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Commercial Division Blog

Current Developments in the Commercial Divisions of the
New York State Courts
Posted: August 20, 2018

Claims Barred by Contract’s One-Year Limitations Period to Make Claims

On August 10, 2018, Justice Sherwood of the New York County Commercial Division issued a decision in MWW Group Holding Co., LLC v. Marcum LLP, 2018 NY Slip Op. 31921(U), holding the claims were time-barred under a contract’s one-year limitations period to assert claims, explaining:

The one-year statute of limitations clause in the engagement agreement is enforceable. In New York, a reasonable contractual shortening of the period of limitations is statutorily authorized. Such a provision is enforceable absent a showing of fraud, duress or misrepresentation with respect to the actual shortened limitation. A one-year limitation period has been held to be reasonable.

Marcum could not provide independent audits because of Weiner’s equity interest in MWW Holding. 8 NYCRR S. 29.10(a)(5) provides that unprofessional conduct in the practice of public accountancy shall include expressing an independent opinion or knowingly permitting his or her firm to express an opinion on financial statements of an enterprise, if the licensee or a partner or employee in the firm is not independent with respect to such enterprise. Weiner was not independent with respect to MWW. MWW argues that fraud permeates the engagement agreements because Weiner affirmatively misrepresented that upon his withdrawal from the MWW board. Marcum could serve as an independent auditor notwithstanding Weiner’s continued equity interest in MWW. The representation was an opinion which was erroneous. It was not a statement of fact and even if it was, there was no justifiable reliance since the representation was reading verifiable. Further even accepting this allegation as true, the contract clause shortening the statutory limitations period is enforceable because there are no allegations that the contract provision itself was procured by fraud.

. . .

The engagement agreements all contain shortened limitations periods of one year following delivery of each individual audit report. Such shortened limitations periods have been found to be reasonable and upheld. The shortened limitations clause cannot be invalidated based on allegations that fraud permeated the engagement agreement as there are no facts alleged to support such a fraud claim. Moreover, to invalidate a contractual limitations period based on fraud, plaintiff must allege the limitations provision itself was procured by fraud.

(Internal quotations and citations omitted).

It is not unusual for the statute of limitations to be an issue in complex commercial litigation. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have questions regarding whether claims are barred by the statute of limitations.

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Posted: August 19, 2018

Court Orders Selective Redaction Rather Than Sealing

On August 8, 2018, Justice Masley of the New York County Commercial Division issued a decision in Barrison v. D’Amato & Lynch LLP, 2018 NY Slip Op. 31922(U), ordering selective redaction rather than sealing of document to be filed, explaining:

Section 216.1 (a) of the Uniform Rules for Trial Courts empowers courts to seal documents upon a written finding of good cause. It provides:

(a) Except where otherwise provided by statute or rule, a court shall not enter an order in any action or proceeding sealing the court records, whether in whole or in part, except upon a written finding of good cause, which shall specify the grounds thereof. In determining whether good cause has been shown, the court shall consider the interests of the public as well as the parties. Where it appears necessary or desirable, the court may prescribe appropriate notice and an opportunity to be heard.
(b) For purposes of this rule, ‘court records’ shall include all documents and records of any nature filed with the clerk in connection with the action. Documents obtained through disclosure and not filed with the clerk shall remain subject to protective orders as set forth in CPLR 3103(a).

Rule 202.5 (e), entitled “Omission or Redaction of Confidential Personal Information”, provides that confidential personal information such as taxpayer identification numbers, social security numbers, and bank account numbers shall be omitted or redacted.

Judiciary Law § 4 provides that judicial proceedings shall be public. The public needs to know that all who seek the court’s protection will be treated evenhandedly, and there is an important societal interest in conducting any court proceeding in an open forum. The public right of access, however, is not absolute.

The party seeking to seal court records bears the burden of demonstrating compelling circumstances to justify restricting public access to the documents. The movant must demonstrate good cause to seal records under Rule§ 216.1 by submitting an affidavit from a person with knowledge explaining why the file or certain documents should be sealed.

Good cause must rest on a sound basis or legitimate need to take judicial action. Courts have sealed tax returns because such records contain private information about personal finances.

The parties must redact all confidential information as defined by Uniform Rule § 202.5(e). Parties are directed to redact all confidential information belonging to parties and non-parties including home addresses and social security numbers. In addition, the court finds good cause based on private finance information for which the public has no interest. The parties are directed to redact all financial information from the tax returns and K-1 Forms that is unrelated to this action. Moreover, while this motion to seal was listed on the court’s public docket, neither the press nor public appeared do demonstrate interest in this case.

(Internal quotations and citations omitted).

This decision relates to a common issue in complex commercial litigation: the balancing of the New York courts’ need to make their proceedings public and litigants’ need to protect sensitive commercial information. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have questions regarding protecting sensitive commercial information during litigation.

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Posted: August 18, 2018

Plaintiff Had Standing to Bring Proceeding to Dissolve LLC

On August 7, 2018, Justice Sherwood of the New York County Commercial Division issued a decision in Matter of Goyal v. Vintage India NYC, LLC, 2018 NY Slip Op. 31926(U), holding that a petitioner had standing to bring a proceeding to dissolve an LLC, explaining:

On a motion to dismiss a plaintiffs claim pursuant to CPLR § 3211(a)(7) for failure to state a cause of action, the court is not called upon to determine the truth of the allegations. Rather, the court is required to afford the pleadings a liberal construction, take the allegations of the complaint as true and provide plaintiff the benefit of every possible inference. Whether a plaintiff can ultimately establish its allegations is not part of the calculus in determining a motion to dismiss. The court’s role is limited to determining whether the pleading states a cause of action, not whether there is evidentiary support to establish a meritorious cause of action.

Vintage India argues the Petitioner has failed to state a claim because he is not a member of Vintage India NYC, LLC. Goyal was, according to respondent, removed for cause at the March 2017 meeting. Keller claims Goyal was removed as a member and expelled from the LLC, and that his interest in Vintage India, which was unvested at that time, was revoked at that meeting. Vintage India cites a handful of cases as part of this section of its memo, but fails to explain how the cases support its position. The Annotations to the Limited Liability Company Law, however, state that neither the LLC nor the other members have the statutory right to expel a member from the LLC. The right to expel a member must be expressly set forth in the operating agreement. Further, while the Limited Liability Company Law provides that a manager of an LLC may be removed, that requires a majority vote, which Keller lacks as Goyal owns half of the interest in Vintage India. Respondent provides no law to support its argument that Goyal’s shares had not vested. While there is a dispute as to whether Goyal paid money into the LLC and the amount, it is undisputed that he put in sweat equity and held a 50% interest in the firm. At most, there is a dispute as to whether his shares had vested. The defense that Goyal’ s interest is unvested is unexplained and is unsupported by citation to either caselaw or statute. Accordingly, the claim that Goyal lacks standing is REJECTED.

(Internal quotations and citations omitted).

This decision relates to a significant part of our practice: business divorce (a break-up between the owners of a closely-held business). Indeed, Schlam Stone & Dolan partner Jeffrey M. Eilender and associate Lee J. Rubin were contributors to the recently-released 2017 Supplement to Litigating the Business Divorce by Kurt Heyman and Melissa Donimirski. Contact Jeffrey Eilender at jeilender@schlamstone.com or Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have questions regarding a business divorce.

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Posted: August 17, 2018

Court Upholds Breach of Duty of Care Claim Against Trustee

On August 7, 2018, Justice Sherwood of the New York County Commercial Division issued a decision in U.S. Educational Loan Trust IV, LLC v. Bank of N.Y. Mellon, 2018 NY Slip Op. 31924(U), upholding a claim for breach of the duty of good care against a trustee, explaining:

With respect to plaintiffs’ duty of care claim, as both AG Capital and Commerce Bank demonstrate, such claims against indenture trustees should not be dismissed as duplicative to the extent they are based on basic non-discretionary ministerial tasks. Although defendant argues that the breaches alleged here do not meet this standard, they fail to provide any authority to support the claim. To the extent Commerce Bank dismissed a portion of the negligence claim as not relating to ministerial tasks, it did so on the basis that the if the act in question (that defendant failed to notify plaintiffs that other parties to the PSA had failed to perform their obligations), were a breach, defendant would have to monitor other parties. Those facts are far removed from the breaches alleged here. Additionally, although defendant contends the agreements’ negating provisions defeat these claims, the court in AG Capital specifically found that the duties described above exist, notwithstanding the Trust Indenture Act’s mandate that an indenture trustee shall not be liable except for the performance of such duties as are specifically set out in such indenture. Accordingly, that branch of defendant’s motion which seeks to dismiss count four is denied.

(Internal quotations and citations omitted).

This decision relates to a significant part of our practice: litigation regarding structured finance transactions. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have questions regarding litigation about financial products and services.

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Posted: August 16, 2018

Court Sanctions Litigant for Frivolous Litigation, Including Awarding Attorneys’ Fees for Defending Frivolous Claims

On August 1, 2018, Justice Ramos of the New York County Commercial Division issued a decision in Citigroup Global Markets, Inc. v. Fiorilla, 2018 NY Slip Op. 31919(U), sanctioning a litigant for frivolous litigation, including awarding attorneys’ fees for defending against the frivolous claims, explaining:

Uniform Rule 130-1.1 vests this Court with discretion to award both attorneys’ fees, costs and sanctions as a result of frivolous conduct. Conduct is frivolous if (1) it is completely without merit in law and cannot be supported by a reasonable argument for an extension, modification or reversal of existing law; (2) it is undertaken primarily to delay or prolong the resolution of the litigation, or to harass or maliciously injure another; or (3) it asserts material factual statements that are false.

Courts also consider whether the conduct was continued when it became apparent, or should have been apparent, that the conduct was frivolous, or when such conduct was brought to the attention of the parties or to counsel. Simply because an argument fails to persuade the court does not necessitate a finding of frivolous conduct.

Throughout this litigation, Fiorilla has pursued a relentless campaign to circumvent this Court’s final judgment by attempting to re-litigate already decided matters. He has prolonged this litigation and compelled CGMI to expend significant resources, both in New York and in France. Both the French proceedings and the OSC were frivolous and completely without merit. Thus, the record establishes that Fiorilla’s outrageous conduct merits the imposition of sanctions, and an award of reasonable attorneys fees.

Fiorilla’s frivolous conduct included making inaccurate and incomplete factcal assertions in the French proceedings. To obtain ex parte recognition of the Award in France, Fiorilla submitted a copy of the Award, and omitted the critical fact that this Court had already vacated the Award and entered a final judgment, which was affirmed on appeal. Fiorilla even used the already vacated Award to attempt to seize CGMI’s assets in France.

Fiorilla’s subsequent OSC to vacate the Award was also frivolous. This is not a simply a circumstance where an argument failed to persuade the Court. Rather, Fiorilla and his counsel rehashed arguments in duplicative proceedings that had already been deemed to lack legal merit by this Court and on appeal. Fiorilla cited no new arguments or evidence in support that warranted reconsideration. Mr. Fiorilla. persisted in this conduct despite repeated warnings by this Court and the First Department.

The Court wholly rejects Fiorilla’s assertion that his conduct was not in bad faith. Fiorilla’s opposition to the motion largely ignores the factual record and repeated admonishments, both by this Court and by the First Department pertaining to his conduct.

(Internal quotations and citations omitted).

Part of being a good litigator is thinking of winning arguments other lawyers miss. However, as this decision shows, courts have little patience for lawyers who cross the line from creative to making frivolous arguments. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client has a question regarding whether an argument has crossed the line from creative to sanctionable.

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Posted: August 15, 2018

Court Rules That Expert Testimony in Legal Malpractice Action is Unnecessary Given Issues in Dispute

On August 1, 2018, Justice Sherwood of the New York County Commercial Division issued a decision in Red Zone LLC v. Cadwalader, Wickersham & Taft LLP, 2018 NY Slip Op. 31888(U), precluding a defendant from presenting an expert witness in a legal malpractice action on the ground that it was unnecessary given the issues in dispute, explaining:

In Motion Sequence Numbers 010-014, 016 and 018-023, plaintiff seeks to preclude Cadwalader, Wickersham & Taft LLP (“CWT”) from presenting expert testimony as to whether it departed from the standard of care required of an attorney and/or that the malpractice did not cause Red Zone LLC’s (“Red Zone”) alleged inquiry. CWT insists it is entitled to present such evidence through expert testimony. It acknowledges that both Justice Schweitzer and the Appellate Division held that expert testimony was not necessary. The Court of Appeals did not address this issue but “(v)iewing the evidence in the light most favorable to defendant as the non-movant,” that court concluded that “material triable questions of fact exist regarding whether defendant failed to exercise the ordinary reasonable skill and knowledge commonly possessed by members of the legal profession.”

At this point in the case there are only two versions of the facts concerning the events of August 16 and 17, 2005 that may have resulted in injury to Red Zone, neither of which involve matters outside the ken of the typical juror. If the jury adopts the facts as alleged by plaintiff, the failure of CWT to memorialize the parties’ agreement is prima facie proof of professional malpractice. If the jury finds that on August 17, 2005, either the parties recognized there was no meeting of the minds and negotiated the Supplement or that Snyder and UBS agreed to change the handshake agreement of August 16, 2005 and despite Block’s warning, agreed simply to clarify that the fee would be limited to $2 million if Red Zone won only three of seven Board seats, a finding of no professional malpractice should follow. Again, none of this requires specialized knowledge.

For these reasons, and consistent with the findings of Justice Schweitzer and the First Department, no expert testimony is needed.

(Internal citations omitted).

An issue that arises in almost all complex commercial litigation is the use of experts to explain evidence that is unfamiliar to a typical juror (or judge). Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have questions regarding the admission of expert evidence.

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Posted: August 14, 2018

Opportunity to Comment on Proposed Changes to Commercial Division Rules

The Office of Court Administration has asked for public comment on a proposed change to the Commercial Division rules relating to the selection of mediators. The new rule would add the following sentence to Commercial Division Rule 3: “Counsel are encouraged to work together to select a mediator that is mutually acceptable, and may wish to consult any list of approved neutrals in the county where the case is pending.”

E-mail comments on this proposal to rulecomments@nycourts.gov by September 28, 2018.

Posted: August 13, 2018

Article 77 Proceeding Excludes Beneficiaries of Trusts That Hold Interests in Trusts That are the Subject of the Proceeding

On August 7, 2018, Justice Friedman of the New York County Commercial Division issued a decision in Matter of Wells Fargo Bank, N.A., 2018 NY Slip Op. 31883(U), holding that beneficiaries of trusts that held interests in trusts that were the subject of an Article 77 proceeding did not have standing to appear in the proceeding, explaining:

Article 77 provides, with exceptions not here relevant, that a special proceeding may be brought to determine a matter relating to any express trust. Permissible uses of Article 77 are broadly construed to cover any matter of interest to trustees, beneficiaries or adverse claimants concerning the trust. Such proceedings are used by trustees to obtain instruction as to whether a future course of conduct is proper, and by trustees (and beneficiaries) to obtain interpretations of the meaning of trust documents. Article 77 limits the parties who may properly participate to persons interested, within the meaning of the statute. CPLR 7703 thus expressly provides: The provisions as to joinder and representation of persons interested in estates as provided in the surrogate’s court procedure act shall govern joinder and representation of persons interested in express trusts. SCPA § 103(39) defines the term “Person interested” as any person entitled or allegedly entitled to share as beneficiary in the estate or the trustee in bankruptcy or receiver of such person. A creditor, shall not be deemed a person interested. SPCA § 103(8) defines Beneficiary as any person entitled to any part or all of an estate.

In determining an intent to confer a beneficial interest in a trust, a court must look to the trust agreement. It is well settled that the trust instrument is to be construed as written and the settlor’s intention determined solely from the unambiguous language of the instrument itself.

The court accordingly looks to the terms of the governing agreements of the Settlement Trusts to determine intent to confer a beneficial interest in the Trusts. As described by the challenging Respondents, the agreements that govern RMBS trusts typically provide that certificates evidence the entire beneficial ownership interest in the Trust Fund. They further typically require the Trustee to act for the benefit of the certificateholders.

The Challenged Respondents do not dispute that these terms are typical of RMBS PSAs, and they do not identify any additional terms of the governing agreements of the Settlement Trusts that contemplate beneficiaries other than certificateholders or insurers. Instead, they claim that their ownership of interests in, and rights with respect to, CDO, re-REMIC, or NIM trusts afford them beneficiary status in the Settlement Trusts. The structures through which the Challenged Respondents claim an interest differ. However, the governing agreements for each, whether a CDO, re-REMIC, or NIM trust, contain provisions, like those for the Settlement Trusts, which transfer all right, title, and interest in the underlying assets held by the structure to its Trustee.

. . .

As the Challenging Respondents correctly argue, each of the Challenged Respondents in effect urges the court to conclude that it is entitled to distributions from the Settlement Trusts because: 1) each is entitled to distributions from the structure in which it is invested; and 2) that structure is entitled to distributions from the Settlement Trust. As the Challenging Respondents also correctly argue, it is the trustees of the structures in which the Challenged Respondents are investors that hold the certificates in the Settlement Trusts and attendant rights to distributions from those Trusts, although they do so for the benefit of the investors in those structures. The rights and entitlements of the Challenged Respondents to distributions from the structures in which they are investors are accordingly separate and distinct from the rights and entitlements of the trustees of those structures to distributions from the Settlement Trusts. The Challenged Respondents’ economic interests in the Settlement Trusts are thus, at best, indirect.

A principal authority on which the Challenged Respondents rely, Matter of Cowles (22 AD2d 365, 370 [1st Dept 1965], affd no opinion 17 NY2d 567 [1966]), does not alter this conclusion. This case does not support the Challenged Respondents’ claim to beneficiary status based on their indirect interests in the Settlement Trusts, and stands merely for the proposition that contingent remaindermen with a remote and uncertain interest in a trust may be proper, although not necessary, parties to a trust proceeding. The challenged parties in Cowles had a direct-albeit, contingent-interest in the estate that was the subject of the proceeding. In the event of the occurrence of specified conditions, they would take as beneficiaries of the estate. Here, there are no conditions under which the Challenged Respondents will acquire a direct interest in the Settlement Trusts. They will only acquire funds from the Settlement Trusts indirectly, through distributions of those funds to the trustees of the separate investment structures in which the Challenged Respondents hold interests. The Challenged Respondents’ eventual receipt of funds may be more certain or likely than that of the Cowles contingent remaindermen. But their status is not analogous, as the Challenged Respondents’ interest is not direct.

(Internal quotations and citations omitted).

Schlam Stone & Dolan represents investors in RMBS actions against underwriters and trustees. If you or a client are RMBS investors and have questions regarding potential claims against a trustee; a trustee instruction proceeding, such as the Article 77 proceeding that is the subject of this decision; or how to influence the trustee’s prosecution of a put back action, contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com.

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Posted: August 12, 2018

Fraud Claim Dismissed as Duplicative of Contract Claim: No Separate Damages Alleged

On August 6, 2018, Justice Masley of the New York County Commercial Division issued a decision in TJ PRP LLC v. Rag & Bone Holdings LLC, 2018 NY Slip Op. 31880(U), dismissing a fraud claim as duplicative of a contract claim, explaining:

A fraud claim that arises from the same facts as an accompanying contract claim, seeks identical damages and does not allege a breach of any duty collateral to or independent of the parties’ agreements is subject to dismissal as redundant of the contract claim. Where a fraud claim is supported by allegations that the defendants misrepresented their intentions with respect to the manner in which their contractual duties would be performed, it is appropriately dismissed as duplicative of the breach of contract claim because the fraud is premised on the same facts as those that compose the contract claim, the obligations allegedly breached are not collateral to those imposed by the contract, and the damages sought are identical to those recoverable under the contract cause of action.

Here, TJ PRP alleges in support of its first cause of action for breach of the Operating Agreement against RBH that RBH failed to maintain RBF’s books and records, and failed to provide TJ PRP with financial statements that comported with GAAP and the Operating Agreement’s provisions. TJ PRP further alleges that RBH engaged in inappropriate related-company transactions on unfair terms and without the requisite approval under the Operating Agreement; improperly altered RBF’s annual budget without Price’s consent, and engaged in other various business decisions in violation of the Operating Agreement.

TJ PRP alleges, in support of its fourth cause of action for fraud against RBH and RBI, that RBI violated the Management Agreement, and RBH violated the Operating Agreement, by failing to prepare financial statements for RBF in accordance with GAAP. TJ PRP further alleges that RBH and RBI fraudulently concealed their self-dealing and other misconduct, and fraudulently concealed, and intentionally led TJ PRP to believe, that the financial statements for [RBF] had been prepared in accordance with GAAP and the Operating Agreement, resulting in unspecified damages.

According to paragraph 6 of the amended complaint, RBH misappropriated, converted, and commingled millions of dollars of RBF funds, and caused RBI fraudulently to represent for many years to RBF and TJ PRP that RBF’s financial statements complied with GAAP and the Operating Agreement. TJ PRP also alleges that RBI pre-paid itself exorbitant fees.

Even if the fraud cause of action is sufficiently pleaded, the claim must be dismissed against RBH as duplicative of the claim for breach of the Operating Agreement. The factual allegations that form the breach of the Operating Agreement claim are the same as those which comprise the fraud claim; specifically, the alleged failure of RBF, through its managing member, RBH, and its management services provider, RBI, to maintain separate books of account, and to maintain financial and accounting records for RBF and minority member TJ PRP, in accordance with GAAP.

Though TJ PRP alleges that the improper accounting practices of RBI and RBH concealed RBH’s misappropriation of RBF funds, commingling of assets, self-dealing, and other assorted violations of the Operating Agreement to the detriment of TJ PRP, each of those acts, representations, and/or omissions-accepted for the purposes of this motion as true-demonstrate that RBH violated its obligations under the Operating Agreement. TJ PRP’s allegations that RBH and RBI concealed RBH’s misdeeds and breaches of the Operating Agreement by maintaining and disseminating deceptive accounting and financial records does not create a fraud claim that is distinct from the breach of contract claim; the accounting practices and financial documents were, themselves, breaches of the Operating Agreement, and TJ PRP identifies no damages that resulted from the alleged fraud that are distinct from the damages it would recover under the breach of contract claim.

A repackaged breach of contract claim does not create a sustainable cause of action sounding in fraud. TJ PRP’s arguments to the contrary are unavailing, and its reliance on Wyle Inc. v ITT Corp. (130 AD3d 438 [1st Dept 2015)) is misplaced. While a fraud claim can be based on a breach of contractual warranties notwithstanding the existence of a breach of contract claim, Wyle concerned a plaintiffs’ claim that they were fraudulently induced to purchase a company by defendants’ failure to disclose all ongoing government audits-the existence of which would negatively impact the company’s value-in violation of a warranty in the sale agreement to disclose all audits. The allegations in this action do not involve fraudulent inducement; here, TJ PRP alleges that RBH’s malfeasance and violations of the Operating Agreement were hidden by RBH’s and RBl’s failure to maintain and prepare accounting records and financial documents in compliance with the provisions in the Operating Agreement.

Notably, TJ PRP does not allege that it sustained any extra-contractual damages as a result of the purported fraud; the damages arising from the alleged fraud are precisely those that TJ PRP would be entitled to recover if it prevails on its breach of the Operating Agreement claim. When a fraud claim would only entitle the plaintiff to the very same damages that are recoverable on its breach of contract claim, the claim should be dismissed as duplicative. Moreover, the factual allegations comprising the fraud claim are identical to those forming the breach of contract claim. Accordingly, the fraud claim against RBH is dismissed as duplicative of the breach of the Operating Agreement claim.

(Internal quotations and citations omitted).

Commercial litigation frequently involves fraud-based claims. Such claims have special pleading requirements such as the rule discussed here that a fraud claim cannot be based on a breach of contract. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have a question regarding a fraud-based claim.

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Posted: August 11, 2018

Court Reviews Law Governing Contract Interpretation on Summary Judgment

On August 6, 2018, Justice Schecter of the New York County Commercial Division issued a decision in Cast Iron Co., LLC v. Cast Iron Corp., 2018 NY Slip Op. 31881(U), discussing contract interpretation on a summary judgment motion:

Contracts are construed in accord with the parties’ intent, the best evidence of which is the language of the contract itself, read as a whole. Thus: a written agreement that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms. A contract is unambiguous if the language it uses has a definite and precise meaning, unattended by danger of misconception in the purport of the agreement itself, and concerning which there is no reasonable basis for a difference of opinion. Moreover, provisions in a contract are not ambiguous merely because the parties interpret them differently. Extrinsic or parol evidence-evidence outside the four corners of the document-is admissible only if a court finds an ambiguity in the contract.

As a general rule, if the court finds that a contract is ambiguous, it cannot be construed as a matter of law on a motion for summary judgment. An exception, exists, however, when the documentary evidence submitted on summary judgment resolves the ambiguity. Conversely, if the extrinsic evidence in the record is insufficient to resolve the ambiguity, the parties’ intent must be determined at trial.

(Internal quotations and citations omitted). The court went on to hold that the contract did not unambiguously support the movant’s position and denied the motion for summary judgment.

Under New York law, the starting point of contract interpretation is the words of the contract. As this decision shows, sometimes those words, without context, may be insufficient to establish what the parties intended. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client face a situation where you are unsure how to enforce rights you believe you have under a contract.

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