Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: September 26, 2014
We have added to our practice pages the biography and part rules of Justice Martin M. Solomon of the Kings County Commercial Division.
Posted: September 26, 2014
On September 8, 2014, we noted two cases of interest from the oral arguments for the week of September 15, 2014:
Posted: September 25, 2014
On September 12, 2014, Justice Bransten of the New York County Commercial Division issued a decision in Hong Leong Fin. Ltd. (Singapore) v. Morgan Stanley, 2014 NY Slip Op. 51396(U), dismissing a claim for equitable subrogation.
In Hong Leong Fin. Ltd., the defendants moved to dismiss the complaint of "Plaintiff Hong Leong Finance Limited (Singapore) ("HLF"), a Singapore financial company" relating to "HLF's purchase of credit-linked notes ('CLNs'), issued by defendant Pinnacle and created and sold by Defendants." The motion related to a number of claims; this post focuses on its discussion of the plaintiff's claim for equitable subrogation, which the court dismissed, explaining:
Posted: September 24, 2014
On September 8, 2014, Justice Schweitzer of the New York County Commercial Division issued a decision in Interventure 77 Hudson LLC v. Falcon Real Estate Investment Co. LP, 2014 NY Slip Op. 32401(U), denying a motion to dismiss.
In Interventure 77 Hudson, the underlying dispute concerns alleged mismanagement of a real estate portfolio. However, the motion at issue involved individual officers of the management company, who are being sued in their individual capacities for breach of fiduciary duty. These defendants moved to dismiss under, inter alia, the "fiduciary shield" doctrine, under which various states have held that actions of a corporation cannot be imputed to corporate officers for purposes of personal jurisdiction.
As the court explained, New York does not follow this doctrine:
Posted: September 23, 2014
On August 21, 2014, Justice Grays of the Queens County Commercial Division issued a decision in The Roman Catholic Diocese of Brooklyn, N.Y. v. Christ the King Regional High School, 2014 NY Slip Op. 32389(U), granting a motion to dismiss in part.
In 1976, the plaintiff Diocese of Brooklyn conveyed real estate to the defendant by deed, which provided that the defendant would retain the property "so long as the grantee continues the operation of a Roman Catholic High School upon the premises described herein, upon the cessation of which [title] shall revert to the grantor." A simultaneously-executed agreement contained similar provisions, including provisions that the defendant would use the entire property only for a Catholic high school, and providing for automatic reverter if the plaintiff ceased to "operate said high school."
In 2010, the defendant leased part of its property to a non-sectarian charter middle school. When the Diocese objected, the defendant asserted that the reverter was unenforceable. The Diocese then commenced the action, seeking declaratory judgments that the reverter was enforceable and also that the defendant had breached the contract, and the defendant moved to dismiss.
Judge Grays dismissed the first cause of action and held that the reverter was unenforceable because of "plaintiff's failure to record a declaration of intention to preserve the restriction within the time specified therefor in Real Property Law § 345." RPL 345 requires such a provision to be recorded within 30 years, which the Diocese failed to do. Judge Grays also rejected the Diocese's argument that RPL 345 barred only the reverter in the deed, and not the reverter in the agreement, holding that RPL 345 applies to all reverters "regardless of the manner in which they came into being."
On the other hand, Judge Grays refused to dismiss the second cause of action. She found that the language in the agreement regarding the use of the property "creates a restriction on use without a reversionary right that is distinct from the condition subsequent . . ." and that RPL 345 permits an action for injunctive relief or money damages to enforce such a covenant. Judge Grays also refused to apply—at least on the motion to dismiss—the general rule that an agreement of sale merges into a deed and cannot be enforced after closing of title:
Posted: September 22, 2014
On September 11, 2014, the First Department issued a decision in Matter of Monarch Consulting, Inc. v. National Union Fire Ins. Co. of Pittsburgh, PA., 2014 NY Slip Op. 06158, addressing the interplay between the Federal Arbitration Act's preemption of state rules invalidating arbitration agreements and the McCarran-Ferguson Act, 15 U.S.C. § 1011, which prevents federal statutes from preempting state laws "regulating the business of insurance," unless the statute "specifically relates to the business of insurance."
In Matter of Monarch Consulting, an insurance carrier sought to enforce arbitration provisions in payment agreements collateral to workers' compensation insurance policies. The policyholders argued that the arbitration provisions were unenforceable because the payment agreements had not been filed with the California Division of Insurance, as required by California law. Ordinarily, notwithstanding state laws to the contrary, the Federal Arbitration Act requires that disputes concerning the validity of a contract containing an arbitration provision (as opposed to a challenge to the validity of the arbitration clause alone) are to be decided by the arbitrators in the first instance, rather than the courts. In this case, the analysis was complicated by the McCarran-Ferguson Act, which, in an effort to preserve the supremacy of the states in regulating the insurance industry, establishes a rule of "reverse preemption": i.e., that no federal statute "shall be construed to invalidate, impair or supersede any law by any State for the purpose of regulating the business of insurance," unless the federal statute "specifically relates to the business of insurance." The First Department held that "applying the FAA to mandate arbitration in this case would, in fact, invalidate, impair, or supersede the California Insurance Code. Therefore, the McCarran-Ferguson Act prevents the FAA from preempting the Code." The Court explained:
Posted: September 21, 2014
On September 16, 2014, Justice Friedman of the New York County Commercial Division issued a decision in Cortlandt St. Recovery Corp. v. Hellas Telecom., S.A.R.L., 2014 NY Slip Op. 24268, discussing the standing of an assignee of a note to bring an action to collect on the note. In Cortlandt St. Recovery Corp., a set of four related actions concerning the
Posted: September 20, 2014
On September 18, 2014, the First Department issued a decision in MSCI Inc. v. Jacob, 2014 NY Slip Op. 06239, reversing a trial court order limiting discovery. In MSCI Inc., the First Department acknowledged that "[a] trial court is vested with broad discretion in its supervision of disclosure," that "deference is afforded to the trial court's discretionary determinations regarding disclosure," and
Posted: September 19, 2014
On September 8, 2014, we noted a case of interest from the oral arguments for the week of September 8, 2014:
Posted: September 18, 2014
On September 4, 2014, Justice Demarest of the Kings County Commercial Division issued a decision in Vintage Flooring & Tile, Inc. v DCM of NY LLC, 2014 NY Slip Op 51376(U), declining to recognize a stay of enforcement of a judgment under CPLR 5519(a)(2) where the defendant failed to comply with the formal requirements for an undertaking under Article 25 of the CPLR.
In Vintage Flooring, the defendant (the general contractor on a construction project at the Kings Plaza Mall in Brooklyn) brought an order to show cause seeking an automatic stay of a judgment pending appeal, under CPLR 5519(a)(2), based on a undertaking that was served on the plaintiff but never filed with the Clerk of the Court. Justice Demarest denied the motion, explaining: