Blogs

Commercial Division Blog

Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: December 4, 2013

Court of Appeals Clarifies Criteria for Giving Missing Witness Charge

On November 26, 2013, the Court of Appeals issued a decision in DeVito v. Feliciano, Docket No. 195, explaining the criteria for issuing a missing witness charge. DeVito was personal injury litigation, but the Court of Appeals' decision relates to an issue that affects commercial trials just as much as personal injury trials: the circumstances under which a jury should be instructed to draw a negative inference from a party's failure to call a key witness at trial. The Court of Appeals explained:

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Posted in Commercial, Trial
Posted: December 3, 2013

Motion to Seal Sensitive Commercial Document Granted

On November 6, 2013, Justice Ramos of the New York County Commercial Division issued a decision in Greystone Funding Corp. v. Kutner, 2013 NY Slip Op. 32980(U), sealing portions of the record in that action. Unlike federal courts, New York state courts rarely seal court records. Because of the importance of this issue to commercial litigators, we have repeated below Justice Ramos's analysis in granting a motion to seal:

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Posted: December 2, 2013

IRS Audit Put Taxpayer on Inquiry Notice of Possible Fraud Claim Against Tax Advisor

On November 19, 2013, Justice Friedman of the New York County Commercial Division issued a decision in Chlsea, LLC v. Gramercy Fin. Servs., LLC, 2013 NY Slip Op. 32946(U), dismissing fraud and related tort claims on statute of limitations grounds because the plaintiff was on inquiry notice. In Chlsea, the plaintiff made a tax shelter investment that ultimately was disallowed by the IRS. Plaintiff sued its tax advisor for fraud. Justice Friedman ruled that the IRS's audits of the plaintiff placed it on inquiry notice of a possible fraud claim, writing:

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Posted: December 1, 2013

Real Property Law § 320 Limits Structuring Real Property Transactions as Sales

On November 27, 2013, the Second Department issued a decision in Bouffard v. Befese, LLC, 2013 NY Slip Op. 07925, interpreting Real Property Law § 320's command that a "deed conveying real property, which, by any other written instrument, appears to be intended only as a security in the nature of a mortgage, although an absolute conveyance in terms, must be considered a mortgage." In Bouffard , a convoluted series of real estate transactions included one in August 2004 where defendant purchased a property for $200,000 and entered into an "option agreement permitting" plaintiff "to repurchase the property within 90 days at an option price of $220,000." Defendant did not take possession of the property. In an action, "inter alia, to set aside the" deed, the trial court found that under Real Property Law § 320, the deed and option were only a mortgage and, moreover, that the mortgage loan "was usurious and void pursuant to Banking Law § 14—a and General Obligations Law § 5—501." The Second Department Affirmed, writing:

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Posted: November 30, 2013

Judiciary Law Section 478 Applies Only to Legal Services Provided in New York

On November 27, 2013, the Second Department issued a decision in Gover v. Savyon, 2013 NY Slip Op. 07934, interpreting Judiciary Law § 478 in a situation where an attorney who was not licensed to practice in New York provided legal services both in New York and in another jurisdiction. In Gover, plaintiff, an Israeli attorney not licensed to practice in New York, sued defendant "to recover fees for legal services."  Defendant argued that the complaint should be dismissed because plaintiff "was barred under Judiciary Law § 478 from recovering fees for such services" because he was not licensed in New York. The trial court granted defendant's motion for summary judgment on this ground with respect to "legal services that the plaintiff undisputably rendered to the defendant in New York," but "otherwise denied the motion." The Second Department affirmed, writing:

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Posted: November 29, 2013

Final Judgments Subject to Discretionary Review Under CPLR 5015

On October 7, 2013, we noted that on October 9, 2013, the Court of Appeals would hear argument in Nash v. The Port Authority of New York and New Jersey, Docket No. 238. On November 26, 2013, the Court of Appeals issued its decision in Nash, 2013 NY Slip Op. 07830, clarifying that even final judgments may be vacated under CPLR 5015. On January 14, 2010, Nash received a judgment for $4.4 million against the Port Authority of New York and New Jersey for injuries she sustained in the 1993 World Trade Center bombing. The First Department affirmed the trial court's decision on June 2, 2011. The judgment became final on July 13, 2011, "due to the failure of the Port Authority to appeal" the First Department's affirmance to the Court of Appeals. The Court of Appeals subsequently issued a decision in In Matter of World Trade Center Bombing Litig. ("Ruiz"), 17 NY3d 428 (2011), holding that "the governmental immunity doctrine insulated the Port Authority from tortious liability for injuries sustained in the" bombing. Four days later, the Port Authority moved to vacate Nash's judgment against it based on the Ruiz decision. The trial court granted the motion in a decision that a divided First Department affirmed. The Court of Appeals ruled that even though the first judgment against the Port Authority was final, the Port Authority could still move to vacate it under CPLR 5015, writing:

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Posted: November 28, 2013

Court of Appeals Enforces Lease as Written, Even Though it Leads to Harsh Result for Commercial Tenant

On October 7, 2013, we noted that on October 8, 2013, the Court of Appeals would hear argument in Eujoy Realty Corp. v. Van Wagner Communications, LLC, Docket No. 179. On November 26, 2013, the Court of Appeals issued its decision in Eujoy Realty Corp. v. Van Wagner Communications, LLC, 2013 NY Slip Op. 07823, strictly enforcing the written terms of a lease even though that resulted in a commercial tenant forfeiting almost a year's rent. The commercial lease at issue in Eujoy, provided that the yearly rent for a billboard was to be paid "in advance on January 1" and that if the lease were "terminated for any reason prior to the date of its expiration," the tenant advertising company would "not be entitled to the return of . . . any basic rent paid in advance and covering a period beyond the date on which the Lease is terminated," with exceptions not relevant here. "In early January 2007," the tenant sent the landlord a check for the "annual basic rent," but soon thereafter stopped payment on the check. A few weeks later, the tenant termminated the lease. The landlord sued for the unpaid rent. The Court of Appeals held that the tenant owed the annual rent, even though the year was only two weeks old when the tenant terminated the lease. The court explained:

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Posted in Commercial, Contracts
Posted: November 27, 2013

Arbitration Provisions in LLC Operating Agreements May Be Enforced by LLCs Even If LLCs Are Not Parties to the Agreements

On November 15, 2013, Justice Kapnick of the New York County Commercial Division issued a decision in Kellman v. Whyte, 2013 NY Slip Op. 32938(U), granting in part and denying in part the defendants’ motion to compel arbitration. In Kellman, plaintiff asserted claims against her former employer, an affiliate of her former employer and the LLC for which she had

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Posted: November 26, 2013

No Private Right of Action Against Banks Under the Exempt Income Protection Act

On October 26, 2013, we noted that on October 15, 2013, the Court of Appeals had heard argument in Cruz v. TD Bank, N.A., Docket No. 191, a matter considering two questions certified from the Second Circuit on whether there is a private right of action under the Exempt Income Protection Act of 2008 ("EIPA"). On November 21, 2013, the Court of

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