Commercial Division Blog

Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: February 18, 2014

Case Against New Jersey Defendants Dismissed for Lack of Personal Jurisdiction

On February 18, 2014, the First Department issued a decision in SunLight General Capital LLC v. CJS Investments Inc., 2014 NY Slip Op. 01118, affirming a dismissal for lack of personal jurisdiction. In SunLight General Capital, the defendants, "CJS" and "Clean Solar," were "New Jersey entities, with offices and employees located solely within the State of New Jersey, and whose alleged actions herein occurred with the State of New Jersey." The trial court dismissed the plaintiff's claims for lack of personal jurisdiction. The First Department affirmed, explaining: ...


Posted: February 17, 2014

Court Denies Motion for Permissive Venue Change from New York County to Nassau County

On February 5, 2014, New York County Commercial Division Justice Friedman issued a decision in W.S. Corp. v. Cullen and Dykman LLP, 2014 NY Slip Op. 30353(U), denying a motion for change of venue from New York County to Nassau County. In W.S. Corp., the court granted in part a motion to dismiss former clients' legal malpractice claims against a law firm. This post focuses on a separate, procedural issue: the defendant's motion to change venue from New York County to Nassau County. The court denied the motion in an opinion that should be instructive to any counsel arguing for a change of venue of the approximately 20 miles between the New York County and Nassau County Courthouses: ...


Posted: February 16, 2014

Legal Malpractice Claim Survives Summary Judgment Because of Potential Red Flag Requiring Law Firm to Investigate Client Representations

On February 13, 2014, the First Department issued a decision in Nomura Asset Capital Corp. v. Cadwalader, Wickersham & Taft LLP, 2014 NY Slip Op. 00954, affirming in part a trial court's denial of the defendant law firm's motion for summary judgment on a legal malpractice claim. In Nomura Asset Capital Corp., the plaintiff sued the law firm that advised ...


Posted: February 15, 2014

Alleged Breach of Disciplinary Rule Alone Does Not Create a Cause of Action for Legal Malpractice

On February 4, 2014, Justice Oing of the New York County Commercial Division issued a decision in Pope Investments II LLC v. Belmont Partners, LLC, 2014 NY Slip Op. 30349(U), dismissing a legal malpractice claim that was based on an alleged breach of a disciplinary rule. In Pope Investments, two groups of plaintiffs sued a handful of defendants, including a law firm and one of its partners, in connection with a failed investment. The court addressed many issues in deciding the motions to dismiss. Here we focus on its dismissal of a malpractice claim based on an alleged breach of a disciplinary rule. The court explained that simply alleging a violation of a disciplinary rule was insufficient to state a claim for legal malpractice: ...


Posted: February 13, 2014

Court of Appeals Rules That Two-Year Statute of Limitations In Insurance Policy Is Unenforceable Where Contractual Condition Precedent To Suit Could Not Be Accomplished Within Two Years

The Court of Appeals issued a decision today in Executive Plaza, LLC v. Peerless Insurance Company, Docket No. 2, addressing, on a certified question from the Second Circuit, the interplay of two provisions of a fire insurance policy--one requiring the insured to bring claims under the policy within two years of the fire, and a second providing that the insured could not recover the cost of replacing damaged property until the repairs are complete. Since the repairs the Plaintiff needed to perform took more than two years to complete, a strict application of both provisions placed the insured in a paradoxical situation where its claim for replacement costs was "time-barred before it [came] into existence." The Court of Appeals noted that, in general, agreements providing "a shorter, but reasonable" limitations period are enforceable, and the Court has upheld limitations periods as short as one year. As applied in this case, however, the Court found that the two-year limitations period was "unreasonable and unenforceable": ...


Posted: February 13, 2014

Agreement Not Unconscionable Because it Was Not One Only a Delusional Party Would Make

On February 11, 2014, the First Department issued a decision in B.D. Estate Planning Corp. v. Trachtenberg, 2014 NY Slip Op. 00889, granting the plaintiff summary judgment on the defendant's defense that an agreement was unconscionable. In B.D. Estate Planning Corp., the First Department affirmed the trial court's dismissal of the defendant's unconscionability defense, explaining: ...


Posted in Commercial, Contracts
Posted: February 12, 2014

Fourth Department Declares Florida Law Regarding the Enforcement of Non-Compete Agreements Unenforceable on Public Policy Grounds

On February 7, 2014, the Fourth Department issued a decision in Brown & Brown, Inc. v. Johnson, 2014 NY Slip Op. 00822, declaring unenforceable on public policy grounds a Florida statute providing that in determining the enforceability of a non-compete agreement, a court "shall not consider any individualized economic or other hardship that might be caused to the person against whom enforcement is sought." In Brown & Brown, the plaintiff sued a former employee for breach of restrictive covenants in an employment agreement that prohibited her from soliciting customers or employees for a two-year period following the termination of her employment.  As the Fourth Department noted, under New York law, non-compete agreements are "almost uniformly disfavored and are sustained only to the extent that they are reasonably necessary to protect the legitimate interests of the employer and not unduly harsh or burdensome to the one restrained."  The courts apply a three-part test to assess the reasonableness of a restrictive covenant under which the party moving to enforce the agreement must show that the restraint "(1) is no greater than is required for the protection of the legitimate interest of the employer, (2) does not impose undue hardship on the employee, and (3) is not injurious to the public."  The employment agreement at issue, however, was governed by Florida law, which "expressly forbids courts from considering the hardship imposed upon an employee in evaluating the reasonableness of a restrictive covenant."  The Fourth Department found that Florida law conflicts with New York public policy and is therefore unenforceable: ...


Posted: February 11, 2014

Breach of Contract With Which Promissory Note Was Inextricably Intertwined Creates Defense to Payment of the Note

On January 21, 2014, Justice Demarest of the Kings County Commercial Division issued a decision in Zamore, Zamore & Zamore v. Aloyts, 2014 NY Slip Op. 50139(U), denying a motion for summary judgment in lieu of complaint for payment of a promissory note. Zamore was "an action to recover monies owed on a promissory note" related to an earlier dispute over the failed sale of co-op shares. The court denied the plaintiff's motion for summary judgment in lieu of a complaint. While the case had several complicating factors, here we focus on the narrow question of the plaintiff's entitlement to summary judgment on their promissory note.  The court explained: ...