In late December 2013, new laws were put in place addressing non-profits. While we do not have a significant non-profit practice, we are often asked about issues relating to non-profits. To that end, here is a link to a more robust discussion of the Nonprofit Revitalization Act of 2013.
Failure to Verify Details of Disputed Credit Report Undermines Experian’s Claims
Plaintiff Keisha James notified Experian that two items on her credit report were incorrect and were reported on her report as a result of identity theft. When Experian notified the companies that listed the debts of her dispute, those companies were only able to verify some of the information as being matching James’s. Nonetheless, Experian refused to remove the disputed debts from her credit report. James sued Experian claiming that it failed to conduct a reasonable investigation into the disputed debts, as required by the Fair Credit Reporting Act. Experian responded by arguing that its investigation and verification complied with the Federal statute and asked that James’s lawsuit be dismissed.
The court focused its decision on defining what would be deemed a”reasonable investigation” by Experian to satisfy its obligations under the law. Noting the absence of a clear definition, the court considered the totality of the circumstance. Observing that the companies reporting the debts to Experian were only able to verify some of the information, so that items like James’s birth date, address and name were incorrect on those company reporting records, described by the court as “glaring discrepancies,” coupled with Experian’s failure to do anything more, compelled the court to deny dismissal of the complaint and allow James to proceed with her case.
Jones v. Experian Information Solutions, Inc.; Southern District of New York, Judge McMahon
Offering Plan for Condominium Building Deemed Contract with Unit Buyers
Plaintiff alleged that the sponsor of a condominium development breached the offering plan by converting the units to rentals from sales, and that the developer was therefore able to maintain control of the buildings board of directors.
Plaintiff, Bauer, alleged that she purchased multiple condominium units in a building newly constructed by defendant Beekman International Center, LLC. She alleged that Beekman’s offering plan described its stated intent to sell the 65 units. Bauer claimed that such statement implied that the sales would be completed in a “reasonable time.” Bauer further alleged that Beekeman’s paperwork did not disclose that Beekman retained the option to rent any unit instead of selling it. Bauer claimed that Beekman’s rentals breached the agreement in that it precluded the unit owners from taking over control over the building as owners. As a result, Bauer and other unit owners were unable to sell their units, the rentals caused the common charges to increase, and impeded the unit owners’ ability from obtaining favorable refinancing rates from lenders. Bauer sought damages and the court’s direction that the units be sold, in addition to forcing Beekman’s principals from the board of directors. Beekman responded by stating that approximately half of the units had been sold and once the market was able to sustain the asking price, arrangements would be made to resume the unit sales. Beekman denied that the unit owners were having difficulty refinancing their respective units, but seemingly did not dispute all of Bauer’s claims.
The court recited some of the legal history involving the relationship between sponsors and buyers. Citing case law and regulatory action, the court deemed a sponsor’s offering plan to be an agreement which contained the implied promise to sell the units within a reasonable period of time. A sponsor’s failure to do so supported a breach of contract claim. The court noted that the current regulatory scheme required a sponsor to specify the intended market for the units built. Those regulations further required a disclosure that once the sponsor sold the minimum 15% of the units necessary for the offering plan to become effective, its ability to rent rather then sell the units could result in the unit buyers never taking control of the condominium.
Substituted Service of Process on Co-Defendant Ruled Insufficient
The plaintiff was a home health aide for Gilberto Rivas in Rivas’s apartment, where she claims to have been injured by a defective window. The plaintiff sued the apartment’s owner and Rivas. The plaintiff served the owner of the apartment by substituted service upon Rivas. Neither defendant responded and plaintiff obtained a default judgment. In seeking to vacate the default, the owner claimed that he was never served and that Rivas did not forward the litigation papers to him.
Putting aside the issue of whether the owner listed that apartment as his home address, the Court found it unreasonable and unreliable for the plaintiff to have served the owner by leaving the lawsuit papers with Rivas, who had interests that were adverse to the interest of the apartment’s owner. In this setting, Rivas could not be relied upon to properly forward the papers to the owner. Therefore, the property owner was allowed to file his late answer and to defend the case.
Martinez v. McSweeny, Queens County – J. McDonald
Court Applies Pre-Suit Notice for Non-Foreclosure Action Based on Mortgage Note
A lender has two options in seeking repayment on a defaulted home loan. A lender has the option of commencing a foreclosure action, auctioning the property, and applying the sale proceeds against the loan amount due. Or, a lender can sue based on the promissory note underlying the loan and obtain a money judgment. A lender cannot do both. RPAPL § 1304 requires that a lender provide a 90-day notice before it commences a lawsuit based on a home loan, which is typically a foreclosure action. The question facing the court in this case was whether the 90-day notice is also required where the lender sues on the promissory note and foregoes seeking foreclosure.
Construing the statute broadly, the court found that RPAPL § 1304 is to be applied to any lawsuit commenced against a borrower that involves a home loan. The court seemed compelled to explain this outcome, because aside from finding this outcome to be consistent with the language of the statute, it grounded its decision on the fact that once a money judgment is obtained by the lender, the home owner will be “subject to levy upon his or her personal property, motor vehicle, savings account and/or other asset, such could result in the borrower being compelled to sell the property in order to protect these possessions.” The court was also concerned that a money judgment “may complicate settlement negotiations” in the event the borrower also defaulted on a senior loan (this case involved a second loan). As a result, this borrower was entitled to the remedial provisions of this statute.
While the outcome here seems reasonable, it is clear that Judge Demarest felt the need to rationalize the outcome by making assumptions about what might occur in the future which could result in the sale of the property. Does that mean that for RPAPL § 1304 to apply in this setting there must be a possibility that the subject property will be at some point sold?
Insurance Policy Applies Even With Wrong Party Named
A deli rented space from 137 Broadway Associates, located at 3379 Broadway. Prior to renting that space, the deli rented from Cromwell Associates, located at 3381 Broadway. The deli had purchased an insurance policy, which included the landlord as an additional insured. Mistakenly, although the deli was now renting from 137 Broadway, Cromwell was listed as the additional insured and not 137 Broadway. After being sued for a patron’s fall, who named both the deli and 137 Broadway, the carrier refused to defend 137 Broadway, claiming that it was not listed as an insured party.
137 Broadway commenced a lawsuit against the carrier, seeking to compel the carrier to defend it in the lawsuit, claiming that it was the intended party to be insured. The carrier argued that the policy documents were clear and did not list 137 Broadway as an insured party. The court refused to accept that approach. After first reciting the principle that the written list of insured parties was not always exclusive as to which party was to be insured, the court determined that where the intent of the parties as to coverage is clear, mistakenly listing the wrong entity would not alone preclude coverage for the intended party. The court noted that the mistake was obvious because there was no way that Cromwell Associates could obtain any benefit by being listed as an additional insured.
137 Broadway Associates, LLC v. 602 West 137th Deli Corp.
Email Agreement Creates Enforceable Settlement
Plaintiff, John T. Forcelli, sued for injuries incurred in an auto accident. While motions to dismiss were pending, the parties mediated the claim. Although one of the defendant’s insurance carriers discussed settlement, no agreement was reached. Shortly thereafter, settlement discussions were revived by email exchange. The carrier’s representative offered $200,000, which was later raised to $230,000. That amount was agreed to orally by Mr. Forcelli’s counsel. The carrier confirmed that amount in a subsequent email, which was signed “[t]hanks Brenda Green” (the carrier’s representative). Settlement and release papers were exchanged and signed by Mr. Forcelli. A few days later, before the defendants had signed off, the court issued a decision granting dismissal of the lawsuit. Thus, the carriers refused to sign the settlement papers or pay any amount to Mr. Forcelli.
The parties went back to the judge. The issue was whether or not the email from Brenda Greene was to be deemed an enforceable, proper, settlement agreement under the law. The judge found that it was.
The carriers appealed but the Second Department affirmed. That court recited the requirements for finding an enforceable agreement–a written agreement signed by the party or his counsel, which includes all of the material terms of the agreement. The email contained the settlement amount and Mr. Forcelli’s agreement to settle, the relevant terms. The fact that not all of the defendants or their counsel had signed off was not a bar, as Ms. Greene had apparent authority to bind all of the defendants. Recognizing that an email is not formally signed, the Second Department allowed this emails as they were clear to show the parties’ intent to settle. That Ms. Greene wrote out her name at the end of the email was further proof of affirmative consent (differentiating from an auto-signature at the end of an email).
Carrier Compelled to Cover Loss on Empty House
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.
The Facts Behind the Infamous McDonald’s Coffee Spill Verdict
I was sent a link to a New York Times video explaining the facts behind this national story. It was news to me, and very interesting.