New York Business Litigation Lawyer Blog

March 28, 2018

Arbitration Decision Denying Broker a Commission Overturned

A broker was hired to find a tenant for a residential apartment in Manhattan. The parties agreed that the broker would receive a six percent commission if the tenant purchased the apartment within six of months after the lease expired, or any extension thereof. The broker found a tenant, and a lease was executed on July 15, 2012, with an expiration of July 14, 2013. With a verbal agreement, the tenants remained until July 10, 2014, when they purchased the apartment for $3.05 million. The owner refused to pay the six percent commission. The parties went to arbitration, where the arbitrator found against the broker.

The broker filed a petition to vacate the award, arguing that the arbitrator’s decision in denying the commission was based on the immaterial allegation that the broker lacked an active role in the sale, and violated public policy. The owner argued that (i) the agreement was signed with the owner’s wife, (ii) the broker did not procure the buyer as the tenants reached out to the owner directly, and (iii) the sale took place a year after the lease expired.

After outlining the limited grounds for overturning an arbitration award, and discussing the basis for this arbitrator’s award—that the owner’s wife signed the brokerage agreement without focusing on the sales commission and without the consent of the husband—the court vacated the award as being irrational and violative of a strong public policy. The court refused to find that the wife’s failure to focus on the commission as a valid reason to ignore the parties’ executed agreement. The court noted that the arbitrator did not base his decision on the wife’s alleged inability to bind her husband or any defect in the agreement. (The court did not address the outcome of this case had the wife’s authority been challenged.) The arbitrator’s emphasis on what the owner’s wife understood could not be a basis for a decision.

January 25, 2018

Don’t Ask for a “Lawyer Dog”

by The Silber Law Firm LLC

While we don’t have a criminal practice, a decision out of Louisiana’s high court highlights the importance of demanding counsel — clearly.

From the Washington Post:

“[W]hen a suspect in an interrogation told detectives to “just give me a lawyer dog,” the Louisiana Supreme Court ruled that the suspect was, in fact, asking for a “lawyer dog,” and not invoking his constitutional right to counsel.”

January 22, 2018

Another Case Where Non-Compete/Confidentiality Provisions are Found Unenforceable

by The Silber Law Firm LLC

As promised, we write about another recent trade-secret case where the court refused to enforce an employer’s claims that its information was secret.

After plaintiff was indicted for a host of crimes, some of its employees left to form a competing business, in violation of their non-compete and confidentiality agreements. These employees argued that because of the indictment, their past employer had unclean hands and could not enforce the non-compete, which is equity-based relief and unavailable generally where the other party does not act equitably.

Judge Emerson, of Suffolk County Supreme Court, first addressed the non-compete issue by noting the “powerful considerations of public policy which militate against sanctioning the loss of a person’s livelihood.” This principle resulted in the general rule that restrictive covenants that prevent an employee’s work in a similar line are “disfavored by the law.” She then found that the non-compete provisions, which bound the employees for three years and contained no geographical limitation, to be overbroad, unnecessary to protect the employer, and therefore unenforceable.

December 11, 2017

Anticipatory Breach Allegation Dressed as Declaratory Relief

by The Silber Law Firm LLC

Earlier this year, we wrote about the First Department’s decision addressing the question, as framed by the Court of Appeals, of “whether the mere commencement of an action seeking ‘rescission and/or reformation’ of a contract constitutes an anticipatory breach of such agreement.” The First Department found that it did. The Court of Appeals recently disagreed and reversed.

The facts of this case are found in our prior post. Briefly, a buyer entered into a contract to buy two parcels of land with the closing set for after the seller obtained certain regulatory approvals, but not later than 18 months from the contract date. If the approvals could not be obtained either party could, among other things, terminate the contract. After the approvals were delayed, the seller opted to terminate the contract and return the downpayment unless the buyer agreed to modify the contract. The contract was modified to extend the deadline to close and other contract terms. The parties also agreed that the buyer would not sue the seller if the approvals could not be timely delivered. Believing that the approvals were forthcoming, the parties again extended the closing deadline. Before that newly extended closing deadline, the buyer sued the seller seeking to cancel, or rescind, the contract. The seller counterclaimed claiming that the buyer’s lawsuit, by which it announced that it would not close and sought to cancel the contract before the time to close, was itself a default entitling the seller to keep the buyer’s substantial downpayment. After the buyer’s lawsuit for rescission was dismissed, the seller pursued its counterclaim for the downpayment. The First Department deemed the buyer’s lawsuit to be a breach of the parties’ contract and allowed the seller to keep the downpayment.

The Court of Appeals zeroed in on the First Department’s core finding that “the Appellate Division affirmed . . . because a rescission action unequivocally evinces the plaintiff’s intent to disavow its contractual obligations, the commencement of such an action before the date of performance constitutes an anticipatory breach’ (Princes Point LLC v. Muss Dev. L.L.C., 138 AD3d 112, 114 [1st Dept 2016] ). The Appellate Division also concluded ‘that the seller . . . was not required to show that it was ready, willing, and able to complete the sale [as a condition of receiving damages] because the buyer’s anticipatory breach relieved [the seller] of further contractual obligations’ (id.).”

November 17, 2017

Two Recent Trade Secret Cases Fail to Find That Secrets Existed or Were Capable of Protection

by The Silber Law Firm LLC

Two cases, one State and one Federal, declined to prevent a competitor from using what was alleged to be another’s secret information.

In Art and Cook, Inc. v. Haber, the Eastern District court found that the secrets alleged to have been infringed or disclosed were in fact not secrets, legally speaking. The plaintiff claimed that Haber, an ex-salesman of plaintiff’s cookware and kitchenware, had been caught emailing himself a list of buyers and separately, marketing, sales and customer list information. After Haber’s termination, he began to compete against plaintiff.

In declining to find that these lists were protectable trade secrets, the court addressed each of these two categories of information that Haber had sent himself. The court discussed the reason and manner of how a customer list could be deemed a trade secret. Specifically, a customer list created through significant effort and which contains unique or valuable information generated by a business, and maintained by the business as a secret, may be enforced as a secret. But, a “contact list [that] contains little more than publicly available information, even if it takes considerable effort to compile, it is not accorded protection… .” In this case, the court determined that the customer list was a compilation of names that the plaintiff hoped to solicit but which did not reflect unique information. That the list took substantial time to create would not convert a list consisting of largely public information into a secret. Finally, the court noted that where “the contacts on Plaintiff’s customer lists are generally known within Plaintiff’s industry is fatal [to a claim of infringement]. Simply put, knowledge that is generally known within an industry cannot be said to constitute the trade secret of one industry participant.”

November 6, 2017

Guarantor’s Liability Greater than Obligor’s

by The Silber Law Firm LLC

A guarantor was sued for the failure of the obligor/tenant to pay rent. The tenant had defaulted on a commercial lease and under the lease’s acceleration clause owed the landlord more than $1,740,000. When the guarantor was sued, he claimed that the landlord’s re-letting of the space precluded full recovery under the acceleration provision and that his liability was limited to what the tenant owed.

The First Department recently rejected that argument. While not disputing that a tenant might not be liable for the period of time for which the premises had been rented to a new tenant, the guarantor did not have the benefit of that provision to offset the amounts due. The court stated that in this setting, a guarantor’s “liability can be greater than that of the obligor tenant, as the lease and guaranties were separate undertakings, and the latter are enforceable without qualification or reservation.”

Essentially, the guaranty agreement, while guaranteeing the underlying lease, was a separate agreement governed by its own set of rules which were not the same as the underlying lease. We saw a similar outcome in a case about a dispute over a brokerage agreement that resulted in a settlement agreement. The settlement agreement was a document distinct from the brokerage agreement, with its own terms and conditions, and enforceable as such. We wrote about it here.

October 30, 2017

Vague Real Estate Contract Enforced

by The Silber Law Firm LLC

For any contract to be enforced, it must address the transaction’s core elements. It must identify the parties, the property sufficiently for it to be identified, and the price. And it must be signed. What if the contract does not detail how or when the balance is to be paid or the closing held?

The Second Department enforced a contract missing those two terms, finding that where the form of payment is missing it is presumed to be money and paid in exchange for the delivery of the deed. The missing closing date was not fatal to the deal because “the law will presume that the closing will take place within a reasonable time.”

One wonders if litigation took place over that vague term.

September 7, 2017

How Apple Uses Foreign Trademark Applications to Hide New Products and Names

by The Silber Law Firm LLC

What do Trinidad, Tobago, Barbados, Peru and Jamaica have in common? By filing for trademark registration in those venues, Apple, and other large companies, are able to hide up and coming products and their names from the public, for months, while obtaining some level of trademark protection. Fortune magazine explains how in its article.

August 21, 2017

Modified Brokerage Agreement Enforced as Settlement Agreement

by The Silber Law Firm LLC

In an interesting recent case, the First Department affirmed the viability of a broker’s claim for a commission despite the fact that there were questions as to the broker’s actual role in procuring a buyer.

After Waterbridge Capital, LLC sold a property, it refused to pay its broker, Eastern Consolidated Properties, Inc., claiming that another broker was also seeking a commission payment. Waterbridge asked Eastern to accept a lower amount, which Eastern agreed to do. In the end, Waterbridge refused to pay anything and Eastern sued. Waterbridge argued that Eastern was not entitled to any commission because it was not the broker that sold the property. In viewing the parties’ agreement as a settlement agreement and not a brokerage agreement, the court rejected Waterbridge’s claim finding that once the parties settled, Eastern was entitled to payment regardless of its work as a broker. Specifically, the court held that “[c]ontrary to defendants’ arguments, plaintiff is not required to plead or prove that it was a ‘procuring cause’ of the purchase in order to recover on this agreement, which was in the nature of a settlement agreement. Plaintiff’s relinquishment of its claim for a full commission provides adequate consideration for the agreement, even if its claim was doubtful or would ultimately prove to be unenforceable” (citations omitted).

August 14, 2017

Failure to Review Insurance Policy Does Not Bar Insured’s Potential Recovery

by The Silber Law Firm LLC

Plaintiffs own a number of commercial properties in Brooklyn. In connection with that ownership, plaintiffs retained defendant broker to arrange for insurance coverage for the buildings.

At the time of issuance, in 2002, the policies did not cover flood-related damage. In 2007, defendant offered plaintiffs flood coverage. Plaintiffs agreed and believed that the buildings were covered for flood damage. However, plaintiffs were never informed that the policies excluded coverage for properties within specified flood zones. The buildings at issue were in flood zones so that they were in fact not covered for flood. The policies were renewed annually.

In 2011, before Hurricane Sandy hit the New York area, plaintiffs requested that defendant affirm to them in writing that the buildings were covered for flood damage. Defendant did so, writing that the buildings had $1 million of flood coverage. Only after Hurricane Sandy damaged plaintiffs’ buildings did plaintiffs learn that the buildings had no flood coverage. Plaintiffs sued for negligence, breach of fiduciary duty and misrepresentation.