Commercial Division Practice Guide

New York’s most complex business litigation actions are assigned to the Commercial Division within New York State’s Supreme Court. Tannenbaum Helpern’s litigators regularly appear in Commercial Division matters in New York, Westchester, Nassau, Kings and Queens Counties. This website provides updates, news, and resources to assist in navigating New York’s Commercial Division.

Gibbs v Holland & Knight, LLP, 2023 NY Slip Op 30506[U] (New York County, J. Borrok - 2/17/23)
Arbitrator Does Not Exceed Power or Violate Public Policy in Attorney’s Fee Award Where Partnership Agreement Authorizes Arbitrator to Assess Costs and Attorneys’ Fees to the Non-Prevailing Party – Even Where That Party Prevailed on One of the Issues.

Plaintiff, a former partner of Defendant, alleged that Defendant unfairly refused to compensate him in accordance with the Partnership Agreement. The arbitrator granted one of Plaintiff’s claim for unpaid compensation, but otherwise denied Plaintiff’s claims for breach of the Partnership Agreement, breach of the covenant of good faith and fair dealing, breach of fiduciary duty and unjust enrichment/quantum meruit. Noting that the Defendant had prevailed on the central issue of the arbitration, the arbitrator granted Defendant’s claim for attorneys’ fees and disbursements paid by counsel and denied Plaintiff’s claims for fees.
Plaintiff moved to vacate the portion of the Final Award granting attorney’s fees and costs to the Defendant, arguing that the award of attorneys’ fees was irrational, exceeded the arbitrator’s power and violated public policy. The Court noted that the Partnership Agreement authorized the arbitrator to assess to the non-prevailing party the costs and reasonable attorneys’ fees of the prevailing party. The Court then found that because Defendant was deemed the prevailing party on a majority of the issues before the Arbitrator, the final award granting Defendant its attorney’s fees and costs was not irrational and supported by more than a colorable justification, and thus the Court was obligated to give deference to the arbitrator’s decision. Accordingly, the Court denied Plaintiff's motion to vacate.

  • Key terms: Attorneys’ Fees, Prevailing Party, Arbitration

SPG Capital Partners, LLC v Cascade 553 LLC, 2023 NY Slip Op 50016 (New York County, J. Reed – 1/6/23)
Term Sheet, Conditioned on Lender’s Completion of Due Diligence and Expressly Identified As Not An Offer or Agreement, Held To Be An Unenforceable Agreement To Agree And Exclusivity Provision Is Not Independently Enforceable Despite Provision Stating That It Will Survive Termination of Term Sheet

Plaintiff, SPG Capital Partners, LLC (“SPG”), a real estate investment and finance corporation, and defendant, Cascade 553 LLC (“Cascade”), a real estate development company, signed a term sheet pursuant to which plaintiff agreed to provide a first mortgage loan of $110,000,000 for the development of property in Brooklyn. Upon execution of the term sheet, Cascade paid SPG a $200,000 good faith deposit. The term sheet provided that Cascade was prohibited from obtaining a first mortgage from another source, and provided that, if Cascade did so, it would forfeit the good faith deposit and pay a 2 percent break-up fee as liquidated damages for the time and effort expended.
Notwithstanding this provision, Cascade obtained first mortgage financing from another source and SPG brought this action for breach of contract, seeking, inter alia, the breakup fee.
Cascade moved for summary judgment on the grounds that the term sheet was a nonbinding agreement to agree. Cascade argued that the term sheet made clear that the parties did not intend it to be a final contract, and that its terms were too indefinite to be enforceable. In particular, Cascade argued that the term sheet stated it was “for discussion purposes only,” subject to Lender’s satisfactory completion of its due diligence “as determined by Lender in its sole discretion,” and was not “an offer, agreement, or commitment to lend or borrow”. Finally, the term sheet agreement stated that “[t]he actual terms and conditions upon which the Lender might extend credit to the Borrower may change and [also] will be subject to … such other terms and conditions as determined by Lender in its sole discretion.”
In response, SPG argued that the term sheet set forth an agreement on all material terms – the amount of the loan, an explanation as to the use of the funds, the interest rate, the loan's term, the origination fee, and the exclusivity provision – such that there was no ambiguity.
The Court granted Cascade’s motion for summary judgment, holding that the term sheet did not bind the parties. The Court relied upon the language in the term sheet that underscored its preliminary nonbinding nature, that vested exclusive discretion in SPG as to whether to proceed with the funding and that provided that essential lending terms could be modified. Although the term sheet provided that the exclusivity provision “shall survive the termination of this Term Sheet” and that SPG was entitled to the breakup fee should the deal not go forward, the Court found that there was no statement that rendered this provision enforceable notwithstanding the general nonbinding nature of the term sheet. Moreover, the Court found that this survival provision lacked mutuality of consideration necessary to make it independently actionable; SPG had not assumed any meaningfully commensurate obligation.

  • Key Terms: Agreement to Agree, Term Sheet, Survival, Real Estate

Deutsche Bank Sec. Inc. v 683 Capital Partners LP, 2023 Slip Op 50002(U) (New York County, J. Reed – 1/3/23)
Court Grants Additional Time to Serve Complaint in the Interests of Justice Despite Jurisdictional Defect of Failure to File Affidavit of Compliance

Plaintiff moved for a 45-day extension of time to allow its process server to properly serve Defendant, a public limited company based in Ireland, with process under Business Corporation Law Section 307. The Court denied Plaintiff’s motion for failing to provide an affidavit of compliance and failing to establish good cause for the delay. Plaintiff then moved for leave to renew its motion for an extension of time because the process server had not received the return receipt for mailing by the required deadline. Although the Court found that Plaintiff failed to provide reasonable justification for failing to present the affidavit of compliance within the statutory deadline, the Court determined that it was in the interest of justice to grant Plaintiff additional time to serve Defendant. The Court found that Plaintiff demonstrated reasonable efforts to effectuate service within the 120-day period after it commenced the action, and that Defendant was not prejudiced by the length in delay given that its counsel was consistently apprised of Plaintiff’s service efforts and provided with all relevant documents.

  • Key Terms: Service of Process, Good Cause, Motion to Renew, Affidavit of Compliance, Jurisdictional Defect, Interests of Justice

Chernomordik v Ocean Sand Dev., LLC, 2022 NY Slip Op 33846(U) (Kings County, J. Ruchelsman – 11/2/22)
Motion to Dismiss LLC Dissolution Cause of Action Denied

In April 2007, Ocean Sand Development LLC was formed to develop oceanfront property in the Dominican Republic. The government of the Dominican Republic rejected plans to develop the property three times, and thus the property has remained undeveloped for fifteen years. Plaintiff, a 5% member of the LLC, sued for judicial dissolution pursuant to Limited Liability Company Law 702. The operating agreement of the LLC states that its purpose is to “own, lease, develop, manage, and operate the premises…” The LLC moved to dismiss, arguing that the best option going forward was to “continue to hold the Property with the reasonable expectation that its value will skyrocket if and when the regulatory environment changes, as it tends to do from time to time in the Dominican Republic.” The Court concluded that this was “so speculative, so abstract and so theoretical” and that “there can be no question the goal of the entity was not to hold the undeveloped property for such a long period of time.” Justice Ruchelsman denied the motion, holding that “the plaintiff may be able to establish the stated goal of the entity will never be achieved.”

Chernomordik v Ocean Sand Dev., LLC, 2022 NY Slip Op 33846(U) (Sup. Ct., Kings County, November 2, 2022)
• Key Terms: Business Divorce, Judicial Dissolution, LLC, Limited Liability Company Law 702

Singer v De Blasio, 2022 NY Slip Op 50318(U) (New York County, J. Borrok - 04/20/22)

Over two-decade-long saga on vacant old P.S. 64 building in East Village endures: Commercial Division permits owner to proceed on tortious interference with prospective business relations.

Plaintiff Gregg Singer bought former P.S. 64, located at 605 East Ninth Street (“Property”), in 1998 from the City of New York. Since that time, Mr. Singer has orchestrated many attempts to redevelop the Property into a student dormitory facility. Mr. Singer has faced contentious opposition to his plans. To date, none of his plans has succeeded and many lawsuits have been filed.
In the latest chapter in this saga, Mr. Singer sued, inter alia, former New York City Mayor Bill de Blasio, the New York City Department of Buildings (“DOB”), and an alleged competing developer of the property, Aaron Sosnick, alleging that Mr. Sosnick employed certain lobbying groups to unlawfully influence former Mayor de Blasio and the DOB to thwart Singer’s ability to develop the Property and to snatch control of it from him so that he could buy it for himself and develop it. Mr. Singer, seeking $330 million in damages, asserted three causes of action against the defendants: (1) tortious interference with existing business relations; (2) tortious interference with prospective business relations; and (3) prima facie tort. The defendants moved to dismiss.
Judge Borrok partially granted the defendants’ motion, dismissing Mr. Singer’s claim for tortious interference with existing business relations (with prejudice) and the prima facie tort claim (without prejudice). The Court, however, denied the defendants’ motion as to Mr. Singer’s claim of tortious interference with prospective business relations. The defendants tried to argue that Mr. Singer failed to sufficiently allege the third element of this claim – that the defendants acted with the sole purpose of harming Mr. Singer or using wrongful means. The Court, however, disagreed, holding that the complaint sufficiently alleged political pressure had improperly been used to interfere not only with the building permit and a lease that Mr. Singer entered into with a university (to use two floors of the Property as a dormitory for students), but also with prospective leases with other tenants.

Quattro Parent LLC v Rakib, 2022 NY Slip Op 30190(U) (New York County, J. Masley – 1/14/22)
Business Valuation Determined on Paper Submissions Without a Trial Based on Defendant’s Testimonial Admission Despite Defendant’s Expert Testimony Refuting Damages

Plaintiff moved for summary judgment on damages in a breach of contract case in which defendant’s liability had already been decided. The Court stated the “sole issue is the value of plaintiff’s shares, if any, on November 15, 2015, when defendant Zaki Rakib refused to proceed to close the deal to purchase shares of Quattro for $7.5 million.” The Court was prepared to try this case virtually in light of the COVID-19 pandemic, but defendant demanded an in-person bench trial and insisted he had a right to cross examine plaintiff's witness at trial. Plaintiff countered that damages could be established on papers as there were no issues of fact necessitating trial. The Court granted plaintiff's request to file the dispositive motion.
The Court held the measure of damages was the difference between the price defendant promised to pay for 100 million shares, $7.5 million, and the value of those shares at the time of breach, as measured by the amount that a knowledgeable investor would pay for the shares.
Plaintiff presented an affidavit by one of its former board members, Joshua Ho-Walker, to support plaintiff’s position that the shares had no value at the time of the breach. Ho-Walker noted that despite investment banker outreach to nearly 150 potential investors, there was no interest in purchasing plaintiff’s shares; the company continued to operate at a deficit; the company owed $40 million to creditors, and subsequently three minority shareholders sold their collective 1.1 million shares for a total of one cent.
Defendant objected to Ho-Walker as an interested witness and offered as its damages witness CPA Michael Garibaldi, who is accredited in business valuation and certified in business forensics. Garabaldi relied on book value on Quattro’s tax returns and audited financial statements to argue that the Quattro was worth more than $7.5 million, such that no damages had been suffered.
While the Court considered the competing views of Ho-Walker and Garibaldi, in the end the Court predominantly relied upon the defendant’s repeated testimony – constituting admissions – that the shares were worthless at the time of the breach. The Court wrote, “[d]efendant has repeatedly stated under oath to this court that plaintiff’s shares were ‘worthless’ unless the company obtained an additional $75 million in financing, which he conceded would never happen.” The Court found that defendant’s affidavit which in opposition to the motion that contradicted its prior testimony that plaintiff’s shares were worthless created only a “feigned issue of fact,” which was “insufficient to defeat a properly supported motion for summary judgment.” Moreover, the Court rejected Garibaldi’s reliance on book value or tax value as a substitute or approximation for market value, which it held to be the proper value for damages analysis. In that regard, “The court finds that the best indication of market price is the price that was paid to the shareholders who sold 1.1 million shares in December 2016 for $0.01, not per share, but per 1.1 million shares.”

  • Key Terms: Business Valuation, Breach of Contract, Summary Judgment, Damages

Levy v Zimmerman, 2021 N.Y. Slip Op 50738(U) (New York County, J. Ostrager - 7/30/21)
Parties’ Unambiguous Agreement Did Not Entitle Co-Writer Plaintiff to Proceeds from Sale of Musician’s Catalog

Plaintiffs commenced this action contending that under a 1975 agreement reflecting the collaboration between defendant Bob Dylan and plaintiff Jacques Levy, they are entitled to proceeds from the sale of Bob Dylan’s music catalog which included copyrights and royalty rights. Defendants Bob Dylan and Universal Music Group moved to dismiss the action on the grounds that the 1975 agreement did not entitle plaintiff to proceeds of the catalog sale, inter alia. After reviewing the 1975 agreement, the Court held that the terms of the agreement were unambiguous and that it did not entitle plaintiff to any proceeds other than the royalties plaintiff was already receiving. As such, the Court granted the defendants’ motion and dismissed the action. The Appellate Division First Department affirmed the decision on appeal.

Levy v Zimmerman, 2021 N.Y. Slip Op 50738(U) (Sup. Ct. New York County, July 30, 2021)
Levy v Zimmerman, 204 AD3d 409 (1st Dept 2022)
• Key Terms: Breach of Contract, Breach of Contract as third party beneficiaries, tortious interference.

Orentreich v John B. Murray Architect, LLC, 2020 NY Slip Op 32944(U) (New York County, J. Borrok - 9/8/20)
Demand for a Bill of Particulars Vacated Because it was Being Used as a Discovery Device: A bill of particulars is intended to amplify the allegations of a pleading, not as a substitute for discovery devices, such as interrogatories.

Plaintiff brought action alleging, inter alia, civil RICO violations, fraud and breach of contract arising from a purported overbilling scheme pursuant to which defendants purportedly charged plaintiff applicable architect rates for work performed by individuals who were not architects. Defendant served a Demand for a Verified Bill of Particulars that contained 75 paragraphs, excluding subparts. Noting that the purpose of a bill of particulars is “to amplify the pleading, limit the proof, and prevent surprise at trial,” the Court found that Defendant’s bill of particulars sought “details more appropriately developed at a deposition” or in interrogatories -- such as identification of witnesses, computation of damages and the basis for particular allegations. Moreover, the court noted that the number of items Defendants sought exceeded the limited number of interrogatories permitted by the Commercial Division Rules. Accordingly, the Court vacated the Defendants' Demand for a Verified Bill of Particulars.

  • Key Terms: Discovery, Demand for a Verified Bill of Particulars, interrogatories, Rule 11-a of the Commercial Division Rules.

Beard v. Chase, 2017 N.Y. Slip Op. 50824(U) (New York County, J. Ramos – 6/19/17)
Acclaimed Photographer Declared Sole Owner of Works Allegedly Taken From His Apartment Pursuant to the Statute of Frauds

Plaintiffs alleged that three pieces of artwork were taken from acclaimed photographer Peter Beard’s apartment without his knowledge or consent. Justice Ramos granted partial summary judgment in favor of plaintiffs and held that the photographer was the sole owner of the works. The Court held that the receipts presented by defendants in support of their assertion of a contract did not clearly identify the parties, the specific artwork to be sold, or the time frame necessary to create an enforceable contract. In addition, Justice Ramos found that the facts did not fall within the specially manufactured goods exception to the statue of frauds because, among other reasons, the payments were not “unequivocally referable” to the sale of the works.

  • Beard v. Chase, 2017 NY Slip Op. 50824(U) (Sup. Ct., New York, June 19, 2017)
  • Key Terms: Art, Statute of Frauds, Summary Judgment, UCC 2-201

Picard v. Bigsbee Enters., Inc., 2017 NY Slip Op 50698(U) (Albany County, J. Platkin - 5/23/17)
Class Action Plaintiffs Granted Summary Judgment on Liability Where Restaurant Added Service Charge Without Distributing Funds to Servers

Plaintiffs in this class action alleged that they were servers at defendants’ restaurants which charged banquet customers an 18% or 20% “service charge” or “service personnel charge” but did not distribute these funds to the servers in violation of Labor Law 196-d. Pursuant to New York State Department of Labor regulation 12 NYCRR 146-2.18 [b], there is a rebuttable presumption, “that any charge in addition to charges for food, beverage, lodging, and other specified materials or services . . . is a charge purported to be a gratuity.” Justice Platkin held that defendants did not submit any proof showing that they complied with the regulation, the defendants’ sales personnel referred to the service charge as a gratuity, and granted partial summary judgment for the post 2011 subclass plaintiffs on the issue of liability finding the “service” and “service personnel” charges to be gratuities.

  • Picard v. Bigsbee Enters., Inc., 2017 NY Slip Op 50698(U) (Sup. Ct., Albany County, May 23, 2017)
  • Key Terms: Employment, Gratuities, Class Action, Labor Law

Americore Drilling & Cutting, Inc. v EMB Contr. Corp., 2017 NY Slip Op 50441(U) (Queens County, J. Dufficy - 4/3/17)
Corporate Veil Pierced in Bench Trial Decision on Oral Contract

Following a bench trial, Justice Timothy J. Dufficy awarded plaintiff Americore Drilling & Cutting, Inc. $118,000 for extra work it rendered pursuant to an oral contract with defendant EMB Contracting Corp. Pursuant to the parties’ oral contract, which the Court found to be enforceable because it could be performed within one year, plaintiff agreed to cut concrete balconies for a hotel being constructed in Long Island City. The Court held that plaintiff could pierce the corporate veil to sustain breach of contract claims against both defendant EMB, which was in privity with plaintiff, and Chilled Properties which the court ruled was created as part of a scheme to prevent the plaintiff from collecting payments due by EMB.

  • Americore Drilling & Cutting, Inc. v EMB Contr. Corp., 2017 NY Slip Op 50441(U) (Sup. Ct., Queens, April 3, 2017)
  • Key Terms: Breach of Contract, Unjust Enrichment, Oral Agreement, Fiduciary Duty, Piercing the Corporate Veil

Kaloyeros v. Fort Schuyler Mgt. Corp., 49 N.Y.S.3d 867 (Albany County, J. Platkin – 3/24/17)
Director of Not-For-Profit’s Bid for Legal Fees and Expenses Denied

Justice Richard Platkin denied a motion for a preliminary injunction seeking declaratory judgment that two not-for-profit corporations were required to indemnify a former director for legal fees and expenses incurred in connection with pending federal and state criminal prosecutions. The Court held that plaintiff did not demonstrate a likelihood of success for statutory indemnification or his claim for promissory estoppel with the proof presented (an unverified Complaint and an affirmation by his counsel). Moreover, plaintiff presented no sworn representation that the failure to obtain advanced legal fees would prejudice his defense in any manner much less constitute irreparable harm.

- Kaloyeros v. Fort Schuyler Mgt. Corp., 49 N.Y.S.3d 867 (Sup. Ct. Albany, March 24, 2017)

- Key Words: Preliminary Injunction, Attorneys’ Fees, Not-For-Profit

Gordon v. Verizon Communications, Inc., 2017 NY Slip Op 00742 (1st Dept reversing New York County, J. Schweitzer - 2/2/17)
First Department Adds Two Factors in Review of Nonmonetary Class Action Settlements

Verizon Communications, Inc. entered into a stock purchase agreement with Vodafone Group PLLC to acquire Vodafone subsidiaries. Following the commencement of a class action suit against Verizon’s board of directors, the parties negotiated a settlement. Justice Schweitzer held a fairness hearing and denied approval of the settlement and plaintiff’s attorney’s fees award holding that the disclosures that were part of the settlement did not benefit the shareholder class. The First Department reversed Justice Schweitzer’s decision and refined the 5 factor Colt standard of review by adding two new factors: “Whether the proposed settlement is in the best interests of the putative settlement class as a whole, and whether the settlement is in the best interest of the corporation.” Justice Moskowitz concurred with the majority’s decision to approve the settlement, but stated that the addition of the two new factors was unnecessary.

- Gordon v. Verizon Communications, Inc., 2017 NY Slip Op 00742 (1st Dept 2017)
- Key Terms: Class Action, Nonmonetary Settlement, Colt Factors

DeCristofaro v Nest Seekers E. End, L.L.C. (Suffolk County, J. Emerson – 1/11/17)
Directed Verdict Denying Plaintiff's Claim of De Facto Partnership in Real-Estate Brokerage

Plaintiff entered into an agreement with defendent giving him a marketing title of "EVP, Managing Partner" and requiring the parties to make best efforts to convert the agreement into an operating partnership agreement. Although proposed agreements were circulated, the parties did not enter into a partnership agreement. Although proposed agreements were circulated, the parties did not enter into a partnership agreement and the relationship between the LLC and the plaintiff deteriorated. Plaintiff commenced this action claiming the existence of a partnership. Justice Emmerson analyzed a number of factors to determine whether a de facto partnership. Justice including the sharing of losses, the lack of K-1 form, ownership of assets, capital contributions, and management and control. The court found that Plaintiff failed to establish a de facto partnership. Further, plaintiff's lack of a real-estate brokerage LLC under Real Property Law § 441-b.

- DeCristofaro v Nest Seekers E. End, L.L.C., 2017 NY Slip Op 50074(U) (Sup. Ct., Suffolk County January 11, 2017)
- Key Terms: Real-Estate Brokerage; De Facto Partnership

Benzies v. Take-Two (New York County, J. Ostrager - 12/19/16)
Multi-Faceted Complaint Filed by Creator of Grand Theft Auto Video Game Reduced to Breach of Contract Action

Leslie Benzies, the creator of the "Grand Theft Auto" video game franchise, brought suit against Take-Two Interactive Software, Inc. and its more widely-known affiliate Rockstar Games Inc. alleging that he was improperly ousted as a shareholder of the company and deprived of royalties. In his 71-page complaint originally filed in federal court, and later removed to the Commercial Division, Benzies alleged that he was constructively discharged, fraudulently induced to enter into unfair agreements, and that the defendants defamed him, were unjustly enriched at his expense, and breached fiduciary duties owed to him. Relying primarily on the plain text of the various agreements between the parties, Justice Barry R. Ostrager ruled that, with the exception of Benzies' defamation claim (which was improperly pleaded), all of Benzies' claims derived from his breach of contract claims and were dismissed.

- Benzies v. Take-Two, Sup Ct, New York County, December 19, 2016, Ostrager, J., index No. 651920/16
- Key Terms: Breach of Contract, Defamation, Unjust Enrichment, Agreement, Fiduciary Duty, Derivative

Justinian Capital SPC v. WestLB AG (Court of Appeals, affirming 1st Dept, affirming New York County J. Kornreich – 10/27/16)
Doctrine of Champerty’s Safe-Harbor Exception Only Applies When There is a Bona Fide Obligation to Pay

The Court of Appeals discussed the seldom-referenced doctrine of champerty, which prohibits an individual or entity from buying or taking an assignment of notes or other security instruments “with the intent and for the purpose of brining an action or proceeding thereon.” See New York Judiciary Law 489. In recognition of New York’s status as a leading commercial center, the statute provides a safe-harbor under which transactions with an aggregate purchase price of at least $500,000 are exempt from the statute’s prohibition. With this background, the Court dismissed the action finding that although the purchase price was over $500,000, the arrangements in this case did not create a bona fide obligation to pay because payment of the purchase price was contingent on a successful litigation outcome.

- Justianian Capital SPC v. WestLB AG, 28 N.Y.3d 160 (2016)
- Key Terms: Champerty, Motion to Dismiss

Tai Huang v Northern Star Management L.L.C. (New York County, J. Ramos – 10/24/16)
Minority Members Denied TRO Seeking to Prevent LLC Freeze-Out Merger

Justice Ramos denied a TRO brought by minority members of an LLC holding a collective interest of 27.50% in one of the defendants that was merging with the other defendant. The majority members of the LLC approved the merger and cashing out of the remaining minority members including the plaintiffs. Justice Ramos ruled that the clear language of the LLC’s operating agreement only required the consent of the majority members and not the majority of the disinterested members. Accordingly, the plaintiffs, as minority members, could not prevent the merger.

- Tai Huang v Northern Star Mgt. L.L.C., 2016 NY Slip Op 32194(U) (Sup. Ct., New York County October 24, 2016)
- Key Terms: Temporary Restraining Order; LLC; Freeze-Out Merger

MP Cool Investments Ltd. v. Forkosh (1st Dept affirming New York County, J. Kornreich - 9/1/16)
Sophisticated Investor Did Not "Justifiably Rely" on Company's Representations to Support Fraud Allegations

The First Department affirmed the opinion of New York County Commercial Division Justice Shirley Werner Kornreich that experienced investors are held to a higher standard when it comes to pleading fraud. In MP Cool Investments, the plaintiff, a majority shareholder of HVAC company DuCool, Ltd., filed suit against the former-majority shareholders of the company alleging that they intentionally provided the plaintiff with false investment information. Specifically, the plaintiff claimed that it had been induced to repeatedly invest in the company based on the defendants' representations that DuCool's products were more technologically advanced than others on the market. Affirming the Commercial Division opinion dismissing the complaint, the First Department held that plaintiff's fraud claims were deficient because not only did they lack the particularity required by the CPLR, they did not establish "justifiable reliance" to prove fraud because the plaintiff was a "sophisticated investor that had the means available to learn the true nature and real quality of [its] investment."

- MP Cool Investments Ltd. v. Forkosh, 142 A.D.3d 286 (1st Dept 2016)
- Key Terms: Fraud, Pleadings, Investor, Investment, Shareholder, Reliance

Michael R. Gianatasio, PE, P.C. v City of New York (New York County, J. Kornreich – 8/26/16)
Contractor's Claim For Unpaid Work by NYC Dismissed Where ACS Entered Into Illegal Contract

Plaintiff construction company was not fully paid for its work on the construction of ACS facilities. Justice Kornreich stated, “[t]here is no doubt that the City acted unlawfully and treated [Plaintiff] unfairly.” The Court, however, was precluded from enforcing the contracts against the NYC defendants because the subject contract did not comply with procurement requirements. “It does not matter that the municipality or its agents violated the law. The very purpose of prohibiting the enforcement of illegal contracts with municipalities is 'to protect the public from corrupt or ill-considered actions of municipal officials.'”​

- Michael R. Gianatasio, PE, P.C. v City of New York, 53 Misc 3d 757 (Sup. Ct., New York County August 26, 2016)
- Key Terms: Illegal Contract; Motion to Dismiss

Integra Optics, Inc. v. Messina (Albany County, J. Platkin – 7/15/16)
Unclean Hands Prevents Employer from Receiving a Preliminary Injunction to Enforce Non-Compete Agreement

The Commercial Division in Albany County denied an employer’s motion for a preliminary injunction to enforce the terms of a non-competition agreement after finding sufficient evidence demonstrating that the former-employee signed the agreement under duress, thereby seriously questioning the employer’s ultimate likelihood of success on the merits. Despite first finding that the employer achieved its initial burden demonstrating entitlement to a preliminary injunction, the court ultimately found the former-employee’s credible and substantial evidence of duress tipped the balance of equities away from an award of preliminary injunctive relief under the doctrine of unclean hands.

- Integra Optics, Inc. v. Messina, 52 Misc. 3d 1210(A) (Sup. Ct., Albany County July 15, 2016)
- Key Words: Preliminary Injunction, Duress, Unclean Hands

Ambac Assur. Corp. v. Countrywide Home Loans, Inc., 27 N.Y.3d 616 (Court of Appeals, reversing 1st Dept, reinstating New York County J. Bransten - 6/9/2016)
Court of Appeals Restricts the Common Interest Privilege

In one of the most significant decisions of 2016, the Court of Appeals held that the common interest privilege – the doctrine that historically allowed attorneys and clients to share privileged information with third-parties with a common legal interest – now only applies when litigation is pending or reasonably anticipated. Rejecting the more expansive application of the common interest privilege practiced by federal courts and the First Department, the Court of Appeals reasoned that the doctrine should be limited to “situations where the benefit and the necessity of shared communications are at their highest, and the potential for misuse is minimal.”

- Ambac Assur. Corp. v. Countrywide Home Loans, Inc., 27 N.Y.3d 616 (2016)
- Key Terms: Common Interest Priviledge, Attorney-Client Priviledge, Commercial Transaction(s), Third Parties

GE Oil & Gas, Inc. v. Turbine Generation Services, L.L.C. (New York County, J. Kornreich – 5/27/16)
Anti-Suit Injunction Warranted Where Party Seeks to Collaterally Challenge Court’s Judgment in a Foreign Action

Justice Kornreich granted an anti-suit injunction against a defendant after plaintiff obtained a summary judgment ruling in New York and the defendant sought to collaterally challenge that ruling in a Louisiana State court action. The court also found the defendant in contempt of court due to its violation of the court’s order by seeking to enjoin the New York action in the Louisiana State Court action. The defendant, however, can purge the contempt by discontinuing the Louisiana State Court action within 14 days.

- GE Oil & Gas, Inc. v Turbine Generation Services, L.L.C., 51 Misc 3d 1226(A) (Sup. Ct., New York County May 27, 2016)
- Key Terms: Anti-Suit Injunction, Contempt, Parallel Action, Foreign Litigation

Romanoff v. Center for Rheumatology, LLP (Albany County, J. Platkin - 5/24/16)
“Distributable Goodwill” Possibly Available to Departing Partners in the Absence of Implied or Express
Agreement to the Contrary

Justice Platkin determined that there is a question of fact as to whether the goodwill of the medical professional partnership is a distributable asset in Romanoff. The partners taking over the practice failed to affirmatively demonstrate that the medical center lacked the ability to attract patients as a result of its name, location and reputation. The Court also ruled that, at the summary judgment stage of the litigation, there was no evidence of an express agreement between the plaintiff doctor and his former partners that excluded goodwill from the practice’s distributable assets. Reciting the Court of Appeals’ decision inMatter of Brown, 242 N.Y. 1 (1926), the Court emphasized that “[g]ood will, when it exists as incidental to the business of a partnership, is presumptively an asset to be accounted for.”

- Romanoff v. Center for Rheumatology, LLP, 2016 NY Slip Op 50856(U) (Sup. Ct., Albany County May 24, 2016)
- Key Terms: Distributable Goodwill, Partnership

In the Matter of Kenneth Cole Productions, Inc., Shareholder Litigation (Court of Appeals, affirming 1st Dept. & NY County J. Marks -5/15/16)
NY Court of Appeals Adopts Delaware’s Standard of Review for “Going-Private” Mergers

The New York Court of Appeals endorsed the Delaware Supreme Court’s hybrid standard of review for going-private mergers. When faced with shareholder challenges to these types of mergers, the Court held that the business judgment rule is properly applied when six shareholder-conscious conditions are met: “(i) the controller conditions the procession of the transaction on the approval of both a Special Committee and a majority of the minority stockholders; (ii) the Special Committee is independent; (iii) the Special Committee is empowered to freely select its own advisors and to say no definitively; (iv) the Special Committee meets its duty of care in negotiating a fair price; (v) the vote of the minority is informed; and (vi) there is no coercion of the minority”. In the absence of these protections, however, the entire fairness standard should be applied.

- In re Kenneth Cole Productions, Inc., Shareholder Litig., 2016 NY Slip Op 03545 (2016)
- Key Terms: Merger, Business Judgement Rule, Entire Fairness Standard, Shareholder

Calltrol Corporation v. DialConnection, LLC (Westchester County, A. Scheinkman – 5/10/2016)
Commercial Division Examines Tolling of Statute of Limitations and Whether Transaction is Governed by the UCC

Justice Alan D. Sheinkman denied a motion to dismiss due to questions of fact regarding a statute of limitations defense. The defendant was licensed by the plaintiff to resell software. The Court held that questions of fact existed as to whether partial payment was made by the defendant before or after the statute of limitations had expired and whether defendant issued written acknowledgment of the debt to the plaintiff with an intention to pay. The Court also ruled that further discovery was needed to determine whether the four-year (UCC) or six-year (CPLR) statute of limitation period applied to plaintiff’s breach to contract cause of action.

- Calltrol Corporation v. DialConnection, LLC, 2016 NY Slip Op 50765(U) (Sup. Ct., Westchester County May 10, 2016)
- Key Terms: Breach of Contract, Statute of Limitations, Motion to Dismiss, UCC

Peter Hammond v. Bruce W. Smith (Monroe County, J. Rosenbaum – 4/22/2016)
Commercial Division Rules Parties’ General Interest Does Not Create Partnership

On the eve of trial, Justice Matthew A. Rosenbaum granted summary judgment in favor of the defendant finding that a partnership agreement did not exist between the parties. The Court ruled the parties’ general interest in creating a partnership did not equate to the actual creation of a partnership. Where there was no agreement to share profits or losses, the parties did not verbally agree to form a partnership, and the defendant was solely liable to the creditors, there were no genuine issues of material fact as to the creation of a partnership.

- Peter Hammond v. Bruce Smith, 2016 NY Slip Op 50670(U) (Sup. Ct., Monroe County April 22, 2016)
- Key Terms: Partnership, Summary Judgment

The Irish Dairy Bd. Cooperative Ltd. v Pryor Cashman LLP (NY County – J. Scarpulla - 4/19/16)
Legal Malpractice Action Arising Out of Human Resources Audit Survives Motion to Dismiss

The defendant law firm, Pryor Cashman, was hired to provide plaintiffs with a labor and employment audit of its human resource practices and policies in the United States. After the audit, one of the plaintiffs was sued in a class action for violations of California wage and hour laws. Plaintiffs brought a legal malpractice action against defendant for failing to properly identify the issues for which it was sued. Justice Scarpulla granted Pryor Cashman’s motion to dismiss as to a number of plaintiffs due to the lack of an attorney-client relationship. However, Justice Scarpulla found that plaintiffs adequately alleged the existence of an attorney-client relationship between one of the plaintiffs and the defendant and plaintiffs sufficiently alleged the defendant’s failure to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession. The breach of fiduciary duty and breach of contract causes of action were dismissed as duplicative of the legal malpractice cause of action.

-The Irish Dairy Bd. Cooperative Ltd. v. Pryor Cashman LLP, 2016 WL 1597762 (Sup. Ct., NY County Apr. 19, 2016)
- Key Terms: Legal Malpractice, Breach of Fiduciary Duty, Breach of Contract, Labor and Employment Audit

Freidman v Yakov (1st Department - 4/19/16)
Appellate Division Upholds Attorney Sanctions For Conduct at Deposition in Commercial Division Case

The First Department upheld Justice Bransten’s decision awarding sanctions for attorney’s frivolous conduct at a deposition. The attorney’s conduct included speaking objections, profanity, multiple directions not to answer questions, and communication with a client without explanation. The sanction was the costs and legal fees for the sanction motion as well as the fees associated with the continued deposition.

-Freidman v Fayenson, 41 Misc 3d 1236(A) [Sup Ct 2013], affd sub nom Freidman v Yakov, 2016 NY Slip Op 02944 [1st Dept 2016]
-Key Terms: Deposition, Attorney Sanctions, Speaking Objections, Profanity, Frivolous Conduct

Universal Investment Advisory, SA, et al. v Bakrie Telecom PTE, Ltd., et al. (NY County, J. Scarpulla – 4/18/16)
Commercial Division Refuses to Bind Non-Signatories to a Forum Selection Clause

Justice Saliann Scarpulla held that the Court lacked personal jurisdiction over a company’s commissioners, directors, and controlling shareholders in their individual capacities. Rejecting the plaintiffs’ argument that these individual defendants were bound by the New York forum selection clause contained in notes, guarantees and an indenture, by virtue of the “closely-related” theory, the Court found no “objective evidence of their intent to be bound.”

-Universal Investment Advisory, SA, et al. v. Bakrie Telecom PTE, Ltd., et al., 2016 NY Slip Op 50631(U) (Sup. Ct., NY County Apr. 18, 2016)
-Key Terms: Forum Selection Clause, Personal Jurisdiction, Motion to Dismiss, Closely-Related Theory

Bonanni v Horizons Invs., Corp. (Suffolk County, J. Emerson - 3/9/16)
Derivative Action Bench Trial Verdict

In a bench trial decision in a derivative action, the court awarded damages to plaintiff for the defendants’ breach of fiduciary duty, unjust enrichment, breach of contract, and conversion. The action involved a dispute between members of an LLC that provided MRI services to patients at hospitals.

-Bonanni v Horizons Invs., Corp., 50 Misc 3d 1227(A) [Sup Ct 2016]
-Key Terms: Derivative Action, Breach of Fiduciary Duty, Unjust Enrichment, Conversion

The Statewide Rules of the Commercial Division, Legislative History, and Proposed Rules

Statewide Rules

Subject of Rule Change

Division Rule

Rule Making

Admin. Order

Expert Disclosure
Confer Before Preliminary Conference on ESI Discovery8(b)Memo
AO-227-12 AO-228-13
Model PC Order7Memo
Repealed by AO132-2016
Accelerated Adjudication Procedure9MemoAO-77-14
Pilot Mandatory Mediation Program3MemoAO1stJD623-14
Pilot Special Masters ProgramMemoAO-120-14
Privilege Logs11-bMemoAO-114-14
Assignment of Cases to Commercial(d), (e)MemoAO-117-14 AO117a-14
Electronically Stored Information Discovery From Non-Parties11(c)MemoAO-133-14
Settlement Related Disclosure8MemoAO-119-14
Staggered Court Appearances34Memo
Limits on the Number and Duration of Depositions11-dMemo
Sanctions(g) PreambleMemoAO-05-15
Responses and Objections to Document Demands11-eMemoAO-36-15
Compliance Conference Order7MemoAO-35-15
Disclosure Disputes14MemoAO-33-15
Depositions of Entity Representatives11-fMemoAO-160-15
Proportionality in Discovery(g) Preamble
Eligibility of Cases for Commercial Division(b), (c)MemoAO-161-15
Model Compliance Conference OrderMemoAO-162-15
Summary Jury Trials3MemoAO-163-15
Bookmarks in Electronically Submitted Documents6Memo
Settlement Conferences Before Nonassigned Justice3(b)MemoAO-121-16
Revised Model PC Order7MemoAO-132-16
Memorialization of Conference Orders14-AMemoAO-128-16
Model Confidentiality Order11-gMemoAO-131-16
Direct Testimony in Affidavit Form32-aMemoAO-190-16
Hyperlinking in E-Filed Documents6Memo
Sealing of Court Records11-hMemo
Trial Time Estimates and Limits26MemoAO-64-17
Sample Forum Selection Clause(d), Appendix CMemoAO-116-17
(supersedes AO35-17)
Consultation on Expert Testimony30(c)Memo
Copies of Supporting Papers With Notice of TRO20MemoAO-71-17
Revised Model Compliance Conference OrderMemo
(Later repealed
by AO-205-17)
ADR Certification for Conferences10,11MemoAO-202-17
Large Complex Case ListMemo
Sample Choice of Law(d), Appendix DMemo


Revised Model Status Conference Stipulation and Order FormMemoAO-205-17
Claw-Back Provision in Confidentiality Stipulation and Order11-g(c), (d)MemoAO- 150-18
Word Limits17MemoAO-247-18
Technology-Assisted Review in Discovery11-eMemo
Immediate Trial or Pretrial Evidentiary Hearing on Material Issue of Fact9-aMemoAO-243-18
Selection of Mediators3Memo
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