Blogs

Commercial Division Blog

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

Insured Not Entitled To Attorneys’ Fee Incurred In Coverage Action

On April 8, 2014, Justice Kornreich of the New York County Commercial Division issued a decision in Madison 96th Associates, LLC v. 17 East Owners Corp., 2014 NY Slip Op. 50569(U), ruling that an insurance policyholder that successfully brought a declaratory judgment action establishing its right to coverage was not entitled to recover its attorneys' fees incurred in the declaratory judgment action even though it would have been so entitled had its insurer brought the action. Under the well-known American Rule, each party to a litigation incurs its own legal fees, unless a statute, court rule or agreement provides otherwise. In Mighty Midgets v Centennial Ins. Co., 47 N.Y.2d 12, 21 (1979), the Court of Appeals recognized a limited exception in the insurance context, allowing an insured to recover fees when it "has been cast in a defensive posture by the legal steps an insurer takes in an effort to free itself from its policy obligations." As Justice Kornreich explained:

READ FULL POST

Posted in Commercial, Insurance
Posted: April 17, 2014

Chinese Wall Does Not Prevent Law Firm From Being Disqualified

On April 4, 2014, Justice Friedman of the New York County Commercial Division issued a decision in Manus v. Family M. Foundation Ltd., 2014 NY Slip Op. 30921(U), disqualifying the defendants' long-time law firm. In Manus, the current plaintiff, Ninotchka Manus, was substituted in as plaintiff based on her acquisition of shares from a previous holder.  Among the issues in the action were the validity of the transfer to Manus as well as the validity of a prior transfer to her predecessor-in-interest. Manus moved to disqualify the defendants' law firm, which had represented them since 2004, because an attorney who previously had represented Manus's predecessor in 2005 had joined the firm as a partner. Justice Friedman granted the motion based upon the following rulings:

READ FULL POST

Posted: April 16, 2014

Insurance Broker Owes Non-Contractual Duty to Other Brokers

On April 8, 2014, Justice Schweitzer of the New York County Commercial Division issued a decision in Rampart Brokerage Corp. v. RIBS NY LLC, 2014 NY Slip Op. 30938(U), addressing the duties owed by one insurance broker to another. In Rampart Brokerage Corp., the plaintiff insurance broker brought tort and breach of contract claims against other brokers and several of their employees. In arguing that the plaintiff's negligence claim should be dismissed, the moving defendants argued that insurance brokers do not owe each other duties other than contractual duties. The trial court disagreed, explaining:

READ FULL POST

Posted in Commercial, Insurance
Posted: April 15, 2014

Court Will Not Examine Adequacy of Consideration Given for Guarantee Absent Fraud or Unconscionability

On April 8, 2014, Justice Kornreich of the New York County Commercial Division issued a decision in Pensmore Investments LLC v. Gruppo, Levey & Co., 2014 NY Slip Op. 30922(U), granting the plaintiff summary judgment as against defendant William Sprague on a guarantee notwithstanding the guarantor’s argument that the guarantee was not a binding contract because there the defendant received no consideration for entering into it. The court also granted a motion made by defendants related to Gruppo, Levey & Co. to dismiss causes of action alleging breaches of the covenant of good faith and fair dealing and granted in part a motion to dismiss causes of action based upon piercing the corporate veil. In granting the summary judgment motion against defendant William Sprague, the court rejected the lack of consideration argument, explaining:

READ FULL POST

Posted in Commercial, Contracts
Posted: April 14, 2014

Opportunity to Comment on Proposed Change to Commercial Division Rules

The Office of Court Administration has asked for public comment on yet another proposed change to the rules of the Commercial Division. This is the fifth proposed Commercial Division rule change on which the court has sought comment in the past two weeks. The proposed new rule would require Commercial Division justices to schedule "oral argument on a motion" for its own

READ FULL POST

Posted: April 13, 2014

Decision Analyzes Limits of Former Employee’s Common Law Obligations to Employer

On April 2, 2014, Justice Whelan of the Suffolk County Commercial Division issued a decision in Freed, Kleinberg, Nussbaum, Festa & Kronberg, MD., LLP v. Nastasi, 2014 NY Slip Op. 30879(U), discussing the duties of employees to their former employer. In Freed, Kleinberg, the plaintiff medical practice sued "[t]he individual defendants" who "were employed by the plaintiff as staff physicians" and a "corporate defendant" that was "a competing medical practice established by" one of the individual defendants. In deciding the plaintiff's motion for partial summary judgment, the court discussed the legal obligations of employees to their employers:

READ FULL POST

Posted: April 12, 2014

E-Mails Can Meet Signed Writing Requirement of Statute of Frauds

On March 31, 2014, Justice Schweitzer of the New York County Commercial Division issued a decision in Rhodium Special Opportunity Fund, LLC v. Life Trading Holdco, LLC, 2014 NY Slip Op. 30840(U), addressing whether an exchange of emails created a binding contract under the statute of frauds. In Rhodium Special Opportunity Fund, the plaintiff hedge fund sued a number of defendants in connection with the "unsuccessful negotiation for the purchase of a $44 million portfolio of forty-five life insurance policies." The court addressed several issues in deciding the defendants' motion to dismiss, including the question of whether e-mails could meet the statute of frauds' requirement that a writing be "subscribed by the party to be charged therewith":

READ FULL POST

Posted in Commercial, Contracts
Posted: April 11, 2014

Opportunity to Comment on Proposed Change to Commercial Division Rules

The Office of Court Administration has asked for public comment on yet another proposed change to the rules of the Commercial Division. This is the fourth proposed Commercial Division rule change on which the court has sought comment in the past two weeks. The proposed change would amend Commercial Division Rule 8(a) to add an additional topic on which parties must consult prior to a preliminary conference:

READ FULL POST

Posted: April 11, 2014

Settlement of Federal Derivative Action Bars State Court Plaintiff’s Derivative Action

On April 1, 2014, Justice Lowe (formerly of the New York County Commercial Division and now Presiding Justice of the Appellate Term, 1st Judicial District), issued a decision in Wexler v. KPMG LLP, 2014 NY Slip Op. 30825(U), granting a series of motions to dismiss in an action brought by an investor who allegedly lost money as a result of

READ FULL POST

Posted: April 10, 2014

Second Circuit Asks Court of Appeals to Clarify the Minimum Requirements Under Judiciary Law § 470

On April 8, 2014, in Schoenefeld v. State of New York, 11-4283-cv, the Second Circuit certified a question to the Court of Appeals regarding the "minimum requirements" of New York Judiciary Law 470, "which mandates that a nonresident attorney maintain an office for the transaction of law business within the state of New York." In Schoenefeld, the NDNY granted the plaintiff summary judgment declaring that "New York Judiciary Law § 470 unconstitutional as violative of the Privileges and Immunities Clause of Article IV, section 2 of the Constitution. Specifically, the district court held that Section 470, which requires nonresident attorneys to maintain an 'office for the transaction of law business' within the state of New York in order to practice in New York courts, places an impermissible burden on" the plaintiff's "fundamental right to practice law and that the state 'failed to establish either a substantial state interest advanced by [the statute], or a substantial relationship between the statute and that interest.'" In considering the defendants' appeal, the Second Circuit reserved decision and certified the following question to the Court of Appeals:

READ FULL POST