You are here: / Second Department

Tag Archive for: Second Department

, , , ,

Allegations of a “Conspiracty to Commit Fraud” Survived a Motion for Summary Judgment/Conspiracy Allegations Must Connect Individual Defendants with an Actionable Underlying Tort

The Second Department determined Supreme Court properly refused to grant summary judgment in favor of an attorney in an action based upon serious allegations of malpractice in connection with a real estate transaction.  Amony other allegations, it was claimed that the attorney allowed an employee to pose as him and caused the plaintiffs to (unknowingly)  sign documents accepting the premises as is. In affirming Supreme Court’s finding that a question of fact had been raised about the “conspiracy to commit fraud” allegations, the Second Department explained the nature of a civil conspiracy:

“New York does not recognize civil conspiracy to commit a tort . . . as an independent cause of action” … . However, “a plaintiff may plead the existence of a conspiracy in order to connect the actions of the individual defendants with an actionable, underlying tort and establish that those actions were part of a common scheme” … . “The allegation of conspiracy carries no greater burden, but also no less, than to assert adequately common action for a common purpose by common agreement or understanding among a group, from which common responsibility derives. Therefore, under New York law, [i]n order to properly plead a cause of action to recover damages for civil conspiracy, the plaintiff must allege a cognizable tort, coupled with an agreement between the conspirators regarding the tort, and an overt action in furtherance of the agreement. A bare conclusory allegation of conspiracy is usually held insufficient”… . Blanco v Polanco, 2014 NY Slip Op 02735, 2nd Dept 4-23-14

 

,

Defendant Entitled to Hearing Re: Whether His Counsel Was Ineffective For Failing to Communicate an Earlier, More Lenient Plea Offer

The Second Department determined defendant had presented enough evidence to justify a hearing on whether his counsel was ineffective for failure to inform him of an earlier, more lenient, plea offer.  The court explained the legal principles involved:

…[T]he United States Supreme Court held in Missouri v Frye ( _____ US _____, _____, 132 S Ct 1399, 1410) that counsel’s failure to advise a criminal defendant of a beneficial plea agreement constitutes ineffective assistance of counsel under the Sixth Amendment … where the defendant establishes that there was a reasonable probability that he or she would have accepted the earlier plea offer had it been communicated to him or her, that the election to go to trial or accept a different plea agreement resulted in a harsher penalty, and that, if the prosecution had the discretion to cancel the earlier proposed plea agreement or the trial court had the discretion to refuse to accept it, there was a reasonable probability that neither the prosecution nor the trial court would have prevented the offer from being accepted or implemented. In Lafler v Cooper ( _____ US _____, _____, 132 S Ct 1376, 1391), which was decided on the same day as Missouri v Frye, the United States Supreme Court concluded that the remedy for a claim of ineffective assistance of counsel that results in a harsher sentence than that initially proposed to the defendant pursuant to a plea agreement is to direct the People to reoffer the plea agreement.

Given the defendant’s detailed allegations on the record, which had first been brought to the Supreme Court’s attention more than one month before the defendant pleaded guilty, the court should have addressed the contention. Accordingly, we remit the matter to the Supreme Court, Queens County, for a hearing and a report on the defendant’s contention that the People had previously made a more lenient plea offer than the one which he ultimately accepted. The defendant has the burden of establishing that the People made that plea offer, including a determinate term of imprisonment of three years in connection with a plea of guilty to a lesser count …, that his first assigned counsel did not adequately inform him of that offer …, that there is a sufficient likelihood that he would have accepted the offer had counsel adequately communicated it to him …, and that there is a reasonable likelihood that neither the People nor the court would have blocked the alleged agreement…  .  People v Maldonado, 2014 NY Slip Op 02800, 2nd Dept 4-23-14

 

, , ,

County Could Not Avoid or Delay Payment of Property Tax Refund on Financial Hardship Grounds

The Second Department determined the county did not make a sufficient showing of “fiscal chaos” to allow it to avoid immediate payment of a refund the  overpayment of property taxes:

Contrary to the appellants’ contention, the decisions of the Court of Appeals … do not stand for the proposition that a court may decline to issue an award of damages or refunds against a municipality whenever such award will result in financial hardship … . “Instead, these cases stand for the more limited proposition that, where a municipality has reasonably relied upon a widespread and longstanding practice (as in Matter of Hellerstein) or a statute is later invalidated (as in Foss), and where applying the invalidation retroactively would call into question a settled assessment roll or property rights based thereon,’ a court may exercise its discretion by giving its holding only prospective application” … . No such situation is present in the instant case. Accordingly, under the circumstances presented here, the Supreme Court properly rejected the appellants’ “fiscal chaos” defense, and granted the petitioner’s motion to compel the appellants to satisfy obligations that they incurred in connection with the stipulation of settlement and, thus, to calculate and pay the refund owed to it. Matter of Long Is Automotive Group Inc v Board of Assessors of Nassau County, 2014 Slip Op 02586, 2nd Dept 4-16-14

 

, ,

Health Service Provider’s Action to Recoup Overpayment of a Surcharge Subject to Six-Year Statute of Limitations

The Second Department determined a statutory provision making payment of a surcharge re: certain hospital services subject to an audit within six years imposed a six-year statute of limitations upon any attempt to recoup overpayment of the surcharge:

The statutory text of Public Health Law § 2807-j(8-a)(a) provides that “[p]ayments and reports . . . shall be subject to audit by the commissioner for a period of six years following the close of the calendar year in which such payments and reports are due, after which such payments shall be deemed final and not subject to further adjustment or reconciliation.” Giving effect to the plain meaning of the text, that section of the statute provides that all payments are deemed final and not subject to further adjustment or reconciliation after the period of six years following the close of the calendar year in which they are due. Thus, the clear language of that section establishes that the determination of the DOH to apply a six-year limitations period to a provider’s administrative application for a refund of an overpayment was not arbitrary and capricious or irrational. Contrary to the Supreme Court’s reasoning, the absence of any reference in Public Health Law § 2807-j(8)(c) to a limitations period specifically applicable to administrative requests for a refund of overpayments does not compel the conclusion that the six-year limitations period contained in Public Health Law § 2807-j(8-a)(a) is inapplicable to such requests.  Matter of New York Med & Diagnostic Ctr Inc v Shah, 2014 NY Slip Op 02592, 2nd Dept 4-16-14

 

Extension for Service of Complaint After Statute of Limitations Had Run Properly Granted in Exercise of Discretion

The Second Department determined Supreme Court properly exercised its discretion to allow service of a complaint after the 120 period for service had passed and the statute of limitations had run:

When considering whether to grant an extension of time to effect service beyond the 120-day statutory period in the interest of justice, the court may consider the plaintiff’s diligence, or lack thereof, along with other relevant factors, including the expiration of the statute of limitations, the potentially meritorious nature of the cause of action, the length of delay in service, the promptness of the plaintiff’s request for the extension of time, and any prejudice to the defendant … . A determination of whether to grant the extension in the interest of justice is generally within the discretion of the motion court … .

In the instant case, an attempt at proper service was made within the 120-day period, which was later adjudicated to be defective. Furthermore, the statute of limitations had expired by the time the appellant challenged service as defective in its motion to vacate the default judgment, the plaintiff promptly cross-moved for an extension of time to effect proper service, and there was no demonstrable prejudice to the appellant attributable to the delay in effecting proper service. Under the circumstances, granting an extension of time pursuant to CPLR 306-b to serve the appellant was a provident exercise of discretion … .  Siragusa v D’Esposito, 2014 NY Slip Op 02570, 2nd Dept 4-16-14

 

,

Participation in Arbitration Precluded Action to Stay Arbitration

The Second Department determined plaintiffs participated in arbitration initially and therefore could not bring a proceeding to stay arbitration:

Pursuant to CPLR article 75, “a party who has not participated in the arbitration and who has not made or been served with an application to compel arbitration, may apply to stay arbitration on the ground that a valid agreement was not made” (CPLR 7503[b]). Consequently, “a party seeking to avoid arbitration on the ground of no agreement to arbitrate can raise such objection only when it has not participated in the arbitration” … .

Here, the record demonstrates that the plaintiffs “participated in the arbitration” (CPLR 7503[b]…). The plaintiffs could not actively engage in the arbitration proceedings and simultaneously retain their right to seek subsequent judicial intervention pursuant to CPLR 7503(b), as such “forum-hedging” is incompatible with the legislative policy underlying CPLR 7503(b) … . Stone v Noble Constr Mgt Inc, 2014 NY Slip Op 02571, 2nd Dept 4-16-14

 

Allegations of Wrongdoing Insufficient to Support Shareholders Derivative Action Pursuant to BCL 626 (c)

The Second Department determined plaintiffs failed to make allegations sufficient to support a shareholders derivative action pursuant to Business Corporation Law 626(c):

Pursuant to Business Corporation Law § 626(c), in order to assert a derivative cause of action, in their complaint, shareholders must “set forth with particularity [their] efforts . . . to secure the initiation of such action by the board or the reasons for not making such effort” … . Here, because the plaintiffs conceded that they made no demand upon the board, they were required to plead facts demonstrating that a demand would have been futile.

“Demand is futile, and excused, when the directors are incapable of making an impartial decision as to whether to bring suit” … . A plaintiff may satisfy this standard by alleging with particularity (1) “that a majority of the board of directors is interested in the challenged transaction,” which may be based on self-interest in the transaction or a loss of independence because a director with no direct interest in the transaction is “controlled” by a self-interested director, (2) “that the board of directors did not fully inform themselves about the challenged transaction to the extent reasonably appropriate under the circumstances,” or (3) “that the challenged transaction was so egregious on its face that it could not have been the product of sound business judgment of the directors” … . However, “[t]o justify failure to make a demand, it is not sufficient to name a majority of the directors as defendants with conclusory allegations of wrongdoing or control by wrongdoers” … .

Although the plaintiffs’ proposed amended complaint alleges that the individual defendants had a personal interest in the challenged transactions, it fails to describe the challenged transactions or to explain how any but one of the corporation’s four directors would have profited from them. These “conclusory allegations of wrongdoing or control by wrongdoers” are insufficient … . Instead, to adequately plead self-interest, the complaint must set forth facts alleging that the directors “receive[d] a direct financial benefit from the transaction which is different from the benefit to shareholders generally” … . The plaintiffs have failed to satisfy this standard. Similarly, the plaintiffs’ allegations that the corporation’s directors made “lavish and unnecessary expenditures” and paid themselves “unwarranted salaries” are insufficient because they fail to “allege compensation rates excessive on their face or other facts which call into question whether the compensation was fair to the corporation when approved, the good faith of the directors setting those rates, or that the decision to set the compensation could not have been a product of valid business judgment” … . Because the proposed amended complaint fails to adequately describe the challenged transactions or allege in what manner they were inappropriate, it also fails to “allege[ ] with particularity that the board of directors did not fully inform themselves about the challenged transaction[s] to the extent reasonably appropriate under the circumstances” or that “the challenged transaction[s were] so egregious on [their] face that [they] could not have been the product of sound business judgment” … . Accordingly, the plaintiffs’ allegations, incorporating the proposed amendments, remained palpably insufficient, and the Supreme Court erred in determining that the plaintiffs had satisfied the standard for leave to amend a pleading … . Walsh v Wwebnet inc, 2014 NY Slip Op 02575, 2nd Dept 4-16-14

 

, , ,

No Private Right of Action for Homeowners Against Lenders Under the Home Affordable Modification Program (HAMP)—Home Affordable Modification Program Was Not Enacted Solely for the Benefit of Homeowners(?)

The Second Department, after finding that the doctrine of judicial estoppel did not apply because there was no final determination adopting the plaintiff’s contrary position in the first litigation, determined the federal Home Affordable Modification Program (HAMP), enacted pursuant to the Emergency Economic Stabilization Act of 2008 (EESA), did not create a private right of action against a lender or loan servicer.  The lender had denied plaintiff’s application for a permanent HAMP loan modification and plaintiff’s brought suit alleging breach of contract (re: a trial period plan or TPP), fraud in the inducement, promissory estoppel and a violation of General Business Law 349:

When, as here, a statute does not provide an express private right of action, the courts will imply a private right of action only upon examination of the following three factors: (1) whether the plaintiff is one of the class for whose particular benefit the statute was enacted; (2) whether recognition of a private right of action would promote the legislative purpose; and (3) whether creation of such a right would be consistent with the legislative scheme” … .

As to the first factor, the Emergency Economic Stabilization Act of 2008 (12 USC §§ 5201-5261; hereinafter the EESA), which authorized the United States Department of the Treasury to promulgate the HAMP, was enacted “to immediately provide authority and facilities that the Secretary of the Treasury can use to restore liquidity and stability to the financial system of the United States” (12 USC § 5201[1]) and “to ensure that such authority and such facilities are used in a manner that (A) protects home values, college funds, retirement accounts, and life savings; (B) preserves homeownership and promotes jobs and economic growth; (C) maximizes overall returns to the taxpayers of the United States; and (D) provides public accountability for the exercise of such authority” (12 USC § 5201[2]). Similarly, Section 201(a)(2)(A)(i) of the Helping Families Save Their Homes Act of 2009 (111 P.L. 22, § 201[a][2][A][i], 123 Stat 1632, 1638) simply articulated a Congressional finding that, in order to reduce the number of foreclosures and stabilize real property values, mortgage lenders should be given authorization to modify mortgage loans consistent with applicable guidelines promulgated by the United States Department of the Treasury pursuant to EESA. Thus, although financially struggling homeowners may derive a benefit from the HAMP, that program was not promulgated solely for their particular benefit … . As to the second factor, the underlying purpose of the HAMP is to incentivize mortgage loan servicers to reduce monthly mortgage payments and, thus, prevent avoidable home foreclosures … . Accordingly, a private right of action against a lender or loan servicer arising from an alleged breach of a TPP agreement is inconsistent with the purpose of HAMP, as judicial recognition of such a private right of action would deter lenders and loan servicers from participating in the HAMP … . As to the third factor, the EESA expressly provides for civil actions by the Secretary of the Treasury (see 12 USC § 5229[a][1]) and for actions seeking equitable relief against the Secretary of the Treasury (see 12 USC § 5229[a][2], [3]), but makes no reference to private rights of action by borrowers against mortgage lenders or loan servicers. Moreover, given that, as noted above, private rights of action could conceivably deter lenders and loan servicers from participating in the HAMP, which would, in turn, undermine the HAMP’s purpose, allowing for a private right of action would be inconsistent with the legislative scheme of EESA. Since the plaintiffs’ claims here are intertwined with the defendants’ alleged obligations under the HAMP, and as no private right of action exists under the HAMP, the Supreme Court should have granted the defendants’ motion to dismiss the amended complaint on the ground that it failed to state a cause of action… . [emphasis added]  Davis v Citibank NA, 2014 NY Slip Op 02557, 2nd Dept 4-16-14

 

Application for Undue Hardship Exception to Medicaid Ineligibility Should Have Been Granted

The Second Department determined the Department of Health (DOH) should have granted a nursing home’s (Tarrytown Hall’s) application for an undue hardship exception to Medicaid Ineligibility:

An individual will not be ineligible for Medicaid as a result of a transfer of assets if it is determined that the denial of eligibility will result in an undue hardship. An undue hardship occurs where the institutionalized individual is otherwise eligible for Medicaid, is unable to obtain appropriate medical care without the provision of Medicaid, and is unable to have the transferred assets returned (see 18 NYCRR 360-4.4).Here, the DOH’s determination that Tarrytown Hall failed to demonstrate undue hardship is not supported by substantial evidence. To the contrary, Tarrytown Hall established that the decedent was otherwise eligible for Medicaid, and further established that she was unable to obtain appropriate medical care without the provision of Medicaid by offering proof that the decedent was insolvent and unable to recover transferred assets, and that no nursing facility which could provide her with the necessary level of care would accept her. By offering this proof, Tarrytown Hall met the statutory and regulatory requirements for the undue hardship exception. Matter of Tarrytown Hall Care Ctr v McGuire, 2014 NY Slip Op 02600, 2nd Dept 4-16-14

 

,

Attorneys Represent the Administrators Individually and Not the Estate Itself/Therefore an Estate May Seek Restitution of Attorney’s Fees Paid from the Estate for the Representation of an Executor Who Defrauded the Estate

After it had bee determined the first executor (Carbone) had looted the estate, the new executor sued the law firm which defended the first executor.  The Second Department determined that the law firm could not be sued by the estate for legal malpractice because the retainer agreement with the first executor did not encompass “administration of the estate.”  Therefore, absent allegations of fraud and collusion with the first executor, the law firm, which was not in privity with the estate, could not be sued for malpractice with respect to the estate.  However the cause of action for restitution, which alleged the payment of lawyers’ fees for the representation of the first executor from the estate, could go forward:

This Court has held that “an attorney represents the administrators individually and not the estate itself” … . Accordingly, an attorney may recover fees from the estate only where the services rendered benefit the estate … . Where a plaintiff asserts a cause of action for restitution, the ” essential inquiry'” is ” whether it is against equity and good conscience to permit the defendant to retain what is sought to be recovered'” … . In determining whether this equitable remedy is warranted, a court should ” look to see if a benefit has been conferred on the defendant under mistake of fact or law, if the benefit still remains with the defendant, if there has been otherwise a change of position by the defendant, and whether the defendant’s conduct was tortious or fraudulent'” … .Here, the plaintiff alleged that the [attorney’s] fees for representing Carbone were paid from estate assets even though those services were not beneficial to the estate and were, in fact, adverse to it. Thus, the plaintiff has pleaded facts sufficient to assert a cause of action for restitution … . Betz v Blatt, 2014 NY Slip Op 02554, 2nd Dept 4-16-14

 

Categories

Sign Up for the Mailing List to Be Notified When the Site Is Updated.

  • This field is for validation purposes and should be left unchanged.

Copyright © 2026 New York Appellate Digest, Inc.
Site by CurlyHost | Privacy Policy