Pleased to announce that recently we obtained judgments for our clients in a commercial arbitration proceeding totaling nearly $2.1 million! Our client, an investor, sued various individuals and corporations regarding his investments in various companies. After discovering their fraudulent behavior, the client sought arbitration against those individuals and entities in accordance with his investment agreements. The arbitration, conducted on an expedited basis, resulted in two judgments- one for $1.6 million and a second for almost $582,000. Our firm is now in the process of enforcing those judgments on behalf of the client. If you or your company need assistance with your commercial litigation and other transactional needs, call us today.
That's the lesson to be learned in the case of Schron v. Troutman Saunders LLP, .... N.Y.3d ...., .... N.Y.S.2d ...., 2013 WL 530572 (Feb. 14, 2013). More to the point, yes, all of that language in your real estate contract, lease, buy-out agreement, etc. all have meaning and if you don't know what a particular term in your document means, then YOU NEED TO ASK YOUR COUNSEL! Otherwise, you'll suffer the same fate of our latest litigants in New York.
In Schron, A possessed an option to buy shares in a company from B. B first tried to void the agreement to purchase the shares through a litany of arguments, all which were rejected by the Court of Appeals. In a last-ditched effort, B tried to void the option to purchase by arguing that the option language in the contract was not really what the parties meant and, therefore, should have been allowed to present evidence of what the parties were really driving at in their agreement.
Nice try says the Court of Appeals but such an argument will not work in this case. Why? Because in Schron the contract provision had no ambiguity. Therefore, extraneous evidence of intent is barred by the parole evidence rule - which dictates that if the contract does not have an ambiguity, the parties are bound to the "four corners" of the document to resolve the dispute. Because there was no ambiguity regarding the option to purchase, B loses and cannot insert outside evidence of intent.
Also notable in this case was the fact that the agreement contained a "merger clause" which also killed any chance of B trying to insert parole evidence into the case. For those who are unfamiliar with that concept, a merger clause is an agreement within an agreement whereby the parties declare that the contract's terms are to be considered the embodiment of the parties' entire agreement not to be altered by extraneous or outside testimony or evidence. The Court of Appeals pointed out this fact in their opinion, even quoting the language of the merger clause, thereby providing further ammunition to determine the contract to be a fully integrated document which did not require parole evidence.
Need help with a contract? Contact us today to find out how we can help.
Say two New York residents have a contract dispute regarding the purchase of a home in New York and a lawsuit is commenced. Generally, because there are only "New York" issues to be resolved, a court will turn to the substantive law of New York to resolve the dispute; but what happens when the transaction crosses into other states or even a foreign country? In many instances, the court will turn to conflicts of laws principles and decide which state or country has the most significant relationship to the transaction in order to determine whether to apply its own law or the laws of another state or country. Such is the case of IRB-Brasil Resseguros v. Inepar Investments, SA, 2012 WL 6571286 (December 18, 2012).
In IRb_Brasil, Plaintiff, a Brazilian company, bought notes issued by Defendant, a Uruguayan company, guaranteed by a second Defendant company, also from Brazil. The notes stipulated to New York jurisdiction. Defendant guarantor said the case had to be decided in accordance with Brazilian law. So the argument went, not only did the stipulation apply to New York's substantive law AND conflicts of laws; and if that was the case , the notes under Brazilian law would have rendered the notes void.
The Court Appeals disagreed. In a unanimous decision, the Court held the stipulation to New York law was intended only to reference New York's substantive law and not its choice of law rules. Had the parties wanted the choice of law rules to apply, the Court of Appeals wrote that the parties could have said so in the stipulation explicitly. They did not and so Defendant's argument does not carry the day. One need only read a part of the agreement to see why the Court would hold in favor of the Plaintiff. Specifically, the agreement did say that it was to be goverened and construed in accordance with New York law "without regard to conflict of laws principles."
On November 1, the Supreme Court of NJ issued an order in the wake of Hurricane Sandy regarding the computation of time periods under the Rules of Court and under any statute of limitations. Specifically, the Court ordered that the computation of time periods under the Rules of Court and under any statute of limitations, for purposes of filing deadlines October 29, 2012 through October 31, 2012, are deemed the same as legal holidays. In addition, the computation of time periods under the Rules of Court and under any statute of limitations for November 1, 2012 is deemed a legal holiday in Atlantic, Bergen, Hudson, Mercer, Middlesex, Monmouth, Morris, Ocean, Sommerset, Sussex, and Warren Counties. The full text of the order is located at http://www.njsba.com/images/content/1/0/1006139.pdf.
On a more personal note, we hope all of you affected by Hurricane Sandy are safe and sound. Our thoughts and prayers are with you.
Business owners hit with environmental cleanup costs scored a major victory two weeks ago when the New Jersey Supreme Court held that to obtain damages under the Spill Act, the Department of Environmental Protection ("DEP") must demonstrate, by a preponderance of the evidence, a reasonable connection between the discharge, the discharger, and the contamination at the damaged site. The ruling, in Department of Environmental Protection v. Dimant, upheld two lower courts that found insufficient evidence a Bound Brook laundromat and dry cleaning establishment caused the groundwater pollution for which it was targeted by DEP for investigative and cleanup costs.
Dimant deals with the alleged discharge of PCE by a laundromat (“Sue’s) into numerous residential wells located in Bound Brook and employment of the Spill Act's various remedies. To summarize, the Spill Act strictly prohibits the discharge of hazardous substances and establishes a broad scope of liability for offenders. N.J.S.A. 58:10-23.11c. A “discharge” occurs when a hazardous substance is spilled or otherwise released “into the waters or onto the lands of the State, or into waters outside the jurisdiction of the State when damage may result to the lands, waters or natural resources within the . . . State.” N.J.S.A. 58:10-23.11b. A spill within the state constitutes a discharge and is subject to various remedies which can be injunctive, investigative, or remedial in nature. Here, the Court found Sue’s committed a “discharge” by operating a business where a pipe leaked fluid containing PCE onto the ground because its actions resulted in the leaking of a hazardous substance onto the lands of the State. According to the Court, because there are not even minor exceptions to the prohibition against discharging hazardous substances, the only question to be determined was whether the DEP connected the discharge at Sue’s to the relief it sought against Sue’s which was investigative and cleanup costs.
New Jersey’s Spill Act is considered to be one of the founders of “clean up” legislation; the purpose of the Spill Act is to provide liability for damage sustained within this State as a result of any discharge of hazardous substances, anyone who is “in any way responsible for any hazardous substance” is strictly liable, upon its discharge, for “all cleanup and removal costs no matter by whom incurred.” N.J.S.A. 58:10-23.11g(c)(1). Cases discussing the phrase “in any way responsible” emphasize a requirement that the State show some connection between discharger to the discharge. Attention thus turned to determining what proof DEP was required to present in order to prevail? The Court looked to the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA") and determined it would be inappropriate to adopt the CERCLA standard because that statute requires only “some connection”.
The Court then looked at the legislative history and determined that the legislature intended to distinguish between damages and cleanup expenditures, with liability for cleanup costs to be imposed without regard to fault. But does that mean DEP must show proximate causation in order to prevail on a claim for damages? In the Court’s opinion, no — while some causal link is required to obtain damages, the Court found that placing a proximate-cause requirement on DEP would thwart the purpose of the Spill Act. Rather, to accommodate the Spill Act’s various forms of relief, the Court held that the discharger must be shown by a preponderance of the evidence to have committed a discharge. Proof that a defendant produced a hazardous substance and that the substance was found at the contaminated site (as was the situation in Dimant) is simply not enough in the Court’s opinion. On proof of the existence of a discharge, DEP can obtain injunctive relief under the Spill Act. In an action to obtain damages and costs however, the Court held that there must be a reasonable link between the discharge, the discharger, and the contamination at the specifically damaged site. Otherwise, you end up with the situation in Dimant.
In Dimant, DEP tested two sites at Sue’s 1988- 10 years prior to any action being taken against it. At one site, DEP found PCE dripping from machines inside the laundromat into a sanitary sewer system which was determined not to be the cause of the contamination. At the second site, on one occasion DEP observed PCE dripping from a pipe outside onto the ground. The Supreme Court found no reason to disturb the findings that the DEP’s proofs were inadequate to obtain the relief sought from Sue’s. The Court agreed that the proofs failed to connect the discharge from the pipe, during Sue’s operation, to the soil or groundwater damage. The Court also agreed that DEP never presented sufficient proof for how the drip of fluid containing PCE observed at Sue’s on one day in 1988 resulted in the contamination of the groundwater in Bound Brook. In the Court's opinion, the fact that DEP never retested the pipe again or took pictures of the drip was properly determined by the lower court to suffice as circumstantial evidence that the DEP did not consider the drip to be of significance regarding its investigation of the source of the groundwater contamination. As such, DEP’s claims for relief for loss of natural resources and for reimbursement to the State for the cost of remedying the groundwater contamination were appropriately rejected.
A copy of the Dimant opinion is below.
I am always amazed when contractors come into my office looking for legal advice and they cannot understand why in the world a customer is suing them for consumer fraud. "We were friends", "He said we did not need a contract", "Why should I have to tell her what materials I'm using" - and the list of mishaps goes on and on and on (even though the N.J. Administrative Code spells out quite clearly what every home improvement contract must have). If you care about your contracting business, then you need to start incorporating into your thought process scenarios where you can envision a problem (i.e., will I get sued for this?). If you don't, then you (yes, you, individually) and your company are just asking for a problem. I am a firm believer that everyone needs to read Sun Tzu, "The opportunity to secure ourselves against defeat lies in our own hands". Had the defendant in Chaykowsky v. Marut followed that advice, they would not be looking at a judgment of over $2.5 million dollars!
In Chaykowsky, the defendant operated a landscaping business and entered into an agreement with a homeowner to build a number of projects for the agreed upon sum of $750,000. Plaintiff paid the entire sum as invoices were presented. Of course, the defendant never used a contract, never informed the homeowner about the materials it would supply and use at the job and never provided a schedule of when the project would begin and end. Coupled with nearly $200,000 in additional monies that had to be paid, inexcusable delays by the defendant (or no work at all) and requests for even more money to complete the project, the plaintiff eventually got tired of the defendant's antics and sued the company and the individual owners of the company for violating the N.J. Consumer Fraud Act ("CFA").
We need not bother ourselves with the nitty grutty procedural aspects of the case but needless to say the defendant did not comply with its discovery obligations thus resulting in dismissal of their answer counterclaim and third-party complaint with prejudice. The lower court also denied defendant's subsequent attempt to restore their pleadings and entered judgment against them in the amount of $2,510,798.22 - finding that plaintiff sustained compensatory damages in the amount of $802,774.00 and that defendant violated N.J.A.C. 13:45A-16.2(a)(12) by failing to have a written contract. The lower court thereafter awarded plaintiff $1,605,548 in statutory damages (remember the CFA provides for TREBLE/TRIPLE damages), $98,612.50 in attorney's fees and $3,863.72 in costs (all recoverable by a plaintiff who successfully pleads consumer fraud).
The Appellate Division upheld the lower court's findings and judgment and remanded the case (meaning sent it back) to the lower court for the purpose of determining an appropriate award of legal fees and costs of suit to the plaintiff and to determine whether whether the individual defendants are liable for the plaintiff's damages.
Click on Chaykowsky v. Marut for the entire opinion. http://www.judiciary.state.nj.us/opinions/a2901-10.pdf
Are you a contractor who needs advice on how to protect your individual and business assets from attack. Call us today and make an appointment to see how we can help.
REAL ESTATE – FORECLOSURE: DOCTRINE OF LACHES UTILIZED TO PREVENT HOMEOWNER FROM VACATING DEFAULT JUDGMENT
The doctrine of laches is an interesting concept. Although pled with a fair amount of regularity, it is a defense to a claim that is employed sparingly. The doctrine of laches can be defined as a bar to any delay in enforcing a known right which cannot be explained or excused and, as a result, the other party has been prejudiced because of such delay. In this foreclosure action, PHH Mortgage Corp. v. Krowicki, laches is used to prevent a homeowner from vacating a default judgment of foreclosure entered in 2007 and well after the sale of the property to an innocent third party. According to the Court, with all of Defendant’s posturing, motion practice, bankruptcies and attempts at mediation regarding the foreclosure, it never once challenged the default judgment until Defendant was out of options. Unfortunately, Defendant waited too long to enforce a right which it was clearly aware of. Similarly, the doctrine of equitable estoppel also barred relief for the same reason. The court also rejected Defendant’s argument, raised for the first time on appeal (see the common thread running through the Defendant’s prosecution of this case), that the Plaintiff bank lacked standing because it did not possess the 1998 note when it filed the complaint, because the judgment and sale were entered and accomplished in 2007 and 2010, well before the Supreme Court adopted substantial amendments to the rules governing foreclosure actions.
Bottom line, DO NOT WAIT and hope for the best when it comes to a foreclosure action. Contact competent legal counsel to find out your rights.
Click on PHH Mortgage Corp. v. Krowicki for the entire opinion.
If you are involved in a service oriented business, you may very well have a contractual obligation to indemnify some of your customers for negligent acts. Therefore, it is critical that you hire competent legal counsel who can identify pitfalls in an indemnity agreement and fight to protect you and your business from financial disaster when that provision comes into play. A good example, the Franchini case. In her complaint, Plaintiff Franchini claimed she injured herself when she slipped and fell on ice on property owned by Defendant Beverly Hills Terrace Condominium Association (the “Association”). The complaint further alleged separate acts of negligence by the Association and Greenview Landscaping, the entity hired to maintain the grounds and provide snow and ice removal for the Association. Following a jury trial on all issues, a verdict was rendered in favor of Greenview and the Association. The Association thereafter filed an application with the trial court for attorney’s fees from Greenview, arguing that Greenview was required to indemnify it for defending against Franchini’s lawsuit. Over the objections of Greenview the trial court awarded the Association approximately $39,000 in counsel fees.
In reversing the lower court’s ruling, the Appellate Division provided a thorough review of indemnity clauses and the N.J. Supreme Court’s decision in Mantilla v. NC Mall Associates, 167 N.J. 262 (2001). In Mantilla, the N.J. Supreme Court held that absent explicit contractual language to the contrary, an indemnitee may not recover the costs of its defense from an indemnitor where the indemnitee has defended against allegations of its own independent fault. With that backdrop, the Appellate Division reviewed the contract between the Association and Greenview, including the indemnification provision language, and held that the indemnification clause in the contract was confined to liability for Greenview’s performance of its work, not third party acts. The Appellate Division rejected the Association’s contention that Greenview assumed indemnification responsibility for the Association’s acts of negligence because of the absence of the explicit contractual language required by Mantilla, and reversed the lower court’s award of counsel fees.
Click on Franchini v. Beverly Hills Terrace Condominium Ass’n for the entire opinion. http://www.judiciary.state.nj.us/opinions/a6221-10.pdf
CONSUMER FRAUD- SCHOOL’S FALSE PROMISE OF EMPLOYMENT WITH LACK OF ACCREDITATION TANTAMOUNT TO CONSUMER FRAUD
After an admissions representative told her that on graduation, she would be able to perform ultrasounds on patients in hospitals and clinics and earn $65,000 per year, Plaintiff Suarez enrolled in the diagnostic medical ultrasound technician program of Defendant Eastern International College, formerly known as Micro Tech, a for-profit school. According to the complaint, Plaintiff alleged that in order to obtain employment in this field, it was necessary to obtain certification from the American Registry for Diagnostic Medical Sonography (“ARDMS”). Because Micro Tech lacked the necessary accreditation, Plaintiff was ineligible on graduation to take the examination administered by ARDMS to obtain the certification required by potential employers. Plaintiff further alleged that, as a practical matter, she could not either attain the credentials necessary to be eligible to take the ARDMS examination or obtain employment as an entry-level sonographer. Plaintiff’s expert supported her version of the facts by explaining that major insurance companies would not reimburse a provider for any service performed by an ultrasound technician not certified by ARDMS; and the inability to obtain reimbursement and the risk of sanctions provided ample reason for employers to decline to employ any ultrasound technologist who was not certified by ARDMS. As a result, Plaintiff sued Defendant alleging violations of the Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -195, and common-law fraud, and contended that the Defendant’s representations were false.
Plaintiff appealed from an order granting summary judgment to Defendant and dismissing her complaint. In an opinion dated August 23, 2012, the Appellate Division held that because a jury could find that Defendant’s statements were so misleading as to a material fact as to deprive the Plaintiff of the ability to make an intelligent decision as a consumer, the statements were actionable under the CFA and summary judgment was inappropriate. The Appellate Division did affirm dismissal of Plaintiff’s common-law fraud claim on the basis that Defendant’s statements regarding Plaintiff’s potential employment and earning capacity were not statements of present or previously existing facts and therefore cannot provide the basis for a claim based on common law fraud.
Defendant also cross-appealed from the lower court’s decision, arguing that plaintiff's CFA claim should have been dismissed as barred under a “learned professional” exemption. That exception, an exception created by the courts, provides that certain transactions are excluded from the purview of the CFA “because they involve services provided by learned professionals in their professional capacity.” The reasoning for this exception is that such professionals are subject to regulation specifically applicable to their profession, which might conflict with the regulation of activities under the CFA. The Appellate Division rejected Defendant’s argument that it was entitled to the “learned professional” exception because it provided post-high school educational and vocational training. In support of its holding, the Appellate Division found that Defendant identified no regulatory body that defined uniform standards for the services Defendant provide or its activities as a for-profit training school, such that it would present a “patent and sharp” conflict with the application of the CFA. Accordingly, the learned professional exemption was inapplicable to this particular case.
Click on Suarez v. Eastern International College for the entire opinion. http://www.judiciary.state.nj.us/opinions/a2705-10.pdf
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NY Commercial Tenant’s Failure to Give Required Notice of Renewal Insufficient as Grounds to Excuse Conduct Required by Lease
Whether you are a commercial landlord or tenant, read your lease, read your lease, read your lease! Lease review is not just for when you are negotiating and executing it, only to be put away and forgotten once the ink has dried; but it is an exercise to be carried out through the entire course of the commercial lease tenancy. If you don’t, you run the risk of making a serious mistake that may leave you scrambling for new space. Take the case of Baygold Assocs., Inc. v. Congregation Yetev Lev of Monsey, Inc., 19 N.Y.3d 223 (May 3, 2012). In Baygold Landlord and Tenant entered into a lease on August 2, 1976 for premises used by Landlord as a nursing home. The term was 10 years with four additional 10-year renewal options available to Tenant. In order to exercise an option period, Tenant was required to provide the Landlord with no less than 270 days’ notice before the expiration of each term. The lease further required that the renewal notice be sent “by certified mail with return receipt requested”.
Thereafter, Tenant subleased the space to Monsey Park. Monsey Park ran the nursing home between 1976 and 1985, during which time it made a number of improvements to the leased space. In January 1985, Monsey Park subleased the space to Orzel, who continued to run the premises as a nursing home. During Orzel’s tenancy, only Orzel made improvements to the premises. Renewals were made extending the lease until 2005. The 2005 renewal became the issue. Baygold’s attorney testified that he sent a timely renewal letter to cover the remaining two option terms, but could produce no mail receipt or return card, as required by the lease. In 2007, the Landlord arranged to sell the property to Congregation Yetev Lev of Monsey. Baygold thereafter sued to declare the rights of the parties with respect to the lease renewal.
The Court of Appeals rejected Baygold’s claim to declare the lease properly renewed. In its 1977 decision in J.N.A. Realty Corp. v. Cross Bay Chelsea, 42 N.Y.2d 392 (1977), the Court of Appeals held that equity would relieve a commercial tenant of its untimely failure to exercise an option to renew a lease where (1) such failure was the result of “inadvertence,” “negligence” or “honest mistake”; (2) the non-renewal would result in a “forfeiture” by the tenant; and (3) the landlord would not be prejudiced by the tenant’s failure to send, or its delay in sending, the renewal notice. J.N.A. Realty Corp. v. Cross Bay Chelsea, 42 N.Y.2d 398-400. Here, the Court found Baygold was not entitled to such equitable relief because it could not prove the second element of forfeiture, defined by the Court as where the tenant “‘has in good faith made improvements of a substantial character, intending to renew the lease’ and the tenant ‘would sustain a substantial loss in case the lease were not renewed.’” Id. at 397-398. Baygold did make substantial improvements, but did so some 20 years earlier; and the more recent improvements to the property were made by Baygold’s subtenants, not by Baygold. Thus, Baygold could not take advantage of what the Court of Appeals deemed to be a “narrow” equitable doctrine.
N.B. Judge Smith filed a dissenting opinion, joined by Judge Grafeo, which sees the majority’s opinion as basically a distinction without a difference from the original J.N.A. decision. In Judge Smith’s opinion, the majority opinion made no effort to explain why a subtenant must forfeit all of its improvements because of the mistake of the tenant in failing to provide timely notice.
Click on Baygold Assocs., Inc. v. Congregation Yetev Lev of Monsey, Inc. for the entire opinion. http://www.nycourts.gov/ctapps/Decisions/2012/May12/66opn12.pdf
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