New York Commercial Division Round-Up

By Eric Raphan and Jonathan Sokolowski

In a recent decision outside the Commercial Division, Eyes of the World v. Boci, No. CV 46549/09 (N.Y. Civ. Ct. Aug. 19, 2011), Judge Margaret A. Chan held that a former employee’s restrictive covenant, prohibiting her from providing salon services to any client of her former employer for whom she provided such services during the last 12 months of her employment, was overly broad and, thus, unenforceable.

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By Mark E. McGrath

In CDR Créances S.A.S. v. Cohen, Index Nos. 109565/2003 and 600448/2006 (Sup. Ct., NY County, Aug. 25, 2011) (the “August Decision”), the Honorable O. Peter Sherwood granted the motions of plaintiff CDR Créances S.A.S. (“CDR”) for an order directing entry of judgment on CDR’s compensatory damages but refused to award CDR punitive damages, despite a January 25, 2011 decision (the “January Decision”) by former Justice James A. Yates that the defendants had repeatedly committed fraud upon the court.

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By Sean J. Kirby

In the matter of In re Sojitz Corporation v. Prithvi Information Solutions, Ltd, Index No. 602511/2009 (1st Dept. 2011) (“Sojitz Corp.”), the First Department, in a case of first impression, affirmed the decision of former Justice James A. Yates, and held that a creditor can attach assets in New York, for security purposes, in anticipation of an award that will be rendered in an international arbitration proceeding, even though the debtor has no connection to New York by way of personal jurisdiction.

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By Eric OConnor

In Trief v. Wells Fargo Bank, N.A., Index No. 105280/09, — N.Y.S.2d — (Sup Ct, NY County, Apr. 4, 2011) (“Trief”), the plaintiffs sought damages arising out of their attempt to refinance a mortgage loan with the defendant bank (the “Bank”), for breach of contract and violation of New York’s Unfair and Deceptive Practices Act, N.Y. General Business Law (“NYGBL”) § 349. Justice Charles Edward Ramos granted the Bank’s motion for summary judgment on both counts. The parties actually proceeded to closing when plaintiff walked away from the refinancing of a luxury midtown condominium located at 15 West 53rd Street, New York, NY – seemingly over a $518.75 dispute.
 

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By Sarah E. Aberg

In Ostad v. Nehmadi, No. 650460/2010 (Sup. Ct., N.Y. Co., Apr. 11, 2011) (“Ostad”), Justice Bernard J. Fried reiterated the rule that a notice of pendency cannot be based on a claim asserting an interest in personal property, even where that personal property is an interest in a partnership whose sole asset is real property.  Ostad illustrates the less-than-straightforward procedures of filing a valid notice of pendency.
 

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By Lisa Lewis

On December 14, 2010, Justice James A. Yates of the New York Commercial Division issued a decision on a motion to dismiss in Mount Sinai School of Medicine v. Konstadinos A. Plestis, M.D., Index No. 601314/2010 (Sup. Ct., NY County, December 14, 2010). The decision addresses the issue of whether an employer can bring an unjust enrichment claim for unearned pay against a former employee where the payments at issued were governed by an employment contract.
 

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By Kathryn J. Hines

In Arbeeny v. Kennedy Executive Search, Index No. 105733/2007 (Sup. Ct., NY County, Jan. 14, 2011) ("Arbeeny"), Defendants Jason Kennedy ("Kennedy") and Kennedy Associates ("Kennedy Associates ") (collectively the "Moving Defendants") moved to dismiss on the basis of Plaintiff Daniel Arbeeny’s failure to serve the complaint in a timely manner pursuant to CPLR § 306-b. Justice Eileen Bransten, of the New York Commercial Division, granted the Moving Defendants’ motion to dismiss as to Kennedy but denied it as to Kennedy Associates. In so doing, she addressed issues that may be important to United States-based companies that have a relationship with foreign corporations.
 

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By: Eric Raphan and Jonathan Sokolowski*

Justice Melvin L. Schweitzer of the New York Commercial Division recently issued a decision in Greater Talent Network, Inc. v. Alec Melman, et. al., Index No. 650522/2010 (Sup. Ct., NY County, Dec. 22, 2010) that can have important ramifications for New York employers.
 

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By Jane Qin

In Zyskind v. FaceCake Marketing Technologies, Inc., Index No. 651240/10 (Sup. Ct., NY County, Dec. 15, 2010) (“FaceCake Marketing”), Justice Bernard J. Fried granted summary judgment in lieu of complaint to plaintiffs Beryl Zyskind and Joel Gold, holding that ten notes issued to them (the "Notes") on account of investment loans they made to the defendant, FaceCake Marketing Technologies, Inc. ("FaceCake"), were instruments "for the payment of money only." 
 

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By: Sean J. Kirby

In Brown, et al.  v. Noble, Inc., et al., Index No. 600876/2010 (Sup. Ct., NY County, Dec. 2, 2010) (“Brown v. Noble”), Justice Bernard Fried granted defendant Thomas Caruso’s (“Caruso”) motion to dismiss plaintiffs Robert Brown and RB Group LLC’s (“Plaintiffs”) complaint, even though the Motion was filed approximately 1 week late.
 

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By Amanda Zablocki

On October 12, 2010, Judge Melvin L. Schweitzer held that Bank of America's filing of an interpleader complaint to resolve ambiguities in an indenture contract was in good faith, reasonable, and prudent, and therefore denied the defendant's motion to dismiss. Bank of America, N.A. v. Prima Capital Advisors LLC, Index No. 600740/10 (Sup. Ct., NY County Oct. 12, 2010). The Court further held that a material question of fact existed, weighing against summary judgment. Id.

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By Lisa Lewis

On October 29, 2010, Justice James A. Yates refused to dismiss tort and defamation claims, among other claims, against the authors and the publisher of a book about Alcor Life Extension Foundation, Inc. (“Alcor”). Alcor Life Extension Foundation, Inc. v. Larry Johnson, Vanguard Press, Inc. and Scott Baldyga, Index No. 113938/2009 (Sup. Ct., NY County, Nov. 3, 2010). Alcor is a not-for-profit organization in the field of cryonics, which is the practice of keeping a clinically dead human body or brain frozen in the hope of later restoring it to life with the help of future technologies. The book, called Frozen, was written by Larry Johnson (“Johnson”), a former employee of Alcor, and co-author Scott Baldyga (“Baldyga”) and published by Vanguard Press, Inc. (“Vanguard”). Alcor alleged in its Complaint that Frozen disclosed confidential and proprietary information about Alcor and its members, including information regarding baseball legend, and alleged Alcor member, Ted Williams.
 

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By Mark E. McGrath

In Vulcan Power Co. v. Munson, Index No. 600712/09 (Sup. Ct., NY County, Dec. 3, 2010), the Honorable Richard B. Lowe III granted summary judgment to Plaintiff Vulcan Power Company (“Vulcan”) against Defendants Soo Min Fay, Doug Frosh, George Marshall, Cal Mitchell and Tim Shea (collectively, the “Non-Munson Defendants”) on a declaratory judgment claim relating to an agreement that the Non-Munson Defendants executed but never reviewed.
 

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By Eric O’Connor

In Reit v. Yelp, Inc., Index No. 600555/10, — N.Y.S.2d —, 2010 WL 3490167 (Sup Ct, NY County, Sept. 2, 2010) (“Reit”), Plaintiff Reit, a dentist, sued Yelp!, Inc. (“Yelp”) and Michael S., an anonymous poster, for defamation, and Yelp alone for deceptive acts and practices under New York’s General Business Law (“NYGBL”) §§ 349 and 350. Justice Jane S. Solomon vacated a prior entry of a TRO and held that (i) plaintiff’s defamation claim against Yelp is barred by the Federal Communications Decency Act of 1996, 47 USC § 230 (the “CDA”), and (ii) plaintiff’s claims under NYGBL §§ 349 and 350 must also be dismissed because Yelp’s alleged manipulation of reviews was business conduct and not addressed to consumers and, thus, was not a deceptive act or practice.
 

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By Sean J. Kirby

In Transfirst EPayment Services, Inc. v. Advanced Marketing Research, Ltd., et al., Index No. 602536/2008 (Sup. Ct. N.Y. County Sept. 29, 2010) (“Transfirst EPayment”), Justice Eileen Bransten granted the motion of plaintiff Transfirst EPayment Services, Inc. (“Transfirst”) for summary judgment on its breach of contract cause of action against defendants Advanced Marketing Research, Ltd. (“AMR”) and the Estate of Albert Dweck. In doing so, Justice Bransten applied New York law to Transfirst’s claims even though both of the agreements at issue contained choice of law clauses which mandated the application of Colorado law.
 

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By Sarah E. Aberg

In Robinson v. Intuit, Inc., et al., Index No. 101160/10 (Sup. Ct. NY County, Sept. 27, 2010) (“Intuit”), Justice Shirley Werner Kornreich held that a foreign corporation with no physical contacts with New York that had contracted to provide services in New York through the website of another party was nonetheless subject to personal jurisdiction in New York. Intuit sheds further light on the extent to which New York courts will exercise long-arm jurisdiction over non-domiciliaries through their “virtual” New York contacts.
 

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By Jane Qin

In New Hampshire Insurance Co., et al., v. MF Global, Inc., Index No. 601621/09 (Sup Ct, NY County, Oct. 5, 2010), Justice Bernard J. Fried granted summary judgment to MF Global, Inc. (“MF Global”), formerly one of the world’s largest non-bank futures brokerages, paving the way for it to collect on an insurance claim covering a $141.5 million loss it suffered when a rogue broker made unauthorized overnight wheat trades in 2008. The court found that the broker, Evan Dooley (“Dooley”), was an “associated person” to MF Global, and, thus, was an employee of MF Global by law. Therefore, insurers could not refuse to cover MF Global’s loss based on the contention that Dooley was not actually an employee covered under the primary insurance policy (the “Policy”). The court further found the losses sustained by MF Global as a result of Dooley’s unauthorized trades were “direct losses” as required under the Policy.
 

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By Sean Kirby

It is a basic rule of pleading that in order to state a cause of action, all elements of a cause of action must be pled in a complaint. However, because “notice pleading” is all that is required, the temptation exists to be overly vague when pleading causes of action. In GS Agrifuels Corp. v. Chaykin, Index No. 101401/2009 (Sup. Ct. N.Y. County August 3, 2010) (“Chaykin”), the Commercial Division provided practitioners with a reminder that failing to plead all elements of a claim will result in dismissal for failure to state a cause of action.
 

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By Jane Qin

In Gotham Partners, L.P. v. High River, L.P., Index No. 602582/04 (App. Div. 1st Dep’t July 20, 2010) (“Gotham Partners”), Judge Saxe held that the indemnification clause in a purchase contract did not permit a seller to recover attorneys’ fees from a buyer after the seller successfully sued for breach of contract, concluding that the language of the indemnification clause fell short of satisfying the exacting “unmistakable intent” standard set forth by the Court of Appeals in Hooper Assoc., Ltd. v. AGS Computers, Inc., 74 N.Y.2d 487 (1989) (“Hooper”). The ruling reversed the decision of Judge Bransten of the Commercial Division granting summary judgment to the seller. Gotham Partners, L.P. v. High River L.P., Index No. 602582/04 (Sup Ct, NY County, January 5, 2009).
 

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By Lisa Lewis

On July 23, 2010, Judge Bernard J. Fried granted a petition for a temporary restraining order and preliminary injunction in aid of arbitration. Invar International, Inc. v. Zorlu Enerji Elektrik Uretim Anonim Sirketi, Index No. 650628/2010 (Sup Ct, N.Y. County July 23, 2010). At issue was whether the petitioners’ service of process on foreign respondent’s U.S. attorneys violated the Hague Convention on Service Abroad of Judicial and Extra-Judicial Documents in Civil or Commercial Matters (the “Hague Convention”).
 

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By Mark McGrath

In MBIA Insurance Corporation v. Credit Suisse Securities (USA) LLC, DLJ Mortgage Capital, Inc., and Select Portfolio Servicing, Inc., Index No. 603751/2009 (Sup Ct, NY County, Aug. 9, 2010), Justice Shirley Werner Kornreich denied, in large part, the defendants’ motion to dismiss fraudulent inducement and breach of contract claims based on certain representations and warranties provided to the plaintiff in the parties’ deal documents.
 

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By Gina Ilardi

On July 14, 2010, Justice Bernard J. Fried granted Bank of New York’s motion to dismiss a complaint alleging conversion in connection with the cashing of false checks. See Tripp & Co., Inc., v. The Bank of New York (Delaware) Inc., N/K/A BNY Mellon Trust of Delaware, N.A., and Citibank South Dakota, N.A., Index No. 114110-2009 (Sup. Ct., NY County July 14, 2010). Tripp is a small brokerage firm that retained the check clearing services of non-party Pershing, LLC (“Pershing”). At Tripp’s request, Pershing issued checks payable to Tripp’s customers and drawn on Pershing’s account maintained by Bank of New York. Tripp’s former employee, Michael Axel (“Axel”) misappropriated $624,244.78 through a series of fraudulent checks between June 2002 and December 2007. Axel accomplished the foregoing by requesting checks from Pershing, forging the payees names, and cashing and depositing the checks into his own personal account at Citibank. Citibank accepted for deposit and made payments on the checks, while Bank of New York accepted and cleared the checks. As a result, Tripp filed an action alleging conversion against Bank of New York and Citibank.
 

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By Mark McGrath

In four related cases, Merrill Lynch Capital Markets AG and Merrill Lynch Capital Services, Inc. v. Controladora Comercial Mexicana S.A.B. De C.V., Index No. 603214/2008 (Sup. Ct., NY County, March 16, 2010), JPMorgan Chase Bank, N.A.  v. Controladora Comercial Mexicana S.A.B. De C.V., Index No. 603215/2008 (Sup. Ct., NY County, March 16, 2010), J. Aron & Company v. Controladora Comercial Mexicana S.A.B. De C.V., Index No. 603225/2008 (Sup. Ct., NY County, March 16, 2010), and Barclays Bank PLC v. Controladora Comercial Mexicana S.A.B. De C.V., Index No. 603233/2008 (Sup. Ct., NY County, March 16, 2010), Justice Eileen Bransten recently granted summary judgment on liability to the plaintiffs against Controladora Comercial Mexicana S.A.B. De C.V. (“CCM”), one of Mexico’s largest retailers and the operator of approximately 200 stores and 70 restaurants. In each of the cases, the plaintiff asserted breach of contract claims and CCM asserted the same affirmative defenses and counterclaims, which defenses were found to fail by Justice Bransten. Of particular interest was the court’s rejection of CCM’s defense that the agreements were illegal under Mexican law and, thus, could not be enforced.
 

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By Sarah Aberg

Recently, in HSBC Guyerzeller Bank AG v. Chascona N.V. et al., Index No. 114705/2003 (Sup. Ct., NY County, June 23, 2010) (“Guyerzeller”), Justice Bernard J. Fried held that the attorney-client and attorney work product privileges did not shield from discovery documents created and maintained by an attorney acting as an investigator.
 

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By Eric O’Connor

On June 25, 2010, Justice Shirley Werner Kornreich of the Commercial Division issued a Decision and Order, inter alia, denying several foreign defendants’ motion to dismiss based upon forum non conveniens. See Coventry Real Estate Advisors, LLC, et al., v. Developers Diversified Realty Corp., et al., Index No. 115559/09 (Sup. Ct. NY Co., June 25, 2010) (“Coventry”).
 

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By Sarah Aberg

In Bluebird Partners, L.P. v. Bank of New York, Index No. 1996-601016, 2010 NY Slip Op 31407(U) (Sup Ct, NY County, June 7, 2010), Justice Eileen Bransten of the New York Commercial Division, granted a summary judgment motion in favor of the Bank of New York, as a collateral trustee, because she found that the bank acted in a reasonable and prudent manner in establishing and administering a litigation reserve pursuant to an indenture and trust agreement.
 

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By Daniel L. Brown and Valentina Shenderovich

On May 10, 2010, Justice Barbara R. Kapnick permitted a fraud claim to proceed against a syndicated lender despite the fact that the plaintiffs were sophisticated parties and the loan documents contained express disclaimers of reliance. See Harbinger Capital Partners Master Fund I Ltd. v. Wachovia Capital Markets LLC, Index No. 602529/08 (Sup Ct, NY County, May 10, 2010) ("Harbinger"). The court held that it was too early in the litigation to determine whether "the true nature of the situation" might place plaintiffs within an exception to the bar on fraud claims that generally occurs where deal documents contain express contractual disclaimers.
 

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By Daniel L. Brown and David A. Schrager

In Hudson Ins. Co. v. M.J. Oppenheim, 604411/05 (Sup Ct, NY County, May 25, 2010) ("Hudson"), Justice Bransten held that statements made in an expert consultant's report prepared in connection with settlement negotiations were not entitled to the usual protections afforded settlement communications and, therefore, were admissible at trial. The lesson to be learned is that attorneys and clients must be careful when disclosing information during settlement discussions, because otherwise admissible evidence is not rendered inadmissible merely because it was provided during settlement negotiations.
 

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By Eric O’Connor

In a recent case in the Commercial Division of the Supreme Court of the State of New York, Justice Bransten granted the lender’s motion for a $50 million summary judgment in lieu of complaint pursuant to CPLR §3213 based upon promissory notes and a guaranty, because borrowers failed to carry their burden to establish any viable defense. See KBS Preferred Holding I LLC v. Petra Fund REIT Corp., Index No. 601836/09 (Sup Ct, NY County, May 3, 2010) (“KBS”)."
 

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By Sean J. Kirby

On May 24, 2010, the Commercial Division of the Supreme Court of the State of New York, New York County instituted mandatory electronic filing for actions filed in the Commercial Division. As a result, this rule change most Commercial Division matters must now be commenced, and all subsequent filings must be filed, through the court's electronic case filing website located at www.nycourts.gov/efile (the "NYSECF website").
 

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By Lisa Lewis

On April 21, 2010, Judge Eileen Bransten of the Commercial Division issued a decision granting summary judgment in favor of defendant Brinks Global Services U.S.A. Inc. (“Brinks”) in a breach of contract and negligence action brought by plaintiff Maxine Company, Inc. (“Maxine”). See Maxine Co. Inc. v. Brinks Global Services U.S.A., Inc., Index No. 602233/05, 2010 NY Slip Op. 50821 (Sup Ct, NY County, April 21, 2010). Maxine is a high-end wholesale and retail jeweler that hired Brinks, a security service, to pick-up, transport and deliver 157 items of fine jewelry from New York City to a department store in Virginia. Although the full retail value of the jewelry was alleged by Maxine to be in excess of $6 million, for reasons that are unclear, Maxine declared the value of the jewelry at only $2 million and did not identify the jewelry as fragile. 
 

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