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“Direct Financial Loss” Caused by Employee Defined

The First Department explained what “direct financial loss” means in the context of bonds issued to indemnify a commodities futures broker [MF Global] for loss caused by a wrongful act by an employee:

In the bonds, plaintiffs agreed to indemnify MF Global for losses “sustained at any time for . . . any wrongful act committed by any employee . . . which is committed . . . with the intent to obtain financial gain for [the employee]” (emphasis omitted). “Loss” means “the direct financial loss sustained by [MF Global] as a result of any single act, single omission or single event, or a series of related or continuous acts, omissions or events.” The bonds exclude coverage for “[i]ndirect or consequential loss.” A “[w]rongful act,” with respect to trading in commodities and futures, is defined as “any . . . dishonest . . . act committed with the intent to obtain improper financial gain for . . . an employee” … .. * * *

The motion court properly concluded that MF Global’s loss constituted a “direct financial loss.” Although that term is not defined in the bonds, “[a] direct loss for insurance purposes has been analogized with proximate cause”… …

Here, [a broker’s] conduct in making unauthorized trades beyond his margin was the direct and proximate cause of MF Global’s loss… . New Hampshire Ins Co v MF Global, 2013 NY Slip Op 05291, 1st Dept 7-16-13

 

Complaint Sufficiently Alleged Facts to Support Piercing the Corporate Veil

In a full-fledged opinion by Justice Mazzarelli (which dealt with many corporation law issues not mentioned here), the First Department determined the complaint alleged sufficient facts to meet the criteria for piercing the corporate veil:

To make out a cause of action for liability on the theory of piercing the corporate veil because the corporation at issue is the defendant’s alter ego, the complaining party must, above all, establish that the owners of the entity, through their domination of it, abused the privilege of doing business in the corporate form to perpetrate a wrong or injustice against the party asserting the claim such that a court in equity will intervene … . Piercing of the corporate veil is not a cause of action independent of that against the corporation; it is established when the facts and circumstances compel a court to impose the corporate obligation on its owners, who are otherwise shielded from liability… . “Because a decision whether to pierce the corporate veil in a given instance will necessarily depend on the attendant facts and equities, the New York cases may not be reduced to definitive rules governing the varying circumstances when the power may be exercised” … . Indeed, this Court has observed:  “In determining the question of control, courts have considered factors such as the disregard of corporate formalities; inadequate capitalization; intermingling of funds; overlap in ownership, officers, directors and personnel; common office space or telephone numbers; the degree of discretion demonstrated by the alleged dominated corporation; whether the corporations are treated as independent profit centers; and the payment or guarantee of the corporation’s debts by the dominating entity . . . [n]o one factor is dispositive”… .   Tap Holdings LLC v Orix Fin Corp, 2013 NY Slip Op 05293, 1st Dept 7-16-13

 

“John Doe” Party Who Was Not Served Waived Objection to Personal Jurisdiction

The First Department determined that an informal appearance by a “John Doe” party who was not served with the complaint waives any objection to personal jurisdiction.  The action stemmed from plaintiff’s decedent’s drowning at Coney Island:

CPLR 1024 allows for the commencement of an action against an unknown party…. While the use of a John Doe designation does not exempt a plaintiff from the requirement of serving process on the intended defendant by an authorized method under CPLR article 3…, a defendant may appear informally by actively litigating the action before the court…. When a defendant participates in a lawsuit on the merits, he or she indicates an intention to submit to the court’s jurisdiction over the action, and by appearing informally in this manner, the defendant confers in personam jurisdiction on the court…. Thus, absent a formal “appearance” by a defendant, a defendant may nevertheless appear in an action where his or her counsel communicates a clear intent to participate… . Taveras v City of New York, 2013 NY Slip Op 05199, 2nd Dept 7-10-13

 

Unsafe Access to Roof Supported Summary Judgment

In affirming the grant of summary judgment to the plaintiff pursuant to Labor Law 240 (1) based on the failure to provide equipment which would allow safe access to the roof where the window-washing equipment in need of repair was located, the First Department explained:

The record demonstrates that the Met and Lincoln Center failed to provide adequate safety devices to protect plaintiff from the risks associated with gaining access to the Opera House roof and the steel carriage rail, and therefore they are liable for plaintiff’s injuries under Labor Law § 240(1)…. Not only did plaintiff have to be elevated to the roof of the Opera House from the sixth floor, for which a ladder was provided, but he also had to use both hands to close the hatch door while standing on the ladder. No safety device was provided to protect him against the risk associated with breaking three-point contact with the ladder so as to use both hands to close the hatch door. Mayo v Metropolitan Opera Assn Inc, 2013 NY Slip Op 04993, 1st Dept 7-2-13

 

Criteria for Domicile Explained

In upholding Surrogate Court’s determination decedent’s domicile was New York, the First Department explained the relevant criteria as follows:

The Surrogate’s Court Procedure Act defines domicile as “[a] fixed, permanent and principal home to which a person wherever temporarily located always intends to return” (SCPA 103[15]). “The determination of an individual’s domicile is ordinarily based on conduct manifesting an intent to establish a permanent home with permanent associations in a given location”…. A person’s domicile is generally a mixed question of fact and law, which the court must determine after reviewing the pertinent evidence…. No single factor is dispositive…, and the unique facts and circumstances of each case must be considered…. A party alleging a change of domicile has the burden of proving that change by clear and convincing evidence … .  Matter of Ranftle, 2013 NY Slip Op 05006, 1st Dept 7-2-13

 

Plaintiff Unable to Prove Actual Malice—Summary Judgment to Defendant

In determining a libel complaint brought by the Humane Society of the United States (HSUS) against defendants based upon an ad defendants placed in the New York Times which was captioned “Why is [HSUS] Helping a Terrorist Group Raise Money?” should have been dismissed, the First Department wrote:

The court should have dismissed the amended complaint as against all of the defendants. Contrary to plaintiff’s contention, it is a public figure…. It thrust itself to the forefront of the public controversy on animal cruelty and sought to influence public action on this issue. Accordingly, as a public figure, plaintiff must show by clear and convincing evidence that defendants published the ad at issue with actual malice in order to prevail on any claim of libel….

“[A] libel defendant’s burden in support of summary judgment is not . . . to prove as a matter of law that it did not publish with actual malice, but to point to deficiencies in the record that will prevent plaintiff from proving that fact by clear and convincing evidence” …. Here, defendants were entitled to summary judgment because they cited deficiencies in the record that prevent plaintiff from proving actual malice (i.e., that defendants “entertained serious doubts as to the truth of [its] publication or acted with a high degree of awareness of . . . probable falsity . . . at the time of publication”) by clear and convincing evidence…. Humane League of Phila Inc v Berman & Co, 2013 NY Slip Op 04989, 1st Dept 7-2-13

 

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Elements of Tampering with Physical Evidence

The First Department explained the elements of the offense of tampering with physical evidence as follows:

…[A] person is guilty of the completed crime of tampering with physical evidence when, “[b]elieving that certain physical evidence is about to be produced or used in an official proceeding or a prospective official proceeding, and intending to prevent such production or use, he suppresses it by any act of concealment” (Penal Law 215.45[2]).

The offense of tampering does not require the actual suppression of physical evidence, but only that a defendant perform an act of concealment while intending to suppress the evidence…. Regardless of whether the defendant is successful in suppressing the evidence, once an act of concealment is completed with the requisite mens rea, the offense of tampering has been committed.  People v Eaglesgrave, 2013 NY Slip Op 05001, 1st Dept 7-2-13

 

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Detention and Frisk of Juvenile Supported by Reasonable Suspicion

The First Department determined the following scenario provided reasonable suspicion sufficient to justify the detention and frisk of the juvenile:

A police officer testified that she was investigating an unruly crowd when she observed appellant walking towards her with his arm under his shirt, clutching an object held at his waist. Based on the rigidity of his body and how tightly he held the object, she believed it to be a weapon. As he passed by, she heard him say that he was “going to get him.” When she approached with her shield visible around her neck, appellant moved towards her, whereupon she grabbed his hand and felt the handle of a knife. During a brief struggle, the knife fell to the ground. Appellant was placed under arrest and the knife, which had a six-inch blade, was recovered.  Matter of Daquan B, 2013 NY Slip Op 04974 1st Dept 7-2-13

 

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Only Attorney Can Represent Voluntary Association—Appeals Dismissed

In dismissing the appeals, the First Department held that only an attorney can represent a voluntary association

Petitioner is a voluntary association comprised of rent-regulated tenants in the subject building. Patricia Pillette is a member of the association and appears pro se purportedly on behalf of the association. However, Pillette is not an attorney, and a voluntary association may only be represented by an attorney and not by one of its members who is not an attorney admitted to practice in the state of New York (see CPLR 321[a]). Accordingly, petitioner’s failure to appear by attorney requires dismissal of the appeals… .  Matter of Tenants Comm of 36 Gramercy Park v NYS Div of Hous & Community Renewal, 2013 NY Slip Op 04984, 1st Dept 7-2-13

 

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Breach of Fiduciary Duty Allegations Not Specific Enough

The First Department determined plaintiff’s allegations in support of a breach of fiduciary duty cause of action were not specific enough to survive a motion to dismiss:

Because the underlying allegations of wrongdoing were inadequately pleaded, the fiduciary breach and injunction causes of action were not sustainable. Although plaintiff alleges, among other things, that defendant tried to prevent her from having any meaningful participation in the companies’ operation, her allegations are vague and conclusory, made without any specific instances of the alleged misconduct…. The lack of particularity with respect to plaintiff’s allegations of breach of fiduciary duty (CPLR 3016[b]) is not excused by the individual defendant’s alleged refusal to provide information or by the lack of discovery, as information regarding the alleged denial of participation in corporate management was not solely in the individual defendant’s possession…. Moreover, plaintiff failed to assert specific dates that she had requested information, or to specify the information she had requested….  Berardi v Beradi, 2013 NY Slip Op 04976, 1st Dept 7-2-13

 

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