Header graphic for print

NY Commercial Case Compendium

A Searchable Database of Court Decisions Issued by New York’s Commercial Division

Pension Fund Auditor May Have Had Duty to Investigate and Verify Fund’s Investments in Madoff-Related Entities

Posted in Ambiguity, Breach of Contract, Breach of Fiduciary Duty, Constructive Fraud, Erie, Fraud, Industry: accounting, Justice Walker Timothy J., Malpractice, Misrepresentation, Summary Judgment

In an August 19, 2014, Erie County Commercial Division decision by Justice Walker, the court denied in part and granted in part defendant-accounting firm’s motion for summary judgment dismissing plaintiff-pension fund’s action for audit deficiencies and other misconduct. Continue Reading

Justice Demarest Dismisses Son’s Suit Against Mother for Alleged Misappropriation of Corporate Assets

Posted in BCL 626, Breach of Contract, Breach of Fiduciary Duty, Constructive Trust, CPLR 3211, Derivative Actions, Fraud, Justice Demarest, Carolyn E., Kings, Shareholder Dispute, Unjust Enrichment

In an October 14, 2014 Commercial Division decision by Justice Demarest, the court granted the defendant’s motion to dismiss the complaint. The action was commenced by the corporate plaintiff, Koryeo Intl. Corp. (“Koryeo”), and the individual plaintiff, Steve Hong (“Steve”), Koryeo’s current sole shareholder, officer and director against Steve’s mother, Kyung Ja Hong (“Kyung”), the former sole shareholder, director and officer of the company. Continue Reading

Preliminary Injunction Relating to Buyout Agreement Denied where Board Adequately Remedied Initial Failure to Adequately Disclose All Relevant Information to Shareholders

Posted in Class Action, Fiduciary Duty, Justice Pines, Emily, Shareholder Dispute, Suffolk

In a September 19, 2014 Commercial Division decision by Justice Pines, the court denied the plaintiff’s motion for a preliminary injunction with respect to a buyout agreement, under which the defendant Medical Action Industries, Inc. (“Medical Action”) sought to cash out the shareholders of Medical Action through a sale of its stock to the defendant Owens & Minor, Inc. Continue Reading

Breach of Contract Claim Survives Dismissal Due to Ambiguous Appraisal Condition in Construction Loan Commitment Letter

Posted in Ambiguity, Breach of Contract, CPLR 3211, Industry: banking, Industry: real estate, Justice Demarest, Carolyn E., Kings

In a September 4, 2014, Kings County Commercial Division decision by Justice Demarest, the court denied defendant-lender’s motion to dismiss plaintiff-borrower’s action for breach of contract, alleging that defendant failed to fund a construction loan pursuant to the terms of a commitment letter. Continue Reading

Court Declines to Recuse Itself and Grants Summary Judgment

Posted in Industry: real estate, Justice Bransten, Eileen, New York, Summary Judgment

In an August 27, 2014 Commercial Division decision by Justice Bransten, the court denied a motion seeking its recusal and granted a motion for summary judgment.  The motions were brought in a landlord tenant litigation after the court held a hearing on a motion for a Yellowstone injunction and the court’s granting the injunction. Continue Reading

Court Certifies Class of Home Care Attendants in Unpaid Overtime Case

Posted in Class Action, Industry: healthcare, Justice Demarest, Carolyn E., Kings

In a September 16, 2014 Commercial Division decision by Justice Demarest, the court granted Plaintiffs’ renewed motion for class certification, following its earlier denial of the motion without prejudice to renew following discovery as to whether the requirements for class certification were satisfied. Continue Reading

Singapore Financial Company’s Suit Against Morgan Stanley Permitted to Proceed in New York Forum, Claims Over Failed Credit-Linked Notes Survive Dismissal

Posted in CPLR 3211, CPLR 327, Credit Swap, Documentary Evidence, Forum non Conveniens, Fraud, Industry: financial services, Justice Bransten, Eileen, Motion to Dismiss, New York, Uncategorized

In a September 12, 2014 Commercial Division decision by Justice Bransten, the court granted in part the motion to dismiss of Morgan Stanley, pursuant to CPLR 327, CPLR 3211(a)(1), and CPLR 3016(b).  Plaintiff HLF, a Singapore financial company, asserted six causes of action based on allegations that Morgan Stanley fraudulently induced it to enter into a distributorship agreement to buy and resell credit-linked notes from Morgan Stanley, contending that Morgan Stanley intended the notes to fail and shorted the assets underlying them.  Continue Reading

Subcontractor’s Motion for Summary Judgment Denied Due to Differing Interpretations of Preconditions for Payment Provisions

Posted in CPLR 3211, Documentary Evidence, Industry: construction, Justice Emerson, Elizabeth, Motion to Dismiss, Suffolk, Summary Judgment, Uncategorized

In a September 18, 2014 Commercial Division decision by Justice Emerson, the court denied the plaintiff’s motion for summary judgment and also denied the defendant’s cross motion to dismiss the complaint.  The plaintiff-subcontractor brought this action to recover the final payment allegedly due it by the defendant-general contractor, in connection with renovation work to a laboratory at the VA hospital in Northport, New York, which was to be performed pursuant to a subcontract. Continue Reading

Citigroup’s Motion to Dismiss RMBS-related Claims Held in Abeyance Pending Hearing on Foreign Statute of Limitations

Posted in CPLR 3211, Industry: financial services, Justice Ramos, Charles E., Motion to Dismiss, New York, Statute of Limitations

In a September 8, 2014 Commercial Division decision by Justice Ramos, the court held in abeyance the defendants’ motion to dismiss pending hearing. The case arose from yet another real estate mortgage backed securities (RMBS) transaction gone wrong, in this instance between the plaintiff Deutsche as the purchaser of $362 million of mortgage loan pass through certificates in 17 RMBS securitizations that were sold or marketed by the defendants, multiple Citigroup entities (collectively “Citigroup”). Deutsche brought claims for fraud and misrepresentations of the “credit quality and characteristics” of the securitized loans it purchased, alleging it relied upon Citigroup’s representations in purchasing the various certificates.

Citigroup moved to dismiss arguing that the complaint failed to state a claim and that the claims were time barred. The court’s decision, however, addressed only the timeliness of Deutsche’s claims, and Citigroup’s argument that Deutsche’s claims were barred by the German statute of limitations (SOL). The court explained that it first had to determine whether the German SOL relied upon by Citigroup was appropriate, noting that when the plaintiff’s alleged injury is purely economic, the place of injury is generally where the plaintiff resides and suffers the impact of the economic loss. The court held that the German SOL was appropriate as the impact of Deutsche’s losses were sustained in Germany where Deustche is incorporated, keeps its consolidated financials, and reported its losses from the subject transactions. The court then noted that pursuant to New York’s borrowing statute – CPLR 202 – it was required to determine whether Deutsche’s claims were time barred under both New York and the German SOL. Because neither party argued that the claims were barred by New York law, the court focused on the German SOL.

Deutsche and Citigroup submitted reports of experts on German law to opine on whether the German statute of limitations for claims sounding fraud applied as a bar to Deutsche’s claims. The experts agreed that under German law, a claim for securities fraud arises at the time the security was purchased, and has a three year statute of limitations. The statute, however, is not triggered until the creditor “has sufficient knowledge of the claim” such that it is “aware of the actionable statement, its own reliance on the actionable statement, and the fact that it may have suffered damage from such reliance.”

Here, Deutsche’s claim accrued, at the latest, on June 25, 2007 when the last security at issue was purchased, and filed its summons and complaint on December 28, 2012. Thus, Deutsche’s claims would be barred if Citigroup established Deutsche knew about the alleged fraud or could have discovered absent gross negligence, prior to the end of 2009. The court found compelling that included in the offering materials reviewed and relied upon by Deutsche was a 2008 report by the Office of the Comptroller (OCC Report), which identified the sub-prime mortgage originators with the highest foreclosure rates for loans originated between 2005 to 2007, including many of the originators for the RMBS at issue in this action. The court explained that it was unclear how Deutsche could “argue it did not have sufficient knowledge after the release of the OCC Report in 2008.”  Notwithstanding, the various disagreements as between the expert reports prevented the court from granting the motion, and instead the court found that “a hearing with expert testimony is required on the appropriate application of German law in these circumstances to resolve the issues underlying the claims alleged in the complaint.”

Deutsche Zentral-Genossenschaftsbank AG v Citigroup, Inc., Sup Ct, New York County, September 8, 2014, Ramos, J, Index No. 654566/12