Developments of Interest

Bank’s Trespass Results in Sanctions against Bank of $155,000

During the pendency of a foreclosure action, the bank entered a owner’s home and changed the locks. The bank claimed that the property had been abandoned because the owner was not present, notwithstanding that not only did the owner not abandon his property, but he had informed the bank that he would not be in the house for extend periods. Although the bank gave the owner a set of new keys, the bank used its set to later enter the home and allegedly remove items from the home and garage. A week later, the owner arrived home to find himself locked out. The bank claimed that the property had been abandoned and the locks changed for a second time. The owner informed the bank that his home was not abandoned and was full of his furniture and personal property. The bank promised to not again enter the home. At a court hearing to investigate the circumstances of the second time the locks were changed, the bank’s representative claimed that he found the house open and unsecured. He informed the bank and was directed to change the locks. The representative denied that he had forcibly removed the locks, because the front door was open. After being question by the court, the representative confessed to having no knowledge of what happened because he had relied on another to whom he had delegated the inspection of the home. Although the bank claimed that it had authority to enter the property, the court assessed its sanction, finding the bank to have acted unreasonably, recklessly and in bad faith. (March 2010)

Dramatic Changes to Residential Foreclosure Laws

A recently signed law, parts of which are already effective and parts of which will be effective in the next few weeks, adds significant burdens upon lenders seeking to foreclose residential loans. Notice to Tenants Effective January 14, all tenants in a residential property (even those without written leases) are to be notified directly, within 10 days of service of the summons and complaint. Depending on the size of the building, this notice is to be sent by certified and regular mail or by posting the summons and complaint to all entrances and exits of the building. The notice informs the tenants that if the leases are not substantially below fair market, the tenants may remain for the term of the lease. Those without leases may remain for 90 days after the acquirer of title notifies the tenants (see below). An exception exists that limits a tenant’s right of occupancy to ninety days (for a single unit) if the successor in interest who acquires title intends to occupy a single unit as his or her primary residence and if the unit is not subject to a federal or state statutory system of subsidy or other federal or state statutory scheme. An owner of the residential real property is excluded from this section. The tenancy continues under same terms and conditions of lease as were in effect at time of entry of judgment, or transfer of ownership. The obligation to pay fair market rent, is defined as rent for a unit of residential real property of similar size, location and condition. 90 Day Notice The current 90 day notice is expanded to include all residential loans, of any amount, including condominium and co-op loans provided that it is the borrower’s principal residence. (Previously, only borrowers with “high-cost,” “subprime” and “nontraditional” home loans had to be sent this notice. A new provision requires the notice to be sent in a separate envelope from any other mailing or notice. The notice is the same as set forth in the Foreclosure Prevention and Responsible Lending Act of 2008 and must be sent to the borrower by registered or certified mail, as well as by first-class mail, to the last known address of the borrower and if different, to the residence that is subject to the mortgage. The date the notice is mailed is the date that the notice is considered to be given.) This was effective as of January 14. Leases Survive Also effective as of January 14, is a new requirement mandating notice to tenants informing them of their right to remain in the property so long as their leases are at market rates. Those without written leases can remain for 90 days after their receipt of a post-auction notice. Electronic Filing with the State As of February 13, every lender, assignee or servicer must file electronically with the NYS Superintendent of Banks, within three business days of mailing the 90 day notice. The filing must include the name, address and last known telephone number of the borrower, the amount claimed to be due, and “other information as will enable the superintendent to ascertain the type of loan at issue.” Additional information may be later requested by the superintendent to determine if the borrower may benefit from foreclosure counseling. The lender must affirmatively plead compliance with this statute in the complaint. Note, I do not believe that this filing system is currently available. So, as of February 14, one must wonder if a residential foreclosure action may be commenced. Maintaining the Property As of April 14, any lender, upon obtaining a judgment of foreclosure and sale for a residential property, must maintain the property until the deed is recorded. This applies to vacant property, property that becomes vacant after judgment, or abandoned property in which a tenant resides. The lender’s obligation includes certain minimums listed in the maintenance code, but where a tenant is in place, additional conditions are imposed. Unless an emergency, the lender must give the tenant seven days notice before entry to inspect and repair the property. The owner’s bankruptcy filing stays this section. Where a receiver is in place, this action does not apply. The law provides for the municipality, tenant and a condominium board of managers or homeowners association (if such premise is subject to rules and regulations of an association), a private right to enforce this duty in court, after seven days notice to the plaintiff. Damages can include costs incurred to maintain the property. This section does not alter existing obligations to maintain, or liabilities for failure to do so, of the mortgagor, or a receiver of rents and profits appointed in an action to foreclose a mortgage, to maintain the property. Conferences Court conferences in foreclosure actions will now be held for all loans, even traditional loans, within 60 days of filing. The parties are now charged to negotiate in good faith. The lender may not charge the borrower for the attorneys’ fees incurred in connection with the conferences. Other issues were addressed which changed definitions and limitations on charging fees for loan modification assistance, including a prohibition on mortgage brokers and loan officers from taking any up-front fees in conjunction with activities constituting the business of a distressed property consultant. This is a quick write-up and not to be relied on. Look to the statutes for the details.

Division of Marital Assets Cannot Be Changed Post-Madoff Fraud

As part of the parties divorce settlement, the husband kept an account held by Bernie Madoff and his firm. Upon learning of the Madoff fraud, the husband asked the court to reform the agreement to divide the parties’ assets as the Madoff account was worthless or non-existent. After finding that the parties’ agreement was comprehensive and left no place for modification, and found further that no mutual mistake could be found as the division was fair when made, the court denied the reformation. (January 2010)

Attempted Service at Foreclosed Property Insufficient

Lender’s counsel had the defendant served with the summons and complaint at the property that it sought to foreclose and at another address listed with the parking violations bureau. The process server could not locate the defendant at the foreclosed property and, when told that the defendant lived at the second address, sought to serve the defendant at the second address. The defendant was not served personally at either address. The process server had no detailed information concerning the second address and did not serve the defendant at a third address, the address listed on the mortgage. After the time to respond expired, the lender moved for a default judgment. In denying the unopposed motion, the court determined that the process server failed to properly exercise due diligence in serving the summons and complaint. The court also dismissed the case because the lender did not own the note at the time the lawsuit was commenced. (December 2009)

Heart Attack Three Years after Accident Possibly Related

In February 2005, plaintiff was hit as he crossed a street. Plaintiff complained of chest pain and was treated for heart-related injures. Plaintiff suffered a heart attack in February 2008 and argued that the accident was the cause of the heart attack. Defendant’s doctor stated that the heart attack did not seem related to the accident years earlier, although no cause was determined. Plaintiff’s doctor stated that to a reasonable degree of medical certainty, the heart attack was related. The court refused to find that as a matter of fact the heart attack was unrelated to the accident and refused to dismiss the case. (December 2009)

Buyer’s Death Requires Heirs to Close

Buyer entered into a contract to purchase a co-op. In connection with doing so, the buyer put his $230,000 deposit into escrow. Between his signing of the contract and closing, the buyer died. The seller argued that the contract was binding on the buyer’s heirs and demanded that the heirs close. The heirs refused. The court found that the contract was binding on the buyer’s heirs, and that no claim of impossibility or frustration of purpose sufficed to excuse performance. The heirs’ refusal to closes was deemed a repudiation and breach. (December 2009)

Court Compels Borrower and Lender to “Split the Difference”

A foreclosure action reached an impasse when a borrower agreed to pay $2000 per month while the lender would accept no less than $3000. After noting that the court could allow the negotiations to stall, and the foreclosure to continue, the court, suspecting that the lender engaged in discriminatory lending, directed the borrower to pay $2500 per month and the lender to accept it. (December 2009)

Dogs That Attack Neighbor Not Euthanized

Town of Hempstead sued to have three dogs that attacked a neighbor deemed dangerous and euthanized. Although the injuries incurred were sever, the court found that they were not “serious” as required by statute, and did not meet other statutory requirements. Thus, although the Court felt that the dogs were dangerous and should be euthanized, it was without authority to order it. Instead, the Court required that the dogs undergo behavior evaluation, be muzzled in public and be treated as dangerous dogs. (December 2009)

Bank Sanctioned and Existing Mortgage Discharged

In a dramatic case, a Suffolk County judge has cancelled a valid and existing note and mortgage. During the course of a foreclosure action, the bank, Indymac Bank, refused to cooperate in reasonable settlement negotiations, engaged in misleading tactics, could not establish the amount that was owed, and demanded full payment of the loan or foreclosure of the property. The court found such conduct to not be in good faith, particularly because an outcome that would have benefitted both the owner and bank was possible under the circumstances yet refused by the bank. Finding the bank’s conduct to be so egregious, the court cancelled the note and mortgage and barred the bank from ever again seeking to collect on the loan. (November 2009)

No Act of G-d in Failing to Maintain Sewer

Claimant sought $5,000 from the City of New York for flooding in her home. The City claimed that it was not negligent in maintaining the sewer system, and that no matter what the cause, because of the torrential rain, any flooding was an act of G-d, excusing any misconduct by the City. The court found the City liable because it performed no inspection even though the City, as a municipality, had an obligation to periodically inspect the sewer and keep it clear from obstruction. (October 2009)

Oral Promise Does Not Extend Note’s Maturity Date

Plaintiff bank sued to collect on a note. Defendant claimed that a bank official orally extended the maturity date on its loan for an additional year so that defendant was not in default. Without denying the oral promise and the fact that negotiations had been undertaken, plaintiff claimed that the loan documents did not allow oral modifications. The court agreed with plaintiff and refused to consider the alleged oral extension of the note’s deadline. The court also decided that plaintiff did not waive the note’s maturity date, regardless of the alleged oral promises. (September 2009)

Sale of Unsafe Car Breaches Warranties

Plaintiff purchased a used car from a dealer. At the time of purchase, the car was already in need of servicing, and in the week that followed, additional problems arose. Plaintiff took the car to a local repair shop, which informed plaintiff that the car had many problems and was unsafe to drive. Plaintiff returned the car to the dealer for repairs. After the dealer returned the car to the plaintiff, the car was inspected by the same local repair shop that diagnosed the problems. Major problems were still found by the repair shop. Over a period of less than four weeks, repairs were made, but ultimately, the car required a new engine. At each stage of the repairs, plaintiff notified the dealer, but the dealer made no effort to make repairs and expressed no desire to assist the plaintiff. Unable to pay for the new engine, plaintiff sold the car for less than half of its purchase price. In plaintiff’s lawsuit against the dealer, the court determined that at the time that the car was sold it was not fit for its ordinary use and would fail to provide satisfactory and adequate service. The court found that the car had zero value at the time it was sold, and awarded the plaintiff the cost of the car plus plaintiff’s expenses. (July 2009)

Placing Items in Shopping Bag Is Not Theft

Defendant was stopped by store security and charged with larceny after putting a number of items in her bag and then going to a different floor in the store without first paying for those items. Defendant argued, among other things, that there was no indication that she had any intent to steal or otherwise remove the items from the store. The court, critical of the store’s conduct, and noting the absence of any sign restricting the movement of goods between floors, agreed with the defendant and dismissed the charges. (July 2009)

Cars Illegally Parked in Bus Stop May be Liable for Personal Injuries

Plaintiff claims she fell in a pothole upon exiting a City bus. The City claims that the bus driver could not discharge the passenger at the bus stop because two cars were parked in the bus stop. In response to plaintiff’s lawsuit, the City sued the owners of the illegally parked cars. The court denied the car owners’ claim that they could not have been the cause of plaintiff’s injury, finding that because the owner of an improperly parked could be liable even in the face of a negligent driver, it is possible that a jury could find the two owners liable. (July 2009)

Damages from Cut Drainage Pipe Deemed Ongoing Trespass

City contractors cut Bloomingdales’ drainage pipe thinking it was a dead line and installed a cement-encased conduit. After flooding in its basement, Bloomingdales commenced an action against the City and its contractor. Although actions against the City must be commenced within one year and ninety days, the Court of Appeals held that because the injury was not just the cutting of the pipe but the ongoing injury created by the conduit in preventing Bloomingdales access to the drainage pipe, the trespass claim was an ongoing claim and not time barred. (June 2009)

Lawyer’s Failure to Disclose May Be Malpractice

Lawyer sought the dismissal of malpractice claims in connections with lawyer’s representation of client in purchasing a condominium which had a desirable view. The purchase was based largely on that view. Plaintiff claimed that because her lawyer represented the seller of an adjoining property and knew that the buyer of that property would build a building that would block her condominium’s view, her lawyer had an obligation to disclose that information as he was aware that the view was what motivated her to buy the condominium. The court held that because the lawyer knew these facts, and because he owed his client a high-level duty, plaintiff’s claim of malpractice was not dismissed. (June 2009)

Mayor’s Term Limit Extension Found Lawful

Plaintiffs sought a court order finding that the action of the Mayor and City Council in extending their term limits violated the law because they used their positions to garner for themselves a personal advantage. After considering that the City’s Conflict of Interest Board found no conflict in the Members’ vote to extend, even where such vote would impact the jobs and interests of those that took part in the vote, there was no improper conduct by those voting to extend the term limit. (May 2009)

Defect in Assignment Defeats Bank’s Foreclosure Action

Bank sought the appointment of a referee. Home owner did not appear to oppose the bank’s motion. The court noted that the bank was not the lender but was assigned the mortgage by the lender. The assignment was dated after the foreclosure action was commenced but made effective as of a date prior to the commencement. The question before the court was whether this arrangement was sufficient to give the bank standing to pursue the foreclosure. The court decided that because that the bank had no interest in the mortgage as of the date that the foreclosure action was commenced it could not continue its foreclosure and the court was inclined to dismissed it. The court noted that date that the assignment was recorded was not the relevant issue. All that mattered was which bank held title to the mortgage as of the commencement of the lawsuit. Only that bank could sue for foreclosure. (January 2009)

Moviegoer Assumes Risk of Eating Popcorn

A court recent denied a moviegoer damages for injuries suffered when he ate an unpopped popcorn kernel. The court held that because there is no such thing as a perfectly popped bag of popcorn, without any unpopped kernels, the moviegoer assumed the risk of such unpopped kernels when he purchased the popcorn. (October 2008)

Deficiency Judgment in Foreclosure Action Time Barred

Plaintiff commenced an action to recover on a mortgage note. The parties conceded that the property’s foreclosure left a balance due. Plaintiff now sought to recover the balance between the loan amount and the amount recouped by the foreclosure sale. Because the action came five years after the foreclosure sale, it was time barred, as such an action must have been commenced within 90 days from the date of the closing of the foreclosure sale. The court dismissed the case even though the plaintiff styled the case as one for recovery on the notes as opposed to an attempt to recover a deficiency judgment. (September 2008)

Accepting Check Waives Right to Sue

Plaintiff dropped off shipments at a UPS outlet store. UPS was allegedly instructed to ship the items COD and to accept money orders only. UPS accepted checks, some of which misspelled plaintiff’s name and some of which bounced. The court held that UPS could not avoid liability simply because plaintiff delivered his packages to an agent and not UPS directly. The court found further that because plaintiff accepted the checks tendered by the customers and delivered to plaintiff by UPS, plaintiff had waived his claims. (April 2008)

Policy Exclusion No Bar to Recovery of Consequential Damages

Plaintiff, a family-owned meat market, purchased an insurance policy which provided for replacement coverage on the business’ building and property. The policy also provided for one year of business interruption coverage. A fire destroyed the business’ inventory and badly damaged the building. When plaintiff submitted a claim, defendant, the insurance company, disputed the actual damages and paid slightly more than $163,000, and refused to pay more than seven months of business interruption losses. Following arbitration, plaintiff was awarded more than $407,000. Thereafter, plaintiff sued the insurance company for, among other things, consequential damages for the insurance company’s refusal to promptly pay under the policy, claiming that such refusal to pay under the policy, caused plaintiff’s business to collapse. The insurance company responded by pointing to the policy’s exclusion for consequential damages. Reversing the lower courts, the Court of Appeals held that the insurance company’s unreasonable refusal to pay under the policy caused plaintiff’s business to fail. Consequential damages are normally recoverable where they are reasonably contemplated between the parties. In this case, the Court held that business interruption coverage was in place to allow plaintiff’s business to continue in the face of a disaster. When defendant refused to promptly and properly investigate and pay for this loss, it knew the effect it would have on plaintiff. As such, the insurance company played a role in the ultimate loss and is liable, and the consequential damages that plaintiff sought was foreseeable and recoverable. The policy bar on consequential loss was inapplicable because such loss contemplated action by third-parties, not the insurance company. (March 2008)

Bidder must Pay Taxes and Interest Due on Foreclosed Property

Eight years after bidding successfully on a foreclosed property, the bidder sought to close. The delay in closing was due, in part, to environmental cleanup demanded by the bidder (as opposed to a refund of his winning bid). The bidder refused to pay accrued taxes and interest on the bid amount, claiming that the taxes are to be paid out the sale proceeds. The court held that because the winning bidder at an auction is the equitable owner, and because the term "sale" means bid date and not the closing date, the bidder was liable. As far as interest, because the bidder opted for the environmental cleanup, reaping those benefits which caused the delay, interest would accrue. (February 2008)

Question of Usury Precludes Judgment

Plaintiff sued to enforce a note. Defendant claimed that the Note included an amount of interest which was usurious, thus rendering the Note unenforceable. Plaintiff claimed that defendant, who in the past had been his attorney, knew or should have known that the interest was usurious and could not raise that as a defense. The court found that although plaintiff was a sophisticated businessman and should have known if the loan was usurious, it was not completely certain how much of the repayment amount was interest and therefore denied summary judgment. (January 2008)

Lease Restrictions Ineffective to Prevent Pizzeria Expansion

A Mediterranean-style restaurant sought to enjoin its landlord from leasing space to a pizzeria, claiming that doing so violated its lease. The lease provided that the owner would not rent space to another store for use as a substantially same restaurant. The restaurant claimed that when the pizzeria expanded, it became such a competing business, especially because the two eateries shared menu items. The court denied the injunction finding that the lease’s prohibition was not conclusive as the lease prohibited only a Mid-Eastern restaurant, which meaning was vague. Additionally, the court found that the pizzeria’s knowledge of the restriction was not determined, further supporting the denial. (December 2007)

Candy Land (the candy) vs. Candy Land (the game)

Plaintiff owns the CANDYLAND mark in connection with candy. Defendant owns the mark in connection with games. When defendant licensed the mark to a third-party to use for selling candy, plaintiff sued. In response, defendant claimed that the mark was generic and not entitled to trademark protection as it simply added the word “land” to a generic term and used it connection with its store, and because others had used the mark to sell candy, thereby weakening the mark. Defendant also claimed that there was no confusion between the marks. The court denied both arguments. As far as the mark being generic, the court found that plaintiff used the mark in connection with the sale of candy and not for a candy store. Thus, the mark, as used in connection with candy goods, was not generic. Additionally, the defendant failed to convince the court that others’ use of the mark rendered it generic. Finally, the court found that given the information it had, it could not state for certain that the use of the marks by the parties was not confusing. (December 2007)

Woman Who Died Day after $150,000 Future Pain and Suffering Award Still Entitled to Payment

Due to defendant’s failure to comply with certain court orders, the court entered a judgement for liability against defendant in plaintiff’s lawsuit after she fell on defendant's steps. At inquest, plaintiff was awarded $150,000 for future pain and suffering. Plaintiff died the next day. Defendant argued that the $150,000 awarded for what was one day of pain and suffering was unfair and contrary to the legislature’s attempt to reform tort awards. The Court found that the legislature’s efforts were directed at awards above $250,000 and allowed the $150,000 award to stand, particularly where defendant caused plaintiff’s case to be significantly delayed. (October 2007)

Punitive Damages Properly Awarded for Disclosing Medical Information

Plaintiff underwent an abortion at defendant’s facility. Plaintiff specifically told defendant not to contact her at home, as she knew that her parents would not approve of the procedure. Nevertheless, not only did defendant call plaintiff at home, but the nurse provided enough information to plaintiff’s mother so that her mother understood that plaintiff had undergone an abortion. Although the court did not find that defendant conducted itself in bad faith or that defendant’s conduct was intentional, it found that punitive damages were permitted, as neither bad faith nor intentional conduct was required for such a finding. So long as the conduct complained of was negligent or reckless and sufficiently blameworthy, and advances a strong public policy to deter future conduct, punitive damages may be awarded. In this case, the court found that defendant’s failure to have a formal, written plan to protect its patient’s privacy, particularly given the sensitive nature of the procedures, and the failure by the Center to be sufficiently organized to prevent the kind of disclosure complaint of, together with the careless disclosure by the nurse of private information to one she knew to be plaintiff’s mother was sufficient to allow punitive damages. (October 2007)

Tenant Expelled from Ship Is Entitled to Residency Payment

Plaintiff, a luxury ship owned and used by its residents, sought to expel defendant, a resident, for improper conduct. Because the court found that the resident compromised the safety and comfort of other residents, in violation of the ship’s rules, the ship’s board acted in its discretion. Nonetheless, the court directed that defendant was entitled to compensation for his unit as the rental income was insufficient to cover his costs and resale was not likely to be achieved. (March 2007)

No Default Found Where Bank Failed to Deduct Payments

Bank sued homeowner for default of a mortgage. Defendant homeowner claimed that bank failed to deduct the monthly payments automatically as was agreed to between the parties. The court held that because homeowner attempted to make payments, and in fact made some of the payments manually, and that the mortgage payments were at all times available in his account, bank was unable to establish a default. (March 2007)

Yacht Found to Be a Home

The plaintiff, a construction worker, fell and was hurt while working on defendant’s yacht. The plaintiff sued for his injuries. Under the labor law, one and two family dwellings are exempt from the rule that a property owner is liable for a worker’s injuries no matter the level of the homeowner’s control over the work site. The court found that a dwelling is defined as a structure in which people reside or sleep, but not limited to a building or primary residence. Because the defendant claimed that he and his family would regularly sleep in the yacht, and because the yacht had all the features of a small home and was treated by the defendant as a second home for tax purposes, the court found the yacht to be a home and defendant exempt from this law. The court dismissed the case. (11/06)

Disloyal Employee May be Liable to Employer Even Absent Injury

Defendant, employee, worked as a manager for a residential building. During the course of an eviction, the building learned that its employee allowed a tenant to remain in his rent-stabilized despite his potential ineligibility, because the employee felt that the tenant had a legal right to do so. The building sued its employee for fraud and breach of her employment contract, among other things. When the tenant was later allowed by the court to stay in the rent-stabilized apartment, the employee sought the dismissal of the action against her claiming that because her conduct was correct, and the employer would have been compelled to allow the tenant to remain, she caused the employer no injury and could not be held accountable. The court disagreed and held that under the faithless servant doctrine, the employee’s disloyalty was relevant, and not the consequences of her disloyalty. Thus, because the employee committed a wrong, she may be liable to her employer. (6/06)

Felony Conviction for Cruelty to Goldfish

In the course of attacking his companion, defendant destroyed a fish tank and stepped on a goldfish killing it. Defendant claimed that the goldfish was not a companion animal and was therefore not subject to the criminal statute forbidding cruelty to animals. The relevant statute defines a companion animal as a dog or cat and any other domesticated animal. Defendant claimed that a goldfish cannot be a companion because it is not domesticated nor able to reciprocate feelings to its owner. Defendant claimed further that a domesticated animal has no desire or inclination to escape. A goldfish, however, would swim away if dropped into a body of water. The court, in rejecting defendant’s claims, held that the statute did not require feelings of mutual affection and that domestication merely meant an animal living with humans and not a wild animal. Loyalty was not required; many pets would escape if given the opportunity. (4/06)

Significant Changes to NY LLC, PLLC and LLP Publication Laws

There has been a major change to the publication requirement of the LLC, PLLC and LLP laws. Presently, an entity must publish the fact of its creation, date of filing and/or formation, county where the entity is located, purpose, and address for service of process in two weekly newspapers, once a week for six weeks. The penalty for failing to publish is the loss of the entity's ability to sue. As of June 1, 2006, the content of the publication and the penalty for failing to publish change dramatically. As of June 1, these entities must also publish the names of the ten members of the entity who are actively engaged in the business and hold the most valuable interest (all of the members' names must be published where there are less than 10 members). The frequency of the publication is also changed, from six weeks in a weekly newspaper, to four weeks, but in one weekly and in one daily. Although unclear, the size of the notice of publication may be larger than is presently required. The penalty for failing to publish is the suspension of the entity's right to carry on its business. In addition to being unable to carry on its business, this provision creates a significant concern that once the entity is suspended---which is automatic after 120 days from the date of entity's formation---the members of the entity will continue to operate as a business but without the liability protection offered by the entity. Even if the suspension is cured, and publication is made, it is unclear whether the members/partners of the entity retained their liability protection for the period of the suspension. Mistakes or inadvertent omissions of a member or partner's name will not void the publication. Certain investment companies/funds are exempt from the "10 person" portion of the disclosure. These new publication requirements also apply to entities formed before June 1, 2006, but entities formed before January 1, 1999 are deemed to be in compliance. Entities formed between January 1, 1999 and May 31, 2006, have 18 months to publish or face suspension. It appears that retroactive protection is retained for these entities, so long as publication under this new law is timely made (18 months from June 1, 2006). I have read that there is a competing bill, not yet signed into law, which will, among other things, shorten this cure period from 18 months to 120 days and change the publication period back to six weeks. This bill also states that absent publication, the members/partners are personally liable for the debts and obligations incurred by the entity after June 1, 2006.

Employee That Learned Trade Secrets from Plaintiff Many Not Use Those Secrets at Competitor

Plaintiff sought to enjoin defendant, a past employee, from working for a competitor, alleging that the defendant was competing with plaintiff using trade secrets learned while working for plaintiff. Defendant claimed that he was coerced into signing the non-compete agreement, that the trade secrets were not really secrets and that he performed no special services for plaintiff that would serve as a basis for granting an injunction. The court found that plaintiff’s threat to fire defendant if he did not sign the agreement was not coercion and that the complexities of the business coupled with defendant’s advanced degrees were sufficient to find that plaintiff had a right to prevent defendant from unfairly competing by using critical trade secrets defendant learned while employed by plaintiff. (3/06)

Photo of Hasidic Man Deemed Art

Defendant, a photographer, took a photo of a Hasidic Jew walking on the streets of New York City, without permission. This photo was included in an advertised and well-publicized exhibit open to the public, and some of the publications and reviews of the exhibit included a copy of this photo. In addition, a few copies of the picture were sold for amounts between $20,000 and $30,000. The subject of the picture sued the photographer for violating civil rights laws which bar the unauthorized use of another’s likeness in a commercial venture. He alleged also that this photo violated his religious beliefs. In addition to finding that plaintiff’s time to sue had expired, the court agreed with the photographer that the civil rights laws at issues were applicable only to bar an unauthorized use in connection with advertising and/or trade. Because the photos were art and not advertising or trade they were therefore excluded from these laws. The court held also that the photo was protected free speech even though significant sales were made, noting that the fact that profits were earned did not defeat the defense of free speech. (2/06)

Director of Non-Profit Improperly Removed

Director of a non-profit challenged his removal by the remaining board members because his removal was not voted upon at a special meeting called for the specific purpose of removal, as required by the non-profit’s governing rules. The Board claimed that because the removal was voted upon at a regular meeting, and because regular meetings addressed all issues relevant to the non-profit, the Director had sufficient notice and a special meeting was unnecessary. The court held that the failure to provide the Director an opportunity to defend himself in advance of the meeting, a right afforded a board member under the law, defeated the Board’s argument and the Director’s removal was invalid. (2/06)

Use of Weight Watchers' Point System Found Confusing

Weight Watchers (“WW”) maintains a system whereby food items are assigned points. Each customer of WW is assigned a permitted number of points per day. Frozen foods manufacturer used Weight Watchers points system on its wrappers but noted that the points system was a feature of WW’s system and a trademark owned by WW. WW sued claiming that the average customer was confused into thinking that WW had either calculated or verified the number of points identified by the manufacturer or otherwise endorsed the item. The court agreed and enjoined the manufacturer’s use of or reference to the points system unless the manufacturer made clear that it had calculated the points. The manufacturer changed its packaging to comply with this order, but the new packaging was very similar to the old. WW objected and asked the court to stop this packaging as well. The court refused. On appeal, the court found that the new disclaimer was too similar to the old and because the lower court’s order was vague, the manufacturer had not established that its packaging was not confusing to the public sufficient to satisfy the lower court’s order. (9/05)

Insurance Policy Exclusion, Used Only as Definition, Is Given No Effect

Tenant sued his landlord alleging lead poisoning. The landlord filed a claim with his insurance company. The insurer sued seeking to avoid its obligation to the landlord to defend against the lawsuit, claiming that the policy had not been triggered. The policy had been drafted so that the insurer was obligated to defend only where the lead reached a certain level, a level that had not been reached here. The insurer claimed that because the level of lead was below the policy trigger point, it had no obligations to the landlord. This exclusion, however, was discussed only in the definition portion of the policy with no mention made in the exclusion portion. The court found that because the policy was poorly drafted and confusing, this exclusion would be ignored. (7/05)

Traditional Cheese Not Entitled to Trademark Protection

This case involved two cheese manufacturers/distributors who both used the mark TRADITIONAL to describe their respective feta cheeses. The company that first used the mark sought to prevent the second company from using it in connection with its feta cheese, claiming that the mark TRADITIONAL was suggestive of the type of cheese—hand made, old word—and entitled to protection. The second company claimed that TRADITIONAL was merely descriptive of the cheese generally—unflavored and natural—and entitled to no protection. After hearing expert testimony, the court found that the mark TRADITIONAL, as applied to feta cheese, was merely descriptive of the cheese and not entitled to protection. Although descriptive marks are sometimes entitled to trademark protection, the court that no be the case. (7/05)

Animal Shelter Compelled to Release Contact Information of Adopter

Plaintiff sued seeking to force a shelter to provide her with the contact information of the people that adopted her cat. Plaintiff returned from a trip to find her cat missing. She was told that the cat had been taken to a shelter. Plaintiff contacted the shelter, less than a week after she discovered the cat missing, only to learn that the shelter had made no effort to locate the plaintiff, in violation of the shelter’s obligations and had given the cat away. The shelter refused to provide the adopter’s contact information to the plaintiff. The court decided that although the plaintiff may have lost her rights to the cat, due to the delay in claiming it, she was entitled to the adopter’s information. The court also found that the shelter did not establish that it had adhered to rules providing for a mandatory waiting period. (5/05)

Staying at Job Post Termination Notice Entitles Employee to Severance

Employee who stayed on with the company that acquired his past employer, was accused of having a hand in his old employer’s accounting misrepresentations at the time of the acquisition and was told that he was about to be terminated but would receive three months severance. The employee, in reliance on that promise, continued with the acquiring company for a short time longer. Ultimately, he was terminated. In defending its decision not to pay, the acquiring company claimed that the promise was a gift and not enforceable because the employee had given up nothing in exchange for that promise. The court determined that while the employee’s past work for the company was insufficient, as it had happened prior to the promise being made, his work post-notice of his impending termination sufficed, notwithstanding that the value of the severance was disproportionate to the work he did. (4/05)

Waiver Valid, Suit Against Gym Dismissed

Plaintiff sued gym alleging that the gym’s trainer was negligent in how she worked with plaintiff resulting in injuries to plaintiff. The gym sought to have the case dismissed arguing that plaintiff had signed a waiver when he purchased the gym membership agreeing not to sue the gym. Plaintiff argued that New York law does not enforce waivers which would allow a place of amusement or recreation to avoid liability for its negligence. The court dismissed the case, finding that the law did not apply to establishments that provide instruction, and found the gym to be an instructional and not recreational establishment. In addition, the court found that because the waiver that plaintiff signed was explicit and comprehensible, there could be no confusion as to its application. (1/05)

Lemon Law Only Covers Vehicles with less than 100,000 Miles Even If New Transmission Is Installed

The buyer of a car with 126,000 miles sought to return the car as defective under New York State’s Lemon Law. The buyer argued that although the car had more than 100,000 miles on it such that it would normally be excluded from the Lemon Law, the fact that a new transmission was installed should exclude her car from that limitation. The court noted the buyer’s novel argument, but found that in addition to the buyer not having the car serviced three times, as required under the Lemon Law, the replacement of the transmission did not exclude the buyer from the 100,000 limitation. (12/04)

Notice of Condition Which Can Cause Mold May Be Sufficient for Liability to Tenant

Landlord/defendant’s attempt to dismiss tenant/plaintiff’s complaint alleging injuries resulting from mold was denied notwithstanding that the landlord was unaware of actual mold in the premises where plaintiff lived. The court held that conditions which could normally lead to the growth of mold, even if no mold is visible, such as water leaks and other wet conditions, was enough to put the landlord on notice of a potential mold problem and for which, as the landlord, it should have taken steps to remedy so as to keep the premises in reasonably safe condition. (12/04)

Domain Name Found to Be a Contract Right

In a case of first impression, a group of domain name holders sued Register.com because it had automatically renewed the plaintiffs’ domain names. The First Department found that a domain name that is not trademarked is nothing more than a contract right and that Register.com’s action did not violate General Obligations Law §5-903 which renders unenforceable automatic renewal provisions in contracts pertaining to the maintenance of real or personal property. The court found also that Register.com’s conduct was not deceptive because it had complied with the agreement between the parties but that plaintiffs may not have received notice of certain allowable changes because plaintiffs’ e-mail addresses had not bee updated. (10/04)

Inactivity of Trust Managers Deemed Negligence

A will which directed that a trust be created at the donor’s death, released the trustee from losses resulting from the trustee’s failure to diversify the trust investments (which were heavily concentrated at the time the trust was created in the stock of one company). The trustee was, however, directed to sell the investments for compelling reasons. The court, using its own analysis, found that the trustee’s failure to sell the stock of that one company as the value declined by more than 17% over a specific period, coupled with the fact that the trust’s investments returned less than half of the Standard and Poor’s index, was negligent and refused to dismiss a lawsuit seeking recovery based on that negligence. (7/04) Update. In February 2006, the Appellate Division, Fourth Department, unanimously reversed the lower Surrogate’s Court finding and held that the trustee committed no wrong in failing to sell the stock at issue. The court agreed with the Surrogate in finding that the heirs objecting to the trustees conduct did not establish a basis for recovery based on the allegations in the petition, but did not agree that the Surrogate could, on its own and absent allegations by the heirs, determine that the trustee was negligent. The Appellate Division objected to the Surrogate’s decision as being based on hindsight and found that holding the stock was not a bad decision, based on impartial investment information. (2/06)

Santa Did Not Violate His Own Copyright

The parties sold self inflating Santa dolls and other holiday items. Plaintiff sued alleging that, among other things, defendant infringed a copyright plaintiff held on its Santa doll. Although each doll had features that set them apart, the “stereotypical features common to all Santa Clauses, which depict a jolly, rotund, elderly gentleman, wearing a traditional red suit . . .” were so common and therefore ineligible for copyright registration. The court held that “[w]here the similarity is because both items contain stereotypical features common to the subject matter” those items do not contain sufficient originality to invoke copyright protection and that infringement could therefore not be found. (7/04)

Restaurant May Be Liable for Exploding Water Glass

Patron sued a restaurant after a glass of water exploded in his hand. Under the theories of liability asserted by plaintiff, before it could be found liable, the restaurant must have been found to be in the business of selling water or water glasses and that the restaurant had warranted that the water was fit for consumption. The Court found that, although the water was complimentary, it was not truly free. The water was offered as part of the meal purchased by the plaintiff, which was the business of the restaurant. Following, the Court determined that by serving the water, the restaurant implied that it was fit for consumption and that the container holding the water was fit for its purpose as well. For these reasons, the restaurant's motion to dismiss was denied. (6/04)

Sale of Outdated Food Products Deemed Misleading Sales Practice

Stop & Shop Supermarket was found to have violated deceptive practice laws by selling expired food and toiletries. The court found that such practices could mislead a reasonable consumer as to the quality or grade of that product. The court held that allowing those items to remain on the store shelf was an affirmative representation that those items were of normal quality and suitable for use. The store’s argument that each product was date marked and therefore not misleading was rejected by the Court because a reasonable consumer could nonetheless be mislead. (6/04)

Confusing Rent Demands Warrant Dismissal

Where a landlord’s rent demands were confusing and contradictory, and unable to be explained, the petition against the tenant was dismissed because it failed to appraise the tenant of the periods for which rent was demanded and the amount due.

Trademark Infringement Found Even Though Product Bearing Infringed Mark Was Not Available In The U.S

The Cuban cigar company which owns the mark COHIBA, sued a U.S. based cigar manufacturer for for selling cigars carrying the name Cohiba. In its detailed decision in which the complexity of the issues were discussed, the court held that even though Cohiba cigars are unavailable in the U.S., the COHIBA mark is sufficiently known in the U.S. market and was known to be in use when the U.S. company began using the Cohiba name, such that allowing another company to sell cigars using the COHIBA mark would probably cause consumer confusion. The U.S. company was ordered to cease sales of the cigar and to turn over all packaging for destruction. (5/04)

Federal Ban On Unsolicited Faxes Stands

Reversing two lower courts, the Appellate Division has recently decided that the Federal law banning unsolicited faxes is constitutional and does not restrict commercial speech because fax communication is only one method of speech and allows an advertiser all other "means of communication" while addressing a substantial governmental interest. The Appellate Court reinstated the cases the lower courts had dismissed and granted the plaintiffs in those case summary judgement as to the issue of liability for violating the fax ban law, remanding the cases for an assessment of damages, including the possibility of triple damages provided for under Federal law. (4/04)

Proof Of Collectibility Not Required For Legal Malpractice Claim

Legal malpractice claims are unique in that a plaintiff must convince a jury that (i) it would have prevailed in the underlying case (the case which the plaintiff alleges the attorney did not properly litigate) and (ii) the attorney representing the plaintiff in that underlying case in fact committed malpractice in the way the underlying case was handled. In a recent decision, the First Department overruled its past decision and held that in an action alleging legal malpractice, the plaintiff does not have to show that it would have successfully collected against the defendant in the underlying case had it won.

Sexual Assault Deemed Accident Under Insurance Policy

A woman brought suit alleging that she had been sexually assaulted in a spa. One of her claims was for negligent hiring by the spa of the masseur. The spa’s insurance carrier refused to defend against that claim because the policy covered only accidents and other unintended injuries. The Court of Appeals decided that the incident must be viewed from the standpoint of the spa and from that standpoint, the assault was unexpected and deemed an accident under the policy requiring the insurance company to defend and indemnify.

Mother May Recover For Emotional Distress of Malpractice

Reversing almost 20 years of precedent, the Court of Appeals has decided that a mother may sue to recover for emotional injuries resulting from medical malpractice which caused a stillborn birth.

Possible Liability For Damages Under Law Later Found Unconstitutional

A Federal judge recent ruled that New York City may be liable for damages for enforcing a law later found unconstitutional. The statute, one concerning communications made with the intent to annoy or alarm, and used as the basis for an individual's arrest, was struck down. The court was not persuaded by the City's argument that it enforced a law which was valid at that time because the law's constitutional basis had been questioned prior to the City's enforcement.