New York Business Litigation Lawyer Blog

February 23, 2021

Property Owner Liable for Tenant’s Trademark Infringement

Defendant owned a property that was long alleged to house individuals selling counterfeit goods. Watchmaker Omega bought two counterfeit watches from a retailer at the same location and commenced a lawsuit against the property owner for contributory trademark infringement. Surviving a motion to dismiss by the property owner, the case went to trial. The judge instructed the jury that the property owner’s contributory infringement could be found if the jury found that the property owner allowed those selling the counterfeit goods to continue doing so once it knew what was being sold. Knowing, included “willful blindness,”meaning ignoring the obvious. The jury awarded Omega $1.1 million.

On appeal, the property owner argued that Omega never proved that it leased space to a specific infringer, which it claimed was required. The Second Circuit disagreed. It held that willful blindness, ignoring what it knew or should have known, suffices for “contribution,” because when it had reason to suspect what was being sold looking away would not shield the contributor from liability even if the specific infringer was not specifically identified. While the owner had no obligation to look for the wrongful conduct, but once it was made aware of it, it could not ignore that conduct.

Omega SA, Swatch, SA v. 375 Canal, LLC

February 4, 2021

Inability to Close Allows Seller to Retain Downpayment

by The Silber Law Firm LLC

Plaintiff entered into a contract to buy a mixed-use building for slightly more than $2 million. Plaintiff’s downpayment was $200,000. The transaction was to be all cash, as-is, and to close six months after the date of the contract. Before that closing date, plaintiff asked permission to show the property to a bank to obtain financing, which was granted. The closing was not held on the scheduled date and defendant-seller gave time of the essence notice for a date about three weeks later. Plaintiff did not appear on that date. Defendant held plaintiff in contempt and declared that it was retaining the downpayment. Plaintiff sued for specific performance. Defendant answered and cross-claimed for a declaration that it was entitled to keep the downpayment. Defendant thereafter moved for summary judgment. The lower court granted summary judgment dismissing the complaint but also denied the counterclaim. Both parties appealed.

Finding that plaintiff could not demonstrate its financial ability to close “on the closing date,” and did not appear to close, hence its breach. As a result, the Second Department affirmed the dismissal but reversed as to the defendant, granting its counterclaim on the downpayment.

Ashkenazi v. Miller

January 19, 2021

Shortened Statute of Limitations Period Rejected Where Accrual Date and Circumstances Unknown

by The Silber Law Firm LLC

Nastasi & Associates, Inc., was a subcontractor for Turner Construction Corp. Payment to Nastasi was conditioned on Turner being paid by the owner. Turner had the right to terminate the parties’ agreement by written notice, with any payments due to Nastasi, again, conditioned on Turner being paid. The agreement also included a one year period in which claims against Turner or the owner could be brought.

In April 2015, Nastasi asked for certain payment from Turner. Turner responded by informing Nastasi that it was working on processing paperwork so payment could be obtained from the owner and paid. In May 2015, Turner terminated its agreement with Nastasi. Between May 2015 and April 2017, Turner continued promising payment to Nastasi. Instead, in April 2017, Turner sued Nastasi for more than $4 million. Nastasi responded with counterclaims, to which Turner moved to dismiss based on the expiration of the one-year limitation period. Nastasi responded by arguing that it had been negotiating with Turner for years. Supreme Court granted Turner’s motion.

The First Department, however, disagreed. While the court agreed that parties may contract to shorter limitation periods, they could not where “a contract imposes a condition precedent that cannot reasonably be met within the time frame of the limitations period under the available facts,” with the “‘circumstances, not the time, … the determining factor.’”

January 11, 2021

Bank Not Required to Ascertain Claims of Authority to Borrow Money on Behalf of an Entity

by The Silber Law Firm LLC

Although not a new issue, we discuss it because it comes up from time to time. What obligation does a lender have to verify documents used by a corporate entity to establish that the individual borrowing the money has the corporate authority to do so? In short, very little (assuming there are no red-flags). A mortgagee has no responsibility— no “duty of care”—to verify that a mortgagor’s alleged principal, with authority to borrow, is so authorized. The lender is permitted to accept whatever documents it requires to allow an individual to borrow for and bind an entity without looking beyond those documents.

In one case, defendant LLC borrowed money and purchased a property. Later, a second loan was taken by that same party. After the borrower’s default, the “real” LLC sued claiming that the individual who had represented himself to be the LLC’s sole member, with authority to borrow for the entity, was not the sole member and had no authority to do so, so that the loans were therefore void.

The court disagreed. Once the individual provided documents to support his authority to borrow on behalf of the entity, the lender had no obligation to “ascertain the validity of the documentation presented by the individual who claims to have authority to act on behalf of a borrower corporation or entity.” As such, the loans and mortgages were valid.

December 15, 2020

“Visual Barrier” Insufficient to Make out Adverse Possession Claim

by The Silber Law Firm LLC

Plaintiff claims that shortly after they built their house, they placed sod, and a tree and bushes on a strip of land at the edge of defendant’s property, and then linked the area to their in-ground sprinkler system. Defendant purchased its adjoining property after this had been done. After defendant tore up the strip, plaintiff filed suit, claiming adverse possession. Pending the decision of defendant’s motion to dismiss, the court granted a preliminary injunction against defendant’s further interference with this strip of land.

The first issue before the court was whether the pre-2008 law or post-2008 law applied. The laws of adverse possession were amended in 2008 to require, among other things, that the adverse possessor make substantial and more obvious improvements to the disputed property so that the conduct was more objectively adverse. Acts that are seen as de minimis, such as fences, hedges, shrubs, and even non-structural building, were not acts upon which adverse possession could be claimed post-2008. Lawn maintenance, too, a basis often used to argue adverse possession, is not a sufficiently adverse to support that claim. Under the pre-2008 law, however, this type of conduct could support a claim, depending on the land and its usage. Because these claims accrued before 2008, the court applied the old law.

Turning next to the adverse use, the court dismissed the case, finding that even under the old law planting and mowing grass would not suffice. Even “[a]dding a bush or a young tree does not tip the balance” to find adverse possession. The same for running a hose and “a few sprinkler heads.” These items do not amount to a showing, by clear and convincing evidence, of exclusive, hostile or use under a claim of right.

June 28, 2020

Unsigned Employment Contract Enforced

by The Silber Law Firm LLC

Plaintiff was induced to leave his current employment and start working at defendant’s agency. As part of the parties’ agreement, plaintiff was promised six months’ severance if terminated without cause. Plaintiff signed the agreement but, despite receiving an email from a board member welcoming him aboard, defendant did not sign the agreement. Plaintiff was terminated without cause but defendant refused to pay his severance.

The First Department reversed the lower court’s dismissal of plaintiff’s case, finding that although defendant did not sign the employment agreement, there was no question that plaintiff began working for defendant and performed as expected. Once fired, he was due the promised severance. The contract made no provision that required a signature for it to be binding, so that defendant’s failure to sign the fully-integrated agreement was no bar to its enforcement.

Lord v. Marilyn Model Management, Inc.

May 18, 2020

Recent Case Asserting COVID-19 Defense Fails

by The Silber Law Firm LLC

While short on facts, a recent decision out of the Southern District rejected the defendants’ claim that their inability to pay on a consent judgment was due to COVID-19. The defendants did not deny liability, only that their payment should be excused because the virus and the circumstances rendered them unable to pay.

Magistrate Judge Stewart D. Aaron rejected that argument. Asserting the impossibility defense, held the Judge, is only available when performance is rendered “‘objectively impossible’” by an unforeseen event that could not be anticipated. The “‘means of performance’” must have been destroyed; financial or economic difficulties would not suffice even if those hardships resulted in an objective inability to pay.

With this, while the defendants’ “financial difficulties arising out of COVID-19 and the PAUSE Executive Order” may have adversely affected their ability to pay, their obligation to do so cannot be excused.

April 27, 2020

Multiple Claims of Breach Dismissed as “Lacking Specificity”

by The Silber Law Firm LLC

Licensor sued a licensee for breaching an agreement to pay certain fees. In responding, the licensee counterclaimed for breach of the parties’ agreement. In doing so, it lumped together multiple allegations of breach into one cause of action but without detailing the specific contract provisions that the licensor violated.

The court granted the licensor’s motion to dismiss the counterclaims, with leave to amend, as the counterclaims failed to specify the provisions breached or the dates that they were breached. Those dates were of particular note, as the claims raised addressed issues that may have been barred by the statute of limitations. Instead of using the licensee’s affidavit to supplement the counterclaims, the court deemed it the “better practice” to replead.

Icon DE Holdings, LLC v. Mondani Handbags & Accessories, Inc.

April 20, 2020

Prior Conduct in Adjourning Closings May Preclude Default in Failing to Close

by The Silber Law Firm LLC

Plaintiff agreed to buy and defendant to sell, three contiguous parcels of property. The parties had set a time of the essence closing date, at which closing, plaintiff did not appear. However, a week before that closing, plaintiff’s attorney informed defendant’s that the lender’s appraisal was pending, and asked to adjourn the closing. Defendant’s counsel did not reply. The day before the closing, the attorneys communicated, but about issues unrelated to the actual closing or the request for an adjournment. On the closing date, seller appeared but buyer did not. Seller declared buyer’s breach and retained the downpayment.

Plaintiff-buyer sued, arguing that based on the parties’ prior practices of adjourning the closing, and defendant’s counsel’s failure to respond, led the buyer to a good faith belief that the time of the essence closing date had been adjourned. Plaintiff also pointed out that title revealed more than $11 million in outstanding mortgages, far exceeding the almost $4 million purchase prices, and that the seller had made no effort address those mortgages prior to the closing date.

The lower court dismissed plaintiff’s case, finding that it was not able to close and had failed to object to the title defects prior to the closing date. With plaintiff-buyer’s default defendant-seller was relieved from performance.

April 7, 2020

Offer to Pay for an Extended Closing Date Insufficient to Avoid Default

by The Silber Law Firm LLC

A buyer signed a contract and paid a downpayment as part of the purchase of real property. The buyer did not show at a time of the essence closing, leading the seller to declare its default and intention to retain the downpayment as damages.

Some eight months later, the buyer sued seeking specific performance. The seller counterclaimed for declaratory relief that it was entitled to retain the downpayment. The trial court denied the seller’s summary judgment motion seeking dismissal of the complaint and relief on its counterclaim.

The Second Department reversed finding that the buyer’s counsel’s email to seller’s counsel offering to extend the closing date for additional consideration, which was ignored by the seller’s counsel, did not void the time of the essence declaration or avoid buyer’s default. The counterclaim was remanded for judgment.