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Allegation Corporation Was Deliberately Rendered Judgment Proof by Parent Corporation Is Sufficient to Support Action in Equity to Pierce the Corporate Veil

The First Department explained the nature of “wrongdoing” which will support a complaint in equity seeking to pierce the corporate veil:

….[T]he allegations that defendant [parent corporation], through its domination of [its subsidiary] PFLLC, misrepresented the value of the assets sold and then caused PFLLC to become judgment proof, are … sufficient to support claims that defendant perpetrated a wrong or injustice against plaintiff, thus warranting intervention by a court of equity … . Wrongdoing in this context does not necessarily require allegations of actual fraud. While fraud certainly satisfies the wrongdoing requirement, other claims of inequity or malfeasance will also suffice … . Allegations that corporate funds were purposefully diverted to make it judgment proof or that a corporation was dissolved without making appropriate reserves for contingent liabilities are sufficient to satisfy the pleading requirement of wrongdoing which is necessary to pierce the corporate veil on an alter-ego theory … . Baby Phat Holding Co LLC v Kellwood Co., 2014 NY Slip Op 05925, 1st Dept 8-21-14

 

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Court Should Have Held a Hearing to Determine Whether Exigent Circumstances Justified Warrantless Forced Entry to an Apartment

The First Department determined that the motion court should have held a hearing to determine whether the forced entry of an apartment was justified by exigent circumstances.  At the time of defendant’s motion for a hearing, the facts surrounding the incident were not available to the defendant and the People’s response to the motion was “conclusory:”

In denying defendant’s application for a hearing, the Court summarily found that exigent circumstances justified the pursuit and warrantless entry, based upon the individuals in the hallway reportedly having smoked marijuana, then racing into the apartment and locking the door, and the need to prevent destruction of evidence. Defendant argues in his brief that at most some individuals were seen smoking marijuana, a class B misdemeanor that would not present exigent circumstances sufficient for a forced entry.

Under the circumstances presented here, where the information proffered by the People to support the forcible entry was conclusory and defendant did not have access to available information, we find that it was incumbent upon the motion court to conduct a hearing to determine whether there were sufficient exigent circumstances to justify the forced warrantless entry… . People v Chamlee, 2014 NY Slip Op 05921, 1st Dept 8-21-14

 

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Police Officer’s Tripping Over a Fire Hose at the Scene of a Fire Was Not a “Service-Related Accident”

The First Department, over a dissent, determined that a police officer who tripped over a fire hose at the scene of a fire was entitled to ordinary (ODR) , as opposed to accidental (ADR), disability retirement benefits:

Not every line of duty injury will result in an award of ADR … . When the denial of ADR benefits to a police officer is the result of a tie vote by the Board of Trustees, this Court is required to uphold the denial unless “it can be determined as a matter of law on the record that the disability was the natural and proximate result of a service-related accident” … . Thus, the issue before us is whether, reviewing the record, it can be said, as a matter of law, that petitioner’s disability was the natural and proximate result of a service-related accident.

In the context of ADR benefits, the Court of Appeals has defined an accident as a ” sudden, fortuitous mischance, unexpected, out of the ordinary, and injurious in impact,'” while ” an injury which occurs without an unexpected event as the result of activity undertaken in the performance of ordinary employment duties, considered in view of the particular employment in question, is not an accidental injury'” … . It is petitioner’s burden to establish that his injuries resulted from an accident as defined in the context of ADR … .

Normal risks in most jobs are not unexpected * * *.

While it is true that petitioner was a police officer, not a firefighter, it cannot be said as a matter of law that his ordinary employment duties did not include responding to a fire emergency. As the Board of Trustees had before it some credible evidence of lack of causation, it did not err as a matter of law in concluding that petitioner’s disability was not the result of an accident within the meaning of Administrative Code § 13-252 … . Finally, contrary to the dissent, we do not regard the charging of fire hoses at the scene of a fire as a sudden, fortuitous, or unexpected event. Matter of Pastalove v Kelly, 2014 NY Slip Op 05922, 1st Dept 8-21-14

 

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Term “Entrustment” in a Policy Exclusion (In the Context of Entrustment of Property to Another) Interpreted to Encompass Entire Leased Premises

The First Department determined that preclusion of coverage for “dishonest or criminal acts” committed by persons to whom the subject property was “entrusted” encompassed the removal of fixtures from premises leased by the insured:

Plaintiffs leased the insured premises to a tenant, which converted the premises into a youth hostel, removed the kitchen cabinets and appliances to turn the kitchens into additional dormitory areas, and, when the hostel closed, did not return the cabinets or appliances … . Plaintiffs argue that the term “entrustment” in the policy pertains solely to chattels and not to fixtures … . However, in Abrams v Great Am. Ins. Co. (269 NY 90, 92 [1935]), the Court of Appeals explained that an insurance contract’s language “must be given its ordinary meaning,” and “common words” in a policy such as entrusted are not “used as words of art with legalistic implications” (id.). Accordingly, Abrams taught, when a contract indicates that the property is entrusted, it can be understood that the parties mean that possession of property is willingly “surrender[ed] or deliver[ed] or transfer[red],” to be “used for the purpose intended by the owner . . . . The controlling element is the design of the owner rather than the motive of the one who obtained possession” (id.). Here, we find that the terms of the policy at issue do not limit what can be entrusted, that property may be entrusted to another under a triple net lease agreement, and that the entrustment refers to the entirety of the premises unless otherwise specified.  Lexington Park Realty LLC v National Union Fire Ins Co of Pittsburgh PA, 2014 NY Slip Op 05817, 8-14-14

 

Pointing Finger and Saying “I’m Going to Shoot You” Did Not Support Harassment and Menacing Charges

The First Department determined that the allegations supporting  harassment and menacing charges were insufficient:

…[T]he accusatory instrument was insufficient as a matter of law with regard to the harassment and menacing charges. The allegation that defendant pointed his finger in a shooting motion and stated, “I’m going to shoot you,” without any indication that defendant was armed at the time, did not set forth an imminent threat of harm to the complainant. Nor were any facts alleged showing the statement should have been taken seriously … . People v Harris, 2014 NY Slip Op 05814, 1st Dept 8-14-14

 

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Arbitrator Not Precluded from Considering Punitive Damages by Provision that the Agreement Is To Be “Construed and Enforced” in Accordance with New York Law

In a full-fledged opinion by Justice Manzanet-Daniels, over an extensive dissent, the First Department determined that the provision in an agreement covering arbitration of disputes stating that the agreement is to be “construed and enforced” in accordance with New York law did not necessarily preclude the arbitrator from considering punitive damages.  The court found the language in the agreement insufficiently specific to invoke the “Garrity rule. ” Under “Garrity,” arbitrators in New York are prohibited from considering punitive damages. But the Federal Arbitration Act, which may apply here because of the involvement of interstate commerce, does not. The court also noted that participation in arbitration precludes a party from seeking a stay of arbitration pursuant to CPLR 7503. The choice of law issue is framed by the following passages:

Merely stating, without further elaboration, that an agreement is to be construed and enforced in accordance with the law of New York does not suffice to invoke the Garrity rule. The Supreme Court has made clear that in order to remove the issue of punitive damages from the arbitrators, the agreement must “unequivocal[ly] exclu[de]” the claim … . The agreement in this case, which provided only that it was to be “construed and enforced” in accordance with the law of New York, did not unequivocally exclude claims for punitive damages from the consideration of the arbitrators

From the dissent:

The core issue in this case – an appeal from an order denying petitioners’ motion to stay arbitration of claims for punitive damages – relates to the tension between New York State policy against the privatization of punitive damages and the federal policy that there is no such prohibition. Specifically, under New York State law, as expressed by Garrity v Lyle Stuart, Inc. (40 NY2d 354 [1976]), the power to award punitive damages is limited to judicial tribunals, and is not within an arbitrator’s authority… . Conversely, the federal view, as reflected in the Federal Arbitration Act (FAA),… which applies to arbitration disputes concerning interstate commerce, generally empowers arbitrators to award punitive damages, absent a contractual intent to the contrary. Unlike the majority, I find that, while the agreement here evidences a transaction involving interstate commerce, the provision stating that the agreement is to be “construed and enforced” in accordance with the laws of New York suffices to invoke the Garrity rule. Therefore, I dissent and would grant petitioners’ motion to stay arbitration of the claims for punitive damages. Matter of Flintlock Constr Servs LLC v Weiss, 2014 NY Slip Op 05818, 8-14-14

 

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Contractor Was a Statutory Agent for the Owner for Purposes of the Labor Law Causes of Action

The First Department explained that a contractor (Bovis) with the authority to direct plaintiff’s work became a statutory agent for the city with respect to the Labor Law 240(1) and 241(6) causes of action:

…[T]he undisputed evidence established that Bovis was a statutory agent for the City since it possessed and exercised supervisory control and authority over the work being done … . ” When the work giving rise to [the duty to conform to the requirements of section 240(1)] has been delegated to a third party, that third party then obtains the concomitant authority to supervise and control that work and becomes a statutory “agent” of the owner or general contractor'” … . Bovis’s own superintendent testified that Bovis functioned as the “eyes and ears” of the City for the subject construction project, and it had broad responsibility under its contract to coordinate and supervise the work of the four prime contractors, including plaintiff’s employer … . Johnson v City of New York, 2014 NY Slip Op 05698, 1st Dept 8-7-14

 

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Allegation in Notice of Claim that Defendant Failed to Maintain a Stairway Was Sufficient to Encompass the Allegation the Handrail Was Obstructed and Could Not Be Used

In a slip and fall case, the First Department, over a two-justice dissent, reversing Supreme Court, determined that a notice of claim which generally alleged a failure to maintain a stairway in the vicinity of the second floor landing was sufficient to encompass allegations in the bill of particulars that the handrail was obstructed and could not be used:

Plaintiff’s claim that defendant failed to maintain the handrail along the stairway at or near the second floor may be fairly inferred from the notice of claim, which alleged that defendant was negligent in maintaining the second floor landing area … . The notice of claim alleged generally that defendant failed to maintain stairway “A” in the vicinity of the second floor landing, causing plaintiff’s injury. The bill of particulars merely amplified the allegations of negligence concerning the landing area by further specifying that defendant had failed to maintain the handrail at the landing area… . Thomas v New York City Hous Auth, 2014 NY Slip Op 05696, 1st Dept 8-7-14

 

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Negligence and “1983” Causes of Action Against the City and/or City Employees Stemming from the Alleged Failure to Provide Medical Assistance to a Rikers Island Inmate Reinstated

The First Department, reversing Supreme Court, determined there were triable issues of fact concerning whether corrections officers breached a duty to protect the decedent, an inmate at Rikers Island, by failing to respond to decedent’s medical emergency.  The court also determined there were triable issues of fact concerning a 1983 action against one of the city employees based upon her alleged “deliberate indifference” to decedent’s “serious medical needs.”  The court noted that the 1983 action against the city, alleging deliberate indifference, was properly dismissed:

Dozens of eyewitnesses provided conflicting accounts regarding, among other things, the timing of the officers’ calls for medical assistance, and whether resuscitative efforts undertaken before medical personnel arrived were performed by the officers or whether other inmates took such measures in the face of inaction by the officers. Plaintiffs’ expert affirmation raised triable issues of fact as to the adequacy of the officers’ response and the soundness of defendants’ expert’s opinions. The City’s reliance on governmental immunity is unavailing, since there are triable issues of fact as to whether the death was caused in part by a negligent failure to comply with mandatory rules and regulations of the New York City Department of Corrections (DOC), requiring, among other things, that correction officers respond immediately in a medical emergency, and that officers who are trained and certified in CPR administer CPR where appropriate … .

The court correctly dismissed the § 1983 claim against the City. … There is … no evidence of a “policy or custom” evincing deliberate indifference to the rights of inmates … . “Deliberate indifference is a stringent standard of fault, requiring proof that a municipal actor disregarded a known or obvious consequence of his action” … . “Without notice that a course of training is deficient in a particular respect, decisionmakers can hardly be said to have deliberately chosen a training program that will cause violations of constitutional rights” … . Luckey v City of New York, 2014 NY Slip Op 05697, 1st Dept 8-7-14

 

“Transactions Involving Commerce” and “Waiver of Arbitration by Participating in Litigation” (Re: the Federal Arbitration Act) Defined

The First Department, in a full-fledged opinion by Justice Richter, determined that the Federal Arbitration Act applied because the underlying transactions “involv[ed] commerce” within the meaning of the federal statute. The court further determined that the plaintiffs did not pursue litigation to the extent necessary to constitute a waiver of arbitration.  The court explained the criteria for “transactions involving commerce” and waiver of arbitration by participating in litigation:

[The Supreme Court] found the phrase “involving commerce” to be the equivalent of “affecting commerce,” a term associated with the broad application of Congress’s power under the Commerce Clause … .

The Supreme Court reaffirmed this interpretation of “involving commerce” … , stating that “it is perfectly clear that the FAA encompasses a wider range of transactions than those actually in commerce, that is, within the flow of interstate commerce” … . Further, the Court held that individual transactions do not need to have a substantial effect on interstate commerce in order for the FAA to apply … . Rather, as long as there is economic activity that constitutes a general practice “bear[ing] on interstate commerce in a substantial way” … . * * *

Although a party may have a right to arbitrate, the court may determine that a party has waived this right by having participated in litigation … . There is a “strong federal policy [*6]favoring arbitration,” and waiver should not be “lightly inferred” under the FAA … . A party does not waive the right to arbitrate simply by pursuing litigation, but by “engag[ing] in protracted litigation that results in prejudice to the opposing party” … . Cusimano v Schnurr, 2014 NY Slip Op 05702, 1st Dept 8-7-14

 

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