SDNY Local Goes Global - Cicero League of International Lawyers

SDNY Local Counsel has been very busy – sorry for a lack of recent updates. 


For now, please see the attached Legal Update from Cicero – the aptly “superhero” named League of International Lawyers.

Dunnington is a proud member of the Cicero League – membership in Cicero allows us to better serve our clients by providing a network of lawyers around the globe who all regularly meet and work together.

This Spring the Cicero Legal Update features Dunnington’s recent victory in what I like to call the “Case of the Golden Amulet.”

Partner Ray Dowd with assistance from yours truly and the crack DBM team brought the long-lost amulet home to its rightful place at the Museum. 


Please read the Cicero Update posted on the DBM website ( CLICK HERE )

Judge Scheindlin decides MSJ on Limitations in favor of Wyly against SEC - Questions of Fact Remain

Judge Scheindlin ruled today that the SEC's penalty claims against the Wylys and other co-defendants are barred to the extent that they arose more than five years before the Wylys and the SEC entered into tolling agreements during the SEC investigation. The Judge also ruled that certain insider trading claims are time-barred.

In conclusion the Court ruled as follows: (1) the SEC’s penalty claims for conduct occurring more than five years prior to the execution of each defendant’s respective tolling agreement are time-barred as to that defendant; (2) summary judgment on the claim for injunctive relief against Schaufele is
denied; (3) summary judgment on the insider trading claims against the Wylys and
Schaufele is denied; (4) summary judgment on the aiding and abetting Section
13(d) violations is denied; and (5) summary judgment on the fraud claims against
the Wylys and French, and aiding abetting fraud against Schaufele are denied.
146 See SEC 56.1 Supp. ¶ 104 (citing 10/5/01 Email from Schaufele re:
Sam Wyly (forwarding email in which a Lehman employee wrote “In a
conversation yesterday between Michael[s] Store[s]’ counsel and Gordon Kiesling,
the attorney said that while Michael[s] Stores considers the entity not to be an
affiliate, that attorney was not sure he would arrive at the same conclusion if asked.
This was not a comforting conversation. What we need is for credible counsel to
Wyly to state that this entity is not an affiliate [and] address the current facts and
circumstances.”).

As can be seen from the conclusion and as detailed in the decision, disputed facts remain about the Wylys knowledge and facts necessary for the SEC to demonstrate there was knowing wrongdoing here. 

If the SEC does not cut a deal, it will be an incredible trial.

The Case No. is 10-cv-05760-SAS, Docket Document No. 190.

DISCLOURE:  SDNY author Luke McGrath previously worked on this matter for the defense team but after switching firms is no longer engaged on this matter.  Nothing in this post discloses any information that is not public or a matter of opinion.

NY Booby-Traps: Mooting a Motion to Dismiss Via An Amended Pleading

Accomplished lawyers have stumbled on numerous occasions in the face of the quirky procedure surrounding the New York CPLR and an amended pleading filed while a motion to dismiss the original pleading is pending.

The issue is thorny enough for Professor Siegal to treat it with caution in his work on New York Practice.

In short, amending a complaint “moots” a pending motion to dismiss, BUT the moving party may choose to inform the Court (and adversary) that the pending motion may be applied to the new amended pleading (which may not be wise if the amended pleading raises new issues not treated in the pending motion).

The below case, decided February 25, 2011, demonstrates how the non-moving party may still suffer sanctions should that party not file an opposition to the pending motion to dismiss - notwithstanding the filing of an amended pleading:

TOIKACH v. BASMANOV

Michael TOIKACH, Plaintiff, v. Yakov BASMANOV, Defendant.

-- February 25, 2011

Marc A. Lavaia, Esq., Robinson Brog Leinwand, Greene Genovese & Gluck, PC, New York, Attorney for Plaintiff.  Stanley K. Schlein, Esq., Bronx, Attorney for Defendant.
Plaintiff moves to strike defendant's amended answer with counterclaims claiming it was not timely filed pursuant to CPLR 3025(b) and for the award of costs and attorney's fees associated with this motion and sanctions pursuant to 22 NYCRR 130-1.1.

BACKGROUND

Plaintiff commenced this action by filing a verified complaint on January 6, 2010 and it was served upon the defendant on March 12, 2010. On April 8, 2010, plaintiff and defendant entered a stipulation to extend defendant's time to answer the complaint until June 1, 2010. On June 10, 2010, defendant served a verified answer with counterclaims (“Answer”), which was accepted. On June 30, plaintiff served a notice of motion to dismiss the defendant's counterclaims pursuant to CPLR 3211(a)(7) for failure to state a cause of action, made returnable on July 23, 2010.¹ Prior to the return date on the motion, on July 20, 2010, defendant's counsel e-mailed and mailed an amended verified answer with counterclaims (“Amended Answer”) to plaintiff's counsel. In e-mail correspondence between the attorneys on July 20, 2010, defendant's counsel indicated that pursuant to CPLR 3025(a), defendant had the right to amend its answer as the “motion to dismiss is a pleading responding to [the defendant's] Answer with Counterclaims, giving us 20 days for the service of your motion to dismiss to make an amendment.” Plaintiff's counsel responded that he disagreed and was “considering [the motion to dismiss] unopposed at th [e] time.” Two days before the adjourned date of the motion, on July 26, 2010, plaintiff mailed a letter rejecting the Amended Answer noting that “[t]he time for defendant to serve an amended answer as of right ha[d] expired.”

On July 28, 2010, counsel appeared for oral argument on the motion to dismiss the defendant's counterclaims. Defendant did not serve written opposition to the motion. At oral argument, defendant's counsel claimed that the Amended Answer had the effect of “moot[ing] out the motion to dismiss․” This court afforded the defendant the opportunity to adjourn the motion to submit opposition so the issue could properly be addressed and, in response, defendant indicated that he “[took] no opposition to the motion to dismiss a pleading that has been amended” and expressly consented to the dismissal of the counterclaims as originally pleaded. This court noted that “[defendant's] failure to serve any papers responsive [to the motion] is causing a lot of inconvenience not only to plaintiff but to the Court and in having to deal with an argument that was not presented to the Court in advance of your standing up here in this courtroom.” Defendant orally cited STS Management Development Inc. v. New York State Department of Taxation and Finance, 254 A.D.2d 409 [2d Dept 1998], for the proposition that plaintiff's motion to dismiss extended the time in which the defendant could amend his answer as of right. This court noted that, based on the defendant's lack of written response including a copy of the Amended Answer, a second motion would be necessary to address the sufficiency of the Amended Answer and counterclaims and “[w]hether or not there should have been leave to amend will remain an open question.” Plaintiff's motion to strike the counterclaims in the Answer was granted based on defendant's express consent.
Plaintiff brought the present motion seeking to strike the Amended Answer arguing that the Amended Answer was untimely filed, without leave of the court, approximately 40 days after the Answer was filed. Plaintiff contends that when the plaintiff moved to dismiss the counterclaims in the Answer, defendant should have cross moved, pursuant to CPLR 3025(b), for leave to serve an amended answer which requires a presentation of “evidence to support the merits of the proposed counterclaims and the Court must examine their sufficiency.” Plaintiff seeks attorney's fees, costs and sanctions for having to make a second motion to address the viability of defendant's pleadings.

Plaintiff did not move in the alternative to dismiss the Amended Answer for failure to state a cause of action or upon any other grounds pursuant to CPLR 3211.

Defendant argues that plaintiff's original motion to dismiss defendant's counterclaims pursuant to CPLR 3211(a)(7) extended plaintiff's time to serve a responsive pleading to the counterclaims in the Answer pursuant to CPLR 3211(f) and, therefore, also extended the defendant's time to amend his pleading without leave pursuant to CPLR 3025(a). Defendant argues that, because the Amended Answer was properly served within this extended period pursuant to CPLR 3025(a), the original Answer “had no further force and effect due to the filing of the Amended Answer on July 20, 2010.”

DISCUSSION

Pursuant to CPLR 3025(a), “[a] party may amend his pleading once without leave of court within twenty days after its service, or at any time before the period for responding to it expires, or within twenty days after service of a pleading responding to it.” However, under CPLR 3211(f), “[s]ervice of a notice of motion under subdivision [3211](a) or (b) before service of a pleading responsive to the cause of action or defense sought to be dismissed extends the time to serve the pleading until ten days after service of notice of entry of the order.”

A motion to dismiss extends the movant's time to answer and thus extends the time in which the opposing party may amend his pleading as of right (CPLR 3025[a]; see Johnson v. Spence, 286 A.D.2d 481, 483 [2d Dept 2001]; STS Mgmt. Dev. v. New York State Dept of Taxation & Fin., 254 A.D.2d 409, 410 [2d Dept 1998] ). Therefore, plaintiff's contention that defendant was required to move pursuant to CPLR 3025(b) for leave to amend the Answer is unavailing. However, courts have diverged on the effect of the service of an amended pleading upon a pending motion to dismiss. While some courts have held that the amended pleading resulted in the motion being abated, “[o]ther courts have held that the amended pleading should be included in [the] record on the pending motion, and that it should be granted or denied based on the sufficiency of the amended pleading” (5 Weinstein-Korn-Miller, N.Y. Civ. Prac P 3025.07; see Taylor v. Eli Haddad Corp, 118 Misc.2d 253, 256 [Sup Ct Special Term, New York County 1983]; D'Addario v. McNab, 73 Misc.2d 59, 62 [Sup Ct Suffolk County 1973] ).

In the Second Department, an amended complaint does not render a motion to dismiss academic and the moving party has the discretion as to whether the motion should be applied to the new pleading (see Livadiotakis v. Tzitzikalakis, 302 A.D.2d 369, 370 [2d Dept 2003], citing Matter of Sage Realty Corp. v. Proskauer Rose Goetz & Mendelsohn, 251 A.D.2d 35, 38 [1st Dept 1998] (holding that an amended pleading does not automatically abate a motion to dismiss “that was addressed to the original pleading” and “that the moving party has the option to decide whether its motion should be applied to the new pleadings”) and Matter of D'Addario, 73 Misc.2d at 62 (holding that an amended complaint did not abate a pending motion to dismiss and the court could treat the motion to dismiss as directed to the amended complaint); see also Sholom & Zuckerbrot Realty Corp. v. Coldwell Banker Commercial Group, Inc., 138 Misc.2d 799, 801 [Sup Ct, Queens County 1988](holding, “the better rule is one which allows the moving party the option of withdrawing its motion or pressing it with regard to the amended pleading”)). This court concurs that the “better rule” is one that most expeditiously advances the litigation.

Accordingly, defendant's contention, that service of the Amended Answer obviated the need to oppose plaintiff's motion, is unavailing. Had defendant submitted a timely response to plaintiff's motion and included the Amended Answer in the papers, plaintiff would have had the option to withdraw the motion or pursue the motion as applied to the Amended Answer. Defendant's refusal to submit opposition to the motion prevented this court from addressing whether the Amended Answer had been properly served without leave and whether it corrected the alleged deficiencies in the Answer and thus delayed the resolution of this matter. Defendant's counsel's contention, in e-mail correspondence to plaintiff's counsel prior to the original motion, that the “motion to dismiss is a pleading” was an ineffectual and incorrect statement as a motion to dismiss is clearly not a “pleading” pursuant to CPLR 3011 and did not relieve defendant of his duty to respond to the motion.

Plaintiff notified defendant's counsel on July 20, 2010, eight days before oral argument on the original motion, that plaintiff was choosing to pursue the motion. Prior to appearing for oral argument, defendant clearly investigated whether a motion to dismiss extended the defendant's time to amend the answer as defendant cited STS Management at oral argument. While the STS Management decision discusses the extension of the time to amend a pleading, it does not address the effect of service of an amended pleading while a motion to dismiss is pending. However, the Sholom decision, cited and relied upon in STS Management, does address this issue, holding that while courts have varied in handling this situation, “the better rule is one which allows the moving party the option of withdrawing its motion or pressing it with regard to the amended pleading” (Sholom, 138 Misc.2d at 801). The defendant's failure to submit the Amended Answer in response to plaintiff's original motion to dismiss prevented the plaintiff from exercising this option. Despite numerous indications from plaintiff's counsel that he was treating the motion as unopposed and would pursue the relief requested, more than a week before oral argument, and an additional opportunity offered by this court at oral argument to submit written opposition in support of its position, defendant refused to submit a written response to the motion, thereby deliberately preventing the plaintiff from choosing whether to pursue the motion as applied to the Amended Answer and necessitating additional motion practice. Such gamesmanship in litigation is found to be frivolous conduct as defined in the Rules of the Chief Administrator § 130-1.1(c)(2) as it was clearly undertaken merely to delay or prolong the resolution of the litigation. Not sure which answer would be found to be controlling of the litigation as a result of defendant's refusal to properly present the issues to the court for determination, plaintiff has been put to the additional expense of this second motion by defendant's conduct. Accordingly, pursuant to 22 NYCRR § 130-1.1(a), the court grants plaintiff's motion for the costs and reasonable attorney's fees incurred in having to bring this motion.

Plaintiff's current motion to strike does not seek dismissal of the Amended Answer pursuant to CPLR 3211 and does not claim any inadequacies in the Amended Answer. Presumably, therefore, plaintiff has determined that the Amended Answer cured the defects in the original pleading. Despite defendant's failure to properly respond to the original motion before this court, defendant was entitled to amend the answer with counterclaims without leave of the court pursuant to CPLR 3025 and 3211(f) and his Amended Answer should not be stricken.

CONCLUSION

Accordingly, plaintiff's motion to strike defendant's Amended Answer is denied.
Plaintiff is to serve a responsive pleading to the Amended Answer and counterclaims within 10 days of the service of this order.
Plaintiff's motion for the costs and reasonable attorneys fees incurred in bringing this motion is granted pursuant to 22 NYCRR § 130-1.1(a). Plaintiff is directed to submit an order on notice including an attorney's affirmation containing proof of costs and reasonable attorney's fees within 30 days of service of this order.
The foregoing constitutes the decision and order of the court.

FOOTNOTES
1. It is noted that although the motion was served on the defendant on June 30, 2010, the motion was filed on July 12, 2010 and the return date was administratively adjourned to this court's motion day, July 28, 2010.
CAROLYN E. DEMAREST, J.

Art As A Regulated Commodity: Get Ready New York

As the New York Times reports, regulators are concerned that art has become such a commodity that it should receive the "benefit" of regulatory oversight. 

Here is a blurb from the NYT:

As Art Sales Rise, So Do Oversight Worries

By ROBIN POGREBIN and KEVIN FLYNN

Some in the art world question the necessity of buyer protections, but others say monitoring has not kept pace with the increasing treatment of art as a commodity ...

 

Link to the full article (as per NYT website rules):  http://www.nytimes.com/2013/01/28/arts/design/as-art-market-rise-so-do-questions-of-oversight.html?hp&_r=0&gwh=6DDE66D3A853508E20188A02B785516D

 

What will this mean for art lovers and for the New York art-scene?  Stay tuned!

Judge Amon to Speak At NYCLA Event Hosted at Dunnington

Judge Amon, Chief Judge, EDNY, is speaking at the NYCLA Federal Courts Committee Meeting tomorrow at Dunnington’s office – SDNY Local Counsel author, Luke McGrath, is hosting, so email, lmcgrath@dunnington.com, if you are interested in attending.

SDNY Local Counsel Goes "Indiana Jones-Style" To Return Stolen Centuries-Old Amulet to Museum

My firm, my partner Ray Dowd and I are very proud of the recent victory in a case right out of Indiana Jones: the Secret of the Stolen Amulet. The DBM team investigated and compelled the return of a priceless centuries-old amulet to the Museum from which it was stolen by Russian soldiers during World War II.


The New York Law Journal report is here.

http://www.newyorklawjournal.com/PubArticleNY.jsp?id=1202556567318&Judges_Order_Return_of_Ancient_Gold_Tablet_to_Berlin_Museum

SDNY Local Counsel Supports Needed Security Pavillion for SDNY Courthouse

SDNY Local Counsel supports the efforts of the New York Congressional Delegation from both parties to push through needed security upgrades to the Daniel Patrick Moynihan Courthouse. Below is a brief run-down of the relevant facts:

Moynihan Courthouse Security Pavilion Security Needs

• After the September 11, 2001 attacks, it was determined by law enforcement that security at the Moynihan Courthouse was deficient.

• The Department of Homeland Security Report issued to the General Services Administration and The United States Courts points out that air intakes and security screening are inadequate.

• Recommendations include raising the fresh air intakes for the courthouse from ground level and the construction of a security screening pavilion outside of the main structure of the courthouse. Background on the Court

• The United States District Court for the Southern District of New York is the largest federal trial court by number of Judges.

• The Daniel Patrick Moynihan Courthouse houses more federal judges than any other federal building in the Country.

• The United States District Court for the Southern District of New York handles many high profile/high security cases (terrorism, international arms dealing, international drug smuggling, international high profile crimes, large securities cases, organized crime).

Security Pavilion, Air Intake and Backfill Project

• The request to fund the Security Pavilion and the Backfill of the United States Probation and Pretrial Offices was contained in the President’s 2011 budget request (combined $28 million).

• GSA appropriated $2 million for the design of the pavilion and backfill.

• The design of the pavilion has been completed up to the 90% drawings and General Services Administration is ready to release the contract.

• The estimated cost to complete the pavilion is $10 million.

Support for the Project

• Members of the New York Congressional Delegation from both parties have expressed support for the project. They include Senators Schumer and Gillibrand, Congressmen Grimm, King, Nadler, Rangel and Serrano.

• The United States Courts, United States Court of Appeals for the Second Circuit, United States District Court, the General Services Administration and the United States Marshals Service has committed to working together to complete the project. To that end, Chief Judge Loretta Preska and Edward Friedland (SDNY District Executive) were scheduled to meet with Commissioner Bob Peck on Wednesday, April 18, at 11:30 AM while in Washington.

Show your suport for these needed security upgrades by commenting below (SDNY Local Counsel will forward positive comments to the supporters of this project) and reaching out to your local bar association or trade association and asking them to contact the General Services Administration to register their support for this project.

Careful What You Wish For: Arbitration Provisions Can Get Lost In The Shuffle If You Amend An Agreement And Do Not Reference Arbitration In The Amendment

Broad arbitration provisions cannot compel parties to arbitrate claims not arising out of the subject matter covered by the arbitration agreement. A party to a contract must be careful when agreeing to subsequent or supplemental agreements because unless expressly referenced, the broad arbitration agreement in one contract may not cover a dispute arising out of the other contracts.

For example, in New Jersey, notwithstanding a very strong state public policy regarding compulsory counterclaims and joinder, the State case-law draws a bright line between claims that must be arbitrated under an agreement between the parties and claims that must be litigated (i.e. not added to the arbitration as a compulsory counterclaim or under a joinder rule). In short, in New Jersey, much like New York, a court will not compel a party to arbitrate a matter that the party has not expressly and knowingly agreed to arbitrate. This makes sense because agreeing to arbitrate is an agreement to waive or give up a right to access the courts and waiver of such an important right should not be treated lightly.

In New York, it’s a similar analysis. New York Courts are confronted daily with applications to compel or avoid arbitration – usually brought by “Orders to Show Cause” seeking emergency relief. The emergency is generally because once a party participates in an arbitration, they cannot later complain of waiving their right to litigate the matter. Because arbitration may be onerous – indeed, some litigants in certain situations may prefer to litigate in Court than pay an arbitrator and undergo an arbitration – parties to a dispute take the arbitration v. litigation issue very seriously.

In short, whichever the preference, a party to a dispute should not shoot first and answer questions later. Arbitration provisions in a contract should be carefully thought-out and, if there are amendments or supplemental agreements, the party’s choice to (or not to) arbitrate should be protected in those later agreements.

SDNY Local Counsel Reports on Supreme Court Long-Arm Decisions

In a well-attended CLE, SDNY Local Counsel author, yours truly, and Prof. Pfeffer, SDNY Local Counsel contributor, presented on the Supreme Court's recent decisions in:


J. McIntyre Machinery Ltd. v. Nicastro, U.S., No. 09-1343 (certiorari petition granted 9/28/10),

and

Goodyear Luxembourg Tires SA v. Brown, U.S., No. 10-76 (certiorari petition granted 9/28/10).

Special thanks to the New York County Lawyers Association and the SDNY Chapter of the Federal Bar Association for co-sponsoring the event.

In J. McIntyre Machinery Ltd. v. Nicastro, the New Jersey Supreme Court found jurisdiction valid in that state over an out-of-state manufacturer. That manufacturer had sold its machine to an Ohio distributor, who then sold it at a Nevada trade show to the company that employed plaintiff, who, in turn, was injured by the machine in New Jersey.

In Goodyear Luxembourg Tires SA v. Brown, the North Carolina Court of Appeals found that jurisdiction was valid over an out-of-state manufacturer of tires based on its sale in North Carolina, even though the plaintiff was injured overseas and the events of the law suit had no connection to North Carolina, other than the fact that plaintiffs lived there.

The U.S. Supreme Court's unanimous decision in Goodyear comes as no surprise. The Court reigned in a lower court practice of finding "general jurisdiction" based upon contacts with the state -- usually in sympathetic cases where the lower courts could not deem the lawsuit as "arising out of" certain contacts with the state. In short, after Goodyear, there should not be a finding of "general jurisdiction" unless the defendant is "at home" in the state. Being at home means that the forum is the home state of the person or company or that person or company has such pervasive contacts that the state is like a second home (which should be rare).

The Court's plurality decision in Nicastro, however, is not so simple. The decision is a must read for any Supreme Court-watcher because of the interplay between the competing plurality, concurrence and dissent is fascinating.

Still, despite the plurality's attempt to go back to basics and phrase the analysis as a state's sovereignty meets due process issue, there remains numerous open questions and no true clarity. In fact, the concurrence and dissent indicate that the due process limitations of long-arm statutes in the new age of global markets and e-commerce is still an open question.

The take-aways from Nicastro that we at SDNY Local Counsel find interesting are:

(i) the phrase "stream of commerce" is no more than a metaphor and not a doctrine that can answer jurisdictional questions in the absolute. In short, the Supreme Court has emphasized the need for a minimum contacts analysis and that putting a product in the "stream of commerce" may be just one factor in such an analysis. Indeed, without more, the stream of commerce metaphor may be insufficient to sustain an assertion of jurisdiction.

(ii) the plurality's criticism of foreseeability as a touchstone for the due process limits of long-arm jurisdiction (which appears to require more than simply putting a product in the stream of commerce that causes injury in the state) may run up against New York's long-arm statute which contemplates jurisdiction when a defendant:

[§302 (a): ]

3. commits a tortious act without the state causing injury to person or property within the state, except as to a cause of action for defamation of character arising from the act, if he

(i) regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in the state, or

(ii) expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce; or …


In sum, clarity is not forthcoming from the Court on the due process limitations on long-arm jurisdiction and may not be taken up again any time soon.

Does The Newmark Case "Clarify" When A Contract Is Enforceable In New York?

On January 13, 2011, the Appellate Division, First Department found that , in some cases, an email with a signature line can satisfy New York's statute of fruads.  Accordingly, in New York, if you are sending a final (but unsigned) contract to another party and do NOT want to be considered to have executed the contract (i.e. it is still subject to approval for example), you should ALWAYS state NOT FINAL or SUBJECT TO APPROVAL AND EXECUTION.  Otherwise, a New York Court may hold you to that contract.

The important section of the case is excerpted here (and the full case is provided below):


An e-mail sent by a party, under which the sending party's name is typed, can constitute a writing for purposes of the statute of frauds (see General Obligations Law § 5-701 [b] [4]; Stevens v Publicis S.A., 50 AD3d 253, 255-256 [2008], lv dismissed 10 NY3d 930 [2008]). Defendant does not dispute its authorship of the e-mails, nor that they were sent by its agent, and contrary to defendant's claims, there is no evidence that it rejected the final e-mail sent by plaintiff, which incorporated defendant's revisions. The e-mail agreement set forth all relevant terms of the agreement, including the particular commission charged by plaintiff, and thus, constituted a meeting of the minds (cf. Naldi v Grunberg, 80 AD3d 1, 13-14 [2010]).


Full case:


2011 NY Slip Op 00158 [80 AD3d 476]

January 13, 2011

Appellate Division, First Department

Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.

As corrected through Wednesday, March 9, 2011



Newmark & Company Real Estate Inc., Appellant,

v

2615 East 17 Street Realty LLC, Respondent, and Wilk Real Estate I, LLC, et al., Intervenors-Respondents.

—[*1] Law Office of Lionel A. Barasch, New York (Lionel A. Barasch of counsel), for appellant.

Sol Mermelstein, Brooklyn, for 2615 East 17 Street Realty LLC, respondent.

Arnold J. Ludwig, Brooklyn, for Wilk Real Estate I, LLC and Albert Wilk, respondents.

Order, Supreme Court, New York County (Joan M. Kenney, J.), entered April 16, 2010, which, insofar as appealed from, in this action alleging a breach of contract, denied plaintiff's motion for summary judgment, unanimously reversed, on the law, with costs, and the motion granted in the principal amount of $124,415, plus interest from June 25, 2009. The Clerk is directed to enter judgment accordingly. Appeal from order, same court and Justice, entered April 15, 2010, which granted the motion of Wilk Real Estate I, LLC and Albert Wilk to intervene, unanimously dismissed, without costs, as academic.

In the lease between defendant, as the landlord, and nonparty tenant, which was brought into the transaction by plaintiff broker, the subscribing parties represented that plaintiff was the exclusive broker for the transaction and that defendant would pay its commission. This clear representation, which was supported by additional documentary evidence, entitled plaintiff to its commission as a matter of law (Morris Cohon & Co. v Russell, 23 NY2d 569, 574-575 [1969]; Helmsley-Spear, Inc. v New York Blood Ctr., 257 AD2d 64 [1999]). We reject defendant's claim that the relevant provision does not mean what it says, but resulted from a scrivener's error (see Edward S. Gordon Co. v Blodnick, Schultz & Abramowitz, 150 AD2d 212 [1989], lv denied 74 NY2d 613 [1989]).

Although defendant did not sign the separate brokerage agreement proffered by plaintiff setting forth the details of its commission, that fact is not fatal either under the statute of frauds or as to enforceability. Several e-mail communications, supported by other documentary evidence, reflected that plaintiff and defendant were in regular contact negotiating the lease and, when the parties appeared close to agreeing to the lease terms, plaintiff e-mailed defendant a draft brokerage agreement, setting forth, inter alia, the particular commission that had been discussed. Plaintiff invited defendant's revisions and defendant sent back, also by e-mail, [*2]handwritten revisions, which did not modify the commission, but only provided that it would be paid in specified increments. Plaintiff incorporated those revisions and sent the final copy back to defendant's agent, and the record contains no evidence that defendant objected to, protested, or rejected any of the provisions in the last version of the agreement.

An e-mail sent by a party, under which the sending party's name is typed, can constitute a writing for purposes of the statute of frauds (see General Obligations Law § 5-701 [b] [4]; Stevens v Publicis S.A., 50 AD3d 253, 255-256 [2008], lv dismissed 10 NY3d 930 [2008]). Defendant does not dispute its authorship of the e-mails, nor that they were sent by its agent, and contrary to defendant's claims, there is no evidence that it rejected the final e-mail sent by plaintiff, which incorporated defendant's revisions. The e-mail agreement set forth all relevant terms of the agreement, including the particular commission charged by plaintiff, and thus, constituted a meeting of the minds (cf. Naldi v Grunberg, 80 AD3d 1, 13-14 [2010]).

In view of the foregoing, plaintiff's challenges to the order granting the motion to intervene are academic. Concur—Tom, J.P., Sweeny, Freedman, Richter and Abdus-Salaam, JJ.

SDNY Local Counsel Celebrates Spring With Wine Tasting

E-Discovery Lessons Direct From The Federal Bar Association

For those of you wrestling with E-discovery and Rule 26 of the Federal Rules of Civil Procedure  (FRCP) discovery obligations, the FBA Website recently featured two thoughtful pieces on E-discovery in The Federal Lawyer magazine: 

Local Practices for Electronic Discovery
by Anne Shea Gaza and Jason J. Rawnsley

and

Creating the Criteria and the Process for Selection of E-Discovery Special Masters in Federal Court

by the Hon. Nora Barry Fischer and Richard N. Letttieri

also, access FBA website here.

SDNY Local Counsel supports the FBA and SDNY Local Counsel author, Luke McGrath, is Membership Chair for the FBA SDNY Chapter, so  ...

why not join?

Tell them Luke sent you.

NY Court of Appeals Rules on Internet-Related Jurisdiction

As reported in today's New York Law Journal, the New York Court of Appeals has ruled on a case in which a New York based publisher sought to hale out-of-state defendants into New York court based on the injuries suffered in New York as a result of the unauthorized down-load of copyrighted materials -- even though the suspect internet "down-loads" or other transaction activity took place as far away as Arizona and Oregon.

The case, Penguin Group (USA) Inc. v. American Buddha, No. 7, involved New York's long-arm statute and internet downloads of copyrighted material.

According to the Court, the fact that the internet is so pervasive distinguishes the case "from traditional commercial tort cases where courts have generally linked the injury to the place where sales or customers are lost."

In keeping with SDNY Local Counsel's commitment to monitor cases that may impact jurisdictional questions in state and federal Courts in New York, SDNY local counsel will keep you all updated on further developments ...

U.S. Supreme Court To Rule On Constitutional Limits (If Any) To Long-Arm Jurisdiction

SDNY Local Counsel blog-author, Luke McGrath, and Prof. Robert Pfeffer, a contributor to SDNY Local Counsel blog, gave a successful talk on March 24, 2011 on the upcoming decisions on cases pending in the United States Supreme Court on the extent courts throughout the United States may exercise jurisdiction over non-residents based upon certain types of contacts with a state. The talk was sponsored by the SDNY Chapter of the Federal Bar Association and the New York County Lawyers Association.

The two cases pending before the Court are:

J. McIntyre Machinery Ltd. v. Nicastro, U.S., No. 09-1343 (certiorari petition granted 9/28/10)

Goodyear Luxembourg Tires SA v. Brown, U.S., No. 10-76 (certiorari petition granted 9/28/10).

NYCLA and the SDNY Chapter of the Federal Bar Association are co-sponsoring the event.

See previous postings on this blog for a discussion of the cases.

During the talk we played excerpts from the oral argument before the Court. The audio of oral argument accentuated our discussion and great audience participation rounded out the event.

Thanks to everyone, including Tim Dougherty and Aleksandra Kaplun, for their support and participation in this successful event.

A is for ... the ABC's of Dispute Resolution -- Author Book-Reading

SDNY Local Counsel is honored to have participated in the organization and sponsorship of a banner-event book-reading in which Victoria Pynchon read from her naughtily titled book: A is for A**hole: The Grownups’ ABCs of Conflict Resolution.

The SDNY Chapter of the Federal Bar Association sponsored the event and a great time was had by all.

New York Law Journal Article re: SDNY Jurisdiction Based on Websites

SDNY Local Counsel author, Luke McGrath, and our contributing correspondent, Prof. Robert Pfeffer, were recently featured in the December 17, 2010 edition of the New York Law Journal. 

The Article, entitled, Jurisdiction.com:  New York's Longest Arm Yet?, discusses the recent Second Circuit decision, Chloe v. Queen Bee of Beverly Hills, LLC,  No. 09-3361-cv, __ F.3d __ 2010, WL 3035495 (Aug. 5, 2010).  Our authors posit that, after Chloe, case law in New York is now consistent:  there is clearly long-arm jurisdiction based upon "active" websites and clearly no such jurisdiction based purely on passive websites that allow no user interaction and are no more than a web-based image containing information (which, for example, do not allow a user to input information, or purchase merchandise or services).

A copy of the article (copyright The New York Law Journal), is available on-line from the New York Law Journal:  http://www.law.com/jsp/nylj/index.jsp

SDNY Local Counsel and Prof. Pfeffer will post further offerings on jurisdictional issues in the future.

U.S. Supreme Court Watch On Personal Jurisdiction From Prof. Pfeffer

Below is a much appreciated contribution from our friend of the SDNY Local Counsel, Prof. Robert Pfeffer.  This post focuses on the personal jurisdiction cases currently pending before the Supreme Court.

Civil litigators should take note of two personal jurisdiction cases in which the Supreme Court has taken certiorari in the upcoming term.  No argument date has been scheduled, but the cases will be argued, and opinons will be issued, by the time the Court completes in term in June 2011. The decisions being reviewed originated from the New Jersey Supreme Court and the North Carolina intermediate appellate court.  These courts that may not be considered "local" to SDNY, but the ramifications of these Supreme Court decisons may be felt in New York and throughout the country.  The current holdings take a more extensive view of jurisdiction than any Supreme Court case ever has.

The New Jersey case:  J. McIntyre Machinery Ltd. v. Nicastro, U.S., No. 09-1343 (certiorari petition granted 9/28/10).

The issue presented here was last addressed by the US Supreme Court in Asahi, but that case did not generate a majority theory on the extent to which stream of commerce theory could support personal jurisdiction consistent with the due process clause of the Fourteenth Amendment. Rather it generated two competing four justice pluralities (the court did reach a majority on the theory that there was no personal jurisdiciton because the only remaining parties were both non-US companies that were adjudicating the issue of indemnity -- the American plaintiff having settled its suit). Brennan, writing for four justices, concluded that placing a product in the stream of commerce with the expectation that it would end up in a given state was sufficient for the exercise of jurisdiction under the due process clause. O'Connor, writing for four justices, concluded that there needed to be both placement with knowledge and additional activity directed toward the forum state (sometimes called stream of commerce "plus"). The New Jersey lower-court opinion finds jurisdiction on a bases that is beyond either what Brennan's or O'Connor's opinions discussed, namely based upon placing a product with a national distributor and having that product cause injury in a given state, even if the defendant did not know that the product was being distributed in that state, and where there was no evidence that any of defendant’s products other than the one machine that allegedly caused plaintiff’s injury were distributed in New Jersey.” The Supreme Court's ruling on this case should be of particular interest to plaintiffs counsel seeking to sue non-US entities in tort or to those who defend foreign companies. The case also has broader implications for jurisdiction in all commercial cases involving large corporate defendants.

The North Carolina case:  Goodyear Luxembourg Tires SA v. Brown, U.S., No. 10-76 (certiorari petition granted 9/28/10) [link to case:  http://www.aoc.state.nc.us/www/public/coa/opinions/2009/pdf/080944-1.pdf ]

This case involves general jurisdiction -- situations in which the suit does NOT arise from the defendant's contacts with a state.  The Supreme Court has indicated that for the exercise of general jurisdiction to be constitutional, that the contacts with a given state must be quite extensive.  Interstingly, the Supreme Court has only upheld the exercise of general jurisdiction once, in the Perkins case.  The North Carolina court concluded that a defendant's sale of tires in a state was enough to subject that defendant to jurisdiction in the state in a case involving an accident that occurred in France due to allegedly defective tires that apparently had nothing to do with North Carolina. The Supreme Court's ruling in this case will have implications for any commericial defendants who have a large volume of sales of a product or service in a given state or througout the United States. In particular, should the Supreme Court affirm the North Carolina court's decision, commercial defendants would arguably be subject to suit to in any state in which it sold goods or services even if the plaintiff's suit is unrelated to those sales, and even if the plaintiff itself has no connection to that state. That result would therefore be a dream-come-true for plaintiff's who wish to shop for a plaintiff's friendly forum, and a nightmare for defendant's seeking to avoid those forums.

Since most of the justices currently on the U.S. Supreme Court were not there the last time the Supreme Court undertook jurisdiction (Roberts, Alito, Thomas, Breyer, Ginsberg, Sotomayer and Kagan were not there) it is hard to predict how the Court will rule in these cases.

Here is a link that will allow one to open the full-text of these opinions

http://www.masstortdefense.com/2010/10/articles/supreme-court-grants-cert-in-important-personal-jurisdiction-cases/

Prof. Pfeffer is a visiting associate professor at the University of Alabama School of Law teaching Civil Procedure, Contracts, Sales, and Criminal Procedure.  Please look for additional blog entries from Mr. McGrath and Prof. Pfeffer on SDNY Local Counsel Blog as these cases are argued and decisions are issued.

Ensuring Proper Discovery Responses That Are Also Cost-Effective

In keeping with SDNY Local Counsel’s commitment to provide insight into the most talked about issues facing litigants in New York today, SDNY Local Counsel will sponsor and post discussions regarding cost-effective and fool-safe procedures to ensure full compliance with discovery requirements in state and federal courts.

Stay tuned ...

Tabor House Event a Success -- Please Support Tabor House

We had a successful fund-raising effort for the Tabor House last night. 

Tabor House is a halfway house providing support for men who are seeking to regain the dignity lost by addiction. 

Tabor House has a 75% sobriety success-rate for five years out of the house -- this is an astonishing success-rate.  George Rose, Head of Operations for the New York Yankee organization in Japan, is one of the founders and the McGrath Family and my firm Dunnington, Bartholow & Miller (special thanks to Ray Dowd and Carol Sigmund) threw in their support for George and the event. 

Yankee GM Brian Cashman gave a Q&A and a good time was had by all ... proving that doing well by doing good is a great way to practice in law, in baseball and in life!

To support Tabor House please visit   http://www.taborhouse.org/Tabor_House/Welcome.html

The Case of the Resort Condo: New York's Long-Arm of the Law[*]

In case anyone was wondering, yes, you may be haled** into a New York Court for your actions outside of New York, relating to subject matter outside New York.

For example, if a New York resident purchases a condo outside of the United States by flying to the location of the condo and purchasing it (i.e. signing the contract) at that location, the New York resident may still be able to sue in New York.  Unless the contract specifically provides for a venue (for example, expressly stating all lawsuits arising from the purchase or sale will be brought in a specific jurisdiction outside New York) the developer or operator of the condo-hotel property may be sued in New York, even if the developer and operator do not consider themselves to be conducting any business activity in New York.

New York cases on this point are all over the map.  Unlike other states in which the long-arm statute expressly allows jurisdiction to the extent constitutionally permissible (like California, for example), the New York long-arm statute is narrower than the due process clause of the United States Consitution.  Personal jurisdiciton cases in New York (including most cases in the four federal district courts in New York, see FRCP 4(k)) generally focus upon whether the exercise of jurisdiciton is allowed by NY CPLR 302.  If jurisdiction is not consistent with that provision, then a New York court cannot exercise jurisdiction over a defendant even if doing so would be consistent with the due process clause.  Correspondingly, if the exercise of jurisdiction is consistent with CPLR 302, then the due process clause, being broader than that section, will necessarily be satisfied.  Accordingly, most New York cases focus on whether the developer/operator was doing business in New York or transacted business in New York sufficient under the CPLR 302 to justify haling** the developer and/or operator into a New York Court.  At this point the facts (and sympathies) take over because New York case law may recognize internet activity (for example) and other business practices to be sufficient to satisfy the New York long-arm statute.

To illustrate, if the developer or operator employed a real estate broker who marketed the condo in such a way as to target the New York market (i.e. potential condo purchasers who live in New York), a New York Court may find that it has jurisdiction over these defendants. In short, if they availed themselves of the market, a New York Court may find that they should be prepared to defend actions in New York arising out of their marketing activities.

On the other hand, if the developer or operator can convince the Court that there is no material connection to New York other than the fact that the condo purchaser resides there (when not residing in condos purchased outside the United States), some New York Courts will tell a plaintiff that they have "made their bed, now lie in it" requiring the plaintiff to bring suit in the jurisdiction where the plaintiff purchased the condo property instead of New York.

Keep watching SDNY Local Counsel as we analyze the "Case of the Resort Condo" by collecting and comparing recent cases that match the fact pattern.

* Special thanks to Prof. Robert Pfeffer, Visiting Associate Professor at University of Alabama School of Law, who has helped me update this blog entry. See later blog postings for news on SDNY Local Counsel's collaboration with Prof. Pfeffer.


** For you philologists (i.e. word-o-philes): a person is "haled" into a court reluctantly, a NYC Yellow Taxi is "hailed," and cargo is "hauled."