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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: August 11, 2019

Court Need Not Determine Whether There is Personal Jurisdiction Before Dismissing on Forum Non Conveniens Grounds

On August 6, 2019, the First Department issued a decision in Kainer v. UBS AG, 2019 NY Slip Op. 06053, holding that a court need not determine whether it has personal jurisdiction over a defendant before dismissing an action on forum non conveniens grounds, explaining:

The motion court properly dismissed this action on forum non conveniens grounds without first determining whether it had personal jurisdiction over all the defendants. Sinochem Intl. Co. Ltd. v Malaysia Intl. Shipping Corp. (549 US 422 [2007]) is persuasive authority on this point. In that case, a unanimous United States Supreme Court held that a trial court

has discretion to respond at once to a defendant’s forum non conveniens plea, and need not take up first any other threshold objection. In particular, a court need not resolve whether it has authority to adjudicate the cause (subject matter jurisidiction) or personal jurisdiction over the defendant if it determines that, in any event, a foreign tribunal is plainly the more suitable arbiter of the merits of the case

To be sure, as the Sinochem Court noted, if a court can readily determine that it lacks personal jurisdiction over a defendant, the proper course is to dismiss on that ground. However, where personal jurisdiction is difficult to determine, and forum non conveniens considerations clearly militate in favor of dismissal, a court may dismiss on the latter ground.

Plaintiffs concede that they currently do not have a basis for personal jurisdiction in New York over any defendant except Christie’s. Plaintiffs’ attempt to minimize the amount of discovery necessary to establish personal jurisdiction over the remaining defendants is unconvincing. This action concerns actions taken by various entities on two continents. The defendants’ alleged actions that would expose them to personal jurisdiction in New York overlap extensively with the merits of plaintiff’s claims that Christie’s conspired with the remaining defendants to interfere with plaintiffs’ rights to the painting. As it could not readily determine, without allowing significant discovery, that it had personal jurisdiction over all the defendants, the motion court properly considered the defendants’ arguments that New York is an inconvenient forum.

The doctrine of forum non conveniens permits a court to dismiss an action that is otherwise jurisdictionally sound if it finds that in the interest of substantial justice the action should be heard in another forum. The relevant factors include: (1) the burden on the New York courts; (2) potential hardship to the defendant; (3) the unavailability of an alternative forum; (4) whether both parties are nonresidents; and (5) whether the transaction out of which the cause of action arose occurred primarily in a foreign jurisdiction. The court may also consider the location of potential witnesses and documents and potential applicability of foreign law.

These factors clearly demonstrate that New York is an inconvenient forum. Plaintiffs’ rights as heirs to the painting arose in Germany and France, although the painting was allegedly wrongfully sold in New York. The burden on the New York court in applying Swiss and French estate law to determine the underlying issue of the lawful heirs to Kainer’s estate is significant. As the motion court noted, the parties not only dispute the applicable foreign law, but discuss the substance of the law in a manner that is, at best, opaque. The applicability of foreign law is an important consideration in determining a forum non conveniens motion and weighs in favor of dismissal.

The potential hardships to the defendants of litigating in New York are clear. Kircher lives in Switzerland, the Foundation was created and is domiciled in Switzerland, UBS AG is incorporated and headquartered there, and UBS Global Asset Management has consented to jurisdiction there. Although UBS has a New York office and resources to litigate the case here, many relevant nonparty witnesses and documents are located in Switzerland and Germany, and UBS would be powerless to compel their attendance in New York.

Switzerland appears to be an available alternative forum. France and Germany also may be possible alternatives. Plaintiffs have asked the Swiss court to find that they are the sole heirs [*3]to the Kainer estate, declare the Swiss certificates of inheritance null and void, and order that all assets — not just the painting at issue herein – originating from Kainer’s estate be returned to plaintiffs. Whether the Foundation and Christie’s could enter into their agreement to sell the painting cannot be determined without reference to the underlying issue of ownership — the very issue that is already being litigated abroad. This factor thus favors dismissal, in part due to the risk of conflicting rulings. Plaintiffs note that the Foundation and the Swiss localities seek dismissal of the Swiss proceedings for lack of jurisdiction and on statute of limitations grounds. In any event, while the existence of a suitable alternative forum is an important factor, its absence does not require a New York court to retain jurisdiction.

Plaintiffs also argue that, even if the Swiss proceedings reach a determination on the merits, they will not determine plaintiffs’ rights to the paintings because the Swiss courts cannot invalidate plaintiffs’ French certificates of inheritance, but the same is true in New York. The certificates merely confer standing to sue, and do not conclusively resolve the question, in Switzerland or New York, of whether the Foundation has rights to the painting.

The foregoing factors favor dismissal against UBS, Kircher, and the Foundation, and a stay of the proceedings against Christie’s pending a determination favorable to plaintiffs in the foreign courts.

(Internal quotations and citations omitted).

Disputes regarding commercial contracts involving international parties end up being heard in New York courts. Even if the court has the power to assert jurisdiction of the parties, it can, under the forum non conveniens doctrine discussed above, dismiss the dispute so it can be heard in a forum that is more convenient for the parties. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client face a situation where you are unsure whether New York is the appropriate forum in which a dispute should be heard.

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Posted: August 10, 2019

Discovery Sanctions Denied for Failure to Explain in Detail Movant’s Efforts to Resolve the Dispute

On August 7, 2019, the Second Department issued a decision in Bronstein v. Charm City Hous., LLC, 2019 NY Slip Op. 06058, denying discovery sanctions because of the movant’s failure to explain in detail its efforts to resolve the dispute, explaining:

Pursuant to 22 NYCRR 202.7(a) and (c), a motion relating to disclosure must be accompanied by an affirmation from moving counsel attesting to a good faith effort to resolve the issues raised in the motion, including the time, place and nature of the consultation as well as the issues discussed. Here, the affirmation of good faith submitted by the defendants’ counsel in support of the cross motion for sanctions pursuant to CPLR 3126 failed to provide any detail of the claimed efforts to resolve the issues. While the defendants’ counsel asserted that he had conversations with the plaintiff’s counsel, he did not identify the dates of such conversations or the name of the attorney with whom he conversed. Therefore, the cross motion should have been denied.

(Internal citations omitted) (emphasis added).

A big part of complex commercial litigation is giving, receiving and evaluating evidence (this is called “discovery”). A litigant can be sanctioned for failing to provide discovery. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client has a question regarding discovery obligations (and what to do if a litigant is not honoring those obligations).

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Posted: August 9, 2019

Indemnification Provision Insufficiently Specific to Support Claim in Action Between Contracting Parties

On July 29, 2019, Justice Scarpulla of the New York County Commercial Division issued a decision in Barnett v. Seth Berkowitz Serve U Brands Inc., 2019 NY Slip Op. 32257(U), holding that an indemnification provision was insufficiently specific to support a claim for attorneys’ fees in an action between the contracting parties, explaining:

Defendants assert that Barnett’s cause of action for contractual indemnification is duplicative of the breach of contract claim and that Barnett is improperly seeking to recover his attorney’s fees in this action. Barnett counters that the Buy-Out Agreement entitles Barnett to contractual indemnification by Berkowitz, which includes any losses or claims incurred by Barnett in seeking to enforce his rights under the Buy-Out Agreement, including attorney’s fees.

Inasmuch as a promise by one party to a contract to indemnify the other for attorney’s fees incurred in litigation between them is contrary to the well-understood rule that parties are responsible for their own attorney’s fees, the court should not infer a party’s intention to waive the benefit of the rule unless the intention to do so is unmistakably clear from the language of the promise.

The indemnity clause in the Buy-Out Agreement does not reference attorney’s fees at all, nor does it refer exclusively or unequivocally to claims between the parties. Instead, the indemnity clause merely states “[Berkowitz] shall indemnify, after the Closing Date, [Barnett] for any losses or claims which may be incurred by [Barnett] relating to any breach of any representation made by [Berkowitz] in this Agreement, breach of any covenant or obligation of [Berkowitz] contained in this Agreement or any third-party claims which may arise from this Agreement.”

Because the indemnity clause in the Buy-Out Agreement does not exclusively or unequivocally contemplate payment of attorney’s fees and does not relate solely to claims between the parties, the indemnity clause does not meet the rigorous requirement of Hooper and Barnett’s claim under the indemnity clause is therefore dismissed.

(Internal quotations and citations omitted) (emphasis added).

We frequently litigate issues relating to the advancement or indemnification of litigation expenses such as attorneys’ fees to corporate officers, directors and employees. Such litigation involves both statutory law and parsing the terms of employment agreements and corporate documents. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have questions regarding contractual indemnification.

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Posted: August 8, 2019

Alleged Misrepresentation Regarding Future Performance Insufficient to Support Claim for Fraudulent Inducement

On July 8, 2019, Justice Scarpulla of the New York County Commercial Division issued a decision in Gluck v. Rosania, 2019 NY Slip Op. 32085(U), holding that alleged misrepresentations regarding future performance were insufficient to support a claim for fraudulent inducement, explaining:

To state a claim for fraudulent inducement, the complaint must allege that the defendant intentionally made a material misrepresentation of fact in order to defraud or mislead the plaintiff, and that the plaintiff reasonably relied on the misrepresentation and suffered damages as a result. To fulfill the element of misrepresentation of material fact, the party advancing the claim must allege a misrepresentation of present fact rather than of future intent. General allegations of lack of intent to perform are insufficient; rather, facts must be alleged establishing that the adverse party, at the time of making the promissory representation, never intended to honor the promise.

Here, Gluck alleges that, to induce him to cooperate with the transfer of his Parkmerced interest and to sign the Agreement, Rosania promised that if and when market conditions improved, he would either sell of recapitalize Parkmerced so that Rosania could use those proceeds to honor his obligations to repay Gluck. Rosania allegedly never intended to perform the Agreement or this promise, as subsequent events have proved.

These allegations are insufficient to allege a misrepresentation of present fact made by Rosania that induced Gluck’s detrimental reliance.

Gluck’s argument that Rosania’s promise is collateral to the Agreement, and is therefore sufficient to preserve his claim, is unavailing. Regardless of whether the promise was a collateral representation or made pursuant to the Agreement, Gluck alleges that Rosania lacked the intent to perform, which is clearly a statement of future intent and is thus not actionable. Accordingly, Gluck has failed to state a cause of action for fraudulent inducement.

(Internal quotations and citations omitted).

Commercial litigation frequently involves fraud-based claims. Such claims have special pleading requirements such as the rule discussed here that a fraud claim cannot be based on a breach of contract. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have a question regarding a fraud-based claim.

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Posted: August 7, 2019

Plaintiff Can Bring Suit as Third-Party Beneficiary of Contract

On July 8, 2019, Justice Cohen of the New York County Commercial Division issued a decision in HTRF Ventures, LLC v. Permasteelisa N. Am. Corp., 2019 NY Slip Op. 32095(U), holding that a plaintiff was a third-party beneficiary of a contract, explaining:

Permasteelisa argues that HTRF was not an intended third-party beneficiary of the design build agreement, and thus, cannot recover for breach of contract or breach of express warranty. Specifically, Permasteelisa contends that: (1) there is no express language indicating that HTRF was an intended third-party beneficiary; and (2) there is no evidence that Turner would have been unable to bring this litigation. HTRF maintains, however, that the design build agreement and construction management agreement expressly indicate that HTRF was the intended beneficiary of the Work and may directly enforce the guarantees and warranties provided in the design build agreement against Permasteelisa.

A third party may sue as a beneficiary on a contract made for [its] benefit. However, an intent to benefit the third party must be shown, and absent such intent, the third party is merely an incidental beneficiary with no right to enforce the particular contracts. The Court of Appeals has held that a third party has the right to enforce a contract in two situations: (1) when the third party is the only one who could recover for the breach of contract; or (2) when it is otherwise clear from the language of the contract that there was an intent to permit enforcement by the third party.

With respect to the latter situation, the First Department has held that a third party cannot be deemed an intended beneficiary of a contract unless the parties’ intent to benefit the third party is apparent from the face of the contract. Absent clear contractual language evincing such intent, New York courts have demonstrated a reluctance to interpret circumstances to construe such an intent. Here, the design build agreement unambiguously evinces an intent to permit enforcement by HTRF. Article XXI of the design build agreement states that “Subcontractor [Permasteelisa] warrants to the Owner … that all materials and equipment furnished under this Agreement will be of first class quality and new, … that the Work performed pursuant to this Agreement will be free from defects and that the Work will strictly conform with the requirements of the Contract Documents”. In addition, Article XXI states that “Subcontractor [Permasteelisa] shall expeditiously remove, replace and/or repair at its own expense and at the convenience of the Owner any faulty, defective or improper Work, materials or equipment. Significantly, Article II states that “Subcontractor [Permasteelisa] agrees … to assume toward Turner all of the duties, obligations and responsibilities that Turner by those Contract Documents assumes toward the Owner …. ”

The construction management agreement provides, in section 13.1.2, that “Construction Manager shall obtain from Trade Contractors and Sub-trade Contractors … warranties which meet or exceed the requirements of the Contract Documents. All such warranties shall be deemed to run to the benefit of Owner’. Section 13.1.3 also states that “[a]ll warranties provided by any Trade Contractor or Sub-trade Contractor … shall be in such form as to permit direct enforcement by Owner against any Trade Contractor or Sub-trade Contractor …. “.

Permasteelisa’s reliance on Dormitory Auth. of the State of N. Y., supra, is misplaced. There, the Court of Appeals held that the City of New York was not an intended third-party beneficiary of an architectural services contract because: (1) the City was not the only entity that could recover under the contract; and (2) the contract did not expressly name the City as an intended third-party beneficiary or authorize the City to enforce any obligations thereunder. Here, in contrast, the parties expressly agreed that the guarantees and warranties would be enforceable by HTRF.

(Internal quotations and citations omitted).

Usually, the only parties who have rights under a contract are the parties that signed the contract. As discussed here, sometimes a person who did not sign a contract nonetheless has rights under a contract that it can sue to enforce. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client face a situation where you are unsure how to enforce rights you believe you have under a contract.

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Posted: August 6, 2019

Law Firm Disqualified; Its Prior Representation of Opposing Party Was Substantially-Related to Current Dispute

On July 12, 2019, Justice Borrok of the New York County Commercial Division issued a decision in NL Brand Holdings LLC v. Lepore, 2019 NY Slip Op. 32147(U), disqualifying a law firm because its prior representation of an opposing party was substantially-related to the current dispute, explaining:

In order to disqualify an adversary’s attorney, the movant must prove either (A) (1) the existence of a prior attorney-client relationship between the moving party and opposing counsel, (2) that the matters involved in both representations are substantially related and (3) that the interests of the present client and former client are materially adverse or (B) that the attorney previously received confidential information substantially related to the present litigation.

In their papers, the parties concede that the first and third branches of the Tekni-Plex test are satisfied. However, the parties dispute whether Sheppard Mullin’s prior and present representation of Bluestar is substantially related. The Plaintiffs rely on Anonymous v. Anonymous to argue that a substantial relationship exists when there is common subject matter between former and present matters. In Tekni-Plex, the law firm’s former and present representation were substantially related because both implicated the same merger agreement and compliance with certain environmental laws to obtain a permit. In opposition, the Defendants cite Becker v. Perla to argue that a substantial relationship exists between former and present litigation when the issues are identical or essentially the same.

The Plaintiffs argue that the Sheppard Firm’s prior and present representation are substantially related because both involve the Bluestar business and share one similar defense regarding the use of intellectual property whose purchase was facilitated by Bluestar. Putting aside the issue of whether or not there was a substantial relationship, it is unquestionable that the Sheppard Firm received confidential information from Bluestar.

The New York Rules of Professional Conduct define confidential information to consist of “information gained during or relating to the representation of a client, whatever its source, that is (a) protected by the attorney-client privilege, (b) likely to be embarrassing or detrimental to the client if disclosed, or (c) information that the client has requested be kept confidential. The movant seeking disqualification must identify the specific confidential information imparted to the attorney. However, the movant does not have to show that confidential information will be disclosed during litigation, but that there is a reasonable probability of such disclosure.

The Plaintiffs argue that the Sheppard Firm received confidential information during its prior representation of Bluestar. In his affidavit in opposition, Mr. Max described Sheppard Mullin’ s representation of Bluestar in the Tween Litigation to encompass retaining local counsel in Ohio, drafting a sworn declaration of Bluestar’s CEO and suggesting changes to Bluestar’ s website due to the litigation. However, Mr. Max’s representation of Bluestar goes beyond this limited description.

During oral argument, the Plaintiffs offered certain privileged materials including e-mails exchanged between the Sheppard Firm and Bluestar during the Limited Too Acquisition and the Tween Action. The court’s in-camera review of these materials, which are clearly subject to attorney-client privilege, confirm and corroborate the Plaintiffs accounting of the scope of Mr. Max’s and the Sheppard Firm’s representation. Although the Sheppard Firm emphasizes the short duration of the prior representation in the Tween Action, the frequency of communications with Bluestar executives and the legal issues discussed reveal that the Sheppard Firm received confidential information from Bluestar that is substantially related to this action.

The confidential information at issue is substantially related to this case because Mr. Max’s understanding ofBluestar’s business and litigation approach is material to his present defense against Bluestar – i.e., the way that Bluestar conducted its business, its insurance, its litigation strategy in the prior representation including without limitation its positions on discovery. Mr. Max’s previous interactions with Bluestar’s CEO, COO and General Counsel are also relevant and problematic as these same Bluestar executives will be deposed in this case. Under these circumstances, the court finds that the Sheppard Firm is disqualified.

(Internal quotations and citations omitted).

We both bring and defend motions relating to attorney conflicts and do appeals of the decisions on those motions. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you face a situation where counsel may be–or is accused of being–conflicted.

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Posted: August 5, 2019

Malpractice Claim Dismissed as Premature Because the Harm Arising from the Alleged Malpractice Has Not Yet Occurred

On July 19, 2019, Justice Sherwood of the New York County Commercial Division issued a decision in YT Madison, LLC v. Sukenik, Segal & Graff, P.C., 2019 NY Slip Op. 32112(U), dismissing a malpractice claim as premature because the alleged harm had not yet happened, explaining:

In an action to recover for legal malpractice, Plaintiff must plead and prove that the attorney failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession and that the attorney’s breach of this duty proximately caused plaintiff to sustain actual and ascertainable damages. In this case it is undisputed that whether or not Plaintiff will sustain any damages as a result of the alleged malpractice is unknowable at this time. Although damages in a legal malpractice case may include litigation expenses incurred in an attempt to avoid, minimize or reduce the damage caused by the attorney’s wrongful conduct, such potential damage cannot save plaintiff’s claim here because the damages that allegedly were proximately caused by the alleged malpractice are unknown.

The motion must be granted because the malpractice claim is premature.

(Internal quotations and citations omitted).

We both bring and defend professional malpractice claims and other claims relating to the duties of professionals such as lawyers, accountants and architects to their clients. Contact Schlam Stone & Dolan partner Erik Groothuis at egroothuis@schlamstone.com if you have questions regarding such claims or appeals of such claims.

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Posted: August 4, 2019

Party That Fails to Close on Purchase Cannot Later Enforce Right of First Refusal

On July 15, 2019, Justice Schecter of the New York County Commercial Division issued a decision in Vahdat v. Capdel LLC, 2019 NY Slip Op. 32028(U), holding that a party that failed to close on a purchase could not later seek to enforce its right of first refusal, explaining:

Plaintiff already exercised his right of first refusal on the Property and then breached by failing to close. Therefore, he can no longer prevent Capdel from selling the Property. If the law were otherwise, then a holder of a right of first refusal could tie up the property for years and years. He would just need to keep exercising the right, default over and over again, and keep repeating that cycle. Meanwhile, the owner of the property would be stuck and have no recourse to sell the property to anyone else.

Significantly, plaintiff has cited no law to the contrary and there is no legal support whatsoever for his meritless opposition. Plaintiff contends that he never previously exercised his right of first refusal because it was SAG that did so in 2017. The Agreement, however, makes clear that the right belongs to plaintiff and any assignee formed by him. The parties’ emails from 2017, moreover, conclusively prove that plaintiff exercised his right of first refusal and chose to contract through SAG. Nor is there any authority for plaintiffs unsupported belief that he or his affiliates can continuously exercise the right after invoking it once and then defaulting.

(Internal quotations and citations omitted).

We frequently litigate disputes over the purchase and sale of commercial property. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you are involved in a dispute regarding a commercial real estate transaction.

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Posted: August 3, 2019

Failure Timely to Move for Default Judgment Leads to Dismissal of Claim

On July 17, 2019, the Second Department issued a decision in U.S. Bank N.A. v. White, 2019 NY Slip Op. 05713, holding that the failure timely to move for a default judgment is grounds for dismissal, explaining:

CPLR 3215(c) provides: If the plaintiff fails to take proceedings for the entry of judgment within one year after the default, the court shall not enter judgment but shall dismiss the complaint as abandoned, without costs, upon its own initiative or on motion, unless sufficient cause is shown why the complaint should not be dismissed. To vacate the order directing dismissal of the complaint pursuant to CPLR 3215(c), the plaintiff was required to demonstrate a reasonable excuse for its delay in seeking a default judgment and a potentially meritorious cause of action.

Here, the plaintiff failed to offer a reasonable excuse for its failure to take proceedings for the entry of a judgment for more than one year after the action was released from the foreclosure settlement conference part and the 60-day stay expired. The plaintiff submitted an attorney’s affirmation containing conclusory and unsubstantiated allegations regarding a delay occasioned by a loss mitigation hold, the collection of unspecified documents, and an unexplained investigation into the scope of the guardianship of a guardian ad litem appointed for White. Under these circumstances, the Supreme Court did not improvidently exercise its discretion in denying that branch of the plaintiff’s motion which was to vacate the order entered November 9, 2015.

(Internal quotations and citations omitted).

If you are served with a complaint (or counterclaims, as happened in this case) and fail timely to answer, the court can enter judgment against you: a default judgment. But as this decision shows, failing timely to seek such a judgment can result in the dismissal of the claims that were the subject of the default. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have questions regarding whether you have been properly served or if a default judgment has been entered against you.

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Posted: August 2, 2019

Allegations That Complaint is Based on False Statement Basis for Judiciary Law Counterclaim

On July 9, 2019, Justice Borrok of the New York County Commercial Division issued a decision in Gerard Fox Law, P.C. v. Vortex Group, LLC, 2019 NY Slip Op. 32065(U), holding that allegations that a complaint was based on false allegations of fact are a sufficient basis for a Judiciary Law claim, explaining:

To state a cause of action for violation of Judiciary Law § 487, a party must plead intentional deceit and damages proximately caused by the deceit. To be actionable, the alleged deceit must have occurred during a pending judicial proceeding. Allegations of deceit or an intent to deceive must be stated with particularity. Where a cause of action under Judiciary Law § 487 is based on allegations of false statements in pleadings, a party may prevail by establishing that the lawsuit could not have gone forward in the absence of the material misrepresentation, and that party’s legal expenses may be treated as the proximate result of the misrepresentation.

This counterclaim is based on Gerard Fox’s statements made in its complaint and in its opposition to Kato’s motion for summary judgment in a related action. Vortex asserts that Gerard Fox knowingly made several false statements concerning the underlying events in this matter as contrived predicates for its claims with the intent to deceive the Court. For example, Paragraph 2 of the Complaint provides:

Specifically, in the Fall of 2015, [Gerard Fox] sought to lease space with room for five to six offices and a conference room, within its monthly budget of $28,000 – $30,000. [Gerard Fox] spelled out its needs and budget in writing, and reinforced those points during lengthy face-to-face meetings. Vortex, however, had a difference agenda. Viewing [Gerard Fox] as an out-of-town “yokel” it could work for a fat commission, Vortex upsold [Gerard Fox] from the get-go. Vortex exclusively presented options far outside of [Gerard Fox’s] price range, including a space in “Tower 49,” located at 12 East 49th Street, New York, New York. To encourage [Gerard Fox] to rent office space beyond its budget, Vortex represented falsely that the rent was below-market and a great deal.

The documentary evidence reveals that these statements, which reflect the gravamen of Gerard Fox’s allegations, are not only misleading, but also demonstrably false. Vortex’s space report, which sets forth the properties that Vortex presented to Gerard Fox, illustrates that 10 of the 12 properties were within Gerard Fox’s stated budget. Therefore, this lawsuit is premised on material misrepresentations of fact and, as a proximate result of those misrepresentations, Vortex was compelled to defend the action and incur legal fees. Assuming Vortex’s allegations to be true and affording Vortex every favorable inference, the counterclaim for violation of § 487 is adequately pled to survive dismissal.

(Internal quotations and citations omitted).

Part of being a good litigator is thinking of winning arguments other lawyers miss. However, courts have little patience for lawyers who cross the line from creative to making frivolous arguments or who attempt to mislead the court. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client has a question regarding whether a lawyer has crossed the line from creative to sanctionable.

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