New York Law Review

Tag: 1993

  • Liberty Mutual Insurance Company v. Goddard, 81 N.Y.2d 509 (1993): Enforceability of Livery Exclusion in Uninsured Motorist Coverage

    Liberty Mutual Insurance Company v. Goddard, 81 N.Y.2d 509 (1993)

    A “livery exclusion” in the uninsured motorists coverage endorsement of a personal automobile liability policy is unenforceable because it is not based on statute or regulation and is inconsistent with the purpose of mandatory uninsured motor vehicle statutes and public policy.

    Summary

    Liberty Mutual sought to stay arbitration of an uninsured motorist claim, arguing that its policy with the vehicle’s owner, Karim, validly excluded coverage for vehicles used to carry persons for a fee (a “livery exclusion”). The respondents were passengers injured when Karim’s livery vehicle collided with another car. The Court of Appeals held the livery exclusion in the uninsured motorist endorsement unenforceable, as it contravened public policy and lacked statutory authorization, upholding the lower courts’ decisions to compel arbitration.

    Facts

    John Karim owned and operated a vehicle as a livery. Respondents were passengers in Karim’s vehicle. Karim’s vehicle ran a stop sign and collided with a vehicle owned by Jeannette Williams and operated by Frank Venable. Liberty Mutual insured Karim’s vehicle under a policy that excluded coverage for vehicles used to carry persons for a fee, both in the liability coverage and uninsured motorists coverage endorsement. Liberty Mutual denied coverage based on the livery exclusion after respondents sued Karim for personal injuries. The other vehicle was insured.

    Procedural History

    Respondents demanded arbitration from Liberty Mutual under the uninsured motorists coverage. Liberty Mutual commenced a proceeding to stay arbitration, arguing the livery exclusion applied. Supreme Court denied the stay and dismissed the petition. The Appellate Division affirmed for the same reasons. The Court of Appeals granted leave to appeal.

    Issue(s)

    Whether a “livery exclusion” contained in the uninsured motorists coverage endorsement of a personal automobile liability policy is invalid and unenforceable.

    Holding

    Yes, because the livery exclusion is not based on any statute or regulation and is inconsistent with the purpose of the mandatory uninsured motor vehicle statutes and the public policy of New York State.

    Court’s Reasoning

    The court reasoned that Insurance Law § 3420 mandates uninsured motorist coverage in every auto insurance policy. Unlike regulations for liability, no-fault, and supplemental uninsured/underinsured coverage, there is no statute or regulation that expressly permits a livery exclusion for uninsured motorist coverage. The Court emphasized that the absence of explicit authorization is critical: “when the Legislature and the State want to allow exclusions, they say so.”

    The Court stated, quoting Rosado v Eveready Ins. Co., 34 NY2d 43, 49, “its obligation, with the exception of permitted exclusions, [arises] by operation of law and [is] as broad as the requirements of the applicable statutes.”

    The court further reasoned that enforcing such an exclusion would undermine the public policy of ensuring compensation for innocent victims of motor vehicle accidents. The purpose of compulsory uninsured motorist coverage is to protect insured persons injured by financially irresponsible motorists. Exclusions narrow the scope of coverage mandated by statute, and are viewed with disfavor. The court quoted Matter of Country-Wide Ins. Co. v Wagoner, 45 NY2d 581, 586, saying that the goal is “to make the prescribed compensation available in all such cases, calls for a policy of inclusion rather than exclusion in determining whom it covers”.

    The court dismissed Liberty Mutual’s argument that the Superintendent of Insurance’s inaction on the livery exclusion constituted tacit approval. While agency interpretations are given weight, courts retain the duty to interpret statutes reasonably. The court also found questionable whether a claim to the Motor Vehicle Accident Indemnification Corporation (MVAIC) is an adequate remedy, especially considering notice requirements. To allow the insurer to escape liability would unjustly enrich the insurer at the public’s expense.

  • Jensen v. General Electric Co., 82 N.Y.2d 77 (1993): Statute of Limitations for Toxic Tort Property Damage Claims

    82 N.Y.2d 77 (1993)

    CPLR 214-c(2), the statute of limitations for property damage caused by exposure to substances, applies to actions for damages resulting from continuing trespass and nuisance, limiting the time to bring suit to three years from the date of discovery of the injury.

    Summary

    Plaintiffs sued General Electric (GE) and Albert J. Smaldone, Sr. and Sons, Inc., alleging property damage from hazardous waste contamination. GE had disposed of waste on a site later purchased by Smaldone. Plaintiffs discovered the contamination in 1986 but did not sue until 1990. The lower courts disagreed about whether the claim was time-barred under CPLR 214-c(2). The Court of Appeals held that the statute applied to continuing trespass and nuisance claims, barring the recovery of damages because the suit was filed more than three years after discovery, but did not affect the availability of equitable injunctive relief.

    Facts

    From 1958 to 1969, General Electric disposed of hazardous waste at the Moreau Site. In 1970, Albert J. Smaldone, Sr. and Sons, Inc. purchased the site. In 1984, GE contacted plaintiff Perkett for permission to place monitoring wells on her property. GE informed Perkett in December 1984 that her property was contaminated with trichloroethylene (TCE). In 1986, Perkett and Jensen took title to the property as joint tenants. GE sent Jensen technical data and notified him that wells on his property showed contamination.

    Procedural History

    Plaintiffs commenced an action in June 1990, seeking damages and an injunction. The defendants moved to dismiss based on CPLR 214-c(2). The Supreme Court granted the motion. The Appellate Division modified the order and reinstated the causes of action for damages and injunctive relief based on continuing trespass and nuisance. The Court of Appeals then modified the Appellate Division’s order, dismissing the damages claims.

    Issue(s)

    Whether CPLR 214-c(2) applies to actions for damages caused by continuing trespass and nuisance, thereby limiting the time to bring such actions to three years from the date the injury was discovered.

    Holding

    Yes, because CPLR 214-c(2) applies to actions for “injury to property caused by the latent effects of exposure to any substance,” encompassing continuing trespass and nuisance actions seeking damages. It does not affect the availability of equitable injunctive relief.

    Court’s Reasoning

    The court reasoned that CPLR 214-c(2) is a comprehensive statute designed to provide relief to injured parties who were previously barred from suing due to the old accrual rule, which started the statute of limitations running from the date of exposure. The court found no evidence that the legislature intended to exempt continuing nuisance and continuing trespass actions from the statute’s scope. The statute’s language is broad and inclusive, covering “injury to property caused by the latent effects of exposure to any substance.” The Court emphasized that it would be ironic for the courts to reformulate the enacted version of this statute. The purpose of CPLR 214-c (2) was to replace the archaic rule, which commences the three-year period for suit on the date that an exposure occurs. The court acknowledged that pre-CPLR 214-c(2), a common-law exception existed for continuing wrongs, but found that the new statute displaced the rationale for this exception, providing a balanced approach that protects both plaintiffs and defendants. The discovery rule allows plaintiffs who act timely to sue for all damages incurred since the wrong began, while defendants are not left potentially liable in perpetuity. As the statute applies only to actions “to recover damages,” it does not affect the availability of injunctive equitable relief. Dissenting opinions argued that the statute was only intended to address the accrual rule and not to abrogate common law rights related to continuing wrongs and that the majority’s approach compels plaintiffs to speculate about future economic loss.

  • Westinghouse Electric Corp. v. New York City Transit Authority, 82 N.Y.2d 47 (1993): Enforceability of ADR Provisions with Interested Adjudicators

    Westinghouse Electric Corp. v. New York City Transit Authority, 82 N.Y.2d 47 (1993)

    New York public policy does not prohibit an alternative dispute resolution provision authorizing an employee of a party to a contract dispute, even one personally involved in the dispute, to make conclusive decisions, provided there is judicial review.

    Summary

    Westinghouse contracted with the NYCTA for subway system equipment. Disputes arose, and the contract’s ADR provision designated the NYCTA’s Chief Electrical Officer (Westfall) as the final decision-maker. Westinghouse challenged this provision as against public policy. The court held that such ADR provisions are enforceable, even when the adjudicator is an employee of one party, provided there’s judicial review (in this case, Article 78 review), emphasizing New York’s policy favoring ADR and freedom of contract.

    Facts

    Westinghouse contracted with NYCTA. Article 8.03 of the contract provided that the Superintendent (Chief Electrical Officer Westfall) would decide all disputes, with his decision being final and binding, subject to Article 78 review for arbitrary, capricious, or bad faith determinations. Disputes arose regarding delays and additional work. Westinghouse claimed the NYCTA’s actions constituted a constructive stop-work order. Westfall rejected Westinghouse’s claims, declaring them in default.

    Procedural History

    Westinghouse sued in the Southern District of New York, arguing the ADR provision violated public policy. The District Court upheld the provision. Westinghouse appealed to the Second Circuit. The Second Circuit certified the question of New York public policy to the New York Court of Appeals.

    Issue(s)

    Whether New York public policy prohibits an alternative dispute resolution provision that authorizes an employee of a party to a contract dispute, where such employee is personally involved in the dispute, to make conclusive, final, and binding decisions on all questions arising under the contract, where that decision is subject to judicial review.

    Holding

    No, because the challenged ADR provision, which expressly provides for judicial review, does not in these circumstances violate New York public policy. The court emphasized New York’s strong public policy favoring arbitration and alternative dispute resolution mechanisms.

    Court’s Reasoning

    The court relied on precedent like Matter of Astoria Med. Group and Matter of Siegel, which established that a known relationship between an arbitrator and a party, even employer-employee, does not automatically disqualify the designee. New York’s public policy encourages arbitration and ADR as effective means to resolve disputes, avoiding the expense and delay of litigation. The court emphasized freedom of contract, stating, “[i]t has long been the policy of the law to interfere as little as possible with the freedom of consenting parties to achieve that objective.” Westinghouse knowingly accepted the ADR clause. The court reasoned that allowing Westinghouse to challenge the provision after the fact would destabilize commercial law. The court specifically noted the availability of Article 78 review, which allows for broader review than typical arbitration award review. The Court rejected the argument that unequal bargaining power rendered the contract an adhesion contract, finding that the judicial review check was sufficient to remedy potential abuses. The court stated, “[t]he bedrock of the doctrine of unconscionability is ‘the prevention of oppression and unfair surprise * * * and not of disturbance of allocation of risk’”. The court also considered the potential impact on existing contracts containing similar ADR provisions, highlighting the need for stability and predictability in commercial law. As Westinghouse freely and knowingly accepted an ADR solution, it could not later reject the unfavorable outcome of the process.

  • Teachers Insurance and Annuity Association of America v. The City of New York, 82 N.Y.2d 35 (1993): Interior Landmark Designation and Public Accessibility

    Teachers Insurance and Annuity Association of America v. The City of New York, 82 N.Y.2d 35 (1993)

    An interior space that is “customarily open or accessible to the public” can be designated a landmark, regardless of whether it is “inherently” public or a commercial space like a restaurant, as long as it is habitually open and accessible to the general public.

    Summary

    Teachers Insurance and Annuity Association of America (TIAA) challenged the Landmarks Preservation Commission’s designation of the Four Seasons restaurant interior as a landmark. TIAA argued the designation exceeded the Commission’s authority, claiming the restaurant lacked the requisite public openness, improperly restricted future use, and included inappropriate interior furnishings. The Court of Appeals affirmed the designation, holding that the restaurant’s customary openness to the public satisfied the statutory requirement and that the designation of interior items was within the Commission’s authority.

    Facts

    The Four Seasons restaurant opened in 1959 in the Seagram Building, designed by Ludwig Mies van der Rohe, with an interior by Philip Johnson. TIAA purchased the building in 1980 and agreed to propose it for landmarking. In 1987, TIAA proposed landmarking the building’s exterior, lobby, and plaza. The restaurant operators proposed landmarking the interior, which the Commission added to the calendar. The Commission landmarked the building and the Four Seasons interior in 1989, including the entrance lobby, Grill Room, Pool Room, balcony dining rooms, marble pool, walnut bar, wall/floor/ceiling surfaces, doors, railings, metal draperies, and hanging metal sculptures.

    Procedural History

    TIAA filed a combined CPLR article 78 proceeding and plenary action to vacate the restaurant designation, alleging a lack of statutory authority, an unconstitutional taking, and impairment of free expression. The trial court dismissed the proceeding, and the Appellate Division affirmed. TIAA appealed to the Court of Appeals, limiting its arguments to statutory grounds.

    Issue(s)

    1. Whether the Landmarks Preservation Commission exceeded its statutory authority by landmarking the interior of the Four Seasons restaurant.
    2. Whether the designation impermissibly restricts the future use of the landmarked space.
    3. Whether the designation improperly included certain interior furnishings.

    Holding

    1. Yes, because the restaurant is “customarily open or accessible to the public”, satisfying the requirements of the Landmarks Law.
    2. No, because the designation does not render the space unusable for other purposes.
    3. No, because the Landmarks Law does not limit the Commission’s jurisdiction to fixtures, and the designated items were integral to the interior’s design.

    Court’s Reasoning

    The Court held that the Landmarks Law requires an interior to be “customarily open or accessible to the public,” which means habitually available to the general public. The Court rejected TIAA’s argument that the interior must have a “distinctively public character,” noting that a restaurant invites the public to enter, similar to a theater. The Court emphasized that the statute does not require the interior to be intended as a place of assemblage and that the relevant inquiry is whether the interior is habitually open to the public. The Court stated, “The threshold requirement prescribed by the legislature is that an interior be ‘customarily open or accessible to the public, or [a place] to which the public is customarily invited.’” Regarding future use, the Court reasoned that any structure could be converted to private use, which should not preclude landmarking. The Court also found that the Commission’s jurisdiction over interior landmark designations extends to “interior architectural features,” including the architectural style, design, general arrangement, and components of an interior. The Court deferred to the Commission’s expertise in applying this provision, finding that the designated items were integral to the design of the interior space.

  • Morris v. New York State Dept. of Taxation & Fin., 82 N.Y.2d 135 (1993): Piercing the Corporate Veil Requires Wrongful Conduct

    Morris v. New York State Dept. of Taxation & Fin., 82 N.Y.2d 135 (1993)

    To pierce the corporate veil and hold an individual liable for a corporation’s obligations, there must be a showing that the individual exercised complete domination of the corporation and used that domination to commit a fraud or wrong against the plaintiff.

    Summary

    The New York State Department of Taxation and Finance assessed a use tax against Joseph Morris, the president of Sunshine Developers, Inc., for cabin cruisers purchased by the corporation. The Department sought to pierce the corporate veil, arguing that Morris controlled Sunshine and used it to avoid taxes. The New York Court of Appeals reversed the lower court’s decision to hold Morris personally liable, holding that while Morris may have dominated the corporation, the Department failed to demonstrate that Morris used his control to commit a fraud or wrong against the state. The Court emphasized that the corporation itself was entitled to a nonresident exemption, negating any corporate tax liability that could be imputed to Morris.

    Facts

    Joseph Morris was the president of Sunshine Developers, Inc., a corporation owned by his brother and nephew. Sunshine purchased two boats outside of New York and moored them in Montauk, New York during the summer. The Department assessed use taxes against Morris, claiming he controlled the corporation and used it to avoid New York taxes. Morris rented an apartment in New York City, which the Department argued disqualified him from claiming a nonresident exemption.

    Procedural History

    The Department initially assessed taxes against Sunshine, Joseph Morris, and Robert Morris. An Administrative Law Judge (ALJ) determined that Sunshine was entitled to a nonresident exemption and that the corporate veil should not be pierced. The Tax Appeals Tribunal reversed the ALJ’s decision regarding Joseph Morris, holding him personally liable. The Appellate Division sustained the Tribunal’s conclusions. The New York Court of Appeals granted leave to appeal and reversed the Appellate Division’s judgment.

    Issue(s)

    Whether the Tax Appeals Tribunal and Appellate Division properly sustained the assessment against Joseph Morris by piercing the corporate veil, thereby holding him personally liable for the corporation’s use tax obligations.

    Holding

    No, because while Morris may have dominated the corporation, the Department failed to demonstrate that Morris used his control to commit a fraud or wrong against the taxing authorities of New York State.

    Court’s Reasoning

    The Court of Appeals emphasized that piercing the corporate veil requires a showing of both complete domination of the corporation and that such domination was used to commit a fraud or wrong against the plaintiff. The Court acknowledged that Morris likely controlled Sunshine, even though he was not a shareholder. However, the Court found no evidence of fraud or wrongdoing. The Court noted the ALJ’s finding of no fraud or wrongdoing was not disturbed on review. “While complete domination of the corporation is the key to piercing the corporate veil, especially when the owners use the corporation as a mere device to further their personal rather than the corporate business (see, Walkovszky, supra, at 417), such domination, standing alone, is not enough; some showing of a wrongful or unjust act toward plaintiff is required.” The Court distinguished this case from typical veil-piercing scenarios where a third party seeks to hold owners liable for corporate obligations. Here, the corporation was determined to be exempt from the use tax, meaning there was no underlying corporate obligation to transfer to Morris. Imposing liability on Morris when the corporation owed nothing would be inconsistent with the doctrine’s essential theory. The Court also rejected arguments based on federal tax law, stating that Sunshine had a legitimate business purpose. The Court concluded, to pierce the corporate veil, there must be evidence the corporation was used to pervert the benefits of incorporation and commit a wrong against the party seeking to pierce the veil. Here, the corporation’s non-resident status eliminated its debt, therefore there was nothing to transfer to the owner personally.

  • Westinghouse Electric Corp. v. New York City Transit Authority, 82 N.Y.2d 47 (1993): Enforceability of ADR with Interested Adjudicator

    82 N.Y.2d 47 (1993)

    New York public policy does not prohibit an alternative dispute resolution (ADR) provision that authorizes an employee of a party to a contract dispute, even one personally involved in the dispute, to make conclusive, final, and binding decisions, especially when judicial review is provided.

    Summary

    Westinghouse contracted with the NYCTA and MTA for power rectifier equipment. Disputes arose, and the contract included an ADR provision where the NYCTA’s Chief Electrical Officer (Westfall) would resolve disputes. Westinghouse submitted a claim to Westfall, who rejected it. Westinghouse sued, arguing the ADR provision was against public policy. The Second Circuit certified to the New York Court of Appeals the question of whether such an ADR provision is enforceable under New York public policy. The Court of Appeals held that the ADR provision, including an interested adjudicator, was enforceable because it did not violate public policy, especially because the agreement provided for judicial review.

    Facts

    In 1983, Westinghouse entered into a contract with the NYCTA and MTA. The contract contained an ADR provision, Article 8.03, which stated that the Superintendent (an NYCTA employee) would decide all questions arising out of the contract, and his decision would be conclusive, final, and binding. Westinghouse notified Westfall, the NYCTA’s Chief Electrical Officer and Superintendent, of outstanding design problems. Westinghouse later suspended performance, which Westfall deemed a breach. Westinghouse then submitted a request for additional compensation to Westfall. Westfall rejected Westinghouse’s claims.

    Procedural History

    Westinghouse sued in the Southern District of New York, arguing that Article 8.03 contravened New York public policy. The District Court upheld the enforceability of the provision. Westinghouse appealed to the Second Circuit, which certified the question of the ADR provision’s validity under New York public policy to the New York Court of Appeals.

    Issue(s)

    Whether New York public policy prohibits an alternative dispute resolution (ADR) provision that authorizes an employee of a party to a contract dispute, where such employee is personally involved in the dispute, to make conclusive, final, and binding decisions on all questions arising under the contract.

    Holding

    No, because the ADR provision does not violate New York public policy when it expressly provides for judicial review.

    Court’s Reasoning

    The Court of Appeals emphasized New York’s strong public policy favoring arbitration and ADR, noting that these mechanisms are an effective and expeditious means of resolving disputes. The court relied on precedent such as Matter of Siegel (Lewis), 40 N.Y.2d 687, stating that “a fully known relationship between an arbitrator and a party, including one as close as employer and employee * * * will not in and of itself disqualify the designee.” The court emphasized that Westinghouse knowingly accepted the terms of the contract, including the ADR clause. The court reasoned that allowing Westinghouse to challenge the ADR provision after the fact, while retaining the benefits of the contract, would have destabilizing commercial law consequences. The court noted the importance of the judicial review provision, stating that review under CPLR article 78 allows broader review than the usual standards of arbitration award review. While acknowledging the power imbalance between municipalities and contractors, the court declined to intervene in arm’s-length commercial dealings absent compelling reasons. The court stated that the judicial review provision was sufficient to regulate abuses. Finally, the court highlighted the potential impact on numerous existing contracts with similar ADR provisions if the provision were deemed unenforceable, arguing against disrupting reliably perceived public policy in New York. The Court referenced Cardozo, stating that “The rule of law should not suddenly be changed to dislodge reliably perceived public policy in New York, which encourages parties to agree to submit their disputes to forums and persons for prompt, efficient and fair resolution, by their reckoning, not that of the courts, after the fact.”

  • People v. Favor, 82 N.Y.2d 254 (1993): Retroactivity of Right to be Present at Sandoval Hearings

    People v. Favor, 82 N.Y.2d 254 (1993)

    The rule established in People v. Dokes, granting defendants the right to be present during Sandoval hearings, applies retroactively to cases pending on direct appeal at the time Dokes was decided, unless the defendant’s presence would have been superfluous.

    Summary

    This case addresses whether the ruling in *People v. Dokes*, which grants defendants the right to be present during *Sandoval* hearings, applies retroactively. The Court of Appeals held that the *Dokes* rule does apply retroactively to cases on direct appeal when *Dokes* was decided. The Court reasoned that the purpose of the *Dokes* rule is to enhance the accuracy of *Sandoval* determinations, and there was no established precedent that permitted excluding defendants from *Sandoval* hearings. However, the Court clarified that the *Dokes* rule does not apply retroactively where the defendant’s presence at the *Sandoval* hearing would have been superfluous.

    Facts

    In *People v. Favor*, the defendant was excluded from an in-camera conference held to determine the admissibility of his prior convictions for cross-examination purposes. The trial court subsequently described the discussion and the *Sandoval* decision in the defendant’s presence. In *People v. Smith*, the defendant was excluded from a brief bench conference during which the court made a preliminary determination excluding ten of fourteen prior bad acts. The defendant was present for the remainder of the *Sandoval* hearing.

    Procedural History

    In *People v. Favor*, the Appellate Division upheld the conviction, noting the defendant did not preserve the argument by timely objection. Leave to appeal was granted after the *Dokes* decision. In *People v. Smith*, the Appellate Division held that the defendant’s exclusion from the bench conference did not require reversal, because the outcome was not prejudicial. The case was appealed by permission of a judge of the Court of Appeals.

    Issue(s)

    1. Whether the rule established in *People v. Dokes*, granting defendants the right to be present during *Sandoval* hearings, applies retroactively to cases pending on direct appeal.

    2. Whether the defendant’s exclusion from the *Sandoval* hearing in *People v. Favor* requires reversal of the conviction.

    3. Whether the defendant’s exclusion from the *Sandoval* hearing in *People v. Smith* requires reversal of the conviction.

    Holding

    1. Yes, because the purpose of the *Dokes* rule is to enhance the accuracy of *Sandoval* determinations, and there was no firmly established body of case law approving the defendant’s exclusion from *Sandoval* hearings.

    2. Yes, because the defendant’s exclusion from the *Sandoval* hearing was a clear violation of the *Dokes* holding and the defendant was not afforded the opportunity for meaningful participation.

    3. No, because the portion of the proceeding from which the defendant was excluded resulted in a wholly favorable outcome; therefore, the defendant’s presence would have been superfluous.

    Court’s Reasoning

    The Court reasoned that cases on direct appeal should generally be decided in accordance with the law as it exists at the time the appellate decision is made. The Court adopted a three-factor test from *People v. Pepper* to determine whether a new rule should be given retroactive effect: “(1) the purpose to be served by the new rule, (2) the extent of reliance on the old rule, and (3) the effect on the administration of justice of retroactive application.” Applying these factors, the Court determined that the *Dokes* rule should be applied retroactively. The Court reasoned that the purpose of *Dokes* is directly related to enhancing the accuracy of the *Sandoval* determination. The court found that there was no firmly established body of case law approving the exclusion of the defendant from *Sandoval* hearings. The Court further reasoned that there was no indication that retroactive application of *Dokes* would lead to wholesale reversals.

    Regarding *People v. Favor*, the Court found the defendant’s exclusion from the *Sandoval* hearing a clear violation of *Dokes*, because the trial court’s recitation of the decision did not provide the defendant the opportunity for meaningful participation. The Court rejected the argument that a case-specific “prejudice” test should be injected into the *Dokes* inquiry, because prejudice is inherent when a defendant is deprived of the opportunity for meaningful participation. The court also rejected the idea that a new *Sandoval* hearing would be an adequate remedy.

    Regarding *People v. Smith*, the Court found that the defendant’s presence would have been wholly “superfluous” because the portion of the proceeding from which the defendant was excluded resulted in a wholly favorable outcome. However, the Court noted that the better practice would be to have the accused present during every colloquy relating to the *Sandoval* question.

  • Town of Huntington v. New York State Division of Human Rights, 82 N.Y.2d 783 (1993): Limits on Using Prohibition to Halt Discrimination Claims

    Town of Huntington v. New York State Division of Human Rights, 82 N.Y.2d 783 (1993)

    The extraordinary writ of prohibition does not lie to prevent the Division of Human Rights from considering an individual’s complaint of racial discrimination when the Division has jurisdiction and the town has other adequate legal remedies.

    Summary

    The Town of Huntington sought a writ of prohibition to prevent the New York State Division of Human Rights from investigating a discrimination complaint filed by a former town employee, Reed. Reed, an African American, claimed he was discriminated against based on race. The Town argued that Reed’s discrimination claim was already litigated during a prior civil service proceeding regarding his termination and was therefore collaterally estopped. The Court of Appeals held that the writ of prohibition was inappropriate because the Division of Human Rights had jurisdiction over discrimination claims, and the Town had other adequate legal remedies to challenge the Division’s findings if necessary.

    Facts

    Charles Reed, an African American male, was hired by the Town of Huntington as a sign inspector. He was later suspended and charged with incompetence and misconduct. During a Civil Service Law § 75 hearing regarding his termination, Reed claimed the charges were racially motivated, alleging harassment and the use of racial epithets by his director. The Hearing Officer found Reed guilty of several charges but found no substantial evidence of racial discrimination. Reed was ultimately terminated. He then filed a complaint with the State Division of Human Rights, alleging discrimination in employment based on race.

    Procedural History

    Reed’s termination was initially challenged in a CPLR article 78 proceeding, which was initially successful but ultimately upheld on appeal after a review by a newly appointed Town official. Subsequently, Reed filed a complaint with the State Division of Human Rights. The Town then commenced its own article 78 proceeding, seeking a writ of prohibition to prevent the Division from investigating Reed’s complaint. The Supreme Court denied the Town’s request. The Appellate Division reversed, granting the petition and prohibiting the Division from considering Reed’s complaint, finding collateral estoppel. The Court of Appeals then reversed the Appellate Division’s decision.

    Issue(s)

    Whether the extraordinary writ of prohibition lies to prevent the New York State Division of Human Rights from considering an individual’s complaint of racial discrimination.

    Holding

    No, because the Division maintains jurisdiction to investigate claims of discrimination, and the Town failed to establish a “clear legal right” to the relief it seeks, having other adequate legal remedies available.

    Court’s Reasoning

    The Court of Appeals emphasized that a writ of prohibition is an extraordinary remedy used to prevent a body or officer from acting without or in excess of its jurisdiction. The Court noted that the Division of Human Rights has clear jurisdiction to investigate and rule on claims of discrimination under Executive Law § 295(6)(a). The Court found that the Town failed to demonstrate a clear legal right to the writ. The Court reasoned that the Town could challenge the Division’s findings on the merits after the investigation, if necessary, and therefore would not suffer irreparable harm by allowing the investigation to proceed. The court stated that prohibition “may be maintained solely to prevent or control a body or officer acting in a judicial or quasi-judicial capacity from proceeding or threatening to proceed without or in excess of its jurisdiction * * * and then only when the clear legal right to relief appears and, in the court’s discretion, the remedy is warranted”. The Court also highlighted that even if technically appropriate, the court must consider factors such as the gravity of potential harm and the availability of other remedies. Judge Levine took no part in the decision.

  • Northeast General Corp. v. Wellington Advertising, Inc., 82 N.Y.2d 158 (1993): Finder’s Fee and Duty to Disclose

    82 N.Y.2d 158 (1993)

    Absent a specific agreement establishing a relationship of trust, a finder has no fiduciary duty to disclose adverse information about a potential business transaction partner to their client.

    Summary

    Northeast General Corporation, a finder, sued Wellington Advertising for a finder’s fee after introducing them to a purchaser, Sternau, who ultimately rendered Wellington insolvent. Wellington refused to pay, arguing Northeast failed to disclose negative information about Sternau’s reputation. The lower courts ruled in favor of Wellington, imposing a fiduciary-like duty on the finder to disclose adverse information. The Court of Appeals reversed, holding that absent an explicit agreement creating a relationship of trust, a finder has no inherent fiduciary duty to disclose such information. The court emphasized that parties in commercial transactions are generally governed by marketplace mores unless they explicitly agree to a higher standard of care.

    Facts

    Northeast, acting as a finder, entered into an agreement with Wellington to identify potential purchasers. The agreement designated Northeast as a non-exclusive, independent investment banker and business consultant for finding candidates. Northeast introduced Sternau to Wellington. Prior to the introduction, Northeast’s president learned of Sternau’s reputation for acquiring companies, extracting assets, and leaving minority investors in financial distress. Northeast did not disclose this information to Wellington. After the merger agreement but before the closing, Northeast offered further assistance, which Wellington declined. Sternau’s company acquired Wellington, leaving Wellington’s principals as minority investors. Wellington became insolvent, resulting in financial losses for Wellington’s principals.

    Procedural History

    Northeast sued Wellington for the finder’s fee. The jury found in favor of Northeast. The Supreme Court set aside the verdict, ruling that Northeast had a fiduciary-like duty to disclose the adverse information. The Appellate Division affirmed, adopting the Supreme Court’s reasoning. The Court of Appeals granted leave to appeal.

    Issue(s)

    Whether a finder, under a standard finder’s fee agreement, has a fiduciary-like duty to disclose adverse information about a potential purchaser to the client.

    Holding

    No, because the agreement between Northeast and Wellington did not establish a relationship of trust imposing such a duty, and absent such an agreement, the parties are governed by the normal mores of the marketplace.

    Court’s Reasoning

    The Court of Appeals reasoned that imposing a fiduciary duty requires a clear indication that the parties intended to create a relationship of trust. The court emphasized that the written agreement defined Northeast’s role solely as a finder, tasked with introducing potential purchasers. The court distinguished finders from brokers, who typically have a fiduciary duty due to their greater involvement in negotiating the transaction. The court noted that “the dispositive issue of fiduciary-like duty or no such duty is determined not by the nomenclature ‘finder’ or ‘broker’ or even ‘agent,’ but instead by the services agreed to under the contract between the parties.” The court refused to impose a duty retroactively that was not contemplated in the agreement. The court also acknowledged that Wellington declined further assistance from Northeast after the initial introduction, indicating that Wellington did not rely on Northeast for ongoing guidance. The court quoted Cardozo, stating some relationships in life impose a duty to act in accordance with the customary morality and nothing more and that those are the standards for the judge. A dissenting opinion argued that the finder had a duty to disclose the negative information based on the confidential information shared and the inherent reliance in the relationship. It emphasized that Dunton knew Arpadi’s business plans and that the merger was the very type of transaction Arpadi feared.

  • Criscuola v. Power Authority, 81 N.Y.2d 649 (1993): Market Perception of Risk and Property Valuation in Eminent Domain

    Criscuola v. Power Authority of the State of New York, 81 N.Y.2d 649 (1993)

    In eminent domain proceedings, consequential damages based on market value diminution due to public fear of a condition (like power lines) do not require proof that the fear is reasonable; evidence of prevalent market perception is sufficient.

    Summary

    Criscuola sought consequential damages in an eminent domain case, arguing that public fear of electromagnetic emissions from power lines negatively impacted the market value of their property. The New York Court of Appeals addressed whether claimants had to prove the “reasonableness” of this fear to recover damages. The Court held that reasonableness is not a separate requirement. The relevant issue is whether the market value was adversely affected by a prevalent perception of danger, regardless of whether that perception is scientifically valid. The Court reversed the lower court’s decision, emphasizing that just compensation depends on market impact, not scientific certainty.

    Facts

    The Power Authority of the State of New York (PASNY) acquired a power line easement over Criscuola’s Delaware County property through eminent domain.

    Criscuola sought direct and consequential damages, arguing that “cancerphobia” and public perception of health risks from electromagnetic emissions from the power lines negatively affected the market value of the property.

    Criscuola claimed this perception rendered the remaining property “valueless”.

    Procedural History

    The claim was consolidated with similar claims under Zappavigna v State of New York.

    The Court of Claims in Zappavigna held that claimants had to prove the “reasonableness” of cancerphobia and denied consequential damages.

    The Appellate Division affirmed this decision.

    The New York Court of Appeals granted Criscuola leave to appeal, specifically to address whether proof of reasonableness is required.

    Issue(s)

    Whether, in an eminent domain proceeding, a claimant seeking consequential damages for a perceived public fear of danger or health risks must independently prove the reasonableness of that fear to demonstrate diminished market value.

    Holding

    No, because the central issue in just compensation is whether the market value of the property has been adversely affected by a prevalent perception, irrespective of the perception’s scientific validity or reasonableness.

    Court’s Reasoning

    The Court emphasized that the key issue is the impact on market value, which can exist even if public fear is unreasonable. Requiring proof of reasonableness would necessitate a new layer of expert testimony (e.g., electromagnetic power engineers, scientists, or medical experts), shifting the focus from market value to scientific validation.

    The Court adopted the view that “evidence of fear in the marketplace is admissible with respect to the value of property taken without proof of the reasonableness of the fear” (Ryan v Kansas Power & Light Co., 249 Kan 1, 7, 815 P2d 528, 533).

    The Court cited cases from other jurisdictions (Florida, California, Kansas) that similarly held reasonableness is not a factor. The court stated, “‘Adverse health effects vel non is not the issue in eminent domain proceedings: full compensation to the landowner for the property taken is’ (Florida Power & Light Co. v Jennings, 518 So 2d 895, 897 [Fla]).”

    The Court clarified that claimants must still provide credible, tangible evidence that a fear is prevalent and that this fear is connected to the market value diminution of the property. Claimants can present evidence that the market value of property near power lines has been negatively affected compared to comparable properties without power lines.

    The court distinguished between a personal or quirky fear, which is insufficient, and a public or market-based perception, which can suffice even without scientific proof.