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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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THE ALLEGATIONS OF DEFENDANTS’ CONDUCT DURING PHOTO SHOOTS OF PLAINTIFF-MODEL WHEN SHE WAS 16 AND 17 YEARS OLD MET THE “SEXUAL CONDUCT” CRITERIA FOR THE EXTENDED STATUTE OF LIMITATIONS UNDER THE CHILD VICTIMS ACT (CVA), THE COMPLAINT STATED CAUSES OF ACTION FOR INVASION OF PRIVACY PURSUANT TO CIVIL RIGHTS LAW SECTION 50 (FIRST DEPT).

The First Department, in a full-fledged opinion by Justice Higgitt, modifying Supreme Court in this Child Victims Act (CVA) action, determined: (1) the conduct alleged to have been committed by defendant modeling agency (Wilhelmina) and defendant-seller of sun tan products (Cal Tan) during photo shoots of plaintiff-model when she was 16 and 17 years old met the criteria for “sexual conduct” within the meaning of the extended statute of limitations under the CVA (CPLR  214-g); (2) New York has jurisdiction over the case against Cal Tan, even though the Cal Tan photo shoot took place in Mexico (plaintiff was a New York resident); (3) the negligent supervision and breach of fiduciary causes of action against Cal Tan were properly dismissed because no allegations supported a duty to supervise; (4) the negligent supervision and breach of fiduciary duty causes of action against Wilhelmina should not have been dismissed because no arguments in opposition were interposed; and (5) the invasion of privacy causes of action (Civil Rights Law section 50) against both defendants survived the motions to dismiss. The following allegations were deemed sufficient to meet the “sexual conduct” criteria for the applicability of the CVA’s extended statute of limitations:

Plaintiff’s allegations as to Cal Tan include that she was “instructed . . . to arch her back and look at the camera ‘sexy,’ ‘like a lover,’ and think about doing ‘naughty things with your boyfriend,'” and that the photographs generated from the photoshoot “included ones in which Doe was depicted topless with her back arched in a sexually suggestive pose; looking out to the sea in a sultry manner; in which she was completely topless and ‘naked in the water’; where she is posed suggesting a willingness to engage in sexual activity; and where Doe is standing on a roof, semi- or totally naked.”

As to Wilhelmina, plaintiff alleged that at one photoshoot, “[s]he was photographed in [see-through lingerie] with another girl, also wearing see-through lingerie, together in bed. Doe and the other underage model wore coy expressions, as if together they had been doing something naughty, or sexual;” at another photoshoot, where plaintiff was unclothed, she was “instructed . . . to look ‘innocent, but sexy’ for some photos, and like a ‘bad girl’ for others”; and that at a third photoshoot she “was made to sit nude on a bed with a white sheet covering part, but not all, of her breast and buttocks.” Doe v Wilhelmina Models, Inc., 2024 NY Slip Op 00969, First Dept 2-27-24\

Practice Point: This comprehensive opinion lays out the criteria for “sexual conduct” within the meaning of the extended statute of limitations under the Child Victims Act (CVA). Here allegations of defendants’ conduct during  photo shoots of plaintiff-model when she was 16 and 17 years old met the CVA sexual-conduct criteria.

 

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THE PURPORTED ORAL ASSIGNMENT OF A SUBLEASE FOR MORE THAN A YEAR VIOLATED THE STATUTE OF FRAUDS; THE CRITERIA FOR AN ASSIGNMENT “BY OPERATION OF LAW” WERE NOT MET (FIRST DEPARTMENT). ​

The First Department, reversing (modifying) Supreme Court, determined the oral assignment of a sublease was invalid under the statute of frauds and there was no assignment “by operation of law:”

An oral assignment of the sublease here would have to satisfy the statute of frauds, which requires the assignment of such a sublease (for more than one year) to be in writing (see General Obligations Law § 5-703[2] …). Although, in the absence of a written assignment, a presumption of “assignment by operation of law” sufficient to satisfy the statute of frauds may be created by a “tenant in possession” paying rent … , such as where a tenant pays the full rent for some extended period of time … , no such presumption applies in the circumstances here. The terms of the sublease allowed for a sublease/occupation but expressly forbade oral assignments and included a “no waiver” clause, and the occupancy and payments by [defendant]  here was not conduct “unequivocally referrable” to any purported agreement by the parties to orally modify the no oral assignment term … . Innerworkings, Inc. v Arik Eshel CPA & Assoc. P.C., 2024 NY Slip Op 00972, First Dept 2-27-24

Practice Point: An oral assignment of a sublease for more than a year violates the statute of frauds.

Practice Point: Payment of rent for an extended period of time may satisfy the statute of frauds “by operation of law” (not the case here).

 

PLAINTIFF BOOK-PRINTER REPUDIATED ITS BOOK-PRINTING CONTRACT WITH DEFENDANT WHEN IT SOLD ITS PRINTING OPERATION TO A THIRD PARTY (FIRST DEPT). ​

The First Department, reversing (modifying) Supreme Court, in a full-fledged opinion by Justice Oing, determined plaintiff (EPAC) had repudiated its book-printing contract with defendant (Wiley) when it sold its printing operation to non-party LS-1. Therefore Wiley was entitled to summary judgment on EPAC’s breach of contract action:

“A repudiation can be either ‘a statement by the obligor to the obligee indicating that the obligor will commit a breach that would of itself give the obligee a claim for damages for total breach’ or ‘a voluntary affirmative act which renders the obligor unable or apparently unable to perform without such a breach'” … . Put another way, “a party repudiates a contract ‘where that party, before the time of performance arrives, puts it out of his power to keep his contract'” … . “Besides giving the nonrepudiating party an immediate right to sue for damages for total breach, a repudiation discharges the nonrepudiating party’s obligations to render performance in the future” … . Thus, if there were a repudiation, the rest of the case falls away, and Wiley would be entitled to summary judgment dismissing the complaint. EPAC Tech., Inc. v John Wiley & Sons, Inc., 2024 NY Slip Op 00933, First Dept 2-20-24

Practice Point: Here the requirements for “repudiation” of a contract are described in some detail.

 

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