Blogs

Commercial Division Blog

Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: October 2, 2014

Unjust Enrichment Claim Survives When Defendants Allegedly Received Funds to Which Payor Had No Right

On September 11, 2014, Justice Bransten of the New York County Commercial Division issued a decision in Trade Expo Inc. v. Sterling Bancorp, 2014 NY Slip Op. 32408(U), declining to dismiss unjust enrichment claims. In Trade Expo, the plaintiffs amended their complaint to assert "causes of action for unjust enrichment and the imposition of a constructive trust" against factoring companies, alleging "that, by accepting the proceeds of the sales of plaintiffs' garments while knowing that such items were not in [the seller's] inventory, defendants were unjustly enriched to the detriment of plaintiffs." The court denied the defendants' motion to dismiss the unjust enrichment claim, explaining:

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Posted: October 1, 2014

Opportunity to Comment on Proposed Change to Commercial Division Rules

The Office of Court Administration has asked for public comment on another proposed change to the rules of the Commercial Division. The proposed new rule would adopt a Model Compliance Conference Order Form ("CC Form") for use in the Commercial Division. The new CC Form is intended to track the expanded Model Preliminary Conference Order Form ("PC Form") adopted effective June

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Posted: October 1, 2014

No Third-Party Claim Where Plaintiff Made no Claim Against Defendant for Which Third Party Defendant Could be Liable

On September 25, 2014, the First Department issued a decision in Fidelity National Title Insurance Co. v. Altshuler Shaham Provident Funds Ltd., 2014 NY Slip Op. 06371, dismissing a third-party claim for legal malpractice. In Fidelity National Title Insurance, the First Department reversed the trial court's denial of a motion to dismiss a legal malpractice third-party claim based on counsel's failure to obtain title insurance, explaining:

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Posted: September 30, 2014

Reinsurer Entitled to Discovery on Reasonableness of Insurer’s Settlement and Allocation Decisions

On September 15, 2014, Justice Scarpulla of the New York County Commercial Division issued a decision in Lexington Insurance Co. v. Sirius America Insurance Co., 2014 NY Slip Op. 32429(U), ruling that a reinsurer was entitled to discovery regarding (1) the reinsured's settlement of a claim covered by the underlying policy, and (2) the allocation of the settlement proceeds, notwithstanding a policy provision that generally requires deference to the reinsured's settlement decisions. Reinsurance contracts like the ones at issue in Lexington Ins. Co. commonly contain a provision known as a "follow-the-fortunes" (or "follow the settlements") clause, which precludes the reinsurer from "second guess[ing] the good faith liability determinations made by its reinsured," and therefore requires the reinsurer "to indemnify for payments reasonably within the terms of the original policy, even if technically not covered by it." Such provisions are designed to prevent extensive collateral litigation on the reasonableness of the settlement amount. As the Court of Appeal recognized in a recent decision cited by Justice Scarpulla on this issue, such deference is sensible because, in general, the interests of reinsurer and the reinsured are presumptively aligned (both want to settle for as little as possible). When it comes to issues of allocation, however, the interests may diverge, since, the reinsured could structure the settlement so as to shift responsibility for all, or a larger portion, of the settlement amount to the reinsured. Thus, in evaluating allocation issues, even where the reinsurance contract has a follow-the-fortunes clause, the courts defer to the reinsured's decision only if it is "objectively reasonable." In light of that background law, Justice Scarpulla found that the reinsurer was entitled to discovery concerning the settlement to establish a potential defense:

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Posted in Commercial, Insurance
Posted: September 29, 2014

Opportunity to Comment on Proposed Change to Commercial Division Rules

The Office of Court Administration has asked for public comment on another proposed change to the rules of the Commercial Division. The proposed new rule would require a party responding to a document request to "state with specificity the grounds for any objection to production." It also would require an affirmative statement concerning whether responsive material is in fact being withheld,

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Posted: September 28, 2014

Post-Answer Motion to Dismiss Converted to Motion for Summary Judgment

On September 18, 2014, Justice Emerson of the Suffolk County Commercial Division issued a decision in Sriram v GCC Enterprises, Inc., 2014 NY Slip Op. 32448(U), converting a motion to dismiss based on documentary evidence to one for summary judgment. In Sriram, the defendant moved to dismiss the complaint. The trial court converted the motion to one for summary judgment (which it denied), explaining:

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Posted: September 27, 2014

Cell Phone Not Within Scope of Stored Communications Act

On September 10, 2014, Justice Oing of the New York County Commercial Division issued a decision in Advanstar Communications Inc. v. Pollard, 2014 NY Slip Op 32398(U), dismissing on summary judgment a claim for violation of the Stored Communications Act. In Advanstar Communications, an employer alleged misconduct by its former employee. The defendant sought summary judgment on his counterclaims for trespass to chattels, violation of the Stored Communications Act (18 USC § 2701[a]), and conversion, "all related to" the plaintiff's "remote wiping of his iPhone and the loss of his personal information and data" when he left the plaintiff's employ to work for a competitor. The court denied the motion on all three claims. It explained, with respect to the Stored Communications Act counterclaim:

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Posted in Commercial, Trespass