Join us on Tuesday, June 2, as Lachtman Cohen P.C. partner Brian Cohen co-moderates a Virtual Town Hall discussion with Hon. Linda S. Jamieson and Hon. Gretchen Walsh about litigating in the Westchester Commercial Division during COVID-19 and beyond.

See the invite for details: WCBA June 2020 Event Flyer

Register with the Westchester County Bar Association.

In civil litigation, contempt is the most severe sanction available because it can subject the offender to fine or imprisonment. A motion for civil contempt was the subject of a recent decision by Westchester Commercial Division Justice Linda S. Jamieson in Matter of Prisco v. L’Aquila Realty LLC, Index No. 58654/2018, a case concerning the breakup of a family business that we discussed in an earlier post.

The Facts

On July 8, 2019, the parties appeared before Justice Jamieson and read into the record a stipulation, in which they agreed to several buyouts that would end their business relationship (“Stipulation of Settlement”). The parties ordered the transcript and submitted it for the Court to So-Order.

On July 22, 2019, the parties privately agreed to amend the Stipulation of Settlement and executed an “Amendment to Stipulation” (“Amendment”), adding several terms to the original agreement, including that Angela Prisco “shall remove the Prisco TV name from its business.”

On September 16, 2019, Justice Jamieson So-Ordered the Stipulation of Settlement, but not the Amendment, which was not presented to the Court.

On December 16, 2019, John Prisco moved to hold Angela Prisco in contempt, arguing that she continued to use the Prisco TV name and in so doing failed “to comply with the so-ordered Stipulation.”

The parties’ agreement concerning the use of the Prisco TV name, however, was not part of the So-Ordered Stipulation of Settlement – only the (private) Amendment.

Applicable Legal Principles

Judiciary Law § 753 gives courts the power “to punish, by fine and imprisonment, or either, a neglect or violation of duty, or other misconduct by which a right or remedy of a party to a civil action or special proceeding, pending in the court may be defeated, impaired, impeded, or prejudiced.” Id. The purpose of a civil contempt order is “vindication for individuals who have been injured or harmed by a contemnor’s failure to obey a court order.” Town of Southampton v. R. K.B. Realty, LLC, 91 A.D.3d 628, 630, 936 N.Y.S.2d 228 (2d Dep’t 2012). As such, “[c]ivil contempt fines must be remedial in nature and effect and awards should be formulated not to punish an offender, but solely to compensate or indemnify private complainants.” Id. (citations omitted).

A party seeking an order of contempt must meet a high standard: “[t]o prevail on a motion to punish a party for civil contempt, the movant must demonstrate that the party charged violated a clear and unequivocal court order, thereby prejudicing a right of another party to the litigation.” Pathak v. Shukla, 164 A.D.3d 687, 688, 81 N.Y.S.3d 549, 551 (2d Dep’t 2018) (citations omitted). “To satisfy the prejudice element, it is sufficient to allege and prove that the contemnor’s actions were calculated to or actually did defeat, impair, impede, or prejudice the rights or remedies of a party.” Pathak, 164 A.D.3d at 689, 81 N.Y.S.3d at 551 (citations omitted). “[T]he movant bears the burden of proving the contempt by clear and convincing evidence.” Savel v. Savel, 153 A.D.3d 872, 873, 61 N.Y.S.3d 97 (2d Dep’t 2017).

Finally, “[w]hile a Court has the power to punish a party for Civil Contempt under Judiciary Law § 753(A) the invocation of this extraordinary relief is narrowly and strictly construed.” Kelly J.A. v. Robert F.A., 2007 N.Y. Misc. LEXIS 5429, *1 (Sup. Ct. Queens County July 16, 2007) (emphasis added).

In this case, the movant didn’t get the memo.

The Court Denies the Motion

Citing Pathak, Justice Jamieson denied the motion. “In this case, the only document that absolutely forbids [Angela] from using the Prisco name is the parties’ amendment to their stipulation of settlement,” the Court held. “It is not a Court-ordered document, and thus not ‘a clear and unequivocal court order’” (emphasis added). Justice Jamieson then cautioned, inter alia: “Should movant make another motion, he must take care to cite law in support of the relief he seeks.”

With that admonition, the movant may have gotten off easy. In Pathak, where the non-movant did not violate a court order (like Angela Prisco here), the movant was sanctioned for frivolous conduct and the non-movant was awarded his attorney’s fees incurred in opposing the motion.

Takeaway: Courts insist on strict and literal construction of contempt statutes, so motions for civil contempt should be used sparingly.

To learn more about new developments in the Westchester Commercial Division, please subscribe to the Westchester Commercial Division Blog.

In light of the COVID-19 emergency in New York State and nationwide, on March 22, 2020, Chief Administrative Judge Lawrence K. Marks directed that no papers shall be accepted for filing by a court except in “essential matters” (for example, criminal, family and domestic violence, mental hygiene, and emergency landlord-tenant).

Effective April 13, 2020, Judge Marks announced additional procedures and protocols to mitigate the effects of the COVID-19 outbreak on the court system. In addition to “essential matters,” the Commercial Division can begin moving pending business disputes forward using remote or virtual operations.

As a result, Commercial Division Justices have been reviewing their dockets of pending cases, assessing matters that can be advanced or resolved through remote court conferencing – either by video using Skype for Business or by telephone – and contacting counsel to schedule and hold conferences.

The Justices are also holding conferences at the request of the parties, if appropriate. If you believe it is necessary and appropriate to contact the Court, here is the best information (as of April 17, 2020) and protocols for the Westchester Commercial Division justices:

  • Hon. Linda S. Jamieson:
    • Communication via email by contacting assistant court attorney, Joseph Hadala: jhadala@nycourts.gov.
    • Email requests for conferences should copy counsel for all parties.
  • Hon. Gretchen Walsh:
    • Communication via email by contacting assistant court attorney Ryan Wintermute: rjwinter@nycourts.gov.
    • Email requests for conferences should copy counsel for all parties.

Justices of the Commercial Division may also decide fully submitted motions in pending cases and resolve discovery disputes and similar matters that do not require the filing of papers.

In addition, the Appellate Division, Second Department, which hears appeals from the Westchester Commercial Division, is scheduling oral arguments via Skype for Business.

In the meantime, until further notice, no new nonessential matters may be filed and no additional papers in pending nonessential matters may be filed.

In light of these restrictions and the ongoing emergency, Governor Cuomo has ordered a temporary suspension on “any specific time limit for the commencement, filing, or service of any legal action, notice, motion, or other process or proceeding,” which includes, but is not limited to “criminal procedure law, the family court act, the civil practice law and rules” or any other statute, local law, ordinance, order, rule, or regulation. As of today, those deadlines are extended through May 7, 2020, but they may be extended further.

We will keep you posted on new developments.

To learn more about new developments in the Westchester Commercial Division, please subscribe to the Westchester Commercial Division Blog.

A bankruptcy filing often puts a quick halt to efforts to collect a debt from a bankrupt debtor.  Under  11 U.S. Code § 362, the filing of a bankruptcy petition puts in place an automatic stay of collection efforts against a debtor. The stay does not, however, automatically stay proceedings against a guarantor of a debtor’s debts.

So, what happens when a plaintiff has sued both a primary obligor on a debt and the guarantor in one action and, during the pendency of that case, the primary obligor files for bankruptcy? A plaintiff seeking to pursue the guarantor can move to sever the claims against the bankrupt defendant and continue the claims against the non-bankrupt defendants.

In United Catalyst Corporation v. NCR Auto Cores & Security Inc., Index No. 69008/2018, Westchester Commercial Division Justice Gretchen Walsh explained: “In ruling on a CPLR § 603 motion to sever claims against a bankrupt defendant from those against the non-bankrupt defendants, New York courts engage in a ‘balanc[ing] of the equities’ to assess whether requiring a plaintiff ‘to await the conclusion of the bankruptcy proceeding before obtaining any remedy outweighs any potential inconvenience to the defendants’” (citation and quotation omitted).

In that case, Justice Walsh found that the prejudice to the plaintiff in having to await the conclusion of a potentially lengthy bankruptcy case far outweighed the inconvenience to the defendants. The Court, therefore, ordered severance of the case into two separate cases, with different captions and different index numbers, and stayed the case against the debtor.

Takeaway: When one defendant files for bankruptcy, the entire case need not grind to a halt. If the bankruptcy is likely to be a lengthy one, the case may be severed and proceed against the non-bankrupt defendants.

A recent decision by Westchester Commercial Division Justice Gretchen Walsh demonstrates how even a non-party subpoena from an arbitrator can quickly and irrevocably lead to party status and considerable liability if you fail to respond. The case, In re Sivanesan v. YBF LLC et al., Index. No. 67996/2018, showed that parties who believe they can take a “wait and see” approach and then seek redress with a state or federal court run a huge risk in light of the astonishingly limited scope of judicial review of arbitration awards. Here’s what happened:

An Agreement Is Breached

Petitioner Janu Sivanesan was a consultant for YBF LLC, a company that sells retail cosmetics products worldwide. In 2009, she was retained by YBF to help the company regain ownership of the “YBF” trademark and related marks from a third party. The deal closed, but Sivanesan did not get paid. Under her consulting agreement, she was entitled to hourly pay and a three-percent equity interest as compensation. After unsuccessfully attempting to secure her compensation, Sivanesan commenced an arbitration through JAMS as required in the agreement. The Arbitrator was Hon. Helen E. Freedman (Ret.).

The Arbitrator found that YBF’s owners repeatedly acknowledged its debt to Sivanesan but failed to pay her. The wrinkle came in with regard to respondents TPR Holdings LLC and Visual Beauty LLC. TPR is an investor in the health, beauty, and wellness industries. During the arbitration, TPR purchased the rights to the YBF trademarks that Sivanesan had helped YBF regain; Visual Beauty is a shell company created for that transaction. When Sivanesan learned of TPR’s purchase, she argued that TPR and Visual Beauty were successors-in-interest to YBF such that they were jointly and severally liable.

The Arbitrator Issues Subpoenas

The Arbitrator issued subpoenas to TPR and Visual Beauty, and although the two entities were not parties to the arbitration, the subpoenas made clear that Sivanesan believed them to be successors-in-interest such that they should be held liable for YBF’s alleged defaults.  When neither party appeared for the arbitration or responded to the subpoenas, Sivanesan made an oral motion at the hearing to add them as parties. The motion was granted, and the Arbitrator agreed that TPR and Visual Beauty were successors-in-interest and jointly and severally liable to Sivanesan for the compensation sought.

This got the attention of TPR and Visual Beauty. After Sivanesan filed a petition in the Westchester Commercial Division seeking an order confirming the Arbitrator’s award, TPR and Visual Beauty cross-petitioned to vacate the award. They argued that their due process rights were violated because the subpoenas did not constitute notice of the prospect that they could be added as parties should they fail to respond. TPR and Visual Beauty argued that the subpoenas only indicated that noncompliance could result in a court order compelling them to attend or, at most, punishing them for contempt.

The Court’s Decision

Under the CPLR, arbitration awards may be vacated only if the award: (1) violates a strong public policy; (2) is irrational; or (3) clearly exceeds a specifically enumerated limitation on the arbitrator’s power. As to the “irrationality” prong, an award is considered rational if “any basis for the conclusion is apparent to the court.” Even a clear legal error by the arbitrator is not grounds to vacate the award if it does not meet one of the three criteria above. Clearly, very few arbitration awards are going to fail this test.

And the one in this case, like most others, did not, as Justice Walsh was unconvinced by TPR’s arguments. The Court held that the subpoenas provided TPR and Visual Beauty with notice that the Arbitrator intended to take evidence on the issue of whether the two entities were successors-in-interest and should be held liable to Sivanesan. Apprised of that fact, the implications were clear and TPR and Visual Beauty could not complain of lack of due process. While Justice Walsh appeared to agree that TPR and Visual Beauty had received adequate notice of the possibility they could be added as parties, the Court cautioned that even if it had found fault with the Arbitrator’s approach, its ability to vacate the award would be extremely limited.

Takeaway: Under both New York and federal law, courts will be extraordinarily deferential to arbitration awards, making it all the more incumbent on counsel to respond to arbitrators’ subpoenas just as if they had been received from a court of law. In short, those who believe that an arbitrator’s decision will not be the last word do so at their peril.

Sometimes, based on the nature of an action, plaintiffs wish to present their case to a jury and file a demand for one with the court. If the defendants oppose, they can move to strike the demand pursuant to CPLR 4101. This was the subject of a recent decision by Westchester Commercial Division Justice Linda Jamieson in Hanover v. Palazzolo, Index No. 54643/2018.

This was the second case between the parties. In the first case, presided over by Westchester Supreme Court Justice Sam Walker, Christopher Hanover sued a husband and wife, the Palazzolos, and their entity, F&M Funding, LLC, over an alleged guaranty given by the Palazzolos to Hanover concerning the sale of stock of entities that owned property in the Bronx (“Prior Action”). In that first case, Hanover won a judgment of more than $350,000.

While that case was going on, F&M filed a Confession of Judgment against Hanover for $3.2 million. Hanover always said that the Confession of Judgment was forged and Justice Walker was troubled by the evidence and testimony about it. To make matters more suspicious, an F&M employee had been arrested for improperly notarizing documents, including the Confession of Judgment.

After winning the first case, Hanover filed a new action to nullify the Confession of Judgment and for damages suffered as a result of it. In June 2019, Hanover demanded a jury trial and at the end of October 2019, Defendants moved to strike the demand pursuant to CPLR 4101(1). In the meantime, Defendants vacated the Confession of Judgment.

Justice Jamieson denied Defendants’ motion to strike the jury demand for several reasons:

First, it was not made in a reasonable period of time prior to trial.

“[A]lthough a motion to strike a jury demand ‘may be made at any time up to the opening of trial, it is preferable in the interest of orderly procedure that it be made within a reasonable period prior thereto’” (quoting A.J. Fritschy Corp. v. Chase Manhattan Bank, 36 A.D.2d 600, 600, 318 N.Y.S.2d 369, 370 (1st Dep’t 1971)).

Here, Defendants waited more than four months after Hanover filed the jury demand, and less than four weeks prior to trial, to raise the issue. In denying Defendants’ motion, Justice Jamieson held: “Defendants’ motion is not returnable until only a few days before the trial, making it exceedingly unreasonable; the parties have to prepare differently for a jury trial versus a non-jury trial.”

Second, when a plaintiff asserts both legal and equitable claims, the plaintiff is entitled to a jury trial where the crux of the action sounds in tort law.

Defendants argued that Plaintiff waived his right to a jury by combining legal and equitable claims. In response, Plaintiff argued that: (i) his declaratory judgment claims are “at the heart of the claims for monetary damages for Defendants’ actions over the course of seven (7) years in maintaining and insisting on the veracity of the” Confession of Judgment; and (ii) “simply declaring the [Confession of Judgment] to be invalid would not make the [him] whole.”

Justice Jamieson agreed with Plaintiff, finding that his arguments are “in line with settled Second Department caselaw,” holding that even if some claims are equitable in nature, where “the gravamen of the action sounds in … tort law rather than equity … [s]uch causes of action are eligible for jury trial …” (quoting Harris v. Trust of Bank New York, 224 A.D.2d 790, 791, 637 N.Y.S.2d 527, 528 (2d Dep’t 1996)).

Third, Justice Jamieson explained that, if Defendants had vacated the Confession of Judgment before Plaintiff sued them, Plaintiff would not have needed the declaratory judgment claims, but still would have been able to assert his claims for damages. “Under those circumstances,” the Court held, “there would be no doubt that plaintiff would have been entitled to a jury trial.” “While the Court cannot speculate as to what prompted defendants to vacate the Confession of Judgment at this juncture,” Justice Jamieson held, “the Court will also not allow defendants to manipulate this action or the Court.”

Takeaway: If a party wants to strike a jury demand, it should do so promptly after the demand is filed. It should also refrain from employing tactics that, like here, could be perceived as an attempt to manipulate the Court.

Defendants usually make a CPLR 3211 motion to dismiss at the outset of the case and file it together with a Request for Judicial Intervention (RJI).  In that situation, a defendant can simply file the motion without contacting the court in advance.  When a defendant makes a later motion to dismiss, though, it is best to check the rules, because you may have to first request a conference.

On November 14, 2019, in Dwyer v. Avo Construction LLC, Index No. 53784/2019, a case we previously wrote about here, Westchester Commercial Division Justice Gretchen Walsh summarily denied a post-RJI motion to dismiss by writing on the notice of motion: “Motion denied based on Defendants’ counsel’s failure to obtain authorization to file this motion under Commercial Division Rule 24.”

Rule 24, titled “Advance Notice of Motions,” provides that “[p]rior to the making or filing of a motion, counsel for the moving party shall advise the Court in writing (no more than two pages) on notice to opposing counsel outlining the issue(s) in dispute and requesting a telephone conference.” Further, “[i]f a cross-motion is contemplated, a similar motion notice letter shall be forwarded to the court and counsel” and “[s]uch correspondence shall not be considered by the court in reaching its decision on the merits of the motion.” The court will then schedule a conference, Rule 24(d), and, “[i]f the matter cannot be resolved, the parties shall set a briefing schedule for the motion which shall be approved by the court.” Rule 24(f).

Notably, Rule 24 does “not apply to disclosure disputes covered by Rule 14 nor to dispositive motions pursuant to CPLR 3211, 3212 or 3213 made at the time of the filing of the Request for Judicial Intervention or after discovery is complete. Rule 24(a).

Because most dispositive motions are made either at the time of the filing of an RJI or after the completion of discovery, counsel may overlook the need to comply with this rule when filing a dispositive motion at another time. (Rule 24 also does not apply to motions to be relieved as counsel, for pro hac vice admission, for reargument or in limine.)

One last step: Rule 24(g) requires that, “[o]n the face of all notices of motion and orders to show cause, there shall be a statement that there has been compliance with this rule.” That way, the judge immediately knows whether to read the motion papers or, as Justice Walsh did, dispose of the motion with a written notation that the motion is denied for failure to comply with Rule 24.

Takeaway: When faced with an unusual procedural situation – like a post-RJI / pre-Note-of-Issue dispositive motion – read the rules, even if you think you know what they say.

Although contracts are to be construed in accordance with the parties’ intent, in New York, it is firmly established that the best evidence of what parties intend is what they say in writing. This rule is applied with special force when the agreement is negotiated at arm’s length or by sophisticated business people. Sometimes, parties dispute the meaning of a contract’s terms and litigation over their intent and the alleged ambiguity ensues. This was the case in Gristede’s Operating Corp. v. Scarsdale Shopping Center Associates, LLC, Index No. 53040/2012.

In 1998, the plaintiff, supermarket chain Gristede’s, leased space in the Golden Horseshoe Shopping Center from defendant Scarsdale Shopping Center Associates, LLC (“Scarsdale”), to operate Gristede’s Store No. 90 (“Store No. 90”) through April 2015 with no right of renewal.

In 2006,  Gristede’s and drug store chain Walgreens, which were in talks for Walgreens to acquire certain leases held by Gristede’s, including Store No. 90, entered into a “Confidentiality Agreement” prohibiting Walgreens from discussing (by itself or through an agent) any possible lease or other issues with the owner or agent of any premises in which a Gristede’s store was located. In 2007, Gristede’s and Walgreens entered into a contract of sale (“2007 Contract”) for Walgreens to purchase six leases from Gristede’s, including the one for Store No. 90. Gristede’s and Walgreens also agreed to extend the Confidentiality Agreement for five years from the contract’s execution date.

On January 1, 2009, Gristede’s and Walgreens amended the 2007 Contract to limit its applicability to the purchase of only one lease for a property in Manhattan and “to terminate the Contract with [sic] to all other Property which has not been sold, assigned or otherwise transferred by Sellers to Purchaser as of the date hereof” (“2009 Amendment”). The 2009 Amendment also provided that “the Contract is terminated and deemed of no further force with respect to each and every Property (other than Store 561) which, as of the date hereof, has not been sold, assigned or otherwise transferred by Sellers to Purchaser pursuant to the Contract  … and that the parties shall have no rights, obligations and liabilities thereto except to the extent that the same expressly survive the termination of the Contract” (emphasis in original).

It was undisputed that Store No. 90 was one of the unsold properties that was excised from the 2007 Contract by the 2009 Amendment.

In 2011, an alleged agent of Walgreens contacted Scarsdale about Store No. 90.

Thereafter, Gristede’s and Walgreens resumed negotiations regarding the potential sale of leases held by Gristede’s. In 2012, Gristede’s and Walgreens entered into an agreement (“2012 Agreement”) providing that they “each hereby confirm that … all of the terms, covenants and conditions of the [Confidentiality Agreement], as amended by [the 2007 Contract] … remain in full force and effect and are incorporated herein by reference thereto” (emphasis added).

Later in 2012, Gristede’s commenced action against Walgreens and Scarsdale. As relevant to the appeal, Gristede’s asserted a cause of action alleging that Walgreens breached the Confidentiality Agreement and Walgreens moved for summary judgment to dismiss it. Westchester Commercial Division Justice Linda S. Jamieson granted Walgreens’ motion and Gristede’s appealed.

The Second Department affirmed, holding that “when parties set down their agreement in a clear, complete document, their writing should be enforced according to its terms’” (citing Riverside S. Planning Corp. v. CRP/Extell Riverside, L.P., 13 N.Y.3d 398, 403 (2009) (quotation omitted)). “Courts may not by construction add or excise terms, nor distort the meaning of those used and thereby make a new contract for the parties under the guise of interpreting the writing’” (citations omitted). “Ambiguity is determined by looking within the four corners of the document, not to outside sources’” (quoting Riverside S. Planning Corp. v., 13 N.Y.3d at 404 (quotation omitted)). “The entire contract must be reviewed and [p]articular words should be considered, not as if isolated from the context, but in the light of the obligation as a whole and the intention of the parties as manifested thereby. Form should not prevail over substance and a sensible meaning of words should be sought’” (quotations omitted). “Where the language chosen by the parties has a definite and precise meaning, there is no ambiguity” (quotations omitted).

The Second Department held that “Walgreens established, prima facie, that the 2009 Amendment unambiguously terminated the Confidentiality Agreement as its pertained to Store No. 90” and that “in narrowing the applicability of the 2007 Contract to one property in Manhattan, Gristede’s and Walgreens ‘clearly and unambiguously’ stated that they ‘shall have no rights, obligations and liabilities’ as to Store No. 90 ‘except to the extent that the same expressly survive the termination of the Contract’” (emphasis added).

In addition, the 2007 Contract and 2009 Amendment contained no express language preserving the Confidentiality Agreement as to Store No. 90. The Second Department held, therefore, that “since an essential element of a breach of contract cause of action is the existence of a valid contract … the alleged contact between an agent of Walgreens and Scarsdale in 2011 could not have constituted a breach of the Confidentiality Agreement, as it was ‘clearly and unambiguously terminated as to Store No. 90 at that time’” (internal citations omitted).

Finally, the Court held that “[a]lthough the subsequent 2012 agreement recited that the Confidentiality Agreement ‘remain[s] in full force and effect,’ there was clearly no contractual prohibition against contact between Walgreens and Scarsdale in existence when the contact between Walgreens and Scarsdale was allegedly made.”

Takeaway: When an agreement between sophisticated parties is memorialized in a clear, complete document, courts will enforce it according to its terms and will not look to outside sources.

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A recent decision by the Honorable Linda S. Jamieson again demonstrates that the Justices of the Westchester Commercial Division will not decide matters on procedural technicalities, and usually will go out of their way to decide a case on the merits. The matter involved service of process, and an apparent default in appearance.

First, some background. In New York, the easiest way to serve a summons on an entity is usually by serving the Secretary of State.  Provisions of the Business Corporation Law, Not-for-Profit Corporation Law, Limited Liability Company Law, and Partnership Law allow service of process upon the Secretary of State as the statutory agent for entities registered with the Department of State. Rather than hire a process server to attempt personal service on the business, you can serve process by having someone hand deliver two copies of the summons and complaint (or other process) to the New York Secretary of State in Albany, together with the statutory fee of $40. The best part of serving the Secretary of State is that it is quick and, as a matter of law, effective.

Courts, however, are reluctant to allow a plaintiff/petitioner to use service on the Secretary of State as a way to avoid giving actual notice to the entity being served. That was what happened in In re C&M Bagel, Inc. v. Semp Realty LLC, Index No. 51985/2019.

In that special proceeding to designate an arbitrator, the petitioner, C&M Bagel, served the petition on the respondent, Semp Realty, via the Secretary of State.  Initially, Justice Jamieson found that “[d]espite proper service of the petition and accompanying documents by serving the Secretary of State … the Court received no opposition to the petition from respondent.” Justice Jamieson then granted the relief sought by the petitioner and directed service of the Order on the respondent by overnight mail.

Days later, the respondent filed a motion to renew and vacate the Court’s order, arguing that it never received the papers from the Secretary of State’s office, and was unaware of the petition. The respondent also argued that for the previous ten years, the petitioner corresponded with the respondent directly, and paid rent, at a specific address, and should have served the papers at that address. In an affidavit, the respondent’s managing member said that he believed the petitioner “attempted to ‘pull a fast one’ on me by serving the Secretary of State and hoping I would not receive the Notice of Petition and Petition in time to answer.” Perhaps significantly, the parties had been embroiled in litigation for some time, and the respondent also argued that the petitioner’s attorney could have just asked the respondent’s attorney to accept service of the papers.

Justice Jamieson recognized that service was proper, but still determined that the proceeding should be decided on the merits:

“It turns out that although petitioner did nothing wrong by serving the Secretary of State, petitioner also well knew that respondent had a preferred address at which it received mail. Petitioner used this alternate address many times over the years, including within months before commencing this special proceeding. To ensure that justice is done, the Court vacates the Decision.”

Takeaway: Service on the Secretary of State may be entirely appropriate, and effective, but that doesn’t mean it is enough.  If you know how to find your adversary or your adversary’s attorney, and they haven’t appeared in the case, give them a heads up that you’ve served via the Secretary of State.

To learn more about new developments in the Westchester Commercial Division, please subscribe to the Westchester Commercial Division Blog.

We’ve previously written about how judges in the Westchester Commercial Division will dismiss cases in which the contract at issue contains a forum selection clause requiring the parties to resolve their dispute elsewhere. On September 10, 2019, Justice Linda Jamieson issued another decision doing just that.

Satin v. 1-800 NY Bulbs Limited, Index No. 63512/2018, concerned the sale of defendant 1-800 NY Bulbs Limited (“Bulbs”). A Stock Purchase Agreement (“SPA”), among defendant Tarsier Ltd., plaintiff Satin, and non-party Lawrence Merson, was one of several agreements relevant to the parties’ relationship. The SPA referenced and attached a Management Agreement between Bulbs and plaintiff NY Bulbs Management LLC. The Management Agreement was signed on the same date as the SPA and referenced the SPA on the first page.

The SPA contained a forum selection clause, which stated that: “EACH PARTY HEREBY CONSENTS TO JURISDICTION AND VENUE EXCLUSIVELY IN THE SUPREME COURT OF THE STATE OF NEW YORK, COUNTY OF NASSAU FOR RESOLUTION OF ANY DISPUTE ARISING FROM, BASED ON, OR RELATED TO THIS AGREEMENT AND/OR ANY OTHER BUSINESS RELATIONSHIP BETWEEN THE PARTIES.” Justice Jamieson noted that this was one of only two provisions in the SPA written in all capital letters.

There was no dispute that the SPA was “the foundational agreement among the parties, even though not all of the parties are parties thereto.” Justice Jamieson also concluded that based on a review of the complaint, “the [SPA] is the critical document in this dispute.” In addition, “[t]he fact that certain of the parties did not sign the [SPA] [was] not relevant in this matter, because ‘a non-signatory may invoke a forum selection clause if the relationship between the nonparty and the signatory is sufficiently close so that the nonparty’s enforcement of the forum selection clause is foreseeable by virtue of the relationship between the signatory and the party sought to be bound’” (quoting Freeford Ltd. v. Pendleton, 53 A.D.3d 32, 40, 857 N.Y.S.2d 62, 68 (1st Dep’t 2008)).

Against this backdrop, the defendants moved to dismiss based on the forum selection clause. The Court held that “a ‘contractual forum selection clause is prima facie valid and enforceable unless it is shown by the challenging party to be unreasonable, unjust, in contravention of public policy, invalid due to fraud or overreaching, or it is shown that a trial in the selected forum would be so gravely difficult that the challenging party would, for all practical purposes, be deprived of its day in court. Absent a strong showing that it should be set aside, a forum selection agreement will control’” (citations omitted).

As the plaintiffs failed to make such a showing, the Court dismissed the case without prejudice and directed the Clerk of the Court to transfer the file to Nassau County.

Takeaway: If you file in Westchester and the governing agreement requires the parties to resolve their dispute elsewhere, you’re getting the boot.

To learn more about new developments in the Westchester Commercial Division, please subscribe to the Westchester Commercial Division Blog.