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MEMBER OF LLC WHICH OWNED A MOBILE HOME PARK IS PERSONALLY LIABLE, PURSUANT TO THE RESPONSIBLE CORPORATE OFFICER DOCTRINE, FOR AN $800,000 PENALTY IMPOSED FOR FAILING TO COMPLY WITH AN ORDER ISSUED BY THE DEPARTMENT OF ENVIRONMENTAL PROTECTION REQUIRING SEWAGE-TREATMENT MEASURES (THIRD DEPT).

The Third Department determined Burr, one of two members of a limited liability company, C & J, was properly held personally liable for the violation of an administrative order issued by the Department of Environmental Conservation (DEP). C & J owned a mobile home park and the administrative order concerned the treatment of waste from the park. The penalty was more than $800,000.00:

Under Limited Liability Company Law § 609, a member of a limited liability company is generally not liable for the contractual obligations of the company. The 2008 order on consent, however, is not merely a contractual obligation. It is also an administrative order, the violation of which is subject to statutory enforcement (see ECL 71-1929). This Court has recognized that a responsible corporate officer may be held personally liable for violations of consent orders issued by DEC that implicate public health and safety … . Individual liability may be imposed where the corporate officer has the knowledge of and ability to prevent or remedy a violation that presents a public health hazard … . …

There can be little dispute that Burr was well aware of the ongoing sewage violations at the park, and, as managing member, he held a position of authority to address the problem. … [T]he 2008 consent order, which Burr signed on C & J’s behalf, expressly provided for stipulated penalties in the event that C & J “fail[ed] to strictly and timely comply.” The order further specified that it was binding on C & J and its officers. …

… [W]e conclude that Supreme Court did not err in holding Burr personally liable under the responsible corporate officer doctrine. State of New York v C & J Enters., LLC, 2020 NY Slip Op 00024, Third Dept 1-2-20

 

PLAINTIFF BANK’S ATTEMPT TO DE-ACCELERATE THE MORTGAGE JUST BEFORE THE STATUTE OF LIMITATIONS RAN WAS PROPERLY REJECTED (THIRD DEPT).

The Third Department, affirming the dismissal of the foreclosure action, held that the plaintiff bank’s attempt to de-accelerate the mortgage just before the statute of limitations ran was properly rejected:

As stated by the [2nd] Department, “acceleration notices must be clear and unambiguous to be valid and enforceable, . . . [and] de-acceleration notices must also be clear and unambiguous to be valid and enforceable” (Milone v US Bank N.A., 164 AD3d 145, 153 [2018] … ). Notably, in Milone, the Court cautioned against pretextual de-acceleration letters issued to avoid an impending statute of limitations. … [T]he [2nd] Department reasoned in Milone that “a de-acceleration letter is not pretextual if . . . it contains an express demand for monthly payments on the note, or, in the absence of such express demand, it is accompanied by copies of monthly invoices transmitted to the homeowner for installment payments” or other comparable evidence … .

… [P]laintiff’s purported de-acceleration letter was issued on the eve of the expiration of the statute of limitations. Although the letter expressly “reinstates the [l]oan as an installment loan,” it does not demand the resumption of monthly payments or provide monthly invoices for payment due. Instead, the letter specifies that defendant remained in default for failing to make the required monthly installment payments since November 1, 2008 and offers to discuss “a variety of homeowner’s assistance programs.” Not to be overlooked is that the March 2, 2016 letter was followed by two June 13, 2016 letters providing 30 days to cure the default by making a payment due of $101,831, as well as a 90-day notice required under RPAPL 1304 — a condition precedent to initiating a foreclosure action. In our view, this proffer does not constitute a valid de-acceleration, as plaintiff simply put defendant on notice of its obligation to cure an eight-year default and then promptly embarked on the notices required to initiate a second foreclosure action. It follows that plaintiff’s second action was properly dismissed as untimely. Wells Fargo Bank, N.A. v Portu, 2020 NY Slip Op 00025, Third Dept 1-2-20

 

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FATHER’S VISITATION SHOULD NOT HAVE BEEN SUBJECT TO MOTHER’S CONSENT; ATTORNEY FOR THE CHILD SHOULD NOT HAVE REFERRED TO EVIDENCE TAKEN IN THE LINCOLN HEARING IN THE APPELLATE BRIEF; THE HEARING TRANSCRIPTS ARE SEALED AND CONFIDENTIAL (THIRD DEPT). ​

The Third Department, modifying Family Court, determined father’s visitation rights should not have been made subject to mother’s consent and the attorney for the child should not have referred to the Lincoln hearing in the appellate brief:

Although the order provides the father with the opportunity for frequent and regular unsupervised access, the provision conditioning expansion of visitation to include overnight visitation only upon the mother’s consent is an impermissible delegation of authority … . …

… [W]e note our displeasure that the attorney for the children made repeated references to the Lincoln hearing in the appellate brief that he submitted on their behalf … . Family Court’s promise of confidentiality should not be lightly breached, and these transcripts are sealed. We again emphasize that “[t]he right to confidentiality during a Lincoln hearing belongs to the child and is superior to the rights or preferences of the parents. Children whose parents are engaged in custody and visitation disputes must be protected from having to openly choose between parents or openly divulging intimate details of their respective parent/child relationships” … . We further note that the breach of the confidentiality of the Lincoln hearing — and of the trust of the children — was exacerbated by the fact that the attorney for the children made certain representations about the children’s testimony that were inconsistent with their statements during the hearing. Matter of Ellen TT. v Parvaz UU., 2019 NY Slip Op 09328, Third Dept 12-26-19

 

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THE JURY WAS WRONGLY INSTRUCTED ON THE INFERENCE WHICH CAN BE DRAWN ABOUT THE LOCATION OF A BOUNDARY LINE FROM A SURVEY MAP FILED FOR MORE THAN 10 YEARS; VERDICT FINDING PLAINTIFF HAD WRONGLY SET THE PROPERTY BOUNDARY REVERSED (THIRD DEPT).

The Third Department, reversing the jury verdict finding that plaintiff had incorrectly set the western boundary of his property, held that the jury was wrongly instructed:

The jury received defective instructions as to the application of CPLR 4522. In that regard, Supreme Court charged the jury that “[a] 2002 survey map prepared by Surveyor Dickinson is in evidence. The survey was filed in 2002 with the Rensselaer County Clerk. The law provides that a map which has been on file with the County [Clerk] for more than [10] years is presumed to be accurate unless rebutted by other credible survey or expert opinion. In deciding whether the presumption of accuracy of the 2002 survey has been rebutted by other evidence you will apply the rules that I have already given you and will continue to give you about the evaluation of evidence.”

CPLR 4522 states that “[a]ll maps, surveys and official records affecting real property, which have been on file in the state in the office of . . . any county clerk . . . for more than [10] years, are prima facie evidence of their contents.” In analyzing similar statutory language from another hearsay exception contained in the same article of the CPLR, the Court of Appeals held that “[p]resumptive evidence[] is, . . . like the prima facie evidence to which CPLR 4518 (c) refers, evidence which permits but does not require the trier of fact to find in accordance with the presumed fact, even though no contradictory evidence has been presented. It is, in short, not a presumption which must be rebutted but rather an inference, like the inference of negligence denominated res ipsa loquitor” … .

Supreme Court’s charge required the jury to locate the western boundary of plaintiff’s property as depicted in the 2002 survey unless plaintiff offered evidence that rebutted the survey’s presumed accuracy. The jury should have been instructed that, in the absence of contradictory evidence, it was permitted but not required to adopt the western boundary as depicted in the 2002 survey. Hence, Supreme Court committed reversible error because the effect of the charge was to improperly require plaintiff to disprove the alleged accuracy of the 2002 survey map … . Kennedy v Nimons, 2019 NY Slip Op 09332, Third Dept 12-26-19

 

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CLAIMANT SHOULD NOT HAVE BEEN REQUIRED TO PROVIDE AN UNLIMITED MEDICAL RELEASE AS OPPOSED TO A LIMITED RELEASE CONCERNING ONLY THOSE AREAS OF HIS BODY AT ISSUE IN THE CLAIM FOR BENEFITS (THIRD DEPT).

The Third Department, reversing the Workers’ Compensation Board, determined claimant was not required to provide an unlimited medical release. Claimant should have been required to provide a release limited to those areas of his body which were at issue in the claim for benefits:

The Board’s regulations provide that a limited release is a “limited authorization to obtain relevant medical records regarding the prior medical history of the body part or illness at issue” (12 NYCRR 300.37 [b] [1] [iii]). It is applicable “if the claimant files a completed employee claim form and indicates on the form that he or she had a prior injury to the same body part or similar illness to the one(s) listed on the form” (12 NYCRR 300.37 [b] [1] [iii]). There is no question that, prior to filing his claim, claimant received medical treatment from various physicians for the same sites of injury dating back to at least 2011. It is evident from the record and the briefs that both parties agree that the employer is entitled to claimant’s past medical records for the claimed sites. That said, claimant maintains that the Board erred in requiring him to sign an open-ended HIPAA release, without limiting that release to treatment records pertaining to the claimed sites. Although the employer would certainly be entitled to the medical records of all providers, once identified, who treated the claimed sites, the fact remains that claimant was only obligated to provide a limited release for those providers. As such, we agree with claimant that the Board erred in directing him to provide an unlimited medical release. Matter of Trusewicz v Delta Envtl., 2019 NY Slip Op 09336, Third Dept 12-26-19

 

CHANGE IN TAX LAW RESULTING IN THE REMOVAL OF PETITIONER LAW FIRM’S CERTIFICATION AS A QUALIFIED EMPIRE ZONE ENTERPRISE ENTITLED TO TAX CREDITS SHOULD NOT HAVE BEEN APPLIED RETROACTIVELY (THIRD DEPT).

The Third Department, reversing Supreme Court, determined the amendments to the Economic Development Zones Act of 2009 should not have been applied retroactively to petitioners, MSLMSH (a law firm and related parties), to remove petitioners’ certification as a qualified empire zone enterprise (QEZE) entitled to tax credits based upon the location of the business in Syracuse:

… [R]esolution of this issue hinges upon examining the three factors articulated by the Court of Appeals in Matter of Replan Dev. v Department of Hous. Preserv. & Dev. of City of N.Y. (70 NY2d 451, 456 [1987] …) — specifically, a taxpayer’s forewarning of the change in law and the reasonableness of his or her reliance on the old law, the length of the retroactive period and the public purpose of the retroactive application.

… [T]he record reflects that MSLMSH was considering various places to relocate, but ultimately executed the 15-year lease in 2001 to remain in downtown Syracuse. MSLMSH also invested approximately $800,000 in equipment and furnishings. Around that time, MSLMSH was undergoing a corporate restructuring and reorganization, which led to the formation of Mackenzie Hughes in 2002. Mackenzie Hughes assumed many assets of MSLMSH, including the lease, and became QEZE certified in 2003. The testimony from the hearing further reflects that the expenditures and investments were made in reliance on receiving QEZE credits, and Mackenzie Hughes continued to operate its business with the QEZE certification until it was decertified in 2009. Based on the foregoing, we conclude that the partner petitioners’ reliance on the old law was reasonable. Nor do we find merit in the Commissioner’s assertion that the actions taken by MSLMSH prior to Mackenzie Hughes obtaining its QEZE certification were too attenuated to constitute justifiable reliance by the partner petitioners. Inasmuch as this factor weighs in favor of petitioners … and viewing all factors holistically, we conclude that the retroactive application of the 2009 amendments in this case was improper … . Matter of Mackenzie Hughes LLP v New York State Tax Appeals Trib., 2019 NY Slip Op 09337, Third Dept 12-26-19

 

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UNION REPRESENTING CITY EMPLOYEES HAS STANDING TO CONTEST THE CREATION OF A NEW CITY DEPARTMENT AFFECTING THOSE EMPLOYEES (THIRD DEPT).

The Third Department, reversing Supreme Court, determined the labor union representing employees of the city’s Office of the Building Inspector and Bureau of Code Enforcement had standing to contest an executive order issued by the mayor and related regulations which created a new Building Department:

“[S]tanding is a threshold determination and a litigant must establish standing in order to seek judicial review, with the burden of establishing standing being on the party seeking review” … . A petitioner challenging governmental action must “show ‘injury in fact,’ meaning that [the petitioner] will actually be harmed by the challenged [governmental] action[,]” and, further, that the injury “fall[s] within the zone of interests or concerns sought to be promoted or protected by the statutory provision under which the [governmental entity] has acted” … . For an organization to have standing, it must establish “‘that at least one of its members would have standing to sue, that it is representative of the organizational purposes it asserts and that the case would not require the participation of individual members'” … .

Petitioners allege that the Mayor unlawfully engaged in a legislative act by creating the Buildings Department and that this unlawful legislative act brought the union’s members under the auspices/jurisdiction of the Commissioner, who used that unlawful grant of authority to enact a regulation that respondents have relied on to supplant the members’ negotiated rights regarding disciplinary proceedings, as set forth in the applicable collective bargaining agreement. In our view, these allegations would, if proven, demonstrate the requisite harm flowing from the executive order, which would fall within the zone of interests … . Matter of Civil Serv. Empls. Assn., Inc., Local 1000, AFSCME, AFL-CIO v City of Schenectady, 2019 NY Slip Op 09342, Thrid Dept 12-26-19

 

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IT WAS AN ABUSE OF DISCRETION TO STRIKE PLAINTIFF’S COMPLAINT BASED UPON AN ALLEGED FAILURE TO COMPLY WITH COURT-ORDERED DISCOVERY (THIRD DEPT). ​

The Third Department, reversing Supreme Court, determined it was an abuse of discretion to grant defendants’ motion to strike the complaint for plaintiff’s alleged failure to comply with discovery orders. Discovery had been ongoing for years with several conferences with the judge and several orders to comply with new discovery demands:

… [I]t is undisputed that defendants’ motion to strike the complaint failed to include an affirmation of good faith as required by 22 NYCRR 202.7 … . Moreover, this error is compounded by the lack of other record evidence demonstrating that defendants engaged in good faith efforts to resolve the ongoing discovery issues without the need for judicial intervention. Despite plaintiff having at least partially complied with defendants’ discovery demands, the record is devoid of any correspondence or other documentation indicating that defendants ever specifically informed plaintiff’s counsel, other than in a generalized conclusory manner, in what manner the subject discovery responses were deficient or inadequate. Further, following the filing of defendants’ April 2018 motion to strike, defendants’ counsel failed to respond to four separate letters sent by plaintiff’s counsel in May 2018 wherein he provided certain additional discovery and otherwise attempted to ascertain from defendants what, if any, paper discovery remained outstanding. Notably, defendants have provided no explanation as to why they failed to provide any such response prior to the filing of defendants’ second motion to strike plaintiff’s complaint … .

Although we appreciate Supreme Court’s concern regarding the length of time that this action has been pending and the fact that the various discovery responses that plaintiff’s counsel did provide were unquestionably untimely, we do not find that defendants have established a “deliberately evasive, misleading and uncooperative course of conduct or a determined strategy of delay [by plaintiff] that would be deserving of the most vehement condemnation” … . Mesiti v Weiss. 2019 NY Slip Op 09343. Third Dept 12-26-19

 

BY STATUTE FAMILY COURT MAY NOT SET A GOAL OF ADOPTION BY SOCIAL SERVICES WITHOUT ORDERING THE FILING OF A PETITION TO TERMINATE PARENTAL RIGHTS; HERE FAMILY COURT ATTEMPTED TO SET THE INCOMPATIBLE GOALS OF ADOPTION AND REUNIFICATION WITH THE PARENT; THE INTENT OF FAMILY COURT IS CLEAR (HOPED-FOR REUNIFICATION) BUT THERE IS NO STATUTORY AUTHORITY FOR THE METHOD CHOSEN BY THE COURT (THIRD DEPT).

The Third Department, reversing Family Court, determined that the goals set by Family Court, moving toward adoption of the child while setting another hearing to see if reunification of the child with mother is possible, were incompatible under the statutes. The intent of Family Court was clear, but the method was not allowed by statute. The matter was sent back for further proceedings:

… [W]e find that Family Court erred in modifying the permanency goal to placement for adoption without directing petitioner to commence a proceeding to terminate respondent’s parental rights. Family Ct Act § 1089 (d) (2) (i) provides that a court may impose one of five specified permanency goals, including “placement for adoption with the local social services official filing a petition for termination of parental rights” … . Nothing in the statutory language permits a permanency goal of placement for adoption to be imposed in the absence of a concurrent petition to terminate the respondent’s parental rights. Further, the statute does not permit “the court [to] select and impose on the parties two or more goals simultaneously” … .

Here, in addition to stating that the permanency goal was being changed to placement for adoption and that no immediate termination proceeding would be commenced, Family Court also stated that another permanency hearing would be scheduled in six months and that it was the court’s “expectation and hope” that the goal could be changed back to reunification at that time. The express language of the permanency order imposes only one goal. However, the effect of the failure to commence termination proceedings and the court’s directions to petitioner regarding services and diligent efforts was to impose two concurrent, contradictory goals of placement for adoption and reunification. Matter of Joseph PP. (Kimberly QQ.), 2019 NY Slip Op 09347, Third Dept 12-26-19

 

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THE SUBCONTRACTORS DID NOT SIGN THE PRIMARY CONTRACT WHICH INCLUDED AN ARBITRATION PROVISION; HOWEVER THE SUBCONTRACTORS EXPLOITED THE ARBITRATION PROVISION BY PARTICIPATING IN PRE-ARBITRATION MEDIATION; THEREFORE THE SUBCONTRACTORS WERE ESTOPPED FROM COMPELLING LITIGATION (THIRD DEPT).

The Third Department, reversing Supreme Court, determined that the subcontractors, who did not sign the primary contract which included an arbitration provision in the “General Conditions,” had exploited the benefits of the primary contract and therefore should be compelled to arbitrate. The primary contract was between Corning Hospital and Gilbane, the general contractor. One subcontractor (Mancini) was responsible for general construction of the building and the other (Alliance) was responsible for the installation of veneer stone panels, which had begun to fall off the building:

… “[U]nder the direct benefits theory of estoppel, a nonsignatory may be compelled to arbitrate where the nonsignatory knowingly exploits the benefits of an agreement containing an arbitration clause, and receives benefits flowing directly from the agreement” … . … “Where the benefits are merely ‘indirect,’ a nonsignatory cannot be compelled to arbitrate a claim. A benefit is indirect where the nonsignatory exploits the contractual relation of the parties, but not the agreement itself” … . Noting that “it can be difficult to distinguish between direct and indirect benefits,” the Court of Appeals stated that “[t]he guiding principle is whether the benefit gained by the nonsignatory is one that can be traced directly to the agreement containing the arbitration clause” … .

Respondent argues that Mancini and Alliance are estopped from compelling litigation regarding the veneer stone panels because Alliance previously served a demand for arbitration on Gilbane and Mancini, with the demand specifically stating that one of the bases for seeking arbitration was the dispute resolution section of the General Conditions related to the construction project … . Following that demand for arbitration, Alliance, Gilbane and Mancini took part in mediation, as required prior to arbitration per a provision of the dispute resolution section of the General Conditions — a provision that Alliance also cited in its demand for arbitration. As a result of the mediation, those three entities then entered into a settlement agreement and released each other from liability regarding anything related to the veneer panels. …

Based on Alliance’s demand citing the applicability of the arbitration section of the General Conditions, and Mancini’s acquiescence to that demand, both of these nonsignatories to the prime contract and General Conditions should be compelled to arbitrate pursuant to the direct benefits theory of estoppel. Accordingly, the applications to permanently stay arbitration should have been denied, and the parties should proceed to arbitration. Matter of Alliance Masonry Corp. (Corning Hosp.), 2019 NY Slip Op 09348, Third Dept 12-26-19

 

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