On November 8, 2018, Justice Garguilo of the Suffolk County Commercial Division issued a decision in Overbay, LLC v. Berkman, Henoch, Peterson, Peddy & Fenchel, P.C., 2018 NY Slip Op. 51975(U), holding that a claim was barred by the voluntary payment doctrine, explaining:
Not just any form of protest is sufficient to overcome the voluntary payment doctrine. Rather, in order for a protest to be characterized as appropriate, it must be in writing and must have been made at the time of payment. Additionally, this written protest must indicate that plaintiff was reserving his rights when it made payment and must be communicated to the party receiving the payment. Here, the court notes that none of the correspondence submitted by the parties, including letters and emails, do not state that plaintiffs paid the settlement amount under protest at the time of payment, or state that they reserved their rights to later sue to recover it. The court also finds that plaintiffs offer no explanation as to the manner in which they purportedly communicated such protest, let alone how they satisfied the above requirements.
Nor have plaintiffs met their burden of demonstrating that an issue of fact exists with regard to whether they were under economic duress at the time of payment. The existence of economic duress is demonstrated by proof that one party to a contract has threatened to breach the agreement by withholding performance unless the other party agrees to some further demand. Conversely, a party cannot be guilty of economic duress for refusing to do that which he or she is not legally required to do. Here, there is no dispute that Harbour obtained a judgment of foreclosure. Although the parties discussed the amount of attorney fees attached to the judgment amount, defendants were not required to reduce the fees. Plaintiffs could have argued their objections to the legal fees at the hearing scheduled by the court, and chose to forego the hearing by paying the attorney fees with the settlement amount on April 20, 2018. In his affidavit, Tsunis concedes that he decided to pay the full settlement amount which included attorney fees in order to obtain his construction loan.
(Internal quotations and citations omitted).
As this decisions discusses, a claim of duress can relate to economic duress, and not just the paradigm case of someone being forced to sign a contract with a gun to their head. But, as this decision also shows, the standards for pleading duress are demanding. Contact Schlam Stone & Dolan partner John Lundin at firstname.lastname@example.org if you or a client have questions regarding a contract entered into under duress.
Click here to subscribe to this or another of Schlam Stone & Dolan’s blogs.