Justia New York Court of Appeals Opinion Summaries

Articles Posted in Business Law

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The Attorney General filed suit against defendants, two former officers of AIG, under the Martin Act, Gen. Bus. Law art. 23-A, and Executive Law 63(12). On appeal, defendants challenged the availability of equitable relief. The court held that the Attorney General's claims against defendants withstand summary judgment and, therefore, should proceed to trial. The court concluded that the Attorney General may obtain permanent injunctive relief under the Martin Act and Executive Law 63 (12) upon a showing of a reasonable likelihood of a continuing violation based upon the totality of the circumstances. Therefore, the court rejected defendants' argument that the Attorney General must show irreparable harm in order to obtain a permanent injunction. Furthermore, defendants' reliance upon State of New York v Fine - in which the court held that the Attorney General must demonstrate irreparable harm to obtain a preliminary injunction under the Martin Act - is misplaced. Finally, the court concluded that disgorgement is an available remedy under the Martin Act and the Executive Law. Accordingly, the court affirmed the Appellate Division. View "People v Greenberg" on Justia Law
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Google Inc. and On2 Technologies, Inc. entered into a merger agreement in 2009. Thereafter, Plaintiff brought a class action on behalf of himself and other similarly situated On2 shareholders, alleging that On2’s board of directors had breached its fiduciary duty to its shareholders. Plaintiffs subsequently agreed with One2 and its directors to settle all claims with respect to the merger. After a hearing, Supreme Court found the settlement to be fair and in the best interest of the class members but refused to approve the settlement because it did not afford out-of-state class members of the opportunity to opt out, thereby prohibiting class members from pursuing any individual claims that are separate and apart from the class settlement. The Appellate Division affirmed. The Court of Appeals affirmed, holding that the lower courts properly refused to approve the proposed settlement because the settlement would deprive out-of-state class members of a cognizable property interest. View "Jiannaras v. Alfant" on Justia Law

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In 2012, Defendant Kenneth Cole proposed a going-private merger of Kenneth Cole Productions, Inc. that was subject to approval by both a special committee of independent directors and a majority of the minority shareholders. Several shareholders, including Plaintiff, commenced separate class actions alleging breach of fiduciary duty by Cole and the directors. Although the shareholder vote occurred after an amended complaint was filed, 99.8 percent of the minority shareholders voted in favor of the merger. In the amended complaint, Plaintiff sought a judgment declaring that Cole and the directors had breached the fiduciary duties they owed to the minority shareholders, an award of damages to the class, and a judgment enjoining the merger. Supreme Court granted Defendants’ motion to dismiss. The Court of Appeals affirmed, holding (1) in reviewing challenges to going-private mergers, New York courts should apply the business judgment rule as long as certain shareholder-protective conditions are present; (2) if those measures are not present, the entire fairness standard should be applied; and (3) applying that standard to this case, the courts below properly determined that Plaintiff’s allegations did not withstand Defendants’ motions to dismiss. View "In re Kenneth Cole Prods., Inc." on Justia Law

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Defendant was a CEO and director of now bankrupt Agra Services of Canada, Inc (Agra Canada) and an officer and director of Agra USA. Agra Canada entered into a purchase agreement with Cooperative Centrale Raiffeisen-Boerenleenbank B.A. (Rabobank) under which Rabobank purchased and financed certain receivables of Agra Canada. Thereafter, Defendant and Eduardo Guzman Solis, Agra Canada’s president and a manager of both Agra businesses, signed personal guarantees in favor of Rabobank. After Guzman Solis died, an investigation revealed fraudulent receivables based on nonexistent transactions submitted by Guzman Solis. Rabobank sued Agra Canada, Agra USA, and the estate of Guzman Solis seeking to recover the millions of dollars owed to Rabobank under the purchase agreement and guarantees. Defendant appeared represented by counsel but failed to retain counsel for Agra USA. The district court entered default judgment against Agra USA. Rabobank then filed this action in state court alleging that Defendant was liable under the guaranty. The Appellate Division granted Rabobank summary judgment. Defendant appealed, arguing that the default judgment against him was obtained by Rabobank’s collusion. The Court of Appeals affirmed, holding (1) Defendant’s collusion claim constituted a defense barred by the language in the guaranty; and (2) Defendant’s claim of collusion was contradicted by the record. View "Cooperatieve Centrale Raiffeisen-Boerenleenbank, B.A. v. Navarro" on Justia Law

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Mahesh Gandhi and his two associates held equal interests in three corporations. The corporations secured a loan, part of which was loaned to the partners, of which Gandhi received a portion pursuant to promissory notes he signed and for which he made interest payments. Litigation among the partners and the corporations soon followed. The parties eventually executed a Settlement Agreement under which Gandhi sold his interest in the corporations to his associates. The corporate successors-in-interest to the corporations made monthly payments to Gandhi until Gandhi ceased paying interest on the notes. The corporations sued, asserting that they were entitled to offset the amount they owed Gandhi against the amount he owed them under the notes. At trial, Gandhi sought to assert a counterclaim for money current owed him under the Settlement Agreement. Supreme Court granted Gandhi’s motion to amend and entered judgment in his favor on the counterclaim. The Appellate Division reversed the judgment on Gandhi’s counterclaim, concluding that Gandhi’s request should have been barred by the doctrine of laches based on Gandhi’s delay in seeking leave to amend. The Court of Appeals reversed, holding that there was no prejudice to the corporations in allowing Gandhi’s amendment to assert the counterclaim for outstanding payments. View "Kimso Apts., LLC v. Gandhi" on Justia Law
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These two cases involved the dissolution of two separate law firms. After the law firms’ dissolution, the partners joined other law firms, which took on unfinished legal matters from the dissolved law firms’ former clients. The dissolved law firms subsequently filed for bankruptcy. Separate adversary proceedings were brought against the law firms that hired the dissolved law firms’ partners. The lawsuits were premised on the unfinished business doctrine, and the plaintiffs sought to recover the value of the dissolved law firms’ business for the benefit of the estate’s creditors. At issue before the Court of Appeals was whether, for purposes of administering a related bankruptcy, New York law treats a dissolved law firm’s pending hourly fee matters as its property. The Court of Appeals held that pending hourly fee matters are not partnership property or unfinished business within the meaning of New York’s Partnership Law, as a law firm does not own a client or an engagement and is only entitled to be paid for services actually rendered. View "In re Thelen LLP" on Justia Law

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Plaintiff initiated litigation to recover wrongfully diverted and concealed proceeds of a loan agreement, asserting that Defendants conspired to avoid repayment by denying their ownership and control over entities used to conceal converted funds. Before the conclusion of discovery in New York, federal authorities arrested Defendants, charging them with tax evasion and alleging a conspiracy to commit fraud on the New York court by forging documents and suborning perjury. A jury convicted Defendants of tax evasion, and the district court concluded that Defendants had perpetrated fraud on Supreme Court in New York. After Defendants’ sentencing, Plaintiff filed a motion to strike Defendants’ pleadings and for a default judgment. Supreme Court determined that Defendants had perpetrated a fraud on the court and granted the motion. The Appellate Division affirmed. The Court of Appeals affirmed in part, holding (1) where a court finds, by clear and convincing evidence, conduct that constitutes fraud on the court, the court may impose sanctions including striking pleadings and entering default judgment against the offending parties; and (2) with one exception, the record supported such sanctions against Defendants. View "CDR Creances S.A.S. v. Cohen" on Justia Law

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Petitioner was a State employee. Suspecting that Petitioner was submitting false time reports, the State attached a global positioning system (GPS) device to Petitioner's car. After a report by the Inspector General based on evidence obtained from the GPS device, the Commissioner of Labor terminated Petitioner's employment. The appellate division confirmed the Commissioner's determination and dismissed the petition. The Court of Appeals affirmed, holding (1) pursuant to People v. Weaver and United States v. Jones, the State's action was a search within the meaning of the State and Federal Constitutions; (2) the search in this case did not require a warrant; but (3) the State failed to demonstrate that the search was reasonable. Remanded. View "Cunningham v. State Dep't of Labor" on Justia Law

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This case arose from efforts of Verizon New England to collect a judgment awarded in 2009 by the U.S. district court against Global NAPs (GNAPs). Verizon served a restraining notice on GNAPs and companies with which it did business, one of which was Transcom Enhanced Services. Verizon subsequently commenced this special proceeding seeking a turnover of property and debts of the judgment debtor held by Transcom. Supreme Court denied turnover and dismissed the petition with prejudice, concluding that Transcom did not owe any debt to GNAPs and it did not hold property in which GNAPs had any interest. At issue on appeal was whether the at-will, prepayment service agreement between the parties, which lacked any obligation to continue services or a commitment to engage in future dealings, constituted a property interest or debt subject to a N.Y. C.P.L.R. 5222(b) restraining notice. The Appellate Division affirmed. The Court of Appeals affirmed, holding that, based on the nature of the agreement, the restraining notice was unenforceable. View "Verizon New England, Inc. v Transcom Enhanced Servs., Inc." on Justia Law

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Plaintiff and Defendant formed a partnership by oral agreement. Defendant later withdrew from the venture after Plaintiff refused his demand for majority ownership of the partnership. Plaintiff sued Defendant for breach of contract, claiming that Defendant could not unilaterally terminate his obligations under the agreement. Supreme Court dismissed the complaint, concluding that the complaint failed to allege that the partnership agreement provided for a definite term or a defined objective, and therefore, dissolution was permissible under N.Y. P'ship Law 62(1)(b). The Appellate Division modified by reinstating the breach of contract cause of action, reasoning that the complaint adequately described a definite term and alleged a particular undertaking. The Court of Appeals reversed with directions that the breach of contract cause of action of the complaint be dismissed, holding (1) the complaint did not satisfy the "definite term" element of section 62(1)(b) because it did not set forth a specific or a reasonably certain termination date; and (2) the alleged scheme of anticipated partnership events detailed in the complaint were too amorphous to meet the statutory "particular undertaking" standard for precluding unilateral dissolution of a partnership. View "Gelman v. Buehler" on Justia Law