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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: May 9, 2014

Fraud on the Court Must be Proved by Clear and Convincing Evidence

On May 8, 2014, the Court of Appeals issued a decision in CDR Creances S.A.S. v. Cohen, 2014 NY Slip Op. 03294, adopting a "clear and convincing evidence" standard for motions to strike an adversary’s pleadings under CPLR 3126. CDR Creances S.A.S., concerned theft of loan funds by diverting them to fictitious entities. After two of the defendants were indicted in federal court in Florida for obstruction of justice and subornation of perjury, the plaintiffs moved to strike those defendants' pleadings and for a default judgment. After finding that the defendants had, among other things "suborned perjury by providing [witnesses] with a 'script' containing false answers to be given to their attorneys and at their depositions; created . . . wholly fictitious individuals and intentionally implicated as controlling the defendant corporations; [and] forged the affidavits of others," the Supreme Court granted the motion, struck the defendants' answers, and granted default judgments. The First Department affirmed. The Court of Appeals granted leave to appeal to address the proper evidentiary and legal standards for such a motion. The court reviewed a number of federal cases and imported the federal “clear and convincing evidence” standard into New York law:

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Posted: May 8, 2014

Minor Amendment to a Complaint Proves Fatal to Plaintiff’s Case

On May 6, 2014, the First Department issued a decision in Healthcare I.Q., LLC v. Tsai Chung Chao, 2014 NY Slip Op. 03216, reversing a decision of the New York County Commercial Division and granting summary judgment to the defendant on a previsously-waived affirmative defense that the defendant had asserted in response to an amended complaint. In Healthcare I.Q., the plaintiff contracted to provide the defendant, a doctor, with coding and billing services, pursuant to which the defendant's patient and billing records were uploaded into the plaintiff's proprietary management software program. The contract provided for an initial 36-month term, followed by automatic renewals for 18-month periods, unless either party provided written notice of non-renewal at least ninety days before the end of a renewal period. After the expiration of the original 36-month period, the defendant ceased making payments. Although he and his staff continued to use the software to review previously-uploaded patient files, they did not upload any additional files. Neither party provided written notice of termination. The plaintiff sued, alleging that the defendant's failure to provide notice of termination, as well as his ongoing use of the software, entitled it to payment for two additional 18-month terms. The defendant moved for summary judgment under General Obligations Law § 5-903(2), which provides that in any contract "for service, maintenance or repair to or for any real or personal property," automatic renewal provisions may not be enforced by the service provider unless he or she provides the service recipient "written notice, served personally or by certified mail, calling the attention of that person to the existence of such provision in the contract" within a specified time period prior to the automatic renewal. The Supreme Court denied the defendant's motion on the ground that GOL § 5-903 was an affirmative defense that had not been pled in the answer and had thereby been waived. When the plaintiff later amended the complaint to increase the ad damnum clause, the defendant included GOL § 5-903 in his amended answer and moved for summary judgment a second time. The trial court both denied the motion and sanctioned the defendant for making a second motion on the same legal ground. The First Department first vacated the award of sanctions, holding that:

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Posted: May 7, 2014

Bank Must Honor Cashier’s Check Absent Fraud or Check Being Lost, Stolen, or Destroyed

On May 6, 2014, the Court of Appeals issued a decision in Golden v. Citibank, N.A., 2014 NY Slip Op. 03192, holding that a bank must honor its cashier's checks "unless there is evidence of fraud, or the check is lost, stolen, or destroyed." The background to the court's brief opinion can be found in the Second Department's decision appealed from:

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Posted: May 6, 2014

Defamation Claim Dismissed Because Not Pled With Particularity

On April 23, 2014, Justice Schweitzer of the New York County Commercial Division issued a decision in Patterson v. Wilhelmina Intl., Ltd., 2014 NY Slip Op. 31092(U), dismissing a defamation claim because it was not pled with particularity. In Patterson, the defendant moved to dismiss the plaintiff's defamation claim. The court granted the motion because the claim was not sufficiently specific, explaining:

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Posted: May 5, 2014

Evidence Inadmissible Under Dead Man’s Statute Admissible In Opposition to Summary Judgment

On March 31, 2014, Justice Schmidt of the Kings County Commercial Division issued a decision in Peck v. Mitchell, 2014 NY Slip Op. 50715(U), applying the Dead Man's Statute on a motion for summary judgment. In Peck, the plaintiff asserted claims relating to ownership of her home. The defendant moved for summary judgment on the plaintiff's claims. One argument raised by the defendant related to the admissibility of the plaintiff's affidavit, which described an oral agreement between the plaintiff and her now-deceased son regarding ownership of her home. The court explained:

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Posted: May 4, 2014

Action Transferred to Civil Court After Summary Judgment Limits Damages

On April 23, 2014, Justice Kornreich of the New York County Commercial Division issued a decision in Saxon Technologies, LLC v. Wesley Clover Solutions-North America, Inc., 2014 NY Slip Op. 31056(U), transferring an action to Civil Court after determining on a motion for summary judgment that the plaintiff's damages were limited to less than $3,000. In Saxon Technologies, the plaintiff asserted claims

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Posted: May 3, 2014

No Fraud Without Justifiable Reliance on Alleged Misrepresentation

On May 1, 2014, the First Department issued a decision in Mosaic Caribe, Ltd. v. AllSettled Group, Inc., 2014 NY Slip Op. 03024, dismissing a fraud claim because the alleged reliance was not justifiable. In Mosaic Caribe, the First Department affirmed the denial of the plaintiff's motion to amend. Among the issues the First Department addressed was whether the plaintiff had "sufficiently allege[d] justifiable reliance on [the defendant's alleged] misrepresentation." The First Department agreed that the plaintiff had not done so, explaining:

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Posted: May 2, 2014

Order is Not Appealable Merely Because it Contains Language or Reasoning that a Party Deems Adverse to its Interests

On April 30, 2014, the Second Department issued a decision in George Tsunis Real Estate, Inc. v. Benedict, 2014 NY Slip Op. 02899, discussing types of orders that are not interlocutorily appealable. In George Tsunis Real Estate, the plaintiff and defendant both appealed the trial court's denial of the plaintiff's motion for summary judgment. The Second Department dismissed the defendant's appeal, explaining:

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Posted in Commercial, Appeals
Posted: May 1, 2014

Court of Appeals Arguments of Interest for the Week of May 5, 2014

Arguments the week of May 5, 2014, in the Court of Appeals that may be of interest to commercial litigators. Docket No. 121: Norex Petroleum Limited v. Blavatnik (To be argued Tuesday, May 6, 2014) (addressing whether "CPLR 202, New York's borrowing statute, which requires a nonresident plaintiff to satisfy the statute of limitations of New York and of the foreign jurisdiction where

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