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THE AMENDED LIMITED LIABILITY COMPANY AGREEMENT SUPERSEDED THE PRIOR ORAL SIDE AGREEMENT BECAUSE IT INCLUDED AN UNAMBIGUOUS INTEGRATION AND MERGER CLAUSE (FIRST DEPT).

The First Department, in a full-fledged opinion by Justice Manzanet-Daniels, over a two-justice dissenting opinion, determined the amended Limited Liability Company (LLC) agreement with an integration and merger clause superseded the prior oral side agreement, called an exit opportunity agreement:

… [T]he amended LLC agreement contains a clear and unambiguous integration and merger clause providing that it “constitutes the sole and entire agreement of the parties to this Agreement with respect to the subject matter contained herein and therein, and supersedes all prior and contemporaneous understandings, agreements, representations and warranties, both written and oral, with respect to such subject matter;” the “subject matter” being the “allocation of profits and losses among the Members, distributions among the Members, [and] the rights, obligations and interests of the Members to each other and to the Company” … . * * *

… [T]he merger clause explicitly states that the amended LLC agreement supersedes all prior written and oral agreements concerning the subject matter of the amended LLC agreement … . Behler v Kai-Shing Tao, 2024 NY Slip Op 01337, First Dept 3-14-24

Practice Point: Here the unambiguous integration and merger clause in the amended Limited Liability Company agreement precluded enforcement of a prior oral side agreement. Although the issue here appears simple, it was the subject of a full-fledged majority opinion and a full-fledged two-justice dissenting opinion.

 

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AFTER BEING TOLD THE PREMISES WAS NOT DEFENDANT’S RESIDENCE, THE PROCESS SERVER DID NOT EXERCISE DUE DILIGENCE TO DETERMINE WHERE DEFENDANT RESIDED BEFORE RESORTING TO NAIL-AND-MAIL SERVICE; THE DEFAULT JUDGMENT AGAINST DEFENDANT VACATED (FIRST DEPT).

The First Department determined plaintiff failed to show defendant Lopez was properly served at the traverse hearing. The default judgment against Lopez was vacated. The decisions provides a rare opportunity to look inside a traverse hearing:

During the traverse hearing, plaintiff’s process server testified that he posted the summons and complaint on the door of the subject premises located at 713 Prospect Avenue in the Bronx (the premises), after making four attempts to serve Lopez there. However, the process server also testified that while he was attempting to personally serve Lopez at the premises, which his employer had represented was her residence, someone at the premises told him Lopez did not live there. This testimony established that the nail-and-mail service of process on Lopez was insufficient because plaintiff’s process server did not first comply with the due diligence requirement of CPLR 308(4) … . Upon obtaining information that Lopez did not reside at the premises, due diligence required the process server to investigate her whereabouts on the date of service and whether the service address was actually her dwelling place or usual place of abode before resorting to the alternative method of serving her with the summons and complaint by nail-and-mail service … . There is no evidence that the process server did so, and the affidavit of service simply states that the process server served Lopez at her “dwelling place/usual place of abode.” Casanova v Lopez, 2024 NY Slip Op 01269, Frist Dept 3-12-24

Practice Point: Here the process server was told defendant did not reside at the premises but he did not exercise due diligence (CPLR 308(4)) to find out where defendant did reside before resorting to nail-and-mail service. The default judgment against defendant was vacated.

 

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THE EVIDENCE WAS SUFFICIENT TO WARRANT SUMMARY JUDGMENT IN FAVOR OF PLAINTIFF IN THIS LABOR LAW 240(1) FALLING-OBJECT CASE; BRICK WORK WAS BEING DONE ON THE BUILDING ABOVE WHERE PLAINTIFF WAS STANDING AND PLAINTIFF WAS STRUCK BY A FALLING BRICK; THERE WAS NO SAFETY NETTING TO PROTECT AGAINST FALLING OBJECTS (FIRST DEPT).

The First Department, reversing (modifying) Supreme Court, in a full-fledged opinion by Justice Manzanet-Daniels, determined plaintiff was entitled to summary judgment on his Labor Law 240(1) cause of action in this falling object case. Plaintiff was unloading a truck in a designated “delivery zone” near the building where bricks were being drilled out to accommodate the installation of windows. Plaintiff was struck on the head by a brick which damaged his hard hat and injured his head:

In the context of falling objects, the risk to be guarded against is the unchecked or insufficiently checked descent of the object” … . It is settled law that a plaintiff establishes a prima facie entitlement to liability on a Labor Law § 240(1) “falling object” claim where he shows that he was struck by a falling object, that such object required securing for the purposes of the undertaking, and that the lack of adequate overhead protection failed to shield against the falling of such object and therefore proximately caused plaintiff’s injuries … . * * *

… [A] “… plaintiff’s prima facie case in a Labor Law § 240(1) action involving falling objects is not dependent on whether the plaintiff observed the object that hit him. . A plaintiff is not required to show the exact circumstances under which the object fell, where a lack of a protective device proximately caused the injuries. Further, [the general contractor’s project manager] identified a photograph of the brick that struck plaintiff, stating that the brick in the photo was consistent with the lone type of brick that was used on the faÇade of the building at the time of the incident … . Torres-Quito v 1711 LLC, 2024 NY Slip Op 01279, Frist Dept 3-12-24

Practice Point: The absence of safety netting to protect against falling objects was deemed the proximate cause of plaintiff’s injury from a falling brick in this Labor Law 240(1) case.

 

DEFENDANTS’ MOTIONS FOR SUMMARY JUDGMENT DISMISSING THE ALTER-EGO (PIERCE-THE-CORPORATE VEIL) CLAIMS SHOULD HAVE BEEN GRANTED; CRITERIA EXPLAINED (FIRST DEPT). ​

The First Department, in a full-fledged opinion by Justice Shulman, reversing Supreme Court, determined plaintiff did not raise a question of fact about whether the corporate veil should be pierced. The court explained the relevant criteria:

A party seeking to pierce the corporate veil must show “complete domination of the corporation in respect to the transaction attacked” and that “such domination was used to commit a fraud or wrong against the plaintiff” … . Because “New York law disfavors disregard of the corporate form” ,,,===… , “[m]ere conclusory allegations that the corporate structure is a sham are insufficient to warrant piercing the corporate veil” … . Instead, the party seeking to pierce the corporate veil “must establish that the owners, through their domination, abused the privilege of doing business in the corporate form to perpetrate a wrong or injustice against that party” … . * * *

In considering domination, courts consider 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” … . Cortlandt St. Recovery Corp. v Bonderman, 2024 NY Slip Op 01250, First Dept 3-7-24

Practice Point: The evidentiary criteria for piercing the corporate veil were not met by the plaintiff. Defendants’ summary judgment motion should have been granted.

 

THERE IS A QUESTION OF FACT WHETHER DEFENDANTS LAUNCHED AN INSTRUMENT OF HARM BY ERECTING AN OPAQUE FENCE AROUND A CONSTRUCTION SITE WHICH BLOCKED DRIVERS’ AND PEDESTRIANS’ LINES OF SIGHT IN AN INTERSECTION; PLAINTIFF PEDESTRIAN WAS STRUCK BY A CAR WHEN HE STEPPED BEYOND THE FENCE INTO A LANE OF TRAFFIC (FIRST DEPT).

The First Department, reversing Supreme Court, determined there was a question of fact whether defendant general contractor and defendant engineer launched an instrument of harm by erecting an opaque fence around a construction site which extended into a road parallel to the crosswalk. Plaintiff, a pedestrian, assumed the fence had blocked off the road to traffic, but there was one lane open. Plaintiff was struck by a car when he walked past the end of the fence into the lane:

The fabric-covered fencing obstructed the line-of-sight of pedestrians and motorists who were in the vicinity of the crosswalk at 29th Street and 9th Avenue in Manhattan, as the fence enclosure extended halfway into 29th Street, paralleling the crosswalk. Plaintiff, believing 29th Street to be fenced-off to traffic, crossed more than halfway through the crosswalk, against a “Don’t Walk” signal, at which time he was hit by a vehicle that passed through a narrow lane on the other side of the fence enclosure from where plaintiff had approached. There was no construction activity taking place on that Saturday, and crossing guards and traffic agents who were ordinarily deployed during actual construction hours were not provided on the weekend. Triable issues exist whether the fence enclosure created a foreseeable, unreasonable risk to others, or exacerbated risks inherent at the subject intersection … .Hyland v MFM Contr. Corp., 2024 NY Slip Op 01252, First Dept 3-7-24

Practice Point: Here an opaque fence parallel to a crosswalk made it appear the road had been blocked off. Plaintiff pedestrian, who assumed the street was blocked off and was using the crosswalk parallel to the fence, was struck by a car when he stepped beyond the end of the fence into a lane of traffic. There was question of fact whether the erection of the fence by defendants launched an instrument of harm.

 

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BURGLARY SECOND DEGREE AS A SEXUALLY MOTIVATED FELONY IS NOT A REGISTRABLE OFFENSE UNDER SORA; DEFENDANT’S SEX OFFENDER ADJUDICATION VACATED (FIRST DEPT).

The First Department, vacating defendant’s sex offender adjudication, noted that burglary second degree as a sexually motivated felony is not a registrable sex offense on SORA:

As the People concede, burglary in the second degree as a sexually motivated felony is not a registrable sex offense under Sora (see People v Conyers, 212 AD3d 417, 418 [1st Dept 2023], lv denied 39 NY3d 1110 [2023]; People v Simmons, 203 AD3d 106, 111-112 [1st Dept 2022], lv denied 38 NY3d 1035 [2022]). We therefore modify the judgment as indicated. People v Burgos, 2024 NY Slip Op 01255, First Dept 3-7-24

Practice Point: Burglary second as a sexually motivated felony is not a registrable offense under SORA.

 

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ALTHOUGH THE STATUTE OF LIMITATIONS FOR REFORMATION OF A CONTRACT BASED ON A SCRIVENER’S ERROR HAD PASSED; THE CLEAR ERROR PRODUCED AN ABSURD RESULT WHICH CANNOT BE ADOPTED OR CONDONED BY THE COURT (FIRST DEPT). ​

The First Department, reversing (modifying) Supreme Court, in a full-fledged opinion by Justice Oing, determined plaintiff’s motion for summary judgment finding defendant “indemnitor” liable as guarantor of a $44 million debt should have been granted. Plaintiff argued the term “borrower,” instead of “indemnitor,” was mistakenly used to indicate the identity of the guarantor of the loan. Although the statute of limitations on the alleged “scrivener’s error” action had run, to interpret the language of the guaranty in the manner argued by defendant (i.e., “borrower” was the intended term) resulted in an absurdity, which would have rendered the loan unguaranteed:

… [A] court may correct a scrivener’s error outside of a claim for reformation of a contract in “those limited instances where some absurdity has been identified or the contract would otherwise be unenforceable either in whole or in part” … . In other words, a court is not “constrained to adopt an absurd phrasing in the contract merely because the statute of limitations for reformation had passed, when the error is obvious and the drafters’ intention clear” … . * * *

… [A] guaranty must be read in the context of the loan agreement and “in a manner that accords the words their ‘fair and reasonable meaning,’ and achieves ‘a practical interpretation of the expressions of the parties'” … . In other words, a “contract should not be interpreted to produce a result that is absurd, commercially unreasonable or contrary to the reasonable expectations of the parties” … . NCCMI, Inc. v Bersin Props., LLC, 2024 NY Slip Op 01161, First Dept 3-5-24

Practice Point: A clear-cut scrivener’s error in a contract which produces an absurd result the parties could not have intended will not be adopted or condoned by a court, despite the running of the statute of limitations on a contract-reformation cause of action.

 

PETITIONER SOUGHT A TEMPORARY LICENSE PURSUANT TO RPAPL 881 TO ENTER RESPONDENT’S ADJOINING PROPERTY TO INSTALL PROTECTIONS PRIOR TO DEMOLITION WORK ON PETITIONER’S BUILDINGS; RESPONDENT WAS ENTITLED TO FULL INDEMNIFICATION FOR ANY DAMAGE (AS OPPOSED TO INDEMNIFICATION “TO THE EXTENT COVERED BY INSURANCE”) AND TO REASONABLE EXPERT’S AND ATTORNEY’S FEES (SECOND DEPT).

The First Department, modifying Supreme Court, determined the respondent adjoining property owner was entitled to unrestricted indemnification from petitioner for damage to respondent’s property plus reasonable expert’s and attorney’s fees in this action by petitioner pursuant to RPAPL 881 for a temporary license to enter respondent’s property. Petitioner was doing demolition work on petitioner’s buildings and sought the license to install protections on respondent’s property. Supreme Court should not have limited respondent’s indemnification “to the extent covered by insurance.” And Supreme Court should have awarded respondent expert’s and attorney’s fee to the extent the fees are deemed reasonable:

RPAPL 881 allows a property owner to petition for a license to enter the premises of an adjoining owner when entry is necessary for making improvements or repairs to the petitioner’s property and the adjoining owners have refused access. The statute is designed to strike a balance between the petitioner’s interest in improving its property and the harm to the adjoining property owner’s enjoyment of its property … , and it gives the motion court the discretion to craft an appropriate remedy in connection with license and access “upon such terms as justice requires” … . Since a respondent compelled to grant access under RPAPL 881 does not seek out the intrusion and does not derive any benefit from it, equity requires that the respondent should not have to bear any costs resulting from the access … .

… [T]he judgment’s indemnity provision provides indemnification for third-party damage claims only “to the extent covered by insurance,” which unreasonably fails to shift the full risk to petitioner as is appropriate under RPAPL 881. Matter of 1643 First LLC v 1645 1st Ave. LLC, 2024 NY Slip Op 01111, First Dept 2-29-24

Practice Point: When a property owner seeks a temporary license to enter an adjoining property pursuant to RPAPL 881 in connection with construction work, the adjoining property owner is entitled to full indemnification for any damage as well as reasonable expert’s and attorney’s fees incurred because of the temporary license.

 

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DENYING A MOTION TO DISMISS ON FORUM NON CONVENIENS GROUNDS WAS NOT AN ABUSE OF DISCRETION DESPITE THE PRIOR GRANTING OF AN IDENTICAL MOTION BY ANOTHER DEFENDANT; HOWEVER PLAINTIFF BANK DID NOT DEMONSTRATE NEW YORK’S PERSONAL JURISDICTION OVER SEVERAL DEFENDANTS IN THIS INTERNATIONAL BANK-FRAUD AND MONEY-LAUNDERING CASE (FIRST DEPT).

The First Department, in a full-fledged opinion by Justice Pitt-Burke, determined the denial of a defendant’s motion to dismiss on forum-non-conveniens grounds was a proper exercise of discretion, despite the fact that the identical motion by another defendant had already been granted. The case stems from an elaborate international fraud and money-laundering scheme which allegedly resulted in the theft by hackers of $81 million from plaintiff bank. The opinion addresses forum non conveniens, long-arm “conspiracy” jurisdiction and conversion but is too complex and detailed to fairly summarize here. With respect to forum non conveniens, the court wrote:

Forum non conveniens is a common-law doctrine that presumes jurisdiction … . … [T]the initial question before this Court is whether Supreme Court had the discretion to deny the … defendants’ motion to dismiss the complaint on forum non conveniens grounds when it had already granted another defendant’s motion to dismiss under the same doctrine. We answer this question in the affirmative and find that the … defendants have not demonstrated that Supreme Court’s denial was an improvident use of discretion. * * *

… [W]e find Supreme Court’s determination to deny each defendant’s motion to dismiss on forum non conveniens grounds was not an abuse of discretion. However, this determination only represents half of our inquiry, as a finding that it was proper for Supreme Court to deny defendants’ motions to dismiss on forum non conveniens grounds does not equate to a finding that Supreme Court had personal jurisdiction over all … defendants. Indeed … , plaintiff has failed to establish personal jurisdiction over Reyes, Pineda, Capina, and Agarrado. Bangladesh Bank v Rizal Commercial Banking Corp. 2024 NY Slip Op 01112, 2-29-24

Practice Point: Whether to grant a motion to dismiss on forum non conveniens grounds is discretionary. Here the denial of the motion was not an abuse of discretion despite the prior granting of an identical motion brought by another defendant.

 

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THE CONTRACTOR WHICH UNDERTOOK THE DUTY TO INSTALL FLOORING WAS REQUIRED TO PERFORM THAT DUTY WITH REASONABLE CARE; THE OWNER OF THE PROPERTY HAD A SEPARATE NONDELEGABLE DUTY TO KEEP THE PROPERTY SAFE WHICH MAY ALLOW THE CONTRACTOR’S NEGLIGENCE TO BE IMPUTED TO THE OWNER; DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT IN THIS TRIP AND FALL CASE SHOULD NOT HAVE BEEN GRANTED (FIRST DEPT).

The First Department, reversing Supreme Court, determined (1) defendant contractor (AW&S) undertook the duty to install flooring and was therefore required to perform that duty with reasonable care, and (2) the owner of the property (UJA) had a separate, nondelegable duty to keep the premises safe. There was evidence AW&S failed to secure portions of the flooring it installed and that failure was the proximate cause of plaintiff’s trip and fall. Defendants did not present any evidence of when the floor was last inspected prior to the fall and therefore did not demonstrate the absence of constructive notice of the defect:

Defendants failed to establish prima facie that they were not negligent in the installation and maintenance of the Masonite flooring on which plaintiff tripped and fell … . Although defendants claim that they neither created nor had actual or constructive notice of the condition that caused plaintiff’s injuries, the record establishes that defendant owner … (UJA) requested that defendant … (AW&S) protect the floors during a renovation project in its building for which AW&S served as general contractor. … AW&S specifically undertook responsibility for the installation, maintenance, and inspection of the protective Masonite flooring while it was on site, and the project superintendent noted that there were sections of Masonite that lacked duct tape securing it to the floor in the area where plaintiff tripped and fell. Based on this testimony, there are questions of fact as to whether AW&S’s failure to secure the Masonite, or to note that it was not secured upon inspection, was the proximate cause of plaintiff’s injuries … . … [W]here a defendant has undertaken a specific duty, it is obligated to perform that duty with reasonable care or be liable for any hazards it creates … . UJA, as owner, has a separate, nondelegable duty to maintain its premises, and AW&S’s negligent maintenance of the Masonite, if established, could be imputed to UJA …

Defendants also failed to make a prima facie showing that they lacked constructive notice of the condition. Neither defendant offered evidence of maintenance and inspection records despite testimony that the duct tape on the Masonite required routine replacement when it became curled or wet … .  …[P]laintiff was not required to establish how long the condition existed … . Bolson v UJA-FED Props. Inc., Ltd., 2024 NY Slip Op 00966, First Dept 2-27-24

Practice Point: A contractor which assumes the duty to do work, here floor-installation, is required to do so with reasonable care.

Practice Point: The property owner which hires a contractor to do work has a separate nondelegable duty to keep the premises safe such that a contractor’s negligence may be imputed to the owner.

 

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