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A dispute involving the distribution of an estate was submitted to arbitration. The parties proceeded to court where one party sought to have the arbitration decision confirmed, while the other requested that it be vacated.

One of the grounds for vacatur was the claim that one of the arbitration hearings took place on a Sunday, something prohibited under Judiciary Law §5. While that law addresses court business, the court in this case extended that rule to arbitration, because “arbitrators perform a judicial function.” With that, the court refused to enforce the arbitration proceeding.

The court also found that the arbitrators exceeded their authority on a number of grounds. One of those grounds dealt with the arbitrators’ direction to transfer a property free and clear of liens or mortgages. Because the party holding the lien or mortgage was not party to the arbitration, such directive could not be enforced.

In interpreting deal documents, an issue arose as to the definition of the word “control” when used in an attempt to obtain “control” over a board of directors. For that reason, and others, the law firm that drafted those documents was found liable to its client to the tune of $17.2 million. The details are a bit complex, but worth a read. Have a look here. Read the comments too.

Bottom line: Write what you mean. As simply as possible.

We have written and counseled on an employer’s right to access an employee’s personal email account from a work computer. Here is an article that goes beyond email, to an employer’s ability to access an employee’s social media account, for a host of reasons, even if accessed from a personal computer.

Its a bit technical, so please let us know if you have any questions.

Plaintiff, Castle Oil Corp., operated a fuel oil terminal in the Bronx, receiving and supplying fuel. The terminal was insured by defendant ACE American Insurance Co. for “direct physical loss or damage” during the policy period. The policy included provisions for flood damage, including from storm surges, which carried a $2.5 million annual limit. The policy had a deductible provision specifically for flood damage that was equal to “2% of the total insurable values at risk,” with a minimum of $250,000. During Superstorm Sandy, Castle’s terminal suffered flood damage of $2.2 million. When Castle submitted an insurance claim, ACE declined to pay claiming that applying the 2% deducible against the entire insurable value of the $124,701,000 policy resulted in a deducible amount of $2,494,202, which was more than the loss.

Castle disputed that computation, claiming that the deductible was not be setoff against the value of the entire property and operation, but only against the property that was “at risk” from flood loss. Because the limit for flood loss “at risk” was $2.5 million, the 2% deductible was $250,000. Castle also pointed out that the $124 million amount was for “premium purposes only,” meaning, to determine the policy cost, but not for deductible calculation.

The Court first recited the law applicable to interpreting insurance policies–according to their plain terms and definitions. The Court’s role was to look at the policy as a whole and attempt to enforce the policy as intended, so that all provisions of the policy are defined and implemented. In this case, the court noted that “at risk” was not defined in the policy. If the policy was interpreted as ACE argued, the term “at risk” would be redundant and the provision “premium purposes only” would be irrelevant. Finally, the court pointed out that following ACE’s logic, the $2.5 million limit on flood damage would also be meaningless, as the deductible amount would always be more than the flood loss limit. Given that the approach proposed by ACE left provisions of the policy without any import or meaning, the Court rejected that position and found for Castle.

After Johnson was terminated by her employer, a subsidiary of a Florida company, Johnson went to work for a competitor. Claiming that working at Johnson’s new job violated a non-compete agreement that she had signed, her prior employer sued Johnson and her new employer. The agreement sued upon contained a provision dictating that Florida law governed the parties’ relationship. The Court determined that because the parties contracted to apply Florida law, Florida Law controlled. Notwithstanding that holding, the court refused to apply Florida law.

The court discussed the general rule that while parties to a contract are free to agree to be governed by a particular state’s law, that was true so long as that governing state had some relationship to the parties or their transaction, and the law was not “truly obnoxious” to New York’s public policy. In this case, the court found that one of the related parties to Johnson’s former employer was based in Florida so that Florida law could apply. However, because Florida law on the enforcement of non-compete agreements was “truly obnoxious” to New York’s public policy, the court refused to apply that law.

The court explained that New York disfavors restricting an employee from competing with a past employer once employment has been terminated so that an individual is not prevented from earning a livelihood. Even when non-compete agreements are enforced, they are done so only to the extent that they are not unduly harsh or burdensome. Florida law, however, specifically excludes any consideration of the hardship suffered by the employee when enforcing such an agreement. Florida law further provides that a Florida court must consider the reasonable protection of the legitimate business interest established by the employer, and should not construe the non-compete provision narrowly against the employee. This “anti-employee bias” contained in Florida law, which is almost the mirror image of New York law, was found to be obnoxious and unenforceable in New York. The New York court was not persuaded by the employer’s argument that while Florida law was written as such, undue hardship was in fact considered by Florida courts’ in their practical application of the statute.

An issue that client’s grapple with concerns how to measure damages where a contract to buy real property is breached by the purchaser. In 2013, the Court of Appeals (New York State’s highest court) addressed this in a comprehensive decision.

Parties to a real estate contract often assume that where a buyer fails to close, and the seller is forced to sell that property to another, the seller is entitled to damages from the first buyer that is equal to the difference between the first contract price and the second contract price (assuming the contract does not limit damages, which is often the case). This assumption is drawn from general legal principles and common-sense intuition. That assumption, however, is wrong.

The court in White v. Farrell addressed this issue. White entered into a contract to purchase a property from Farrell for $1.725 million. As in almost every transaction, the contract had certain contingencies. In an effort to close, the parties agreed to remove the contingencies in exchange for certain promises and a payment. Ultimately, unhappy with a particular issue, White terminated the contract.

After closing on their house, plaintiffs Douglas and Joanna Dean found extensive termite damage. At that time, a home owner’s policy was in place. The Deans spent the next year or so renovating the house. Their insurance policy renewed in March 2006. As the renovations were being completed, a fire destroyed the house, in May 2006. In June 2006, the carrier refused to cover, claiming that the house was unoccupied and thus not a “‘residence premises’ [sic]” and ineligible for coverage. The carrier also alleged that the Deans lied about their intended use of the property-that they would live there.

Remarkably, the trial court granted the carrier’s request to dismiss the case. The Appellate Divisions reversed, finding ambiguity in how the term “residence” was defined. The Court of Appeals, New York’s highest court, agreed with that finding.

The court questioned how the word residence should, or could, be defined. Mr. Dean stated that he was at the house regularly to work on it, and that he sometimes ate and slept there. Therefore, Mr. Dean could be seen as residing in the house. The court further held that just because the house contained no furniture did not mean that the house was not occupied (which the carrier also used as its basis to deny coverage). Because of this confusion, the Appellate Division’s decision was confirmed and the dismissal was reversed.

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.

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.

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.

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