face that it could not have been the product of sound business judgment of the directors” … . The demand requirement of Business Corporation Law § 626(c) also applies to members of New York limited liability companies … .

The complaint alleges only that since Sowers owns 80% of the LLC, it would be futile for plaintiff to make a demand upon him to consent to the filing of an action on the LLC’s behalf. However, this Court has made clear that Business Corporation Law § 626(c) “does not differentiate between minority and majority shareholders for demand purposes” … . We note that Sowers’ alleged concealment of financial information does not warrant a finding that demand was futile, since “[a] corporation’s refusal to provide information to its shareholders is not on the [] list of circumstances where demand is excused” … , Barone v Sowers, 2015 NY Slip Op 04195, 1st Dept, 5-14-15

 

Inability to Remember Fall and Absence of Witnesses Did Not Preclude Summary Judgment on Labor Law 240(1) Cause of Action

The First Department determined the plaintiff’s inability to remember his fall from a scaffold and the absence of witnesses did not preclude summary judgment in his favor for the Labor Law 240(1) cause of action:

Plaintiff established his entitlement to judgment as a matter of law on the issue of liability in this action where he sustained injuries when, while performing asbestos removal work in a building owned by defendant, he fell from a baker’s scaffold. Plaintiff’s testimony that he was standing on the scaffold working, and then woke up on the ground with the scaffold tipped over near him, established a prima facie violation of the statute and that such violation proximately caused his injuries … . That plaintiff could not remember how he fell does not bar summary judgment … . Nor does the fact that he was the only witness raise an issue as to his credibility where, as here, his proof was not inconsistent or contradictory as to how the accident occurred, or with any other evidence … . Strojek v 33 E. 70th St. Corp., 2015 NY Slip Op 04203, 1st Dept 5-14-15

 

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“Bankruptcy” Exclusion in a Political Risk Insurance Policy Applied—Insurer Not Obligated to Cover Loss Occasioned by Bankruptcy Proceedings in Mexico

The First Department, in a full-fledged opinion by Justice Gonzalez, determined that the “bankruptcy” exclusion in a Political Risk Insurance Policy applied to court proceedings in Mexico and the insurer was therefore entitled to disclaim coverage for the related loss to plaintiff.  The core issue was the meaning of “bankruptcy.”  The plaintiff argued the term referred to a final adjudication of bankruptcy. But the court held the definition was much broader, and included the ongoing court proceedings in Mexico.  The fact that the plaintiff and defendant disagreed about the definition of “bankruptcy” did not render the policy-contract ambiguous.  Applying the plaintiff’s narrow definition would have rendered other provisions of the policy-contract superfluous:

We agree with defendant that plaintiff’s definition of bankruptcy (a final judgment of reorganization or liquidation) is overly narrow. Bankruptcy is generally understood to include being under the judicial protection of a bankruptcy court – or, according to dictionary definition – “a statutory procedure by which a (usu[ally] insolvent) debtor obtains financial relief and undergoes a judicially supervised reorganization or liquidation. . . for the benefit of creditors” (Black’s Law Dictionary 175 [10th ed 2014]; see Compact Oxford English Dictionary 934-935 [2d ed 1999][same]).

Plaintiff contends that since the parties have conflicting interpretations of the term “bankruptcy,” the policy must be ambiguous on this point, and points out that settled principles of interpretation of insurance contracts require resolution of any ambiguity in favor of the insured … . However, “provisions in a contract are not ambiguous merely because the parties interpret them differently” … . Here, common understanding supports interpreting the term bankruptcy as the court proceeding in which the debtor is afforded judicial protection while it reorganizes or liquidates.

Further, settled law requires that the terms of a contract be read in context … . Plaintiff’s definition of bankruptcy, i.e. the state of having been declared bankrupt, would render the accompanying alternatives in Section 4.12 of the policy (insolvency and financial default) superfluous. The redundancy can be eliminated only by accepting defendant’s definition, an interpretation that gives meaning to every “sentence, clause, and word of [the] contract of insurance” … . CT Inv. Mgt. Co., LLC v Chartis Specialty Ins. Co., 2015 NY Slip Op 04051, 1st Dept 5-12-15

 

Tenant’s Common Law Duty to Keep Sidewalk on the Premises Safe Applies Even Though Another Party Agreed to Maintain the Sidewalk in Its Lease

The First Department noted that a tenant has a common law duty to keep a sidewalk on the leased premises safe, even if another party is obligated to maintain the sidewalk in its lease. Plaintiff slipped and fell on ice on the sidewalk:

It is well established that a tenant owes a common-law duty of reasonable care to maintain the demised premises in a reasonably safe condition, independent of any obligation that might be imposed by the existence of a lease … . The fact that nonparty C.L.B. #6 Inc. (CLB#6) was required to maintain the sidewalk under its lease with the landlord is irrelevant to CLB’s common-law duty to maintain the demised premises … . Additionally, whether a gas station was also a tenant of the premises is also irrelevant to CLB’s duty … . Because CLB never produced the lease between itself and CLB#6, which might reflect whether the subject sidewalk was part of the demised premises, it failed to establish prima facie that it owed no duty to maintain the subject sidewalk … . Williams v Esor Realty Co, 2014 NY Slip Op 03343, 1st Dept 5-8-14

 

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