Blogs

Commercial Division Blog

Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: January 3, 2015

Guarantor of Corporation’s Performance of Covenants Under Contract Bound By Corporation’s Consent To Jurisdiction In New York

On December 31, 2014, the Second Department issued a decision in Professional Merchant Advance Capital, LLC v. Your Trading Room, LLC, 2014 NY Slip Op. 09115, holding that the principal of a corporation who personally guaranteed the corporation's performance of contractual covenants was bound by the corporation's consent to jurisdiction in New York in a lawsuit for breach of the

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Posted: January 2, 2015

Communications with Accountant Not Privileged When No Record That He Was Engaged By and For Counsel

On December 19, 2014, Justice Kornreich of the New York County Commercial Division issued a decision in Barry v. Clermont York Associates, LLC, 2014 NY Slip Op. 33335(U), holding that a client's communications with an accountant regarding a lawsuit were not privileged. in Barry, the court reviewed a referee's report regarding disputed privilege claims. One issue the court addressed was whether communications between the plaintiff and an accountant were privileged. The court explained:

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Posted: January 1, 2015

No Appeal from Order Issued in Response to Letter Request

On December 30, 2014, the First Department issued a decision in 1471 Second Corp. v. Nat of NY Corp., 2014 NY Slip Op. 09039, dismissing an appeal on the ground that it was taken from a nonappealable paper. In 1471 Second Corp., New York County Commercial Division Justice O. Peter Sherwood "denied defendants' letter request to submit a reply brief

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Posted in Commercial, Appeals
Posted: December 31, 2014

Contract Provision For Renegotiation Of Fees Too Vague To Be Enforced

On December 10, 2014, Justice Bransten of the New York County Commercial Division issued a decision in Spielman Koenigsberg & Parker, LLP v. Taxi Club Management, Inc., 2014 NY Slip Op. 33282(U), dismissing a breach of contract claim because the provision to be enforced was unenforceably vague. In Spielman Koenigsberg & Parker, the principal dispute concerned the amount of money owed by the defendant to its accountants, SKP. Pursuant to a letter of engagement ("LOE"), the defendant was to pay $20,000 per month for accounting services. The LOE also provided that "both parties agree that at the end of 2011 a discussion will be held to analyze the amount of time actually incurred in regard to the engagement and compare to the amount paid by the monthly retainers – and see if a 'true up' in regard to fees is appropriate." SKP billed Defendant $280,000 for fourteen months' worth of accounting services—the contract rate—but also demanded a further $285,866 under the 'true up' provision, which Defendant refused to pay. The court granted summary judgment to the defendant on the grounds that the "true-up" provision was unenforceably vague:

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Posted in Commercial, Contracts
Posted: December 30, 2014

Court of Appeals Arguments of Interest for the Week of January 5, 2015

Arguments the week of January 5, 2015 in the Court of Appeals that may be of interest to commercial litigators. No. 3: Elmaliach v. Bank of China Limited (considering whether plaintiffs’ claims against a Chinese bank for transferring funds used to finance terrorist attacks in Israel are governed by Israeli law, under which a bank can be liable for torts

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Posted in Commercial, Appeals
Posted: December 30, 2014

Mechanics Lien That Incorrectly Listed Corporation As Property Owner Instead of Corporation’s Sole Shareholder Could Be Amended To Reflect The True Owner

On December 16, 2014, the Court of Appeals issued a decision in Rigano v. Vibar Construction, Inc., 2014 NY Slip Op. 08762, ruling that a mechanic's lien that erroneously listed the sole shareholder of the property owner was not jurisdictionally deficient and could be amended nunc pro tunc to reflect the true owner. In Rigano, a construction company (Vibar) filed a notice of mechanic's lien on a property to recover the cost of constructing a road on the property. The mechanic's lien incorrectly listed an entity, Fawn Builders, as the owner, when in fact the property was owned by Fawn Builder's sole shareholder, Rigano. The Supreme Court granted Rigano's motion to discharge the lien, and the Appellate Division affirmed, holding that "[w]hile a failure to state the true owner or contractor or a misdescription of the true owner will not affect the validity of a notice of lien, a misidentification of the true owner is a jurisdictional defect which cannot be cured by an amendment nunc pro tunc." The Court of Appeals reversed, finding that a lien may be amended after the fact where "the true owner and listed owner are closely related and there was consent to the construction work"; under those circumstances the error constitutes a "misdescription" of the owner rather than a "misidentification." The Court explained that under this standard, an amendment was proper:

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Posted: December 29, 2014

Supplier Lists Not Trade Secrets

On December 19, 2014, Justice Demarest of the Kings County Commercial Division issued a decision in Knit Knit LLC v. Unitrade Enterprises, Inc., 2014 NY Slip Op. 51784(U), examining whether supplier lists constitute trade secrets. In Knit Knit LLC, the plaintiff "was engaged in purchase, importation and wholesale distribution of off-price apparel." Among the claims that the plaintiff brought against defendants was misappropriation of trade secrets based on their use of "the names and addresses of plaintiff's Guatemalan broker and suppliers, as well as its customers" in a new business started by one of the plaintiff's former employees. The court granted the defendants summary judgment on the plaintiff's misappropriation of trade secrets claim, explaining:

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Posted: December 28, 2014

Officer of Dissolved Corporation Personally Liable For Obligations Incurred By Corporation Post-Dissolution

On December 17, 2014, the Second Department issued a decision in 80-02 Leasehold, LLC v. CM Realty Holdings Corp., 2014 NY Slip Op. 08805, holding that a corporate officer was personally liable for the corporation’s obligations under a commercial lease that was executed after the corporation’s dissolution. The Court explained: Pursuant to Tax Law § 203-a, the Secretary of State

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Posted: December 27, 2014

Personal Jurisdiction Adequately Alleged Where There Was a Factual Showing that Out-of-State Defendants Conspired with In-State Defendant

On December 15, 2014, Justice Friedman of the New York County Commercial Division issued a decision in BGC Partners, Inc. v. Avison Young (Canada) Inc., 2014 NY Slip Op. 51774(U), holding that a plaintiff had adequately alleged personal jurisdiction over out-of-state defendants based on the in-state actions of co-conspirators. In BGC Partners, the plaintiffs sued the defendants in connection with the defendants' acquisition of plaintiffs. Among the arguments that all the defendants except the one located in New York made was that the court lacked personal jurisdiction over them. While the court agreed that it did not have jurisdiction based on the actions of those defendants, it held that the plaintiffs had sufficiently alleged that it had jurisdiction over two of the out-of-state defendants based on their alleged status as co-conspirators with the New York-based defendant, explaining:

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Posted: December 26, 2014

In Pari Delicto Doctrine Limited When Agent Defrauded its Principal

On December 17, 2014, the Second Department issued a decision in Schwartz v. Leaf, Salzman, Manganelli, Pfiel, & Tendler, LLP, 2014 NY Slip Op. 08823, applying the adverse interest exception to the in pari delicto doctrine. In Schwartz, the plaintiff brought an action "inter alia, to recover damages for negligence, accounting malpractice, fraud, breach of fiduciary duty, and unjust enrichment." The parties both appealed the trial court's decision dismissing in part the plaintiff's claims. This post focuses on the Second Department's discussion of the trial court's refusal to dismiss the plaintiff's accounting malpractice cause of action on in pari delicto grounds:

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