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Subsequent Action Which Included Claims Which Could Have Been Raised in the First Action Precluded by Doctrine of Res Judicata

The Third Department determined that a prior ruling had res judicata effect even though the subsequent action sought damages for a different period of time:

Under the doctrine of res judicata, “once a claim is brought to a final conclusion, all other claims arising out of the same transaction or series of transactions are barred, even if based upon different theories or if seeking a different remedy” … , so long as “the party to be barred had a full and fair opportunity to litigate any cause of action arising out of the same transaction and the prior disposition was a final judgment on the merits” … . Thus, where those requirements have been met, if “a plaintiff in a later action brings a claim for damages that could have been presented in a prior [action] against the same party, based upon the same harm and arising out of the same or related facts, the claim is barred by res judicata” … . Stated another way, “when a plaintiff brings an action for only part of his [or her] cause of action, the judgment obtained in that action precludes him [or her] from bringing a second action for the residue of the claim” … .

Here, the record reflects that plaintiff had a full opportunity to litigate the issues relating to his small claim for unpaid wages in City Court and such court’s disposition was a final decision on the merits. It is also evident that the claim brought by plaintiff in City Court and the instant action arise out of the same series of transactions in connection with his work for defendants. Although the present action concerns wages allegedly owed for a different time period than the City Court claim, inasmuch as it had matured at the time that plaintiff commenced the prior action …, plaintiff could have also raised the current claim at that time … . Tovar v Tesoros Prop Mgt LLC, 2014 NY Slip Op 05233, 3rd Dept 7-10-14

 

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Failure to Comply with a Time-Limit for a Buy-Out in a Shareholders’ Agreement Was Trumped by the Overall Purpose of the Agreement—Shareholder Properly Compelled to Sell His Shares

The Third Department determined a shareholders’ agreement. although it did not address the particular problem at issue, must be read to avoid a result which would be at odds with the clear purposes of the agreement.  One of the three shareholders of the closely held corporation (the defendant) was convicted of a felony and the other shareholders terminated his employment and sought to buy his shares. The defendant sought to prohibit the buy-out by arguing it was untimely under the terms of the shareholders’ agreement.  Because the corporation distributed alcoholic beverages, if the defendant remained a shareholder the corporation would lose its distributor’s license:

A shareholders’ agreement — like any other contract — should be enforced according to its terms … . In so doing, “[t]he contract must be read as a whole to determine its purpose and intent, and it should be interpreted in a way [that] reconciles all its provisions, if possible” … . To that end, “the goal should be a practical construction of the language used so that the reasonable expectations of the parties are realized” …, and “the contract must be interpreted so as to give effect to, not nullify, its general or primary purpose” … .

Here, the shareholders’ agreement reflects “[t]he shareholders[‘] desire to establish a market value for their shares, to effectively control the management of the company, for their mutual best interests, and to protect against divisive relationships which would arise if outsiders with incompatible management philosophies gained interests in the company.” Consistent with that stated objective, the agreement further recognizes that “[t]he company is dependent upon and derives substantial benefit from the continued active interest and participation of those shareholders who participate in the management of the company.” In an attempt to preserve the closely-held nature of the corporation, the agreement provides that when a shareholder’s employment with the corporation ceases, “he or she shall be treated as though he or she were selling all of his or her shares under paragraph A of . . . [s]ection [t]wo [of the agreement],” which outlines the procedures to be followed when a shareholder, during the course of his or her lifetime, “transfer[s] any of his or her shares to anyone other than a family member.” In such case, the shareholder is to give notice of his or her intention to sell and, “[f]or a period of thirty [30] days after the notice is delivered, the [corporation] shall have an option to purchase all or any part of the offered shares on the payment terms specified in [s]ection [f]our [of the agreement].” If the corporation does not exercise such option, then the remaining shareholders are granted an additional 30-day option to purchase any or all of the available shares. * * *

…[R]eading the agreement as a whole and affording it a practical construction that is consistent with and gives proper effect to the parties’ stated intentions …, we are satisfied that Supreme Court properly granted plaintiffs’ motion to compel [defendant] to sell his shares to the corporation — even if that option to purchase was not timely exercised. To hold otherwise and permit [defendant] to retain his shares due to the asserted noncompliance with the time period set forth in the shareholders’ agreement not only would effectively rewrite the parties’ agreement and undermine its stated purpose, i.e., to retain managerial control within the closely-held family corporation, but would place the corporation at risk of losing its distributor’s license, thereby rendering its stock worthless… . A Cappione Inc v Cappione, 2014 NY Slip Op 05230, 3rd Dept 7-10-14

 

Alleged Error Did Not Raise a Question of Jurisdiction or Constitute a Constitutional Defect—Therefore the Alleged Error Did Not Survive the Guilty Plea

The Third Department described the types of fundamental errors which survive a guilty plea. The prosecutor’s alleged failure to inform the grand jury of defendant’s request to call witnesses in not one of them:

By his plea of guilty, defendant forfeited this argument. “As a rule, a defendant who in open court admits guilt of an offense charged may not later seek review of claims relating to the deprivation of rights that took place before the plea was entered” … . As relevant here, a claim “that the District Attorney did not inform the grand jury of defendant’s request to call witnesses to testify on his behalf as required by CPL 190.50 (6) . . . does not activate a question of jurisdiction or constitute a constitutional defect and, thus, does not survive a guilty plea” … . People v McCommons, 2014 NY Slip Op 05215, 3rd Dept 7-10-14

 

Procedure Used by Family Court in Custody-Modification Proceeding Did Not Meet the Criteria for a Fact-Finding Hearing

The Third Department determined the proceeding Family Court used in a custody-modification proceeding did not meet the criteria for the required fact-finding hearing:

Family Court erred in failing to conduct a fact-finding hearing. The final appearance was not a true hearing; the parties should have been “afforded a full and fair opportunity to be heard” … . While Family Court stated at the outset of the August 2013 appearance that the matter was set for a hearing that day, the court then allowed each party to deliver a long, unsworn narrative comprised mostly of hearsay — as the court had permitted the parties to do at each previous appearance. After the parties had discussed their views of the situation for an extended time, they were asked to swear to the statements they had made, following which the court rendered a determination without any opportunity for the parties to avail themselves of the usual attributes of a hearing, including the opportunity to present opening and closing statements, to present any other evidence or to conduct cross-examination (see id.). Thus, the court erred in modifying the prior order without holding a fact-finding hearing … . Matter of McCullough v Harris, 2014 NY Slip Op 04984, 3rd Dept 7-3-14

 

Fraud Cause of Action Seeking Only Lost Profits as Damages Must Be Dismissed

The Third Department determined that plaintiff’s fraud cause of action could not go forward because plaintiff sought only lost profits as damages.  Also dismissed and briefly discussed were “conspiracy to commit fraud (not a valid separate cause of action),” prima facie tort and a demand for punitive damages:

Plaintiff’s cause of action alleging fraud requires “a misrepresentation or omission of a material fact known to be false and made with the intent to deceive, as well as justifiable reliance and damages” … . * * * “The true measure of damage [for fraud] is indemnity for the actual pecuniary loss sustained as the direct result of the wrong or what is known as the out-of-pocket rule” … . Damages for fraudulent acts should “compensate plaintiffs for what they lost because of the fraud, not for what they might have gained” … . As plaintiff does not dispute that it seeks only the lost profit it anticipated earning as a result of conveying the property to BLP, defendants are entitled to summary judgment dismissing the first cause of action … .

Plaintiff’s second cause of action alleging a conspiracy to commit fraud must also be dismissed because “‘a mere conspiracy to commit a [tort] is never of itself a cause of action'” … . Plaintiff’s third cause of action for prima facie tort “requires a showing of an intentional infliction of harm, without excuse or justification, by an act or series of acts that would otherwise be lawful” … . Significantly, “[s]uch acts must be motivated solely by malevolence” … . Plaintiff … makes no claim that defendants were motivated — even in part — by malevolence. As for plaintiff’s fourth cause of action for declaratory relief, it too must be dismissed as entirely unnecessary under the circumstances here … .

Nor, in light of our determination that plaintiff failed to establish its causes of action for fraud and prima facie tort, is this a case for punitive damages. There is no basis upon which to conclude that defendants’ conduct “‘evince[s] a high degree of moral turpitude and demonstrate[s] such wanton dishonesty as to imply a criminal indifference to civil obligations'” … . Route 217, LLC v Greeg, 2014 NY Slip Op 04998, 3rd Dept 7-3-14

 

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Former Assistant Principal Entitled to Full Report Generated In Response to Her Allegations of Harassment and Discrimination Against Superintendent

The Third Department determined a former assistant principal was entitled to the full report generated by special counsel at the request of the school board in response to her allegations of harassment and discrimination against the school superintendent:

In our view, the [school] Board’s interpretation [of its regulation] is inconsistent with the language of the regulation, which is mandatory and dictates that the complainant and the accused will have received at least one report “pertaining to the investigation/outcome of the formal complaint” prior to the Board holding a hearing on the matter. Even assuming that [counsel who wrote the report] was appointed to perform only the complaint officer’s role — as opposed to the superintendent’s role — in the adjudicatory structure set forth in the regulation, a complainant is entitled to a copy of the complaint officer’s report under the regulation. Nevertheless, respondents failed to provide either the complainant or this Court with a copy of the report. Matter of Yager v Massena Cent Schoo Dist, 2014 NY Slip Op 05014, 3rd Dept 7-3-14

 

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Request to File Late Notice of Claim Against School District Stemming from Alleged Sexual Abuse of the Plaintiff by a Teacher Should Not Have Been Granted—School Did Not Have Actual Notice—No Good Reason for Delay in Filing

The Third Department determined the request to file a late notice of claim against a school district should have been denied.  The underlying action relates to alleged sexual abuse of a student (plaintiff) by a teacher.  The plaintiff and the teacher had initially both denied the existence of relationship.  Therefore, the court determined the school did not have actual knowledge of it.  The lack of actual knowledge coupled with the delay in filing the notice of claim after the plaintiff turned 18 required denial of the application:

…”[I]n determining whether to permit service of a late notice of claim, the court must consider all relevant facts and circumstances, including whether (1) the public corporation acquired actual knowledge of the essential facts constituting the claim within 90 days of its accrual or a reasonable time thereafter, (2) the [plaintiff] was an infant at the time the claim arose and, if so, whether there was a nexus between the [plaintiff’s] infancy and the failure to serve a timely notice of claim, (3) the [plaintiff] demonstrated a reasonable excuse for the failure to serve a timely notice of claim, and (4) the public corporation was substantially prejudiced by the delay in its ability to maintain its defense on the merits” … . Although no one factor is determinative … , the case law makes clear that actual knowledge “is a factor which should be accorded great weight” … . Notably, actual knowledge of the essential facts underlying the claim requires more than “mere notice of the underlying occurrence” … and the fact that some sort of injury occurred… . Babcock v Walton Cent School Dist, 2014 NY Slip Op 05013, 3rd Dept 7-3-14

 

Summary Judgment Properly Awarded in Derivative Child-Neglect Proceeding

The Third Department determined summary judgment was properly awarded in a derivative child-neglect proceeding, based in large part on findings made in prior neglect proceedings:

“‘Although it is a drastic procedural device, Family Court is authorized to grant summary judgment in a neglect proceeding where no triable issue of fact exists'” … . Neglect or abuse of one child typically may not serve as the sole support for a finding of derivative abuse or neglect; however, where the proof of “past neglect and abuse demonstrably ‘evidence[s] fundamental flaws in the respondent’s understanding of the duties of parenthood, proof of abuse or neglect of other children is alone sufficient to sustain a finding of abuse or neglect of another child'” … . A prior determination should be “sufficiently proximate in time to reasonably conclude that the problematic conditions continue to exist” …, but “there is no ‘bright-line, temporal rule beyond which we will not consider older child protective determinations'” … .

Here, petitioner established a prima facie case for summary judgment with the affidavit of its counsel setting forth the prior proceedings, the Family Court records of such proceedings and an affidavit from a caseworker. The nature of the acts that Family Court had found in the 2010 proceedings as having been perpetrated upon a child entrusted to respondent’s care established a fundamental defect in respondent’s understanding of parental duties. The caseworker set forth, among other things, respondent’s failure to complete preventive services, including sex offender treatment. Although respondent’s affidavit in opposition offered explanations for his inability to complete some services, he acknowledged that he had not yet completed sex offender treatment. Given the nature of the 2008 acts found in the 2010 proceedings, together with the fact that respondent is still in, but has not yet successfully completed, sex offender treatment, we are unpersuaded that Family Court erred in granting summary judgment… . Matter of Ilonni I…, 2014 NY Slip Op 04987, 3rd Dept 7-3-14

 

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Adirondack Park Agency Properly Approved the Construction of a Resort Within the Confines of the Park

In a full-fledged opinion by Justice Rose, the Third Department determined the Adirondack Park Agency (APA) properly approved the construction of a club and resort project which will include a ski area, an inn, single family residences, camps and a marina.  The court went through each of the required findings and found them supported by substantial evidence.  The court explained its review role as follows:

Judicial review of the APA’s determination, made after a hearing at which evidence was taken pursuant to law, is limited to whether the decision is supported by substantial evidence (see CPLR 7803 [4]…). Substantial evidence does not require overwhelming evidence or even a preponderance of the evidence … . Rather, all that is required is “‘relevant proof [that] a reasonable mind may accept as adequate to support a conclusion or ultimate fact'” … . Additionally, “[t]he fact that a different conclusion could have been reasonably reached is not sufficient ground to set aside the determination” … .

To the extent that petitioners argue that the APA’s determination was affected by errors of law (see CPLR 7803 [3]), this Court’s “review of these arguments, made in a CPLR article 78 proceeding following a hearing, is limited to whether the [APA] exceeded its authority, violated a controlling law or otherwise acted in an arbitrary and capricious manner” … . Matter of Protect the Adirondacks! Inc v Adirondack Park Agency, 2014 NY Slip Op 04992, 3rd Dept 7-3-14

 

Precedent Precluded Denial of Benefits

The Third Department, reversing the Workers’ Compensation Board, determined precedent required that benefits be afforded the claimant because his testimony he was engaged in a job search was deemed credible by the Board:

…”[E]ven though there is in the record substantial evidence to support the determination made,” the Board’s “failure to conform to [its] precedent will . . . require reversal on the law as arbitrary” if the Board has failed to explain the reason for its departure … . As relevant here, the Board has previously determined that a claimant remains attached to the labor market when he or she is actively participating in, among other things, a job-location service — such as One-Stop Career Centers — or Board-approved vocational rehabilitation, and that a claimant’s credible testimony regarding that participation is sufficient to establish attachment to the labor market (see Employer: Classic Bindery, Inc., 2011 WL 3612749, *2, 2011 NY Wrk Comp LEXIS 3997, *5-6 [WCB No. G021 5031, July 27, 2011]). The Board here expressly found claimant’s testimony that he was actively participating with One-Stop to be credible but, because claimant did not provide documentation of his participation, the Board concluded that he failed to adequately demonstrate attachment to the labor market. The Board purported to rely upon a prior decision, Employer: American Axle …, in determining that documentation was necessary but, while American Axle held that documentary evidence of active participation in One-Stop constitutes evidence of attachment to the labor market, it required documentary evidence only in connection with a claimant’s independent job search (id.). American Axle, therefore, does not provide an adequate basis for distinguishing Classic Bindery.  Matter of Winters v Advance Auto Parts, 2014 NY Slip Op 05005, 3rd Dept 7-3-14

 

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