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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: November 4, 2013

“Best Efforts” Clause Enforced Notwithstanding Absence of Objective Criteria in Agreement Against Which Efforts Could Be Measured

On October 24, 2013, Justice Friedman of the New York County Commercial Division issued a decision in Glanzer & Co., LLC v. Air Line Pilots Association, 2013 NY Slip Op. 32713(U), denying defendant's motion for summary judgment dismissing plaintiff's breach of contract claim after concluding that material issues of fact existed with respect to whether defendant had breached a "best

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Posted in Commercial, Contracts
Posted: November 3, 2013

Public Not Third-Party Beneficiary of Lease Between City and Museum

On October 29, 2013, Justice Kornreich of the New York County Commercial Division issued a decision in Saska v. Metropolitan Museum of Art, 2013 NY Slip Op. 23366, addressing, among other things, the law of third-party beneficiaries as applied to the Metropolitan Museum of Art's "pay what you wish" admissions policy. In Saska, the plaintiffs alleged that they were third-party beneficiaries of the lease entered into by the City and the museum in 1878 that prohibited the museum from charging for admission. The museum, they argued, had violated the lease by charging admission under its "pay what you wish" admissions policy, because that policy required almost all visitors to pay something to enter the museum, even if only a penny. Justice Kornreich found that the plaintiffs were not third-party beneficiaries of the lease, even though they were members of the public that the museum was founded to serve, and even if they were, they were not entitled to the remedy they were seeking:

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Posted in Commercial, Contracts
Posted: November 2, 2013

Failure to Timely Raise Discovery Disputes with the Court Waives Them

On October 21, 2013, Justice Bransten of the New York County Commercial Division issued a decision in Gama Aviation Inc. v. Sandton Capital Partners, LP, 2013 NY Slip Op. 32648(U), showing the importance of dilligently identifying and raising discovery disputes. The Gama Aviation decision dealt with several issues, including two motions to compel the production of documents. Both were denied. Among the reasons for the denial was that the movants did not bring the motions until the close of discovery, as much as two years after document production began. As Justice Bransten held in connection with the motion to compel relating to a non-party:

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Posted: November 1, 2013

Insurance Law’s Notice Requirements Strictly Construed

On October 23, 2013, Justice Ramos of the New York County Commercial Division issued a decision in Schoonover v. Massachusetts Mut. Life. Ins. Co., 2013 NY Slip Op. 32682(U), reminding insurance companies that they ignore the notice requirements of the Insurance Law at their peril. In Schoonover, the plaintiffs, trustees of an insurance trust established by a now-deceased partner at Skadden Arps, purchased life insurance from defendant Mass Mutual through Skadden. From the date of issuance until the insured's retirement, Skadden paid the monthly charges on the policy. Upon the insured's retirement, Mass Mutual issued a letter of portability. When premiums had thereafter not been paid, Mass Mutual issued non-payment notices to Skadden and then ultimately notices of cancellation to Skadden as well. Justice Ramos granted summary judgment to the plaintiffs, ruling that the notices to Skadden were not sufficient and that the insurer was required to provide actual notice to the actual address of the insured:

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Posted in Commercial, Insurance
Posted: October 31, 2013

Existence of Fiduciary Duty Depends on Role in Which Party is Acting

On October 30, 2013, the Second Department issued a decision in Varveris v. Zacharakos, 2013 N.Y. Slip Op. 07028, examining when a corporate officer/director owes a fiduciary duty to the corporation's shareholders. In Varveris, the defendant was "a director, officer, shareholder, and managing agent of" a close corporation of which plaintiff was a shareholder. Defendant purchased another shareholder's shares in the corporation. Plaintiff sued defendant for breach of fiduciary duty in connection with the sale, claiming that defendant had a duty to allow plaintiff to participate in the purchase. The Second Department held that defendant had no fiduciary duty to plaintiff in this situation, writing:

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Posted: October 30, 2013

Res Judicata Bars Claims Arising During Prior Lawsuit

On October 29, 2013, the First Department issued a decision in Jumax Assoc. v. 350 Cabrini Owners Corp., 2013 NY Slip Op. 06992, illustrating the scope of the doctrine of res judicata. Jumax had previously commenced an action in 2002 seeking to recover fees that had been paid to defendant co-op pursuant to a license agreement defendant had entered into

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Posted: October 29, 2013

Documentary Evidence Refutes Allegation that Defendant was Party to Contract

On October 16, 2013, the Second Department issued a decision in Kalmon Dolgin Affiliates, Inc. v. Tonacchio, 2013 NY Slip Op. 06660, illustrating the importance of the documentary evidence prong of a motion to dismiss and its usefulness in dismissing a claim at the beginning of an action. In Kalmon Dolgin, the Second Department partially reversed an opinion by Justice Schmidt of the Kings County Commercial Division, holding that he should have granted a motion to dismiss based on documentary evidence establishing that the signatory to the contract was not actually binding his corporate affiliates to the agreement upon which they were being sued. The Second Department wrote:

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Posted: October 26, 2013

Oral Argument Heard on Exempt Income Protection Act (EIPA)’s Procedural Requirements

On October 9, 2013, we noted that on October 15, 2013, the Court of Appeals would be hearing argument in Cruz v. TD Bank NA., Docket No. 191, an appeal addressing two questions certified from the US Court of Appeals for the Second Circuit relating to a private right of action for money damages and injunctive relief against banks that violate

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Posted: October 25, 2013

Divided First Department Panel Enforces Burdensome “Notwithstanding” Clause

On October 24, 2013, the First Department, in a 3-2 decision, issued a decision in BDC Finance L.L.C. v. Barclays Bank PLC, 2013 NY Slip Op. 06963, enforcing a contract in a way that created a significant burden on one party but not the other. This apparent unfair result was due to a "notwithstanding" clause similar to the clause examined in the First Department decision that was a subject of our October 24, 2013 post: “Notwithstanding” Clause Controls Contract Even When It Reads Other Term Out of the Contract." The BDC Finance majority (Saxe, DeGrasse, and Richter, JJ.) held that Barclays breached its contract with the plaintiff hedge fund by not immediately complying with the hedge fund's demand that Barclays return certain collateral pledged to secure a derivative transaction, even though Barclays disputed the amount of collateral that had to be returned. The majority held:

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Posted in Commercial, Contracts
Posted: October 25, 2013

False Warranty in Commercial Contract Can be Basis of Fraud Claim

On October 21, 2013, Justice Ramos of the New York County Commercial Division issued a decision in Wyle Inc. v. ITT Corp., 2013 NY Slip Op. 51707(U), addressing the availability of a fraudulent inducement claim based on a breach of warranty. In Wyle, defendant ITT argued that a fraud claim based on a warranty in an agremeent "must be dismissed as duplicative of Plaintiffs' breach of contract claim."  Justice Ramos disagreed, writing that:

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Posted in Commercial, Contracts