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Commercial Division Blog

Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: September 11, 2014

Air Rights Real Property That Cannot be Converted

On September 3, 2014, Justice Ramos of the New York County Commercial Division issued a decision in Harmit Realties LLC v. 835 Ave. of the Americas, L.P., 2014 NY Slip Op. 51349(U), holding that air rights were real property and thus not a permissible subject of a conversion claim. In Harmit Realties, a dispute regarding air rights, the defendant moved to dismiss on statute of limitations grounds, arguing that notwithstanding how they were styled, the plaintiff's claims were for conversion and for that reason were time barred. The court rejected the argument, explaining that air rights are real property, which is not subject to conversion:

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Posted: September 10, 2014

Fraud Claim Dismissed As Duplicative of Breach of Contract Claim

On September 4, 2014, the First Department issued a decision in Beta Holdings, Inc. v. Goldsmith, 2014 NY Slip Op. 06035, dismissing a fraud counterclaim as duplicative of the counterclaim-plaintiffs' breach of contract claim. In Beta Holdings, the plaintiffs, entities associated with a private equity fund, filed suit against the principals of a company the fund acquired, asserting claims for fraud and breach of contract arising from alleged misrepresentations regarding the financial condition of the company.  The defendants filed counterclaims, including a claim for fraud, arising from the plaintiffs' failure to pay amounts due on a note that was issue in connection with the transaction.  New York Commercial Division Justice Jeffrey K. Oing denied the plaintiffs' motion to dismiss the fraud counterclaim, and the First Department reversed, holding that the fraud claim was duplicative of the breach contract claim because the defendants did not "allege a duty separate from the terms of the agreement that was breached":

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Posted: September 9, 2014

Claim for Breach of Covenant of Good Faith and Fair Dealing Duplicative When it Arises from Same Operative Facts as Contract Claim

On September 4, 2014, the First Department issued a decision in Mill Financial, LLC v. Gillett, 2014 NY Slip Op. 06039, holding that a claim for breach of the covenant of good faith and fair dealing is duplicative of a breach of contract claim when both claims arise from the same operative facts. In Mill Financial, a dispute over commercial loans, the trial court denied a defendant's motion to dismiss. On appeal, the First Department reversed the portion of the trial court's decision that refused to dismiss the plaintiffs' "claim for breach of the covenant of good faith and fair dealing" as "duplicative of the breach of contract claim," explaining:

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Posted in Commercial, Contracts
Posted: September 8, 2014

Court of Appeals Arguments of Interest for the Weeks of September 8, 2014 and September 15, 2014

Arguments the weeks of September 8, 2014 and September 15, 2014, in the Court of Appeals that may be of interest to commercial litigators. No. 156: Ellington v. EMI Music Inc. (To be argued Thursday, September 11, 2014) (regarding the interpretation of the provisions of a royalty agreement between the family of Duke Ellington and music publishers concerning the allocation of revenues from foreign publication of

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Posted: September 7, 2014

Defendant Not Allowed to Subpoena Plaintiffs’ Employees Directly

On August 28, 2014, Justice Bransten of the New York County Commercial Division issued a decision in Town New Development Sales & Marketing LLC v. Price, 2014 NY Slip Op. 32307(U), explaining the application of CPLR 3106 when a party seeks to depose an opponent's employees. In Town New Development Sales & Marketing, an employment contract dispute, the defendant moved to compel discovery, including "the depositions of two of Plaintiffs' employees, nonparties Andrew Heiberger and Wendy Maitland." The court denied that part of the defendant's motion, explaining:

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Posted: September 6, 2014

Insured Must Act Promptly to get Advancement of Defense Costs; Past Defense Costs Need not be Paid until any Coverage Litigation is Resolved

On August 27, 2014, Justice Kornreich of the New York County Commercial Division issued a decision in QBE Americas, Inc. v. ACE America Insurance Co., 2014 NY Slip Op. 51330(U), granting in part and denying in part a motion a summary judgment motion seeking advancement of defense costs. This insurance coverage dispute arose from underlying litigations where consumers sued QBE for

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Posted: September 5, 2014

Attorney Affidavit Admitted in Support of Motion for Summary Judgment

On August 27, 2014, Justice Bransten of the New York County Commercial Division issued a decision in ZV NY, Inc. v. Moskowitz, 2014 NY Slip Op. 51338(U), explaining the circumstances in which an attorney affidavit may be used to support a motion for summary judgment. In ZV NY, a commercial landlord-tenant dispute, the defendant opposed the plaintiff's motion for partial summary judgment on several grounds, including that the motion was "procedurally deficient because Plaintiff failed to submit an affidavit by a person having knowledge of the facts as required by CPLR 3212(b). Instead, Plaintiff submitted an affirmation of its attorney, along with accompanying exhibits." (Internal quotations and elision omitted). Notwithstanding many cases providing--as a general matter--that attorney affidavits are not sufficient support for a motion for summary judgment, the court rejected the defendant's argument, explaining:

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Posted: September 4, 2014

Court of Appeals Accepts Certified Questions Regarding Interpretation of Oil and Gas Leases

On August 28, 2014, the Court of Appeals accepted two certified questions from the Second Circuit in Beardslee v. Inflection Energy, LLC, 12-4897-CV, a case involving the interpretation of oil and gas leases. At issue in Beardslee is the interplay between two provisions in the leases: (1) the so-called "habendum" clause, which sets the duration of the lease, and (2) a force majeure clause, which concerns delays or interruptions in drilling. The habendum clauses at issue provided for a five year initial term, and an option for a secondary term, which would extend "as long thereafter" as the land "is operated by the Lessee in the production of oil or gas." The force majeure clauses stated: "If and when drilling . . . [is] delayed or interrupted . . . as a result of some order, rule regulation . . . or necessity of the government, or as the result of any other cause whatsoever beyond the control of the Lessee, the time of such delay or interruption shall not be counted against the Lessee, anything in this lease to the contrary notwithstanding." After the expiration of the five-year term, the lessee had still not commenced drilling because the only "commercially viable" method of drilling in the property—high-volume hydraulic fracturing, or "fracking"—was subject to a regulatory moratorium in New York (although permits for other unprofitable methods were in theory available). The lessees took the position that the regulations amounted to a force majeure event under the leases, and that the force majeure clause extended the term in the habendum clause. The landowners brought a declaratory judgment action in the Northern District of New York, alleging that the leases expired by their terms after five years because the lessees had not begun drilling. The district judge granted summary judgment to the landowners, declaring the leases expired. Finding that the case raised novel and important questions of New York law that had not been addressed by the Court of Appeals, or any lower courts, the Second Circuit certified two questions to the Court of Appeals:

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Posted: September 3, 2014

First Department Decisions Address Use of Emails As “Documentary Evidence” For Motion to Dismiss

On August 28, 2014, the First Department issued decisions in Amsterdam Hospitality Group, LLC v. Marshall-Alan Assoc., Inc., 2014 NY Slip Op. 06007, and Art & Fashion Group Corp. v. Cyclops Production, Inc., 2014 NY Slip Op. 06008, addressing the use of email correspondence as "documentary evidence" for purposes of a motion to dismiss. One unique feature of New York State motion practice is that, in addition to the motion to dismiss for failure to state a cause of action, the CPLR permits a motion to dismiss on the "ground that . . . a defense is founded upon documentary evidence." CPLR 3211(a)(1). Amsterdam Hospitality Group and Art Fashion Group are commercial cases (the former a fraud action brought against an executive search firm and the latter an action for breach of an oral joint venture agreement) in which the defendants filed 3211(a)(1) motions based on email correspondence between the parties that allegedly refuted the claims. As the majority observed in Amsterdam Hospitality Group, the New York courts "have grappled with the issue of what writings do and do not constitute documentary evidence, since the term is not defined by statute":

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Posted: September 2, 2014

Second Department Affirms Trial Court Decision Modifying Settlement Agreement

On August 27, 2014, the Second Department issued a decision in Mochkin v. Mochkin, 2014 NY Slip Op. 05963, affirming a trial court decision modifying a settlement agreement that had been entered on the record before it. In Mochkin, the parties settled a dispute between them "in a stipulation of settlement dated July 25, 2011, which was so-ordered by the Supreme Court." The stipulation "provided that the Supreme Court would retain jurisdiction 'in all matters related hereto.'" When the defendant was unable to perform the agreement because the plaintiff had filed a notice of pendency against property involved in the dispute, "the defendant moved for a further extension of time to pay the remaining $700,000," which the trial court granted. The Second Department affirmed, explaining:

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