Blogs

Commercial Division Blog

Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: August 29, 2014

Defamation Claim Dismissed Where Statements Were Protected By “Fair Reporting” Privilege

On August 28, 2014, Justice Kornreich of the New York County Commercial Division issued a decision in GEM Holdco, LLC v. Changing World Technologies, L.P., Index No. 650941/2013, ruling that a defamation claim arising from a press release explaining a party's defenses and anticipated counterclaims in a pending lawsuit was barred by New York’s absolute "fair reporting" privilege. In GEM Holdco, a lawsuit arising from an investment in a renewable fuel company, the plaintiff issued a press release announcing the filing of an amended complaint. Two hours later, one of the defendants issued its own press release that, in substance, outlined its defenses and anticipated counterclaims in the lawsuit. The plaintiff claimed that the statements in the defendant’s press release were defamatory and amended its complaint again to add a cause of action for defamation. Justice Kornreich dismissed the claim, ruling that the statements in the defendant's press release were protected by the "fair reporting" privilege set forth in Section 74 of the New York Human Rights Law and could not be the subject of a defamation claim:

READ FULL POST

Posted in Commercial, Defamation
Posted: August 28, 2014

Acquirer Not Liable for Tortious Interference With Contract of Company it Acquired

On August 4, 2014, Justice Schweitzer of the New York County Commercial Division issued a decision in American Water Enterprises Inc. v. Tectura Corp., 2014 NY Slip Op. 32182(U), dismissing a claim for tortious interference with contract. In American Water Enterprises, the plaintiff asserted a claim for tortious interference with contract against a defendant that was in the process of acquiring Tectura, a company that had a contract with the plaintiff. The court granted the defendant's motion to dismiss the claim, explaining:

READ FULL POST

Posted: August 27, 2014

Defendant Can Be Held Liable Statements in Preliminary Offering Materials it Later Disclaimed

On August 5, 2014, Justice Schweitzer of the New York County Commercial Division issued a decision in NRAM PLC v. Societe Generale Corp., 2014 NY Slip Op. 32155(U), holding that the plaintiff had stated a claim for fraud based on statements the defendant later had disclaimed.  In NRAM PLC, the plaintiff brought "causes of action for fraud, breach of contract, and unjust enrichment in relation to a collateralized debt obligation" against several defendants. One defendant--Societe Generale Corporate and Investment Banking (SGCIB)--moved to dismiss. Among the issues the court addressed in denying SGCIB's motion were its arguments that it was not liable for the misrepresentations alleged in the Complaint. The court rejected those arguments, explaining:

READ FULL POST

Posted: August 26, 2014

Court Grants Summary Judgment Even Though Defendants Sought More Discovery

On August 15, 2014, Justice Whelan of the Suffolk County Commercial Division issued a decision in Flax v. Shirian, 2014 NY Slip Op. 51229(U), rejecting a request to defer decision on a motion for summary judgment pending further discovery. In Flax, the plaintiffs sought partial summary judgment on their claims in a business divorce action. Among the grounds advanced by the defendants in opposition to the motion was that the "motion [wa]s premature due to the absence of discovery." The court rejected that argument, explaining:

READ FULL POST

Posted: August 25, 2014

New York Choice of Law Clause Not Sufficient To Invoke New York Rule Against Punitive Damages Awards In Arbitration

On August 14, 2014, the First Department issued a decision in In re Flintlock Construction Services, LLC v. Weiss, NY Slip Op 05818, ruling (by a 3-2 vote) that a choice of law provision providing that the parties' agreement was to be "construed and enforced" in accordance with the law of New York was not sufficient to invoke New York's public policy against the imposition of punitive damages in a private arbitration, and therefore, the issue of punitive damages could be submitted to the arbitrators. In In re Flintlock, investors in a real estate project commenced an arbitration against real estate development companies and their principals, alleging fraud and breach of contract, and seeking punitive damages. The transactions at issue were governed by two LLC operating agreements, which contained identical choice of law clauses, providing that the agreements "shall be construed and enforced in accordance with the laws of the State of New York." The defendants moved before the arbitration panel to dismiss the punitive damages claim on the ground that such a claim was not arbitrable under New York law. Specifically, the Court of Appeals held, in Garrity v. Lyle Stuart, Inc., 40 N.Y.2d 354, 356 (1976), that under New York law, arbitrators "ha[ve] no power to award punitive damages, even if agreed upon by the parties." By contrast, under the Federal Arbitration Act (which applies to any claim concerning a "transaction involving interstate commerce"), punitive damages are available if the parties' agreement so provides. See Mastrobuono v. Shearson Lehman Hutton, 514 U.S. 52, 58 (1995) (where parties "agree to include claims for punitive damages within the issues to be arbitrated, the FAA ensures that their agreement will be enforced according to its terms even if a rule of state law would otherwise exclude such claims from arbitration"). The panel denied the motion to dismiss "without prejudice to renewal at the hearing, based on a more complete record as to whether the claim affected interstate commerce, and thus, mandated application of the [FAA]." The defendants then commenced a special proceeding in New York Supreme Court to permanently enjoin the arbitration, under CPLR 7503(b), on the grounds that the arbitrators had exceeded their authority, and lacked the power to award punitive damages. The motion court denied the motion, holding that the movants had "charted their own course" by "actively litigat[ing]" before the arbitration panel, and waived any argument as the arbitrability of punitive damages claims. The First Department, in a decision by Justice Manzanet-Daniels (and joined by Justices Acosta and Saxe), affirmed. The majority rejected the argument that the New York choice of law provision in the contracts mandated application of the Garrity rule barring punitive damages claims in arbitration:

READ FULL POST

Posted: August 24, 2014

Court Refuses to Vacate Default Judgment Where Defendant Provides no Reasonable Excuse for his Failure to Answer

On August 5, 2014, Justice Whelan of the Suffolk County Commercial Division issued a decision in Wells Fargo Bank, N.A. v. Pasciuta, 2014 NY Slip Op. 32113(U), granting a default judgment. In Wells Fargo Bank, the plaintiff moved for default judgment against the defendant and the defendant cross-moved to vacate the default and answer. Notwithstanding the liberality shown by courts to defaulting defendants, the court granted the motion for default judgment, explaining:

READ FULL POST

Posted: August 23, 2014

Statute of Limitations Applicable to Fraud and Breach of Fiduciary Duty Claims Can Vary Based on Nature of Claim and Relief Sought

On August 4, 2014, Justice Sherwood of the New York County Commercial Division issued a decision in Blumenstyk v. Singer, 2014 NY Slip Op. 32124(U), illustrating the analysis used to determine the statute of limitations applicable to claims of breach of fiduciary duty and fraud. In Blumenstyk, the plaintiffs brought twenty-four causes action against the defendants. Ultimately, most were dismissed. This post looks at the question of the statute of limitations applicable to the plaintiffs' breach of fiduciary duty and fraud claims. The court reviewed the analysis used to determine the statute of limitations applicable to such claims:

READ FULL POST

Posted: August 22, 2014

Exchange of E-mails Did Not Create Binding Settlement Agreement

On August 6, 2014, Justice Schmidt of the Kings County Commercial Division issued a decision in Rubin v. Deckelbaum, 2014 NY Slip Op. 32150(U), declining to find that an exchange of e-mails had created a binding settlement agreement. In Rubin, the defendant moved for judgment dismissing the complaint based on an out-of-court settlement agreement that the parties and their counsel had negotiated by e-mail but not reduced to a single writing. The court denied the motion, explaining:

READ FULL POST

Posted: August 21, 2014

Statute of Frauds Applies to All Aspects of Agreement Regarding Negotiating Business Opportunity

On July 30, 2014, Justice Kornreich of the New York County Commercial Division issued a decision in Penncolab LLC v. 118 E. 59th St. Realty LLC, 2014 NY Slip Op. 32027(U), holding that all aspects of an agreement "to pay compensation for services rendered in negotiating a business opportunity" were governed by the statute of frauds, even those collateral to the negotiation. In Penncolab LLC, the plaintiff brought an action relating to the defendants' alleged failure to honor an oral agreement. In granting the defendants' motion to dismiss on statute of frauds grounds, the court explained:

READ FULL POST

Posted in Commercial, Contracts
Posted: August 20, 2014

JHO Vacates Own Report For Exceeding Her Mandate

On August 13, 2014, the Second Department issued a decision in GMS Batching, Inc. v. TADCO Construction Corp., 2014 NY Slip Op. 05773, largely affirming a 2012 judgment of Justice Kitzes of the Queens County Commercial Division. The factual basis of the action was a run-of-the-mill contract dispute, but the procedural history is of some interest:

READ FULL POST